PACIFIC SELECT FUND, 497, 1996-04-05

PACIFIC SELECT FUND
497, 1996-04-05

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<PAGE>

PACIFIC SELECT FUND

PROSPECTUS

(14 PORTFOLIOS)
<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 Portfolio
The High Yield Bond Portfolio The Multi-Strategy Portfolio
The Managed Bond Portfolio The Equity Portfolio***
The Government Securities Portfolio The Bond and Income Portfolio***
The Growth Portfolio** The Equity Index Portfolio
The Aggressive Equity Portfolio The International Portfolio
The Growth LT 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 April 1, 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.

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* 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 31.

*** 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 APRIL 1, 1996.
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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.................. 16
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.................................................. 31
OTHER INFORMATION ABOUT THE FUND........................................... 33
TOTAL RETURN............................................................... 35
APPENDIX................................................................... 35
Description of Bond Ratings.............................................. 35
</TABLE>
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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 3-7 years
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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 3-7 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 income Investment grade debt Greenwich Street Advisors
Income consistent with prudent investment securities Division of Smith Barney
management and Mutual Funds Management Inc.
preservation of capital
- -------------------------------------------------------------------------------------------------------------------
Equity Index Provide investment results that Stocks included in the Bankers Trust Company
correspond to the total return S&P 500
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. The information in the
tables for the years 1991 through 1995 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, 1995. 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.

1
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Investment Activities Distributions Ratios/Supplemental Data
------------------------------ --------------------------- ------------------------------------------------------
Ratio
Net Ratio of
Realized Net Net of Net
Net and Distri- Asset Assets, Expenses Investment Port-
Asset Net Unrealized Dividends butions Value, End of to Income folio
Year Value, Invest- Gain (Loss) Total from (from Net (from Total End Total Period Average to Turn-
Ended Beginning ment on Investment Investment Capital Distri- of Return (in Net Average over
12/31 of Period Income Securities Operations Income) Gains) bution Period (8) thousands) Assets Net Assets Rate
- ----- --------- ------ ---------- ---------- ---------- ------- ------- ------ ------ ---------- -------- ---------- --------

MONEY MARKET PORTFOLIO

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $10.03 $0.54 $0.00 $0.54 $0.55 $0.00 $0.55 $10.02 5.54% $ 95,949 0.53% 5.41% N/A
1994 9.99 0.33 0.04 0.37 0.33 0.00 0.33 10.03 3.76% 94,150 0.64% 3.94% N/A
1993 9.96 0.23 0.03 0.26 0.23 0.00 0.23 9.99 2.58% 33,910 0.65% 2.56% N/A
1992 9.94 0.29 0.02 0.31 0.29 0.00 0.29 9.96 3.22% 23,905 0.65% 3.13% N/A
1991 9.94 0.56 0.00 0.56 0.56 0.00 0.56 9.94 5.74% 14,502 0.65% 5.53% N/A
1990 9.82 0.79 (0.03) 0.76 0.64 0.00 0.64 9.94 7.92% 15,401 0.65% 7.57% N/A
1989 9.81 0.82 0.01 0.83 0.82 0.00 0.82 9.82 8.73% 4,252 1.00% 8.38% N/A
1988(1) 10.00 0.58 (0.01) 0.57 0.76 0.00 0.76 9.81 5.85% 3,913 1.65%* 6.04%* N/A
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HIGH YIELD BOND PORTFOLIO

1995 $ 8.91 $0.76 $0.88 $1.64 $0.76 $0.00 $0.76 $ 9.79 18.87% $ 84,425 0.77% 8.51% 127.31%
1994 9.67 0.73 (0.70) 0.03 0.73 0.06 0.79 8.91 0.42% 25,338 0.88% 8.13% 141.86%
1993 9.24 0.86 0.77 1.63 0.86 0.34 1.20 9.67 18.01% 16,017 0.75% 8.37% 185.83%
1992 8.54 0.87 0.69 1.56 0.86 0.00 0.86 9.24 18.72% 14,152 0.75% 9.46% 186.23%
1991 7.84 0.91 0.95 1.86 0.91 0.25 1.16 8.54 24.58% 10,356 0.75% 10.77% 149.20%
1990 8.90 1.04 (1.01) 0.03 1.04 0.05 1.09 7.84 0.38% 8,288 0.75% 12.02% 69.59%
1989 9.72 1.20 (0.79) 0.41 1.23 0.00 1.23 8.90 4.16% 8,208 0.95% 12.48% 121.76%
1988(1) 10.00 1.07 (0.26) 0.81 0.99 0.10 1.09 9.72 8.30% 7,871 1.65%* 10.63%* 69.14%
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MANAGED BOND PORTFOLIO

1995 $ 9.90 $0.65 $1.19 $1.84 $0.64 $0.00 $0.64 $11.10 19.04% $126,992 0.76% 6.04% 191.39%
1994 10.89 0.50 (0.98) (0.48) 0.50 0.01 0.51 9.90 (4.36)% 53,219 0.84% 5.04% 127.95%
1993 10.62 0.52 0.70 1.22 0.52 0.43 0.95 10.89 11.63% 43,116 0.75% 4.74% 163.11%
1992 10.79 0.68 0.23 0.91 0.67 0.41 1.08 10.62 8.68% 26,406 0.75% 6.39% 89.55%
1991 10.35 0.82 0.88 1.70 0.82 0.44 1.26 10.79 17.03% 16,645 0.75% 7.74% 80.96%
1990 10.43 0.85 (0.01) 0.84 0.85 0.07 0.92 10.35 8.52% 12,412 0.75% 8.32% 68.79%
1989 9.99 0.86 0.56 1.42 0.86 0.12 0.98 10.43 14.74% 11,371 0.91% 8.36% 115.89%
1988(1) 10.00 0.68 0.03 0.71 0.62 0.10 0.72 9.99 7.11% 9,031 1.69%* 6.76%* 209.49%
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GOVERNMENT SECURITIES PORTFOLIO

1995 $ 9.64 $0.58 $1.19 $1.77 $0.57 $0.00 $0.57 $10.84 18.81% $ 59,767 0.82% 5.58% 298.81%
1994 10.64 0.44 (0.99) (0.55) 0.44 0.01 0.45 9.64 (5.10)% 21,489 0.88% 4.29% 232.99%
1993 10.48 0.34 0.78 1.12 0.34 0.62 0.96 10.64 10.79% 23,584 0.75% 3.15% 402.37%
1992 10.55 0.51 0.27 0.78 0.51 0.34 0.85 10.48 7.52% 17,701 0.75% 4.95% 212.31%
1991 10.07 0.69 0.93 1.62 0.71 0.43 1.14 10.55 16.67% 10,841 0.75% 6.90% 110.74%
1990 10.22 0.79 (0.02) 0.77 0.78 0.14 0.92 10.07 8.01% 7,469 0.75% 7.87% 45.99%
1989 9.82 0.84 0.56 1.40 0.84 0.16 1.00 10.22 14.61% 6,428 0.98% 8.22% 151.10%
1988(1) 10.00 0.65 0.01 0.66 0.65 0.19 0.84 9.82 6.65% 5,523 1.77%* 6.42%* 284.30%
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GROWTH PORTFOLIO(3)

1995 $14.90 $0.15 $3.67 $3.82 $0.15 $0.00 $0.15 $18.57 25.75% $129,741 0.79% 0.88% 46.76%
1994 18.20 0.10 (2.01) (1.91) 0.10 1.29 1.39 14.90(10.49)% 81,451 0.86% 0.58% 40.42%
1993 15.76 0.08 3.37 3.45 0.08 0.93 1.01 18.20 21.89% 77,405 0.71% 0.51% 35.08%
1992 13.70 0.11 2.69 2.80 0.11 0.63 0.74 15.76 20.53% 34,747 0.75% 0.81% 39.97%
1991 10.09 0.15 3.78 3.93 0.15 0.17 0.32 13.70 39.15% 13,482 0.75% 1.31% 31.48%
1990 13.67 0.20 (2.39) (2.19) 0.19 1.20 1.39 10.09(17.30)% 6,351 0.75% 1.75% 41.18%
1989 11.15 0.18 3.70 3.88 0.17 1.19 1.36 13.67 34.96% 5,896 0.97% 1.42% 65.35%
1988
(1)(2) 10.00 0.00 1.53 1.53 0.02 0.36 0.38 11.15 15.31% 3,335 2.46%* 0.01%* 33.61%
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GROWTH LT PORTFOLIO

1995 $11.11 $0.10 $3.96 $4.06 $0.10 $0.95 $1.05 $14.12 36.75% $200,785 0.94% 0.90% 165.83%
1994(4) 10.00 0.10 1.21 1.31 0.12 0.08 0.20 11.11 13.25% 49,374 1.08%* 1.32%* 257.20%
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</TABLE>
(continued on next page)

2
<PAGE>

<TABLE>
<CAPTION>
Investment Activities Distributions Ratios/Supplemental Data
-------------------------- --------------------------------------- ------------------------------------------------
Ratio
of
Net
Net Net Divi- In Net Ratio Invest-
Asset Realized Total dends excess Net Assets, of ment
Value, and from (from of Distri- Asset End of Expenses Income Port-
Begin- Net Unrealized Invest- Net Net butions Value, Period to to folio
Year ning Invest- Gain(Loss) ment Invest- Invest- (from Return Total End Total (in Average Average Turn-
Ended of ment on Opera- ment ment Capital of Distri- of Return thous- Net Net over
12/31 Period Income Securities tions Income) Income Gains) Capital bution Period (8) ands) Assets Assets Rate
- ------- ------ ------- ---------- ------- ------- ------- ------- ------- ------- ------ ------- -------- -------- ------- -------

EQUITY INCOME PORTFOLIO(3)(6)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $14.05 $0.26 $ 4.16 $ 4.42 $0.26 $0.00 $0.00 $0.00 $0.26 $18.21 31.66% $206,653 0.83% 1.59% 86.47%
1994 15.52 0.20 (0.25) (0.05) 0.20 0.00 1.22 0.00 1.42 14.05 (0.28)% 75,083 0.94% 1.39% 134.57%
1993 15.11 0.26 0.98 1.24 0.26 0.00 0.57 0.00 0.83 15.52 8.29% 33,356 0.75% 1.74% 27.67%
1992 14.74 0.19 0.59 0.78 0.19 0.00 0.22 0.00 0.41 15.11 5.36% 22,021 0.75% 1.39% 18.52%
1991 11.64 0.32 3.28 3.60 0.32 0.00 0.18 0.00 0.50 14.74 31.42% 12,117 0.76% 2.49% 17.43%
1990 13.11 0.32 (1.30) (0.98) 0.32 0.00 0.17 0.00 0.49 11.64 (7.54)% 5,974 0.75% 2.67% 17.63%
1989 10.68 0.17 2.94 3.11 0.30 0.00 0.38 0.00 0.68 13.11 29.22% 5,449 1.02% 2.52% 24.89%
1988(1) 10.00 0.12 0.70 0.82 0.12 0.00 0.02 0.00 0.14 10.68 8.25% 3,292 2.45%* 1.21%* 8.15%
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MULTI-STRATEGY PORTFOLIO(3)(6)

1995 $11.73 $0.45 $ 2.47 $ 2.92 $0.45 $0.00 $0.00 $0.00 $0.45 $14.20 25.25% $134,501 0.84% 3.49% 176.45%
1994 12.66 0.32 (0.51) (0.19) 0.32 0.00 0.42 0.00 0.74 11.73 (1.50)% 79,147 0.94% 2.78% 187.40%
1993 12.18 0.35 0.77 1.12 0.35 0.00 0.29 0.00 0.64 12.66 9.25% 41,448 0.75% 3.01% 27.87%
1992 11.99 0.37 0.27 0.64 0.37 0.00 0.08 0.00 0.45 12.18 5.57% 19,931 0.75% 3.36% 16.52%
1991 10.14 0.46 1.93 2.39 0.45 0.00 0.09 0.00 0.54 11.99 24.03% 10,454 0.75% 4.30% 11.24%
1990 10.84 0.51 (0.66) (0.15) 0.48 0.00 0.07 0.00 0.55 10.14 (1.47)% 4,559 0.75% 4.77% 26.04%
1989 10.35 0.57 1.82 2.39 0.59 0.00 1.31 0.00 1.90 10.84 23.42% 3,120 1.10% 4.38% 19.67%
1988(1) 10.00 0.34 0.34 0.68 0.32 0.00 0.01 0.00 0.33 10.35 6.85% 4,111 2.20%* 3.33%* 22.30%
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EQUITY PORTFOLIO (FORMERLY A SERIES OF PACIFIC CORINTHIAN VARIABLE FUND)

1995 $14.20 $0.05 $ 3.33 $ 3.38 $0.06 $0.00 $0.00 $0.00 $0.06 $17.52 23.80% $108,136 0.80% 0.27% 226.45%
1994 14.94 0.32 (0.74) (0.42) 0.32 0.00 0.00 0.00 0.32 14.20 (2.87)% 73,125 0.96% 2.19% 178.63%
1993 14.39 0.22 1.90 2.12 0.22 0.00 0.81 0.54 1.57 14.94 16.06% 84,791 0.93% 1.52% 229.77%
1992 14.83 0.19 0.49 0.68 0.19 0.00 0.93 0.00 1.12 14.39 6.30% 81,902 0.93% 1.30% 242.37%
1991 11.71 0.33 3.12 3.45 0.33 0.00 0.00 0.00 0.33 14.83 29.77% 107,366 0.91% 2.52% 449.75%
1990 12.59 0.56 (0.88) (0.32) 0.56 0.00 0.00 0.00 0.56 11.71 (2.55)% 178,191 0.86% 4.63% 541.61%
1989 10.37 0.82 2.23 3.05 0.83 0.00 0.00 0.00 0.83 12.59 30.12% 239,478 0.74% 7.01% 621.45%
1988 10.23 0.56 0.14 0.70 0.56 0.00 0.00 0.00 0.56 10.37 7.19% 233,020 0.69% 5.41% 402.26%
1987 14.17 0.36 0.12 0.48 0.38 0.00 4.04 0.00 4.42 10.23 2.18% 254,863 0.68% 2.58% 415.62%
1986 12.98 0.38 2.15 2.53 0.40 0.00 0.94 0.00 1.34 14.17 20.92% 222,945 0.69% 2.75% 334.91%
1985 10.65 0.34 2.71 3.05 0.39 0.00 0.33 0.00 0.72 12.98 30.02% 65,845 0.95% 3.62% 395.09%
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BOND AND INCOME PORTFOLIO (FORMERLY A SERIES OF PACIFIC CORINTHIAN VARIABLE FUND)

1995 $10.42 $0.82 $ 2.59 $ 3.41 $0.81 $0.00 $0.00 $0.00 $0.81 $13.02 33.71% $ 56,853 0.80% 6.93% 51.84%
1994 13.05 0.83 (1.87) (1.04) 0.83 0.00 0.53 0.23 1.59 10.42 (8.36)% 34,078 0.93% 7.25% 31.97%
1993 11.70 0.87 1.35 2.22 0.86 0.01 0.00 0.00 0.87 13.05 19.39% 43,223 0.84% 6.86% 41.92%
1992 11.69 0.89 0.01 0.90 0.89 0.00 0.00 0.00 0.89 11.70 8.09% 42,731 0.85% 7.67% 21.99%
1991 10.27 0.93 1.42 2.35 0.93 0.00 0.00 0.00 0.93 11.69 24.32% 59,323 0.78% 8.70% 131.40%
1990 10.93 0.97 (0.66) 0.31 0.97 0.00 0.00 0.00 0.97 10.27 3.27% 107,921 0.73% 9.35% 43.52%
1989 10.40 1.00 0.69 1.69 1.00 0.00 0.16 0.00 1.16 10.93 17.04% 146,310 0.61% 9.30% 108.64%
1988 10.75 1.01 (0.35) 0.66 1.01 0.00 0.00 0.00 1.01 10.40 6.37% 161,208 0.61% 10.05% 50.49%
1987 13.03 1.03 (1.17) (0.14) 1.19 0.00 0.95 0.00 2.14 10.75 (2.09)% 194,603 0.55% 9.20% 101.25%
1986 11.81 1.12 1.36 2.48 0.97 0.00 0.29 0.00 1.26 13.03 21.39% 194,814 0.55% 8.71% 202.87%
1985 10.56 1.17 1.50 2.67 1.15 0.00 0.27 0.00 1.42 11.81 27.61% 78,750 0.72% 10.12% 549.28%
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EQUITY INDEX PORTFOLIO(3)

1995 $13.02 $0.34 $ 4.43 $ 4.77 $0.34 $0.00 $0.00 $0.00 $0.34 $17.45 36.92% $137,519 0.42% 2.26% 7.52%
1994 13.24 0.30 (0.18) 0.12 0.30 0.00 0.04 0.00 0.34 13.02 1.05% 40,612 0.51% 2.37% 2.02%
1993 12.43 0.29 0.86 1.15 0.29 0.00 0.05 0.00 0.34 13.24 9.38% 33,836 0.50% 2.34% 1.15%
1992 11.98 0.29 0.53 0.82 0.29 0.00 0.08 0.00 0.37 12.43 6.95% 23,030 0.50% 2.53% 3.52%
1991(5) 10.00 0.30 2.16 2.46 0.30 0.00 0.18 0.00 0.48 11.98 24.88% 15,205 0.50%* 3.03%* 4.26%
- ----------------------------------------------------------------------------------------------------------------------------------

INTERNATIONAL PORTFOLIO(3)(7)

1995 $11.94 $0.33 $ 0.91 $ 1.24 $0.25 $0.00 $0.00 $0.00 $0.25 $12.93 10.56% $182,199 1.12% 1.87% 16.07%
1994 12.09 0.07 0.30 0.37 0.07 0.00 0.45 0.00 0.52 11.94 3.01% 75,971 1.22% 1.28% 52.22%
1993 9.38 0.09 2.73 2.82 0.09 0.02 0.00 0.00 0.11 12.09 30.02% 30,574 1.04% 0.92% 46.48%
1992 10.59 0.15 (1.19) (1.04) 0.17 0.00 0.00 0.00 0.17 9.38 (9.78)% 19,402 1.05% 1.43% 38.99%
1991 9.72 0.13 0.94 1.07 0.17 0.00 0.03 0.00 0.20 10.59 10.92% 18,239 1.04% 1.19% 69.71%
1990 12.44 0.16 (1.84) (1.68) 0.16 0.00 0.88 0.00 1.04 9.72 (13.48)% 14,266 1.05% 1.48% 69.24%
1989 11.29 0.02 2.30 2.32 0.06 0.00 1.11 0.00 1.17 12.44 20.51% 15,735 1.20% 0.14% 94.35%
1988(1) 10.00 0.09 1.66 1.75 0.06 0.00 0.40 0.00 0.46 11.29 17.69% 13,980 1.69%* 0.84%* 62.48%
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</TABLE>
(continued on next page)

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.

