<PAGE>
OCC ACCUMULATION TRUST
Supplement dated October 20, 2000
to the Prospectus dated July 27, 2000
OCC ACCUMULATION TRUST (the "Fund") is an open-end investment company with the
following investment portfolios (the "Portfolios"):
Equity Portfolio
Blended Equity Portfolio
Large Cap Growth Portfolio
Small Cap Growth Portfolio
Science and Technology Portfolio
Target Portfolio
Mid Cap Portfolio
Small Cap Portfolio
Global Equity Portfolio
Managed Portfolio
Balanced Portfolio
U.S. Government Income Portfolio
Shares of the Portfolios are sold only to variable accounts of certain life
insurance companies as an investment vehicle for their variable annuity and
variable life insurance contracts and to qualified pension and retirement plans.
The Securities and Exchange Commission has not approved any Portfolio's shares
as an investment or determined whether this Prospectus is accurate or complete.
Any representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
Page
Risk/Return Summary..........................................................3
Fees & Expenses of the Portfolios...........................................12
Sub-Advisor's Past Performance..............................................13
Principal Investment Strategies.............................................15
Risks.......................................................................21
Investment Policies.........................................................23
Fund Management.............................................................25
Share Price.................................................................30
Distributions and Taxes.....................................................30
Financial Highlights........................................................31
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RISK/RETURN SUMMARY
INVESTMENT GOALS
<TABLE>
<S> <C>
Equity Portfolio.........................Long term capital appreciation
Blended Equity Portfolio.................Long term capital appreciation
Large Cap Growth Portfolio...............Long term capital appreciation
Small Cap Growth Portfolio...............Capital appreciation
Target Portfolio.........................Capital appreciation
Mid Cap Portfolio........................Long term capital appreciation
Small Cap Portfolio......................Capital appreciation
Science and Technology Portfolio.........Capital appreciation
Global Equity Portfolio..................Long term capital appreciation
Managed Portfolio........................Growth of capital over time
Balanced Portfolio.......................Growth of capital and investment income
U.S. Gov't Income Portfolio..............High current income and protection of capital
</TABLE>
PRINCIPAL INVESTMENT
STRATEGIES
- The Equity Portfolio invests primarily in equity securities that the
investment advisor believes are undervalued in the marketplace.
- The Blended Equity Portfolio invests generally in equity securities of
companies with market capitalizations of at least $5 billion that the
sub-adviser believes offer growth opportunities and in equity securities of
companies with market capitalizations of more than $2 billion that the
investment adviser believes are undervalued relative to their industry
group.
- The Large Cap Growth Portfolio invests primarily in equity securities of
companies with market capitalizations of at least $5 billion.
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- The Small Cap Growth Portfolio invests primarily in equity securities of
companies with market capitalizations under $2 billion.
- The Science and Technology Portfolio invests primarily in equity securities
of companies which use innovative technologies to gain a strategic
competitive advantage in their industry, as well as companies that provide
and service those technologies.
- The Target Portfolio invests primarily in equity securities of companies
with market capitalizations between $1 billion and $10 billion.
- The Mid Cap Portfolio invests primarily in equity securities of companies
with market capitalizations between $500 million and $5 billion.
- The Small Cap Portfolio invests primarily in equity securities of companies
with market capitalizations under $2 billion.
- The Global Equity Portfolio invests primarily in equity securities on a
worldwide basis and may invest in U.S. or foreign fixed income securities.
- The Managed Portfolio invests in common stocks, bonds and cash equivalents,
allocated based on the investment adviser's judgment.
- The Balanced Portfolio invests in common stocks, preferred stocks,
securities convertible into common stock and debt securities.
- The U.S. Government Income Portfolio invests solely in debt obligations
including mortgage-backed securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
INVESTMENT
PHILOSOPHY
OpCap Advisors is the investment adviser to all of the Portfolios. OpCap
Advisors has retained PIMCO Equity Advisors, a division of PIMCO Advisors L.P.
("PIMCO Equity Advisors"), as sub-adviser to the Large Cap Growth, Small Cap
Growth, Science and Technology and Target Portfolios, and for a portion of the
assets of the Blended Equity Portfolio. OpCap Advisors has retained Pacific
Investment Management Company ("PIMCO") as sub-adviser for
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a portion of the assets of the Managed Portfolio.
For the equity investments it manages directly, i.e., the Equity, Mid Cap, Small
Cap, Global Equity and Balanced Portfolios and the portion of the assets of the
Blended Equity and Managed Portfolios not sub-advised by its affiliates, OpCap
Advisors applies principles of value investing, although the individual
portfolio managers may implement those principles differently.
When selecting equity securities, OpCap Advisors believes there are two major
components of value.
- A company's ability to generate earnings that contribute to shareholder
value. OpCap Advisors considers discretionary cash flow-cash that remains
after a company spends what is needed to sustain its industrial position as
a primary determinant of a company's potential to add economic value.
- Price - OpCap Advisors looks for market undervaluation great enough to
offer the potential for upside reward with what it believes is modest
downward risk.
OpCap Advisors uses fundamental company analysis to select securities.
Fundamental company analysis involves intensive evaluation of historic financial
data including:
- Company financial statements
- Market share analysis
- Unit volume growth
- Barriers to entry
- Pricing policies
- Management record.
OpCap Advisors uses fundamental company analysis to select companies they
believe have one or more of the following characteristics:
- substantial and growing discretionary cash flow
- strong shareholder value-oriented management
- valuable consumer or commercial franchises
- high returns on capital
- favorable price to intrinsic value relationship.
In selecting debt securities, OpCap Advisors analyzes yield relationships
between different sectors and among securities along the yield curve. OpCap
Advisors seeks to take advantage of
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maturities and individual issues that are inexpensive and have the potential to
provide superior returns. In evaluating high yield debt securities, OpCap
Advisors supplements its traditional credit analysis with an evaluation of an
issuer's asset values.
There can be no assurance that OpCap Advisors will achieve its goals.
PIMCO Equity Advisors acts as sub-adviser to the Large Cap Growth, Small Cap
Growth, Science and Technology and Target Portfolios and has been retained by
OpCap Advisors to act as sub-adviser for a portion of the investments of the
Blended Equity Portfolio.
PIMCO Equity Advisors' investment philosophy focuses on the wealth-creating
characteristics of a growing business. By combining the characteristics of
growth, quality, and time, its investment process seeks to capture the powerful
compounding effect of a growing enterprise. PIMCO Equity Advisors seeks to
invest in superior companies and then monitor accounts to ensure that it
maintains a portfolio of the highest-quality companies available. The investment
process includes both quantitative and qualitative screens at identifying
candidate securities. PIMCO Equity Advisors aims to significantly outperform the
relevant market index over the long term and to control risk relative to the
market. There can be no assurance that it will achieve these goals.
PIMCO acts as the sub-adviser to the Managed Portfolio. In selecting securities
for the Managed Portfolio, PIMCO develops an outlook for interest rates,
currency exchange rates and the economy; analyzes credit and call risks, and
uses other security selection techniques. The proportion of the Portfolio's
assets committed to investment in securities with particular characteristics
(such as quality, section interest rate or maturity) varies based on PIMCO's
outlook for the U.S. economy and the economies of other countries in the world,
the financial markets and other factors.
PIMCO attempts to identify areas of the bond market that are undervalued
relative to the rest of the market. PIMCO identifies these areas by grouping
bonds into the following sectors: money markets, governments, corporates,
mortgages, asset-backed and international. Sophisticated proprietary software
then assists in evaluating sectors and pricing specific securities. Once
investment opportunities are identified, PIMCO will shift assets among sectors
depending upon changes in relative valuations and credit spreads.
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There is no guarantee that PIMCO's security selection techniques will produce
the desired results.
PRINCIPAL RISKS
If you invest in the Portfolios that invest in equity securities, you could lose
money or those Portfolios could underperform other investments if any of the
following happens:
- The stock market goes down
- The Portfolio's investment style (i.e., value or growth) falls out of favor
with the stock market
- The Portfolio's investment sector (e.g., small cap, mid cap, technology or
foreign securities, which generally are more volatile than U.S. large cap
securities) declines or becomes less liquid
- For the Equity, Mid Cap, Small Cap, Global Equity, Managed and Balanced
Portfolios, the market undervalues the stocks held for longer than
expected, or the stocks purchased turn out not to be undervalued
- The stocks selected for growth potential do not achieve such growth.
