<PAGE>
As filed with the Securities and Exchange Commission on October 14, 1999
Registration No. 333-71081
811-09203
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_]
Pre-Effective Amendment No. 1 [X]
Post Effective Amendment No. [_]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 1 [X]
(Check appropriate box or boxes)
SEPARATE ACCOUNT A
(Exact Name of Registrant)
PACIFIC LIFE & ANNUITY INSURANCE COMPANY*
(Name of Depositor)
700 Newport Center Drive
Newport Beach, California 92660
(Address of Depositor's Principal Executive Offices) (Zip Code)
(949) 219-3743
(Depositor's Telephone Number, including Area Code)
Diane N. Ledger
Vice President
Pacific Life Insurance Company
700 Newport Center Drive
Newport Beach, California 92660
(Name and address of agent for service)
Copies of all communications to:
Diane N. Ledger Jane A. Kanter, Esq.
Pacific Life Insurance Company Dechert Price & Rhoads
P. O. Box 9000 1775 Eye Street, N.W.
Newport Beach, CA 92658-9030 Washington, D.C. 20006-2401
Approximate date of proposed public offering: As soon as practicable after
filing.
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/ / on pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a)(1) of Rule 485
/ / On (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities being registered: interests in the Separate Account under
Pacific Portfolios individual flexible premium variable annuity contracts.
Filing Fee: None
* On March 3, 1999, PM Group Life Insurance Company received approval from
Arizona regulators to change its name to Pacific Life & Annuity Company.
<PAGE>
SEPARATE ACCOUNT A
FORM N-4
CROSS REFERENCE SHEET
PART A
Item No. Prospectus Heading
1. Cover Page Cover Page
2. Definitions SPECIAL DEFINITIONS
3. Synopsis SUMMARY; FEE TABLE
4. Condensed Financial Information YOUR INVESTMENT OPTIONS -- Variable
Investment Option Performance;
ADDITIONAL INFORMATION -- Financial
Statements; Financial Highlights
5. General Description of Registrant,
Depositor and Portfolio Companies SUMMARY -- What are My Investment
Options? PACIFIC LIFE & ANNUITY
COMPANY AND THE SEPARATE ACCOUNT --
Pacific Life & Annuity Company, --
Separate Account A; YOUR INVESTMENT
OPTIONS -- Your Variable Investment
Options; ADDITIONAL INFORMATION --
Voting Rights
6. Deductions SUMMARY -- What Charges Will I Pay?,
-- Can I Change My Investment
Options?; FEE TABLE; HOW YOUR
PAYMENTS ARE ALLOCATED -- Transfers;
CHARGES, FEES AND DEDUCTIONS;
WITHDRAWALS -- Optional Withdrawals
7. General Description of Variable
Annuity Contracts SPECIAL DEFINITIONS; SUMMARY; WHY
BUY A CONTRACT; PURCHASING YOUR
CONTRACT -- How to Apply for your
Contract; HOW YOUR PAYMENTS ARE
ALLOCATED; RETIREMENT BENEFITS AND
OTHER PAYOUTS -- Choosing Your
Annuity Option, -- Your Annuity
Payments, -- Death Benefits;
ADDITIONAL INFORMATION -- Voting
Rights, -- Changes to Your Contract,
-- Changes to ALL Contracts, --
Inquiries and Submitting Forms
and Requests, -- Timing of
Payments and Transactions
8. Annuity Period RETIREMENT BENEFITS AND OTHER PAYOUTS
9. Death Benefit RETIREMENT BENEFITS AND OTHER PAYOUTS
<PAGE>
-- Death Benefits -- Death of Owner
Distribution Rules
10. Purchases and Contract Value SUMMARY -- How Do I Purchase a
Contract?; PURCHASING YOUR CONTRACT;
HOW YOUR PAYMENTS ARE ALLOCATED;
PACIFIC LIFE & ANNUITY COMPANY
AND THE SEPARATE ACCOUNT --
PACIFIC LIFE & ANNUITY COMPANY;
THE GENERAL ACCOUNT -- Withdrawals
and Transfers
11. Redemptions SUMMARY -- Can I Withdraw My
Contract Value?, -- Can I Return My
Contract?; CHARGES, FEES AND
DEDUCTIONS; WITHDRAWALS; ADDITIONAL
INFORMATION -- Timing of Payments and
Transactions; THE GENERAL ACCOUNT --
Withdrawals and Transfers
12. Taxes SUMMARY; CHARGES, FEES AND DEDUCTIONS
-- Premium Taxes; WITHDRAWALS --
Optional Withdrawals, -- Tax
Consequences of Withdrawals; FEDERAL
TAX STATUS
13. Legal Proceedings Not Applicable
14. Table of Contents of the Statement
of Additional Information CONTENTS OF THE STATEMENT
OF ADDITIONAL INFORMATION
PART B
Item No. Statement of Additional Information
Heading
15. Cover Page Cover Page
16. Table of Contents TABLE OF CONTENTS
17. General Information and History Not Applicable
18. Services Not Applicable
19. Purchase of Securities Being Offered THE CONTRACTS AND THE SEPARATE
ACCOUNT -- Calculating Subaccount
Unit Values, -- Systematic Transfer
Programs
20. Underwriters DISTRIBUTION OF THE CONTRACTS --
Pacific Securities
21. Calculation of Performance Data PERFORMANCE
<PAGE>
22. Annuity Payments THE CONTRACTS AND THE SEPARATE
ACCOUNT --Variable Annuity Payment
Amounts
23. Financial Statements FINANCIAL STATEMENTS
PART C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.
<PAGE>
PACIFIC PORTFOLIOS
[Front Cover Artwork to come]
<PAGE>
This Contract is not available in all states. This Prospectus is not an offer in
any state or jurisdiction where we're not legally permitted to offer the
Contract.
