<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Pacific Select Fund
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Pacific Select Fund
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
PRELIMINARY
[DRAFT - FEBRUARY 26, 1998]
LOGO
[LOGO OF PACIFIC SELECT FUND]
THOMAS C. SUTTON
Chairman of the Board
and President
March , 1998
Dear Variable Contract Owner:
We are pleased to enclose a Notice and Proxy Statement for the Special
Meeting of Shareholders (the "Meeting") of the Aggressive Equity Portfolio,
the Equity Portfolio, and the Bond and Income Portfolio (the "Portfolios") of
Pacific Select Fund (the "Fund").
The Meeting is scheduled to be held at [TIME] Pacific Time on April [ ],
1998 at 700 Newport Center Drive, Newport Beach, California 92660. Please take
the time to read the Proxy Statement and cast your vote, since it covers
matters that are important to the Fund and to you as a variable contract owner
having an interest in one or more of the Portfolios.
The purpose of the Meeting is to seek your approval of a new Portfolio
Management Agreement for the three Portfolios. Shareholders of the Aggressive
Equity Portfolio will be asked to approve a Portfolio Management Agreement
with Alliance Capital Management L.P., while Shareholders of the Equity
Portfolio and the Bond and Income Portfolio will be asked to approve a
separate Portfolio Management Agreement with Goldman Sachs Asset Management.
In addition, Shareholders of the Bond and Income Portfolio will be asked to
approve an amendment to that Portfolio's investment objective.
The Trustees have concluded that these proposals are in the best interests
of the Fund and its shareholders and recommend that shareholders vote in favor
of each proposal for which they are eligible to vote. These proposals are
described in more detail in the enclosed Proxy Statement.
We appreciate your participation and prompt response in this matter and
thank you for your continued support.
Sincerely,
/s/ THOMAS C. SUTTON
Thomas C. Sutton
PACIFIC SELECT FUND
700 Newport Center Drive, Newport Beach, California 92660, Telephone (714)
640-3126 FAX (714) 721-5130
<PAGE>
PRELIMINARY
PACIFIC SELECT FUND
700 NEWPORT CENTER DRIVE
NEWPORT BEACH, CALIFORNIA 92660
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
[DATE OF NOTICE]
----------------
To the Shareholders of the Aggressive Equity Portfolio, the Equity Portfolio,
and the Bond and Income Portfolio of Pacific Select Fund:
Notice is hereby given that a Special Meeting of Shareholders (the
"Meeting") of the Aggressive Equity Portfolio, the Equity Portfolio, and the
Bond and Income Portfolio (the "Portfolios") of Pacific Select Fund (the
"Fund") will be held at [TIME] Pacific Time on April , 1998 at 700 Newport
Center Drive, Newport Beach, California 92660 for the following purposes:
I. To consider and vote on the approval of a Portfolio Management
Agreement with Alliance Capital Management L.P. for the Aggressive Equity
Portfolio under which Alliance Capital Management L.P. would commence
serving as Portfolio Manager of the Aggressive Equity Portfolio on May 1,
1998;
II. To consider and vote on the approval of the Portfolio Management
Agreement with Goldman Sachs Asset Management for the Equity Portfolio
under which Goldman Sachs Asset Management would commence serving as
Portfolio Manager of the Equity Portfolio on May 1, 1998;
III. (A) To consider and vote on the approval of a Portfolio Management
Agreement with Goldman Sachs Asset Management for the Bond and Income
Portfolio under which Goldman Sachs Asset Management would commence serving
as Portfolio Manager of the Bond and Income Portfolio on May 1, 1998; and
(B) to consider and vote on the approval of an amendment to the Bond and
Income Portfolio's investment objective; and
IV. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Trustees has fixed the close of business on [ , 1998],
as the record date for determining Shareholders entitled to notice of and to
vote at the Meeting and any adjournment thereof.
You are cordially invited to attend the Meeting. Shareholders who do not
expect to attend the Meeting are requested to complete, sign, and return the
enclosed proxy promptly. The enclosed proxy is being solicited by the Board of
Trustees of the Fund.
PLEASE RESPOND--YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING, PLEASE FILL IN, SIGN, AND MAIL THE PROXY IN THE ENVELOPE
PROVIDED.
By Order of the Board of Trustees
By: _________________________________
Audrey L. Milfs, Secretary
Newport Beach, California
[DATE]
<PAGE>
PRELIMINARY
----------------
PROXY STATEMENT
----------------
PACIFIC SELECT FUND
700 NEWPORT CENTER DRIVE
NEWPORT BEACH, CALIFORNIA 92660
SPECIAL MEETING OF SHAREHOLDERS
OF THE AGGRESSIVE EQUITY PORTFOLIO, THE EQUITY PORTFOLIO AND THE BOND AND
INCOME PORTFOLIO
[DATE OF PROXY STATEMENT]
SOLICITATION OF PROXIES
This statement is furnished in connection with the solicitation of proxies
on behalf of the Board of Trustees of Pacific Select Fund (the "Fund") for use
at a Special Meeting of Shareholders of the Aggressive Equity Portfolio, the
Equity Portfolio, and the Bond and Income Portfolio (the "Portfolios") of the
Fund to be held at [TIME OF MEETING] Pacific Time on [DATE OF MEETING] at 700
Newport Center Drive, Newport Beach, California 92660, and at any adjournment
thereof, for the purposes set forth in the accompanying Notice of Special
Meeting of Shareholders ("Notice"). The primary purpose of the Meeting is for
Shareholders of the Portfolios to consider and approve new agreements with
proposed new portfolio managers for each Portfolio. In addition, Shareholders
of the Bond and Income Portfolio will also vote on an amendment to that
Portfolio's investment objective. The date of the first mailing of this proxy
statement will be on or about [MAILING DATE OF PROXY STATEMENT].
As set forth in the attached Notice of Meeting, Shareholders will be asked
to consider and vote on four proposals at the Meeting. The following table
explains the Shareholders that are entitled to vote for each proposal.
<TABLE>
<S> <C>
Proposal I................... Shareholders of the Aggressive Equity Portfolio
Proposal II.................. Shareholders of the Equity Portfolio
Proposals III.A and III.B.... Shareholders of the Bond and Income Portfolio
</TABLE>
INTRODUCTION
Pacific Life Insurance Company ("Pacific Life" and formerly "Pacific Mutual
Life Insurance Company") acts as Investment Adviser to each Portfolio under an
Investment Advisory Agreement ("Advisory Agreement") between the Fund, on
behalf of each Portfolio, and Pacific Life. As permitted by the Advisory
Agreement, Pacific Life may hire another advisory firm as sub-adviser or
"portfolio manager" for each Portfolio, whose fees Pacific Life (and not the
Fund) pays out of its investment advisory fee. At the Meeting, the
Shareholders of each Portfolio will be asked to approve a new portfolio
management agreement among the Fund, Pacific Life, and a new Portfolio
Manager, as described below. The firms that currently serve as the portfolio
managers for these Portfolios have provided written confirmation that they
will not manage their respective Portfolios after April 30, 1998. The current
portfolio managers are Columbus Circle Investors for the Aggressive Equity
Portfolio, and Greenwich Street Advisors, a division of Smith Barney Mutual
Funds Management, Inc., for the Equity and Bond and Income Portfolios (the
"Current Portfolio Managers").
<PAGE>
Shareholders are asked to approve agreements with the following proposed
portfolio managers ("New Portfolio Managers"):
<TABLE>
<S> <C>
Aggressive Equity Portfolio: Alliance Capital Management L.P.
Equity Portfolio: Goldman Sachs Asset Management
Bond and Income Portfolio: Goldman Sachs Asset Management
</TABLE>
TERMS OF THE NEW PORTFOLIO MANAGEMENT AGREEMENTS
The terms of each new portfolio management agreement ("New Portfolio
Management Agreements") are substantially similar to those of the portfolio
management agreement ("Current Portfolio Management Agreement") currently in
effect for each applicable Portfolio, other than with regard to the fees, as
discussed below, the effective date, and the parties. The form of the New
Portfolio Management Agreement with Alliance Capital Management L.P. is
attached as Appendix A. The form of the New Portfolio Management Agreement
with Goldman Sachs Asset Management is attached as Appendix B. Each New
Portfolio Management Agreement requires the New Portfolio Manager to provide,
subject to the supervision of Pacific Life, a continuous investment program
for the Portfolio and to determine the composition of the assets of the
Portfolio, including determination of the purchase, retention, or sale of the
securities, cash, and other investments for the Portfolio, in accordance with
the Portfolio's investment objective, policies, and restrictions. Each New
Portfolio Manager also will provide investment research and analysis.
Under the terms of each New Portfolio Management Agreement, the New
Portfolio Manager is not subject to liability for any damages, expenses, or
losses to the Fund connected with or arising out of any investment advisory
services rendered under the New Portfolio Management Agreement, except by
reason of willful misfeasance, bad faith, or gross negligence in the
performance of the New Portfolio Manager's duties or by reason of its reckless
disregard of its obligations and duties under the New Portfolio Management
Agreement. This same provision has applied to each Current Portfolio Manager
during its tenure as Portfolio Manager of a Portfolio.
Each New Portfolio Management Agreement will terminate automatically in the
event of its assignment. In addition, it may be terminated by Pacific Life
upon sixty days' written notice to the New Portfolio Manager and the Fund, by
the New Portfolio Manager upon sixty days' written notice to Pacific Life and
the Fund, and by the Fund, upon the vote of a majority of the Fund's Board of
Trustees ("Trustees") or a majority of the outstanding voting shares of
Portfolio, upon sixty days' written notice to the New Portfolio Manager.
If approved by Shareholders of a Portfolio, each New Portfolio Management
Agreement will continue in effect for an initial term of two years from its
effective date, and will continue from year to year thereafter, subject to
approval annually by the Trustees or by the Shareholders of the Portfolio, and
also, in either event, approval by a majority of those Trustees who are not
parties to the New Portfolio Management Agreement or "interested persons" of
any such party at a meeting called for the purpose of voting on such approval.
"Interested person" is defined in the Investment Company Act of 1940, and
generally refers to a person who is not independent of Pacific Life and the
New Portfolio Manager.
On the recommendation of Pacific Life, the Trustees have decided to retain,
subject to Shareholder approval, a New Portfolio Manager for each Portfolio.
Each New Portfolio Management Agreement was approved by the Trustees,
including a majority of the Trustees who are not parties to the New Portfolio
Management Agreement or "interested persons" of such parties, at a meeting
held on February 23, 1998. Under the terms of the New Portfolio Management
Agreement, the New Portfolio Managers would begin service on May 1, 1998.
2
<PAGE>
FEES UNDER THE NEW PORTFOLIO MANAGEMENT AGREEMENTS
A. The Aggressive Equity Portfolio
The table below compares the portfolio management fees paid to the Current
Portfolio Manager under the Current Portfolio Management Agreement and the
proposed fees to be paid to Alliance Capital Management L.P. ("Alliance")
under the New Portfolio Management Agreement. In both instances, the portfolio
management fees are paid by Pacific Life in its capacity as the Fund's
Investment Adviser. The fees payable to Pacific Life under the advisory
agreement would not change so that investment management fees paid by the
Portfolio will not change if Alliance is approved as New Portfolio Manager.
Under the proposed fee structure with Alliance, Pacific Life would pay more
than it currently pays the Current Portfolio Manager for as long as the
Portfolio's average net assets remain at their current level ($85,727,861 as
of December 31, 1997). Once the Portfolio's average net assets reach
approximately $200 million, the portfolio management fees paid by Pacific Life
to Alliance should be approximately the same as it currently is required to
pay to the Current Portfolio Manager under the Current Portfolio Management
Agreement. For the year ended December 31, 1997, Pacific Life paid $468,441
for the Current Portfolio Manager's service as Portfolio Manager of the
Portfolio. This fee was the effective equivalent to an annual rate of 0.55% of
the Portfolio's average daily net assets.
<TABLE>
<CAPTION>
PROPOSED FEES TO BE PAID TO ALLIANCE BY
FEES PAID TO CURRENT PORTFOLIO MANAGER PACIFIC LIFE
------------------------------------------------------------------------------------------------
FEE (AS PERCENT OF FEE (AS PERCENT OF
AVG. DAILY NET ASSETS AVG. DAILY NET ASSETS) AVG. DAILY NET ASSETS AVG. DAILY NET ASSETS)
------------------------ ---------------------- ------------------------ ----------------------
<S> <C> <C> <C>
0-$100 million.......... 0.55% 0-$100 million......... 0.60%
Next $150 million....... 0.50% Next $400 million...... 0.45%
Next $250 million....... 0.45% Net Assets Thereafter.. 0.40%
Net Assets Thereafter... 0.40%
B. The Equity and Bond and Income Portfolios
The table below compares the portfolio management fees, based on the combined
daily net assets of the Equity Portfolio and the Bond and Income Portfolio,
paid to the Current Portfolio Manager under the Current Portfolio Management
Agreement and the proposed fees to be paid to Goldman Sachs Asset Management, a
separate operating division of Goldman, Sachs & Co., ("Goldman Sachs" or
"GSAM") under the New Portfolio Management Agreement. The portfolio management
fees for each portfolio are paid by Pacific Life in its capacity as the Fund's
Investment Adviser. The fees payable to Pacific Life under the Advisory
Agreement would not change so that investment management fees paid by each
Portfolio will not change if Goldman Sachs is approved as the New Portfolio
Manager. Under the proposed fee structure with Goldman Sachs, Pacific Life
would pay a lower rate than it currently pays the Current Portfolio Manager on
the Portfolios' combined average net assets below $1 billion (the Portfolios'
combined average net assets were $374,953,118 as of December 31, 1997). Once
the Portfolios' combined average daily net asset level reaches $1 billion,
Pacific Life would begin paying Goldman Sachs at the same rate that it pays to
the Current Portfolio Manager on average daily net assets above $1 billion.
Thus, the difference in the amount retained by Pacific Life under the Current
Portfolio Management Agreement versus the New Portfolio Management Agreement
will depend on the asset size of the two Portfolios as shown below.
<CAPTION>
FEES PAID TO CURRENT PORTFOLIO MANAGER PROPOSED FEES TO BE PAID TO GOLDMAN SACHS
------------------------------------------------------------------------------------------------
COMBINED AVG. DAILY COMBINED AVG. DAILY
NET ASSETS OF THE EQUITY NET ASSETS OF THE EQUITY
PORTFOLIO AND THE BOND FEE (AS PERCENT OF PORTFOLIO AND THE BOND FEE (AS PERCENT OF
AND INCOME PORTFOLIO AVG. DAILY NET ASSETS) AND INCOME PORTFOLIO AVG. DAILY NET ASSETS)
------------------------ ---------------------- ------------------------ ----------------------
<S> <C> <C> <C>
0-$100 million.......... 0.45% 0-$100 million......... 0.35%
Next $100 million....... 0.40% Next $100 million...... 0.30%
Next $200 million....... 0.35% Next $800 million...... 0.25%
Next $600 million....... 0.30% Net Assets Thereafter.. 0.20%
Net Assets Thereafter... 0.20%
</TABLE>
3
<PAGE>
For the year ended December 31, 1997, Pacific Life paid the Current
Portfolio Manager $1,456,943 for its service as Portfolio Manager of the
Equity Portfolio and the Bond and Income Portfolio. This fee was equivalent to
an effective annual rate of 0.39% of each Portfolio's average daily net
assets. During the same period, the Equity Portfolio paid $61,512 of brokerage
commissions, constituting 8.7% of aggregate brokerage commissions paid by the
Equity Portfolio, to Smith Barney Inc. and $23,700 of brokerage commissions,
constituting 3.4% of aggregate brokerage commissions paid by the Equity
Portfolio, to Robinson Humphrey Co., Inc., each of which is a broker-dealer
affiliated with the Current Portfolio Manager.
COMPARISON OF FEES PAID BY PACIFIC LIFE UNDER THE CURRENT AND NEW PORTFOLIO
MANAGEMENT AGREEMENTS
The table below compares the actual fees paid for each Portfolio to its
Current Portfolio Manager by Pacific Life under each Current Portfolio
Management Agreement during calendar year 1997 with the hypothetical fees that
would have been paid to each New Portfolio Manager by Pacific Life under the
New Portfolio Management Agreements if they had been in effect during that
period:
<TABLE>
<CAPTION>
FEES THAT WOULD HAVE BEEN
PAID/RETAINED UNDER THE NEW
PORTFOLIO MANAGEMENT AGREEMENT
ACTUAL FEES PAID/RETAINED UNDER THE -----------------------------------
ACTUAL ADVISORY CURRENT PORTFOLIO MANAGEMENT
FEES PAID TO PL AGREEMENT MGMT FEES THAT NET ADVISORY FEES
(RESULT NET ------------------------------------- WOULD HAVE THAT WOULD HAVE
CHANGE) MGMT FEES PAID TO NET ADVISORY FEES BEEN PAID TO BEEN RETAINED
AVG. DAILY (DOES NOT CHANGE) PORTFOLIO MANAGER RETAINED BY PL PORTFOLIO MGR. BY PL
NET ASSETS ----------------- -------------------- -------------------- ------------------ -----------------
(IN 000'S) ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL
PORTFOLIO $ $ RATE(%) $ RATE(%) $ RATE(%) $ RATE(%) $ RATE(%)
--------- ---------- --------- ------- --------- ------- ---------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive
Equity......... 85,728 684,226 0.80 468,441 0.55 215,785 0.25 514,367 0.60 169,859 0.20
Equity.......... 280,095 1,818,664 0.65 1,088,097(1) 0.39 730,567 0.26 812,289(1) 0.29 1,006,375 0.36
Bond and Income. 94,858 568,647 0.60 368,846(1) 0.39 199,801 0.21 275,094(1) 0.29 293,553 0.31
<CAPTION>
CHANGE
IN RATE
OF NET
ADV. FEE
RETAINED
PORTFOLIO (%)
--------- --------
<S> <C>
Aggressive
Equity......... (0.05)
Equity.......... 0.10
Bond and Income. 0.10
</TABLE>
- -------
(1) Portfolio management fees reflect breakpoints that are based on the
combined average daily net assets of the Equity Portfolio and the Bond and
Income Portfolio.
COMPARISON OF PORTFOLIO MANAGEMENT FEES PAID BY PACIFIC LIFE AT HYPOTHETICAL
NET ASSET LEVELS
Similarly, the tables below compare the hypothetical estimated fees that
would be paid to the Portfolio Manager by Pacific Life and the net advisory
fees retained by Pacific Life under each Current Portfolio Management
Agreement versus those that would be paid and retained under each New
Portfolio Management Agreement at different assumed net asset levels as
specified below. The information in the charts is hypothetical and estimated.
