PACIFIC SELECT EXEC SEPARATE ACCT PACIFIC MUTUAL LIFE INS
485BPOS, 1997-01-15
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<PAGE>

     
As filed with the Securities and Exchange Commission on January 15, 1997
Registration No. 333-01713     

SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
    
POST-EFFECTIVE AMENDMENT NO. 1 TO
FORM 485BPOS     

FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF UNIT
INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2

PACIFIC SELECT EXEC SEPARATE ACCOUNT OF
PACIFIC MUTUAL LIFE INSURANCE COMPANY
(Exact Name of Registrant)

PACIFIC MUTUAL LIFE INSURANCE COMPANY
(Name of Depositor)

700 Newport Center Drive
P.O. Box 9000
Newport Beach, California 92660
(Address of Depositor's Principal Executive Office)

Diane N. Ledger
Assistant Vice President 
Pacific Mutual Life Insurance Company
700 Newport Center Drive
P.O. Box 9000
Newport Beach, California 92660
(Name and Address of Agent for Service of Process)

Copies to:
Jeffrey S. Puretz
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
    
It is proposed that this filing will become effective on January 15, 1997 
pursuant to paragraph (b) of Rule 485.     

Title of securities being registered: Interests in the Separate Account under
Pacific Select Estate Preserver Last Survivor Flexible Premium Variable Life
Insurance Policies.
    
The Registrant has registered an indefinite number of securities under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940 and will file its Rule 24f-2 Notice for the fiscal year ending December
31, 1996, within the time period required by Section 24 of the Investment
Company Act of 1940 and applicable regulations thereunder.    
<PAGE>
 
Pacific Select   Separate Account of Pacific Mutual Life Insurance Company

CROSS-REFERENCE SHEET

Pursuant to Rule 404(c) of Regulation C under the Securities Act of 1933

(Form N-8B-2 Items required by Instruction as to the Prospectus in Form S-6)
 
<TABLE>
<CAPTION>

Form N-8B-2                                                     Form S-6
Item Number                                              Heading in Prospectus

<S>                                                      <C>
1.  (a)  Name of trust.................................  Prospectus front cover

    (b)  Title of securities issues....................  Prospectus front cover

2.  Name and address of each depositor.................  Prospectus front cover

3.  Name and address of trustee........................  N/A

4.  Name and address of each principal underwriter.....  Pacific Mutual Life Insurance
                                                         Company

5.  State of organization of trust.....................  Pacific Select Exec Separate
                                                         Account

6.  Execution and termination of trust agreement.......  Pacific Select Exec Separate
                                                         Account

7.  Changes of name....................................  N/A

8.  Fiscal year........................................  N/A

9.  Material Litigation................................  N/A

II. General Description of the Trust and Securities of the Trust

10. (a)  Registered or bearer securities...............  The Policy

    (b)  Cumulative or distributive securities.........  The Policy

    (c)  Withdrawal or redemption......................  Policy Loans; 
                                                         Surrender; Partial 
                                                         Withdrawals

    (d)  Conversion, transfer, etc.....................  Transfer of Accumulated
                                                         Value; Policy Loans;
                                                         Surrender; Partial
                                                         Withdrawals
</TABLE>
<PAGE>
 
<TABLE>
<S>                                                      <C>
                                                         Policy

    (e)  Periodic payment plan.........................  N/A

    (f)  Voting rights.................................  Voting of Fund Shares

    (g)  Notice to security holders....................  Reports to Owners

    (h)  Consents required.............................  Voting of Fund Shares; 
                                                         Disregard of Voting
                                                         Instructions;
                                                         Substitution of
                                                         Investments

    (i)  Other provisions..............................  The Policy 

11. Type of securities comprising units................  The Policy; Pacific
                                                         Select Exec Separate
                                                         Account

12. Certain information regarding periodic
    payment plan certificates..........................  N/A

13. (a)  Load, fees, expenses, etc.....................  Charges and Deductions

    (b)  Certain information regarding periodic
         payment plan certificates.....................  N/A

    (c)  Certain percentages...........................  Charges and Deductions

    (d)  Difference in price...........................  N/A

    (e)  Certain other fees, etc.......................  Charges and Deductions

    (f)  Certain other profits or benefits.............  The Policy

    (g)  Ratio of annual charges to income.............  N/A

14. Issuance of trust's securities.....................  The Policy

15. Receipt and handling of payments from
    purchasers.........................................  The Policy; Premiums

16. Acquisition and disposition of underlying            
    securities.........................................  Introduction; Pacific
                                                         Select Exec Separate
                                                         Account; The Policy

17. Withdrawal or redemption...........................  Transfer of Accumulated
                                                         Value; Policy Loans;
                                                         Surrender; Partial
                                                         Withdrawals

18. (a)  Receipt, custody and disposition
         of income.....................................  The Policy
</TABLE>
<PAGE>
 
<TABLE>
<CAPTION>
<S>                                                      <C>
    (b)  Reinvestment of distributions.................  N/A

    (c)  Reserves or special funds.....................  N/A

    (d)  Schedule of distributions.....................  N/A

19. Records, accounts and reports......................  Report to Owners

20. Certain miscellaneous provisions of trust
    agreement

    (a)  Amendment.....................................  N/A

    (b)  Termination...................................  N/A

    (c) and (d) Trustee, removal and successor.........  N/A

    (e) and (f) Depositors, removal and successor......  N/A

21. Loans to security holders..........................  Policy Loans

22. Limitations on liability...........................  N/A

23. Bonding arrangements...............................  N/A

24. Other material provisions of trust agreement.......  N/A

III. Organizations, Personnel and Affiliated Persons of Depositor

25. Organization of depositor..........................  Pacific Mutual Life Insurance
                                                         Company

26. Fees received by depositor.........................  See Items 13(a) and 13(e)

27. Business of depositor..............................  Pacific Mutual Life Insurance
                                                         Company

28. Certain information as to officials and affiliated
    persons of depositor...............................  More About Pacific Mutual

29. Voting securities of depositor.....................  N/A

30. Persons controlling depositor......................  N/A

31. Payments by depositor for certain services

</TABLE>
<PAGE>
 
<TABLE>
<CAPTION>
<S>                                                      <C>
     rendered to trust.................................  N/A

32.  Payments by depositor for certain other services
     rendered to trust.................................  N/A

33.  Remuneration of employees of depositor for
     certain services rendered to trust................  Charges and Deductions

34.  Remuneration of other persons for certain
     services rendered to trust........................  Charges and Deductions

IV.  Distribution and Redemption of Securities

35.  Distribution of trust's securities by states......  N/A

36.  Suspension of sales of trust's securities.........  N/A

37.  Revocation of authority to distribute.............  N/A

38.  (a)  Method of distribution.......................  Distribution of the Policy

     (b)  Underwriting agreements......................  Distribution of the Policy

     (c)  Selling agreements...........................  Distribution of the Policy

39.  (a)  Organization of principal underwriters.......  See Item 25

     (b)  N.A.S.D. membership of principal
          underwriters.................................  Distribution of the Policy

40.  Certain fees received by principal underwriters...  See Items 13(a) and 13(e)

41.  (a)  Business of each principal underwriter.......  See Item 39(b)

     (b)  Branch offices of each principal
          underwriter..................................  N/A

     (c)  Salesmen of each principal underwriter.......  N/A

42.  Ownership of trust's securities by certain persons  N/A

43.  Certain brokerage commissions received by
     principal underwriters............................  N/A

44.  (a)  Method of valuation..........................  Determination of Accumulated
</TABLE>
<PAGE>
 
<TABLE>
<S>                                                      <C>
                                                         Value

     (b)  Schedule as to offering price................  Charges and Deductions

     (c)  Variation in offering price to certain
          persons......................................  Charges and Deductions

45.  Suspension of redemption rights...................  Surrender

46.  (a)  Redemption Valuation.........................  See Items 10(c) and (d)

     (b)  Schedule as to redemption price..............  Surrender

47.  Maintenance of position in underlying securities..  The Pacific Select Fund

V.   Information Concerning the Trustee or Custodian

48.  Organization and regulation of trustee............  N/A

49.  Fees and expenses of trustees.....................  N/A

50.  Trustee's lien....................................  N/A

VI.  Information Concerning Insurance of Holders of Securities

51.  Insurance of holders of trust's securities........  Pacific Mutual Life Insurance
                                                         Company; The Policy
VII. Policy of Registrant

52.  (a)  Provisions of trust agreement with respect
          to selection or elimination of underlying
          securities...................................  Substitution of Investments

     (b)  Transactions involving elimination of
          underlying securities........................  Substitution of Investments

     (c)  Policy regarding substitution or
          elimination of underlying securities.........  See Items 13(a) and 52(a)

     (d)  Fundamental policy not otherwise
          covered......................................  N/A

53.  Tax status of trust...............................  Federal Income Tax Considerations

VIII. Financial and Statistical Information
</TABLE>
<PAGE>
 
<TABLE>
<S>                                                      <C>
54.  Trust's securities during last ten years..........  N/A

55.  N/A

56.  Certain information regarding periodic payment
     plan certificates.................................  Premiums

57.  N/A

58.  N/A

59.  Financial statements (Instruction 1(c) of
     "Instructions as to the Prospectus" of Form S-6)..  Financial Statements
                                                         
</TABLE>
<PAGE>
 







                                  PROSPECTUS
<PAGE>
 
 
 
 
 
 
                  [LOGO OF PACIFIC SELECT ESTATE PRESERVER]
 
                                Flexible Premium
                            Variable Universal Life
 
                                PROSPECTUSES FOR
 
                        PACIFIC SELECT ESTATE PRESERVER
 
         LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
 
                                   ISSUED BY
 
                     PACIFIC MUTUAL LIFE INSURANCE COMPANY
                             
                          DATED JANUARY 15, 1997     
 
                              ------------------
 
                              PACIFIC SELECT FUND
                             
                          DATED JANUARY 15, 1997     
<PAGE>
 
                                                PROSPECTUS
 
                                       PACIFIC SELECT ESTATE PRESERVER
 
                                       LAST SURVIVOR FLEXIBLE PREMIUM
                                       VARIABLE LIFE INSURANCE POLICY
[LOGO OF PACIFIC SELECT 
 ESTATE PRESERVER]
                               ISSUED BY PACIFIC MUTUAL LIFE INSURANCE COMPANY
                                          700 NEWPORT CENTER DRIVE
                                       NEWPORT BEACH, CALIFORNIA 92660
                                               1-800-800-7681
 
  This prospectus describes Pacific Select Estate Preserver--a Last Survivor
Flexible Premium Variable Life Insurance Policy (individually, the "Policy,"
and collectively, the "Policies") offered by Pacific Mutual Life Insurance
Company ("Pacific Mutual", "we", "us", or "our"). The Policy, for so long as it
remains in force, provides lifetime insurance protection on the lives of two
Insureds named in the Policy, with a death benefit payable when the last
surviving Insured dies while the Policy is in force. Four death benefit options
are available under the Policy. The Policy is designed to provide flexibility
in connection with premium payments and death benefits to permit a Policy Owner
to provide for changing insurance needs under a single insurance policy. A
Policy may be surrendered for its Cash Surrender Value, less outstanding Policy
Debt.
   
  Net premium payments may be allocated at the Policy Owner's discretion to one
or more of the Investment Options available under the Policy to the Owner.
Variable Investment Options are funded by one of our separate accounts, the
Pacific Select Exec Separate Account (the "Separate Account"), which is divided
into Variable Accounts. Each of the fourteen Variable Accounts that are
currently available to the Owner invest in a corresponding portfolio of the
Pacific Select Fund (the "Fund"):     
<TABLE>    
                <S>                              <C>
                Money Market Portfolio           Equity Income Portfolio
                High Yield Bond Portfolio        Multi-Strategy Portfolio
                Managed Bond Portfolio           Equity Portfolio           
                Government Securities Portfolio  Bond and Income Portfolio
                Growth Portfolio                 Equity Index Portfolio
                Agressive Equity Portfolio       International Portfolio
                Growth LT Portfolio              Emerging Markets Portfolio
</TABLE>     
  Net premium payments also may be allocated to the Fixed Account. The
Accumulated Value in the Fixed Account will accrue interest at an interest rate
that is guaranteed by us. This prospectus generally describes only the portion
of the Policy involving the Separate Account. For a brief summary of the Fixed
Account, see "The Fixed Account," page 32.
 
  To the extent that all or a portion of net premium payments are allocated to
the Separate Account, the Accumulated Value under the Policy will vary based
upon the investment performance of the Variable Accounts to which the
Accumulated Value is allocated. No minimum amount of Accumulated Value is
guaranteed.
 
  The Policy insures the lives of two Insureds and is intended to provide death
benefits after the deaths of both of the Insureds. Prospective applicants for
the Policy should consult with their agent regarding the appropriateness of the
Policy, relative to a life insurance policy insuring the life of only one
person, for their financial planning goals.
 
  It may not be advantageous to replace existing insurance with this Policy.
The Policy may be returned according to the terms of its Free-Look Right (see
"Right to Examine a Policy--Free-Look Right," page 22).
 
                               ----------------
 
  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
   AND  EXCHANGE  COMMISSION  NOR  HAS THE  COMMISSION  PASSED  UPON  THE
     ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
                   TO THE CONTRARY IS A CRIMINAL OFFENSE.
 
                               ----------------
 
  THIS PROSPECTUS IS ACCOMPANIED BY THE CURRENT PROSPECTUS FOR THE PACIFIC
SELECT FUND. BOTH PROSPECTUSES SHOULD BE READ CAREFULLY AND RETAINED FOR FUTURE
REFERENCE.
                             
                          DATE: JANUARY 15, 1997     
 
                               ----------------
 
  THE POLICY IS NOT AVAILABLE IN ALL STATES. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE
LAWFULLY MADE. NO PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN AS CONTAINED IN THIS PROSPECTUS, THE
FUND'S PROSPECTUS, OR THE STATEMENT OF ADDITIONAL INFORMATION OF THE FUND OR
ANY SUPPLEMENT THERETO.
<PAGE>
 
                               TABLE OF CONTENTS
 
<TABLE>   
<CAPTION>
                                                                            PAGE
<S>                                                                         <C>
IMPORTANT TERMS............................................................   4

SUMMARY OF THE POLICY......................................................   5
  Purpose Of The Policy....................................................   5
  Policy Values............................................................   5
  The Death Benefit........................................................   5
  Premium Features.........................................................   6
  Investment Options.......................................................   6
  Transfer Of Accumulated Value............................................   6
  Policy Loans.............................................................   6
  Free-Look Right..........................................................   6
  Surrender Right..........................................................   6
  Partial Withdrawals......................................................   7
  Charges And Deductions...................................................   7
  Fund Annual Expenses After Expense Limitation............................   8
  Tax Treatment Of Increases In Accumulated Value..........................   8
  Tax Treatment Of Death Benefit...........................................   9
  Contacting Pacific Mutual................................................   9

INFORMATION ABOUT PACIFIC MUTUAL, THE SEPARATE ACCOUNT, AND THE FUND.......  10
  Pacific Mutual Life Insurance Company....................................  10
  Pacific Select Exec Separate Account.....................................  10
  The Pacific Select Fund..................................................  10
  The Investment Adviser And Portfolio Managers............................  12

THE POLICY.................................................................  12
  Application For A Policy.................................................  12
  Premiums.................................................................  12
  Allocation Of Net Premiums...............................................  13
  Dollar Cost Averaging Option.............................................  14
  Portfolio Rebalancing....................................................  14
  Transfer Of Accumulated Value............................................  15
  Death Benefit............................................................  15
  Changes In Death Benefit Option..........................................  18
  Decrease In Face Amount..................................................  18
  Policy Values............................................................  19
  Determination Of Accumulated Value.......................................  19
  Policy Loans.............................................................  20
  Surrender................................................................  21
  Partial Withdrawals......................................................  21
  Right To Examine A Policy--Free-Look Right...............................  22
  Lapse....................................................................  22
  Reinstatement............................................................  23

CHARGES AND DEDUCTIONS.....................................................  23
  Premium Load.............................................................  23
  Deductions From Accumulated Value........................................  23
  Surrender Charge.........................................................  25
  Withdrawal Charge........................................................  25
  Corporate Purchasers.....................................................  26
  Other Charges............................................................  26
  Guarantee of Certain Charges.............................................  26
</TABLE>    
 
 
                                       2
<PAGE>
 
<TABLE>   
<CAPTION>
                                                                            PAGE
<S>                                                                         <C>
OTHER INFORMATION..........................................................  26
  Federal Income Tax Considerations........................................  26
  Charge For Our Income Taxes..............................................  29
  Voting Of Fund Shares....................................................  30
  Disregard Of Voting Instructions.........................................  30
  Report To Owners.........................................................  30
  Substitution Of Investments..............................................  30
  Changes To Comply With Law...............................................  31

PERFORMANCE INFORMATION....................................................  31

THE FIXED ACCOUNT..........................................................  32
  General Description......................................................  32
  Death Benefit............................................................  33
  Policy Charges...........................................................  33
  Transfers, Surrenders, Withdrawals, And Policy Loans.....................  33

MORE ABOUT THE POLICY......................................................  33
  Ownership................................................................  33
  Beneficiary..............................................................  34
  The Contract.............................................................  34
  Payments.................................................................  34
  Assignment...............................................................  34
  Errors On The Application................................................  34
  Incontestability.........................................................  35
  Payment In Case Of Suicide...............................................  35
  Dividends................................................................  35
  Policy Illustrations.....................................................  35
  Payment Plan.............................................................  35
  Optional Insurance Benefits..............................................  35
  Life Insurance Retirement Plans..........................................  36
  Risks Of Life Insurance Retirement Plans.................................  36
  Distribution Of The Policy...............................................  37

MORE ABOUT PACIFIC MUTUAL..................................................  38
  Management...............................................................  38
  State Regulation.........................................................  40
  Telephone Transfer And Loan Privileges...................................  40
  Legal Proceedings........................................................  40
  Legal Matters............................................................  41
  Registration Statement...................................................  41
  Independent Accountants..................................................  41
  Financial Statements.....................................................  41

ILLUSTRATIONS..............................................................  86

APPENDICES.................................................................  98
</TABLE>    
 
                                       3
<PAGE>
 
                                IMPORTANT TERMS
 
Accumulated Value--The total value of the amounts in the Investment Options
for the Policy, as well as any amount set aside in the Loan Account, including
any accrued earned interest, as of any Valuation Date.
Age--Generally, age nearest birthday as of the Policy Date, increased by the
number of complete Policy Years elapsed.
Beneficiary--The person or persons named by you in the application or by
proper later designation to receive the death benefit proceeds upon the death
of the last surviving Insured.
Cash Surrender Value--The Accumulated Value less the surrender charge.
Planned Periodic Premium--The premium determined by you as a level amount
planned to be paid at fixed intervals over a specified period of time.
Face Amount--The minimum death benefit for so long as your Policy remains in
force. The Face Amount may be decreased under certain circumstances.
Fixed Account--An account that is part of our General Account to which all or
a portion of net premium payments may be allocated for accumulation at a
guaranteed annual effective rate of interest of 4.0%. We may at our sole
discretion pay interest in excess of the guaranteed amount.
General Account--All of our assets other than those allocated to the Separate
Account or to any other of our segregated separate accounts.
Guideline Minimum Death Benefit--The minimum death benefit that is sufficient
for the Policy to qualify as life insurance under Internal Revenue Code. It is
equal to your Policy's Accumulated Value times the applicable Death Benefit
Percentage shown in Appendix C.
Home Office--The Policy Benefits and Services Department at our main office at
700 Newport Center Drive, Newport Beach, California 92660.
Insured--One of two persons upon whose life your Policy is issued and whose
death may be the contingency upon which the death benefit proceeds are
payable.
Investment Option--A Variable Account or the Fixed Account.
Joint Equal Age--An age determined under a calculation shown in Appendix A
that represents a blending of the age and insurance risks presented by two
Insureds. It is used in calculating the mortality and expense risk charge, the
underwriting surrender charge, the Sales Surrender Target, and the death
benefit under Option D. For example, the Joint Equal Age for a male Insured
Age 55 and a female Insured Age 55 is 53 assuming a standard nonsmoker or
smoker underwriting classification for each Insured.
Loan Account--An account to which amounts are transferred from the Investment
Options as collateral for Policy loans.
Monthly Payment Date--The day each month on which the monthly deduction is due
against the Accumulated Value. The first Monthly Payment Date is the Policy
Date.
Net Cash Surrender Value--The Cash Surrender Value less Policy Debt.
Policy Date--The date used to determine the Monthly Payment Date, Policy
Months, Policy Years, and Policy Monthly, Quarterly, Semi-annual and Annual
Anniversaries. It is usually the date the initial premium is received at our
Home Office, although it will never be the 29th, 30th, or 31st of any month.
The term "Issue Date" is substituted for Policy Date with respect to Policies
issued to residents of the Commonwealth of Massachusetts.
Policy Debt--The unpaid Policy loan balance including accrued loan interest.
Policy Owner, Owner, you, or your--The person or persons who own the Policy.
If the Policy has been absolutely assigned, the assignee becomes the Owner. A
collateral assignee is not the Owner.
Sales Surrender Target--The maximum amount of premiums paid against which the
sales surrender charge may be applied. The Sales Surrender Target is equal to
a specified amount that varies with the Joint Equal Age of the Insureds for
each $1,000 of a Policy's initial Face Amount in accordance with schedule
shown in Appendix B.
Survivor--The Insured remaining alive after the first death of the two
Insureds that occurs while your Policy is in force.
Valuation Date--Each date on which the Separate Account is valued, which
currently includes each day that the New York Stock Exchange is open for
trading and on which our administrative offices are open. The New York Stock
Exchange is closed on weekends and on: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, July Fourth, Labor Day, Thanksgiving Day, and Christmas
Day. Our administrative offices are normally not open on the following: the
Monday before New Year's Day, July Fourth, or Christmas Day if any of these
holidays falls on a Tuesday; the Friday after New Year's Day, July Fourth or
Christmas Day if any of these holidays falls on a Thursday; and the Friday
after Thanksgiving. If any transaction or event is scheduled to occur on a day
that is not a Valuation Date, such transaction or event will be deemed to
occur on the next following Valuation Date unless otherwise specified.
Valuation Period--The period that starts at the close of a Valuation Date and
ends at the close of the next succeeding Valuation Date.
   
Variable Account--A separate account of ours or a subaccount of such a
separate account, which is used only to support the variable death benefits
and policy values of variable life insurance policies, and the assets of which
are segregated from our General Account and our other separate accounts. The
Separate Account serves as the funding vehicle for the Policies. The Money
Market Variable Account, High Yield Bond Variable Account, Managed Bond
Variable Account, Government Securities Variable Account, Growth Variable
Account, Aggressive Equity Variable Account, Growth LT Variable Account,
Equity Income Variable Account, Multi-Strategy Variable Account, Equity
Variable Account, Bond and Income Variable Account, Equity Index Variable
Account, International Variable Account, and Emerging Markets Variable Account
are all subaccounts of the Separate Account.     
 
                                       4
<PAGE>
 
 
                             SUMMARY OF THE POLICY
 
  This summary is intended to provide a brief overview of the more significant
aspects of the Policy. Further detail is provided in this prospectus and in the
Policy. Unless the context indicates otherwise, the discussion in this summary
and the remainder of the prospectus relates to the portion of the Policy
involving the Separate Account. The Fixed Account is briefly described under
"The Fixed Account," on page 32 and in the Policy.
 
PURPOSE OF THE POLICY
 
  Like traditional fixed life insurance, the Policy provides for a death
benefit equal to its Face Amount, accumulation of cash value, and surrender and
loan privileges. Unlike traditional fixed life insurance, your Policy offers a
choice of investment alternatives, and an opportunity for your Policy's
Accumulated Value and, if elected by you and under certain circumstances, its
death benefit to grow based on investment results. The Policy is a flexible
premium policy, so that, unlike many other life insurance policies and subject
to certain limitations, you may choose the amount and frequency of premium
payments.
 
  Your Policy offers you lifetime insurance protection on the lives of two
Insureds for so long as your Policy is in force. The death benefit proceeds
under your Policy are payable upon the death of the last surviving Insured
named in your Policy. The Policy is intended for situations in which you desire
to provide a benefit to beneficiaries after the deaths of two persons. For
example, the Policy could be used where two spouses wish to provide an estate
benefit for their children after the death of both spouses. The Policy might
not be appropriate where one spouse wishes to provide a benefit to the other
spouse after the death of the first spouse. An insurance policy for a single
insured may be better in this situation. We offer variable life insurance
policies that provide protection for the life of one insured. Applicants should
consult their agent on the appropriateness of the Policy for their situation.
 
POLICY VALUES
 
  You may allocate net premium payments among the various Investment Options
available to you.
 
  You bear the investment risk on that portion of the net premiums and
Accumulated Value allocated to the Variable Accounts. The death benefit may or
may not increase or decrease depending upon several factors, including the
death benefit option you select, although the death benefit will never decrease
below the Face Amount provided your Policy is in force. There is no guarantee
that your Policy's Accumulated Value and death benefit will increase.
 
  Your Policy will remain in force until the earliest of the death of the
Survivor, lapse, or a full surrender of your Policy.
 
THE DEATH BENEFIT
 
  You may elect one of four death benefit options under the Policy. THE AMOUNT
OF DEATH BENEFIT IS THE GREATER OF THE POLICY'S GUIDELINE MINIMUM DEATH BENEFIT
OR THE DEATH BENEFIT UNDER THE OPTION YOU SELECT.
 
<TABLE>
<CAPTION>
       OPTION                            DEATH BENEFIT
      --------                           -------------
      <S>        <C>
      Option A   Face Amount
      Option B   Face Amount plus Accumulated Value
      Option C   Face Amount plus premiums paid minus Partial Withdrawals
      Option D   Face Amount multiplied by the applicable Death Benefit Factor
</TABLE>
 
  You may change the death benefit option to Option A or B subject to certain
conditions. See "Death Benefit" and "Changes in Death Benefit Option," pages 15
and 18, respectively.
 
                                       5
<PAGE>
 
 
PREMIUM FEATURES
 
  We require you to pay an initial premium equal to at least 25% of an annual
premium that will be estimated by us. Thereafter, subject to certain
limitations, you may choose the amount and frequency of premium payments. The
Policy, therefore, provides you with the flexibility to vary premium payments
to reflect varying financial conditions.
 
INVESTMENT OPTIONS
   
  You may choose to allocate net premium payments to one or more of the fifteen
Investment Options available to you.     
   
  The fourteen Variable Accounts available to you invest in portfolios of a
mutual fund which offers you the opportunity to direct us to invest in
diversified portfolios of stocks, bonds, money market instruments, or a
combination of these securities, or in securities of foreign issuers. Each of
the available Variable Accounts invests exclusively in shares of a designated
Portfolio of the Fund. Each of the Portfolios of the Fund, which are shown in
the chart on page 11, has a different investment objective or objectives. See
"The Pacific Select Fund," page 10.     
 
  You also may allocate all or a portion of net premium payments and transfer
Accumulated Value to the Fixed Account. We guarantee that the Accumulated Value
allocated to the Fixed Account will be credited interest monthly at a rate
equivalent to an effective annual rate of 4%, and may in its sole discretion
pay interest in excess of the guaranteed amount. See "The Fixed Account," page
32.
 
TRANSFER OF ACCUMULATED VALUE
 
  Subject to certain limitations, you may transfer Accumulated Value among the
Variable Accounts and between the Variable Accounts and the Fixed Account. See
"Transfer of Accumulated Value," page 15.
 
POLICY LOANS
 
  You may borrow from us an amount up to the greater of (1) 90% of your
Policy's Accumulated Value allocated to the Variable Accounts and 100% of
Accumulated Value allocated to the Fixed Account, less any surrender charges
that would have been imposed if your Policy were surrendered on the date the
loan is taken, or (2) 100% of the product of (a X b/c - d) where (a) equals the
Policy's Accumulated Value less any surrender charge that would be imposed if
the Policy were surrendered on the date the loan is taken and less 12 times the
current monthly deduction; (b) equals 1 plus the annual loan interest rate
credited; (c) equals 1 plus the annual loan interest rate currently charged;
and (d) equals any existing Policy Debt. The minimum loan is $500 ($200 in
Connecticut, $250 in Oregon). Your Policy will be the only security required
for a loan. The amount of any Policy Debt is subtracted from the death benefit
or from your Cash Surrender Value upon surrender. See "Policy Loans," page 20.
 
FREE-LOOK RIGHT
 
  A Policy Owner may obtain a full refund of the premium paid if the Policy is
returned within 10 days after the Owner receives it (15 days in Colorado; 20
days in North Dakota; and 30 days if the Owner is a resident of California and
is age 60 or older), or within 45 days after the application for the Policy is
signed, whichever is later (the "Free-Look Period"). However, in Pennsylvania,
you have a different Free-Look Right, under which your Policy may be returned
only within 10 days after you receive it. See "Right to Examine a Policy--Free-
Look Right," page 22.
 
SURRENDER RIGHT
 
  You can surrender the Policy while either Insured is living and receive your
Net Cash Surrender Value, which is equal to your Policy's Accumulated Value
less any surrender charge and less any outstanding Policy Debt.
 
 
                                       6
<PAGE>
 
PARTIAL WITHDRAWALS
 
  After the first Policy Anniversary and subject to certain restrictions, you
may make Partial Withdrawals of Net Cash Surrender Value. A withdrawal fee of
$25 will be assessed upon a Partial Withdrawal. A Partial Withdrawal might
decrease the Face Amount on a Policy. See "Partial Withdrawals," page 21.
 
CHARGES AND DEDUCTIONS
 
 Premium Load
 
  A premium load is deducted from each premium payment under a Policy prior to
allocation of the net premium to the Policy Owner's Accumulated Value. The
premium load consists of the following items:
 
  --A sales load equal to 5% of each premium paid during the first ten Policy
   Years and 3% of each premium paid thereafter. (For information on the
   sales surrender charge, see page 25.)
 
  --A state and local premium tax charge equal to 2.35% of each premium paid.
 
  --A federal tax charge equal to 1.50% of each premium paid.
 
 Deductions from Accumulated Value
 
  A charge called the monthly deduction is deducted from the Policy's
Accumulated Value on each Monthly Payment Date. The monthly deduction consists
of the following items:
 
  --Cost of Insurance: The amount of the charge is equal to a current cost of
   insurance rate multiplied by the net amount at risk (the death benefit
   less Accumulated Value) under a Policy at the beginning of the Policy
   Month.
 
  --Administrative Charge: A monthly administrative charge is deducted equal
   to $16 in each of the first five Policy Years, and thereafter at a rate
   equal to $6 per month.
 
  --Mortality and Expense Risk Charge: The mortality and expense risk charge
  consists of two components:
 
    (1) Face Amount Component--During the first ten Policy Years, the Face
        Amount Component will be assessed at a rate determined with reference
        to the Joint Equal Age of the Insureds and the initial Face Amount of
        the Policy. This component is not assessed after the tenth Policy
        Year.
 
    (2) Accumulated Value Component--The Accumulated Value Component is
        assessed at an annual rate equal to .30% of Accumulated Value in the
        first 20 Policy Years and an annual rate equal to .10% of Accumulated
        Value thereafter. For purposes of this component, the Accumulated
        Value is determined after the deduction of the cost of insurance
        charge and charges for any optional insurance Riders or Benefits
        added to the Policy.
 
  --Optional Insurance Benefits Charges: The monthly deduction will include
   charges for any optional insurance Riders or Benefits added to the Policy.
 
 Surrender Charge
 
  We will assess a surrender charge against Accumulated Value upon surrender of
a Policy until the tenth Policy Anniversary. The surrender charge consists of
two charges: an underwriting surrender charge and a sales surrender charge.
 
  --Underwriting Surrender Charge: The underwriting surrender charge is equal
   to a specified amount that varies with the Joint Equal Age of the Insureds
   for each $1,000 of a Policy's initial Face Amount in accordance with a
   schedule shown in Appendix B. After the first Policy Year, the charge
   decreases by 0.9259% per month until it reaches zero at the end of the
   120th Policy Month.
 
  --Sales Surrender Charge: During the first Policy Year, the sales surrender
   charge is equal to 25% of the lesser of the premiums paid under the Policy
   or the Sales Surrender Target. The Sales Surrender Target is equal to a
   specified amount that varies with the Joint Equal Age of the Insureds for
   each $1,000 of a
 
                                       7
<PAGE>
 
   Policy's initial Face Amount in accordance with a schedule shown in
   Appendix B. After the first Policy Year, the sales surrender charge as
   calculated above is adjusted by a reduction factor. This reduction factor
   is equal to 99.0741% in the 13th month and reduces by 0.9259% per month
   until it reaches zero at the end of the 120th Policy Month.
 
  The operating expenses of the Separate Account are paid by us. For a more
complete description of these charges, see "Charges and Deductions," page 23.
 
FUND ANNUAL EXPENSES AFTER EXPENSE LIMITATION (as a percentage of each
Portfolio's average daily net assets)
 
  Investment advisory fees and operating expenses of the Fund are paid by the
Fund. Fund expenses are not specified under the terms of the Policy, and they
may vary from year to year.
 
<TABLE>       
<CAPTION>
                                                      ADVISORY  OTHER    TOTAL
                                                        FEE    EXPENSES EXPENSES
                                                      -------- -------- --------
      <S>                                             <C>      <C>      <C>
      Money Market Portfolio.........................    .40%    .11%      .51%
      High Yield Bond Portfolio......................    .60%    .14%      .74%
      Managed Bond Portfolio.........................    .60%    .13%      .73%
      Government Securities Portfolio................    .60%    .17%      .77%
      Growth Portfolio...............................    .65%    .11%      .76%
      Aggressive Equity Portfolio....................    .80%    .23%     1.03%
      Growth LT Portfolio............................    .75%    .15%      .90%
      Equity Income Portfolio........................    .65%    .13%      .78%
      Multi-Strategy Portfolio.......................    .65%    .15%      .80%
      Equity Portfolio...............................    .65%    .12%      .77%
      Bond and Income Portfolio......................    .60%    .13%      .73%
      Equity Index Portfolio.........................    .22%    .13%      .35%
      International Portfolio........................    .25%    .24%     1.09%
      Emerging Markets Portfolio.....................   1.10%    .36%     1.46%
</TABLE>    
   
  The expenses listed for the Fund Portfolios reflect current expenses for the
six month period ending June 30, 1996 adjusted to reflect a decrease in fees
for certain operating expenses. The Aggressive Equity and Emerging Markets
Portfolios did not begin operations until April 1, 1996 and their "other
expenses" are on an annualized basis and reflect the policy adopted by Pacific
Mutual as Investment Adviser to the Fund, to waive its fees or otherwise
reimburse expenses so that operating expenses (exclusive of advisory fees,
additional custodial fees associated with holding foreign securities, foreign
taxes on dividends, interest or capital gains, and extraordinary expenses)
expressed as a decimal are not greater than 0.0025 of average daily net assets
per year. We began this policy in 1989 and intend to continue this policy until
at least December 31, 1998, but may discontinue it after that time. In the
absence of this policy, it is estimated that such expenses for the Aggressive
Equity Portfolio and the Emerging Markets Portfolio would exceed this expense
cap in 1996 and total adjusted expenses would be approximately 1.21% and 1.65%
on an annualized basis, respectively. No reimbursement to the other Portfolios
was necessary for the Fund's six month period ending June 30, 1996.     
 
  The Fund's expenses are assessed at the Fund level and are not direct charges
against the Variable Accounts or the Policy's Accumulated Value. These expenses
are taken into account in computing each Portfolio's per share net asset value,
which in turn is used to compute the corresponding Variable Account's
Accumulation Unit Value. The Fund's investment advisory fees and operating
expenses are more fully described in the Fund's prospectus, which accompanies
this Prospectus.
 
TAX TREATMENT OF INCREASES IN ACCUMULATED VALUE
 
  We believe that the Accumulated Value under the Policy is currently subject
to the same federal income tax treatment as the cash value under traditional
fixed life insurance. Therefore, generally you will not be deemed to
 
                                       8
<PAGE>
 
be in constructive receipt of your Accumulated Value unless and until you are
deemed to be in receipt of a distribution from your Policy. For information on
the tax treatment of the Policy and on the tax treatment of a surrender, a
Partial Withdrawal, or a Policy loan, see "Federal Income Tax Considerations,"
page 26.
 
TAX TREATMENT OF DEATH BENEFIT
 
  We believe that the death benefit under the Policy is currently subject to
federal income tax treatment consistent with that of traditional fixed life
insurance. Therefore, generally the death benefit will be fully excludable from
the gross income of the Beneficiary under the Internal Revenue Code. See
"Federal Income Tax Considerations," page 26.
 
CONTACTING PACIFIC MUTUAL
 
  All written requests, notices, and forms required by the Policies, and any
questions or inquiries should be directed to our Policy Benefits and Services
Department at 700 Newport Center Drive, P.O. Box 7500, Newport Beach,
California 92658-7500.
   
  The effective date of certain notices or of instructions is determined by the
date and time on which Pacific Mutual "receives" the notice or instructions.
Unless otherwise stated, we "receive" this information only when it arrives
"properly completed" at our Home Office. Premium payments after your initial
premium payment, transfer requests, loan requests, loan repayments, and
withdrawal requests we receive before 4:00 p.m. Eastern time (or the close of
the New York Stock Exchange, if earlier) will normally be effective as of the
end of the Valuation Day that we receive them "properly completed," unless the
transaction or event is scheduled to occur on another day. Transactions are
effected as of the end of the Valuation Date on which they are effective.
"Properly completed" may require, among other things, a signature guarantee or
other verification of authenticity. We do not generally require a signature
guarantee unless it appears that your signature may have changed over time or
due to other circumstances. Requests regarding death benefits must be
accompanied by both proof of death and instructions regarding payment
satisfactory to us. You should call your registered representative or Pacific
Mutual if you have questions regarding the required form of a request.     
 
                                       9
<PAGE>
 
     INFORMATION ABOUT PACIFIC MUTUAL, THE SEPARATE ACCOUNT, AND THE FUND
 
PACIFIC MUTUAL LIFE INSURANCE COMPANY
 
  We are a mutual life insurance company organized under the laws of the State
of California. We were authorized to conduct business as a life insurance
company on January 2, 1868, as Pacific Mutual Life Insurance Company of
California, and were reincorporated under our present name on July 22, 1936.
 
  We offer a complete line of life insurance policies and annuity contracts,
as well as financial and retirement services. We are admitted to do business
in the District of Columbia and in all states except New York. As of the end
of 1995, we had $44.2 billion of individual life insurance in force and total
assets of $17.6 billion. We and our subsidiaries and affiliated enterprises
together had total assets and funds under management of $116.6 billion as of
the end of 1995. We have been ranked according to assets as the 23rd largest
life insurance carrier in the nation for 1995.
   
  The principal underwriter for the Policies is Pacific Mutual Distributors,
Inc. ("PMD") one of our wholly owned subsidiaries. PMD is registered as a
broker-dealer with the Securities and Exchange Commission ("SEC").     
 
PACIFIC SELECT EXEC SEPARATE ACCOUNT
 
  The Separate Account is a separate investment account of ours that is used
only to support the variable death benefits and policy values of variable life
insurance policies. The assets in the Separate Account are kept separate from
our General Account assets and our other separate accounts.
 
  We own the assets in the Separate Account and are required to maintain
sufficient assets in the Separate Account to meet anticipated obligations of
the insurance policies funded by the Account. The Separate Account is divided
into subaccounts called Variable Accounts. The income, gains, or losses,
realized or unrealized, of each Variable Account are credited to or charged
against the assets held in the Variable Account without regard to our other
income, gains, or losses. Assets in the Separate Account attributable to the
reserves and other liabilities under the variable life insurance policies
funded by the Separate Account are not chargeable with liabilities arising
from any other business that we conduct. However, we may transfer to our
General Account any assets which exceed anticipated obligations of the
Separate Account. All obligations arising under the Policy are our general
corporate obligations. We may accumulate in the Separate Account proceeds from
various policy charges and investment results applicable to those assets.
 
  The Separate Account was established on May 12, 1988 under California law
under the authority of our Board of Directors. The Separate Account is
registered as a unit investment trust with the SEC. Such registration does not
involve any supervision by the SEC of the administration or investment
practices or policies of the Account.
 
  Each Variable Account available to you invests exclusively in shares of a
designated Portfolio of the Fund. We may in the future establish additional
Variable Accounts within the Separate Account, which may invest in other
Portfolios of the Fund or in other securities.
 
THE PACIFIC SELECT FUND
   
  The Fund is a diversified, open-end management investment company of the
series type, generally known as a mutual fund. The Fund is registered with the
SEC under the Investment Company Act of 1940. The Fund currently offers
fourteen separate Portfolios that fund the Variable Investments Options
available to you. 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.
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. Fund shares will be redeemed
by us at their net asset value to the extent necessary to make payments under
the Policies.     
 
 
                                      10
<PAGE>
 
  Shares of the Fund currently are offered only to separate accounts of ours
and an affiliated insurer to serve as an investment medium for variable life
insurance policies and variable annuity contracts issued or administered by
these insurers. Shares of the Fund may also be sold in the future to separate
accounts of other insurance companies, either affiliated or not affiliated
with us. Investment in the Fund by other separate accounts in connection with
variable annuity and variable life insurance contracts may potentially create
conflicts. See "MORE ON THE FUND'S SHARES" in the accompanying prospectus of
the Fund.
 
  The chart below summarizes some basic data about each Portfolio of the Fund
offered to the Separate Account. There can be no assurance that any Portfolio
will achieve its objective. This chart is only a summary. You should read the
more detailed information which is contained in the accompanying prospectus of
the Fund, including information on the risks associated with the investments
and investment techniques of each of the Portfolios.
 
  THE FUND'S PROSPECTUS ACCOMPANIES THIS PROSPECTUS AND SHOULD BE READ
CAREFULLY BEFORE INVESTING.
<TABLE>   
<CAPTION>
                                                                             INVESTMENT
                                              PRIMARY INVESTMENTS        ADVISER/PORTFOLIO
   PORTFOLIO            OBJECTIVE         (UNDER NORMAL CIRCUMSTANCES)        MANAGER
- --------------------------------------------------------------------------------------------
<S>              <C>                      <C>                          <C>
 Money Market    Current income             Highest quality money      Pacific Mutual
                 consistent with            market instruments
                 preservation of capital
- --------------------------------------------------------------------------------------------
 High-Yield      High level of current      Intermediate and long-     Pacific Mutual
 Bond            income                     term, high-yielding,
                                            lower and medium quality
                                            (high risk) fixed-income
                                            securities
- --------------------------------------------------------------------------------------------
 Managed Bond    Maximize total return      Investment grade           Pacific Investment
                 consistent with prudent    marketable debt            Management Company
                 investment management      securities. Will
                                            normally maintain an
                                            average portfolio
                                            duration of 3-6 years
- --------------------------------------------------------------------------------------------
 Government      Maximize total return      U.S. Government            Pacific Investment
 Securities      consistent with prudent    securities including       Management Company
                 investment management      futures and options
                                            thereon and high-grade
                                            corporate debt
                                            securities. Will
                                            normally maintain an
                                            average portfolio
                                            duration of 3-6 years
- --------------------------------------------------------------------------------------------
 Growth          Growth of capital          Common stock               Capital Guardian
                                                                       Trust Company
- --------------------------------------------------------------------------------------------
 Aggressive      Capital appreciation       Stock of small- and        Columbus Circle
 Equity                                     medium-sized companies     Investors
                                            that utilize or provide
                                            and service innovative
                                            technologies
- --------------------------------------------------------------------------------------------
 Growth LT       Long-term growth of        Common stock               Janus Capital
                 capital consistent with                               Corporation
                 the preservation of
                 capital
- --------------------------------------------------------------------------------------------
 Equity Income   Long-term growth of        Dividend paying common     J.P. Morgan
                 capital and income         stock                      Investment Management
                                                                       Inc.
- --------------------------------------------------------------------------------------------
 Multi-Strategy  High total return          Equity and fixed-income    J.P. Morgan
                                            securities                 Investment Management
                                                                       Inc.
- --------------------------------------------------------------------------------------------
 Equity          Capital appreciation       Common stocks and          Greenwich Street
                                            securities convertible     Advisors
                                            into or exchangeable for
                                            common stocks
- --------------------------------------------------------------------------------------------
 Bond and        High level of current      Investment grade debt      Greenwich Street
 Income          income consistent with     securities                 Advisors
                 prudent investment
                 management and
                 preservation of capital
- --------------------------------------------------------------------------------------------
 Equity Index    Provide investment         Stocks included in the     Bankers Trust Company
                 results that correspond    S&P 500
                 to the total return
                 performance of common
                 stocks publicly traded
                 in the U.S.
- --------------------------------------------------------------------------------------------
 International   Long-term capital          Equity securities of       Templeton Investment
                 appreciation               corporations domiciled     Counsel, Inc.
                                            outside the United
                                            States
- --------------------------------------------------------------------------------------------
 Emerging        Long-term capital          Common stocks of           Blairlogie Capital
 Markets         appreciation               companies domiciled in     Management
                                            emerging markets
                                            countries
- --------------------------------------------------------------------------------------------
</TABLE>      
 
                                      11
<PAGE>
 
THE INVESTMENT ADVISER AND PORTFOLIO MANAGERS
   
  We serve as Investment Adviser to each Portfolio of the Fund. We are
registered with the SEC as an Investment Adviser. For twelve of the
Portfolios, we and the Fund have engaged other firms to serve as Portfolio
Managers, which are shown in the chart above.     
 
                                  THE POLICY
 
  The variable life insurance benefits provided by the Policies are funded
through the Policy Owner's Accumulated Value in the Separate Account and the
Fixed Account. The information included below describes the benefits,
features, charges, and other major provisions of the Policies.
 
APPLICATION FOR A POLICY
 
  The Policy is designed to meet the needs of individuals by insuring the
lives of two Insureds. Anyone wishing to purchase the Policy may submit an
application to us. A Policy can be issued on the life of Insureds for Ages 20
through Age 85 with evidence of insurability satisfactory to us. An Insured's
Age is calculated for most purposes as of the Insured's birthday nearest the
Policy Date. Acceptance is subject to our underwriting rules, and we reserve
the right to request additional information and to reject an application.
 
  Each Policy is issued with a Policy Date. If your application is accompanied
by all or a portion of the initial premium and is accepted by us, your Policy
Date is usually the date the application and premium payment were received at
our Home Office, although your Policy Date will never be the 29th, 30th, or
31st of any month. If your application is not accompanied by all or a portion
of the initial premium payment, your Policy Date is usually the date your
application is accepted by us. We first become obligated under your Policy on
the date your total initial premium is received or on the date your
application is accepted, whichever is later. Any monthly deductions due will
be taken on the Monthly Payment Date on or next following the date we become
obligated. Your initial premium must be received within 20 days after your
Policy is issued, although we may waive the 20 day requirement at our
discretion. If your initial premium is not received or your application is
rejected by us, your Policy will be cancelled and any partial premium received
will be refunded.
 
  Subject to our approval, your Policy may be backdated, but your Policy Date
may not be more than six months prior to the date of your application.
Backdating can be advantageous if the Insureds' lower issue Ages results in
lower cost of insurance rates. If your Policy is backdated, the minimum
initial premium required will include sufficient premium to cover the
backdating period. Monthly deductions will be made for the period your Policy
Date is backdated.
 
  Insureds are assigned to underwriting (insurance risk) classes which are
used in calculating the cost of insurance charges. In assigning Insureds to
underwriting classes, we will normally use the medical or paramedical
underwriting method, which may require a medical examination of a proposed
Insured, although other forms of underwriting may be used when deemed
appropriate by us.
 
PREMIUMS
 
  The Policy is a flexible-premium policy, and it provides considerable
flexibility, subject to the limitations described below, to pay premiums at
your discretion. We usually require you to pay a minimum initial premium equal
to at least 25% of the sum of your Policy's monthly deductions plus premium
load for the first year, which will be based upon your Policy's Face Amount
and the Age, smoking status, gender (unless unisex cost of insurance rates
apply, see "Charges and Deductions: Cost of Insurance"), and underwriting
classes of the Insureds. Thereafter, subject to the limitations described
below, you may choose the amount and frequency of premium payments. The
Policy, therefore, provides the Policy Owner with the flexibility to vary
premium payments to reflect varying financial conditions.
 
  When applying for a Policy, you will determine a Planned Periodic Premium
that provides for the payment of level premiums at fixed intervals over a
specified period of time. You will receive a premium reminder notice
 
                                      12
<PAGE>
 
annually, semi-annually, or quarterly; however, you are not required to pay
Planned Periodic Premiums. Premiums may be paid monthly under the Uni-check
electronic funds transfer plan where you authorize us to withdraw premiums
from your checking account each month. The minimum initial premium required
must be paid before the Uni-check plan will be accepted by us. You may elect
the day each month on which premiums are paid under the Uni-check plan,
provided the day elected is between the 4th and the 28th day of the month. If
no day is elected by you, the day on which premiums are paid will be the
Monthly Anniversary.
 
  Payment of the Periodic Planned Premium will not guarantee that your Policy
will remain in force. Instead, the continuation of your Policy depends upon
your Policy's Accumulated Value. Even if Periodic Planned Premiums are paid,
your Policy will lapse any time Accumulated Value less Policy Debt is
insufficient to pay the current monthly deduction and a grace period expires
without sufficient payment. See "Lapse".
 
  Any premium payment must be for at least $50.00. We also may reject or limit
any premium payment that would result in an immediate increase in the net
amount at risk under the Policy, although such a premium may be accepted with
satisfactory evidence of insurability. See "Charges and Deductions: Cost of
Insurance". A premium payment would result in an immediate increase in the net
amount at risk if the death benefit under your Policy is, or upon acceptance
of the premium would be, equal to your Guideline Minimum Death Benefit. See
"Death Benefit". If satisfactory evidence of insurability is not received, the
payment, or portion thereof, may be returned. All or a portion of a premium
payment will be rejected and returned to you if it would exceed the maximum
premium limitations prescribed by federal tax law. We also reserve the right
to make distributions from your Policy to the extent we deem it necessary to
continue to qualify your Policy as life insurance under the Internal Revenue
code.
 
  The amount, frequency, and period of time over which you pay premiums might
affect whether your Policy will be classified as a modified endowment
contract, which is a type of life insurance contract subject to different tax
treatment for certain pre-death distributions than conventional life insurance
contracts.
 
  In order for your Policy to avoid being treated as a modified endowment
contract, the sum of the premiums paid less a portion of any Partial
Withdrawals may not exceed the "seven pay premium" limit as defined in the
Internal Revenue Code. (See "Federal Income Tax Considerations"). If we
receive any premium payment that we believe, if applied to your Policy in that
Policy year, would cause your Policy to become a modified endowment contract,
the portion of the payment that we believe would cause your Policy to become a
modified endowment contract will not be applied to your Policy but will be
returned to you, unless you have previously notified us that payments that
cause your Policy to become a modified endowment contract may be accepted by
us and applied to your Policy. However, for premium payments received by us at
our Home Office within 20 days before the upcoming Annual Anniversary of your
Policy, we may apply the portion of the premium payment that we believe would
cause your Policy to become a modified endowment contract to your Policy on
the upcoming Annual Anniversary.
 
  Certain charges will be deducted from each premium payment. See "Charges and
Deductions". The remainder of the premium, known as the net premium, will be
allocated as described below under "Allocation of Net Premiums." Additional
payments will first be treated as premium payments unless you request
otherwise.
 
ALLOCATION OF NET PREMIUMS
 
  In your application for the Policy, you select the Investment Options to
which net premium payments will be allocated. When your application is
approved and your Policy is issued, your Accumulated Value will be
automatically allocated according to your instructions contained in your
application, or more recent written instructions, if any (except for amounts
allocated to the Loan Account to secure any Policy Debt). For residents of
states that require a refund of premium to an Owner who returns the Policy
during the Free-Look Period, net premiums received by us before the Free-Look
Transfer Date will be allocated to the Money Market Variable Account (except
for amounts allocated to the Loan Account to secure any Policy loan). The
Free-Look Transfer Date is the later of 15 days after the Policy is issued or
45 days after the application is signed, or, if longer, upon receipt of the
minimum initial premium. Net premiums received after the Free-Look Transfer
Date will be allocated upon receipt among the Investment Options according to
your most recent instructions.
 
                                      13
<PAGE>
 
  You may change the allocation of net premiums by submitting a proper written
request to our Home Office. Changes in net premium allocation instructions may
be made by telephone if a properly completed Authorization for Telephone
Requests is on file at our Home Office. We reserve the right to suspend or
discontinue telephone net premium allocation instructions.
 
DOLLAR COST AVERAGING OPTION
 
  We currently offer an option under which you may dollar cost average your
allocations in the available Variable Accounts under your Policy by
authorizing us to make periodic allocations of Accumulated Value from any one
Variable Account to one or more of the other Variable Accounts. Dollar cost
averaging is a systematic method of investing under which securities are
purchased at regular intervals in fixed dollar amounts so that the cost of the
securities gets averaged over time and possibly over various market values.
The option will result in the allocation of Accumulated Value to one or more
Variable Accounts, and these amounts will be credited at the Accumulation Unit
values as of the end of the Valuation Dates on which the transfers are
processed. Since the value of Accumulation Units will vary, the amounts
allocated to a Variable Account will result in the crediting of a greater
number of units when the Accumulation Unit value is low and a lesser number of
units when the Accumulation Unit value is high. Dollar cost averaging does not
guarantee profits, nor does it assure that a Policy Owner will not have
losses.
 