The Contract is described in detail in this Prospectus and its Statement of
Additional Information (SAI). The Pacific Select Fund is described in its
Prospectus and its SAI. No one has the right to describe the Contract or the
Pacific Select Fund any differently than they have been described in these
documents.
You should be aware that the Securities and Exchange Commission (SEC) has not
reviewed the Contract and does not guarantee that the information in this
Prospectus is accurate or complete. It's a criminal offense to say otherwise.
PACIFIC PORTFOLIOS
Prospectus , 1999
PACIFIC PORTFOLIOS is an INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
CONTRACT ("Contract") issued by Pacific Life & Annuity Company ("PL&A", formerly
known as PM Group Life Insurance Company).
This Prospectus provides information that you should know before buying a
Contract. It's accompanied by a current Prospectus for the Pacific Select Fund,
the Fund that provides the underlying Portfolios for the Variable Investment
Options offered under the Contract. The Variable Investment Options are funded
by Separate Account A of PL&A. Please read both Prospectuses carefully, and keep
them for future reference.
Here's a list of all of the Investment Options available under your Contract:
<TABLE>
<CAPTION>
VARIABLE INVESTMENT OPTIONS
<S> <C>
Money Market
High Yield Bond Mid-Cap Value
Managed Bond Equity
Government Securities Bond and Income
Aggressive Equity Equity Index
Growth LT Small-Cap Index
Equity Income REIT
Multi-Strategy International
Large-Cap Value Emerging Markets
FIXED OPTIONS
Fixed Option DCA Plus Fixed Option
</TABLE>
You'll find more information about the Contract
and Separate Account A in the SAI dated ,
1999. The SAI has been filed with the SEC and is
considered to be part of this Prospectus because
it's incorporated by reference. You'll find a
table of contents for the SAI on page 44 of this
Prospectus. You can get a copy of the SAI
without charge by calling or writing to PL&A.
You can also visit the SEC's website at
www.sec.gov, which contains the SAI, material
incorporated into this Prospectus by reference,
and other information about registrants that
file electronically with the SEC.
THIS CONTRACT IS NOT A DEPOSIT OR OBLIGATION OF,
OR GUARANTEED OR ENDORSED BY, ANY BANK. IT'S NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN A CONTRACT INVOLVES RISK,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY 3
- -----------------------------------------------------
FEE TABLE 4
- -----------------------------------------------------
WHY BUY A CONTRACT 7
- -----------------------------------------------------
YOUR INVESTMENT OPTIONS 8
Your Variable Investment Options 8
Variable Investment Option Performance 10
Your Fixed Option and DCA Plus Fixed Option 10
- -----------------------------------------------------
PURCHASING YOUR CONTRACT 11
How to Apply for Your Contract 11
Making Your Purchase Payments 11
- -----------------------------------------------------
HOW YOUR PAYMENTS ARE ALLOCATED 11
Choosing Your Investment Options 11
Investing in Variable Investment Options 12
When Your Investment is Effective 12
Transfers 12
- -----------------------------------------------------
CHARGES, FEES AND DEDUCTIONS 15
Withdrawal Charge 15
Premium Taxes 16
Annual Fee 17
Waivers and Reduced Charges 17
Mortality and Expense Risk Charge 17
Administrative Fee 18
Expenses of the Fund 18
- -----------------------------------------------------
RETIREMENT BENEFITS AND OTHER PAYOUTS 18
Selecting Your Annuitant 18
Annuitization 18
Choosing Your Annuity Date ("Annuity Start Date") 19
Default Annuity Date and Options 19
Choosing Your Annuity Option 20
Your Annuity Payments 21
Death Benefits 22
- -----------------------------------------------------
WITHDRAWALS 25
Optional Withdrawals 25
Tax Consequences of Withdrawals 26
Short-Term Cancellation Right ("Free Look") 26
- -----------------------------------------------------
PACIFIC LIFE & ANNUITY AND THE SEPARATE ACCOUNT 27
Pacific Life & Annuity 27
Separate Account A 27
FEDERAL TAX STATUS 28
Taxes Payable by Contract Owners: General Rules 28
Qualified Contracts 30
Loans 31
Withholding 33
Impact of Federal Income Taxes 34
Taxes on PL&A 34
- -----------------------------------------------------
ADDITIONAL INFORMATION 34
Voting Rights 34
Changes to Your Contract 35
Changes to All Contracts 35
Inquiries and Submitting Forms and Requests 36
Timing of Payments and Transactions 37
Confirmations, Statements and Other Reports
to Contract Owners 37
Replacement of Life Insurance or Annuities 38
Financial Statements 38
Preparation for the Year 2000 38
- -----------------------------------------------------
THE GENERAL ACCOUNT 39
General Information 39
Guarantee Terms 39
Withdrawals and Transfers 40
- -----------------------------------------------------
SPECIAL DEFINITIONS 41
- -----------------------------------------------------
CONTENTS OF THE STATEMENT OF ADDITIONAL
INFORMATION 43
- -----------------------------------------------------
BACK
WHERE TO GO FOR MORE INFORMATION COVER
</TABLE>
2
<PAGE>
SUMMARY
THIS IS A BRIEF OVERVIEW OF THE MORE SIGNIFICANT FEATURES OF YOUR CONTRACT. MORE
DETAILED INFORMATION MAY BE FOUND IN OTHER SECTIONS OF THIS PROSPECTUS, THE SAI
AND THE CONTRACT. ENDORSEMENTS TO YOUR CONTRACT MAY CONTAIN VARIATIONS FORM THE
STANDARDIZED INFORMATION IN THIS PROSPECTUS.
IF THE INFORMATION IN ANY CONTRACT ENDORSEMENT OR PROSPECTUS SUPPLEMENT DIFFERS
FROM THE INFORMATION IN THIS PROSPECTUS, WE WILL CONSIDER THE ENDORSEMENT OR
SUPPLEMENT TO BE CORRECT.