A. The Aggressive Equity Portfolio
<TABLE>
<CAPTION>
HYPOTHETICAL ESTIMATED FEES
----------------------------------------------------------------------
UNDER CURRENT PORTFOLIO UNDER NEW PORTFOLIO MANAGEMENT
MANAGEMENT AGREEMENT AGREEMENT
--------------------------------- ------------------------------------
FEES THAT WOULD NET FEES THAT NET FEES THAT
AVERAGE DAILY HAVE BEEN PAID TO WOULD HAVE BEEN FEES THAT WOULD BE WOULD BE RETAINED
NET ASSET LEVELS PORTFOLIO MGR. RETAINED BY PL PAID TO ALLIANCE BY PL
---------------- ----------------- --------------- ------------------ -----------------
<S> <C> <C> <C> <C>
$200 million............ $1,050,000 $ 550,000 $1,050,000 $ 550,000
$400 million............ $1,975,000 $1,225,000 $1,950,000 $1,250,000
$600 million............ $2,825,000 $1,975,000 $2,800,000 $2,000,000
</TABLE>
4
<PAGE>
B. The Equity Portfolio and the Bond and Income Portfolio (Combined 75%
Equity Portfolio and 25% Bond and Income Portfolio)
<TABLE>
<CAPTION>
HYPOTHETICAL ESTIMATED FEES
------------------------------------------------------------------------
UNDER CURRENT PORTFOLIO MANAGEMENT UNDER NEW PORTFOLIO MANAGEMENT
AGREEMENT AGREEMENT
------------------------------------------------------------------------
COMBINED AVERAGE DAILY
NET ASSETS OF THE
EQUITY FEES THAT WOULD NET FEES THAT NET FEES THAT
AND BOND AND INCOME HAVE BEEN PAID TO WOULD HAVE BEEN FEES THAT WOULD BE WOULD BE RETAINED
PORTFOLIOS PORTFOLIO MGR.(1) RETAINED BY PL PAID TO GSAM(1) BY PL
- ------------------------ ------------------ ----------------------------------- -----------------
<S> <C> <C> <C> <C>
$400 million......... $ 1,550,000 $ 1,000,000 $1,150,000 $1,400,000
$800 million......... $ 2,750,000 $ 2,350,000 $2,150,000 $2,950,000
$1.2 billion......... $ 3,750,000 $ 3,900,000 $3,050,000 $4,600,000
</TABLE>
- --------
(1) Portfolio management fees reflect the breakpoints that are based on the
combined average daily net assets of the Equity Portfolio and the Bond and
Income Portfolio.
PROPOSAL I
APPROVAL OF PORTFOLIO MANAGEMENT AGREEMENT
WITH ALLIANCE CAPITAL MANAGEMENT L.P. FOR
THE AGGRESSIVE EQUITY PORTFOLIO
Under Proposal I, the Shareholders of the Aggressive Equity Portfolio
("Portfolio") are asked to approve a New Portfolio Management Agreement among
the Fund, Pacific Life, and Alliance under which Alliance would provide
portfolio management services to the Portfolio. The Current Portfolio Manager
has been serving as Portfolio Manager for the Portfolio since April 1, 1996
under the Current Portfolio Management Agreement that was approved by the then
sole Shareholder of the Aggressive Equity Portfolio on January 30, 1996.
Based on a recommendation from Pacific Life, the Trustees have approved the
appointment of Alliance to serve as the New Portfolio Manager for the
Portfolio. The Trustees considered the recommendation of Pacific Life that the
best interests of the Portfolio's Shareholders would be served and that the
potential for strong investment performance relative to comparable funds would
be enhanced if Alliance were engaged. Accordingly, the Trustees now submit for
Shareholder approval a New Portfolio Management Agreement under which Alliance
would serve as New Portfolio Manager.
CHANGES IN THE PORTFOLIO'S INVESTMENT POLICIES
The Portfolio's investment objective is capital appreciation. The investment
objective would not change. The Trustees have approved changes to certain of
the Portfolio's investment policies, which will become effective, if the
Shareholders approve the New Portfolio Management Agreement, on the date that
Alliance would assume management responsibility for the Portfolio, which is
expected to be May 1, 1998. The Portfolio's investment objective and
investment policies, restated to reflect the changes in investment policies
that will become effective if the New Portfolio Management Agreement is
approved, are as follows:
INVESTMENT OBJECTIVE. Capital Appreciation. No consideration is given to
income.
INVESTMENT POLICIES. The Portfolio invests primarily in common stock and
other equity-type securities of small emerging growth and medium
capitalization companies. It may also invest in more well-established
companies. Investments may include preferred stocks, convertible debt, and
warrants. From time to time, the Portfolio may emphasize securities of
companies in cyclical industries, securities believed to be undervalued,
and companies in special situations. 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.
5
<PAGE>
The Portfolio may also invest a portion of its assets in high-quality
money market instruments. For temporary defensive purposes, the Portfolio
may invest to a significant degree in U.S. Government securities, mortgage-
related and other asset-backed securities, and in corporate fixed-income
securities that are rated, at the time of acquisition, investment grade,
or, if not rated, are determined by the Portfolio Manager to be of
comparable quality.
The Portfolio may invest in securities of foreign issuers, although the
Portfolio may not acquire a security of a foreign issuer principally traded
outside of the United States, if, at the time of such investment, more than
20% of the Portfolio's total assets would be invested in such foreign
securities.
OTHER TECHNIQUES. For hedging purposes, the Portfolio may purchase put
and call options on securities and securities indexes and may write covered
call options. The Portfolio may purchase and sell stock index futures
contracts and options thereon. The Portfolio may make secured loans of its
portfolio securities to others with securities that constitute up to 25% of
the Portfolio's total assets. To hedge against the risk of currency
fluctuation associated with investment on foreign securities, the Portfolio
may buy or sell foreign currencies on a spot (cash) basis and enter into
forward foreign currency contracts or options on foreign currencies or
foreign currency futures contracts and options thereon. These investment
techniques and investment in securities of foreign issuers may involve a
greater degree of risk than more conservative approaches.
COMPARISON OF MANAGEMENT STYLES
It is expected that if Shareholders approve the New Portfolio Management
Agreement with Alliance, and the changes in investment policies become
effective, the differences in investment policies and the different investment
management styles of Alliance and the Current Portfolio Manager will result in
some changes in the Portfolio and its holdings. Under both the current and
revised policies, the Portfolio invests primarily in small and medium
capitalization companies, and therefore the Portfolio will continue to be
intended for long-term investors who are willing to accept the greater risks
associated with investment in such companies. However, the Current Portfolio
Manager utilizes an investment discipline called "Positive Momentum & Positive
Surprise" and seeks companies doing better than expected. In contrast,
Alliance selects companies that it believes have favorable growth prospects.
For more information on certain of the investment techniques permitted by the
Portfolio's investment policies, see Appendix C.
In the event that Shareholders of the Portfolio approve the New Portfolio
Management Agreement, significant portfolio turnover may occur in connection
with a restructuring of the Portfolio's holdings to reflect the management
style of Alliance. Such restructuring may result in increased transactional
costs in the Portfolio's current fiscal year.
PRIOR PERFORMANCE OF A COMPARABLE FUND MANAGED BY ALLIANCE
The table below sets forth the performance data relating to the historical
performance of the Alliance Aggressive Stock Portfolio, a series of the Hudson
River Trust. The Alliance Aggressive Stock Portfolio is a mutual fund managed
by Alliance and has substantially similar investment objectives, policies, and
strategies to those of the Aggressive Equity Portfolio (assuming effectiveness
of the revised investment policies described above). The Aggressive Equity
Portfolio's current and future investments are not and will not necessarily be
identical to those of the Alliance Aggressive Stock Portfolio. Differences in
the asset size of the two funds might reduce their comparability. The
performance information for the Alliance Aggressive Stock Portfolio is
presented in two forms: (1) the first presentation reflects the fees and
expenses of the Alliance Aggressive Stock Portfolio and (2) the second
presentation uses the gross performance of the Alliance Aggressive Stock
Portfolio, which is adjusted to reflect the fees and expenses of the Fund's
Aggressive Equity Portfolio.
The investment results presented below are not those of the Fund and are not
intended to predict or suggest returns that might be experienced by the
Aggressive Equity Portfolio or an individual investor having an interest in
the Aggressive Equity Portfolio. These total return figures represent past
performance and do not indicate future results, which will vary.
6
<PAGE>
The following performance data does not reflect the deduction for separate
account or contract level charges.
TOTAL RETURN FOR THE ALLIANCE AGGRESSIVE
STOCK PORTFOLIO AND 50% RUSSELL 2000 INDEX/50% RUSSELL MIDCAP INDEX
<TABLE>
<CAPTION>
ALLIANCE AGGRESSIVE STOCK
PORTFOLIO ADJUSTED
TO REFLECT EXPENSES OF
THE 50% RUSSELL 2000
ALLIANCE AGGRESSIVE AGGRESSIVE EQUITY INDEX/ 50% RUSSELL
STOCK PORTFOLIO PORTFOLIO MIDCAP INDEX
- -----------------------------------------------------------------------------------
ANNUAL ANNUAL ANNUAL
YEAR TOTAL RETURN(%) TOTAL RETURN(%) TOTAL RETURN(%)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
1997 10.94 10.62 25.69
1996 22.20 21.66(/2/) 17.75
1995 31.63 31.45
1994 (3.81) (1.96)
1993 16.77 16.60
1992 (3.16) 17.38
1991 86.87 43.78
1990 8.16 (15.51)
1989 43.50 21.26
1988 1.13 22.36
1987 7.30 (4.28)
1986 35.90(/1/) N/A
- -----------------------------------------------------------------------------------
<CAPTION>
TIME PERIOD AVERAGE ANNUAL AVERAGE ANNUAL AVERAGE ANNUAL
(THRU 12/31/97) TOTAL RETURN (%) TOTAL RETURN (%) TOTAL RETURN (%)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
1 year 10.94 10.62 25.69
3 years 21.29 24.88
5 years 14.92 17.33
10 years 19.00 16.75
Inception
(1/27/86) 19.41 14.32(/3/)
</TABLE>
(/1/)Annual total return for 1986 is rounded to the nearest tenth of a
percent.
(/2/)Aggressive Equity Portfolio began operations on April 1, 1996. Expenses
used in calculating adjusted annual total return for 1996 were annualized.
(/3/)Average annual total return is for the period 2/1/86 through 12/31/97.
INFORMATION ABOUT ALLIANCE
Alliance, with principal offices at 1345 Avenue of the Americas, New York,
NY 10105, is a registered investment adviser under the Investment Advisers Act
of 1940. Alliance is a major international investment adviser with a staff of
more than 1,500 employees operating out of domestic offices and the offices of
subsidiaries in Bahrain, Boston, Chennai, Istanbul, London, Luxembourg,
Madrid, Melbourne, Paris, Singapore, Sydney, Tokyo, and Toronto, and
affiliated offices located in Hong Kong, Moscow, Sao Paolo, Seoul, Vienna, and
Warsaw.
See Appendix D to this proxy statement for information regarding directors
and principal executive officers of Alliance, as well as information about
other investment companies, or series thereof, having an investment objective
and investment policies similar to those of the Portfolio for which Alliance
provides investment advisory services.
7
<PAGE>
THE TRUSTEES' RECOMMENDATION
In determining to approve the New Portfolio Management Agreement and to
recommend approval to Shareholders, the Trustees, including the Trustees who
are not "interested persons" of Pacific Life or Alliance, considered various
matters and materials provided by Alliance and Pacific Life. The Trustees
considered the recommendation of Pacific Life that the best interests of the
Portfolio's Shareholders would be served and that the potential for strong
investment performance relative to comparable funds would be enhanced if
Alliance were engaged. Other factors considered by the Trustees included,
among other things: (1) the nature and quality of the services anticipated to
be rendered and Alliance's experience in managing equity portfolios,
including, but not limited to, Alliance's record in managing similar
portfolios; (2) the strength of Alliance in terms of investment and research
personnel, as well as existing and anticipated institutional resources; and
(3) the reasonableness of the compensation to be paid to Alliance by Pacific
Life and to be retained by Pacific Life.
In analyzing whether it is appropriate for Pacific Life to retain the
difference between the fees under the New Portfolio Management Agreement and
the Current Portfolio Management Agreement, the Trustees also considered
Pacific Life's expenses associated with the development and operation of its
variable life insurance policies and variable annuity contracts (collectively,
"Variable Contracts") funded by its separate accounts whose proceeds are
invested in the Portfolio, and the services rendered by Pacific Life in
connection with the Variable Contracts.
ACCORDINGLY, THE TRUSTEES, INCLUDING THE TRUSTEES WHO ARE NOT "INTERESTED
PERSONS" OF ANY PARTY TO THE NEW PORTFOLIO MANAGEMENT AGREEMENT, RECOMMEND THE
APPROVAL OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG PACIFIC LIFE, THE
FUND, AND ALLIANCE ON BEHALF OF THE AGGRESSIVE EQUITY PORTFOLIO.
PROPOSAL II
APPROVAL OF PORTFOLIO MANAGEMENT AGREEMENT
WITH GOLDMAN SACHS ASSET MANAGEMENT FOR
THE EQUITY PORTFOLIO
Under Proposal II, Shareholders of the Equity Portfolio ("Portfolio") are
asked to approve a New Portfolio Management Agreement among the Fund, Pacific
Life, and Goldman Sachs under which Goldman Sachs would provide portfolio
management services to the Portfolio. The Current Portfolio Manager currently
serves as Portfolio Manager of the Equity Portfolio under a Portfolio
Management Agreement that was last approved by the then sole Shareholder of
the Equity Portfolio on September 4, 1994.
Based on a recommendation from Pacific Life, the Trustees have approved the
appointment of Goldman Sachs to serve as New Portfolio Manager for the
Portfolio. The Trustees considered the recommendation of Pacific Life that the
best interests of the Portfolio's Shareholders would be served and that
Pacific Life's efforts to increase the assets of the Fund and provide high
quality investment management services would be enhanced if Goldman Sachs were
engaged. Accordingly, the Trustees now submit for Shareholder approval a New
Portfolio Management Agreement under which Goldman Sachs would serve as
Portfolio Manager.
CHANGES IN THE PORTFOLIO'S INVESTMENT POLICIES
The Portfolio's primary investment objective is to achieve capital
appreciation, with current income being of secondary importance. The Trustees
have approved changes to certain of the Portfolio's investment policies, which
will become effective, if the Shareholders approve the New Portfolio
Management Agreement, on the date that Goldman Sachs would assume management
responsibility for the Portfolio, which is expected to be May 1, 1998. The
investment objective would not change. The Portfolio's investment objective
and investment policies, restated to reflect the changes in investment
policies that will become effective if the New Portfolio Management Agreement
is approved, are as follows:
INVESTMENT OBJECTIVE. The primary investment objective of the Equity
Portfolio is capital appreciation. Current income is of secondary
importance.
8
<PAGE>
INVESTMENT POLICIES. The Portfolio seeks to achieve this objective by
investing primarily in common stock, or securities convertible into or
exchangeable for common stock, including convertible preferred stocks,
convertible debentures, or warrants. The Portfolio invests, under normal
circumstances, at least 90% of its total assets in equity securities of
U.S. issuers.
The Portfolio Manager emphasizes a company's growth prospects in
analyzing equity securities to be purchased by the Portfolio. The Portfolio
Manager selects investments using both a variety of quantitative techniques
and fundamental research, while attempting to maintain risk, style,
capitalization, and industry characteristics similar to the Russell 1000
Growth Index ("Index"). The Portfolio seeks to maintain a portfolio
comprised of companies with capitalizations and earnings growth
expectations that are above the average of the Index and dividend yields
that are below the average of the Index. The Portfolio also may invest in
U.S. Government securities, corporate bonds, money market instruments, and
enter into repurchase agreements. The Portfolio may increase its investment
in these securities when in a temporary defensive position.
The Portfolio Manager utilizes a "Computer-Optimized, Research-Enhanced"
("CORE") investment strategy in connection with its management of the
Portfolio. Under the CORE strategy, the Portfolio Manager begins with a
broad universe of U.S. equity securities and then uses a proprietary
multifactor model ("Multifactor Model") to assign each equity security a
rating. The Multifactor Model is a rigorous computerized rating system for
forecasting the returns of individual equity securities according to
fundamental investment characteristics. The Multifactor Model contains
variables that measure value, growth, momentum, and risk (e.g., book/price
ratio, earnings/price ratio, price momentum, price volatility, consensus
growth forecasts, earnings estimate revisions, and earnings stability).
The weightings assigned to the factors in the Multifactor Model are
derived from a statistical formulation that considers each factor's
historical performance in different market environments. As such, the
Multifactor Model is designed to evaluate each security using only the
factors that are statistically related to returns in the anticipated market
environment. Because it includes many disparate factors, the Portfolio
Manager believes that the Multifactor Model is broader in scope and
provides a more thorough evaluation than most conventional quantitative
models.
OTHER TECHNIQUES. In pursuing its investment objective, the Portfolio may
purchase and sell put and call options on securities and stock indices. In
addition, the Portfolio may purchase or sell stock index futures contracts
and futures thereon. These investment techniques may involve a greater
degree or different type of risk than those inherent in more conservative
investment approaches.
COMPARISON OF MANAGEMENT STYLES
It is expected that if Shareholders approve the New Portfolio Management
Agreement with Goldman Sachs, and the changes in investment policies become
effective, the differences in investment policies referenced above and the
different investment management styles of Goldman Sachs and the Current
Portfolio Manager will result in some changes in the Portfolio and its
holdings. Under both the current and revised policies, the Portfolio invests
primarily in equity securities of U.S. issuers, and therefore Shareholders
will continue to be exposed to the market and financial risks of investment in
common stock. Under the current investment policies, from time to time the
Portfolio could be invested in fewer industries or groups of industries than
more broad-based equity portfolios, which may create an opportunity for higher
returns, but may also result in higher risk because of greater exposure to an
industry or group of industries. Under the revised investment policies, it is
expected that the Portfolio would normally be diversified across a broad
spectrum of industries.
The utilization of the CORE methodology, as described above, would result in
a different investment strategy for security selection if Goldman Sachs is
approved. It is expected that under the CORE methodology, the risk,
capitalization, and industry characteristics of the Portfolio would be more
closely aligned to the Russell
9
<PAGE>
1000 Growth Index (the "Russell Index") than under the current investment
policies. In addition, the revised investment policies would reflect a greater
emphasis on seeking to outperform the total return of the Russell Index.
For more information on certain of the investment techniques permitted by
the Portfolio's investment policies, see Appendix C.