  A Dollar Cost Averaging Request Form is available upon request. To elect the
Dollar Cost Averaging Option, the Accumulated Value in the Variable Account
from which the Dollar Cost Averaging transfers will be made must be at least
$5,000. After we have received a Dollar Cost Averaging Request in proper form
at our Home Office, we will transfer Accumulated Value in amounts you
designate from the Variable Account from which transfers are to be made to the
Variable Account or Accounts you choose. The minimum amount that may be
transferred to any one Variable Account is $50. After the Free-Look Period,
the first transfer will be effected on your Policy's Monthly, Quarterly, Semi-
Annual, or Annual Anniversary, whichever corresponds to the period selected by
you, on or next following receipt at our Home Office of a Dollar Cost
Averaging Request in proper form. Subsequent transfers will be effected on the
following Monthly, Quarterly, Semi-Annual, or Annual Anniversary for so long
as you designate until the total amount elected has been transferred, until
Accumulated Value in the Variable Account from which transfers are made has
been depleted, or until your Policy enters the grace period. Amounts
periodically transferred under this option will not be subject to any transfer
charges that may be imposed by us in the future, except as may be required by
applicable law.
 
  You may instruct us at any time to terminate this option by written request
to our Home Office. We may discontinue, modify, or suspend the Dollar Cost
Averaging Option at any time.
 
PORTFOLIO REBALANCING
 
  You may direct us to automatically re-set the percentage of your Accumulated
Value allocated to each Variable Account at a predetermined level. This
process is called portfolio rebalancing. (The Fixed Account is not available
for portfolio rebalancing.) Over time, the variations in each Variable
Account's investment results will shift the percentage allocations of your
Accumulated Value. The portfolio rebalancing feature will automatically
transfer your Accumulated Value among the Variable Accounts back to the preset
percentages. Rebalancing can be made quarterly, semi-annually or annually,
measured from your Policy Date ("frequency period"). Rebalancing may result in
transferring amounts from a Variable Account with relatively higher investment
performance to a Variable Account with relatively lower investment
performance.
 
  You may initiate portfolio rebalancing by sending our Home Office a signed,
written request in good form or a properly completed Automatic Portfolio
Rebalancing form. You must specify the frequency for rebalancing and a
beginning date. The first rebalancing will usually occur on your Monthly
Payment Date that starts the frequency period you elected and that occurs on
or follows the beginning date you elected. If you stop portfolio rebalancing,
you must wait 30 days to begin again. Portfolio rebalancing cannot be used
with the Dollar Cost Averaging Option.
 
  We may modify, terminate or suspend the portfolio rebalancing feature at any
time.
 
                                      14
<PAGE>
 
TRANSFER OF ACCUMULATED VALUE
 
  Accumulated Value may be transferred among the Variable Accounts by the
Policy Owner upon proper written request to our Home Office. Transfers may not
be made until after the Free-Look Transfer Date if you reside in a state that
requires us to refund premiums if you exercise your Free-Look Right. Transfers
(other than transfers in connection with the Dollar Cost Averaging Option) may
be made by telephone if a properly completed Authorization For Telephone
Requests is on file at our Home Office. Currently, there are no limitations on
the number of transfers between Variable Accounts, no minimum amount required
for a transfer, nor any minimum amount required to be remaining in a given
Variable Account after a transfer (except as required under the Dollar Cost
Averaging Option). No transfer may be made if your Policy is in the grace
period and a payment required to avoid lapse is not paid. See "Lapse". No
charges are currently imposed upon such transfers. We reserve the right,
however, at a future date to limit the size of transfers and remaining
balances, to assess transfer charges, to limit the number and frequency of
transfers, and to impose other reasonable limits or suspend or discontinue
telephone transfers.
   
  Accumulated Value may also be transferred after the Free-Look Transfer Date
from the Variable Accounts to the Fixed Account; however, such a transfer will
only be permitted in the Policy Month preceding your Policy Anniversary,
except that if you reside in Connecticut, Georgia, Maryland, North Carolina,
North Dakota, or Pennsylvania, you may make such a transfer at any time during
the first 18 Policy Months. Transfers from the Fixed Account to the Variable
Accounts are restricted as described in "The Fixed Account".     
 
DEATH BENEFIT
 
  When your Policy is issued, we will determine the initial amount of
insurance based on the instructions provided in the application. That amount
will be shown on the specifications page of your Policy and is called the
"Face Amount". The minimum Face Amount at issuance of a Policy is $100,000. We
may reduce the minimum Face Amount required at issuance under certain
circumstances.
 
  For so long as your Policy remains in force, we will, upon proof of the
death of both Insureds, pay death benefit proceeds to a named Beneficiary.
Death benefit proceeds will consist of the death benefit under the Policy,
plus any insurance proceeds provided by Rider, reduced by any outstanding
Policy Debt (and, if in the grace period, any overdue charges).
 
  Each Policy Owner may select one of four death benefit options: Option A,
Option B, Option C, or Option D. Generally, you designate the death benefit
option in your application. If no option is designated, Option A will be
assumed by us to have been selected. Subject to certain restrictions, you may
change the death benefit option selected to Option A or B.
 
  The death benefit upon the death of the Survivor will be equal to the death
benefit option selected or, if greater, the Guideline Minimum Death Benefit,
which is Accumulated Value (determined as of the end of the Valuation Period
during which the Survivor dies) multiplied by the Death Benefit Percentage.
The Death Benefit Percentage varies according to the Age of the younger
Insured and will be at least equal to the cash value corridor in Section 7702
of the Internal Revenue Code, which addresses the definition of a life
insurance policy for tax purposes. The Death Benefit Percentage is 250% for an
Insured at Age 40 or under, and it declines for older Insureds. A table
showing the Death Benefit Percentages is in Appendix C to this prospectus and
in the Policy. Under any option, for so long as your Policy remains in force,
the death benefit will never be less than the Face Amount of your Policy and
will always be sufficient to qualify the Policy as life insurance under
Section 7702 of the Internal Revenue Code.
 
  Option A. Under Option A, the death benefit will be equal to the Face Amount
of your Policy.
 
  Option B. Under Option B, the death benefit will be equal to the Face Amount
of your Policy plus the Accumulated Value. The death benefit under Option B
will always vary as Accumulated Value varies.
 
 
                                      15
<PAGE>
 
  Option C. Under Option C, the death benefit will be equal to the Face Amount
of your Policy plus the total premiums paid minus the sum of any partial
withdrawals taken and any other distribution of Accumulated Value.
 
  Option D. Under Option D, the death benefit will be equal to the Face Amount
of the Policy multiplied by a Death Benefit Factor. Death Benefit Factors for
Joint Equal Ages and Policy years, each at 5 year intervals, are shown in
Appendix D; a complete chart is contained in your Policy. Generally, the Death
Benefit Factor is a number from 1.0 to 2.0. The factor that applies to a
Policy varies with the Joint Equal Age of the Insureds and the number of
completed Policy Years, and changes on each Policy Anniversary. Generally, the
Death Benefit Factor will reach the maximum of 2.0 when the sum of the Joint
Equal Age and the number of completed Policy Years is between 85 and 90, so
that the minimum death benefit at that time would be equal to twice the amount
of the Face Amount.
 
  Choosing Among the Options. Options A through D are intended to provide
flexibility in the amount of insurance protection provided under a Policy.
Option A provides for the smallest amount of insurance protection, in that the
death benefit is equal to the Face Amount (assuming that the Guideline Minimum
Death Benefit is not greater than the Face Amount). Under this option,
favorable investment performance will be reflected in increasing Accumulated
Value rather than insurance protection. Options B and C provide for a greater
degree of insurance protection, in that the death benefit under Option B
includes Accumulated Value, and the benefit under Option C includes the amount
of premiums paid minus withdrawals and any other distributions of Accumulated
Value. As between Options B and C, the death benefit under Option B will
reflect the value of growth in Accumulated Value due to performance, and
Option C will not (assuming that Guideline Minimum Death Benefit is not
greater than the death benefit otherwise determined). Option D provides some
assurance that the death benefit will increase gradually over time without
regard to the investment performance of the Investment Options.
 
                                      16
<PAGE>
 
  Examples of Death Benefit Options. The following examples demonstrate the
determination of death benefits under Options A through D. The examples show
eight hypothetical Policies, each with a Face Amount of $1,000,000 and where
the two Insureds are male and female nonsmokers, each Age 45 at the time of
issue, and assuming that there is no outstanding Policy Debt, that no
withdrawals have been taken, and the other assumptions shown below. (The
examples are intended to portray differences in death benefits; Accumulated
Value assumptions may not be realistic.)
 
<TABLE>
<CAPTION>
ASSUMPTIONS                      POLICY I   POLICY II   POLICY III  POLICY IV
- -----------                     ----------  ----------  ----------  ----------
<S>                             <C>         <C>         <C>         <C>
Face Amount.................... $1,000,000  $1,000,000  $1,000,000  $1,000,000
Accumulated Value on Date of
 Death......................... $  600,000  $  900,000  $1,200,000  $1,800,000
Total Premium Paid on Date of
 Death......................... $  300,000  $  400,000  $  500,000  $  700,000
Youngest Age on Date of Death..         65          65          65          65
Death Benefit Percentage.......        120%        120%        120%        120%
Death Benefit Factor (Option
 D)............................      108.4%      108.4%      108.4%      108.4%
DEATH BENEFITS OPTIONS
- ----------------------
Death Benefit Under Option A... $1,000,000  $1,080,000  $1,440,000  $2,160,000
Death Benefit Under Option B... $1,600,000  $1,900,000  $2,200,000  $2,800,000
Death Benefit Under Option C... $1,300,000  $1,400,000  $1,500,000  $2,160,000
Death Benefit Under Option D... $1,084,000  $1,084,000  $1,440,000  $2,160,000
<CAPTION>
                                                                      POLICY
ASSUMPTIONS                      POLICY V   POLICY VI   POLICY VII     VIII
- -----------                     ----------  ----------  ----------  ----------
<S>                             <C>         <C>         <C>         <C>
Face Amount.................... $1,000,000  $1,000,000  $1,000,000  $1,000,000
Accumulated Value on Date of
 Death......................... $  600,000  $  900,000  $1,200,000  $1,800,000
Total Premium Paid on Date of
 Death......................... $  300,000  $  400,000  $  500,000  $  700,000
Youngest Age on Date of Death..         90          90          90          90
Death Benefit Percentage.......        105%        105%        105%        105%
Death Benefit Factor (Option
 D)............................        200%        200%        200%        200%
DEATH BENEFITS OPTIONS
- ----------------------
Death Benefit Under Option A... $1,000,000  $1,000,000  $1,260,000  $1,890,000
Death Benefit Under Option B... $1,600,000  $1,900,000  $2,200,000  $2,800,000
Death Benefit Under Option C... $1,300,000  $1,400,000  $1,500,000  $1,890,000
Death Benefit Under Option D... $2,000,000  $2,000,000  $2,000,000  $2,000,000
</TABLE>
 
  The death benefit shown in these examples is based upon the Guideline
Minimum Death Benefit for the following examples: Policy II, Option A; Policy
III, Options A and D; Policy IV, Options A, C, and D; Policy VII, Option A;
and Policy VIII, Options A and C.
   
  If the death benefit is equal to the Guideline Minimum Death Benefit, we
reserve the right to reduce the death benefit by requiring Partial Withdrawals
be made in order to maintain the net amount at risk at a level that will not
exceed three times the death benefit on the Policy Date. Such Partial
Withdrawals may be taxable to you in whole or in part. See "Federal Income Tax
Considerations." The $25 withdrawal fee will not be assessed on Partial
Withdrawals we require.     
 
  The Policy is intended to qualify as a life insurance contract under the
Internal Revenue Code for Federal tax purposes, and the death benefit under
the Policy is intended to qualify for the income tax exclusion under the
Internal Revenue Code. Unless otherwise specified by you in writing, it is
intended that the Policy will not be treated as a modified endowment contract
under the Internal Revenue Code. To these ends, the provisions of the Policy,
including any other Rider, Benefit, or endorsement, are to be interpreted to
ensure such tax qualification and to prevent the Policy from being treated as
a modified endowment contract, notwithstanding any other provisions to the
contrary.
 
  If at any time the premiums paid under your Policy exceed the amount
allowable for such tax qualification, such excess amount shall be removed from
the Policy as of the date of its payment, and any appropriate adjustment in
the death benefit shall be made as of such date. The excess amount shall be
refunded to you no later than 60 days after the end of the applicable Policy
Year. The excess amount removed from the Policy and refunded to you may be
adjusted for interest or for changes in Accumulated Value attributable to the
excess amount. If for some reason this excess amount is not refunded by then,
the death benefit under this Policy shall
 
                                      17
<PAGE>
 
be increased retroactively and prospectively so that at no time is the death
benefit ever less than the amount needed to ensure such tax qualification. To
the extent that the death benefit as of any time is increased by this
provision, appropriate adjustments shall be made retroactively in any cost of
insurance or supplemental benefits as of that time that are consistent with
such an increase.
 
  If at any time the premiums or other amounts paid under the Policy exceed
the limit for avoiding modified endowment contract treatment, and you have not
specified in writing that such treatment is acceptable to you, such excess
amount shall be removed from the Policy as of the date of its payment, and any
appropriate adjustment in the Policy's death benefit shall be made as of such
date. This excess amount shall be refunded to you no later than 60 days after
the end of the applicable Policy Year. The excess amount removed from the
Policy and refunded to you may be adjusted for interest or for changes in
Accumulated Value attributable to the excess amount. If this excess amount is
not refunded by then, the death benefit under your Policy shall be increased
retroactively and prospectively to the minimum amount necessary so that at no
time is the death benefit ever less than the amount needed to avoid modified
endowment contract treatment. To the extent the death benefit as of any time
is increased by this provision, appropriate adjustments shall be made,
retroactively or otherwise, in any cost of insurance or supplemental benefits
as of that time that are consistent with such an increase.
 
  All calculations of death benefit will be made as of the end of the
Valuation Period during which the Survivor dies. We will pay interest on death
benefit proceeds from the date of the Survivor's death to the date of payment
at an annual rate of not less than 4% or if higher, the interest rate required
by state law. Death benefit proceeds may be paid to the Beneficiary in a lump
sum or under a payment plan offered under the Policy. Your Policy should be
consulted for details.
 
CHANGES IN DEATH BENEFIT OPTION
 
  After the fifth Policy Year, you may request that the death benefit option
under your Policy be changed to Option A or B. Changes to Option C or D will
not be available. Changes in the death benefit option may be made only once
per Policy Year and should be made in writing to our Home Office. The
effective date of any such change shall be the next Monthly Payment Date on or
next following the date we receive your written request at our Home Office.
 
  A change in the death benefit under a Policy will result in a change in the
Face Amount of the Policy so that the death benefit under the new death
benefit option will equal the death benefit under the former option
immediately prior to the change. From that point on, the change in option will
affect the determination of the death benefit. In addition, a change in death
benefit option may affect the monthly cost of insurance charge since this
charge varies with the net amount at risk, which generally is the amount by
which the death benefit exceeds Accumulated Value. A change will not be
permitted if it would result in a Face Amount of less than $100,000, although
we reserve the right to waive this minimum under certain circumstances.
 
  Unless otherwise specified by you in writing, any request for a death
benefit option change will not be accepted by us if the option change would
cause your Policy to be treated as a modified endowment contract.
 
DECREASE IN FACE AMOUNT
 
  You may request a decrease in the Face Amount under your Policy subject to
approval from us. A decrease in Face Amount may only be made once per Policy
Year and only after the first Policy Year. Decreasing the Face Amount could
decrease the death benefit. The amount of change in the death benefit will
depend, among other things, upon the death benefit option chosen by you and
whether, and the degree to which, the death benefit under your Policy exceeds
the Face Amount prior to the change. Changing the Face Amount could affect the
subsequent level of the death benefit while your Policy is in force and the
subsequent level of Policy values. A decrease in Face Amount may decrease the
net amount at risk, which may decrease your cost of insurance charge.
 
 
                                      18
<PAGE>
 
  Any request for a decrease in Face Amount must be made by written
application to our Home Office. It will become effective on the Monthly
Payment Date on or next following the date we receive your written request at
our Home Office.
 
  A decrease will not be permitted if the Face Amount would fall below
$100,000, although we reserve the right to waive the minimum Face Amount under
certain circumstances, such as for group or sponsored arrangements. A decrease
in Face Amount during the first ten Policy Years will result in surrender
charges being deducted from the Accumulated Value. See "Surrender Charges". If
a decrease in the Face Amount would result in total premiums paid exceeding
the premium limitations prescribed under tax law to qualify your Policy as a
life insurance contract, we may refund to you the amount of such excess above
the premium limitations.
 
  We reserve the right to disallow a requested decrease, and will not permit a
requested decrease, among other reasons, (1) if compliance with the guideline
premium limitations under tax law resulting from the requested decrease would
result in immediate termination of your Policy, (2) if, to effect the
requested decrease, payments to you would have to be made from Accumulated
Value for compliance with the guideline premium limitations, and the amount of
such payments would exceed the Net Cash Surrender Value under your Policy, or
(3) if the decrease would cause your Policy to be treated as a modified
endowment contract and you have not specified in writing that such treatment
is acceptable to you.
 
POLICY VALUES
 
  Accumulated Value. The Accumulated Value is the sum of the amounts under the
Policy held in each Investment Option, as well as the amount set aside in our
Loan Account to secure any Policy Debt.
 
  On each Valuation Date, the portion of your Accumulated Value allocated to
any particular Variable Account will be adjusted to reflect the investment
experience of that Variable Account. On each Monthly Payment Date, the portion
of the Accumulated Value allocated to a particular Investment Option also will
be adjusted to reflect the assessment of the monthly deduction. See
"Determination of Accumulated Value". No minimum amount of Accumulated Value
is guaranteed. You bear the risk for the investment experience of Accumulated
Value allocated to the Variable Accounts.
 
  Cash Surrender Value. The Cash Surrender Value of your Policy equals the
Accumulated Value less the surrender charge. Thus, the Accumulated Value will
exceed your Policy's Cash Surrender Value by the amount of the surrender
charge. Once the surrender charge has expired, the Accumulated Value will
equal the Cash Surrender Value.
 
  Net Cash Surrender Value. The Net Cash Surrender Value of your Policy equals
the Cash Surrender Value less any outstanding Policy Debt. You can surrender
your Policy at any time while either Insured is living and receive its Net
Cash Surrender Value. See "Surrender".
 
DETERMINATION OF ACCUMULATED VALUE
 
  Although the death benefit under your Policy can never be less than the
Policy's Face Amount, your Accumulated Value will vary to a degree that
depends upon several factors, including investment performance of the Variable
Accounts to which Accumulated Value has been allocated, payment of premiums,
the amount of any outstanding Policy Debt, Partial Withdrawals, and the
charges assessed in connection with your Policy. There is no guaranteed
minimum Accumulated Value, and you bear the entire investment risk relating to
the investment performance of Accumulated Value allocated to the Variable
Accounts.
 
  The amounts allocated to the Variable Accounts will be invested in shares of
the corresponding Portfolio of the Fund. The investment performance of the
Variable Accounts will reflect increases or decreases in the net asset value
per share of the corresponding Portfolio and any dividends or distributions
declared by a Portfolio. Any dividends or distributions from any Portfolio of
the Fund will be automatically reinvested in shares of the same Portfolio,
unless we, on behalf of the Separate Account, elect otherwise.
 
                                      19
<PAGE>
 
  Assets in the Variable Accounts are divided into accumulation units, which
are a measure of value used for bookkeeping purposes. When you allocate net
premiums to a Variable Account, the Policy is credited with accumulation
units. In addition, other transactions including loans, a surrender, Partial
Withdrawals, transfers, and assessment of charges against your Policy affect
the number of accumulation units credited to your Policy. The number of units
credited or debited in connection with any such transaction is determined by
dividing the dollar amount of such transaction by the unit value of the
affected Variable Account. The unit value of each Variable Account is
determined on each Valuation Date. The number of units credited will not
change because of subsequent changes in unit value.
 
  The accumulation unit value of each Variable Account's unit initially was
$10. The unit value of a Variable Account on any Valuation Date is calculated
by adjusting the unit value from the previous Valuation Date for (1) the
investment performance of the Variable Account, which is based upon the
investment performance of the corresponding Portfolio of the Fund, (2) any
dividends or distributions paid by the corresponding Portfolio, and (3) the
charges, if any, that may be assessed by us for income taxes attributable to
the operation of the Variable Account.
 
POLICY LOANS
 
  You may borrow money from us using your Policy as the only security for the
loan by submitting a proper written request to our Home Office. We may in our
discretion permit loans to be made by telephone if a properly completed
Authorization For Telephone Requests has been filed at our Home Office. A loan
may be taken any time your Policy is in force. The minimum loan that can be
taken at any time is $500 ($200 in Connecticut, $250 in Oregon). The maximum
amount that can be borrowed at any time is the greater of (1) 100% of your
Accumulated Value in the Fixed Account plus 90% of your Accumulated Value in
the Variable Accounts, less any surrender charges that would have been imposed
if the Policy were surrendered on the date the loan is taken, or (2) 100% of
the product of (a X b/c - d) where (a) equals the Policy's Accumulated Value
less any surrender charge that would be imposed if the Policy were surrendered
on the date the loan is taken and less 12 times the current monthly deduction;
(b) equals 1 plus the annual loan interest rate credited; (c) equals 1 plus
the annual loan interest rate currently charged; and (d) equals any existing
Policy Debt.
 
  When you take a loan, an amount equal to the loan is transferred out of your
Accumulated Value in the Investment Options into the Loan Account to secure
the loan. Unless you request otherwise, loan amounts will be deducted from the
Investment Options in the proportion that each bears to your Accumulated Value
less Policy Debt.
 
  The Policy loan interest rate is 4.50% for years one through ten, and 4.25%
thereafter. We will credit interest monthly on amounts held in the Loan
Account to secure the loan at an annual effective rate of 4.00%.
 
  You may repay all or part of the loan at any time while your Policy is in
force. Interest on a loan is accrued daily and is due for the prior year on
each Policy Anniversary. If interest is not paid when due, it will be added to
the amount of the loan principal and interest will begin accruing thereon from
that date. An amount equal to the loan interest charged will be transferred to
the Loan Account from the Investment Options on a proportional basis.
 
  Unless you request otherwise, any loan repayment will be transferred into
the Investment Options in accordance with the most recent premium allocation
instructions. In addition, on each Policy Anniversary any interest earned on
the loan balance held in the Loan Account will be transferred to each of the
Investment Options in accordance with your most recent premium allocation
instructions. Any payment we receive from you while you have a loan
outstanding will be first considered a premium payment, unless you tell us in
writing it is a loan repayment.
 
  While the amount to secure the loan is held in the Loan Account, you forgo
the investment experience of the Variable Accounts and the current interest
rate of the Fixed Account on the loaned amount. Thus a loan, whether or not
repaid, will have a permanent effect on your Policy's values and might have an
effect on the amount and duration of the death benefit. If not repaid, the
Policy Debt will be deducted from the amount of
 
                                      20
<PAGE>
 
death benefit upon the death of the Survivor, the Cash Surrender Value upon
surrender, or the refund of premium upon exercise of the Free-Look Right.
 
  A loan may affect the length of time your Policy remains in force. Your
Policy will lapse when Accumulated Value minus Policy Debt is insufficient to
cover the monthly deduction against your Policy's Accumulated Value on any
Monthly Payment Date and the minimum payment required is not made during the
grace period. Moreover, your Policy may enter the grace period more quickly
when a loan is outstanding, because the loaned amount is not available to
cover the monthly deduction. Additional payments or repayment of a portion of
Policy Debt may be required to keep your Policy in force. See "Lapse".
 
  A loan will not be treated as a distribution from your Policy and will not
result in taxable income to you unless your Policy is a modified endowment
contract, in which case a loan will be treated as a distribution that may give
rise to taxable income.
 
  For information on the tax treatment of loans, see "Federal Income Tax
Considerations".
 
SURRENDER
 
  You may fully surrender your Policy at any time during the life of either
Insured. The amount received in the event of a full surrender is your Policy's
Net Cash Surrender Value, which is equal to its Accumulated Value less any
applicable surrender charge and less any outstanding Policy Debt.
 
  You may surrender your Policy by sending a written request together with
your Policy to our Home Office. The proceeds will be determined as of the end
of the Valuation Period during which the request for a surrender is received.
You may elect to have the proceeds paid in cash or applied under a payment
plan offered under the Policy. See "Payment Plan". For information on the tax
effects of a surrender of a Policy, see "Federal Income Tax Considerations".
 
PARTIAL WITHDRAWALS
 
  A Policy Owner may make Partial Withdrawals of Net Cash Surrender Value
starting on the first Policy Anniversary. The portion of the first Partial
Withdrawal in each of the first 15 Policy Years of up to the lesser of $10,000
or 10% of the Cash Surrender Value will not reduce the Face Amount under your
Policy. The excess of any Partial Withdrawal over this amount may cause a
reduction in Face Amount if the death benefit option is Option A or D, as
described below.
 
  Partial Withdrawals must be for at least $500, and your Policy's Net Cash
Surrender Value after the withdrawal must be at least $500. If there is any
Policy Debt, the maximum Partial Withdrawal is limited to the excess, if any,
of your Cash Surrender Value immediately prior to the withdrawal over the
result of the Policy Debt divided by 90%. If you do not make a Partial
Withdrawal during one of the first 15 Policy Years, the amount that you could
have withdrawn without affecting Face Amount does not carry over in the
following year.
 
  You may make a Partial Withdrawal by submitting a proper written request to
our Home Office. As of the effective date of any withdrawal, your Accumulated
Value, Cash Surrender Value, and Net Cash Surrender Value will be reduced by
the amount of the withdrawal. The amount of the withdrawal will be allocated
proportionately to your Accumulated Value in the Investment Options unless you
request otherwise. If the Survivor dies after the request for a withdrawal is
sent to us and prior to the withdrawal being effected, the amount of the
withdrawal will be deducted from the death benefit proceeds, which will be
determined without taking into account the withdrawal. A withdrawal fee of $25
will be charged for a Partial Withdrawal. (See "Charges and Deductions.")
 
  Except as noted above, when a Partial Withdrawal is made on a Policy on
which you have selected death benefit Option A or D, the Face Amount under
your Policy is decreased by the excess, if any, of the Face Amount over the
result of the death benefit immediately prior to the Partial Withdrawal minus
the amount of the Partial Withdrawal. A Partial Withdrawal will not change the
Face Amount of your Policy if you have selected death benefit Option B or C.
However, assuming that the death benefit is not equal to the Guideline Minimum
Death
 
                                      21
<PAGE>
 
Benefit, the Partial Withdrawal will reduce the death benefit by the amount of
the Partial Withdrawal. To the extent the death benefit is the Guideline
Minimum Death Benefit, a Partial Withdrawal may cause the death benefit to
decrease by an amount greater than the amount of the Partial Withdrawal. See
"Death Benefit".
 
  Unless otherwise specified by you in writing, no Partial Withdrawal request
will be accepted by us if the Partial Withdrawal would cause your Policy to be
treated as a modified endowment contract.
 
  For information on the tax treatment of Partial Withdrawals, see "Federal
Income Tax Considerations".
 
RIGHT TO EXAMINE A POLICY--FREE-LOOK RIGHT
 
  You have a Free-Look Right, under which your Policy may be returned within
10 days after you receive it (15 days in Colorado; 20 days in North Dakota;
and 30 days if you are a resident of California and are age 60 or older), or
within 45 days after you complete the application for insurance, whichever is
later. However, in Pennsylvania, you have a different Free-Look Right, under
which your Policy may be returned only within 10 days after you receive it.
For this purpose, your application is considered complete when you sign it. It
can be mailed or delivered to us or our agent. The returned Policy will be
treated as if we never issued it, except as indicated below, and we will
refund any charges deducted from premiums received, any net premium allocated
to the Fixed Account, plus the sum of your Accumulated Value allocated to the
Variable Accounts plus any Policy Charges and Fees deducted from your
Accumulated Value in the Variable Accounts. If you reside in a state that
requires us to return premium payments to Policy Owners who exercise the Free-
Look Right, we will refund the amount of the premium paid. If you have taken a
loan during the Free-Look Period, the Policy Debt will be deducted from the
amount refunded. When the application is approved and the Policy is issued,
net premiums will be allocated according to your instructions, unless the
Policy is sold to a resident of a state that requires a refund of premium, in
which case, until the Free-Look Transfer Date, net premiums received by us
will be allocated to the Money Market Variable Account (except for amounts
allocated to the Loan Account to secure a Policy loan). See "Allocation of Net
Premiums".
 
LAPSE
 
  Your Policy will remain in force until the earliest of the death of the
Survivor or a full surrender of your Policy, unless before either of these
events, Accumulated Value less Policy Debt is insufficient to pay the current
monthly deduction on a Monthly Payment Date and a grace period expires without
sufficient additional premium payment or loan repayment by your Policy Owner.
If your Accumulated Value less Policy Debt is insufficient to cover the
current monthly deduction on a Monthly Payment Date, you must pay during the
grace period a minimum of three times the full monthly deduction due on the
Monthly Payment Date when the insufficiency occurred to avoid termination of
your Policy. We will not accept any payment if it would cause your total
premium payments to exceed the maximum permissible premium for your Policy's
Face Amount under the Internal Revenue Code. This is unlikely to occur unless
you have outstanding Policy Debt, in which case you could repay a sufficient
portion of the Policy Debt to avoid termination. In this instance, you may
wish to repay a portion of Policy Debt to avoid recurrence of the potential
lapse. If premium payments have not exceeded the maximum permissible premiums
for your Policy's Face Amount, you may wish to make larger or more frequent
premium payments to avoid recurrence of the potential lapse.
 
  If your Accumulated Value less Policy Debt is insufficient to cover the
monthly deduction on a Monthly Payment Date, we will deduct the amount that is
available. We will notify you (and any assignee of record) of the payment
required to keep your Policy in force. You will then have a "grace period" of
61 days, measured from the date the notice is sent, to make the required
payment. Your Policy will remain in force through the grace period. Failure to
make the required payment within the grace period will result in termination
of coverage under your Policy, and your Policy will lapse with no value. If
the required payment is made during the grace period, any premium paid will be
allocated among the Investment Options in accordance with your current premium
allocation instructions. Any monthly deduction due will be charged to the
Investment Options on a proportionate basis. If the Survivor dies during the
grace period, the death benefit proceeds will equal the amount of the death
benefit immediately prior to the commencement of the grace period, reduced by
any unpaid monthly deductions and any Policy Debt.
 
                                      22
<PAGE>
 
REINSTATEMENT
 
  We will reinstate a lapsed Policy (but not a Policy which has been
surrendered for its Net Cash Surrender Value) at any time within five years
after the end of the grace period provided we receive the following: (1) a
written application from the Policy Owner; (2) evidence of insurability
satisfactory to us for each Insured; and (3) payment of all monthly deductions
that were due and unpaid during the grace period, and payment of a premium at
least sufficient to keep the Policy in force for three months after the date
of reinstatement.
 
  When your Policy is reinstated, the Accumulated Value will be equal to your
Accumulated Value on the date of the lapse subject to the following: If your
Policy is reinstated after the first Monthly Payment Date following lapse, the
Accumulated Value will be reduced by the amount of Policy Debt on the date of
lapse and no Policy Debt will exist on the date of the reinstatement. If your
Policy is reinstated on the Monthly Payment Date next following lapse, any
Policy Debt on the date of lapse will also be reinstated. No interest on
amounts held in our Loan Account to secure Policy Debt will be paid or
credited between lapse and reinstatement. Reinstatement will be effective as
of the Monthly Payment Date on or next following the date of approval by us,
and Accumulated Value minus, if applicable, Policy Debt will be allocated
among the Investment Options in accordance with your most recent premium
allocation instructions.
 
                            CHARGES AND DEDUCTIONS
 
PREMIUM LOAD
 
  A premium load is deducted from each premium payment under a Policy prior to
allocation of the net premium to the Policy Owner's Accumulated Value. The
premium load consists of the following items:
 
    Sales Load. The sales load is equal to 5% of each premium paid during the
  first ten Policy Years and 3% of each premium paid thereafter.
 
    The sales load is deducted to compensate us for the cost of distributing
  the Policies. The amount derived by us from the sales load is not expected
  to be sufficient to cover the sales and distribution expenses in connection
  with the Policies. If surrendered within 10 years after issuance, the
  Policy will also be subject to a sales surrender charge, which is described
  in "Surrender Charge". To the extent that sales and distribution expenses
  exceed sales loads and any amounts derived from the sales surrender charge,
  such expenses may be recovered from other charges, including amounts
  derived from the charge for mortality and expense risks and from mortality
  gains.
 
    We may reduce or waive the sales load on Policies sold to our directors
  or employees or any of our affiliates or to trustees or any employees of
  the Fund.
 
    State and Local Premium Tax Charge. A charge equal to 2.35% is assessed
  against each premium to pay applicable state and local premium taxes.
  Premium taxes vary from state to state, and in some instances, among
  municipalities. The 2.35% rate approximates the average tax rate expected
  to be paid on premiums from all states. Premium taxes vary from state to
  state, and in some instances, among municipalities. We reserve the right to
  change the premium tax charge to reflect any changes in the law. We do not
  expect to profit from this charge.
 
    Federal Tax Charge. A charge equal to 1.50% is assessed against each
  premium to pay applicable Federal Tax. We reserve the right to change the
  Federal Tax charge to reflect any changes in the law.
 
DEDUCTIONS FROM ACCUMULATED VALUE
   
  A charge called the monthly deduction is deducted from a Policy's
Accumulated Value in the Investment Options beginning on the Monthly Payment
Date on or next following the date we first become obligated under the Policy
and on each Monthly Payment Date thereafter. Unless you request otherwise, the
monthly deduction will be deducted from the Investment Options on a prorata
basis. The monthly deduction consists of the following items:     
 
  Cost of Insurance. This monthly charge compensates us for the anticipated
cost of paying death benefits in excess of Accumulated Value to Beneficiaries
of joint Insureds who die. The amount of the charge is equal to a current cost
of insurance rate multiplied by the net amount at risk under a Policy at the
beginning of the Policy Month. We may use any profit we derive from this
charge for any lawful purpose, including the cost of claims processing and
investigation. The net amount at risk for these purposes is equal to the
amount of death benefit
 
                                      23
<PAGE>
 
payable at the beginning of the Policy Month divided by 1.00327374 (a discount
factor to account for return deemed to be earned during the month) less the
Accumulated Value at the beginning of the Policy Month.
 
  Each Policy contains guaranteed cost of insurance rates that may not be
increased. The guaranteed rates are intended to reflect the insurance risk
associated with joint Insureds. They are based on certain of the 1980
Commissioners Standard Ordinary Mortality Tables (and where unisex cost of
insurance rates apply, the 1980 Commissioners Ordinary Mortality Table B), and
the Ages, gender (where permissible), and underwriting classes of the
Insureds. The guaranteed cost of insurance rates are set equal to zero
starting at the Policy Anniversary where the younger Insured reaches age 100,
and will remain zero from that point on. As of the date of this prospectus, we
charge "current rates" that are lower (i.e., less expensive) than the
guaranteed rates, and we may also charge current rates in the future. Like the
guaranteed rates, the current rates also vary with the Ages, gender (where
permissible), and underwriting classes of the Insureds. They also vary with
the number of completed Policy Years. The cost of insurance rates generally
increase with the Ages of the Insureds.
 
  Administrative Charge. A monthly administrative charge is deducted equal to
$16 in each of the first 60 Policy Months and $6 per month thereafter. The
administrative charge is assessed to reimburse us for the expenses associated
with administration and maintenance of the Policies. The administrative charge
is guaranteed never to exceed $16 during the first 60 Policy Months and $6 per
month thereafter. We do not expect to profit from this charge.
 
  The monthly administrative charges will be waived on the second or
subsequent Policies acquired by you on the lives of the Insureds who are the
same Insureds as on your initial Policy, and that Policy is in force. However,
we deduct $200 from the initial premium to cover processing costs.
 
  Mortality and Expense Risk Charge. A monthly charge is deducted for
mortality and expense risks assumed by us. The mortality and expense risk
charge consists of two components: a Face Amount Component and an Accumulated
Value Component.
 
  During the first ten Policy Years, the Face Amount Component will be
assessed at a rate determined with reference to the initial Face Amount of the
Policy. The rate will be equal to a Face Amount Component Factor per $1,000 of
initial Face Amount. Face Amount Component Factors are shown in Appendix B,
and they are based upon the Joint Equal Age of the Insureds at the Policy
Date. For example, for a Policy where the Joint Equal Age attributable to the
Insureds is 50 on the Policy Date, and where the Face Amount is $100,000, the
Face Amount Component Factor would be 0.102, and the monthly Face Amount
Component for the first ten Policy Years would be $10.20. This component is
not assessed after the tenth Policy Year.
 
  In addition, a monthly Accumulated Value Component is assessed at an annual
rate equal to .30% of Accumulated Value during the first twenty Policy Years
and .10% of Accumulated Value thereafter. For purposes of this component, the
Accumulated Value is based upon its value on the Monthly Payment Date after
the deduction of the cost of insurance charge and charges for any optional
insurance Riders or Benefits added.
   
  The mortality and expense risk charge is assessed to compensate us for
assuming certain mortality and expense risks under the Policies. The mortality
risk assumed is that Insureds, as a group, may live for a shorter period of
time than estimated and, therefore, the cost of insurance charges specified in
the Policy will be insufficient to meet actual claims. The expense risk
assumed is that other expenses incurred in issuing and administering the
Policies and operating the Separate Account will be greater than the charges
assessed for such expenses. We will realize a gain from this charge to the
extent it is not needed to provide the mortality benefits and expenses under
the Policies, and will realize a loss to the extent the charge is not
sufficient. We may use any profit derived from this charge for any lawful
purpose, including any distribution expenses not covered by the sales load or
sales surrender charge. See "Surrender Charge" below.     
 
  Optional Insurance Benefits Charges. The monthly deduction will include
charges for any optional insurance Riders or Benefits added to the Policy. See
"Optional Insurance Benefits".
 
 
                                      24
<PAGE>
 
SURRENDER CHARGE
 
  We will assess a Surrender Charge against Accumulated Value upon surrender
of a Policy within ten years after its issuance. The Surrender Charge consists
of two charges: an underwriting surrender charge and a sales surrender charge.
 
  Underwriting Surrender Charge. The underwriting surrender charge will be
assessed at a rate determined with reference to the Joint Equal Age of the
Insureds on the Policy Date for each $1,000 of a Policy's initial Face Amount
in accordance with the schedule shown in Appendix A.
 
  The amount of the charge remains level for the first Policy Year. After the
first Policy Anniversary, the charge decreases by 0.9259% per month until it
reaches zero at the end of the 120th Policy Month.
 
  The charge is based upon the Joint Equal Age of the Insureds and the Face
Amount on the Policy Date, and it does not increase as the Insureds get older
or with increases in the Face Amount. For example, if Insureds of Joint Equal
Age 50 purchase a Policy with an initial Face Amount of $100,000 and surrender
the Policy at the end of the third Policy Year, the underwriting surrender
charge would be $404.45.
 
  The underwriting surrender charge is designed to cover the administrative
expenses associated with underwriting and issuing a Policy, including the
costs of processing applications, conducting medical examinations, determining
insurability and the Insureds' underwriting class, and establishing policy
records. We do not expect to profit from the underwriting surrender charge.
 
  Sales Surrender Charge. During the first Policy Year, the sales surrender
charge is equal to 25% of the lesser of the premiums paid under the Policy or
of the Sales Surrender Target. The Sales Surrender Target is equal to a
specified amount that varies with the Joint Equal Age of the Insureds for each
$1000 of a Policy's initial Face Amount in accordance with a schedule shown in
Appendix B. After the first Policy Year, the charge as calculated above is
adjusted by a reduction factor. This reduction factor is equal to 99.0741% in
the 13th Policy Month and reduces by 0.9259% per month until it reaches zero
at the end of the 120th Policy Month. The Sales Surrender Target does not
increase as the Insureds get older or with increases in the Face Amount due to
a death benefit option change.
 
  For example, if Insureds of Joint Equal Age 50 purchase a Policy with a Face
Amount of $100,000, the Sales Surrender Target, based upon the assumptions
described above, would be $905. The maximum sales surrender charge during the
first Policy Year would be 25% of this amount, or $226.25.
 
  The purpose of the sales surrender charge is to reimburse us for some of the
expenses of distributing the Policies.
 
  We may reduce or waive the sales surrender charge on Policies sold to our
directors or employees or any of our affiliates or to trustees or any
employees of the Fund.
 
  A Surrender Charge (sales and underwriting) may also be deducted on a
decrease in Face Amount in an amount that reflects, as a fractional amount of
the total Surrender Charge that would be applied if the Policy were fully
surrendered, the amount of the decrease relative to the Face Amount
immediately prior to the decrease. Such a Surrender Charge will reduce the
Accumulated Value and will be allocated proportionately to the Accumulated
Value in the Investment Options. After the decrease, the total Surrender
Charge is reduced. The new total Surrender Charge will be determined by
dividing the Face Amount after the decrease by the Face Amount immediately
prior to the decrease and multiplying the result by the total Surrender Charge
that would have applied based on the Face Amount before the decrease.
 
WITHDRAWAL CHARGE
 
  A withdrawal fee of $25 will be deducted proportionately from the
Accumulated Value in the Investment Options each time a Partial Withdrawal
occurs.
 
                                      25
<PAGE>
 
CORPORATE PURCHASERS
 
  The Policy is available for individuals and for corporations and other
institutions. For corporations or other group or sponsored arrangements
purchasing one or more Policies, we may reduce the amount of the sales
surrender charge, underwriting surrender charge, or other charges where the
expenses associated with the sale of the Policy or Policies or the
underwriting or other administrative costs associated with the Policy or
Policies are reduced. Sales, underwriting or other administrative expenses may
be reduced, for reasons such as expected economies resulting from a corporate
purchase or a group or sponsored arrangements, from the amount of the initial
premium payment or payments, or the amount of projected premium payments.
 
OTHER CHARGES
 
  We will bear the direct operating expenses of the Separate Account. Each
Variable Account available to you purchases shares of the corresponding
Portfolio of the underlying Fund. The Fund and each of its Portfolios incur
certain charges, including the investment advisory fee, and certain operating
expenses. The Fund is governed by its Board of Trustees. The 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 "Summary of the Policy: Fund Annual Expenses After Expense
Limitation" and in the prospectus of the Fund.
 
GUARANTEE OF CERTAIN CHARGES
 
  We guarantee that certain charges will not increase. This includes the
charge for mortality and expense risks, the administrative charge with respect
to the guaranteed rates described above, the premium load, the guaranteed cost
of insurance rates, and the surrender charge.
 
                               OTHER INFORMATION
 
FEDERAL INCOME TAX CONSIDERATIONS
 
  The following discussion provides a general description of the federal
income tax considerations relating to the Policy. This discussion is based
upon our understanding of the present federal income tax laws as they are
currently interpreted by the Internal Revenue Service ("IRS"). This discussion
is not intended as tax advice. Because of the inherent complexity of such laws
and the fact that tax results will vary according to the particular
circumstances of the individual involved, tax advice may be needed by a person
contemplating the purchase of the Policy. It should, therefore, be understood
that these comments concerning federal income tax consequences are not an
exhaustive discussion of all tax questions that might arise under the Policy
and that special rules which are not discussed herein may apply in certain
situations. Moreover, no representation is made as to the likelihood of
continuation of federal income tax or estate or gift tax laws or of the
current interpretations by the IRS or the courts. Future legislation may
adversely affect the tax treatment of life insurance policies or other tax
rules described in this discussion or that relate directly or indirectly to
life insurance policies. Finally, these comments do not take into account any
state or local income tax considerations which may be involved in the purchase
of the Policy.
 
  While we believe that the Policy meets the statutory definition of life
insurance under Section 7702 of the Internal Revenue Code ("IRC") and hence
will receive federal income tax treatment consistent with that of traditional
fixed life insurance, the area of the tax law relating to the definition of
life insurance does not explicitly address all relevant issues (including, for
example, the treatment of substandard risk policies, policies with term
insurance on the Insureds, and certain tax requirements relating to joint
survivorship life insurance policies). We reserve the right to make changes to
the Policy if changes are deemed appropriate by us to attempt to assure
qualification of the Policy as a life insurance contract. If a Policy were
determined not to qualify as life insurance, the Policy would not provide the
tax advantages normally provided by life insurance. The discussion below
summarizes the tax treatment of life insurance contracts.
 
  The death benefit under a Policy should be excludable from the gross income
of the Beneficiary (whether the Beneficiary is a corporation, individual or
other entity) under IRC Section 101(a)(1) for purposes of the
 
                                      26
<PAGE>
 
regular federal income tax and you generally should not be deemed to be in
constructive receipt of the cash values, including increments thereof, under
the Policy until a full surrender thereof or a Partial Withdrawal. In
addition, certain Policy loans may be taxable in the case of Policies that are
modified endowment contracts. PROSPECTIVE POLICY OWNERS THAT INTEND TO USE
POLICIES TO FUND DEFERRED COMPENSATION ARRANGEMENTS FOR THEIR EMPLOYEES ARE
URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF
SUCH ARRANGEMENTS. PROSPECTIVE CORPORATE OWNERS SHOULD CONSULT THEIR TAX
ADVISORS ABOUT THE TREATMENT OF LIFE INSURANCE IN THEIR PARTICULAR
CIRCUMSTANCES FOR PURPOSES OF THE ALTERNATIVE MINIMUM TAX APPLICABLE TO
CORPORATIONS AND THE ENVIRONMENTAL TAX UNDER IRC SECTION 59A. Changing the
Policy Owner may also have tax consequences. Exchanging a Policy for another
involving the same Insureds generally will not result in the recognition of
gain or loss according to Section 1035(a) of the IRC. Changing the Insureds
under a Policy will, however, not be treated as a tax-free exchange under
Section 1035, but rather as a taxable exchange.
 
  Diversification Requirements. To comply with regulations under Section
817(h) of the IRC, each Portfolio of the Fund is required to diversify its
investments. For details on these diversification requirements, see "What is
the Federal Income Tax Status of the Fund" in the Fund's prospectus.
 
  The IRS has stated in published rulings that a variable contract owner will
be considered the owner of separate account assets if the contract owner
possesses incidents of ownership in those assets, such as the ability to
exercise investment control over the assets. In those circumstances, income
and gains from the separate account assets would be includable in the variable
policy owner's gross income. The Treasury Department also announced, in
connection with the issuance of regulations concerning diversification, that
those regulations "do not provide guidance concerning the circumstances in
which investor control of the investments of a segregated asset account may
cause the investor [i.e., the Policy Owner], rather than the insurance
company, to be treated as the owner of the assets in the account." This
announcement also stated the guidance would be issued by way of regulations or
rulings on the "extent to which policyholders may direct their investments to
particular subaccounts without being treated as owners of the underlying
assets." As of the date of this prospectus, no such guidance has been issued.
 
  The ownership rights under your Policy are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that policy owners were not owners of separate account assets. For
example, you have additional flexibility in allocating premium payments and
Policy values. These differences could result in your being treated as the
owner of your Policy's pro rata portion of the assets of the Separate Account.
In addition, we do not know what standards will be set forth, if any, in the
regulations or ruling which the Treasury Department has stated it expects to
issue. We therefore reserve the right to modify the Policy, as deemed
appropriate by us, to attempt to prevent you from being considered the owner
of your Policy's pro rata share of the assets of the Separate Account.
Moreover, in the event that regulations are adopted or rulings are issued,
there can be no assurance that the Portfolios will be able to operate as
currently described in the Prospectus, or that the Fund will not have to
change any Portfolio's investment objective or investment policies.
 
  Tax Treatment of Policies. IRC Section 7702A defines a class of life
insurance contracts referred to as modified endowment contracts. Under this
provision, the policies will be treated for tax purposes in one of two ways.
Policies that are not classified as modified endowment contracts will be taxed
as conventional life insurance contracts, as described below. Taxation of pre-
death distributions from Policies that are classified as modified endowment
contracts and that are entered into on or after June 21, 1988 is somewhat
different, as described below.
 
  A life insurance contract becomes a "modified endowment contract" if, at any
time during the first seven contract years, the sum of actual premiums paid
exceeds the sum of the "seven-pay premium." Generally, the "seven-pay premium"
is the level annual premium, such that if paid for each of the first seven
years, will fully pay for all future death and endowment benefits under a life
insurance contract. For example, if the "seven-pay premiums" were $1,000, the
maximum premiums that could be paid during the first seven years to avoid
"modified endowment" treatment would be $1,000 in the first year; $2,000
through the first two years and $3,000 through the first three years, etc.
Under this test, a Select Estate Preserver Policy may or may not be a modified
endowment contract, depending on the amount of premiums paid during each of
the Policy's first seven
 
                                      27
<PAGE>
 
contract years. Changes in the Policy, including changes in death benefits,
may require "retesting" of a Policy to determine if it is to be classified as
a modified endowment contract.
 
  Conventional Life Insurance Policies. If a Policy is not a modified
endowment contract, upon full surrender for its Net Cash Surrender Value, the
excess, if any, of the Net Cash Surrender Value plus any outstanding Policy
Debt over the cost basis under a Policy will be treated as ordinary income for
federal income tax purposes. Such a Policy's cost basis will usually equal the
premiums paid less any premiums previously recovered in Partial Withdrawals.
Under IRC Section 7702, if a Partial Withdrawal occurring within 15 years of
the Policy Date is accompanied by a reduction in benefits under the Policy,
special rules apply to determine whether part or all of the cash received is
paid out of the income of the Policy and is taxable. Cash distributed to a
Policy Owner on Partial Withdrawals occurring more than 15 years after the
Policy Date will be taxable as ordinary income to the Policy Owner to the
extent that it exceeds the cost basis under a Policy.
 
  We also believe that loans received under Policies that are not modified
endowment contracts will be treated as indebtedness of the Owner for Federal
income tax purposes, and that no part of any loan under the Policy will
constitute income to the Owner unless the Policy is surrendered or matures or
lapses. CONSULT WITH YOUR TAX ADVISOR ON WHETHER INTEREST PAID (OR ACCRUED BY
AN ACCRUAL BASIS TAXPAYER) ON A LOAN UNDER A POLICY THAT IS NOT A MODIFIED
ENDOWMENT CONTRACT MAY BE DEDUCTIBLE. Tax law provisions may limit the
deduction of interest payable on loan proceeds that are used to purchase or
carry certain life insurance policies.
 
  Modified Endowment Contracts. Pre-death distributions from modified
endowment contracts may give rise to taxable income. Upon full surrender or
maturity of the Policy, the Policy Owner would recognize ordinary income for
federal income tax purposes equal to the amount by which the Net Cash
Surrender Value plus Policy Debt exceeds the investment in the Policy (usually
the premiums paid plus certain pre-death distributions that were taxable less
any premiums previously recovered that were excludable from gross income).
Upon Partial Withdrawals and Policy loans, the Policy Owner would recognize
ordinary income to the extent allocable to income (which includes all
previously non-taxed gains) on the Policy. The amount allocated to income is
the amount by which the Accumulated Value of the Policy exceeds investment in
the Policy immediately before the distribution. If two or more policies which
are classified as modified endowment contracts are purchased from any one
insurance company, including us, during any calendar year, all such policies
will be aggregated for purposes of determining the portion of the pre-death
distributions allocable to income on the policies and the portion allocable to
investment in the policies.
 
  Amounts received under a modified endowment contract that are included in
gross income are subject to an additional tax equal to 10% of the amount
included in gross income, unless an exception applies. The 10% additional tax
does not apply to any amount received: (i) when the taxpayer is at least 59
1/2 years old; (ii) which is attributable to the taxpayer becoming disabled;
or (iii) which is part of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the taxpayer or the joint lives (or joint life expectancies) of the taxpayer
and his or her beneficiary.
 
  If a Policy was not originally a modified endowment contract but becomes
one, under Treasury Department regulations which are yet to be prescribed,
pre-death distributions received in anticipation of a failure of a Policy to
meet the seven-pay premium test are to be treated as pre-death distributions
from a modified endowment contract (and, therefore, are to be taxable as
described above) even though, at the time of the distribution(s) the Policy
was not yet a modified endowment contract. For this purpose, pursuant to the
IRC, any distribution made within two years before the Policy is classified as
a modified endowment contract shall be treated as being made in anticipation
of the Policy's failing to meet the seven-pay premium test.
 
  It is unclear whether interest paid (or accrued by an accrual basis
taxpayer) on Policy Debt with respect to a modified endowment contract
constitutes interest for federal income tax purposes. CONSULT YOUR TAX
ADVISOR. Tax law provisions may limit the deduction of interest payable on
loan proceeds that are used to purchase or carry certain life insurance
policies.
 
  Reasonableness Requirement for Charges. Another provision of the tax law
deals with allowable charges for mortality costs and other expenses that are
used in making calculations to determine whether a contract
 
                                      28
<PAGE>
 
qualifies as life insurance for federal income tax purposes. For life
insurance policies entered into on or after October 21, 1988, these
calculations must be based upon reasonable mortality charges and other charges
reasonably expected to be actually paid. The Treasury Department has issued
proposed regulations and is expected to promulgate temporary or final
regulations governing reasonableness standards for mortality charges. Under
the proposed regulations, the standards applicable to joint survivor life
insurance policies are not entirely clear. While we believe under IRS
pronouncements currently in effect that the mortality costs and other expenses
used in making calculations to determine whether the Policy qualifies as life
insurance meet the current requirements, complete assurance cannot be given
that the IRS would necessarily agree. It is possible that future regulations
will contain standards that would require us to modify the mortality charges
used for the purposes of the calculations in order to retain the qualification
of the Policy as life insurance for federal income tax purposes, and we
reserve the right to make any such modifications.
 
