PARAGON PORTFOLIO, 485BPOS, 1995-07-31

PARAGON PORTFOLIO
485BPOS, 1995-07-31

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<PAGE>

1933 Act Registration No. 33-31334
1940 Act Registration No. 811-05879

As filed with the Securities and Exchange Commission
on July 27, 1995

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________

FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 ( )

Post-Effective Amendment No. 11 ( X )
and

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 ( )

Amendment No. 13 ( X )
(Check appropriate box or boxes)

____________

PARAGON PORTFOLIO
(Exact name of registrant as specified in charter)

4900 Sears Tower
Chicago, Illinois 60606
(Address of principal executive offices)

Registrant's Telephone Number, including Area Code
312-621-2550

_____________

Copy to:
Michael J. Richman, Esq. Pamela J. Wilson, Esq.
Goldman, Sachs & Co. Hale and Dorr
85 Broad Street 60 State Street
New York, New York Boston, Massachusetts
10004 02109

(Name and address of Agent for Service of Process)
_____________
<PAGE>

It is proposed that this filing will become effective (check appropriate box)

( ) immediately upon filing pursuant to paragraph (b)
( X ) on July 31, 1995 pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(i)
( ) on (date) pursuant to paragraph (a)(i)
( ) 75 days after filing pursuant to paragraph (a)(ii)
( ) on (date) pursuant to paragraph (a)(ii) of rule 485

REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF SHARES UNDER THE SECURITIES
ACT OF 1933 PURSUANT TO RULE 24F-2.
ON JANUARY 31, 1995, REGISTRANT FILED A RULE 24F-2 NOTICE FOR THE FISCAL YEAR
ENDED NOVEMBER 30, 1994.

THE TOTAL NUMBER OF PAGES IS _____. THE EXHIBIT INDEX IS ON PAGE ______.
<PAGE>

PARAGON PORTFOLIO
-----------------

CROSS REFERENCE SHEET
---------------------

Items Required by Form N-1A
<TABLE>
<CAPTION>
ITEM NUMBER IN PART A PROSPECTUS CAPTION
- --------------------- ------------------
<C> <S> <C>
1. Cover Page Cover Page

2. Synopsis An Introduction to Paragon
Portfolio

3. Condensed Financial Not Applicable
Information

4. General Description An Introduction to Paragon
of Registrant Portfolio; Investment Objec
tive and Policies of Invest
ment Objective and Policies of
Paragon Power Intermediate-
Term Bond Portfolio; Invest
ment Objective and Policies of
Paragon Power Value Growth
Portfolio; Investment Objec
tive and Policies of Paragon
Power Value Equity Income
Portfolio; Investment Objec
tive and Policies of Paragon
Power Gulf South Growth Port
folio; Organization and Shares
of the Portfolio; Permissible
Investments for the Portfo
lios; Investment Practices
Common to the Portfolios;
Investment Restrictions

5. Management of the Portfolio The Adviser, Administrator
and Distributor; Portfolio
Transactions; Organization and
Shares of the Portfolio

6. Capital Stock and Purchases and Redemptions;
Other Securities Distributions and Taxes;
Organization and Shares of the
Portfolios

7. Purchase of Securities Purchases and Redemptions
Being Offered

8. Redemption or Repurchase Purchases and Redemptions

9. Pending Legal Proceedings Not Applicable

</TABLE>
<PAGE>

<TABLE>
<CAPTION>
ITEM NUMBER IN PART B PROSPECTUS CAPTION
- --------------------- ------------------
<C> <S> <C>
10. Cover Page Cover Page

11. Table of Contents Table of Contents

12. General Information Organization and Capitaliza-
and History tion

13. Investment Objectives Investment Policies and Prac
and Policies tices of the Portfolios; In
vestment Restrictions

14. Management of the Portfolio Management

15. Control Persons and Management
Principal Holders of
Securities

16. Investment Advisory The Adviser, Administrator,
and Other Services Distributor and Transfer
Agent; Portfolio Transactions;
Custodian; Independent Accoun
tants

17. Brokerage Allocation Portfolio Transactions

18. Capital Stock and Organization and Capitaliza-
Other Securities tion; Shareholder and Trustee
Liability

19. Purchase, Redemption and Net Asset Value; Shareholder
Pricing of Securities Investment Account; Redemp
Being Offers tions

20. Tax Status Tax Information

21. Underwriters The Adviser, Administrator,
Distributor and Transfer Agent

22. Calculation of Calculation of Performance
Performance Data Quotations

23. Financial Statements Financial Statements

</TABLE>

This amendment is not intended to, and nothing set forth herein shall amend or
otherwise effect the Prospectus and Statement of Additional Information
currently in effect for each of the Paragon Treasury Money Market Fund, Paragon
Short-Term Government Fund, Paragon Intermediate-Term Bond Fund, Paragon
Louisiana Tax-Free Fund, Paragon Value Growth Fund, Paragon Value Equity Income
Fund and Paragon Gulf South Growth Fund.
<PAGE>

PARAGON PORTFOLIO
4900 Sears Tower
Chicago, Illinois 60606

Paragon Portfolio (the "Trust") is an open-end, management investment
company that offers a selection of managed investment portfolios, each with
its own investment objective and policies. The following four portfolios (the
"Portfolios") with the investment objectives set forth below are offered by
this Prospectus.

Paragon Power Intermediate-Term Bond Portfolio. A high level of current
income, consistent with prudent investment risk, by investment in a
diversified portfolio of investment grade fixed-income securities.

Paragon Power Value Growth Portfolio. Long-term capital growth and growth of
income while, as a secondary objective, providing a moderate level of current
income by investment in a diversified portfolio of equity securities that have
the potential for earnings growth.

Paragon Power Value Equity Income Portfolio. Capital growth and current
income by investment in a diversified portfolio of equity securities with low
price-earnings ratios.

Paragon Power Gulf South Growth Portfolio. Long-term capital growth by
investment in a non-diversified portfolio of equity securities of small
capitalization, emerging growth and medium capitalization companies which are
either headquartered in or whose primary market is in the southeastern region
of the United States.

Shares of each of the Portfolios are offered only to insurance company
separate accounts that fund certain variable contracts. The information
contained in this Prospectus should be read together with the prospectus for
the variable contracts.

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ADDITIONAL INFORMATION

Account and Sales Information......................(toll free) (800) 894-3719

This Prospectus provides you with information about the Trust and each of
the Portfolios that you should know before investing. It should be read and
retained for future reference. If you would like more detailed information,
the Statement of Additional Information relating to the Portfolios, dated July
31, 1995, as amended or supplemented from time to time, is available upon re-
quest without charge by calling the Goldman, Sachs & Co. telephone number
listed above or by writing Great Northern Insured Annuity Corporation, 5600
Two Union Square, Seattle, Washington 98101. The Statement of Additional In-
formation, which is incorporated by reference into this Prospectus, has been
filed with the Securities and Exchange Commission.

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

SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR EN-
DORSED BY, PREMIER BANK, N.A. OR ANY OTHER INSURED DEPOSITORY INSTITUTION AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RE-
SERVE BANK, OR ANY OTHER GOVERNMENT AGENCY. SHARES OF THE TRUST INVOLVE IN-
VESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The date of this Prospectus is July 31, 1995.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
An Introduction to Paragon Portfolio...................................... 3
Financial Highlights...................................................... 4
Investment Objective and Policies of Paragon Power Intermediate-Term Bond
Portfolio................................................................ 5
Investment Objective and Policies of Paragon Power Value Growth Portfolio. 5
Investment Objective and Policies of Paragon Power Value Equity Income
Portfolio................................................................ 6
Investment Objective and Policies of Paragon Power Gulf South Growth Port-
folio.................................................................... 6
Permissible Investments for the Portfolios................................ 7
Investment Practices Common to the Portfolios............................. 10
Investment Restrictions................................................... 12
Portfolio Transactions.................................................... 12
The Adviser, Administrator and Distributor................................ 13
Purchase and Redemptions.................................................. 14
Distributions and Taxes................................................... 15
Net Asset Value........................................................... 15
Performance and Yield Information......................................... 16
Organization and Shares of the Portfolios................................. 17
</TABLE>

2--Paragon Portfolio

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<PAGE>

AN INTRODUCTION TO PARAGON PORTFOLIO

Paragon Portfolio (the "Trust") is an open-end, management investment com-
pany registered under the Investment Company Act of 1940, as amended (the "In-
vestment Company Act"), that offers a diversified selection of managed invest-
ment portfolios, each with its own investment objective and policies. Premier
Investment Advisors, L.L.C. ("Premier") serves as the investment adviser to
Paragon Power Intermediate-Term Bond Portfolio, Paragon Power Value Growth
Portfolio, Paragon Power Value Equity Income Portfolio and Paragon Power Gulf
South Growth Portfolio (the "Portfolios"). Goldman Sachs Asset Management
("GSAM"), a separate operating division of Goldman, Sachs & Co. ("Goldman
Sachs"), serves as the Trust's administrator.

Shares of the Portfolios are offered only to insurance company separate ac-
counts that fund certain variable contracts (the "Contracts"). Separate ac-
counts may purchase or redeem shares at net asset value without any sales or
redemption charge. Fees and charges imposed by a separate account, however,
will affect the actual return to the holder of a Contract. A separate account
may also impose certain restrictions or limitations on the allocation of pur-
chase payments or Contract value to the Portfolios, and the Portfolios may not
be available in connection with a particular Contract. Prospective investors
should consult the applicable Contract prospectus for information regarding
fees and expenses of the Contract and separate account and any applicable re-
strictions or limitations.

Shares of the Portfolios are offered to separate accounts of Great Northern
Insured Annuity Corporation ("GNA") and its affiliates and may also be offered
to the separate accounts of unaffiliated insurance companies. Shares of the
Portfolios may serve as the underlying investments for both variable annuity
and variable life insurance contracts. In that event, certain conflicts may at
some point arise between variable annuity contract holders and variable life
insurance contract holders which could adversely affect the management of the
Portfolios. See "Purchase and Redemptions."

Premier is an indirect subsidiary of one of Louisiana's largest bank holding
companies. Goldman Sachs, which serves as the Trust's distributor, is one of
the largest international investment banking and brokerage firms in the United
States. State Street Bank and Trust Company is the Trust's transfer agent (the
"Transfer Agent").

None of the Portfolios alone constitutes a complete investment program.
There can be no assurance that the Portfolios will achieve their investment
objectives.

Paragon Portfolio--3

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<PAGE>

PARAGON PORTFOLIO

FINANCIAL HIGHLIGHTS

SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIOD ENDED MAY 31, 1995(a)
(UNAUDITED)

The following per share data and ratios for a share of beneficial interest
of each Portfolio outstanding throughout the period stated below are unau-
dited. This information should be read in conjunction with the financial
statements and related notes incorporated by reference and attached to the
Statement of Additional Information ("Additional Statement"). The Semiannual
Report also contains performance information (unaudited) and is available upon
request and without charge by writing to Goldman Sachs or GNA.

<TABLE>
<CAPTION>
DISTRIBUTIONS TO
INCOME FROM INVESTMENT OPERATIONS SHAREHOLDERS
------------------------------------ ------------------------
<CAPTION> TOTAL NET NET
NET ASSET NET REALIZED INCOME TOTAL INCREASE ASSET
VALUE, NET AND UNREALIZED FROM FROM NET DISTRIBUTIONS IN NET VALUE,
BEGINNING INVESTMENT GAIN ON INVESTMENT INVESTMENT TO ASSET END OF TOTAL
OF PERIOD INCOME INVESTMENTS(d) OPERATIONS INCOME SHAREHOLDERS VALUE PERIOD RETURN(b)
--------- ---------- -------------- ---------- ---------- ------------- -------- ------ ---------
PARAGON POWER INTERMEDIATE-TERM BOND PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Period ended: 5/31/95 $ 9.56 $0.25 $0.67 $0.92 $(0.25) $(0.25) $0.67 $10.23 9.69%

PARAGON POWER VALUE GROWTH PORTFOLIO
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Period ended: 5/31/95 13.56 0.12 1.03 1.15 (0.12) (0.12) 1.03 14.59 8.51

PARAGON POWER VALUE EQUITY INCOME PORTFOLIO
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Period ended: 5/31/95 11.35 0.12 1.46 1.58 (0.12) (0.12) 1.46 12.81 14.04

<CAPTION>
RATIOS ASSUMING
NO EXPENSE REIMBURSEMENTS
RATION ---------------------------
RATIO OF NET RATIO
OF NET INVESTMENT OF NET
EXPENSES INCOME NET ASSETS RATIO INVESTMENT
TO AVERAGE TO AVERAGE PORTFOLIO AT END OF EXPENSES INCOME (LOSS)
NET NET TURNOVER OF PERIOD TO AVERAGE TO AVERAGE
ASSETS(c) ASSETS(c) RATE (IN 000'S) NET ASSETS(c) NET ASSETS(c)
---------- ---------- --------- ---------- ------------- -------------
PARAGON POWER INTERMEDIATE-TERM BOND PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Period ended: 5/31/95 0.75% 6.65% 0% $1,434 4.89% 2.51%

PARAGON POWER GULF SOUTH GROWTH PORTFOLIO
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Period ended: 5/31/95 1.00 0.25 11 1,700 4.79 (3.54)
</TABLE>
(a) For the period from commencement of operations (January 13, 1995) to May
31, 1995.
(b) Assumes investment at the net asset value at inception (January 13, 1995),
reinvestment of all dividends and distributions and a complete redemption
of the investment at the net asset value at the end of the period.
(c) Annualized.
(d) Includes the balancing effect of calculating per share amounts.

4--Paragon Portfolio

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<PAGE>

INVESTMENT OBJECTIVE AND POLICIES OF PARAGON POWER INTERMEDIATE-TERM BOND
PORTFOLIO

The investment objective of Paragon Power Intermediate-Term Bond Portfolio
("Bond Portfolio") is to provide a high level of current income, consistent
with prudent investment risk, by investment in a diversified portfolio of in-
vestment grade fixed-income securities.

As a matter of fundamental policy, at least 65% of Bond Portfolio's total
assets will consist of investment grade bonds and debentures with a dollar-
weighted average portfolio maturity of three to ten years. Markets, securities
and maturities selected will be those that offer the greatest potential for
providing high current income without assuming undue risk. In making these se-
lections, Premier considers yield curves, interest rate expectations, techni-
cal aspects of the market, and spread relationships among various sectors of
the fixed-income securities markets. The proportion of Bond Portfolio's assets
invested in securities with particular characteristics (such as maturity, type
and coupon rate) may vary based on Premier's outlook for the economy, the fi-
nancial markets, and other factors.

Bond Portfolio may invest its assets in: (i) securities that are issued or
guaranteed as to principal and interest by the U.S. Government, its agencies,
authorities or instrumentalities, including mortgage-related securities,
("U.S. Government Securities"); (ii) U.S. dollar denominated debt securities
issued by foreign governments and their political subdivisions and other for-
eign issuers; (iii) foreign and domestic corporate debt securities, some of
which may involve equity features; (iv) asset-backed securities; and (v) obli-
gations of banks or savings and loan associations.

As a matter of nonfundamental policy, under normal market conditions, at
least 80% of the value of Bond Portfolio's total assets will be invested in
the fixed-income securities described above. For this purpose, Bond Portfolio
will consider convertible debt securities to be fixed-income securities. Bond
Portfolio intends to invest all of its assets in fixed-income securities.

Bond Portfolio will invest only in investment grade debt securities, which
are those rated Baa or higher by Moody's Investors Service Inc. ("Moody's") or
BBB or higher by Standard & Poor's Ratings Group ("S&P") or, if unrated, de-
termined by Premier to be of comparable quality. Securities rated Baa and BBB
may have speculative elements as well as investment grade characteristics. In
the event that the rating for any security held in the Bond Portfolio drops
below the minimal acceptable rating, such change will be considered by Premier
in evaluating the overall composition of the Bond Portfolio.

INVESTMENT OBJECTIVE AND POLICIES OF PARAGON POWER VALUE GROWTH PORTFOLIO

The investment objective of Paragon Power Value Growth Portfolio ("Growth
Portfolio ") is to seek long-term capital growth and growth of income while,
as a secondary objective, providing a moderate level of current income.

Growth Portfolio pursues its objectives by investing primarily in a diversi-
fied portfolio of common stocks, preferred stocks, convertible securities,
warrants and other equity securities of companies that show the potential for
growth of earnings over time. Stock selection is guided by current valuation
relative to a stock's historical valuation and relative to Premier's estimates
of future growth of earnings and dividends. Over the long term, continued
earnings growth tends to lead to both higher dividends and capital apprecia-
tion. Growth Portfolio expects to invest in securities currently paying a mod-
erate level of income, although it may invest in non-income producing securi-
ties when Premier considers their potential for growth of capital or future
income to be promising. Growth Portfolio diversifies its investments among
different industries and companies and changes its portfolio securities for
investment considerations and not for trading purposes.

In selecting portfolio securities for Growth Portfolio, Premier analyzes its
outlook for the economy and each economic sector over a 12 to 18 month period
and the relative attractiveness of the various securities markets and individ-
ual market sectors. Premier then selects securities within these sectors and
markets when it believes that a company's fundamental outlook as well as the
company's ability to

Paragon Portfolio_--5

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<PAGE>

achieve earnings growth are not sufficiently reflected in the market values of
the company's securities. Accordingly, Growth Portfolio may emphasize securi-
ties of companies that Premier believes are overlooked or undervalued by in-
vestors, which fact should contribute to an increase in the market value of
the security over time. Portfolio securities are generally sold when there is
a substantial reduction in Premier's forecast of the company's future earnings
potential or when the price of a security appreciates to such an extent that
it is believed to have realized Premier's appreciation goal. No effort is made
by Premier to time the market.

Growth Portfolio will ordinarily invest at least 80% of the value of its to-
tal assets in securities with the characteristics described above. Although
Growth Portfolio intends to invest all of its assets in such securities, up to
20% of its total assets may be held in cash or invested in U.S. Government Se-
curities, other investment grade fixed-income securities and cash equivalents.

INVESTMENT OBJECTIVE AND POLICIES OF PARAGON POWER VALUE EQUITY INCOME
PORTFOLIO

The investment objective of Paragon Power Value Equity Income Portfolio
("Equity Income Portfolio") is to seek capital growth and current income. Eq-
uity Income Portfolio pursues its objective by investing primarily in a diver-
sified portfolio of common stocks, preferred stocks, convertible securities,
warrants and other equity securities of companies which are, in Premier's
opinion, undervalued relative to their intrinsic value and to the stock market
in general due to an overly pessimistic appraisal by the marketplace. A low
price-earnings ratio is the dominant factor in the selection of investments
for Equity Income Portfolio. Equity Income Portfolio expects to maintain a
dividend yield equal to or in excess of the composite yield on the securities
comprising the Standard & Poor's Index of 500 Common Stocks.

Premier uses a disciplined approach in its review and selection of portfolio
securities for Equity Income Portfolio. To identify undervalued companies,
Premier first screens a broad universe of securities by systematically evalu-
ating such factors as historical earnings, dividend yield, market price rela-
tive to book value, earnings per share and financial strength. Premier then
ranks such securities according to price-earnings ratios using 18-month earn-
ings forecasts. Sophisticated computer technology is then used to identify
those securities which present the optimal combination of return and risk. At
least quarterly, the securities in Equity Income Portfolio are compared to
those securities identified by the computer at that time. If a security is be-
lieved to have reached a fully-valued position, it will, under most circum-
stances, be sold and replaced by securities which are deemed to be undervalued
in the marketplace in accordance with the foregoing analysis. No effort is
made by Premier to time the market.

As a matter of nonfundamental policy Equity Income Portfolio ordinarily will
invest at least 80% of the value of its total assets in securities with the
characteristics described above. Although Equity Income Portfolio intends to
invest all of its assets in such securities, up to 20% of its total assets may
be held in cash or invested in U.S. Government Securities, other investment
grade fixed-income securities and cash equivalents.

INVESTMENT OBJECTIVE AND POLICIES OF PARAGON POWER GULF SOUTH GROWTH PORTFOLIO

The investment objective of Paragon Power Gulf South Growth Portfolio ("Gulf
South Portfolio") is to seek long-term capital growth. Gulf South Portfolio
pursues its objective by investing primarily in a portfolio of common stocks,
preferred stocks, convertible securities, warrants and other equity securities
of small capitalization, emerging growth and medium capitalization growth com-
panies, which are either headquartered in or whose primary market is in the
southeastern region of the United States. In Premier's opinion, small to me-
dium capitalization companies in general and those located in the southeast in
particular will provide above average investment performance over the long
term as they grow and become more recognized by the investment community. Div-
idend income, if any, is a consideration incidental to Gulf South Portfolio's
objective of capital growth.

Premier anticipates that Gulf South Portfolio will normally consist of secu-
rities of approximately twenty to forty emerging growth companies from

6--Paragon Portfolio

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<PAGE>

Virginia, North Carolina, South Carolina, Florida, Georgia, Tennessee, Ala-
bama, Mississippi, Arkansas, Louisiana, Kentucky and Texas. In selecting port-
folio securities for Gulf South Portfolio, Premier analyzes emerging growth
companies whose securities have been analyzed by several regional brokerage
firms. Stock selection is guided by a company's earnings forecasts over a one
to two year period, as well as by its financial strength. In addition, on an
ongoing basis, Premier reviews a stock's current valuation relative to (1) the
entire stock market, (2) that of other companies in the same industry, and (3)
its recent and expected earnings growth rate. It is expected that companies
selected would generally have market capitalizations ranging from $50,000,000
to $2,000,000,000, though Gulf South Portfolio may occasionally hold securi-
ties of companies whose market capitalizations are considerably larger if do-
ing so contributes to Gulf South Portfolio's investment objective. Companies
selected would also be expected to show earnings growth over time that is well
above the growth rate of the overall economy and the rate of inflation.

Because Gulf South Portfolio is non-diversified, its share price may be sub-
ject to greater fluctuations as a result of changes in an issuer's financial
condition or the market's assessment of an individual issuer. In addition, in-
vesting in emerging growth companies involves greater risk than is customarily
associated with investments in more established companies. Emerging growth
companies often have limited product lines, markets, or financial resources,
and they may be dependent on fewer management resources. The securities of
emerging growth companies may have limited marketability and may be subject to
more abrupt or erratic market movements than securities of larger, more estab-
lished growth companies or the market averages in general. Shares of Gulf
South Portfolio, therefore, are subject to greater fluctuation in value than
shares of a growth fund which invests entirely in proven growth stocks. Gulf
South Portfolio is intended for investors who can bear the risk of losing a
portion or all of their investment.

As a matter of non-fundamental policy, Gulf South Portfolio will ordinarily
invest at least 75% of the value of its total assets in securities with the
characteristics described above. Although Gulf South Portfolio intends to in-
vest all of its assets in such securities, up to 25% of its total assets may
be held in cash or invested in U.S. Government Securities, other investment
grade fixed-income securities and cash equivalents, when Premier's assessment
of the attractiveness of the entire stock market and individual market sectors
changes.

PERMISSIBLE INVESTMENTS FOR THE PORTFOLIOS

CORPORATE DEBT SECURITIES

Each Portfolio may invest in certain types of corporate debt securities.
Corporate debt securities of both domestic and foreign issuers (denominated in
U.S. dollars) in which the Portfolios may invest include all types of long- or
short-term debt obligations, such as bonds, debentures, notes, and commercial
paper (including obligations secured by such instruments) and, in the case of
Growth Portfolio, Equity Income Portfolio and Gulf South Portfolio, preferred
and preference stock.

Corporate debt securities may bear fixed, fixed and contingent, or variable
rates of interest and may involve equity features, such as conversion or ex-
change rights or warrants for the acquisition of stock of the same or a dif-
ferent issuer; participations based on revenues, sales or profits; or the pur-
chase of common stock in a unit transaction (where corporate debt securities
and common stock are offered as a unit).

U.S. GOVERNMENT SECURITIES

Each Portfolio may invest in U.S. Government Securities in varying degrees.
U.S. Government Securities are obligations of, or guaranteed by, the U.S. Gov-
ernment, its agencies, authorities or instrumentalities. Some U.S. Government
Securities, such as Treasury bills, notes and bonds and Government National
Mortgage Association certificates (see below) are supported by the full faith
and credit of the United States; others, such as those of the Federal Home
Loan Banks, are supported by the right of the issuer to borrow from the Trea-
sury; others, such as those of the Federal Home Loan Mortgage Corporation are
supported only by the credit of the particular agency or instrumentality; and
still others, such as those of the Federal National Mortgage Association, are
supported by the discretionary authority of the U.S. Government to purchase
the agency's obligations. No assurance can be given that the U.S. Government
will provide financial support to U.S. Gov-

Paragon Portfolio_--7

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<PAGE>

ernment agencies or instrumentalities in the future. U.S. Government Secur-
ities may include certain government agency zero coupon bonds.

A Portfolio may also invest in separately traded principal and interest com-
ponents of securities guaranteed or issued by the U.S. Treasury if such compo-
nents are traded independently under the Separate Trading of Registered Inter-
est and Principal of Securities program ("STRIPS").

CUSTODIAL RECEIPTS

Although they are not considered obligations of the U.S. Government for cer-
tain purposes, a Portfolio may acquire securities issued or guaranteed as to
principal and interest by the U.S. Government in the form of custodial re-
ceipts that evidence ownership of future interest payments, principal payments
or both on certain U.S. Treasury notes or bonds.

MORTGAGE-RELATED SECURITIES

Each Portfolio may invest in mortgage-related securities. Mortgage pass-
through securities are securities representing interests in "pools" of resid-
ential mortgage loans. Monthly payments of interest and principal by the indi-
vidual borrowers on the mortgages are passed through to the holders of the se-
curities (net of fees paid to the issuer or guarantor of the securities). The
maturities of mortgage-related securities are variable and unknown when issued
because their maturities depend on prepayment rates. Early repayment of prin-
cipal on mortgage pass-through securities may expose a Portfolio to a lower
rate of return upon reinvestment and, if such security was purchased at a pre-
mium, a loss of the value of the premium which may increase the volatility of
such investments relative to similarly rated debt securities. Mortgage prepay-
ments generally increase with falling interest rates and decrease with rising
interest rates. During periods of rising interest rates, reduced prepayment
rates may extend the average life of mortgage-related securities and increase
a Portfolio's exposure to rising interest rates. As a result, there may be
significant depreciation in the value of certain mortgage-backed securities.
Conversely, during periods of declining interest rates and increased prepay-
ment rates, the value of some mortgage-related securities may decline or may
appreciate less than that of other fixed-income securities. In addition, de-
clining interest rates may impair a Portfolio's ability to reinvest the pro-
ceeds of early principal prepayments at comparable yields.

Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by
the full faith and credit of the U.S. Government (in the case of securities
guaranteed by the Government National Mortgage Association ("GNMA")); or guar-
anteed by agencies or instrumentalities of the U.S. Government (in the case of
securities guaranteed by the Federal National Mortgage Association ("FNMA") or
the Federal Home Loan Mortgage Corporation ("FHLMC"), which are supported only
by the discretionary authority of the U.S. Government to purchase the agency's
obligations). Under certain interest rate and prepayment scenarios, a Portfo-
lio may fail to recoup fully its investment in mortgage-related securities
notwithstanding a direct or indirect governmental or agency guarantee. Mort-
gage pass-through securities created by non-governmental issuers may be sup-
ported by various forms of insurance or guarantees which may be issued by gov-
ernmental or private entities.

Collateralized Mortgage Obligations ("CMOs") are hybrid instruments with
characteristics of both mortgage-backed bonds and mortgage pass-through secu-
rities. As with a bond, interest and pre-paid principal on a CMO are paid, in
most cases, semi-annually. CMOs are usually collateralized by portfolios of
mortgage pass-through securities guaranteed by GNMA, FHLMC, or FNMA but may be
collateralized by whole mortgage loans or private mortgage pass-through secu-
rities. Interests in CMOs are structured as classes of securities with differ-
ent maturities. Under a common structure, monthly payments of principal, in-
cluding prepayments, are first made to investors holding the shortest maturity
class; investors holding the longer maturity classes receive principal pay-
ments only after the first class has been retired.

Real Estate Mortgage Investment Conduits ("REMICs") are CMO vehicles that
qualify for special tax treatment under the Internal Revenue Code and invest
in mortgages principally secured by interests in real property and other in-
vestments permitted by the Internal Revenue Code. No Portfolio will invest
more than 5% of its total assets in REMICs.

Bond Portfolio may also invest in asset-backed securities, which represent
participations in, or are

8--Paragon Portfolio

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<PAGE>

secured by and payable from, pools of assets such as motor vehicle installment
sale contracts, installment loan contracts, leases of various types of real
and personal property, receivables from revolving credit (credit card) agree-
ments and other categories of receivables. Such asset pools are securitized
through the use of privately-formed trusts or special purpose corporations.
Payments or distributions of principal and interest may be guaranteed up to
certain amounts and for a certain time period by a letter of credit or a pool
insurance policy issued by a financial institution unaffiliated with the trust
or corporation, or other credit enhancements may be present. Asset-backed se-
curities present certain risks that are not presented by mortgage-related se-
curities because asset-backed securities generally do not have the benefit of
a security interest in collateral that is comparable to mortgage assets.