HERE IS SOME IMPORTANT INFORMATION TO REMEMBER ABOUT YOUR CONTRACT.
WHAT IS THE CONTRACT? The Contract is an annuity Contract designed to be a
long-term financial planning device. It permits you to invest, on a tax-deferred
basis, for retirement or other long-range goals. It also allows you to receive a
series of regular payments for a specific length of time. See FEDERAL TAX
STATUS.
HOW DO I PURCHASE A CONTRACT? You can purchase a Contract with an initial
payment of at least $5,000 (for a Qualified Contract $2,000). After the initial
Purchase Payment, you may make additional Purchase Payments if you want, but it
is not required. You can also pay your initial Purchase Payment over the first
Contract Year by automatic installments. See PURCHASING YOUR CONTRACT.
WHAT ARE MY INVESTMENT OPTIONS? You select your own Investment Options.
Seventeen Variable Investment Options are available through Separate Account A.
Each Variable Investment Option invests in a corresponding Portfolio of the
Pacific Select Fund ("Fund"). Pacific Life Insurance Company ("Pacific Life") is
the Investment Advisor of the Fund. Pacific Life and the Fund have retained
other Portfolio Managers for fifteen of the available Portfolios. You bear the
investment associated with the Variable Investment Options. You should expect
any Contract Value and any Subaccount Annuity Units attributed to any variable
annuity payments to fluctuate. See HOW YOUR PAYMENTS ARE ALLOCATED. Fixed
annuity payments are funded through Pacific Life's General Account.
Also available as Investment Options are the Fixed Option and the DCA Plus Fixed
Option. These options provide a fixed annual rate of at least 3%. We hold the
Purchase Payments that you allocate to the Fixed Option and the DCA Plus Option
in our General Account. You may select as many Investment Options as you wish up
to the Annuity Date of your Contract. After that date, you may select the
Variable Investment Options if you choose variable annuity payments.
CAN I CHANGE MY INVESTMENT OPTIONS? On or before your Annuity Date, you may
transfer amounts from any Investment Option to another. After the Annuity Date,
you may make up to four exchanges of subaccount annuity units in any
twelve-month period. Certain restrictions apply to the Fixed Option and DCA Plus
Fixed Option. You may transfer amounts automatically using Dollar Cost
Averaging, portfolio rebalancing, or an earnings sweep. In the future, we may
impose transaction fees for excessive transfers. See HOW YOUR PAYMENTS ARE
ALLOCATED - TRANSFERS and THE GENERAL ACCOUNT - WITHDRAWALS AND TRANSFERS in
this Prospectus and THE CONTRACTS AND THE SEPARATE ACCOUNT - SYSTEMATIC TRANSFER
PROGRAMS in the SAI.
WHAT CHARGES WILL I PAY? We charge an administrative fee at an annual rate of
.15% and a mortality and expense risk charge at an annual rate of 1.25% against
the assets held in the Variable Investment Options. The amounts invested in the
Variable Investment Options are also subject each year to the operating expenses
imposed on the corresponding Portfolios of the Fund. Before you annuitize and,
at the time of a full withdrawal if your Net Contract Value is less than
$50,000, we charge an annual fee of $30. You may be subject to a contingent
deferred sales charge (or "withdrawal charge") when you withdraw amounts from
your Contract Value that we attributed to Purchase Payments. This charge can be
up to 7%. It is determined by:
- -the amount of your withdrawal; and
- -the length of time the Purchase Payment considered withdrawn was held under the
Contract.
- -You may also be subject to other fees. See CHARGES, FEES AND DEDUCTIONS.
3
<PAGE>
CAN I WITHDRAW MY CONTRACT VALUE? Generally, you may withdraw all or part of
your Contract Value at any time on or before your Annuity Date. Withdrawals may
be subject to fees, charges and taxation. In certain circumstances, you may be
subject to a tax penalty. Certain restrictions on withdrawals are imposed from
the Fixed Option and certain Qualified Contracts. See WITHDRAWALS, FEDERAL TAX
STATUS and THE GENERAL ACCOUNT - WITHDRAWALS AND TRANSFERS.
CAN I RETURN MY CONTRACT? For 10 days after you receive your Contract, you may
return it for a refund without any penalties or surrender charges. This is
called a "free look" provision. See WITHDRAWALS - SHORT-TERM CANCELLATION RIGHT
("FREE LOOK").
HOW DO I REACH PL&A? You can reach a PL&A service representative between the
hours of 6:00 a.m. and 5:00 p.m., Pacific time at 1-800-748-6907. For
information on sending payments, forms or other requests, see ADDITIONAL
INFORMATION - INQUIRIES AND SUBMITTING FORMS AND REQUESTS.
FEE TABLE
The purpose of this fee table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly under your
Contract.
The table reflects expenses of the Separate Account as well as expenses of the
Fund. Expenses shown under "Contract Expenses" and "Separate Account A Annual
Expenses" are specified under the terms of the Contract and are fixed. Expenses
shown under "Fund Annual Expenses After Expense Limitation" are estimated
expenses of the Fund; Fund expenses are not specified under the terms of the
Contract and may vary from year to year.
In addition to the charges and expenses described below, a charge for premium
taxes and/or other taxes may apply. See CHARGES, FEES AND DEDUCTIONS - PREMIUM
TAXES, the discussion under MANAGING THE PACIFIC SELECT FUND in the Fund's
Prospectus, and ORGANIZATION AND MANAGEMENT OF THE FUND in the Fund's SAI.
