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SUPPLEMENT DATED JANUARY 15, 1997
TO PROSPECTUS DATED JANUARY 15, 1997 FOR
PACIFIC SELECT ESTATE PRESERVER
LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICIES ISSUED BY PACIFIC MUTUAL LIFE INSURANCE COMPANY
Capitalized terms used in this supplement are defined in the prospectuses
referred to above or the M Fund's prospectus.
INTRODUCTION
A Policy Owner may choose to allocate net premium payments to four
additional options available under the Policy (the "Investment Options") that
are funded through the Variable Accounts of the Separate Account: The Edinburgh
Overseas Equity Variable Account ("Variable Account I"), Turner Core Growth
Variable Account ("Variable Account II"), the Frontier Capital Appreciation
Variable Account ("Variable Account III"), and the Enhanced U.S. Equity
Variable Account ("Variable Account IV"). A Policy Owner also may transfer
Accumulated Value to the Variable Accounts funding these additional Variable
Investment Options. The Variable Accounts funding the additional Variable
Investment Options invest in the following corresponding portfolios
("Portfolios") of M Fund, Inc. ("M Fund"):
Variable Account I: Edinburgh Overseas Equity Fund
Variable Account II: Turner Core Growth Fund
Variable Account III: Frontier Capital Appreciation Fund
Variable Account IV: Enhanced U.S. Equity Fund
In addition to these Investment Options, a Policy Owner may allocate all or
a portion of net premium payments and transfer Accumulated Value to the Variable
Accounts or the Fixed Account of Pacific Mutual Life Insurance Company ("Pacific
Mutual", "we", "us", or "our") described in the accompanying prospectus for the
Policy.
Except as described below in relation to the four additional Variable
Investment Options, all features of the Policy and all operational procedures
regarding the Policy remain in effect as described in the Policy's prospectus.
INFORMATION ABOUT M FUND
M FUND, INC.
M Fund is a diversified, open-end management investment company registered
with the Securities and Exchange Commission ("SEC") under the Investment Company
Act of 1940. M Fund currently offers four separate Portfolios as Investment
Options under the Policies. Each Portfolio pursues different investment
objectives and policies. The shares of each Portfolio are purchased by us for
the corresponding Variable Account at net asset value, i.e., without sales load.
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All dividends and capital gains distributions received from a Portfolio are
automatically reinvested in such Portfolio at net asset value, unless we, on
behalf of the Separate Account, elect otherwise. M Fund shares may be redeemed
by us at their net asset value to the extent necessary to make payments under
the Policies.
The chart below summarizes some basic information about each Portfolio of M
Fund offered to the
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Separate Account. There can be no assurance that any Portfolio will achieve its
objective. More detailed information is contained in the accompanying prospectus
of M Fund, including information on the risks associated with the investments
and investment techniques of each Portfolio of M Fund.
M FUND'S PROSPECTUS ACCOMPANIES THIS PROSPECTUS SUPPLEMENT AND SHOULD BE
READ CAREFULLY BEFORE INVESTING.
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<CAPTION>
Primary Investments Investment
(under normal Adviser/Portfolio
Portfolio Objective circumstances) Manager
- --------- --------- ------------------- -----------------
<S> <C> <C> <C>
Edinburgh Overseas Long-term capital Common stock and M Financial Invest-
Equity Fund appreciation with common stock equi- ment Advisers, Inc.
reasonable invest- valents of foreign ("MFIA")/Edinburgh Fund
ment risk through issuers, including Managers plc.
active management smaller issuers and
and investment in issuers located in
common stock and small, emerging markets
common stock equi-
valents of foreign
issuers
Turner Core Growth Fund Long-term capital Common stocks that MFIA/Turner Investment
appreciation through a show strong earnings Partners, Inc.
diversified port- potential with reasonable
folio of common stocks market prices
that show strong
earnings potential
with reasonable market
prices
Frontier Capital Maximum capital Common stock of com- MFIA/Frontier Capital
Appreciation Fund appreciation through panies of all sizes, Management Company, Inc.