A Portfolio may invest in new types of mortgage-related securities and in
other asset-backed securities that may be developed in the future to the ex-
tent consistent with its investment objective and policies and approved by the
Trust's Board of Trustees.

RISKS ASSOCIATED WITH DERIVATIVE MORTGAGE-BACKED AND FLOATING RATE SECURITIES

Derivative mortgage-backed securities are subject to different combinations
of interest rate and/or prepayment risks. In addition, particular derivative
securities may be leveraged such that their exposure (i.e., price sensitivity)
to interest rate and/or prepayment risks is magnified. A Portfolio may acquire
derivative mortgage-backed securities and other derivative securities to the
extent consistent with the Portfolio's investment objective and for various
purposes, including adjusting the average duration of interest rate sensitiv-
ity of the Portfolio or attempting to enhance the Portfolio's total return.
The Investment Adviser manages the risks and benefits of derivative securities
through prudent analysis, selection and monitoring of each Portfolio's invest-
ments in these securities.

FOREIGN SECURITIES

Bond Portfolio may invest in securities of foreign issuers denominated in
U.S. dollars. Growth Portfolio and Equity Income Portfolio may invest in secu-
rities of foreign issuers in the form of American Depository Receipts
("ADRs"). ADRs are receipts issued by a U.S. bank or trust company which evi-
dence ownership of underlying securities of foreign corporations. Investment
in foreign securities may present a greater degree of risk than investment in
domestic securities because of the possibility of less publicly-available fi-
nancial and other information, more volatile and less liquid markets, less se-
curities regulation, higher brokerage costs, imposition of foreign withholding
and other taxes, war, expropriation or other adverse governmental actions.

INTEREST RATE AND MARKET RISK FACTORS

Since shares of a Portfolio represent an investment in securities with fluc-
tuating market prices, the net asset value per share of each Portfolio and the
value of a shareholder's holdings will vary as the aggregate value of a Fund's
portfolio securities increases or decreases. The dividends paid by each Port-
folio will increase or decrease in relation to the income received from its
investments and the expenses incurred by the Portfolio.

The net asset value of Bond Portfolio generally will change as the general
levels of interest rates fluctuate. During periods of falling interest rates,
the market value of fixed-income securities generally rises, and conversely,
during periods of rising interest rates, the market value of fixed-income se-
curities generally declines. The magnitude of the fluctuation is generally
greater for securities with longer maturities and durations. Market values of
fixed-income securities are also affected by general economic conditions,
business conditions affecting the issuer or the industry in which it competes,
and changes by rating agencies in their ratings of a fixed-income security.
The market value of different types of fixed-income securities varies in re-
sponse to the foregoing factors affecting market values.

TEMPORARY DEFENSIVE INVESTMENTS

When Premier believes that investment for defensive purposes is appropriate,
part or all of a Portfolio's assets may be temporarily invested in cash or
cash equivalent short-term obligations including, but not limited to, certifi-
cates of deposit, commercial paper, notes, U.S. Government Securities, foreign
government securities (if permitted) and repurchase agreements. Under such
circumstance or in order to invest uninvested cash balances, the Portfolios
may

Paragon Portfolio_-- 9

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<PAGE>

also invest in securities issued by other investment companies that invest
primarily in high quality, short-term money market instruments and which de-
termine their net asset value per share based on the amortized cost valuation
and/or penny rounding pricing methods. The amount of a Portfolio's investments
in securities of other investment companies will be subject to the limitations
on such investments prescribed by the Investment Company Act. These limits in-
clude a prohibition on a Portfolio acquiring more than 3% of the voting shares
of any other fund, and investing more than 5% of its assets in securities of
any one fund or more than 10% of its assets in securities of all funds. A Fund
will indirectly bear its proportionate share of any management fees paid by
investment companies in which it invests in addition to the advisory fee paid
by the Portfolio.

INVESTMENT PRACTICES COMMON TO THE PORTFOLIOS

REPURCHASE AGREEMENTS

Each Portfolio may enter into repurchase agreements with selected broker-
dealers, banks or other financial institutions. A repurchase agreement is an
agreement under which a Portfolio purchases securities and the seller agrees
to repurchase the securities within a particular time at a specified price.
Such price will exceed the original purchase price, the difference being in-
come to the Portfolio, and will be unrelated to the interest rate on the pur-
chased security. The Trust's custodian or subcustodian will maintain custody
of the purchased securities for the duration of the agreement. At the time the
Portfolio enters into a repurchase agreement the value of the purchased secur-
ities, including accrued interest, will be equal to or exceed the value of the
repurchase agreement including accrued interest. For purposes of the Invest-
ment Company Act, a repurchase agreement is deemed to be a loan from the Port-
folio to the seller. In the event of bankruptcy of the seller or failure of
the seller to repurchase the securities as agreed, the Portfolio could suffer
losses, including loss of interest on or principal of the security and costs
associated with delay and enforcement of the repurchase agreement. In evaluat-
ing whether to enter into a repurchase agreement, the Adviser will carefully
consider the creditworthiness of the seller pursuant to procedures reviewed
and approved by the Trustees.

ZERO COUPON AND DEFERRED INTEREST BONDS

Each Portfolio may purchase zero coupon bonds and deferred interest bonds.
Zero coupon and deferred interest bonds are issued at a significant discount
from face value. The discount approximates the total amount of interest the
bonds would accrue and compound over the period until maturity or the first
interest payment date at a rate of interest reflecting market rate at the time
of issuance. Zero coupon bonds do not require the periodic payment of inter-
est. Deferred interest bonds provide for a period of delay before regular pay-
ment of interest begins. The market value of such investments fluctuates more
in response to interest rate changes and, accordingly, is subject to greater
market volatility than the value of debt obligations which require regular
cash payments of interest. If it holds zero coupon bonds or deferred interest
bonds in its portfolio, however, a Portfolio would recognize income currently
in the amount of the unpaid, accrued interest and would be required in order
to avoid Federal taxes on undistributed amounts to distribute such income to
shareholders from cash from other sources, including the proceeds of sales of
portfolio securities or the proceeds of Portfolio shares sold, even though
cash representing such income would not have been received by the Portfolio.
To the extent that a Portfolio is required to use the proceeds from the sale
of portfolio securities or Portfolio shares to pay such distributions, it may
forego the opportunity to invest such funds in additional income producing se-
curities. This may ultimately result in a reduction in the income earned and
distributed by the Portfolio.

FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES

Each Portfolio may purchase when-issued securities, i.e. make contracts to
purchase securities for a fixed price at a future date beyond customary set-
tlement time. A Portfolio is required to hold and maintain in a segregated ac-
count until the settlement date of such purchases, cash or liquid, high-grade
debt obligations in an amount sufficient to meet the purchase price. Alterna-
tively, the Portfolio may enter into offsetting contracts for the forward sale
of other securities that it owns. The purchase of securities on a when-issued
or forward commitment basis involves a risk of loss if the value of the secu-
rity to be purchased declines prior to the settlement date. Although a Portfo-
lio would generally purchase securities on a when-issued or forward commitment
basis with the

10--Paragon Portfolio

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<PAGE>

intention of acquiring securities for its portfolio, the Portfolio may dispose
of a when-issued security or forward commitment prior to settlement if Premier
deems it appropriate to do so.

OPTIONS ON SECURITIES

Writing Covered Options. Each Portfolio may each write (sell) exchange
traded covered call and put options on any securities in which it may invest.
A call option written by a Portfolio obligates the Portfolio to sell specified
securities to the holder of the option at a specified price if the option is
exercised at any time before the expiration date. All call options written by
a Portfolio are covered, which means that the Portfolio will own the securi-
ties subject to the option for such period as the option is outstanding. The
purpose of writing covered call options is for the Portfolio to realize
greater income than would be realized on portfolio securities transactions
alone. However, the Portfolio may forego the opportunity to profit from an in-
crease in the market price of the underlying security.

A put option written by a Portfolio would obligate the Portfolio to purchase
specified securities from the option holder at a specified price if the option
is exercised at any time before the expiration date. All put options written
by a Portfolio would be covered, which means that the Portfolio would have de-
posited with its custodian cash or liquid, high-grade debt obligations with a
value at least equal to the exercise price of the put option. The purpose of
writing such options is to generate additional income for the Portfolio. How-
ever, in return for the option premium, the Portfolio accepts the risk that it
will be required to purchase the underlying securities at a price in excess of
the securities' market value at the time of purchase.

A Portfolio may terminate its obligations under an exchange traded call or
put option at any time prior to its exercise by purchasing an option identical
to the one it has written. Such purchases are referred to as "closing purchase
transactions."

Purchasing Options. Each Portfolio may purchase put and call options on any
securities in which it may invest. A Portfolio would also be able to enter
into closing sale transactions in order to realize gains or minimize losses on
options it had purchased.

A Portfolio would normally purchase call options in anticipation of an in-
crease in the market value of securities of the type in which it may invest.
The purchase of a call option would entitle the Portfolio, in return for the
premium paid, to purchase specified securities at a specified price during the
option period. The Portfolio would ordinarily realize a gain if, during the
option period, the value of such securities exceeded the sum of the exercise
price, the premium paid and transaction costs; otherwise the Portfolio would
realize a loss on the purchase of the call option.

A Portfolio would normally purchase put options in anticipation of a decline
in the market value of securities in its portfolio ("protective puts") or in
securities in which it may invest. The purchase of a put option would entitle
the Portfolio, in exchange for the premium paid, to sell specified securities
at a specified price during the option period. The purchase of protective puts
is designed to offset or hedge against a decline in the market value of the
Fund's portfolio securities. Put options may also be purchased by a Portfolio
for the purpose of affirmatively benefiting from a decline in the price of se-
curities which it does not own. A Portfolio would ordinarily realize a gain
if, during the option period, the value of the underlying securities decreased
below the exercise price sufficiently to cover the premium and transaction
costs; otherwise the Portfolio would realize a loss on the purchase of the put
option. Gains and losses on the purchase of protective put options would tend
to be offset by countervailing changes in the value of underlying portfolio
securities.

Risks Associated With Options Transactions. There is no assurance that a
liquid secondary market on an options exchange will exist for any particular
option or at any particular time. If a Portfolio is unable to effect a closing
purchase transaction with respect to covered options it has written, the Port-
folio will not be able to sell the underlying securities or dispose of assets
held in a segregated account until the options expire or are exercised. Simi-
larly, if a Portfolio is unable to effect a closing sale transaction with re-
spect to options it has purchased, it would have to exercise the options in
order to realize any profit and will incur transaction costs upon the purchase
or sale of underlying securities.

A Portfolio may purchase and sell only options which are traded on United
States exchanges.

The writing and purchase of options is a highly specialized activity which
involves investment tech-

Paragon Portfolio_--11

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<PAGE>

niques and risks different from those associated with ordinary portfolio secu-
rities transactions. The successful use of protective puts for hedging pur-
poses depends in part on Premier's ability to predict future price fluctua-
tions and the degree of correlation between the options and securities mar-
kets.

LENDING OF PORTFOLIO SECURITIES

Each Portfolio may also seek to increase its income by lending portfolio se-
curities provided that the value of the securities loaned would not exceed
one-third of the value of the total assets of each Portfolio. Under present
regulatory policies, such loans may be made to institutions, such as broker-
dealers, and are required to be secured continuously by collateral in cash,
cash equivalents, or U.S. Government Securities maintained on a current basis
at an amount at least equal to the market value of the securities loaned. Cash
collateral may be invested in short-term debt securities. A Portfolio may ex-
perience loss or delay in the recovery of its securities if the institution
with which it has engaged in a portfolio loan transaction breaches its agree-
ment with such Portfolio.

RESTRICTED AND ILLIQUID SECURITIES

Each Portfolio may purchase securities that are not registered ("restricted
securities") under the Securities Act of 1933 ("1933 Act"), including securi-
ties offered and sold to "qualified institutional buyers" under Rule 144A un-
der the 1933 Act. However, each Portfolio will not invest more than 15% of its
net assets (taken at market value) in illiquid investments, which include cer-
tain repurchase agreements maturing in more than seven days, securities that
are not readily marketable and restricted securities, unless the Board of
Trustees determines, based upon a continuing review of the trading markets for
the specific restricted security, that such restricted securities are liquid.
The Board of Trustees has adopted guidelines and delegated to Premier the
daily function of determining and monitoring liquidity of restricted securi-
ties. The Board, however, will retain sufficient oversight, focusing on fac-
tors such as valuation, liquidity and availability of information and is ulti-
mately responsible for each determination. Investing in restricted securities
eligible for resale pursuant to Rule 144A could have the effect of increasing
the level of illiquidity in a Portfolio to the extent that qualified institu-
tional buyers become for a time uninterested in purchasing these restricted
securities. The purchase price and subsequent valuation of restricted and il-
liquid securities normally reflect a discount, which may be significant from
the market price of comparable securities for which a liquid market exists.

INVESTMENT RESTRICTIONS

The Trust, on behalf of each Portfolio, has adopted certain fundamental in-
vestment restrictions which are enumerated in detail in the Statement of Addi-
tional Information and which may not be changed with respect to any Portfolio
unless authorized by the holders of a majority of outstanding securities of
that Portfolio. Among other restrictions, a Portfolio may not, with respect to
75% (50% in the case of Gulf South Portfolio) of its total assets taken at
market value, invest more than 5% of its total assets in the securities of any
one issuer (except U.S. Government Securities) or acquire more than 10% of any
class of the outstanding voting securities of any one issuer. In addition, no
Portfolio may invest more than 25% of its total assets in any one industry,
except that for purposes of this limitation, the issuers of U.S. Government
Securities are not considered to be part of any industry. In addition, each
Portfolio may borrow money from banks only for temporary or emergency purposes
in an aggregate amount not exceeding one-third of the value of its total as-
sets, and a Portfolio may not pledge more than 15% of its total assets in con-
nection with such borrowings. A Portfolio may not purchase securities while
such borrowings exceed 5% of the value of the Portfolio's assets. Except for
such enumerated restrictions and as otherwise indicated in this Prospectus,
the investment objectives and policies of each Portfolio are not fundamental
policies and accordingly may be changed by the Trust's Board of Trustees with-
out obtaining the approval of the shareholders.

PORTFOLIO TRANSACTIONS

Premier is responsible for selecting brokers and dealers to effect portfolio
securities transactions and for negotiating brokerage commissions and dealers'
charges. Fixed-income securities are generally traded in the over-the-counter
market on a net basis with dealers acting as principal for their own accounts
without a stated commission.

12--Paragon Portfolio

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<PAGE>

The primary consideration in selecting broker-dealers to execute portfolio
security transactions is the execution of such portfolio transactions at the
most favorable prices. Subject to this requirement, securities may be bought
from or sold to brokers who have furnished statistical, research and other in-
formation or services to Premier. Higher commissions may be paid to brokers
that provide research services. Goldman Sachs and Premier Securities Corpora-
tion, an affiliate of Premier, may each act as a broker for the Trust in ac-
cordance with applicable rules of the Securities and Exchange Commission
("SEC") and the restrictions of the Glass-Steagall Act on the activities of
broker-dealer subsidiaries of national banks.

PORTFOLIO TURNOVER

Although none of the Portfolios invests for short-term profits, securities
in a portfolio will be sold whenever Premier believes it is appropriate to do
so without regard to the length of time the particular security may have been
held. This policy is subject to certain requirements for qualification as a
regulated investment company for Federal income tax purposes. A higher portfo-
lio turnover rate involves greater expenses to a Portfolio and may increase
the possibility of shareholders receiving taxable distributions.

THE ADVISER, ADMINISTRATOR AND DISTRIBUTOR

THE ADVISER

Premier, 451 Florida Street, Baton Rouge, Louisiana, acts as investment ad-
viser to the Portfolios. Premier is a registered investment adviser, a subsid-
iary of Premier Bank, N.A., and an indirect subsidiary of Premier Bancorp,
Inc., one of the largest bank holding companies in Louisiana. Prior to its in-
corporation in 1985, Premier was the Investment Department of the Trust Divi-
sion of Louisiana National Bank of Baton Rouge (Premier Bank's predecessor),
the flagship bank of the holding company. In addition to managing the assets
of the Portfolios, Premier also manages approximately another $700 million in
assets for other portfolios of the Trust, tax-exempt organizations, pension
plans, other employee benefit plans, foundations, endowments and personal
trusts as of December 31, 1994.

The portfolio managers for the Portfolios are Donald E. Allred, Richard L.
Chauvin, Jr. and Keith W. Mooney.

Mr. Allred joined Louisiana National Bank (Premier Bank's predecessor) in
1965 where his employment has been exclusively in trust business activities,
serving as Senior Investment Manager of that institution since 1979. Upon for-
mation of Premier Investment Advisers, Inc. ("PIA") in 1985, he assumed the
duties of Chief Investment Officer. Mr. Allred was manager of Premier Bank's
Value Growth and Gulf South strategies at the time of conversion of certain
trust assets into portfolios of the Trust. Mr. Chauvin joined Louisiana Na-
tional Bank (Premier Bank's predecessor) in 1978. He joined the bank's trust
division in 1982 as portfolio manager. He joined PIA Inc. in 1986 as a portfo-
lio manager. Mr. Mooney joined Premier in September, 1990 as a Fixed Income
Portfolio Manager. Prior to that he joined Louisiana National Bank in 1980 in
the Management Training Program.

Under each Portfolio's Investment Advisory Agreement, Premier continually
manages the Portfolios, including the purchase, retention and disposition of
its securities and other assets. The management of each Portfolio is subject
to the supervision of the Trust's Board of Trustees and the Portfolio's in-
vestment policies. For these services and facilities, each Portfolio pays to
Premier a monthly fee at an annual rate of the Portfolio's average daily net
assets as follows:

<TABLE>
<CAPTION>
RATE PAID
FOR THE
STATED PERIOD ENDED
ANNUAL RATE MAY 31, 1995
----------- ------------
<S> <C> <C>
Bond Portfolio .50% .50%
Growth Portfolio .65% .65%
Equity Income Portfolio .65% .65%
Gulf South Portfolio .65% .65%
</TABLE>

The Adviser has voluntarily agreed to reimburse expenses (excluding inter-
est, taxes and extraordinary expenses) to the extent that such expenses ex-
ceed, on an annualized basis, .75%, 1.00%, 1.00% and 1.00% for the Bond Port-
folio, Growth Portfolio, Equity Income Portfolio and Gulf South Portfolio, re-
spectively.

Each Portfolio is responsible for all expenses other than those expressly
borne by Premier under the Portfolio's Investment Advisory Agreement. These
expenses include each Portfolio's investment advisory and administration fees,
shareholder service expenses, expenses of issuing reports to shareholders, its
proportionate share of custodian fees, registration fees under Federal and
state securities laws, legal fees, auditing and tax return preparation fees,
taxes, Trustees' fees and other expenses of adminis-

Paragon Portfolio_--13

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<PAGE>

tering the Portfolio. In the event that the expenses of a Portfolio (including
the fees of Premier, but excluding interest, taxes, litigation and indemnifi-
cation expenses and other extraordinary expenses) for any fiscal year exceed
the limits set by certain state securities administrators, the investment ad-
visory fee payable on behalf of such Portfolio will be reduced by the amount
of such excess to the extent of each Portfolio's respective fee. Fee reduc-
tions on account of any excess amounts will be made on a monthly basis.

THE ADMINISTRATOR

GSAM is the Administrator for the Portfolios. Under the Administration
Agreement of the Trust, GSAM administers the Trust's business affairs, subject
to the supervision of the Board of Trustees, and in connection therewith fur-
nishes the Trust with office facilities and is responsible for ordinary cleri-
cal, recordkeeping and bookkeeping services required to be maintained by the
Trust (excluding those maintained by the Trust's custodian, Transfer Agent or
Adviser), preparation and filing of documents required to comply with Federal
and state securities laws, supervising the activities of the Trust's custodian
and Transfer Agent, providing assistance in connection with meetings of the
Board of Trustees and shareholders and other administrative services necessary
to conduct the Trust's business. For these services and facilities, each Port-
folio pays to GSAM a monthly fee at an annual rate of the Portfolio's average
daily net assets as follows:

<TABLE>
<CAPTION>
RATE PAID
FOR THE
STATED PERIOD ENDED
ANNUAL RATE MAY 31, 1995
----------- ------------
<S> <C> <C>
Bond Portfolio .15% .15%
Growth Portfolio .15% .15%
Equity Income Portfolio .15% .15%
Gulf South Portfolio .15% .15%
</TABLE>

THE DISTRIBUTOR

Goldman Sachs serves as the Distributor of shares of the Portfolios pursuant
to a Distribution Agreement with the Trust.

PURCHASE AND REDEMPTIONS

Shares of each Portfolio are offered only to the insurance company separate
accounts that fund the Contracts, and may at any time be offered to other sep-
arate accounts of GNA or any of its affiliates or any other insurance company
approved by the Trustees. Shares of each Portfolio may be purchased and re-
deemed by the separate accounts without any sales charge at net asset value.
Goldman Sachs serves as distributor for each Portfolio. The Contracts are de-
scribed in the separate prospectuses issued by GNA or its affiliates and any
other insurance company which has established separate accounts that invest in
the Portfolios.

Purchase and redemption orders will be processed at the net asset value next
determined after such order has been received in proper form by the transfer
agent. See "Net Asset Value." Orders to purchase or redeem each Portfolio's
shares must be received by the transfer agent before the close of regular
trading on the New York Stock Exchange in order to receive that day's net as-
set value. Proceeds from redemption orders will be wired to the insurance com-
pany on or before the seventh day following the request for redemption. Under
unusual circumstances, a Portfolio may suspend redemptions or postpone payment
of redemption proceeds, as permitted by applicable law. Each Portfolio re-
serves the right to suspend the offering of shares for a period of time. Each
Portfolio also reserves the right to reject any specific purchase order.

Due to differences in tax treatment or other considerations, the interests
of various Contract owners might at some time be in conflict. The Trust cur-
rently does not foresee any such conflict. If such a conflict were to occur,
one or more insurance companies' separate accounts might be required to with-
draw their investments in a Portfolio. This might force such Portfolio to sell
securities at disadvantageous prices or otherwise adversely affect such Port-
folio.

Within the limitations set forth in the appropriate Contract,
Contractholders may direct through GNA or any other insurance company which
has established separate accounts which invests in the Portfolios, the alloca-
tion of amounts available for investment under their Contracts among the Port-
folios. Instructions for any such allocation, or the purchase or redemption of
the shares of any Portfolio, must be made through the insurance company as the
record holder of the Portfolio's shares. The rights of the insurance company
as the record holder of shares of a Portfolio are different from the rights of
a Contractholder. The term "shareholder" in this Pro-

14--Paragon Portfolio

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<PAGE>

spectus refers to the insurance company and not to the Contractholder.

DISTRIBUTIONS AND TAXES

DISTRIBUTIONS

Bond Portfolio will declare a dividend of its net investment income daily
and distribute such dividend on or about the last calendar day of the month.
All or substantially all long-term and short-term capital gains in excess of
available capital losses, if any, of Bond Portfolio will be distributed at
least annually.

Each of Growth Portfolio and Equity Income Portfolio will typically declare
and distribute a dividend of its net investment income on or about the last
calendar day of every month and will distribute all long-term and short-term
capital gains in excess of available capital losses, if any, at least annual-
ly. Gulf South Portfolio will typically declare and distribute a dividend of
its net investment income semi-annually and will distribute all long-term and
short-term capital gains in excess of available capital losses, if any, at
least annually.

Dividends and distributions from a Portfolio will automatically be rein-
vested in additional shares of such Portfolio.

FEDERAL TAXES

Each Portfolio is treated as a separate entity for tax purposes, and intends
to elect to be treated as a regulated investment company under Subchapter M of
the Code and to qualify for such treatment for each taxable year. To qualify
as such, each Portfolio must satisfy certain requirements relating to the
sources of its income, diversification of its assets and distribution of its
income to shareholders. As a regulated investment company, a Portfolio will
not be subject to Federal income tax on any net investment income and net re-
alized capital gains that are distributed to its shareholders in accordance
with certain timing requirements of the Code.

Shares of each Portfolio are offered only to insurance company separate ac-
counts that fund variable annuity and variable life insurance contracts. Under
the Code, no tax is imposed on an insurance company with respect to income of
a qualifying separate account properly allocable to certain specified reserve
items. See the applicable Contract prospectus for a discussion of the Federal
income tax status of (1) the separate accounts that purchase and hold shares
of a Portfolio and (2) the holders of Contracts funded through those accounts.

Each Portfolio intends to comply with the diversification requirements im-
posed by Section 817(h) of the Code and the regulations thereunder. These re-
quirements, which are in addition to the diversification requirements imposed
on a Portfolio by the Investment Company Act and Subchapter M of the Code,
place certain limitations on the assets of each separate account. Because Sec-
tion 817(h) and those regulations treat the assets of the Portfolio as assets
of the related separate account, these limitations also restrict the percent-
age of assets of a Portfolio that may be invested in securities of a single
issuer. Specifically, the regulations provide that, except as permitted by the
"safe harbor" described below, as of the end of each calendar quarter or
within 30 days thereafter no more than 55% of the value of the total assets of
a Portfolio may be represented by any one investment, no more than 70% by any
two investments, no more than 80% by any three investments and no more than
90% by any four investments. For this purpose, all securities of the same is-
suer are considered a single investment, but each U.S. government agency or
instrumentality is considered a separate issuer. Section 817(h) provides, as a
safe harbor, that a separate account is treated as being adequately diversi-
fied if the diversification requirements under Subchapter M are satisfied and
no more than 55% of the value of the account's total assets are cash and cash
items (including receivables), U.S. government securities and securities of
other regulated investment companies. Failure by a Portfolio to satisfy the
Section 817(h) requirements would, unless the failure is inadvertent and cer-
tain other conditions are satisfied, result in treatment of the Contract hold-
ers other than as described in the applicable Contract prospectus, including
inclusion in ordinary income of income accrued under the Contracts for the
current and all prior taxable years. Any such failure may also result in ad-
verse tax consequences for the investment company issuing the Contracts.

NET ASSET VALUE

The net asset value of shares of each Portfolio is determined at the close
of regular trading on the New

Paragon Portfolio_--15

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<PAGE>

York Stock Exchange (normally 3:00 p.m. Louisiana time, 4:00 p.m. New York
time) on each Business Day.

For purposes of determining net asset value per share, equity securities
traded on a national securities exchange or the Nasdaq National Market
("NASDAQ") are valued at their last sale price on the principal exchange on
which they are traded or NASDAQ (if NASDAQ is the principal market for such
securities) on the valuation day or, if no sale occurs, at the mean between
the closing bid and asked price. Unlisted equity securities for which market
quotations are available are valued at the mean between the most recent bid
and asked prices.

Fixed-income securities will be valued at prices supplied by a pricing agent
selected by the Trustees, which prices reflect broker/dealer-supplied valua-
tions and electronic data processing techniques. Short-term obligations matur-
ing in sixty days or less are valued at amortized cost. Other assets and as-
sets whose market value does not, in Premier's opinion, reflect fair value are
valued at fair value using methods determined in good faith by the Board of
Trustees.

PERFORMANCE AND YIELD INFORMATION

From time to time a Portfolio may publish its average annual total return
and/or yield in advertisements and communications to shareholders. A Portfo-
lio's average annual total return is determined by computing the average an-
nual percentage change in value of a $1,000 investment. All calculations as-
sume the reinvestment of all dividends and distributions at net asset value.
The total return calculation assumes a complete redemption of the investment
at the end of the relevant period.

A Portfolio may also from time to time advertise total return on a cumula-
tive, average, year-by-year or other basis for various specified periods by
means of quotations, charts, graphs or schedules. In addition, a Portfolio may
furnish total return calculations based on investments at various sales charge
levels imposed on investments in the variable annuity or at net asset value.
In addition to the above, a Portfolio may from time to time advertise its per-
formance relative to certain performance rankings and indices.

The yield of a Portfolio will be calculated by dividing the net investment
income during a recent 30-day period by the product of the average daily num-
ber of shares outstanding and entitled to receive dividends and the maximum
public offering price (net asset value) per share on the last day of the rele-
vant period. The results are compounded on a bond equivalent (semi-annual) ba-
sis and then annualized.

Investors should note that the investment results of a Portfolio are based
on historical performance and will fluctuate over time. The value of a Portfo-
lio's shares, when redeemed, may be more or less than their original cost. Any
presentation of a Portfolio's yield, effective yield or total return for any
prior period should not be considered a representation of what an investment
may earn or what a Portfolio's yield, effective yield or total return may be
in any future period.

Any Portfolio performance information presented will also include perfor-
mance information for the insurance company separate accounts that fund Con-
tracts investing in the Portfolios, which will take into account insurance-re-
lated charges and expenses under such contracts.

Additional performance information will also be contained in the Annual Re-
port of each Portfolio, which may be obtained by contacting the Trust at (800)
894-3719. See "Performance Information" in the Statement of Additional Infor-
mation.