<TABLE>
<S> <C>
CONTRACT EXPENSES
Sales Charge on Purchase Payments............... None
Maximum Withdrawal Charge as a percentage of
Purchase Payments............................. 7.0%(1)
Withdrawal Transaction Fee...................... None(2)
Transfer Fee.................................... None(3)
Annual Fee...................................... $30.00(4)
SEPARATE ACCOUNT A ANNUAL EXPENSES
(as a percentage of average daily account value)
Mortality and Expense Risk Charge............... 1.25%(5)
Administrative Fee.............................. 0.15%(5)
-------
Total Separate Account A Annual Expenses........ 1.40%
</TABLE>
- ---------
(1) The withdrawal charge, also called a "contingent deferred sales charge,"
may not apply or may be reduced under certain circumstances. See
WITHDRAWALS, and CHARGES, FEES AND DEDUCTIONS.
(2) We reserve the right to impose a transaction fee in the future of up to $15
per withdrawal on partial withdrawals in excess of 15 in any Contract Year.
See WITHDRAWALS - OPTIONAL WITHDRAWALS.
(3) We reserve the right to impose a transaction fee in the future of up to $15
per transfer on transfers in excess of 15 in any Contract year. See HOW
YOUR PAYMENTS ARE ALLOCATED - TRANSFERS.
(4) This fee will be charged on each Contract Anniversary prior to your Annuity
Date and at the time of a full withdrawal of any Contract Value unless your
Net Contract Value is at least $50,000 on that date.
(5) This is an annual rate. The daily rate is calculated by dividing the annual
rate by 365.
<PAGE>
OTHER EXPENSES
The table also shows expenses the Fund paid in 1998 as an annual percentage of
each Portfolio's average daily net assets. To help limit Fund expenses, we've
agreed to waive all or part of our investment advisory fees or otherwise
reimburse each Portfolio for expenses (not including advisory fees, additional
costs associated with foreign investing and extraordinary expenses) that exceed
0.25% of its average daily net assets. We do this voluntarily, but do not
guarantee that we'll continue to do so after December 31, 2000. No reimbursement
was necessary for 1998.
FUND ANNUAL EXPENSES AFTER EXPENSE LIMITATION
(AS A PERCENTAGE OF PORTFOLIO AVERAGE DAILY NET ASSETS)
<TABLE>
<CAPTION>
ADVISORY OTHER TOTAL
PORTFOLIO FEE EXPENSES EXPENSES
- ----------------------------------- -------- -------- --------
<S> <C> <C> <C>
Money Market(1).................... .37% .06% .43%
High Yield Bond(1)................. .60% .06% .66%
Managed Bond....................... .60% .06% .66%
Government Securities.............. .60% .06% .66%
Aggressive Equity.................. .80% .09% .89%
Growth LT.......................... .75% .05% .80%
Equity Income(1)................... .65% .05% .70%
Multi-Strategy(1).................. .65% .06% .71%
Large-Cap Value(2)................. .85% .06% .91%
Mid-Cap Value(2)................... .85% .06% .91%
Equity............................. .65% .06% .71%
Bond and Income.................... .60% .10% .70%
Equity Index....................... .16% .05% .21%
Small-Cap Index(2)................. .50% .06% .56%
REIT(2)............................ 1.10% .06% 1.16%
International...................... .85% .15% 1.00%
Emerging Markets................... 1.10% .36% 1.46%
</TABLE>
- ---------
(1) Total net expenses for these Portfolios in 1998, after deduction of an
offset for custodian credits, were: 0.42% - Money Market Portfolio; 0.65% -
High Yield Bond Portfolio; 0.69% - Equity Income Portfolio; and 0.70% -
Multi-Strategy Portfolio.
(2) Expenses are estimated. There were no actual advisory fees or other
expenses for these Portfolios in 1998 because the Portfolio started on
January 4, 1999.
EXAMPLE: If, at the end of the indicated time period, YOU ANNUITIZE YOUR
CONTRACT VALUE, YOU SURRENDER YOUR CONTRACT AND WITHDRAW YOUR CONTRACT VALUE,
OR YOU NEITHER ANNUITIZE NOR SURRENDER YOUR CONTRACT, you would pay the
following cumulative expenses on each $1,000 invested, assuming 5% annual
return on assets:
<TABLE>
<CAPTION>
NEITHER ANNUITIZED
VARIABLE ACCOUNT ANNUITIZED SURRENDERED NOR SURRENDERED
- ----------------- ----------- ------------ -------------------
<S> <C> <C> <C>
Money Market
1 Year............................. $ 82 $ 82 $ 19
3 Year............................. 59 113 59
5 Year............................. 102 129 102
10 Year............................ 220 220 220
High Yield Bond
1 Year............................. $ 85 $ 85 $ 22
3 Year............................. 66 120 66
5 Year............................. 114 141 114
10 Year............................ 245 245 245
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
NEITHER ANNUITIZED
VARIABLE ACCOUNT ANNUITIZED SURRENDERED NOR SURRENDERED
- ----------------- ----------- ------------ -------------------
Managed Bond
<S> <C> <C> <C>
1 Year............................. 85 85 22
3 Year............................. 66 120 66
5 Year............................. 114 141 114
10 Year............................ 245 245 245
Government Securities
1 Year............................. 85 85 22
3 Year............................. 66 120 66
5 Year............................. 114 141 114
10 Year............................ 245 245 245
Aggressive Equity
1 Year............................. 87 87 24
3 Year............................. 73 127 73
5 Year............................. 126 153 126
10 Year............................ 268 268 268
Growth LT
1 Year............................. 86 86 23
3 Year............................. 71 125 71
5 Year............................. 121 148 121
10 Year............................ 259 259 259
Equity Income
1 Year............................. 85 85 22
3 Year............................. 68 122 68
5 Year............................. 116 143 116
10 Year............................ 249 249 249
Multi-Strategy
1 Year............................. 85 85 22
3 Year............................. 68 122 68
5 Year............................. 116 143 116
10 Year............................ 250 250 250
Large-Cap Value
1 Year............................. 87 87 24
3 Year............................. 74 128 74
5 Year............................. 127 154 127
10 Year............................ 270 270 270
Mid-Cap Value
1 Year............................. 87 87 24
3 Year............................. 74 128 74
5 Year............................. 127 154 127
10 Year............................ 270 270 270
Equity
1 Year............................. 85 85 22
3 Year............................. 68 122 68
5 Year............................. 116 143 116
10 Year............................ 250 250 250
Bond and Income
1 Year............................. 85 85 22
3 Year............................. 68 122 68
5 Year............................. 116 143 116
10 Year............................ 249 249 249
Equity Index
1 Year............................. $ 80 $ 80 $ 17
3 Year............................. 53 107 53
5 Year............................. 91 118 91
10 Year............................ 197 197 197
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NEITHER ANNUITIZED
VARIABLE ACCOUNT ANNUITIZED SURRENDERED NOR SURRENDERED
- ----------------- ----------- ------------ -------------------
Small-Cap Index
<S> <C> <C> <C>
1 Year............................. 84 84 21
3 Year............................. 63 117 63
5 Year............................. 109 136 109
10 Year............................ 234 234 234
REIT
1 Year............................. 90 90 27
3 Year............................. 82 136 82
5 Year............................. 139 166 139
10 Year............................ 295 295 295
International
1 Year............................. 88 88 25
3 Year............................. 77 131 77
5 Year............................. 131 158 131
10 Year............................ 279 279 279
Emerging Markets
1 Year............................. 93 93 30
3 Year............................. 90 144 90
5 Year............................. 154 181 154
10 Year............................ 324 324 324
</TABLE>
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES; ACTUAL EXPENSES INCURRED IN ANY GIVEN YEAR MAY BE MORE OR LESS THAN
THOSE SHOWN IN THE EXAMPLES.