In the event that Shareholders of the Portfolio approve the New Portfolio
Management Agreement, significant portfolio turnover may occur in connection
with a restructuring of the Portfolio's holdings to reflect the management
style of Goldman Sachs. Such restructuring may result in increased
transactional costs in the Portfolio's current fiscal year.
PRIOR PERFORMANCE OF COMPARABLE ACCOUNTS MANAGED BY GOLDMAN SACHS
The table below sets forth the performance data relating to the historical
performance of the Goldman Sachs CORE Large Cap Growth Composite (the
"Composite").
Each account represented in the Composite is managed by Goldman Sachs and
has substantially similar investment objectives, policies, and strategies to
those of the Equity Portfolio (assuming effectiveness of the revised
investment policies described above). The Composite currently consists of 8
accounts, including 6 advisory accounts and 2 mutual funds. In prior years,
the Composite consisted of fewer advisory accounts and one mutual fund. The
performance information for the Composite is presented in two forms: (1) the
first presentation reflects the average fees and expenses charged to the
accounts in the Composite; and (2) the second presentation uses the gross
performance of the Composite as adjusted to reflect the fees and expenses of
the Equity Portfolio. The expenses shown for the Composite include investment
advisory fees. For the advisory accounts and one of the mutual funds, expenses
do not include the expense of custody, which if included, could lessen
performance and which is an expense the Portfolio bears; for the other mutual
fund the expense for custody and other operating expenses are included. The
average fees for the Composite from January 1995 through December 1997 are
estimated. The composite performance figures also reflect the inclusion of any
dividends and interest income received, the deductions of any brokerage
commissions, and other related portfolio transaction expenses which are
generally reflected as part of the cost of a security.
The Composite data was calculated using the methodology recommended by the
Association for Investment Management and Research ("AIMR"), retroactively
applied to all time periods. Accounts under Goldman Sachs' management are
included in the Composite the month after operations commence. To determine
composite values, the beginning market value of each comparable account is
divided by the sum of the market values of all comparable accounts, which
results in a percentage number. The percentage number is multiplied by each
comparable account's rate of return. The sum of all accounts for the
comparable accounts results in a dollar-weighted composite return. The
Composite investment results are unaudited.
Because of the differences in computation methods, such as the method or
frequency of reinvesting dividends or measuring gains, the data for the
comparable accounts shown below may not be precisely comparable to performance
data for a mutual fund. In addition, the performance data for the advisory
accounts included in the Composite may not be representative of the Equity
Portfolio because those accounts are not subject to the obligation to redeem
shares upon request and to meet diversification requirements, specific tax
restrictions and investment limitations imposed on the Portfolio by the
Investment Company Act of 1940 or Subchapter M of the Internal Revenue Code,
which, if imposed, could have adversely affected the performance. In addition,
if the asset size of the comparable accounts varies from that of the Equity
Portfolio, this might reduce the comparability of the Equity Portfolio's
performance to that of the comparable accounts. Moreover, the Equity
Portfolio's current and future investments are not and will not necessarily be
identical to those of the comparable accounts. Investors should also be aware
that the use of a methodology different from that used to calculate these
Composite returns could result in different performance data.
10
<PAGE>
The investment results presented below are not those of the Fund and are not
intended to predict or suggest returns that might be experienced by the Equity
Portfolio or an individual investor having an interest in the Equity
Portfolio. These total return figures represent past performance and do not
indicate future results, which will vary.
THE FOLLOWING PERFORMANCE DATA DOES NOT REFLECT THE DEDUCTION FOR SEPARATE
ACCOUNT OR CONTRACT LEVEL CHARGES.
TOTAL RETURN FOR THE GOLDMAN SACHS CORE LARGE CAP
GROWTH COMPOSITE AND THE RUSSELL 1000 GROWTH INDEX
<TABLE>
<CAPTION>
GOLDMAN SACHS CORE
LARGE CAP GROWTH COMPOSITE
ADJUSTED TO REFLECT
GOLDMAN SACHS CORE EXPENSES OF THE EQUITY RUSSELL 1000
LARGE CAP GROWTH COMPOSITE* PORTFOLIO GROWTH INDEX
- ------------------------------------------------------------------------------------------
ANNUAL ANNUAL ANNUAL
YEAR TOTAL RETURN (%) TOTAL RETURN (%) TOTAL RETURN (%)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1997 30.49
1996 [To be provided] [To be provided] 23.12
1995 37.19
1994 0.60
1993 0.87
1992 N/A
- ------------------------------------------------------------------------------------------
<CAPTION>
TIME PERIOD AVERAGE ANNUAL AVERAGE ANNUAL AVERAGE ANNUAL
(THRU 12/31/97) TOTAL RETURN (%) TOTAL RETURN (%) TOTAL RETURN (%)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 year 30.49
3 years [To be provided] [To be provided] 30.11
5 years 18.40
Inception
(12/1/91) 17.54
</TABLE>
*Adjusted to reflect the fees and expenses described above.
INFORMATION ABOUT GOLDMAN SACHS
Goldman Sachs Asset Management, with principal offices at One New York
Plaza, New York, NY 10004, is the investment management division of Goldman,
Sachs & Co. Founded in 1869, Goldman, Sachs & Co. is one of the world's
largest investment banking firms. With one of the industry's largest research
commitments ($300 million in 1998), Goldman, Sachs & Co. follows financial
markets, economies, industries and companies throughout the world.
Goldman Sachs has been a registered investment adviser since 1981 and
provides portfolio management services to a diverse group of investment
companies. As of January 26, 1998, Goldman Sachs, together with its
affiliates, acted as investment adviser or distributor for assets in excess of
$140 billion. In addition to its New York headquarters, Goldman Sachs and its
affiliates have offices in other major U.S. cities as well as London, Tokyo,
and Singapore.
See Appendix E to this proxy statement for information regarding directors
and principal executive officers of Goldman Sachs, as well as information
about other investment companies, or series thereof, having an investment
objective and investment policies similar to those of the Portfolio for which
Goldman Sachs provides investment advisory services.
THE TRUSTEES' RECOMMENDATION
In determining to approve the New Portfolio Management Agreement and to
recommend approval to Shareholders, the Trustees, including the Trustees who
are not "interested persons" of Pacific Life or
11
<PAGE>
Goldman Sachs, considered various matters and materials provided by Goldman
Sachs and Pacific Life. The Trustees considered the recommendation of Pacific
Life that the best interests of the Portfolio's Shareholders would be served
and that Pacific Life's efforts to increase the assets of the Fund and provide
high quality investment management services would be enhanced if Goldman Sachs
were engaged. Other factors considered by the Trustees included, among other
things: (1) the nature and quality of the services anticipated to be rendered
and Goldman Sachs' experience in managing equity portfolios, including, but
not limited to, Goldman Sachs' record in managing similar portfolios; (2) the
strength of Goldman Sachs in terms of investment and research personnel, as
well as existing and anticipated institutional resources; and (3) the
reasonableness of the compensation to be paid to Goldman Sachs by Pacific Life
and to be retained by Pacific Life.
In analyzing whether it is appropriate for Pacific Life to retain the
difference between the fees under the New Portfolio Management Agreement and
the Current Portfolio Management Agreement, the Trustees also considered
Pacific Life's expenses associated with the development and operation of its
variable life insurance policies and variable annuity contracts (collectively,
"Variable Contracts") funded by its separate accounts whose proceeds are
invested in the Portfolio, and the services rendered by Pacific Life in
connection with the Variable Contracts.
ACCORDINGLY, THE TRUSTEES, INCLUDING THE TRUSTEES WHO ARE NOT INTERESTED
PERSONS OF ANY PARTY TO THE NEW PORTFOLIO MANAGEMENT AGREEMENT, RECOMMEND THE
APPROVAL OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG PACIFIC LIFE, THE
FUND, AND GOLDMAN SACHS ON BEHALF OF THE EQUITY PORTFOLIO.
PROPOSAL III
(A) APPROVAL OF PORTFOLIO MANAGEMENT AGREEMENT
WITH GOLDMAN SACHS ASSET MANAGEMENT FOR THE BOND AND
INCOME PORTFOLIO
INTRODUCTION
Under Proposal III.A, Shareholders of the Bond and Income Portfolio
("Portfolio") are asked to approve a New Portfolio Management Agreement among
the Fund, Pacific Life, and Goldman Sachs under which Goldman Sachs would
provide portfolio management services to the Portfolio. Under Proposal III.B,
Shareholders are also asked to approve a change to the investment objective of
the Portfolio. This change in investment objective and related changes in
investment policies are intended to modernize the Portfolio's policies and to
reflect the investment management style that Goldman Sachs would utilize in
managing the Portfolio. The proposed change in the investment objective in
Proposal III.B is contingent upon Shareholder approval of the New Portfolio
Management Agreement in Proposal III.A. Accordingly, a vote on Proposal III.B
will occur only if Shareholders approve the New Portfolio Management Agreement
with Goldman Sachs. The Current Portfolio Manager currently serves as
Portfolio Manager of the Portfolio under a Portfolio Management Agreement that
was last approved by the then sole Shareholder of the Bond and Income
Portfolio on September 6, 1994.
Based on a recommendation from Pacific Life, the Fund's Board of Trustees
has approved the appointment of Goldman Sachs to serve as the New Portfolio
Manager for the Portfolio. The Trustees considered the recommendation of
Pacific Life that the best interests of the Portfolio's Shareholders would be
served and that Pacific Life's efforts to increase the assets of the Fund and
provide high quality investment management services would be enhanced if
Goldman Sachs were engaged. Accordingly, the Trustees now submit for
Shareholder approval a New Portfolio Management Agreement under which Goldman
Sachs would serve as New Portfolio Manager.
INFORMATION ABOUT GOLDMAN SACHS
See "Information About Goldman Sachs," under Proposal II.
12
<PAGE>
See Appendix E to this proxy statement for information regarding directors
and principal executive officers of Goldman Sachs, as well as information
about other investment companies, or series thereof, having an investment
objective and investment policies similar to those of the Bond and Income
Portfolio for which Goldman Sachs provides investment advisory services.
(B) APPROVAL OF AN AMENDMENT TO THE
BOND AND INCOME PORTFOLIO'S INVESTMENT OBJECTIVE
INVESTMENT OBJECTIVE AND POLICIES UNDER THE NEW PORTFOLIO MANAGEMENT AGREEMENT
The current investment objective of the Bond and Income Portfolio is to
provide as high a level of current income as is consistent with prudent
investment management and preservation of capital. Under Proposal III.B,
Shareholders are being asked to approve an amendment to the Portfolio's
investment objective under which the Portfolio would seek to provide total
return and income consistent with prudent investment management. This change,
and related changes to the Portfolio's investment policies (which are not
subject to Shareholder approval), are intended to modernize the Portfolio's
policies and to reflect the investment management style that Goldman Sachs
would utilize in managing the Portfolio. The proposed change in investment
objective in Proposal III.B is contingent upon Shareholder approval of the New
Portfolio Management Agreement in Proposal III.A. Accordingly, a Shareholder
vote regarding the new investment objective of the Portfolio will occur only
if Shareholders first approve Goldman Sachs as the New Portfolio Manager.
The Fund's Board of Trustees also has approved changes to certain of the
Portfolio's investment policies, which will become effective, if the
Shareholders approve the New Portfolio Management Agreement, on the date that
Goldman Sachs would assume management responsibility for the Portfolio, which
is expected to be May 1, 1998. The Portfolio's investment objective and
investment policies, restated to reflect the proposed change in investment
objective and changes in investment policies that will become effective if the
New Portfolio Management Agreement is approved, are as follows:
INVESTMENT OBJECTIVE. Provide total return and income consistent with
prudent investment management.
INVESTMENT POLICIES. The Portfolio invests in the following types of
securities: U.S. dollar-denominated debt securities of U.S. or foreign
corporations; U.S. Government securities; mortgage-related and other asset-
backed securities; U.S. dollar-denominated obligations of foreign
governments, foreign governmental agencies, and international agencies
(such as the International Bank for Reconstruction and Development); within
certain limits as described below, non-U.S. dollar-denominated obligations
of foreign corporations, governments, governmental agencies, and
international agencies; certain derivative instruments for hedging
purposes; and high-quality short-term instruments, including, among others,
commercial paper, bank instruments, and repurchase agreements. These
securities may include securities with debt characteristics such as
convertible securities and preferred stock.
The Portfolio normally invests at least 80% of its assets in securities
rated, at the time of acquisition, investment grade by at least one
nationally recognized statistical rating organization ("NRSRO") (e.g., Baa
or better by Moody's or BBB or better by S&P), or, if not rated by an
NRSRO, of comparable quality as determined by the Portfolio Manager. The
Portfolio may invest up to 20% of its assets in securities that are not
rated investment grade by at least one NRSRO, 15% of which may consist of
debt securities of issuers located in emerging market countries. This may
include securities of foreign governments or their agencies that are
emerging market countries. Generally, debt securities that are not
considered investment grade 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 non-investment grade
securities, mortgage-related securities, and the risks of investment in
foreign issuers, see Appendix C.
13
<PAGE>
Other limitations apply to the Portfolio to address potential volatility
associated with certain investment techniques. The Portfolio may not invest
more than 10% of its assets in the following types of mortgage-related
securities: inverse floaters, super floaters, interest-only ("IO's") and
principal-only ("PO's") tranches of stripped mortgage backed securities
(including planned amortization class certificates) and inverse IO's. The
Portfolio may invest up to 10% of its assets in non-U.S. dollar denominated
securities. The Portfolio may invest up to 15% of its assets in restricted
securities that are illiquid, which, for these purposes, does not include
securities that may be sold without registration to qualified institutional
buyers under the Trust's procedures for restricted securities under SEC
Rule 144A. Measurement of these limits is determined at the time of
acquiring a security.
DURATION. The Portfolio invests in securities of varying maturities.
Under normal circumstances, the Portfolio maintains an average portfolio
duration that is within one-half year of the duration of the Lehman
Brothers Long Term Government/Corporate Bond Index ("Index"). The average
duration of the Index as of January 31, 1998 was 10.13 years. It is
expected that the duration of the Index will change over time, but only
gradually. The Bond and Income Portfolio ordinarily will have the potential
to be more volatile than fixed-income funds of shorter duration.
OTHER TECHNIQUES. For hedging risk or adjusting interest rate exposure,
the Portfolio may (but is not obligated to) use several investment
techniques. The Portfolio may purchase put and call options on securities
and on securities indices and may write (sell) covered call options. The
Portfolio also may enter into the following: financial futures contracts
and options thereon; instruments such as interest rate caps, floors, and
collars; and interest rate swaps. To hedge against fluctuations in currency
exchange rates that affect non-U.S. dollar-denominated securities, the
Portfolio may (but is not obligated to) enter into spot (or cash)
transactions in currency, forward currency contracts, options on foreign
currency contracts, foreign currency futures and options thereon, and
currency swaps. The Portfolio may invest up to 5% of its assets in
structured notes to hedge interest rate or currency risk. The Portfolio may
enter into swaps, caps, floors, collars, structured notes, and non-exchange
traded options only with counterparties that have outstanding securities
rated A or better by Moody's or S&P or that have outstanding short-term
securities rated P-2 or better by Moody's or A-2 or better by S&P. More
information about some of these techniques is included in Appendix B.
COMPARISON OF INVESTMENT OBJECTIVE AND POLICIES
The change in the Portfolio's investment objective and policies reflect a
modernization in the Portfolio's investment policies and differences in the
management styles between Goldman Sachs and the Current Portfolio Manager. By
including total return in the Portfolio's investment objective, it signifies
that the Portfolio may invest in debt securities for purposes other than
achieving income. For instance, the Portfolio could invest in debt securities
that the Portfolio Manager believes are attractively priced for the purpose of
realizing appreciation in value over time.
The new investment policies will also expand the range of eligible
investments for the Portfolio. The current investment policies of the
Portfolio provide that, among other things, the Portfolio may invest in
corporate bonds which are rated Baa or better by Moody's Investor Service,
Inc. ("Moody's"), or BBB or better by Standard & Poor's Corporation ("S&P").
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. Nevertheless, these ratings are considered to be
"investment grade." In contrast, the new investment policies would require the
Portfolio to invest 80% of its assets in debt securities that are considered
to be "investment grade" and permit the remaining 20%, subject to the
limitations set forth above, to be invested among a variety of securities that
may present higher degrees of risk. Specifically, the Portfolio may invest up
to 20% of its assets in non-investment grade debt securities, 15% of which may
consist of debt securities of issuers, including governmental issuers located
in emerging market countries, and may invest up to 10% of its assets in non-
U.S. dollar-denominated securities.
14
<PAGE>
In addition, under the revised investment policies, the Portfolio generally
will seek an average portfolio duration that is tied closely to the average
duration of the Lehman Brothers Long Term Government/Corporate Bond Index.
Duration is a measure of the 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. Debt securities with longer durations
generally are subject to greater price volatility than shorter term debt
securities in the event of changes in interest rates. The average portfolio
duration of the Index was 10.19 years as of December 31, 1997. On that same
date, the Portfolio's average portfolio duration was 12.5 years. While the
duration of the Index is long in relation to other fixed-income funds, it is
shorter than the Portfolio's duration under current policies. This shorter
duration is likely to result in the Portfolio having somewhat less total
return potential in a rising bond market than the Portfolio under current
policies, but somewhat less volatility and potential loss in a falling bond
market.
For more information on certain of the investment techniques permitted by
the Portfolio's investment policies, see Appendix C.
In the event that Shareholders of the Bond and Income Portfolio approve the
New Portfolio Management Agreement, significant portfolio turnover may occur
in connection with a restructuring of the Portfolio's holdings to reflect the
management style of Goldman Sachs.
THE TRUSTEES' RECOMMENDATION
In determining to approve the New Portfolio Management Agreement and to
recommend approval to Shareholders, the Trustees, including the Trustees who
are not "interested persons" of Pacific Life or Goldman Sachs, considered
various matters and materials provided by Goldman Sachs and Pacific Life. The
Trustees considered the recommendation of Pacific Life that the best interests
of the Portfolio's Shareholders would be served and that Pacific Life's
efforts to increase the assets of the Fund and provide high quality investment
management services would be enhanced if Goldman Sachs were engaged. Other
factors considered by the Trustees included, among other things: (1) the
nature and quality of the services anticipated to be rendered and Goldman
Sachs' experience in managing debt portfolios; (2) the strength of Goldman
Sachs in terms of investment and research personnel, as well as existing and
anticipated institutional resources; and (3) the reasonableness of the
compensation to be paid to Goldman Sachs by Pacific Life and to be retained by
Pacific Life.