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(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.

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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, 1995, the Portfolio held securities of
42 corporate issuers, excluding short-term obligations. Based upon an average
of the Portfolio's holdings at the end of each month in 1995, an average of
approximately 87% of the Portfolio's holdings during 1995 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 1995.

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, 1995, 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 6.55%.

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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 7 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 7 years. A discussion of "duration" is provided above in the
description of the Managed Bond Portfolio and in the SAI.

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<PAGE>

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 stocks 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 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.

AGGRESSIVE EQUITY PORTFOLIO

INVESTMENT OBJECTIVE. Capital appreciation. No consideration is given to
income.

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emphasize companies that utilize innovative technologies in their products or
services, including the use of technology to enhance distribution and/or
improve management techniques, or companies that provide and service those
technologies. The Portfolio is intended for aggressive long-term investors
seeking above average gains who are willing to accept the greater risks
associated with 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 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 size 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.

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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 of 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, nondividend-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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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.

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 of its individual securities. 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. It is contemplated that most of the Portfolio's common stock
investments will be made in securities listed on a U.S. stock exchange. 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.

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, 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.

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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. The Portfolio may also invest up to 10%
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 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.

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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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. Moody's describes securities
rated Baa 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 is made, however, 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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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
nonconvertible 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-size companies and smaller, less seasoned companies in
earlier stages 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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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.

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.

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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.

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.

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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 values are 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
included among the descriptions 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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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: The International and Emerging Markets Portfolios may
invest primarily in equity securities of foreign issuers and may invest in
debt securities and money market obligations of foreign issuers. The
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. The
Growth LT Portfolio may invest up to 25% of its assets in foreign securities
denominated in a foreign currency. 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 included in the S&P 500. The
Managed Bond and Government Securities Portfolios may invest up to 20% of
their assets in foreign debt securities denominated in a foreign currency. The
Multi-Strategy Portfolio may invest up to 10% of its assets in foreign debt
securities denominated in a foreign currency. The Money Market, High Yield
Bond, Managed Bond, Government Securities, Aggressive Equity, Growth LT,
Multi-Strategy, International, and Emerging Markets 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

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or over-the-counter in the United States. The Growth 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 an ownership arrangement similar to ADRs and are
designed for use in European securities markets; and may invest in 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 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 write (sell) 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 writing (selling) 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.

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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
purchase and sell interest rate futures contracts and options thereon
("futures options"). The Aggressive Equity, Growth LT, Equity Income, Multi-
Strategy, Equity Index, International, and Emerging Markets Portfolios may
purchase and sell stock index futures contracts and may purchase options
thereon. The Managed Bond, Government Securities, Aggressive Equity, Growth
LT, International, and Emerging Markets Portfolios may purchase and sell
foreign currency futures contracts and options thereon. The Emerging Markets
Portfolio may invest in futures contracts on securities, and in options
thereon.

USE OF FUTURES. These investments, the purchase or sale of futures contracts
or options thereon, 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.

The High Yield Bond, Multi-Strategy, Equity Income and Equity Index
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").

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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 1995, Pacific Mutual had $44.2 billion of individual life
insurance in force and total assets of approximately $17.6 billion. Together
with its subsidiaries and affiliated enterprises, Pacific Mutual had total
assets and funds under management of over $116.6 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. Raymond J. Lee has primary responsibility for investment management of
the Money Market and the High Yield Bond Portfolios; 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 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. Mr. Dale W. Patrick, Investment Analyst,

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shares in the responsibility for investment management of the Money Market
Portfolio. Mr. Patrick joined Pacific Mutual in 1985 and holds a Bachelor of
Arts degree in Economics from the University of Colorado. Mr. Patrick has
assisted in management of the Money Market Portfolio since 1994. Mr. Patrick
is also responsible for the investment management of Pacific Mutual's short-
term fixed income investments.

Pacific Mutual and the Fund employ other investment advisory firms as
Portfolio Managers for all of the Fund's Portfolios, except the Money Market
and High Yield Bond 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 $76.9 billion assets under management as of year-end
1995. 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,
Post Office Box 6430, Newport Beach, California 92658-6430.

WHO AT PIMCO MANAGES THE MANAGED BOND AND GOVERNMENT SECURITIES
PORTFOLIOS? Mr. John L. Hague, Managing Director and senior member of PIMCO's
Portfolio Management Group, 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 15 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 Companies, 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.

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<PAGE>

professional (30 years with Capital Guardian or its affiliates). Douglas M.
Urban, Senior Vice President, Capital Guardian, has had 22 years of experience
as an investment professional (12 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" or "CCI"), 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,
1995, Columbus Circle Investors managed approximately $12.7 billion of assets.

WHO AT COLUMBUS CIRCLE INVESTORS MANAGES THE AGGRESSIVE EQUITY
PORTFOLIO? The following persons are primarily responsible for the portfolio
management of the Aggressive Equity Portfolio. Irwin F. Smith, Managing
Director and Chairman of Columbus Circle, joined Columbus Circle as President
and founding member in 1975. He has over 30 years of investment experience
including the position of Deputy Treasurer/Chief Investment Officer for the
State of Connecticut and Senior Portfolio Manager at Bank of America. Mr.
Smith holds a bachelor's degree and MBA from the University of Wisconsin. Amy
M. Hogan, Managing Director of Columbus Circle, has had over 11 years of
experience as an investment professional (9 years with Columbus Circle). She
holds a bachelor's degree and MBA from the University of Wisconsin. Ms. Hogan
is a Chartered Financial Analyst and a member of the New York Society of
Security Analysts. Mr. Anthony Rizza, Vice President of Equity Research for
Columbus Circle, has had over 8 years of investment experience (4 years with
Columbus Circle). He holds a bachelor's degree from the University of
Connecticut. Mr. Rizza is a Chartered Financial Analyst and a member of the
Hartford Society of Security Analysts.

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, 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. Incorporated. 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.

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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 the firm's 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.

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, 1995, SBMFM
managed approximately $65.5 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
E. Mueller, Jr. 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 ("BTCO"), a wholly-owned subsidiary of Bankers Trust New York
Corporation. BTCO's address is 130 Liberty Street, New York, New York 10006.
BTCO 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 BTCO, the department directly responsible for
the management of the Equity Index Portfolio, as of December 31, 1995, managed
assets approximating $110.4 billion. BTCO is the investment manager to 25
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 170 registered investment companies. The Templeton
organization has been investing globally over the past 53 years and provides
investment management and advisory services to a worldwide client base,
including approximately 1,456,000 mutual fund shareholders in United States
funds, 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.

28
<PAGE>

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 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, 1995, accounts managed by Blairlogie had combined
assets of approximately $645.4 million.

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 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.

Under the Portfolio Management Agreements, the Portfolio Managers are
compensated by Pacific Mutual, and not by 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.

29
<PAGE>

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.

WHAT OTHER EXPENSES DOES THE FUND BEAR? The Fund bears all costs of its
operations. These costs may include expenses for custody, 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.

The Fund is also responsible for bearing the expense of various matters,
including, among other things, the expense of registering and qualifying the
Fund on state and federal levels, legal and accounting services, maintaining
the Fund's legal existence, shareholders' meetings and expenses associated
with preparing, printing and distributing reports, proxies and prospectuses to
shareholders.

The Fund and Pacific Mutual entered into an Agreement for Support Services
effective October 1, 1995, pursuant to which Pacific Mutual provides support
services such as those described above. Under the terms of the Agreement for
Support Services, it is not intended that Pacific Mutual will profit from
these services to the Fund.

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 December 31, 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--.53%, High Yield Bond
Portfolio--.77%, Managed Bond Portfolio--.76%, Government Securities
Portfolio--.82%, Growth Portfolio--.79%, Growth LT Portfolio--.94%, Equity
Income Portfolio--.83%, Multi-Strategy Portfolio--.84%, Equity Portfolio--
.80%, Bond and Income Portfolio--.80%, Equity Index Portfolio--.42%, and
International Portfolio--1.12%. 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, 1997, 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, 1997.

30
<PAGE>

92660. PMD is a broker-dealer registered with the SEC and a member of the
National Association of Securities Dealers. PMD 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.

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 will ordinarily be paid within seven days
following receipt of instructions in proper form, or sooner, if 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.

31
<PAGE>

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.

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,
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.

32
<PAGE>

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 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.

33
<PAGE>

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.

34
<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 year to year. 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
RETURN
YEAR (FOR ALL
ENDED YEARS
12/31/95 SHOWN)
-------- --------
<S> <C> <C>
Money Market.... 5.54 5.40
High Yield Bond. 18.87 11.33
Managed Bond.... 19.04 10.08
Government
Securities..... 18.81 9.52
Growth.......... 25.75 14.54
Growth LT....... 36.75 24.52
Equity
Income(4)...... 31.66 12.40
Multi-
Strategy(4).... 25.25 10.94
Equity(5)....... 23.80 13.74
Bond and
Income(5)...... 33.71 13.35
Equity Index.... 36.92 15.37
International(4). 10.56 7.76
</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 through December 31, 1993 were achieved 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.

35
<PAGE>

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.

36
<PAGE>

[LOGO of PACIFIC SELECT FUND]

PACIFIC SELECT FUND

INVESTMENT ADVISER Pacific Investment Management Company
Pacific Mutual Life Insurance Company 840 Newport Center Drive, Suite 360
700 Newport Center Drive Post Office Box 6430
Post Office Box 9000 Newport Beach, California 92658-6430
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 Pacific Mutual Distributors, Inc.
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
388 Greenwich Street Costa Mesa, California 92626
23rd Floor
New York, New York 10048 COUNSEL
Dechert Price & Rhoads
Janus Capital Corporation 1500 K Street, N.W.
100 Fillmore Street Suite 500
Denver, Colorado 80206-4923 Washington, D.C. 20005

J.P. Morgan Investment Management Inc.
522 Fifth Avenue
New York, New York 10036

Prospectus dated April 1, 1996

<PAGE>

PACIFIC SELECT FUND

PROSPECTUS

(13 PORTFOLIOS)
<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
separate portfolios (each a "Portfolio"). This Prospectus describes thirteen
Portfolios of the Fund. 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 thirteen Portfolios of the Fund are as follows:

The Money Market Portfolio* The Multi-Strategy Portfolio
The High Yield Bond Portfolio The Equity Portfolio**
The Managed Bond Portfolio The Bond and Income Portfolio**
The Government Securities Portfolio The Equity Index Portfolio
The Aggressive Equity Portfolio The International Portfolio
The Growth LT Portfolio The Emerging Markets Portfolio
The Equity Income Portfolio

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 April 1, 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 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 APRIL 1, 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
Aggressive Equity Portfolio.............................................. 8
Growth LT Portfolio...................................................... 8
Equity Income Portfolio.................................................. 9
Multi-Strategy Portfolio................................................. 10
Equity Portfolio......................................................... 11
Bond and Income Portfolio................................................ 12
Equity Index Portfolio................................................... 12
International Portfolio.................................................. 13
Emerging Markets Portfolio............................................... 15
All Portfolios: Diversification and Changes in Policies.................. 16
SECURITIES AND INVESTMENT TECHNIQUES....................................... 16
Derivatives.............................................................. 16
Mortgage-Related Securities.............................................. 17
High Yield Bonds......................................................... 18
Small Capitalization Stocks.............................................. 18
Borrowing................................................................ 19
Illiquid and Restricted Securities....................................... 19
Precious Metals-Related Securities....................................... 19
Foreign Securities....................................................... 20
Forward Foreign Currency Contracts....................................... 21
Options.................................................................. 21
Foreign Currency Options................................................. 22
Swap Agreements.......................................................... 22
Spread Transactions...................................................... 23
Futures Contracts and Futures Options.................................... 23
ORGANIZATION AND MANAGEMENT OF THE FUND.................................... 24
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

<TABLE>
<CAPTION>
PRIMARY INVESTMENTS
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 3-7 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 3-7 years
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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
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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 income Investment grade debt Greenwich Street Advisors
Income consistent with prudent investment securities Division of Smith Barney
management and Mutual Funds Management Inc.
preservation of capital
- ------------------------------------------------------------------------------------------------------------------
Equity Index Provide investment results that Stocks included in the Bankers Trust Company
correspond to the total return S&P 500
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

1
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Investment Activities Distributions Ratios/Supplemental Data
------------------------------ --------------------------- ------------------------------------------------------
Ratio
Net Ratio of
Realized Net Net of Net
Net and Distri- Asset Assets, Expenses Investment Port-
Asset Net Unrealized Dividends butions Value, End of to Income folio
Year Value, Invest- Gain(Loss) Total from (from Net (from Total End Total Period Average to Turn-
Ended Beginning ment on Investment Investment Capital Distri- of Return (in Net Average over
12/31 of Period Income Securities Operations Income) Gains) bution Period (8) thousands) Assets Net Assets Rate
- ----- --------- ------ ---------- ---------- ---------- ------- ------- ------ ------ ---------- -------- ---------- --------

MONEY MARKET PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $10.03 $0.54 $0.00 $0.54 $0.55 $0.00 $0.55 $10.02 5.54% $ 95,949 0.53% 5.41% N/A
1994 9.99 0.33 0.04 0.37 0.33 0.00 0.33 10.03 3.76% 94,150 0.64% 3.94% N/A
1993 9.96 0.23 0.03 0.26 0.23 0.00 0.23 9.99 2.58% 33,910 0.65% 2.56% N/A
1992 9.94 0.29 0.02 0.31 0.29 0.00 0.29 9.96 3.22% 23,905 0.65% 3.13% N/A
1991 9.94 0.56 0.00 0.56 0.56 0.00 0.56 9.94 5.74% 14,502 0.65% 5.53% N/A
1990 9.82 0.79 (0.03) 0.76 0.64 0.00 0.64 9.94 7.92% 15,401 0.65% 7.57% N/A
1989 9.81 0.82 0.01 0.83 0.82 0.00 0.82 9.82 8.73% 4,252 1.00% 8.38% N/A
1988(1) 10.00 0.58 (0.01) 0.57 0.76 0.00 0.76 9.81 5.85% 3,913 1.65%* 6.04%* N/A
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HIGH YIELD BOND PORTFOLIO

MANAGED BOND PORTFOLIO

GOVERNMENT SECURITIES PORTFOLIO

GROWTH LT PORTFOLIO

1995 $11.11 $0.10 $3.96 $4.06 $0.10 $0.95 $1.05 $14.12 36.75% $200,785 0.94% 0.90% 165.83%
1994(3) 10.00 0.10 1.21 1.31 0.12 0.08 0.20 11.11 13.25% 49,374 1.08%* 1.32%* 257.20%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(continued on next page)

2
<PAGE>

<TABLE>
<CAPTION>
Investment Activities Distributions Ratios/Supplemental Data
-------------------------- --------------------------------------- ------------------------------------------------
Ratio
of
Net
Net Net Divi- In Net Ratio Invest-
Asset Realized Total dends excess Net Assets, of ment
Value, and from (from of Distri- Asset End of Expenses Income Port-
Begin- Net Unrealized Invest- Net Net butions Value, Period to to folio
Year ning Invest- Gain(Loss) ment Invest- Invest- (from Return Total End Total (in Average Average Turn-
Ended of ment on Opera- ment ment Capital of Distri- of Return thous- Net Net over
12/31 Period Income Securities tions Income) Income Gains) Capital bution Period (8) ands) Assets Assets Rate
- ------- ------ ------- ---------- ------- ------- ------- ------- ------- ------- ------ ------- -------- -------- ------- -------

EQUITY INCOME PORTFOLIO(2)(5)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $14.05 $0.26 $ 4.16 $ 4.42 $0.26 $0.00 $0.00 $0.00 $0.26 $18.21 31.66% $206,653 0.83% 1.59% 86.47%
1994 15.52 0.20 (0.25) (0.05) 0.20 0.00 1.22 0.00 1.42 14.05 (0.28)% 75,083 0.94% 1.39% 134.57%
1993 15.11 0.26 0.98 1.24 0.26 0.00 0.57 0.00 0.83 15.52 8.29% 33,356 0.75% 1.74% 27.67%
1992 14.74 0.19 0.59 0.78 0.19 0.00 0.22 0.00 0.41 15.11 5.36% 22,021 0.75% 1.39% 18.52%
1991 11.64 0.32 3.28 3.60 0.32 0.00 0.18 0.00 0.50 14.74 31.42% 12,117 0.76% 2.49% 17.43%
1990 13.11 0.32 (1.30) (0.98) 0.32 0.00 0.17 0.00 0.49 11.64 (7.54)% 5,974 0.75% 2.67% 17.63%
1989 10.68 0.17 2.94 3.11 0.30 0.00 0.38 0.00 0.68 13.11 29.22% 5,449 1.02% 2.52% 24.89%
1988(1) 10.00 0.12 0.70 0.82 0.12 0.00 0.02 0.00 0.14 10.68 8.25% 3,292 2.45%* 1.21%* 8.15%
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MULTI-STRATEGY PORTFOLIO(2)(5)

EQUITY PORTFOLIO (FORMERLY A SERIES OF PACIFIC CORINTHIAN VARIABLE FUND)

BOND AND INCOME PORTFOLIO (FORMERLY A SERIES OF PACIFIC CORINTHIAN VARIABLE FUND)

EQUITY INDEX PORTFOLIO(2)

1995 $13.02 $0.34 $ 4.43 $ 4.77 $0.34 $0.00 $0.00 $0.00 $0.34 $17.45 36.92% $137,519 0.42% 2.26% 7.52%
1994 13.24 0.30 (0.18) 0.12 0.30 0.00 0.04 0.00 0.34 13.02 1.05% 40,612 0.51% 2.37% 2.02%
1993 12.43 0.29 0.86 1.15 0.29 0.00 0.05 0.00 0.34 13.24 9.38% 33,836 0.50% 2.34% 1.15%
1992 11.98 0.29 0.53 0.82 0.29 0.00 0.08 0.00 0.37 12.43 6.95% 23,030 0.50% 2.53% 3.52%
1991(4) 10.00 0.30 2.16 2.46 0.30 0.00 0.18 0.00 0.48 11.98 24.88% 15,205 0.50%* 3.03%* 4.26%
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INTERNATIONAL PORTFOLIO(2)(6)

3
<PAGE>

- --------
(1) Information is for the period from January 4, 1988 (commencement of
operations) to December 31, 1988.