The examples use an assumed Contract Value of $45,000, and reflect the deduction
of the Annual Fee amount without regard to the waiver for Contract Values over
$50,000.
WHY BUY A CONTRACT
Your Pacific Portfolios Contract (your "Contract") is an annuity contract that
provides you with flexibility in tax-deferred retirement planning or other
long-term financial planning. You may select among seventeen Variable Investment
Options, the Fixed Option, and the DCA Plus Fixed Option when you elect DCA
Plus. You may choose to add to your Contract Value at any time before the
Annuity Date, and your additional Purchase Payments may be in any amount you
choose (subject to certain limitations). When you annuitize, we will send the
payee a series of variable and/or fixed payments for life or for a specified
number of years.
If you purchase a Contract with after-tax dollars ("Non-Qualified Contract") or
if your Contract is purchased through a Qualified Plan or IRA ("Qualified
Contract"), your earnings on the Contract are not subject to tax until amounts
are withdrawn or distributed (including annuity payments). See FEDERAL TAX
STATUS.
7
<PAGE>
PACIFIC PORTFOLIOS
YOUR INVESTMENT OPTIONS
You may choose among seventeen different Variable Investment Options, the Fixed
Option and the DCA Plus Fixed Option.
YOUR VARIABLE INVESTMENT OPTIONS
Separate Account A, a separate account of ours, currently offers you seventeen
"Variable Investment Options" (also called "Subaccounts"). Each Variable
Investment Option invests in a separate Portfolio of the Fund. Your Variable
Investment Options are:
- -Money Market Subaccount
- -High Yield Bond Subaccount
- -Managed Bond Subaccount
- -Government Securities Subaccount
- -Aggressive Equity Subaccount
- -Growth LT Subaccount
- -Equity Income Subaccount
- -Multi-Strategy Subaccount
- -Large-Cap Value Subaccount
- -Mid-Cap Value Subaccount
- -Equity Subaccount
- -Bond and Income Subaccount
- -Equity Index Subaccount
- -Small-Cap Index Subaccount
- -REIT Subaccount
- -International Subaccount
- -Emerging Markets Subaccount
8
<PAGE>
WHAT ARE EACH OF THOSE OPTIONS?
For your convenience, the following chart summarizes some basic data about each
Portfolio. THIS CHART IS ONLY A SUMMARY. FOR MORE COMPLETE INFORMATION ON EACH
PORTFOLIO, INCLUDING A DISCUSSION OF THE PORTFOLIO'S INVESTMENT TECHNIQUES AND
THE RISKS ASSOCIATED WITH ITS INVESTMENTS, SEE THE ACCOMPANYING FUND PROSPECTUS.
NO ASSURANCE CAN BE GIVEN THAT A PORTFOLIO WILL ACHIEVE ITS INVESTMENT
OBJECTIVE. YOU SHOULD READ THE FUND PROSPECTUS CAREFULLY BEFORE INVESTING.
<TABLE>
<CAPTION>
PRIMARY INVESTMENTS
PORTFOLIO OBJECTIVE (UNDER NORMAL CIRCUMSTANCES) PORTFOLIO MANAGER
<S> <C> <C> <C>
Money Market Current income consistent with Highest quality money market instruments believed Pacific Life
preservation of capital. to have limited credit risk. Insurance Company
High Yield Bond High level of current income. Fixed income securities with lower and Pacific Life
medium-quality credit ratings and intermediate to Insurance Company
long terms to maturity.
Managed Bond Maximize total return consistent Medium and high-quality fixed income securities Pacific Investment
with prudent investment with varying terms to maturity. Management Company
management.
Government Maximize total return consistent Fixed income securities that are issued or Pacific Investment
Securities with prudent investment guaranteed by the U.S. government, its agencies or Management Company
management. government-sponsored enterprises.
Aggressive Capital appreciation. Equity securities of small emerging-growth Alliance Capital
Equity companies and medium-sized companies. Management L.P.
Growth LT Long-term growth of capital Equity securities of a large number of companies Janus Capital
consistent with the preservation of any size. Corporation
of capital.
Equity Income Long-term growth of capital and Equity securities of large and medium-sized J.P. Morgan
income. dividend- paying U.S. companies. Investment
Management Inc.
Multi-Strategy High total return. A mix of equity and fixed income securities. J.P. Morgan
Investment
Management Inc.