In analyzing whether it is appropriate for Pacific Life to retain the
difference between the fees under the New Portfolio Management Agreement and
the Current Portfolio Management Agreement, the Trustees also considered
Pacific Life's expenses associated with the development and operation of its
variable life insurance policies and variable annuity contracts (collectively,
"Variable Contracts") and funded by its separate accounts whose proceeds are
invested in the Portfolio, and the services rendered by Pacific Life in
connection with the Variable Contracts.
ACCORDINGLY, THE TRUSTEES, INCLUDING THE TRUSTEES WHO ARE NOT INTERESTED
PERSONS OF ANY PARTY TO THE NEW PORTFOLIO MANAGEMENT AGREEMENT, RECOMMEND THE
APPROVAL OF: (A) THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG PACIFIC LIFE,
THE FUND, AND GOLDMAN SACHS ON BEHALF OF THE BOND AND INCOME PORTFOLIO; AND
(B) THE AMENDMENT TO THE PORTFOLIO'S INVESTMENT OBJECTIVE.
OTHER MATTERS
The Trustees know of no other business to be brought before the Meeting
other than as set forth above. If, however, any other matters properly come
before the Meeting, it is the intention of the persons named in the enclosed
form of proxy to vote on such matters in accordance with their best judgment.
15
<PAGE>
VOTING INFORMATION
Approval of Proposals I, II, III.A, and III.B requires a vote of 67% or more
of the shares of the relevant Portfolio that are present at the Meeting, if
the holders of more than 50% of the outstanding shares are present or
represented by proxy at the Meeting, or the vote of more than 50% of the
outstanding shares of the relevant Portfolio, whichever is less ("Majority
Vote").
The shares of the Fund are offered as an investment medium for Variable
Contracts. As of the close of business on [DATE], the record date for the
Meeting ("Record Date"), the sole Shareholders of the Fund were Pacific Life's
separate accounts.
Pacific Life will vote shares of the Portfolios held by each separate
account that is registered as an investment company in accordance with
instructions received from Variable Contract owners having variable contract
value therein. Pacific Life will also vote shares of the Portfolios held in
each such separate account for which it has not received instructions in the
same proportion as it votes shares held by that separate account for which it
has received instructions from Variable Contract owners. Pacific Life will
vote shares of the Portfolios held by unregistered separate accounts in the
manner described in the applicable offering documents. Variable Contract
owners permitted to give instructions for the Portfolios and the number of
shares for which such instructions may be given to be voted at the Meeting and
any adjournment thereof will be determined as of the Record Date.
Shares held by Shareholders present in person or represented by proxy at the
Meeting will be counted both for the purpose of determining the presence of a
quorum and for calculating the votes cast on the proposals before the Meeting.
Shares represented by timely and properly executed proxies will be voted as
specified. Executed proxies that are unmarked will be voted in favor of the
proposals set forth in the Notice. A proxy may be revoked at any time prior to
its exercise by written notice, by execution of a subsequent proxy, or by
attending the Meeting and voting in person. However, attendance at the
Meeting, by itself, will not serve to revoke a proxy. An abstention on any
proposal by a Shareholder, either by proxy or by vote in person at the
Meeting, will be counted for purposes of establishing quorum, but has the same
effect as a negative vote.
In the event that a sufficient number of votes to approve the proposal is
not received, Pacific Life may propose one or more adjournments of the Meeting
to permit further solicitation of voting instructions, or for any other
purpose. A vote may be taken on any proposal prior to an adjournment if
sufficient votes have been received for approval. Any adjournment will require
the affirmative vote of a majority of those shares represented at the Meeting
in person or by proxy. Unless otherwise instructed, proxies will be voted in
favor of any adjournment. At any subsequent reconvening of the Meeting,
proxies will (unless previously revoked) be voted in the same manner as they
would have been voted at the Meeting.
Shares of each Portfolio have equal rights and privileges with all other
shares of each Portfolio. Shares of each Portfolio entitle their holders to
one vote per share, with proportional voting for fractional shares.
As of the close of business on the Record Date, there were [ ] shares of
beneficial interest issued and outstanding of the Aggressive Equity Portfolio,
[ ] shares of beneficial interest issued and outstanding of the Equity
Portfolio, and [ ] of beneficial interest issued and outstanding of the Bond
and Income Portfolio. [No Variable Contract owner who owns a Variable Contract
is entitled to give voting instructions with respect to 5% or more of the
shares of each Portfolio.] As of the Record Date, the number of shares of the
Aggressive Equity Portfolio, the Equity Portfolio, and the Bond and Income
Portfolio held by Pacific Life in its general account and shares held by its
non-insurance subsidiaries was [ ]%, [ ]%, and [ ]%, respectively.
INFORMATION ABOUT PACIFIC LIFE
Pacific Life, located at 700 Newport Center Drive, Newport Beach,
California, 92660, is a life insurance company that is domiciled in
California. Pacific Life's operations include both life insurance and annuity
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products as well as financial and retirement services. As of the end of 1997,
Pacific Life had $80.0 billion of individual life insurance in force and total
admitted assets of approximately $31.8 billion. Together with its subsidiaries
and affiliated enterprises, Pacific Life had total assets and funds under
management of over $236 billion as of December 31, 1997.
Pacific Life was organized on January 2, 1868, under the name "Pacific
Mutual Life Insurance Company of California" and reincorporated as "Pacific
Mutual Life Insurance Company" on July 22, 1936. On September 1, 1997, Pacific
Life converted from a mutual life insurance company to a stock life insurance
company ultimately controlled by a mutual holding company. Pacific Life is a
subsidiary of Pacific LifeCorp, a holding company which, in turn, is a
subsidiary of Pacific Mutual Holding Company, a mutual holding company.
TRUSTEES AND OFFICERS
None of the Trustees and Officers of the Fund is an officer or employee of
Alliance or Goldman Sachs. As of the Record Date, the Officers and Trustees of
the Fund as a group beneficially owned less than 1% of the outstanding shares
of each Portfolio.
INFORMATION ABOUT THE DISTRIBUTOR
Pacific Mutual Distributors, Inc. ("PMD"), 700 Newport Center Drive, Newport
Beach, California 92660, serves as the Fund's distributor. PMD receives no
remuneration from the Fund for its services.
EXPENSES OF THE MEETING
The costs of the Meeting, including the solicitation of proxies, will be
paid by the Fund. The solicitation of proxies primarily will be by mail. In
addition to solicitation of proxies by mail, proxies also may be solicited by
telephone, telegraph or personal interview conducted by officers or agents of
the Fund or Pacific Life.
PROPOSALS FOR FUTURE SHAREHOLDER MEETINGS
The Fund does not intend to hold Shareholder meetings each year, but
meetings may be called by the Trustees from time to time. Proposals of
Shareholders that are intended to be presented at a future Shareholder meeting
must be received by the Fund a reasonable time prior to the Fund's
solicitation of proxies relating to such meeting.
ANNUAL REPORT
An Annual Report for the Fund dated December 31, 1997 has been filed with
the Securities and Exchange Commission and is available without charge upon
request by calling (800) 800-7681 or by writing the Fund at 700 Newport Center
Drive, Newport Beach, CA 92660.
YOU ARE URGED TO FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY.
By Order of the Trustees
Audrey C. Milfs
Secretary
[DATE]
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APPENDIX A
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this day of , 1998 between Pacific Life Insurance
Company ("Adviser"), a California corporation, and Alliance Capital Management
L.P. ("Portfolio Manager"), a limited partnership organized and existing under
the laws of the State of Delaware, and the Pacific Select Fund (the "Fund"), a
Massachusetts Business Trust.
WHEREAS, the Fund is registered with the Securities and Exchange Commission
("SEC") as an open-end, management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund is authorized to issue shares of beneficial interest
("Shares") in separate Portfolios, with each such portfolio representing
interests in a separate portfolio; and
WHEREAS, the Fund currently offers multiple Portfolios, one of which is
designated as the Aggressive Equity Portfolio, such Portfolio together with
any other Portfolio subsequently established by the Fund, with respect to
which the Fund and Adviser desire to retain the Portfolio Manager to render
investment advisory services hereunder, and with respect to which the
Portfolio Manager is willing to do so, being herein collectively referred to
also as the "Portfolio"; and
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940 ("Advisers Act"); and
WHEREAS, the Portfolio Manager is registered with the SEC as an investment
adviser under the Advisers Act; and
WHEREAS, the Fund has retained the Adviser to render investment advisory
services to the Portfolio pursuant to an Advisory Agreement, as amended, and
such Agreement authorizes the Adviser to engage Portfolio Manager to discharge
the Adviser's responsibilities with respect to the investment management of
the Portfolio, a copy of which has been provided to the Portfolio Manager and
is incorporated by reference herein; and
WHEREAS, the Fund and the Adviser desire to retain the Portfolio Manager to
furnish investment advisory services to one or more Portfolios of the Fund,
and the Portfolio Manager is willing to furnish such services to such
Portfolio and the Adviser in the manner and on the terms hereinafter set
forth; and
NOW THEREFORE, in consideration of the premises and the promises and mutual
covenants herein contained, it is agreed between the Fund, the Adviser, and
the Portfolio Manager as follows:
1. Appointment. The Fund and the Adviser hereby appoint Alliance Capital
Management L.P. to act as Portfolio Manager to the Aggressive Equity Portfolio
("the Portfolio") for the periods and on the terms set forth in this
Agreement. The Portfolio Manager accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein provided.
In the event the Adviser wishes to retain the Portfolio Manager to render
investment advisory services to one or more Portfolio other than the
Portfolio, the Adviser shall notify the Portfolio Manager in writing. If the
Portfolio Manager is willing to render such services, it shall notify the Fund
and Adviser in writing, whereupon such portfolio shall become a Portfolio
hereunder, and be subject to this Agreement.
2. Portfolio Manager Duties. Subject to the supervision of the Fund's Board
of Trustees and the Adviser, the Portfolio Manager will provide a continuous
investment program for the Portfolio and determine the composition of the
assets of the Portfolio, including determination of the purchase, retention,
or sale of
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the securities, cash, and other investments, including futures contracts and
options thereon, for the Portfolio. The Portfolio Manager will provide
investment research and analysis, which may consist of computerized investment
methodology, and will conduct a continuous program of evaluation, investment,
sales, and reinvestment of the Portfolio's assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for the Portfolio, when these transactions should be
executed, and what portion of the assets of the Portfolio should be held in
the various securities and other investments in which it may invest, and the
Portfolio Manager is hereby authorized to execute and perform such services on
behalf of the Portfolio. To the extent permitted by the investment policies of
the Portfolio, the Portfolio Manager shall make decisions for the Portfolio as
to foreign currency matters and make determinations as to the retention or
disposition of foreign currencies or securities or other instruments
denominated in foreign currencies, or derivative instruments based upon
foreign currencies, including forward foreign currency contracts and options
and futures on foreign currencies and shall execute and perform the same on
behalf of the Portfolio. The Portfolio Manager is authorized to exercise
tender offers, exchange offers and to vote proxies on behalf of the Fund, each
as the Portfolio Manager determines is in the best interest of the Fund. In
performing these duties, the Portfolio Manager:
(a) Will (1) manage the Portfolio so that it will qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code ("IRC")
and (2) manage the Portfolio so as to ensure compliance by the Portfolio
with the diversification requirements of Section 817(h) of the IRC and
Regulations issued thereunder. The Adviser will notify the Portfolio
Manager of any amendments to Section 817(h) of the IRC and Regulations
issued thereunder. In managing the Portfolio in accordance with these
requirements, the Portfolio Manager shall be entitled to receive and act
upon advice of counsel to the Fund, counsel to the Adviser, or counsel to
the Portfolio Manager that is also acceptable to the Adviser.
(b) Shall conform with (1) the 1940 Act and all rules and regulations
thereunder, and releases and interpretations related thereto (including any
no-action letters and exemptive orders which have been granted by the SEC
to the Fund, the Adviser or the Portfolio Manager), (2) with all other
applicable federal and state laws and regulations pertaining to the
investment activities of investment vehicles underlying variable annuity
and/or variable life insurance contracts, (3) with any applicable
procedures, policies and guidelines adopted by the Fund's Board of
Trustees, (4) with the Portfolio's objectives, investment policies and
investment restrictions as stated in the Fund's Prospectus and Statement of
Additional Information, and (5) with the provisions of the Fund's
Registration Statement filed on Form N-1A under the Securities Act of 1933
(the "1933 Act") and the 1940 Act, as supplemented or amended from time to
time. Until the Adviser delivers any supplements or amendments to the
Portfolio Manager, the Portfolio Manager shall be fully protected in
relying on the Fund's Registration Statement previously furnished to the
Portfolio Manager by the Adviser.
(c) Will: (i) use its best efforts to identify each position in the
Portfolio that constitutes stock in a Passive Foreign Investment Company
("PFIC"), as that term is defined in Section 1296 of the Internal Revenue
Code, and (ii) make such determinations and inform the Adviser at least
annually, (or more often and by such date(s) as the Adviser shall request),
of any stock in a PFIC.
(d) Is responsible, in connection with its responsibilities under this
Section 2, for decisions to buy and sell securities and other investments
for the Portfolio, for broker-dealer and futures commission merchant
("FCM") selection, and for negotiation of commission rates. The Portfolio
Manager's primary consideration in effecting a security or other
transaction will be to obtain the best execution for the Portfolio, taking
into account the factors specified in the Prospectus and Statement of
Additional Information for the Fund, as they may be amended or supplemented
from time to time. Subject to such policies as the Board of Trustees may
determine and consistent with Section 28(e) of the Securities Exchange Act
of 1934, the Portfolio Manager shall not be deemed to have acted unlawfully
or to have breached any duty created by this Agreement or otherwise solely
by reason of its having caused the Portfolio to pay a broker or dealer,
acting as agent, for effecting a portfolio transaction at a price in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Portfolio Manager determines in good
faith that such amount of commission was reasonable in relation to the
value of the brokerage and
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research services provided by such broker or dealer, viewed in terms of
either that particular transaction or the Portfolio Manager's (or its
affiliates) overall responsibilities with respect to the Portfolio and to
its other clients as to which it exercises investment discretion. To the
extent consistent with these standards, and in accordance with
Section 11(a) of the Securities Exchange Act of 1934 and Rule 11a2-2(T)
thereunder, and subject to any other applicable laws and regulations
including Section 17(e) of the 1940 Act, the Portfolio Manager is further
authorized to place orders on behalf of the Portfolio through the Portfolio
Manager if the Portfolio Manager is registered as a broker or dealer with
the SEC or as a FCM with the Commodities Futures Trading Commission
("CFTC"), to any of its affiliates that are brokers or dealers or FCMs or
such other entities which provide similar services in foreign countries, or
to such brokers or dealers that also provide research or statistical
research and material, or other services to the Portfolio or the Portfolio
Manager. Such allocation shall be in such amounts and proportions as the
Portfolio Manager shall determine consistent with the above standards, and,
upon request, the Portfolio Manager will report on said allocation to the
Adviser and Board of Trustees of the Fund, indicating the brokers, dealers
or FCMs to which such allocations have been made and the basis therefor.
(e) When the purchase or sale of a security is deemed to be in the best
interest of the Portfolio as well as any other investment advisory clients,
to the extent permitted by applicable laws and regulations, but shall not
be obligated to, aggregate the securities to be so sold or purchased with
those of its other clients where such aggregation is not inconsistent with
the policies set forth in the Fund's Registration Statement. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Portfolio Manager in a
manner that is fair and equitable in the judgment of the Portfolio Manager
in the exercise of its fiduciary obligations to the Fund and to such other
clients.
(f) Will, in connection with the purchase and sale of securities for the
Portfolio, together with the Adviser, arrange for the transmission to the
custodian and recordkeeping agent for the Fund, on a daily basis, such
confirmation(s), trade tickets, and other documents and information,
including, but not limited to, Cusip, Sedol, or other numbers that identify
securities to be purchased or sold on behalf of the Portfolio, as may be
reasonably necessary to enable the custodian and recordkeeping agent to
perform its administrative and recordkeeping responsibilities with respect
to the Portfolio, and with respect to portfolio securities to be purchased
or sold through the Depository Trust Company, will arrange for the
automatic transmission of the confirmation of such trades to the Fund's
custodian, and recordkeeping agent, and, if required, the Adviser.
(g) Will assist the custodian and recordkeeping agent for the Fund in
determining or confirming, consistent with the procedures and policies
stated in the Registration Statement for the Fund, the value of any
portfolio securities or other assets of the Portfolio for which the
custodian and recordkeeping agent seeks assistance from the Portfolio
Manager or identifies for review by the Portfolio Manager. In this regard,
the Portfolio Manager may be required, if requested by the Fund's Adviser
or custodian and recordkeeping agent, to obtain and provide broker and/or
market-maker quotations, to verify prices obtained from Fund pricing
sources, to price portfolio securities for which there is no readily
available market and/or to take such other actions as may be required to
insure the Fund is valued at fair market value in accordance with the
Fund's pricing procedures.
(h) Will make available to the Fund and the Adviser promptly upon
request, any of the Portfolio's investment records and ledgers maintained
by the Portfolio Manager (which shall not include the records and ledgers
maintained by the custodian and recordkeeping agent for the Fund), as are
necessary to assist the Fund and the Adviser to comply with requirements of
the 1940 Act and the Advisers Act, as well as other applicable laws, and
will furnish to regulatory authorities having the requisite authority any
information or reports in connection with such services which may be
requested in order to ascertain whether the operations of the Fund are
being conducted in a manner consistent with applicable laws and
regulations.
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(i) Will regularly report to the Fund's Board of Trustees on the
investment program for the Portfolio and the issuers and securities
represented in the Portfolio's Portfolio, and will furnish the Fund's Board
of Trustees with respect to the portfolio such periodic and special reports
as the Trustees and the Adviser may reasonably request.
(j) Will not disclose or use any records or information obtained pursuant
to this Agreement (excluding investment research and investment advice) in
any manner whatsoever except as expressly authorized in this Agreement or
in the ordinary course of business in connection with placing orders for
the purchase and sale of securities or obtaining investment licenses in
various countries or the opening of custody accounts and dealing with
settlement agents in various countries, and will keep confidential any
information obtained pursuant to the Agreement, and disclose such
information only if the Board of Trustees of the Fund has authorized such
disclosure, or if such disclosure is required by applicable federal or
state law or regulations or regulatory authorities having the requisite
authority. The Fund and the Adviser will not disclose or use any records or
information respecting the Portfolio Manager obtained pursuant to this
Agreement in any manner whatsoever except as expressly authorized in this
Agreement, and will keep confidential any information obtained pursuant to
this Agreement, and disclose such information only as expressly authorized
in this Agreement, if the Board of Trustees of the Fund has authorized such
disclosure, or if such disclosure is required by applicable federal or
state law or regulations or regulatory authorities having the requisite
authority.