If you invest in the Portfolios that invest in debt securities, you could lose
money or your investment may underperform other investments if any of the
following happens:
- Interest rates rise and the bond market goes down
- Issuers of debt instruments cannot meet their obligations
- Bond issuers' call bonds selling at a premium to their call price before
the maturity date
- Loans securing mortgage-backed obligations prepay principal more rapidly
than expected. The Portfolios may have to reinvest these prepayments at
lower rates.
The U.S. Government Income Portfolio principally buys fixed income securities
that are issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, so credit risk should be low.
BAR CHART &
PERFORMANCE
TABLE
The bar charts provide some indication of the risks of investing in the
Portfolios by showing changes in the performance of each Portfolio's shares from
year to year over the past 10 or less full calendar years during the life of
each Portfolio and the highest and lowest quarterly return during the same
period for each Portfolio. Performance is not shown in a table for the Blended
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Equity, Balanced, Large Cap Growth, Small Cap Growth, Science and Technology and
Target Portfolios because they do not have a full calendar year of performance.
Supplemental performance of the sub-adviser with regard to the Large Cap Growth,
Small Cap Growth, Science & Technology and Target Portfolios can be found in
the section captioned "Sub-Advisor's Past Performance" after the section "Fees &
Expenses of the Portfolios."
The Portfolios' past performance does not necessarily indicate how each
Portfolio will perform in the future. The Portfolios' performance does not
reflect charges and deductions which are imposed under the variable contracts.
Performance results after charges and deductions will be lower.
EQUITY PORTFOLIO
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(2.22)% 31.22% 17.90% 7.85% 3.81% 38.85% 23.36% 26.63% 11.86% 2.54%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
14.17% (for the quarter ended March 31, 1991) and the lowest quarterly return
was (13.32)% (for the quarter ended September 30, 1990). Year-to-date total
return as of June 30, 2000 was (5.80)%.
MID CAP PORTFOLIO
<TABLE>
<CAPTION>
1999
<S><C>
21.63%
</TABLE>
During the period shown in the bar chart, the highest quarterly return was
23.78% (for the quarter ended December 31, 1999) and the lowest quarterly return
was (17.87)% (for the quarter ended September 30, 1998). Year-to-date total
return as of June 30, 2000 was 15.31%.
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SMALL CAP PORTFOLIO
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(9.76)% 48.12% 19.51% 19.51% (1.01)% 15.23% 18.72% 22.24% (9.03)% (1.80)%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
19.20% (for the quarter ended March 31, 1991) and the lowest quarterly return
was (17.26)% (for the quarter ended September 30, 1998). Year-to-date total
return as of June 30, 2000 was 13.28%.
GLOBAL EQUITY
<TABLE>
<CAPTION>
1996 1997 1998 1999
<S> <C> <C> <C>
15.02% 14.02% 13.29% 26.53%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
14.89% (for the quarter ended December 31, 1998) and the lowest quarterly return
was (15.04)% (for the quarter ended September 30, 1998). Year-to-date total
return as of June 30, 2000 was (0.51)%.
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MANAGED PORTFOLIO
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(3.63)% 45.98% 18.65% 10.39% 2.61% 45.55% 22.77% 22.29% 7.12% 5.00%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
20.80% (for the quarter ended March 31, 1991) and the lowest quarterly return
was (13.37)% (for the quarter ended September 30, 1998). Year-to-date total
return as of June 30, 2000 was (2.98)%.
U.S. GOVERNMENT INCOME PORTFOLIO
<TABLE>
<CAPTION>
1996 1997 1998 1999
<S> <C> <C> <C>
3.02% 7.04% 8.15% (1.61)%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
4.68% (for the quarter ended September 30, 1998) and the lowest quarterly return
was (1.05)% (for the quarter ended June 30, 1999). Year-to-date total return as
of June 30, 2000 was 3.16%.
The table below shows how the average annual returns for one year, five years
and for the life of the Equity and Managed Portfolios compare to that of the
Standard & Poor's Composite Index of 500 Stocks, how the average annual returns
for one year and for the life of the Mid Cap Portfolio compare to those of the
Wilshire 750 Mid Cap Index, how the average annual returns for the Small Cap
Portfolio compare to the Russell 2000, how the average annual returns for the
Global Equity Portfolio compare to the MSCI World Index, and how the returns for
the U.S. Government Income Portfolio compare to the Lehman Intermediate
Government Bond Index. The table gives some indication of the risks of the
Portfolios by comparing the performance of each Portfolio with a broad measure
of market performance. The Blended Equity, Balanced, Large Cap Growth, Small Cap
Growth and Target Portfolios do not have one year track records yet.
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Average Annual Total Returns for the periods ended December 31, 1999
<TABLE>
<CAPTION>
Past Year Past 5 Years Since Inception
<S> <C> <C> <C>
Equity Portfolio 2.54% 19.98% 15.66%*
Managed Portfolio 5.00% 19.69% 17.70%*
S&P 500 Index 21.04% 28.54% 18.98%
Small Cap Portfolio (1.82)% 8.35% 11.48%*
Russell 2000 21.26% 16.69% 13.06%
Mid Cap Portfolio 21.63% N/A 9.96%
Wilshire 750 Mid Cap Index 26.63% N/A 16.29%
Global Equity Portfolio 26.53% N/A 18.06%
MSCI World Index 24.93% N/A 20.50%
U.S. Government Income Portfolio (1.61)% N/A 5.78%
Lehman Intermediate Government
Bond Index 0.49% N/A 6.93%
U.S. Government Income Portfolio
Yield for the 30-day period ended
December 31, 1999 5.38%
</TABLE>
*On September 16, 1994, an investment company then called Quest for Value
Accumulation Trust (the "Old Trust") was effectively divided into two investment
funds, the Old Trust and the Fund, at which time the Fund commenced operations.
The total net assets for each of the Equity, Small Cap and Managed Portfolios
immediately after the transaction were $86,789,755, $139,812,573 and
$682,601,380, respectively, with respect to the Old Trust and for each of the
Equity, Small Cap and Managed Portfolios, $3,764,598, $8,129,274 and
$51,345,102, respectively, with respect to the Fund. For the period prior to
September 16, 1994, the performance figures above for each of the Equity, Small
Cap and Managed Portfolios reflect the performance of the corresponding
Portfolios of the Old Trust. The Old Trust commenced operations on August 1,
1988.
The benchmark for the portion of the Managed Portfolio managed by PIMCO is the
Lehman Brothers Aggregate Bond Index.
For current yield information please call 1-800-700-8258.
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FEES & EXPENSES OF THE PORTFOLIOS
This table describes the fees and expenses that you may pay if you buy and hold
shares in the Portfolios.
SHAREHOLDER FEES-FEES YOU PAY DIRECTLY None
Annual Fund Operating Expenses - Expenses that are deducted from Fund assets
<TABLE>
<CAPTION>
Total Annual Fund
Management Fees Other Expenses Operating Expenses
<S> <C> <C> <C>
Equity Portfolio 0.80% 0.11% 0.91%
Blended Equity Portfolio 0.80% 0.20% 1.00%
Large Cap Growth Portfolio 0.80% 0.20% 1.00%
Small Cap Growth Portfolio 0.80% 0.20% 1.00%
Science & Technology Portfolio 0.80% 0.20% 1.00%
Target Portfolio 0.80% 0.20% 1.00%
Mid Cap Portfolio 0.80% 0.20% 1.00%
Small Cap Portfolio 0.80% 0.09% 0.89%
Global Equity Portfolio 0.80% 0.30% 1.10%
Managed Portfolio 0.77% 0.06% 0.83%
Balanced Portfolio 0.80% 0.20% 1.00%
U.S. Government Income Portfolio 0.60% 0.35% 0.95%
</TABLE>
EXAMPLE:
This example is intended to help you compare the cost of investing in each Fund
with the cost of investing in other funds. Although your actual costs may be
higher or lower, you would pay the following expenses on a $10,000 investment
assuming: (1) 5% annual return; (2) the Fund's operating expenses remain the
same, and (3) you redeem all your shares at the end of each period in the table.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Equity Portfolio $93 $290 $504 $1,120
Blended Equity Portfolio $102 $318 $552 $1,225
Large Cap Growth Portfolio $102 $318 $552 $1,225
Small Cap Growth Portfolio $102 $318 $552 $1,225
Science & Technology Portfolio $102 $318 $552 $1,225
Target Portfolio $102 $318 $552 $1,225
Mid Cap Portfolio $102 $318 $552 $1,225
Small Cap Portfolio $91 $284 $493 $1,096
Global Equity Portfolio $112 $350 $606 $1,340
Managed Portfolio $85 $265 $460 $1,025
Balanced Portfolio $102 $318 $552 $1,225
U.S. Government Income Portfolio $97 $303 $525 $1,166
</TABLE>
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SUB-ADVISOR'S PAST PERFORMANCE
The performance results shown below represent composite returns (the
"Composites") derived from performance data furnished by PIMCO Equity Advisors
which is sub-advisor to the Large Cap Growth, Small Cap Growth, Science and
Technology and Target portfolios, the ("Growth Portfolios"). The Composites are
comprised of all accounts managed by PIMCO Equity Advisors with substantially
similar investment objectives, policies and strategies as the Growth Portfolios.