  Accelerated Living Benefits. An Accelerated Living Benefit Rider is
available in connection with the Policy. Benefits under the Accelerated Living
Benefit Rider may be taxable. The Internal Revenue Service has issued proposed
regulations and is expected to issue final regulations in the near future
under which accelerated living benefits that meet the requirements set forth
in the regulations can be received without incurring a Federal income tax. The
precise requirements which will be incorporated in the final regulations are
not known.
 
  In some cases, there may be a question as to whether a life insurance policy
that has an accelerated living benefit rider can meet certain technical
aspects of the definition of "life insurance contract" under the Code. The IRS
regulations mentioned above are expected to set forth the requirements under
which a policy with an accelerated living benefits rider will be deemed to
meet the definitional requirements of a life insurance contract. Pacific
Mutual reserves the right to (but is not obligated to) modify the Rider to
conform with requirements under the final regulations. OWNERS CONSIDERING
ADDING AN ACCELERATED LIVING BENEFIT RIDER OR EXERCISING RIGHTS UNDER THE
RIDER SHOULD FIRST CONSULT A QUALIFIED TAX ADVISOR.
 
  Split Policy Option Rider. This Rider permits a Policy to be split into two
individual policies. A Policy split could have adverse tax consequences. For
example, it is not clear whether a Policy split will be treated as a
nontaxable exchange under IRC Section 1031 through 1043. If a Policy split is
not treated as a nontaxable exchange, a split could result in the recognition
of taxable income in an amount up to any gain in the Policy at the time of the
split. OWNERS CONSIDERING ADDING A SPLIT POLICY OPTION RIDER OR EXERCISING
RIGHTS UNDER THIS RIDER SHOULD FIRST CONSULT A QUALIFIED TAX ADVISER.
 
  Other. Federal estate and gift and state and local estate, inheritance, and
other tax consequences of ownership or receipt of Policy proceeds depend on
the jurisdiction and the circumstances of each Owner or Beneficiary.
 
  FOR COMPLETE INFORMATION ON FEDERAL, STATE, LOCAL AND OTHER TAX
CONSIDERATIONS, A QUALIFIED TAX ADVISER SHOULD BE CONSULTED.
 
  WE DO NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF ANY POLICY.
 
CHARGE FOR OUR INCOME TAXES
 
  For federal income tax purposes, variable life insurance generally is
treated in a manner consistent with traditional fixed life insurance. We will
review the question of the charge to the Separate Account for our federal
income taxes periodically. A charge may be made for any federal income taxes
incurred by us that are attributable to the Separate Account or to our
operations with respect to the Policy. A charge might become necessary if our
tax treatment is ultimately determined to be other than what we currently
believe it to be, if there are changes made in the federal income tax
treatment of variable life insurance at the insurance company level, or if
there is a change in our tax status.
 
  Under current laws, we may incur state and local taxes (in addition to
premium taxes) in several states. At present, these taxes are not significant.
If there is a material change in applicable state or local tax laws, we
reserve the right to charge the Account for such taxes, if any, attributable
to the Account.
 
                                      29
<PAGE>
 
VOTING OF FUND SHARES
 
  In accordance with our view of present applicable law, we will exercise
voting rights attributable to the shares of each Portfolio of the Fund held in
the Variable Accounts at any regular and special meetings of the shareholders
of the Fund on matters requiring shareholder voting under the Investment
Company Act of 1940 or by the Fund. We will exercise these voting rights based
on instructions received from persons having the voting interest in
corresponding Variable Accounts of the Separate Account. However, if the
Investment Company Act of 1940 or any regulations thereunder should be
amended, or if the present interpretation thereof should change, and as a
result we determine that we are permitted to vote the shares of the Fund in
our own right, we may elect to do so.
 
  You are the person having the voting interest under a Policy. Unless
otherwise required by applicable law, the number of votes as to which you will
have the right to instruct will be determined by dividing your Accumulated
Value in a Variable Account by the net asset value per share of the
corresponding Portfolio of the Fund. Fractional votes will be counted. The
number of votes as to which a Policy Owner will have the right to instruct
will be determined as of the date coincident with the date established by the
Fund for determining shareholders eligible to vote at the meeting of the Fund.
If required by the SEC, we reserve the right to determine in a different
fashion the voting rights attributable to the shares of the Fund based upon
the instructions received from Policy Owners. Voting instructions may be cast
in person or by proxy.
 
  If there are shares of a Portfolio held by a Variable Account for which we
do not receive timely voting instructions, we will vote those shares in the
same proportion as all other shares of that Portfolio held by that Variable
Account for which we have received timely voting instructions. If we hold
shares of a Portfolio in our General Account, we will vote those shares in the
same proportion as other votes cast by all of our separate accounts in the
aggregate.
 
DISREGARD OF VOTING INSTRUCTIONS
 
  We may, when required by state insurance regulatory authorities, disregard
voting instructions if the instructions require that voting rights be
exercised so as to cause a change in the subclassification or investment
objective of a Portfolio or to approve or disapprove an investment advisory
contract. In addition, we may disregard voting instructions of changes
initiated by Policy Owners in the investment policy or the investment adviser
(or portfolio manager) of a Portfolio, provided that our disapproval of the
change is reasonable and is based on a good faith determination that the
change would be contrary to state law or otherwise inappropriate, considering
the Portfolio's objectives and purpose, and considering the effect the change
would have on us. In the event we do disregard voting instructions, a summary
of that action and the reasons for such action will be included in the next
report to Policy Owners.
 
REPORT TO OWNERS
 
  A statement will be sent quarterly to you setting forth a summary of the
transactions which occurred during the Policy Quarter and indicating the death
benefit, Face Amount, Accumulated Value, Cash Surrender Value, and any Policy
Debt. In addition, the statement will indicate the allocation of Accumulated
Value among the Investment Options and any other information required by law.
Confirmations will be sent out upon unscheduled premium payments and
transfers, loans, loan repayments, withdrawals, and surrenders. Confirmation
of scheduled transactions under dollar cost averaging and portfolio
rebalancing will appear on your quarterly statement.
 
  You will also be sent annual financial statements for the Separate Account
and the Fund, the latter of which will include a list of the portfolio
securities of the Fund, as required by the Investment Company Act of 1940,
and/or such other reports as may be required by federal securities laws.
 
SUBSTITUTION OF INVESTMENTS
 
  We reserve the right, subject to compliance with the law as then in effect,
to make additions to, deletions from, or substitutions for the securities that
are held by the Separate Account or any Variable Account or that
 
                                      30
<PAGE>
 
the Separate Account or any Variable Account may purchase. If shares of any or
all of the Portfolios of the Fund should no longer be available for
investment, or if, in the judgment of our management, further investment in
shares of any or all Portfolios of the Fund should become inappropriate in
view of the purposes of the Policies, we may substitute shares of another
Portfolio of the Fund or of a different fund for shares already purchased, or
to be purchased in the future under the Policies.
 
  Where required, we will not substitute any shares attributable to a Policy
Owner's interest in a Variable Account or the Separate Account without notice,
Policy Owner approval, or prior approval of the SEC and without following the
filing or other procedures established by applicable state insurance
regulators.
 
  We also reserve the right to establish additional Variable Accounts of the
Separate Account, each of which would invest in a new Portfolio of the Fund,
or in shares of another investment company, a portfolio thereof, or suitable
investment vehicle. New Variable Accounts may be established when, in our sole
discretion, marketing needs or investment conditions warrant, and any new
Variable Accounts will be made available to existing Policy Owners on a basis
to be determined by us. We may also eliminate one or more Variable Accounts
if, in our sole discretion, marketing, tax, or investment conditions so
warrant. We may also terminate and liquidate any Variable Account.
 
  In the event of any such substitution or change, we may, by appropriate
endorsement, make such changes in this and other policies as may be necessary
or appropriate to reflect such substitution or change. If deemed by us to be
in the best interests of persons having voting rights under the Policies, the
Separate Account may be operated as a management investment company under the
Investment Company Act of 1940 or any other form permitted by law, it may be
deregistered under that Act in the event such registration is no longer
required, or it may be combined with other separate accounts of our or an
affiliate of ours. Subject to compliance with applicable law, we also may
combine one or more Variable Accounts and may establish a committee, board, or
other group to manage one or more aspects of the operation of the Separate
Account.
 
CHANGES TO COMPLY WITH LAW
 
  We reserve the right to make any change without your consent to the
provisions of the Policy to comply with, or give you the benefit of, any
federal or state statute, rule, or regulation, including but not limited to
requirements for life insurance contracts and modified endowment under the
IRC, under regulations of the United States Treasury Department or any state.
 
                            PERFORMANCE INFORMATION
 
  Performance information for the Variable Accounts of the Separate Account
may appear in advertisements, sales literature, or reports to Policy Owners or
prospective purchasers. Performance information in advertisements or sales
literature may be expressed in any fashion permitted under applicable law,
which may include presentation of a change in a Policy Owner's Accumulated
Value attributable to the performance of one or more Variable Accounts, or as
a change in a Policy Owner's death benefit. Performance quotations may be
expressed as a change in a Policy Owner's Accumulated Value over time or in
terms of the average annual compounded rate of return on the Policy Owner's
Accumulated Value, based upon a hypothetical Policy in which premiums have
been allocated to a particular Variable Account over certain periods of time
that will include one year or from the commencement of operation of the
Variable Account. If a Portfolio has been in existence for a longer period of
time than its corresponding Variable Account, we may also present hypothetical
returns that the Variable Account would have achieved had it invested in its
corresponding Portfolio for periods through the commencement of operation of
the Portfolio. For the period that a particular Variable Account has been in
existence, the performance will be actual performance and not hypothetical in
nature. Any such quotation may reflect the deduction of all applicable charges
to the Policy including premium load, the cost of insurance, the
administrative charge, and the mortality and expense risk charge. The varying
death benefit options will result in different expenses for the cost of
insurance, and the varying expenses will result in different Accumulated
Values. Since the Guideline Minimum Death Benefit is equal to a percentage
(e.g., 250% for an Insured Age 40)
 
                                      31
<PAGE>
 
times Accumulated Value, it will vary with Accumulated Value. The cost of
insurance charge varies according to the Ages of the Insureds and therefore
the cost of insurance charge reflected in the performance for the hypothetical
Policy is based on the hypothetical Insureds and death benefit option assumed.
The quotation may also reflect the deduction of the surrender charge, if
applicable, by assuming a surrender at the end of the particular period,
although other quotations may simultaneously be given that do not assume a
surrender and do not take into account deduction of the surrender charge or
other charges.
 
  Performance information for a Variable Account may be compared, in
advertisements, sales literature, and reports to Policy Owners, to: (i) other
variable life separate accounts or investment products tracked by research
firms, ratings services, companies, publications, or persons who rank separate
accounts or investment products on overall performance or other criteria; and
(ii) the Consumer Price Index (measure for inflation) to assess the real rate
of return from the purchase of a Policy. Reports and promotional literature
may also contain our rating or a rating of our claim-paying ability as
determined by firms that analyze and rate insurance companies and by
nationally recognized statistical rating organizations.
 
  Performance information for any Variable Account of the Separate Account
reflects only the performance of a hypothetical Policy whose Accumulated Value
is allocated to the Variable Account during a particular time period on which
the calculations are based. Performance information should be considered in
light of the investment objectives and policies, characteristics and quality
of the Portfolio of the Fund in which the Variable Account invests, and the
market conditions during the given period of time, and should not be
considered as a representation of what may be achieved in the future.
 
                               THE FIXED ACCOUNT
 
  You may allocate all or a portion of your net premium payments and transfer
Accumulated Value to our Fixed Account. Amounts allocated to the Fixed Account
become part of our "General Account," which supports insurance and annuity
obligations. Because of exemptive and exclusionary provisions, interests in
the Fixed Account have not been registered under the Securities Act of 1933,
and the Fixed Account has not been registered as an investment company under
the Investment Company Act of 1940. Accordingly, neither the Fixed Account nor
any interest therein is generally subject to the provisions of these Acts and,
as a result, the staff of the SEC has not reviewed the disclosure in this
prospectus relating to the Fixed Account. Disclosures regarding the Fixed
Account may, however, be subject to certain generally applicable provisions of
the federal securities laws relating to the accuracy and completeness of
statements made in the prospectus. For more details regarding the Fixed
Account, see the Policy itself.
 
GENERAL DESCRIPTION
 
  Amounts allocated to the Fixed Account become part of our General Account,
which consists of all assets owned by us other than those in the Separate
Account and other separate accounts of ours. Subject to applicable law, we
have sole discretion over the investment of the assets of our General Account.
 
  You may elect to allocate net premium payments to the Fixed Account, the
Separate Account, or both. You may also transfer Accumulated Value from the
Variable Accounts to the Fixed Account, or from the Fixed Account to the
Variable Accounts, subject to the limitations described below. We guarantee
that the Accumulated Value in the Fixed Account will be credited with a
minimum interest rate of .32737% per month, compounded monthly, for a minimum
effective annual rate of 4%. Such interest will be paid regardless of the
actual investment experience of the Fixed Account. In addition, we may at our
sole discretion declare current interest in excess of the 4%, which will be
guaranteed for one year. (The portion of your Accumulated Value that has been
used to secure Policy Debt will be credited with an interest rate of .32737%
per month, compounded monthly, for an effective annual rate of 4%.)
 
  We bear the full investment risk for the Accumulated Value allocated to the
Fixed Account.
 
                                      32
<PAGE>
 
DEATH BENEFIT
 
  The death benefit under the Policy will be determined in the same fashion
for a Policy Owner who has Accumulated Value in the Fixed Account as for a
Policy Owner who has Accumulated Value in the Variable Accounts. See "Death
Benefit".
 
POLICY CHARGES
 
  Policy charges will be the same whether you who allocate net premiums or
transfer Accumulated Value to the Fixed Account or allocate net premiums to
the Variable Accounts. These charges consist of the premium load, including
the sales load, state and local premium tax charge, and federal tax charge;
the deductions from Accumulated Value, including the charges for the cost of
insurance, administrative charge, mortality and expense risk charge, the
charge for any optional insurance benefits added by rider, any death benefit
change charge; the surrender charge; and the withdrawal charge. Any amounts
that we pay for income taxes allocable to the Variable Accounts will not be
charged against the Fixed Account. In addition, the operating expenses of the
Variable Accounts, as well as the investment advisory fee charged by the Fund,
will not be paid directly or indirectly by you to the extent your Accumulated
Value is allocated to the Fixed Account; however, to such extent, you will not
participate in the investment experience of the Variable Accounts.
 
TRANSFERS, SURRENDERS, WITHDRAWALS, AND POLICY LOANS
 
  Amounts may be transferred from the Variable Accounts to the Fixed Account
and from the Fixed Account to the Variable Accounts, subject to the following
limitations. If you reside in states that require us to refund premiums to
Owners who return their Policies during the Free Look Period, you may not make
transfers until after the Free Look Transfer Date. No transfer may be made if
the Policy is in a grace period and the required premium has not been paid.
You may not make more than one transfer from the Fixed Account to the Variable
Accounts in any 12-month period. Further, you may not transfer more than the
greater of 25% of your Accumulated Value in the Fixed Account or $5,000 in any
year. Currently there is no charge imposed upon transfers; however, we reserve
the right to assess such a charge in the future and to impose other
limitations on the number of transfers, the amount of transfers, and the
amount remaining in the Fixed Account or Variable Accounts after a transfer.
Transfers from the Variable Accounts to the Fixed Account may be made in the
Policy Month preceding a Policy Anniversary, except that if you reside in
Connecticut, Georgia, Maryland, North Carolina, or Pennsylvania, you may make
such a transfer at any time during the first eighteen Policy Months.
 
  You may also make full surrenders and Partial Withdrawals from the Fixed
Account to the same extent as an Owner who has invested in the Variable
Accounts. See "Surrender" and "Partial Withdrawals". You may borrow up to the
greater of (1) 90% of your Accumulated Value in the Variable Accounts and 100%
of your Accumulated Value in the Fixed Account, less any surrender charges
that would have been imposed if your Policy were surrendered on the date the
loan is taken, or (2) 100% of the product of (a X b/c - d) where (a) equals
the Policy's Accumulated Value less any surrender charge that would be imposed
if the Policy were surrendered on the date the loan is taken and less 12 times
the current monthly deductions; (b) equals 1 plus the annual loan interest
rate credited; (c) equals 1 plus the annual loan rate currently charged; and
(d) equals any existing Policy Debt. See "Policy Loans". Transfers,
surrenders, and withdrawals payable from the Fixed Account, and the payment of
Policy loans allocated to the Fixed Account, may be delayed for up to six
months.
 
                             MORE ABOUT THE POLICY
 
OWNERSHIP
 
  The Policy Owner is the individual named as such in the application or in
any later change shown in our records. While the Insureds are living, the
Policy Owner alone has the right to receive all benefits and exercise all
rights that the Policy grants or we allow.
 
  Joint Owners. If more than one person is named as Policy Owner, they are
joint Owners. Any Policy transaction requires the signature of all persons
named jointly. Unless otherwise provided, if a joint Owner dies, ownership
passes to the surviving joint Owner(s). When the last joint Owner dies,
ownership passes through that person's estate, unless otherwise provided.
 
 
                                      33
<PAGE>
 
BENEFICIARY
 
  The Beneficiary is the individual named as such in the application or any
later change shown in our records. You may change the Beneficiary at any time
during the life of either Insured by written request on forms provided by us,
which must be received by us at our Home Office. The change will be effective
as of the date this form is signed. Contingent and/or concurrent Beneficiaries
may be designated. You may designate a permanent Beneficiary, whose rights
under your Policy cannot be changed without his or her consent. Unless
otherwise provided, if no designated Beneficiary is living upon the death of
the Survivor, you are the Beneficiary, if living; otherwise your estate is the
Beneficiary.
 
  We will pay the death benefit proceeds to the Beneficiary. Unless otherwise
provided, in order to receive proceeds at the Survivor's death, the
Beneficiary must be living at the time of the Survivor's death.
 
THE CONTRACT
 
  This Policy is a contract between the Owner and us. The entire contract
consists of the Policy, a copy of the initial application, all subsequent
applications to change the Policy, any endorsements, any Riders and Benefits,
and all additional Policy information sections (specification pages) added to
the Policy.
 
PAYMENTS
 
  We ordinarily will pay death benefit proceeds, Net Cash Surrender Value on
surrender, Partial Withdrawals, and loan proceeds based on allocations made to
the Variable Accounts, and will effect a transfer between Variable Accounts or
from a Variable Account to the Fixed Account within seven days after we
receive all the information needed to process a payment or, if sooner, any
other period required by law.
 
  However, we can postpone the calculation or payment of such a payment or
transfer of amounts based on investment performance of the Variable Accounts
if:
 
  .  The New York Stock Exchange is closed on other than customary weekend
     and holiday closing or trading on the New York Stock Exchange is
     restricted as determined by the SEC; or
 
  .  An emergency exists, as determined by the SEC, as a result of which
     disposal of securities is not reasonably practicable or it is not
     reasonably practicable to determine the value of a Variable Account's
     net assets; or
 
  .  The SEC by order permits postponement for the protection of Policy
     Owners.
 
ASSIGNMENT
 
  You may assign a Policy as collateral security for a loan or other
obligation. No assignment will bind us unless the original, or a copy, is
received at our Home Office, and will be effective only when recorded by us.
An assignment does not change the ownership of the Policy. However, after an
assignment, the rights of any Owner or Beneficiary will be subject to the
assignment. The entire Policy, including any attached payment option, Rider,
Benefit, and endorsement, will be subject to the assignment. We will not be
responsible for the validity of any assignment. Unless otherwise provided, the
assignee may exercise all rights this Policy grants except (a) the right to
change the Policy Owner or Beneficiary; and (b) the right to elect a payment
option. Assignment of a Policy that is a modified endowment contract may
generate taxable income. (See "Federal Income Tax Considerations".)
 
ERRORS ON THE APPLICATION
 
  If the Age or sex of either Insured has been misstated, the Face Amount
shall be adjusted as follows in order to reflect the correct Age or sex: the
Face Amount before the adjustment will be multiplied by the monthly cost of
insurance rate used in the Policy Year in which the misstatement is
discovered, based on the misstated Age or sex, and the result will be divided
by the monthly cost of insurance rate for the Policy Year in which the
misstatement is discovered, based on the correct Age and sex. For all Policy
Months following the discovery of the misstatement, Accumulated Value will be
calculated using cost of insurance charges, Rider charges and
 
                                      34
<PAGE>
 
Benefit charges based on the correct Age and sex, but Accumulated Value for
all Policy Months through the Month in which the misstatement is discovered
will not be recalculated. Surrender charges and mortality and expense risk
charges will not be recalculated. If unisex cost of insurance rates apply, no
adjustment will be made for a misstatement of sex. See "Charges and
Deductions: Cost of Insurance".
 
INCONTESTABILITY
 
  We may contest the validity of your Policy if any material misstatements are
made in the application. However, your Policy will be incontestable after the
expiration of the following: the initial Face Amount cannot be contested with
respect to a given Insured after the Policy has been in force during the
Insured's lifetime for two years from the Policy Date; and reinstatement
cannot be contested after it has been in force during an Insured's lifetime
for two years from the date of reinstatement.
 
PAYMENT IN CASE OF SUICIDE
 
  If either Insured dies by suicide, while sane or insane, within two years
from the Policy Date, we will limit the death benefit proceeds to the premium
payments less any withdrawal amounts, dividends paid by us in cash, and Policy
Debt.
 
DIVIDENDS
 
  The current dividend scale is zero and we do not anticipate that dividends
will be paid. Any dividends that do become payable will be paid in cash.
 
POLICY ILLUSTRATIONS
 
  Upon request, we will send you an illustration of future benefits under your
Policy based on both guaranteed and current cost factor assumptions. However,
we reserve the right to charge a $25 fee for requests for illustrations in
excess of one per Policy year.
 
PAYMENT PLAN
 
  Surrender or withdrawal benefits may be used to purchase a payment plan
providing monthly income for the lifetime of the Insureds, and death benefit
proceeds may be used to purchase a payment plan providing monthly income for
the lifetime of the Beneficiary. The monthly payments consisting of proceeds
plus interest will be paid in equal installments for at least ten years. The
purchase rates for the payment plan are guaranteed not to exceed those shown
in the Policy, but current rates that are lower (i.e., providing greater
income) may be established by us from time to time. This benefit is not
available if the income would be less than $100 a month. Surrender or
withdrawal benefits or death benefit proceeds may be used to purchase any
other payment plan that we make available at that time.
 
OPTIONAL INSURANCE BENEFITS
 
  Subject to certain requirements, you may elect to add one or more of the
following optional insurance benefits to the Policy by a Rider at the time of
application for your Policy (subject to approval of state insurance
authorities). These optional benefits are: guaranteed payment of a specified
coverage amount upon the death of the Survivor, subject to stated conditions;
provision for level or varying coverage on the same two Insureds; renewable
level or varying term insurance on either Insured, or individually on the
Insureds; allowance to split the Policy into individual policies for each
Insured without evidence of individual insurability; allowance to split the
Policy into individual policies for each Insured subject to evidence of
individual insurability; and Policy Owner access to a portion of the Policy's
proceeds if an Insured has been diagnosed with a terminal illness resulting in
a life expectancy of six months or less (or such other period that may be
required by state insurance authorities). The cost of any additional insurance
benefits will be deducted as part of the monthly deduction against Accumulated
Value. See "Charges and Deductions". The amounts of these benefits are fully
guaranteed at issue. Certain restrictions may apply and are described in the
applicable Rider or Benefit. Under certain
 
                                      35
<PAGE>
 
circumstances, a Policy can be combined with an added protection benefit to
result in a combined coverage amount (face amount) equal to the same Face
Amount that could be acquired under a single policy. For given Insureds,
combining a Policy and a benefit may result in a Face Amount component of the
mortality and expense risk charge and an underwriting surrender charge for a
Policy that are lower than the single Policy providing the same Face Amount.
An insurance agent authorized to sell the Policy can describe these extra
benefits further. Samples of the provisions are available from us upon written
request.
 
LIFE INSURANCE RETIREMENT PLANS
 
  Any Policy Owners or applicants who wish to consider using the Policy as a
funding vehicle for (non-qualified) retirement purposes may obtain additional
information from us. An Owner could pay premiums under a Policy for a number
of years, and upon retirement, could utilize a Policy's loan and partial
withdrawal features to access Accumulated Value as a source of retirement
income for a period of time. This use of a Policy does not alter an Owner's
rights or our obligations under a Policy; the Policy would remain a life
insurance contract that, so long as it remains in force, provides for a death
benefit payable when the Survivor dies.
 
  Ledger illustrations are available upon request that portray how the Policy
can be used as a funding mechanism for (non-qualified) retirement plans,
referred to herein as "life insurance retirement plans," for individuals.
Ledger illustrations provided upon request show the effect on Accumulated
Value, Net Cash Surrender Value, and the net death benefit of premiums paid
under a Policy and Partial Withdrawals and loans taken for retirement income;
or reflecting allocation of premiums to specified Variable Accounts. This
information will be portrayed at hypothetical rates of return that are
requested. Charts and graphs presenting a comparison of retirement strategies
will also be furnished upon request. Any graphic presentations and retirement
strategy charts must be accompanied by a corresponding ledger illustration;
ledger illustrations must always include or be accompanied by comparable
information that is based on guaranteed cost of insurance rates and that
presents a hypothetical gross rate of return of 0%. Retirement illustrations
will not be furnished with a hypothetical gross rate of return in excess of
12%.
 
  The hypothetical rates of return in ledger illustrations are illustrative
only and should not be interpreted as a representation of past or future
investment results. Policy values and benefits shown in the ledger
illustrations would be different if the gross annual investment rates of
return were different from the hypothetical rates portrayed, if premiums were
not paid when due, and loan interest was paid when due. Withdrawals or loans
may have an adverse effect on Policy benefits.
 
RISKS OF LIFE INSURANCE RETIREMENT PLANS
 
  Using the Policy as a funding vehicle for retirement income purposes
presents several risks, including the risk that if the Policy is
insufficiently funded in relation to the income stream from the Policy, the
Policy can lapse prematurely and result in significant income tax liability to
the Owner in the year in which the lapse occurs. Other risks associated with
borrowing from the Policy also apply. Loans will be automatically repaid from
the gross death benefit at the death of the Survivor, resulting in the
estimated payment to the Beneficiary of the net death benefit, which will be
less than the gross death benefit and may be less than the Face Amount. Upon
surrender, the loan will be automatically repaid, resulting in the payment to
you of the Net Surrender Value. Similarly, upon lapse, the loan will be
automatically repaid. The automatic repayment of the loan upon lapse or
surrender will cause the recognition of taxable income to the extent that Net
Surrender Value plus the amount of the repaid loan exceeds your basis in the
Policy. Thus, under certain circumstances, surrender or lapse of the Policy
could result in tax liability to you. In addition, to reinstate a lapsed
Policy, you would be required to make certain payments as described under
"Reinstatement". Thus, you should be careful to fashion a life insurance plan
so that the Policy will not lapse prematurely under various market scenarios
as a result of withdrawals and loans taken from the Policy.
 
  The Policy will lapse if your Accumulated Value less Policy Debt is
insufficient to cover the current monthly deduction on any Monthly Payment
Date, and a grace period expires without your making a sufficient payment. To
avoid lapse of your Policy, it is important to fashion a payment stream that
does not leave your Policy with insufficient Accumulated Value. Determinations
as to the amount to withdraw or borrow each year
 
                                      36
<PAGE>
 
warrant careful consideration. Careful consideration should also be given to
any assumptions respecting the hypothetical rate of return, to the duration of
withdrawals and loans, and to the amount of Accumulated Value that should
remain in your Policy upon its maturity. Poor investment performance can
contribute to the risk that your Policy may lapse. In addition, the cost of
insurance generally increases with the Age of the Insured, which can further
erode existing Accumulated Value and contribute to the risk of lapse.
 
  Further, interest on a Policy loan is due to us for any Policy Year on the
Policy Anniversary. If this interest is not paid when due, it is added to the
amount of the outstanding Policy Debt, and interest will begin accruing
thereon from that date. This can have a compounding effect, and to the extent
that the outstanding loan balance exceeds your basis in the Policy, the
amounts attributable to interest due on the loans can add to your federal (and
possibly state) income tax liability.
 
  You should consult with your attorney and financial advisers in designing a
life insurance retirement plan that is suitable. Further, you should continue
to monitor the Accumulated Value net of loans remaining in a Policy to assure
that the Policy is sufficiently funded to continue to support the desired
income stream and so that it will not lapse. In this regard, you should
consult your periodic statements to determine the amount of their remaining
Accumulated Value minus the outstanding loan balance. Illustrations showing
the effect of charges under the Policy upon existing Accumulated Value or the
effect of future withdrawals or loans upon the Policy's Accumulated Value and
death benefit are available from your agent. Consideration should be given
periodically to whether the Policy is sufficiently funded so that it will not
lapse prematurely.
 
  Because of the potential risks associated with borrowing from a Policy, use
of the Policy in connection with a life insurance retirement plan may not be
suitable for all Policy Owners. These risks should be carefully considered
before borrowing from the Policy to provide an income stream.
 
DISTRIBUTION OF THE POLICY
 
  PMD is principal underwriter (distributor) of the Policies. PMD is
registered as a broker-dealer with the SEC and is a member of the National
Association of Securities Dealers, Inc. ("NASD"). We pay PMD for acting as
principal underwriter under a Distribution Agreement. PMD is a wholly-owned
subsidiary of Pacific Mutual. PMD's principal business address is 700 Newport
Center Drive, Newport Beach, California 92660.
 
  We and PMD have sales agreements with various broker-dealers under which the
Policy will be sold by registered representatives of the broker-dealers. The
registered representatives are required to be authorized under applicable
state regulations to sell variable life insurance. The broker-dealers are
required to be registered with the SEC and members of the NASD. We pay
compensation directly to broker-dealers for promotion and sales of the Policy.
The compensation payable to a broker-dealer for sales of the Policy may vary
with the Sales Agreement, but is not expected to exceed 90% of premiums paid
up to the first sales surrender target premium (as described in "Surrender
Charge: Sales Surrender Target" and in Appendix B), 8% of the premiums paid
under sales surrender targets 2 and 3; and on the premium in excess of the sum
of sales surrender targets 1-3, 4% of premiums paid in Policy years 1-10 and
2% of premiums paid thereafter. Broker-dealers may also receive annual renewal
compensation of up to .20% of Accumulated Value less Policy Debt. The annual
renewal compensation will be computed monthly and payable on each Policy
Anniversary. In addition, we may also pay override payments, expense
allowances, bonuses, wholesaler fees, and training allowances. Registered
representatives earn commissions from the broker-dealers with whom they are
affiliated for selling our Policies. Compensation arrangements vary among
broker-dealers. In addition, registered representatives who meet specified
production levels may qualify, under sales incentive programs adopted by us,
to receive non-cash compensation such as expense-paid trips, expense-paid
educational seminars and merchandise and may elect to receive compensation on
a deferred basis. We make no separate deductions, other than as previously
described, from premiums to pay sales commissions or sales expenses.
 
                                      37
<PAGE>
 
                           MORE ABOUT PACIFIC MUTUAL
 
MANAGEMENT
 
  Our directors and officers are listed below together with information as to
their principal occupations during the past five years and certain other
current affiliations. Unless otherwise indicated, the business address of each
director and officer is c/o Pacific Mutual Life Insurance Company, 700 Newport
Center Drive, Newport Beach, California 92660.
 
<TABLE>   
<CAPTION>
        NAME AND POSITION               PRINCIPAL OCCUPATION DURING THE LAST FIVE YEARS
        -----------------               -----------------------------------------------
 <C>                             <S>
 Thomas C. Sutton                Director, Chairman of the Board and Chief Executive Officer
 Director, Chairman of            of Pacific Mutual; Equity Board Member of PIMCO Advisors,
 the Board and                    L.P.; Director of: Newhall Land & Farming; The Irvine
 Chief Executive Officer          Company; The Edison Company. Pacific Corinthian Life
                                  Insurance Company; similar positions with other
                                  subsidiaries of Pacific Mutual.

 Glenn S. Schafer                Director and President of Pacific Mutual, January 1995 to
 Director and President           present; Executive Vice President and Chief Financial
                                  Officer of Pacific Mutual, March 1991 to January 1995;
                                  Equity Board Member of PIMCO Advisors, L.P.; Director of
                                  Pacific Corinthian Life Insurance Company; similar
                                  positions with other subsidiaries of Pacific Mutual.

 Harry G. Bubb                   Director and Chairman Emeritus of Pacific Mutual.
 Director and
 Chairman Emeritus

 Richard M. Ferry                Director of Pacific Mutual, President, Director and Chairman
 Director                         of Korn/Ferry International; Director of: Avery Dennison
                                  Corporation, ConAM Management; First Business Bank; Mullin
                                  Consulting, Inc.; Northwestern Restaurants, Inc.; Dole Food
                                  Co. Address: 1800 Century Park East, Suite 900, Los
                                  Angeles, California 90067.

 Donald E. Guinn                 Director of Pacific Mutual, Chairman Emeritus and Director
 Director                         of Pacific Telesis Group; Director of: The Dial Corp.; Bank
                                  of America NT & SA; BankAmerica Corporation. Address:
                                  Pacific Telesis Center, 130 Kearny Street, Room 3704, San
                                  Francisco, California 94108-4818.

 Ignacio E. Lozano, Jr.          Director of Pacific Mutual; Chairman and Former Editor-in-
 Director                         Chief of La Opinion; Director of: BankAmerica Corporation;
                                  Bank of America NT & SA; The Walt Disney Company; Pacific
                                  Enterprises. Address: 411 West Fifth Street, 12th Floor,
                                  Los Angeles, California 90013.

 Charles A. Lynch                Director of Pacific Mutual; Chairman and Former Chief
 Director                         Executive Officer Fresh Choice, Inc.; Director of:
                                  Nordstrom, Inc.; PST Vans, Inc.; SRI International, Inc.;
                                  Age Wave; Artmaster, Inc.; Bojangles Acquisitions Corp.;
                                  Cucina Holdings, Inc.; Dakin, Inc.; Greyhound Lines, Inc.;
                                  Krh' Thermal Systems; La Salsa Restaurants; Mid Peninsula
                                  Bank; Syntex Corporation; Former Chairman of Market Value
                                  Partners Company. Address: 2901 Tasman Drive, Suite 109,
                                  Santa Clara, California 95054-1169.

 Dr. Allen W. Mathies, Jr.       Director of Pacific Mutual; Director and President Emeritus,
 Director                         Huntington Memorial Hospital; Director of Occidental
                                  College; former President and Chief Executive Officer of
                                  Huntington Memorial Hospital. Address: 314 Arroyo Drive,
                                  South Pasadena, California 91030.
</TABLE>    
 
                                      38
<PAGE>
 
<TABLE>
<CAPTION>
       NAME AND POSITION              PRINCIPAL OCCUPATION DURING THE LAST FIVE YEARS
       -----------------              -----------------------------------------------
<S>                             <C>
Charles D. Miller               Director of Pacific Mutual; Director, Chairman, and Chief
Director                         Executive Officer of Avery Dennison Corporation; Director
                                 of: Davidson & Associates; Great Western Financial
                                 Corporation; Nationwide Health Properties, Inc.; Southern
                                 California Edison Company. Address: 150 North Orange Grove
                                 Boulevard, Pasadena, California 91103.

Donn B. Miller                  Director of Pacific Mutual, Director, President, and Chief
Director and                     Executive Officer of Pearson-Sibert Oil Co. of Texas;
Chief Executive Officer          Director of: The Irvine Company; Automobile Club of
                                 Southern California; St. John's Hospital & Health Center
                                 Foundation; former Senior Partner with the law
                                 firm of O'Melveny & Meyers. Address: 136 El Camino, Suite
                                 216, Beverly Hills, California 90212.

Jacqueline C. Morby             Director of Pacific Mutual, February 1996 to present;
                                 Managing Director of TA Associates; Director of Axent
                                 Technologies Inc. Address: High Street Tower, Suite 2500,
                                 125 High Street, Boston, Massachusetts 02110.

J. Fernando Niebla              Director of Pacific Mutual, May 1995 to present; Director,
                                 Chairman and Chief Executive Officer of Infotec Commerical
                                 Systems, formerly Infotec Development, Inc.; Director of:
                                 Bank of California. Address: 3100 South Harbor Boulevard,
                                 Suite 100, Santa Ana, California 92704.

Susan Westerberg Prager         Director of Pacific Mutual; Dean of the UCLA School of Law
Director                         at the University of California at Los Angeles; Director of
                                 Lucille Salter Packard Children's Hospital of Stanford. Ad-
                                 dress: 405 Hillgard Avenue, Room 3374, Los Angeles, Cali-
                                 fornia 90095-1476.

Richard M. Rosenberg            Director of Pacific Mutual, November 1995 to present; Chair-
                                 man and Chief Executive Officer Retired of BankAmerica Cor-
                                 poration, and Bank of America NT & SA; Director of: Air-
                                 borne Express Corporation; Northrop Grumman Corporation;
                                 Potlatch Corporation; Pacific Telesis Group. Address: 555
                                 California Street, 40th Floor, San Francisco, California
                                 94104.

James R. Ukropina               Director of Pacific Mutual, Partner with the law firm of
Director                         O'Melveny & Meyers; Director, former Chairman and Chief
                                 Executive Officer of Pacific Enterprises; Director of
                                 Lockheed Corporation. Address: 400 South Hope Street, 16th
                                 Floor, Los Angeles, California 90071-2899.

Raymond L. Watson               Director of Pacific Mutual, Vice Chairman and Director of
Director                         The Irvine Company; Director of: The Walt Disney Company;
                                 The Mitchell Energy and Development Company. Address: 550
                                 Newport Center Drive, 9th Floor, Newport Beach, California
                                 92660.

Lynn C. Miller                  Executive Vice President, Individual Insurance, of Pacific
Executive Vice President         Mutual, January 1995 to present; Senior Vice President,
                                 Individual Insurance, of Pacific Mutual 1989-1995.

David R. Carmichael             Senior Vice President and General Counsel of Pacific Mutual;
Senior Vice President            Vice President and Investment Counsel of Pacific Mutual,
and General Counsel              1989 to April 1992; Director of: Pacific Corinthian Life
                                 Insurance Company; PM Group Life Insurance Company.

Audrey L. Milfs                 Vice President and Corporate Secretary of Pacific Mutual;
Vice President                   Secretary to other subsidiaries of Pacific Mutual.
and Corporate Secretary
</TABLE>
 
                                       39
<PAGE>
 
<TABLE>
<CAPTION>
       NAME AND POSITION              PRINCIPAL OCCUPATION DURING THE LAST FIVE YEARS
       -----------------              -----------------------------------------------
<S>                             <C>
Edward R. Byrd                  Vice President and Controller of Pacific Mutual, June 1992
Vice President and Controller    to present; Vice President, Corporate Audit and Financial
                                 Planning of Pacific Mutual, November 1991 to June 1992;
                                 Assistant Vice President, Corporate Audit of Pacific
                                 Mutual, May 1990 to November 1991.

Khanh T. Tran                   Senior Vice President and Chief Financial Officer, June 1996
Senior Vice President and        to present; Vice President and Treasurer of Pacific Mutual,
Chief Financial Officer          November 1991 to June 1996; Assistant Vice President and
                                 Treasurer of Pacific Mutual, September 1990 to November
                                 1991; Chief Financial Officer to other subsidiaries of
                                 Pacific Mutual.
</TABLE>
 
  No officer or director listed above receives any compensation from the
Separate Account. No separately allocable compensation has been paid by us or
any of our affiliates to any person listed for services rendered to the
Separate Account.
 
STATE REGULATION
 
  We are subject to the laws of the state of California governing insurance
companies and to regulation by the Commissioner of Insurance of California. In
addition, we are subject to the insurance laws and regulations of the other
states and jurisdictions in which we are licensed or may become licensed to
operate. An annual statement in a prescribed form must be filed with the
Commissioner of Insurance of California and with regulatory authorities of
other states on or before March 1st in each year. This statement covers our
operations for the preceding year and our financial condition as of December
31st of that year. Our affairs are subject to review and examination at any
time by the Commissioner of Insurance or his agents, and subject to full
examination of our operations at periodic intervals.
 
TELEPHONE TRANSFER AND LOAN PRIVILEGES
 
  A Policy Owner may request a transfer of Accumulated Value or a Policy Loan
by telephone if a properly completed Authorization for Telephone Requests
("Telephone Authorization") has been filed at our Home Office. All or part of
any telephone conversation with respect to transfer or loan instructions may
be recorded by us. Telephone instructions received by us by 1:00 P.M. Pacific
time, or the close of the New York Stock Exchange, if earlier, on any
Valuation Date will be processed as of the end of that Valuation Date in
accordance with your instructions, (presuming that the Free-Look Period has
expired). We reserve the right to deny any telephone transfer or loan request.
If all telephone lines are busy (which might occur, for example, during
periods of substantial market fluctuations), Policy Owners might not be able
to request transfers and loans by telephone and would have to submit written
requests.
 
  We have established procedures to confirm that instructions communicated by
telephone are genuine. Under the procedures, any person requesting a transfer
by telephone must provide certain personal identification as requested by us,
and we will send a written confirmation of all transfers requested by
telephone within 7 days of the transfer. Upon the submission of a Telephone
Authorization, you authorize us to accept and act upon telephone instructions
for transfers or loans involving your Policy, and agree that neither we, any
of our affiliates, Pacific Select Fund, nor any of our or their directors,
trustees, officers, employees or agents, will be liable for any loss, damages,
cost, or expense (including attorney's fees) arising out of any requests
effected in accordance with the Telephone Authorization and believed by us to
be genuine, provided that we have complied with its procedures. As a result of
this policy on telephonic requests, you will bear the risk of loss arising
from the telephone transfer and loan privileges.
 
LEGAL PROCEEDINGS
 
  There are no legal proceedings pending to which the Separate Account is a
party, or which would materially affect the Separate Account.
 
                                      40
<PAGE>
 
LEGAL MATTERS
 
  Legal matters in connection with the issue and sale of the Policies
described in this Prospectus and our organization, our authority to issue the
Policies under California law, and the validity of the forms of the Policies
under California law have been passed on by our General Counsel.
 
  Legal matters relating to the federal securities and federal income tax laws
have been passed upon by Dechert Price & Rhoads.
 
REGISTRATION STATEMENT
 
  A registration statement under the Securities Act of 1933 has been filed
with the SEC relating to the offering described in this prospectus. This
prospectus does not include all of the information set forth in the
registration statement, as portions have been omitted pursuant to the rules
and regulations of the SEC. The omitted information may be obtained at the
SEC's principal office in Washington, D.C., upon payment of the SEC's
prescribed fees.
   
INDEPENDENT AUDITORS     
   
  The financial statements for Pacific Mutual as of December 31, 1995 and 1994
and for the years then ended and the financial statements for Pacific Select
Exec Separate Account as of December 31, 1995 and 1994 and for the years then
ended included in this prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and have
been so included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.     
       
FINANCIAL STATEMENTS
   
  The audited financial statements of Pacific Select Exec Separate Account as
of December 31, 1995 and 1994 for the years then ended are set forth herein,
starting on page 42. The unaudited financial statements for the Pacific Select
Exec Separate Account as of June 30, 1996 and for the six months in the period
ended June 30, 1996 and 1995 are set forth herein starting on page 51. The
audited financial statements of Pacific Mutual as of December 31, 1995 and
1994 and the years then ended are set forth herein starting on page 63. The
unaudited financial statements of Pacific Mutual as of September 30, 1996 and
for the nine months in the period ended September 30, 1996 and 1995 are set
forth herein starting on page 80. The unaudited financial statements of the
Pacific Select Exec Separate Account and Pacific Mutual include all
adjustments (consisting only of normal recurring adjustments) which management
of the Pacific Select Exec Separate Account and Pacific Mutual consider
necessary for a fair presentation of the results of operations.     
   
  The financial statements of Pacific Mutual should be distinguished from the
financial statements of the Pacific Select Exec Separate Account and should be
considered only as bearing upon the ability of Pacific Mutual to meet its
obligations under the Policies.     
 
                                      41
<PAGE>
 
                      PACIFIC SELECT EXEC SEPARATE ACCOUNT
 
                          AUDITED FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 1995 AND 1994
 
                                       42
<PAGE>
 
                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Pacific Mutual Life Insurance Company


We have audited the accompanying statements of assets and liabilities of the
Pacific Select Exec Separate Account (comprised of the Money Market, Managed
Bond, Government Securities, High Yield Bond, Growth, Equity Income, Multi-
Strategy, International, Equity Index, and Growth LT Variable Accounts) as of
December 31, 1995 and the related statements of operations for the year then
ended and statements of changes in net assets for each of the two years ended
December 31, 1995 and 1994.  These financial statements are the responsibility
of the Separate Account's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective Variable
Accounts constituting the Pacific Select Exec Separate Account as of 
December 31, 1995 and the results of their operations for the year then ended 
and the changes in their net assets for each of the two years then ended, in 
conformity with generally accepted accounting principles.



DELOITTE & TOUCHE LLP

Costa Mesa, California
February 16, 1996

 
                                       43
<PAGE>
 
PACIFIC SELECT EXEC SEPARATE ACCOUNT 
STATEMENTS OF ASSETS & LIABILITIES 
DECEMBER 31, 1995 
(In thousands)

<TABLE>
<CAPTION>
                                                                                                             High                  
                                                                   Money        Managed      Government      Yield                 
                                                                   Market         Bond       Securities      Bond          Growth  
                                                                  Variable      Variable      Variable      Variable      Variable 
                                                                  Account       Account       Account       Account       Account  
                                                                 ---------     ---------     ---------     ---------     --------- 
<S>                                                              <C>           <C>           <C>           <C>           <C>       
ASSETS                                 

Investments in Pacific Select Fund:                          
  Money Market Portfolio (2,301 shares; cost $23,106) ...........$ 23,045
  Managed Bond Portfolio (4,265 shares; cost $45,342) ...........              $ 47,343
  Government Securities Portfolio (581 shares; cost $5,877) .....                            $  6,299
  High Yield Bond Portfolio (1,479 shares; cost $13,881) ........                                          $ 14,474
  Growth Portfolio (4,719 shares; cost $78,927) .................                                                        $ 87,624
  Equity Income Portfolio (2,731 shares; cost $43,643) ..........                        
  Multi-Strategy Portfolio (3,822 shares; cost $48,796) .........                        
  International Portfolio (4,354 shares; cost $54,916) ..........                        
  Equity Index Portfolio (3,592 shares; cost $51,564) ...........                        
  Growth LT Portfolio (3,810 shares; cost $49,540) ..............                        
 
Receivables:
  Due from Pacific Mutual Life Insurance Company ................     223           387                         144            75 
                                                                 --------      --------      --------      --------      --------
TOTAL ASSETS ....................................................  23,268        47,730         6,299        14,618        87,699   

                                                                 --------      --------      --------      --------      --------
 
LIABILITIES
Payables:
  Due to Pacific Mutual Life Insurance Company ..................                                  30
  Fund shares purchased .........................................      90            40             5            27           180
                                                                 --------      --------      --------      --------      --------
TOTAL LIABILITIES ...............................................      90            40            35            27           180
                                                                 --------      --------      --------      --------      --------
 
NET ASSETS ......................................................$ 23,178      $ 47,690      $  6,264      $ 14,591      $ 87,519  
                                                                 ========      ========      ========      ========      ========
<CAPTION> 
                                                                  Equity         Multi-        Inter-        Equity        Growth
                                                                  Income        Strategy      national       Index           LT  
                                                                  Variable      Variable      Variable      Variable      Variable
                                                                  Account       Account       Account       Account       Account
                                                                 ---------     ---------     ---------     ---------     ---------
<S>                                                              <C>           <C>           <C>           <C>           <C>      
ASSETS                                 
                                       
Investments in Pacific Select Fund:                          
  Money Market Portfolio (2,301 shares; cost $23,106) ...........
  Managed Bond Portfolio (4,265 shares; cost $45,342) ...........
  Government Securities Portfolio (581 shares; cost $5,877) .....
  High Yield Bond Portfolio (1,479 shares; cost $13,881) ........
  Growth Portfolio (4,719 shares; cost $78,927) .................
  Equity Income Portfolio (2,731 shares; cost $43,643) ..........$ 49,717
  Multi-Strategy Portfolio (3,822 shares; cost $48,796) .........              $ 54,269
  International Portfolio (4,354 shares; cost $54,916) ..........                            $ 56,325
  Equity Index Portfolio (3,592 shares; cost $51,564) ...........                                          $ 62,687
  Growth LT Portfolio (3,810 shares; cost $49,540) ..............                                                        $ 53,801

Receivables:
  Due from Pacific Mutual Life Insurance Company ................     117           696           196           166           198
                                                                 --------      --------      --------      --------      --------
TOTAL ASSETS ....................................................  49,834        54,965        56,521        62,853        53,999 
                                                                 --------      --------      --------      --------      --------

LIABILITIES
Payables:
  Due to Pacific Mutual Life Insurance Company ..................            
  Fund shares purchased .........................................     118           659            94           178           240
                                                                 --------      --------      --------      --------      --------
TOTAL LIABILITIES ...............................................     118           659            94           178           240 
                                                                 --------      --------      --------      --------      --------

NET ASSETS                                                       $ 49,716      $ 54,306      $ 56,427      $ 62,675      $ 53,759 
                                                                 ========      ========      ========      ========      ========
</TABLE> 

See Notes to Financial Statements. 


                                       44
<PAGE>
 
PACIFIC SELECT EXEC SEPARATE ACCOUNT 
STATEMENTS OF OPERATIONS 
FOR THE YEAR ENDED DECEMBER 31, 1995 
(In thousands)

<TABLE>
<CAPTION>
                                                                                                        High                  
                                                              Money        Managed      Government      Yield                 
                                                              Market        Bond        Securities      Bond         Growth   
                                                             Variable      Variable      Variable      Variable      Variable  
                                                             Account       Account       Account       Account       Account 
                                                            ---------     ---------     ---------     ---------     ---------
<S>                                                         <C>           <C>           <C>           <C>           <C>      
INVESTMENT INCOME                                           
 Dividends................................................  $ 1,418       $ 2,208       $   294       $   944       $   656
                                                            -------       -------       -------       -------       -------
NET INVESTMENT INCOME.....................................    1,418         2,208           294           944           656
                                                            -------       -------       -------       -------       -------
                                                            
REALIZED AND UNREALIZED GAIN (LOSS)                         
 ON INVESTMENTS                                             
 Net realized gain (loss) from security transactions......       31          (141)          (41)          (92)       (1,046)
 Net unrealized appreciation on investments...............       65         4,063           624         1,042        16,423
                                                            -------       -------       -------       -------       -------
NET REALIZED AND UNREALIZED GAIN                            
 ON INVESTMENTS...........................................       96         3,922           583           950        15,377
                                                            -------       -------       -------       -------       -------
                                                            
NET INCREASE IN NET ASSETS                                  
 RESULTING FROM OPERATIONS................................  $ 1,514       $ 6,130       $   877       $ 1,894       $16,033
                                                            =======       =======       =======       =======       =======
<CAPTION>                                                   
                                                              Equity        Multi-        Inter-        Equity        Growth  
                                                              Income       Strategy      national       Index           LT   
                                                             Variable      Variable      Variable      Variable      Variable
                                                             Account       Account       Account       Account       Account
                                                            ---------     ---------     ---------     ---------     ---------
<S>                                                         <C>           <C>           <C>           <C>           <C>     
INVESTMENT INCOME                                           
 Dividends................................................  $   577       $ 1,401       $ 1,070       $ 1,015       $ 3,592
                                                            -------       -------       -------       -------       -------
NET INVESTMENT INCOME.....................................      577         1,401         1,070         1,015         3,592
                                                            -------       -------       -------       -------       -------
                                                            
REALIZED AND UNREALIZED GAIN (LOSS)                         
 ON INVESTMENTS                                             
 Net realized gain (loss) from security transactions......      785            71           574         2,069         1,225
 Net unrealized appreciation on investments...............    7,737         7,406         2,646        10,698         3,892
                                                            -------       -------       -------       -------       -------
NET REALIZED AND UNREALIZED GAIN                            
 ON INVESTMENTS...........................................    8,522         7,477         3,220        12,767         5,117
                                                            -------       -------       -------       -------       -------
                                                            
NET INCREASE IN NET ASSETS                                  
 RESULTING FROM OPERATIONS................................  $ 9,099       $ 8,878       $ 4,290       $13,782       $ 8,709
                                                            =======       =======       =======       =======       =======
</TABLE> 
See Notes to Financial Statements.