(k) Shall not permit any employee of the Portfolio Manager to have any
material connection with the handling of the Portfolio if such employee
has:
(i) been convicted, in the last ten (10) years, of any felony or
misdemeanor involving the purchase or sale of any security or arising
out of such person's conduct as an underwriter, broker, dealer,
investment adviser, municipal securities dealer, government securities
broker, government securities dealer, transfer agent, or entity or
person required to be registered under the Commodity Exchange Act, or
as an affiliated person, salesperson, or employee of any investment
company, bank, insurance company, or entity or person required to be
registered under the Commodity Exchange Act; or
(ii) been permanently or temporarily enjoined by reason of any
misconduct, by order, judgment, or decree of any court of competent
jurisdiction from acting as an underwriter, broker, dealer, investment
adviser, municipal securities dealer, government securities broker,
government securities dealer, transfer agent, or entity or person
required to be registered under the Commodity Exchange Act, or as an
affiliated person, salesperson or employee of any investment company,
bank, insurance company, or entity or person required to be registered
under the Commodity Exchange Act, or from engaging in or continuing any
conduct or practice in connection with any such activity or in
connection with the purchase or sale of any security.
(l) Shall provide to Adviser a copy of Portfolio Manager's Form ADV as
filed with the SEC and a list of persons who Portfolio Manager wishes to
have authorized to give written and/or oral instructions to custodians of
Fund assets for the Portfolio.
(m) The Portfolio Manager agrees that it will notify the Fund and the
Adviser of any change in the membership of the general partnership of the
Portfolio Manager.
3. Disclosure about Portfolio Manager. The Portfolio Manager has reviewed
the current Registration Statement for the Fund filed with the SEC and
represents and warrants that, with respect to the disclosure about the
Portfolio Manager or information relating, directly or indirectly, to the
Portfolio Manager, such Registration Statement contains, as of the date
hereof, no untrue statement of any material fact and does not omit any
statement of a material fact which was required to be stated therein or
necessary to make the statements contained therein not misleading. The
Portfolio Manager further represents and warrants that it is a duly registered
investment adviser under the Advisers Act and a duly registered investment
adviser in all states in which the Portfolio Manager is required to be
registered. The Adviser has received a current copy of the Portfolio Manager's
Uniform Application for Investment Adviser Registration on Form ADV, as filed
with the SEC. On
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an annual basis, (or more frequently if requested by the Adviser or the Fund's
Board of Trustees) the Portfolio Manager agrees to provide the Adviser with
current copies of the Portfolio Manager's Form ADV, and any supplements or
amendments thereto, as filed with the SEC.
4. Expenses. During the term of this Agreement, the Portfolio Manager will
pay all expenses incurred by it and its staff and for their activities in
connection with its services under this Agreement. The Portfolio Manager shall
not be responsible for, including but not limited to, any of the following:
(a) Expenses of all audits by the Fund's independent public accountants;
(b) Expenses of the Fund's transfer agent, registrar, dividend disbursing
agent, and shareholder recordkeeping services;
(c) Expenses of the Fund's custodial services including recordkeeping
services provided by the custodian;
(d) Expenses of the Fund's recordkeeping services provided by the
recordkeeping agent;
(e) Expenses of obtaining quotations for calculating the value of the
Portfolio's net assets;
(f) Expenses of obtaining portfolio activity reports for the Portfolio;
(g) Expenses of maintaining the Fund's tax records;
(h) Salaries and other compensation of any of the Fund's executive
officers and employees, if any, who are not officers, directors,
stockholders, or employees of the Portfolio Manager or its subsidiaries or
affiliates (except that the Adviser, or any of its subsidiaries or
affiliates, shall bear the expense with respect to executive officers and
employees, if any, who are officers, directors, stockholders or employees
of the Adviser or of its subsidiaries or affiliates);
(i) Taxes, if any, levied against the Fund or any of its Portfolios;
(j) Brokerage fees and commissions in connection with the purchase and
sale of portfolio securities for the Portfolio;
(k) Costs, including the interest expenses, of borrowing money;
(l) Costs and/or fees incidental to meetings of the Fund's shareholders,
the preparation and mailings of proxy statements, prospectuses, statements
of additional information and reports of the Fund to its shareholders, the
filing of reports with regulatory bodies, the maintenance of the Fund's
existence, and the registration of shares with federal and state securities
or insurance authorities;
(m) The Fund's legal fees, including the legal fees related to the
registration and continued qualification of the Fund's shares for sale;
(n) Costs of printing "share" stock certificates, if any, representing
shares of the Fund;
(o) Trustees' fees and expenses of Trustees of the Fund who are not
officers, employees, or stockholders of the Portfolio Manager or any
affiliate thereof (except that the Adviser shall bear the expense of any
Trustee who is an officer, employee, or stockholder of the Adviser or any
affiliate thereof);
(p) The Fund's fidelity bond required by Section 17(g) of the 1940 Act,
or other insurance premiums;
(q) Association membership dues;
(r) Extraordinary expenses of the Fund as may arise including expenses
incurred in connection with litigation, proceedings and other claims and
the legal obligations of the Fund to indemnify its Trustees, officers,
employees, shareholders, distributors, and agents with respect thereto
(unless Portfolio Manager is responsible for such expenses under Section 14
of this Agreement); and
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(s) Organizational and offering expenses and, if applicable,
reimbursement (with interest) of underwriting discounts and commissions.
5. Compensation. For the services provided and the expenses borne by the
Portfolio Manager pursuant to this Agreement, the Adviser will pay to the
Portfolio Manager a fee in accordance with the Fee Schedule attached to this
Agreement. This fee will be computed and accrued daily and payable monthly.
6. Seed Money. The Adviser agrees that the Portfolio Manager shall not be
responsible for providing money for the initial capitalization of any
Portfolio.
7. Compliance.
(a) The Portfolio Manager agrees that it shall immediately notify the
Adviser and the Fund in the event (i) that the SEC has censured the
Portfolio Manager; placed limitations upon its activities, functions or
operations; suspended or revoked its registration as an investment adviser;
or has commenced proceedings or an investigation that can reasonably be
expected to result in any of these actions, (ii) upon having a reasonable
basis for believing that a Portfolio has ceased to qualify or might not
qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code, and (iii) upon having a reasonable basis for
believing that the Portfolio has ceased to comply with the diversification
provisions of Section 817(h) of the IRC or the Regulations thereunder. The
Portfolio Manager further agrees to notify the Adviser and the Fund
immediately of any material fact known to the Portfolio Manager respecting
or relating to the Portfolio Manager that is not contained in the
Registration Statement or prospectus for the Fund, or any amendment or
supplement thereto, or of any statement contained therein that becomes
untrue in any material respect.
(b) The Adviser agrees that it shall immediately notify the Portfolio
Manager in the event (i) that the SEC has censured the Adviser or the Fund;
placed limitations upon either of their activities, functions, or
operations; suspended or revoked the Adviser's registration as an
investment adviser; or has commenced proceedings or an investigation that
may result in any of these actions, (ii) upon having a reasonable basis for
believing that a Portfolio has ceased to qualify or might not qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code, and (iii) upon having a reasonable basis for believing that the
Portfolio has ceased to comply with the diversification provisions of
Section 817(h) of the IRC or the Regulations thereunder.
8. Independent Contractor. The Portfolio Manager shall for all purposes
herein be deemed to be an independent contractor and shall, unless otherwise
expressly provided herein or authorized by the Adviser from time to time, have
no authority to act for or represent the Adviser in any way or otherwise be
deemed its agent. The Portfolio Manager understands that unless provided
herein or authorized from time to time by the Fund, the Portfolio Manager
shall have no authority to act for or represent the Fund in any way or
otherwise be deemed the Fund's Agent.
9. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Portfolio Manager hereby agrees that all records which
it maintains for the Portfolio are the property of the Fund and further agrees
to surrender promptly to the Fund any of such records upon the Fund's or the
Adviser's request, although the Portfolio Manager may, at its own expense,
make and retain a copy of such records. The Portfolio Manager further agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the 1940 Act with
respect to its activities as Portfolio Manager and to preserve such records
required by Rule 204-2 under the Advisers Act for the period specified in the
Rule.
10. Cooperation. Each party to this Agreement agrees to cooperate with each
other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the SEC and state
insurance authorities) in connection with any investigation or inquiry
relating to this Agreement or the Fund.
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11. Responsibility and Control. Notwithstanding any other provision of this
Agreement, it is understood and agreed that the Fund shall at all times retain
the ultimate responsibility for and control of all functions performed
pursuant to this Agreement and reserves the right to direct, approve or
disapprove any action hereunder taken on its behalf by the Portfolio Manager.
12. Services Not Exclusive. It is understood that the services of the
Portfolio Manager are not exclusive, and nothing in this Agreement shall
prevent the Portfolio Manager (or its affiliates) from providing similar
services to other clients, including investment companies (whether or not
their investment objectives and policies are similar to those of the
Portfolio) or from engaging in other activities.
13. Liability. Except as provided in Section 14 and as may otherwise be
required by the 1940 Act or the rules thereunder or other applicable law, the
Fund and the Adviser agree that the Portfolio Manager, any affiliated person
of the Portfolio Manager, and each person, if any, who, within the meaning of
Section 15 of the 1933 Act, controls the Portfolio Manager shall not be liable
for, or subject to any damages, expenses, or losses in connection with, any
act or omission connected with or arising out of any services rendered under
this Agreement, except by reason of willful misfeasance, bad faith, or gross
negligence in the performance of the Portfolio Manager's duties, or by reason
of reckless disregard of the Portfolio Manager's obligations and duties under
this Agreement.
14. Indemnification.
(a) The Portfolio Manager agrees to indemnify and hold harmless, the
Adviser, any affiliated person within the meaning of Section 2(a)(3) of the
1940 Act ("affiliated person") of the Adviser, and each person, if any,
who, within the meaning of Section 15 of the 1933 Act, controls
("controlling person") the Adviser (collectively, "Adviser Indemnified
Persons") against any and all losses, claims, damages, liabilities or
litigation (including legal and other expenses), to which the Adviser or
such affiliated person or controlling person may become subject under the
1933 Act, 1940 Act, the Advisers Act, under any other statute, at common
law or otherwise, arising out of the Portfolio Manager's responsibilities
to the Fund which (i) may be based upon any willful misfeasance, bad faith,
or gross negligence of, or by reckless disregard of, the Portfolio
Manager's obligations and/or duties under this Agreement by the Portfolio
Manager or by any of its directors, officers or employees, or any affiliate
acting on behalf of the Portfolio Manager (other than an Adviser
Indemnified Person), or (ii) may be based upon any untrue statement or
alleged untrue statement of a material fact contained in a registration
statement or prospectus covering the shares of the Fund or any Portfolio,
or any amendment thereof or any supplement thereto, or the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, if such
a statement or omission was made in reliance upon information furnished in
writing to the Adviser, the Fund, or any affiliated person of the Fund for
the purpose of inclusion in such registration statements by the Portfolio
Manager or any affiliated person of the Portfolio Manager (other than a
Adviser Indemnified Person); provided, however, that in no case is the
Portfolio Manager's indemnity in favor of the Adviser or any affiliated
person or controlling person of the Adviser deemed to protect such person
against any liability to which any such person would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of his or her duties, or by reason of his or her reckless
disregard of obligation and duties under this Agreement.
(b) The Adviser agrees to indemnify and hold harmless the Portfolio
Manager, any affiliated person within the meaning of Section 2(a)(3) of the
1940 Act of the Portfolio Manager and each person, if any, who, within the
meaning of Section 15 of the 1933 Act controls ("controlling person") the
Portfolio Manager (collectively, "Portfolio Manager Indemnified Persons")
against any and all losses, claims, damages, liabilities or litigation
(including legal and other expenses) to which a Portfolio Manager
Indemnified Person may become subject under the 1933 Act, the 1940 Act, the
Advisers Act, under any other statute, at common law or otherwise, arising
out of the Adviser's responsibilities as adviser of the Fund which (i) may
be based upon any willful misfeasance, bad faith or gross negligence by the
Adviser, any of its employees or any affiliate acting on behalf of the
Adviser (other than a Portfolio Manager
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Indemnified Person) or (ii) may be based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or prospectus covering Shares of the Fund or any Portfolio, or
any amendment thereof or any supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading, unless such
statement or omission was made in reliance upon written information
furnished to the Fund or the Adviser or any affiliated person of the
Adviser by a Portfolio Manager Indemnified Person (other than an Adviser
Indemnified Person); provided however, that in no case is the indemnity of
the Adviser in favor of the Portfolio Manager Indemnified Persons deemed to
protect such person against any liability to which any such person would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of his duties, or by reason of his reckless
disregard of obligations and duties under this Agreement.
15. Duration and Termination. This Agreement shall become effective as of
the date of execution first written above, and shall continue in effect for
two years from such date and continue thereafter on an annual basis with
respect to the Portfolio; provided that such annual continuance is
specifically approved at least annually (a) by the vote of a majority of the
Board of Trustees of the Fund, or (b) by the vote of a majority of the
outstanding voting shares of the Portfolio, and provided that continuance is
also approved by the vote of a majority of the Board of Trustees of the Fund
who are not parties to this Agreement or "interested persons" (as such term is
defined in the 1940 Act) of the Fund, the Adviser, or the Portfolio Manager,
cast in person at a meeting called for the purpose of voting on such approval.
This Agreement may not be materially amended without a majority vote of the
outstanding shares (as defined in the 1940 Act) of the Portfolio. This
Agreement may be terminated:
(a) by the Fund at any time with respect to the services provided by the
Portfolio Manager, without the payment of any penalty, forfeiture,
compulsory buyout amount, or performance of any other obligation which
could deter termination, by vote of a majority of the entire Board of
Trustees of the Fund or by a vote of a majority of the outstanding voting
shares of the Fund or, with respect to a particular Portfolio, by vote of a
majority of the outstanding voting shares of such Portfolio, on 60 days'
written notice to the Portfolio Manager and the Adviser;
(b) by the Portfolio Manager at any time, without the payment of any
penalty, forfeiture, compulsory buyout amount or performance of any other
obligation which could deter termination, upon 60 days' written notice to
the Adviser and the Fund.
(c) by the Adviser at any time, without the payment of any penalty,
forfeiture, compulsory buyout amount or performance of any other obligation
which could deter termination, upon 60 days' written notice to the
Portfolio Manager and the Fund.
However, any approval of this Agreement by the holders of a majority of the
outstanding shares (as defined in the 1940 Act) of a particular Portfolio
shall be effective to continue this Agreement with respect to such Portfolio
notwithstanding (a) that this Agreement has not been approved by the holders
of a majority of the outstanding shares of any other Portfolio or (b) that
this Agreement has not been approved by the vote of a majority of the
outstanding shares of the Fund, unless such approval shall be required by any
other applicable law or otherwise. In the event of termination for any reason,
all records of the Portfolio(s) shall promptly be returned to the Adviser or
the Fund, free from any claim or retention of rights in such record by the
Portfolio Manager, although the Portfolio Manager may, at its own expense,
make and retain a copy of such records. This Agreement will terminate
automatically in event of its assignment (as that term is defined in the 1940
Act), but shall not terminate in connection with any transaction not deemed an
assignment within the meaning of Rules 2a-6 under the 1940 Act, or any other
rule adopted by the SEC regarding transactions not deemed to be assignments.
In the event this Agreement is terminated or is not approved in the manner
described above, the Sections or Paragraphs numbered 2(h), 2(j), 9, 10, 11,
13, 14 and 16 of this Agreement as well as any applicable provision of this
Paragraph numbered 15 shall remain in effect.
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16. Use of Name.
(a) It is understood that the name "Pacific Life Insurance Company" or
"Pacific Life", or "Pacific Select Fund" or any derivative thereof or logo
associated with that name is the valuable property of the Adviser and its
affiliates, and that the Portfolio Manager has the right to use such name
(or derivative or logo) only with the prior written approval of the Adviser
and only so long as the Adviser is an investment adviser to the Fund and/or
the Portfolio. Upon termination of the Investment Advisory Agreement
between the Fund and the Adviser, the Portfolio Manager shall forthwith
cease to use such name (or derivative or logo).
(b) It is understood that the name "Alliance Capital Management L.P." or
"Alliance Capital" or any derivative thereof or logo associated with that
name is the valuable property of the Portfolio Manager and that the Adviser
has the right to use such name (or derivative or logo), in offering
materials of the Fund and/or Portfolio with the approval of the Portfolio
Manager and for so long as the Portfolio Manager is a Portfolio Manager to
the Fund and/or the Portfolio. Upon termination of this Agreement between
the Fund, the Adviser and the Portfolio Manager, the Fund and the Adviser
shall forthwith cease to use such name (or derivative or logo).
(c) Neither the Fund nor the Advisers shall use the Portfolio Manager's
name in promotional or sales related materials prepared by or on behalf of
the Adviser or the Fund, without prior review and approval by the Portfolio
Manager, which may not be unreasonably withheld.
17. Limitation of Liability. A copy of the Amended and Restated Agreement
and Declaration of Trust for the Fund is on file with the Secretary of the
Commonwealth of Massachusetts. The Agreement and Declaration of Trust has been
executed on behalf of the Fund by a Trustee of the Fund in his capacity as
Trustee of the Fund and not individually. The obligations of this Agreement
shall be binding upon the assets and property of the Fund and shall not be
binding upon any Trustee, officer, employee, agent or shareholder, whether
past, present, or future, of the Fund individually.
18. Miscellaneous.
(a) This Agreement shall be governed by the laws of California, provided
that nothing herein shall be construed in a manner inconsistent with the
1940 Act, the Advisers Act or rules or orders of the SEC thereunder. The
term "affiliate" or "affiliated person" as used in this Agreement shall
mean "affiliated person" as defined in Section 2(a)(3) of the 1940 Act.
(b) The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(c) To the extent permitted under Section 15 of this Agreement, this
Agreement may only be assigned by any party with prior written consent of
the other parties.
(d) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby, and to this extent, the provisions of this
Agreement shall be deemed to be severable. To the extent that any provision
of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise with regard to any party hereunder, such
provisions with respect to other parties hereto shall not be affected
thereby.
(e) This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original, and all such counterparts shall together
constitute one and the same Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first written above.
PACIFIC LIFE INSURANCE COMPANY
Attest: By:
- --------------------------------- ----------------------------------
Title: Title:
By:
----------------------------------
Title:
ALLIANCE CAPITAL MANAGEMENT L.P.