The Composites have not been subject to the same types of expenses and
restrictions to which the Growth Portfolio's are subject under the Investment
Company Act and the Internal Revenue Code. The information
regarding the performance of the Composites does not represent the
Growth Portfolio's performance. Such information should not be considered a
prediction of the future performance of the Growth Portfolios. The Growth
Portfolios are newly organized and have no performance record of their own.
The table below shows the average annual total return of the Composites
managed by PIMCO Equity Advisors for the period ending September 30, 2000.
The Composite returns are also compared against their relevant benchmark
(which are the same benchmarks for the Growth Portfolios). The past
performance data for the Composites has been adjusted to reflect the
management fees and other expenses actually paid by the Growth Portfolios and
assume the reinvestment of all dividends and distributions. The fees and
expenses paid by the Growth Portfolios will be higher than the fees and
expenses paid by the Composites. The performance of the Composites would have
been lower than that shown below if the Composites had been subject to the
fees and expenses of the Growth Portfolios and to other restrictions
applicable to investment companies under relevant laws.
AVERAGE ANNUAL TOTAL RETURN
(for the period ended September 30, 2000
<TABLE>
<CAPTION>
1998 1999 YEAR TO DATE LAST 12 MONTHS SINCE INCEPTION(2)
<S> <C> <C> <C> <C> <C>
Science and Technology Composite 37.22(1) 139.75 21.41 118.82 99.87
Lipper Science & Technology Index 39.06(1) 113.90 6.64 67.56 78.10
Large Cap Growth Portfolio N/A 30.91(3) 6.15 43.60 24.53
Russell 1000 Growth Index N/A 25.20(3) -1.37 23.43 15.10
Small Cap Growth Portfolio -3.65 66.03 6.03 54.10 28.01
Russell 2000 Growth Index 1.23 43.09 -2.80 29.66 15.91
Target Portfolio N/A 64.48(3) 40.91 115.87 75.15
S&P Mid-Cap Index N/A 22.54(3) 22.21 43.21 30.90
</TABLE>
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(1) Performance is for the period October 1, 1998 through December 31, 1998.
(2) The inception periods for the Large Cap Growth Composite, Small Cap Growth
Composite, Science and Technology Composite and Target Composite are
4/1/99, 7/1/94, 10/1/98 and 4/1/99 respectively.
(3) Performance is for the period April 1, 1999 through December 31, 1999.
Average Annual Total Return: Composite results are measured internally based
upon trade date accounting and include the reinvestment of dividends and
interest. Results for the full historical period are time weighted. The
Composites are valued monthly and portfolio returns are asset weighted using
beginning-of-month market values. Quarterly, annual and annualized periods are
calculated based upon geometrically linked monthly returns.
The benchmark (or index) for each of the Composites are a measure of the broad
market for their respective strategy. Each index is included to provide a
detailed basis of comparison. Each index is unmanaged and reflects past
performance, which is not indicative of future results. For comparison purposes,
the unmanaged index is fully invested and returns are gross of investment
management fees.
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PRINCIPAL INVESTMENT STRATEGIES
EQUITY PORTFOLIO
Q What is the Portfolio's investment objective?
A Long term capital appreciation through investment in a diversified
portfolio of equity securities selected on the basis of a value approach to
investing.
Q What is the Portfolio's investment program?
A The Equity Portfolio invests primarily in equity securities of companies
that OpCap Advisors believes are undervalued in the marketplace. Under
normal conditions, the Portfolio will invest in equity securities listed on
the New York Stock Exchange and on other U.S. or foreign securities
exchanges or traded in the U.S. or foreign over the counter markets.
Q What are the potential rewards of investing in the Portfolio?
A Common stocks and other equity securities offer a way to invest for long
term growth of capital. Equity investors should have a long term investment
horizon and should be prepared for the ups and downs of the stock markets.
BLENDED EQUITY PORTFOLIO
Q What is the Portfolio's investment objective?
A Long term capital appreciation.
Q What is the Portfolio's investment program?
A The Portfolio invests generally in equity securities of companies with
market capitalization of a least $5 billion at the time of purchase that
PIMCO Equity Advisors believes will experience relatively rapid earnings
growth and in equity securities of companies with market capitalizations of
at least $2 billion that OpCap Advisors believes are undervalued relative
to their industry group. The majority of the stocks purchased by the
Portfolio will be listed on a domestic stock exchange or traded in the U.S.
over the counter market. The Portfolio may purchase foreign securities that
are listed on a U.S. or foreign exchange or traded in the U.S. or foreign
over the counter market, purchase and sell foreign currencies and use
derivatives for risk management purposes or as part of its investment
strategy. In response to unfavorable market and other conditions, the
Portfolio may invest temporarily in high-quality fixed income securities.
Q What are the potential rewards of investing in the Portfolio?
A Common stocks and other equity securities offer a way to invest for long
term growth of
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capital. Opportunities for long term growth of capital arise from companies
that are undervalued relative to their industry group or show strong
potential for growth or experience better than anticipated earnings growth.
LARGE CAP GROWTH PORTFOLIO
Q What is the Portfolio's investment objective?
A Long term capital appreciation.
Q What is the Portfolio's investment program?
A The Portfolio invests primarily in equity securities of companies with
market capitalizations of at least $5 billion at the time of purchase which
PIMCO Equity Advisors believes will experience relatively rapid earnings
growth. The majority of the stocks purchased by the Portfolio will be
listed on a domestic stock exchange or traded in the U.S. over the counter
market. The Portfolio may purchase foreign securities that are listed on a
U.S. or foreign exchange or traded in the U.S. or foreign over the counter
market, purchase and sell foreign currencies and use derivatives for risk
management purposes or as part of its investment strategy. In response to
unfavorable market and other conditions, the Portfolio may invest
temporarily in high-quality fixed income securities.
Q What are the potential rewards of investing in the Portfolio?
A Common stocks and other equity securities offer a way to invest for long
term growth of capital. The prices of securities of large cap companies may
be less volatile than those of less highly-capitalized companies.
SMALL CAP GROWTH PORTFOLIO
Q What is the Portfolio's investment objective?
A Capital appreciation.
Q What is the Portfolio's investment program?
A The Portfolio invests primarily in equity securities of companies with
market capitalizations of under $2 billion at the time of purchase which
PIMCO Equity Advisors believes will experience relatively rapid earnings
growth. The majority of the stocks purchased by the Portfolio will be
listed on a domestic stock exchange or traded in the U.S. over the counter
market. The Portfolio may purchase foreign securities that are listed on a
U.S. or foreign exchange or traded in the U.S. or foreign over the counter
market, purchase and sell foreign currencies and use derivatives for risk
management purposes or as part of its investment strategy. In response to
unfavorable market and other conditions, the Portfolio may invest
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<PAGE>
temporarily in high-quality fixed income securities.
Q What are the potential rewards of investing in the Portfolio?
A Common stocks and other equity securities offer a way to invest for long
term growth of capital. Opportunities for appreciation for small cap
companies could result from product expansion or product improvement,
industry transition, new management or the sale of the company. Small cap
companies are followed by fewer analysts than are large and mid cap
companies. So as additional analysts follow a small cap stock, investor
demand for the stock may increase.
SCIENCE AND TECHNOLOGY PORTFOLIO
Q What is the Portfolio's investment objective?
A Capital appreciation.
Q What is the Portfolio's investment program?