Large-Cap Value Long-term growth of capital. Equity securities of large U.S. companies. Salomon Brothers
Current income is of secondary Asset Management
importance. Inc.
Mid-Cap Value Capital appreciation. Equity securities of medium-sized U.S. companies Lazard Asset
believed to be undervalued. Management
Equity Capital appreciation. Current Equity securities of large U.S. growth-oriented Goldman Sachs Asset
income is of secondary companies. Management
importance.
Bond and Income Total return and income A wide range of fixed income securities with Goldman Sachs Asset
consistent with prudent varying terms to maturity, with an emphasis on Management
investment management. long-term bonds.
Equity Index Investment results that Equity securities of companies that are included Bankers Trust
correspond to the total return of in the Standard & Poor's 500 Composite Stock Price Company
common stocks publicly traded in Index.
the U.S.
Small-Cap Index Investment results that Equity securities that are included in the Russell Bankers Trust
correspond to the total return of 2000 Small Stock Index. Company
an index of small capitalization
companies.
REIT Current income and long-term Equity securities of real estate investment Morgan Stanley Asset
capital appreciation. trusts. Management
International Long-term capital appreciation. Equity securities of companies of any size located Morgan Stanley Asset
in developed countries outside of the U.S. Management
Emerging Long-term growth of capital. Equity securities of companies that are located in Blairlogie Capital
Markets countries generally regarded as "emerging market" Management
countries.
</TABLE>
9
<PAGE>
THE INVESTMENT ADVISER
Pacific Life Insurance Company ("Pacific Life") is the Investment Adviser for
the Fund. Pacific Life and the Fund have retained other portfolio managers,
supervised by Pacific Life, for fifteen of the Portfolios.
VARIABLE INVESTMENT OPTION PERFORMANCE
Historical performance information can help you understand how investment
performance can affect your investment in the Variable Investment Options.
Although the Subaccounts were established January 2, 1996 and have no historical
performance prior to that date, each Subaccount will be investing in shares of a
Portfolio of the Fund, and the majority of these Portfolios do have historical
performance data which covers a longer period. Performance data include total
returns for each Subaccount, current and effective yields for the Money Market
Subaccount, and yields for the other fixed income Subaccounts. Calculations are
in accordance with standard formulas prescribed by the SEC which are described
in the SAI. Yields do not reflect any charge for premium taxes and/or other
taxes; this exclusion may cause yields to show more favorable performance. Total
returns may or may not reflect withdrawal charges, Annual Fees or any charge for
premium and/or other taxes; data that do not reflect these charges may show more
favorable performance.
The SAI presents some hypothetical performance data. The SAI also presents some
performance benchmarks, based on unmanaged market indices, such as the Standard
& Poor's 500 Composite Stock Price Index (S&P 500), and on "peer groups," which
use other managed funds with similar investment objectives. These benchmarks may
give you a broader perspective when you examine hypothetical or actual
Subaccount performance.
In addition, we may provide you with reports both as an insurance company and as
to our claims paying ability that are produced by rating agencies and
organizations.
YOUR FIXED OPTION AND DCA PLUS FIXED OPTION
The Fixed Option and the DCA Plus Fixed Option each offer you a guaranteed
minimum interest rate on the amounts you allocate to these Options. Amounts you
allocate to these Options, and your earnings credited are held in our General
Account. For more detailed information about these Options, see THE GENERAL
ACCOUNT section in this Prospectus.
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PACIFIC PORTFOLIOS
PURCHASING YOUR CONTRACT
HOW TO APPLY FOR YOUR CONTRACT
The Contract is intended to be offered for sale in the State of New York. To
purchase a Contract, fill out an application and submit it along with your
initial Purchase Payment to Pacific Life & Annuity Company at 1111 S. Arroyo
Parkway, Suite 205, Pasadena, California 91105. If your application and payment
are complete when received, or once they have become complete, we will issue
your Contract within two Business Days. If some information is missing from your
application, we may delay issuing your Contract while we obtain the missing
information; however, we will not hold your initial Purchase Payment for more
than five Business Days without your permission.
You may also purchase a Contract by exchanging your existing contract. YOU MUST
SUBMIT ALL CONTRACTS TO BE EXCHANGED WHEN YOU SUBMIT YOUR APPLICATION. Call your
representative, or call us at 1-800-748-6907, if you are interested in this
option.
We reserve the right to reject any application or Purchase Payment for any
reason, subject to any applicable nondiscrimination laws and to our own
standards and guidelines. The maximum age of a Contract Owner, including Joint
and Contingent Owners, for which a Contract will be issued is 85. The Contract
Owner's age is calculated as of his or her age last birthday. If the sole
Contract Owner or sole Annuitant named in the application for a Contract dies
prior to our issuance of a Contract, then the application for the Contract
and/or any Contract issued shall be deemed null and void; and any premiums we
receive, including any proceeds received in connection with an exchange or
transfer, will be returned to the applicant/Owner or the applicant/Owner's
estate.
MAKING YOUR PURCHASE PAYMENTS
MAKING YOUR INITIAL PAYMENT
Your initial Purchase Payment must be at least $5,000 if you are buying a
Non-Qualified Contract, and at least $2,000 if you are buying a Qualified
Contract. You may pay this entire amount when you submit your application, or
you may choose our pre-authorized checking plan ("PAC"), which allows you to pay
in equal monthly installments over one year (at least $400 per month for
Non-Qualified Contracts, and at least $150 per month for Qualified Contracts).
If you choose PAC, you must make your first installment payment when you submit
your application. Further requirements for PAC are discussed in the PAC form.
You must obtain our consent before making an initial or additional Purchase
Payment that will bring your aggregate Purchase Payments over $1,000,000.
MAKING ADDITIONAL PAYMENTS
You may choose to invest additional amounts in your Contract at any time. Each
additional Purchase Payment must be at least $250 for Non-Qualified Contracts
and $50 for Qualified Contracts.