(2) 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.

(3) Information is for the period from January 4, 1994 (commencement of
operations) to December 31, 1994.

(4) Information is for the period from January 30, 1991 (commencement of
operations) to December 31, 1991.

(5) 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.

(6) 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.

(7) 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

MONEY MARKET PORTFOLIO

INVESTMENT OBJECTIVE. Current income consistent with preservation of
capital.

4
<PAGE>

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.

5
<PAGE>

MANAGED BOND PORTFOLIO

INVESTMENT OBJECTIVE. Maximize total return consistent with prudent
investment management.

6
<PAGE>

GOVERNMENT SECURITIES PORTFOLIO

INVESTMENT OBJECTIVE. Maximize total return consistent with prudent
investment management.

7
<PAGE>

AGGRESSIVE EQUITY PORTFOLIO

INVESTMENT OBJECTIVE. Capital appreciation. No consideration is given to
income.

INVESTMENT POLICIES. The Portfolio invests primarily in common stock of
small emerging growth and medium capitalization companies. It may also invest
in more well-established companies. The Portfolio is not restricted to
companies in any particular business or industry. However, the Portfolio may
from time to time emphasize companies that utilize innovative technologies in
their products or services, including the use of technology to enhance
distribution and/or improve management techniques, or companies that provide
and service those technologies. The Portfolio is intended for aggressive long-
term investors seeking above average gains who are willing to accept the
greater risks associated with small capitalization stocks.

GROWTH LT PORTFOLIO

INVESTMENT OBJECTIVE. Long-term growth of capital in a manner consistent
with the preservation of capital.

8
<PAGE>

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
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.

EQUITY INCOME PORTFOLIO

INVESTMENT OBJECTIVE. Long-term growth of capital and income.

9
<PAGE>

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 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.

10
<PAGE>

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. It is contemplated that most of the
Portfolio's common stock investments will be made in securities listed on a
U.S. stock exchange. 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.

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. The Portfolio may also invest up to 10%
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 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.

EQUITY PORTFOLIO

INVESTMENT OBJECTIVE. The primary investment objective of the Equity
Portfolio is capital appreciation. Current income is of secondary importance.

11
<PAGE>

BOND AND INCOME PORTFOLIO

INVESTMENT OBJECTIVE. Provide as high a level of current income as is
consistent with prudent investment management and preservation of capital.

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. Moody's describes
securities rated Baa 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.

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.

12
<PAGE>

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.

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.

INTERNATIONAL PORTFOLIO

13
<PAGE>

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 the
Portfolio Manager determines that economic or financial conditions are adverse
for holding equity securities of corporate issuers.) Securities held for
defensive purposes, which include nonconvertible 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.

14
<PAGE>

EMERGING MARKETS PORTFOLIO

INVESTMENT OBJECTIVE. Long-term growth of capital.

15
<PAGE>

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.

ALL PORTFOLIOS: DIVERSIFICATION AND CHANGES IN POLICIES

SECURITIES AND INVESTMENT TECHNIQUES

DERIVATIVES

16
<PAGE>

MORTGAGE-RELATED SECURITIES

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").

17
<PAGE>

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.

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).

SMALL CAPITALIZATION STOCKS

APPLICABLE PORTFOLIOS. Aggressive Equity, Growth LT, Equity, and Emerging
Markets Portfolios, and to a lesser degree, Equity Income and Multi-Strategy
Portfolios.

18
<PAGE>

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.

ILLIQUID AND RESTRICTED SECURITIES

APPLICABLE PORTFOLIOS: All Portfolios may acquire illiquid securities. The
Money Market, High Yield Bond, Managed Bond, Government Securities, Aggressive
Equity, Growth LT, Equity Income, Multi-Strategy, Equity, Bond and Income,
International, and Emerging Markets Portfolios may acquire restricted
securities.

PRECIOUS METALS-RELATED SECURITIES

APPLICABLE PORTFOLIOS. Equity Portfolio, and possibly other Portfolios that
invest in equity securities.

19
<PAGE>

FOREIGN SECURITIES

APPLICABLE PORTFOLIOS: The International and Emerging Markets Portfolios may
invest primarily in equity securities of foreign issuers and may invest in
debt securities and money market obligations of foreign issuers. The
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. The
Growth LT Portfolio may invest up to 25% of its assets in foreign securities
denominated in a foreign currency. The 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. The
Managed Bond and Government Securities Portfolios may invest up to 20% of
their assets in foreign debt securities denominated in a foreign currency. The
Multi-Strategy Portfolio may invest up to 10% of its assets in foreign debt
securities denominated in a foreign currency. The Money Market, High Yield
Bond, Managed Bond, Government Securities, Aggressive Equity, Growth LT,
Multi-Strategy, International, and Emerging Markets 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 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 an ownership arrangement similar to ADRs
and are designed for use in European securities markets; and may invest in
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.

20
<PAGE>

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.

FORWARD FOREIGN CURRENCY CONTRACTS

APPLICABLE PORTFOLIOS: Managed Bond, Government Securities, Aggressive
Equity, Growth LT, Multi-Strategy, International, and Emerging Markets
Portfolios.

OPTIONS

21
<PAGE>

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.

FOREIGN CURRENCY OPTIONS

APPLICABLE PORTFOLIOS: Managed Bond, Government Securities, Aggressive
Equity, Growth LT, International, and Emerging Markets Portfolios.

SWAP AGREEMENTS

APPLICABLE PORTFOLIO: Emerging Markets Portfolio.

22
<PAGE>

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 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

23
<PAGE>

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 on U.S. domestic markets as well as
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 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 separate Portfolios,
thirteen of which are described herein. 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.

24
<PAGE>

DOES PACIFIC MUTUAL MANAGE ANY OF THE PORTFOLIOS DIRECTLY? Pacific Mutual
directly manages both the High Yield Bond and the Money Market Portfolios.

Pacific Mutual and the Fund employ other investment advisory firms as
Portfolio Managers for all of the Fund's Portfolios, except the Money Market
and High Yield Bond Portfolios.

25
<PAGE>

26
<PAGE>

27
<PAGE>

28
<PAGE>

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 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.

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 December 31, 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--.53%, High Yield Bond
Portfolio--.77%, Managed Bond Portfolio--.76%, Government Securities
Portfolio--.82%, Growth LT Portfolio--.94%, Equity Income Portfolio--.83%,
Multi-Strategy Portfolio--.84%, Equity Portfolio--.80%, Bond and Income
Portfolio--.80%, Equity Index Portfolio--.42%, and International Portfolio--
1.12%. 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.

29
<PAGE>

92660. PMD is a broker-dealer registered with the SEC and a member of the
National Association of Securities Dealers. PMD acts as Distributor without
remuneration from the Fund.

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. 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.

30
<PAGE>

31
<PAGE>

OTHER INFORMATION ABOUT THE FUND

32
<PAGE>

33
<PAGE>

TOTAL RETURN

<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 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
RETURN
YEAR (FOR ALL
ENDED YEARS
12/31/95 SHOWN)
-------- --------
<S> <C> <C>
Money Market.... 5.54 5.40
High Yield Bond. 18.87 11.33
Managed Bond.... 19.04 10.08
Government
Securities..... 18.81 9.52
Growth LT....... 36.75 24.52
Equity
Income(4)...... 31.66 12.40
Multi-
Strategy(4).... 25.25 10.94
Equity(5)....... 23.80 13.74
Bond and
Income(5)...... 33.71 13.35
Equity Index.... 36.92 15.37
International(4). 10.56 7.76
</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

34
<PAGE>

ultimate degree of protection as to principal and interest. With AA bonds, as
with AAA bonds, prices move with the long-term money market.

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, Suite 360
700 Newport Center Drive Post Office Box 6430
Post Office Box 9000 Newport Beach, California 92658-6430
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 Pacific Mutual Distributors, Inc.
4th Floor Member: NASD & SIPC
125 Princes Street 700 Newport Center Drive
Edinburgh EH2 4AD, Scotland P.O. Box 9000
Newport Beach, California 92660
Columbus Circle Investors
Metro Center CUSTODIAN
One Station Place Investors Fiduciary Trust Company
Stamford, Connecticut 06902 127 West Tenth Street
Kansas City, Missouri 64105
Greenwich Street Advisors
388 Greenwich Street ACCOUNTANTS
23rd Floor Deloitte & Touche LLP
New York, New York 10048 695 Town Center Drive
Suite 1200
Janus Capital Corporation Costa Mesa, California 92626
100 Fillmore Street
Denver, Colorado 80206-4923 COUNSEL
Dechert Price & Rhoads
J.P. Morgan Investment Management Inc. 1500 K Street, N.W.
522 Fifth Avenue Suite 500
New York, New York 10036 Washington, D.C. 20005

Prospectus dated April 1, 1996

<PAGE>

PACIFIC SELECT FUND

PROSPECTUS

(12 PORTFOLIOS)
<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
separate portfolios (each a "Portfolio"). This Prospectus describes twelve
Portfolios of the Fund. 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 twelve Portfolios of the Fund are as follows:

The Money Market Portfolio* The Growth LT Portfolio
The High Yield Bond Portfolio The Equity Income Portfolio
The Managed Bond Portfolio The Multi-Strategy Portfolio
The Government Securities Portfolio The Equity Index Portfolio
The Growth Portfolio** The International Portfolio
The Aggressive Equity Portfolio The Emerging Markets Portfolio

- --------

* Investment in the Money Market Portfolio (or in any other Portfolio) is
neither insured nor guaranteed by the U.S. Government.

THE DATE OF THIS PROSPECTUS IS APRIL 1, 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......................................................... 7
Aggressive Equity Portfolio.............................................. 8
Growth LT Portfolio...................................................... 9
Equity Income Portfolio.................................................. 10
Multi-Strategy Portfolio................................................. 11
Equity Index Portfolio................................................... 11
International Portfolio.................................................. 12
Emerging Markets Portfolio............................................... 14
All Portfolios: Diversification and Changes in Policies.................. 15
SECURITIES AND INVESTMENT TECHNIQUES....................................... 15
Derivatives.............................................................. 15
Mortgage-Related Securities.............................................. 16
High Yield Bonds......................................................... 17
Small Capitalization Stocks.............................................. 17
Borrowing................................................................ 18
Illiquid and Restricted Securities....................................... 18
Precious Metals-Related Securities....................................... 18
Foreign Securities....................................................... 19
Forward Foreign Currency Contracts....................................... 20
Options.................................................................. 20
Foreign Currency Options................................................. 21
Swap Agreements.......................................................... 21
Spread Transactions...................................................... 22
Futures Contracts and Futures Options.................................... 22
ORGANIZATION AND MANAGEMENT OF THE FUND.................................... 23
MORE ON THE FUND'S SHARES.................................................. 29
OTHER INFORMATION ABOUT THE FUND........................................... 30
TOTAL RETURN............................................................... 32
APPENDIX................................................................... 32
Description of Bond Ratings.............................................. 32
</TABLE>
<PAGE>

THE FUND'S PORTFOLIOS AT A GLANCE

<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 3-7 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 3-7 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 Index Provide investment results that Stocks included in the Bankers Trust Company
correspond to the total return S&P 500
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. The information in the
tables for the years 1991 through 1995 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, 1995. These financial statements have
been audited by Deloitte & Touche LLP, independent public accountants. The
Annual Report, which is available without charge, contains more information
about the Fund's performance.

1
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Investment Activities Distributions Ratios/Supplemental Data
------------------------------ --------------------------- ------------------------------------------------------
Ratio
Net Ratio of
Realized Net Net of Net
Net and Distri- Asset Assets, Expenses Investment Port-
Asset Net Unrealized Dividends butions Value, End of to Income folio
Year Value, Invest- Gain(Loss) Total from (from Net (from Total End Total Period Average to Turn-
Ended Beginning ment on Investment Investment Capital Distri- of Return (in Net Average over
12/31 of Period Income Securities Operations Income) Gains) bution Period (8) thousands) Assets Net Assets Rate
- ----- --------- ------ ---------- ---------- ---------- ------- ------- ------ ------ ---------- -------- ---------- --------

MONEY MARKET PORTFOLIO

HIGH YIELD BOND PORTFOLIO

MANAGED BOND PORTFOLIO

GOVERNMENT SECURITIES PORTFOLIO

GROWTH PORTFOLIO(3)

GROWTH LT PORTFOLIO

2
<PAGE>

<TABLE>
<CAPTION>
Investment Activities Distributions Ratios/Supplemental Data
-------------------------- -------------------------------- ------------------------------------------------
Ratio
of
Net
Net Net Divi- In Net Ratio Invest-
Asset Realized Total dends excess Net Assets, of ment
Value, and from (from of Distri- Asset End of Expenses Income Port-
Begin- Net Unrealized Invest- Net Net butions Value, Period to to folio
Year ning Invest- Gain(Loss) ment Invest- Invest- (from Total End Total (in Average Average Turn-
Ended of ment on Opera- ment ment Capital Distri- of Return thous- Net Net over
12/31 Period Income Securities tions Income) Income Gains) bution Period (8) ands) Assets Assets Rate
- ------- ------ ------- ---------- ------- ------- ------- ------- ------- ------ ------- -------- -------- ------- -------

EQUITY INCOME PORTFOLIO(3)(6)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $14.05 $0.26 $ 4.16 $ 4.42 $0.26 $0.00 $0.00 $0.26 $18.21 31.66% $206,653 0.83% 1.59% 86.47%
1994 15.52 0.20 (0.25) (0.05) 0.20 0.00 1.22 1.42 14.05 (0.28)% 75,083 0.94% 1.39% 134.57%
1993 15.11 0.26 0.98 1.24 0.26 0.00 0.57 0.83 15.52 8.29% 33,356 0.75% 1.74% 27.67%
1992 14.74 0.19 0.59 0.78 0.19 0.00 0.22 0.41 15.11 5.36% 22,021 0.75% 1.39% 18.52%
1991 11.64 0.32 3.28 3.60 0.32 0.00 0.18 0.50 14.74 31.42% 12,117 0.76% 2.49% 17.43%
1990 13.11 0.32 (1.30) (0.98) 0.32 0.00 0.17 0.49 11.64 (7.54)% 5,974 0.75% 2.67% 17.63%
1989 10.68 0.17 2.94 3.11 0.30 0.00 0.38 0.68 13.11 29.22% 5,449 1.02% 2.52% 24.89%
1988(1) 10.00 0.12 0.70 0.82 0.12 0.00 0.02 0.14 10.68 8.25% 3,292 2.45%* 1.21%* 8.15%
- ---------------------------------------------------------------------------------------------------------------------------

MULTI-STRATEGY PORTFOLIO(3)(6)