From time to time any Portfolio may publish an indication of its past per-
formance (including investment standings and rankings) as measured by indepen-
dent sources such as Lipper Analytical Services, Incorporated, Weisenberger
Investment Companies Service, IBC Donoghue's Money Fund Report, Barron's,
Business Week, Changing Times, Financial World, Forbes, Money, Personal In-
vestor, Sylvia Porter's Personal Finance, and The Wall Street Journal. The
Portfolios may also advertise information which has been provided to the NASD
for publication in regional and local newspapers.

16--Paragon Portfolio

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<PAGE>

ORGANIZATION AND SHARES OF THE PORTFOLIOS

The Trust was formed as a business trust under the laws of The Commonwealth
of Massachusetts on October 2, 1989. The Trustees of the Trust are responsible
for the overall management and supervision of its affairs. As of the date
hereof, the Trustees have established eleven series of the Trust, including
the Portfolios described in this Prospectus. The other series of the Trust are
not available through the Contracts. Shares entitle their holders to one vote
per share, are freely transferable and have no preemptive, subscription or
conversion rights. To the best knowledge of the Trust, there are no persons
owning 5% or more of the outstanding shares of any Portfolio as of July 7,
1995, except the GNA Variable Investment Account of Great Northern Insured An-
nuity Corporation which on such date held 100% of the outstanding shares of
each of the Portfolios.

Shares of a Portfolio will be voted separately by series of the Trust with
respect to matters pertaining to that series except for the election of Trust-
ees and ratification of independent accountants. For example, shareholders of
each Portfolio are required to approve the adoption of any investment advisory
agreement relating to such Portfolio and any changes in fundamental investment
restrictions or policies of such Portfolio. Approval by the shareholders of
one Portfolio is effective only as to that Portfolio. An insurance company is-
suing a Contract that participates in a Portfolio will vote shares in the ap-
plicable separate account as required by law and any interpretation thereof,
as such may be amended or changed from time to time. In accordance with cur-
rent law and interpretations thereof, a participating insurance company is re-
quired to request voting instructions from Contract owners and must vote
shares in the applicable separate account in proportion to the voting instruc-
tions received. For further discussion, please refer to the prospectus for
your Contract.

The Trust does not intend to hold annual shareholder meetings, although spe-
cial meetings may be called for purposes such as electing or removing Trustees
or such other purposes as are set forth above.

Paragon Portfolio_--17

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<PAGE>

PARAGON PORTFOLIO
4900 Sears Tower
Chicago, Illinois 60606

INVESTMENT ADVISER
Premier Investment Advisors, L.L.C.
451 Florida Street
Baton Rouge, Louisiana 70821

ADMINISTRATOR
Goldman Sachs Asset Management
1 New York Plaza
New York, New York 10004

DISTRIBUTOR

Goldman, Sachs & Co.

85 Broad Street

New York, New York 10004

CUSTODIAN
State Street Bank and Trust Company

225 Franklin Street

Boston, Massachusetts 02110

TRANSFER AGENT
State Street Bank and Trust Company

P.O. Box 1978

Boston, Massachusetts 02105

INDEPENDENT ACCOUNTANTS

Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036

LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109

[LOGO]
PARAGON
PORTFOLIO

PROSPECTUS

DATED JULY 31, 1995
<PAGE>

PARAGON PORTFOLIO
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606

STATEMENT OF ADDITIONAL INFORMATION--JULY 31, 1995

Paragon Portfolio (the "Trust") is an open-end, management investment
company (a mutual fund) that offers a diversified selection of managed
investment portfolios, each with its own investment objective and policies.
The following four portfolios (the "Portfolios") are offered by this Statement
of Additional Information and related Prospectus:

Paragon Power Intermediate-Term Bond Portfolio;
Paragon Power Value Growth Portfolio;
Paragon Power Value Equity Income Portfolio;
Paragon Power Gulf South Growth Portfolio.

Paragon Power Gulf South Growth Portfolio is a non-diversified portfolio;
the portfolios of the other Funds are diversified.

Premier Investment Advisors, L.L.C. (formerly Premier Investment Advisors,
Inc.) ("Premier" or the "Adviser") serves as the investment adviser to the
Portfolios, Goldman Sachs Asset Management ("GSAM"), a separate operating
division of Goldman, Sachs & Co. ("Goldman Sachs"), acts as the administrator
and State Street Bank and Trust Company ("State Street"), acts as transfer
agent.

This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus of Paragon Portfolio, dated July 31,
1995 as amended and supplemented from time to time, a copy of which may be
obtained without charge by calling toll-free at 800-894-3719 or by writing
Great Northern Insured Annuity Corporation, 5600 Two Union Square, Seattle,
Washington 98111-0490.

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE IN
STATEMENT OF
ADDITIONAL
INFORMATION
------------
<S> <C>
Investment Policies and Practices of the Portfolios................ 3
Investment Restrictions............................................ 10
Management......................................................... 13
The Adviser, Administrator, Distributor and Transfer Agent......... 15
Portfolio Transactions............................................. 16
Net Asset Value.................................................... 18
Purchase and Redemption Information................................ 19
Calculation of Performance Quotations.............................. 20
Tax Information.................................................... 22
Organization and Capitalization.................................... 25
Shareholder and Trustee Liability.................................. 26
Custodian.......................................................... 26
Independent Accountants............................................ 26
Financial Highlights............................................... 26
Appendix........................................................... 1-A
</TABLE>

2 --Paragon Portfolio

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<PAGE>

INVESTMENT POLICIES AND PRACTICES OF THE PORTFOLIOS

The following discussion elaborates on the description of each Portfolio's
investment policies and practices contained in the Prospectus:

CORPORATE DEBT SECURITIES

Included in the corporate debt securities in which certain Portfolios may
invest are preferred, preference and convertible stocks. Preference stocks are
stocks that have many characteristics of preferred stocks, but are typically
junior to an existing class of preferred stocks. When and if available,
corporate debt securities may be purchased at a discount from face value.

U.S. GOVERNMENT SECURITIES

A Portfolio may also invest in separately traded principal and interest
components of securities issued or guaranteed by the U.S. Treasury. The
principal and interest components of selected securities are traded
independently under the Separate Trading of Registered Interest and Principal
of Securities program ("STRIPS"). Under the STRIPS program, the principal and
interest components are individually numbered and separately issued by the
U.S. Treasury at the request of depository financial institutions, which then
trade the component parts independently.

CUSTODIAL RECEIPTS

A Portfolio may also acquire securities which, although not considered U.S.
Government securities for certain purposes are issued or guaranteed as to
principal and interest by the U.S. Government, its agencies, authorities and
instrumentalities in the form of custodial receipts that evidence ownership of
future interest payments, principal payments or both on certain U.S. Treasury
notes or bonds. Such notes and bonds are held in custody by a bank on behalf
of the owners. These custodial receipts are known by various names, including
"Treasury Receipts," "Treasury Investment Growth Receipts" ("TIGR's"), and
"Certificates of Accrual on Treasury Securities" ("CATS").

FOREIGN SECURITIES

Paragon Power Intermediate-Term Bond Portfolio may invest in securities of
foreign issuers denominated in U.S. dollars. Paragon Power Value Growth
Portfolio and Paragon Power Value Equity Portfolio may invest in securities of
foreign issuers in the form of American Depository Receipts ("ADRs"). ADRs are
receipts issued by U.S. bank or trust company which evidence ownership of
underlying securities of foreign corporations. Investment in foreign issuers
involves certain special considerations, including those set forth below,
which are not typically associated with investment in U.S. issuers. Since
foreign companies are not generally subject to uniform accounting, auditing
and financial reporting standards, practices and requirements comparable to
those applicable to U.S. companies, there may be less publicly available
information about a foreign company than about a domestic company. Volume and
liquidity in most foreign bond markets are less than in the United States and,
at times, volatility of price can be greater than in the United States.

There is generally less government supervision and regulation of securities
exchanges, brokers and listed companies in foreign countries than in the
United States. Mail service between the United States and foreign countries
may be slower or less reliable than within the United States, thus increasing
the risk on some transactions of delayed settlements of portfolio transactions
or loss of certificates for portfolio securities. In addition, with respect to
certain foreign countries, there is the possibility of expropriation or
confiscatory taxation, political or social instability, or diplomatic
developments which could affect Paragon Power Intermediate-Term Bond
Portfolio's investments in those countries. Moreover, individual foreign
economies

Paragon Portfolio--3

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<PAGE>

may differ favorably or unfavorably from the U.S. economy in such respects as
growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Each Portfolio
will limit its equity investments in "passive foreign investment companies,"
which could in certain circumstances subject the Portfolio to disadvantageous
U.S. tax treatment on such investments.

ADRs are receipts issued by a U.S. bank or trust company which evidence
ownership of underlying securities of foreign corporations. ADRs are traded on
domestic exchanges or in the U.S. over-the-counter market and, generally, are
in registered form. To the extent a Portfolio acquires ADRs through banks
which do not have a contractual relationship with the foreign issuer of the
security underlying the ADR to issue and service such ADRs, there may be an
increased possibility that the Portfolio would not become aware of and be able
to respond in a timely manner to corporate actions such as stock splits or
rights offerings involving the foreign issuer. In addition, the lack of
information may result in inefficiencies in the valuation of such instruments.

MORTGAGE-RELATED SECURITIES

Mortgage Pass-Through Securities. Interests in pools of mortgage-related
securities differ from other forms of debt securities, which normally provide
for periodic payment of interest in fixed amounts with principal payments at
maturity or specified call dates. Instead, these securities generally provide
a monthly payment which consists of both interest and principal payments. In
effect, these payments are a "pass-through" of the monthly payments made by
the individual borrowers on their residential mortgage loans, net of any fees
paid to the issuer or guarantor of such securities. Additional payments are
caused by prepayments of principal resulting from the sale, refinancing or
foreclosure of the underlying residential property, net of fees or costs which
may be incurred. Some mortgage-related securities (such as securities issued
by the Government National Mortgage Association) ("GNMA")) are described as
"modified pass-through." These securities entitle the holder to receive all
interest and principal payments owed on the mortgages in the mortgage pool,
net of certain fees, at the scheduled payment dates regardless of whether the
mortgagor actually makes the payment.

The GNMA is the principal governmental guarantor of mortgage-related
securities. GNMA is a wholly-owned U.S. Government corporation within the
Department of Housing and Urban Development. GNMA is authorized to guarantee,
with the full faith and credit of the U.S. Government, the timely payment of
principal and interest on securities issued by institutions approved by GNMA
(such as savings and loan institutions, commercial banks and mortgage bankers)
and backed by pools of FHA-insured or VA-guaranteed mortgages.

Government-related guarantors (i.e., whose guarantees are not backed by the
full faith and credit of the U.S. Government) include the Federal National
Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation
("FHLMC"). FNMA is a government-sponsored corporation owned entirely by
private stockholders. It is subject to general regulation by the Secretary of
Housing and Urban Development. FNMA purchases conventional residential
mortgages (i.e., mortgages not insured or guaranteed by any governmental
agency) from a list of approved seller/servicers which include state and
Federally-chartered savings and loan associations, mutual savings banks,
commercial banks and credit unions and mortgage bankers. Pass-through
securities issued by FNMA are guaranteed as to timely payment by FNMA of
principal and interest but are not backed by the full faith and credit of the
U.S. Government.

FHLMC is a corporate instrumentality of the U.S. Government and was created
by Congress in 1970 for the purpose of increasing the availability of mortgage
credit for residential housing. FHLMC issues Participation Certificates
("PCs") which represent interests in conventional mortgages from FHLMC's
national portfolio. FHLMC guarantees timely payment of interest,

4--Paragon Portfolio

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<PAGE>

ultimate collection of principal and, in some cases, timely collection of
principal, but FHLMC PCs are not backed by the full faith and credit of the
U.S. Government.

Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Such issuers
may also be the originators and/or servicers of the underlying mortgage loans
as well as the guarantors of the mortgage-related securities. Pools created by
such non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or
indirect government or agency guarantees of payments in the former pools.
However, timely payment of interest and principal of mortgage loans in these
pools may be supported by various forms of insurance or guarantees, including
individual loan, title, pool and hazard insurance and letters of credit. The
insurance and guarantees are issued by governmental entities, private insurers
and the mortgage poolers. Such insurance and guarantees and the
creditworthiness of the issuers thereof will be considered in determining
whether a mortgage-related security meets a Portfolio's investment quality
standards. There can be no assurance that the private insurers or guarantors
can meet their obligations under the insurance policies or guarantee
arrangements. Mortgage-related securities without insurance or guarantees may
be purchased by a Portfolio if the Adviser, after an examination of the loan
experience and practices of the originator/servicers and poolers, determines
that the securities meet the Portfolio's quality standards. Although the
market for such securities is becoming increasingly liquid, mortgage-related
securities issued by certain private organizations may not be readily
marketable. A Portfolio will not purchase mortgage-related securities or any
other assets which in the Adviser's opinion are illiquid if, as a result, more
than 15% of the value of a Portfolio's net assets will be illiquid.

Collateralized Mortgage Obligations (CMOs). A CMO is a hybrid security,
having characteristics of both a mortgage-backed bond and a mortgage pass-
through security. As with a bond, interest and prepaid principal on CMOs are
paid, in most cases, semiannually. CMOs may be collateralized by whole
mortgage loans or private mortgage pass-through securities but are more
typically collateralized by portfolios of mortgage pass-through securities
guaranteed by GNMA, FHLMC, or FNMA, and the income streams on such securities.
CMOs are only the obligation of their issuers, and in the event of default
there is no assurance that the collateral, which is typically the issuer's
only asset, will be sufficient to pay principal and interest.

CMOs are structured with multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. Many CMOs provide for a modified form of call
protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Under a common structure,
monthly payments of principal received from the pool of underlying mortgages,
including prepayments, are first returned to investors holding the shortest
maturity class. Investors holding the longer maturity class receive principal
only after the first class has been retired. An investor is partially
protected against an earlier than desired return of principal because of the
sequential payments.

In a typical CMO transaction, a corporation ("issuer") issues multiple
series, (e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond
offering are used to purchase mortgages or mortgage pass-through certificates
("Collateral"). The Collateral is pledged to a third party trustee as security
for the Bonds. Principal and interest payments from the collateral are used to
pay principal on the Bonds in the order A, B, C, Z. The Series A, B, and C
Bonds all bear current interest. Interest on the Series Z Bond is accrued and
added to principal and a like amount is paid as principal on the Series A, B,
or C Bond currently being paid off. When the Series A, B, and C Bonds are paid
in full, interest and principal on the Series Z Bond begins to be paid
currently.

Paragon Portfolio--5

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<PAGE>

Other types of CMO structures may provide for principal payments to two or
more classes concurrently on a proportionate or disproportionate basis. With
some CMOs, the issuer serves as a conduit to allow loan originators (primarily
builders or savings and loan associations) to borrow against their loan
portfolios.

FHLMC Collateralized Mortgage Obligations. FHLMC CMOs are debt obligations
of FHLMC issued in multiple classes having different maturity dates which are
secured by the pledge of a pool of conventional mortgage loans purchased by
FHLMC. Unlike FHLMC pass-through securities, payments of principal and
interest on the CMOs are made semiannually, as opposed to monthly. The amount
of principal payable on each semiannual payment date is determined in
accordance with FHLMC's mandatory sinking fund schedule, which, in turn, is
equal to approximately 100% of the FHA prepayment experience applied to the
mortgage collateral pool. All sinking fund payments in the CMOs are allocated
to the retirement of the individual classes of bonds in the order of their
stated maturities. Payments of principal on the mortgage loans in the
collateral pool in excess of the amount of FHLMC's minimum sinking fund
obligation for any payment date are paid to the holders of the CMOs as
additional sinking fund payments. Because of the "pass-through" nature of all
principal payments received on the collateral pool in excess of FHLMC's
minimum sinking fund requirement, the rate at which principal of the CMOs is
actually repaid is likely to be such that each class of bonds will be retired
in advance of its scheduled maturity date.

If collection of principal (including prepayments) on the mortgage loans
during any semiannual payment period is not sufficient to meet FHLMC's minimum
sinking fund obligation on the next sinking fund payment date, FHLMC agrees to
make up the deficiency from its general funds. Criteria for the mortgage loans
in the pool backing the CMOs are identical to those of FHLMC pass-through
securities. FHLMC has the right to substitute collateral in the event of
delinquencies and/or defaults.

Real Estate Mortgage Investment Conduits. A CMO vehicle that qualifies as a
"real estate mortgage investment conduit" ("REMIC") under the Internal Revenue
Code of 1986, as amended (the "Code"), invests in certain mortgages
principally secured by interests in real property and other permitted
investments. Investors may purchase beneficial interests in REMICs, which are
known as "regular" interests or "residual" interests. Such beneficial
interests in REMICs may offer a higher yield than U.S. Government securities,
but they may also be subject to greater price fluctuations and credit risk. In
addition, interests in REMICs typically will be issued in a variety of classes
or series, which may have different maturities and may be retired in sequence.
Under the Code, CMOs created after 1991 will generally be required to qualify
as REMICs in order for the issuing entity to avoid being subject to Federal
income tax as a "taxable mortgage pool."

Some REMIC interests are not government securities and are not supported in
any way by any governmental agency or instrumentality. In the event of a
default by an issuer of the assets of such a REMIC, there is no assurance that
the assets of the REMIC will be sufficient to pay principal and interest. It
is possible that there will be limited opportunities for trading REMIC
interests in the over-the-counter market, the depth and liquidity of which
will vary from issue to issue and from time to time. Due to possible
unfavorable tax consequences, no Portfolio will purchase residual interests in
REMICs under present tax law.

Other Mortgage-Related Securities. The Adviser expects that governmental,
government-related or private entities may create mortgage loan pools and
other mortgage-related securities offering mortgage pass-through and mortgage-
collateralized investments in addition to those described above. The mortgages
underlying these securities may include alternative mortgage instruments, that
is, mortgage instruments whose principal or interest payments may vary or
whose terms to maturity may differ from customary long-term fixed rate
mortgages. As new types

6--Paragon Portfolio

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<PAGE>

of mortgage-related securities are developed and offered to investors, the
Adviser will, consistent with a Portfolio's investment objectives, policies
and quality standards and, subject to the review and approval of the Trust's
Board of Trustees, consider making investments in such new types of mortgage-
related securities.

Other Asset-Backed Securities. A Portfolio may invest in asset-backed
securities. Such securities are often subject to more rapid repayment than
their stated maturity date would indicate as a result of the pass-through of
prepayments of principal on the underlying loans. During periods of declining
interest rates, prepayment of loans underlying asset-backed securities can be
expected to accelerate. Accordingly, a Portfolio's ability to maintain
positions in such securities will be affected by reductions in the principal
amount of such securities resulting from prepayments, and its ability to
reinvest the returns of principal at comparable yields is subject to generally
prevailing interest rates at that time.

Credit card receivables are generally unsecured and the debtors on such
receivables are entitled to the protection of a number of state and Federal
consumer credit laws, many of which give such debtors the right to set-off
certain amounts owed on the credit cards, thereby reducing the balance due.
Automobile receivables generally are secured, but by automobiles rather than
residential real property. Most issuers of automobile receivables permit the
loan servicers to retain possession of the underlying obligations. If the
servicers were to sell these obligations to another party, there is a risk
that the purchaser would acquire an interest superior to that of the holders
of the asset-backed securities. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have a
proper security interest in the underlying automobiles. Therefore, there is
the possibility that, in some cases, recoveries on repossessed collateral may
not be available to support payments on these securities.

Consistent with each Portfolio's investment objectives and policies and,
subject to the review and approval of the Trust's Board of Trustees, the
Portfolios also may invest in other types of asset-backed securities.

REPURCHASE AGREEMENTS

Each Portfolio may enter into repurchase agreements with selected broker-
dealers, banks or other financial institutions. In addition, each Portfolio
may enter into repurchase agreements with any foreign bank whose
creditworthiness has been determined by the Adviser to be at least equal to
that of issuers of commercial paper rated within the two highest grades
assigned by Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's
("S&P").

A repurchase agreement is an arrangement under which the purchaser (i.e.,
the Portfolio) purchases a U.S. Government or other high quality short-term
debt obligation (the "Obligation") and the seller agrees, at the time of sale,
to repurchase the Obligation at a specified time and price.

Custody of the Obligation will be maintained by the Trust's custodian or
subcustodian. The repurchase price may be higher than the purchase price, the
difference being income to the Portfolio, or the purchase and repurchase
prices may be the same, with interest at a stated rate due to the Portfolio
together with the repurchase price on repurchase. In either case, the income
to the Portfolio is unrelated to the interest rate on the Obligation subject
to the repurchase agreement.

Repurchase agreements pose certain risks for all entities, including the
Portfolios, that utilize them. Such risks are not unique to the Portfolios but
are inherent in repurchase agreements. The

Paragon Portfolio--7

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<PAGE>

Portfolios seek to minimize such risks by, among others, the means indicated
below, but because of the inherent legal uncertainties involved in repurchase
agreements, such risks cannot be eliminated.

For purposes of the Investment Company Act of 1940 (the "Investment Company
Act") and for certain federal and state tax purposes, a repurchase agreement
is deemed to be a loan from the Portfolio to the seller of the Obligation. It
is not clear whether for other purposes a court would consider the Obligation
purchased by the Portfolio subject to a repurchase agreement as being owned by
the Portfolio or as being collateral for a loan by the Portfolio to the
seller.

If, in the event of bankruptcy or insolvency proceedings against the seller
of the Obligation, a court holds that the Portfolio does not have a perfected
security interest in the Obligation, the Portfolio may be required to return
the Obligation to the seller's estate and be treated as an unsecured creditor
of the seller. As an unsecured creditor, a Portfolio would be at risk of
losing some or all of the principal and income involved in the transaction. To
minimize this risk, the Portfolios utilize custodians and subcustodians that
the Adviser believes follow customary securities industry practice with
respect to repurchase agreements, and the Adviser analyzes the
creditworthiness of the obligor, in this case the seller of the Obligation.
But because of the legal uncertainties, this risk, like others associated with
repurchase agreements, cannot be eliminated.

Also, in the event of commencement of bankruptcy or insolvency proceedings
with respect to the seller of the Obligation before repurchase of the
Obligation under a repurchase agreement, the Portfolio may encounter delay and
incur costs before being able to sell the security. Such a delay may involve
loss of interest or decline in price of the Obligation.

Apart from risks associated with bankruptcy or insolvency proceedings, there
is also the risk that the seller may fail to repurchase the security. However,
if the market value of the Obligation subject to the repurchase agreement
becomes less than the repurchase price (including accrued interest), the
Portfolio will direct the seller of the Obligation to deliver additional
securities so that the market value of all securities subject to the
repurchase agreement equals or exceeds the repurchase price.

Certain repurchase agreements which have a stated maturity of more than
seven days can be liquidated before the nominal fixed term on seven days or
less notice. These repurchase agreements will be treated by the Portfolios as
liquid investments for purposes of the Trust's limitation on investment in
illiquid securities.

CASH EQUIVALENTS

Commercial paper represents short-term unsecured promissory notes issued in
bearer form by banks or bank holding companies, corporations, and finance
companies. The commercial paper purchased by the Portfolios consists of direct
obligations of domestic or foreign issuers. Bank obligations in which the
Portfolios may invest include certificates of deposit, bankers' acceptances,
and fixed time deposits. Certificates of deposit are negotiable certificates
issued against funds deposited in a commercial bank for a definite period of
time and earning a specified return.

Bankers' acceptances are negotiable drafts or bills of exchange, normally
drawn by an importer or exporter to pay for specific merchandise, which are
"accepted" by a bank, meaning, in effect, that the bank unconditionally agrees
to pay the face value of the instrument on maturity. Fixed time deposits are
bank obligations payable at a stated maturity date and bearing interest at a
fixed rate. Fixed time deposits may be withdrawn on demand by the investor,
but may be subject to early withdrawal penalties which vary depending upon
market conditions and the remaining maturity of the obligation. There are no
contractual restrictions on the right to transfer a beneficial interest in a
fixed time deposit to a third party, although there is no market for such
deposits.

8--Paragon Portfolio

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<PAGE>

SPECIAL RISKS ASSOCIATED WITH OPTIONS ON SECURITIES

There is no assurance that a liquid secondary market on an exchange will
exist for any particular option, or at any particular time. For some options
no secondary market on an exchange may exist. In such event, it might not be
possible to effect closing transactions in particular options, with the result
that a Portfolio would have to exercise options it has purchased in order to
realize any profit and may incur transaction costs upon the purchase or sale
of underlying securities. If a Portfolio is unable to effect a closing
purchase transaction with respect to covered options it has written, it will
not be able to sell the underlying security or dispose of assets held in a
segregated account until the option expires or is exercised.

Reasons for the absence of a liquid secondary market on an exchange include
the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options or underlying securities; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the
facilities of an exchange or the Options Clearing Corporation may not at all
times be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that exchange (or
in that class or series of options) would cease to exist, although outstanding
options on that exchange that had been issued by the Options Clearing
Corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms. There is no assurance that higher
than anticipated trading activity or other unforeseen events might not, at
times, render certain of the facilities of the Options Clearing Corporation
inadequate, and thereby result in the institution by an exchange of special
procedures which may interfere with the timely execution of customers' orders.

The amount of the premiums which a Portfolio may pay or receive may be
adversely affected as new or existing institutions, including other investment
companies, engage in or increase their option purchasing and writing
activities.

FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES

Each Portfolio may purchase securities on a when-issued basis or purchase or
sell securities on a forward commitment basis. These transactions involve a
commitment by the Portfolio to purchase or sell securities at a future date
(ordinarily one or two months later). The price of the underlying securities
(usually expressed in terms of yield) and the date when the securities will be
delivered and paid for (the settlement date) are fixed at the time the
transaction is negotiated. When-issued purchases and forward commitment
transactions are negotiated directly with the other party. Such commitments
are not traded on exchanges, but may be traded over-the-counter.

When-issued purchases and forward commitment transactions enable a Portfolio
to lock in what is believed to be an attractive price or yield on a particular
security for a period of time, regardless of future changes in interest rates.
For instance, in periods of rising interest rates and falling prices, the
Portfolio might sell securities it owns on a forward commitment basis to limit
its exposure to falling prices. In periods of falling interest rates and
rising prices, the Portfolio might sell securities it owns and purchase the
same or a similar security on a when-issued or forward commitment basis,
thereby obtaining the benefit of currently higher yield.

The value of securities purchased on a when-issued or forward commitment
basis and any subsequent fluctuations in their value are reflected in the
computation of a Portfolio's net asset value starting on the date of the
agreement to purchase the securities. A Portfolio does not earn interest on
the securities it has committed to purchase until they are paid for and
delivered on

Paragon Portfolio--9

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<PAGE>

the settlement date. When a Portfolio makes a forward commitment to sell
securities that it owns, the proceeds to be received upon settlement are
included in the Portfolio's assets. Fluctuations in the market value of the
underlying securities are not reflected in the Portfolio's net asset value as
long as the commitment to sell remains in effect. Settlement of when-issued
purchases and forward commitment transactions generally takes place within two
months after the date of the transaction, but the Portfolio may agree to a
longer settlement period.

A Portfolio will purchase securities on a when-issued basis or purchase or
sell securities on a forward commitment basis only with the intention of
completing the transaction and actually purchasing or selling the securities.
If deemed advisable as a matter of investment strategy, however, a Portfolio
may dispose of or negotiate a commitment after entering into it. A Portfolio
also may sell securities it has committed to purchase before those securities
are delivered to the Portfolio on the settlement date. The Portfolio may
realize a capital gain or loss in connection with these transactions.

When a Portfolio purchases securities on a when-issued or forward commitment
basis, the Trust's custodian will maintain in a segregated account cash or
liquid high grade debt securities having a value (determined daily) at least
equal to the amount of the Portfolio's purchase commitments. These procedures
are designed to ensure that the Portfolio will maintain sufficient assets at
all times to cover its obligations under when-issued and forward commitment
purchases.

LENDING OF PORTFOLIO SECURITIES

Each Portfolio may seek to increase its income by lending portfolio
securities. Under present regulatory policies, such loans may be made to
institutions, such as broker-dealers, and would be required to be secured
continuously by collateral in cash, cash equivalents or high quality debt
securities maintained on a current basis at an amount at least equal to the
market value of the securities loaned. Cash collateral may be invested in cash
equivalents and other debt securities. A Portfolio would have the right to
call a loan and obtain the securities loaned at any time on five days' notice.

For the duration of a loan, the Portfolio would continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities
loaned and would also receive compensation from investment of the collateral.
The Portfolio would not, however, have the right to vote any securities having
voting rights during the existence of the loan, but the Portfolio would call
the loan in anticipation of an important vote to be taken among holders of the
securities or of the giving or withholding of their consent on a material
matter affecting the investment.

As with other extensions of credit there are risks of delay in recovering or
even loss of rights in the collateral should the borrower of the securities
fail financially. However, the loans would be made only to firms deemed by the
relevant Adviser to be of good standing, and when, in the judgment of the
Adviser, the consideration which can be earned currently from securities loans
of this type justifies the attendant risk. If an Adviser determines to make
securities loans, it is intended that the value of the securities loaned would
not exceed 33 1/3% of the value of the total assets of the lending Portfolio.