FORMS OF PAYMENT
Your initial and additional Purchase Payments may be sent by personal or bank
check or by wire transfer. You may also make additional PAC Purchase Payments
via electronic funds transfer. All checks must be drawn on U.S. funds. If you
make Purchase Payments by check other than a cashier's check, your payment of
any withdrawal proceeds and any refund during your "free look" period may be
delayed until your check has cleared.
HOW YOUR PAYMENTS ARE ALLOCATED
CHOOSING YOUR INVESTMENT OPTIONS
You may allocate your Purchase Payments among the seventeen Subaccounts, the
Fixed Option and, if you elect DCA Plus, the DCA Plus Fixed Option. Allocations
of your initial Purchase Payment to the Investment Options you selected will be
effective on your Contract Date. See WITHDRAWALS - SHORT-TERM CANCELLATION RIGHT
("FREE LOOK"). Each additional
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PACIFIC PORTFOLIOS
Purchase Payment will be allocated to the Investment Options according to your
allocation instructions in your application, or most recent instructions, if
any, subject to the terms described in the WITHDRAWALS - SHORT-TERM CANCELLATION
RIGHT ("FREE LOOK") section. We reserve the right, in the future, to require
that your allocation to any particular Investment Option meet a certain minimum
amount. If your Contract is issued in exchange for another annuity contract or a
life insurance contract, our administrative procedures may vary depending on the
state in which your Contract is issued.
INVESTING IN VARIABLE INVESTMENT OPTIONS
Each time you allocate your investment to a Variable Investment Option, your
Contract is credited with a number of "Subaccount Units" in that Subaccount. The
number of Subaccount Units credited is equal to the amount you have allocated to
that Subaccount, divided by the "Unit Value" of one Unit of that Subaccount.
EXAMPLE: You allocate $600 to the Government Securities Subaccount. At the
end of the Business Day on which your allocation is effective, the value of
one Unit in the Government Securities Subaccount is $15. As a result, 40
Subaccount Units are credited to your Contract for your $600.
YOUR VARIABLE ACCOUNT VALUE WILL CHANGE
After we credit your Contract with Subaccount Units, the value of those Units
will usually fluctuate. This means that, from time to time, your investment
allocated to the Variable Investment Options may be worth more or less than the
original Purchase Payments to which those amounts can be attributed.
Fluctuations in Subaccount Unit Value will not change the number of Units
credited to your Contract.
Subaccount Unit Values will vary in accordance with the investment performance
of the corresponding Portfolio. For example, the value of Units in the Managed
Bond Subaccount will change to reflect the performance of the Managed Bond
Portfolio (including that Portfolio's investment income, its capital gains and
losses, and its expenses). Subaccount Unit Values are also adjusted to reflect
the Administrative Fee and Risk Charge imposed on the Separate Account.
We calculate the value of all Subaccount Units at or about 4:00 p.m., Eastern
time on each Business Day. The SAI contains a detailed discussion of these
calculations.
WHEN YOUR INVESTMENT IS EFFECTIVE
Your initial Purchase Payment is ordinarily effective on the day we issue your
Contract. Any additional allocation is effective on the day we receive your
Purchase Payment in proper form.
The day your allocation is effective determines the Unit Value at which
Subaccount Units are attributed to your Contract. In the case of transfers or
withdrawals, the effective day determines the Unit Value at which affected
Subaccount Units are debited and/or credited under your Contract. The Unit Value
at which purchase, transfer and withdrawal transactions are credited or debited
is the value of the Subaccount Units next calculated after your transaction is
effective. Your Variable Account Value begins to reflect the investment
performance results of your new allocations on the day after your transaction is
effective. See ADDITIONAL INFORMATION - INQUIRIES AND SUBMITTING FORMS AND
REQUESTS.
TRANSFERS
Once your Payments are allocated to the Investment Options you selected, you may
transfer your Contract Value less Loan Account Value from any Investment Option
to any other Investment Option, except the DCA Plus Fixed Option. Certain
restrictions apply to the Fixed Option and the DCA Plus Fixed Option. See THE
GENERAL ACCOUNT - WITHDRAWALS AND TRANSFERS. Transfer requests are normally
effective on the Business Day we receive them in proper form.
No transfer fee is currently imposed for transfers among the Investment Options,
but we reserve the right to impose a transaction fee for transfers in the
future; a fee of up to $15 per transfer may apply to transfers in excess of 15
in any
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PACIFIC PORTFOLIOS
Contract Year. Transfers under the dollar cost averaging and earnings sweep
options (but not the DCA Plus or portfolio rebalancing options) are counted
toward your total transfers in a Contract Year. Any such fee would be charged
against your Investment Options proportionately, based on your relative Account
Value in each immediately after the transfer.
We have the right, at our option (unless otherwise required by law), to require
certain minimums in the future in connection with transfers; these may include a
minimum transfer amount and a minimum Account Value, if any, for the Investment
Option from which the transfer is made or to which the transfer is made. If your
transfer request results in your having a remaining Account Value in an
Investment Option that is less than the minimum amount, we may transfer that
remaining amount to your other Investment Options in the proportions specified
in your current allocation instructions. Any such DCA Plus Fixed Option balance
or any amount that would otherwise be allocated to the DCA Plus Fixed Option
will be allocated to the Variable Investment Options according to your most
recent DCA Plus transfer instructions. We also reserve the right (unless
otherwise required by law) to limit the size of transfers, to limit the number
and frequency of transfers, to restrict transfers, and to suspend transfers. We
reserve the right to reject any transfer request.
Exchanges of Annuity Units in any Subaccount(s) to any other Subaccount(s) after
annuitization are limited to four in any twelve-month period. See THE GENERAL
ACCOUNT -- WITHDRAWALS AND TRANSFERS in the Prospectus and THE CONTRACTS AND THE
SEPARATE ACCOUNT in the SAI.