1995 $11.73 $0.45 $ 2.47 $ 2.92 $0.45 $0.00 $0.00 $0.45 $14.20 25.25% $134,501 0.84% 3.49% 176.45%
1994 12.66 0.32 (0.51) (0.19) 0.32 0.00 0.42 0.74 11.73 (1.50)% 79,147 0.94% 2.78% 187.40%
1993 12.18 0.35 0.77 1.12 0.35 0.00 0.29 0.64 12.66 9.25% 41,448 0.75% 3.01% 27.87%
1992 11.99 0.37 0.27 0.64 0.37 0.00 0.08 0.45 12.18 5.57% 19,931 0.75% 3.36% 16.52%
1991 10.14 0.46 1.93 2.39 0.45 0.00 0.09 0.54 11.99 24.03% 10,454 0.75% 4.30% 11.24%
1990 10.84 0.51 (0.66) (0.15) 0.48 0.00 0.07 0.55 10.14 (1.47)% 4,559 0.75% 4.77% 26.04%
1989 10.35 0.57 1.82 2.39 0.59 0.00 1.31 1.90 10.84 23.42% 3,120 1.10% 4.38% 19.67%
1988(1) 10.00 0.34 0.34 0.68 0.32 0.00 0.01 0.33 10.35 6.85% 4,111 2.20%* 3.33%* 22.30%
- ---------------------------------------------------------------------------------------------------------------------------

EQUITY INDEX PORTFOLIO(3)

1995 $13.02 $0.34 $ 4.43 $ 4.77 $0.34 $0.00 $0.00 $0.34 $17.45 36.92% $137,519 0.42% 2.26% 7.52%
1994 13.24 0.30 (0.18) 0.12 0.30 0.00 0.04 0.34 13.02 1.05% 40,612 0.51% 2.37% 2.02%
1993 12.43 0.29 0.86 1.15 0.29 0.00 0.05 0.34 13.24 9.38% 33,836 0.50% 2.34% 1.15%
1992 11.98 0.29 0.53 0.82 0.29 0.00 0.08 0.37 12.43 6.95% 23,030 0.50% 2.53% 3.52%
1991(5) 10.00 0.30 2.16 2.46 0.30 0.00 0.18 0.48 11.98 24.88% 15,205 0.50%* 3.03%* 4.26%
- ---------------------------------------------------------------------------------------------------------------------------

INTERNATIONAL PORTFOLIO(3)(7)

1995 $11.94 $0.33 $ 0.91 $ 1.24 $0.25 $0.00 $0.00 $0.25 $12.93 10.56% $182,199 1.12% 1.87% 16.07%
1994 12.09 0.07 0.30 0.37 0.07 0.00 0.45 0.52 11.94 3.01% 75,971 1.22% 1.28% 52.22%
1993 9.38 0.09 2.73 2.82 0.09 0.02 0.00 0.11 12.09 30.02% 30,574 1.04% 0.92% 46.48%
1992 10.59 0.15 (1.19) (1.04) 0.17 0.00 0.00 0.17 9.38 (9.78)% 19,402 1.05% 1.43% 38.99%
1991 9.72 0.13 0.94 1.07 0.17 0.00 0.03 0.20 10.59 10.92% 18,239 1.04% 1.19% 69.71%
1990 12.44 0.16 (1.84) (1.68) 0.16 0.00 0.88 1.04 9.72 (13.48)% 14,266 1.05% 1.48% 69.24%
1989 11.29 0.02 2.30 2.32 0.06 0.00 1.11 1.17 12.44 20.51% 15,735 1.20% 0.14% 94.35%
1988(1) 10.00 0.09 1.66 1.75 0.06 0.00 0.40 0.46 11.29 17.69% 13,980 1.69%* 0.84%* 62.48%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

- -------
(1) Information is for the period from January 4, 1988 (commencement of
operations) to December 31, 1988.

(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.

(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.

* Ratios are annualized.

3
<PAGE>

THE PORTFOLIOS: INVESTMENT OBJECTIVES AND POLICIES

GENERAL

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; (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.

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.

4
<PAGE>

HIGH YIELD BOND PORTFOLIO

INVESTMENT OBJECTIVE. High level of current income.

5
<PAGE>

MANAGED BOND PORTFOLIO

INVESTMENT OBJECTIVE. Maximize total return consistent with prudent
investment management.

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 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.

6
<PAGE>

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.

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

INVESTMENT OBJECTIVE. Growth of capital. The realization of current income
will not be a factor in considering portfolio securities.

7
<PAGE>

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.

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.

AGGRESSIVE EQUITY PORTFOLIO

INVESTMENT OBJECTIVE. Capital appreciation. No consideration is given to
income.

8
<PAGE>

GROWTH LT PORTFOLIO

INVESTMENT OBJECTIVE. Long-term growth of capital in a manner consistent
with the preservation of capital.

9
<PAGE>

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.

10
<PAGE>

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.

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. The Portfolio may also invest up to 10%
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 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.

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.

11
<PAGE>

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.

INTERNATIONAL PORTFOLIO

12
<PAGE>

13
<PAGE>

EMERGING MARKETS PORTFOLIO

INVESTMENT OBJECTIVE. Long-term growth of capital.

14
<PAGE>

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.

ALL PORTFOLIOS: DIVERSIFICATION AND CHANGES IN POLICIES

SECURITIES AND INVESTMENT TECHNIQUES

DERIVATIVES

15
<PAGE>

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 included
among the descriptions below and in the SAI.

MORTGAGE-RELATED SECURITIES

APPLICABLE PORTFOLIOS: Money Market, High Yield Bond, Managed Bond,
Government Securities, Growth LT, and Multi-Strategy 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.

16
<PAGE>

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.

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).

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.

17
<PAGE>

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.

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, International,
and Emerging Markets Portfolios may acquire restricted securities.

PRECIOUS METALS-RELATED SECURITIES

APPLICABLE PORTFOLIOS. Possibly the Portfolios that invest in equity
securities.

18
<PAGE>

FOREIGN SECURITIES

19
<PAGE>

FORWARD FOREIGN CURRENCY CONTRACTS

APPLICABLE PORTFOLIOS: Managed Bond, Government Securities, Aggressive
Equity, Growth LT, Multi-Strategy, International, and Emerging Markets
Portfolios.

OPTIONS

20
<PAGE>

FOREIGN CURRENCY OPTIONS

APPLICABLE PORTFOLIOS: Managed Bond, Government Securities, Aggressive
Equity, Growth LT, International, and Emerging Markets Portfolios.

SWAP AGREEMENTS

APPLICABLE PORTFOLIO: Emerging Markets Portfolio.

21
<PAGE>

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 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

22
<PAGE>

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.

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 separate Portfolios,
twelve of which are described herein. 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.

23
<PAGE>

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
1995, Pacific Mutual had $44.2 billion of individual life insurance in force
and total assets of approximately $17.6 billion. Together with its
subsidiaries and affiliated enterprises, Pacific Mutual had total assets and
funds under management of over $116.6 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.

Pacific Mutual and the Fund employ other investment advisory firms as
Portfolio Managers for all of the Fund's Portfolios, except the Money Market
and High Yield Bond Portfolios.

WHO AT PIMCO MANAGES THE MANAGED BOND AND GOVERNMENT SECURITIES
PORTFOLIOS? Mr. John L. Hague, Managing Director and senior member of PIMCO's
Portfolio Management Group, has primary

24
<PAGE>

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 15 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 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 34 years of experience as an investment professional (24 years with
Capital Guardian or its affiliates). Michael R. Ericksen, Vice President of
Capital Guardian, has had 14 years experience as an investment professional (8
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 44
years of experience as an investment professional (30 years with Capital
Guardian or its affiliates). Douglas M. Urban, Senior Vice President, Capital
Guardian, has had 22 years of experience as an investment professional (12
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.

25
<PAGE>

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 the firm's 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.

26
<PAGE>

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 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.

27
<PAGE>

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, and Government
Securities Portfolios, the Fund pays .60% of the average daily net assets of
each of the Portfolios. For the Growth, Equity Income, 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.

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 December 31, 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--.53%, High Yield Bond
Portfolio--.77%, Managed Bond Portfolio--.76%, Government Securities
Portfolio--.82%, Growth Portfolio--.79%, Growth LT Portfolio--.94%, Equity
Income Portfolio--.83%, Multi-Strategy Portfolio--.84%, Equity Index
Portfolio--.42%, and International Portfolio--1.12%. 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.

WHO DISTRIBUTES THE FUND'S SHARES? Shares of the Fund are distributed
through Pacific Mutual Distributors, Inc. (the "Distributor" or "PMD"),
(formerly known as Pacific Equities Network) a wholly-owned subsidiary of
Pacific Mutual. PMD's address is 700 Newport Center Drive, Newport Beach,
California 92660. PMD is a broker-dealer registered with the SEC and a member
of the National Association of Securities Dealers. PMD acts as Distributor
without remuneration from the Fund.

28
<PAGE>

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 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.

29
<PAGE>

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.

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,
Government Securities, Growth LT, Equity Income, and Multi-Strategy 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.

OTHER INFORMATION ABOUT THE FUND

30
<PAGE>

31
<PAGE>

TOTAL RETURN

<TABLE>
<CAPTION>
AVERAGE
ANNUAL
TOTAL
RETURN
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR (FOR ALL
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED YEARS
12/31/88(1) 12/31/89 12/31/90 12/31/91(2) 12/31/92 12/31/93 12/31/94(3) 12/31/95 SHOWN)
----------- -------- -------- ----------- -------- -------- ----------- -------- --------
<S> <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 5.54 5.40
High Yield Bond......... 8.30 4.16 0.38 24.58 18.72 18.01 0.42 18.87 11.33
Managed Bond............ 7.11 14.74 8.52 17.03 8.68 11.63 - 4.36 19.04 10.08
Government Securities... 6.65 14.61 8.01 16.67 7.52 10.79 - 5.10 18.81 9.52
Growth.................. 15.31 34.96 - 17.30 39.15 20.53 21.89 - 10.49 25.75 14.54
Growth LT............... -- -- -- -- -- -- 13.25 36.75 24.52
Equity Income(4)........ 8.25 29.22 - 7.54 31.42 5.36 8.29 - 0.28 31.66 12.40
Multi-Strategy(4)....... 6.85 23.42 - 1.47 24.03 5.57 9.25 - 1.50 25.25 10.94
Equity Index............ -- -- -- 24.88 6.95 9.38 1.05 36.92 15.37
International(4)........ 17.69 20.51 - 13.48 10.92 - 9.78 30.02 3.01 10.56 7.76
</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 through December 31, 1993 were achieved 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.

APPENDIX

DESCRIPTION OF BOND RATINGS

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). 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.

32
<PAGE>

33
<PAGE>

[LOGO OF PACIFIC SELECT FUND]

PACIFIC SELECT FUND

INVESTMENT ADVISER Pacific Investment Management Company
Pacific Mutual Life Insurance Company 840 Newport Center Drive, Suite 360
700 Newport Center Drive Post Office Box 6430
Post Office Box 9000 Newport Beach, California 92658-6430
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 Pacific Mutual Distributors, Inc.
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
Janus Capital Corporation Suite 1200
100 Fillmore Street Costa Mesa, California 92626
Denver, Colorado 80206-4923
COUNSEL
J.P. Morgan Investment Management Inc. Dechert Price & Rhoads
522 Fifth Avenue 1500 K Street, N.W.
New York, New York 10036 Suite 500
Washington, D.C. 20005

Prospectus dated April 1, 1996

<PAGE>

PACIFIC SELECT FUND

PROSPECTUS

(11 PORTFOLIOS)
<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
separate portfolios (each a "Portfolio"). This Prospectus describes eleven
Portfolios of the Fund. 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 eleven Portfolios of the Fund are as follows:

The Money Market Portfolio* The Multi-Strategy Portfolio
The High Yield Bond Portfolio The Equity Portfolio
The Managed Bond Portfolio The Bond and Income Portfolio
The Government Securities Portfolio The Equity Index Portfolio
The Growth LT Portfolio The International Portfolio
The Equity Income Portfolio

- --------

* Investment in the Money Market Portfolio (or in any other Portfolio) is
neither insured nor guaranteed by the U.S. Government.

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

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.

THE DATE OF THIS PROSPECTUS IS APRIL 1, 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 LT Portfolio...................................................... 8
Equity Income Portfolio.................................................. 9
Multi-Strategy Portfolio................................................. 10
Equity Portfolio......................................................... 10
Bond and Income Portfolio................................................ 11
Equity Index Portfolio................................................... 11
International Portfolio.................................................. 12
All Portfolios: Diversification and Changes in Policies.................. 14
SECURITIES AND INVESTMENT TECHNIQUES....................................... 14
Derivatives.............................................................. 14
Mortgage-Related Securities.............................................. 14
High Yield Bonds......................................................... 16
Small Capitalization Stocks.............................................. 16
Borrowing................................................................ 16
Illiquid and Restricted Securities....................................... 17
Precious Metals-Related Securities....................................... 17
Foreign Securities....................................................... 17
Forward Foreign Currency Contracts....................................... 18
Options.................................................................. 19
Foreign Currency Options................................................. 19
Spread Transactions...................................................... 20
Futures Contracts and Futures Options.................................... 20
ORGANIZATION AND MANAGEMENT OF THE FUND.................................... 21
MORE ON THE FUND'S SHARES.................................................. 26
OTHER INFORMATION ABOUT THE FUND........................................... 28
TOTAL RETURN............................................................... 30
APPENDIX................................................................... 30
Description of Bond Ratings.............................................. 30
</TABLE>
<PAGE>

THE FUND'S PORTFOLIOS AT A GLANCE

<TABLE>
<CAPTION>
PRIMARY INVESTMENTS
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 3-7 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 3-7 years
- ----------------------------------------------------------------------------------------------------------------
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 income Investment grade debt Greenwich Street Advisors
Income consistent with prudent investment securities Division of Smith Barney
management and Mutual Funds Management Inc.
preservation of capital
- ----------------------------------------------------------------------------------------------------------------
Equity Index Provide investment results that Stocks included in the Bankers Trust Company
correspond to the total return S&P 500
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
- ----------------------------------------------------------------------------------------------------------------
</TABLE>

CONDENSED FINANCIAL INFORMATION

1
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Investment Activities Distributions Ratios/Supplemental Data
------------------------------ --------------------------- ------------------------------------------------------
Ratio
Net Ratio of
Realized Net Net of Net
Net and Distri- Asset Assets, Expenses Investment Port-
Asset Net Unrealized Dividends butions Value, End of to Income folio
Year Value, Invest- Gain(Loss) Total from (from Net (from Total End Total Period Average to Turn-
Ended Beginning ment on Investment Investment Capital Distri- of Return (in Net Average over
12/31 of Period Income Securities Operations Income) Gains) bution Period (8) thousands) Assets Net Assets Rate
- ----- --------- ------ ---------- ---------- ---------- ------- ------- ------ ------ ---------- -------- ---------- --------

HIGH YIELD BOND PORTFOLIO

MANAGED BOND PORTFOLIO

GOVERNMENT SECURITIES PORTFOLIO

GROWTH LT PORTFOLIO

2
<PAGE>

<TABLE>
<CAPTION>
Investment Activities Distributions Ratios/Supplemental Data
-------------------------- --------------------------------------- ------------------------------------------------
Ratio
of
Net
Net Net Divi- In Net Ratio Invest-
Asset Realized Total dends excess Net Assets, of ment
Value, and from (from of Distri- Asset End of Expenses Income Port-
Begin- Net Unrealized Invest- Net Net butions Value, Period to to folio
Year ning Invest- Gain(Loss) ment Invest- Invest- (from Return Total End Total (in Average Average Turn-
Ended of ment on Opera- ment ment Capital of Distri- of Return thous- Net Net over
12/31 Period Income Securities tions Income) Income Gains) Capital bution Period (8) ands) Assets Assets Rate
- ------- ------ ------- ---------- ------- ------- ------- ------- ------- ------- ------ ------- -------- -------- ------- -------

MULTI-STRATEGY PORTFOLIO(2)(5)

EQUITY PORTFOLIO (FORMERLY A SERIES OF PACIFIC CORINTHIAN VARIABLE FUND)

BOND AND INCOME PORTFOLIO (FORMERLY A SERIES OF PACIFIC CORINTHIAN VARIABLE FUND)

EQUITY INDEX PORTFOLIO(2)

1995 $13.02 $0.34 $ 4.43 $ 4.77 $0.34 $0.00 $0.00 $0.00 $0.34 $17.45 36.92% $137,519 0.42% 2.26% 7.52%
1994 13.24 0.30 (0.18) 0.12 0.30 0.00 0.04 0.00 0.34 13.02 1.05% 40,612 0.51% 2.37% 2.02%
1993 12.43 0.29 0.86 1.15 0.29 0.00 0.05 0.00 0.34 13.24 9.38% 33,836 0.50% 2.34% 1.15%
1992 11.98 0.29 0.53 0.82 0.29 0.00 0.08 0.00 0.37 12.43 6.95% 23,030 0.50% 2.53% 3.52%
1991(4) 10.00 0.30 2.16 2.46 0.30 0.00 0.18 0.00 0.48 11.98 24.88% 15,205 0.50%* 3.03%* 4.26%
- ----------------------------------------------------------------------------------------------------------------------------------

INTERNATIONAL PORTFOLIO(2)(6)

3
<PAGE>

(continued on next page)
- --------
(1) Information is for the period from January 4, 1988 (commencement of
operations) to December 31, 1988.