                                       45
<PAGE>
 
PACIFIC SELECT EXEC SEPARATE ACCOUNT 
STATEMENTS OF CHANGES IN NET ASSETS 
FOR THE YEAR ENDED DECEMBER 31, 1995 
(In thousands)

<TABLE>
<CAPTION>
 
                                                                                                             High    
                                                                   Money        Managed      Government      Yield                 
                                                                   Market        Bond        Securities      Bond          Growth  
                                                                  Variable      Variable      Variable      Variable      Variable 
                                                                  Account       Account       Account       Account       Account  
                                                                 ---------     ---------     ---------     ---------     --------- 
<S>                                                              <C>           <C>           <C>           <C>           <C>       
INCREASE (DECREASE) IN NET ASSETS
  FROM OPERATIONS
  Net investment income........................................  $  1,418      $  2,208      $    294      $    944      $    656
  Net realized gain (loss) from security transactions..........        31          (141)          (41)          (92)       (1,046)
  Net unrealized appreciation on investments...................        65         4,063           624         1,042        16,423
                                                                 --------      --------      --------      --------      --------
NET INCREASE IN NET ASSETS                                       
  RESULTING FROM OPERATIONS....................................     1,514         6,130           877         1,894        16,033
                                                                 --------      --------      --------      --------      --------
                                                                 
INCREASE (DECREASE) IN NET ASSETS FROM                           
  POLICY TRANSACTIONS                                            
  Transfer of net premiums.....................................    72,942         7,113         1,962         5,029        25,318
  Transfers--policy charges and deductions.....................    (4,297)       (2,830)         (908)       (1,423)       (9,201)
  Transfers in (from other variable accounts)..................    29,120        15,186         2,845         7,781        30,352
  Transfers out (to other variable accounts)...................  (110,816)       (2,813)       (2,390)       (6,185)      (22,297)
  Transfers--other.............................................       119           339           (31)          116          (103)
                                                                 --------      --------      --------      --------      --------
NET INCREASE (DECREASE) IN NET ASSETS                            
  DERIVED FROM POLICY TRANSACTIONS.............................   (12,932)       16,995         1,478         5,318        24,069
                                                                 --------      --------      --------      --------      --------
                                                                 
NET INCREASE (DECREASE) IN NET ASSETS..........................   (11,418)       23,125         2,355         7,212        40,102
                                                                 
NET ASSETS                                                       
  Beginning of year............................................    34,596        24,565         3,909         7,379        47,417
                                                                 --------      --------      --------      --------      --------
  End of year..................................................  $ 23,178      $ 47,690      $  6,264      $ 14,591      $ 87,519
                                                                 ========      ========      ========      ========      ========
<CAPTION> 
                                                                  Equity         Multi-        Inter-        Equity        Growth   
                                                                  Income        Strategy      national       Index          LT      
                                                                  Variable      Variable      Variable      Variable      Variable  
                                                                  Account       Account       Account       Account       Account   
                                                                 ---------     ---------     ---------     ---------     ---------  
<S>                                                              <C>           <C>           <C>           <C>           <C>
INCREASE (DECREASE) IN NET ASSETS
  FROM OPERATIONS
  Net investment income........................................  $    577      $  1,401      $  1,070      $  1,015      $  3,592
  Net realized gain (loss) from security transactions..........       785            71           574         2,069         1,225
  Net unrealized appreciation on investments...................     7,737         7,406         2,646        10,698         3,892
                                                                 --------      --------      --------      --------      --------
NET INCREASE IN NET ASSETS                                       
  RESULTING FROM OPERATIONS....................................     9,099         8,878         4,290        13,782         8,709
                                                                 --------      --------      --------      --------      --------
                                                                 
INCREASE (DECREASE) IN NET ASSETS FROM                           
  POLICY TRANSACTIONS                                            
  Transfer of net premiums.....................................    13,169        14,278        16,778        11,713        12,930
  Transfers--policy charges and deductions.....................    (4,072)       (3,990)       (5,319)       (4,228)       (3,931)
  Transfers in (from other variable accounts)..................    16,222         5,601        25,476        17,636        32,699
  Transfers out (to other variable accounts)...................    (4,940)       (2,670)      (16,093)       (6,615)       (8,074)
  Transfers--other.............................................        16            38           141            (6)           18
                                                                 --------      --------      --------      --------      --------
NET INCREASE (DECREASE) IN NET ASSETS                            
  DERIVED FROM POLICY TRANSACTIONS.............................    20,395        13,257        20,983        18,500        33,642
                                                                 --------      --------      --------      --------      --------
                                                                 
NET INCREASE (DECREASE) IN NET ASSETS..........................    29,494        22,135        25,273        32,282        42,351
                                                                 
NET ASSETS                                                       
  Beginning of year............................................    20,222        32,171        31,154        30,393        11,408
                                                                 --------      --------      --------      --------      --------
  End of year..................................................  $ 49,716      $ 54,306      $ 56,427      $ 62,675      $ 53,759
                                                                 ========      ========      ========      ========      ========
</TABLE> 

See Notes to Financial Statements.

                                       46
<PAGE>
 
PACIFIC SELECT EXEC SEPARATE ACCOUNT 
STATEMENTS OF CHANGES IN NET ASSETS FOR THE
YEAR ENDED DECEMBER 31, 1994 
(In thousands)
<TABLE>
<CAPTION>
                                                                                                  High
                                                              Money      Managed   Government     Yield                Equity
                                                              Market      Bond     Securities     Bond       Growth    Income
                                                             Variable   Variable    Variable    Variable    Variable   Variable
                                                              Account    Account     Account     Account    Account    Account
                                                             ---------  ---------  -----------  ---------  ---------  ---------
<S>                                                          <C>        <C>        <C>          <C>        <C>        <C>
INCREASE (DECREASE) IN NET ASSETS
 FROM OPERATIONS
 Net investment income....................................   $     812  $   1,143  $       170  $     472  $   4,039  $   1,838
 Net realized gain (loss) from security transactions......         131        (14)        (172)      (101)     1,075        207
Net unrealized appreciation (depreciation)
 on investments...........................................         (68)    (2,086)        (160)      (330)   (10,371)    (2,115)
                                                             ---------  ---------  -----------  ---------  ---------  ---------
NET INCREASE (DECREASE) IN NET ASSETS
 RESULTING FROM OPERATIONS................................         875       (957)        (162)        41     (5,257)       (70)
                                                             ---------  ---------  -----------  ---------  ---------  ---------

INCREASE (DECREASE) IN NET ASSETS FROM
 POLICY TRANSACTIONS
 Transfer of net premiums.................................      53,082      6,795        2,740      2,716     21,157      6,781
 Transfers--policy charges and deductions.................      (3,578)    (1,634)      (1,212)      (748)    (5,776)    (2,110)
 Transfers in (from other variable accounts)..............      47,668      5,550        1,200      4,398     31,248      6,482
 Transfers out (to other variable accounts)...............     (81,555)    (1,862)      (1,816)    (2,395)   (28,528)    (2,573)
Transfers--other..........................................        (189)         5           (6)       (13)        79         46
                                                             ---------  ---------  -----------  ---------  ---------  ---------
NET INCREASE IN NET ASSETS
 DERIVED FROM POLICY TRANSACTIONS.........................      15,428      8,854          906      3,958     18,180      8,626
                                                             ---------  ---------  -----------  ---------  ---------  ---------

NET INCREASE IN NET ASSETS................................      16,303      7,897          744      3,999     12,923      8,556

NET ASSETS
 Beginning of year........................................      18,293     16,668        3,165      3,380     34,494     11,666
                                                             ---------  ---------  -----------  ---------  ---------  ---------
 End of year..............................................   $  34,596  $  24,565  $     3,909  $   7,379  $  47,417  $  20,222
                                                             =========  =========  ===========  =========  =========  =========
<CAPTION> 
                                                               Multi-     Inter-     Equity     Growth 
                                                              Strategy   national    Index       LT   
                                                              Variable   Variable   Variable   Variable
                                                              Account    Account    Account    Account
                                                             ---------  ---------  ---------  ---------
                                                             <C>        <C>        <C>        <C>     
                                                                                                      
INCREASE (DECREASE) IN NET ASSETS                                                                    
 FROM OPERATIONS                                                                                      
 Net investment income....................................   $   1,767  $   1,290  $     718  $     174

                                                                                                      
 Net realized gain (loss) from security transactions......         218        831        342         56
 Net unrealized appreciation (depreciation)                                                            
 on investments...........................................      (2,374)    (2,049)      (841)       369 
                                                             ---------  ---------  ---------  ---------
NET INCREASE (DECREASE) IN NET ASSETS                          
 RESULTING FROM OPERATIONS................................        (389)        72        219        599
                                                             ---------  ---------  ---------  ---------

INCREASE (DECREASE) IN NET ASSETS FROM                                                                
 POLICY TRANSACTIONS                                                                                  
 Transfer of net premiums.................................      12,158     11,673     10,776      3,920
 Transfers--policy charges and deductions.................      (2,364)    (2,878)    (2,180)      (684)
 Transfers in (from other variable accounts)..............       2,983     19,282      4,498      8,962
 Transfers out (to other variable accounts)...............      (1,864)    (8,521)    (2,407)    (1,436)
 Transfers--other.........................................          32         23         44         47
                                                             ---------  ---------  ---------  ---------
NET INCREASE IN NET ASSETS                                    
 DERIVED FROM POLICY TRANSACTIONS.........................      10,945     19,579     10,731     10,809
                                                             ---------  ---------  ---------  ---------

NET INCREASE IN NET ASSETS................................      10,556     19,651     10,950     11,408
                                                                                                      
NET ASSETS                                                                                            
 Beginning of year........................................      21,615     11,503     19,443           
                                                             ---------  ---------  ---------  ---------
 End of year..............................................   $  32,171  $  31,154  $  30,393  $  11,408
                                                             =========  =========  =========  =========
</TABLE> 
See Notes to Financial Statements

 
                                       47
<PAGE>
 

                     PACIFIC SELECT EXEC SEPARATE ACCOUNT

                         NOTES TO FINANCIAL STATEMENTS


1. SIGNIFICANT ACCOUNTING POLICIES

     The Pacific Select Exec Separate Account (the "Separate Account") is
registered as a unit investment trust under the Investment Company Act of 1940,
as amended, and is currently comprised of ten subaccounts called Variable
Accounts: the Money Market Variable Account, the Managed Bond Variable Account,
the Government Securities Variable Account, the High Yield Bond Variable
Account, the Growth Variable Account, the Equity Income Variable Account, the
Multi-Strategy Variable Account, the International Variable Account, the Equity
Index Variable Account, and the Growth LT Variable Account. The assets in each
Variable Account are invested in shares of the corresponding portfolios of
Pacific Select Fund (the "Fund"), each of which pursues different investment
objectives and policies.

     The Separate Account was established by Pacific Mutual Life Insurance
Company ("Pacific Mutual") on May 12, 1988 and commenced operations on 
November 22, 1988. Under applicable insurance law, the assets and liabilities of
the Separate Account are clearly identified and distinguished from the other
assets and liabilities of Pacific Mutual. The assets of the Separate Account
will not be charged with any liabilities arising out of any other business
conducted by Pacific Mutual, but the obligations of the Separate Account,
including benefits related to variable life insurance, are obligations of
Pacific Mutual.

     The Separate Account held by Pacific Mutual represents funds from 
individual flexible premium variable life policies. The assets of these accounts
are carried at market value.

     The preparation of the accompanying financial statements requires 
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported 
amounts of income and expenses during the reporting period. Actual results could
differ from those estimates.

  A. Valuation of Investments

     Investments in shares of the Fund are valued at the reported net asset
values of the respective portfolios.

  B. Security Transactions

     Transactions are recorded on the trade date. Realized gains and losses on
sales of investments are determined on the basis of identified cost.

  C. Federal Income Taxes

     The operations of the Separate Account will be reported on the Federal
income tax return of Pacific Mutual, which is taxed as a life insurance company
under the provisions of the Tax Reform Act of 1986. Under current tax law, no
Federal income taxes are expected to be paid by Pacific Mutual with respect to
the operations of the Separate Account.

2. DIVIDENDS

     During 1995, the Fund has declared dividends for each portfolio. The
amounts accrued by the Separate Account for its share of the dividends were
reinvested in additional full and fractional shares of the related portfolio.

3. CHARGES AND EXPENSES

     With respect to variable life insurance policies funded by the Separate
Account, Pacific Mutual makes certain deductions from premiums for sales load
and state premium taxes before amounts are allocated to the Separate Account.
Pacific Mutual also makes certain deductions from the net assets of each
Variable Account for the mortality and expense risks Pacific Mutual assumes,
administrative expenses, cost of insurance, charges for optional benefits and
any sales and underwriting surrender charges. The operating expenses of the
Separate Account are paid by Pacific Mutual.

4. RELATED PARTY AGREEMENT

     Pacific Equities Network, a wholly-owned subsidiary of Pacific Mutual, is
the principal underwriter of variable life insurance policies funded by
interests in the Separate Account, and is compensated by Pacific Mutual.
 
                                      48
<PAGE>
 
                     PACIFIC SELECT EXEC SEPARATE ACCOUNT

                   NOTES TO FINANCIAL STATEMENTS (Continued)


5.  SELECTED ACCUMULATION UNIT** INFORMATION

     Selected accumulation unit information for the year ended December 31, 1995
were as follows:

<TABLE>
<CAPTION>
                                                                                                             High
                                                                   Money        Managed      Government      Yield   
                                                                   Market        Bond        Securities      Bond          Growth
                                                                  Variable      Variable      Variable      Variable      Variable
                                                                  Account       Account       Account       Account       Account
                                                                 ---------     ---------     ---------     ---------     --------- 
<S>                                                             <C>           <C>           <C>           <C>           <C>   
ACCUMULATION UNIT

  VALUE:

  Beginning                                                      $  13.76      $  16.68      $  16.23      $  18.29      $  19.00
                                                                 ========      ========      ========      ========      ========
  Ending                                                         $  14.52      $  19.86      $  19.28      $  21.74      $  23.89
                                                                 ========      ========      ========      ========      ========
Number of Units Outstanding at
  End of Period                                                 1,596,322     2,401,282       324,905       671,116     3,663,739

<CAPTION> 
                                                                   Equity        Multi-        Inter-        Equity        Growth
                                                                   Income       Strategy      national       Index          LT
                                                                  Variable      Variable      Variable      Variable      Variable
                                                                  Account       Account       Account       Account       Account
                                                                 ---------     ---------     ---------     ---------     --------- 
<S>                                                             <C>           <C>           <C>           <C>           <C>   
ACCUMULATION UNIT

  VALUE:

  Beginning                                                      $  18.01      $  17.24      $  14.07      $  14.76      $  11.32
                                                                 ========      ========      ========      ========      ========
  Ending                                                         $  23.72      $  21.60      $  15.55      $  20.21      $  15.49
                                                                 ========      ========      ========      ========      ========
Number of Units Outstanding at
  End of Period                                                 2,096,246     2,514,394     3,628,251     3,101,024     3,471,271
 
</TABLE>
__________ 
  **Accumulation Unit: unit of measure used to calculate the value of a Contract
    Owner's interest in a Variable Account during the Accumulation Period.
 
                                      49

<PAGE>
 
 
 
 
                      [THIS PAGE INTENTIONALLY LEFT BLANK]
 
 
 
 
                                       50
<PAGE>
 
 
 
                      PACIFIC SELECT EXEC SEPARATE ACCOUNT
 
                         UNAUDITED FINANCIAL STATEMENTS
                              AS OF JUNE 30, 1996
              AND FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
 
                                       51
<PAGE>

PACIFIC SELECT EXEC SEPARATE ACCOUNT
STATEMENTS OF ASSETS & LIABILITIES
JUNE 30, 1996 (UNAUDITED)
(IN THOUSANDS)

<TABLE> 
<CAPTION> 

                                                                            HIGH
                                                                 MONEY      YIELD      MANAGED    GOVERNMENT             AGGRESSIVE
                                                                MARKET      BOND         BOND     SECURITIES    GROWTH     EQUITY
                                                               VARIABLE   VARIABLE     VARIABLE    VARIABLE    VARIABLE   VARIABLE
                                                               ACCOUNT     ACCOUNT     ACCOUNT     ACCOUNT     ACCOUNT    ACCOUNT
                                                              ---------  ---------    ---------  ---------    ---------  ---------
<S>                                                           <C>        <C>          <C>        <C>          <C>        <C>  
ASSETS
Investments in Pacific Select Fund:

Money Market Portfolio (2,223 shares; cost $22,328).......... $  22,284

High Yield Bond Portfolio (1,949 shares; cost $18,525).......            $  18,542

Managed Bond Portfolio (5,479 shares; cost $57,971)..........                         $  57,524

Government Securities Portfolio (663 shares; cost $6,758)....                                    $   6,759

Growth Portfolio (5,525 shares; cost $94,649)................                                                 $ 108,476 

Aggressive Equity Portfolio (824 shares; cost $9,011)........                                                            $   8,690

Receivables:
  Due from Pacific Mutual Life Insurance Company.............                   28                       8           94         12 
  Fund shares redeemed.......................................     1,442                      15
                                                              ---------  ---------    ---------  ---------    ---------  ---------
TOTAL ASSETS.................................................    23,726     18,570       57,539      6,767      108,570      8,702
                                                              ---------  ---------    ---------  ---------    ---------  ---------

 
LIABILITIES
Payables:
  Due to Pacific Mutual Life Insurance Company...............     1,423                      15
  Fund shares purchased......................................                   28                       8           94         12
                                                              ---------  ---------    ---------  ---------    ---------  ---------
TOTAL LIABILITIES............................................     1,423         28           15          8           94         12
                                                              ---------  ---------    ---------  ---------    ---------  ---------
NET ASSETS................................................... $  22,303  $  18,542    $  57,524  $   6,759    $ 108,476  $   8,690
                                                              =========  =========    =========  =========    =========  ========= 
</TABLE> 

SEE NOTES TO FINANCIAL STATEMENTS.
                                       52
<PAGE>
 
PACIFIC SELECT EXEC SEPARATE ACCOUNT
STATEMENTS OF ASSETS & LIABILITIES (Continued)
JUNE 30, 1996 (Unaudited)
(In thousands)
<TABLE> 
<CAPTION>  
 
                                                      
                                                      
                                                        Growth       Equity       Multi-       Equity        Inter-       Emerging 
                                                          LT         Income      Strategy      Index        national       Markets  
                                                       Variable     Variable     Variable     Variable      Variable      Variable 
                                                        Account      Account      Account      Account       Account       Account
                                                       ---------    ---------    ---------    ----------    ----------    ----------
<S>                                                    <C>          <C>          <C>          <C>           <C>           <C>
ASSETS
 
Investments in Pacific Select Fund:
 
 Growth LT Portfolio (4,695 shares; cost $64,865)..... $  73,684
 
 Equity Income Portfolio (3,506 shares; cost $58,281).              $  64,600
 
 Multi-Strategy Portfolio (4,448 shares; cost $57,650)                           $  61,158
 
 Equity Index Portfolio (4,855 shares; cost $74,831)..                                        $   89,798
 
 International Portfolio (5,515 shares; cost $71,098).                                                      $   77,994
 
 Emerging Markets Portfolio (72 shares; cost $724)....                                                                    $      729

 
Receivables:
 Due from Pacific Mutual Life Insurance Company.......       313          111           70            10           175             4
                                                       ---------    ---------    ---------    ----------    ----------    ----------
TOTAL ASSETS..........................................    73,997       64,711       61,228        89,808        78,169           733
                                                       ---------    ---------    ---------    ----------    ----------    ----------


LIABILITIES
Payables:
 Fund shares purchased................................       313          111           70            10           175             4
                                                       ---------    ---------    ---------    ----------    ----------    ----------
TOTAL LIABILITIES.....................................       313          111           70            10           175             4
                                                       ---------    ---------    ---------    ----------    ----------    ----------
 

NET ASSETS............................................ $  73,684    $  64,600    $  61,158    $   89,798    $   77,994    $      729
                                                       =========    =========    =========    ==========    ==========    ==========

</TABLE> 

See Notes to Financial Statements.

                                      53
 

<PAGE>
 
PACIFIC SELECT EXEC SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1996 (Unaudited)
(In thousands)
 
<TABLE> 
<CAPTION> 
                                                                      High                       
                                                     Money           Yield        Managed      Government                Aggressive
                                                     Market           Bond         Bond        Securities     Growth       Equity
                                                    Variable        Variable     Variable       Variable     Variable     Variable
                                                     Account        Account       Account       Account       Account      Account
                                                     -------        -------       -------       -------       -------      -------  

<S>                                                 <C>            <C>           <C>           <C>           <C>           <C> 
INVESTMENT INCOME
 Dividends........................................  $   563        $   843       $ 2,040       $   259      $  6,332       $     2
                                                    -------        -------       -------       -------      --------       -------
NET INVESTMENT INCOME.............................      563            843         2,040           259         6,332             2
                                                    -------        -------       -------       -------      --------       -------

REALIZED AND UNREALIZED GAIN (LOSS)
 ON INVESTMENTS
 Net realized gain (loss) from security
  transactions....................................                      75          (124)           36           600
 Net unrealized appreciation
  (depreciation) on investments...................       18           (575)       (2,448)         (421)        5,130          (321)
                                                    -------        -------       -------       -------      --------       -------

NET REALIZED AND UNREALIZED GAIN
 (LOSS) ON INVESTMENTS............................       18           (500)       (2,572)         (385)        5,730          (321)
                                                    -------        -------       -------       -------      --------       -------

NET INCREASE (DECREASE) IN NET ASSETS
 RESULTING FROM OPERATIONS........................  $   581        $   343       $  (532)      $  (126)     $ 12,062       $  (319)
                                                    =======        =======       =======       =======      ========       =======
</TABLE> 
 
 
See Notes to Financial Statements.
 
                                       54


<PAGE>
 
PACIFIC SELECT EXEC SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS (Continued)
FOR THE PERIOD ENDED JUNE 30, 1996 (Unaudited)
(In thousands)
 
 
<TABLE> 
<CAPTION> 
                                                    Growth        Equity         Multi-       Equity          Inter-      Emerging
                                                      LT          Income        Strategy      Index          national     Markets
                                                   Variable      Variable       Variable     Variable        Variable     Variable
                                                   Account       Account        Account      Account         Account      Account
                                                   -------       -------        -------      -------         -------      -------
<S>                                                <C>           <C>            <C>          <C>             <C>          <C> 
INVESTMENT INCOME
 Dividends.......................................  $   317       $ 2,921        $ 3,612       $ 2,739        $   678
                                                   -------       -------        -------       -------        -------
NET INVESTMENT INCOME............................      317         2,921          3,612         2,739            678
                                                   -------       -------        -------       -------        -------
REALIZED AND UNREALIZED GAIN (LOSS)
 ON INVESTMENTS
 Net realized gain from security
  transactions...................................    2,087           452            240           508            167
 Net unrealized appreciation
  (depreciation) on investments..................    4,558           244         (1,965)        3,843          5,486       $     4
                                                   -------       -------        -------       -------        -------       -------

NET REALIZED AND UNREALIZED GAIN
 (LOSS) ON INVESTMENTS...........................    6,645           696         (1,725)        4,351          5,653             4
                                                   -------       -------        -------       -------        -------       -------

NET INCREASE IN NET ASSETS
 RESULTING FROM OPERATIONS.......................  $ 6,962       $ 3,617        $ 1,887       $ 7,090        $ 6,331       $     4
                                                   =======       =======        =======       =======        =======       =======
</TABLE> 
 
 
See Notes to Financial Statements.
 
                                       55


<PAGE>

PACIFIC EXEC SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 1996 (Unaudited)
(In thousands)

<TABLE> 
<CAPTION> 
                                                        
                                                        
                                                        High                                
                                            Money       Yield       Managed     Government                   Aggressive
                                            Market      Bond         Bond       Securities      Growth         Equity         
                                           Variable    Variable     Variable     Variable       Variable       Variable
                                           Account     Account      Account      Account        Account        Account
                                           -------     -------      -------      -------        -------        -------
<S>                                     <C>          <C>         <C>          <C>           <C>             <C>      
INCREASE (DECREASE) IN NET
 ASSETS FROM OPERATIONS
 Net investment income ..............   $      563   $     843   $    2,040   $      259    $     6,332     $        2
 Net realized gain (loss) from                                                                                          
  security transactions .............                       75         (124)          36            600                 
 Net unrealized appreciation                                                                                            
  (depreciation) on investments .....           18        (575)      (2,448)        (421)         5,130           (321)
                                        ----------   ---------   ----------   ----------    -----------     ----------
NET INCREASE (DECREASE) IN NET
 ASSETS RESULTING FROM OPERATIONS ....         581         343         (532)        (126)        12,062           (319)
                                        ----------   ---------   ----------   ----------    -----------     ----------

INCREASE (DECREASE) IN NET
 ASSETS FROM POLICY TRANSACTIONS
 Transfer of net premiums ...........       26,333       3,688       12,717          956         16,252             96
 Transfers--policy charges and                                                                                          
  deductions ........................       (1,318)       (679)      (1,238)        (285)        (3,737)           (36) 
 Transfers in (from other                                                                                              
  variable accounts) ................       16,232       4,039        3,669        1,108         30,709          9,079 
 Transfers out (to other                                                                                                
  variable accounts) ................      (41,596)     (3,043)      (4,315)        (989)       (33,024)           (89) 
 Transfers--other ...................       (1,107)       (397)        (467)        (169)        (1,305)           (41)
                                        ----------   ---------   ----------   ----------    -----------     ----------
NET INCREASE (DECREASE) IN NET
 ASSETS DERIVED FROM POLICY 
 TRANSACTIONS .......................       (1,456)      3,608       10,366          621          8,895          9,009
                                        ----------   ---------   ----------   ----------    -----------     ----------
  
NET INCREASE (DECREASE) IN NET                                                                                         
 ASSETS .............................         (875)      3,951        9,834          495         20,957          8,690 
 
NET ASSETS
 Beginning of year ..................       23,178      14,591       47,690        6,264         87,519              
                                        ----------   ---------   ----------   ----------    -----------     ----------
 End of year ........................   $   22,303   $  18,542    $  57,524    $   6,759     $  108,476     $    8,690
                                        ==========   =========   ==========   ==========    ===========     ==========
</TABLE> 
 
 
See Notes to Financial Statements.

                                       56
 

<PAGE>
 
PACIFIC SELECT EXEC SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
FOR THE PERIOD ENDED JUNE 30, 1996 (Unaudited)
(In thousands)
 
<TABLE> 
<CAPTION> 
                                              Growth      Equity     Multi-       Equity     Inter-     Emerging
                                                LT        Income     Strategy     Index      national   Markets
                                             Variable    Variable    Variable    Variable    Variable   Variable
                                             Account     Account     Account     Account     Account    Account
                                             --------  ----------   ---------   ---------   ---------   --------
<S>                                        <C>          <C>         <C>         <C>         <C>         <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
 Net investment income ..............      $      317   $   2,921   $   3,612   $   2,739   $     678
 Net realized gain from security                                                                                 
  transactions ......................           2,087         452         240         508         167            
 Net unrealized appreciation                                                                                     
  (depreciation) on investments .....           4,558         244      (1,965)      3,843       5,486   $      4 
                                           ----------   ---------   ---------   ---------   ---------   -------- 
NET INCREASE IN NET ASSETS            
 RESULTING FROM OPERATIONS ..........           6,962       3,617       1,887       7,090       6,331          4
                                           ----------   ---------   ---------   ---------   ---------   --------
 
INCREASE (DECREASE) IN NET ASSETS
 FROM POLICY TRANSACTIONS
 Transfer of net premiums ...........          11,347      13,747       7,770      16,120      13,573         73
 Transfers--policy charges and                                                                                    
  deductions ........................          (2,436)     (1,920)     (1,703)     (2,302)     (2,507)        (6) 
 Transfers in (from other variable                                                                                
  accounts) .........................          24,610       4,139       1,841      12,203      12,512        674  
 Transfers out (to other variable                                                                                 
  accounts) .........................         (19,700)     (3,716)     (1,335)     (5,338)     (7,632)       (16) 
 Transfers--other ...................            (858)       (983)     (1,608)       (650)       (710)
                                           ----------   ---------   ---------   ---------   ---------   --------
NET INCREASE IN NET ASSETS
 DERIVED FROM POLICY TRANSACTIONS ...          12,963      11,267       4,965      20,033      15,236        725
                                           ----------   ---------   ---------   ---------   ---------   --------
 
NET INCREASE IN NET ASSETS ..........          19,925      14,884       6,852      27,123      21,567        729
 
NET ASSETS
 Beginning of year ..................          53,759      49,716      54,306      62,675      56,427
                                           ----------   ---------   ---------   ---------   ---------   --------
 End of year ........................      $   73,684   $  64,600   $  61,158   $  89,798   $  77,994   $    729
                                           ==========   =========   =========   =========   =========   ========
</TABLE> 
 
 
See Notes to Financial Statements.
 
                                       57


<PAGE>

PACIFIC SELECT EXEC SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
(In thousands)
 
<TABLE> 
<CAPTION> 
                                                                
                                                                             High   
                                                               Money        Yield       Managed     Government
                                                               Market        Bond         Bond      Securities     Growth
                                                              Variable     Variable     Variable     Variable     Variable
                                                               Account      Account      Account      Account      Account
                                                               -------      -------      -------      -------      -------
INCREASE (DECREASE) IN NET ASSETS
  FROM OPERATIONS
<S>                                                            <C>          <C>          <C>          <C>          <C> 
  Net investment income....................................    $  1418      $   944      $ 2,208      $   294      $   656
  Net realized gain (loss) from security transactions......         31          (92)        (141)         (41)      (1,046) 
  Net unrealized appreciation on investments...............         65        1,042        4,063          624       16,423
                                                               -------      -------      -------      -------      ------- 
NET INCREASE IN NET ASSETS
  RESULTING FROM OPERATIONS................................      1,514        1,894        6,130          877       16,033
                                                               -------      -------      -------      -------      ------- 
     
 
INCREASE (DECREASE) IN NET ASSETS FROM
  POLICY TRANSACTIONS
  Transfer of net premiums.................................     72,942        5,029        7,113        1,962       25,318
  Transfers--policy charges and deductions*................     (3,157)      (1,065)      (1,983)        (490)      (6,369)
  Transfers in (from other variable accounts)..............     29,120        7,781       15,186        2,845       30,352
  Transfers out (to other variable accounts)...............   (110,816)      (6,185)      (2,813)      (2,390)     (22,297)
  Transfers--other*........................................     (1,021)        (242)        (508)        (449)      (2,935)
                                                               -------      -------      -------      -------      ------- 
 
NET INCREASE (DECREASE) IN NET ASSETS
  DERIVED FROM POLICY TRANSACTIONS.........................    (12,932)       5,318       16,995        1,478       24,069
                                                               -------      -------      -------      -------      ------- 
 
NET INCREASE (DECREASE) IN NET ASSETS......................    (11,418)       7,212       23,125        2,355       40,102
 
NET ASSETS
  Beginning of year........................................     34,596        7,379       24,565        3,909       47,417
                                                               -------      -------      -------      -------      ------- 
  End of year..............................................    $23,178      $14,591      $47,690      $ 6,264      $87,519
                                                               =======      =======      =======      =======      ======= 

 
</TABLE> 
 
*Prior year balances have been restated to conform with current year
 presentation.
 
 
See Notes to Financial Statements.
 
                                       58
 

<PAGE>

PACIFIC SELECT EXEC SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
FOR THE YEAR ENDED DECEMBER 31, 1995
(In thousands)
 
<TABLE> 
<CAPTION> 
                                                               Growth        Equity       Multi-      Equity      Inter-
                                                                 LT          Income      Strategy      Index      national
                                                               Variable     Variable     Variable     Variable    Variable
                                                               Account      Account      Account      Account      Account
                                                               -------      -------      -------      -------      -------
<S>                                                            <C>         <C>           <C>          <C>          <C>  
INCREASE (DECREASE) IN NET ASSETS
  FROM OPERATIONS
  Net investment income......................................  $ 3,592     $   577       $ 1,401      $ 1,015      $ 1,070
  Net realized gain from security transactions...............    1,225         785            71        2,069          574
  Net unrealized appreciation on investments.................    3,892       7,737         7,406       10,698        2,646
                                                               -------     -------       -------      -------      -------
NET INCREASE IN NET ASSETS
  RESULTING FROM OPERATIONS..................................    8,709       9,099         8,878       13,782        4,290
                                                               -------     -------       -------      -------      -------
 
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
  Transfer of net premiums...................................   12,930      13,169        14,278       11,713       16,778
  Transfers--policy charges and deductions*..................   (2,765)     (2,773)       (2,760)      (2,873)      (3,967)
  Transfers in (from other variable accounts)................   32,699      16,222         5,601       17,636       25,476
  Transfers out (to other variable accounts).................   (8,074)     (4,940)       (2,670)      (6,615)     (16,093)
  Transfers--other*..........................................   (1,148)     (1,283)       (1,192)      (1,361)      (1,211)
                                                               -------     -------       -------      -------      -------
NET INCREASE IN NET ASSETS
  DERIVED FROM POLICY TRANSACTIONS...........................   33,642      20,395        13,257       18,500       20,983
                                                               -------     -------       -------      -------      -------

NET INCREASE IN NET ASSETS                                      42,351      29,494        22,135       32,282       25,273
 
NET ASSETS
  Beginning of year..........................................   11,408      20,222        32,171       30,393       31,154
                                                               -------     -------       -------      -------      -------
  End of year................................................  $53,759     $49,716       $54,306      $62,675      $56,427
                                                               =======     =======       =======      =======      =======
</TABLE> 

*Prior year balances have been restated to conform with current year 
 presentation.

See Notes to Financial Statements.

                                       59
 

<PAGE>

                     PACIFIC SELECT EXEC SEPARATE ACCOUNT

                         NOTES TO FINANCIAL STATEMENTS
                                  (Unaudited)


1. SIGNIFICANT ACCOUNTING POLICIES

   The Pacific Select Exec Separate Account (the "Separate Account") is
registered as a unit investment trust under the Investment Company Act of 1940,
as amended, and is currently comprised of twelve subaccounts called Variable
Accounts:  the Money Market Variable Account, the High Yield Bond Variable
Account, the Managed Bond Variable Account, the Government Securities Variable
Account, the Growth Variable Account, the Aggressive Equity Variable Account
(Note 5), the Growth LT Variable Account, the Equity Income Variable Account,
the Multi-Strategy Variable Account, the Equity Index Variable Account, the
International Variable Account, and the Emerging Markets Variable Account (Note
5). The assets in each Variable Account are invested in shares of the
corresponding portfolios of Pacific Select Fund (the "Fund"), each of which
pursues different investment objectives and policies.

   The Separate Account was established by Pacific Mutual Life Insurance Company
("Pacific Mutual") on May 12, 1988 and commenced operations on November 22,
1988. Under applicable insurance law, the assets and liabilities of the Separate
Account are clearly identified and distinguished from the other assets and
liabilities of Pacific Mutual. The assets of the Separate Account will not be
charged with any liabilities arising out of any other business conducted by
Pacific Mutual, but the obligations of the Separate Account, including benefits
related to variable life insurance, are obligations of Pacific Mutual.

   The Separate Account held by Pacific Mutual represents funds from individual
flexible premium variable life policies.  The assets of these accounts are
carried at market value.

   The preparation of the accompanying financial statements requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
income and expenses during the reporting period.  Actual results could differ
from those estimates.

A. Valuation of Investments

   Investments in shares of the Fund are valued at the reported net asset values
of the respective portfolios.

B. Security Transactions

   Transactions are recorded on the trade date. Realized gains and losses on
sales of investments are determined on the basis of identified cost.

C. Federal Income Taxes

   The operations of the Separate Account will be reported on the Federal income
tax return of Pacific Mutual, which is taxed as a life insurance company under
the provisions of the Tax Reform Act of 1986.  Under current tax law, no Federal
income taxes are expected to be paid by Pacific Mutual with respect to the
operations of the Separate Account.

2. DIVIDENDS

   During 1996, the Fund has declared dividends for each portfolio. The amounts
accrued by the Separate Account for its share of the dividends were reinvested
in additional full and fractional shares of the related portfolio.

3. CHARGES AND EXPENSES

   With respect to variable life insurance policies funded by the Separate
Account, Pacific Mutual makes certain deductions from premiums for sales load
and state premium taxes before amounts are allocated to the Separate Account.
Pacific Mutual also makes certain deductions from the net assets of each
Variable Account for the mortality and expense risks Pacific Mutual assumes,
administrative expenses, cost of insurance, charges for optional benefits and
any sales and underwriting surrender charges.  The operating expenses of the
Separate Account are paid by Pacific Mutual.

4. RELATED PARTY AGREEMENT

   Pacific Mutual Distributors, Inc. (formerly known as Pacific Equities
Network), a wholly-owned subsidiary of Pacific Mutual, is the principal
underwriter of variable life insurance policies funded by interests in the
Separate Account, and is compensated by Pacific Mutual.

                                       60



 

<PAGE>
 
                     PACIFIC SELECT EXEC SEPARATE ACCOUNT

                   NOTES TO FINANCIAL STATEMENTS (Continued)
                                  (Unaudited)




5. AGGRESSIVE EQUITY VARIABLE ACCOUNT AND EMERGING MARKETS VARIABLE ACCOUNT

   The Separate Account has organized and registered with the Securities and
Exchange Commission two new Variable Accounts, the Aggressive Equity Variable
Account and the Emerging Markets Variable Account.  Both Variable Accounts
commenced operations on April 8, 1996.

6. SELECTED ACCUMULATION UNIT** INFORMATION

   Selected accumulation unit information for the period ended June 30, 1996
were as follows:



<TABLE>
<CAPTION>
                                                    High
                                     Money          Yield        Managed     Government                  Aggressive
                                     Market         Bond          Bond       Securities      Growth        Equity
                                    Variable      Variable      Variable      Variable      Variable      Variable
                                     Account       Account       Account       Account       Account       Account
                                     -------       -------       -------       -------       -------       -------
<S>                                 <C>           <C>           <C>           <C>           <C>           <C> 
ACCUMULATION UNIT

  VALUE:

  Beginning                         $  14.52      $  21.74      $  19.86      $  19.28      $  23.89      $  10.00
                                    ========      ========      ========      ========      ========      ========
  Ending                            $  14.88      $  22.24      $  19.59      $  18.88      $  26.97      $  10.62
                                    ========      ========      ========      ========      ========      ========
Number of Units Outstanding at
  End of Period                    1,499,306       833,813     2,937,012       358,007     4,022,216       817,991

<CAPTION> 
                                     Growth        Equity        Multi-        Equity        Inter-       Emerging
                                       LT          Income       Strategy       Index        national       Markets
                                    Variable      Variable      Variable      Variable      Variable      Variable
                                     Account       Account       Account       Account       Account       Account
                                     -------       -------       -------       -------       -------       -------
<S>                                 <C>           <C>           <C>           <C>           <C>           <C> 
ACCUMULATION UNIT

  VALUE:

  Beginning                         $  15.49      $  23.72      $  21.60      $  20.21      $  15.55      $  10.00
                                    ========      ========      ========      ========      ========      ========
  Ending                            $  17.30      $  25.37      $  22.33      $  22.18      $  17.18      $  10.34
                                    ========      ========      ========      ========      ========      ========
Number of Units Outstanding at
  End of Period                    4,258,959     2,545,935     2,739,343     4,048,911     4,540,397        70,438
</TABLE>



- ------------
  ** Accumulation Unit: unit of measure used to calculate the value of a
     Contract Owner's interest in a Variable Account during the Accumulation
     Period.


                                       61
<PAGE>
 
 
 
 
                      [THIS PAGE INTENTIONALLY LEFT BLANK]
 
 
 
 
                                       62
<PAGE>
 
 
                     PACIFIC MUTUAL LIFE INSURANCE COMPANY
 
                          AUDITED FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 1995 AND 1994
 
                                       63
<PAGE>
 
INDEPENDENT AUDITORS' REPORT
- ----------------------------
 
Pacific Mutual Life Insurance Company:
 
We have audited the accompanying statements of financial position of Pacific
Mutual Life Insurance Company as of December 31, 1995 and 1994, and the related
statements of operations and surplus, and of cash flow for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
 
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Pacific Mutual Life Insurance Company as of
December 31, 1995 and 1994, and the results of its operations and its cash flow
for the years then ended, in conformity with accounting practices prescribed or
permitted by the Insurance Department of the State of California and with
generally accepted accounting principles.
 
DELOITTE & TOUCHE LLP
 
Costa Mesa, California
February 23, 1996
 
                                       64
<PAGE>
 
                     Pacific Mutual Life Insurance Company
 
                        STATEMENTS OF FINANCIAL POSITION
 
<TABLE>
<CAPTION>
                                                      December 31,
                                                    1995        1994
- ------------------------------------------------------------------------
                                                     (In Thousands)
<S>                                              <C>         <C>
ASSETS
  Bonds                                          $ 6,699,489 $ 6,669,853
  Preferred stocks                                   156,097     132,604
  Common stocks                                       54,504      57,874
  Unconsolidated subsidiaries                        182,040     196,401
  Mortgage loans                                   1,388,743   1,421,182
  Real estate                                        145,178     157,507
  Home office properties                              48,446      51,419
  Policy loans                                     2,700,544   2,312,455
  Cash and short-term investments                    262,527      97,745
  Investment income due and accrued                  135,607     125,534
  Premiums due and uncollected, and other assets     295,159     245,243
  Separate account assets                          5,520,478   3,260,374
- ------------------------------------------------------------------------
TOTAL ASSETS                                     $17,588,812 $14,728,191
========================================================================
LIABILITIES AND SURPLUS
Liabilities
  Policy reserves                                $ 7,204,362 $ 6,476,634
  Deposit funds                                    3,262,340   3,298,915
  Other liabilities                                  686,989     885,638
  Asset valuation reserve                            191,392     179,006
  Separate account liabilities                     5,520,478   3,260,374
- ------------------------------------------------------------------------
Total Liabilities                                 16,865,561  14,100,567
Surplus                                              723,251     627,624
- ------------------------------------------------------------------------
TOTAL LIABILITIES AND SURPLUS                    $17,588,812 $14,728,191
========================================================================
</TABLE>
 
See Notes to Financial Statements
 
                                       65
<PAGE>
 
                     Pacific Mutual Life Insurance Company
 
                      STATEMENTS OF OPERATIONS AND SURPLUS
 
<TABLE>
<CAPTION>
                                                     Years Ended December 31,
                                                         1995         1994
- -------------------------------------------------------------------------------
                                                          (In Thousands)
<S>                                                  <C>          <C>
REVENUES
  Premiums, annuity considerations and deposit funds   $2,919,920   $2,180,409
  Net investment income                                   945,546      879,116
  Other income                                              5,685        5,073
- -------------------------------------------------------------------------------
TOTAL REVENUES                                          3,871,151    3,064,598
- -------------------------------------------------------------------------------
BENEFITS AND EXPENSES
  Current and future policy benefits                    3,371,448    2,659,601
  Operating expenses                                      309,588      249,018
  Premium and other taxes (excluding tax on capital
   gains)                                                  35,168       28,705
  Dividends to policyowners                                16,639       17,162
- -------------------------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES                             3,732,843    2,954,486
- -------------------------------------------------------------------------------
INCOME BEFORE FEDERAL INCOME TAXES                        138,308      110,112
Federal income taxes                                       59,470       41,510
- -------------------------------------------------------------------------------
NET GAIN FROM OPERATIONS                                   78,838       68,602
NET REALIZED CAPITAL GAINS                                  6,311       12,424
- -------------------------------------------------------------------------------
NET INCOME                                             $   85,149   $   81,026
===============================================================================
SURPLUS
Net income                                             $   85,149   $   81,026
Other surplus transactions, net                            10,478      (36,178)
- -------------------------------------------------------------------------------
Increase in surplus                                        95,627       44,848
Surplus, beginning of year                                627,624      582,776
- -------------------------------------------------------------------------------
SURPLUS, END OF YEAR                                   $  723,251   $  627,624
===============================================================================
</TABLE>
 
See Notes to Financial Statements
 
                                       66
<PAGE>
 
                     Pacific Mutual Life Insurance Company
 
                            STATEMENTS OF CASH FLOW
 
<TABLE>
<CAPTION>
                                                    Years Ended December 31,
                                                        1995          1994
- -------------------------------------------------------------------------------
                                                         (In Thousands)
<S>                                                 <C>           <C>
CASH FLOW FROM OPERATING ACTIVITIES
Receipts
  Premiums, annuity considerations and deposit
   funds                                            $  2,687,698  $  1,687,583
  Net investment income                                  927,918       809,791
  Allowances and reserve adjustments on reinsurance
   ceded                                                 187,380       491,363
  Other                                                   13,885        23,862
Payments
  Policy benefit payments                             (1,677,788)   (1,408,650)
  Net policy loans                                      (388,320)     (352,358)
  Operating expenses                                    (278,138)     (247,437)
  Net transfer to separate accounts                   (1,178,622)     (594,284)
  Premium and other taxes                                (41,116)      (34,795)
  Dividends to policyowners                              (16,715)      (17,319)
  Federal income taxes                                   (35,779)      (23,995)
- -------------------------------------------------------------------------------
NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES           200,403       333,761
- -------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds
  Bonds                                                2,496,486     2,937,210
  Stocks                                                 208,235       139,785
  Mortgage loans                                         261,514       390,642
  Real estate                                             21,419        20,163
  Other investments                                       49,089        47,132
Payments for the purchase of
  Bonds                                               (2,431,687)   (3,673,859)
  Stocks                                                (222,678)     (126,823)
  Mortgage loans                                        (239,355)     (230,859)
  Real estate                                             (4,716)      (17,466)
  Other investments                                     (124,164)     (114,106)
- -------------------------------------------------------------------------------
NET CASH FLOW PROVIDED BY (USED IN)
  INVESTING ACTIVITIES                                    14,143      (628,181)
- -------------------------------------------------------------------------------
</TABLE>
(Continued)
 
See Notes to Financial Statements
 
                                       67
<PAGE>
 
                     Pacific Mutual Life Insurance Company
 
                            STATEMENTS OF CASH FLOW
 
<TABLE>
<CAPTION>
                                                    Years Ended December 31,
(Continued)                                                1995        1994
- ------------------------------------------------------------------------------
                                                         (In Thousands)
<S>                                                 <C>          <C>
CASH FLOW FROM FINANCING ACTIVITIES
Issuance (repayment) of short-term borrowings       $   (49,764) $     49,764
- ------------------------------------------------------------------------------
NET CASH FLOW PROVIDED BY (USED IN) FINANCING
 ACTIVITIES                                             (49,764)       49,764
- ------------------------------------------------------------------------------
Increase (decrease) in cash and short-term
 investments                                            164,782      (244,656)
Cash and short-term investments, beginning of year       97,745       342,401
- ------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS, END OF YEAR        $   262,527  $     97,745
==============================================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Interest paid                                     $    18,376  $     22,120
==============================================================================
</TABLE>
 
See Notes to Financial Statements
 
                                       68
<PAGE>
 
                     Pacific Mutual Life Insurance Company
 
                         NOTES TO FINANCIAL STATEMENTS
 
1.  SIGNIFICANT ACCOUNTING POLICIES
 
    DESCRIPTION OF BUSINESS
 
    Pacific Mutual Life Insurance Company ("Pacific Mutual") was established
    in 1868 and is organized under the laws of the State of California as a
    mutual life insurance company. Pacific Mutual conducts business in every
    state except New York.
 
    Pacific Mutual, including its subsidiaries and affiliates, has primary
    business segments which consist of life insurance, annuities, pension
    products, group employee benefits and investment management and advisory
    services. These primary business segments provide products for
    individuals and corporations and offer a range of investment products to
    institutions and pension plans.
 
    BASIS OF PRESENTATION
 
    Pacific Mutual's financial statements are prepared in accordance with
    accounting practices prescribed or permitted by the Insurance Department
    of the State of California, which are currently considered generally
    accepted accounting principles ("GAAP") for mutual life insurance
    companies. Prescribed statutory accounting practices include a variety of
    publications of the National Association of Insurance Commissioners
    ("NAIC"), as well as state laws, regulations, and general administrative
    rules. Permitted statutory accounting practices encompass all accounting
    practices not so prescribed. The financial statements of Pacific Mutual
    are not consolidated with those of its subsidiaries.
 
    The Financial Accounting Standards Board ("FASB") has issued certain
    pronouncements effective for 1996 financial statements and thereafter
    that will no longer allow statutory financial statements of mutual life
    insurance companies to be described as being prepared in conformity with
    GAAP.
 
    Upon the effective date of these pronouncements, in order for their
    financial statements to be described as being prepared in accordance with
    GAAP, mutual life insurance companies and their insurance subsidiaries
    will be required to adopt all applicable authoritative GAAP
    pronouncements in any general purpose financial statements that they may
    issue. Pacific Mutual intends to issue 1996 general purpose financial
    statements reflecting the adoption of all applicable GAAP pronouncements.
 
    INVESTMENTS
 
    Bonds qualifying for amortization are carried at amortized cost; all
    other bonds are carried at prescribed values. Preferred stocks are
    principally stated at amortized cost. Unaffiliated common stocks are
    carried at market value. Investments in unconsolidated subsidiaries are
    reported on the equity method of accounting, except for Pacific
    Corinthian Life Insurance Company ("PCL") (Note 2) which is carried at
    cost.
 
    Mortgage loans and policy loans are stated at unpaid principal balances.
    Real estate is valued at the lower of depreciated cost or market, less
    related mortgage debt. Real estate is depreciated using the straight-line
    method over 30 years.
 
    Short-term investments generally mature within a year and are carried at
    amortized cost which approximates estimated fair value.
 
    The Asset Valuation Reserve ("AVR") is computed in accordance with a
    prescribed formula and is designed to stabilize surplus against valuation
    and credit-related losses for certain invested assets. Changes to the AVR
    are reported as direct additions or deductions from surplus. The Interest
    Maintenance Reserve ("IMR"), included in other liabilities on the
    accompanying statements of financial position, results in the deferral of
    after-tax realized capital gains and losses attributable to interest rate
    fluctuations on fixed income investments. These capital gains and losses
    are amortized into investment income over the remaining life of the
    investment sold. The IMR was $25.3 million and $13.1 million as of
    December 31, 1995 and 1994, respectively.
 
 
                                       69
<PAGE>
 
                     Pacific Mutual Life Insurance Company
 
                         NOTES TO FINANCIAL STATEMENTS
 
1.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
    Net realized capital gains and losses are determined on the specific
    identification method and are presented net of federal capital gains tax
    of $18.5 million and $(2.3) million and transfers to the IMR of $22.6
    million and $(.4) million for the years ended December 31, 1995 and 1994,
    respectively.
 
    Derivatives which qualify for hedge accounting are valued consistently
    with the hedged items. Realized hedged gains and losses on fixed income
    contracts are deferred and amortized over the average life of the related
    hedged assets or insurance liabilities. Realized gains and losses on
    equity securities, which are marked to market, are recognized
    immediately. Derivatives which do not qualify for hedge accounting are
    valued at market value through surplus while still held and when realized
    through income.
 
    On November 15, 1994, Pacific Financial Asset Management Corporation
    ("PFAMCo"), a wholly-owned, subsidiary of Pacific Mutual, and five of its
    subsidiaries (Pacific Investment Management Company and subsidiaries,
    Parametric Portfolio Associates, Inc., Cadence Capital Management
    Corporation, NFJ Investment Group, Inc. and Blairlogie Capital Management
    Limited) entered into an agreement and plan of consolidation with Thomson
    Advisory Group L.P., a Delaware limited partnership with publicly traded
    units, to merge into a newly capitalized partnership named PIMCO Advisors
    L.P. Collectively, PFAMCo and various of its subsidiaries beneficially
    own approximately 42% of the outstanding general and limited partner
    units of PIMCO Advisors L.P. as of December 31, 1995 and 1994. Net cash
    distributions received on these units are recorded as income as permitted
    by the Insurance Department of the State of California.
 
    On December 21, 1995, Pacific Mutual completed a subsidiary
    reorganization in which PFAMCo became a direct, wholly-owned subsidiary
    of Pacific Mutual. Prior to that PFAMCo was a wholly-owned second-tier
    subsidiary of Pacific Mutual. The intermediate company, Pacific Financial
    Holding Company ("PFHC") and certain of its assets and liabilities were
    merged into PFAMCo in connection with this reorganization. The remaining
    assets were merged into Pacific Mutual which consisted of investments in
    subsidiaries as follows: Pacific Equities Network, PM Group Life
    Insurance Company and PFAMCo.
 
    POLICY RESERVES AND DEPOSIT FUNDS
 
    Life insurance reserves are valued using the net level premium method,
    the Commissioners' Reserve Valuation Method, or other modified reserve
    methods.
 
    Reserves for individual annuities are maintained principally on the
    Commissioners' Annuity Reserve Valuation Method. Group annuity contract
    reserves are valued using the net single premium method.
 
    The liability for deposit funds, including guaranteed interest contracts,
    is based primarily upon and is not less than the policyowners' equity in
    their deposit accounts, including credited interest.
 
    REVENUES AND EXPENSES
 
    Premiums are recognized as income over the premium paying period.
    Deposits made in connection with annuity contracts are recognized as
    revenue when received. Investment income is recorded as earned.
 
    Expenses, including policy acquisition costs, such as commissions, and
    Federal income taxes are charged to operations as incurred.
 
    DIVIDENDS
 
    Dividends are provided based on dividend formulas approved by the Board
    of Directors and reviewed for reasonableness and equitable treatment of
    policyowners by an independent consulting actuary.
 
                                       70
<PAGE>
 
                     Pacific Mutual Life Insurance Company
 
                         NOTES TO FINANCIAL STATEMENTS
 
1.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
    FEDERAL INCOME TAXES
 
    Pacific Mutual is taxed as a life insurance company for Federal income
    tax purposes. Pacific Mutual's income tax return is consolidated with all
    its includable domestic subsidiaries except PCL. The amount of Federal
    income tax expense includes an equity tax calculated by a prescribed
    formula that incorporates a differential earnings rate between stock and
    mutual life insurance companies. Under prescribed statutory accounting
    practices, deferred tax assets and liabilities are not recorded. The
    difference between the effective tax rate and the statutory tax rate of
    35% for 1995 and 1994 is primarily due to certain policy acquisition
    costs being deferred and amortized over a ten-year period for tax
    purposes, reserve differences, non-taxable investment income and the
    equity tax.
 
    OTHER SURPLUS TRANSACTIONS
 
    Other surplus transactions consist primarily of unrealized capital gains
    and losses, changes in nonadmitted assets, and changes in the AVR.
 
    SEPARATE ACCOUNTS
 
    Separate account assets are recorded at market value and the related
    liabilities represent segregated contract owner funds maintained in
    accounts with individual investment objectives. The investment results of
    separate account assets generally pass through to separate account policy
    owners and contract owners.
 