A The Portfolio invests primarily in equity securities of companies which
PIMCO Equity Advisors believes uses innovative technologies to gain a
strategic competitive advantage in their industry, as well as companies
that provide and service those technologies. Although the Portfolio
emphasizes technology companies, it is not required to invest exclusively
in companies in a particular business sector. The Portfolio is
concentrated, investing in approximately 25 mid and large cap stocks. The
majority of the stocks purchased by the Portfolio will be listed on a
domestic stock exchange or traded in the U.S. over the counter market. The
Portfolio may purchase foreign securities that are listed on a U.S. or
foreign exchange or traded in the U.S. or foreign over the counter market,
purchase and sell foreign currencies and use derivatives for risk
management purposes or as part of its investment strategy. In response to
unfavorable market and other conditions, the Portfolio may invest
temporarily in high-quality fixed income securities.
Q What are the potential rewards of investing in the Portfolio?
A Common stocks offer a way to invest for long term growth of capital.
Opportunities for technology companies may result from the competitive
strategic advantages associated with the use and service of innovative
technologies as well as from the successful development and sale of those
technologies.
TARGET PORTFOLIO
Q What is the Portfolio's investment objective?
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A Capital appreciation.
Q What is the Portfolio's investment program?
A The Portfolio invests primarily in equity securities of companies with
market capitalizations between $2 billion and $10 billion at the time of
purchase which PIMCO Equity Advisors believes will experience relatively
rapid earnings growth. The majority of the stocks purchased by the
Portfolio will be listed on a domestic stock exchange or traded in the U.S.
over the counter market. The Portfolio may purchase foreign securities that
are listed on a U.S. or foreign exchange or traded in the U.S. or foreign
over the counter market, purchase and sell foreign currencies and use
derivatives for risk management purposes or as part of its investment
strategy. In response to unfavorable market and other conditions, the
Portfolio may invest temporarily in high-quality fixed income securities.
Q What are the potential rewards of investing in the Portfolio?
A Common stocks offer a way to invest for long term growth of capital. To the
extent the Portfolio invests in mid cap companies it may take advantage of
opportunities for value creation resulting from regional or product line
expansion or the sale of such companies. Investments in larger-size
companies help mitigate the volatility of the Portfolio.
MID CAP PORTFOLIO
Q What is the Portfolio's investment objective?
A Long term capital appreciation.
Q What is the Portfolio's investment program?
A The Portfolio invests primarily in equity securities of companies with
market capitalizations between $500 million and $5 billion at the time of
purchase which OpCap Advisors believes are undervalued. The majority of the
stocks purchased by the Portfolio will be listed on a domestic stock
exchange or traded in the U.S. over the counter market. The Portfolio may
purchase foreign securities that are listed on a U.S. or foreign exchange
or traded in the U.S. or foreign over the counter markets. The Portfolio
also may purchase securities in initial public offerings or shortly after
those offerings have been completed.
Q What are the potential rewards of investing in the Portfolio?
A Common stocks offer a way to invest for long term growth of capital. Mid
cap companies generally are studied by fewer analysts than are large cap
companies. Institutional investors may not want to hold large positions in
mid cap companies. Opportunities for capital appreciation for mid cap
companies could result from regional or product line expansion or sale of
the company.
18
<PAGE>
SMALL CAP PORTFOLIO
Q What is the Portfolio's investment objective?
A Capital appreciation through a diversified portfolio consisting primarily
of securities of companies with market capitalizations of under $2 billion
at time of purchase.
Q What is the Portfolio's investment program?
A The Portfolio invests primarily in equity securities of companies with
market capitalizations under $2 billion at the time of purchase that OpCap
Advisors believes are undervalued in the marketplace. The Portfolio may
purchase securities listed on U.S. or foreign securities exchanges or
traded in the U.S. or foreign over the counter markets. The Portfolio also
may purchase securities in initial public offerings or shortly after those
offerings have been completed.
Q What are the potential rewards of investing in the Portfolio?
A Common stocks offer a way to invest for long term growth of capital.
Opportunities for value creation for small cap companies could result from
product expansion or product improvement, industry transition, new
management or sale of the company. Small cap companies are followed by
fewer analysts than are large and mid cap companies. So as additional
analysts follow a small cap stock, investor demand for the stock may
increase.
GLOBAL EQUITY PORTFOLIO
Q What is the Portfolio's investment objective?
A Long term capital appreciation through pursuit of a global investment
strategy primarily involving equity securities.
Q What is the Portfolio's investment program?
A The Portfolio invests primarily in equity securities of companies located
throughout the world which OpCap Advisors believes are undervalued in the
marketplace. The Portfolio may invest up to 35% of its total assets in
fixed income securities which may be lower than investment grade.
Q What are the potential rewards of investing in the Portfolio?
A Foreign securities provide additional opportunities and diversification.
U.S. stocks represent less than half of the world's stock market
capitalization.
19
<PAGE>
MANAGED PORTFOLIO
Q What is the Portfolio's investment objective?
A Growth of capital over time through investment in a portfolio consisting of
common stocks, bonds and cash equivalents, the percentages of which will
vary based on OpCap Advisors' and PIMCO's assessments of the relative
outlook for such investments.
Q What is the Portfolio's investment program?
A The Portfolio seeks to meet its objective by investing in common stocks,
bonds and cash equivalents in varying percentages based on OpCap Advisors'
and PIMCO's view of relative values. The Portfolio may purchase securities
listed on U.S. or foreign securities exchanges or traded in the U.S. or
foreign over the counter markets. The Portfolio also may purchase
investment grade U.S. government and corporate bonds and high quality money
market securities. The Portfolio can invest up to 100% of its assets in
debt securities but will only do so if equity securities are not an
attractive investment.
Q What are the potential rewards of investing in the Portfolio?
A The Portfolio normally invests mainly in equity securities. Common stocks
offer a way to invest for long term growth of capital.
BALANCED PORTFOLIO
Q What is the Portfolio's investment objective?
A Growth of capital and investment income.
Q What is the Portfolio's investment program?
A The Portfolio invests in equity securities (with an emphasis on
dividend-paying stocks) and debt securities that OpCap Advisors believes
are undervalued. Generally, the Portfolio will invest at least 25% of its
total assets in equity securities and at least 25% of its total assets in
debt securities. The Portfolio seeks debt securities that offer investment
income and the potential for capital appreciation if interest rates decline
or the issuer's credit improves. OpCap Advisors seek to find convertible
securities that have the potential for investment income prior to
conversion and capital growth. Convertible debt securities may be
classified as equity securities or as debt securities depending on the
value of the conversion feature as compared to the debt feature. The
Portfolio may purchase securities listed on U.S. or foreign securities
exchanges or traded in U.S. or foreign over the counter markets. The
Portfolio may invest up to 25% of its total assets in debt securities rated
below investment grade.
Q What are the potential rewards of investing in the Portfolio?
20
<PAGE>
A The Portfolio's mix of equity securities, convertible securities and debt
securities may result in the Portfolio's being less volatile than the
market.
U.S. GOVERNMENT INCOME PORTFOLIO
Q What is the Portfolio's investment objective?
A High level of current income together with protection of capital by
investing exclusively in debt obligations, including mortgage-backed
securities issued or guaranteed by the United States government, its
agencies or instrumentalities.
Q What is the Portfolio's investment program?
A The Portfolio invests in debt obligations issued or guaranteed by the
United States Government, its agencies or instrumentalities. These
securities are referred to as "U.S. Government Securities." The Portfolio
also may purchase mortgage-backed securities to effectuate this program.
OpCap Advisors observes current and historical yield relationships between
maturities and sectors to seek the best relative values. The Portfolio
generally maintains an average maturity between five and ten years. OpCap
Advisors does not attempt to forecast interest rates in managing the
Portfolio.
Q What are the potential rewards of investing in the Portfolio?
A The Portfolio consists of the highest quality debt instruments. Since the
average maturity of the Portfolio's investments are between five and ten
years, the Portfolio should be less volatile than a longer term bond fund.
RISKS
Q What are the risks of investing in the Portfolios?
A The Equity, Blended Equity, Large Cap Growth, Small Cap Growth, Science and
Technology, Target, Mid Cap, Small Cap, Global Equity, Managed and Balanced
Portfolios invest principally in equity securities which may be affected by
the following:
STOCK MARKET VOLATILITY - The stock market in general may fluctuate in
response to political, market and economic developments and you can lose
money on your investments.