(3) Information is for the period from January 4, 1994 (commencement of
operations) to December 31, 1994.

(4) Information is for the period from January 30, 1991 (commencement of
operations) to December 31, 1991.

(6) 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.

* Ratios are annualized.

THE PORTFOLIOS: INVESTMENT OBJECTIVES AND POLICIES

GENERAL

MONEY MARKET PORTFOLIO

INVESTMENT OBJECTIVE. Current income consistent with preservation of
capital.

4
<PAGE>

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.

5
<PAGE>

MANAGED BOND PORTFOLIO

INVESTMENT OBJECTIVE. Maximize total return consistent with prudent
investment management.

6
<PAGE>

GOVERNMENT SECURITIES PORTFOLIO

INVESTMENT OBJECTIVE. Maximize total return consistent with prudent
investment management.

7
<PAGE>

GROWTH LT PORTFOLIO

INVESTMENT OBJECTIVE. Long-term growth of capital in a manner consistent
with the preservation of capital.

8
<PAGE>

EQUITY INCOME PORTFOLIO

INVESTMENT OBJECTIVE. Long-term growth of capital and income.

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.

9
<PAGE>

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.

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. The Portfolio may also invest up to 10%
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 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.

EQUITY PORTFOLIO

INVESTMENT OBJECTIVE. The primary investment objective of the Equity
Portfolio is capital appreciation. Current income is of secondary importance.

10
<PAGE>

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.

BOND AND INCOME PORTFOLIO

INVESTMENT OBJECTIVE. Provide as high a level of current income as is
consistent with prudent investment management and preservation of capital.

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.

11
<PAGE>

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.

INTERNATIONAL PORTFOLIO

12
<PAGE>

common stock. The Portfolio may, however, for defensive purposes as described
below, invest in nonconvertible fixed income securities denominated in
currencies of foreign countries and in United States dollars.

13
<PAGE>

ALL PORTFOLIOS: DIVERSIFICATION AND CHANGES IN POLICIES

SECURITIES AND INVESTMENT TECHNIQUES

DERIVATIVES

MORTGAGE-RELATED SECURITIES

14
<PAGE>

15
<PAGE>

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).

SMALL CAPITALIZATION STOCKS

APPLICABLE PORTFOLIOS. Growth LT, and Equity Portfolios, and to a lesser
degree, Equity Income and Multi-Strategy Portfolios.

BORROWING

APPLICABLE PORTFOLIOS. All Portfolios.

16
<PAGE>

ILLIQUID AND RESTRICTED SECURITIES

APPLICABLE PORTFOLIOS: All Portfolios may acquire illiquid securities. The
Money Market, High Yield Bond, Managed Bond, Government Securities, Growth LT,
Equity Income, Multi-Strategy, Equity, Bond and Income, and International
Portfolios may acquire restricted securities.

PRECIOUS METALS-RELATED SECURITIES

APPLICABLE PORTFOLIOS. Equity Portfolio, and possibly other Portfolios that
invest in equity securities.

FOREIGN SECURITIES

APPLICABLE PORTFOLIOS: The International Portfolio may invest primarily in
equity securities of foreign issuers and may invest in debt securities and
money market obligations of foreign issuers. The Growth LT Portfolio may
invest up to 25% of its assets in foreign securities denominated in a foreign
currency. The 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. The Managed Bond and Government Securities
Portfolios may invest up to 20% of their assets in foreign debt securities
denominated in a foreign currency. The Multi-Strategy Portfolio may invest up
to 10% of its assets in foreign debt securities denominated in a foreign
currency. The 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 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 an ownership arrangement similar to ADRs
and are designed for use in European securities markets; and may invest in
Global

17
<PAGE>

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.

FORWARD FOREIGN CURRENCY CONTRACTS

APPLICABLE PORTFOLIOS: Managed Bond, Government Securities, Growth LT,
Multi-Strategy, and International Portfolios.

18
<PAGE>

OPTIONS

APPLICABLE PORTFOLIOS: The High Yield Bond, Managed Bond, Government
Securities, Growth LT, Equity Income, and Multi-Strategy Portfolios may
purchase put and call options on securities in pursuing their investment
objectives. The High Yield Bond, Managed Bond, Government Securities, Growth
LT, Equity Income, and Multi-Strategy Portfolios may write (sell) 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 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.

FOREIGN CURRENCY OPTIONS

APPLICABLE PORTFOLIOS: Managed Bond, Government Securities, Growth LT, and
International Portfolios.

19
<PAGE>

SPREAD TRANSACTIONS

APPLICABLE PORTFOLIO: High Yield Bond Portfolio.

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
purchase and sell interest rate futures contracts and options thereon
("futures options"). The Growth LT, Equity Income, Multi-Strategy, Equity
Index, and International Portfolios may purchase and sell stock index futures
contracts and may purchase options thereon. The Managed Bond, Government
Securities, Growth LT, and International Portfolios may purchase and sell
foreign currency futures contracts and options thereon.

20
<PAGE>

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.

FOREIGN FUTURES. The Managed Bond, Government Securities, Growth LT, and
International Portfolios may trade futures contracts and options on futures
contracts on U.S. domestic markets as well as 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 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

21
<PAGE>

DOES PACIFIC MUTUAL MANAGE ANY OF THE PORTFOLIOS DIRECTLY? Pacific Mutual
directly manages both the High Yield Bond and the Money Market Portfolios.

Pacific Mutual and the Fund employ other investment advisory firms as
Portfolio Managers for all of the Fund's Portfolios, except the Money Market
and High Yield Bond Portfolios.

WHO AT PIMCO MANAGES THE MANAGED BOND AND GOVERNMENT SECURITIES
PORTFOLIOS? Mr. John L. Hague, Managing Director and senior member of PIMCO's
Portfolio Management Group, has primary

22
<PAGE>

23
<PAGE>

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 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.

24
<PAGE>

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.

HOW MUCH DOES THE FUND PAY FOR THE ADVISORY 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 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 International Portfolio, the Fund pays .85% of the average
daily net assets of the Portfolio. These fees are computed and accrued daily
and paid monthly.

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 December 31, 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--.53%, High Yield Bond
Portfolio--.77%, Managed Bond Portfolio--.76%, Government Securities
Portfolio--.82%, Growth LT Portfolio--.94%, Equity Income Portfolio--.83%,
Multi-Strategy Portfolio--.84%, Equity Portfolio--.80%, Bond and Income
Portfolio--.80%, Equity Index Portfolio--.42%, and International Portfolio--
1.12%. 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

25
<PAGE>

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.

WHO DISTRIBUTES THE FUND'S SHARES? Shares of the Fund are distributed
through Pacific Mutual Distributors, Inc. (the "Distributor" or "PMD")
(formerly known as Pacific Equities Network), a wholly-owned subsidiary of
Pacific Mutual. PMD's address is 700 Newport Center Drive, Newport Beach,
California 92660. PMD is a broker-dealer registered with the SEC and a member
of the National Association of Securities Dealers. PMD acts as Distributor
without remuneration from the Fund.

MORE ON THE FUND'S SHARES

26
<PAGE>

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 Portfolio 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.

27
<PAGE>

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

28
<PAGE>

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.

29
<PAGE>

TOTAL RETURN

<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 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
RETURN
YEAR (FOR ALL
ENDED YEARS
12/31/95 SHOWN)
-------- --------
<S> <C> <C>
Money Market.... 5.54 5.40
High Yield Bond. 18.87 11.33
Managed Bond.... 19.04 10.08
Government
Securities..... 18.81 9.52
Growth LT....... 36.75 24.52
Equity
Income(4)...... 31.66 12.40
Multi-
Strategy(4).... 25.25 10.94
Equity(5)....... 23.80 13.74
Bond and
Income(5)...... 33.71 13.35
Equity Index.... 36.92 15.37
International(4). 10.56 7.76
</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 through December 31, 1993 were achieved 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

30
<PAGE>

ultimate degree of protection as to principal and interest. With AA bonds, as
with AAA bonds, prices move with the long-term money market.

31
<PAGE>

[LOGO of PACIFIC SELECT FUND]

PACIFIC SELECT FUND

INVESTMENT ADVISER Templeton Investment Counsel, Inc.
Pacific Mutual Life Insurance Company Broward Financial Centre
700 Newport Center Drive Suite 2100
Post Office Box 9000 Fort Lauderdale, Florida 33394-3091
Newport Beach, California 92660
DISTRIBUTOR
PORTFOLIO MANAGERS Pacific Mutual Distributors, Inc.
Bankers Trust Company Member: NASD & SIPC
130 Liberty Street 700 Newport Center Drive
New York, New York 10006 P.O. Box 9000
Newport Beach, California 92660

Greenwich Street Advisors
388 Greenwich Street CUSTODIAN
23rd Floor Investors Fiduciary Trust Company
New York, New York 10048 127 West Tenth Street
Kansas City, Missouri 64105
Janus Capital Corporation
100 Fillmore Street ACCOUNTANTS
Denver, Colorado 80206-4923 Deloitte & Touche LLP
695 Town Center Drive
J.P. Morgan Investment Management Inc. Suite 1200
522 Fifth Avenue Costa Mesa, California 92626
New York, New York 10036
COUNSEL
Pacific Investment Management Company Dechert Price & Rhoads
840 Newport Center Drive, Suite 360 1500 K Street, N.W.
Post Office Box 6430 Suite 500
Newport Beach, California 92658-6430 Washington, D.C. 20005

Prospectus dated April 1, 1996

FORM NO. 700-01
<PAGE>

PACIFIC SELECT FUND

STATEMENT OF ADDITIONAL INFORMATION

(14 PORTFOLIOS)

<PAGE>

[LOGO OF PACIFIC SELECT FUND]

PACIFIC SELECT FUND

STATEMENT OF ADDITIONAL INFORMATION

DATE: APRIL 1, 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 April 1, 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 Mutual Distributors, Inc.
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
Fundamental Investment Restrictions....................................... 29
Nonfundamental Investment Restrictions.................................... 30
</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............................................................. 43
PERFORMANCE INFORMATION..................................................... 44
TAXATION.................................................................... 47
Distributions............................................................. 48
Hedging Transactions...................................................... 48
OTHER INFORMATION........................................................... 48
Concentration Policy...................................................... 48
Capitalization............................................................ 48
Voting Rights............................................................. 49
Custodian and Transfer Agency and Dividend Disbursing Services............ 49
Financial Statements...................................................... 49
Independent Accountants................................................... 50
Counsel................................................................... 50
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.

3
<PAGE>

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

4
<PAGE>

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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<PAGE>

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 may only invest 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 Manager, are of an
investment quality comparable to fixed income obligations in which the
Portfolio may invest. The Aggressive Equity and Emerging Markets Portfolios
may only invest 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
Manager, are of an investment quality comparable to obligations of United
States banks in which the Portfolios may invest. There is no limitation on the
amount of a Portfolio's assets which may be invested in obligations of foreign
banks if the bank obligations meet the appropriate conditions set forth above.

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

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and, to the extent of 20% of their assets, the Managed Bond, and Government
Securities Portfolios, and to the extent of 10% of its assets the Multi-
Strategy Portfolio, 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 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 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
nonconvertible 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
nonconvertible fixed-income securities (nonconvertible 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 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. The Multi-Strategy Portfolio
may invest up to 10% of its 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.

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Fund. Under these agreements, Chase and IFTC have agreed (i) to use reasonable
care in the safekeeping of these securities, (ii) 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
and (iii) 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 its relative costs
for the services to be rendered. 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 assets
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.

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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).

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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.

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 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.

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<PAGE>

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 put and call options on stock indexes which are standardized and
traded on an U.S. exchange or board of trade, or for which an established
over-the-counter market exists. 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 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.

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.

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.

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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 write
(sell) 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.

The High Yield Bond, Multi-Strategy, Equity Income and Equity Index
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 or 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.

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<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 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, 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.

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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.

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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

FUNDAMENTAL 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) 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);

(vi) 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;

(vii) 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

In addition, with respect to the Money Market, High Yield Bond, Managed
Bond, Government Securities, Growth, Growth LT, Equity Income, Multi-Strategy,
Equity Index and International Portfolios, unless otherwise indicated, such
Portfolios may not:

(viii) 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;

29
<PAGE>

(ix) except the Growth LT Portfolio, 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;

(x) except the Growth LT Portfolio, 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.

NONFUNDAMENTAL INVESTMENT RESTRICTIONS

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) 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) 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, (a)
futures contracts and options on futures contracts, (b) forward foreign
currency contracts and (c) stock index futures, options on stock indexes, and
options on stock index futures; subject to any applicable restrictions
described in the Prospectus and in the SAI.

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 The Irvine Company;
Director of Edison
International.

Richard A. Nelson Trustee President of Nelson
8 Cherry Hills Lane Financial Consultants;
Newport Beach, CA 92660 retired Partner with Ernst &
Age 66 Young; Director, Wynn's
International, Inc.

Lyman W. Porter Trustee Professor of the Graduate
University of California School of Management at the
at Irvine University of California,
Irvine, CA 92717 Irvine.
Age 66

Alan Richards Trustee Consultant and Investor;
P. O. Box 675760 Partner, Old Winery Estates;
15401 Pimlico Corte Partner, Lomas Verdes
Rancho Santa Fe, CA 92067 Estates; Director,
Age 66 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 1995. It also shows
total compensation paid to these Trustees in 1995 by the Fund and PIMCO Funds:
Equity Advisors Series (formerly 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............... $18,500 0 0 $37,833
Lyman W. Porter................. $17,500 0 0 $35,667
Alan Richards................... $18,500 0 0 $37,583
</TABLE>

None of the Trustees or Officers directly own shares of the Fund. As of
January 31, 1995, 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, 1996, 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
January 30, 1996. 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, 1997, 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, 1997.

Net advisory fees paid or owed to Pacific Mutual for 1995 were as follows:
Money Market Portfolio--$386,292, High Yield Bond Portfolio--$318,918, Managed
Bond Portfolio--$519,084, Government Securities Portfolio--$226,533, Growth
Portfolio--$708,702, Growth LT Portfolio--$845,391, Equity Income Portfolio--
$840,710, Multi-Strategy Portfolio--$650,409, Equity Portfolio--$564,917, Bond
and Income Portfolio--$255,233, Equity Index Portfolio--$194,604 and
International Portfolio--$1,030,744.

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.

33
<PAGE>

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.

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, and $415,347 and $124,604 in 1993.
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, and $178,349 and
$66,881 in 1993.

The Fund paid Pacific Mutual $28,550 for its services under the Agreement
for Support Services during 1995, representing 0.003% of the Fund's average
daily net assets and anticipates that fees to be paid for 1996 under said
Agreement will be approximately 0.007% of the Fund's average daily net assets.

PORTFOLIO MANAGEMENT AGREEMENTS

Pursuant to a Portfolio Management Agreement between the Fund, the Adviser,
and Pacific Investment Management Company ("PIMCO"), 840 Newport Center Drive,
Suite 360, Post Office Box 6430, Newport Beach, California 92658-6430, 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 Funds:
Equity Advisors Series (formerly 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., 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 1995 were $310,529 for the Managed Bond Portfolio
and $171,814 for the Government Securities Portfolio, in 1994 were $149,130
for the Managed Bond Portfolio and $106,476 for the Government Securities
Portfolio, and in 1993 were $159,860 for the Managed Bond Portfolio and
$106,139 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, 1995, in excess of $48 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. which is a closed-end investment company.

Net fees paid or owed by Pacific Mutual to Capital Guardian for the Growth
Portfolio in 1995 were $417,483, in 1994 were $335,544, and in 1993 were
$196,614.

Pursuant to a Portfolio Management Agreement between the Fund, the Adviser,
and Janus Capital Corporation ("Janus"), 100 Fillmore Street, 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 in 1995 were $664,739, and 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. Incorporated ("Morgan"), 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 Morgan.

Morgan acquired its first tax-exempt client in 1913 and its first pension
account in 1940. As of December 31, 1995, J.P. Morgan Investment's assets
under management were approximately $139 billion. With offices around the
globe, J.P. Morgan Investment draws from a worldwide resources base to provide
comprehensive service to an international group of clients.

J.P. Morgan Investment also provides investment advisory services to the
following registered 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 Sierra Trust
Funds and of The Sierra Variable Trust, International Securities Fund,
International Fund, Emerging Markets Fund, Equity Q Fund and Quantitative
Equity Fund of Frank Russell Investment Co., Preferred Fixed Income Fund and
Preferred Money Market Fund of The Preferred Group of Mutual Funds, AST Money
Market Portfolio of American Skandia's Trust, Benham European Government Bond
Fund, Growth and Income Stock Portfolio of Northwestern Mutual Series Fund,
Inc., North American Funds International Growth and Income Fund and NASL
Series Trust's International Growth and Income Trust.

Net fees paid or owed by Pacific Mutual to J.P. Morgan Investment in 1995
were $537,832 for the Equity Income Portfolio and $417,904 for the Multi-
Strategy Portfolio, 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.

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"), 388 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 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.

Greenwich Street Advisors and its predecessors have been in the investment
counseling business since 1934 providing investment advice to a wide variety
of individual and institutional clients. SBMFM and its predecessors have been
providing investment-advisory services to mutual funds since 1968. As of
December 31, 1995, Greenwich Street Advisors had aggregate assets under
management in excess of $53 billion and SBMFM had approximately $65.5 billion
of mutual funds under management.