    FAIR VALUE OF FINANCIAL INSTRUMENTS
 
    The estimated fair value of financial instruments disclosed in Notes 3
    and 4 have been determined using available market information and
    appropriate valuation methodologies. However, considerable judgment is
    required to interpret market data to develop the estimates of fair value.
    Accordingly, the estimates presented may not be indicative of the amounts
    Pacific Mutual could realize in a current market exchange. The use of
    different market assumptions and/or estimation methodologies could have a
    significant effect on the estimated fair value amounts.
 
    USE OF ESTIMATES
 
    The preparation of financial statements in conformity with accounting
    practices prescribed or permitted by regulatory authorities and generally
    accepted accounting principles requires management to make estimates and
    assumptions that affect the reported amounts of assets and liabilities at
    the date of the financial statements and the reported amounts of revenues
    and expenses during the reporting period. Actual results could differ
    from those estimates.
 
    RECLASSIFICATIONS
 
    Certain prior year amounts have been reclassified to conform to the 1995
    financial statement presentation.
 
2.  REHABILITATION OF FIRST CAPITAL LIFE INSURANCE COMPANY
 
    Pursuant to a five-year rehabilitation agreement approved by a California
    Superior Court and the Insurance Department of the State of California in
    July 1992, Pacific Mutual, through its wholly-owned subsidiary, PCL, will
    facilitate the rehabilitation of First Capital Life Insurance Company
    ("FCL"). In accordance with the rehabilitation agreement, insurance
    policies of FCL were restructured and assumed by PCL on December 31,
    1992.
 
    The rehabilitation agreement provides for the holders of restructured
    policies to share in a substantial percentage of the unallocated surplus
    of PCL at the end of the rehabilitation period. Policyholders have the
    option to surrender their restructured policies with reduced benefits
    during this five-year period. During the rehabilitation
 
                                       71
<PAGE>
 
                     Pacific Mutual Life Insurance Company
 
                         NOTES TO FINANCIAL STATEMENTS
 
2.  REHABILITATION OF FIRST CAPITAL LIFE INSURANCE COMPANY (CONTINUED)
    plan period, PCL is prohibited from issuing new insurance policies. At
    the end of the rehabilitation period, PCL will merge into Pacific Mutual,
    with Pacific Mutual as the surviving entity. Substantially all of the
    assets and certain of the liabilities of FCL were assumed by PCL on
    December 31, 1992, pursuant to an assumption reinsurance agreement and
    asset purchase agreement.
 
    In accordance with the rehabilitation agreement, PCL was capitalized by a
    cash contribution of $8.3 million from Pacific Mutual and a $45 million
    certificate of contribution provided by a wholly-owned subsidiary of
    Pacific Mutual for a total of $53.3 million initial capitalization.
 
    In the event PCL is unable to pay contract benefits, Pacific Mutual is
    obligated to contribute funds to pay those benefits in accordance with
    the rehabilitation agreement.
 
3.  INVESTMENTS IN DEBT SECURITIES
 
    The statement value, gross unrealized gains and losses and estimated fair
    value of bonds and redeemable preferred stocks ("debt securities"),
    including short-term investments, are shown below. The estimated fair
    value of publicly traded securities was based on quoted market prices.
    For securities not actively traded, estimated fair values were provided
    by independent pricing services specializing in "matrix pricing" and
    modeling techniques. Pacific Mutual also estimates certain fair values
    based on interest rates, credit quality and average maturity or from
    securities with comparable trading characteristics.
<TABLE>
<CAPTION>
                                                  Gross Unrealized  Estimated
                                       Statement  -----------------    Fair
                                         Value     Gains    Losses    Value
                                 ---------------------------------------------
                                                   (In Thousands)
     <S>                               <C>        <C>      <C>      <C>
     December 31, 1995:
     U.S. Treasury securities and
      obligations of U.S. government
      authorities and agencies         $  147,436 $ 28,214          $  175,650
     Obligations of states, political
      subdivisions and foreign
      governments                         452,273   66,960 $  3,064    516,169
     Corporate securities               3,901,979  442,497   46,539  4,297,937
     Mortgage-backed securities         2,438,052  116,650   10,106  2,544,596
     Redeemable preferred stock            89,191    2,840    2,472     89,559
                                 ---------------------------------------------
     Total                             $7,028,931 $657,161 $ 62,181 $7,623,911
                                 =============================================
     December 31, 1994:
     U.S. Treasury securities and
      obligations of U.S. government
      authorities and agencies         $  216,201 $  1,064 $ 37,113 $  180,152
     Obligations of states, political
      subdivisions and foreign
      governments                         321,798    5,371   16,309    310,860
     Corporate securities               3,771,271  104,311  160,712  3,714,870
     Mortgage-backed securities         2,475,472   28,472   81,111  2,422,833
     Redeemable preferred stock            81,026      343    5,031     76,338
                                 ---------------------------------------------
     Total                             $6,865,768 $139,561 $300,276 $6,705,053
                                 =============================================
</TABLE>
 
                                       72
<PAGE>
 
                     Pacific Mutual Life Insurance Company
 
                         NOTES TO FINANCIAL STATEMENTS
 
3.  INVESTMENTS IN DEBT SECURITIES (CONTINUED)
 
    The statement value and estimated fair value of debt securities as of
    December 31, 1995 by contractual repayment date of principal are shown
    below. Expected maturities may differ from contractual maturities because
    borrowers may have the right to call or prepay obligations with or
    without call or prepayment penalties.
<TABLE>
<CAPTION>
                                                          Estimated
                                              Statement     Fair
                                                Value       Value
                                             -----------------------
                                                 (In Thousands)
     <S>                                     <C>         <C>
     Due in one year or less                 $   445,645 $   449,283
     Due after one year through five years     1,319,487   1,426,373
     Due after five years through ten years    1,409,209   1,542,228
     Due after ten years                       1,416,538   1,661,431
                                             -----------------------
                                               4,590,879   5,079,315
     Mortgage-backed securities                2,438,052   2,544,596
                                             -----------------------
     Total                                   $ 7,028,931 $ 7,623,911
                                             =======================
</TABLE>
 
    Proceeds from sales of investments in debt securities were $1.4 billion
    and $1.5 billion for the years ended December 31, 1995 and 1994,
    respectively. In 1995 and 1994, gross gains of $36 million and $30
    million and gross losses of $14 million and $43 million, respectively,
    were realized on those sales.
 
4.  FINANCIAL INSTRUMENTS
 
    The estimated fair values of Pacific Mutual's financial instruments,
    including debt securities, are as follows:
 
<TABLE>
<CAPTION>
                                 December 31, 1995       December 31, 1994
                               Statement   Estimated   Statement   Estimated
                                 Value    Fair Value     Value    Fair Value
                              ------------------------------------------------
                                              (In Thousands)
     <S>                      <C>         <C>         <C>         <C>
     Assets:
       Debt securities (Note
        3)                    $ 7,028,931 $ 7,623,911 $ 6,865,768 $ 6,705,053
       Preferred and common
        stocks                    121,420     139,613     109,458     116,993
       Mortgage loans           1,388,743   1,500,000   1,421,182   1,452,596
       Policy loans             2,700,544   2,700,544   2,312,455   2,312,455
       Derivative financial
        instruments:
         Interest rate swaps        1,068       3,379         121     (24,809)
         Other                     18,008      30,649       2,672      (2,822)
     Liabilities:
       Guaranteed interest
        contracts               2,375,898   2,459,323   2,635,356   2,614,961
       Deposit liabilities        876,276     899,393     897,743     859,469
       Annuity liabilities        308,742     311,441     220,026     223,423
       Other derivative fi-
        nancial instruments         2,373       1,490       2,270       2,128
     Surplus:
       Contribution certifi-
        cates                     149,596     157,688     149,593     124,313
</TABLE>
 
                                       73
<PAGE>
 
                     Pacific Mutual Life Insurance Company
 
                         NOTES TO FINANCIAL STATEMENTS
 
4.  FINANCIAL INSTRUMENTS (CONTINUED)
 
    The following methods and assumptions were used to estimate the fair
    values of these financial instruments as of December 31, 1995 and 1994:
 
    PREFERRED AND COMMON STOCKS
 
    The estimated fair values are based on quoted market prices or dealer
    quotes.
 
    MORTGAGE LOANS
 
    The estimated fair value of the mortgage loan portfolio is determined by
    discounting the estimated future cash flows, using a year-end market rate
    which is applicable to the yield, credit quality and average maturity of
    the composite portfolio.
 
    POLICY LOANS
 
    The statement value of policy loans is a reasonable estimate of their
    fair value.
 
    GUARANTEED INTEREST CONTRACTS AND DEPOSIT LIABILITIES
 
    The estimated fair values of fixed-maturity guaranteed interest contracts
    are estimated using the rates currently offered for deposits of similar
    remaining maturities. The estimated fair values of deposit liabilities
    with no defined maturities are the amounts payable on demand.
 
    Pacific Mutual has issued PRO GIC and Diversifier GIC contracts to plan
    sponsors totaling $914 million as of December 31, 1995, pursuant to the
    terms of which the plan sponsor retains direct ownership and control of
    the assets related to these contracts. Pacific Mutual agrees to provide
    benefit responsiveness in the event that plan benefit requests exceed
    plan cash flows. In return for this guarantee, Pacific Mutual receives a
    fee which varies by contract. Pacific Mutual sets the investment
    guidelines to provide for appropriate credit quality and cash flow
    matching.
 
    ANNUITY LIABILITIES
 
    The fair value of annuity liabilities approximates statement value and
    primarily includes policyholder deposits and accumulated credited
    interest.
 
    DERIVATIVE FINANCIAL INSTRUMENTS
 
    Pacific Mutual utilizes certain derivative financial instruments to
    diversify its business risk and to minimize its exposure to fluctuations
    in market prices, interest rates, or basis risk. Pacific Mutual has also
    set aside a corporate total return portfolio utilizing derivative
    financial instruments. These instruments include interest rate and
    currency swaps, asset swaps, credit derivatives, forwards, options held,
    options written, and futures contracts, and involve elements of credit
    risk and market risk in excess of amounts recognized in the accompanying
    financial statements. The notional amounts of those instruments reflect
    the extent of involvement in those various types of financial
    instruments. The estimated fair values of these instruments are based on
    market or dealer quotes. Pacific Mutual determines, on an individual
    counterparty basis, the need for collateral or other security to support
    financial instruments with off-balance sheet credit risks.
 
                                       74
<PAGE>
 
                     Pacific Mutual Life Insurance Company
 
                         NOTES TO FINANCIAL STATEMENTS
 
4.  FINANCIAL INSTRUMENTS (CONTINUED)
 
    Options and Floors
    ------------------
    Pacific Mutual uses options and floors to hedge against fluctuations in
    interest rates and in its corporate total return portfolio. Cash
    requirements on options held are limited to the premium paid by Pacific
    Mutual at acquisition. Pacific Mutual uses written options on a limited
    basis consisting primarily of covered calls. Gains and losses on covered
    calls are offset by gains and losses on the underlying position. Options
    and floors held are reported as assets and options written are reported
    as liabilities. As of December 31, 1995, the notional amount of options
    held and options written approximated $1.3 billion and $30 million,
    respectively. As of December 31, 1994, the notional amount of options
    held and options written approximated $1.5 billion and $42 million,
    respectively. Option contracts mature during 1996 through 2007.
 
    Interest Rate Swap Contracts
    ---------------------------- 
    Pacific Mutual has entered into interest rate swap contracts to reduce
    the impact of changes in interest rates on its variable short-term and
    long-term investments. These contracts effectively change the interest
    rate exposure on variable rate notes to fixed rates which range from 1.9%
    to 8.9% as of December 31, 1995, and from 1.9% to 8.6% as of December 31,
    1994. Interest rate swap contracts mature during 1996 through 2013. As of
    December 31, 1995 and 1994, interest rate swap contracts outstanding with
    financial institutions had a total notional amount of $656 million and
    $411 million, respectively.
 
    Asset Swap Contracts
    --------------------
    Pacific Mutual has entered into an asset swap contract to reduce interest
    rate risk by shortening both the duration and maturity of one of its
    fixed rate investments. The asset swap contract matures during 1998. As
    of December 31, 1995, the asset swap contract had a notional amount of
    $10 million.
 
    Credit Derivatives
    ------------------ 
    Pacific Mutual uses credit derivatives to take advantage of market
    opportunities. As of December 31, 1995 and 1994, the notional amount of
    credit derivatives outstanding approximated $90 million and $66 million,
    respectively. Credit derivatives mature during 1996 through 2000.
 
    Foreign Currency Exchange Contracts
    ----------------------------------- 
    Pacific Mutual enters into foreign currency exchange contracts that are
    used to hedge against fluctuations in foreign currency-denominated assets
    and related income. Gains and losses on such agreements offset currency
    gains and losses on the related assets. As of December 31, 1995 and 1994,
    the notional amount of foreign currency exchange contracts approximated
    $15 million and $35 million, respectively. Foreign currency exchange
    contracts expire during 1998 and 1999.
 
    Future Contracts
    ---------------- 
    Pacific Mutual uses exchange-traded futures contracts for asset and
    liability management of fixed maturity securities and insurance
    liabilities and for hedging market fluctuations on equity securities.
    Price changes on futures are settled daily through the daily margin cash
    flows. As of December 31, 1995 and 1994, the notional amounts of futures
    contracts were $340 million and $163 million, respectively. The notional
    amounts of the contracts do not represent future cash requirements, as
    Pacific Mutual intends to close out open positions prior to expiration.
 
                                       75
<PAGE>
 
                     Pacific Mutual Life Insurance Company
 
                         NOTES TO FINANCIAL STATEMENTS
 
4.  FINANCIAL INSTRUMENTS (CONTINUED)
 
    CONTRIBUTION CERTIFICATES
 
    The estimated fair value of contribution certificates is based on market
    quotes.
 
5.  CONCENTRATION OF CREDIT RISK
 
    Pacific Mutual manages its investments to limit credit risk by
    diversifying its portfolio among various security types and industry
    sectors. The credit risk of financial instruments is controlled through
    credit approvals, limits and monitoring procedures. Real estate and
    mortgage loan investments are diversified by geographic location and
    property type. Management believes that significant concentrations of
    credit risk do not exist.
 
    Pacific Mutual is exposed to credit loss in the event of nonperformance
    by the other parties to the interest rate swaps contracts and other
    derivative securities. However, Pacific Mutual does not anticipate
    nonperformance by the counterparties.
 
6.  UNCONSOLIDATED SUBSIDIARIES
 
    Pacific Mutual's subsidiary operations primarily include other life and
    health insurance and investment management and advisory services. As of
    December 31, 1995 and 1994, subsidiary assets were $4.5 billion and
    liabilities were $4.3 billion as of December 31, 1995 and $4.2 billion as
    of December 31, 1994.
 
    Revenue and net income, including PCL, were $908 million and $63 million
    for the year ended December 31, 1995, and $1.1 billion and $75 million
    for the year ended December 31, 1994. Dividends from subsidiaries totaled
    $64.7 million and $2 million for the years ended December 31, 1995 and
    1994, respectively. Earnings of subsidiaries, excluding PCL, and
    excluding capital gains, are included in net investment income.
 
7.  BORROWINGS
 
    Pacific Mutual borrows for short-term needs by issuing commercial paper.
    Approximately $50 million was outstanding as of December 31, 1994,
    bearing an interest rate of 5.86%, and was repaid in January, 1995. There
    were no borrowings outstanding as of December 31, 1995.
 
    In addition, Pacific Mutual had available a revolving credit facility
    totaling approximately $250 million as of December 31, 1995 and 1994.
    There were no borrowings outstanding as of December 31, 1995 and 1994.
 
8.  CONTRIBUTION CERTIFICATES
 
    Pacific Mutual has $150 million of Contribution Certificates (the
    "Certificates"), also referred to as Surplus Notes, outstanding at an
    interest rate of 7.9% maturing on December 30, 2023. Interest is payable
    semiannually on June 30 and December 30. The Certificates may not be
    redeemed at the option of Pacific Mutual or any holder of the
    Certificates. The Certificates are unsecured and subordinated to all
    present and future senior indebtedness and policy claims of Pacific
    Mutual. Each payment of interest on and the payment of principal of the
    Certificates may be made only out of Pacific Mutual's surplus and with
    the prior approval of the Insurance Commissioner of the State of
    California. In accordance with accounting practices prescribed or
    permitted by the Insurance Department of the State of California, the
    Certificates are not part of the liabilities of Pacific Mutual and are
    included in surplus.
 
                                       76
<PAGE>
 
                     Pacific Mutual Life Insurance Company
 
                         NOTES TO FINANCIAL STATEMENTS
 
9.  REINSURANCE

    Pacific Mutual has reinsurance agreements with other insurance companies
    for the purpose of diversifying risk and limiting exposure on larger
    risks. For the years ended December 31, 1995 and 1994, individual life
    and annuity premiums assumed were $16 million and $20 million and
    premiums ceded were $339 million and $363 million, respectively. Amounts
    recoverable from reinsurers for individual life and annuities include
    reinsured and paid claims of $8 million and $13 million as of December
    31, 1995 and 1994, respectively. Policy benefits payable are net of
    reinsurance recoveries of $8 million and $4 million at December 31, 1995
    and 1994, respectively.
 
    Pacific Mutual also reinsures substantially all of its group life and
    health business with a subsidiary insurance company. Premiums of $72
    million and $90 million, and benefits of $53 million and $70 million were
    ceded during the years ended December 31, 1995 and 1994, respectively.
 
    Amounts payable to the subsidiary under this agreement were $6 million
    and $8 million as of December 31, 1995 and 1994, respectively.
 
    To the extent that the assuming companies become unable to meet their
    obligations under these treaties, Pacific Mutual remains contingently
    liable. However, Pacific Mutual does not anticipate nonperformance by
    these assuming companies.
 
10. PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS
 
    PENSION PLAN
 
    Pacific Mutual maintains a defined benefit pension plan covering eligible
    employees and agents. In 1995, Pacific Mutual accrued $2.5 million in
    pension expense that will be funded in 1996 based on the latest actuarial
    valuation report. No expense or contributions were made during 1994
    because of the funded status of the plans and related income tax
    considerations. Accumulated benefits and net assets available for
    benefits as of the latest valuation dates (January 1, 1995 and April 1,
    1994) are as follows:
 
<TABLE>
<CAPTION>
                                                           1995      1994
                                                         -------------------
                                                           (In Thousands)
       <S>                                               <C>       <C>
       Actuarial present value of accumulated benefits:
         Vested                                          $  92,966 $  88,122
         Nonvested                                             392     1,115
                                                         -------------------
       Total                                             $  93,358 $  89,237
                                                         ===================
       Net assets available for benefits                 $ 107,530 $ 111,089
                                                         ===================
</TABLE>
 
    The above present values were determined using an assumed discount rate
    of 8.5% in 1995 and 1994.
 
    POSTRETIREMENT HEALTHCARE AND LIFE INSURANCE PLANS
 
    Pacific Mutual sponsors a defined benefit health care plan and a defined
    benefit life insurance plan ("The Plans") that provide postretirement
    benefits for all eligible retirees and their dependents. Generally,
    qualified employees may become eligible for these benefits if they reach
    normal retirement age, have been covered under Pacific Mutual's policy as
    an active employee for a minimum continuous period prior to the date
    retired, and have an employment date before January 1, 1990. The Plans
    contain cost-sharing features such as deductibles and coinsurance and
    require retirees to make contributions which can be adjusted annually.
    Pacific Mutual's
 
                                       77
<PAGE>
 
                     Pacific Mutual Life Insurance Company
 
                         NOTES TO FINANCIAL STATEMENTS
 
10. PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
    commitment to qualified employees who retire after April 1, 1994 is
    limited to specific dollar amounts. Pacific Mutual reserves the right to
    modify or terminate The Plans at any time. As in the past, the general
    policy is to fund these benefits on a pay-as-you-go basis. The amount of
    benefits paid under The Plans for the years ended December 31, 1995 and
    1994 was approximately $1.7 million for both years.
 
    Pacific Mutual utilizes the accrual method of accounting for the costs of
    The Plans as prescribed by the Insurance Department of the State of
    California and amortizes its transition obligation of $26.7 million over
    twenty years.
 
    Components of net periodic postretirement benefit cost are as follows (In
    Thousands):
 
<TABLE>
<CAPTION>
                                                  Years Ended December 31,
                                                      1995          1994
                                                  ---------------------------
        <S>                                       <C>           <C>
        Service cost                              $        177  $        186
        Interest cost                                    1,921         1,790
        Amortization                                      (260)         (260)
                                                  ---------------------------
                                                         1,838         1,716
        Recognized transition obligation-net             1,336         1,337
                                                  ---------------------------
        Net periodic postretirement benefit cost  $      3,174  $      3,053
                                                  ===========================
</TABLE>
 
    The following table presents The Plans' funded status reconciled with
    amounts recorded in other liabilities on Pacific Mutual's statement of
    financial position (In Thousands):
 
<TABLE>
<CAPTION>
                                                          1995      1994
                                                        ------------------
        <S>                                             <C>       <C>
        Accumulated postretirement obligation:
          Retirees                                      $ 20,936  $ 20,580
          Fully eligible active plan participants          1,695     1,346
          Other active plan participants                   2,290     2,455
                                                        ------------------
                                                          24,921    24,381
        Fair value of plan assets                              0         0
                                                        ------------------
        Unfunded accumulated postretirement obligation    24,921    24,381
        Unrecognized net gain                                878       942
        Prior service cost                                 1,589     1,849
        Unrecognized transition obligation-net           (22,720)  (24,056)
                                                        ------------------
        Accrued postretirement benefit liability        $  4,668  $  3,116
                                                        ==================
</TABLE>
 
    The assumed health care cost trend rate used in measuring the accumulated
    benefit obligation was 10% for 1995 and 11% for 1994, and is assumed to
    decrease gradually to 5% in 2003 and remain at that level thereafter. The
    amount reported is materially affected by the health care cost trend rate
    assumptions. If the health care cost trend
 
                                       78
<PAGE>
 
                     Pacific Mutual Life Insurance Company
 
                         NOTES TO FINANCIAL STATEMENTS
 
10. PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)

    rate assumptions were increased by 1%, the accumulated postretirement
    benefit obligation as of December 31, 1995 and 1994 would be increased by
    10.9% and 11.2%, respectively. The effect of this change would increase
    the aggregate of the service, interest and amortization cost components
    of the net periodic benefit cost by 11.4% and 13.6%, respectively.
 
    The discount rate used in determining the accumulated postretirement
    benefit obligation is 7% and 8% for 1995 and 1994, respectively.
 
11. INVESTMENT COMMITMENTS
 
    Pacific Mutual has outstanding commitments to make investments in bonds
    and other invested assets as follows (In Thousands):
 
<TABLE>
<CAPTION>
        Year ended December 31:
        -----------------------
        <S>                   <C>
         1996                 $ 179,551
         1997-2000               88,698
         2001 and thereafter     32,091
                              --------- 
        Total                 $ 300,340
                              =========
</TABLE>
 
12. LITIGATION
 
    Pacific Mutual and its subsidiaries are respondents in a number of legal
    proceedings, some of which involve extra-contractual damages. In the
    opinion of management, the outcome of these proceedings is not likely to
    have a material adverse effect on the financial position of Pacific
    Mutual.
 
    --------------------------------------------------------------------------
 
 
                                       79
<PAGE>
 
 
 
                     PACIFIC MUTUAL LIFE INSURANCE COMPANY
 
                         UNAUDITED FINANCIAL STATEMENTS
                            AS OF SEPTEMBER 30, 1996
           AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
 
                                       80
<PAGE>
 
                     Pacific Mutual Life Insurance Company
 
                        STATEMENT OF FINANCIAL POSITION
                                  (Unaudited)
 
<TABLE>
<CAPTION>
                                                 September 30,
                                                      1996
- ---------------------------------------------------------------
                                                 (In Thousands)
<S>                                              <C>
ASSETS
  Bonds                                           $ 7,716,692
  Preferred stocks                                    173,518
  Common stocks                                        63,712
  Unconsolidated subsidiaries                         184,433
  Mortgage loans                                    1,379,072
  Real estate                                         188,125
  Home office properties                               49,299
  Policy loans                                      2,935,059
  Cash and short-term investments                       9,207
  Investment income due and accrued                   161,683
  Premiums due and uncollected, and other assets      265,941
  Separate account assets                           7,173,748
- ---------------------------------------------------------------
TOTAL ASSETS                                      $20,300,489
===============================================================

LIABILITIES AND SURPLUS

Liabilities
  Policy reserves                                 $ 7,761,290
  Deposit funds                                     3,445,445
  Other liabilities                                   911,840
  Asset valuation reserve                             207,072
  Separate account liabilities                      7,173,748
- ---------------------------------------------------------------
Total Liabilities                                  19,499,395
Surplus                                               801,094
- ---------------------------------------------------------------
TOTAL LIABILITIES AND SURPLUS                     $20,300,489
===============================================================
</TABLE>
 
See Note to Financial Statements
 
                                       81
<PAGE>
 
                     Pacific Mutual Life Insurance Company
 
                      STATEMENTS OF OPERATIONS AND SURPLUS
                                  (Unaudited)
 
<TABLE>
<CAPTION>
                                                       Nine Months Ended
                                                         September 30,
                                                        1996        1995
- ---------------------------------------------------------------------------
                                                        (In Thousands)
<S>                                                  <C>         <C>
REVENUES
  Premiums, annuity considerations and deposit funds $3,003,603  $2,321,355
  Net investment income                                 739,239     697,919
  Other income                                           33,435      25,915
- ---------------------------------------------------------------------------
TOTAL REVENUES                                        3,776,277   3,045,189
- ---------------------------------------------------------------------------

BENEFITS AND EXPENSES
  Current and future policy benefits                  3,330,865   2,674,965
  Operating expenses                                    268,329     213,705
  Premium and other taxes (excluding tax on capital
   gains)                                                26,880      23,221
  Dividends to policyowners                              13,734      13,197
- ---------------------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES                           3,639,808   2,925,088
- ---------------------------------------------------------------------------

INCOME BEFORE FEDERAL INCOME TAXES                      136,469     120,101
Federal income taxes                                     68,866      61,311
- ---------------------------------------------------------------------------
NET GAIN FROM OPERATIONS                                 67,603      58,790
NET REALIZED CAPITAL GAINS                               25,460       5,306
- ---------------------------------------------------------------------------
NET INCOME                                           $   93,063  $   64,096
===========================================================================

SURPLUS
Net income                                           $   93,063  $   64,096
Other surplus transactions, net                         (15,220)      6,958
- ---------------------------------------------------------------------------
Increase in surplus                                      77,843      71,054
Surplus, beginning of period                            723,251     627,624
- ---------------------------------------------------------------------------
SURPLUS, END OF PERIOD                               $  801,094  $  698,678
===========================================================================
</TABLE>
 
See Note to Financial Statements
 
                                       82
<PAGE>
 
                     Pacific Mutual Life Insurance Company
 
                            STATEMENTS OF CASH FLOW
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                        Nine Months Ended
                                                          September 30,
                                                        1996         1995
- ------------------------------------------------------------------------------
                                                         (In Thousands)
<S>                                                  <C>          <C>
CASH FLOW FROM OPERATING ACTIVITIES
Receipts
  Premiums, annuity considerations and deposit funds $ 2,910,948  $ 2,183,095
  Net investment income                                  691,819      667,819
  Allowances and reserve adjustments on reinsurance
   ceded                                                  66,102       64,606
Payments
  Policy benefit payments                             (1,268,520)  (1,159,208)
  Net policy loans                                      (234,248)    (256,617)
  Operating expenses                                    (260,820)    (197,451)
  Net transfer to separate accounts                   (1,065,400)    (916,515)
  Premium and other taxes                                (28,979)     (32,619)
  Dividends to policyowners                              (13,403)     (12,884)
  Federal income taxes                                  (122,737)     (33,564)
Other sources/(applications), net                        (21,404)      21,144
- ------------------------------------------------------------------------------
NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES           653,358      327,806
- ------------------------------------------------------------------------------

CASH FLOW FROM INVESTING ACTIVITIES
Proceeds
  Bonds                                                2,351,964    1,648,810
  Stocks                                                 191,284       98,913
  Mortgage loans                                         195,395      170,072
  Real estate                                             13,861        3,412
  Other investments                                       98,947       70,187
Payments for the purchase of
  Bonds                                               (3,308,410)  (1,825,506)
  Stocks                                                (192,377)    (116,415)
  Mortgage loans                                        (193,453)    (146,442)
  Real estate                                            (54,905)      (2,179)
  Other investments                                      (63,792)    (148,788)
- ------------------------------------------------------------------------------
NET CASH FLOW USED IN
  INVESTING ACTIVITIES                                  (961,486)    (247,936)
- ------------------------------------------------------------------------------
</TABLE>
(Continued)
 
See Note to Financial Statements
 
                                       83
<PAGE>
 
                     Pacific Mutual Life Insurance Company
 
                            STATEMENTS OF CASH FLOW
                                  (Unaudited)
 
<TABLE>
<CAPTION>
                                                        Nine Months Ended
                                                          September 30,
<S>                                                     <C>        <C>
(Continued)                                                  1996    1995
- ---------------------------------------------------------------------------
<CAPTION>
                                                          (In Thousands)
<S>                                                     <C>        <C>
CASH FLOW FROM FINANCING ACTIVITIES
Issuance of short-term borrowings                       $  54,808  $119,013
- ---------------------------------------------------------------------------
NET CASH FLOW PROVIDED BY FINANCING ACTIVITIES             54,808   119,013
- ---------------------------------------------------------------------------
Increase (decrease) in cash and short-term investments   (253,320)  198,883
Cash and short-term investments, beginning of period      262,527    97,745
- ---------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS, END OF PERIOD          $   9,207  $296,628
===========================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Interest paid                                         $  12,789  $ 11,231
===========================================================================
</TABLE>
 
See Note to Financial Statements
 
                                       84
<PAGE>
 
                     Pacific Mutual Life Insurance Company
 
                          NOTE TO FINANCIAL STATEMENTS
                                  (Unaudited)
 
1.  BASIS OF PRESENTATION
 
    The information set forth in the statement of financial position as of
    September 30, 1996 and the statements of operations and surplus and of
    cash flow for the nine months ended September 30, 1996 and 1995 is
    unaudited. The information reflects all adjustments, consisting only of
    normal recurring adjustments, that, in the opinion of management, are
    necessary to present fairly the financial position and results of
    operations of Pacific Mutual Life Insurance Company ("Pacific Mutual")
    for the periods indicated. Results of operations for the interim periods
    are not necessarily indicative of the results of operations for the full
    year. For further information, refer to the financial statements and
    footnotes thereto included in Pacific Mutual's audited financial
    statements for the years ended December 31, 1995 and December 31, 1994.
 
    Pacific Mutual's financial statements are prepared in accordance with
    accounting practices prescribed or permitted by the Insurance Department
    of the State of California, which are currently considered generally
    accepted accounting principles ("GAAP") for mutual life insurance
    companies. Prescribed statutory accounting practices include a variety of
    publications of the National Association of Insurance Commissioners
    ("NAIC"), as well as state laws, regulations, and general administrative
    rules. Permitted statutory accounting practices encompass all accounting
    practices not so prescribed. The financial statements of Pacific Mutual
    are not consolidated with those of its subsidiaries.
 
    The Financial Accounting Standards Board has issued certain
    pronouncements effective for 1996 financial statements and thereafter
    that will no longer allow statutory financial statements of mutual life
    insurance companies to be described as being prepared in conformity with
    GAAP. Upon the effective date of these pronouncements, in order for their
    financial statements to be described as being prepared in accordance with
    GAAP, mutual life insurance companies and their insurance subsidiaries
    will be required to adopt all applicable authoritative GAAP
    pronouncements in any general purpose financial statements that they may
    issue. Pacific Mutual intends to issue December 31, 1996 general purpose
    financial statements reflecting the adoption of all applicable GAAP
    pronouncements.
 
 
                                       85
<PAGE>
 
                                 ILLUSTRATIONS
 
  The following tables illustrate how the death benefits, Accumulated Values
and Net Cash Surrender Values of a hypothetical policy may vary over an
extended period of time assuming hypothetical rates of return equivalent to
constant gross annual rates of 0%, 6% and 12%.
 
  The Policies are illustrated based on the Guideline Premium Test and include
the following:
     
  Death Benefit Option A, Face Amount $1,500,000, Annual Premium $33,093,
  male nonsmoker, issue Age 55, and female nonsmoker, issue Age 55, current
  cost of insurance rates:     
     
  Death Benefit Option A, Face Amount $1,500,000, Annual Premium $33,093,
  male nonsmoker, issue Age 55, and female nonsmoker, issue Age 55,
  guaranteed cost of insurance rates:     
     
  Death Benefit Option B, Face Amount $1,500,000, Annual Premium $124,955,
  male nonsmoker, issue Age 55, and female nonsmoker, issue Age 55, current
  cost of insurance rates:     
     
  Death Benefit Option B, Face Amount $1,500,000, Annual Premium $124,955,
  male nonsmoker, issue Age 55, and female nonsmoker, issue Age 55,
  guaranteed cost of insurance rates:     
     
  Death Benefit Option C, Face Amount $1,500,000, Annual Premium $79,072,
  male nonsmoker, issue Age 55, and female nonsmoker, issue Age 55, current
  cost of insurance rates:     
     
  Death Benefit Option C, Face Amount $1,500,000, Annual Premium $79,072,
  male nonsmoker, issue Age 55, and female nonsmoker, issue Age 55,
  guaranteed cost of insurance rates:     
     
  Death Benefit Option D, Face Amount $1,500,000, Annual Premium $54,009,
  male nonsmoker, issue Age 55, and female nonsmoker, issue Age 55, current
  cost of insurance rates:     
     
  Death Benefit Option D, Face Amount $1,500,000, Annual Premium $54,009,
  male nonsmoker, issue Age 55, and female nonsmoker, issue Age 55,
  guaranteed cost of insurance rates:     
 
  The values would be different from those shown if the gross annual
investment rates of return averaged 0%, 6% or 12% over a period of years, but
also fluctuated above or below those averages for individual policy years.
 
  The second column of each table, labeled "Total Premiums Paid Plus Interest
at 5%," shows the amount which would accumulate if an amount equal to the
annual premium (after taxes) were invested to earn interest at 5% compounded
annually. All premium payments are illustrated as if they were made at the
beginning of the year. These illustrations assume that no Policy loans have
been made.
 
  The amounts shown for the death benefits, Accumulated Values and Net Cash
Surrender Values reflect the fact that the net investment return on the
Variable Accounts is lower than the gross investment return on the assets as a
result of charges levied against the Variable Accounts. These values also take
into account the premium loads, the administrative charges and the mortality
and expense risk charges.
   
  The Fund's daily investment advisory fee is assumed to be equivalent to an
annual weighted rate of 0.63% of the aggregate average daily net assets of the
Fund. This hypothetical rate is representative of the weighted average
investment advisory fee applicable to the Portfolios of the Fund available as
options under the Policy. The amounts shown would differ if unisex rates were
used or if the Insureds were females and female rates were used. On those
illustrations assuming current rates, the amounts would also differ if either
Insured were a smoker and smoker rates were used. The tables also reflect
other expenses of the Fund at the weighted rate of 0.24% of the average daily
net assets of a Portfolio, which amounts to 0.87% of the average daily net
assets of a Portfolio including the investment advisory fees, operating
expenses and any foreign taxes. Foreign taxes (annualized) for the six month
period ended June 30, 1996 were 0.55% of the average daily net assets of the
International Portfolio, 0.07% for the Equity Income Portfolio, 0.01% for the
Multi-Strategy Portfolio, 0.02% for the Equity Index Portfolio, 0.04% for the
Growth LT Portfolio and 0.27% for the Emerging Markets Portfolio. SEE "Summary
of the Policy: Fund Annual Expenses After Expense Limitation" for more
complete information on Fund investment advisory fees and operating expenses.
    
                                      86
<PAGE>
 
  After deduction of the charges and Fund expenses described above, the
illustrated gross annual investment rates of return of 0%, 6%, and 12%
correspond to approximate net annual rates of return of -0.87%, 5.08%, and
11.03%. The hypothetical values shown in the tables do not reflect any charges
against the Variable Accounts for income taxes that may be attributable to the
Variable Accounts in the future, since we are not currently making these
charges.
 
  We will furnish upon request a comparable illustration reflecting the
proposed Insureds' Ages, underwriting classes, Face Amount, death benefit and
premium amounts requested. In addition, upon request, illustrations will be
furnished reflecting allocation of premiums to specified Variable Accounts.
Such illustrations will reflect the expenses of the Portfolio of the Fund in
which the Variable Account invests. Illustrations that use a hypothetical
gross rate of return in excess of 12% are available to certain large
institutional investors upon request.
 
                                      87
<PAGE>
 
             FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE UNIVERSAL LIFE
 
ILLUSTRATION OF DEATH BENEFITS, ACCUMULATED VALUES AND NET CASH SURRENDER VALUES
                  BASED ON CURRENT COST OF INSURANCE CHARGES
 
DEATH BENEFIT OPTION: A                                 FACE AMOUNT: $1,500,000
MALE NONSMOKER ISSUE AGE 55                       FEMALE NONSMOKER ISSUE AGE 55
GUIDELINE PREMIUM TEST                                  ANNUAL PREMIUM: $33,093
 
<TABLE>
<CAPTION>
                                  END OF YEAR DEATH BENEFIT
                     TOTAL                ASSUMING
                   PREMIUMS       HYPOTHETICAL GROSS ANNUAL
         END OF    PAID PLUS        INVESTMENT RETURN OF
         POLICY   INTEREST AT ---------------------------------
           YEAR       5%          0%         6%         12%
         ------   ----------- ---------- ---------- -----------
         <S>      <C>         <C>        <C>        <C>
            1     $   34,748  $1,500,000 $1,500,000 $ 1,500,000
            2     $   71,233  $1,500,000 $1,500,000 $ 1,500,000
            3     $  109,542  $1,500,000 $1,500,000 $ 1,500,000
            4     $  149,767  $1,500,000 $1,500,000 $ 1,500,000
            5     $  192,003  $1,500,000 $1,500,000 $ 1,500,000
            6     $  236,350  $1,500,000 $1,500,000 $ 1,500,000
            7     $  282,916  $1,500,000 $1,500,000 $ 1,500,000
            8     $  331,809  $1,500,000 $1,500,000 $ 1,500,000
            9     $  383,147  $1,500,000 $1,500,000 $ 1,500,000
           10     $  437,052  $1,500,000 $1,500,000 $ 1,500,000
           15     $  749,804  $1,500,000 $1,500,000 $ 1,500,000
           20     $1,148,964  $1,500,000 $1,500,000 $ 2,038,650
           25     $1,658,405  $1,500,000 $1,500,000 $ 3,570,205
           30     $2,308,594  $1,500,000 $1,959,506 $ 6,166,005
           35     $3,138,418  $1,500,000 $2,635,740 $10,376,435
</TABLE>
 
<TABLE>
<CAPTION>
        END OF YEAR ACCUMULATED VALUE
         ASSUMING HYPOTHETICAL GROSS   END OF YEAR NET CASH SURRENDER VALUE
                    ANNUAL              ASSUMING HYPOTHETICAL GROSS ANNUAL
END OF       INVESTMENT RETURN OF              INVESTMENT RETURN OF
POLICY  ------------------------------ ------------------------------------
  YEAR     0%        6%        12%         0%          6%          12%
- ------  -------- ---------- ---------- ----------------------- ------------
<S>     <C>      <C>        <C>        <C>        <C>          <C>
   1    $ 27,383 $   29,093 $   30,805   $ 15,030  $   16,741   $   18,453
   2    $ 54,241 $   59,362 $   64,689   $ 43,261  $   48,382   $   53,709
   3    $ 80,549 $   90,830 $  101,947   $ 70,941  $   81,222   $   92,340
   4    $106,280 $  123,523 $  142,915   $ 98,045  $  115,288   $  134,680
   5    $131,404 $  157,467 $  187,959   $124,542  $  150,604   $  181,096
   6    $156,005 $  192,807 $  237,614   $150,515  $  187,317   $  232,124
   7    $179,930 $  229,456 $  292,229   $175,812  $  225,338   $  288,112
   8    $203,573 $  267,869 $  352,736   $200,828  $  265,124   $  349,991
   9    $226,937 $  308,135 $  419,776   $225,564  $  306,763   $  418,403
  10    $250,026 $  350,346 $  494,062   $250,026  $  350,346   $  494,062
  15    $374,086 $  609,279 $1,023,230   $374,086  $  609,279   $1,023,230
  20    $477,070 $  927,591 $1,905,280   $477,070  $  927,591   $1,905,280
  25    $542,698 $1,336,528 $3,400,195   $542,698  $1,336,528   $3,400,195
  30    $505,289 $1,866,196 $5,872,386   $505,289  $1,866,196   $5,872,386
  35    $189,812 $2,510,229 $9,882,319   $189,812  $2,510,229   $9,882,319
</TABLE>
- --------
All premium payments are illustrated as if made at the beginning of the policy
year.
 
This illustration assumes no policy loans or partial withdrawals have been
made.
 
 
THE DEATH BENEFITS, ACCUMULATED VALUES AND THE CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
 
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE INTERPRETED AS A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE TO VARIABLE ACCOUNTS BY THE OWNER AND THE
EXPERIENCE OF THE ACCOUNTS. NO REPRESENTATION CAN BE MADE BY PACIFIC MUTUAL,
THE SEPARATE ACCOUNT OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN
BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
 
                                      88
<PAGE>
 
             FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE UNIVERSAL LIFE
 
ILLUSTRATION OF DEATH BENEFITS, ACCUMULATED VALUES AND NET CASH SURRENDER VALUES
                 BASED ON GUARANTEED COST OF INSURANCE CHARGES
 
DEATH BENEFIT OPTION: A                                 FACE AMOUNT: $1,500,000
MALE NONSMOKER ISSUE AGE 55                       FEMALE NONSMOKER ISSUE AGE 55
GUIDELINE PREMIUM TEST                                  ANNUAL PREMIUM: $33,093
 
<TABLE>
<CAPTION>
                                 END OF YEAR DEATH BENEFIT
                     TOTAL                ASSUMING
                   PREMIUMS      HYPOTHETICAL GROSS ANNUAL
         END OF    PAID PLUS        INVESTMENT RETURN OF
         POLICY   INTEREST AT ---------------------------------
          YEAR        5%          0%          6%        12%
         ------   ----------- ----------  ---------- ----------
         <S>      <C>         <C>         <C>        <C>
           1      $   34,748  $1,500,000  $1,500,000 $1,500,000
           2      $   71,233  $1,500,000  $1,500,000 $1,500,000
           3      $  109,542  $1,500,000  $1,500,000 $1,500,000
           4      $  149,767  $1,500,000  $1,500,000 $1,500,000
           5      $  192,003  $1,500,000  $1,500,000 $1,500,000
           6      $  236,350  $1,500,000  $1,500,000 $1,500,000
           7      $  282,916  $1,500,000  $1,500,000 $1,500,000
           8      $  331,809  $1,500,000  $1,500,000 $1,500,000
           9      $  383,147  $1,500,000  $1,500,000 $1,500,000
          10      $  437,052  $1,500,000  $1,500,000 $1,500,000
          15      $  749,804  $1,500,000  $1,500,000 $1,500,000
          20      $1,148,964  $1,500,000  $1,500,000 $1,962,216
          25      $1,658,405  $1,500,000  $1,500,000 $3,425,496
          30      $2,308,594  $        0* $1,640,651 $5,866,160
          35      $3,138,418  $        0* $2,201,402 $9,722,061
</TABLE>
 
<TABLE>
<CAPTION>
        END OF YEAR ACCUMULATED VALUE
         ASSUMING HYPOTHETICAL GROSS    END OF YEAR NET CASH SURRENDER VALUE
                    ANNUAL               ASSUMING HYPOTHETICAL GROSS ANNUAL
END OF       INVESTMENT RETURN OF               INVESTMENT RETURN OF
POLICY  ------------------------------- -------------------------------------
 YEAR      0%         6%        12%         0%           6%          12%
- ------  --------  ---------- ---------- ----------- ------------ ------------
<S>     <C>       <C>        <C>        <C>         <C>          <C>
   1    $ 27,366  $   29,077 $   30,788   $ 15,014   $   16,724   $   18,436
   2    $ 54,173  $   59,290 $   64,614   $ 43,193   $   48,310   $   53,634
   3    $ 80,387  $   90,658 $  101,766   $ 70,779   $   81,050   $   92,158
   4    $105,977  $  123,197 $  142,565   $ 97,742   $  114,962   $  134,330
   5    $130,909  $  156,927 $  187,370   $124,047   $  150,064   $  180,508
   6    $155,257  $  191,980 $  236,701   $149,767   $  186,490   $  231,211
   7    $178,841  $  228,240 $  290,873   $174,723   $  224,122   $  286,755
   8    $201,577  $  265,688 $  350,354   $198,832   $  262,943   $  347,609
   9    $223,357  $  304,284 $  415,654   $221,985   $  302,912   $  414,282
  10    $244,058  $  343,982 $  487,358   $244,058   $  343,982   $  487,358
  15    $340,772  $  574,303 $  989,591   $340,772   $  574,303   $  989,591
  20    $383,387  $  833,937 $1,833,846   $383,387   $  833,937   $1,833,846
  25    $308,670  $1,139,504 $3,262,377   $308,670   $1,139,504   $3,262,377
  30    $      0* $1,562,525 $5,586,819   $      0*  $1,562,525   $5,586,819
  35    $      0* $2,096,573 $9,259,105   $      0*  $2,096,573   $9,259,105
</TABLE>
- --------
All premium payments are illustrated as if made at the beginning of the policy
year.
 
This illustration assumes no policy loans or partial withdrawals have been
made.
 
*Additional payment will be required to prevent policy termination.
 
THE DEATH BENEFITS, ACCUMULATED VALUES AND THE CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
 
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE INTERPRETED AS A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE TO VARIABLE ACCOUNTS BY THE OWNER AND THE
EXPERIENCE OF THE ACCOUNTS. NO REPRESENTATION CAN BE MADE BY PACIFIC MUTUAL,
THE SEPARATE ACCOUNT OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN
BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
 
                                      89
<PAGE>
 
             FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE UNIVERSAL LIFE
 
ILLUSTRATION OF DEATH BENEFITS, ACCUMULATED VALUES AND NET CASH SURRENDER VALUES
                  BASED ON CURRENT COST OF INSURANCE CHARGES
 
DEATH BENEFIT OPTION: B                                 FACE AMOUNT: $1,500,000
MALE NONSMOKER ISSUE AGE 55                       FEMALE NONSMOKER ISSUE AGE 55
GUIDELINE PREMIUM TEST                                 ANNUAL PREMIUM: $124,955
 
<TABLE>
<CAPTION>
                     TOTAL    END OF YEAR DEATH BENEFIT ASSUMING
                   PREMIUMS       HYPOTHETICAL GROSS ANNUAL
         END OF    PAID PLUS         INVESTMENT RETURN OF
         POLICY   INTEREST AT ----------------------------------
          YEAR        5%          0%         6%          12%
         ------   ----------- ---------- ----------- -----------
         <S>      <C>         <C>        <C>         <C>
            1     $   131,203 $1,610,136 $ 1,616,812 $ 1,623,489
            2     $   268,966 $1,718,772 $ 1,738,967 $ 1,759,956
            3     $   413,617 $1,825,884 $ 1,866,675 $ 1,910,742
            4     $   565,500 $1,931,445 $ 2,000,155 $ 2,077,332
            5     $   724,978 $2,035,422 $ 2,139,631 $ 2,261,362
            6     $   892,430 $2,137,892 $ 2,285,446 $ 2,464,759
            7     $ 1,068,254 $2,238,693 $ 2,437,720 $ 2,689,404
            8     $ 1,252,869 $2,338,277 $ 2,597,204 $ 2,938,027
            9     $ 1,446,716 $2,436,656 $ 2,764,240 $ 3,213,192
           10     $ 1,650,254 $2,533,843 $ 2,939,189 $ 3,517,736
           15     $ 2,831,167 $3,023,434 $ 3,971,440 $ 5,633,225
           20     $ 4,338,344 $3,463,700 $ 5,249,927 $ 9,121,836
           25     $ 6,261,927 $3,840,545 $ 6,847,139 $14,976,406
           30     $ 8,716,959 $4,040,741 $ 8,704,221 $24,607,542
           35     $11,850,273 $3,894,854 $10,693,111 $40,754,116
</TABLE>
 
<TABLE>
<CAPTION>
          END OF YEAR ACCUMULATED VALUE
           ASSUMING HYPOTHETICAL GROSS    END OF YEAR NET CASH SURRENDER VALUE
                     ANNUAL                ASSUMING HYPOTHETICAL GROSS ANNUAL
END OF        INVESTMENT RETURN OF                INVESTMENT RETURN OF
POLICY  --------------------------------- ------------------------------------
 YEAR       0%         6%         12%         0%          6%          12%
- ------  ---------- ---------- ----------- ----------- ----------- ------------
<S>     <C>        <C>        <C>         <C>         <C>         <C>
  1     $  110,136 $  116,812 $   123,489  $   97,783  $   104,460 $   111,137
  2     $  218,772 $  238,967 $   259,956  $  207,792  $   227,987 $   248,976
  3     $  325,884 $  366,675 $   410,742  $  316,277  $   357,068 $   401,135
  4     $  431,445 $  500,155 $   577,332  $  423,210  $   491,920 $   569,097
  5     $  535,422 $  639,631 $   761,362  $  528,560  $   632,768 $   754,500
  6     $  637,892 $  785,446 $   964,759  $  632,402  $   779,956 $   959,269
  7     $  738,693 $  937,720 $ 1,189,404  $  734,576  $   933,602 $ 1,185,286
  8     $  838,277 $1,097,204 $ 1,438,027  $  835,532  $1,094,459  $ 1,435,282
  9     $  936,656 $1,264,240 $ 1,713,192  $  935,283  $1,262,868  $ 1,711,819
  10    $1,033,843 $1,439,189 $ 2,017,736  $1,033,843  $1,439,189  $ 2,017,736
  15    $1,523,434 $2,471,440 $ 4,133,225  $1,523,434  $2,471,440  $ 4,133,225
  20    $1,963,700 $3,749,927 $ 7,621,836  $1,963,700  $3,749,927  $ 7,621,836
  25    $2,340,545 $5,347,139 $13,476,406  $2,340,545  $5,347,139  $13,476,406
  30    $2,540,741 $7,204,221 $23,107,542  $2,540,741  $7,204,221  $23,107,542
  35    $2,394,854 $9,193,111 $38,813,443  $2,394,854  $9,193,111  $38,813,443
</TABLE>
- --------
All premium payments are illustrated as if made at the beginning of the policy
year.
 
This illustration assumes no policy loans or partial withdrawals have been
made.
 
 
THE DEATH BENEFITS, ACCUMULATED VALUES AND THE CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
 
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE INTERPRETED AS A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE TO VARIABLE ACCOUNTS BY THE OWNER AND THE
EXPERIENCE OF THE ACCOUNTS. NO REPRESENTATION CAN BE MADE BY PACIFIC MUTUAL,
THE SEPARATE ACCOUNT OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN
BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
 
                                      90
<PAGE>
 
             FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE UNIVERSAL LIFE
 
   ILLUSTRATION OF DEATH BENEFITS, ACCUMULATED VALUES AND NET CASH SURRENDER
                                    VALUES
                 BASED ON GUARANTEED COST OF INSURANCE CHARGES
 
DEATH BENEFIT OPTION: B                                 FACE AMOUNT: $1,500,000
MALE NONSMOKER ISSUE AGE 55                       FEMALE NONSMOKER ISSUE AGE 55
GUIDELINE PREMIUM TEST                                 ANNUAL PREMIUM: $124,955
 
<TABLE>
<CAPTION>
                                  
                     TOTAL    END OF YEAR DEATH BENEFIT ASSUMING            
                   PREMIUMS        HYPOTHETICAL GROSS ANNUAL
         END OF    PAID PLUS         INVESTMENT RETURN OF
         POLICY   INTEREST AT ----------------------------------
          YEAR        5%          0%         6%         12%
         ------   ----------- ---------- ---------- ------------
         <S>      <C>         <C>        <C>        <C>
           1      $   131,203 $1,610,119 $1,616,795 $ 1,623,472
           2      $   268,966 $1,718,702 $1,738,893 $ 1,759,879
           3      $   413,617 $1,825,715 $1,866,495 $ 1,910,551
           4      $   565,500 $1,931,124 $1,999,808 $ 2,076,957
           5      $   724,978 $2,034,890 $2,139,045 $ 2,260,719
           6      $   892,430 $2,137,078 $2,284,536 $ 2,463,741
           7      $ 1,068,254 $2,237,492 $2,436,356 $ 2,687,855
           8      $ 1,252,869 $2,336,029 $2,594,681 $ 2,935,185
           9      $ 1,446,716 $2,432,546 $2,759,650 $ 3,208,040
          10      $ 1,650,254 $2,526,879 $2,931,387 $ 3,508,952
          15      $ 2,831,167 $2,981,950 $3,922,084 $ 5,573,993
          20      $ 4,338,344 $3,342,793 $5,094,801 $ 8,918,395
          25      $ 6,261,927 $3,547,205 $6,446,479 $14,405,732
          30      $ 8,716,959 $3,445,271 $7,833,467 $23,246,767
          35      $11,850,273 $2,811,514 $8,993,833 $37,683,479
</TABLE>
 
<TABLE>
<CAPTION>
             
          END OF YEAR ACCUMULATED VALUE   END OF YEAR NET CASH SURRENDER VALUE
           ASSUMING HYPOTHETICAL GROSS     ASSUMING HYPOTHETICAL GROSS ANNUAL
END OF     ANNUAL INVESTMENT RETURN OF             INVESTMENT RETURN OF
POLICY  --------------------------------- ------------------------------------
 YEAR       0%         6%         12%         0%          6%          12%
- ------  ---------- ---------- ----------- ----------- ----------- ------------
<S>     <C>        <C>        <C>         <C>         <C>         <C>
   1    $  110,119 $  116,795 $   123,472 $   97,767  $  104,442  $   111,119
   2    $  218,702 $  238,893 $   259,879 $  207,722  $  227,913  $   248,899
   3    $  325,715 $  366,495 $   410,551 $  316,107  $  356,887  $   400,943
   4    $  431,124 $  499,808 $   576,957 $  422,889  $  491,573  $   568,722
   5    $  534,890 $  639,045 $   760,719 $  528,028  $  632,183  $   753,856
   6    $  637,078 $  784,536 $   963,741 $  631,588  $  779,046  $   958,251
   7    $  737,492 $  936,356 $ 1,187,855 $  733,375  $  932,239  $ 1,183,737
   8    $  836,029 $1,094,681 $ 1,435,185 $  833,284  $1,091,936  $ 1,432,440
   9    $  932,546 $1,259,650 $ 1,708,040 $  931,174  $1,258,278  $ 1,706,668
  10    $1,026,879 $1,431,387 $ 2,008,952 $1,026,879  $1,431,387  $ 2,008,952
  15    $1,481,950 $2,422,084 $ 4,073,993 $1,481,950  $2,422,084  $ 4,073,993
  20    $1,842,793 $3,594,801 $ 7,418,395 $1,842,793  $3,594,801  $ 7,418,395
  25    $2,047,205 $4,946,479 $12,905,732 $2,047,205  $4,946,479  $12,905,732
  30    $1,945,271 $6,333,467 $21,746,767 $1,945,271  $6,333,467  $21,746,767
  35    $1,311,514 $7,493,833 $35,889,028 $1,311,514  $7,493,833  $35,889,028 
</TABLE>                                                         
- --------
All premium payments are illustrated as if made at the beginning of the policy
year.
 