Equity investors should have a long-term investment horizon and should be
prepared for the ups and downs of the stock market.
STOCK PICKING - The portfolio manager may select stocks that have prices
that turn out not to
21
<PAGE>
be undervalued or do not achieve expectations for growth in income or
revenues.
ISSUER CHANGES - Changes in the financial condition of an issuer or changes
in economic conditions that affect a particular type of issuer can affect
the value or credit quality of an issuer's securities.
SMALL CAP AND MID CAP VOLATILITY - Mid cap stocks are more volatile and
have less trading volume than large cap stocks. Small cap stocks are more
volatile and have less trading volume than both large cap and mid cap
stocks.
SECTOR RISK - OpCap Advisors are bottom up investment managers. That means
that they select securities for a Portfolio based on the investment merits
of a particular issue rather than the business sector. The Science and
Technology Portfolio will invest primarily in technology related companies.
Companies dependent on new technology and innovative products are more
volatile than well established, older companies.
INVESTMENT STYLES - Value or growth stocks may be out of favor for a period
of time. Both investment styles can produce poor returns for a period of
time.
ASSET ALLOCATION RISK - The Managed and Balanced Portfolios invest in a mix
of equity and fixed income securities. The portfolio managers of those
Portfolios can make the wrong allocation decisions.
FOREIGN EXPOSURE - When selecting foreign securities for the Portfolios,
OpCap Advisors use approximately the same standards that they set for U.S.
issuers. Foreign securities, foreign currencies and securities issued by
U.S. entities with substantial foreign operations may have additional risks
than U.S. securities. This risk is greater for the Global Equity Portfolio
which invests on a worldwide basis.
- Political Risk - Foreign governments can take over the assets or
operations of a company or may impose taxes or limits on the removal
of the Portfolio's assets from that country.
- Currency risk - The value of securities held in foreign currencies
will be affected by changes in the value of that currency.
- Liquidity - Some foreign markets are less liquid and more volatile
than the U.S. stock market.
- Limited information - There may be less public information about
foreign issuers than there is about U.S. issuers.
- Settlement and clearance - Some foreign markets experience delays in
settlement. These delays could cause the Portfolio to miss investment
opportunities or to be unable to sell a security.
22
<PAGE>
- Euro - The effect of the Euro on international markets has not yet
been determined.
- Emerging Markets - There are greater risks of unstable governments and
economies and restriction on foreign ownership in these countries. The
Portfolios presently intend to limit investment in emerging markets to
no more than 5% of their total assets.
To the extent that the Portfolios invest in debt securities, the Portfolios are
exposed to these risks:
- Interest rate risk - The risk that changes in interest rates will
affect the value of fixed income securities in the Portfolio.
- Prepayment risk - The risk that the holder of a mortgage underlying a
mortgage backed security will prepay principal.
- Credit risk - The risk that an issuer of a fixed income security will
be unable to pay principal and interest payments when they are due.
To the extent that the Global Equity Portfolio or the Balanced Portfolio invests
in lower grade debt securities, you should know that lower grade debt may have
the following additional risks:
- more volatility
- less liquidity
- greater risk of issuer default or insolvency.
INVESTMENT POLICIES
Q Can a Portfolio change its investment objective and investment policies?
A Fundamental policies of a Portfolio cannot be changed without the approval
of a majority of the outstanding voting shares of the Portfolio. A
Portfolio's investment objective is a fundamental policy. Investment
restrictions that are fundamental policies are listed in the Statement of
Additional Information. Investment policies are not fundamental and can be
changed by the Fund's Board of Trustees.
Q Can the Portfolios use derivative instruments?
A Yes. The Equity, Blended Equity, Large Cap Growth, Small Cap Growth,
Science and Technology, Target, Mid Cap, Small Cap, Global Equity, Managed
and Balanced Portfolios may use the following derivative instruments:
- futures contracts
23
<PAGE>
- options on futures contracts
- forward foreign currency contracts
- covered calls written on individual securities
- uncovered calls and puts
- options on stock indices.
The Equity, Mid Cap, Small Cap, Global Equity and Balanced Portfolios do
not expect to use derivative instruments significantly, if at all. The
Blended Equity, Managed, Large Cap Growth, Small Cap Growth, Science and
Technology and Target Portfolios will sometimes use derivative instruments
as part of a strategy designed to reduce exposure to other risks, such as
interest risk or currency risk, and may use derivative instruments to meet
their investment objectives.
Q What are the risks of derivative instruments?
A Derivative instruments can reduce the return of a Portfolio if :
- Its investment adviser uses a derivative instrument at the wrong time
- The prices of a Portfolio's futures or options positions are not
correlated with its other investments
- A Portfolio cannot close out a position because of an illiquid market.
Q Do the Portfolios expect to engage in short-term trading?
A The Portfolios do not expect to engage in frequent short-term trading. The
Financial Highlights table in this prospectus shows the turnover rates
during prior fiscal years for the Portfolios that were active during this
period.
Q Can the Portfolios vary from their investment goals?
A When a Portfolio's investment adviser or subadviser thinks market or
economic conditions are adverse, it may invest up to 100% of its assets in
defensive investments such as U.S. Government securities and money market
instruments. To the extent that a Portfolio takes a defensive position, it
will not be pursuing its investment objective.
24
<PAGE>
FUND MANAGEMENT
OPCAP ADVISORS
The Board of Trustees of the Fund has hired OpCap Advisors to serve as manager
of the Fund.
OpCap Advisors is a subsidiary of Oppenheimer Capital, an investment advisory
firm with approximately $53 billion of assets under management as of December
31, 1999. They are indirect wholly-owned subsidiaries of PIMCO Advisors L.P. The
mailing address is 1345 Avenue of the Americas, New York, New York 10105.
The general partners of PIMCO Advisors L.P. are PIMCO Partners G.P. and PIMCO
Advisors Holding L.P. ("PAH"). PIMCO Partners, G.P. is a general partnership
between PIMCO Holdings LLC, a Delaware limited liability company and an indirect
wholly-owned subsidiary of Pacific Life Insurance Company, and PIMCO Partners
LLC, a California limited liability company controlled by the current Managing
Directors and two former Managing Directors of Pacific Investment Management
Company, a subsidiary of PIMCO Advisors L.P. PIMCO Partners, G.P. is the sole
general partner of PAH.
On October 31, 1999, PIMCO Advisors L.P., PAH and Allianz AG ("Allianz")
announced that they had reached a definitive agreement pursuant to which Allianz
will acquire majority ownership of PIMCO Advisors L.P. and its subsidiaries,
including OpCap Advisors (the "Allianz Transaction"). Under the terms of the
transaction, Allianz will acquire all of PAH, the publicly traded general
partner of PIMCO Advisors L.P. Pacific Life Insurance Company will retain an
approximately 30% interest in PIMCO Advisors L.P. The Allianz Transaction was
completed on May 5, 2000.
Allianz is the world's second largest insurance company and a leading provider
of financial services, particularly in Europe, and is represented in 68
countries world-wide through subsidiaries, branch and representative offices,
and other affiliated entities. Allianz currently has assets under management of
more than $390 billion, and in its last fiscal year wrote approximately $50
billion in gross insurance premiums. After consummation of the transaction, the
combined firms will have over $650 billion in assets under management.
Affiliates of Allianz currently include Dresdner Bank AG, Deutsche Bank AG,
Munich Re, and Hypo Vereinsbank. These entities, as well as certain broker-
dealers controlled by or affiliated with these entities, such as Bankers Trust
Company and BT Alex Brown, Inc. are considered the "Affiliated Brokers." Once
the Allianz transaction is consummated, absent an SEC exemption or other relief,
the Fund's Portfolios would generally be precluded from effecting principal
transactions with the Affiliated Brokers, and each Portfolio's ability to
purchase securities being underwritten by an Affiliated Broker or to utilize the
Affiliated Brokers for agency transactions would be subject to restrictions.
OpCap Advisors does not believe that the restrictions on transactions with the
Affiliated Brokers described above will materially adversely affect its ability,
post-closing, to provide services to the Fund, the ability of the Portfolios to
take advantage of market opportunities, or the overall performance of the
Portfolios.
25
<PAGE>
OpCap Advisors has been in business as an investment adviser since 1987 and
Oppenheimer Capital has been in business as an investment adviser since 1969.