INVESTMENT RESTRICTIONS

The following restrictions may not be changed with respect to any Portfolio
without the approval of the majority of outstanding voting securities of that
Portfolio (which, under the Investment Company Act and the rules thereunder
and as used in the Prospectus and this Statement of Additional Information,
means the lesser of (1) 67% of the shares of that Portfolio present at a
meeting if the holders of more than 50% of the outstanding shares of that
Portfolio

10--Paragon Portfolio

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<PAGE>

are present in person or by proxy, or (2) more than 50% of the outstanding
shares of that Portfolio). Investment restrictions that involve a maximum
percentage of securities or assets shall not be considered to be violated
unless an excess over the percentage occurs immediately after, and is caused
by, an acquisition or encumbrance of securities or assets of, or borrowings by
or on behalf of, a Portfolio, with the exception of borrowings permitted by
Investment Restriction (3).

The Trust may not, on behalf of any Portfolio:

(1) with respect to 75% (50% in the case of Paragon Power Gulf South
Growth Portfolio) of a Portfolio's total assets taken at market value,
invest more than 5% of the value of the total assets of that Portfolio in
the securities of any one issuer, except U.S. Government securities;

(2) with respect to 75% (50% in the case of Paragon Power Gulf South
Growth Portfolio) of a Portfolio's total assets taken at market value,
purchase the securities of any issuer if such purchase would cause more
than 10% of the voting securities of such issuer to be held by that
Portfolio;

(3) borrow money, except from banks on a temporary basis for
extraordinary or emergency purposes, provided that a Portfolio is required
to maintain asset coverage of 300% for all borrowings and that no purchases
of securities will be made if such borrowings exceed 5% of the value of the
Portfolio's assets. This restriction does not apply to cash collateral
received as a result of portfolio securities lending;

(4) pledge, mortgage or hypothecate its assets, except that, to secure
permitted borrowings, it may pledge securities having a market value at the
time of pledge not exceeding 15% of the cost of a Portfolio's total assets
and except in connection with permitted transactions in options, futures
contracts and options on futures contracts;

(5) act as underwriter of the securities issued by others, except to the
extent that the purchase of securities in accordance with a Portfolio's
investment objective and policies directly from the issuer thereof and the
later disposition thereof may be deemed to be underwriting;

(6) purchase securities if such purchase would cause more than 25% in the
aggregate of the market value of the total assets of a Portfolio to be
invested in the securities of one or more issuers having their principal
business activities in the same industry, other than U.S. Government
securities (for the purposes of this restriction, telephone companies are
considered to be a separate industry from gas or electric utilities, and
wholly-owned finance companies are considered to be in the industry of
their parents if their activities are primarily related to financing the
activities of their parents);

(7) issue senior securities, except as appropriate to evidence
indebtedness that a Portfolio is permitted to incur and except for shares
of existing or additional series of the Trust;

(8) purchase or sell real estate (including limited partnership interests
but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodities
contracts (except futures contracts, including but not limited to contracts
for the future delivery of securities or currency and futures contracts
based on securities indexes or related options thereon), the Trust
reserving the freedom to hold and to sell real estate acquired for any
Portfolio as a result of the ownership of securities. Foreign currency,
forward foreign currency exchange contracts and options on currency are not
deemed to be prohibited commodities or commodities contracts for the
purpose of this restriction; or

(9) make loans to other persons, except loans of portfolio securities and
except to the extent that the purchase of debt obligations and entry into
repurchase agreements in accordance with such Portfolio's investment
objectives and policies may be deemed to be loans.

Paragon Portfolio--11

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<PAGE>

In addition to the investment restrictions mentioned above, the Trustees of
the Trust have voluntarily adopted the following policies and restrictions
which are observed in the conduct of the affairs of the Portfolios. These
represent intentions of the Trustees based upon current circumstances. They
differ from fundamental investment policies in that they may be changed or
amended by action of the Trustees without prior notice to or approval of
shareholders. Accordingly, the Trust may not, on behalf of any Portfolio:

(a) purchase securities of any issuer with a record of less than three
years' continuous operation, including predecessors, except U.S. Government
securities, securities of such issuers which are rated by at least one
nationally recognized statistical rating organization, municipal
obligations, and obligations issued or guaranteed by any foreign government
or its agencies or instrumentalities, if such purchase would cause the
investments of a Portfolio in all such issuers to exceed 5% of the value of
the total assets of that Portfolio;

(b) purchase from or sell portfolio securities of a Portfolio to any of
the officers or Trustees of the Trust, its adviser(s), its principal
underwriter or the members, officers or directors of its adviser(s) or
principal underwriter;

(d) purchase warrants of any issuer, except on a limited basis if, as a
result of such purchases by a Portfolio, no more than 2% of the value of
its total assets would be invested in warrants which are not listed on the
New York Stock Exchange or the American Stock Exchange and no more than 5%
of the value of the total assets of a Portfolio would be invested in
warrants, whether or not so listed, such warrants in each case to be valued
at the lesser of cost or market, but assigning no value to warrants
acquired by a Portfolio in units with or attached to debt securities;

(e) knowingly purchase or retain securities of an issuer any of whose
officers, partners, directors, trustees or securities holders is an officer
or Trustee of the Trust or a member, officer or director of an investment
adviser of the Trust if one or more of such individuals owns beneficially
more than one-half of one percent ( 1/2 of 1%) of the securities (taken at
market value) of such issuer and such individuals owning more than one half
of one percent ( 1/2 of 1%) of such securities together own beneficially
more than 5% of such securities;

(f) purchase securities on margin or make short sales, except in
connection with arbitrage transactions or unless, by virtue of its
ownership of other securities, a Portfolio has the right to obtain
securities equivalent in kind and amount to the securities sold and, if the
right is conditional, the sale is made upon the same conditions, except
that a Portfolio may obtain such short-term credits as may be necessary for
the clearance of purchases and sales of securities and in connection with
transactions involving forward foreign currency exchange contracts;

(g) invest in repurchase agreements maturing in more than seven days and
securities which are not readily marketable if, as a result thereof, more
than 15% of the net assets of a Portfolio (taken at market value) would be
invested in such investments; or

(h) purchase puts, calls, straddles, spreads and any combination thereof
if the value of the Portfolio's aggregate investment in such securities
exceeds 5% of its total assets.

"Value" for the purposes of all investment restrictions shall mean the value
used in determining a Portfolio's net asset value. "U.S. Government
securities" shall mean securities issued or guaranteed by the U.S. Government
or any of its agencies, authorities or instrumentalities.

12--Paragon Portfolio

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<PAGE>

MANAGEMENT

Information pertaining to the Trustees and officers of the Trust is set forth
below. Trustees and officers deemed to be "interested persons" of the Trust for
purposes of the Investment Company Act are indicated by an asterisk.

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS POSITIONS WITH TRUST DURING PAST 5 YEARS
- ---------------- -------------------- ------------------------------------
<S> <C> <C>
Paul C. Nagel, Jr. Trustee Retired (since January 1976); Direc-
19223 Riverside Dr. Age 73 tor and Chairman of the Finance and
Tequesta, FL 33469 Audit Committees of Great Atlantic &
Pacific Tea Co., Inc.; Director of
United Conveyor Corporation (a pri-
vately held manufacturer of coal-ash
removal equipment for large scale
boiler installations.)
Ernest E. Howard III Trustee President and Chief Executive Offi-
FM Properties, Inc. Age 52 cer (since May 1993); Senior Vice-
1615 Poydras Street President & Chief Investment Officer
New Orleans, LA 70112 of Freeport-McMoRan Inc. (since
1984).
Bruce C. Gottwald, Jr. Trustee Chairman and CEO, First Colony Cor-
First Colony Corporation Age 37 poration (since 1992); Director,
Riverfront Plaza Vice President West (since 1992) and
West Tower, Ste. 1350 Treasurer of Ethyl Corporation (from
Richmond, VA 23219 1989-1991); President of First Col-
ony Investment Company (since 1991);
Assistant Treasurer, Ethyl Corpora-
tion (1988)
Paul Klug President Director of Proprietary Mutual Funds
1 New York Plaza Age 43 of GSAM (since February 1994); Chief
New York, NY 10004 Operating Officer, Vista Capital
Management, Chase Manhattan Bank
(from January 1990 to February
1994); Vice President, JP Morgan
(February 1984 to January 1990).
*Marcia L. Beck Vice President Director of Mutual Funds Group of
1 New York Plaza Age 39 GSAM (since September 1992); Vice
New York, NY 10004 President and Senior Portfolio Man-
ager (from June 1988 to 1992); Vice
President Portfolios Group (from May
1985 to June 1988).
*Nancy L. Mucker Vice President Vice President, Goldman Sachs; Man-
4900 Sears Tower Age 46 ager, Shareholder Services of GSAM.
Chicago, Illinois
60606
*John W. Mosior Vice President Vice President, Goldman Sachs; Man-
4900 Sears Tower Age 56 ager, Shareholder Services of GSAM.
Chicago, Illinois
60606
</TABLE>

Paragon Portfolio--13

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<PAGE>

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS POSITIONS WITH COMPANY DURING PAST 5 YEARS
- ---------------- ---------------------- ------------------------------------
<S> <C> <C>
*Pauline Taylor Vice President Vice President, Goldman Sachs since
4900 Sears Tower Age 48 June, 1992; Consultant since 1989
Chicago, Illinois and Senior Vice President, Fidelity
60606 Investments prior to 1989.
*Scott M. Gilman Treasurer Director, Mutual Funds Administra-
1 New York Plaza Age 35 tion (since April 1994); Assistant
New York, NY 10004 Treasurer, Goldman Sachs Funds Man-
agement, Inc., (since March 1993);
Vice President, Goldman Sachs (since
March 1990); Assistant Treasurer of
the Trust (April 1990 - October
1991); formerly Manager, Arthur An-
dersen LLP.
*Michael J. Richman Secretary Associate General Counsel, GSAM
85 Broad Street Age 34 (since February 1994); Vice Presi-
New York, NY 10004 dent and Assistant General Counsel,
Goldman Sachs (since June 1992);
Counsel to the Funds Group of GSAM
(since June 1992); formerly partner
of Hale and Dorr.
*Howard B. Surloff Assistant Secretary Vice President and Counsel, Goldman
85 Broad Street Age 30 Sachs since November 1993 and May
New York, NY 10004 1994, respectively; Assistant Coun-
sel to the Funds Group, GSAM since
November 1993. Formerly, Associate,
Shereff, Friedman, Hoffman &
Goodman.
Kaysie Uniacke Assistant Secretary Vice President and Portfolio Manag-
1 New York Plaza Age 34 er, GSAM (since 1988).
New York, NY 10004
Elizabeth Alexander Assistant Secretary Funds Trading Assistant, GSAM (since
1 New York Plaza Age 25 1993). Formerly, Compliance Analyst,
New York, NY 10004 Prudential Insurance (1991-1993).
Steven Hartstein Assistant Secretary Legal Products Analyst, Goldman
85 Broad Street Age 31 Sachs since June 1993; Funds Compli-
New York, NY 10004 ance Officer, Citibank Global Asset
Management (August 1991 to June
1993); Legal Assistant, Brown & Wood
(prior thereto).
Gail Shanley Assistant Secretary Legal Products Analyst, Goldman
85 Broad Street Age 26 Sachs since June 1994. Formerly Blue
New York, NY 10004 Sky Legal Assistant at Smith Barney
Shearson.
</TABLE>

As of July 7, 1995 the Trustees and officers of the Trust, as a group, owned
in the aggregate less than 1% of the outstanding shares of the Trust. Each
interested Trustee and officer holds comparable positions with certain other
investment companies of which Goldman Sachs, GSAM or an affiliate thereof is
the investment adviser and/or distributor.

14--Paragon Portfolio

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<PAGE>

THE ADVISER, ADMINISTRATOR, DISTRIBUTOR AND TRANSFER AGENT

THE ADVISER

Premier serves as the investment adviser to the Portfolios. Premier is
responsible for the management of each Portfolio's assets in accordance with
such Portfolio's investment objectives and policies. In fulfilling their day-
to-day responsibilities, the investment personnel of Premier are committed to
the pursuit of excellence.

Under each of the separate Investment Advisory Agreements between Premier
and the Trust on behalf of each Portfolio, Premier, subject to the supervision
of the Trustees of the Trust and in conformity with the stated policies of
each Portfolio, acts as investment adviser and directs the investments of the
Portfolio.

Premier receives investment advisory fees from each Portfolio equal to an
annual rate, as a percentage of the Portfolio's average daily net assets, as
follows:

<TABLE>
<S> <C>
Paragon Power Intermediate-Term Bond Portfolio....................... .50%
Paragon Power Value Growth Portfolio................................. .65%
Paragon Power Value Equity Income Portfolio.......................... .65%
Paragon Power Gulf South Growth Portfolio............................ .65%
</TABLE>

The Investment Advisory Agreements entered into on behalf of each of the
Portfolios were initially approved by the Trustees, including the "non-
interested" Trustees, on October 20, 1994, and by the sole initial
shareholders of each Portfolio on October 20, 1994. The Investment Advisory
Agreements will remain in effect until April 30, 1996 and will continue in
effect thereafter only if such continuance is specifically approved at least
annually by the Trustees or by a vote of a majority of the outstanding voting
securities of the particular Portfolio (as defined in the Investment Company
Act) and, in either case, by a majority of the "non-interested" Trustees.

For the period January 13, 1995 (commencement of operations) through May 31,
1995, the amount of the advisory fees paid by Paragon Power Intermediate-Term
Bond Portfolio, Paragon Power Value Growth Portfolio, Paragon Power Value
Equity Income Portfolio and Paragon Power Gulf South Growth Portfolio was
$2,185, $3,145, $2,747 and $3,270, respectively.

In addition, for the period January 13, 1995 (commencement of operations)
through May 31, 1995, the Adviser has voluntarily agreed to reimburse expenses
(excluding interest, taxes and extraordinary expenses) to the extent that such
expenses exceed, on an annualized basis, .75%, 1.00%, 1.00% and 1.00% for the
Paragon Power Intermediate-Term Bond Portfolio, Paragon Power Value Growth
Portfolio, Paragon Power Value Equity Income Portfolio and Paragon Power Gulf
South Growth Portfolio, respectively. The effect of these reimbursements by
the Adviser for the period ended May 31, 1995 was to reduce expenses by
$18,090, $18,074, $19,224 and $19,064 for the Paragon Power Intermediate-Term
Bond Portfolio, Paragon Power Value Growth Portfolio, Paragon Power Value
Equity Income Portfolio and Paragon Power Gulf South Growth Portfolio,
respectively.

THE ADMINISTRATOR

GSAM administers the Trust's business affairs, and, in connection therewith,
furnishes each Portfolio with office facilities and is responsible for
clerical, record keeping and bookkeeping services, to the extent not provided
pursuant to the Trust's Custodian and Transfer Agency Agreements, and for the
financial and accounting records required to be maintained by each Portfolio,
other than those maintained pursuant to the Trust's Custodian and Transfer
Agency Agreements.

Paragon Portfolio--15

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<PAGE>

For its services under the Administration Agreement GSAM receives a monthly
administration fee at the annual rate of .15% of the average daily net assets
of each Portfolio. For the period January 13, 1995 (commencement of
operations) through May 31, 1995, the amount of the administration fees paid
by Paragon Power Intermediate-Term Bond Portfolio, Paragon Power Value Growth
Portfolio, Paragon Power Value Equity Income Portfolio and Paragon Power Gulf
South Growth Portfolio was $656, $726, $634 and $755, respectively.

Goldman Sachs is one of the largest international investment banking firms
in the United States. Founded in 1869, Goldman Sachs is a major factor in a
broad range of financing and investing services both in the United States and
abroad. In 1981, Goldman Sachs was registered as an investment adviser. As of
June 30, 1995 GSAM, together with its advisory affiliates, acted as investment
adviser, administrator or distributor for approximately $52.9 billion in
assets.

THE TRANSFER AGENT AND DISTRIBUTOR

State Street serves as the Trust's transfer agent. State Street provides
customary transfer agency services to the Portfolios, including the handling
of shareholder communications, the processing of shareholder transactions, the
maintenance of shareholder account records, payment of dividends and
distributions and related functions. For these services, State Street is
entitled to a monthly fee with respect to each Portfolio based on the number
of shareholders, together with out-of-pocket expenses. The fee is 1
shareholder = $250 per month, 2-5 = $500, 6-15 = $1,000,16-25 = $1,500, 26-
50 = $2,000 and 51-200 = $2,500.

Goldman Sachs acts as distributor of each Portfolio's shares. The
Distribution Agreement between Goldman Sachs and the Trust was most recently
approved by the Trustees on February 2, 1995.

PORTFOLIO TRANSACTIONS

Purchases and sales of securities on a securities exchange are effected by
brokers, and the Portfolios pay a brokerage commission for this service. In
transactions on stock exchanges in the United States, these commissions are
negotiated, whereas on many foreign stock exchanges the commissions are fixed.
In the over-the-counter market, securities are normally traded on a "net"
basis with dealers acting as principal for their own accounts without a stated
commission, although the price of the securities usually includes a profit to
the dealer. In underwritten offerings, securities are purchased at a fixed
price which includes an amount of compensation to the underwriter, generally
referred to as the underwriter's concession or discount. On occasion, certain
money market instruments may be purchased directly from an issuer, in which
case no commissions or discounts are paid.

The primary consideration in placing portfolio security transactions with
broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting broker-
dealers to execute portfolio transactions on behalf of each Portfolio and its
other clients on the basis of the broker-dealers' professional capability, the
value and quality of their brokerage services and the level of their brokerage
commissions.

Goldman Sachs and Premier Securities Corporation may act as a broker for the
Portfolios. In order for Goldman Sachs and Premier Securities Corporation to
effect any portfolio transactions for the Portfolios, the commissions, fees or
other remuneration received by Goldman Sachs and Premier Securities
Corporation must be reasonable and fair compared to the commissions, fees or

16--Paragon Portfolio

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<PAGE>

other remuneration paid to other brokers in connection with comparable
transactions involving similar securities during a comparable period of time.
This standard would allow Goldman Sachs and Premier Securities Corporation to
receive no more than the remuneration which would be expected to be received
by an unaffiliated broker in a commensurate arms-length transaction. The
Trustees of the Trust regularly review the commissions paid by the Portfolios
to Goldman Sachs and Premier Securities Corporation. The Portfolios will not
deal with Goldman Sachs or Premier Securities Corporation in any portfolio
transaction in which Goldman Sachs or Premier Securities Corporation acts as
principal.

Under each Investment Advisory Agreement and as permitted by Section 28(e)
of the Securities Exchange Act of 1934 (the "Exchange Act"), the Adviser may
cause a Portfolio to pay to a broker (except Goldman Sachs or Premier
Securities Corporation), which provides brokerage and research services to the
Adviser, a commission for effecting a securities transaction for a Portfolio
which exceeds the amount other brokers would have charged for the transaction,
if the Adviser determines in good faith that the greater commission is
reasonable in relation to the value of the brokerage and research services
provided by the executing broker viewed in terms of either a particular
transaction or the Adviser's overall responsibilities to the Portfolios or to
its other clients. The term "brokerage and research services" includes advice
as to the value of securities, the advisability of investing in, purchasing or
selling securities, and the availability of securities or of purchasers or
sellers of securities, furnishing analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy and
the performance of accounts, and effecting securities transactions and
performing functions incidental thereto such as clearance and settlement.

Although commissions paid on every transaction will, in the judgment of the
Adviser, be reasonable in relation to the value of the brokerage services
provided, commissions exceeding those which another broker might charge may be
paid to brokers (except Goldman Sachs or Premier Securities Corporation) who
were selected to execute transactions on behalf of the Portfolios and the
Adviser's other clients in part for providing advice as to the availability of
securities or of purchasers or sellers of securities and services in effecting
securities transactions and performing functions incidental thereto such as
clearance and settlement. Research provided by brokers is used for the benefit
of all of the Adviser's clients and not solely or necessarily for the benefit
of the Portfolios. The Adviser's investment management personnel attempt to
evaluate the quality of research provided by brokers. Results of this effort
are sometimes used by the Adviser as a consideration in the selection of
brokers to execute portfolio transactions.

In certain instances there may be securities which are suitable for a
Portfolio's portfolio as well as for that of another Portfolio, other series
of the Trust and for one or more of the Adviser's other clients. Investment
decisions for each Portfolio and for the Adviser's other clients are made with
a view to achieving their respective investment objectives. It may develop
that a particular security is bought or sold for only one client even though
it might be held by, or bought or sold for, other clients. Likewise, a
particular security may be bought for one or more clients when one or more
other clients are selling that same security. Some simultaneous transactions
are inevitable when several clients receive investment advice from the same
investment adviser, particularly when the same security is suitable for the
investment objectives of more than one client. When two or more clients are
simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed to be equitable to
each. It is recognized that in some cases this system could have a detrimental
effect on the price or volume of the security in a particular transaction as
far as a Portfolio is concerned. The Trust believes that over time its ability
to participate in volume transactions will produce better executions for the
Portfolios.

Paragon Portfolio--17

- -------------------------------------------------------------------------------
<PAGE>

The investment advisory fee that the Portfolios pay to the Adviser will not
be reduced as a consequence of the Adviser's receipt of brokerage and research
services. To the extent a Portfolio's portfolio transactions are used to
obtain such services, the brokerage commissions paid by the Portfolio will
exceed those that might otherwise be paid by an amount which cannot be
presently determined. Such services would be useful and of value to the
Adviser in serving both the Portfolios and other clients and, conversely, such
services obtained by the placement of brokerage business of other clients
would be useful to the Adviser in carrying out its obligations to the
Portfolios.

During the period January 13, 1995 through May 31, 1995, the Paragon Power
Intermediate-Term Bond Portfolio acquired and/or sold securities of
NationsBank Corp., its regular broker/dealer. As of May 31, 1995, the Paragon
Power Intermediate-Term Bond Portfolio owned the following amounts of
securities of its regular broker/dealers, as defined in Rule 10b-1 under the
Investment Company Act, or their parents: NationsBank Corp. with an aggregate
value of $105,101.

As of May 31, 1995, the Paragon Power Value Growth Portfolio, Paragon Power
Value Equity Income Portfolio and Paragon Power Gulf South Growth Portfolio
held no securities of its regular broker/dealers, as defined in Rule 10b-1
under the Investment Company Act, or their parents.

During the period ended May 31, 1995, each of the Portfolios bought
securities, including repurchase agreements, issued by State Street Bank &
Trust Company, which was one of the ten entities which executed the largest
amount of transactions with the Portfolios. As of May 31, 1995, the following
Portfolios held the following amounts of repurchase agreements with State
Street Bank & Trust Company:

<TABLE>
<S> <C>
Paragon Power Intermediate Term Bond Portfolio..................... $110,000
Paragon Power Value Growth Portfolio............................... 285,000
Paragon Power Value Equity Income Portfolio........................ 200,000
Paragon Power Gulf South Growth Portfolio.......................... 295,000
</TABLE>

For the period January 13, 1995 (commencement of operations) through May 31,
1995, each of the following Portfolios paid brokerage commissions as follows:

<TABLE>
<CAPTION>
TOTAL
TOTAL TOTAL BROKERAGE
BROKERAGE AMOUNT OF COMMISSIONS
TOTAL COMMISSIONS TRANSACTIONS PAID TO
BROKERAGE PAID TO ON WHICH BROKERS WHO
COMMISSIONS AFFILIATED COMMISSIONS PROVIDED
PAID PERSONS PAID RESEARCH
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
For the period January 13,
1995 (Commencement of
Operations) through May 31,
1995:
Paragon Power Value Growth
Portfolio................... $3,235 $ 0 $1,440,180 $ 0
Paragon Power Value Equity
Income Portfolio............ $1,921 $ 0 $1,293,996 $ 0
Paragon Power Gulf South
Growth Portfolio............ $2,073 $ 0 $1,500,461 $ 0
</TABLE>

Paragon Power Intermediate-Term Bond Portfolio paid no brokerage commissions
during such period.

NET ASSET VALUE

The net asset value per share of each Portfolio is determined by the Trust's
custodian as of the close of regular trading on the New York Stock Exchange
("NYSE") (normally 3:00 p.m. Louisiana time, 4:00 p.m. New York time) on each
Business Day. A Business Day means any day on which the New York Stock
Exchange is open. Holidays include: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.

18--Paragon Portfolio

- -------------------------------------------------------------------------------
<PAGE>

Portfolio securities of each Portfolio are valued as follows: (a) stocks
which are traded on any U.S. stock exchange or the Nasdaq National Market
("NASDAQ") are valued at the last sale price on the principal exchange on
which they are traded or NASDAQ (if NASDAQ is the principal market for such
securities) on the valuation day or, if no sale occurs, at the mean between
the closing bid and closing asked price; (b) over-the-counter stocks not
quoted on NASDAQ are valued at the last sale price on the valuation day or, if
no sale occurs, at the mean between the last bid and asked price; (c)
securities listed or traded on foreign exchanges (including foreign exchanges
whose operations are similar to the U.S. over-the-counter market) are valued
at the last sale price on the exchange where they are principally traded on
the valuation day or, if no sale occurs, at the official bid price (both the
last sale price and the official bid price are determined as of the close of
the London Foreign Exchange); (d) debt securities are valued at prices
supplied by a pricing agent selected by the Trustees, which prices reflect
broker/dealer-supplied valuations and electronic data processing techniques,
if those prices are deemed by the Adviser to be representative of market
values at the close of business of the NYSE; (e) options contracts are valued
at the last sale price on the market where any such options contract is
principally traded; and (f) all other securities and other assets, including
debt securities, for which prices are supplied by a pricing agent but are not
deemed by the Adviser to be representative of market values, but excluding
money market instruments with a remaining maturity of sixty days or less and
including restricted securities and securities for which no market quotation
is available, are valued at fair value under procedures established by the
Trustees or the Valuation Committee, if any, although the actual calculation
may be done by others. Money market instruments held by the Portfolios with a
remaining maturity of sixty days or less will be valued by the amortized cost
method. Portfolio securities traded on more than one United States national
securities exchange or foreign securities exchange are valued at the last sale
price on each Business Day at the close of the exchange representing the
principal market for such securities.

Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of
business on each Business Day. In addition, European or Far Eastern securities
trading generally or in a particular country or countries may not take place
on all Business Days. Furthermore, trading takes place in Japanese markets on
certain Saturdays and in various foreign markets on days which are not
Business Days and days on which the Portfolios' net asset values are not
calculated. Such calculation does not take place contemporaneously with the
determination of the prices of the majority of the portfolio securities used
in such calculation. Events affecting the values of portfolio securities that
occur between the time their prices are determined and the close of the NYSE
will not be reflected in the Portfolios' calculation of net asset values
unless the Adviser deems that the particular event would materially affect net
asset value, in which case an adjustment will be made.

The proceeds received by each Portfolio for each issue or sale of its
shares, and all net investment income, realized and unrealized gain and
proceeds thereof, subject only to the rights of creditors, will be
specifically allocated to such Portfolio and constitute the underlying assets
of that Portfolio. The underlying assets of each Portfolio will be segregated
on the books of account, and will be charged with the liabilities in respect
to such Portfolio and with a share of the general liabilities of the Trust.
Expenses with respect to the Portfolios are to be allocated in proportion to
the net asset values of the respective Portfolios except where allocations of
direct expenses can otherwise be fairly made.

PURCHASE AND REDEMPTION INFORMATION

Shares of the Portfolios may be purchased only by separate accounts of
certain insurance companies. The insurance company separate accounts may
purchase and redeem share of the Portfolios on each day, Monday through
Friday, on which the NYSE is open for trading based on,

Paragon Portfolio--19

- -------------------------------------------------------------------------------
<PAGE>

among other things, the amount of premium payments to be invested and
surrendered and transfer requests to be effect on that day pursuant to the
variable contracts. Such purchases and redemptions of shares of each Portfolio
are effected at their respective net asset values per share determined as of
4:00 p.m. on that day. Payments for redemptions are made by the Portfolios
within seven days thereafter. No fee is charged the separate accounts when
they purchase or redeem shares.

The Portfolios may not suspend redemption privileges or postpone the date of
payment on shares of the Portfolios for more than seven days except during any
period (1) when the NYSE is closed or trading on the Exchange is restricted as
determined by the SEC; (2) when an emergency exists, as defined by the SEC,
which makes it not reasonably practicable for a Portfolio to dispose the
securities owned by it or fairly to determine the value of its assets; or (3)
as the SEC may otherwise permit.

The value of the shares on redemption may be more or less than the
shareholder's cost, depending upon the market value of the portfolio
securities at the time of redemption.

CALCULATION OF PERFORMANCE QUOTATIONS

The average annual total return of each Portfolio is determined for a
particular period by calculating the actual dollar amount of the investment
return on a $1,000 investment. Total return for a period of one year is equal
to the actual return of the Portfolio during that period. This calculation
assumes a complete redemption of the investment. It also assumes that all
dividends and distributions are reinvested at net asset value on the
reinvestment dates during the period.

Year-by-year total return and cumulative total return for a specified period
are each derived by calculating the percentage rate required to make a $1,000
investment made at the maximum public offering price (net asset value), with
all distributions reinvested, at the beginning of such period equal to the
actual total value of such investment at the end of such period.

Performance data quoted will represent historical performance and the
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than original
cost.