This illustration assumes no policy loans or partial withdrawals have been
made.
 
THE DEATH BENEFITS, ACCUMULATED VALUES AND THE CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
 
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE INTERPRETED AS A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE TO VARIABLE ACCOUNTS BY THE OWNER AND THE
EXPERIENCE OF THE ACCOUNTS. NO REPRESENTATION CAN BE MADE BY PACIFIC MUTUAL,
THE SEPARATE ACCOUNT OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN
BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
 
                                      91
<PAGE>
 
             FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE UNIVERSAL LIFE
 
   ILLUSTRATION OF DEATH BENEFITS, ACCUMULATED VALUES AND NET CASH SURRENDER
                                    VALUES
                  BASED ON CURRENT COST OF INSURANCE CHARGES
 
DEATH BENEFIT OPTION: C                                 FACE AMOUNT: $1,500,000
MALE NONSMOKER ISSUE AGE 55                       FEMALE NONSMOKER ISSUE AGE 55
GUIDELINE PREMIUM TEST                                  ANNUAL PREMIUM: $79,072
 
<TABLE>
<CAPTION>
                                  
                     TOTAL    END OF YEAR DEATH BENEFIT ASSUMING 
                   PREMIUMS        HYPOTHETICAL GROSS ANNUAL
         END OF    PAID PLUS         INVESTMENT RETURN OF
         POLICY   INTEREST AT ----------------------------------
           YEAR       5%          0%         6%         12%
         ------   ----------- ---------- ---------- ------------
         <S>      <C>         <C>        <C>        <C>
            1     $   83,026  $1,579,072 $1,579,072 $ 1,579,072
            2     $  170,202  $1,658,145 $1,658,145 $ 1,658,145
            3     $  261,738  $1,737,218 $1,737,218 $ 1,737,218
            4     $  357,851  $1,816,291 $1,816,291 $ 1,816,291
            5     $  458,769  $1,895,364 $1,895,364 $ 1,895,364
            6     $  564,733  $1,974,436 $1,974,436 $ 1,974,436
            7     $  675,995  $2,053,509 $2,053,509 $ 2,053,509
            8     $  792,820  $2,132,582 $2,132,582 $ 2,132,582
            9     $  915,487  $2,211,655 $2,211,655 $ 2,211,655
           10     $1,044,287  $2,290,728 $2,290,728 $ 2,290,728
           15     $1,791,573  $2,686,092 $2,686,092 $ 2,999,482
           20     $2,745,321  $3,081,456 $3,081,456 $ 5,125,958
           25     $3,962,571  $3,476,820 $3,552,870 $ 8,949,791
           30     $5,516,125  $3,872,184 $4,937,460 $15,431,632
           35     $7,498,898  $4,267,548 $6,617,893 $25,944,833
</TABLE>
<TABLE>
<CAPTION>
                                        
          END OF YEAR ACCUMULATED VALUE   END OF YEAR NET CASH SURRENDER VALUE
           ASSUMING HYPOTHETICAL GROSS     ASSUMING HYPOTHETICAL GROSS ANNUAL
END OF     ANNUAL INVESTMENT RETURN OF            INVESTMENT RETURN OF
POLICY  --------------------------------- ------------------------------------
  YEAR      0%         6%         12%         0%          6%          12%
- ------  ---------- ---------- ----------- ----------- ----------- ------------
<S>     <C>        <C>        <C>         <C>         <C>         <C>
   1    $   68,801 $   72,997 $    77,195 $   56,449  $   60,645  $    64,842
   2    $  136,582 $  149,249 $   162,416 $  125,602  $  138,269  $   151,436
   3    $  203,307 $  228,864 $   256,480 $  193,700  $  219,257  $   246,873
   4    $  268,939 $  311,960 $   360,296 $  260,704  $  303,725  $   352,061
   5    $  333,430 $  398,652 $   474,871 $  326,568  $  391,790  $   468,009
   6    $  396,843 $  489,179 $   601,449 $  391,353  $  483,689  $   595,959
   7    $  458,997 $  583,551 $   741,171 $  454,879  $  579,434  $   737,054
   8    $  520,356 $  682,401 $   895,898 $  517,611  $  679,656  $   893,153
   9    $  580,927 $  785,950 $ 1,067,260 $  579,555  $  784,578  $ 1,065,888
  10    $  640,716 $  894,429 $ 1,257,070 $  640,716  $  894,429  $ 1,257,070
  15    $  944,622 $1,539,888 $ 2,585,761 $  944,622  $1,539,888  $ 2,585,761
  20    $1,204,188 $2,342,645 $ 4,790,615 $1,204,188  $2,342,645  $ 4,790,615
  25    $1,377,917 $3,383,685 $ 8,523,611 $1,377,917  $3,383,685  $ 8,523,611
  30    $1,271,054 $4,702,343 $14,696,792 $1,271,054  $4,702,343  $14,696,792
  35    $  282,810 $6,302,756 $24,709,364 $  282,810  $6,302,756  $24,709,364 
</TABLE>
- --------
All premium payments are illustrated as if made at the beginning of the policy
year.
 
This illustration assumes no policy loans or partial withdrawals have been
made.
 
THE DEATH BENEFITS, ACCUMULATED VALUES AND THE CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
 
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE INTERPRETED AS A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE TO VARIABLE ACCOUNTS BY THE OWNER AND THE
EXPERIENCE OF THE ACCOUNTS. NO REPRESENTATION CAN BE MADE BY PACIFIC MUTUAL,
THE SEPARATE ACCOUNT OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN
BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
 
                                      92
<PAGE>
 
             FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE UNIVERSAL LIFE
 
   ILLUSTRATION OF DEATH BENEFITS, ACCUMULATED VALUES AND NET CASH SURRENDER
                                    VALUES
                 BASED ON GUARANTEED COST OF INSURANCE CHARGES
 
DEATH BENEFIT OPTION: C                                 FACE AMOUNT: $1,500,000
MALE NONSMOKER ISSUE AGE 55                       FEMALE NONSMOKER ISSUE AGE 55
GUIDELINE PREMIUM TEST                                  ANNUAL PREMIUM: $79,072
 
<TABLE>
<CAPTION>
                                  
                     TOTAL    END OF YEAR DEATH BENEFIT ASSUMING        
                   PREMIUMS       HYPOTHETICAL GROSS ANNUAL
         END OF    PAID PLUS        INVESTMENT RETURN OF
         POLICY   INTEREST AT ----------------------------------
          YEAR        5%          0%          6%         12%
         ------   ----------- ----------  ---------- -----------
         <S>      <C>         <C>         <C>        <C>
            1     $   83,026  $1,579,072  $1,579,072 $ 1,579,072
            2     $  170,202  $1,658,145  $1,658,145 $ 1,658,145
            3     $  261,738  $1,737,218  $1,737,218 $ 1,737,218
            4     $  357,851  $1,816,291  $1,816,291 $ 1,816,291
            5     $  458,769  $1,895,364  $1,895,364 $ 1,895,364
            6     $  564,733  $1,974,436  $1,974,436 $ 1,974,436
            7     $  675,995  $2,053,509  $2,053,509 $ 2,053,509
            8     $  792,820  $2,132,582  $2,132,582 $ 2,132,582
            9     $  915,487  $2,211,655  $2,211,655 $ 2,211,655
           10     $1,044,287  $2,290,728  $2,290,728 $ 2,290,728
           15     $1,791,573  $2,686,092  $2,686,092 $ 2,963,323
           20     $2,745,321  $3,081,456  $3,081,456 $ 5,043,445
           25     $3,962,571  $3,476,820  $3,476,820 $ 8,765,129
           30     $5,516,125  $3,872,184  $4,551,308 $14,973,706
           35     $7,498,898  $        0* $6,037,112 $24,781,315
</TABLE>
 
<TABLE>
<CAPTION>
                                         
          END OF YEAR ACCUMULATED VALUE    END OF YEAR NET CASH SURRENDER VALUE
           ASSUMING HYPOTHETICAL GROSS      ASSUMING HYPOTHETICAL GROSS ANNUAL
END OF     ANNUAL INVESTMENT RETURN OF             INVESTMENT RETURN OF
POLICY  ---------------------------------- -------------------------------------
 YEAR       0%          6%         12%         0%           6%          12%
- ------  ----------  ---------- ----------- -----------  ----------- ------------
<S>     <C>         <C>        <C>         <C>          <C>         <C>
   1    $   68,785  $   72,980 $    77,177 $   56,432   $   60,628  $    64,825
   2    $  136,510  $  149,174 $   162,338 $  125,530   $  138,194  $   151,358
   3    $  203,134  $  228,682 $   256,289 $  193,527   $  219,075  $   246,681
   4    $  268,610  $  311,610 $   359,924 $  260,375   $  303,375  $   351,689
   5    $  332,882  $  398,062 $   474,238 $  326,020   $  391,200  $   467,376
   6    $  395,998  $  488,264 $   600,461 $  390,508   $  482,774  $   594,971
   7    $  457,739  $  582,186 $   739,696 $  453,622   $  578,068  $   735,578
   8    $  517,973  $  679,897 $   893,295 $  515,228   $  677,152  $   890,550
   9    $  576,516  $  781,442 $ 1,062,764 $  575,144   $  780,069  $ 1,061,391
  10    $  633,154  $  886,856 $ 1,249,812 $  633,154   $  886,856  $ 1,249,812
  15    $  896,911  $1,495,908 $ 2,554,589 $  896,911   $1,495,908  $ 2,554,589
  20    $1,052,297  $2,221,579 $ 4,713,500 $1,052,297   $2,221,579  $ 4,713,500
  25    $  943,693  $3,133,696 $ 8,347,742 $  943,693   $3,133,696  $ 8,347,742
  30    $   61,286  $4,334,579 $14,260,672 $   61,286   $4,334,579  $14,260,672
  35    $        0* $5,749,631 $23,601,253 $        0*  $5,749,631  $23,601,253
</TABLE>
- --------
All premium payments are illustrated as if made at the beginning of the policy
year.
 
This illustration assumes no policy loans or partial withdrawals have been
made.
 
*Additional payment will be required to prevent policy termination.
 
THE DEATH BENEFITS, ACCUMULATED VALUES AND THE CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
 
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE INTERPRETED AS A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE TO VARIABLE ACCOUNTS BY THE OWNER AND THE
EXPERIENCE OF THE ACCOUNTS. NO REPRESENTATION CAN BE MADE BY PACIFIC MUTUAL,
THE SEPARATE ACCOUNT OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN
BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
 
                                      93
<PAGE>
 
             FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE UNIVERSAL LIFE
 
   ILLUSTRATION OF DEATH BENEFITS, ACCUMULATED VALUES AND NET CASH SURRENDER
                                    VALUES
                  BASED ON CURRENT COST OF INSURANCE CHARGES
 
DEATH BENEFIT OPTION: D                                 FACE AMOUNT: $1,500,000
MALE NONSMOKER ISSUE AGE 55                       FEMALE NONSMOKER ISSUE AGE 55
GUIDELINE PREMIUM TEST                                  ANNUAL PREMIUM: $54,009
 
<TABLE>
<CAPTION>
                                  
                     TOTAL    END OF YEAR DEATH BENEFIT ASSUMING        
                   PREMIUMS       HYPOTHETICAL GROSS ANNUAL
         END OF    PAID PLUS        INVESTMENT RETURN OF
         POLICY   INTEREST AT ----------------------------------
          YEAR        5%          0%         6%         12%
         ------   ----------- ---------- ---------- -----------
         <S>      <C>         <C>        <C>        <C>
            1     $   56,709  $1,500,000 $1,500,000 $ 1,500,000
            2     $  116,254  $1,500,000 $1,500,000 $ 1,500,000
            3     $  178,777  $1,500,000 $1,500,000 $ 1,500,000
            4     $  244,425  $1,515,000 $1,515,000 $ 1,515,000
            5     $  313,356  $1,515,000 $1,515,000 $ 1,515,000
            6     $  385,733  $1,530,000 $1,530,000 $ 1,530,000
            7     $  461,729  $1,530,000 $1,530,000 $ 1,530,000
            8     $  541,525  $1,545,000 $1,545,000 $ 1,545,000
            9     $  625,310  $1,545,000 $1,545,000 $ 1,545,000
           10     $  713,285  $1,560,000 $1,560,000 $ 1,560,000
           15     $1,223,708  $1,680,000 $1,680,000 $ 2,020,715
           20     $1,875,152  $1,905,000 $1,905,000 $ 3,458,169
           25     $2,706,578  $2,325,000 $2,418,618 $ 6,042,179
           30     $3,767,711  $2,760,000 $3,362,059 $10,422,230
           35     $5,122,015  $3,000,000 $4,507,109 $17,526,512
</TABLE>
 
<TABLE>
<CAPTION>
                                       
         END OF YEAR ACCUMULATED VALUE  END OF YEAR NET CASH SURRENDER VALUE
          ASSUMING HYPOTHETICAL GROSS    ASSUMING HYPOTHETICAL GROSS ANNUAL
END OF    ANNUAL INVESTMENT RETURN OF           INVESTMENT RETURN OF
POLICY  ------------------------------- -------------------------------------
 YEAR      0%        6%         12%         0%          6%           12%
- ------  -------- ---------- ----------- ----------------------- -------------
<S>     <C>      <C>        <C>         <C>        <C>          <C>
   1    $ 46,226 $   49,067 $    51,910 $ 33,873   $   36,715   $    39,557
   2    $ 91,714 $  100,268 $   109,162 $ 80,734   $   89,288   $    98,182
   3    $136,448 $  153,681 $   172,307 $126,840   $  144,073   $   162,699
   4    $180,403 $  209,381 $   241,949 $172,168   $  201,146   $   233,714
   5    $223,568 $  267,465 $   318,781 $216,706   $  260,603   $   311,919
   6    $266,024 $  328,132 $   403,676 $260,534   $  322,642   $   398,186
   7    $307,645 $  391,386 $   497,398 $303,528   $  387,268   $   493,281
   8    $348,785 $  457,693 $   601,238 $346,040   $  454,948   $   598,493
   9    $389,471 $  527,228 $   716,322 $388,099   $  525,856   $   714,949
  10    $429,687 $  600,131 $   843,853 $429,687   $  600,131   $   843,853
  15    $638,476 $1,038,963 $ 1,741,996 $638,476   $1,038,963   $ 1,741,996
  20    $820,454 $1,588,579 $ 3,231,934 $820,454   $1,588,579   $ 3,231,934
  25    $946,315 $2,303,446 $ 5,754,456 $946,315   $2,303,446   $ 5,754,456
  30    $861,682 $3,201,961 $ 9,925,933 $861,682   $3,201,961   $ 9,925,933
  35    $116,285 $4,292,485 $16,691,916 $116,285   $4,292,485   $16,691,916 
</TABLE>
- --------
All premium payments are illustrated as if made at the beginning of the policy
year.
 
This illustration assumes no policy loans or partial withdrawals have been
made.
 
THE DEATH BENEFITS, ACCUMULATED VALUES AND THE CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
 
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE INTERPRETED AS A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE TO VARIABLE ACCOUNTS BY THE OWNER AND THE
EXPERIENCE OF THE ACCOUNTS. NO REPRESENTATION CAN BE MADE BY PACIFIC MUTUAL,
THE SEPARATE ACCOUNT OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN
BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
 
                                      94
<PAGE>
 
             FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE UNIVERSAL LIFE
 
   ILLUSTRATION OF DEATH BENEFITS, ACCUMULATED VALUES AND NET CASH SURRENDER
                                    VALUES
                 BASED ON GUARANTEED COST OF INSURANCE CHARGES
 
DEATH BENEFIT OPTION: D                                 FACE AMOUNT: $1,500,000
MALE NONSMOKER ISSUE AGE 55                       FEMALE NONSMOKER ISSUE AGE 55
GUIDELINE PREMIUM TEST                                  ANNUAL PREMIUM: $54,009
 
<TABLE>
<CAPTION>
                              
                     TOTAL    END OF YEAR DEATH BENEFIT ASSUMING
                   PREMIUMS       HYPOTHETICAL GROSS ANNUAL
         END OF    PAID PLUS        INVESTMENT RETURN OF
         POLICY   INTEREST AT -----------------------------------
          YEAR        5%          0%          6%          12%     
         ------   ----------- ----------  ----------  ----------- 
         <S>      <C>         <C>         <C>         <C>         
            1     $   56,709  $1,500,000  $1,500,000  $ 1,500,000 
            2     $  116,254  $1,500,000  $1,500,000  $ 1,500,000 
            3     $  178,777  $1,500,000  $1,500,000  $ 1,500,000 
            4     $  244,425  $1,515,000  $1,515,000  $ 1,515,000 
            5     $  313,356  $1,515,000  $1,515,000  $ 1,515,000 
            6     $  385,733  $1,530,000  $1,530,000  $ 1,530,000 
            7     $  461,729  $1,530,000  $1,530,000  $ 1,530,000 
            8     $  541,525  $1,545,000  $1,545,000  $ 1,545,000 
            9     $  625,310  $1,545,000  $1,545,000  $ 1,545,000 
           10     $  713,285  $1,560,000  $1,560,000  $ 1,560,000 
           15     $1,223,708  $1,680,000  $1,680,000  $ 1,996,824 
           20     $1,875,152  $1,905,000  $1,905,000  $ 3,403,278 
           25     $2,706,578  $2,325,000  $2,325,000  $ 5,918,846 
           30     $3,767,711  $2,760,000  $3,155,141  $10,115,251 
           35     $5,122,015  $        0* $4,180,558  $16,744,370  
</TABLE>
 
<TABLE>
<CAPTION>
                                        
         END OF YEAR ACCUMULATED VALUE   END OF YEAR NET CASH SURRENDER VALUE
          ASSUMING HYPOTHETICAL GROSS     ASSUMING HYPOTHETICAL GROSS ANNUAL
END OF    ANNUAL INVESTMENT RETURN OF            INVESTMENT RETURN OF
POLICY  -------------------------------- --------------------------------------
  YEAR     0%         6%         12%          0%           6%           12%
- ------  --------  ---------- ----------- ---------- ------------ -------------
<S>     <C>       <C>        <C>         <C>        <C>          <C>
   1    $ 46,210  $   49,051 $    51,893  $ 33,857  $   36,698   $    39,540
   2    $ 91,647  $  100,198 $   109,090  $ 80,667  $   89,218   $    98,110 
   3    $136,291  $  153,515 $   172,132  $126,684  $  143,908   $   162,524 
   4    $180,112  $  209,070 $   241,616  $171,877  $  200,835   $   233,381 
   5    $223,096  $  266,953 $   318,227  $216,233  $  260,091   $   311,365 
   6    $265,314  $  327,356 $   402,828  $259,824  $  321,866   $   397,338 
   7    $306,620  $  390,257 $   496,160  $302,502  $  386,140   $   492,042 
   8    $346,925  $  455,706 $   599,130  $344,180  $  452,961   $   596,385 
   9    $386,176  $  523,802 $   712,822  $384,803  $  522,429   $   711,450 
  10    $424,235  $  594,583 $   838,401  $424,235  $  594,583   $   838,401 
  15    $608,117  $1,011,071 $ 1,721,400  $608,117  $1,011,071   $ 1,721,400 
  20    $729,869  $1,520,671 $ 3,180,633  $729,869  $1,520,671   $ 3,180,633 
  25    $680,613  $2,172,956 $ 5,636,997  $680,613  $2,172,956   $ 5,636,997 
  30    $ 64,483  $3,004,896 $ 9,633,572  $ 64,483  $3,004,896   $ 9,633,572 
  35    $      0* $3,981,484 $15,947,019  $      0* $3,981,484   $15,947,019  
</TABLE>
- --------
All premium payments are illustrated as if made at the beginning of the policy
year.
 
This illustration assumes no policy loans or partial withdrawals have been
made.
 
*Additional payment will be required to prevent policy termination.
 
THE DEATH BENEFITS, ACCUMULATED VALUES AND THE CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
 
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE INTERPRETED AS A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE TO VARIABLE ACCOUNTS BY THE OWNER AND THE
EXPERIENCE OF THE ACCOUNTS. NO REPRESENTATION CAN BE MADE BY PACIFIC MUTUAL,
THE SEPARATE ACCOUNT OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN
BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
 
                                      95
<PAGE>
 
                                  APPENDIX A
 
                  DESCRIPTION OF JOINT EQUAL AGE CALCULATION
 
1. A Joint Equal Age (JEA) conversion changes many possible combinations of
   Ages, risk classes, substandard ratings and sexes for two lives into a "two
   life status" in which both Insureds are assumed to have the same Age, sex
   (both always male), and risk class (both nonsmoker, or smoker).
 
2. Certain Policy charges are based on the JEA determined at issue. JEA
   eliminates many of the tables needed when Age rates are used. JEA will be
   used to determine the rates per $1000 of initial Face Amount for the Sales
   Surrender Target, underwriting surrender charge and the Face Amount
   component of the mortality and expense risk charge. JEA determined at issue
   is also used to determine the death benefit under Death Benefit Option D.
   Age is used for cost of insurance rates, both current and guaranteed.
 
3. To calculate JEA, the two Ages are each converted to an adjusted Age, the
   difference in adjusted Ages is converted to an Age add-on, and the Age add-
   on is added to the younger adjusted Age. The steps are as follows:
 
   a. Smoker Age Adjustment:
 
      If both Insureds are smoker or both Insureds are nonsmoker, no smoker
      adjustment is made. If exactly one Insured is a smoker, the Age of the
      smoker is adjusted as follows:
 
<TABLE>
<CAPTION>
      NUMBER OF
       SMOKERS     SMOKER AGE ADD-ON
      ---------    -----------------
      <S>          <C>
         0                0
         1 female         +4
         1 male           +6
         1 unisex         +5
         2                0
</TABLE>
 
   b. Sex Age Adjustment:
 
      Each female Insured has a 5 year Age reduction. Each male Insured has a
      0 year Age reduction. Each unisex Insured has a 1 year Age reduction.
 
   c. Table rating Age adjustment:
 
      The substandard Table ratings represent a multiple of standard
      mortality rates. An Age adjustment will be added to each Insured with a
      substandard Table rating as follows:
 
                          TABLE RATING AGE ADJUSTMENT
 
<TABLE>
     <S>             <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
     Table Rating      0   A   B   C   D   E   F   H   J   L   N   P
    ----------------------------------------------------------------
     Age Adjustment    0   2   4   6   8  10  12  14  15  16  18  19
</TABLE>
 
      The adjusted Age for substandard is capped at Age 100.
 
      For uninsurable Insureds, the adjusted Age will always be 100,
      independently of the Age and sex of the uninsurable Insureds. (We
      reserve the right to reject an application for a policy.)
 
                                      96
<PAGE>
 
  d. After the Ages are adjusted for sex, smoker, and table ratings, the
     younger adjusted Age is subtracted from the older adjusted Age. The
     difference is used to determine an adjusted Age add-on.
 
<TABLE>
<CAPTION>
      DIFFERENCE IN       ADD TO YOUNGER         DIFFERENCE IN         ADD TO YOUNGER
      ADJUSTED AGE         ADJUSTED AGE          ADJUSTED AGE           ADJUSTED AGE
      -------------       --------------         -------------         --------------
      <S>                 <C>                    <C>                   <C>
           0                     0                  40-44                   12
           1-2                   1                  45-47                   13
           3-4                   2                  48-50                   14
           5-6                   3                  51-53                   15
           7-9                   4                  54-56                   16
          10-12                  5                  57-60                   17
          13-15                  6                  61-64                   18
          16-18                  7                  65-69                   19
          19-23                  8                  70-75                   20
          24-28                  9                  76-82                   21
          29-34                 10                  83-91                   22
          35-39                 11                  92-100                  23
</TABLE>
 
  e. Add the Age add-on factor from Step d to the younger adjusted Age. This
     is the Joint Equal Age, or JEA.
 
EXAMPLE: Assuming a male smoker, Age 65, and a female nonsmoker, Age 55, Table
D substandard rating, JEA is calculated as follows:
 
<TABLE>
<CAPTION>
                                           MALE FEMALE
                                           ---- ------
      <S>                                  <C>  <C>    <C>
      Age                                   65    55
      Step a--Smoker Age Adjustment         71    55
      Step b--Sex Age Adjustment            71    50
      Step c--Table Rating Age Adjustment   71    58
      Step d--Subtract Younger from Older              71-58=13
      Step e--Add Adjusted Age Add-On                  58+6=64 JEA
</TABLE>
 
                                      97
<PAGE>
 
                                   APPENDIX B
 
                     RATES PER $1000 OF INITIAL FACE AMOUNT
 
<TABLE>
<CAPTION>
                              FACE AMOUNT                              FACE AMOUNT
JOINT    SALES   UNDERWRITING  COMPONENT  JOINT   SALES   UNDERWRITING  COMPONENT
EQUAL  SURRENDER  SURRENDER   OF M&E RISK EQUAL SURRENDER  SURRENDER   OF M&E RISK
 AGE    TARGET      CHARGE      CHARGE     AGE   TARGET      CHARGE      CHARGE
- -----  --------- ------------ ----------- ----- --------- ------------ -----------
<S>    <C>       <C>          <C>         <C>   <C>       <C>          <C>
 15       2.28       2.0         0.051      58    16.74        7.0        0.208
 16       2.35       2.1         0.052      59    18.04        7.3        0.230
 17       2.43       2.1         0.053      60    19.35        7.6        0.253
 18       2.50       2.2         0.054      61    20.64        7.9        0.275
 19       2.57       2.3         0.055      62    21.89        8.2        0.298
 20       2.65       2.3         0.056      63    23.08        8.5        0.320
 21       2.73       2.4         0.056      64    24.20        8.9        0.341
 22       2.81       2.4         0.057      65    25.26        9.3        0.362
 23       2.89       2.5         0.058      66    26.25        9.7        0.382
 24       2.98       2.6         0.059      67    27.20       10.1        0.401
 25       3.07       2.7         0.060      68    28.12       10.5        0.420
 26       3.16       2.8         0.061      69    29.00       10.9        0.439
 27       3.25       2.9         0.062      70    29.87       11.3        0.457
 28       3.35       3.0         0.063      71    30.73       11.7        0.475
 29       3.45       3.1         0.064      72    31.59       12.1        0.492
 30       3.55       3.2         0.065      73    32.46       12.5        0.510
 31       3.66       3.3         0.066      74    33.35       12.9        0.528
 32       3.77       3.4         0.067      75    34.26       13.3        0.547
 33       3.88       3.5         0.068      76    35.19       13.7        0.566
 34       4.04       3.6         0.069      77    36.14       14.1        0.585
 35       4.21       3.7         0.070      78    37.09       14.5        0.605
 36       4.38       3.8         0.072      79    38.06       14.9        0.626
 37       4.56       3.9         0.073      80    39.04       15.3        0.647
 38       4.75       4.0         0.074      81    40.02       15.7        0.668
 39       4.95       4.1         0.075      82    41.01       16.1        0.689
 40       5.15       4.2         0.076      83    42.00       16.5        0.711
 41       5.37       4.3         0.078      84    43.00       16.9        0.733
 42       5.59       4.4         0.079      85    44.00       17.3        0.756
 43       5.82       4.5         0.080      86    45.00       17.7        0.778
 44       6.20       4.6         0.082      87    46.00       18.1        0.801
 45       6.60       4.7         0.085      88    47.00       18.5        0.824
 46       7.03       4.8         0.087      89    48.00       18.9        0.848
 47       7.49       4.9         0.090      90    49.00       19.3        0.871
 48       7.98       5.0         0.093      91    50.00       19.7        0.895
 49       8.50       5.1         0.097      92    51.00       20.1        0.919
 50       9.05       5.2         0.102      93    52.00       20.5        0.944
 51       9.64       5.3         0.107      94    53.00       20.9        0.968
 52      10.27       5.4         0.113      95    54.00       21.3        0.993
 53      10.94       5.5         0.120      96    55.00       21.7        1.018
 54      11.94       5.8         0.134      97    56.00       22.1        1.044
 55      13.03       6.1         0.150      98    57.00       22.5        1.069
 56      14.21       6.4         0.168      99    58.00       22.9        1.095
 57      15.45       6.7         0.188     100    59.00       23.3        1.121
</TABLE>
 
                                       98
<PAGE>
 
                                   APPENDIX C
 
                           DEATH BENEFIT PERCENTAGES
 
<TABLE>
<CAPTION>
 AGE    PERCENTAGE   AGE   PERCENTAGE   AGE   PERCENTAGE    AGE    PERCENTAGE
 ----   ----------   ---   ----------   ---   ----------   -----   ----------
 <S>    <C>          <C>   <C>          <C>   <C>          <C>     <C>
 0-40      250%      50       185%      60       130%       70        115%
   41      243       51       178       61       128        71        113
   42      236       52       171       62       126        72        111
   43      229       53       164       63       124        73        109
   44      222       54       157       64       122        74        107
   45      215       55       150       65       120       75-90      105
   46      209       56       146       66       119        91        104
   47      203       57       142       67       118        92        103
   48      197       58       138       68       117        93        102
   49      191       59       134       69       116       >93        101
</TABLE>
 
                                       99
<PAGE>
 
                                  APPENDIX D
 
                          DEATH BENEFIT FACTOR TABLE
 
RATE PER $1.00 OF FACE AMOUNT
 
<TABLE>
<CAPTION>
 JOINT
 EQUAL
  AGE                                         POLICY YEARS*
 -----  -----------------------------------------------------------------------------------------
          5    10    15    20    25    30    35    40    45    50    55    60    65    70    75+
        ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
 <S>    <C>   <C>   <C>   <C>   <C>   <C>   <C>   <C>   <C>   <C>   <C>   <C>   <C>   <C>   <C>
 15     1.000 1.000 1.000 1.001 1.002 1.005 1.010 1.022 1.048 1.102 1.210 1.415 1.702 1.957 2.000
 20     1.000 1.000 1.001 1.002 1.004 1.009 1.021 1.046 1.100 1.207 1.411 1.700 1.957 2.000 2.000
 25     1.000 1.000 1.001 1.003 1.008 1.019 1.044 1.097 1.204 1.408 1.697 1.956 2.000 2.000 2.000
 30     1.000 1.001 1.003 1.007 1.018 1.042 1.094 1.200 1.404 1.694 1.955 2.000 2.000 2.000 2.000
 35     1.000 1.002 1.006 1.016 1.039 1.091 1.197 1.400 1.692 1.954 2.000 2.000 2.000 2.000 2.000
 40     1.001 1.005 1.014 1.036 1.087 1.192 1.395 1.688 1.953 2.000 2.000 2.000 2.000 2.000 2.000
 45     1.002 1.011 1.032 1.081 1.185 1.388 1.682 1.952 2.000 2.000 2.000 2.000 2.000 2.000 2.000
 50     1.006 1.025 1.072 1.174 1.376 1.674 1.949 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000
 55     1.015 1.058 1.157 1.358 1.660 1.945 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000
 60     1.035 1.128 1.327 1.636 1.936 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000
 65     1.079 1.274 1.595 1.920 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000
 70     1.175 1.519 1.891 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000
 75     1.357 1.822 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000
 80     1.620 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000
 85     1.894 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000
 90     1.969 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000
 95     2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000
 99     2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000
</TABLE>
 
* Factors are portrayed for both Joint Equal Ages and Policy Anniversaries, at
  five year intervals. See your Policy for one year increments in Death
  Benefit factors.
 
                                      100
<PAGE>
 
                           [LOGO OF PACIFIC SELECT
                              ESTATE PRESERVER]

<TABLE>
<S>                                    <C>
              Issued By                      Principal Underwriter

Pacific Mutual Life Insurance Company  Pacific Mutual Distributors, Inc.
      700 Newport Center Drive                Member: NASD & SIPC
            P.O. Box 9000                  700 Newport Center Drive
   Newport Beach, California 92660               P.O. Box 9000
                                         Newport Beach, California 92660
</TABLE>
 
<PAGE>
 
 
 
                                 Sponsored by:
 
                           [LOGO OF PACIFIC MUTUAL]

                    PACIFIC MUTUAL LIFE INSURANCE COMPANY
                          700 NEWPORT CENTER DRIVE 
                           NEWPORT BEACH, CA 92660
 
                                Distributed by:
 
                 [LOGO OF PACIFIC MUTUAL DISTRIBUTORS, INC.]

                       PACIFIC MUTUAL DISTRIBUTORS, INC.
                               Member NASD & SIPC
                       700 NEWPORT CENTER DRIVE, NB-3 
                           NEWPORT BEACH, CA 92660 
                                1-800-800-7681

   
FORM NO. 15-20514-00     
<PAGE>
 











                                  SUPPLEMENT
<PAGE>
 
                       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.
                                                       ----    
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 
<PAGE>
 
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.

<TABLE> 
<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                                                                          
</TABLE> 
                               

                                      -2-
<PAGE>
 
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

                                      -3-
<PAGE>
 
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.

                                      -4-
<PAGE>
 
PART II.  ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS

CONTENTS OF REGISTRATION STATEMENT

     This Registration Statement on Form S-6 comprises the following papers and
documents:
    
     The facing sheet.
     The cross-reference sheet.
     The Prospectus consisting of 101 pages (including illustrations).
     Supplement to Prospectus dated January 15, 1997 consisting of 4 pages.
     The undertaking to file reports.
     Notice pursuant to Paragraph (b)(13)(i) under Rule 6e-3(T).
     Representation pursuant to Section 26(e) of the Investment Company Act of
     1940.
     The signatures.     

The following exhibits:

  1.  (1)   Resolution of the Board of Directors of the Depositor dated November
            22, 1989 and copies of the Memoranda concerning Pacific Select Exec
            Separate Account dated May 12, 1988 and January 26, 1993.*
      (2)   Inapplicable
      (3)   (a)  Distribution Agreement Between Pacific Mutual Life Insurance
                 Company and Pacific Equities Network*
            (b)  Form of Selling Agreement Between Pacific Equities Network and 
                 Various Broker-Dealers     
      (4)   Inapplicable
      (5)   (a)  Last Survivor Flexible Premium Variable Life Insurance 
                 Policy (Form 96-56)**     
            (b)  Accelerated Living Benefit Rider*
            (c)  Policy Split Option Rider*
            (d)  Last Survivor Added Protection Benefit (Form R96-LSAPB)**     
            (e)  Individual Annual Renewable Term Rider (Form R96-ART)**     
            (f)  Enhanced Policy Split Option Rider (Form R96-EPSO)**     
      (6)   (a)  Articles of Incorporation of Pacific Mutual Life Insurance
                 Company*
            (b)  Bylaws of Pacific Mutual Life Insurance Company*
      (7)   Inapplicable
      (8)   Inapplicable
      (9)   Participation Agreement between Pacific Mutual Life Insurance 
            Company and Pacific Select Fund     
      (10)  Applications and General Questionnaire*

  2.  See Exhibit 1.(5)

  3.  Form of Opinion and consent of legal officer of Pacific Mutual as to 
      legality of Policies being registered*

 
<PAGE>
 
  4.  Inapplicable

  5.  Inapplicable
    
  6.  (a)   Consent of Independent Accountants
      (b)   Consent of Dechert Price & Rhoads**     

  7.  Opinion of Actuary**

  8.  Memorandum Describing Issuance, Transfer, and Redemption Procedures*
    
  9.  Powers of Attorney**     
    
 27.  Financial Data Schedules     

_______________________
*    Filed as part of the Registration Statement on Form S-6 EL24/A filed via
     EDGAR on March 14, 1996, Accession Number 0000898430-96-000838.
    
**   Filed as part of Pre-Effective Amendment No. 1 to the Registration
     Statement on Form S-6 EL24/A filed via EDGAR on October 25, 1996, Accession
     Number 0001017062-96-000349.    
<PAGE>
 
UNDERTAKING TO FILE REPORTS

     Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.

NOTICE PURSUANT TO PARAGRAPH (b)(13)(i) UNDER RULE 6e-3(T)

     Registrant hereby notifies the Securities and Exchange Commission that it
elects to be governed by subparagraph (A) of Rule 6e-3(T)(b)(13)(i) for purposes
of determining the maximum permitted sales load.

REPRESENTATION PURSUANT TO SECTION 26(e) OF THE INVESTMENT COMPANY ACT OF 1940

     
     Pacific Mutual Life Insurance Company and Registrant represent that the 
fees and charges to be deducted under the Variable Life Insurance Policy 
("Policy") described in the prospectus contained in this registration statement
are, in the aggregate, reasonable in relation to the services rendered, the 
expenses to be incurred, and the risks assumed in connection with the Policy.

<PAGE>
 
SIGNATURES
    
     Pursuant to the requirements of the Securities act of 1933, Pacific Mutual
Life Insurance Company has duly caused this Post-Effective Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, all in the City of Newport Beach, and State of
California, on this 15th day of January, 1997.    

                                       PACIFIC MUTUAL LIFE INSURANCE COMPANY
                                       (Depositor)


                                  BY:  _____________________________________
                                       Thomas C. Sutton*
                                       Chairman & Chief Executive Officer



*BY:  /s/DAVID R. CARMICHAEL
      David R. Carmichael
      as attorney-in-fact

    
(Power of attorney is contained as Exhibit 9 of Pre-Effective Amendment No.
1 to the Registration Statement on Form S-6EL24/A of Pacific Select Exec
Separate Account, File No. 333-01713, filed via EDGAR on October 25, 1996, 
Accession Number 0001017062-000349.)     

 
<PAGE>
 
SIGNATURES
    
     Pursuant to the requirements of the Securities Act of 1933, the registrant,
Pacific Select Exec Separate Account of Pacific Mutual Life Insurance Company,
certifies that it meets all of the requirements for effectiveness of this
registration statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Post-Effective Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, all in the City of Newport Beach, and State of California, on this
15th day of January, 1997.    

                                       PACIFIC SELECT EXEC SEPARATE ACCOUNT
                                       (Registrant)

                                  BY:  PACIFIC MUTUAL LIFE INSURANCE COMPANY
                                       (Depositor)

                                  BY:  _____________________________________
                                       Thomas C. Sutton*
                                       Chairman & Chief Executive Officer


*BY:  /s/DAVID R. CARMICHAEL
      David R. Carmichael
      as attorney-in-fact


    
(Power of Attorney is contained in Exhibit 9 of Pre-Effective Amendment No.
1 to the Registration Statement on Form S-6EL24/A of Pacific Select Exec
Separate Account, File No. 333-01713, filed via EDGAR on October 25, 1996, 
Accession Number 0001017062-000349.)     

 
<PAGE>
 
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
    
<TABLE> 
<CAPTION> 
Signature                              Title              Date              
<S>                           <C>                         <C>
Thomas C. Sutton*             Director, Chairman          ____________, 1997
                              of the Board and                              
                              Chief Executive Officer                       
                                                                            
Glenn S. Schafer*             President                   ____________, 1997
                                                                            
Edward Byrd*                  Vice President and                            
                              Controller                  ____________, 1997
                                                                            
Harry G. Bubb*                Director and                ____________, 1997
                              Director Emeritus                             
                                                                            
Richard M. Ferry*             Director                    ____________, 1997
                                                                            
Donald E. Guinn*              Director                    ____________, 1997
                                                                            
Ignacio E. Lozano, Jr.*       Director                    ____________, 1997
                                                                            
Charles A. Lynch*             Director                    ____________, 1997
                                                                            
Dr. Allen W. Mathies, Jr.*    Director                    ____________, 1997
                                                                            
Charles D. Miller*            Director                    ____________, 1997
                                                                            
Donn B. Miller*               Director                    ____________, 1997

Jacqueline C. Morby*          Director                    ____________, 1997
                                                                            
J. Fernando Niebla*           Director                    ____________, 1997
                                                                            
Susan Westerberg Prager*      Director                    ____________, 1997
                                                                            
Richard M. Rosenberg*         Director                    ____________, 1997
                                                                            
James R. Ukropina*            Director                    ____________, 1997
                                                                            
Raymond L. Watson*            Director                    ____________, 1997
</TABLE>      
 



<PAGE>

     
*BY: /s/DAVID R. CARMICHAEL                               January 15, 1997     
David R. Carmichael
as attorney-in-fact


    
(Powers of Attorney are contained as Exhibit 9 of Pre-Effective Amendment
No. 1 to the Registration Statement on Form S-6EL24/A of Pacific Select Exec
Separate Account, File No. 333-01713, filed via EDGAR on October 25, 1996, 
Accession Number 0001017062-000349.)     



<PAGE>
 
EXHIBIT 99.1(3)(b)

Form of Selling Agreement between Pacific Mutual,
PEN and Various Broker-Dealers


<PAGE>
 
                               SELLING AGREEMENT

  AGREEMENT by and between PACIFIC MUTUAL LIFE INSURANCE COMPANY ("Pacific
Mutual"), a California corporation; PACIFIC EQUITIES NETWORK ("PEN"), a
California corporation, a broker-dealer registered with the Securities and
Exchange Commission under the Securities Exchange Act of 1934 (the "1934 Act"),
and a member of the National Association of Securities Dealers, Inc. ("NASD");
_______________________________________________________________________________
_______________________________________________________________________________ 
("Selling Broker-Dealer"), also a broker-dealer registered under the 1934 Act
and a member of the NASD; and each of the undersigned General Agents jointly and
severally referred to herein as "General Agent".

                              W I T N E S S E T H:

  WHEREAS, Pacific Mutual issues certain insurance and annuity contracts listed
in Schedule B (the "Contracts"), some of which are registered ("Securities
Registered Contracts") under the Securities Act of 1933 (the "1933 Act");

  WHEREAS, Pacific Mutual has authorized PEN, as principal underwriter of the
Contracts, to enter into agreements, subject to the consent of Pacific Mutual,
with broker-dealers and general agents for the distribution of the Contracts;

  WHEREAS, PEN has agreed to secure duly qualified broker-dealers and general
agents to contract with Pacific Mutual and PEN for the distribution of the
Contracts, assist these broker-dealers and general agents in obtaining licenses,
registrations and appointments to enable their registered representatives and
sub-agents to sell the Contracts, and provide educational meetings to
familiarize these broker-dealers and general agents and their registered
representatives and sub-agents with the provisions and features of the
Contracts; and

  WHEREAS, Selling Broker-Dealer and General Agent have been selected by PEN to
distribute the contracts and Selling Broker-Dealer and General Agent wish to
participate in the distribution of the Contracts.

  NOW THEREFORE, in consideration of the promises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:

                                       I.
                                  APPOINTMENT

  Subject to the terms and conditions of this Agreement, Pacific Mutual and PEN
hereby appoint Selling Broker-Dealer and General Agent for the solicitation of
applications for the purchase of the Contracts.

  Selling Broker-Dealer and General Agent accept such appointment and each
agrees to use its best efforts to find purchasers for the Contracts acceptable
to Pacific Mutual. Selling Broker-Dealer and General Agent will seek purchasers
of Securities Related Contracts only while the registration statement relating
to such contracts is effective under the 1933 Act.
<PAGE>
 
                                      II.
                     AUTHORITY AND DUTIES OF GENERAL AGENT

A.  LICENSING AND APPOINTMENT OF SUB-AGENTS

  General Agent is authorized to appoint sub-agents ("Sub-agents") to solicit
sales of the Contracts. General Agent agrees to fulfill all requirements set
forth in the General Letter of Recommendation attached as Schedule A hereto in
conjunction with its submission of licensing and appointment papers for all Sub-
agents.

  General Agent warrants that it and all of its Sub-agents appointed pursuant to
this Agreement shall not solicit nor aid, directly or indirectly, in the
solicitation of any application for any Contract until they are fully licensed
by the proper authorities under the applicable insurance laws within the
applicable jurisdictions where General Agent and Sub-agents propose to offer the
Contracts, where Pacific Mutual is authorized to conduct business and where the
Contracts may be lawfully sold.

  General Agent shall periodically provide Pacific Mutual with a list of all
Sub-agents appointed by General Agent and the jurisdictions where such Sub-
agents are licensed to solicit sales of the Contracts. Pacific Mutual shall
periodically provide General Agent with a list which shows; (i) the
jurisdictions where Pacific Mutual is authorized to do business; and (ii) any
limitations on the availability of the Contracts in any of such jurisdictions.

  General Agent shall prepare and transmit the appropriate appointment forms to
Pacific Mutual. General Agent shall pay all fees to state insurance regulatory
authorities in connection with obtaining necessary licenses and authorizations
for Sub-agents to solicit and sell the Contracts.  Pacific Mutual will pay
appointment fees for General Agent and resident appointment fees for Sub-agents.
Non-resident appointment fees for Sub-agents will be paid by the General Agent.
All renewal appointment fees will be paid by the General Agent for Sub-agents
who have generated less than $20,000 target premium within the prior 12 months.
Pacific Mutual may refuse for any reason to apply for the appointment of a Sub-
agent and may cancel any existing appointment at any time.

B.  REJECTION OF SUB-AGENT

  Pacific Mutual or PEN may refuse for any reason, by written notice to General
Agent, to permit any Sub-agent the right to solicit applications for the sale of
any of the Contracts.  Upon receipt of such notice, General Agent immediately
shall cause such Sub-agent to cease such solicitations of sales and cancel the
appointment of any Sub-agent under this agreement.

C.  SUPERVISION OF SUB-AGENTS

  General Agent shall supervise all Sub-agents appointed pursuant to this
Agreement to solicit sales of the Contracts and bear responsibility for all acts
and omissions of each Sub-agent. General Agent shall comply with and exercise
all responsibilities required by applicable federal and state law and
regulations.  General Agent shall train and supervise its Sub-agents to ensure
that purchase of a Contract is not recommended to an applicant in the absence of
reasonable grounds to believe the purchase of the Contract is suitable for that
applicant.  While not limited to the following, a determination of suitability
shall be based on information furnished to a Sub-agent after reasonable inquiry
of such applicant concerning the applicant's insurance and investment
objectives, financial situation and needs, and the likelihood that the applicant
will continue to make any premium payments contemplated by the Contracts and
will keep the Contract in force for a sufficient period of time so that Pacific
Mutual's acquisition costs are amortized over a reasonable period of time.

  Nothing contained in this Agreement or otherwise shall be deemed to make any
Sub-agent appointed by General Agent an employee or agent of Pacific Mutual or
PEN.  Pacific Mutual and PEN shall not have any responsibility for the training
and supervision of any Sub-agent or any other employee of General Agent.  If the
act or omission of a Sub-agent or any other employee of General Agent is the
proximate cause of claim, damage or liability (including reasonable attorneys'
fees) to Pacific Mutual or PEN, General Agent shall be responsible and liable
therefor.

                                       2
<PAGE>
 
                                      III.
                 AUTHORITY AND DUTIES OF SELLING BROKER-DEALER

  Selling Broker-Dealer agrees that it has full responsibility for the training
and supervision of all persons, including Sub-agents of General Agent,
associated with Selling Broker-Dealer who are engaged directly or indirectly in
the offer or sale of Securities Regulated Contracts.  All such persons shall be
registered representatives of Selling Broker-Dealer and shall be subject to the
control of Selling Broker-Dealer with respect to their securities regulated
activities.  Broker-Dealer shall: (i) train and supervise Sub-agents, in their
capacity as registered representatives, in the sale of Securities Regulated
Contracts; (ii) use its best efforts to cause such Sub-agents to qualify under
applicable federal and state laws to engage in the sale of Securities Regulated
Contracts; (iii) provide Pacific Mutual and PEN to their satisfaction with
evidence of Sub-agents' qualifications to sell Securities Regulated Contracts;
(iv) notify Pacific Mutual if any of such Sub-agents ceases to be a registered
representative of Selling Broker-Dealer; and (v) train and supervise Sub-agents
to ensure compliance with applicable federal and state securities laws, rules,
regulations, statements of policy thereunder and with NASD rules. Selling
Broker-Dealer shall train and supervise Sub-agents to ensure that purchase of a
Contract is not recommended to an applicant in the absence of reasonable grounds
to believe the purchase of the Contract is suitable for that applicant.  While
not limited to the following, a determination of suitability shall be based on
information furnished to a Sub-agent after reasonable inquiry of such applicant
concerning the applicant's other security holdings, financial situation and
needs.  Selling Broker-Dealer shall ensure that any offer of a Securities
Regulated Contract made by a Sub-agent will be made by means of a currently
effective prospectus.

  Pacific Mutual and PEN shall not have any responsibility for the supervision
of any registered representative or any other employee or affiliate of Selling
Broker-Dealer.  If the act or omission of a registered representative or any
other employee or affiliate of Selling Broker-Dealer is the proximate cause of
any claim, damage or liability (including reasonable attorney's fees) to Pacific
Mutual or PEN, Selling Broker-Dealer shall be responsible and liable therefor.

  Selling Broker-Dealer at all times shall be duly registered as a broker-dealer
under the 1934 Act, a member in good standing of the NASD and duly licensed in
all states and jurisdictions where required to perform pursuant to this
agreement.  Selling Broker-Dealer shall fully comply with the requirements of
the 1934 Act and all other applicable federal or state laws and with the rules
of the NASD.  Selling Broker-Dealer shall establish such rules and procedures as
may be necessary to cause diligent supervision of the securities activities of
the Sub-agents including ensuring compliance with the prospectus delivery
requirements of the 1933 Act.


                                      IV.
                            AUTHORITY AND DUTIES OF
                    GENERAL AGENT AND SELLING BROKER-DEALER

A.  CONTRACTS

  The securities and insurance regulated Contracts issued by Pacific Mutual to
which this Agreement applies are listed in Schedule B, which may be amended from
time to time by Pacific Mutual.  Pacific Mutual, in its sole discretion, with
prior or concurrent written notice to Selling Broker-Dealer and General Agent,
may suspend distribution of any Contract.  Pacific Mutual also has the right to
amend any Contract at any time.

B.  SECURING APPLICATIONS

  Each application for a Contract shall be made on an application form provided
by Pacific Mutual, and all payments collected by Selling Broker-Dealer, General
Agent or any registered representative and Sub-agent shall be remitted promptly
in full, together with such application form and any other required
documentation, directly to Pacific Mutual at the address indicated on such
application or to such other address as may be designated by Pacific Mutual.
All such payments and documents shall be the property of Pacific Mutual.
Selling Broker-Dealer and 

                                       3
<PAGE>
 
General Agent shall review all such applications for completeness and for
compliance with the conditions herein, including the suitability and prospectus
delivery requirements set forth above under Sections II.C and III. Check or
money order in payment of such Contracts should be made payable to the order of
"Pacific Mutual". All applications are subject to acceptance or rejection by
Pacific Mutual in its sole discretion.

C.  RECEIPT OF MONEY

  All money payable in connection with any of the Contracts, whether as premium,
purchase payment or otherwise and whether paid by or on behalf of any contract
owner or anyone else having an interest in the Contracts, is the property of
Pacific Mutual and shall be transmitted immediately in accordance with the
administrative procedures of Pacific Mutual without any deduction or offset for
any reason including, but not limited to, any deduction or offset for
compensation claimed by Selling Broker-Dealer or General Agent, unless there has
been a prior arrangement for net wire transmissions between Pacific Mutual and
Selling Broker-Dealer or General Agent.

D.  NOTICE OF SUB-AGENT'S NONCOMPLIANCE

  Selling Broker-Dealer shall immediately notify PEN and General Agent in the
event a Sub-agent fails or refuses to submit to the supervision of Selling
Broker-Dealer or General Agent in accordance with this Agreement, the agreement
between Selling Broker-Dealer, General Agent and Sub-agent referred to in
Section IV.H, below, or otherwise fails to meet the rules and standards imposed
by Selling Broker-Dealer or its registered representatives or General Agent or
its Sub-agents.  Selling Broker-Dealer or General Agent shall also immediately
notify such Sub-agent that he or she is no longer authorized to sell the
Contracts, and both Selling Broker-Dealer and General Agent shall take whatever
additional action may be necessary to terminate the sale activities of such Sub-
agent relating to the Contracts.