Net fees paid or owed by Pacific Mutual to Greenwich Street Advisors in 1995
were $435,730 for the Equity Portfolio. 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, and $415,347 in 1993.
Net fees paid or owed by Pacific Mutual to Greenwich Street Advisors in 1995
were $170,779 for the Bond and Income Portfolio. 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, and $178,349 in 1993. The same fee schedules were in effect for the
predecessors of the Equity Portfolio and Bond and Income Portfolio as are
currently in effect.

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 Equity Advisors Series (formerly PIMCO Advisors Institutional Funds),
and the Cash Accumulation Trust. As of December 31, 1995, Columbus Circle
Investors managed approximately $12.7 billion of assets, including
approximately $4.3 billion of mutual fund assets.

Pursuant to a Portfolio Management Agreement between the Fund, the Adviser
and Bankers Trust Company ("BTCO"), a wholly-owned subsidiary of Bankers Trust
New York Corporation, 130 Liberty Street, New York, New York 10006, BTCO 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 BTCO, 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. For the calendar year 1995 and after
October 18, 1994, the fee was subject to a minimum annual fee of $75,000 and
$50,000, respectively. Prior to October 18, 1994, the fee was subject to a
minimum annual fee of $20,000.

BTCO 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 BTCO, the department directly responsible for
the management of the Equity Index Portfolio, as of December 31, 1995, managed
assets approximating $110.4 billion. BTCO is the investment manager to the
following registered investment companies: Short-Intermediate Fixed-Income
Portfolio of Accessor 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, Cash Management Portfolio,
and 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; Small Cap
Portfolio; Tax Free Money Portfolio; Treasury Money Portfolio and Utility
Portfolio; The Limited Maturity Bond Series, Emerging Market Series, and The
Liquid Asset Series of the GCG Trust.

Net fees paid or owed by Pacific Mutual to BTC in 1995 were $75,000, in 1994
were $50,000, and in 1993 were $21,027.

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, Carmel, Hong Kong, Singapore,
Edinburgh, Melbourne, Toronto, Buenos Aires, Bombay, Warsaw, Moscow,
Johannesburg, Ho Chi Minh City, and the Bahamas. Templeton and its affiliates
serve as advisers for over 170 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, 1995,
the Templeton organization managed approximately $53.5 billion in assets,
including over $5.9 billion invested in equity securities in emerging market
countries, and over $604.4 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, 1995,
the Templeton/Franklin organization managed over $136 billion in assets
worldwide.

Net fees paid or owed by Pacific Mutual to Templeton for the International
Portfolio in 1995 were $643,941, and 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.

Pursuant to a Portfolio Management Agreement between the Fund, the Adviser
and Blairlogie Capital Management ("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 Funds: Equity Advisors Series (formerly PIMCO Advisors
Institutional Funds). As of December 31, 1995, Blairlogie managed
approximately $645.4 million of assets, including approximately $379.1 million
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 Mutual Distributors, Inc. ("PMD") (formerly Pacific Equities
Network) 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. PMD 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 PMD in connection with the distribution or sale of the shares.

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 April 1, 1996, Pacific Mutual beneficially owned 0% of the outstanding
shares of the Portfolios of the Fund. Pacific Financial Asset Management
Corporation ("PFAMCo"), a wholly-owned subsidiary of Pacific Mutual,
beneficially owned 100% of the outstanding shares of the Aggressive Equity
Portfolio and the Emerging Markets Portfolio, including monies paid in
connection with the initial capital advances made to the Fund, and 0% of the
outstanding shares of the other twelve Portfolios of the Fund. Pacific Mutual
and PFAMCo would exercise voting rights attributable to any shares of the Fund
owned by them in accordance with voting instructions received by Owners of the
Policies issued by Pacific Mutual. To this extent, as of April 1, 1996,
Pacific Mutual and PFAMCo 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

40
<PAGE>

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.

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.

41
<PAGE>

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 1995, the following Portfolios incurred brokerage
commissions and markups on principal transactions as follows: the High Yield
Bond Portfolio--$0, the Managed Bond Portfolio--$21,987, the Government
Securities Portfolio--$11,874, the Growth Portfolio--$167,561, the Equity
Income Portfolio--$314,236, the Multi-Strategy Portfolio--$129,476, the Equity
Portfolio--$335,550, of which $68,472 (20.41%) was paid to Smith Barney Inc.
or its predecessors, and $22,500 (6.71%) was paid to Robinson Humphrey Co.,
Inc., affiliates of Greenwich Street Advisors, the Bond and Income Portfolio--
$0, the Equity Index Portfolio--$43,415, the International Portfolio--
$376,660, and the Growth LT Portfolio--$325,340. During the years 1994 and
1993, respectively, the following Portfolios incurred brokerage commissions as
follows: the High Yield Bond Portfolio--$0 and $690, the Managed Bond
Portfolio--$9,636 and $5,568, the Government Securities Portfolio--$5,652 and
$4,548, the Growth Portfolio--$118,823, of which $558 (0.47%) was paid to J.P.
Morgan Securities, an affiliate of J.P. Morgan Investment, and $119,526, the
Equity Income Portfolio--$126,489, of which $84 (0.07%) was paid to BT
Securities, an affiliate of BTCO, and $33,310, the Multi-Strategy Portfolio--
$77,944, of which $62 (0.08%) was paid to BT Securities, and $28,251, 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, and $418,458, of which $71,472 (17.08%) was paid to Smith Barney
Inc. or its predecessors, the Bond and Income Portfolio--$0 and $0, the Equity
Index Portfolio--$6,337 and $6,541, and the International Portfolio--$304,029,
of which $515 (0.17%) was paid to J.P. Morgan Securities, and $126,924, and
the Growth LT Portfolio--$101,353, of which $259 (0.26%) was paid to J.P.
Morgan Securities. Information for the years 1994 and 1993 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 Growth LT Portfolio had
not commenced operations as of December 31, 1993. The Aggressive Equity and
Emerging Markets Portfolios had not commenced operations as of December 31,
1995.

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 1995, 1994,
and 1993, respectively, the portfolio turnover rate for each of the Portfolios
was as follows: Money Market Portfolio--0%, 0%, and 0%, High Yield Bond
Portfolio--127%, 142%, and 186%, Managed Bond Portfolio--191%, 128%, and 163%,
Government Securities Portfolio--299%, 233%, and 402%, Growth Portfolio--47%,
40%, and 35%, Growth LT Portfolio--166%, and 257%, Equity Income Portfolio--
86%, 135%, and 28%, Multi-Strategy Portfolio--176%, 187%, and 28%, Equity
Portfolio--226%, 179%, and 230%, Bond and Income Portfolio--52%, 32%, and 42%,
International Portfolio--16%, 52%, and 46%, and Equity Index Portfolio--8%,
2%, and 1%. The 1994 portfolio turnover rate for the Growth LT Portfolio is
based on the period from commencement of operations on January 4, 1994 to
December 31, 1994. Information for the years 1994 and 1993 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.

42
<PAGE>

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 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:

43
<PAGE>

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.

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) (To the power of 365/7)]-1

For the 7-day period ending December 31, 1995, the current yield of the
Money Market Portfolio was 5.53% and the effective yield of the Portfolio was
5.68%.

44
<PAGE>

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:

2[ (a-b + 1) (to the power of 6) -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.

For the 30 day period ended December 31, 1995, the yield of the remaining
Portfolios that had commenced operations on or before that date was as
follows: 9.12% for the High Yield Bond Portfolio, 5.89% for the Managed Bond
Portfolio, 5.62% for the Government Securities Portfolio, 0.39% for the Growth
Portfolio, 0.99% for the Growth LT Portfolio, 3.63% for the Multi-Strategy
Portfolio, 1.88% for the Equity Income Portfolio, (0.09)% for the Equity
Portfolio, 6.69% for the Bond and Income Portfolio, 1.25% for the
International Portfolio, and 2.49% 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 December 31, 1995, the total return for each
Portfolio that had commenced operations on or before that date was as follows:
5.54% for the Money Market Portfolio, 18.87% for the High Yield Bond
Portfolio, 19.04% for the Managed Bond Portfolio, 18.81% for the Government
Securities Portfolio, 25.75% for the Growth Portfolio, 36.75% for the Growth
LT Portfolio, 31.66% for the Equity Income Portfolio, 25.25% for the Multi-
Strategy Portfolio, 23.80% for the Equity Portfolio, 33.71% for the Bond and
Income Portfolio, 10.56% for the International Portfolio, and 36.92% 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 December 31, 1995, the average annual total
return for each Portfolio that had commenced operations on or before that date
was as follows: 4.17% for the Money Market Portfolio, 15.83% for the High
Yield Bond Portfolio, 10.14% for the Managed Bond Portfolio, 9.46% for the
Government Securities Portfolio, 18.41% for the Growth Portfolio, 14.53% for
the Equity Income Portfolio, 12.08% for the Multi-Strategy Portfolio, 13.99%
for the Equity Portfolio, 14.47% for the Bond and Income Portfolio, and 8.18%
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 December 31, 1995.

For the ten year period ended December 31, 1995, the average annual total
returns for the Equity Portfolio and Bond and Income Portfolio were 12.46% and
11.40%, respectively.

45
<PAGE>

Based upon the period from the commencement of Fund operations on January 4,
1988 until December 31, 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, 11.33% for the High Yield Bond Portfolio, 10.08% for
the Managed Bond Portfolio, 9.52% for the Government Securities Portfolio,
14.54% for the Growth Portfolio, 12.40% for the Equity Income Portfolio,
10.94% for the Multi-Strategy Portfolio, and 7.76% for the International
Portfolio. Based upon the period from the commencement of the Equity Index
Portfolio operations on January 30, 1991 until December 31, 1995, the average
annual total return for the Equity Index Portfolio was 15.37%. Based upon the
period from the commencement of operations of the Growth LT Portfolio on
January 4, 1994 until December 31, 1995, the average annual total return for
the Growth LT Portfolio was 24.52%. 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 13.74% and 13.35%, respectively. The
Aggressive Equity and Emerging Markets Portfolios had not commenced operations
on December 31, 1995.

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 Portfolio,
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.

46
<PAGE>

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 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.

47
<PAGE>

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.

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.

48
<PAGE>

Expenses incurred by the Aggressive Equity, Growth LT, and Emerging Markets
Portfolios in connection with the Fund's organization and establishment of
those Portfolios and the public offering of the shares of those Portfolios,
aggregated approximately $23,410, $3,952, and $23,410, respectively. These
costs have been deferred by the Aggressive Equity, Growth LT, and Emerging
Markets Portfolios and are being amortized by them over a period of five years
from the beginning of operations of each 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 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, 1995, 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, 1995.
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.

49
<PAGE>

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.

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>

FORM NO. 250-6A
<PAGE>

PACIFIC SELECT FUND

STATEMENT OF ADDITIONAL INFORMATION

(13 PORTFOLIOS)
<PAGE>

[LOGO OF PACIFIC SELECT FUND]

PACIFIC SELECT FUND

STATEMENT OF ADDITIONAL INFORMATION

DATE: APRIL 1, 1996

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

Pacific Select Fund (the "Fund") is an open-end diversified management
investment company currently offering separate investment Portfolios, thirteen
of which are described in the Prospectus and this Statement of Additional
Information ("SAI"): the Money Market Portfolio; the High Yield Bond
Portfolio; the Managed Bond Portfolio; the Government Securities 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 SAI is intended to supplement the information provided to investors in
the Prospectus dated April 1, 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 Mutual Distributors, Inc.
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..................................... 20
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
Fundamental Investment Restrictions....................................... 29
Nonfundamental Investment Restrictions.................................... 30
</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................................................. 39
PORTFOLIO TRANSACTIONS AND BROKERAGE........................................ 40
Investment Decisions...................................................... 40
Brokerage and Research Services........................................... 40
Portfolio Turnover........................................................ 41
NET ASSET VALUE............................................................. 42
PERFORMANCE INFORMATION..................................................... 44
TAXATION.................................................................... 46
Distributions............................................................. 47
Hedging Transactions...................................................... 47
OTHER INFORMATION........................................................... 48
Concentration Policy...................................................... 48
Capitalization............................................................ 48
Voting Rights............................................................. 48
Custodian and Transfer Agency and Dividend Disbursing Services............ 48
Financial Statements...................................................... 49
Independent Accountants................................................... 49
Counsel................................................................... 49
Registration Statement.................................................... 49
</TABLE>

ii
<PAGE>

INTRODUCTION

INVESTMENT POLICIES FOR MONEY MARKET PORTFOLIO

SECURITIES AND INVESTMENT TECHNIQUES

U.S. GOVERNMENT SECURITIES

1
<PAGE>

MORTGAGE-RELATED SECURITIES

2
<PAGE>

3
<PAGE>

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.

4
<PAGE>

5
<PAGE>

OTHER ASSET-BACKED SECURITIES

HIGH YIELD BONDS

6
<PAGE>

BANK OBLIGATIONS

7
<PAGE>

CORPORATE DEBT SECURITIES

8
<PAGE>

The High Yield Bond, Managed Bond, 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.

VARIABLE AND FLOATING RATE SECURITIES

COMMERCIAL PAPER

9
<PAGE>

CONVERTIBLE SECURITIES

10
<PAGE>

REPURCHASE AGREEMENTS

11
<PAGE>

BORROWING

Reverse repurchase agreements will be included as borrowing subject to the
borrowing limitations described above.

REVERSE REPURCHASE AGREEMENTS AND OTHER BORROWINGS

12
<PAGE>

FIRM COMMITMENT AGREEMENTS AND WHEN-ISSUED SECURITIES

LOANS OF PORTFOLIO SECURITIES

For the purpose of realizing additional income, each Portfolio, except the
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

13
<PAGE>

RESTRICTED SECURITIES (PRIVATE PLACEMENTS)

The Money Market, High Yield Bond, Managed Bond, Government Securities,
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.

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 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 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. The Multi-Strategy Portfolio
may invest up to 10% of its 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.

14
<PAGE>

15
<PAGE>

FOREIGN CURRENCY TRANSACTIONS

16
<PAGE>

17
<PAGE>

OPTIONS

18
<PAGE>

19
<PAGE>

20
<PAGE>

OPTIONS ON FOREIGN CURRENCIES

21
<PAGE>

22
<PAGE>

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

23
<PAGE>

24
<PAGE>

25
<PAGE>

FOREIGN CURRENCY FUTURES AND OPTIONS THEREON

26
<PAGE>

SWAP AGREEMENTS

WARRANTS

DURATION

27
<PAGE>

28
<PAGE>

INVESTMENT RESTRICTIONS

FUNDAMENTAL INVESTMENT RESTRICTIONS

(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;

In addition, with respect to the Money Market, High Yield Bond, Managed
Bond, Government Securities, Growth LT, Equity Income, Multi-Strategy, Equity
Index and International Portfolios, unless otherwise indicated, such
Portfolios may not:

29
<PAGE>

NONFUNDAMENTAL INVESTMENT RESTRICTIONS

(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;

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:

Richard A. Nelson Trustee President of Nelson
8 Cherry Hills Lane Financial Consultants;
Newport Beach, CA 92660 retired Partner with Ernst &
Age 66 Young; Director, Wynn's
International, Inc.

Lyman W. Porter Trustee Professor of the Graduate
University of California School of Management at the
at Irvine University of California,
Irvine, CA 92717 Irvine.
Age 66

31
<PAGE>

INVESTMENT ADVISER

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, 1996, 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, 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,
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 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 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, 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.

Net advisory fees paid or owed to Pacific Mutual for 1995 were as follows:
Money Market Portfolio--$386,292, High Yield Bond Portfolio--$318,918, Managed
Bond Portfolio--$519,084, Government Securities Portfolio--$226,533, Growth LT
Portfolio--$845,391, Equity Income Portfolio--$840,710, Multi-Strategy
Portfolio--$650,409, Equity Portfolio--$564,917, Bond and Income Portfolio--
$255,233, Equity Index Portfolio--$194,604 and International Portfolio--
$1,030,744.

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 LT
Portfolio--$132,860, Equity Income Portfolio--$251,902, Multi-Strategy
Portfolio--$304,896, Equity Index Portfolio--$79,401, and International
Portfolio--$454,012.

33
<PAGE>

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, Equity Income Portfolio--$121,504, Multi-Strategy
Portfolio--$120,529, Equity Index Portfolio--$44,656, and International
Portfolio--$144,024.

PORTFOLIO MANAGEMENT AGREEMENTS

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>

34
<PAGE>

GROWTH LT PORTFOLIO

<TABLE>
<CAPTION>
RATE
(%) BREAK POINT (ASSETS)
---- ---------------------
<S> <C>
.60% On first $100 million
.55% On excess

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 in 1995 were $664,739, and from January 4, 1994 (date of commencement
of operations) to December 31, 1994 were $134,659.

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

<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>

35
<PAGE>

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>

36
<PAGE>

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>

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: Equity Advisors Series (formerly PIMCO Advisors Institutional Funds),
and the Cash Accumulation Trust. As of December 31, 1995, Columbus Circle
Investors managed approximately $12.7 billion of assets, including
approximately $4.3 billion of mutual fund assets.

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>

Net fees paid or owed by Pacific Mutual to BTC in 1995 were $75,000, in 1994
were $50,000, and in 1993 were $21,027.

37
<PAGE>

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>

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>

38
<PAGE>

The Portfolio Management Agreements are not exclusive, and PIMCO, 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

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 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."