20--Paragon Portfolio

- -------------------------------------------------------------------------------
<PAGE>

VALUE OF $1,000 INVESTMENT

(TOTAL RETURN)
<TABLE>
<CAPTION>
ENDING
REDEEMABLE
VALUE OF
INVESTMENT CUMULATIVE
AT PERIOD TOTAL
END RETURN
AT NET AT NET
ASSET ASSET
PORTFOLIO INVESTMENT DATE VALUE VALUE
- --------- ---------------- ---------- ----------
<S> <C> <C> <C>
Paragon Power Intermediate-Term Bond 1/13/95* through
Portfolio 5/31/95
Assuming Reimbursement $1,096.93 9.69%
Assuming No Reimbursement $1,079.75 7.98%
Paragon Power Value Growth Portfolio 1/13/95* through
5/31/95
Assuming Reimbursement $1,085.12 8.51%
Assuming No Reimbursement $1,075.92 7.59%
Paragon Power Value Equity Income 1/13/95* through
Portfolio 5/31/95
Assuming Reimbursement $1,140.37 14.04%
Assuming No Reimbursement $1,128.28 12.83%
Paragon Power Gulf South Growth 1/13/95* through
Portfolio 5/31/95
Assuming Reimbursement $1,069.38 6.94%
Assuming No Reimbursement $1,066.59 6.66%
</TABLE>
- --------

* Commencement of Operations.

The above table should not be considered a representation of future
performance.

The yield of each Portfolio is computed by dividing its net investment
income earned during a recent thirty-day period by the product of the average
daily number of shares outstanding and entitled to receive dividends during
the period and maximum offering price per share (net asset value) on the last
day of the period. The results are compounded on a bond equivalent (semi-
annual) basis and then annualized. Net investment income per share is equal to
the Portfolio's dividends and interest earned during the period, reduced by
accrued expenses for the period.

The distribution rate is calculated by dividing the total distribution per
share by the maximum public offering price (net asset value) on the last day
of the period and then annualizing such amount.

YIELD
<TABLE>
<CAPTION>
YIELD
INVESTMENT ASSUMING NO
PORTFOLIO PERIOD YIELD REIMBURSEMENTS
- --------- ------------- ------------ -----------------
<S> <C> <C> <C>
Paragon Power Intermediate-Term 30-Days Ended
Bond Portfolio May 31, 1995 5.70% 2.24%
DISTRIBUTION RATE
<CAPTION>
DISTRIBUTION
DISTRIBUTION RATE ASSUMING
PORTFOLIO PERIOD RATE NO REIMBURSEMENTS
- --------- ------------- ------------ -----------------
<S> <C> <C> <C>
Paragon Power Intermediate-Term 30-Days Ended
Bond Portfolio May 31, 1995 6.30% 2.72%
</TABLE>

As described above, yield and distribution rate is based on historical
earnings and is not intended to indicate future Performance. Yield will vary
based on changes in market conditions and the level of expenses.

Paragon Portfolio--21

- -------------------------------------------------------------------------------
<PAGE>

The Portfolios may from time to time advertise comparative performance
and/or their past performance as measured by various independent sources,
including, but not limited to, Barron's, The Wall Street Journal, Weisenberger
Investment Companies Service, Business Week, Changing Times, Financial World,
Forbes, Fortune and Money. In addition, the Portfolios may from time to time
advertise their performance relative to certain indices and benchmark
investments, including: (a) the Lipper Analytical Services, Inc. Mutual
Portfolio Performance Analysis, Fixed Income Analysis and Mutual Fund Indices
(which measure total return and average current yield for the mutual fund
industry and rank mutual fund performance); (b) the CDA Mutual Fund Report
published by CDA Investment Technologies, Inc. (which analyzes price, risk and
various measures of return for the mutual fund industry); (c) the Consumer
Price Index published by the U.S. Bureau of Labor Statistics (which measures
changes in the price of goods and services); (d) Stocks, Bonds, Bills and
Inflation published by Ibbotson Associates (which provides historical
performance figures for stocks, government securities and inflation); and (e)
historical investment data supplied by the research departments of Goldman
Sachs, Smith Barney Shearson Inc., First Boston Corporation, Morgan Stanley,
Salomon Brothers, Merrill Lynch, Donaldson Lufkin and Jenrette or other
providers of such data. The composition of the investments in such indices and
the characteristics of such benchmark investments are not identical to, and in
some cases are very different from, those of each Portfolio's portfolio. These
indices and averages are generally unmanaged and the items included in the
calculations of such indices and averages may not be identical to the formulas
used by a Portfolio to calculate its performance figures.

From time to time, advertisements or information may include a discussion of
certain attributes or benefits to be derived by an investment in a Portfolio.
Such advertisements or information may include symbols, headlines or other
material which highlight or summarize the information discussed in more detail
in the communication.

The Trust may from time to time summarize the substance of discussions
contained in shareholder reports in advertisements and publish the Adviser's
views as to markets, the rationale for a Portfolio's investments and
discussions of a Portfolio's current asset allocation.

Each Portfolio's performance data will be based on historical results and
will not be intended to indicate future performance. The total return of a
Portfolio will vary based on market conditions, portfolio expenses, portfolio
investments and other factors. The value of shares of each Portfolio will
fluctuate and an investor's shares may be worth more or less than their
original cost upon redemption. The Trust may also, at its discretion, from
time to time make a list of each Portfolio's holdings available to investors
upon request.

TAX INFORMATION

Shares of the Portfolios are currently offered only to insurance company
separate accounts that fund certain variable annuity or variable life
insurance contracts. See the applicable Contract prospectus for a discussion
of the special taxation of insurance companies with respect to such accounts
and of Contract holders.

Each Portfolio is treated as a separate entity for tax and accounting
purposes. Each Portfolio intends to elect to be treated as a separate
regulated investment company under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), and to qualify for such treatment for each
taxable year. Such qualification does not involve supervision of management or
investment practices or policies by any governmental agency or bureau.

22--Paragon Portfolio

- -------------------------------------------------------------------------------
<PAGE>

In order to qualify as a regulated investment company, each Portfolio must,
among other things, (a) derive at least 90% of its annual gross income from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stock or securities, or other income (such as
gains from options, futures or forward contracts) derived with respect to its
business of investing in such stock or securities; (b) derive less than 30% of
its annual gross income from the sale or other disposition of stock or
securities or options and futures contracts held less than three months; and
(c) diversify its holdings so that, at the end of each quarter of its taxable
year, (i) at least 50% of the market value of the Portfolio's total (gross)
assets is represented by cash and cash items (including receivables), U.S.
Government securities, securities of other regulated investment companies and
other securities limited, in respect of any one issuer, to an amount not
greater than 5% of the value of the Portfolio's assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of
the value of the Portfolio's total assets is invested in the securities (other
than U.S. Government securities and securities of other regulated investment
companies) of any one issuer or two or more issuers controlled by the
Portfolio and engaged in the same, similar or related trades or business.

As noted in the Prospectus, each Portfolio must, and intends to continue to,
comply with the diversification requirements imposed by Section 817(h) of the
Internal Revenue Code and the regulations thereunder. These requirements,
which are in addition to the diversification requirements mentioned above,
place certain limitations on the portion of each Portfolio's assets that may
be represented by any single investment (which includes all securities of the
same issuer) or any two, three or four investments.

Each Portfolio, as a regulated investment company, will not be subject to
Federal income tax on any of its net investment income and net realized
capital gains that are distributed to shareholders with respect to any taxable
year, provided that the Portfolio distributes, in compliance with the Code's
timing requirements, at least 90% of its investment company taxable income
(all of its taxable income other than the excess of net long-term capital gain
over net short-term capital loss, after reduction by deductible expenses) for
such year and net tax-exempt interest, if any.

Distributions of net investment income (including dividends, interest income
from securities loans, repurchase agreements and certain other investments)
and the excess of net short-term capital gain over net long-term capital loss
will be treated as ordinary income in the hands of shareholders. Distributions
of the excess of net long-term capital gain over net short-term capital loss
will be treated by shareholders as long-term capital gain, regardless of the
length of time shares of a Portfolio have been held by such shareholders.
These tax consequences apply whether distributions are taken in cash or
reinvested in additional shares.

Any loss realized upon a redemption or exchange of shares of a Portfolio
with a tax holding period of six months or less will be treated as a long-term
capital loss to the extent of any distribution of net long term capital gains
with respect to such shares. A loss realized upon a redemption or exchange of
shares of a Portfolio within a 61 day period beginning 30 days before and
ending 30 days after a purchase of shares of the same Portfolio (whether by
reinvestment of distributions or otherwise) may be disallowed under "wash
sale" rules in whole or in part.

Paragon Power Intermediate-Term Bond Portfolio, Paragon Power Value Growth
Portfolio and Paragon Power Value Equity Income Portfolio may be subject to
foreign withholding taxes with respect to investments in certain securities of
foreign entities. These taxes may be reduced under the terms of applicable
U.S. income tax treaties, and the Portfolio intends to satisfy any procedural
requirements to qualify for benefits under these treaties.

Paragon Portfolio--23

- -------------------------------------------------------------------------------
<PAGE>

A Portfolio's transactions in options and forward contracts will give rise
to taxable income, gain or loss and will be subject to special tax rules, the
effect of which may be to accelerate income to a Portfolio, defer Portfolio
losses, cause adjustments in the holding periods of Portfolio securities,
convert capital gains and losses into ordinary income and losses, convert
long-term capital gains into short-term capital gains and convert short-term
capital losses into long-term capital losses. These rules could therefore
affect the amount, timing and character of distributions to shareholders.

For example, the tax treatment of certain listed non-equity options written
or purchased by a Portfolio (including options on debt securities, options on
futures contracts and options on securities indices) will be governed by
Section 1256 of the Code. Absent a tax election for "mixed straddles" (see
below), each such position held by a Portfolio on the last business day of
each taxable year of a Portfolio will be marked to market (i.e., treated as if
it were closed out), and all resulting gain or loss will be treated as 60%
long-term capital gain or loss and 40% short-term capital gain or loss, with
subsequent adjustments made to any gain or loss realized upon an actual
disposition of such positions.

When a Portfolio holds an option or contract governed by Section 1256 which
substantially diminishes a Portfolio's risk of loss with respect to another
position of the Portfolio not governed by Section 1256 (as might occur in some
hedging transactions), this combination of positions could be a "mixed
straddle" which is generally subject to certain straddle rules of Section 1092
of the Code in addition to being subject in part to Section 1256. A Portfolio
may make certain tax elections for its "mixed straddles" which could alter
certain effects of Section 1256 or Section 1092.

A Portfolio's activities involving options and futures contracts may be
limited by the requirement for qualification as a regulated investment company
that less than 30% of the Portfolio's annual gross income be derived from the
disposition of investments held less than three months.

A Portfolio's investment in zero coupon bonds, deferred interest bonds or
bonds that provide for payment of interest in kind are subject to special tax
rules that may affect the timing of distributions to shareholders by causing
the Portfolio to recognize income prior to the receipt of cash payments. For
example, with respect to zero coupon bonds and deferred interest bonds, a
Portfolio will generally be required to accrue as income each year a portion
of the discount (or deemed discount) at which the securities were issued and
to distribute such income each year in order to maintain its qualification as
a regulated investment company and to avoid Federal income taxes. A Portfolio
may also elect to accrue market discount on a current basis and be required to
distribute any such accrued discount. Mark to market rules applicable to
certain positions governed by Section 1256 of the Code (as described above)
may also require the recognition of gain without concurrent receipt of cash.
In order to generate cash to satisfy the distribution requirements applicable
to such income or gain, a Portfolio may have to dispose of portfolio
securities which it would otherwise have continued to hold.

All distributions, whether received in shares or cash, as well as
redemptions and exchanges, must be taken into account by each shareholder in
determining its Federal income tax liability, if any.

Assuming that each Portfolio qualifies as a regulated investment company for
Federal income tax purposes, each Portfolio, as a series of a Massachusetts
business trust, will not be subject to any income tax in Massachusetts. The
Portfolios are also not subject to Massachusetts corporate excise or franchise
tax.

24--Paragon Portfolio

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<PAGE>

The foregoing discussion relates solely to U.S. Federal income tax law as it
applies to the Portfolios and their distributions. The discussion does not
address special tax rules applicable to certain classes of investors, such as
insurance companies, and such investors should consult their own tax advisers
regarding these rules.

This discussion of the tax treatment of the Portfolios and their
distributions is based on the tax laws in effect as of the date of this
Statement of Additional Information.

ORGANIZATION AND CAPITALIZATION

The Portfolios are designed to be the funding vehicle for various insurance
contracts (the "Contracts") to be offered by Great Northern Insured Annuity
Corporation ("GNA") and other participating insurance companies. Shares of the
Portfolios are offered exclusively to the separate accounts (the "Accounts")
of GNA and other insurance companies. The terms and conditions of the
Contracts and any limitations upon the Portfolios in which the Accounts may be
invested are set forth in a separate prospectus and statement of additional
information. The Trust reserves the right to limit in the future the types of
Accounts that may invest in the any Portfolio.

GNA and any other participating insurance companies are the recordholders of
the shares of beneficial interest of each Portfolio. Within the limitation set
forth in the appropriate Contract, Contract holders may direct through GNA or
such other insurance company the allocation of amounts available for
investment under their Contracts among the Portfolios. Instructions for any
such allocation, or the purchase or redemption of the shares of any Portfolio,
must be made through GNA or such other insurance company as the record holder
of the Portfolio's shares. The rights of GNA or such other insurance company
as the record holder of the shares of a Portfolio are different from the
rights of a Contractholder. The term "Shareholder" in this Statement of
Additional Information when used with respect to a Portfolio refers to GNA or
such other insurance companies and not to the Contractholder.

The rights, if any, of Contract holders to vote the shares of a Portfolio
beneficially owned by such Contractholders are governed by the relevant
Contract. For information on such voting rights, see the prospectus describing
such Contract.

The Trust is a Massachusetts business trust established under the laws of
the Commonwealth of Massachusetts by a Declaration of Trust dated October 2,
1989. The authorized capital of the Trust consists of an unlimited number of
shares of beneficial interest. The Trustees have authority under the
Declaration of Trust to create and classify shares of beneficial interest in
separate series ("Funds") without further action by shareholders. In addition
to the Portfolios, the Trust has seven additional series.

Shares entitle their holder to one vote per share; however, separate votes
will be taken by each Portfolio on matters affecting an individual Portfolio.
Shares are freely transferable and have no preemptive, subscription or
conversion rights. All shares issued and outstanding are fully paid and non-
assessable. The shares of the Trust have non-cumulative voting rights, which
means that the holders of more than 50% of the Trust's shares voting for the
election of Trustees can elect 100% of the Trustees if they choose to do so,
and, in such event, the holders of the remaining less than 50% of the shares
voting for the election of Trustees will not be able to elect any person or
persons to the Board of Trustees.

To the best knowledge of the Trust, as of July 7, 1995, there are no persons
owning 5% or more of the outstanding shares of Paragon Power Intermediate-Term
Bond Portfolio, Paragon Power Value Growth Portfolio, Paragon Power Value
Equity Income Portfolio and Paragon Power

Paragon Portfolio--25

- -------------------------------------------------------------------------------
<PAGE>

Value Equity Portfolio, except GNA Variable Investment Account of Great
Northern Insured Annuity Corporation which currently holds 100% of the shares
of each of the Portfolios listed above.

SHAREHOLDER AND TRUSTEE LIABILITY

The Trust is an entity of the type commonly known as a "Massachusetts
business trust", which is the form in which many mutual funds are organized.
Under Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for the obligations of
the trust. The Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Trust. Notice of such
disclaimer will normally be given in each agreement, obligation or instrument
entered into or executed by the Trust or the Trustees. The Declaration of
Trust provides for indemnification by the relevant Portfolio for any loss
suffered by a shareholder as a result of an obligation of the Portfolio. The
Declaration of Trust also provides that the Trust shall, upon request, assume
the defense of any claim made against any shareholder for any act or
obligation of the Trust and satisfy any judgment thereon. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which a Portfolio is unable to meet its
obligations. The Trustees believe that, in view of the above, the risk of
personal liability of shareholders is not material.

The Declaration of Trust provides that the Trustees of the Trust shall not
be liable for any action taken by them in good faith, and that they shall be
fully protected in relying in good faith upon the records of the Trust and
upon reports made to the Trust by persons selected in good faith by the
Trustees as qualified to make such reports. The Declaration of Trust further
provides that the Trustees will not be liable for errors of judgment or
mistakes of fact or law. The Declaration of Trust provides that the Trust will
indemnify Trustees and officers of the Trust against liabilities and expenses
reasonably incurred in connection with litigation in which they may be
involved because of their positions with the Trust, unless it is determined in
the manner provided in the Declaration of Trust that they have not acted in
good faith in the reasonable belief that in the case of conduct in his or her
official capacity with the Trust, that the conduct was in the best interests
of the Trust, and in all other cases, that the conduct was at least not
opposed to the best interests of the Trust (and in the case of any criminal
proceeding, he or she had no reasonable cause to believe that the conduct was
unlawful). However, nothing in the Declaration of Trust or the By-Laws
protects or indemnifies a Trustees or officer against any liability to which
he or she would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.

CUSTODIAN

State Street Bank and Trust Company has been retained to act as custodian of
the Trust's assets and, in that capacity, maintains the accounting records and
calculates the daily net asset value per share of the Portfolios. Its mailing
address is 225 Franklin Street, Boston, MA 02110. The Northern Trust Company,
50 South LaSalle Street, Chicago, Illinois 60603, serves as subcustodian of
the Trust.

INDEPENDENT ACCOUNTANTS

Price Waterhouse LLP has been selected as independent accountants of the
Trust. In addition to audit services, Price Waterhouse LLP prepares the
Trust's Federal and state tax returns and provides consultation and assistance
on accounting, internal control and related matters.

FINANCIAL STATEMENTS

The unaudited financial statements of the Portfolios for the period January
13, 1995 (commencement of operations) through May 31, 1995 are attached
hereto.

Paragon Portfolio--26

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<PAGE>

APPENDIX

DESCRIPTION OF SECURITIES RATINGS*

MOODY'S INVESTORS SERVICE, INC.

AAA: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

AA: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than with Aaa
securities.

A: Bonds which are rated A possess many favorable investment attributes and
may be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.

BAA: Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

UNRATED: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.

Should no rating be assigned, the reason may be one of the following:

1. An application for rating was not received or accepted;

2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy;

3. There is a lack of essential data pertaining to the issue or issuer;
or

4. The issue was privately placed, in which case the rating is not
published in Moody's publications. Suspension or withdrawal may occur if
new and material circumstances arise, the effects of which preclude
satisfactory analysis; if there is no longer available reasonable up-to-
date data to permit a judgment to be formed; if a bond is called for
redemption; or for other reasons.

Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.

Moody's ratings for state and municipal and other short-term obligations
will be designated Moody's Investment Grade ("MIG"). This distinction is in
recognition of the differences between short-term credit risk and long-term
risk. Factors affecting the liquidity of the borrower are uppermost in
importance in short-term borrowing, while various factors of the first
importance in long-term borrowing risk are of lesser importance in the short
run. Symbols used will be as follows:

1-A

- -------------------------------------------------------------------------------
<PAGE>

MIG-1--Notes bearing this designation are of the best quality enjoying
strong protection from established cash flows of funds for their servicing
or from established and broad-based access to the market for refinancing,
or both.

MIG-2--Notes bearing this designation are of high quality, with margins
of protection ample although no so large as the preceding group.

MIG-3--Notes bearing this designation are of favorable quality with all
security elements accounted for, but lacking the undeniable strength of the
preceding grades. Market access for refinancing, in particular, is likely
to be less well established.

A short-term rating may also be assigned on an issue having a demand
feature. Such ratings will be designated as VMIG to reflect such
characteristics as payment upon periodic demand rather than fixed maturity
dates and payment relying on external liquidity. Additionally, investors
should be alert to the fact that the source of payment may be limited to the
external liquidity with no or limited legal recourse to the issuer in the
event the demand is not met VMIG-1, VMIG-2 and VMIG-3 ratings carry the same
definitions as MIG-1, MIG-2 and MIG-3, respectively.

STANDARD & POOR'S RATINGS GROUP**

AAA: Bonds rated AAA are highest grade debt obligations. This rating
indicates an extremely strong capacity to pay principal and interest.

AA: Bonds rated AA also qualify as high-quality obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.

A: Bonds rated A have a strong capacity to pay principal and interest,
although they are more susceptible to the adverse effects of changes in
circumstances and economic conditions.

BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds
in this category than in higher rated categories.

PLUS (+) OR MINUS (-): The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

UNRATED: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate
a particular type of obligation as a matter of policy.

Municipal notes issued since July 29, 1984 are rated "SP-1", "SP-2", and
"SP-3". The designation SP-1 indicates a very strong capacity to pay principal
and interest. A "+" is added to those issues determined to possess
overwhelming safe characteristics. An SP-2 designation indicates a
satisfactory capacity to pay principal and interest while an SP-3 designation
indicates speculative capacity to pay principal and interest.

DESCRIPTION OF COMMERCIAL PAPER RATINGS

MOODY'S INVESTORS SERVICE, INC.

P-1: Moody's Commercial Paper ratings are opinions of the ability of issuers
to repay punctually promissory obligations not having an original maturity in
excess of nine months. The designation "Prime-1" or "P-1" indicates the
highest quality repayment capacity of the rated issue.

2-A

- -------------------------------------------------------------------------------
<PAGE>

STANDARD & POOR'S RATINGS GROUP

A-1: Standard & Poor's Commercial Paper ratings are current assessments of
the likelihood of timely payment of debts having an original maturity of no
more than 365 days. The A-1 designation indicates the degree of safety
regarding timely payment is very strong.
- --------
* The ratings indicated herein are believed to be the most recent ratings
available at the date of this Additional Statement for the securities
listed. Ratings are generally given to the securities at the time of
issuance. While the rating agencies may from time to time revise such
ratings, they undertake no obligation to do so, and the ratings indicated
do not necessarily represent ratings which will be given to these
securities on the date of the Portfolios' fiscal year end.
** Rates all governmental bodies having $1,000,000 or more of debt
outstanding, unless adequate information is not available.

3-A

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

<PAGE>

PARAGON PORTFOLIO

LETTER TO SHAREHOLDERS
FELLOW SHAREHOLDERS:

The staff of Premier Investment Advisors, L.L.C. welcomes you as a
shareholder of the Paragon Power Variable Annuity. The Power Portfolios began
operations on January 13, 1995. This letter covers the economic environment
and investment results as of May 31, 1995.

THE ECONOMY

Investors have been waiting for the "soft landing" in the U.S. economy and
it appears to be here. A good indication is the rate of employment growth,
which is settling in at 150,000-200,000 new jobs each month. This is
consistent with a 2% rate of Gross Domestic Product growth. This slower rate
of growth through the year should help keep a lid on inflation, which is
running around 3% based on consumer prices. Due to the economic environment,
the Federal Reserve has lowered the Federal Funds Rate from 6% to 5.75%. This
was the first rate cut in three years and does not appear to be the last in
1995.

The slowing in economic activity was preordained by rising short-term and
long-term interest rates in 1994. Long-term interest rates approached 8.2%
last November, creating a 5% real return over inflation, which investors
eventually viewed as a major buying opportunity. Yields have since dropped
below 7%. Our analysis suggests that every one percentage point drop in yields
adds a full percentage point in economic activity one year later. That means
that 1996 should exhibit stronger economic activity aided by increased
domestic and foreign demand for goods and services. With unemployment below 6%
and the nation's capacity utilization already at high levels, inflation
pressure may ensue, forcing the Federal Reserve into another round of credit
tightening late next year.

THE STOCK MARKET

For the six months ended May 31, 1995, the Dow Jones Industrial Average
increased 21.1% while the broader S&P 500 Index achieved a 19.2% return. The
Russell 2000 Index, a proxy for small-capitalization stocks, is up 11.7%.
International stocks, as measured by the Europe Asia Far East ("EAFE") Index,
have risen 5.3% during the last six months. Clearly, U.S. stocks have been
stellar performers so far this year. What kind of stocks have been rewarding
investors? Believing that the economy is slowing to a sustainable growth rate,
investors are attracted to stocks of well-known companies with consistent
earnings patterns. Investors also have been seeking large multinational
companies with exposure to the economic recovery in Europe. These investment
characteristics help explain why large-company stocks have outperformed
smaller stocks by a considerable margin this year.

Equities continue to be supported by a belief that the U.S. economy is
executing a soft landing. Furthermore, the end of the Federal Reserve's
tightening and a drop in bond yields below 7% are strong props under stock
prices. A major negative continues to be the low average dividend yield, but
we believe this is an indication that companies have found more productive
uses for their cash. They are expanding their businesses, buying other
businesses or buying back their own shares. These activities have helped boost
share prices to record levels.

FIXED INCOME MARKET

For the six months ended May 31, 1995, bonds have rallied strongly as short-
term and long-term interest rates have plummeted. The Lehman Brothers
Aggregate Bond Index has earned a cumulative total return of 11.4% during the
last six months. This Index measures the performance of the bond market as a
whole, both short and long-term maturities. Even the Lehman Brothers Mutual
Fund Short (1-3) Government Index, a high-quality short-term index, achieved
an impressive return of 6.2% for the six month period. Our longer term view of
the bond market remains positive.

SUMMARY

The rise in short-term interest rates since February 1994 has had its
desired affect of slowing economic activity. Thus, further increases in short-
term interest rates are not likely in the near term. Stock valuations appear
high with the S&P 500 price to earnings (based on 1995 earnings projections)
ratio at nearly 16 times, but when compared to interest rates and inflation,
stocks appear slightly undervalued. Demand for U.S. securities from domestic
investors appears strong, yet sentiment does not seem alarmingly high. Demand
from foreign investors could rise once the dollar has stabilized. Though a 5%-
10% technical correction could occur, the trend in U.S. stock prices for 1995
appears to be upward.

With this overview of the economy and financial markets, let us turn to the
events that shaped each Power Portfolio's first months of operations.

PARAGON POWER INTERMEDIATE-TERM BOND PORTFOLIO

For the period since inception (January 13, 1995) through May 31, 1995, the
Portfolio reported a total return of 9.69% based on net asset value ("NAV").
This compares with the Lehman Brothers Mutual Fund Intermediate
Government/Corporate Bond Index return of 8.46% for the same time period.

1
<PAGE>

PARAGON PORTFOLIO

LETTER TO SHAREHOLDERS--(CONTINUED)

The Portfolio's duration, average maturity, coupon, and percent of holdings
with the exception of mortgage backed securities are all at their desired
levels. Mortgage backed securities will be added as the Portfolio grows and
size limitations can be overcome. It will take several months to achieve the
desired ratios, but up to this point, this has neither hurt nor helped the
Portfolio since the total return on mortgage backed securities is in line with
the other sectors of the Portfolio.

The timing in creating this Portfolio could not have been more opportune,
given the rapid appreciation in the bond market since inception.

PARAGON POWER VALUE GROWTH PORTFOLIO

The Portfolio reported a total return of 8.51% for the period since
inception (January 13, 1995) through May 31, 1995 based on NAV. This compares
to a total return of 16.81% for the S&P 500 and a total return of 13.91% for
the Lipper Growth and Income Fund Index for the same period.

The Portfolio benefited from its exposure to several well-performing
economic sectors of the market. Most notably, the 11.6% weighting in the
Technology Sector showed a 37.4% return for the period. Standout performers
were semiconductor stocks: Intel Corp. up 65% and Texas Instruments, Inc. up
54%. These stocks led all issues in the Portfolio for the stated time frame.
The Financial sector turned in impressive results due to decreasing interest
rates. A total of 8.2% of the net assets of the Portfolio were invested in
this sector, which showed a 21.8% return. Federal National Mortgage
Association was the greatest beneficiary, with a return of 32.8%. Dow Chemical
Co. (up 10.7%) and Du Pont (E.I.) de Nemours & Co. (up 22.9%) outperformed the
other issues held in the Basic Materials & Natural Resources sector. These
stocks benefited from the focus on large-capitalization companies. The
Utilities sector was also a beneficiary of the decrease in interest rates
during the period. These income-producing stocks had a return of 17.9% for the
group for this time frame.

The areas of sub-par performance were found almost exclusively in the
Consumer Cyclical sector and focused clearly on the retail stocks. Especially
damaging was the poor performance of the specialty retailer Sports and
Recreation, Inc., 4.25% Convertible Bond due 11/01/00. Other disappointing
performers included Heilig Meyers, a furniture retailer and the home
improvement company Home Depot, Inc. Consumer cyclical stocks remain under the
cloud of decreased spending by consumers.

PARAGON POWER VALUE EQUITY INCOME PORTFOLIO

For the period since inception on January 13, 1995 through May 31, 1995, the
Portfolio achieved a total return of 14.04% based on NAV. The S&P 500 Index
earned a 16.81% total return over the same period while the Lipper Equity
Income Mutual Fund Index earned a 13.01% total return.

Several reasons for the Portfolio's results being slightly behind the S&P
500 Index can be cited. We stated earlier that the stock market has been most
kind to the largest U.S. companies. Though the Portfolio does invest in large
companies, the average capitalization of its holdings is smaller than the
average capitalization of companies in the S&P 500 Index. More specific
reasons for the relative results include the following:

1. Over the period measured, the Portfolio held between 14%-17% of its net
assets in convertible securities, which tend to perform relatively well
in a flat to down stock market, but tend to lag in a strong market such
as the one we have had this year.