E.  SALES PROMOTION, ADVERTISING AND PROSPECTUSES

  No sales promotion materials, circulars, documents or any advertising relating
to any of the Contracts shall be used by Selling Broker-Dealer, General Agent or
any Sub-agents unless the specific item has been approved in writing by PEN and
Pacific Mutual prior to use.  Selling Broker-Dealer shall be provided, without
any expense to Selling Broker-Dealer, with prospectuses relating to Securities
Regulated Contracts.  Selling Broker-Dealer and General Agent shall be provided
with such other material as PEN determines necessary or desirable for use in
connection with sales of the Contracts.  Nothing in these provisions shall
prohibit Selling Broker-Dealer or General Agent from advertising life insurance
and annuities on a generic basis.

  Selling Broker-Dealer, General Agent and Sub-agents shall make no material
representations relating to the Securities Regulated Contracts, other than those
contained in the relevant registration statement, as may be amended, or in sales
promotion or other materials approved by Pacific Mutual and PEN as provided in
this section.

F.  CONFIDENTIALITY

  Selling Broker-Dealer and General Agent shall keep confidential all
information obtained pursuant to this Agreement, including, without limitation,
names of the purchasers of the Policies, and shall disclose such information,
only if Pacific Mutual or PEN have authorized such disclosure in writing, or if
such disclosure is expressly required by applicable federal or state regulatory
authorities.

G.  RECORDS

  Selling Broker-Dealer and General Agent shall have the responsibility for
maintaining the records of its Sub-agents and representatives licensed,
registered and otherwise qualified to sell the Contracts.  Selling Broker-Dealer
and General Agent shall maintain such other records as are required of them by
applicable laws and regulations.  The books, accounts and records of Selling
Broker-Dealer and General Agent relating to the sale of the Contracts shall be
maintained so as to clearly and accurately disclose the nature and details of
the transactions.  Selling Broker-Dealer and General Agent each agree to make
the books and records relating to the sale of the Contracts available to Pacific
Mutual or PEN upon their written request.

                                       4
<PAGE>
 
H.  SUB-AGENT AGREEMENTS

  Before a Sub-agent is permitted to sell the Contracts, General Agent, Selling
Broker-Dealer and Sub-agent shall have entered into a written agreement pursuant
to which: (i) Sub-agent is appointed a Sub-agent of General Agent and a
registered representative of Selling Broker-Dealer; (ii) Sub-agent agrees that
his or her selling activities relating to Securities Regulated Contracts shall
be under the supervision and control of Selling Broker-Dealer; and (iii) that
Sub-agent's right to continue to sell such Contracts is subject to his or her
continued compliance with such agreement and any procedures, rules or
regulations implemented by Selling Broker-Dealer or General Agent.

                                       V.
                                  COMPENSATION

A.  COMMISSIONS AND FEES

  Commissions and fees payable to General Agent or any Sub-agent in connection
with the Contracts shall be paid by Pacific Mutual through PEN to General Agent,
or as otherwise permitted by law or regulation.  General Agent shall pay Sub-
agents.  PEN will provide Selling Broker-Dealer and General Agent with a copy of
its current Compensation Schedule(s), attached hereto as Schedule B.  Unless
otherwise provided in Schedule B, compensation will be paid as a percentage of
premiums or purchase payments (collectively, "Payments") received in cash or
other legal tender and accepted by Pacific Mutual on applications obtained by
the various Sub-agents appointed by General Agent hereunder.  Upon termination
of this Agreement, all compensation to General Agent hereunder shall cease.
However, General Agent shall be entitled to receive compensation for all new and
additional premium payments which are in process at the time of termination, and
shall continue to be liable for any charge-backs pursuant to the provisions of
said Schedule B, or for any other amount advanced by or otherwise due Pacific
Mutual or PEN hereunder.  Pacific Mutual reserves the right not to pay
compensation on a policy or contract for which the premium is paid in whole or
in part by the loan or surrender value of any other life insurance policy or
annuity contract issued by Pacific Mutual.

  PEN shall deduct any chargebacks from compensation otherwise due General Agent
or Selling Broker-Dealer.  If any amount to be deducted exceeds compensation
otherwise due, General Agent and/or Selling Broker-Dealer shall promptly pay
back the amount of the excess following a written demand by PEN or Pacific
Mutual.  General Agent and Selling Broker-Dealer are jointly and severally
liable for such chargebacks.

  Pacific Mutual reserves the right to reduce first year commissions and renewal
commissions, if necessary, on any life policies sold to residents of the State
of Kentucky and paid for after May 1, 1991.  Such reduction shall be in an
amount sufficient to cover any premium tax levied by cities and counties within
the State of Kentucky which is over and above the premium tax paid by Pacific
Mutual to the State of Kentucky.

  Pacific Mutual recognizes the Contract owners' right on issued Contracts to
terminate Selling Broker-Dealer and/or change a Selling Broker-Dealer, provided
that the Contract owner notifies PEN in writing.  When a Contract owner
terminates Selling Broker-Dealer, no further compensation on any payments due or
received, or on any increases in face amount in the existing policy after
termination, shall be payable to that Selling Broker-Dealer in accordance with
Schedule B after the notice of termination is received and accepted by PEN.
However, when a Contract owner designates a Selling Broker-Dealer other than the
Selling Broker-Dealer of record, compensation on any payments due or received,
or on any increases in face amount in the existing Contract after the change,
shall be payable to the new Selling Broker-Dealer in accordance with Schedule B
in effect at the time of issuance of the Contract.

                                       5
<PAGE>
 
  A change of Selling Broker-Dealer request shall be honored only if there
exists a valid Selling Agreement between  Pacific Mutual, PEN and the new
Selling Broker-Dealer and (1) the Contract owner(s) requests in writing that the
Sub-agent remains as representative of record, or (2) both the former and future
Selling Broker-Dealers direct Pacific Mutual and PEN in a joint writing to
transfer all policies and future compensation to the new Selling Broker-Dealer,
or (3) the NASD approves and effects a bulk transfer of all representatives to a
new Selling Broker-Dealer.

B.  TIME OF PAYMENT

  PEN will pay any commissions due General Agent at least twice monthly in
accordance with Schedule B of this Agreement, as it may be amended from time to
time.

C.  AMENDMENT OF SCHEDULES

  PEN may amend Schedule B upon at least ten (10) days' prior written notice to
Selling Broker-Dealer and General Agent.  The submission of an application for
the Contracts by Selling Broker-Dealer or General Agent after the effective date
of any such amendment shall constitute agreement to such amendment.  Any such
amendment shall apply to compensation due on applications received by Pacific
Mutual after the effective date of such notice.

D.  Prohibition Against Rebates

  Pacific Mutual or PEN may terminate this Agreement if Selling Broker-Dealer,
General Agent or any Sub-agent rebates, offers to rebate or withholds any part
of any Payment on the Contracts.  If Selling Broker-Dealer, General Agent or any
Sub-agent of General Agent shall at any time induce or endeavor to induce any
owner of any Contract issued hereunder to discontinue payments or to relinquish
any such Contract, except under circumstances where there is reasonable grounds
for believing the Contract is not suitable for such person, any and all
compensation due General Agent hereunder shall cease and terminate.

E.  INDEBTEDNESS AND RIGHT OF SET OFF

  Nothing contained in this Agreement shall be construed as giving Selling
Broker-Dealer or General Agent the right to incur any indebtedness on behalf of
Pacific Mutual or PEN.  Selling Broker-Dealer and General Agent hereby authorize
PEN and Pacific Mutual to set off liabilities of Selling Broker-Dealer and
General Agent to Pacific Mutual and PEN against any and all amounts otherwise
payable to Selling Broker-Dealer or General Agent.


                                      VI.
                               GENERAL PROVISIONS

A.  Waiver

  Failure of any party to insist upon strict compliance with any of the
conditions of this Agreement shall not be construed as a waiver of any of the
conditions, but the same shall remain in full force and effect.  No waiver of
any of the provisions of this Agreement shall be deemed to be, or shall
constitute, a waiver of any other provisions, whether or not similar, nor shall
any waiver constitute a continuing waiver.

                                       6
<PAGE>
 
B.  LIMITATIONS

  The Selling Broker-Dealer and General Agent are independent contractors with
respect to Pacific Mutual and PEN.  No party other than Pacific Mutual and or
PEN, as the case may be, shall have the authority to: (i) make, alter or
discharge any Contract issued by Pacific Mutual; (ii) waive any forfeiture or
extend the time of making any payments; (iii) enter into any proceeding in a
court of law or before a regulatory agency in the name of or on behalf of
Pacific Mutual or PEN; (iv) contract for the expenditure of funds of Pacific
Mutual or PEN; (v) alter the forms which PEN prescribes, or substitute other
forms in place of those prescribed by PEN.

C.  FIDELITY BOND AND OTHER LIABILITY COVERAGE

  Selling Broker-Dealer and General Agent each represent that all directors,
officers, agents, employees and Sub-agents who are licensed pursuant to this
Agreement as Pacific Mutual agents for state insurance law purposes or who have
access to funds of Pacific Mutual, including but not limited to, funds submitted
with applications for the Contracts are and shall be covered by a blanket
fidelity bond, including coverage for larceny and embezzlement, issued by a
reputable bonding company.  This bond shall be maintained by Selling Broker-
Dealer or General Agent at their expense.  Such bond shall be, at a minimum, of
the form, type, and amount required under NASD Rules, endorsed to extend
coverage to transactions relating to the Contracts.  Pacific Mutual may require
evidence, satisfactory to it, that such coverage is in force and Selling Broker-
Dealer or General Agent, as the case may be, shall give prompt written notice to
Pacific Mutual of any notice of cancellation of the bond or change of coverage.

  Selling Broker-Dealer and General Agent hereby assign any proceeds received
from a fidelity bonding company, error and omissions or other liability
coverage, to Pacific Mutual or PEN as their interest may appear, to the extent
of their loss due to activities covered by the bond, policy or other liability
coverage. If there is any deficiency amount, whether due to a deductible or
otherwise, Selling Broker-Dealer or General Agent shall promptly pay such
amounts on demand.  Selling Broker-Dealer and General Agent hereby indemnify and
hold harmless Pacific Mutual and PEN from any such deficiency and from the costs
of collection thereof (including reasonable attorneys' fees).

D.  BINDING EFFECT

  This Agreement shall be binding on and shall inure to the benefit of the
parties to it and their respective successors and assigns provided that neither
Selling Broker-Dealer nor General Agent may assign this Agreement or any rights
or obligations hereunder without the prior written consent of Pacific Mutual.

E.  REGULATIONS

  All parties agree to observe and comply with the existing laws and rules or
regulations of applicable local, state, or federal regulatory authorities and
with those which may be enacted or adopted during the term of this Agreement
regulating the business contemplated hereby in any jurisdiction in which the
business described herein is to be transacted.

F.  INDEMNIFICATION

  Pacific Mutual and PEN agree to indemnify and hold harmless Selling Broker-
Dealer and General Agent, their officers, directors, agents and employees,
against any and all losses, claims, damages or liabilities to which they may
become subject under the 1933 Act, the 1934 Act, or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact or any omission or alleged omission to state a material fact required to be
stated or necessary to make the statements made not misleading in the
registration statement for the Contracts or for the shares of Pacific Select
Fund (the "Fund") filed pursuant to the 1933 Act, or any prospectus included as
a part thereof, as from time to time amended and supplemented, or in any
advertisement or sales literature approved in writing by Pacific Mutual and PEN
pursuant to Section IV.E. of this Agreement

                                       7
<PAGE>
 
  Selling Broker-Dealer and General Agent agree to indemnify and hold harmless
Pacific Mutual, the Fund and PEN, their officers, directors, agents and
employees, against any and all losses, claims, damages or liabilities to which
they may become subject under the 1933 Act, the 1934 Act, or other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon; (a) any oral or written misrepresentation by Selling
Broker-Dealer or General Agent or their officers, directors, employees or agents
unless such misrepresentation is contained in the registration statement for the
Contracts or Fund shares, any prospectus included as a part thereof, as from
time to time amended and supplemented, or any advertisement or sales literature
approved in writing by Pacific Mutual and PEN pursuant to Section IV.E. of this
Agreement, (b) the failure of Selling Broker-Dealer or General Agent or their
officers, directors, employees or agents to comply with any applicable
provisions of this Agreement or (c) claims by Sub-agents or employees of General
Agent or Selling Broker-Dealer for payments of compensation or remuneration of
any type.  Selling Broker-Dealer and General Agent will reimburse Pacific Mutual
or PEN or any director, officer, agent or employee of either entity for any
legal or other expenses reasonably incurred by Pacific Mutual, PEN, or such
officer, director, agent or employee in connection with investigating or
defending any such loss, claims, damages, liability or action.  This indemnity
agreement will be in addition to any liability which Broker-Dealer may otherwise
have.

G.  NOTICES

  All notices or communications shall be sent to the following address for
Pacific Mutual or PEN, or to such other address as Pacific Mutual or PEN may
request by giving written notice to the other parties:

      Pacific Mutual Life Insurance Company     Pacific Equities Network
      700 Newport Center Drive                  700 Newport Center Drive
      Newport Beach, CA 92660                   Newport Beach, CA 92660

  All notices or communications to the Selling Broker-Dealer or General Agent
shall be sent to the last address known to Pacific Mutual or PEN for that party,
or to such other address as Selling Broker-Dealer or General Agent may request
by giving written notice to the other parties.

H.  Governing Law

  This Agreement shall be construed in accordance with and governed by the laws
of California.

I.  AMENDMENT OF AGREEMENT

  PEN may amend this Agreement upon at least ten (10) days' prior written notice
to Selling Broker-Dealer and General Agent.  The submission of an application
for the Contracts by Selling Broker-Dealer or General Agent after the effective
date of any such amendment shall constitute agreement to such amendment.

  Additional General Agents may be added as parties to this Agreement at any
time by a written amendment signed by Pacific Mutual, PEN, Selling Broker-Dealer
and such additional General Agents.  All General Agents which are parties to
this Agreement at the time of such amendment hereby consent and agree in advance
to the addition of such additional General Agents.

J.  GENERAL AGENT AS BROKER-DEALER

  Selling Broker-Dealer and General Agent shall not have the other entity's
authority and shall not be responsible for the other entity's duties hereunder
unless Selling Broker-Dealer and General Agent are the same entity.  If Selling
Broker-Dealer and General Agent are the same person or legal entity, such person
or legal entity shall have the rights and obligations hereunder of both Selling
Broker-Dealer and General Agent and this Agreement shall be binding and
enforceable by and against such person or legal entity in both capacities.

                                       8
<PAGE>
 
K.  COMPLAINTS AND INVESTIGATIONS

  Pacific Mutual, PEN, Selling Broker-Dealer and General Agent agree to
cooperate fully in any insurance regulatory investigation or proceeding or
judicial proceeding arising in connection with the Contracts distributed under
this Agreement.  Pacific Mutual, PEN, Selling Broker-Dealer and General Agent
further agree to cooperate fully in any securities regulatory investigation or
proceeding with respect to Pacific Mutual, PEN, Selling Broker-Dealer and
General Agent, their affiliates and their agents or representatives to the
extent that such investigation or proceeding is in connection with the Contracts
distributed under this Agreement.  Without limiting the foregoing:

     (a) Selling Broker-Dealer or General Agent will be notified promptly of any
  customer complaint or notice of any regulatory investigation or proceeding or
  judicial proceeding received by Pacific Mutual or PEN with respect to Selling
  Broker-Dealer or General Agent or any Sub-agent or which may affect Pacific
  Mutual's issuance of any contracts sold under this Agreement; and

     (b) Selling Broker-Dealer and General Agent will promptly notify Pacific
  Mutual and PEN of any customer complaint or notice of any regulatory
  investigation or proceeding received by Selling Broker-Dealer, General Agent
  or their affiliates with respect to Selling Broker-Dealer, General Agent or
  any Sub-agent in connection with any Contracts distributed under this
  Agreement or any activity in connection with any such policies.

  In the case of a substantive customer complaint, Pacific Mutual, PEN, Selling
Broker-Dealer and General Agent will cooperate in investigating such complaint
and any response will be sent to the other party to this Agreement for approval
not less than five business days prior to its being sent to the customer or
regulatory authority, except that if a more prompt response is required, the
proposed response shall be communicated by telephone or telegraph.

L.  TERMINATION

  This Agreement may be terminated, without cause, by any party upon thirty (30)
days' prior written notice.  This Agreement also may be terminated, for cause,
by any party immediately. This Agreement shall be terminated immediately if PEN
or Selling Broker-Dealer shall cease to be a registered Broker-Dealer under the
1934 Act or a member in good standing of the NASD, or if there occurs the
dissolution, bankruptcy or insolvency of Selling Broker-Dealer or General Agent.
Sections VI F and K shall survive termination of this Agreement.

  Upon termination of this Agreement, Selling Broker-Dealer and General Agent
shall each use their best efforts to have all property of Pacific Mutual and PEN
in Selling Broker-Dealer, General Agent or Sub-agents' possession promptly
returned to Pacific Mutual or PEN, as the case may be.  Such property includes
prospectuses, applications and other literature supplied by Pacific Mutual or
PEN.



                      THIS SPACE INTENTIONALLY LEFT BLANK

                                       9
<PAGE>
 
M.  EXCLUSIVITY

  Selling Broker-Dealer and General Agent each agree that no territory is
assigned exclusively hereunder and that Pacific Mutual and PEN reserve the right
in their discretion to establish one or more agencies in any jurisdiction in
which Selling Broker-Dealer and General Agent transact business hereunder.

  This Agreement shall be effective as of  __________________________________.


       PACIFIC EQUITIES NETWORK           -------------------------------------
                                                 (SELLING BROKER-DEALER)

By:                                       By:
   ------------------------------------      ----------------------------------
              (Signature)                                 (Signature)

Title:                                    Title:  
      ---------------------------------         -------------------------------
Date:                                     Date:  
      ---------------------------------         -------------------------------



 PACIFIC MUTUAL LIFE INSURANCE COMPANY    -------------------------------------
                                                     (GENERAL AGENT)

By:                                       By:
   ------------------------------------      ----------------------------------
              (Signature)                                (Signature)

Title:                                    Title:  
      ---------------------------------         -------------------------------
Date:                                     Date:  
      ---------------------------------         -------------------------------




- ---------------------------------------   ------------------------------------- 
          (GENERAL AGENT)                            (GENERAL AGENT)

By:                                       By:
   ------------------------------------      ----------------------------------
              (Signature)                                (Signature)

Title:                                    Title:  
      ---------------------------------         -------------------------------
Date:                                     Date:  
      ---------------------------------         -------------------------------




- ---------------------------------------   ------------------------------------- 
          (GENERAL AGENT)                            (GENERAL AGENT)

By:                                       By:
   ------------------------------------      ----------------------------------
              (Signature)                                (Signature)

Title:                                    Title:  
      ---------------------------------         -------------------------------
Date:                                     Date:  
      ---------------------------------         -------------------------------




- ---------------------------------------   ------------------------------------- 
          (GENERAL AGENT)                            (GENERAL AGENT)

By:                                       By:
   ------------------------------------      ----------------------------------
              (Signature)                                (Signature)

Title:                                    Title:  
      ---------------------------------         -------------------------------

                                       10
<PAGE>
 
Date:                                     Date:  
      ---------------------------------         -------------------------------




- ---------------------------------------   ------------------------------------- 
          (GENERAL AGENT)                            (GENERAL AGENT)

By:                                       By:
   ------------------------------------      ----------------------------------
              (Signature)                                (Signature)

Title:                                    Title:  
      ---------------------------------         -------------------------------
Date:                                     Date:  
      ---------------------------------         -------------------------------




- ---------------------------------------   ------------------------------------- 
          (GENERAL AGENT)                            (GENERAL AGENT)

By:                                       By:
   ------------------------------------      ----------------------------------
              (Signature)                                (Signature)

Title:                                    Title:  
      ---------------------------------         -------------------------------
Date:                                     Date:  
      ---------------------------------         -------------------------------




- ---------------------------------------   ------------------------------------- 
          (GENERAL AGENT)                            (GENERAL AGENT)

By:                                       By:
   ------------------------------------      ----------------------------------
              (Signature)                                (Signature)

Title:                                    Title:  
      ---------------------------------         -------------------------------
Date:                                     Date:  
      ---------------------------------         -------------------------------




- ---------------------------------------   ------------------------------------- 
          (GENERAL AGENT)                            (GENERAL AGENT)

By:                                       By:
   ------------------------------------      ----------------------------------
              (Signature)                                (Signature)

Title:                                    Title:  
      ---------------------------------         -------------------------------
Date:                                     Date:  
      ---------------------------------         -------------------------------



- ---------------------------------------   ------------------------------------- 
          (GENERAL AGENT)                            (GENERAL AGENT)

By:                                       By:
   ------------------------------------      ----------------------------------
              (Signature)                                (Signature)

Title:                                    Title:  
      ---------------------------------         -------------------------------
Date:                                     Date:  
      ---------------------------------         -------------------------------


                                       11
<PAGE>
 
                                   SCHEDULE A
                                   ----------


                        GENERAL LETTER OF RECOMMENDATION


  General Agent hereby certifies to Pacific Mutual that all of the following
requirements will be fulfilled in conjunction with the submission of
licensing/appointment papers for all applicants as Sub-agents ("applicant")
submitted by General Agent. General Agent will, upon request, forward proof of
compliance with same to Pacific Mutual in a timely manner.

  1. We have made a thorough and diligent inquiry and investigation relative to
each applicant's identity, residence and business reputation and declare that
each applicant is personally known to us, has been examined by us, is known to
be of good moral character, has a good business reputation, is reliable, is
financially responsible and is worthy of a license.  Each individual is
trustworthy, competent, and qualified to act as an agent for Pacific Mutual, and
to hold himself out in good faith to the general public.  We vouch for each
applicant.

  2. We have on file a B-300, B-301 or U-4 form which was completed by each
applicant. We have fulfilled all the necessary investigative requirements for
the registration of each applicant as a registered representative through our
NASD member firm, and each applicant is presently registered as an NASD
registered representative.

  The above information in our files indicates no fact or condition which would
disqualify the applicant from receiving a license, and all the findings of all
investigative information is favorable.

  3. We certify that all educational requirements have been met for the specific
state in which each applicant is requesting a license, and that all such persons
have fulfilled the appropriate examination, education and training requirements.

  4. If the applicant is required to submit his or her picture, signature, and
securities registration in the state in which he or she is applying for a
license, we certify that those items forwarded to Pacific Mutual are those of
the applicant and the securities registration is a true copy of the original.

  5. We hereby warrant that the applicant is not applying for a license with
Pacific Mutual in order to place insurance chiefly or solely on his or her life
or property, lives or property of his or her relatives, or property or liability
of his or her associates.

  6. We certify that each applicant will receive close and adequate supervision,
and that we will make inspection when needed of any or all risks written by
these applicants, to the end that the insurance interest of the public will be
properly protected.

  7. We will not permit any applicant to transact insurance as an agent until
duly licensed therefor.  No applicants have been given a contract or furnished
supplies, nor have any applicants have permitted to write, solicit business or
act as an agent in any capacity, and they will not be so permitted until the
certificate of authority or license applied for is received.

  8. We certify that General Agent, Selling Broker-Dealer and applicant shall
have entered into a written agreement pursuant to which: (i) applicant is
appointed a Sub-agent of General Agent and a registered representative of
Selling Broker-Dealer; (ii) applicant agrees that his or her selling activities
relating to securities regulated Contracts shall be under the supervision and
control of Selling Broker-Dealer and his or her selling activities relating to
all Contracts shall be under the supervision and control of General Agent; and
(iii) that applicant's right to continue to sell such Contracts is subject to
his or her continued compliance with such agreement and any procedures, rules or
regulations implemented by Selling Broker-Dealer or General Agent.

                                       12
<PAGE>
 
                                  SCHEDULE B

                             COMPENSATION SCHEDULE
                           TO SELLING AGREEMENT FOR
                        PACIFIC SELECT ESTATE PRESERVER
                           VARIABLE LIFE POLICY FORM

This Schedule to the Pacific Select Selling Agreement is entered into by and
among the undersigned parties on the dates appearing next to their signatures
below.  The provisions of this Schedule shall apply only to PACIFIC SELECT
ESTATE PRESERVER Flexible Premium Variable Universal Life policies solicited and
issued while this schedule is in effect. All compensation payable under this
schedule shall be subject to the terms and conditions contained herein when
premium payments are accepted by Pacific Mutual ("Pacific Mutual").

<TABLE> 
<CAPTION> 
     PREMIUM PAYMENTS ACCEPTED BY PACIFIC MUTUAL
     ON POLICIES SOLICITED BY BROKER-DEALER
     AND ISSUED FOR WHICH APPLICATIONS                       COMMISSIONS ON
     WERE SOLICITED IN ACCORDANCE WITH:                     PREMIUM PAYMENTS
     -------------------------------------------------------------------------
                                                           A     B     C     D
     -------------------------------------------------------------------------
     <S>                                                  <C>   <C>   <C>   <C> 
       Non-Guaranteed Issue                               90%    6%    4%    2%
       Trail commission of 0.20% annualized (See Note 6)
</TABLE> 

                                 NOTES

1.  COMMISSION STRUCTURE:

<TABLE> 
<CAPTION> 
     POLICY YEAR                  CALCULATION
     <S>                          <C> 
       First                      A% of premium up to the first target premium;
       (1)                        B% on premium in excess of the first target
                                  but not greater than two times the target
                                  premium; C% of all premium in excess of two
                                  times the target premium.

       Second                     B% of premium up to two times the target 
       (2)                        premium less any premium paid in the first
                                  year up to two times the target; C% of all
                                  other premiums.

       Third-Tenth                C% of all premium
       (3-10)

       Eleventh and thereafter    D% of all premium
       (11+)
</TABLE> 

2.  Commissions calculated at the rate of 4.0% of first target premium
(equivalent to 5.0% of first target commission) will be held by Pacific Mutual.
Any promotional and marketing expenditures made by Pacific Mutual in support of
Selling Broker-Dealer's sale of Pacific Mutual products will be charged against
amounts held.  Net credit balances remaining at year-end will be paid to Broker-
Dealer within 45 calendar days after the end of the year, or as mutually agreed
between the parties.

<PAGE>
 
3.  COMMISSION RATES ON INCREASE IN FACE AMOUNT:  After a policy has had an
increase in face amount, premiums paid shall be allocated to the initial face
amount and to each increase in proportion to the respective target premiums.

4.  TARGET PREMIUM:  The target premium is an amount determined from tables
published by Pacific Mutual with respect to a policy or rider upon which
commissions are based. Target premiums shall be calculated in accordance with
the rates and methods of calculations described in the Pacific Select Exec Rates
and Values Booklet. As it applies to future business, the target premium may be
changed from time to time by Pacific Mutual. The target premium applicable to a
particular coverage shall be determined from the table in force when the first
premium for such coverage is entered as paid in the accounting records of
Pacific Mutual. There is a separate table of target premiums for guaranteed
issue policies.

5.  GUARANTEED ISSUE:  The commission target premium has been reduced for Issue
Ages 41 and above for males, females and unisex policies. (See current Rates and
Values Booklet for more details.)

6.  TRAIL COMMISSION:  A trail commission shall be credited on an annualized
basis. Such trail commission shall be computed monthly as of the end of each
policy month on the policy's Accumulated Value less policy debt. The total of
such amounts shall be payable annually at policy anniversary.

7.  COMMISSION CHARGEBACK: In the event that a policy for which a commission has
been paid is lapsed or surrendered by the Contract owner during the first two
policy years, or is returned to PEN or Pacific Mutual for refund of premium
within the later of 10 days after the purchaser receives it or 45 days after the
application for the policy is completed, or a premium for which commission has
been paid is refunded by Pacific Mutual, PEN shall require reimbursement from
General Agent and/or Selling Broker-Dealer as follows:

    .  100% of the commission if the lapse, surrender, return or refund occurs
         within six months of the policy issue date;
    .  50% of the commission if the lapse, surrender, return or refund occurs
         during the seventh through twelfth months after the policy issue date;
    .  25% of the commission if the lapse, surrender, return or refund occurs
         during the thirteenth through twenty-fourth months after the policy
         issue date.
If the amount to be deducted exceeds compensation otherwise due, General Agent
and/or Selling Broker-Dealer shall reimburse PEN before the next commission
cycle or within 10 business days from the date of mailing of a written demand
for reimbursement, whichever is later.

8.  The amount, if any, and the time of payment of compensation on replacements,
changes, conversions, exchanges, term renewals, premiums paid in advance,
policies issued on a "guaranteed issue" basis, life policies issued over age 70,
policies in excess of Pacific Mutual's retention or policies requiring
reinsurance, and other special cases and programs shall be governed by Pacific
Mutual's underwriting and administrative rules then in effect.

9.  BROKER-DEALER TRANSFER:  In the event that a Registered Representative
terminates from the Selling Broker-Dealer, no future compensation payments shall
be remitted for credit to the registered representative unless there exists a
valid Selling Agreement between Pacific Mutual, PEN and the broker-dealer that
the registered representative is joining, and (1) the Contract owner(s) requests
in writing that the registered representative remains as representative of
record, or (2) both the former and future broker-dealers direct Pacific Mutual
and PEN in a joint writing to transfer all policies and future compensation to
the new Selling Broker-Dealer, or (3) the NASD approves and effects a bulk
transfer of all Registered Representatives to a new Broker-Dealer.

10. Commissions shall only be calculated on premium actually received and
accepted by Pacific Mutual. Commissions shall only be paid on an earned basis.

                                       2

<PAGE>
 
11. Compensation on initial premium shall be due to the General Agent at the
time of the issuance of the policy and for all other premium payments at the
time of the receipt and acceptance of premium by Pacific Mutual.  After a change
of Compensation Schedule or a change of Broker-Dealer, compensation due on
existing policies shall be payable to the General Agent and/or Selling Broker-
Dealer in accordance with the Schedule B in effect at the time of solicitation
of the policy.  Moreover, when a Contract owner terminates a Broker-Dealer, no
further compensation due on existing policies after termination shall be payable
to the General Agent and/or Selling Broker-Dealer after the notice of
termination is received and accepted by Pacific Mutual.

    Pacific Mutual and PEN reserve the right to terminate or amend this schedule
by providing written notification to the other parties in accordance with
Section VI. G of the Selling Agreement.

   This schedule shall be effective as of _____________________________________.

<TABLE> 

<S>                                     <C>
       PACIFIC EQUITIES NETWORK         _______________________________________
                                               (SELLING BROKER-DEALER)

By: _________________________________   By:____________________________________
             (Signature)                               (Signature)

Title:_______________________________   Title:_________________________________

Date:________________________________   Date:__________________________________


PACIFIC MUTUAL LIFE INSURANCE COMPANY   _______________________________________
                                                     (GENERAL AGENT)

By:__________________________________   By:____________________________________
            (Signature)                                (Signature)

Title:_______________________________   Title:_________________________________

Date:________________________________   Date:__________________________________



_____________________________________   _______________________________________
         (GENERAL AGENT)                             (GENERAL AGENT)

By:__________________________________   By:____________________________________
            (Signature)                                (Signature)

Title:_______________________________   Title:_________________________________

Date:________________________________   Date:__________________________________

</TABLE> 
                                       3

         

<PAGE>
 
EXHIBIT 99.1(9)(a)

Fund Participation Agreement

<PAGE>
 
FUND PARTICIPATION AGREEMENT

This AGREEMENT is made this 6th day of November, 1992, by and between Pacific
Mutual Life Insurance Company (the "Company"), a life insurance company
domiciled in California, on its behalf and on behalf of the segregated asset
accounts of the Company listed on Exhibit A to this Agreement (the "Separate
Accounts"); Pacific Select Fund (the "Fund"), a Massachusetts business trust;
and Pacific Equities Network ("Distributor"), a California corporation.

WITNESSETH

WHEREAS, the Fund is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended ("1940 Act") and the Fund is authorized to issue
separate classes of shares of beneficial interests ("shares"), each representing
an interest in a separate portfolio of assets known as a "series" and each
series has its own investment objective, policies, and limitations; and

WHEREAS, the Fund is available to offer shares of one or more of its series to
separate accounts of insurance companies that fund variable life insurance
policies and variable annuity contracts ("Variable Contracts") and to serve as
an investment medium for Variable Contracts offered by insurance companies that
have entered into participation agreements substantially similar to this
agreement ("Participating Insurance Companies"), and the Fund is currently
comprised of nine separate series, and other series may be established in the
future; and

WHEREAS, the Fund has obtained an order from the SEC granting Participating
Insurance Companies, separate accounts funding Variable Contracts of
Participating Insurance Companies, and the Fund exemptions from the provisions
of sections 9(a), 13(a), 15(a), and 15(b) of the 1940 Act and paragraph (b)(15)
of Rule 6e-3(T) under the 1940 Act, to the extent necessary to permit such
persons to rely on the exemptive relief provided under paragraph (b)(15) of Rule
6e-3(T), even though shares of the Fund may be offered to and held by separate
accounts funding variable annuity contracts or scheduled or flexible premium
variable life insurance contracts of both affiliated and unaffiliated life
insurance companies (the "Shared Funding Exemptive Order"); and

WHEREAS, the Distributor is registered as a broker-dealer with the SEC under the
Securities Exchange Act of 1934, as amended ("1934 Act"), and is a member in
good standing of the National Association of Securities Dealers, Inc. ("NASD");
and

WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company wishes to purchase shares of one or more of the Fund's series on
behalf of its Separate Accounts to serve as an investment medium for Variable
Contracts funded by the Separate Accounts, and the Distributor is authorized to
sell shares of the Fund's series;

NOW, THEREFORE, in consideration of the foregoing and the mutual promises and
covenants hereinafter set forth, the parties hereby agree as follows:

ARTICLE I.    Sale of Fund Shares

                                       1
<PAGE>
 
1.1.  The Distributor agrees to sell to the Company those shares of the series
offered and made available by the Fund and identified on Exhibit B ("Series")
that the Company orders on behalf of its Separate Accounts, and agrees to
execute such orders on each day on which the Fund calculates its net asset value
pursuant to rules of the SEC ("business day") at the net asset value next
computed after receipt and acceptance by the Fund or its agent of the order for
the shares of the Fund.

1.2.  The Fund agrees to make available on each business day shares of the
Series for purchase at the applicable net asset value per share by the Company
on behalf of its Separate Accounts' provided, however, that the Board of
Trustees of the Fund may refuse to sell shares of any Series to any person, or
suspend or terminate the offering of shares of any Series, if such action is
required by law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the Trustees, acting in good faith and in light of the
Trustees' fiduciary duties under applicable law, necessary in the best interests
of the shareholders of any Series.

1.3.  The Fund and the Distributor agree that shares of the Series of the Fund
will be sold only to Participating Insurance Companies, their separate accounts,
and other persons consistent with each Series being adequately diversified
pursuant to Section 817(h) of the Internal Revenue Code of 1986, as amended
("Code") and the regulations thereunder.  No shares of any Series will be sold
directly to the general public.

1.4.  The Fund and the Distributor will not sell shares of the Series to any
insurance company or separate account unless an agreement containing provisions
substantially the same as this Agreement is in effect to govern such sales.

1.5.  Upon receipt of a request for redemption in proper form from the Company,
the Fund agrees to redeem any full or fractional shares of the Series held by
the Company, ordinarily executing such requests on each business day at the net
asset value next computed after receipt and acceptance by the Fund or its agent
of the request for redemption, except that the Fund reserves the right to
suspend the right of redemption, consistent with Section 22(e) of the 1940 Act
and any rules thereunder. Such redemption shall be paid consistent with
applicable rules of the SEC and procedures and policies of the Fund as described
in the current prospectus.

1.6.  The Company agrees to purchase and redeem the shares of each Series in
accordance with the provisions of the current prospectus for the Fund.

1.7.  The Company shall pay for shares of the Series on the same day that it
places an order to purchase shares of the Series.  Payment shall be in federal
funds transmitted by wire.

1.8.  Issuance and transfer of shares of the Series will be by book entry only
unless otherwise agreed by the Fund.  Stock certificates will not be issued to
the Company or the Separate Accounts unless otherwise agreed by the Fund.
Shares ordered from the Fund will be recorded in an appropriate title for the
Separate Accounts or the appropriate subaccounts of the Separate Accounts.

1.9.  The Fund shall promptly furnish notice (by wire or telephone, followed by
written confirmation) to the Company of any income dividends or capital gain
distributions payable on the

                                       2
<PAGE>
 
shares of the Series.  The Company hereby elects to reinvest in the Series all
such dividends and distributions as are payable on a Series' shares and to
receive such dividends and distributions in additional shares of that Series.
The Company reserves the right to revoke this election in writing and to receive
all such dividends and distributions in cash.  The Fund shall notify the Company
of the number of shares so issued as payment of such dividends and
distributions.

1.10.  The Fund shall instruct its recordkeeping agent to advise the Company on
each business day of the net asset value per share for each Series as soon as
reasonably practical after the net asset value per share is calculated.

ARTICLE II.    Representations and Warranties

2.1.  The Company represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it is taxed as an
insurance company under Subchapter L of the Code.

2.2.  The Company represents and warrants that it has legally and validly
established each of the Separate Accounts as a segregated asset account under
the ________________________ Insurance Code, and that each of the Separate
Accounts is a validly existing segregated asset account under applicable federal
and state law.

2.3.  The Company represents and warrants that the Variable Contracts issued by
the Company or interests in the Separate Accounts under such Variable Contracts
(1) are or, prior to issuance, will be registered as securities under the
Securities Act of 1933 ("1933 Act") or, alternatively (2) are not registered
because they are properly exempt from registration under the 1933 Act or will be
offered exclusively in transactions that are properly exempt from registration
under the 1933 Act.

2.4.  The Company represents and warrants that each of the Separate Accounts (1)
has been registered as a unit investment trust in accordance with the provisions
of the 1940 Act or, alternatively (2) has not been registered in proper reliance
upon an exclusion from registration under the 1940 Act.

2.5.  The Company represents that it believes, in good faith, that the Variable
Contracts issued by the Company are currently treated as annuity contracts or
life insurance policies (which may include modified endowment contracts),
whichever is appropriate, under applicable provisions of the Code.

2.6.  The Company represents and warrants that any of its Separate Accounts that
fund variable life insurance contracts and that are registered with the SEC as
investment companies rely on the exemptions provided by Rule 6e-3(T), or any
successor thereto, and not on Rule 6e-2 under the 1940 Act.

2.7.  The Fund represents and warrants that it is duly organized as a business
trust under the laws of the Commonwealth of Massachusetts, and is in good
standing under applicable law.

2.8.  The Fund represents and warrants that the shares of the Series are duly
authorized for issuance

                                       3
<PAGE>
 
in accordance with applicable law and that the Fund is registered as an open-end
management investment company under the 1940 Act.

2.9.  The Fund represents that it believes, in good faith, that the Series
currently comply with the diversification provisions of Section 817(h) of the
Code and the regulations issued thereunder relating to the diversification
requirements for variable life insurance policies and variable annuity
contracts.

2.10.  The Distributor represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC.

ARTICLE III.    General Duties

3.1.  The Fund shall take all such actions as are necessary to permit the sale
of the shares of each Series to the Separate Accounts, including maintaining its
registration as an investment company under the 1940 Act, and registering the
shares of the Series sold to the Separate Accounts under the 1933 Act for so
long as required by applicable law.  The Fund shall amend its Registration
Statement filed with the SEC under the 1933 Act and the 1940 Act from time to
time as required in order to effect the continuous offering of the shares of the
Series.  The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states to the extent deemed necessary by the Fund
or the Distributor.

3.2.  The Fund shall make every effort to maintain qualification of each Series
as a Regulated Investment Company under Subchapter M of the Code (or any
successor or similar provision) and shall notify the Company immediately upon
having a reasonable basis for believing that a Series has ceased to so qualify
or that it might not so qualify in the future.

3.3.  The Fund shall make every effort to enable each Series to comply with the
diversification provisions of Section 817(h) of the Code and the regulations
issued thereunder relating to the diversification requirements for variable life
insurance policies and variable annuity contracts and any prospective amendments
or other modifications to Section 817 or regulations thereunder, and shall
notify the Company immediately upon having a reasonable basis for believing that
any Series has ceased to comply.

3.4.  The Fund shall be entitled to receive and act upon advice of its General
Counsel or its outside counsel in meeting the requirements specified in Sections
3.2 and 3.3 hereof.

3.5  The Company shall take all such actions as are necessary under applicable
federal and state law to permit the sale of the Variable Contracts issued by the
Company, including registering each Separate Account as an investment company to
the extent required under the 1940 Act, and registering the Variable Contracts
or interests in the Separate Accounts under the Variable Contracts to the extent
required under the 1933 Act, and obtaining all necessary approvals to offer the
Variable Contracts from state insurance commissioners.

3.6.  The Company shall make every effort to maintain the treatment of the
Variable Contracts issued

                                       4
<PAGE>
 
by the Company as annuity contracts or life insurance policies, whichever is
appropriate, under applicable provisions of the Code, and shall notify the Fund
and the Distributor immediately upon having a reasonable basis for believing
that such Variable Contracts have ceased to be so treated or that they might not
be so treated in the future.

3.7.  The Company shall offer and sell the Variable Contracts issued by the
Company in accordance with applicable provisions of the 1933 Act, the 1934 Act,
the 1940 Act, the NASD Rules of Fair Practice, and state law respecting the
offering of variable life insurance policies and variable annuity contracts.

3.8.  The Distributor shall sell and distribute the shares of the Series of the
Fund in accordance with the applicable provisions of the 1933 Act, the 1934 Act,
the 1940 Act, the NASD Rules of Fair Practice, and state law.

3.9.  A majority of the Board of Trustees of the Fund shall consist of persons
who are not "interested persons" of the Fund ("disinterested Trustees"), as
defined by Section 2(a)(19) of the 1940 Act, except that if this provision of
this Section 3.9 is not met by reason of the death, disqualification, or bona
fide resignation of any Trustee or Trustees, then the operation of this
provision shall be suspended (a) for a period of 45 days if the vacancy or
vacancies may be filled by the Fund's Board; (b) for a period of 60 days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.

3.10.  The Company agrees to provide, as promptly as possible, notice to the
Fund and to the Distributor if the Company has reason to know about a meeting of
some or all of the owners of the Variable Contracts or shareholders of the Fund,
where the agenda or purpose of the meeting relates, in whole or in part, to the
Fund and that has not been called by the Fund's Board of Trustees (and which
shall not include a vote of Variable Contract Owners having an interest in a
Separate Account to substitute shares of another investment company for
corresponding shares of the Fund or a Series, as described in Section 9(e) and
to which the notice provision of Section 9.2 shall apply).  In such an event,
the Company agrees to distribute proxy statements and any additional
solicitation materials upon the request of the Fund or the Distributor to the
owners of the Variable Contracts issued by the Company at least 30 days prior to
the meeting.  The Company further agrees that it shall take no action, directly
or indirectly, in furtherance of shareholders of the Fund or Contract Owners
taking any action with respect to the Fund by written consent and without a
meeting.

3.11.  Each party hereto shall cooperate with each other party and all
appropriate governmental authorities having jurisdiction (including, without
limitation, the SEC, the NASD, and state insurance regulators) and shall permit
such authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.

ARTICLE IV.  Potential Conflicts

4.1.  The Fund's Board of Trustees shall monitor the Fund for the existence of
any material irreconcilable conflict (1) between the interests of owners of
variable annuity contracts and variable

                                       5
<PAGE>
 
life insurance policies, and (2) between the interests of owners of Variable
Contracts ("Variable Contract Owners") issued by different Participating
Insurance Companies that invest in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including:  (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretive letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of the Fund or any Series are being managed; or (e) a decision by a
Participating Insurance Company to disregard the voting instructions of Variable
Contract Owners.

4.2.  The Company agrees that it shall be responsible for reporting any
potential or existing conflicts to the Fund's Board of Trustees.  The Company
will be responsible for assisting the Board of Trustees of the Fund in carrying
out its responsibilities under this agreement, by providing the Board with all
information reasonably necessary for the Board to consider any issues raised.
This includes, but is not limited to, an obligation by the Company to inform the
Board whenever Variable Contract Owner voting instructions are disregarded.  The
Company shall carry out its responsibility under this Section 4.2 with a view
only to the interests of the Variable Contract Owners.

4.3.  The Company agrees that in the event that it is determined by a majority
of the Board of Trustees of the Fund or a majority of the Fund's disinterested
Trustees that a material irreconcilable conflict exists, the Company shall, to
the extent reasonably practicable (as determined by a majority of the
disinterested Trustees of the Board of the Fund), take whatever steps are
necessary to eliminate the irreconcilable material conflict, including: (1)
withdrawing the assets allocable to some or all of the Separate Accounts from
the Fund or any Series and reinvesting such assets in a different investment
medium, which may include another series of the Fund, or submitting the question
of whether such segregation should be implemented to a vote of all affected
Variable Contract Owners and, as appropriate, segregating the assets of any
appropriate group (i.e., Contract Owners of Variable Contracts issued by one or
more Participating Insurance Companies) that votes in favor of such segregation,
or offering to the affected Variable Contract Owners the option of making such a
change; and (2) establishing a new registered management investment company or
managed separate account.  If a material irreconcilable conflict arises because
of the Company's decision to disregard Variable Contract Owners' voting
instructions and that decision represents a minority position or would preclude
a majority vote, the Company shall be required, at the Fund's election, to
withdraw the Separate Accounts' investment in the Fund, and no charge or penalty
will be imposed as a result of such withdrawal.  The Fund shall neither be
required to bear the costs of remedial actions taken to remedy a material
irreconcilable conflict nor shall it be requested to pay a higher investment
advisory fee for the sole purpose of covering such costs.  In addition, no
Variable Contract Owner shall be required directly or indirectly to bear the
direct or indirect costs of remedial actions taken to remedy a material
irreconcilable conflict.  A new funding medium for any Variable Contract need
not be established pursuant to this Section 4.3, if an offer to do so has been
declined by vote of a majority of Variable Contract Owners materially adversely
affected by the irreconcilable material conflict.  All reports received by the
Fund's Board of Trustees of potential or existing conflicts, and all Board
action with regard to determining the existence of a conflict, notifying
Participating Insurance Companies and the Fund's investment adviser of a
conflict, and determining whether any proposed action adequately remedies a
conflict, shall be properly recorded

                                       6
<PAGE>
 
in the minutes of the Board of Trustees of the Fund or other appropriate
records, and such minutes or other records shall be made available to the SEC
upon request.  The Company and the Fund shall carry out their responsibilities
under this Section 4.3 with a view only to the interests of the Variable
Contract Owners.

4.4.  The Board of Trustees of the Fund shall promptly notify the Company in
writing of its determination of the existence of an irreconcilable material
conflict and its implications.

ARTICLE V.    Prospectuses and Proxy Statements; Voting

5.1.  The Company shall distribute such prospectuses, proxy statements and
periodic reports of the Fund to the owners of Variable Contracts issued by the
Company as required to be distributed to such Variable Contract Owners under
applicable federal or state law.

5.2.  The Distributor shall provide the Company with as many copies of the
current prospectus of the Fund as the Company may reasonably request.  If
requested by the Company in lieu thereof, the Fund shall provide such
documentation (including a final copy of the Fund's prospectus as set in type or
in camera-ready copy) and other assistance as is reasonably necessary in order
for the Company to print together in one document the current prospectus for the
Variable Contracts issued by the Company and the current prospectus for the
Fund.  The Fund shall bear the expense of printing copies of its current
prospectus that will be distributed to existing Variable Contract Owners, and
the Company shall bear the expense of printing copies of the Fund's prospectus
that are used in connection with offering the Variable Contracts issued by the
Company.

5.3.  The Fund and the Distributor shall provide (1) at the Fund's expense, one
copy of the Fund's current Statement of Additional Information ("SAI") to the
Company and to any owner of a Variable Contract issued by the Company who
requests such SAI, (2) at the Company's expense, such additional copies of the
Fund's current SAI as the Company shall reasonably request and that the Company
shall require in accordance with applicable law in connection with offering the
Variable Contracts issued by the Company.

5.4.  The Fund, at its expense, shall provide the Company with copies of its
proxy material, periodic reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably require for
purposes of distributing to owners of Variable Contracts issued by the Company.
The Fund, at the Company's expense, shall provide the Company with copies of its
periodic reports to shareholders and other communications to shareholders in
such quantity as the Company shall reasonably request for use in connection with
offering the Variable Contracts issued by the Company.  If requested by the
Company in lieu thereof, the Fund shall provide such documentation (including a
final copy of the Fund's proxy materials, periodic reports to shareholders and
other communications to shareholders, as set in type or in camera-ready copy)
and other assistance as reasonably necessary in order for the Company to print
such shareholder communications for distribution to owners of Variable Contracts
issued by the Company.

5.5.  For so long as the SEC interprets the 1940 Act to require pass-through
voting by Participating Insurance Companies whose Separate Accounts are
registered as investment companies under the

                                       7
<PAGE>
 
1940 Act, the Company shall vote shares of each Series of the Fund held in a
Separate Account or a subaccount thereof, whether or not registered under the
1940 Act, at regular and special meetings of the Fund in accordance with
instructions timely received by the Company (or its designated agent) from
owners of Variable Contracts funded by such Separate Account or subaccount
thereof having a voting interest in the Series.  The Company shall vote shares
of a Series of the Fund held in a Separate Account or a subaccount thereof that
are attributable to the Variable Contracts as to which no timely instructions
are received, as well as shares held in such Separate Account or subaccount
thereof that are not attributable to the Variable Contracts and owned
beneficially by the Company (resulting from charges against the Variable
Contracts or otherwise), in the same proportion as the votes cast by owners of
the Variable Contracts funded by that Separate Account or subaccount thereof
having a voting interest in the Series from whom instructions have been timely
received.  The Company shall vote shares of each Series of the Fund held in its
general account, if any, in the same proportion as the votes cast with respect
to shares of the Series held in all Separate Accounts of the Company or
subaccounts thereof, in the aggregate.

5.6.  The Fund shall disclose in its prospectus that (1) shares of the Series of
the Fund are offered to affiliated or unaffiliated insurance company separate
accounts which fund both annuity and life insurance contracts, (2) due to
differences in tax treatment or other considerations, the interests of various
Variable Contract Owners participating in the Fund or a Series might at some
time be in conflict, and (3) the Board of Trustees of the Fund will monitor for
any material conflicts and determine what action, if any, should be taken.  The
Fund hereby notifies the Company that prospectus disclosure may be appropriate
regarding potential risks of offering shares of the Fund to separate accounts
funding both variable annuity contracts and variable life insurance policies and
to separate accounts funding Variable Contracts of unaffiliated life insurance
companies.

ARTICLE VI.  Sales Material and Information

6.1.  The Company shall furnish, or shall cause to be furnished, to the Fund or
its designee, each piece of sales literature or other promotional material in
which the Fund (or any Series thereof) or its investment adviser or the
Distributor is named, and no such sales literature or other promotional material
shall be used without the approval of the Fund and the Distributor or the
designee of either.

6.2.  The Company agrees that neither it nor any of its affiliates or agents
shall give any information or make any representations or statements on behalf
of the Fund or concerning the Fund other than the information or representations
contained in the Registration Statement or prospectus for the Fund shares, as
such registration statement and prospectus may be amended or supplemented from
time to time, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material approved by the Fund or its designee
and by the Distributor or its designee, except with the permission of the Fund
or its designee and the Distributor or its designee.

6.3.  The Fund or the Distributor or the designee of either shall furnish to the
Company or its designee, each piece of sales literature or other promotional
material in which the Company or its Separate Accounts are named, and no such
material shall be used without the approval of the Company or its designee.

                                       8
<PAGE>
 
6.4.  The Fund and the Distributor agree that each and the affiliates and agents
of each shall not give any information or make any representations on behalf of
the Company or concerning  the Company, the Separate Accounts, or the Variable
Contracts issued by the Company, other than the information or representations
contained in a registration statement or prospectus for such Variable Contracts,
as such registration statement and prospectus may be amended or supplemented
from time to time, or in reports for the Separate Accounts or prepared for
distribution to owners of such Variable Contracts, or in sales literature or
other promotional material approved by the Company or its designee, except with
the permission of the Company.

6.5.  The Fund will provide to the Company at least one complete copy of all
prospectuses, Statements of Additional Information, reports, proxy statements
and other voting solicitation materials, and all amendments and supplements to
any of the above, that relate to the Fund or its shares, promptly after the
filing of such document with the SEC or other regulatory authorities.

6.6.  The Company will provide to the Fund at least one complete copy of all
prospectuses (which shall include an offering memorandum if the Variable
Contracts issued by the Company or interests therein are not registered under
the 1933 Act), Statements of Additional Information, reports, solicitations for
voting instructions, and all amendments or supplements to any of the above, that
relate to the Variable Contracts issued by the Company or the Separate Accounts
promptly after the filing of such document with the SEC or other regulatory
authority.

6.7.  For purposes of this Article VI, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, computerized media, or other public
media), sales literature (i.e., any written communication distributed or made
generally available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees.