PURCHASES AND REDEMPTIONS

39
<PAGE>

PORTFOLIO TRANSACTIONS AND BROKERAGE

INVESTMENT DECISIONS

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>

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 1995, the following Portfolios incurred brokerage
commissions and markups on principal transactions as follows: the High Yield
Bond Portfolio--$0, the Managed Bond Portfolio--$21,987, the Government
Securities Portfolio--$11,874, the Equity Income Portfolio--$314,236, the
Multi-Strategy Portfolio--$129,476, the Equity Portfolio--$335,550, of which
$68,472 (20.41%) was paid to Smith Barney Inc. or its predecessors, and
$22,500 (6.71%) was paid to Robinson Humphrey Co., Inc., affiliates of
Greenwich Streets Advisors, the Bond and Income Portfolio--$0, the Equity
Index Portfolio--$43,415, the International Portfolio--$376,660, and the
Growth LT Portfolio--$325,340. During the years 1994 and 1993, respectively,
the following Portfolios incurred brokerage commissions as follows: the High
Yield Bond Portfolio--$0 and $690, the Managed Bond Portfolio--$9,636 and
$5,568, the Government Securities Portfolio--$5,652 and $4,548, the Equity
Income Portfolio--$126,489, of which $84 (0.07%) was paid to BT Securities, an
affiliate of BTCO, and $33,310, the Multi-Strategy Portfolio--$77,944, of
which $62 (0.08%) was paid to BT Securities, and $28,251, 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,
and $418,458 of which $71,472 (17.08%) was paid to Smith Barney Inc. or its
predecessors, the Bond and Income Portfolio--$0 and $0, the Equity Index
Portfolio--$6,337 and $6,541, and the International Portfolio--$304,029, of
which $515 (0.17%) was paid to J.P. Morgan Securities, and $126,924, and the
Growth LT Portfolio--$101,353, of which $259 (0.26%) was paid to J.P. Morgan
Securities. Information for the years 1994 and 1993 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, 1995. The Growth LT
Portfolio had not commenced operations as of December 31, 1993.

PORTFOLIO TURNOVER

41
<PAGE>

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 1995, 1994,
and 1993, respectively, the portfolio turnover rate for each of the Portfolios
was as follows: Money Market Portfolio--0%, 0%, and 0%, High Yield Bond
Portfolio--127%, 142%, and 186%, Managed Bond Portfolio--191%, 128%, and 163%,
Government Securities Portfolio--299%, 233%, and 402%, Growth LT Portfolio--
166%, and 257%, Equity Income Portfolio--86%, 135%, and 28%, Multi-Strategy
Portfolio--176%, 187%, and 28%, Equity Portfolio--226%, 179%, and 230%, Bond
and Income Portfolio--52%, 32%, and 42%, International Portfolio--16%, 52%,
and 46%, and Equity Index Portfolio--8%, 2%, and 1%. The 1994 portfolio
turnover rate for the Growth LT Portfolio is based on the period from
commencement of operations on January 4, 1994 to December 31, 1994.
Information for the years 1994 and 1993 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

42
<PAGE>

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.

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.

43
<PAGE>

PERFORMANCE INFORMATION

Effective Yield = [(Base Period Return + 1) (To the power of 365/7)]-1

For the 7-day period ending December 31, 1995, the current yield of the
Money Market Portfolio was 5.53% and the effective yield of the Portfolio was
5.68%.

2[ (a-b + 1) (to the power of 6) -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.

For the 30 day period ended December 31, 1995, the yield of the remaining
Portfolios that had commenced operations on or before that date was as
follows: 9.12% for the High Yield Bond Portfolio, 5.89% for the Managed Bond
Portfolio, 5.62% for the Government Securities Portfolio, 0.99% for the Growth
LT Portfolio, 3.63% for the Multi-Strategy Portfolio, 1.88% for the Equity
Income Portfolio, (0.09)% for the Equity Portfolio, 6.69% for the Bond and
Income Portfolio, 1.25% for the International Portfolio, and 2.49% for the
Equity Index Portfolio. The Aggressive Equity and Emerging Markets Portfolios
had not commenced operations as of that date.

44
<PAGE>

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 December 31, 1995, the total return for each
Portfolio that had commenced operations on or before that date was as follows:
5.54% for the Money Market Portfolio, 18.87% for the High Yield Bond
Portfolio, 19.04% for the Managed Bond Portfolio, 18.81% for the Government
Securities Portfolio, 36.75% for the Growth LT Portfolio, 31.66% for the
Equity Income Portfolio, 25.25% for the Multi-Strategy Portfolio, 23.80% for
the Equity Portfolio, 33.71% for the Bond and Income Portfolio, 10.56% for the
International Portfolio, and 36.92% 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 December 31, 1995, the average annual total
return for each Portfolio that had commenced operations on or before that date
was as follows: 4.17% for the Money Market Portfolio, 15.83% for the High
Yield Bond Portfolio, 10.14% for the Managed Bond Portfolio, 9.46% for the
Government Securities Portfolio, 14.53% for the Equity Income Portfolio,
12.08% for the Multi-Strategy Portfolio, 13.99% for the Equity Portfolio,
14.47% for the Bond and Income Portfolio, and 8.18% 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 December 31, 1995.

For the ten year period ended December 31, 1995, the average annual total
returns for the Equity Portfolio and Bond and Income Portfolio were 12.46% and
11.40%, respectively.

Based upon the period from the commencement of Fund operations on January 4,
1988 until December 31, 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, 11.33% for the High Yield Bond Portfolio, 10.08% for
the Managed Bond Portfolio, 9.52% for the Government Securities Portfolio,
12.40% for the Equity Income Portfolio, 10.94% for the Multi-Strategy
Portfolio, and 7.76% for the International Portfolio. Based upon the period
from the commencement of the Equity Index Portfolio operations on January 30,
1991 until December 31, 1995, the average annual total return for the Equity
Index Portfolio was 15.37%. Based upon the period from the commencement of
operations of the Growth LT Portfolio on January 4, 1994 until December 31,
1995, the average annual total return for the Growth LT Portfolio was 24.52%.
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 13.74%
and 13.35%, respectively. The Aggressive Equity and Emerging Markets
Portfolios had not commenced operations on December 31, 1995.

45
<PAGE>

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.

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").

46
<PAGE>

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.

DISTRIBUTIONS

HEDGING TRANSACTIONS

47
<PAGE>

OTHER INFORMATION

CONCENTRATION POLICY

CAPITALIZATION

VOTING RIGHTS

CUSTODIAN AND TRANSFER AGENCY AND DIVIDEND DISBURSING SERVICES

48
<PAGE>

Pacific Mutual provides dividend disbursing and transfer agency services to
the Fund.

FINANCIAL STATEMENTS

INDEPENDENT ACCOUNTANTS

COUNSEL

REGISTRATION STATEMENT

49
<PAGE>

FORM NO. 288-7A

<PAGE>

PACIFIC SELECT FUND

STATEMENT OF ADDITIONAL INFORMATION

(12 PORTFOLIOS)
<PAGE>

[LOGO OF PACIFIC SELECT FUND]

PACIFIC SELECT FUND

STATEMENT OF ADDITIONAL INFORMATION

DATE: APRIL 1, 1996

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

Pacific Select Fund (the "Fund") is an open-end diversified management
investment company currently offering separate investment Portfolios twelve of
which are described in the Prospectus and this Statement of Additional
Information: 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 Index
Portfolio; the International Portfolio; and the Emerging Markets Portfolio.
The Fund's Adviser is Pacific Mutual Life Insurance Company.

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Distributor:

Pacific Mutual Distributors, Inc.
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..................................... 20
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
Fundamental Investment Restrictions....................................... 29
Nonfundamental Investment Restrictions.................................... 30
</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............................................... 38
Purchases and Redemptions................................................. 39
PORTFOLIO TRANSACTIONS AND BROKERAGE........................................ 39
Investment Decisions...................................................... 39
Brokerage and Research Services........................................... 39
Portfolio Turnover........................................................ 41
NET ASSET VALUE............................................................. 41
PERFORMANCE INFORMATION..................................................... 43
TAXATION.................................................................... 45
Distributions............................................................. 46
Hedging Transactions...................................................... 46
OTHER INFORMATION........................................................... 47
Concentration Policy...................................................... 47
Capitalization............................................................ 47
Voting Rights............................................................. 47
Custodian and Transfer Agency and Dividend Disbursing Services............ 47
Financial Statements...................................................... 48
Independent Accountants................................................... 48
Counsel................................................................... 48
Registration Statement.................................................... 48
</TABLE>

ii
<PAGE>

INTRODUCTION

INVESTMENT POLICIES FOR MONEY MARKET PORTFOLIO

SECURITIES AND INVESTMENT TECHNIQUES

U.S. GOVERNMENT SECURITIES

1
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MORTGAGE-RELATED SECURITIES

2
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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.

3
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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.

4
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5
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OTHER ASSET-BACKED SECURITIES

HIGH YIELD BONDS

6
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BANK OBLIGATIONS

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, 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 aggregate investment made
in any one such bank is limited to an

7
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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, 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.

CORPORATE DEBT SECURITIES

8
<PAGE>

The High Yield Bond, Managed Bond, Growth, Aggressive Equity, Growth LT,
Equity Income, Multi-Strategy, 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.

VARIABLE AND FLOATING RATE SECURITIES

COMMERCIAL PAPER

All of the Portfolios may invest in commercial paper (including variable
amount master demand notes). Each Portfolio other than the Money Market
Portfolio 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 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 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."

9
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CONVERTIBLE SECURITIES

10
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REPURCHASE AGREEMENTS

11
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BORROWING

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, 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.

12
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FIRM COMMITMENT AGREEMENTS AND WHEN-ISSUED SECURITIES

LOANS OF PORTFOLIO SECURITIES

SHORT SALES AGAINST THE BOX

The Aggressive Equity Portfolio 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.

13
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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,
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.

FOREIGN SECURITIES

14
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15
<PAGE>

FOREIGN CURRENCY TRANSACTIONS

16
<PAGE>

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.

17
<PAGE>

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
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.

OPTIONS

18
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19
<PAGE>

20
<PAGE>

OPTIONS ON FOREIGN CURRENCIES

21
<PAGE>

22
<PAGE>

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

23
<PAGE>

24
<PAGE>

25
<PAGE>

FOREIGN CURRENCY FUTURES AND OPTIONS THEREON

26
<PAGE>

SWAP AGREEMENTS

WARRANTS

The Growth LT, Equity Income, Multi-Strategy, 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), 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

27
<PAGE>

28
<PAGE>

INVESTMENT RESTRICTIONS

FUNDAMENTAL INVESTMENT RESTRICTIONS

(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;

29
<PAGE>

NONFUNDAMENTAL INVESTMENT RESTRICTIONS

(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;

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:

Richard A. Nelson Trustee President of Nelson
8 Cherry Hills Lane Financial Consultants;
Newport Beach, CA 92660 retired Partner with Ernst &
Age 66 Young; Director, Wynn's
International, Inc.

Lyman W. Porter Trustee Professor of the Graduate
University of California School of Management at the
at Irvine University of California,
Irvine, CA 92717 Irvine.
Age 66

31
<PAGE>

INVESTMENT ADVISER

Under the terms of the Advisory Contract, Pacific Mutual is obligated to
manage the Fund's Portfolios in accordance with applicable laws and
regulations.

32
<PAGE>

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 January 30, 1996. 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 and
Government Securities Portfolios, the Fund will pay .60% of the average daily
net assets of each of the Portfolios. For the Growth, Equity Income and Multi-
Strategy 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.

Net advisory fees paid or owed to Pacific Mutual for 1995 were as follows:
Money Market Portfolio--$386,292, High Yield Bond Portfolio--$318,918, Managed
Bond Portfolio--$519,084, Government Securities Portfolio--$226,533, Growth
Portfolio--$708,702, Growth LT Portfolio--$845,391, Equity Income Portfolio--
$840,710, Multi-Strategy Portfolio--$650,409, Equity Index Portfolio--$194,604
and International Portfolio--$1,030,744.

33
<PAGE>

PORTFOLIO MANAGEMENT AGREEMENTS

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>

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>

Net fees paid or owed by Pacific Mutual to Capital Guardian for the Growth
Portfolio in 1995 were $417,483, in 1994 were $335,544, and in 1993 were
$196,614.

GROWTH LT PORTFOLIO

<TABLE>
<CAPTION>
RATE
(%) BREAK POINT (ASSETS)
---- ---------------------
<S> <C>
.60% On first $100 million
.55% On excess
</TABLE>

35
<PAGE>

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>

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>

36
<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: Equity Advisors Series (formerly PIMCO Advisors Institutional Funds),
and the Cash Accumulation Trust. As of December 31, 1995, Columbus Circle
Investors managed approximately $12.7 billion of assets, including
approximately $4.3 billion of mutual fund assets.

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>

Net fees paid or owed by Pacific Mutual to BTC in 1995 were $75,000, in 1994
were $50,000, and in 1993 were $21,027.

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>

37
<PAGE>

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>

DISTRIBUTION OF FUND SHARES

38
<PAGE>

PURCHASES AND REDEMPTIONS

PORTFOLIO TRANSACTIONS AND BROKERAGE

INVESTMENT DECISIONS

BROKERAGE AND RESEARCH SERVICES

39
<PAGE>

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>

PORTFOLIO TURNOVER

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 1995, 1994,
and 1993, respectively, the portfolio turnover rate for each of the Portfolios
was as follows: Money Market Portfolio--0%, 0%, and 0%, High Yield Bond
Portfolio--127%, 142%, and 186%, Managed Bond Portfolio--191%, 128%, and 163%,
Government Securities Portfolio--299%, 233%, and 402%, Growth Portfolio--47%,
40%, and 35%, Growth LT Portfolio--166%, and 257%, Equity Income Portfolio--
86%, 135%, and 28%, Multi-Strategy Portfolio--176%, 187%, and 28%,
International Portfolio--16%, 52%, and 46%, and Equity Index Portfolio--8%,
2%, and 1%. The 1994 portfolio turnover rate for the Growth LT Portfolio is
based on the period from commencement of operations on January 4, 1994 to
December 31, 1994.

NET ASSET VALUE

41
<PAGE>

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.

All other Portfolios are valued as follows:

42
<PAGE>

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.

PERFORMANCE INFORMATION

Effective Yield = [(Base Period Return + 1) (To the power of 365/7)]-1

For the 7-day period ending December 31, 1995, the current yield of the
Money Market Portfolio was 5.53% and the effective yield of the Portfolio was
5.68%.

2[ (a-b + 1)/6/ -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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<PAGE>

for the Growth LT Portfolio, 3.63% for the Multi-Strategy Portfolio, 1.88% for
the Equity Income Portfolio, 1.25% for the International Portfolio, and 2.49%
for the Equity Index Portfolio. The Aggressive Equity and Emerging Markets
Portfolios had not commenced operations as of that date.

For the one year period ended December 31, 1995, the total return for each
Portfolio that had commenced operations on or before that date was as follows:
5.54% for the Money Market Portfolio, 18.87% for the High Yield Bond
Portfolio, 19.04% for the Managed Bond Portfolio, 18.81% for the Government
Securities Portfolio, 25.75% for the Growth Portfolio, 36.75% for the Growth
LT Portfolio, 31.66% for the Equity Income Portfolio, 25.25% for the Multi-
Strategy Portfolio, 10.56% for the International Portfolio, and 36.92% 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 December 31, 1995, the average annual total
return for each Portfolio that had commenced operations on or before that date
was as follows: 4.17% for the Money Market Portfolio, 15.83% for the High
Yield Bond Portfolio, 10.14% for the Managed Bond Portfolio, 9.46% for the
Government Securities Portfolio, 18.41% for the Growth Portfolio, 14.53% for
the Equity Income Portfolio, 12.08% for the Multi-Strategy Portfolio, and
8.18% 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 December 31, 1995.

Based upon the period from the commencement of Fund operations on January 4,
1988 until December 31, 1995, the average annual total return for each
Portfolio, except the Equity Index, Growth LT, Aggressive Equity, and Emerging
Markets Portfolios, was as follows: 5.40% for the Money Market Portfolio,
11.33% for the High Yield Bond Portfolio, 10.08% for the Managed Bond
Portfolio, 9.52% for the Government Securities Portfolio, 14.54% for the
Growth Portfolio, 12.40% for the Equity Income Portfolio, 10.94% for the
Multi-Strategy Portfolio, and 7.76% for the International Portfolio. Based
upon the period from the commencement of the Equity Index Portfolio operations
on January 30, 1991 until December 31, 1995, the average annual total return
for the Equity Index Portfolio was 15.37%. Based upon the period from the
commencement of operations of the Growth LT Portfolio on January 4, 1994 until
December 31, 1995, the average annual total return for the Growth LT Portfolio
was 24.52%. The Aggressive Equity and Emerging Markets Portfolios had not
commenced operations on December 31, 1995.

44
<PAGE>

Emerging Markets Portfolio, 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.

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").

45
<PAGE>

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.