2. The Portfolio has maintained an overweighted position in Basic Materials
& Natural Resources stocks such as Dow Chemical Co., Du Pont (E.I.) de
Nemours & Co. and International Paper Co., though the weighting in this
sector was reduced somewhat by the end of the period. This sector of the
stock market underperformed the S&P 500 by over 3% as investors begin to
discount a slowing economy, which could reduce earnings expectations for
these economically sensitive stocks.

3. The Portfolio maintained an underweighted but growing position in
financial stocks during the period. This sector outperformed the market,
rising almost 24% due to the dramatic drop in interest rates. Portfolio
holdings include Reliastar Financial Corp., Merrill Lynch & Co., Inc.
and Federal National Mortgage Association. On average, this segment of
the Portfolio almost doubled the S&P 500 results during the period.
However, we did not anticipate the dramatic interest rate declines
during this period and were not sufficiently weighted in this sector to
match the S&P 500's performance.

Several factors had a beneficial effect on the Portfolio's results:

1. The Portfolio's Capital Equipment & Services sector performed extremely
well. The main contributors were Lockheed Martin Corp., gaining 27%, and
Deere & Co., which increased 24% in value.

2
<PAGE>

PARAGON PORTFOLIO

LETTER TO SHAREHOLDERS--(CONTINUED)

2. We correctly reduced the Portfolio's exposure to consumer cyclical
stocks from two-thirds to about one-half of the S&P 500's weighting.
This market sector, which includes automobiles, retailers and other
consumer discretionary items, underperformed the S&P 500 by
approximately 5% as investors forecasted the slowing in consumer
spending as the economy decelerated.

3. The Portfolio maintained a market weighting in the Technology sector,
which was the strongest market sector since the rally began in January.
We were successful in our stock selection in this sector as well. Issues
that contributed strongly to the Portfolio's gain were Intel Corp. and
Texas Instruments, Inc., up 65% and 54%, respectively.

The significant changes in the Portfolio since inception include the
purchase of shares of Baxter International, Inc., a leading hospital supply
company; Exxon Corp., a major integrated oil company; and International
Business Machines Corp. ("IBM") the leading mainframe computer manufacturer.
Additional purchases included shares in Paccar, Inc., a manufacturer of heavy-
duty trucks. Sales during the period include all shares in General Electric
Co. and Johnson & Johnson, which were sold in order to capture significant
profits. In addition, a portion of our holdings in Texas Instruments, Inc.
were sold for the same reason.

The Portfolio retains a strong value orientation maintaining a lower average
price to earnings ratio as compared to the S&P 500 Index.

PARAGON POWER GULF SOUTH GROWTH PORTFOLIO

For the period since inception on January 13, 1995 through May 31, 1995, the
Portfolio achieved a total return of 6.94% based on NAV. The Russell 2000
Index, a popular small-capitalization stock index, earned a 10.34% total
return, the Lipper Small-Company Growth Fund Index, an index of a group of
mutual funds with similar investment objectives, rose 9.47% and the S&P 500
Index earned a 16.81% total return, for the same time period.

The primary reason for the Portfolio's underperformance versus the S&P 500
lies with the median capitalization of the Portfolio versus the S&P 500 Index
capitalization. As stated earlier in this letter, large-capitalization stocks
have outperformed small capitalization stocks by a wide margin as exhibited by
the S&P 500 Index return being approximately 6% above the Russell 2000 Index
return.

Several specific reasons can be cited for the results trailing the Russell
2000 Index and the Lipper Small Company Growth Index:

1. In April 1995, Health Maintenance Organization ("HMO") stocks declined
significantly following an announcement of price cuts by a small HMO in
the Midwest. The Portfolio's holdings of HMO stocks, which make up over
3% of net assets declined in price between 16% and 42% during the last
two months of this period.

2. Basic Material & Natural Resources stocks such as Georgia Gulf Corp.,
Nucor Corp. and Image Industries, Inc. declined during the period an
average of 12.2% while the market indices rose. These three stocks made
up of over 6% of Portfolio assets as of May 31, 1995. Investors were
concerned about pricing pressure and earnings sustainability in a
slowing economy. The Portfolio continues to hold these stocks since we
believe they have excellent growth potential.

3. The Portfolio's holdings of consumer cyclical stocks declined 17% during
the period, led by Sports and Recreation, Inc., Michaels Stores, Inc.,
and Heilig Meyers Co. We continue to have confidence in the investment
merits of these stocks.

Several events had beneficial effects on the Portfolio's performance during
the period:

1. Portfolio holdings in the Energy sector, which comprises almost 10% of
net assets, had large gains during the period. Benton Oil & Gas Co., a
small exploration and production company, rose 40% in price, while
Input/Output, Inc., a seismic equipment company, rose 49% during the
period. In addition, shares of Landmark Graphics Corp., a company that
develops software to analyze seismic data for oil and gas exploration,
rose 25% during the period.

2. Financial stocks, which make up almost 20% of net assets, gained an
average of 33%. Holdings include Regional Acceptance Corp., up 46%;
United Companies Financial Corp. up 71%; and Stewart Enterprises, Inc.
up 21%.

Important changes made in the Portfolio's holdings during the period include
the following:

1. The Technology sector was increased from 6.9% to 11.1% of net assets
through the purchase of DSC Communications Corp., a Texas-based
manufacturer of telecommunications switching equipment, and Acxiom
Corp., an Arkansas-based company that maintains target marketing data-
bases for use by Fortune 1000 companies.

3
<PAGE>

PARAGON PORTFOLIO

LETTER TO SHAREHOLDERS--(CONTINUED)

Financial stocks were increased by over 4% to 19.7% of net assets by
purchasing Bankers First Corp., a High Point, North Carolina-based savings and
loan, and Medaphis Corp., a company that performs accounts receivable
management and office management for hospitals and medical practices.

Asset sales for the period included all shares of Tech Data Corp., a
personal computer products distributor which was sold at a 39% loss following
an interruption in earnings momentum in the company due to internal inventory
management problems. In addition, PMT Services, a company that provides credit
card transaction-processing services to small businesses, was sold to capture
an 80% gain.

In conclusion, we appreciate your support of the Paragon Power Portfolio
Variable Annuity and look forward to helping you meet your investment
objectives.

/s/ Donald E. Allred

Donald E. Allred
President and Chief Investment Officer
Premier Investment Advisors, L.L.C.
July 7, 1995

4
<PAGE>

PARAGON PORTFOLIO

STATEMENT OF INVESTMENTS

PARAGON POWER INTERMEDIATE-TERM BOND PORTFOLIO
MAY 31, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
--------- -------- -------- ----------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS--35.8%
Federal Farm Credit Bank
$100,000 5.81% 11/10/03 $ 95,503
Federal Home Loan Bank
100,000 7.61 09/23/04 105,380
Federal Home Loan Mortgage Corp.
100,000 7.13 07/21/99 103,306
Federal National Mortgage Assn.
100,000 6.80 01/10/03 101,524
Tennessee Valley Authority 1989 Series D
100,000 8.38 10/01/99 107,550
----------
Total U.S. Government Agency Obligations
(Cost $485,217).............................. $ 513,263
----------
U.S. TREASURY OBLIGATIONS--34.3%
United States Treasury Bond
$100,000 9.38% 02/15/06 $ 123,073
United States Treasury Notes
95,000 7.38 11/15/97 98,112
100,000 8.00 05/15/01 109,302
150,000 7.50 05/15/02 161,132
----------
Total U.S. Treasury Obligations
(Cost $459,143).............................. $ 491,619
----------
CORPORATE OBLIGATIONS--21.5%
Anheuser Busch Companies, Inc.
$100,000 6.90% 10/01/02 $ 100,885
Ford Motor Credit Corp.
100,000 7.50 06/15/04 102,781
NationsBank Corp.
100,000 7.75 08/15/04 105,101
----------
Total Corporate Obligations (Cost $287,283)... $ 308,767
----------
</TABLE>

<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
--------- -------- -------- ----------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS--7.7%
State Street Bank & Trust Company, dated
05/31/95, repurchase price $110,017
(U.S. Treasury Note: $110,000, 6.63%,
03/31/97)
$110,000 5.50% 06/01/95 $ 110,000
----------
Total Repurchase Agreements (Cost $110,000)... $ 110,000
----------
Total Investments (Cost $1,341,643(a))........ $1,423,649
==========
</TABLE>

<TABLE>
- ----------------------------------------------------------------------------------------------------
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in which value
exceeds cost.............................................. $ 82,006
Gross unrealized loss for investments in which cost exceeds
value..................................................... 0
----------
Net unrealized gain........................................ $ 82,006
==========
- ----------------------------------------------------------------------------------------------------
</TABLE>

(a) The cost stated also represents aggregate cost for federal income tax
purposes.

The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.

The accompanying notes are an integral part of these financial statements.

5
<PAGE>

PARAGON PORTFOLIO

STATEMENT OF INVESTMENTS

PARAGON POWER VALUE GROWTH PORTFOLIO
MAY 31, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- ----------
<C> <S> <C>
COMMON STOCKS--80.8%
BASIC MATERIALS & NATURAL RESOURCES--8.8%
800 Dow Chemical Co. $ 58,700
500 Du Pont (E.I.) de Nemours & Co. 33,937
400 International Paper Co. 31,450
600 Nucor Corp. 28,650
----------
152,737
----------
CAPITAL EQUIPMENT & SERVICES--9.0%
1,100 Allied Signal, Inc. 44,412
600 General Electric Co. 34,800
500 Grainger (W.W.), Inc.(a) 29,938
800 Johnson Controls, Inc. 45,800
----------
154,950
----------
CONSUMER CYCLICAL--14.2%
1,400 Autozone, Inc.(b) 32,550
500 Chrysler Corp.(a) 21,813
400 Dayton Hudson Corp. 28,350
1,100 Heilig Meyers Co. 26,263
800 Home Depot, Inc. 33,300
1,300 Michaels Stores, Inc.(b) 29,412
700 Minnesota Mining & Manufacturing Co. 41,913
1,300 Office Depot, Inc.(b) 31,200
----------
244,801
----------
CONSUMER NONCYCLICAL--11.5%
300 Darden Restaurants, Inc.(b) 3,300
1,000 Duracell International, Inc. 43,250
1,300 Foundation Health Corp.(b) 36,562
500 General Mills, Inc. 25,937
900 Healthcare Compare Corp.(b) 28,125
600 Proctor & Gamble Co. 43,125
500 United Healthcare Corp. 18,625
----------
198,924
----------
ENERGY--5.4%
800 Amoco Corp. 54,700
1,200 Sun Co., Inc. 37,800
----------
92,500
----------
</TABLE>

<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- ----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
FINANCE--8.2%
700 CCB Financial Corp.(a) $ 28,875
500 Federal National Mortgage Assn. 46,500
1,000 First American Corp. of Tennessee 34,688
1,500 Southtrust Corp. 32,063
----------
142,126
----------
TECHNOLOGY--11.6%
800 AMP, Inc.(a) 34,100
1,200 Compaq Computer Corp.(b) 46,950
500 Intel Corp. 56,125
300 Texas Instruments, Inc. 34,687
250 Xerox Corp. 28,344
----------
200,206
----------
TRANSPORTATION--1.6%
1,800 Skywest, Inc. 27,675
----------
UTILITIES--10.5%
700 AT&T Corp. 35,525
500 BellSouth Corp. 30,687
1,000 Enron Corp. 36,500
1,600 Peco Energy Co. 45,000
1,300 WorldCom, Inc.(b) 33,800
----------
181,512
----------
Total Common Stocks (Cost $1,295,915)......... $1,395,431
----------
PREFERRED STOCKS--4.1%
300 Ashland Oil Co., Convertible Preferred, 3.13% $ 17,700
500 Corning Delaware LP, Convertible Preferred, 6.00% 24,875
300 Ford Motor Co., Convertible Preferred, 4.20% 28,650
----------
Total Preferred Stocks (Cost $68,293)......... $ 71,225
----------
</TABLE>

The accompanying notes are an integral part of these financial statements.

6
<PAGE>

PARAGON PORTFOLIO

STATEMENT OF INVESTMENTS

PARAGON POWER VALUE GROWTH PORTFOLIO--(CONTINUED)
MAY 31, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
--------- -------- -------- ----------
<S> <C> <C> <C>
CORPORATE OBLIGATIONS--2.2%
Avnet, Inc.
$ 20,000 6.00% 04/15/12 $ 22,125
Sports & Recreation, Inc.
20,000 4.25 11/01/00 15,225
----------
Total Corporate Obligations
(Cost $41,541)....................... $ 37,350
----------
REPURCHASE AGREEMENTS--16.5%
State Street Bank & Trust Company, dated
05/31/95, repurchase price $285,044
(U.S. Treasury Note: $285,000, 6.63%,
03/31/97)
$285,000 5.50% 06/01/95 $ 285,000
----------
Total Repurchase Agreements
(Cost $285,000)...................... $ 285,000
----------
Total Investments
(Cost $1,690,749(c))................. $1,789,006
==========
</TABLE>

<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in which value exceeds cost.... $136,370
Gross unrealized loss for investments in which cost exceeds value.... (38,113)
--------
Net unrealized gain.................................................. $ 98,257
========
- --------------------------------------------------------------------------------
</TABLE>

(a) There are common stock rights attached to these securities.
(b) Non-income producing security.
(c) The cost stated also represents aggregate cost for federal income tax
purposes.

The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.

The accompanying notes are an integral part of these financial statements.

7
<PAGE>

PARAGON PORTFOLIO

STATEMENT OF INVESTMENTS

PARAGON POWER VALUE EQUITY INCOME PORTFOLIO
MAY 31, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- ----------
<C> <S> <C>
COMMON STOCKS--80.4%
BASIC MATERIALS & NATURAL RESOURCES--10.4%
900 Birmingham Steel Corp. $ 16,875
600 Dow Chemical Co. 44,025
700 Du Pont (E.I.) de Nemours & Co. 47,513
250 International Paper Co. 19,656
200 Mead Corp. 10,775
----------
138,844
----------
CAPITAL EQUIPMENT & SERVICES--8.9%
200 Deere & Co. 17,300
200 ITT Corp. 22,375
200 Johnson Controls, Inc. 11,450
900 Lockheed Martin Corp. 53,550
300 Paccar, Inc.(a) 14,437
----------
119,112
----------
CONSUMER CYCLICAL--7.4%
500 Chrysler Corp.(a) 21,812
800 Fleetwood Enterprises, Inc. 16,600
500 Reebok International Ltd. 16,750
400 Sears Roebuck & Co. 22,550
400 VF Corp. 21,300
----------
99,012
----------
CONSUMER NONCYCLICAL--17.4%
1,100 Baxter International, Inc. 38,363
250 Bristol-Myers Squibb Co. 16,594
400 Conagra, Inc. 13,350
1,200 IBP, Inc. 45,000
700 Phillip Morris Companies, Inc. 51,013
900 Premark International, Inc. 44,888
300 Schering Plough Corp.(a) 23,625
----------
232,833
----------
ENERGY--7.5%
200 Exxon Corp. 14,275
600 Mobil Corp.(a) 60,225
200 Royal Dutch Petroleum Co. ADR 25,350
----------
99,850
----------
FINANCE--6.7%
400 Federal National Mortgage Assn. 37,200
400 Merrill Lynch & Co., Inc. 18,800
900 Reliastar Financial Corp. 33,412
----------
89,412
----------
</TABLE>

<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- ----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
TECHNOLOGY--12.4%
400 Compaq Computer Corp.(b) $ 15,650
300 Intel Corp. 33,675
400 International Business Machines Corp. 37,300
600 Morgan Stanley Group, Inc. (Cisco Systems, Inc.--PERQS) 21,675
200 Texas Instruments, Inc. 23,125
300 Xerox Corp. 34,012
----------
165,437
----------
TRANSPORTATION--3.5%
900 Atlantic Southeast Airlines, Inc. 21,713
200 British Airways ADR 13,150
500 Consolidated Freightways, Inc. 11,875
----------
46,738
----------
UTILITIES--6.2%
400 BellSouth Corp. 24,550
400 Entergy Corp. 9,900
800 Peco Energy Co. 22,500
800 Sprint Corp. 26,800
----------
83,750
----------
Total Common Stocks (Cost $956,811)................. $1,074,988
----------
PREFERRED STOCKS--8.4%
300 Citicorp, Convertible Preferred, 5.38% $ 43,500
400 Ford Motor Co., Convertible Preferred, 4.20% 38,200
500 General Motors Corp., Convertible Preferred, 3.25% 31,000
----------
Total Preferred Stocks (Cost $101,401).............. $ 112,700
----------
</TABLE>

The accompanying notes are an integral part of these financial statements.

8
<PAGE>

PARAGON PORTFOLIO

STATEMENT OF INVESTMENTS

PARAGON POWER VALUE EQUITY INCOME PORTFOLIO--(CONTINUED)
MAY 31, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- --------- -------- -------- ----------
<S> <C> <C> <C>
CORPORATE OBLIGATIONS--6.2%
Avnet, Inc.
$30,000 6.00% 04/15/12 $ 33,187
Healthsouth Rehabilitation
10,000 5.00 04/01/01 10,850
Pennzoil Co.
20,000 6.50 01/15/03 23,600
Sports & Recreation, Inc.
20,000 4.25 11/01/00 15,225
----------
Total Corporate Obligations
(Cost $83,429)............................... $ 82,862
----------
REPURCHASE AGREEMENTS--15.0%
State Street Bank & Trust Company, dated
05/31/95, repurchase price $200,031
(U.S. Treasury Note: $200,000, 6.63%,
03/31/97)
$200,000 5.50% 06/01/95 $ 200,000
----------
Total Repurchase Agreements
(Cost $200,000).............................. $ 200,000
----------
Total Investments
(Cost $1,341,641(c))......................... $1,470,550
==========
</TABLE>

<TABLE>
- ---------------------------------------------------------------------------------------------------
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in which value
exceeds cost..................................... $ 144,014
Gross unrealized loss for investments in which cost exceeds
value............................................ (15,105)
----------
Net unrealized gain............................... $ 128,909
==========
- ---------------------------------------------------------------------------------------------------
</TABLE>

(a) There are common stock rights attached to these securities.
(b) Non-income producing security.
(c) The cost stated also represents aggregate cost for federal income tax
purposes.

The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.

ADR--American Depository Receipt
PERQS--Performance Equity-Linked Quarterly-Pay Security

The accompanying notes are an integral part of these financial statements.

9
<PAGE>

PARAGON PORTFOLIO

STATEMENT OF INVESTMENTS

PARAGON POWER GULF SOUTH GROWTH PORTFOLIO
MAY 31, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- ----------
<C> <S> <C>
COMMON STOCKS--95.2%
BASIC MATERIALS & NATURAL RESOURCES--8.3%
1,400 Albemarle Corp. $ 21,525
1,000 Clayton Homes, Inc. 17,375
1,200 Georgia Gulf Corp. 36,450
1,200 Image Industries, Inc.(b) 12,600
1,100 Nucor Corp. 52,525
----------
140,475
----------
CAPITAL EQUIPMENT & SERVICES--3.6%
2,300 Union Switch & Signal, Inc.(b) 35,794
800 Wolverine Tube, Inc.(b) 25,800
----------
61,594
----------
CONSUMER CYCLICAL--16.9%
2,400 Autozone, Inc.(b) 55,800
1,200 Books-A-Million, Inc.(b) 16,800
1,700 Cameron Ashley, Inc.(b) 19,125
2,000 Heilig Meyers Co. 47,750
800 Michaels Stores, Inc.(b) 18,100
2,800 Office Depot, Inc.(b) 67,200
2,800 River Oaks Furniture, Inc.(b) 35,000
2,400 Sports & Recreation, Inc.(b) 27,600
----------
287,375
----------
CONSUMER NONCYCLICAL--13.5%
2,300 Apple South, Inc. 39,962
700 Coastal Physician Group, Inc.(b) 10,937
1,200 Coventry Corp.(b) 24,750
1,800 Cracker Barrel Old Country Store 43,875
800 HealthWise of America, Inc.(b) 23,400
800 Healthcare Compare Corp.(b) 25,000
1,200 Inphynet Medical Management, Inc.(b) 19,500
1,600 Isolyser Company, Inc.(b) 42,400
----------
229,824
----------
ENERGY--9.8%
2,300 Benton Oil & Gas Co.(b) 30,188
800 Global Industries, Inc.(b) 19,600
2,100 Input/Output, Inc.(b) 71,400
1,900 Landmark Graphics Corp.(b) 44,888
----------
166,076
----------
</TABLE>

<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- ----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
FINANCE--19.7%
1,500 American Federal Bank, FSB $ 21,000
900 Bankers First Corp. 24,300
900 First Financial Management Corp. 63,900
1,100 Medaphis Corp.(b) 66,275
2,700 Regional Acceptance Corp.(b) 42,525
1,700 Stewart Enterprises, Inc. 51,000
1,500 United Companies Financial Corp. 66,375
----------
335,375
----------
TECHNOLOGY--11.1%
1,200 Acxiom Corp.(b) 23,400
1,000 DSC Communications Corp.(a)(b) 37,000
1,200 Dallas Semiconductor Corp. 22,050
2,500 Mobile Telecommunications Technology Corp.(b) 56,250
2,400 SCI Systems, Inc.(b) 49,800
----------
188,500
----------
TRANSPORTATION--5.2%
1,900 Atlantic Southeast Airlines, Inc. 45,838
2,300 Miller Industries, Inc.(b) 42,262
----------
88,100
----------
UTILITIES--7.1%
2,400 Communications Central, Inc.(b) 19,800
1,600 Equalnet Holding Corp.(b) 26,200
2,900 WorldCom, Inc.(b) 75,400
----------
121,400
----------
Total Common Stocks
(Cost $1,540,762)......................... $1,618,719
----------
</TABLE>

The accompanying notes are an integral part of these financial statements.

10
<PAGE>

PARAGON PORTFOLIO

STATEMENT OF INVESTMENTS

PARAGON POWER GULF SOUTH GROWTH PORTFOLIO--(CONTINUED)
MAY 31, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- --------- -------- -------- ----------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS--17.4%
State Street Bank & Trust Company, dated
05/31/95, repurchase price $295,045
(U.S. Treasury Note $295,000, 6.63%,
03/31/97)
$295,000 5.50% 06/01/95 $ 295,000
----------
Total Repurchase Agreements
(Cost $295,000).............................. $ 295,000
----------
Total Investments
(Cost $1,835,762(c))......................... $1,913,719
==========
</TABLE>

<TABLE>
- ---------------------------------------------------------------------------------------------------
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in which value
exceeds cost..................................... $ 173,032
Gross unrealized loss for investments in which cost exceeds
value............................................ (95,075)
----------
Net unrealized gain............................... $ 77,957
==========
- ---------------------------------------------------------------------------------------------------
</TABLE>

(a) There are common stock rights attached to these securities.
(b) Non-income producing security.
(c) The cost stated also represents aggregate cost for federal income tax
purposes.

The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.

The accompanying notes are an integral part of these financial statements.

11
<PAGE>

PARAGON PORTFOLIO

STATEMENTS OF ASSETS AND LIABILITIES

MAY 31, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
PARAGON PARAGON PARAGON PARAGON
POWER POWER POWER POWER
INTERMEDIATE- VALUE VALUE EQUITY GULF SOUTH
TERM BOND GROWTH INCOME GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities,
at value
(cost $1,341,643;
$1,690,749; $1,341,641 and
$1,835,762, respectively)... $1,423,649 $1,789,006 $1,470,550 $1,913,719
Cash........................ 4,292 1,369 2,017 396
Receivables:
Investment securities sold.. -- 18,569 -- --
Interest.................... 19,274 257 906 45
Dividends................... -- 4,832 3,532 235
Fund shares sold............ 13 1,641 7 24
Deferred organization
expenses, net............... 12,703 12,703 12,703 12,703
Other....................... 4,017 3,979 4,325 4,204
---------- ---------- ---------- ----------
Total assets............... 1,463,948 1,832,356 1,494,040 1,931,326
---------- ---------- ---------- ----------
LIABILITIES:
Payables:
Investment securities
purchased................... -- 75,608 125,801 200,436
Fund shares redeemed........ 13 24 7 24
Dividends and distributions. 333 -- -- --
Advisory fees............... 572 871 694 883
Administration fees......... 171 201 160 204
Accrued expenses and other
liabilities................. 28,801 29,266 30,437 30,193
---------- ---------- ---------- ----------
Total liabilities.......... 29,890 105,970 157,099 231,740
---------- ---------- ---------- ----------
NET ASSETS:
Paid-in capital............. 1,352,081 1,633,072 1,198,784 1,613,049
Accumulated undistributed
net investment income....... -- 7 9 1,248
Accumulated net realized
gain (loss) on investment
transactions................ (29) (4,950) 9,239 7,332
Net unrealized gain on
investments................. 82,006 98,257 128,909 77,957
---------- ---------- ---------- ----------
Net assets................. $1,434,058 $1,726,386 $1,336,941 $1,699,586
========== ========== ========== ==========
Net asset value per share
(net assets/shares
outstanding)................ $ 10.23 $ 14.59 $ 12.81 $ 16.02
========== ========== ========== ==========
SHARES OUTSTANDING:
Shares of beneficial
interest outstanding, ($0.01
par value),
unlimited number of shares
authorized.................. 140,213 118,291 104,334 106,096
========== ========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

12
<PAGE>

PARAGON PORTFOLIO

STATEMENTS OF OPERATIONS

FOR THE PERIOD ENDED MAY 31, 1995(a)
(UNAUDITED)

<TABLE>
<CAPTION>
PARAGON PARAGON PARAGON PARAGON
POWER POWER POWER POWER
INTERMEDIATE- VALUE VALUE EQUITY GULF SOUTH
TERM BOND GROWTH INCOME GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- --------- ------------ ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest...................... $ 32,340 $ 4,614 $ 3,515 $ 5,304
Dividends(b) ................. -- 11,092 11,854 974
-------- -------- -------- -------
Total income................. 32,340 15,706 15,369 6,278
-------- -------- -------- -------
EXPENSES:
Advisory fees................. 2,185 3,145 2,747 3,270
Administration fees........... 656 726 634 755
Transfer agent fees........... 432 432 432 432
Custodian fees................ 3,237 3,453 3,885 3,885
Professional fees............. 10,144 10,144 10,144 10,144
Trustee fees.................. 136 136 136 136
Registration fees............. 595 894 1,489 1,489
Amortization of deferred
organization expenses......... 1,047 1,047 1,047 1,047
Other......................... 2,936 2,936 2,936 2,936
-------- -------- -------- -------
Total expenses............... 21,368 22,913 23,450 24,094
Less--Expenses reimbursable
by Advisor.................... 18,090 18,074 19,224 19,064
-------- -------- -------- -------
Net expenses................. 3,278 4,839 4,226 5,030
-------- -------- -------- -------
Net investment income....... 29,062 10,867 11,143 1,248
-------- -------- -------- -------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
investment transactions....... (29) (4,950) 9,239 7,332
Net change in unrealized gain
on investments................ 82,006 98,257 128,909 77,957
-------- -------- -------- -------
Net realized and unrealized
gain on investments........... 81,977 93,307 138,148 85,289
-------- -------- -------- -------
Net increase in net assets
resulting from operations..... $111,039 $104,174 $149,291 $86,537
======== ======== ======== =======
</TABLE>
- -----
(a) For the period from commencement of operations (January 13, 1995) to May
31, 1995.
(b) For the Paragon Power Value Equity Income Portfolio, amount is net of $94
in foreign withholding taxes.

The accompanying notes are an integral part of these financial statements.

13
<PAGE>

PARAGON PORTFOLIO

STATEMENTS OF CHANGES IN NET ASSETS

FOR THE PERIOD ENDED MAY 31, 1995(a)
(UNAUDITED)

<TABLE>
<CAPTION>
PARAGON PARAGON PARAGON PARAGON
POWER POWER POWER POWER
INTERMEDIATE- VALUE VALUE EQUITY GULF SOUTH
TERM BOND GROWTH INCOME GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income...... $ 29,062 $ 10,867 $ 11,143 $ 1,248
Net realized gain (loss) on
investment transactions.... (29) (4,950) 9,239 7,332
Net change in unrealized
gain on investments........ 82,006 98,257 128,909 77,957
---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations. 111,039 104,174 149,291 86,537
---------- ---------- ---------- ----------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income. (29,062) (10,860) (11,134) --
---------- ---------- ---------- ----------
Total distributions to
shareholders.............. (29,062) (10,860) (11,134) --
---------- ---------- ---------- ----------
FROM SHARE TRANSACTIONS:
Proceeds from sale of
shares..................... 1,327,435 1,634,786 1,191,063 1,614,846
Reinvestment of dividends
and distributions.......... 25,542 8,548 8,006 --
Cost of shares redeemed.... (896) (10,262) (285) (1,797)
---------- ---------- ---------- ----------
Net increase in net assets
resulting from share
transactions.............. 1,352,081 1,633,072 1,198,784 1,613,049
---------- ---------- ---------- ----------
Total increase............ 1,434,058 1,726,386 1,336,941 1,699,586
---------- ---------- ---------- ----------
NET ASSETS:
Beginning of period........ -- -- -- --
---------- ---------- ---------- ----------
End of period.............. $1,434,058 $1,726,386 $1,336,941 $1,699,586
========== ========== ========== ==========
ACCUMULATED UNDISTRIBUTED
NET INVESTMENT INCOME....... $ -- $ 7 $ 9 $ 1,248
========== ========== ========== ==========
SUMMARY OF SHARE
TRANSACTIONS:
Sold....................... 137,731 118,422 103,705 106,210
Issued on reinvestment of
dividends and
distributions.............. 2,572 597 652 --
Redeemed................... (90) (728) (23) (114)
---------- ---------- ---------- ----------
Increase in shares out-
standing................... 140,213 118,291 104,334 106,096
========== ========== ========== ==========
</TABLE>
- -----
(a) For the period from commencement of operations (January 13, 1995) to May
31, 1995.