BY: ALLIANCE CAPITAL MANAGEMENT
CORP., GENERAL PARTNER
Attest: By:
- --------------------------------- ----------------------------------
Title: Title:
PACIFIC SELECT FUND
Attest: By:
- --------------------------------- ----------------------------------
Title: Title:
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PACIFIC SELECT FUND
FEE SCHEDULE
Portfolio: Agressive Equity
Fee:
The Adviser will pay to the Portfolio Manager a monthly fee based on the
average daily net assets of this Portfolio at an annual rate equal to:
.60% of the first $100 million
.45% on the next $400 million
.40% on excess over $500 million
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APPENDIX B
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this 1st day of May, 1998 between Pacific Life Insurance
Company ("Adviser"), a California corporation, and Goldman Sachs Asset
Management, a separate operating division of Goldman Sachs & Co. ("Portfolio
Manager"), a partnership organized and existing under the laws of the State of
New York, and Pacific Select Fund (the "Fund"), a Massachusetts Business
Trust.
WHEREAS, the Fund is registered with the Securities and Exchange Commission
("SEC") as an open-end, management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund is authorized to issue shares of beneficial interest
("Shares") in separate portfolios, with each such portfolio representing
interests in a separate portfolio; and
WHEREAS, the Fund currently offers multiple Portfolios, two of which are
designated as the Equity Portfolio and the Bond and Income Portfolio, such
Portfolios together with any other Portfolios subsequently established by the
Fund, with respect to which the Fund and Adviser desire to retain the
Portfolio Manager to render investment advisory services hereunder, and with
respect to which the Portfolio Manager is willing to do so, being herein
collectively referred to also as the "Portfolios"; and
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940 ("Advisers Act"); and
WHEREAS, the Portfolio Manager is registered with the SEC as an investment
adviser under the Advisers Act; and
WHEREAS, the Fund has retained the Adviser to render investment advisory
services to the Portfolios pursuant to an Advisory Agreement, as amended, and
such Agreement authorizes the Adviser to engage Portfolio Manager to discharge
the Adviser's responsibilities with respect to the investment management of
the Portfolios, a copy of which has been provided to the Portfolio Manager and
is incorporated by reference herein; and
WHEREAS, the Fund and the Adviser desire to retain the Portfolio Manager to
furnish investment advisory services to one or more Portfolios of the Fund and
the Portfolio Manager is willing to furnish such services to such Portfolios
and the Adviser in the manner and on the terms hereinafter set forth; and
NOW THEREFORE, in consideration of the premises and the promises and mutual
covenants herein contained, it is agreed between the Fund, the Adviser, and
the Portfolio Manager as follows:
1. Appointment. The Fund and the Adviser hereby appoint Goldman Sachs Asset
Management to act as Portfolio Manager to the Equity Portfolio and the Bond
and Income Portfolio ("the Portfolios") for the periods and on the terms set
forth in this Agreement. The Portfolio Manager accepts such appointment and
agrees to furnish the services herein set forth for the compensation herein
provided.
In the event the Adviser wishes to retain the Portfolio Manager to render
investment advisory services to one or more portfolios other than the
Portfolios, the Adviser shall notify the Portfolio Manager in writing. If the
Portfolio Manager is willing to render such services, it shall notify the Fund
and Adviser in writing, whereupon such portfolio shall become a Portfolio
hereunder, and be subject to this Agreement.
2. Portfolio Manager Duties. Subject to the supervision of the Fund's Board
of Trustees and the Adviser, the Portfolio Manager will provide a continuous
investment program for the Portfolios and determine the composition of the
assets of the Portfolios, including determination of the purchase, retention,
or sale of the securities, cash, and other investments, including futures
contracts and options thereon, for the Portfolios. The
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Portfolio Manager will provide investment research and analysis, which may
consist of computerized investment methodology, and will conduct a continuous
program of evaluation, investment, sales, and reinvestment of the Portfolios'
assets by determining the securities and other investments that shall be
purchased, entered into, sold, closed, or exchanged for the Portfolios, when
these transactions should be executed, and what portion of the assets of the
Portfolios should be held in the various securities and other investments in
which it may invest, and the Portfolio Manager is hereby authorized to execute
and perform such services on behalf of the Portfolios. To the extent permitted
by the investment policies of the Portfolios, the Portfolio Manager shall make
decisions for the Portfolios as to foreign currency matters and make
determinations as to the retention or disposition of foreign currencies or
securities or other instruments denominated in foreign currencies, or
derivative instruments based upon foreign currencies, including forward
foreign currency contracts and options and futures on foreign currencies and
shall execute and perform the same on behalf of the Portfolios. The Portfolio
Manager is authorized to exercise tender offers, exchange offers and to vote
proxies on behalf of the Fund, each as the Portfolio Manager determines is in
the best interest of the Fund. In performing these duties, the Portfolio
Manager:
(a) Shall conform with (1) the 1940 Act and all rules and regulations
thereunder, and releases and interpretations related thereto (including any
no- action letters and exemptive orders which have been granted by the SEC
to the Fund and/or the Adviser, provided that the Fund or Adviser notifies
Portfolio Manager of any conditions set forth therein, or any no-action
letters and exemptive orders which have been granted to the Portfolio
Manager) which the Portfolio Manager shall provide copies of to the Fund
and the Adviser, (2) with all other applicable federal and state laws and
regulations pertaining to investment vehicles underlying variable annuity
and/or variable life insurance contracts, provided Adviser informs
Portfolio Manager of all applicable state insurance laws relating to the
investment and management of the Portfolios, including restrictions or
limitations on investments in the Portfolios, and further provided that
Adviser promptly notifies Portfolio Manager of any changes in such laws or
requirements, (3) any applicable procedures, policies and/or guidelines,
including but not limited to diversification procedures, adopted by the
Fund's Board of Trustees, or implemented by the Adviser with respect to
Portfolio Manager; provided that with respect to procedures governing
transactions involving affiliates (such as those adopted pursuant to 1940
Act Rules 17a-7, 17e-1 and 10f-3), such procedures will identify any
affiliate of the Adviser and the Fund, other than affiliates of the
Portfolio Manager, (4) with the Portfolios' objectives, investment policies
and investment restrictions as stated in the Fund's Prospectus and
Statement of Additional Information ("SAI"), and (5) with the provisions of
the Fund's Registration Statement filed on Form N-1A under the Securities
Act of 1933 (the "1933 Act") and the 1940 Act, as supplemented or amended
from time to time. Until the Adviser delivers any supplements or amendments
to the Portfolio Manager, the Portfolio Manager shall be fully protected in
relying on the Fund's Registration Statement previously furnished to the
Portfolio Manager by the Adviser.
(b) Is responsible, in connection with its responsibilities under this
Section 2, for decisions to buy and sell securities and other investments
for the Portfolios, for broker-dealer and futures commission merchant
("FCM") selection, and for negotiation of commission rates. The Portfolio
Manager's primary consideration in effecting a security or other
transaction will be to obtain the best execution for the Portfolios, taking
into account the factors specified in the Prospectus and SAI for the Fund,
as they may be amended or supplemented from time to time. Subject to such
policies as the Board of Trustees may determine and consistent with Section
28(e) of the Securities Exchange Act of 1934, the Portfolio Manager shall
not be deemed to have acted unlawfully or to have breached any duty created
by this Agreement or otherwise solely by reason of its having caused the
Portfolio to pay a broker or dealer, acting as agent, for effecting a
portfolio transaction at a price in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction,
if the Portfolio Manager determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of
either that particular transaction or the Portfolio Manager's (or its
affiliates) overall responsibilities with respect to the Portfolios and to
its other clients as to which it exercises investment discretion. To the
extent consistent with these standards, and in accordance with Section
11(a) of the Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder,
and subject to
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any other applicable laws and regulations including Section 17(e) of the
1940 Act, the Portfolio Manager is further authorized to place orders on
behalf of the Portfolios through the Portfolio Manager or any affiliate
thereof if the Portfolio Manager or its affiliate is registered as a broker
or dealer with the SEC or as a FCM with the Commodities Futures Trading
Commission ("CFTC"), to any of its affiliates that are brokers or dealers
or FCMs or such other entities which provide similar services in foreign
countries, or to such brokers or dealers that also provide research or
statistical research and material, or other services to the Portfolios or
the Portfolio Manager. Such allocation shall be in such amounts and
proportions as the Portfolio Manager shall determine consistent with the
above standards, and, upon request, the Portfolio Manager will report on
said allocation to the Adviser and Board of Trustees of the Fund,
indicating the brokers, dealers or FCMs to which such allocations have been
made and the basis therefor.
(c) May, on occasion when the purchase or sale of a security is deemed to
be in the best interest of a Portfolio as well as any other investment
advisory clients, to the extent permitted by applicable laws and
regulations, but shall not be obligated to, aggregate the securities to be
so sold or purchased with those of its other clients where such aggregation
is not inconsistent with the policies set forth in the Fund's Registration
Statement. In such event, allocation of the securities so purchased or
sold, as well as the expenses incurred in the transaction, will be made by
the Portfolio Manager in a manner that is fair and equitable in the
judgment of the Portfolio Manager in the exercise of its fiduciary
obligations to the Fund and to such other clients.
(d) Will, in connection with the purchase and sale of securities for the
Portfolios, together with the Adviser, arrange for the transmission to the
custodian and recordkeeping agent for the Fund, on a daily basis, such
confirmation(s), trade tickets, and other documents and information,
including, but not limited to, Cusip, Sedol, or other numbers that identify
securities to be purchased or sold on behalf of the Portfolio, as may be
reasonably necessary to enable the custodian and recordkeeping agent to
perform its administrative and recordkeeping responsibilities with respect
to the Portfolios, and with respect to portfolio securities to be purchased
or sold through the Depository Trust Company, will arrange for the
automatic transmission of the confirmation of such trades to the Fund's
custodian, and recordkeeping agent, and, if required, the Adviser.
(e) Will assist the custodian and recordkeeping agent for the Fund in
determining or confirming, consistent with the procedures and policies
stated in the Registration Statement for the Fund, the value of any
portfolio securities or other assets of the Portfolios for which the
custodian and recordkeeping agent seeks assistance from the Portfolio
Manager or identifies for review by the Portfolio Manager. In this regard,
the Portfolio Manager may be required, if requested by the Fund's Adviser
or custodian and recordkeeping agent, to obtain and provide broker and/or
market-maker quotations, to verify prices obtained from Fund pricing
sources, to price portfolio securities for which there is no readily
available market and/or to take such other actions as may be required to
ensure the Fund is valued at fair market value in accordance with the
Fund's pricing procedures.
(f) Will make available to the Fund and the Adviser promptly upon
request, any of the Portfolios' investment records and ledgers maintained
by the Portfolio Manager (which shall not include the records and ledgers
maintained by the custodian and recordkeeping agent for the Fund), as are
necessary to assist the Fund and the Adviser to comply with requirements of
the 1940 Act and the Advisers Act, as well as other applicable laws, and
will furnish to regulatory authorities having the requisite authority any
information or reports in connection with such services which may be
requested in order to ascertain whether the operations of the Fund are
being conducted in a manner consistent with applicable laws and
regulations.
(g) Will regularly report to the Fund's Board of Trustees on the
investment program for the Portfolios and the issuers and securities
represented in the Portfolios' portfolios, and will furnish the Fund's
Board of Trustees with respect to the portfolio such periodic and special
reports as the Trustees and the Adviser may reasonably request.
(h) Will not disclose or use any records or information obtained pursuant
to this Agreement (excluding investment research and investment advice) in
any manner whatsoever except as expressly authorized in
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this Agreement or in the ordinary course of business in connection with
placing orders for the purchase and sale of securities or obtaining
investment licenses in various countries or the opening of custody accounts
and dealing with settlement agents in various countries, and will keep
confidential any information obtained pursuant to the Agreement, and
disclose such information only if the Board of Trustees of the Fund has
authorized such disclosure, or if such disclosure is otherwise made public
or is required by applicable federal or state law or regulations or
regulatory authorities having the requisite authority, or as may be
required by the legal process or in connection with any litigation arising
out of the subject matter of this Agreement. The Fund and the Adviser will
not disclose or use any records or information respecting the Portfolio
Manager obtained pursuant to this Agreement in any manner whatsoever except
as expressly authorized in this Agreement, and will keep confidential any
information obtained pursuant to this Agreement, and disclose such
information only as expressly authorized in this Agreement, if the Board of
Trustees of the Fund has authorized such disclosure, or if such disclosure
is otherwise made public or is required by applicable federal or state law
or regulations or regulatory authorities having the requisite authority, or
as may be required by the legal process or in connection with any
litigation arising out of the subject matter of this Agreement.
(i) Shall not permit any employee of the Portfolio Manager to have any
material connection with the handling of the Portfolios if such employee
has:
(i) been convicted, in the last ten (10) years, of any felony or
misdemeanor involving the purchase or sale of any security or arising
out of such person's conduct as an underwriter, broker, dealer,
investment adviser, municipal securities dealer, government securities
broker, government securities dealer, transfer agent, or entity or
person required to be registered under the Commodity Exchange Act, or
as an affiliated person, salesperson, or employee of any investment
company, bank, insurance company, or entity or person required to be
registered under the Commodity Exchange Act; or
(ii) been permanently or temporarily enjoined by reason of any
misconduct, by order, judgment, or decree of any court of competent
jurisdiction from acting as an underwriter, broker, dealer, investment
adviser, municipal securities dealer, government securities broker,
government securities dealer, transfer agent, or entity or person
required to be registered under the Commodity Exchange Act, or as an
affiliated person, salesperson or employee of any investment company,
bank, insurance company, or entity or person required to be registered
under the Commodity Exchange Act, or from engaging in or continuing any
conduct or practice in connection with any such activity or in
connection with the purchase or sale of any security.
(j) Shall provide to Adviser a copy of Portfolio Manager's Form ADV as
filed with the SEC and a list of persons who Portfolio Manager wishes to
have authorized to give written and/or oral instructions to custodians of
Fund assets for the Portfolios.
(k) The Portfolio Manager agrees that it will immediately notify the Fund
and the Adviser of any change in the control (as defined in the 1940 Act)
of the Portfolio Manager.
3. Disclosure about Portfolio Manager. The Portfolio Manager has reviewed
the current Registration Statement for the Fund filed with the SEC and
represents and warrants that, with respect to the disclosure about the
Portfolio Manager or information relating, directly or indirectly, to the
Portfolio Manager, such Registration Statement contains, as of the date
hereof, no untrue statement of any material fact and does not omit any
statement of a material fact which was required to be stated therein or
necessary to make the statements contained therein not misleading. The
Portfolio Manager further represents and warrants that it is a duly registered
investment adviser under the Advisers Act and a duly registered investment
adviser in all states in which the Portfolio Manager is required to be
registered. The Adviser has received a current copy of the Portfolio Manager's
Uniform Application for Investment Adviser Registration on Form ADV, as filed
with the SEC. On an annual basis, (or more frequently if requested by the
Adviser or the Fund's Board of Trustees) the Portfolio Manager agrees to
provide the Adviser with current copies of the Portfolio Manager's Form ADV,
and any supplements or amendments thereto, as filed with the SEC.
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4. Certain Diversification Matters. Adviser shall perform quarterly and
annual tax compliance tests to ensure that the Portfolios are in compliance
with Subchapter M of the Internal Revenue Code ("IRC") and Section 817(h) of
the IRC. Adviser shall apprise the Portfolio Manager promptly after each
quarter end of any non-compliance with the diversification requirements in
such IRC provisions. If so advised, the Portfolio Manager shall take prompt
action to bring the Portfolio(s) back into compliance with such IRC
diversification provisions, as directed by the Adviser. The Portfolio Manager
agrees that it shall not be absolved of its responsibilities, duties and
obligations to manage the Portfolios in a manner consistent with
Diversification Procedures or other procedures, policies and/or guidelines
adopted by the Fund, or implemented by the Adviser with respect to Portfolio
Manager.
5. Expenses. During the term of this Agreement, the Portfolio Manager will
pay all expenses incurred by it and its staff and for their activities in
connection with its services under this Agreement. The Portfolio Manager shall
not be responsible for any of the following:
(a) Expenses of all audits by the Fund's independent public accountants;
(b) Expenses of the Fund's transfer agent, registrar, dividend disbursing
agent, and shareholder recordkeeping services;
(c) Expenses of the Fund's custodial services including recordkeeping
services provided by the custodian;
(d) Expenses of the Fund's recordkeeping services provided by the
recordkeeping agent;
(e) Expenses of obtaining quotations for calculating the value of the
Portfolio's net assets;
(f) Expenses of obtaining portfolio activity reports for each Portfolio;
(g) Expenses of maintaining the Fund's tax records;
(h) Salaries and other compensation of any of the Fund's executive
officers and employees, if any, who are not officers, directors,
stockholders, or employees of the Portfolio Manager or its subsidiaries or
affiliates (except that the Adviser, or any of its subsidiaries or
affiliates, shall bear the expense with respect to executive officers and
employees, if any, who are officers, directors, stockholders or employees
of the Adviser or of its subsidiaries or affiliates);
(i) Taxes, if any, levied against the Fund or any of its Portfolios;
(j) Brokerage fees and commissions in connection with the purchase and
sale of portfolio securities for the Portfolios;
(k) Costs, including the interest expenses, of borrowing money;
(l) Costs and/or fees incidental to meetings of the Fund's shareholders,
the preparation and mailings of proxy statements, prospectuses, statements
of additional information and reports of the Fund to its shareholders, the
filing of reports with regulatory bodies, the maintenance of the Fund's
existence, and the registration of shares with federal and state securities
or insurance authorities;
(m) The Fund's legal fees, including the legal fees related to the
registration and continued qualification of the Fund's shares for sale;
(n) Costs of printing "share" stock certificates, if any, representing
shares of the Fund;
(o) Trustees' fees and expenses of Trustees of the Fund who are not
officers, employees, or stockholders of the Portfolio Manager or any
affiliate thereof (except that the Adviser shall bear the expense of any
trustee who is an officer, employee, or stockholder of the Adviser or any
affiliate thereof);
(p) The Fund's fidelity bond required by Section 17(g) of the 1940 Act,
or other insurance premiums;
(q) Association membership dues;
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(r) Extraordinary expenses of the Fund as may arise including expenses
incurred in connection with litigation, proceedings and other claims and
the legal obligations of the Fund to indemnify its trustees, officers,
employees, shareholders, distributors, and agents with respect thereto
(unless Portfolio Manager is responsible for such expenses under Section 14
of this Agreement); and
(s) Organizational and offering expenses and, if applicable,
reimbursement (with interest) of underwriting discounts and commissions.
6. Compensation. For the services provided and the expenses borne by the
Portfolio Manager pursuant to this Agreement, the Adviser will pay to the
Portfolio Manager a fee in accordance with the Fee Schedule attached to this
Agreement. This fee will be computed and accrued daily and payable monthly.