OpCap Advisors manages the investments of certain Portfolios (and places
brokerage orders) and conducts the business affairs of the Fund. Employees of
Oppenheimer Capital, PIMCO Advisors and OpCap Advisors perform these services.
Each Portfolio pays OpCap Advisors fees in return for providing or arranging for
the provision of investment advisory services. In the case of the Blended
Equity, Large Cap Growth, Small Cap Growth, Science and Technology and Target
Portfolios for which OpCap Advisors has retained PIMCO Equity Advisors as
subadvisor, OpCap Advisors (and not the Fund) pays a portion of the advisory
fees its receives to PIMCO Equity Advisors in return for its services. OpCap
also pays a portion of its advisory fees to PIMCO in return for the advisory
services PIMCO performs for the Managed Portfolio. The Portfolios of the Fund
listed below paid OpCap Advisors the following fees as a percentage of average
daily net assets during the fiscal year ended December 31, 1999:
Equity Portfolio..................................................0.80%
Mid Cap Portfolio.................................................0.10%
Small Cap Portfolio...............................................0.80%
Global Equity Portfolio...........................................0.80%
Managed Portfolio.................................................0.77%
U.S. Government Income Portfolio..................................0.60%
OpCap will pay PIMCO a fee at the annual rate of 0.25% of the average daily net
assets of the Managed Portfolio for the advisory services PIMCO performed for
the Managed Portfolio.
OpCap Advisors waived a portion of its fees from the MidCap Portfolio for the
fiscal year ended December 31, 1999. Absent such waiver the advisory fee for the
MidCap Portfolio would have been 0.80% of the average daily net assets of the
Portfolio.
The Fund pays OpCap Advisors at the annual rate of .80% of the first $400
million of average net assets, .75% on the next $400 million of average net
assets and .70% of assets in excess of $800 million with respect to the Equity,
Global Equity, Managed, Small Cap, Science and Technology, Mid Cap, Balanced,
Blended Equity, Large Cap Growth, Small Cap Growth and Target Portfolios. The
rate applicable to the U.S. Government Income Portfolio is .60% of average net
assets.
OpCap Advisors will pay PIMCO Equity Advisors fees at the annual rate of .40% of
the first $400 million of average net assets, .375% on the next $400 million of
average net assets and .35% of assets in excess of $800 million with respect to
the Blended Equity, Large Cap Growth, Small Cap Growth, Science and Technology
and Target Portfolios for investment advisory services PIMCO Equity Advisors
renders to those Portfolios.
26
<PAGE>
PIMCO EQUITY ADVISORS
PIMCO Equity Advisors acts as subadviser to the Large Cap Growth, Small Cap
Growth, Science and Technology and Target Portfolios. OpCap Advisors has also
retained the PIMCO Equity Advisors to manage a portion of the investments of the
Blended Equity Portfolio. PIMCO Equity Advisors is a division of PIMCO Advisors
L.P., which has its principal offices at 800 Newport Center Drive, Newport
Beach, California 92660. Organized in 1987, PIMCO Advisors provides investment
management and advisory services to private accounts of institutional and
individual clients and to mutual funds. As of December 31, 1999 PIMCO Advisors
and its subsidiary partnerships had approximately $261 billion in assets under
management.
PACIFIC INVESTMENT MANAGEMENT COMPANY (PIMCO)
Founded in 1971, Pacific Investment currently manages $186 billion on behalf of
mutual fund and institutional clients located around the world. PIMCO, a wholly
owned subsidiary of PIMCO Advisors L.P., has its principal offices at 800
Newport Center Drive, Newport Beach, California 92660, is located at 840 Newport
Center Drive, Suite 300, Newport Beach, CA 92660. Renowned for its fixed income
management expertise, PIMCO manages assets for many of the largest corporations,
foundations, endowments, and governmental bodies in the United States and the
world.
PORTFOLIO MANAGERS
[PHOTO]
Louis Goldstein has been the portfolio manager of the Mid
Cap Portfolio since its inception. Mr. Goldstein, a Senior
Vice President of Oppenheimer Capital, joined Oppenheimer
Capital in 1991. He earned a BS Summa Cum Laude and a MBA in
Finance with honors from the Wharton School of Business.
[PHOTO]
John Lindenthal, Managing Director and senior equity
portfolio manager and analyst at Oppenheimer Capital, is the
portfolio manager of the Equity Portfolio. He brings 31
years of investment experience to his current position. Mr.
Lindenthal joined Oppenheimer Capital in 1979 from Bank of
America where he was a senior portfolio manager responsible
primarily for pension assets. Mr. Lindenthal graduated from
the University of Santa Clara in California with a BS in
Economics and an MBA in Finance.
27
<PAGE>
[PHOTO]
Mark Degenhart, who has been a portfolio manager of the
Small Cap Portfolio since February 1999, joined Oppenheimer
Capital in January 1999 as a Vice President with
responsibilities including research, analysis and investment
management. He acts as a portfolio manager for several small
capitalization funds. Prior to joining Oppenheimer Capital,
he was Director of Research and Associate Portfolio Manager
at Palisade Capital Management. From 1990 to 1993, he was a
Generalist for Cazenove & Co. Previously Mr. Degenhart was a
Special Situations Analyst at Argus Research Corp. for over
three years. He has a BS degree in marketing from the
University of Scranton.
[PHOTO]
Elisa A. Mazen, Senior Vice President, has been a member of
the international equity investment team at Oppenheimer
Capital since 1994 and is primarily responsible for European
research within the firm's global effort. Prior to joining
Oppenheimer Capital, she was a Portfolio Manager/ Analyst at
Clemente Capital, Inc. Ms. Mazen graduated with a BA in
economics/ finance from Douglass College, Rutgers University
in 1983.
[PHOTO]
Richard Glasebrook, Managing Director of Oppenheimer
Capital, has managed the domestic portion of the Global
Equity Portfolio since its inception. Mr. Glasebrook joined
Oppenheimer Capital in 1991. He has a BA from Kenyan College
and a MBA from the Harvard School of Business
Administration. Mr. Glasebrook has been a portfolio manager
of the Managed Portfolio since its inception.
[PHOTO]
Colin Glinsman, Chief Investment Officer and Managing
Director of Oppenheimer Capital, has been named the
portfolio manager of the Balanced Portfolio. He joined
Oppenheimer Capital in 1989 as a securities analyst. Mr.
Glinsman has a BA from Yale University and a MS from New
York University.
[PHOTO]
Vikki Hanges, Senior Vice President of Oppenheimer Capital,
has been the portfolio manager of the U.S. Government
Portfolio since its inception. She joined Oppenheimer
Capital in 1982. Ms. Hanges has a BS from Cornell
University.
28
<PAGE>
[PHOTO]
Kenneth W. Corba is the portfolio manager of the Large Cap
Growth Portfolio. Mr. Corba, Chief Investment Officer,
Managing Director of PIMCO Equity Advisors, joined PIMCO
Equity Advisors in January 1999. Prior to this time, he was
the Chief Investment Officer for Eagle Asset Management from
March 1995 to March 1999 and Director of the Capital
Management Group at Stein Roe & Farnham from June 1984 to
February 1995. He has a BA and MBA from the University of
Michigan.
[PHOTO]
Michael F. Gaffney, a Managing Director of PIMCO Equity
Advisors, is the portfolio manager of the Small Cap Growth
Portfolio. Mr. Gaffney joined PIMCO Equity Advisors in
January 1999. Prior to this time, he was the Senior Vice
President and Portfolio Manager for Alliance Capital
Management from September 1987 to January 1999. He has a BS
Magna Cum Laude from St. John's University and a MBA from
New York University.
[PHOTO]
Dennis McKechnie, a Certified Financial Analyst, is a
Managing Director of PIMCO Equity Advisors. Mr. McKechnie is
the manager of the Science and Technology Portfolio and
joined PIMCO Equity Advisors in January 1999. He has eight
years of investment management experience as the Vice
President for Columbus Circle Investors from April 1991 to
January 1999. Mr. McKechnie has a BS in Electrical
Engineering from Purdue University and a MBA from Columbus
Business School.