The accompanying notes are an integral part of these financial statements.

14
<PAGE>

PARAGON PORTFOLIO

FINANCIAL HIGHLIGHTS

SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIOD ENDED MAY 31, 1995(a)
(UNAUDITED)

<TABLE>
<CAPTION>
DISTRIBUTIONS TO
INCOME FROM INVESTMENT OPERATIONS SHAREHOLDERS
------------------------------------ ------------------------
TOTAL NET NET
NET ASSET NET REALIZED INCOME TOTAL INCREASE ASSET
VALUE, NET AND UNREALIZED FROM FROM NET DISTRIBUTIONS IN NET VALUE,
BEGINNING INVESTMENT GAIN ON INVESTMENT INVESTMENT TO ASSET END OF TOTAL
OF PERIOD INCOME INVESTMENTS(d) OPERATIONS INCOME SHAREHOLDERS VALUE PERIOD RETURN(b)
--------- ---------- -------------- ---------- ---------- ------------- -------- ------ ---------

PARAGON POWER INTERMEDIATE-TERM BOND PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Period ended: 5/31/95 $ 9.56 $0.25 $0.67 $0.92 $(0.25) $(0.25) $0.67 $10.23 9.69%

PARAGON POWER VALUE GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended: 5/31/95 13.56 0.12 1.03 1.15 (0.12) (0.12) 1.03 14.59 8.51

PARAGON POWER VALUE EQUITY INCOME PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended: 5/31/95 11.35 0.12 1.46 1.58 (0.12) (0.12) 1.46 12.81 14.04

<CAPTION>
RATIOS ASSUMING
NO EXPENSE
REIMBURSEMENTS
RATIO --------------------------
RATIO OF NET RATIO
OF NET INVESTMENT OF NET
EXPENSES INCOME NET ASSETS RATIO INVESTMENT
TO AVERAGE TO AVERAGE PORTFOLIO AT END OF EXPENSES INCOME (LOSS)
NET NET TURNOVER OF PERIOD TO AVERAGE TO AVERAGE
ASSETS(c) ASSETS(c) RATE (IN 000'S) NET ASSETS(c) NET ASSETS(c)
---------- ---------- --------- ---------- ------------- -------------

PARAGON POWER INTERMEDIATE-TERM BOND PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Period ended: 5/31/95 0.75% 6.65% 0% $1,434 4.89% 2.51%

PARAGON POWER VALUE GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended: 5/31/95 1.00 2.25 6 1,726 4.74 (1.49)

PARAGON POWER VALUE EQUITY INCOME PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended: 5/31/95 1.00 2.64 14 1,337 5.55 (1.91)

</TABLE>
(a) For the period from commencement of operations (January 13, 1995) to May
31, 1995.
(b) Assumes investment at the net asset value at inception (January 13, 1995),
reinvestment of all dividends and distributions and a complete redemption
of the investment at the net asset value at the end of the period.
(c) Annualized.
(d) Includes the balancing effect of calculating per share amounts.

The accompanying notes are an integral part of these financial statements.

<PAGE>

PARAGON PORTFOLIO

NOTES TO FINANCIAL STATEMENTS

MAY 31, 1995
(UNAUDITED)

NOTE 1. ORGANIZATION

Paragon Portfolio (the "Trust") is a Massachusetts business trust registered
under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Trust consists of eleven portfolios four of
which (the "Portfolios") are contained within: Paragon Power Intermediate-Term
Bond Portfolio ("Intermediate-Term Bond Portfolio"), Paragon Power Value
Growth Portfolio ("Value Growth Portfolio"), Paragon Power Value Equity Income
Portfolio ("Value Equity Income Portfolio"), and Paragon Power Gulf South
Growth Portfolio ("Gulf South Growth Portfolio"). Gulf South Growth Portfolio
is a non-diversified portfolio; all other Portfolios are diversified. The
Portfolios commenced operations on January 13, 1995.

At May 31, 1995, Great Northern Insured Annuity Corporation owned seed money
shares in the Portfolios.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies followed by
the Portfolios which are in conformity with those generally accepted in the
investment company industry.

Investment Valuation. Equity securities traded on a national securities
exchange or the National Association of Securities Dealers NASDAQ System
("NASDAQ") are valued at their last sale price on the principal exchange on
which they are traded or NASDAQ (if NASDAQ is the principal market for such
securities) on the valuation day or, if no sale occurs, at the mean between
the closing bid and asked prices. Unlisted equity securities for which market
quotations are available are valued at the mean between the most recent bid
and asked prices. Fixed-income securities are valued at prices supplied by an
independent pricing service which reflect broker/dealer-supplied valuations
and electronic data processing techniques. Short-term debt obligations
maturing in sixty days or less are valued at amortized cost. Other assets and
assets whose market values, in the investment adviser's opinion, do not
reflect fair value are valued at fair value using methods determined in good
faith by the Board of Trustees.

Securities Transactions and Investment Income. Securities transactions are
recorded on the trade date. Realized gains and losses on sales of investments
are calculated on the identified cost basis. Dividend income is recorded on
the ex-dividend date and interest income is recorded on the accrual basis.

Premiums and Discounts on Debt Securities Owned. Intermediate-Term Bond
Portfolio accretes discounts on long-term debt securities on a straight-line
basis and does not amortize premiums. Value Growth, Value Equity Income and
Gulf South Growth Portfolios accrete discounts on long-term debt securities on
a straight-line basis and amortize premiums on a straight-line basis. Original
issue discounts on debt securities are amortized to interest income over the
life of the security with a corresponding increase in the cost basis of that
security. Intermediate-Term Bond Portfolio may invest in mortgage-backed
securities. Certain mortgage security paydown gains and losses are taxable as
ordinary income. Such paydown gains and losses increase or decrease taxable
ordinary income available for distributions and are classified as interest
income in the accompanying Statements of Operations.

Federal Taxes. The Trust's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute each year substantially all of the investment company taxable
income to the shareholders of each Portfolio. Accordingly, no federal tax
provisions are required. The characterization of distributions to shareholders
for financial reporting purposes is determined in accordance with income tax
rules.

Deferred Organization Costs. Organization-related costs are being amortized
on a straight-line basis over a period of five years beginning with the
commencement of each of the Portfolios' operations.

16
<PAGE>

PARAGON PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

MAY 31, 1995
(UNAUDITED)

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

Expenses. Expenses incurred by the Trust which do not specifically relate to
an individual Portfolio are allocated to the Portfolios based on each
Portfolio's relative average net assets for the period.

Dividends and Distributions to Shareholders. Dividends from net investment
income are declared daily and paid monthly by the Intermediate-Term Bond
Portfolio; declared and paid monthly by the Value Growth and Value Equity
Income Portfolios; declared and paid semi-annually by the Gulf South Growth
Portfolio. Each Portfolio's net realized capital gains (including net short-
term capital gains), if any, are declared and distributed at least annually.
Distributions to shareholders are recorded on the ex-dividend date.

NOTE 3. AGREEMENTS

The Portfolios have entered into Investment Advisory Agreements with Premier
Investment Advisors, L.L.C., ("Premier"). Pursuant to the terms of the
Investment Advisory Agreements, Premier manages the investments and makes
investment decisions for each Portfolio. For these services, each Portfolio
pays Premier a monthly fee at the following annual rate of the corresponding
Portfolio's average daily net assets:

<TABLE>
<S> <C>
Intermediate-Term Bond Portfolio.................................... .50%
Value Growth Portfolio.............................................. .65%
Value Equity Income Portfolio....................................... .65%
Gulf South Growth Portfolio......................................... .65%
</TABLE>

For the period from commencement of operations to May 31, 1995, Premier has
voluntarily agreed to reimburse expenses (excluding interest, taxes, and
extraordinary expenses) to the extent that such expenses exceed, on an
annualized basis, .75%, 1.00%, 1.00% and 1.00% for the Intermediate-Term Bond,
Value Growth, Value Equity Income and Gulf South Growth Portfolios,
respectively. The effect of these reimbursements by Premier for the period
ended May 31, 1995 was to reduce expenses by approximately $18,100, $18,100,
$19,200 and $19,100 for the Intermediate-Term Bond, Value Growth, Value Equity
Income and Gulf South Growth Portfolios, respectively. The amounts
reimbursable to the Intermediate-Term Bond, Value Growth, Value Equity Income
and Gulf South Growth Portfolios were approximately $4,000, $4,000, $4,300 and
$4,200, respectively, and are reflected in "Other Assets" in the accompanying
Statement of Assets and Liabilities.

Goldman Sachs Asset Management, ("GSAM"), a separate operating division of
Goldman, Sachs and Co., serves as the Trust's administrator pursuant to an
Administration Agreement. Under the Administration Agreement, GSAM administers
the Trust's business affairs. As compensation for services rendered under the
Administration Agreement, each Portfolio pays GSAM a fee, computed daily and
payable monthly, at the annual rate of .15% of the average daily net assets of
the corresponding Portfolio.

Goldman Sachs serves as the Distributor of shares of the Portfolios pursuant
to a Distribution Agreement with the Trust. Goldman Sachs receives no
compensation for this service.

State Street Bank and Trust Co. serves as Custodian and Transfer Agent of
the Portfolios for a fee.

NOTE 4. REPURCHASE AGREEMENTS

During the term of a repurchase agreement, the value of the underlying
securities, including accrued interest, is required to equal or exceed the
value of the repurchase agreement. The underlying securities for all
repurchase agreements are held in safekeeping in the customer-only account of
State Street Bank & Trust Co., the Portfolios' custodian, at the Federal
Reserve Bank of Boston, or at sub-custodians. The market values of the
underlying securities are monitored by pricing them daily.

In connection with transactions in repurchase agreements, if the seller
defaults and the value of the collateral declines, or if the seller enters an
insolvency proceeding, realization of the collateral by the Trust may be
delayed or limited.

17
<PAGE>

PARAGON PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

MAY 31, 1995
(UNAUDITED)

NOTE 5. INVESTMENT TRANSACTIONS

Purchases and proceeds of sales or maturities of long-term investments for
the period ended May 31, 1995 were as follows:
INTERMEDIATE-TERM BOND PORTFOLIO
<TABLE>
<S> <C>
Purchases (excluding U.S. Government and Agency Obligations)........ $ 287,283
Sales (excluding U.S. Government and Agency Obligations)............ --
Purchases of U.S. Government and Agency Obligations................. 948,207
Sales of U.S. Government and Agency Obligations..................... 4,950
VALUE GROWTH PORTFOLIO
Purchases (excluding U.S. Government and Agency Obligations)........ $1,479,595
Sales (excluding U.S. Government and Agency Obligations)............ 68,822
Purchases of U.S. Government and Agency Obligations................. --
Sales of U.S. Government and Agency Obligations..................... --
VALUE EQUITY INCOME PORTFOLIO
Purchases (excluding U.S. Government and Agency Obligations)........ $1,286,682
Sales (excluding U.S. Government and Agency Obligations)............ 154,133
Purchases of U.S. Government and Agency Obligations................. --
Sales of U.S. Government and Agency Obligations..................... --
GULF SOUTH GROWTH PORTFOLIO
Purchases (excluding U.S. Government and Agency Obligations)........ $1,673,987
Sales (excluding U.S. Government and Agency Obligations)............ 140,550
Purchases of U.S. Government and Agency Obligations................. --
Sales of U.S. Government and Agency Obligations..................... --
</TABLE>

18
<PAGE>

PARAGON PORTFOLIO

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

TRUSTEES
Paul C. Nagel, Jr.,
Chairman
Bruce C. Gottwald, Jr.
Ernest E. Howard III

OFFICERS
Paul W. Klug
President
Marcia L. Beck
Vice President
John W. Mosior
Vice President
Nancy L. Mucker
Vice President
Pauline Taylor
Vice President
Scott M. Gilman
Treasurer
Michael J. Richman
Secretary
Howard B. Surloff
Assistant Secretary
This Semiannual Report is authorized for distribution to prospective
investors only when preceded or accompanied by a Paragon Portfolio Prospectus
which contains facts concerning Paragon Portfolio's objectives and policies,
management, expenses and other information.
<PAGE>

PARAGON PORTFOLIO

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

PARAGON POWER PORTFOLIO
VARIABLE ANNUITY

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

Paragon Power Intermediate-Term Bond Portfolio

Paragon Power Value Growth Portfolio

Paragon Power Value Equity Income Portfolio

Paragon Power Gulf South Growth Portfolio

Semiannual Report

-----------

May 31, 1995

LOGO
PARAGON PORTFOLIO
4900 Sears Tower
Chicago, Illinois 60606

INVESTMENT ADVISER
Premier Investment Advisors, L.L.C.
451 Florida Street
Baton Rouge, Louisiana 70801

ADMINISTRATOR
Goldman Sachs Asset Management
One New York Plaza
New York, New York 10004

DISTRIBUTOR
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004

CUSTODIAN
State Street Bank & Trust Company
225 Franklin Street
Boston, Massachusetts 02110

TRANSFER AGENT
State Street Bank & Trust Company
P.O. Box 1978
Boston, Massachusetts 02105

INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036

LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109

PWR-SEM95

<PAGE>

PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
---------------------------------

(a) Financial Statements.

Included in Part A of this Registration Statement:

Financial Highlights for the period January 31, 1995 (commencement of
operations) through May 31, 1995.

Incorporated by reference from the May 31, 1995 Semiannual Report to
Shareholders into Part B of this Registration Statement:

Statement of Investments as of May 31, 1995.

Statement of Assets and Liabilities as of May 31, 1995.

Statement of Operations for the period January 31, 1995 (commencement
of operations) through May 31, 1995.

Statement of Changes in Net Assets for the period January 31, 1995
(commencement of operations) through May 31, 1995.

Notes to Financial Statements.

Financial Highlights for the period January 31, 1995 (commencement of
operations) through May 31, 1995.

(b) Exhibits--

The following exhibits are incorporated herein by reference to
Registrant's Registration Statement on Form N-1A as initially filed
(Reference A), to
Pre-Effective Amendment No. 2 (Reference B), to
Post-Effective Amendment No. 1 (Reference C), to
Post-Effective Amendment No. 2 (Reference D), to
Post-Effective Amendment No. 3 (Reference E), to
Post-Effective Amendment No. 4 (Reference F), to
Post-Effective Amendment No. 5 (Reference G), to
Post-Effective Amendment No. 7 (Reference H), to
Post-Effective Amendment No. 8 (Reference I), to
Post-Effective Amendment No. 9 (Reference J), to
Post-Effective Amendment No. 10 (Reference K)if so
noted; otherwise, they are included herein:
<PAGE>

(1)(a) Amended and Restated Declaration of Trust Establishing and Designating
CDSL Class (Class B Shares)(Reference I)

(1)(b) Amended and Restated Establishment and Designation of Series of
Shares Power Portfolios, dated October 20, 1994. (Reference K)

(2) By-laws of Registrant. (Reference A)

(3) Not applicable.

(4) Specimen Certificate of Share of Beneficial Interest of the
Registrant. (Reference B)

(5)(a) Investment Advisory Agreement between the Registrant, on behalf of
Paragon Treasury Money Market Fund, and Goldman Sachs Assets
Management. (Reference C)

(5)(b) Subadvisory Agreement among the Registrant, on behalf of Paragon
Treasury Money Market Fund, Goldman Sachs Asset Management and Premier
Investment Advisors,
Inc. (Reference C)

(5)(c) Investment Advisory Agreement between the Registrant, on behalf of
Paragon Short-Term Government Fund, and Premier Investment Advisors,
Inc. (Reference C)

(5)(d) Investment Advisory Agreement between the Registrant, on behalf of
Paragon Intermediate-Term Bond Fund, and Premier Investment Advisors,
Inc. (Reference C)

(5)(e) Investment Advisory Agreement between the Registrant, on behalf of
Paragon Louisiana Tax-Free Fund, and Premier Investment Advisors, Inc.
(Reference C)

(5)(f) Investment Advisory Agreement between the Registrant, on behalf of
Paragon Value Growth Fund, and Premier Investment Advisors, Inc.
(Reference C)

(5)(g) Investment Advisory Agreement between the Registrant, on behalf of
Paragon Value Equity Income Fund, and Premier Investment Advisors,
Inc. (Reference C)

(5)(h) Investment Advisory Agreement between the Registrant on behalf of
Paragon Gulf South Growth Fund, and Premier Investment Advisors, Inc.
(Reference G)

(5)(i) Investment Advisory Agreement between the Registrant, on behalf of
Paragon Power Intermediate-Term Bond Portfolio, and Premier Investment
Advisors, L.L.C. (Reference K)

C-2
<PAGE>

(5)(j) Investment Advisory Agreement between the Registrant, on behalf of
Paragon Power Value Growth Portfolio, and Premier Investment Advisors,
L.L.C.(Reference K)

(5)(k) Investment Advisory Agreement between the Registrant, on behalf of
Paragon Power Value Equity Income Portfolio, and Premier Investment
Advisors, L.L.C. (Reference K)

(5)(l) Investment Advisory Agreement between the Registrant, on behalf of
Paragon Power Gulf South Growth Portfolio, and Premier Investment
Advisors, L.L.C. (Reference K)

(6) Not applicable.

(7) Distribution Agreement between the Registrant and Goldman, Sachs & Co.
(Reference C)

(8)(a) Custodian Agreement between Registrant and State Street Bank and Trust
Company. (Reference C)

(8)(b) Fee schedule for Exhibit (8)(a). (Reference C)

(8)(c) Wiring Agreement between and among State Street Bank and Trust
Company, Goldman, Sachs & Co. and The Northern Trust Company.
(Reference C)

(9)(a) Transfer Agency Agreement between the Registrant and Goldman, Sachs &
Co. (Reference C)

(9)(b) Fee Schedule for Exhibit (9)(a). (Reference C)

(9)(c) Administration Agreement between the Registrant and Goldman Sachs
Asset Management. (Reference C)

(9)(d) Amendment to Administration Agreement between the Trust, on behalf of
Paragon Gulf South Growth Fund, and Goldman Sachs Asset Management.
(Reference G)

(10) Opinion and Consent of Hale and Dorr, Counsel to Registrant, as to the
legality of the securities registered hereby (filed with Registrant's
Notice pursuant to Rule 24f-2).

(12) Not Applicable.

(13) Letter from Goldman Sachs Asset Management to the Registrant providing
that its purchases were made
for investment purposes without any present
intention of redeeming or reselling. (Reference B)

(14) Not applicable.

C-3
<PAGE>

(15) Not Applicable.

The following exhibits are filed herewith electronically pursuant to EDGAR
rules:

(11) Consent of Independent Accountants

(16) Schedule of Computation of Performance Quotations.

(17) Powers of Attorney from Messrs. Ernest E. Howard III, Paul
C. Nagel, Jr., Bruce C. Gottwald, Jr., Paul W. Klug, John W.
Mosior, Michael J. Richman, Scott M. Gilman, Marcia L. Beck,
Howard B. Surloff, Nancy L. Mucker and Pauline Taylor.

(18) Rule 18f-3 Plan

(27) Financial Data Schedules

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
---------------------------------------------------
REGISTRANT.
----------
Not Applicable.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES (AS OF JULY 7, 1995)
----------------------------------------------------
<TABLE>
<CAPTION>
Number of
Record Holders
--------------

Shares of Beneficial Interest $0.01 par value per share:
<S> <C>
Paragon Treasury Money Market Fund 1002
Paragon Short-Term Government Fund 596
Paragon Intermediate-Term Bond Fund 1791
Paragon Louisiana Tax-Free Fund 1754
Paragon Value Growth Fund 4723
Paragon Value Equity Income Fund 568
Paragon Gulf South Growth Fund 3079
Paragon Power Intermediate-Term Bond Portfolio 1
Paragon Power Value Growth Portfolio 1
Paragon Power Value Equity Income Portfolio 1
Paragon Power Gulf South Growth Portfolio 1
</TABLE>

C-4
<PAGE>

ITEM 27. INDEMNIFICATION.
---------------

Reference is made to Article IV of the Registrant's Declaration of Trust.
Nothing in the Declaration of Trust or By-Laws of the Registrant may be
construed to be in derogation of the provisions of Section 17(h) of the
Investment Company Act of 1940 (the "1940 Act") which provides that the
Declaration of Trust or by-laws of a registered investment company shall not
contain any provision which protects or purports to protect any director or
officer of such company against any liability of the company or to its security
holders to which he would otherwise be subject by reason of wilful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office ("disabling conduct").

The Registrant understands that in the opinion of the Securities and Exchange
Commission (the "Commission") an indemnification provision does not violate
Section 17(h) of the 1940 Act if it precludes indemnification for any liability
whether or not there is an adjudication of liability, arising by reason of
disabling conduct. Reasonable and fair means for determining whether
indemnification shall be made include (1) a final decision on the merits by a
court or other body before whom the proceeding was brought that the person to be
indemnified (the "indemnitee") was not liable by reason of disabling conduct, or
(2) in the absence of such a decision, a reasonable determination, based upon a
review of the facts that the indemnitee was not liable by reason of disabling
conduct by (a) the vote of a majority of a quorum of trustees who are neither
"interested persons" of the Registrant as defined in Section 2(a)(19) of the
1940 Act nor parties to the preceding ("disinterested nonparty trustees"), or
(b) an independent legal counsel in a written opinion.

The Registrant further understands that in the Commission's view the dismissal
of either a court action or an administrative proceeding against an indemnitee
for insufficiency of evidence of any disabling conduct with which he has been
charged would provide reasonable assurance that he was not liable by reason of
disabling conduct. A determination by the vote of a majority of a quorum of
disinterested nonparty directors would also provide reasonable assurance that
the indemnitee was not liable by reason of disabling conduct.

The Registrant further understands that the Commission believes that an
indemnification provision does not violate Section 17(h) of the 1940 Act simply
because it requires or permits the Registrant to advance attorney's fees or
other expenses incurred by its Trustees, officers or investment adviser in
defending a proceeding, upon the undertaking by or on behalf of the indemnitee
to repay the advance unless it is ultimately determined that he is entitled to
indemnification, so long as the provision also requires at least one of the
following as a

C-5
<PAGE>

condition to the advance: (1) the indemnitee shall provide security for his
undertaking, (2) the Registrant shall be insured against losses arising by
reason of any lawful advances, or (3) a majority of a quorum of the
disinterested nonparty Trustees of the Registrant, or an independent legal
counsel in a written opinion, shall determine, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that there is reason
to believe that the indemnitee ultimately will be found entitled to
indemnification. The Registrant is also aware that the Commission believes that
an improper indemnification payment or advance of legal expenses could
constitute a breach of fiduciary duty involving personal misconduct under
Section 36 of the 1940 Act or an unlawful and willful conversion of an
investment company's assets under Section 37 of the 1940 Act.

Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Securities Act") may be permitted to Trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant understands that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Trustee, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction on the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
----------------------------------------------------

The business and other connections of the officers and directors of Premier
Investment Advisors L.L.C. are listed on the Form ADV of Premier Investment
Adviser's L.L.C. as currently on file with the Commission (File No. 801-26186)
the text of which is hereby incorporated by reference.

Goldman, Sachs & Co., through Goldman Sachs Asset Management, acts as investment
adviser. The business and other connections of the General Partners of Goldman,
Sachs & Co. are listed on the Uniform Application for Investment Adviser
Registration ("FORM ADV") of Goldman, Sachs & Co. as currently on file with the
Commission (File No. 801-16048), the Goldman Sachs Funds Management, L.P. (No.
801-37951) and Goldman Sachs Asset Management International (No. 801-38157) as
applicable. These

C-6
<PAGE>

Form ADV's are currently on file with the Commission, the text of which is
hereby incorporated by reference.

ITEM 29. PRINCIPAL UNDERWRITERS
----------------------

(a) Goldman, Sachs & Co., or an affiliate or division thereof, currently serves
as investment adviser and distributor of the units or shares of Goldman Sachs
Money Market Trust, Goldman Sachs Trust, Goldman Sachs Equity Portfolios, Inc.,
Paragon Portfolio and Trust for Credit Unions. Goldman, Sachs & Co. or a
division thereof, currently serves as administrator and distributor of the units
of The Benchmark Funds and shares of Paragon Portfolio.

(b) Set forth below is certain information pertaining to the general partners of
Goldman, Sachs & Co., Registrant's principal underwriter. Each of the following
persons is a general partner of Goldman, Sachs & Co. and does not hold a
position with Registrant.

GOLDMAN SACHS GENERAL PARTNERS

<TABLE>
<CAPTION>
Name and Principal Name and Principal
Business Address Business Address
---------------- ----------------
<S> <C>
Jon Corzine, Chairman (1)(2) Hideo Ishihara (10)
Roy J. Zuckerberg (2) Oki Matsumoto Inc. (2)
David M. Silfen (2) Richard M. Hayden (2)
Eugene V. Fife (7) Armen A. Avanessians (2)
Robert J. Hurst (2) Howard C. Katz (2)
Paul M. Achleitner (7) Peter K. Barker (9)
Joel S. Beckman (2) David W. Blood (7)
Eric S. Dobkin (2) Henry M. Paulson, Jr.(8)
Willard J. Overlock, Jr. (2) Zachariah Cobrinik (7)
Jonathan L. Cohen (2) Kevin W. Kennedy (2)
Frederic B. Garonzik(7) Daniel M. Neidich (2)
William C. Landreth (11) Edward Spiegel (2)
Gary D. Cohn (7) Christopher A. Cole (2)
Fischer Black (5) Henry Cornell (13)
Robert F. Cummings, Jr. (2) Robert V. Delaney (2)
</TABLE>

C-7
<PAGE>

<TABLE>
<CAPTION>
Name and Principal Name and Principal
Business Address Business Address
---------------- ----------------
<S> <C>
Angelo De Caro (7) Joseph DellaRosa (2)
Steven G. Einhorn (2) David B. Ford (2)
J. Michael Evans (7) Lawton W. Fitt (2)
David M. Leuschen (2) Michael D. McCarthy (2)
Michael R. Lynch (2) Joseph D. Gatto (2)
Donald C. Opatrny, Jr. (7) Thomas E. Tuft (2)
Peter C. Gerhard (2) Michael P. Mortara (2)
Robert J. Katz (1) (2) Lloyd C. Blankfein (2)
Nomi P. Ghez (2) John P. Curtin, Jr. (2)
David T. Hamamoto (2) Dexter D. Earle (2)
Gavyn Davies (7) Christopher Flowers (2)
John Ehara (10) Walter H. Haydock (15)
Gary Gensler (2) Thomas J. Healey (2)
Charles T. Harris, III (2) Robert E. Higgins (2)
Stephen Hendel (2) David L. Henle (2)
Ernest S. Liu (2) Charles B. Mayer, Jr. (2)
Eff W. Martin (11) Mark Schwartz (2)
Michael J. O'Brien (7) Robert K. Steel (7)
Stephen M. Semlitz (2) John A. Thain (2)
Francis J. Ingrassia (2) Scott B. Kapnick (7)
John L. Thornton (7) Joseph R. Zimmel (2)
Bracebridge H. Young, Jr. (10) Gary L. Zwerling (2)
Barry L. Zubrow (2) Andrew M. Alper (2)
Jon R. Aisbitt (7) Frank L. Coulson, Jr. (2)
William J. Buckley (2) Richard A. Friedman (2)
Connie Duckworth (8) John H. Gleberman (2)
Alan R. Gillespie (7) Steven M. Heller (2)
Jacob D. Goldfield (2) Robert S. Kaplan (10)
Ann F. Kaplan (2) Kevin M. Kelly (2)
Peter D. Kiernan, III (2) Gaetano J. Muzio (2)
T. Willem Mesdag (7) Timothy J. O'Neill (2)
Robin Neustein (2) John J. Powers (2)
Scott M. Pinkus (2) Arthur J. Reimers,III (7)
Stephen D. Quinn (2) Richard A. Sapp (7)
James P. Riley, Jr. (2) Donald F. Textor (2)
John C. Keinert (2) Patrick J. Ward (10)
Thomas B. Walker, III (2) Jon Winkelried (2)
Jeffrey M. Weingarten (7) Gregory K. Palm (7)
Richard E. Witten (2) John O. Downing (7)
Carlos A. Cordeiro (7) Michael D. Fascitelli (2)
W. Mark Evans (7) Reuben Jeffrey, III (2)
Sylvain M. Hefes (7) Jun Makihara (9)
Lawrence H. Linden (2) Robert B. Morris,III (11)
Masanori Mochida (10) Suzanne M. Johnson (9)
Philip D. Murphy (14) Carl G.E. Palmstierna (7)
Terence M. O'Toole (2) J. David Rogers (10)
Michael G. Rantz (2) Peter Savitz (10)
Joseph Sassoon (7) Ralph F. Severson (11)
Charles B. Seelig, Jr. (2) Gary A. Syman (10)
</TABLE>

C-8
<PAGE>

<TABLE>
<CAPTION>
Name and Principal Name and Principal
Business Address Business Address
---------------- ----------------
<S> <C>
Gene T. Sykes (9) John L. Townsend, III (2)
Leslie C. Tortora (2) David A. Viniar (2)
Lee G. Vance (7) Peter A. Weinberg (2)
John S. Weinberg (2) George W. Wellde, Jr. (2)
Laurence M. Weiss (2) Sharmin Mossavar-
Jaime E. Yordan (2) Rahmani (5)
Jonathan L. Kolatch (2) Robert Litterman (2)
Peter S. Kraus (2) Thomas J. Macirowski (2)
Jonathan M. Lopatin (2) Oki Matsumoto (10)
Peter G. Mallinson (13) Eric M. Mindich (2)
E. Scott Mead (7) Thomas K. Montag (2)
Steven T. Mnuchin (2) Kipp M. Nelson (7)
Edward A. Mule (2) Robert J. O'Shea (2)
Christopher K. Norton (14) Jack L. Salzman (2)
Wiet H. Pot (7) Michael F. Schwerin (2)
Eric S. Schwartz (2) Richard G. Sherlund (2)
Richard S. Sharp (7) Cody J. Smith (2)
Michael S. Sherwood (7) Esta E. Stecher (2)
Daniel W. Stanton (2) Byron D. Trott (8)
Frederic E. Steck (11) Peter S. Wheeler (13)
Barry S. Volpert (2) Gary W. Williams (2)
Anthony G. Williams (7) Danny O. Yee (13)
Tracy R. Wolstencroft (4) Mark A. Zurack (2)
Michael J. Zamkow (2)
__________
</TABLE>

(1) Management Committee

(2) 85 Broad Street, New York, NY 10004

(3) Mellon Bank Center, 1735 Market Street, 26th Floor,
Philadelphia, PA 19103
(4) 100 Crescent Court, Suite 1000, Dallas, TX 75201
(5) One New York Plaza, New York, NY 10004
(6) 1000 Louisiana Street, Suite 550, Houston, TX 77002
(7) Peterborough Court, 133 Fleet Street, London EC4A 2BB,
England
(8) 4900 Sears Tower, Chicago, IL 60606
(9) 333 South Grand Avenue, Suite 1900, Los Angeles, CA 90071
(10) ARK Mori Bldg.,10th Floor, 12-32 Akasaka, 1-chome, Minato-
ku, Tokyo 107, Japan
(11) 555 California Street, 31st Floor, San Francisco, CA 94104
(12) Exchange Place, 53 State Street, 13th Floor, Boston, MA
02109

(13) Asia Pacific Finance Tower, 35th Floor, Citibank Plaza, 3
Garden Road, Hong Kong
(14) Finanz GmbH, MesseTurm, 60308 Frankfurt am Main 1, Germany

(15) Munsterhof 4, 8022, Zurich, Switzerland

C-9
<PAGE>

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
--------------------------------

All accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940, as amended and the rules thereunder
will be maintained (1) at the offices of the Registrant at One New York Plaza,
New York, New York 10004 (2) at the offices of the Registrant's Custodian, State
Street Bank and Trust Company, at P.O. Box 1713, Boston, MA 02105.