investment in common with emphasis on stocks
stock of companies of of small- to medium-
all sizes, with capitalization companies
emphasis on stocks of (i.e., companies with
small- to medium- ----
capitalization companies market capitalization of
less than $3 billion)
Enhanced U.S. Equity Fund Above-market total Common stocks of MFIA/Franklin Portfolio
return through in- companies perceived Associates Trust
vestment in common stock to provide a return
of companies perceived higher than that of
to provide a return higher the S&P 500 at
than that of the Standard approximately the same
& Poor's 500 Composite level of investment risk
Stock Price Index ("S&P
500") at approximately the
same level of investment
risk as the S&P 500
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THE INVESTMENT ADVISER AND PORTFOLIO MANAGERS
M Financial Investment Advisers, Inc. ("MFIA") serves as Investment Adviser
to each Portfolio of M Fund. MFIA has engaged other firms, as shown in the
chart above, to serve as Portfolio Managers under the supervision of MFIA and M
Fund's Board of Directors.
Pacific Mutual assumes no responsibility for the operation of M Fund or any
Portfolio thereof, or the compliance of M Fund or the Portfolio with any
applicable law.
THE POLICY
All features of the Policy described in its prospectus remain intact.
The following discussion supplements the one included in the Policy's
prospectus under "CHARGES AND DEDUCTIONS - Other Charges."
OTHER CHARGES
M Fund and each of its Portfolios incur certain charges, including the
investment advisory fee, and certain operating expenses. M Fund's expenses
are not fixed or specified under the terms of the Policy, and these
expenses may vary from year to year. The advisory fees and other expenses
are more fully described in the prospectus of M Fund.
We will exercise voting rights attributable to shares of M Fund consistent
with the discussion in the prospectus on "Voting of Fund Shares." The rights we
have as described in the prospectus under "Disregard of Voting Instructions" and
"Substitution of Investments" also apply to M Fund and its Portfolios.
REPORT TO OWNERS
We will send to each Policy Owner any annual and semiannual reports
containing financial statements for M Fund that we receive from that fund.
ILLUSTRATIONS
For the M Fund Portfolios, the investment advisory fees are equivalent to
the following annual rates of the average daily net assets of the Portfolios:
1.05% for the Edinburgh Overseas Equity Fund (subject to breakpoints), 0.45% for
the Turner Core Growth Fund, 0.90% for the Frontier Capital Appreciation Fund,
and 0.55% for the Enhanced U.S. Equity Fund (subject to breakpoints). Other
expenses of the Portfolios are 0.25% of the average daily net assets for each of
the Portfolios on an annualized basis, which amounts to total expenses equal to
the following annual rates of the average daily net assets of the Portfolios:
1.30% for the Edinburgh Overseas Equity Fund, 0.70% for the Turner Core Growth
Fund, 1.15% for the Frontier Capital Appreciation Fund, and 0.80% for the
Enhanced U.S. Equity Fund. If adjusted to include the effect of foreign taxes
on dividends, M Fund estimates that the expenses for the Edinburgh Overseas
Equity Fund would be 1.50%. These estimated expenses are for the period January
4, 1996 (commencement of operations of the Portfolios) through June 30, 1996 and
reflect the policy of MFIA, which has voluntarily undertaken to pay operating
expenses of M Fund (not including brokerage or other portfolio transaction
expenses or
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expenses of litigation, indemnification, taxes or other extraordinary expenses)
to the extent that such expenses, as accrued for each Portfolio, from January 5,
1996 (commencement of operations) through December 31, 1996, exceed 0.25% of
that Portfolio's estimated average daily net assets on an annualized basis. In
the absence of this policy, such expenses would exceed the expense cap and total
expenses for the period January 5, 1996 through June 30, 1996 on an annualized
basis would be approximately 7.75% for the Edinburgh Overseas Equity Fund, 8.36%
for the Turner Growth Fund, 8.82% for the Frontier Capital Appreciation Fund,
and 12.94% for the Enhanced U.S. Equity Fund, respectively. MFIA has extended
this policy through December 31, 1997. There can be no assurance that MFIA will
continue the policy after that date. Upon request, Pacific Mutual will furnish
individualized illustrations reflecting allocation of net premiums to one or
more of the Variable Accounts that each invest in a corresponding Portfolio of M
Fund, which will reflect the expenses (after payment of certain operating
expenses by MFIA) described above.
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