[PHOTO]
Jeffrey D. Parker, a senior portfolio manager of PIMCO
Equity Advisors, is the portfolio manager of the Target
Portfolio. Mr. Parker joined PIMCO Equity Advisors in
January 1999. Prior to this time, he was an Assistant
Portfolio Manager for Eagle Asset Management from July 1996
to December 1998 and a Senior Consultant specializing in
health care and technology for Andersen Consulting from
February 1991 to May 1994. Mr. Parker has a BBA from the
University of Miami and a MBA from Vanderbilt University.
29
<PAGE>
[PHOTO]
William H. Gross, Managing Director and Chief Investment
Officer of PIMCO, has been a co-portfolio manager of the
Managed Portfolio since March 2000. Mr. Gross joined PIMCO
in June 1971 and is a founding partner of PIMCO.
SHARE PRICE
The Fund calculates each Portfolio's share price, called its net asset value, on
each business day that the New York Stock Exchange is open after the close of
regular trading (generally 4:00 p.m. Eastern Standard Time). Net asset value per
share is computed by adding up the total value of a Portfolio's investments and
other assets, subtracting its liabilities and then dividing by the number of
shares outstanding.
Net Asset Value = TOTAL PORTFOLIO ASSETS - LIABILITIES
-------------------------------------------
NUMBER OF PORTFOLIO SHARES OUTSTANDING
The Fund uses the market prices of securities to value a Portfolio's investments
unless securities do not have market quotations or are short-term debt
securities. When the Fund uses fair value to price a security, the Fund reviews
the pricing method with the Fund's Board. The Fund prices short-term investments
that mature in less than 60 days using amortized cost or amortized value.
Foreign securities trade on days when the Portfolios do not price their shares
so the net asset value of a Portfolio's shares may change on days when
shareholders will not be able to buy or sell shares of the Portfolio. If an
event occurs after the close of the New York Stock Exchange that the Fund
believes changes the value of a security, then the Fund will value the security
at what it believes to be fair value.
DISTRIBUTIONS AND TAXES
This discussion is about distributions to the Portfolio's shareholders, which
are variable accounts of insurance companies and qualified pension and
retirement plans. You should read the prospectus for the variable account for
information about distributions and federal tax treatment for contract owners of
variable products.
Each Portfolio pays dividends from its net investment income and distributes any
net capital gains that it has realized at least once a year. The U.S. Government
Income Portfolio pays dividends from its net investment income once a month.
30
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Portfolios' financial performance. Certain information reflects financial
results for a single Portfolio share. The total returns in the table represent
the rate that an investor would have earned (or lost) on an investment in a
Portfolio (assuming reinvestment of all dividends and distributions). The
information in the financial highlights table below has been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report, along with
the corresponding Portfolios' financial statements, is incorporated by reference
in the Fund's SAI, which is available upon request.
31
<PAGE>
OCC ACCUMULATION TRUST
EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
For a share of beneficial interest
outstanding throughout each year:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $38.70 $36.52 $30.07 $25.05 $18.12
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.25 0.39 0.39 0.21 0.31
Net realized and unrealized gain
on investments 0.62 3.84 7.34 5.52 6.71
---- ---- ---- ---- ----
Total income from
investment operations 0.87 4.23 7.73 5.73 7.02
---- ---- ---- ---- ----
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (0.36) (0.39) (0.28) (0.24) (0.09)
Net realized gains (1.65) (1.66) (1.00) (0.47) --
------ ------ ------ ------
Total dividends and distributions to
shareholders (2.01) (2.05) (1.28) (0.71) (0.09)
------ ------ ------ ------ ------
Net asset value, end of year $37.56 $38.70 $36.52 $30.07 $25.05
====== ====== ====== ====== ======
TOTAL RETURN (1) 2.5% 11.9% 26.6% 23.4% 38.9%
==== ===== ===== ===== =====
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $70,512 $48,711 $28,820 $19,843 $9,036
Ratio of expenses to
average net assets (2) 0.91% 0.94% 0.99% 0.93%(3) 0.72%(3)
Ratio of net investment income to
average net assets 0.86% 1.36% 1.25% 1.29%(3) 1.74%(3)
Portfolio Turnover 84% 29% 32% 36% 31%
</TABLE>
-----------------------------------------------
(1) Assumes reinvestment of all dividends and distributions.
(2) For fiscal years ended after September 1, 1995, ratios are inclusive of
expenses offset by earnings credits from custodian bank.
(3) During the fiscal years indicated above, the Investment Adviser waived a
portion or all of its fees and assumed a portion of the Portfolio's
expenses. If such waivers and assumptions had not been in effect, the
ratios of expenses to average net assets and the ratios of net investment
income to average net assets would have been 1.05% and 1.17%,
respectively, for the year ended December 31, 1996, 1.26% and 1.20%,
respectively, for the year ended December 31, 1995.
32
<PAGE>
OCC ACCUMULATION TRUST
MID CAP PORTFOLIO
FINANCIAL HIGHLIGHTS
For a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
For the Year For the Period
Ended February 9, 1998 (1) to
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Net asset value, beginning of period $9.79 $10.00
----- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.05 0.05
Net realized and unrealized gain (loss) on
investments 2.07 (0.21)
---- ------
Total income (loss) from investment operations 2.12 (0.16)
---- ------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.05) (0.05)
Net realized gains (0.23) --
------
Total dividends and distributions to shareholders (0.28) (0.05)
------ ------
Net asset value, end of period $11.63 $9.79
------ -----
TOTAL RETURN (2) 21.6% (1.6)%
===== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $5,382 $1,885
Ratio of expenses to
average net assets (4) (5) 1.03% 1.05% (3)
Ratio of net investment income to
average net assets 0.62% 0.78% (3)
Portfolio Turnover 108% 38%
</TABLE>
----------------------------------------------
(1) Commencement of operations
(2) Assumes reinvestment of all dividends and distributions. Total return for
a period of less than one year is not annualized.
(3) Annualized
(4) Inclusive of expenses offset by earnings credits from custodian bank.
(5) During the fiscal periods indicated above, the Investment Adviser waived its
fee and assumed a portion of the Portfolio's expenses. If such waivers and
assumptions had not been in effect, the ratios of expenses to average net
assets and the ratios of net investment income (loss) to average net assets
would have been 1.70% and (0.05)%, respectively for the year ended December
31, 1999, and 4.28% (annualized) and (2.45)% (annualized), respectively, for
the period February 9, 1998 (commencement of operations) to December 31,
1998.
33
<PAGE>
OCC ACCUMULATION TRUST
SMALL CAP PORTFOLIO
FINANCIAL HIGHLIGHTS
For a share of beneficial interest outstanding throughout each year:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $23.10 $26.37 $22.61 $19.91 $17.38
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS: 0.14 0.14 0.08 0.14 0.26
Net investment income
Net realized and unrealized gain (loss)
on investments (0.57) (2.38) 4.73 3.45 2.37
------ ------ ---- ---- ----
Total income (loss) from investment (0.43) (2.24) 4.81 3.59 2.63
------ ------ ---- ---- ----
operations
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (0.15) (0.09) (0.13) (0.25) (0.05)
Net realized gains --- (0.94) (0.92) (0.64) (0.05)
--- ------ ------ ------ ------
Total dividends and distributions to
Shareholders (0.15) (1.03) (1.05) (0.89) (0.10)
------ ------ ---- ---- ----
Net asset value, end of year $22.52 $23.10 $26.37 $22.61 $19.91
====== ====== ====== ====== ======
TOTAL RETURN (1) (1.8)% (9.0)% 22.2% 18.7% 15.2%
====== ====== ===== ===== =====
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $151,290 $155,506 $110,565 $34,257 $16,004
Ratio of expenses
to average net assets (2) 0.89% 0.88% 0.97% 0.93% (3) 0.74% (3)
Ratio of net investment income
to average net assets 0.61% 0.72% 0.64% 1.03% (3) 1.75% (3)
Portfolio Turnover 99% 51% 68% 50% 69%
</TABLE>
------------------------------------
(1) Assumes reinvestment of all dividends and distributions.
(2) For fiscal years ended after September 1, 1995, ratios are inclusive of
expenses offset by earnings credits from custodian bank.
(3) During the fiscal years indicated above, the Investment Adviser waived a
portion or all of its fees and assumed a portion of the Portfolio's
expenses. If such waivers and assumptions had not been in effect, the
ratios of expenses to average net assets and the ratios of net investment
income to average net assets would have been 1.01% and 0.95%, respectively,
for the year ended December 31, 1996, and 0.99% and 1.50%, respectively,
for the year ended December 31, 1995.