7. Seed Money. The Adviser agrees that the Portfolio Manager shall not be
responsible for providing money for the initial capitalization of any
Portfolio.
8. Duty to Notify
(a) The Portfolio Manager agrees that it shall immediately notify the
Adviser and the Fund in the event (i) that the SEC has censured the
Portfolio Manager; placed limitations upon its activities, functions or
operations; suspended or revoked its registration as an investment adviser;
or has commenced proceedings or an investigation that can reasonably be
expected to result in any of these actions, (ii) the Portfolio Manager has
a reasonable basis for believing that the Portfolio Manager or the
Portfolio has ceased to comply with any procedures, policies and/or
guidelines adopted by the Fund or implemented by the Adviser, including but
not limited to diversification procedures, or (iii) if the Portfolio
Manager knows of any material fact respecting or relating to the Portfolio
Manager that is not contained in the Registration Statement or prospectus
for the Fund, or any amendment or supplement thereto, or of any statement
contained therein that becomes untrue in any material respect.
(b) The Adviser agrees that it shall immediately notify the Portfolio
Manager in the event (i) that the SEC has censured the Adviser or the Fund;
placed limitations upon either of their activities, functions, or
operations; suspended or revoked the Adviser's registration as an
investment adviser; or has commenced proceedings or an investigation that
may result in any of these actions, (ii) upon having a reasonable basis for
believing that a Portfolio has ceased to qualify or might not qualify as a
regulated investment company under Subchapter M of the IRC, and (iii) upon
having a reasonable basis for believing that the Portfolio has ceased to
comply with the diversification provisions of Section 817(h) of the IRC or
the Regulations thereunder.
9. Independent Contractor. The Portfolio Manager shall for all purposes
herein be deemed to be an independent contractor and shall, unless otherwise
expressly provided herein or authorized by the Adviser from time to time, have
no authority to act for or represent the Adviser in any way or otherwise be
deemed its agent. The Portfolio Manager understands that unless provided
herein or authorized from time to time by the Fund, the Portfolio Manager
shall have no authority to act for or represent the Fund in any way or
otherwise be deemed the Fund's Agent.
10. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Portfolio Manager hereby agrees that all records which
it maintains for the Portfolio are the property of the Fund and further agrees
to surrender promptly to the Fund any of such records upon the Fund's or the
Adviser's request, although the Portfolio Manager may, at its own expense,
make and retain a copy of such records. The Portfolio Manager further agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the 1940 Act and to
preserve the records required by Rule 204-2 under the Advisers Act for the
period specified in the Rule.
11. Cooperation. Each party to this Agreement agrees to cooperate with each
other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the SEC and state
insurance authorities) in connection with any investigation or inquiry
relating to this Agreement or the Fund.
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12. Responsibility and Control. Notwithstanding any other provision of this
Agreement, it is understood and agreed that the Fund shall at all times retain
the ultimate responsibility for and control of all functions performed
pursuant to this Agreement and reserves the right to direct, approve or
disapprove any action hereunder taken on its behalf by the Portfolio Manager.
13. Services Not Exclusive. It is understood that the services of the
Portfolio Manager are not exclusive, and nothing in this Agreement shall
prevent the Portfolio Manager (or its affiliates) from providing similar
services to other clients, including investment companies (whether or not
their investment objectives and policies are similar to those of the
Portfolios) or from engaging in other activities.
14. Liability. Except as provided in Section 14 and as may otherwise be
required by the 1940 Act or the rules thereunder or other applicable law, the
Fund and the Adviser agree that the Portfolio Manager, any affiliated person
of the Portfolio Manager, and each person, if any, who, within the meaning of
Section 15 of the 1933 Act, controls the Portfolio Manager shall not be liable
for, or subject to any damages, expenses, or losses in connection with, any
act or omission connected with or arising out of any services rendered under
this Agreement, except by reason of willful misfeasance, bad faith, or gross
negligence in the performance of the Portfolio Manager's duties, or by reason
of reckless disregard of the Portfolio Manager's obligations and duties under
this Agreement.
15. Indemnification.
(a) The Portfolio Manager agrees to indemnify and hold harmless, the
Adviser, any affiliated person within the meaning of Section 2(a)(3) of the
1940 Act ("affiliated person") of the Adviser, and each person, if any,
who, within the meaning of Section 15 of the 1933 Act, controls
("controlling person") the Adviser (collectively, "Adviser Indemnified
Persons") against any and all losses, claims, damages, liabilities or
litigation (including reasonable legal and other expenses), to which the
Adviser or such affiliated person or controlling person may become subject
under the 1933 Act, 1940 Act, the Advisers Act, under any other statute, at
common law or otherwise, arising out of the Portfolio Manager's
responsibilities to the Fund which (i) may be based upon any willful
misfeasance, bad faith, or gross negligence of, or by reckless disregard
of, the Portfolio Manager's obligations and/or duties under this Agreement
by the Portfolio Managers or by any of its directors, officers or
employees, or any affiliate acting on behalf of the Portfolio Manager
(other than an Adviser Indemnified Person), or (ii) may be based upon any
untrue statement or alleged untrue statement of a material fact contained
in a registration statement or prospectus covering the Shares of the Fund
or any Portfolio, or any amendment thereof or any supplement thereto, or
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, if such a statement or omission was made in reliance upon
information furnished in writing to the Adviser, the Trust, or any
affiliated person of the Fund by the Portfolio Manager or any affiliated
person of the Portfolio Manager (other than an Adviser Indemnified Person);
provided, however, that in no case is the Portfolio Manager's indemnity in
favor of the Adviser or any affiliated person or controlling person of the
Adviser deemed to protect such person against any liability to which any
such person would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance of his or her duties, or
by reason of his or her reckless disregard of obligation and duties under
this Agreement.
(b) The Adviser agrees to indemnify and hold harmless the Portfolio
Manager, any affiliated person within the meaning of Section 2(a)(3) of the
1940 Act of the Portfolio Manager and each person, if any, who, within the
meaning of Section 15 of the 1933 Act controls ("controlling person") the
Portfolio Manager (collectively, "Portfolio Manager Indemnified Persons")
against any and all losses, claims, damages, liabilities or litigation
(including reasonable legal and other expenses) to which a Portfolio
Manager Indemnified Person may become subject under the 1933 Act, the 1940
Act, the Advisers Act, under any other statute, at common law or otherwise,
arising out of the Adviser's responsibilities as adviser of the Fund which
(i) may be based upon any willful misfeasance, bad faith or gross
negligence by the Adviser, any of its employees or any affiliate acting on
behalf of the Adviser (other than a Portfolio Manager
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Indemnified Person) or (ii) may be based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or prospectus covering Shares of the Fund or any Portfolio, or
any amendment thereof or any supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading, unless such
statement or omission was made in reliance upon written information
furnished to the Fund or the Adviser or any affiliated person of the
Adviser by a Portfolio Manager Indemnified Person (other than an Adviser
Indemnified Person); provided however, that in no case is the indemnity of
the Adviser in favor of the Portfolio Manager Indemnified Persons deemed to
protect such person against any liability to which any such person would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of his duties, or by reason of his reckless
disregard of obligations and duties under this Agreement.
16. Duration and Termination. This Agreement shall become effective as of
the date of execution first written above, and shall continue in effect for
two years from such date and continue thereafter on an annual basis with
respect to the Portfolios; provided that such annual continuance is
specifically approved at least annually (a) by the vote of a majority of the
Board of Trustees of the Fund, or (b) by the vote of a majority of the
outstanding voting shares of each Portfolio, and provided that continuance is
also approved by the vote of a majority of the Board of Trustees of the Fund
who are not parties to this Agreement or "interested persons" (as such term is
defined in the 1940 Act) of the Fund, the Adviser, or the Portfolio Manager,
cast in person at a meeting called for the purpose of voting on such approval.
This Agreement may not be materially amended without a majority vote of the
outstanding shares (as defined in the 1940 Act) of the Portfolios. This
Agreement may be terminated:
(a) by the Fund at any time with respect to the services provided by the
Portfolio Manager, without the payment of any penalty, forfeiture,
compulsory buyout amount, or performance of any other obligation which
could deter termination, by vote of a majority of the entire Board of
Trustees of the Fund or by a vote of a majority of the outstanding voting
shares of the Fund or, with respect to a particular Portfolio, by vote of a
majority of the outstanding voting shares of such Portfolio, on 60 days'
written notice to the Portfolio Manager and the Adviser;
(b) by the Portfolio Manager at any time, without the payment of any
penalty, forfeiture, compulsory buyout amount or performance of any other
obligation which could deter termination, upon 60 days' written notice to
the Adviser and the Fund.
(c) by the Adviser at any time, without the payment of any penalty,
forfeiture, compulsory buyout amount or performance of any other obligation
which could deter termination, upon 60 days' written notice to the
Portfolio Manager and the Fund.
However, any approval of this Agreement by the holders of a majority of the
outstanding shares (as defined in the 1940 Act) of a particular Portfolio
shall be effective to continue this Agreement with respect to such Portfolio
notwithstanding (a) that this Agreement has not been approved by the holders
of a majority of the outstanding shares of any other Portfolio or (b) that
this Agreement has not been approved by the vote of a majority of the
outstanding shares of the Fund, unless such approval shall be required by any
other applicable law or otherwise. In the event of termination for any reason,
all records of the Portfolio(s) shall promptly be returned to the Adviser or
the Fund, free from any claim or retention of rights in such record by the
Portfolio Manager, although the Portfolio Manager may, at its own expense,
make and retain a copy of such records. This Agreement will terminate
automatically in event of its assignment (as that term is defined in the 1940
Act), but shall not terminate in connection with any transaction not deemed an
assignment within the meaning of Rules 2a-6 under the 1940 Act, or any other
rule adopted by the SEC regarding transactions not deemed to be assignments.
In the event this Agreement is terminated or is not approved in the manner
described above, the Sections or Paragraphs numbered 2(h), 2(j), 9, 10, 11,
13, 14 and 16 of this Agreement as well as any applicable provision of this
Paragraph numbered 15 shall remain in effect.
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17. Use of Name.
(a) It is understood that the name "Pacific Life Insurance Company" or
"Pacific Life", or "Pacific Select Fund" or any derivative thereof, any
tradename, trademark, trade device, service mark, symbol or logo associated
with those names are the valuable property of the Adviser and its
affiliates, and that the Portfolio Manager has the right to use such name
(or derivative or logo) only with the prior written approval of the Adviser
and only so long as the Adviser is an investment adviser to the Fund and/or
the Portfolios. Upon termination of the Investment Advisory Agreement
between the Fund and the Adviser, the Portfolio Manager shall forthwith
cease to use such name (or derivative or logo).
(b) It is understood that the name "Goldman Sachs & Co." or "Goldman
Sachs" or any derivative thereof, any tradename, trademark, trade device,
service mark, symbol or logo associated with those names are the valuable
property of the Portfolio Manager and that the Adviser has the right to use
such name (or derivative or logo), in offering materials of the Fund and/or
Portfolios with the prior written approval of the Portfolio Manager and for
so long as the Portfolio Manager is a Portfolio Manager to the Fund and/or
the Portfolios. Upon termination of this Agreement between the Fund, the
Adviser and the Portfolio Manager, the Fund and the Adviser shall forthwith
cease to use such name (or derivative or logo).
(c) Neither the Fund nor the Advisers shall use the Portfolio Manager's
name (or that of any affiliate, including the name "Goldman Sachs") in
promotional or sales related materials prepared by or on behalf of the
Adviser or the Fund, without prior review and approval by the Portfolio
Manager, which may not be unreasonably withheld.
18. Limitation of Liability. A copy of the Amended and Restated Agreement
and Declaration of Trust for the Fund is on file with the Secretary of the
Commonwealth of Massachusetts. The Agreement and Declaration of Trust has been
executed on behalf of the Trust by a Trustee of the Trust in his capacity as
Trustee of the Trust and not individually. The obligations of this Agreement
shall be binding upon the assets and property of the Fund and shall not be
binding upon any Trustee, officer, employee, agent or shareholder, whether
past, present, or future, of the Fund individually.
19. Miscellaneous.
(a) This Agreement shall be governed by the laws of California, provided
that nothing herein shall be construed in a manner inconsistent with the
1940 Act, the Advisers Act or rules or orders of the SEC thereunder. The
term "affiliate" or "affiliated person" as used in this Agreement shall
mean "affiliated person" as defined in Section 2(a)(3) of the 1940 Act.
(b) The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(c) To the extent permitted under Section 15 of this Agreement, this
Agreement may only be assigned by any party with prior written consent of
the other parties.
(d) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby, and to this extent, the provisions of this
Agreement shall be deemed to be severable. To the extent that any provision
of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise with regard to any party hereunder, such
provisions with respect to other parties hereto shall not be affected
thereby.
(e) This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original, and all such counterparts shall together
constitute one and the same Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first written above.
PACIFIC LIFE INSURANCE COMPANY
Attest: By:
- --------------------------------- ----------------------------------
Title: Title:
By:
----------------------------------
Title:
GOLDMAN SACHS ASSET
MANAGEMENT, A DIVISION OF
GOLDMAN, SACHS & CO.
Attest: By:
- --------------------------------- ----------------------------------
Title: Title:
PACIFIC SELECT FUND
Attest: By:
- --------------------------------- ----------------------------------
Title: Title:
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PACIFIC SELECT FUND
FEE SCHEDULE
Portfolios: Equity and Bond and Income Portfolios
Fee:
The Adviser will pay to the Portfolio Manager a monthly fee based on the
combined average daily net assets of these Portfolios at an annual rate equal
to:
.35% of the first $100 million
.30% on the next $100 million
.25% on the next $800 million
.20% on excess
However, this rate will be reduced if the Portfolio Manager is paid lower
fees by another variable insurance client, advised or sub-advised by Portfolio
Manager or any of its affiliates with (i) initial assets of $750 million or
less, or (ii) the combined daily net assets of the Equity and Bond and Income
Portfolios, whichever is greater. The fee structure set forth above shall be
automatically reduced so that fees paid to Portfolio Manager for services
under this Agreement are at a rate equal to the most favorable rate paid to
Portfolio Manager or any of its affiliates by such of its investment
management clients/accounts as described above.
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APPENDIX C
CERTAIN INVESTMENT POLICIES AND RELATED RISKS
The following passages provide information regarding the risks associated
with some of the investment policies set forth in the proxy statement for each
Portfolio, including those investment policies that currently are not used by
any current Portfolio Manager of the Fund. For a complete list of other
investment techniques and their related risks, please refer to the Fund's
Prospectus or Statement of Additional Information.
Small-Capitalization Companies
The Aggressive Equity Portfolio may continue to invest in the equity
securities of small capitalization companies. 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.
Foreign Securities
The Aggressive Equity Portfolio may invest up to 20% of its assets in the
equity securities of foreign issuers that are principally traded in securities
markets outside the United States, and the Bond and Income Portfolio may
invest up to 10% of its assets in non-U.S. dollar denominated securities,
including in securities from issuers located in "emerging market countries."
The non-U.S. dollar denominated foreign securities in which each Portfolio
may invest will be exposed 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 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 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. 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 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
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may exhibit greater price volatility. 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 interest
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 risks of
possible losses through the holding of securities in custodian banks and
securities depositories in foreign countries.
High-Yield Bonds and Emerging Market Debt:
If Shareholders approve Goldman Sachs as the New Portfolio Manager of the
Bond and Income Portfolio, the Portfolio will be permitted to invest up to 20%
of its assets in high risk debt securities rated lower than Baa by Moody's or
BBB by S&P, or, if not rated by Moody's or S&P, of equivalent quality. These
securities often are referred to as "high yield bonds" or "junk bonds."
In general, investments in high yield bonds provide greater income and
increased opportunity for capital appreciation than investments in higher
quality securities, but they also entail greater price volatility and
principal and income risk. They are regarded as predominantly 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 bonds 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.
The Portfolio may also invest in the debt securities of issuers, which may
include governments, from developing or "emerging market" countries. Most, if
not all, of these securities are unrated and exhibit many of the same
characteristics described above for high-yield debt securities. In the case of
many emerging market debt securities, the amount of publicly-available
information may be even less than for domestic high-yield debt securities.
Included among the emerging market debt obligations in which the Bond and
Income Portfolio may invest are "Brady Bonds," which are created through the
exchange of existing commercial bank loans to sovereign entities for new
obligations in connection with debt restructuring under a plan introduced by
former U.S. Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan").
Brady Bonds are not considered U.S. Government securities and are considered
speculative. Brady Bonds have been issued only recently, and accordingly, do
not have a long payment history. They may be collateralized or
uncollateralized or have collateralized or uncollateralized elements, and
issued in various currencies (although most are U.S. dollar-denominated), and
they are traded in the over-the-counter secondary market.
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Brady Bonds involve various risk factors including residual risk and the
history of defaults with respect to commercial bank loans by public and
private entities of countries issuing Brady Bonds. There can be no assurance
that Brady Bonds in which the Portfolio may invest will not be subject to
restructuring arrangements or to requests for new credit, which may cause the
Portfolio to suffer a loss of interest or principal on any of its holdings.
Investing in emerging market debt securities also involves the risks of
investing in foreign securities generally. Please see "Foreign Securities" for
a summary of these risk factors.
Interest Rate Swap Agreements: The Bond and Income Portfolio may invest in
interest rate swap agreements. Swap agreements are two party contracts entered
into primarily by institutional investors for periods ranging from a few weeks
to more than a year. 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. The gross returns to
be exchanged or "swapped" between the parties are calculated with respect to a
"notional amount," i.e., the return on or increase in value of a particular
dollar amount invested at a particular interest rate, in a particular foreign
currency, or in a "basket" of securities representing the particular index.
The "notional amount" of the swap agreement is only a fictive basis on which
to calculate the obligations which the parties to a swap agreement have agreed
to exchange. Commonly used swap agreements include interest rate caps,
interest rate floors, and collars.
Interest Rate Caps: In return for a premium, one party agrees to make
payments to the other to the extent that interest rates exceed a specified
rate, or "cap."
Interest Rate Floors: In return for a premium, one party agrees to make
payments to the other to the extent that interest rates fall below a certain
level.
Interest Rate Collars: Under this arrangement, one party sells a cap and
purchases a floor or vice-versa in an attempt to protect itself against
interest rate movements exceeding given minimum or maximum levels.