ARTICLE VII.  Indemnification

7.1.  Indemnification By The Company

7.1(a).  The Company agrees to indemnify and hold harmless the Fund, each of its
Trustees and officers, any affiliated person of the Fund within the meaning of
Section 2(a)(3) of the 1940 Act, and the Distributor (collectively, the
"Indemnified Parties" for purposes of this Section 7.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation expenses (including legal and
other expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or litigation expenses are related to the sale or
acquisition of the Fund's shares or the Variable Contracts issued by the Company
and:

(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material

                                       9
<PAGE>
 
fact contained in the registration statement or prospectus (which shall include
an offering memorandum) for the Variable Contracts issued by the Company or
sales literature for such Variable Contracts (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or on behalf
of the Fund for use in the registration statement or prospectus for the Variable
Contracts issued by the Company or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of such Variable
Contracts or Fund shares; or

(ii) arise out of or as a result of any statement or representation (other than
statements or representations contained in the registration statement,
prospectus or sales literature of the Fund not supplied by the Company or
persons under its control) or wrongful conduct of the Company or any of its
affiliates, employees or agents with respect to the sale or distribution of the
Variable Contracts issued by the Company or the Fund shares; or

(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or sales
literature of the Fund or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading if
such a statement or omission was made in reliance upon information furnished to
the Fund by or on behalf of the Company;

except to the extent provided in Sections 7.1(b) and 7.1(c) hereof.

7.1(b).  The Company shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation expenses
to which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his or her
duties or by reason of his or her reckless disregard of obligations or duties
under this Agreement or to the Fund.

7.1(c).  The Company shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such Party
shall have notified the Company in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after such Party
shall have received notice of such service on any designated agent), but failure
to notify the Company of any such claim shall not relieve the Company from any
liability which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision.  In case
any such action is brought against the Indemnified Parties, the Company shall be
entitled to participate, at its own expense, in the defense of such action.  The
Company also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action.  After notice from the Company to
such party of the Company's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Company will not be liable to such party under this
Agreement for

                                       10
<PAGE>
 
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.

7.1(d).  The Indemnified Parties shall promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Variable Contracts issued by the
Company or the operation of the Fund.

7.2  Indemnification By the Distributor

7.2(a).  The Distributor agrees to indemnify and hold harmless the Company and
each of its directors and officers and each person, if any, who is an affiliated
person of the Company within the meaning of Section 2(a)(3) of the 1940 Act
(collectively, the "Indemnified Parties" for purposes of this Section 7.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Distributor) or litigation
expenses (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or litigation expenses are related to
the sale or acquisition of the Fund's shares or the Variable Contracts issued by
the Company and:

(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement or
prospectus or sales literature of the Fund (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Distributor or the Fund
or the designee of either by or on behalf of the Company for use in the
registration statement or prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection with the sale of the
Variable Contracts issued by the Company or Fund shares; or

(ii) arise out of or as a result of any statement or representation (other than
statements or representations contained in the registration statement,
prospectus or sales literature for the Variable Contracts not supplied by the
Distributor or any employees or agents thereof) or wrongful conduct of the Fund
or Distributor, or the affiliates, employees, or agents of the Fund or the
Distributor with respect to the sale or distribution of the Variable Contracts
issued by the Company or Fund shares; or

(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or sales
literature covering the Variable Contracts issued by the Company, or any
amendment thereof or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statement or statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to the Company by or on
behalf of the Fund;

except to the extent provided in Sections 7.2(b) and 7.2(c) hereof.

                                       11
<PAGE>
 
7.2(b).  The Distributor shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of his or
her duties or by reason of his or her reckless disregard of obligations and
duties under this Agreement or to the Company or the Separate Accounts.

7.2(c).  The Distributor shall not be liable under this indemnification
provision with respect to any claim made against the Indemnified Party unless
such Party shall have notified the Distributor in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Party shall have received notice of such service on any designated agent),
but failure to notify the Distributor of any such claim shall not relieve the
Distributor from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
Indemnification Provision.  In case any such action is brought against the
Indemnified Parties, the Distributor will be entitled to participate, at its own
expense, in the defense thereof.  The Distributor also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action.  After notice from the Distributor to such party of the Distributor's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Distributor
will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.

7.2(d).  The Company shall promptly notify the Distributor of the commencement
of any litigation or proceedings against it or any of its officers or directors
in connection with the issuance or sale of the Variable Contracts issued by the
Company or the operation of the Separate Accounts.

ARTICLE VIII.  Applicable Law

8.1.  This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of California.

8.2.  This Agreement shall be subject to the provisions of the 1933, 1934, and
1940 Acts, and the rules and regulations and rulings thereunder, including such
exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, the Shared Funding Exemptive Order) and the
terms hereof shall be interpreted and construed in accordance therewith.

ARTICLE IX.  Termination

9.1.  This Agreement shall terminate:

(a) at the option of any party upon 180 days advance written notice to the other
parties; or

(b) at the option of the Company if shares of the Series are not reasonably
available to meet the requirements of the Variable Contracts issued by the
Company, as determined by the Company, and upon prompt notice by the Company to
the other parties; or

                                       12
<PAGE>
 
(c) at the option of the Fund or the Distributor upon institution of formal
proceedings against the Company or its agent by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of the Variable
Contracts issued by the Company, the operation of the Separate Accounts, or the
purchase of the Fund shares; or

(d) at the option of the Company upon institution of formal proceedings against
the Fund or the Distributor by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body; or

(e) upon requisite vote of the Variable Contract Owners having an interest in
the Separate Accounts (or any subaccounts thereof) to substitute the shares of
another investment company for the corresponding shares of the Fund or a Series
in accordance with the terms of the Variable Contracts for which those shares
had been selected to serve as the underlying investment media; or

(f) in the event any of the shares of a Series are not registered, issued or
sold in accordance with applicable state and/or federal law, or such law
precludes the use of such shares as the underlying investment media of the
Variable Contracts issued or to be issued by the Company; or

(g) by any party to the Agreement upon a determination by a majority of the
Trustees of the Fund, or a majority of its disinterested Trustees, that an
irreconcilable conflict exists; or

(h) at the option of the Company if the Fund or a Series fails to meet the
diversification requirements specified in Section 3.3 hereof.

9.2.  Each party to this Agreement shall promptly notify the other parties to
the Agreement of the institution against such party of any such formal
proceedings as described in Sections 9.1(c) and (d) hereof.  The Company shall
give 60 day's prior written notice to the Fund of the date of any proposed vote
of Variable Contract Owners to replace the Fund's shares as described in Section
9.1(e) hereof.

9.3.  Except as necessary to implement Variable Contract Owner initiated
transactions, or as required by state insurance laws or regulations, the Company
shall not redeem Fund shares attributable to the Variable Contracts issued by
the Company (as opposed to Fund shares attributable to the Company's assets held
in the Separate Accounts), and the Company shall not prevent Variable Contract
Owners from allocating payments to a Series, until 60 days after the Company
shall have notified the Fund or Distributor of its intention to do so.

9.4.  If this Agreement terminates, any provision of this Agreement necessary to
the orderly windup of business under it will remain in effect as to that
business, after termination.

ARTICLE X.    Notices

Any notice shall be sufficiently given when sent by registered or certified mail
to the other party at the address of such party set forth below or at such other
address as such party may from time to time specify in writing to the other
party.

                                       13
<PAGE>
 
If to the Fund:

Pacific Select Fund
Attn: SEC Regulatory Compliance Department
700 Newport Center Drive
P.O. Box 7500
Newport Beach, CA  92260

If to the Distributor:

Pacific Equities Network
Attn: Compliance Officer
700 Newport Center Drive, NB-4
Newport Beach, CA  92660

If to the Company:

Pacific Mutual Life Insurance Company
Attn: SEC Regulatory Compliance Department
700 Newport Center Drive
P.O. Box 7500
Newport Beach, CA  92660

ARTICLE XI.  Miscellaneous

11.1.  The Fund and the Company agree that if and to the extent Rule 6e-3(T)
under the 1940 Act is amended or if Rule 6e-3 is adopted in final form, to the
extent applicable, ,the Fund and the Company shall each take such steps as may
be necessary to comply with the Rule as amended or adopted in final form.

11.2.  A copy of the Fund's Agreement and Declaration of Trust is on file with
the Secretary of the Commonwealth of Massachusetts and notice is hereby given
that the Agreement has been executed on behalf of the Fund by a Trustee of the
Fund in his or her capacity as Trustee and not individually. The obligations of
this Agreement shall only be binding upon the assets and property of the Fund
and shall not be binding upon any Trustee, officer or shareholder of the Fund
individually.

11.3.  Nothing in this Agreement shall impede the Fund's Trustees or
shareholders of the shares of the Fund's Series from exercising any of the
rights provided to such Trustees or shareholders in the Fund's Agreement and
Declaration of Trust, as amended, a copy of which will be provided to the
Company upon request.

11.4.  It is understood that the name "Pacific", "Pacific Mutual", "Pacific
Select" or any derivative thereof or logo associated with that name is the
valuable property of the Distributor and its affiliates, and that the Company
has the right to use such name (or derivative or logo) only so long as this
Agreement is in effect.  Upon termination of this Agreement the Company shall
forthwith cease to

                                       14
<PAGE>
 
use such name (or derivative or logo).

11.5.  The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect.

11.6.  This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.

11.7.  If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.

11.8.  This Agreement may not be assigned by any party to the Agreement except
with the written consent of the other parties to the Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.

PACIFIC SELECT FUND

ATTEST:                                 BY:
Name:  AUDREY L. MILFS                  Name:  THOMAS C. SUTTON
Title:  SECRETARY                       Title:  PRESIDENT


PACIFIC EQUITIES NETWORK

ATTEST:                                 BY:
Name:  AUDREY L. MILFS                  Name:  ARTHUR M. KESSELHAUT
Title:  SECRETARY                       Title:  PRESIDENT


PACIFIC MUTUAL LIFE INSURANCE CO.

ATTEST:                                 BY:
Name:  AUDREY L. MILFS                  Name:  WILLIAM D. CVENGROS
Title:  SECRETARY                       Title:  CHIEF INVESTMENT OFFICER

                                       15
<PAGE>
 
EXHIBIT A


PACIFIC SELECT SEPARATE ACCOUNT
PACIFIC SELECT EXEC SEPARATE ACCOUNT
PACIFIC SELECT VARIABLE ANNUITY SEPARATE ACCOUNT
PACIFIC COLI SEPARATE ACCOUNT
SEPARATE ACCOUNT A

                                       16
<PAGE>
 
IN WITNESS WHEREOF, the parties hereto have caused this Exhibit A to be executed
by their Officers designated below on this 3rd day of January, 1995.


PACIFIC SELECT FUND


Attest:                                  By:
Name:  Audrey L. Milfs                      Name:  Thomas C. Sutton
Title:    Secretary                         Title:    President



PACIFIC EQUITIES NETWORK


Attest:                                  By:
Name:  Audrey L. Milfs                      Name:  Gerald W. Robinson
Title:    Secretary                         Title:     President


PACIFIC MUTUAL LIFE INSURANCE COMPANY

Attest:                                  By:
Name:  Diane N. Ledger                      Name:  Glenn S. Schafer
Title:    Assistant Vice President          Title:     President

                                       17
<PAGE>
 
EXHIBIT B


MONEY MARKET SERIES
MANAGED BOND SERIES
GOVERNMENT SECURITIES SERIES
HIGH YIELD BOND SERIES
GROWTH SERIES
GROWTH LT SERIES
EQUITY INCOME SERIES
MULTI-STRATEGY SERIES
EQUITY SERIES
BOND AND INCOME SERIES
EQUITY INDEX SERIES
INTERNATIONAL SERIES

                                       18
<PAGE>
 
IN WITNESS WHEREOF, the parties hereto have caused this Exhibit B to be executed
by their Officers designated below on this 3rd day of January, 1995.


PACIFIC SELECT FUND


Attest:                                   By:
Name:  Audrey L. Milfs                       Name:  Thomas C. Sutton
Title:    Secretary                          Title:    President



PACIFIC EQUITIES NETWORK


Attest:                                   By:
Name:  Audrey L. Milfs                       Name:  Gerald W. Robinson
Title:    Secretary                          Title:     President


PACIFIC MUTUAL LIFE INSURANCE COMPANY

Attest:                                   By:
Name:  Diane N. Ledger                       Name:  Glenn S. Schafer
Title:    Assistant Vice President           Title:     President

                                       19
<PAGE>
 
ADDENDUM TO PARTICIPATION AGREEMENT

The Participation Agreement, made the 6th day of November, 1992 by and between
PACIFIC MUTUAL LIFE INSURANCE COMPANY (the "Company"), a life insurance company
domiciled in California, on its behalf and on behalf of the segregated asset
accounts of the Company listed on Exhibit A to this Agreement (the "Separate
Accounts"); Pacific Select Fund (the "Fund"), a Massachusetts business trust;
and Pacific Equities Network ("Distributor"), a California Corporation ("the
Agreement") is hereby amended by the addition of the provisions set forth in
this Addendum to the Agreement ("Addendum"), which is made this 4th day of
January, 1994.

WITNESSETH:

WHEREAS, the Fund is authorized to issue separate classes of shares of
beneficial interest ("shares") each representing an interest in a separate
portfolio of assets known as a "series" and each series has its own investment
objective, policies, and limitations; and

WHEREAS, the Fund is available to offer shares of one or more of its series to
separate accounts of insurance companies that fund variable life insurance
policies and variable annuity contracts ("Variable Contracts"); and

WHEREAS, the Fund currently consists of nine separate series designated as the
Money Market Series, Managed Bond Series, High Yield Bond Series, Government
Securities Series, Growth Series, Equity Income Series, Multi-Strategy Series,
International Series and Equity Index Series; and

WHEREAS, the Fund intends to establish one additional Series to be designated as
the Growth LT Series; and

NOW THEREFORE, in consideration of the mutual promises and covenants contained
in this Addendum, it is agreed between the parties hereto as follows:

The Agreement is amended by replacing the second paragraph with the following
language:

"WHEREAS, the Fund is available to offer shares of one or more of its series to
separate accounts of insurance companies that fund variable life insurance
policies and variable annuity contracts ("Variable Contracts') and to serve as
an investment medium for Variable Contracts offered by insurance companies that
have entered into participation agreements substantially similar to this
agreement ("Participating Insurance Companies"), and the Fund is comprised of
multiple separate series, and other series may be established in the future;
and"

IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be executed
by their officers designated below on the date written above.

                                       1
<PAGE>
 
PACIFIC SELECT FUND


Attest: /s/ AUDREY L. MILFS                 By: /s/ THOMAS C. SUTTON
Name:  Audrey L. Milfs                      Name:  Thomas C. Sutton
Title:  Secretary                           Title:  President


PACIFIC EQUITIES NETWORK


Attest: /s/ AUDREY L. MILFS                 By: /s/ GLENN S. SCHAFER
Name:  Audrey L. Milfs                      Name:  Glenn S. Schafer
Title:  Secretary                           Title:  President


Attest: /s/ AUDREY L. MILFS                 By: /s/ DIANE N. LEDGER
Name:  Audrey L. Milfs                      Name:  Diane N. Ledger
Title:  Secretary                           Title:  Assistant Vice President


PACIFIC MUTUAL LIFE INSURANCE COMPANY


Attest: /s/ DIANE N. LEDGER                 By: /s/ WILLIAM D. CVENGROS
Name:  Diane N. Ledger                      Name:  William D. Cvengros
Title:  Assistant Vice President            Title:  Chief Investment Officer


Attest: /s/ DIANE N. LEDGER                 By: /s/ GLENN S. SCHAFER
Name:  Diane N. Ledger                      Name:  Glenn S. Schafer
Title:  Assistant Vice President            Title:  Chief Financial Officer

                                       2
<PAGE>
 
ADDENDUM TO PARTICIPATION AGREEMENT


The Participation Agreement, made the 6th day of November, 1992, by and between
PACIFIC MUTUAL LIFE INSURANCE COMPANY (the "Company"), a life insurance company
domiciled in California, on its behalf and on behalf of the segregated asset
accounts of the company listed on Exhibit A to this Agreement (the "Separate
Accounts"); Pacific Select Fund (the "Fund"), a Massachusetts business trust;
and Pacific Equities Network ("Distributor"), a California Corporation ("the
Agreement") is hereby amended by the addition of the provisions set forth in
this Addendum to the Agreement ("Addendum"), which is made this 15th day of
August, 1994.

WITNESSETH:

WHEREAS, the Fund is authorized to issue separate classes of shares of
beneficial interest ("shares") each representing an interest in a separate
portfolio of assets known as a "series" and each series has its own investment
objective, policies, and limitations; and

WHEREAS, the Fund is available to offer shares of one or more of its series to
separate accounts of insurance companies that fund variable life insurance
policies and variable annuity contracts ("Variable Contracts"); and

WHEREAS, the Fund currently consists of ten separate series designated as the
Money Market Series, Managed Bond Series, High Yield Bond Series, Government
Securities Series, Growth Series, Equity Income Series, Multi-Strategy Series,
International Series, Equity Index Series and Growth LT Series; and

WHEREAS, the Fund intends to establish two additional Series to be designated as
the Equity Series and Bond and Income Series; and

NOW THEREFORE, in consideration of the mutual promises and covenants contained
in this addendum, it is agreed between the parties hereto as follows:

The Agreement is amended by replacing the second paragraph with the following
language:

"WHEREAS, the Fund is available to offer shares of one or more of its series to
separate accounts of insurance companies that fund variable life insurance
policies and variable annuity contracts ("Variable Contracts") and to serve as
an investment medium for Variable Contracts offered by insurance companies that
have entered into participation agreements substantially similar to this
agreement ("Participating Insurance Companies"), and the Fund is comprised of
multiple separate series, and other series may be established in the future;
and"

IN WITNESS WHEREOF, the parties hereto have caused this addendum to be executed
by their officers designated below on the date written above.


PACIFIC SELECT FUND

                                       1
<PAGE>
 
PACIFIC SELECT FUND


Attest: /s/ AUDREY L. MILFS             By: /s/ THOMAS C. SUTTON
Name:  Audrey L. Milfs                      Name:  Thomas C. Sutton
Title:  Secretary                           Title:  President


PACIFIC EQUITIES NETWORK


Attest: /s/ AUDREY L. MILFS             By: /s/ GLENN S. SCHAFER
Name:  Audrey L. Milfs                      Name:  Glenn S. Schafer
Title:  Secretary                           Title:  President


Attest: /s/ AUDREY L. MILFS             By: /s/ DIANE N. LEDGER
Name:  Audrey L. Milfs                      Name:  Diane N. Ledger
Title:  Secretary                           Title:  Assistant Vice President


PACIFIC MUTUAL LIFE INSURANCE COMPANY


Attest: /s/ DIANE N. LEDGER             By: /s/ WILLIAM D. CVENGROS
Name:  Diane N. Ledger                      Name:  William D. Cvengros
Title:  Assistant Vice President            Title:  Chief Investment Officer


Attest: /s/ DIANE N. LEDGER             By: /s/ GLENN S. SCHAFER
Name:  Diane N. Ledger                      Name:  Glenn S. Schafer
Title:  Assistant Vice President            Title:  Chief Financial Officer

                                       2
<PAGE>
 
                   ADDENDUM TO PARTICIPATION AGREEMENT
                   -----------------------------------

  The Participation Agreement, made the 6th day of November, 1992 and
subsequently amended on January 4, 1994 and August 15, 1994, by and between 
PACIFIC MUTUAL LIFE INSURANCE COMPANY (the "Company"), a life insurance
company domiciled in California, on its behalf and on behalf of the segregated 
asset accounts of the Company listed on Exhibit A to this Agreement (the
"Separate Accounts"); Pacific Select Fund (the "Fund"), a Massachusetts
business trust; and Pacific Equities Network ("Distributor"), a California
Corporation (the "Agreement") is hereby amended by the addition of the 
provisions set forth in this Addendum to the Agreement ("Addendum"), which
is made this 20th day of November, 1995.

                             WITNESSETH:

  WHEREAS, the Fund is authorized to issue separate classes of shares of
beneficial interest ("Shares") each representing an interest in a separate
portfolio of assets known as a "series" and each series has its own
investment objective, policies, and limitations; and

  WHEREAS, the Fund is available to offer shares of one or more of its 
series to separate accounts of insurance companies that fund variable 
life insurance policies and variable annuity contracts ("Variable
Contracts"); and

  WHEREAS, the Fund currently consists of twelve separate series 
designated as the Money Market Portfolio, Managed Bond Portfolio, High 
Yield Bond Portfolio, Government Securities Portfolio, Growth Portfolio, 
Equity Income Portfolio, Multi-Strategy Portfolio, International
Portfolio, Equity Index Portfolio, Growth LT Portfolio, Equity Portfolio 
and Bond and Income Portfolio (each referred to as a "Series" in the
Agreement, and hereinafter referred to as a "Portfolio"); and

  WHEREAS, the Fund intends to establish two additional Portfolios to
be designated as the Emerging Markets Portfolio and Aggressive Equity
Portfolio; and

  NOW THEREFORE, in consideration of the mutual promises and covenants
contained in this Addendum, it is agreed between the parties hereto as
follows:

       The Agreement is amended by replacing the second paragraph
  with the following language:

       "WHEREAS, the Fund is available to offer shares of one or more
  of its Portfolios to separate accounts of insurance companies that
  fund variable life insurance policies and variable annuity contracts
  ("Variable Contracts") and to serve as an investment medium for
  Variable Contracts offered by insurance companies that have entered
  into participation agreements substantially similar to this 
  agreement ("Participating Insurance Companies"), and the Fund is
  comprised of multiple separate Portfolios, and other Portfolios may
  be established in the future; and" 


<PAGE>
 
      IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be 
executed by their officers designated below on the date written above.


                        PACIFIC SELECT FUND


Attest: /s/ AUDREY L. MILFS                 By: /s/ THOMAS C. SUTTON
Name:  Audrey L. Milfs                      Name:  Thomas C. Sutton
Title:  Secretary                           Title:  President


                      PACIFIC EQUITIES NETWORK


Attest: /s/ AUDREY L. MILFS                 By: /s/ GERALD W. ROBINSON
Name:  Audrey L. Milfs                      Name:  Gerald W. Robinson
Title:  Secretary                           Title:  President, Director & CEO


Attest: /s/ AUDREY L. MILFS                 By: /s/ EDWARD R. BYRD
Name:  Audrey L. Milfs                      Name:  Edward R. Byrd
Title:  Secretary                           Title:  CFO & Treasurer


                PACIFIC MUTUAL LIFE INSURANCE COMPANY


Attest: /s/ DIANE N. LEDGER                 By: /s/ THOMAS C. SUTTON
Name:  Diane N. Ledger                      Name:  Thomas C. Sutton
Title:  Assistant Vice President            Title:  Chairman and CEO


Attest: /s/ DIANE N. LEDGER                 By: /s/ GLENN S. SCHAFER
Name:  Diane N. Ledger                      Name:  Glenn S. Schafer
Title:  Assistant Vice President            Title:  Chief Financial Officer

<PAGE>
 
                                   EXHIBIT B

                            MONEY MARKET PORTFOLIO
                            MANAGED BOND PORTFOLIO
                        GOVERNMENT SECURITIES PORTFOLIO
                           HIGH YIELD BOND PORTFOLIO
                               GROWTH PORTFOLIO
                              GROWTH LT PORTFOLIO
                            EQUITY INCOME PORTFOLIO
                           MULTI-STRATEGY PORTFOLIO
                               EQUITY PORTFOLIO
                           BOND AND INCOME PORTFOLIO
                            EQUITY INDEX PORTFOLIO
                            INTERNATIONAL PORTFOLIO
                          EMERGING MARKETS PORTFOLIO
                          AGGRESSIVE EQUITY PORTFOLIO


<PAGE>
 
                                                                 EXHIBIT 99.6(A)

INDEPENDENT AUDITORS' CONSENT


Pacific Mutual Life Insurance Company:
700 Newport Center Drive
Newport Beach, California 92660

We hereby consent to the use in Post-Effective Amendment No. 1 to Registration
Statement No. 333-01713 of Pacific Select Estate Preserver on Form S-6 of our
report dated February 16, 1996 related to the financial statements of Pacific
Select Exec Separate Account of Pacific Mutual Life Insurance Company as of and
for the years ended December 31, 1995 and 1994 and our report dated February 23,
1996 related to the financial statements of Pacific Mutual Life Insurance
Company as of and for the years ended December 31, 1995 and 1994 appearing in
the Prospectus, which is a part of such Registration Statement.

We also consent to the reference to us under the heading "Independent Auditors"
in such Prospectus.


/s/ DELOITTE & TOUCHE LLP
Costa Mesa, California
January 15, 1997

<TABLE> <S> <C>

<PAGE>
 
<ARTICLE> 6
<CIK> 0000832908
<NAME> PACIFIC SELECT EXEC SEPARATE ACCOUNT
<SERIES>
   <NUMBER> 1
   <NAME> MONEY MARKET PORTFOLIO
<MULTIPLIER> 1,000
       
<S>                             <C>                     <C>
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<PERIOD-END>                               DEC-31-1995             SEP-30-1996
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<AVG-DEBT-OUTSTANDING>                               0                       0
<AVG-DEBT-PER-SHARE>                                 0                       0
        

</TABLE>

<TABLE> <S> <C>

<PAGE>
 
<ARTICLE> 6
<CIK> 0000832908
<NAME> PACIFIC SELECT EXEC SEPARATE ACCOUNT
<SERIES>
   <NUMBER> 2
   <NAME> HIGH YIELD BOND PORTFOLIO
<MULTIPLIER> 1,000
       
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<PERIOD-END>                               DEC-31-1995             SEP-30-1996
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<TABLE> <S> <C>

<PAGE>
 
<ARTICLE> 6
<CIK> 0000832908
<NAME> PACIFIC SELECT EXEC SEPARATE ACCOUNT
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   <NAME> GOVERNMENT SECURITIES PORTFOLIO
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<TABLE> <S> <C>

<PAGE>
 
<ARTICLE> 6
<CIK> 0000832908
<NAME> PACIFIC SELECT EXEC SEPARATE ACCOUNT
<SERIES>
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   <NAME> MANAGED BOND PORTFOLIO
<MULTIPLIER> 1,000
       
<S>                             <C>                     <C>
<PERIOD-TYPE>                   12-MOS                   9-MOS
<FISCAL-YEAR-END>                          DEC-31-1995             DEC-31-1996
<PERIOD-START>                             JAN-01-1995             JAN-01-1996
<PERIOD-END>                               DEC-31-1995             SEP-30-1996
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</TABLE>

<TABLE> <S> <C>

<PAGE>
 
<ARTICLE> 6
<CIK> 0000832908
<NAME> PACIFIC SELECT EXEC SEPARATE ACCOUNT
<SERIES>
   <NUMBER> 5
   <NAME> GROWTH PORTFOLIO
<MULTIPLIER> 1,000
       
<S>                             <C>                     <C>
<PERIOD-TYPE>                   12-MOS                   9-MOS
<FISCAL-YEAR-END>                          DEC-31-1995             DEC-31-1996
<PERIOD-START>                             JAN-01-1995             JAN-01-1996
<PERIOD-END>                               DEC-31-1995             SEP-30-1996
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<SHARES-COMMON-PRIOR>                                0                       0
<ACCUMULATED-NII-CURRENT>                            0                       0
<OVERDISTRIBUTION-NII>                               0                       0
<ACCUMULATED-NET-GAINS>                              0                       0
<OVERDISTRIBUTION-GAINS>                             0                       0
<ACCUM-APPREC-OR-DEPREC>                             0                       0
<NET-ASSETS>                                    87,519                 114,361
<DIVIDEND-INCOME>                                  656                   6,473
<INTEREST-INCOME>                                    0                       0
<OTHER-INCOME>                                       0                       0
<EXPENSES-NET>                                       0                       0
<NET-INVESTMENT-INCOME>                            656                   6,473
<REALIZED-GAINS-CURRENT>                       (1,046)                   1,442
<APPREC-INCREASE-CURRENT>                       16,423                   7,664
<NET-CHANGE-FROM-OPS>                           16,033                  15,579
<EQUALIZATION>                                       0                       0
<DISTRIBUTIONS-OF-INCOME>                            0                       0
<DISTRIBUTIONS-OF-GAINS>                             0                       0
<DISTRIBUTIONS-OTHER>                                0                       0
<NUMBER-OF-SHARES-SOLD>                          1,168                     425
<NUMBER-OF-SHARES-REDEEMED>                          0                       0
<SHARES-REINVESTED>                                  0                       0
<NET-CHANGE-IN-ASSETS>                          40,102                  26,843
<ACCUMULATED-NII-PRIOR>                              0                       0
<ACCUMULATED-GAINS-PRIOR>                            0                       0
<OVERDISTRIB-NII-PRIOR>                              0                       0
<OVERDIST-NET-GAINS-PRIOR>                           0                       0
<GROSS-ADVISORY-FEES>                                0                       0
<INTEREST-EXPENSE>                                   0                       0
<GROSS-EXPENSE>                                      0                       0
<AVERAGE-NET-ASSETS>                            71,402                 100,397
<PER-SHARE-NAV-BEGIN>                                0                       0
<PER-SHARE-NII>                                      0                       0
<PER-SHARE-GAIN-APPREC>                              0                       0
<PER-SHARE-DIVIDEND>                                 0                       0
<PER-SHARE-DISTRIBUTIONS>                            0                       0
<RETURNS-OF-CAPITAL>                                 0                       0
<PER-SHARE-NAV-END>                                  0                       0
<EXPENSE-RATIO>                                      0                       0
<AVG-DEBT-OUTSTANDING>                               0                       0
<AVG-DEBT-PER-SHARE>                                 0                       0
        

</TABLE>

<TABLE> <S> <C>

<PAGE>
 
<ARTICLE> 6
<CIK> 0000832908
<NAME> PACIFIC SELECT EXEC SEPARATE ACCOUNT
<SERIES>
   <NUMBER> 6
   <NAME> EQUITY INCOME PORTFOLIO
<MULTIPLIER> 1,000
       
<S>                             <C>                     <C>
<PERIOD-TYPE>                   12-MOS                   9-MOS
<FISCAL-YEAR-END>                          DEC-31-1995             DEC-31-1996
<PERIOD-START>                             JAN-01-1995             JAN-01-1996
<PERIOD-END>                               DEC-31-1995             SEP-30-1996
<INVESTMENTS-AT-COST>                           43,643                  66,577
<INVESTMENTS-AT-VALUE>                          49,717                  74,510
<RECEIVABLES>                                      117                       0
<ASSETS-OTHER>                                       0                       0
<OTHER-ITEMS-ASSETS>                                 0                       0
<TOTAL-ASSETS>                                  49,834                  74,510
<PAYABLE-FOR-SECURITIES>                           118                       0
<SENIOR-LONG-TERM-DEBT>                              0                       0
<OTHER-ITEMS-LIABILITIES>                            0                       0
<TOTAL-LIABILITIES>                                118                       0
<SENIOR-EQUITY>                                      0                       0
<PAID-IN-CAPITAL-COMMON>                             0                       0
<SHARES-COMMON-STOCK>                                0                       0
<SHARES-COMMON-PRIOR>                                0                       0
<ACCUMULATED-NII-CURRENT>                            0                       0
<OVERDISTRIBUTION-NII>                               0                       0
<ACCUMULATED-NET-GAINS>                              0                       0
<OVERDISTRIBUTION-GAINS>                             0                       0
<ACCUM-APPREC-OR-DEPREC>                             0                       0
<NET-ASSETS>                                    49,716                  74,510
<DIVIDEND-INCOME>                                  577                   3,143
<INTEREST-INCOME>                                    0                       0
<OTHER-INCOME>                                       0                       0
<EXPENSES-NET>                                       0                       0
<NET-INVESTMENT-INCOME>                            577                   3,143
<REALIZED-GAINS-CURRENT>                           785                     512
<APPREC-INCREASE-CURRENT>                        7,737                   1,860
<NET-CHANGE-FROM-OPS>                            9,099                   5,515
<EQUALIZATION>                                       0                       0
<DISTRIBUTIONS-OF-INCOME>                            0                       0
<DISTRIBUTIONS-OF-GAINS>                             0                       0
<DISTRIBUTIONS-OTHER>                                0                       0
<NUMBER-OF-SHARES-SOLD>                            974                     759
<NUMBER-OF-SHARES-REDEEMED>                          0                       0
<SHARES-REINVESTED>                                  0                       0
<NET-CHANGE-IN-ASSETS>                          29,494                  24,794
<ACCUMULATED-NII-PRIOR>                              0                       0
<ACCUMULATED-GAINS-PRIOR>                            0                       0
<OVERDISTRIB-NII-PRIOR>                              0                       0
<OVERDIST-NET-GAINS-PRIOR>                           0                       0
<GROSS-ADVISORY-FEES>                                0                       0
<INTEREST-EXPENSE>                                   0                       0
<GROSS-EXPENSE>                                      0                       0
<AVERAGE-NET-ASSETS>                            34,914                  59,136
<PER-SHARE-NAV-BEGIN>                                0                       0
<PER-SHARE-NII>                                      0                       0
<PER-SHARE-GAIN-APPREC>                              0                       0
<PER-SHARE-DIVIDEND>                                 0                       0
<PER-SHARE-DISTRIBUTIONS>                            0                       0
<RETURNS-OF-CAPITAL>                                 0                       0
<PER-SHARE-NAV-END>                                  0                       0
<EXPENSE-RATIO>                                      0                       0
<AVG-DEBT-OUTSTANDING>                               0                       0
<AVG-DEBT-PER-SHARE>                                 0                       0
        

</TABLE>

<TABLE> <S> <C>

<PAGE>
 
<ARTICLE> 6
<CIK> 0000832908
<NAME> PACIFIC SELECT EXEC SEPARATE ACCOUNT
<SERIES>
   <NUMBER> 7
   <NAME> MULTI-STRATEGY PORTFOLIO
<MULTIPLIER> 1,000
       
<S>                             <C>                     <C>
<PERIOD-TYPE>                   12-MOS                   9-MOS
<FISCAL-YEAR-END>                          DEC-31-1995             DEC-31-1996
<PERIOD-START>                             JAN-01-1995             JAN-01-1996
<PERIOD-END>                               DEC-31-1995             SEP-30-1996
<INVESTMENTS-AT-COST>                           48,796                  59,554
<INVESTMENTS-AT-VALUE>                          54,269                  64,249
<RECEIVABLES>                                      696                       0
<ASSETS-OTHER>                                       0                       0
<OTHER-ITEMS-ASSETS>                                 0                       0
<TOTAL-ASSETS>                                  54,965                  64,249
<PAYABLE-FOR-SECURITIES>                           659                       0
<SENIOR-LONG-TERM-DEBT>                              0                       0
<OTHER-ITEMS-LIABILITIES>                            0                       0
<TOTAL-LIABILITIES>                                659                       0
<SENIOR-EQUITY>                                      0                       0
<PAID-IN-CAPITAL-COMMON>                             0                       0
<SHARES-COMMON-STOCK>                                0                       0
<SHARES-COMMON-PRIOR>                                0                       0
<ACCUMULATED-NII-CURRENT>                            0                       0
<OVERDISTRIBUTION-NII>                               0                       0
<ACCUMULATED-NET-GAINS>                              0                       0
<OVERDISTRIBUTION-GAINS>                             0                       0
<ACCUM-APPREC-OR-DEPREC>                             0                       0
<NET-ASSETS>                                    54,306                  64,249
<DIVIDEND-INCOME>                                1,401                   4,023
<INTEREST-INCOME>                                    0                       0
<OTHER-INCOME>                                       0                       0
<EXPENSES-NET>                                       0                       0
<NET-INVESTMENT-INCOME>                          1,401                   4,023
<REALIZED-GAINS-CURRENT>                            71                     276
<APPREC-INCREASE-CURRENT>                        7,406                   (778)
<NET-CHANGE-FROM-OPS>                            8,878                   3,521
<EQUALIZATION>                                       0                       0
<DISTRIBUTIONS-OF-INCOME>                            0                       0
<DISTRIBUTIONS-OF-GAINS>                             0                       0
<DISTRIBUTIONS-OTHER>                                0                       0
<NUMBER-OF-SHARES-SOLD>                            649                     293
<NUMBER-OF-SHARES-REDEEMED>                          0                       0
<SHARES-REINVESTED>                                  0                       0
<NET-CHANGE-IN-ASSETS>                          22,135                   9,942
<ACCUMULATED-NII-PRIOR>                              0                       0
<ACCUMULATED-GAINS-PRIOR>                            0                       0
<OVERDISTRIB-NII-PRIOR>                              0                       0
<OVERDIST-NET-GAINS-PRIOR>                           0                       0
<GROSS-ADVISORY-FEES>                                0                       0
<INTEREST-EXPENSE>                                   0                       0
<GROSS-EXPENSE>                                      0                       0
<AVERAGE-NET-ASSETS>                            40,306                  58,940
<PER-SHARE-NAV-BEGIN>                                0                       0
<PER-SHARE-NII>                                      0                       0
<PER-SHARE-GAIN-APPREC>                              0                       0
<PER-SHARE-DIVIDEND>                                 0                       0
<PER-SHARE-DISTRIBUTIONS>                            0                       0
<RETURNS-OF-CAPITAL>                                 0                       0
<PER-SHARE-NAV-END>                                  0                       0
<EXPENSE-RATIO>                                      0                       0
<AVG-DEBT-OUTSTANDING>                               0                       0
<AVG-DEBT-PER-SHARE>                                 0                       0
        

</TABLE>

<TABLE> <S> <C>

<PAGE>
 
<ARTICLE> 6
<CIK> 0000832908
<NAME> PACIFIC SELECT EXEC SEPARATE ACCOUNT
<SERIES>
   <NUMBER> 8
   <NAME> INTERNATIONAL PORTFOLIO
<MULTIPLIER> 1,000
       
<S>                             <C>                     <C>
<PERIOD-TYPE>                   12-MOS                   9-MOS
<FISCAL-YEAR-END>                          DEC-31-1995             DEC-31-1996
<PERIOD-START>                             JAN-01-1995             JAN-01-1996
<PERIOD-END>                               DEC-31-1995             SEP-30-1996
<INVESTMENTS-AT-COST>                           54,916                  76,334
<INVESTMENTS-AT-VALUE>                          56,325                  84,440
<RECEIVABLES>                                      196                       0
<ASSETS-OTHER>                                       0                       0
<OTHER-ITEMS-ASSETS>                                 0                       0
<TOTAL-ASSETS>                                  56,521                  84,440
<PAYABLE-FOR-SECURITIES>                            94                       0
<SENIOR-LONG-TERM-DEBT>                              0                       0
<OTHER-ITEMS-LIABILITIES>                            0                       0
<TOTAL-LIABILITIES>                                 94                       0
<SENIOR-EQUITY>                                      0                       0
<PAID-IN-CAPITAL-COMMON>                             0                       0
<SHARES-COMMON-STOCK>                                0                       0
<SHARES-COMMON-PRIOR>                                0                       0
<ACCUMULATED-NII-CURRENT>                            0                       0
<OVERDISTRIBUTION-NII>                               0                       0
<ACCUMULATED-NET-GAINS>                              0                       0
<OVERDISTRIBUTION-GAINS>                             0                       0
<ACCUM-APPREC-OR-DEPREC>                             0                       0
<NET-ASSETS>                                    56,427                  84,440
<DIVIDEND-INCOME>                                1,070                     678
<INTEREST-INCOME>                                    0                       0
<OTHER-INCOME>                                       0                       0
<EXPENSES-NET>                                       0                       0
<NET-INVESTMENT-INCOME>                          1,070                     678
<REALIZED-GAINS-CURRENT>                           574                     498
<APPREC-INCREASE-CURRENT>                        2,646                   6,697
<NET-CHANGE-FROM-OPS>                            4,290                   7,873
<EQUALIZATION>                                       0                       0
<DISTRIBUTIONS-OF-INCOME>                            0                       0
<DISTRIBUTIONS-OF-GAINS>                             0                       0
<DISTRIBUTIONS-OTHER>                                0                       0
<NUMBER-OF-SHARES-SOLD>                          1,414                   1,194
<NUMBER-OF-SHARES-REDEEMED>                          0                       0
<SHARES-REINVESTED>                                  0                       0
<NET-CHANGE-IN-ASSETS>                          25,273                  28,013
<ACCUMULATED-NII-PRIOR>                              0                       0
<ACCUMULATED-GAINS-PRIOR>                            0                       0
<OVERDISTRIB-NII-PRIOR>                              0                       0
<OVERDIST-NET-GAINS-PRIOR>                           0                       0
<GROSS-ADVISORY-FEES>                                0                       0
<INTEREST-EXPENSE>                                   0                       0
<GROSS-EXPENSE>                                      0                       0
<AVERAGE-NET-ASSETS>                            42,982                  71,018
<PER-SHARE-NAV-BEGIN>                                0                       0
<PER-SHARE-NII>                                      0                       0
<PER-SHARE-GAIN-APPREC>                              0                       0
<PER-SHARE-DIVIDEND>                                 0                       0
<PER-SHARE-DISTRIBUTIONS>                            0                       0
<RETURNS-OF-CAPITAL>                                 0                       0
<PER-SHARE-NAV-END>                                  0                       0
<EXPENSE-RATIO>                                      0                       0
<AVG-DEBT-OUTSTANDING>                               0                       0
<AVG-DEBT-PER-SHARE>                                 0                       0
        

</TABLE>

<TABLE> <S> <C>

<PAGE>
 
<ARTICLE> 6
<CIK> 0000832908
<NAME> PACIFIC SELECT EXEC SEPARATE ACCOUNT
<SERIES>
   <NUMBER> 9
   <NAME> EQUITY INDEX PORTFOLIO
<MULTIPLIER> 1,000
       
<S>                             <C>                     <C>
<PERIOD-TYPE>                   12-MOS                   9-MOS
<FISCAL-YEAR-END>                          DEC-31-1995             DEC-31-1996
<PERIOD-START>                             JAN-01-1995             JAN-01-1996
<PERIOD-END>                               DEC-31-1995             SEP-30-1996
<INVESTMENTS-AT-COST>                           51,564                  91,180
<INVESTMENTS-AT-VALUE>                          62,687                 108,485
<RECEIVABLES>                                      166                       0
<ASSETS-OTHER>                                       0                       0
<OTHER-ITEMS-ASSETS>                                 0                       0
<TOTAL-ASSETS>                                  62,853                 108,485
<PAYABLE-FOR-SECURITIES>                           178                       0
<SENIOR-LONG-TERM-DEBT>                              0                       0
<OTHER-ITEMS-LIABILITIES>                            0                       0
<TOTAL-LIABILITIES>                                178                       0
<SENIOR-EQUITY>                                      0                       0
<PAID-IN-CAPITAL-COMMON>                             0                       0
<SHARES-COMMON-STOCK>                                0                       0
<SHARES-COMMON-PRIOR>                                0                       0
<ACCUMULATED-NII-CURRENT>                            0                       0
<OVERDISTRIBUTION-NII>                               0                       0
<ACCUMULATED-NET-GAINS>                              0                       0
<OVERDISTRIBUTION-GAINS>                             0                       0
<ACCUM-APPREC-OR-DEPREC>                             0                       0
<NET-ASSETS>                                    62,675                 108,485
<DIVIDEND-INCOME>                                1,015                   3,246
<INTEREST-INCOME>                                    0                       0
<OTHER-INCOME>                                       0                       0
<EXPENSES-NET>                                       0                       0
<NET-INVESTMENT-INCOME>                          1,015                   3,246
<REALIZED-GAINS-CURRENT>                         2,069                     778
<APPREC-INCREASE-CURRENT>                       10,698                   6,181
<NET-CHANGE-FROM-OPS>                           13,782                  10,205
<EQUALIZATION>                                       0                       0
<DISTRIBUTIONS-OF-INCOME>                            0                       0
<DISTRIBUTIONS-OF-GAINS>                             0                       0
<DISTRIBUTIONS-OTHER>                                0                       0
<NUMBER-OF-SHARES-SOLD>                          1,042                   1,637
<NUMBER-OF-SHARES-REDEEMED>                          0                       0
<SHARES-REINVESTED>                                  0                       0
<NET-CHANGE-IN-ASSETS>                          32,282                  45,810
<ACCUMULATED-NII-PRIOR>                              0                       0
<ACCUMULATED-GAINS-PRIOR>                            0                       0
<OVERDISTRIB-NII-PRIOR>                              0                       0
<OVERDIST-NET-GAINS-PRIOR>                           0                       0
<GROSS-ADVISORY-FEES>                                0                       0
<INTEREST-EXPENSE>                                   0                       0
<GROSS-EXPENSE>                                      0                       0
<AVERAGE-NET-ASSETS>                            45,457                  83,258
<PER-SHARE-NAV-BEGIN>                                0                       0
<PER-SHARE-NII>                                      0                       0
<PER-SHARE-GAIN-APPREC>                              0                       0
<PER-SHARE-DIVIDEND>                                 0                       0
<PER-SHARE-DISTRIBUTIONS>                            0                       0
<RETURNS-OF-CAPITAL>                                 0                       0
<PER-SHARE-NAV-END>                                  0                       0
<EXPENSE-RATIO>                                      0                       0
<AVG-DEBT-OUTSTANDING>                               0                       0
<AVG-DEBT-PER-SHARE>                                 0                       0
        

</TABLE>

<TABLE> <S> <C>

<PAGE>
 
<ARTICLE> 6
<CIK> 0000832908
<NAME> PACIFIC SELECT EXEC SEPARATE ACCOUNT
<SERIES>
   <NUMBER> 10
   <NAME> GROWTH LT PORTFOLIO
<MULTIPLIER> 1,000
       
<S>                             <C>                     <C>
<PERIOD-TYPE>                   12-MOS                   9-MOS
<FISCAL-YEAR-END>                          DEC-31-1995             DEC-31-1996
<PERIOD-START>                             JAN-01-1995             JAN-01-1996
<PERIOD-END>                               DEC-31-1995             SEP-30-1996
<INVESTMENTS-AT-COST>                           49,540                  71,487
<INVESTMENTS-AT-VALUE>                          53,801                  81,385
<RECEIVABLES>                                      198                       0
<ASSETS-OTHER>                                       0                       0
<OTHER-ITEMS-ASSETS>                                 0                       0
<TOTAL-ASSETS>                                  53,999                  81,385
<PAYABLE-FOR-SECURITIES>                           240                       0
<SENIOR-LONG-TERM-DEBT>                              0                       0
<OTHER-ITEMS-LIABILITIES>                            0                       0
<TOTAL-LIABILITIES>                                240                       0
<SENIOR-EQUITY>                                      0                       0
<PAID-IN-CAPITAL-COMMON>                             0                       0
<SHARES-COMMON-STOCK>                                0                       0
<SHARES-COMMON-PRIOR>                                0                       0
<ACCUMULATED-NII-CURRENT>                            0                       0
<OVERDISTRIBUTION-NII>                               0                       0
<ACCUMULATED-NET-GAINS>                              0                       0
<OVERDISTRIBUTION-GAINS>                             0                       0
<ACCUM-APPREC-OR-DEPREC>                             0                       0
<NET-ASSETS>                                    53,759                  81,385
<DIVIDEND-INCOME>                                3,592                     437
<INTEREST-INCOME>                                    0                       0
<OTHER-INCOME>                                       0                       0
<EXPENSES-NET>                                       0                       0
<NET-INVESTMENT-INCOME>                          3,592                     437
<REALIZED-GAINS-CURRENT>                         1,225                   4,016
<APPREC-INCREASE-CURRENT>                        3,892                   5,638
<NET-CHANGE-FROM-OPS>                            8,709                  10,091
<EQUALIZATION>                                       0                       0
<DISTRIBUTIONS-OF-INCOME>                            0                       0
<DISTRIBUTIONS-OF-GAINS>                             0                       0
<DISTRIBUTIONS-OTHER>                                0                       0
<NUMBER-OF-SHARES-SOLD>                          2,464                     994
<NUMBER-OF-SHARES-REDEEMED>                          0                       0
<SHARES-REINVESTED>                                  0                       0
<NET-CHANGE-IN-ASSETS>                          42,351                  27,626
<ACCUMULATED-NII-PRIOR>                              0                       0
<ACCUMULATED-GAINS-PRIOR>                            0                       0
<OVERDISTRIB-NII-PRIOR>                              0                       0
<OVERDIST-NET-GAINS-PRIOR>                           0                       0
<GROSS-ADVISORY-FEES>                                0                       0
<INTEREST-EXPENSE>                                   0                       0
<GROSS-EXPENSE>                                      0                       0
<AVERAGE-NET-ASSETS>                            30,953                  66,402
<PER-SHARE-NAV-BEGIN>                                0                       0
<PER-SHARE-NII>                                      0                       0
<PER-SHARE-GAIN-APPREC>                              0                       0
<PER-SHARE-DIVIDEND>                                 0                       0
<PER-SHARE-DISTRIBUTIONS>                            0                       0
<RETURNS-OF-CAPITAL>                                 0                       0
<PER-SHARE-NAV-END>                                  0                       0
<EXPENSE-RATIO>                                      0                       0
<AVG-DEBT-OUTSTANDING>                               0                       0
<AVG-DEBT-PER-SHARE>                                 0                       0
        

</TABLE>

<TABLE> <S> <C>

<PAGE>
 
<ARTICLE> 6
<CIK> 0000832908
<NAME> PACIFIC SELECT EXEC SEPARATE ACCOUNT
<SERIES>
   <NUMBER> 13
   <NAME> AGGRESSIVE EQUITY PORTFOLIO
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   6-MOS
<FISCAL-YEAR-END>                          DEC-31-1996
<PERIOD-START>                             APR-08-1996
<PERIOD-END>                               SEP-30-1996
<INVESTMENTS-AT-COST>                            2,249
<INVESTMENTS-AT-VALUE>                           2,329
<RECEIVABLES>                                        0
<ASSETS-OTHER>                                       0
<OTHER-ITEMS-ASSETS>                                 0
<TOTAL-ASSETS>                                   2,329
<PAYABLE-FOR-SECURITIES>                             0
<SENIOR-LONG-TERM-DEBT>                              0
<OTHER-ITEMS-LIABILITIES>                            0
<TOTAL-LIABILITIES>                                  0
<SENIOR-EQUITY>                                      0
<PAID-IN-CAPITAL-COMMON>                             0
<SHARES-COMMON-STOCK>                                0
<SHARES-COMMON-PRIOR>                                0
<ACCUMULATED-NII-CURRENT>                            0
<OVERDISTRIBUTION-NII>                               0
<ACCUMULATED-NET-GAINS>                              0
<OVERDISTRIBUTION-GAINS>                             0
<ACCUM-APPREC-OR-DEPREC>                             0
<NET-ASSETS>                                     2,329
<DIVIDEND-INCOME>                                    2
<INTEREST-INCOME>                                    0
<OTHER-INCOME>                                       0
<EXPENSES-NET>                                       0
<NET-INVESTMENT-INCOME>                              2
<REALIZED-GAINS-CURRENT>                         (955)
<APPREC-INCREASE-CURRENT>                           80
<NET-CHANGE-FROM-OPS>                            (873)
<EQUALIZATION>                                       0
<DISTRIBUTIONS-OF-INCOME>                            0
<DISTRIBUTIONS-OF-GAINS>                             0
<DISTRIBUTIONS-OTHER>                                0
<NUMBER-OF-SHARES-SOLD>                            212
<NUMBER-OF-SHARES-REDEEMED>                          0
<SHARES-REINVESTED>                                  0
<NET-CHANGE-IN-ASSETS>                           2,329
<ACCUMULATED-NII-PRIOR>                              0
<ACCUMULATED-GAINS-PRIOR>                            0
<OVERDISTRIB-NII-PRIOR>                              0
<OVERDIST-NET-GAINS-PRIOR>                           0
<GROSS-ADVISORY-FEES>                                0
<INTEREST-EXPENSE>                                   0
<GROSS-EXPENSE>                                      0
<AVERAGE-NET-ASSETS>                             3,292
<PER-SHARE-NAV-BEGIN>                                0
<PER-SHARE-NII>                                      0
<PER-SHARE-GAIN-APPREC>                              0
<PER-SHARE-DIVIDEND>                                 0
<PER-SHARE-DISTRIBUTIONS>                            0
<RETURNS-OF-CAPITAL>                                 0
<PER-SHARE-NAV-END>                                  0
<EXPENSE-RATIO>                                      0
<AVG-DEBT-OUTSTANDING>                               0
<AVG-DEBT-PER-SHARE>                                 0
        

</TABLE>

<TABLE> <S> <C>

<PAGE>
 
<ARTICLE> 6
<CIK> 0000832908
<NAME> PACIFIC SELECT EXEC SEPARATE ACCOUNT
<SERIES>
   <NUMBER> 14
   <NAME> EMERGING MARKETS PORTFOLIO
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   6-MOS
<FISCAL-YEAR-END>                          DEC-31-1996
<PERIOD-START>                             APR-08-1996
<PERIOD-END>                               SEP-30-1996
<INVESTMENTS-AT-COST>                            1,484
<INVESTMENTS-AT-VALUE>                           1,466
<RECEIVABLES>                                        0
<ASSETS-OTHER>                                       0
<OTHER-ITEMS-ASSETS>                                 0
<TOTAL-ASSETS>                                   1,466
<PAYABLE-FOR-SECURITIES>                             0
<SENIOR-LONG-TERM-DEBT>                              0
<OTHER-ITEMS-LIABILITIES>                            0
<TOTAL-LIABILITIES>                                  0
<SENIOR-EQUITY>                                      0
<PAID-IN-CAPITAL-COMMON>                             0
<SHARES-COMMON-STOCK>                                0
<SHARES-COMMON-PRIOR>                                0
<ACCUMULATED-NII-CURRENT>                            0
<OVERDISTRIBUTION-NII>                               0
<ACCUMULATED-NET-GAINS>                              0
<OVERDISTRIBUTION-GAINS>                             0
<ACCUM-APPREC-OR-DEPREC>                             0
<NET-ASSETS>                                     1,466
<DIVIDEND-INCOME>                                    0
<INTEREST-INCOME>                                    0
<OTHER-INCOME>                                       0
<EXPENSES-NET>                                       0
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