DISTRIBUTIONS

HEDGING TRANSACTIONS

46
<PAGE>

OTHER INFORMATION

CONCENTRATION POLICY

CAPITALIZATION

Expenses incurred by the Aggressive Equity, Growth LT, and Emerging Markets
Portfolios in connection with the Fund's organization and establishment of
these Portfolios and the public offering of the shares of these Portfolios,
aggregated approximately $23,410, $3,952, and $23,410, respectively. These
costs have been deferred by the Aggressive Equity, Growth LT, and Emerging
Markets Portfolios and are being amortized by them over a period of five years
from the beginning of operations of each of these Portfolios.

VOTING RIGHTS

CUSTODIAN AND TRANSFER AGENCY AND DIVIDEND DISBURSING SERVICES

47
<PAGE>

Pacific Mutual provides dividend disbursing and transfer agency services to
the Fund.

FINANCIAL STATEMENTS

INDEPENDENT ACCOUNTANTS

COUNSEL

REGISTRATION STATEMENT

48
<PAGE>

FORM NO. 15-17595-11
<PAGE>

PACIFIC SELECT FUND

STATEMENT OF ADDITIONAL INFORMATION

(11 PORTFOLIOS)
<PAGE>

[LOGO OF PACIFIC SELECT FUND]

PACIFIC SELECT FUND

STATEMENT OF ADDITIONAL INFORMATION

DATE: APRIL 1, 1996

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

Pacific Select Fund (the "Fund") is an open-end diversified management
investment company currently offering separate investment Portfolios eleven of
which are described in the Prospectus and this Statement of Additional
Information ("SAI"): the Money Market Portfolio; the High Yield Bond
Portfolio; the Managed Bond Portfolio; the Government Securities 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; and the International Portfolio. The Fund's Adviser is
Pacific Mutual Life Insurance Company.

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

Distributor:

Pacific Mutual Distributors, Inc.
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)................................ 13
Foreign Securities........................................................ 14
Foreign Currency Transactions............................................. 16
Forward Foreign Currency Contracts...................................... 16
Options................................................................... 18
Purchasing and Writing Options on Securities............................ 18
Purchasing Options on Stock Indexes..................................... 20
Risks of Options Transactions........................................... 20
Spread Transactions..................................................... 21
Options on Foreign Currencies............................................. 21
Futures Contracts and Options on Futures Contracts........................ 22
Interest Rate Futures................................................... 22
Stock Index Futures..................................................... 23
Futures Options......................................................... 23
Limitations............................................................. 24
Risks Associated with Futures and Futures Options....................... 25
Foreign Currency Futures and Options Thereon.............................. 26
Warrants.................................................................. 26
Duration.................................................................. 27
INVESTMENT RESTRICTIONS..................................................... 29
Fundamental Investment Restrictions....................................... 29
Nonfundamental Investment Restrictions.................................... 30
</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............................................... 38
Purchases and Redemptions................................................. 38
PORTFOLIO TRANSACTIONS AND BROKERAGE........................................ 39
Investment Decisions...................................................... 39
Brokerage and Research Services........................................... 39
Portfolio Turnover........................................................ 40
NET ASSET VALUE............................................................. 41
PERFORMANCE INFORMATION..................................................... 42
TAXATION.................................................................... 45
Distributions............................................................. 46
Hedging Transactions...................................................... 46
OTHER INFORMATION........................................................... 46
Concentration Policy...................................................... 46
Capitalization............................................................ 46
Voting Rights............................................................. 47
Custodian and Transfer Agency and Dividend Disbursing Services............ 47
Financial Statements...................................................... 47
Independent Accountants................................................... 48
Counsel................................................................... 48
Registration Statement.................................................... 48
</TABLE>

ii
<PAGE>

INTRODUCTION

INVESTMENT POLICIES FOR MONEY MARKET PORTFOLIO

SECURITIES AND INVESTMENT TECHNIQUES

U.S. GOVERNMENT SECURITIES

1
<PAGE>

MORTGAGE-RELATED SECURITIES

2
<PAGE>

3
<PAGE>

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.

4
<PAGE>

5
<PAGE>

OTHER ASSET-BACKED SECURITIES

HIGH YIELD BONDS

6
<PAGE>

BANK OBLIGATIONS

7
<PAGE>

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, Government Securities, Growth LT, Multi-Strategy, and International
Portfolios may invest in U.S. dollar-denominated debt securities of foreign
issuers. The Growth LT and International Portfolios, and, to the extent of 20%
of their assets, the Managed Bond, and Government Securities Portfolios, and
to the extent of 10% of its assets the Multi-Strategy Portfolio, 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

8
<PAGE>

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 High Yield Bond, Managed Bond, Growth LT, Equity Income, Multi-Strategy,
Bond and Income, and International 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.

VARIABLE AND FLOATING RATE SECURITIES

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 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 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 International
Portfolio 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.

9
<PAGE>

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

10
<PAGE>

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.

REPURCHASE AGREEMENTS

11
<PAGE>

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.

BORROWING

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, Growth LT, Bond and Income, and Equity Index 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.

12
<PAGE>

FIRM COMMITMENT AGREEMENTS AND WHEN-ISSUED SECURITIES

LOANS OF PORTFOLIO SECURITIES

SHORT SALES AGAINST THE BOX

The Equity Portfolio 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.

RESTRICTED SECURITIES (PRIVATE PLACEMENTS)

The Money Market, High Yield Bond, Managed Bond, Government Securities,
Growth LT, Equity Income, Multi-Strategy, Equity, Bond and Income, and
International Portfolios may invest in restricted securities

13
<PAGE>

(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.

FOREIGN SECURITIES

The Money Market, High Yield Bond, Managed Bond, Government Securities,
Growth LT, Multi-Strategy, and International 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 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 up to
25% of its assets in foreign securities denominated in a foreign currency and
not publicly traded in the United States. The International Portfolio 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. The Multi-Strategy Portfolio may invest up to
10% of its 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.

14
<PAGE>

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.

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 Fund.
Under these agreements, Chase and IFTC have agreed (i) to use reasonable care
in the safekeeping of these securities, (ii) 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 and
(iii) 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

15
<PAGE>

efficiently the custodial services required, and its relative costs for the
services to be rendered. 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.

FOREIGN CURRENCY TRANSACTIONS

Generally, the foreign exchange transactions of the Managed Bond, Government
Securities, Growth LT, Multi-Strategy, and International 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, Growth
LT, Multi-Strategy, and International 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.

Forward Foreign Currency Contracts. The Managed Bond, Government Securities,
Growth LT, Multi-Strategy, and International 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

16
<PAGE>

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.

17
<PAGE>

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.

The Growth LT Portfolio 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, Growth LT, Equity Income, and Multi-Strategy Portfolios
may engage in the purchase and writing of put and call options on securities.
In pursuing their investment objectives, the Growth LT, Equity Income, Multi-
Strategy, and Equity Index 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, Growth LT, Equity Income, and Multi-Strategy
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.
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.

18
<PAGE>

19
<PAGE>

Purchasing Options on Stock Indexes. The Growth LT, Equity Income, Multi-
Strategy, and Equity Index Portfolios may purchase put and call options on
stock indexes which are standardized and traded on an U.S. exchange or board
of trade, or for which an established over-the-counter market exists. Like
other options listed on United States securities exchanges, index options are
issued by the Options Clearing Corporation ("OCC").

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 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.

20
<PAGE>

OPTIONS ON FOREIGN CURRENCIES

The Managed Bond, Government Securities, Growth LT, and International
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.

21
<PAGE>

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.

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 Growth LT, Equity Income, Multi-Strategy, Equity Index,
and International Portfolios may invest in stock index futures and options
thereon.

22
<PAGE>

(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.

Stock Index Futures. (The Growth LT, Equity Income, Multi-Strategy, Equity
Index, and International 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 Growth LT, Equity Income, Multi-Strategy, Equity Index, and
International 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.

23
<PAGE>

The Growth LT, Equity Income, Multi-Strategy, Equity Index, and
International 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.

24
<PAGE>

(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.

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 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.

25
<PAGE>

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 Managed Bond, Government Securities, Growth LT, and International
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.

FOREIGN CURRENCY FUTURES AND OPTIONS THEREON

The Managed Bond, Government Securities, Growth LT, and International
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.

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. 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.

26
<PAGE>

DURATION

27
<PAGE>

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.

28
<PAGE>

INVESTMENT RESTRICTIONS

FUNDAMENTAL INVESTMENT RESTRICTIONS

(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;

29
<PAGE>

NONFUNDAMENTAL INVESTMENT RESTRICTIONS

(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;

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:

Richard A. Nelson Trustee President of Nelson
8 Cherry Hills Lane Financial Consultants;
Newport Beach, CA 92660 retired Partner with Ernst &
Age 66 Young; Director, Wynn's
International, Inc.

Lyman W. Porter Trustee Professor of the Graduate
University of California School of Management at the
at Irvine University of California,
Irvine, CA 92717 Irvine.
Age 66

31
<PAGE>

INVESTMENT ADVISER

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, 1996, 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, 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,
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 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 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. 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, 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.

Net advisory fees paid or owed to Pacific Mutual for 1995 were as follows:
Money Market Portfolio--$386,292, High Yield Bond Portfolio--$318,918, Managed
Bond Portfolio--$519,084, Government Securities Portfolio--$226,533, Growth LT
Portfolio--$845,391, Equity Income Portfolio--$840,710, Multi-Strategy
Portfolio--$650,409, Equity Portfolio--$564,917, Bond and Income Portfolio--
$255,233, Equity Index Portfolio--$194,604 and International Portfolio--
$1,030,744.

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 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, Equity Income Portfolio--$121,504, Multi-Strategy
Portfolio--$120,529, Equity Index Portfolio--$44,656, and International
Portfolio--$144,024.

33
<PAGE>

PORTFOLIO MANAGEMENT AGREEMENTS

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>

GROWTH LT PORTFOLIO

<TABLE>
<CAPTION>
RATE
(%) BREAK POINT (ASSETS)
---- ---------------------
<S> <C>
.60% On first $100 million
.55% On excess
</TABLE>

34
<PAGE>

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>

35
<PAGE>

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>

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>

36
<PAGE>

Net fees paid or owed by Pacific Mutual to BTC in 1995 were $75,000, in 1994
were $50,000, and in 1993 were $21,027.

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>

37
<PAGE>

The Portfolio Management Agreements are not exclusive, and PIMCO, BTC,
Janus, J.P. Morgan Investment, Greenwich Street Advisors, and Templeton may
provide and currently are providing investment advisory services to other
clients, including other investment companies.

DISTRIBUTION OF FUND SHARES

As of April 1, 1996, Pacific Mutual beneficially owned 0% of the outstanding
shares of the Portfolios of the Fund. Pacific Mutual would exercise voting
rights attributable to any shares of the Fund owned by them in accordance with
voting instructions received by Owners of the Policies issued by Pacific
Mutual. To this extent, as of April 1, 1996, Pacific Mutual and PFAMCo did not
exercise control over any Portfolio.

PURCHASES AND REDEMPTIONS

38
<PAGE>

PORTFOLIO TRANSACTIONS AND BROKERAGE

INVESTMENT DECISIONS

BROKERAGE AND RESEARCH SERVICES

39
<PAGE>

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.

During the year 1995, the following Portfolios incurred brokerage
commissions and markups on principal transactions as follows: the High Yield
Bond Portfolio--$0, the Managed Bond Portfolio--$21,987, the Government
Securities Portfolio--$11,874, the Equity Income Portfolio--$314,236, the
Multi-Strategy Portfolio--$129,476, the Equity Portfolio--$335,550, of which
$68,472 (20.41%) was paid to Smith Barney Inc. or its predecessors, and
$22,500 (6.71%) was paid to Robinson Humphrey Co., Inc., affiliates of
Greenwich Street Advisors, the Bond and Income Portfolio--$0, the Equity Index
Portfolio--$43,415, the International Portfolio--$376,660, and the Growth LT
Portfolio--$325,340. During the years 1994 and 1993, respectively, the
following Portfolios incurred brokerage commissions as follows: the High Yield
Bond Portfolio--$0 and $690, the Managed Bond Portfolio--$9,636 and $5,568,
the Government Securities Portfolio--$5,652 and $4,548, the Equity Income
Portfolio--$126,489, of which $84 (0.07%) was paid to BT Securities, an
affiliate of BTCO, and $33,310, the Multi-Strategy Portfolio--$77,944, of
which $62 (0.08%) was paid to BT Securities, and $28,251, 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,
and $418,458, of which $71,472 (17.08%) was paid to Smith Barney Inc. or its
predecessors, the Bond and Income Portfolio--$0 and $0, the Equity Index
Portfolio--$6,337 and $6,541, and the International Portfolio--$304,029, of
which $515 (0.17%) was paid to J.P. Morgan Securities, and $126,924, and the
Growth LT Portfolio--$101,353, of which $259 (0.26%) was paid to J.P. Morgan
Securities. Information for the years 1994 and 1993 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 Growth LT Portfolio had not commenced
operations as of December 31, 1993.

PORTFOLIO TURNOVER

40
<PAGE>

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 1995, 1994,
and 1993, respectively, the portfolio turnover rate for each of the Portfolios
was as follows: Money Market Portfolio--0%, 0%, and 0%, High Yield Bond
Portfolio--127%, 142%, and 186%, Managed Bond Portfolio--191%, 128%, and 163%,
Government Securities Portfolio--299%, 233%, and 402%, Growth LT Portfolio--
166%, and 257%, Equity Income Portfolio--86%, 135%, and 28%, Multi-Strategy
Portfolio--176%, 187%, and 28%, Equity Portfolio--226%, 179%, and 230%, Bond
and Income Portfolio--52%, 32%, and 42%, International Portfolio--16%, 52%,
and 46%, and Equity Index Portfolio--8%, 2%, and 1%. The 1994 portfolio
turnover rate for the Growth LT Portfolio is based on the period from
commencement of operations on January 4, 1994 to December 31, 1994.
Information for the years 1994 and 1993 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 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, Growth LT, and International 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.

41
<PAGE>

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.

All other Portfolios are valued as follows:

PERFORMANCE INFORMATION

42
<PAGE>

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) (To the power of 365/7)]-1

For the 7-day period ending December 31, 1995, the current yield of the
Money Market Portfolio was 5.53% and the effective yield of the Portfolio was
5.68%.

2[ (a-b + 1)/6/ -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.

For the 30 day period ended December 31, 1995, the yield of the remaining
Portfolios that had commenced operations on or before that date was as
follows: 9.12% for the High Yield Bond Portfolio, 5.89% for the Managed Bond
Portfolio, 5.62% for the Government Securities Portfolio, 0.99% for the Growth
LT Portfolio, 3.63% for the Multi-Strategy Portfolio, 1.88% for the Equity
Income Portfolio, (0.09)% for the Equity Portfolio, 6.69% for the Bond and
Income Portfolio, 1.25% for the International Portfolio, and 2.49% for the
Equity Index Portfolio.

For the one year period ended December 31, 1995, the total return for each
Portfolio that had commenced operations on or before that date was as follows:
5.54% for the Money Market Portfolio, 18.87% for the High Yield Bond
Portfolio, 19.04% for the Managed Bond Portfolio, 18.81% for the Government
Securities Portfolio, 36.75% for the Growth LT Portfolio, 31.66% for the
Equity Income Portfolio, 25.25% for the Multi-Strategy Portfolio, 23.80% for
the Equity Portfolio, 33.71% for the Bond and Income Portfolio, 10.56% for the
International Portfolio, and 36.92% for the Equity Index Portfolio.

43
<PAGE>

for the Equity Portfolio, 14.47% for the Bond and Income Portfolio, and 8.18%
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.

For the ten year period ended December 31, 1995, the average annual total
returns for the Equity Portfolio and Bond and Income Portfolio were 12.46% and
11.40%, respectively.

Based upon the period from the commencement of Fund operations on January 4,
1988 until December 31, 1995, the average annual total return for each
Portfolio, except the Equity Index, Growth LT, Equity, and Bond and Income
Portfolios, was as follows: 5.40% for the Money Market Portfolio, 11.33% for
the High Yield Bond Portfolio, 10.08% for the Managed Bond Portfolio, 9.52%
for the Government Securities Portfolio, 12.40% for the Equity Income
Portfolio, 10.94% for the Multi-Strategy Portfolio, and 7.76% for the
International Portfolio. Based upon the period from the commencement of the
Equity Index Portfolio operations on January 30, 1991 until December 31, 1995,
the average annual total return for the Equity Index Portfolio was 15.37%.
Based upon the period from the commencement of operations of the Growth LT
Portfolio on January 4, 1994 until December 31, 1995, the average annual total
return for the Growth LT Portfolio was 24.52%. 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 13.74% and 13.35%, respectively.

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; 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.

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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").

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DISTRIBUTIONS

HEDGING TRANSACTIONS

OTHER INFORMATION

CONCENTRATION POLICY

CAPITALIZATION

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Expenses incurred by the Growth LT Portfolio in connection with the Fund's
organization and establishment of the Portfolio and the public offering of the
shares of the Portfolio, aggregated approximately $3,952. These costs have
been deferred by the Growth LT Portfolio and are being amortized by it over a
period of five years from the beginning of operations of the Portfolio.

VOTING RIGHTS

CUSTODIAN AND TRANSFER AGENCY AND DIVIDEND DISBURSING SERVICES

Pacific Mutual provides dividend disbursing and transfer agency services to
the Fund.

FINANCIAL STATEMENTS

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INDEPENDENT ACCOUNTANTS

COUNSEL

REGISTRATION STATEMENT

48
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FORM NO. 800-01