Whether a Portfolio's use of a swap agreement will be successful in
furthering its investment objective will depend on the Portfolio Manager's
ability to correctly predict 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. Moreover, a Portfolio bears the
risk of loss of the amount expected to be received under a swap agreement in
the event of default or bankruptcy of a swap agreement counterparty. A
Portfolio Manager will enter into swap agreements only with counterparties
that have outstanding securities rated A or better by Moody's or S&P or that
have outstanding short-term securities rated P-2 or better by Moody's or A-2
or better by S&P.
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 a Portfolio's ability to
terminate existing swap agreements or to realize amounts to be received under
such agreements.
Stripped Mortgage Backed Securities: Stripped mortgage-backed securities
("SMBS") are derivative multi-class 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.
SMBS are usually structured with two classes that receive different
proportions of interest and principal distributions on a pool of mortgage
assets. For instance, a common type of SMBS will have one class receiving some
of the interest and most of the principal from mortgage assets, while the
other class will receive most of the interest and the remainder of the
principal.
Moreover, there are SMBS under which one class will receive all of the
interest (the interest-only or "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
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related underlying mortgage assets, and a rapid rate of principal payments may
have a material adverse effect on a 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 some 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.
In addition, the Bond and Income Portfolio may invest in inverse floaters
and "IO" and "PO" tranches of planned amortization class ("PAC") certificates.
PAC Certificates are parallel-pay real estate mortgage investment conduit
("REMIC") certificates that generally require that specified amounts of
principal be applied on each payment date to one or more classes of REMIC
Certificates, even though all other principal payments and prepayments of the
mortgage assets are then required to be applied to one or more other classes
of the Certificates. The scheduled principal payments for the PAC Certificates
generally have the highest priority on each payment date after interest due
has been paid to all classes entitled to receive interest currently.
Shortfalls, if any, are added to the amount payable on the next payment date.
The PAC Certificate payment schedule is taken into account in calculating the
final distribution date of each class of PAC. In order to create PAC Tranches,
one or more tranches generally must be created that absorb most of the
volatility in the underlying mortgage assets. These tranches tend of have
market prices and yields that are much more volatile than other PAC classes.
A PAC IO is a PAC bond that pays an extremely high coupon rate, such as
200%, on its outstanding principal balance, and pays down according to a
designated PAC schedule. Due to their high-coupon interest, PAC IO's are
priced at very high premiums to par. Due to the nature of PAC prepayment bands
and PAC collars, the PAC IO has a greater call (contraction) potential and
thus would be impacted negatively by a sustained increase in payment speeds.
Floating and Variable Rate Securities
Floating and variable rate securities provide for a specific adjustment in
the interest rate paid on the obligations. The terms of such obligations must
provide that the interest rates are adjusted periodically based upon an
interest rate adjustment index as provided in the respective obligations. The
adjustment intervals may be regular, and range from daily up to annually, or
may be based on an event, such as a change in the prime rate.
The interest rate on a floating rate debt instrument ("floater") is a
variable rate which is tied to another interest rate, such as a money market
index or Treasury bill rate. The interest rate on a floater resets
periodically, typically every six months. While, because of the interest rate
reset feature, floaters provide Portfolios with a certain degree of protection
against rises in interest rates, Portfolios investing in floaters will
participate in any declines in interest rates as well.
The interest rate on a leveraged inverse floating rate debt instrument
("inverse floater") resets in the opposite direction from the market rate of
interest to which the inverse floater is indexed. An inverse floater may be
considered to be leveraged to the extent that its interest rate varies by a
magnitude that exceeds the magnitude of the change in the index rate of
interest. The higher degree of leverage inherent in inverse floaters is
associated with greater volatility in their market values. Accordingly,
duration of an inverse floater may exceed its stated final maturity. Certain
inverse floaters may be deemed to be illiquid securities for purposes of a
Portfolio's limitations on investments in such securities.
Structured Notes
The Bond and Income Portfolio may invest in structured notes. The value of
the principal of and/or interest on such securities is determined by reference
to changes in the value of specific currencies, interest rates,
C-4
<PAGE>
commodities, indices or other financial indicators (the "Reference") or the
relative change in two or more References. The interest rate or the principal
amount payable upon maturity or redemption may be increased or decreased
depending upon changes in the applicable Reference. The terms of the
structured notes may provide that in certain circumstances no principal is due
at maturity and, therefore, result in the loss of a Portfolio's investment.
Structured notes may be positively or negatively indexed, so that appreciation
of the Reference may produce an increase or decrease in the interest rate or
value of the security at maturity. In addition, changes in the interest rates
or the value of the security at maturity may be a multiple of changes in the
value of the Reference, Consequently, structured securities may entail a
greater degree of market risk than other types of fixed-income securities.
Structured notes may also be more volatile, less liquid and more difficult to
accurately price than less complex securities.
C-5
<PAGE>
APPENDIX D
OTHER INFORMATION REGARDING ALLIANCE CAPITAL MANAGEMENT L.P.
Alliance Capital Management Corporation (ACMC) is the General Partner of and
therefore controls Alliance. The directors of ACMC are listed below, together
with principal executive officers of ACMC, each with their principal
occupations. Unless otherwise noted, the business address of each person shown
below is 1345 Avenue of the Americas, New York, New York 10105.
<TABLE>
<CAPTION>
NAME POSITION WITH ACMC, PRINCIPAL OCCUPATION AND OTHER INFORMATION
---- --------------------------------------------------------------
<C> <S>
Williams, Dave Harrell Chairman of the Board, Chief Executive Officer & Director, ACMC
787 Seventh Avenue
New York, NY 10019
Holloway, Benjamin Duke Director, ACMC; Financial Consultant
Melone, Joseph James Director, ACMC; Chairman of the Executive Committee, The
787 Seventh Avenue Equitable Companies Incorporated; Chairman of the Executive
New York, NY 10019 Committee, The Equitable Life Assurance Society of the United
States; Senior Vice President, AXA-UAP
Bebear, Claude Director, ACMC; Chairman of the Executive Board, AXA-UAP;
23 ava Matignon Chairman, The Equitable Companies Incorporated
Paris, France 75008
Duverne, Denis Director, ACMC; Senior Vice President AXA-UAP; Director, The
23 ava Matignon Equitable Life Assurance Society of the United States
Paris, France 75008
Hellebuyck, Jean-Pierre Director, ACMC; Chairman, AXA Asset Management (Europe)
23 ava Matignon
Paris, France 75008
Savage, Frank Director, ACMC; Chairman, Alliance Capital Management
787 Seventh Avenue International
New York, NY 10019
Bastida, Luis Javier Director, ACMC; Chief Financial Officer, Banco Bilbao Vizcaya
Plaza San Nicholas S.A.
1-Bilbao, Spain
Miller, Edward D. Director, ACMC; President & Chief Executive Officer, The
787 Seventh Avenue Equitable Companies Incorporated; Chairman of the Board and
New York, NY 10019 Chief Executive Officer, The Equitable Life Assurance Society
of the United States
de Castries, Henri Director, ACMC; Vice Chairman, Director and Senior Executive
23 ava Matignon Vice President AXA-UAP; Vice Chairman of the Board, The
Paris, France 75008 Equitable Companies Incorporated
</TABLE>
D-1
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH ACMC,
NAME PRINCIPAL OCCUPATION AND OTHER INFORMATION
---- ------------------------------------------
<C> <S>
Brydon, Donald H. Director, ACMC; Chief Executive Officer, AXA Asset
Management (Europe); Director, AXA Investment Managers S.A.
Dolan, Kevin C. Director, ACMC; Chief Executive Officer, AXA Asset
23 ava Matignon Management (France)
Paris, France 75008
Williams, Reba White Director, ACMC; Director, Special Projects, ACMC; Art
Historian
Tullin, Stanley B. Director, ACMC; Executive Vice President and Chief Financial
Officer, The Equitable Companies Incorporated; Vice Chairman
and Chief Financial Officer and Vice Chairman, Insurance
Division, The Equitable Life Assurance Society of the United
States
Noris, Peter D. Director, ACMC; Executive Vice President and Chief
787 Seventh Avenue Investment Officer, The Equitable Companies Incorporated
New York, NY 10019
Zoellick, Robert Bruce Director, ACMC; John M. Olin Professor in National Security
3900 Wisconsin Avenue, NW Affairs at the U.S. Naval Academy
Washington, D.C.
Carifa, John Donato Director, President & Chief Operating Officer, ACMC
Calvert, Bruce William Director, Vice Chairman & Chief Investment Officer, ACMC
Harrison, Alfred Director & Vice Chairman, ACMC
Brewer, Jr., David Ramson Senior Vice President, General Counsel & Secretary, ACMC
Joseph, Jr., Robert Henry Senior Vice President & Chief Financial Officer, ACMC
</TABLE>
Alliance serves as adviser to the Hudson River Trust Alliance Aggressive
Stock Portfolio which has a substantially similar investment objective and
similar investment policies to the Aggressive Equity Portfolio that will
become effective if the New Portfolio Management Agreement is approved. The
approximate net assets of the Alliance Aggressive Stock Portfolio were $
as of [date]; and the fee charged by Alliance for their services (as a
percentage of average daily net assets) is 0.625% of the first $750 million,
0.575% of the next $750 million, 0.525% of the next $1 billion, 0.500% of the
next $2.5 billion, and 0.475% thereafter.
D-2
<PAGE>
APPENDIX E
OTHER INFORMATION REGARDING GOLDMAN SACHS ASSET MANAGEMENT
Goldman Sachs Asset Management is a separate operating division of Goldman
Sachs and has its principal business address at One New York Plaza, New York,
New York 10004. Goldman Sachs Funds Management, L.P. ("GSFM") is a Delaware
limited partnership and has its principal business address at One New York
Plaza, New York, New York 10004. Goldman Sachs Asset Management International
is a wholly owned subsidiary of Goldman Sachs and has its principal business
address at 140 Fleet Street, London, England EC4A 2BJ.
Goldman Sachs is a worldwide investment banking firm and has its principal
business address at 85 Broad Street, New York, New York 10004. Goldman Sachs
is the general partner of GSFM. The principal executive officers of Goldman
Sachs are Jon S. Corzine and Henry M. Paulson. The principal occupation of
Messrs. Corzine and Paulson is the management of Goldman Sachs. The general
Partners of Goldman Sachs are The Goldman Sachs Group, L.P. (a Delaware
Limited Partnership) ("GSGLP") and The Goldman, Sachs & Co. L.L.C. (a Delaware
limited liability company) ("GSGLLC"). The principal business address of the
executive officers and general partners is 85 Broad Street, New York, New York
10004. The Goldman Sachs Corporation ("GSC") is the parent company of both
GSGLP and GSCLLC. GSGLP is also a parent of GSGLLC. GSC is the sole general
partner of GSGLP. David B. Ford is chief executive officer of GSAMI and co-
chief executive officer of GSFM. John P. McNulty is co-chief executive officer
of GSFM.
Goldman Sachs provides investment management services to two other
registered mutual funds which have similar objectives and similar policies to
those of the Equity Portfolio that will become effective if the New Portfolio
Management Agreement with Goldman Sachs is approved: the Goldman Sachs CORE
Large Cap Growth Fund and the Hirtle Callaghan Growth Equity Portfolio. The
approximate net assets of the Goldman Sachs CORE Large Cap Growth Fund as of
January 31, 1998 were $75,000,000, and the fee charged by Goldman Sachs for
its services (as a percentage of average daily net assets) is 0.75%. The
approximate net assets of the Hirtle Callaghan Growth Equity Portfolio as of
were $ , and the fee charged by Goldman Sachs for its services (as
a percentage of average net assets) is 0.30%.
E-1
<PAGE>
VOTING INSTRUCTION/PROXY
------------------------
Pacific Select Fund
Aggressive Equity Portfolio
The undersigned owner of a variable life insurance policy or variable annuity
contract (collectively, "Variable Contracts") issued or administered by Pacific
Life Insurance Company ("Pacific Life"), and funded by separate accounts of
Pacific Life, hereby instructs Pacific Life, on behalf of the pertinent separate
account, to vote the shares of the Aggressive Equity Portfolio of the Pacific
Select Fund (the "Fund") attributable to his or her Variable Contract at the
meeting of shareholders of the Fund to be held at _____ a.m./p.m., Pacific Time,
on _________, 1998, at 700 Newport Center Drive, Newport Beach, California,
92660, and at any adjournment thereof, in the manner directed below with respect
to the matters referred to in the proxy statement for the meeting, receipt of
which is hereby acknowledged, and in the discretion of Pacific Life upon such
other matters as may properly come before the meeting or any adjournment
thereof.
THIS VOTING INSTRUCTION IS SOLICITED BY THE BOARD OF TRUSTEES OF THE FUND.
The Board of Trustees recommends a vote FOR the following proposal.
---
I. To approve the portfolio management agreement with Alliance Capital
Management L.P. ("Alliance Capital") for the Aggressive Equity Portfolio
under which Alliance Capital would commence serving as Portfolio Manager
of the Aggressive Equity Portfolio on May 1, 1998.
_____________ FOR _____________ AGAINST _____________ ABSTAIN
This voting instruction will be voted as specified. IF NO SPECIFICATION IS
MADE, THIS VOTING INSTRUCTION WILL BE VOTED FOR THE PROPOSAL. If this voting
instruction is not returned or is not returned properly executed, such votes
will be cast by Pacific Life on behalf of the pertinent separate account in the
same proportion as it votes shares held by that separate account for which it
has received instructions from Variable Contract owners.
Receipt of the Notice of Meeting and
Proxy Statement is hereby acknowledged:
Dated: _____________________, 1998
__________________________________
__________________________________
Signature(s) of Contractowner(s)
All designated owners of the Variable Contract(s) shown on this voting
instruction must sign hereon. If as an attorney, executor, trustee, guardian or
in some representative capacity or as an officer of a corporation or
partnership, please add title as such.
PLEASE VOTE, SIGN AND DATE THIS VOTING INSTRUCTION AND RETURN IT IN THE ENCLOSED
ENVELOPE PROMPTLY.
<PAGE>
VOTING INSTRUCTION/PROXY
------------------------
Pacific Select Fund
Equity Portfolio
The undersigned owner of a variable life insurance policy or variable annuity
contract (collectively, "Variable Contracts") issued or administered by Pacific
Life Insurance Company ("Pacific Life"), and funded by separate accounts of
Pacific Life, hereby instructs Pacific Life, on behalf of the pertinent separate
account, to vote the shares of the Equity Portfolio of the Pacific Select Fund
(the "Fund") attributable to his or her Variable Contract at the meeting of
shareholders of the Fund to be held at _____ a.m./p.m., Pacific Time, on
_________, 1998, at 700 Newport Center Drive, Newport Beach, California, 92660,
and at any adjournment thereof, in the manner directed below with respect to the
matters referred to in the proxy statement for the meeting, receipt of which is
hereby acknowledged, and in the discretion of Pacific Life upon such other
matters as may properly come before the meeting or any adjournment thereof.
THIS VOTING INSTRUCTION IS SOLICITED BY THE BOARD OF TRUSTEES OF THE FUND.
The Board of Trustees recommends a vote FOR the following proposal.
---
II. To approve the portfolio management agreement with Goldman Sachs Asset
Management ("Goldman Sachs") for the Equity Portfolio under which Goldman
Sachs would commence serving as Portfolio Manager of the Equity Portfolio
as of May 1, 1998.
_____________ FOR _____________ AGAINST _____________ ABSTAIN
This voting instruction will be voted as specified. IF NO SPECIFICATION IS
MADE, THIS VOTING INSTRUCTION WILL BE VOTED FOR THE PROPOSAL. If this voting
instruction is not returned or is not returned properly executed, such votes
will be cast by Pacific Life on behalf of the pertinent separate account in the
same proportion as it votes shares held by that separate account for which it
has received instructions from Variable Contract owners.
Receipt of the Notice of Meeting and
Proxy Statement is hereby acknowledged:
Dated: _____________________, 1998
__________________________________
__________________________________
Signature(s) of Contractowner(s)
All designated owners of the Variable Contract(s) shown on this voting
instruction must sign hereon. If as an attorney, executor, trustee, guardian or
in some representative capacity or as an officer of a corporation or
partnership, please add title as such.
PLEASE VOTE, SIGN AND DATE THIS VOTING INSTRUCTION AND RETURN IT IN THE ENCLOSED
ENVELOPE PROMPTLY.
<PAGE>
VOTING INSTRUCTION/PROXY
------------------------
Pacific Select Fund
Bond and Income Portfolio
The undersigned owner of a variable life insurance policy or variable annuity
contract (collectively, "Variable Contracts") issued or administered by Pacific
Life Insurance Company ("Pacific Life"), and funded by separate accounts of
Pacific Life, hereby instructs Pacific Life, on behalf of the pertinent separate
account, to vote the shares of the Bond and Income Portfolio of the Pacific
Select Fund (the "Fund") attributable to his or her Variable Contract at the
meeting of shareholders of the Fund to be held at _____ a.m./p.m., Pacific Time,
on _________, 1998, at 700 Newport Center Drive, Newport Beach, California,
92660, and at any adjournment thereof, in the manner directed below with respect
to the matters referred to in the proxy statement for the meeting, receipt of
which is hereby acknowledged, and in the discretion of Pacific Life upon such
other matters as may properly come before the meeting or any adjournment
thereof.
THIS VOTING INSTRUCTION IS SOLICITED BY THE BOARD OF TRUSTEES OF THE FUND.
The Board of Trustees recommends a vote FOR the following proposal.
---
III. A. To approve the portfolio management agreement with Goldman Sachs Asset
Management ("Goldman Sachs") for the Bond and Income Portfolio under
which Goldman Sachs would commence serving as Portfolio Manager of the
Bond and Income Portfolio as of May 1, 1998.
III. B. To approve an amendment to the Bond and Income Portfolio's investment
objective as described in the Proxy Statement.
_____________ FOR _____________ AGAINST _____________ ABSTAIN
This voting instruction will be voted as specified. IF NO SPECIFICATION IS
MADE, THIS VOTING INSTRUCTION WILL BE VOTED FOR THE PROPOSAL. If this voting
instruction is not returned or is not returned properly executed, such votes
will be cast by Pacific Life on behalf of the pertinent separate account in the
same proportion as it votes shares held by that separate account for which it
has received instructions from Variable Contract owners.
Receipt of the Notice of Meeting and
Proxy Statement is hereby acknowledged:
Dated: _____________________, 1998
__________________________________
__________________________________
Signature(s) of Contractowner(s)
All designated owners of the Variable Contract(s) shown on this voting
instruction must sign hereon. If as an attorney, executor, trustee, guardian or
in some representative capacity or as an officer of a corporation or
partnership, please add title as such.
PLEASE VOTE, SIGN AND DATE THIS VOTING INSTRUCTION AND RETURN IT IN THE ENCLOSED
ENVELOPE PROMPTLY.