ITEM 31. MANAGEMENT SERVICES.
-------------------

Not Applicable.

ITEM 32.

(C) The Portfolio's Semiannual Report contains performance information
and is available to any recipient of the Prospectus upon request and without
charge by writing to Great Northern Insured Annuity Corporation, 5600 Two Union
Square, Seattle, Washington 98101, or Goldman, Sachs & Co., 4900 Sears Tower,
Chicago, Illinois 60606.

C-10
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certfies that it meets all of the
requirements for effectiveness of this Post-Effective Amendment No. 11 pursuant
to Rule 485(b) under this Securities Act of 1933 and has duly caused this Post-
Effective Amendment No. 11 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 27th day of July, 1995.

PARAGON PORTFOLIO

By: ________________________________

Howard Surloff, Assistant Secretary

Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No.11 to the Registration Statement has been signed below by the
following persons in the capacities indicated on July 27, 1995.

Name Title
---- -----

* President and Chief Executive Officer
- ------------------

Paul W. Klug

* Treasurer and Chief Financial Officer
- ------------------
Scott M. Gilman

*
- ------------------

Paul C. Nagel, Jr. Trustee

* Trustee
- -----------------
Bruce C. Gottwald, III

* Trustee
- -----------------
Ernest E. Howard, III

* By ____________________________________________

Howard Surloff, Attorney-in-fact
Pursuant to a power of attorney previously filed

C-11
<PAGE>

INDEX TO EXHIBITS

The following exhibits are filed as part of this Post-Effective Amendment No. 11
to the Registration Statement:

<TABLE>
<CAPTION>
Exhibit
No. Description Page
- ------- ----------- ----
<C> <S> <C>

(11) Consent of Independent Accountants.

(16) Schedule of Computation of Performance Quotations.

(17) Powers of Attorney from Messrs. Ernest E. Howard III, Paul C. Nagel,
Jr., Bruce C. Gottwald, Jr., Paul W. Klug, John W. Mosior, Michael J.
Richman, Scott M. Gilman, Marcia L. Beck, Howard B. Surloff, Nancy L.
Mucker and Pauline Taylor.

(18) Rule 18f-3 Plan

(27) Financial Data Schedules

</TABLE>

<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PARAGON
PORTFOLIO'S SEMI-ANNUAL REPORT DATED MAY 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 8
<NAME> PARAGON POWER INTERMEDIATE-TERM BOND PORTFOLIO

<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> JAN-13-1995
<PERIOD-END> MAY-31-1995
<INVESTMENTS-AT-COST> 1,341,643
<INVESTMENTS-AT-VALUE> 1,423,649
<RECEIVABLES> 19,287
<ASSETS-OTHER> 21,012
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,463,948
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29,890
<TOTAL-LIABILITIES> 29,890
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,352,081
<SHARES-COMMON-STOCK> 140,213
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (29)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 82,006
<NET-ASSETS> 1,434,058
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 32,340
<OTHER-INCOME> 0
<EXPENSES-NET> (3,278)
<NET-INVESTMENT-INCOME> 29,062
<REALIZED-GAINS-CURRENT> (29)
<APPREC-INCREASE-CURRENT> 82,006
<NET-CHANGE-FROM-OPS> 111,039
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 29,062
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 137,731
<NUMBER-OF-SHARES-REDEEMED> (90)
<SHARES-REINVESTED> 2,572
<NET-CHANGE-IN-ASSETS> 1,434,058
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,185
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 21,368
<AVERAGE-NET-ASSETS> 1,147,508
<PER-SHARE-NAV-BEGIN> 9.56
<PER-SHARE-NII> 0.25
<PER-SHARE-GAIN-APPREC> 0.67
<PER-SHARE-DIVIDEND> (0.25)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.23
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PARAGON
PORTFOLIO'S SEMI-ANNUAL REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 9
<NAME> PARAGON POWER VALUE GROWTH PORTFOLIO

<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> JAN-13-1995
<PERIOD-END> MAY-31-1995
<INVESTMENTS-AT-COST> 1,690,749
<INVESTMENTS-AT-VALUE> 1,789,006
<RECEIVABLES> 25,299
<ASSETS-OTHER> 18,051
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,832,356
<PAYABLE-FOR-SECURITIES> 75,608
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,362
<TOTAL-LIABILITIES> 105,970
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,633,072
<SHARES-COMMON-STOCK> 118,291
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 7
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,950)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 98,257
<NET-ASSETS> 1,726,386
<DIVIDEND-INCOME> 11,092
<INTEREST-INCOME> 4,614
<OTHER-INCOME> 0
<EXPENSES-NET> (4,839)
<NET-INVESTMENT-INCOME> 10,867
<REALIZED-GAINS-CURRENT> (4,950)
<APPREC-INCREASE-CURRENT> 98,257
<NET-CHANGE-FROM-OPS> 104,174
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (10,860)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 118,422
<NUMBER-OF-SHARES-REDEEMED> (728)
<SHARES-REINVESTED> 597
<NET-CHANGE-IN-ASSETS> 1,726,386
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,145
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 22,913
<AVERAGE-NET-ASSETS> 1,270,476
<PER-SHARE-NAV-BEGIN> 13.56
<PER-SHARE-NII> 0.12
<PER-SHARE-GAIN-APPREC> 1.03
<PER-SHARE-DIVIDEND> (0.12)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.59
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PARAGON
PORTFOLIO'S SEMI-ANNUAL REPORT DATED MAY 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 10
<NAME> PARAGON POWER VALUE EQUITY INCOME PORTFOLIO

<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> JAN-13-1995
<PERIOD-END> MAY-31-1995
<INVESTMENTS-AT-COST> 1,341,641
<INVESTMENTS-AT-VALUE> 1,470,550
<RECEIVABLES> 4,445
<ASSETS-OTHER> 19,045
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,494,040
<PAYABLE-FOR-SECURITIES> 125,801
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31,298
<TOTAL-LIABILITIES> 157,099
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,198,784
<SHARES-COMMON-STOCK> 104,334
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 9
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,239
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 128,909
<NET-ASSETS> 1,336,941
<DIVIDEND-INCOME> 11,854
<INTEREST-INCOME> 3,515
<OTHER-INCOME> 0
<EXPENSES-NET> (4,226)
<NET-INVESTMENT-INCOME> 11,143
<REALIZED-GAINS-CURRENT> 9,239
<APPREC-INCREASE-CURRENT> 128,909
<NET-CHANGE-FROM-OPS> 149,291
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (11,134)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 103,705
<NUMBER-OF-SHARES-REDEEMED> (23)
<SHARES-REINVESTED> 652
<NET-CHANGE-IN-ASSETS> 1,336,941
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,747
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 23,450
<AVERAGE-NET-ASSETS> 1,109,741
<PER-SHARE-NAV-BEGIN> 11.35
<PER-SHARE-NII> 0.12
<PER-SHARE-GAIN-APPREC> 1.46
<PER-SHARE-DIVIDEND> (0.12)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.81
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> JAN-13-1995
<PERIOD-END> MAY-31-1995
<INVESTMENTS-AT-COST> 1,835,762
<INVESTMENTS-AT-VALUE> 1,913,719
<RECEIVABLES> 304
<ASSETS-OTHER> 17,303
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,931,326
<PAYABLE-FOR-SECURITIES> 200,436
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31,304
<TOTAL-LIABILITIES> 231,740
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,613,049
<SHARES-COMMON-STOCK> 106,096
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1,248
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,332
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 77,957
<NET-ASSETS> 1,699,586
<DIVIDEND-INCOME> 974
<INTEREST-INCOME> 5,304
<OTHER-INCOME> 0
<EXPENSES-NET> (5,030)
<NET-INVESTMENT-INCOME> 1,248
<REALIZED-GAINS-CURRENT> 7,332
<APPREC-INCREASE-CURRENT> 77,957
<NET-CHANGE-FROM-OPS> 86,537
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 106,210
<NUMBER-OF-SHARES-REDEEMED> (114)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,699,586
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,270
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 24,094
<AVERAGE-NET-ASSETS> 1,321,109
<PER-SHARE-NAV-BEGIN> 14.98
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 1.03
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.02
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>

EXHIBIT 99.11

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the reference to us under the heading "Independent
Accountants" in the Statement of Additional Information constituting part of
this Post-Effective Amendment No. 11 to the Paragon Portfolio registration
statement on Form N-1A.

/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, NY 10036
July 26, 1995

<PAGE>

EXHIBIT 99.16(A)

EXHIBIT (16A-1) FOR THE PARAGON POWER PORTFOLIOS--CUMULATIVE TOTAL RETURN
- -------------------------------------------------------------------------
PERIOD SINCE INCEPTION (JANUARY 13, 1995) THROUGH MAY 31, 1995
- --------------------------------------------------------------

CUMULATIVE TOTAL RETURNS

ERV
Formula: T = (---) - 1
P
Where:

P = a hypothetical initial payment of $1,000 made on January 13, 1995
T = Cumulative total return
ERV = Ending Redeemable Value of a hypothetical $1,000 payment made at
the beginning of the period

P = $1,000

1) POWER INTERMEDIATE TERM BOND PORTFOLIO:
ERV = $1,096.93
CUMULATIVE TOTAL RETURN = 9.69%
-----

2) POWER VALUE GROWTH PORTFOLIO:
ERV = $1,085.12
CUMULATIVE TOTAL RETURN = 8.51%
-----

3) POWER VALUE EQUITY INCOME PORTFOLIO:
ERV = $1,140.37
CUMULATIVE TOTAL RETURN = 14.04%
------

4) POWER OF GULF SOUTH GROWTH PORTFOLIO:
ERV = $1,069,38
CUMULATIVE TOTAL RETURN = 6.94%
-----
<PAGE>

EXHIBIT (16A-2) FOR THE PARAGON POWER PORTFOLIOS--CUMULATIVE TOTAL RETURN
- -------------------------------------------------------------------------
PERIOD SINCE INCEPTION (JANUARY 13, 1995) THROUGH MAY 31, 1995
- --------------------------------------------------------------

ASSUMING NO REIMBURSEMENTS
--------------------------

CUMULATIVE TOTAL RETURNS

ERV
Formula: T = (---) - 1
P
Where:

P = a hypothetical initial payment of $1,000 made on January 13, 1995
T = Cumulative total return
ERV = Ending Redeemable Value of a hypothetical $1,000 payment made at
the beginning of the period

P = $1,000

1) POWER INTERMEDIATE-TERM BOND PORTFOLIO:
ERV = $1,079.75
CUMULATIVE TOTAL RETURN = 7.98%
-----

2) POWER VALUE GROWTH PORTFOLIO:
ERV = $1,075.92
CUMULATIVE TOTAL RETURN = 7.59%
-----

3) POWER VALUE EQUITY INCOME PORTFOLIO:
ERV = $1,128.28
CUMULATIVE TOTAL RETURN = 12.83%
------

4) POWER OF GULF SOUTH GROWTH PORTFOLIO:
ERV = $1,066.59
CUMULATIVE TOTAL RETURN = 6.66%
-----

<PAGE>

EXHIBIT (16A-3) FOR THE PARAGON POWER PORTFOLIOS--30-DAY SEC YIELD
- ------------------------------------------------------------------
(AT MAXIMUM PUBLIC OFFERING PRICE PER SHARE (POP = NAV) FOR THE PERIOD
- ----------------------------------------------------------------------
ENDING MAY 31, 1995
- -------------------

Formula used in calculating SEC 30-day yield for the Paragon Power
Intermediate-Term Bond Portfolio:

a - b
YIELD = 2 * [(----- + 1) to the power of 6 - 1]
c * d
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period
c = the average daily number of shares outstanding during May 2-31, 1995
d = the maximum offering price per share on May 31, 1995 (POP = NAV)

For the 30-day period ending May 31, 1995, these variables for the
Portfolio were as follows:

1) PARAGON POWER INTERMEDIATE-TERM BOND PORTFOLIO:
-----------------------------------------------

a = 7,258.39
b = 830.84
c = 133,817.850
d = 10.23

THUS, THE 30-DAY YIELD COMPUTED TO 5.70%
<PAGE>

EXHIBIT (16A-4) FOR THE PARAGON POWER PORTFOLIOS--30-DAY SEC YIELD
- ------------------------------------------------------------------
(AT MAXIMUM PUBLIC OFFERING PRICE PER SHARE FOR THE PERIOD ENDING MAY 31, 1995
- ------------------------------------------------------------------------------
(POP = NAV) ASSUMING NO REIMBURSEMENTS
- ----------- --------------------------

Formula used in calculating SEC 30-day yield for the Paragon Power
Intermediate-Term Bond Portfolio:

For the 30-day period ending May 31, 1995, these variables for the
Portfolio were as follows:

1) PARAGON POWER INTERMEDIATE-TERM BOND PORTFOLIO:
-----------------------------------------------

a = 7,258.39
b = 4,719.23
c = 133,817.85
d = 10.23

THUS, THE 30-DAY YIELD COMPUTED TO 2.24%

<PAGE>
EXHIBIT (16A-5) FOR THE PARAGON POWER PORTFOLIOS - 30-DAY DISTRIBUTION RATE
- ---------------------------------------------------------------------------
FOR THE PERIOD ENDING MAY 31, 1995
- ----------------------------------

Formula used in calculating 30-day distribution rate for the Paragon
Power Intermediate-Term Bond Portfolio:

Rate: (a / b) x (365 / 30 days)

Where:
a=total distributions per share for the 30-day period ended
May 31, 1995
b=the maximum offering price per share on May 31, 1995

For the 30-day period ending May 31, 1995, these variables were as
follows:

1) Paragon Power Intermediate Term Bond Portfolio:
-----------------------------------------------
a = 0.052963386
b = 10.23

Thus, the 30-Day Distribution Rate computed to 6.30%

<PAGE>

EXHIBIT (16A-6) FOR THE PARAGON POWER PORTFOLIOS - 30-DAY DISTRIBUTION RATE
- ---------------------------------------------------------------------------
FOR THE PERIOD ENDING MAY 31, 1995 ASSUMING NO REIMBURSMENTS
- ---------------------------------- -------------------------

Rate: (a / b) x (365 / 30 days)

Where:
a=total distributions per share for the 30-day period ended
May 31, 1995
b=the maximum offering price per share on May 31, 1995

For the 30-day period ending May 31, 1995, these variables were as
follows:

1) Paragon Power Intermediate-Term Bond Portfolio:
-----------------------------------------------
a = 0.0229082
b = 10.23

Thus, the 30-Day Distribution Rate computed to 2.72%

<PAGE>

EXHIBIT 99.17

POWER OF ATTORNEY
-----------------

Know All Men By These Presents, that the undersigned, Bruce C. Gottwald, Jr.,
hereby constitutes and appoints Marcia L. Beck, Scott M. Gilman, John W. Mosior,
Nancy L. Mucker, Michael J. Richman, Howard B. Surloff and Pauline Taylor,
jointly and severally, his attorneys-in-fact, each with power of substitution,
for them in any and all capacities to sign the Registration Statement under the
Securities Act of 1933 and the Investment Company Act of 1940 of Paragon
Portfolio and any and all amendments to such Registration Statements, and to
file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitute or
substitutes, may do or cause to be done virtue thereof.

Dated: November 4, 1993

Bruce C. Gottwald, Jr.
----------------------
Bruce C. Gottwald, Jr.
<PAGE>

POWER OF ATTORNEY
-----------------

Know All Men By These Presents, that the undersigned, Ernest E. Howard, III,
hereby constitutes and appoints Marcia L. Beck, Scott M. Gilman, John W. Mosior,
Nancy L. Mucker, Michael J. Richman, Howard B. Surloff and Pauline Taylor,
jointly and severally, his attorneys-in-fact, each with power of substitution,
for them in any and all capacities to sign the Registration Statement under the
Securities Act of 1933 and the Investment Company Act of 1940 of Paragon
Portfolio and any and all amendments to such Registration Statements, and to
file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitute or
substitutes, may do or cause to be done virtue thereof.

Dated: November 4, 1993

Ernest E. Howard, III
---------------------
Ernest E. Howard, III
<PAGE>

POWER OF ATTORNEY
-----------------

Know All Men By These Presents, that the undersigned, Paul C. Nagel, Jr., hereby
constitutes and appoints Marcia L. Beck, Scott M. Gilman, John W. Mosior, Nancy
L. Mucker, Michael J. Richman, Howard B. Surloff and Pauline Taylor, jointly and
severally, his attorneys-in-fact, each with power of substitution, for them in
any and all capacities to sign the Registration Statement under the Securities
Act of 1933 and the Investment Company Act of 1940 of Paragon Portfolio and any
and all amendments to such Registration Statements, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done virtue thereof.

Dated: November 4, 1993

Paul C. Nagel, Jr.
------------------
Paul C. Nagel, Jr.
<PAGE>

POWER OF ATTORNEY
-----------------

Know All Men By These Presents, that the undersigned, Marcia L. Beck, hereby
constitutes and appoints Scott M. Gilman, John W. Mosior, Nancy L. Mucker,
Michael J. Richman, Howard B. Surloff and Pauline Taylor, jointly and severally,
her attorneys-in-fact, each with power of substitution, for them in any and all
capacities to sign the Registration Statement under the Securities Act of 1933
and the Investment Company Act of 1940 of Paragon Portfolio and any and all
amendments to such Registration Statements, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute or substitutes, may do or cause to
be done virtue thereof.

Dated: November 4, 1993

Marcia L. Beck
--------------
Marcia L. Beck
<PAGE>

POWER OF ATTORNEY
-----------------

Know All Men By These Presents, that the undersigned, Scott M. Gilman, hereby
constitutes and appoints Marcia L. Beck, John W. Mosior, Nancy L. Mucker,
Michael J. Richman, Howard B. Surloff and Pauline Taylor, jointly and severally,
his attorneys-in-fact, each with power of substitution, for them in any and all
capacities to sign the Registration Statement under the Securities Act of 1933
and the Investment Company Act of 1940 of Paragon Portfolio and any and all
amendments to such Registration Statements, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute or substitutes, may do or cause to
be done virtue thereof.

Dated: November 4, 1993

Scott M. Gilman
---------------
Scott M. Gilman
<PAGE>

POWER OF ATTORNEY
-----------------

Know All Men By These Presents, that the undersigned, John W. Mosior, hereby
constitutes and appoints Marcia L. Beck, Scott M. Gilman, Nancy L. Mucker,
Michael J. Richman, Howard B. Surloff and Pauline Taylor, jointly and severally,
his attorneys-in-fact, each with power of substitution, for them in any and all
capacities to sign the Registration Statement under the Securities Act of 1933
and the Investment Company Act of 1940 of Paragon Portfolio and any and all
amendments to such Registration Statements, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute or substitutes, may do or cause to
be done virtue thereof.

Dated: November 4, 1993

John W. Mosior
--------------
John W. Mosior
<PAGE>

POWER OF ATTORNEY
-----------------

Know All Men By These Presents, that the undersigned, Nancy L. Mucker, hereby
constitutes and appoints Marcia L. Beck, Scott M. Gilman, John W. Mosior,
Michael J. Richman, Howard B. Surloff and Pauline Taylor, jointly and severally,
her attorneys-in-fact, each with power of substitution, for them in any and all
capacities to sign the Registration Statement under the Securities Act of 1933
and the Investment Company Act of 1940 of Paragon Portfolio and any and all
amendments to such Registration Statements, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute or substitutes, may do or cause to
be done virtue thereof.

Dated: November 4, 1993

Nancy L. Mucker
---------------
Nancy L. Mucker
<PAGE>

POWER OF ATTORNEY
-----------------

Know All Men By These Presents, that the undersigned, Michael J. Richman, hereby
constitutes and appoints Marcia L. Beck, Scott M. Gilman, John W. Mosior, Nancy
L. Mucker, Howard B. Surloff and Pauline Taylor, jointly and severally, his
attorneys-in-fact, each with power of substitution, for them in any and all
capacities to sign the Registration Statement under the Securities Act of 1933
and the Investment Company Act of 1940 of Paragon Portfolio and any and all
amendments to such Registration Statements, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute or substitutes, may do or cause to
be done virtue thereof.

Dated: November 4, 1993

Michael J. Richman
------------------
Michael J. Richman
<PAGE>

POWER OF ATTORNEY
-----------------

Know All Men By These Presents, that the undersigned, Howard B. Surloff, hereby
constitutes and appoints Marcia L. Beck, Scott M. Gilman, John W. Mosior, Nancy
L. Mucker, Michael J. Richman and Pauline Taylor, jointly and severally, his
attorneys-in-fact, each with power of substitution, for them in any and all
capacities to sign the Registration Statement under the Securities Act of 1933
and the Investment Company Act of 1940 of Paragon Portfolio and any and all
amendments to such Registration Statements, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute or substitutes, may do or cause to
be done virtue thereof.

Dated: November 4, 1993

Howard B. Surloff
-----------------
Howard B. Surloff
<PAGE>

POWER OF ATTORNEY
-----------------

Know All Men By These Presents, that the undersigned, Pauline Taylor, hereby
constitutes and appoints Marcia L. Beck, Scott M. Gilman, John W. Mosior, Nancy
L. Mucker, Michael J. Richman and Howard B. Surloff, jointly and severally, her
attorneys-in-fact, each with power of substitution, for them in any and all
capacities to sign the Registration Statement under the Securities Act of 1933
and the Investment Company Act of 1940 of Paragon Portfolio and any and all
amendments to such Registration Statements, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute or substitutes, may do or cause to
be done virtue thereof.

Dated: November 4, 1993

Pauline Taylor
---------------
Paulline Taylor
<PAGE>

POWER OF ATTORNEY
-----------------

Know All Men By These Presents, that Paul Klug, the undersigned, hereby
constitutes and appoints Marcia L. Beck, Scott M. Gilman, John W. Mosior, Nancy
L. Mucker, Michael J. Richman, Howard B. Surloff and Pauline Taylor, jointly and
severally, his attorneys-in-fact, each with power of substitution, for them in
any and all capacities to sign the Registration Statement under the Securities
Act of 1933 and the Investment Company Act of 1940 of Paragon Portfolio and any
and all amendments to such Registration Statements, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done virtue thereof.

Dated: February 16, 1995

Paul Klug
---------
Paul Klug

<PAGE>

EXHIBIT 99.18

PARAGON TREASURY MONEY MARKET FUND
PARAGON SHORT-TERM GOVERNMENT FUND
PARAGON INTERMEDIATE-TERM BOND FUND
PARAGON LOUISIANA TAX-FREE FUND
PARAGON VALUE GROWTH FUND
PARAGON VALUE EQUITY INCOME FUND
PARAGON GULF SOUTH GROWTH FUND
(THE "FUNDS)

PLAN IN ACCORDANCE WITH RULE 18F-3

Each class of shares of each Fund will have the same relative rights and
privileges and be subject to the same sales charges, fees and expenses, except
as set forth below. In addition, extraordinary expenses attributable to one or
more classes shall be borne by such classes. The Board of Trustees may
determine in the future that other allocations of expenses or other services to
be provided to a class of shares are appropriate and amend this Plan accordingly
without the approval of shareholders of any class. Unless a class of shares is
otherwise designated, it shall have the terms set forth below with respect to
Class A Shares. Except as set forth in the Funds' prospectus, shares of any
class of a Fund may be exchanged only for shares of the same class of another
Fund.

CLASS A SHARES

Class A Shares are sold at net asset value per share plus the applicable
sales charge (if any) as set forth in the Funds' prospectus. Class A Shares are
not subject to any Distribution Plan or to a contingent deferred sales charge.
Class A Shares are sold subject to the minimum purchase requirements set forth
in the Funds' prospectus. A wire transfer fee may be imposed in connection with
the payment of redemption proceeds from Class A Shares. Class A Shares shall be
entitled to the shareholder services set forth from time to time in the Funds'
prospectus with respect to Class A Shares.

CLASS B SHARES

Class B Shares are sold at net asset value per share without the imposition of
an initial sales charge. However, Class B Shares redeemed within five years of
purchase will be subject to a contingent deferred sales charge as set forth in
the Funds' prospectus. Class B Shares are sold subject to the minimum purchase
requirements set forth in the Funds' prospectus. Class B Shares are subject to
fees under the Class B Rule 12b-1 Distribution Plan on the terms set forth in
the Funds' prospectus. A wire transfer fee may be imposed in connection with
the payment of redemption proceeds from Class B Shares. The Class B
Shareholders of each Fund have exclusive voting rights, if any, with respect to
the Fund's Class B Distribution Plan. Class B Shares shall be entitled to the
shareholder services set
<PAGE>

forth from time to time in the Fund's prospectus with respect to Class B Shares.

Class B Shares will automatically convert to Class A Shares of the same
Fund at the end of the calendar quarter that is seven years after the initial
purchase date of Class B Shares, except as provided in the Funds' prospectus.
The initial purchase date for Class B Shares acquired through reinvestment of
dividends on Class B Shares will be deemed to be the date on which the original
Class B Shares were purchased. Such conversion will occur at the relative net
asset value per share of each class. Redemption requests placed by shareholders
who own both Class A and Class B Shares of a Fund will be satisfied first by
redeeming the shareholder's Class A Shares, unless the shareholder has made a
specific election to redeem Class B Shares.

The conversion of Class B Shares to Class A Shares is subject to the
receipt of a ruling of the Internal Revenue Service or an opinion of counsel to
the effect that the automatic conversion of Class B Shares to Class A Shares
does not constitute a taxable event under federal income tax law. The
conversion of Class B Shares to Class A Shares may be suspended if such a ruling
is no longer effective or such an opinion is no longer available.