34
<PAGE>
OCC ACCUMULATION TRUST
GLOBAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
For a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
Year ended December 31, For the Period
----------------------------------------------------- March 1, 1995 (1)
1999 1998 1997 1996 to December 31, 1995
---- ---- ---- ---- --------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.43 $14.32 $13.23 $11.61 $10.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.31 0.12 0.06 0.04 0.05
Net realized and unrealized gain
on investments and foreign currency transactions 3.78 1.78 1.79 1.70 1.83
---- ---- ---- ---- ----
Total income from investment operations 4.09 1.90 1.85 1.74 1.88
---- ---- ---- ---- ----
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
From Net investment income in excess of (0.26) (0.18) (0.04) (0.05) (0.03)
net investment income -- -- (0.03) -- --
From net realized gains (2.70) (0.61) (0.69) (0.07) (0.24)
------ ------ ------ ------ ------
Total dividends and distributions to shareholders (2.96) (0.79) (0.76) (0.12) (0.27)
------ ------ ------ ------ ------
Net asset value, end of period $16.56 $15.43 $14.32 $13.23 $11.61
====== ====== ====== ====== ======
TOTAL RETURN (2) 26.5% 13.3% 14.0% 15.0% 18.9%
===== ===== ===== ===== =====
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $43,412 $34,777 $25,874 $16,972 $2,891
Ratio of net operating expenses
to average net assets (3) 1.10% 1.13% 1.19%(4) 1.42%(4) 1.25%(4)(5)
Ratio of net investment income
to average net assets 0.48% 0.79% 0.45%(4) 0.81%(4) 1.02%(4)(5)
Portfolio Turnover 83% 55% 53% 40% 67%
</TABLE>
------------------------------------
(1) Commencement of operations
(2) Assumes reinvestment of all dividends and distributions. Total return for
a period of less than one year is not annualized.
(3) Inclusive of expenses offset by earnings credits from custodian bank.
(4) During the fiscal periods indicated above, the Investment Adviser waived a
portion or all of its fees and assumed a portion of the Portfolio's
expenses. If such waivers and assumptions had not been in effect, the
ratios of expenses to average net assets and the ratios of net investment
income (loss) to average net assets would have been 1.20% and 0.44%,
respectively, for the year ended December 31, 1997, 1.83% and 0.40%,
respectively, for the year ended December 31, 1996 and 3.94% (annualized)
and (1.67)% (annualized), respectively, for the period March 1, 1995
(commencement of operations) to December 31, 1995.
(5) Annualized
35
<PAGE>
OCC ACCUMULATION TRUST
MANAGED PORTFOLIO
FINANCIAL HIGHLIGHTS
For a share of beneficial interest outstanding throughout each year:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $43.74 $42.38 $36.21 $30.14 $20.83
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.56 0.60 0.34 0.43 0.42
Net realized and unrealized gain
on investments 1.47 2.40 7.45 6.31 9.02
---- ---- ---- ---- ----
Total income from investment
operations 2.03 3.00 7.79 6.74 9.44
---- ---- ---- ---- ----
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.65) (0.33) (0.40) (0.41) (0.13)
Net realized gains (1.47) (1.31) (1.22) (0.26) ---
------ ------ ------ ------
Total dividends and distributions to shareholders
(2.12) (1.64) (1.62) (0.67) (0.13)
------ ------ ------ ------ ------
Net asset value, end of year $43.65 $43.74 $42.38 $36.21 $30.14
====== ====== ====== ====== ======
TOTAL RETURN (1) 5.0% 7.1% 22.3% 22.8% 45.6%
==== ==== ===== ===== =====
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of Year (000's) $804,467 $777,087 $466,791 $180,728 $99,188
Ratio of expenses
to average net assets (2) 0.83% 0.82% 0.87% 0.84%(3) 0.66%(3)
Ratio of net investment income
to average net assets 1.27% 1.74% 1.42% 1.66%(3) 1.85%(3)
Portfolio Turnover 50% 37% 32% 27% 22%
</TABLE>
------------------------------------
(1) Assumes reinvestment of all dividends and distributions.
(2) For fiscal years ended after September 1, 1995, ratios are inclusive of
expenses offset by earnings credits from custodian bank.
(3) During the fiscal years indicated above, the Investment Adviser waived
a portion of its fees. If such waivers had not been in effect, the ratios
of expenses to average net assets and the ratios of net investment income
to average net assets would have been 0.85% and 1.65%, respectively, for
the year ended December 31, 1996 and 0.74% and 1.77%, respectively, for
the year ended December 31, 1995.
36
<PAGE>
OCC ACCUMULATION TRUST
U.S. GOVERNMENT INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
For a share of beneficial interest outstanding throughout each period:
<TABLE>
<CAPTION>
Year ended December 31, For the Period
------------------------------------------------ January 3, 1995 (1)
1999 1998 1997 1996 to December 31, 1995
---- ---- ---- ----- -------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.66 $10.51 $10.38 $10.62 $10.00
------ ------ ------ ------ -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.49 0.53 0.57 0.55 0.60
Net realized and unrealized gain (loss) on
investments (0.66) 0.31 0.14 (0.24) 0.68
------ ---- ---- ------ ----
Total income (loss) from investment operations (0.17) 0.84 0.71 0.31 1.28
------ ---- ---- ---- ----
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.49) (0.53) (0.57) (0.55) (0.60)
Net realized gains --- (0.16) (0.01) --- (0.06)
------ ------ ------
Total dividends and distributions to shareholders (0.49) (0.69) (0.58) (0.55) (0.66)
------ ------ ------ ------ ------
Net asset value, end of period $10.00 $10.66 $10.51 $10.38 $10.62
====== ====== ====== ====== ======
TOTAL RETURN (2) (1.6)% 8.1% 7.0% 3.0% 13.1%
====== ==== ==== ==== =====
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $9,830 $10,542 $6,983 $3,422 $1,442
Ratio of expenses
to average net assets (3) 0.95% 1.00%(4) 0.93% (4) 0.96% (4) 0.75% (4)(5)
Ratio of net investment income
to average net assets 4.78% 4.96%(4) 5.51%(4) 5.27%(4) 5.75% (4)(5)
Portfolio Turnover 69% 80% 80% 31% 65%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Commencement of operations.
(2) Assumes reinvestment of all dividends and distributions. Total return for
a period of less than one year is not annualized.
(3) Inclusive of expenses offset by earnings credits from custodian bank.
(4) During the fiscal periods indicated above, the Investment Adviser waived a
portion or all of its fees and assumed a portion of the Portfolio's
expenses. If such waivers and assumptions had not been in effect, the
ratios of expenses to average net assets and the ratios of net investment
income to average net assets would have been 1.19% and 4.77%, respectively,
for the year ended December 31, 1998, 1.06% and 5.38%, respectively, for
the year ended December 31, 1997, 2.34% and 3.89%, respectively, for the
year ended December 31, 1996, and 4.73% (annualized) and 1.77%,
(annualized), respectively, for the period January 3, 1995 (commencement
of operations) to December 31, 1995.
(5) Annualized
37
<PAGE>
For investors who want more information about the Portfolios, the following
documents are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Portfolios'
investments is available in the Portfolios' annual and semi-annual reports to
shareholders. In each Portfolio's annual report, you will find a discussion of
the market conditions and investment strategies that significantly affected the
Portfolio's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Portfolios and is incorporated into this prospectus by
reference.
The SAI and the Portfolio's annual and semi-annual reports are available without
charge upon request to your insurance agent or by calling the Portfolios at
1-800-700-8258.
You can review and copy the Portfolios' reports and SAIs at the Public Reference
Room of the Securities and Exchange Commission. You can get text-only copies:
After paying a duplicating fee, by electronic request at the following
email address: [email protected], or by writing to or calling the Public
Reference Room of the Securities and Exchange Commission, Washington, D.C.
20549-0102 Telephone: 1-202-942-8090
Free from the EDGAR Database on the Commission's Internet website at
http://www.sec.gov.
OCC ACCUMULATION TRUST
Equity Portfolio
Blended Equity Portfolio
Large Cap Growth Portfolio
Small Cap Growth Portfolio
Science and Technology Portfolio
Target Portfolio
Mid Cap Portfolio
Small Cap Portfolio
Global Equity Portfolio
Managed Portfolio
Balanced Portfolio
U.S. Government Income Portfolio
38