AUTOMATIC TRANSFER OPTIONS
We offer four automatic transfer options: DCA Plus, dollar cost averaging,
portfolio rebalancing and earnings sweep. There is no charge for these options,
although transfers under the dollar cost averaging and earnings sweep options
are counted towards your total transfers in a Contract Year.
DCA PLUS
DCA Plus provides a way for you to transfer amounts monthly from the DCA Plus
Fixed Option to one or more Variable Investment Option(s) over a period of up to
one year. This allows you to average the Unit Values of the Variable Investment
Option(s) over time, and may permit a "smoothing" of abrupt peaks and drops in
Unit Values.
Prior to the Annuity Date, you may allocate all or a portion of your Purchase
Payment(s) to the DCA Plus Fixed Option. The initial minimum amount that you may
allocate to the DCA Plus Fixed Option is $5,000. You may not transfer any
amounts to the DCA Plus Fixed Option from any other Investment Option. All
Purchase Payments allocated to the DCA Plus Fixed Option will earn interest at
the then current Guaranteed Interest Rate declared by us.
The day that the first Purchase Payment allocation is made to the DCA Plus Fixed
Option will begin a Guaranteed Term of 12 months and a period of 12 monthly
transfers. On the same day of each month thereafter, we will transfer to the
Variable Investment Options you selected an amount equal to your DCA Plus Fixed
Option Value on that day divided by the remaining number of monthly transfers in
the Guaranteed Term.
EXAMPLE: On May 1, you submit a $10,000 Purchase Payment entirely to the DCA
Plus Fixed Option at a then current Guaranteed Interest Rate of 5.00%. On
June 1, the value of the DCA Plus Fixed Option is $10,040.75. On June 1, a
transfer equal to $836.73 ($10,040.75/12) will be made according to your DCA
Plus transfer instructions. Your remaining DCA Plus Fixed Option Value after
the transfer is therefore $9,204.02.
On July 1, your DCA Plus Fixed Option Value has now increased to $9,241.52.
We will transfer $840.14 ($9,241.52/11) to the Variable Investment Options,
leaving a remaining value of $8,401.38 in the DCA Plus Fixed Option.
During the Guarantee Term, you may allocate all or a part of additional Purchase
Payments to the DCA Plus Fixed Option, provided such allocations are at least
$250. Each such allocation will be transferred to the Variable Investment
Options you selected over the remaining Guarantee Term. Transfers will be made
proportionately from the DCA Plus Fixed Option Value attributed to each Purchase
Payment allocation.
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PACIFIC PORTFOLIOS
EXAMPLE: (Using the previous example): On July 15, you allocate an additional
$5,000 to the DCA Plus Option at a Guaranteed Interest Rate of 4.00%. On
August 1, your DCA Plus Fixed Option Value has increased to $13,443.79. An
amount equal to $1,344.38 ($13,443.79/10) is transferred from the DCA Plus
Fixed Option to the Variable Investment Options. The remaining DCA Plus Fixed
Option Value is $12,099.41.
The minimum amount for the DCA Plus monthly transfer is $250. If a monthly DCA
Plus transfer amount is less than $250, we may transfer your entire DCA Plus
Fixed Option Value to the Variable Investment Options according to your most
recent DCA Plus transfer instructions and automatically terminate your DCA Plus.
DCA Plus transfers must be made on a monthly basis to the Variable Investment
Options; you may not choose to transfer other than monthly nor may you transfer
to the Fixed Option under DCA Plus.
Unless otherwise instructed, any additional Purchase Payment we receive during a
Guarantee Term will be allocated to the Investment Options, including the DCA
Plus Fixed Option if so indicated, according to your most recent Purchase
Payment allocation instructions. If we receive any additional Purchase Payments
after your DCA Plus ends and you have not changed your Purchase Payment
allocation instructions, the portion of additional Purchase Payments that you
had instructed us to allocate to the DCA Plus Fixed Option under DCA Plus will
be allocated to the Variable Investment Options in the same proportion you had
elected under DCA Plus.
When your DCA Plus program ends you may request, in a form satisfactory to us,
to establish a new DCA Plus program subject to our minimum allocation
requirements.
Your DCA Plus program automatically ends at the end of your DCA Plus Guarantee
Term. If we do not receive completed DCA Plus transfer instructions in proper
order by the time your first DCA Plus transfer is due, your DCA Plus will be
automatically terminated at the time and your DCA Plus Fixed Account Value will
be transferred to the Fixed Option at the Fixed Option's then current Guaranteed
Interest Rate, unless you provide us with other transfer instructions. You may
request, in a form satisfactory to us, termination of your DCA Plus program at
any time. Upon our receipt of such request, or when death benefit proceeds
become payable, any remaining balance in your DCA Plus Fixed Option will be
transferred to the Fixed Option at the Fixed Option's then current Guaranteed
Interest Rate, unless you instruct us to transfer such amounts to other
Investment Options. On your Annuity Date any net amount converted to an annuity
from your DCA Plus Fixed Option will be applied to a fixed annuity and will be
held in our General Account, unless you instruct us otherwise.
You may have only one DCA Plus program in effect at any given time. DCA Plus may
not be used concurrently with our dollar cost averaging program. Further, the
DCA Plus Fixed Option is not available for use with any of our other systematic
transfer programs; i.e., dollar cost averaging, portfolio rebalancing or
earnings sweep.
We reserve the right to change the terms and conditions of DCA Plus, but not a
DCA Plus program you already have in effect.
DOLLAR COST AVERAGING
Dollar cost averaging is a method in which you buy securities in a series of
regular purchases instead of in a single purchase. This allows you to average
the securities' prices over time, and may permit a "smoothing" of abrupt peaks
and drops in price. Prior to your Annuity Date, you may use dollar cost
averaging to transfer amounts, over time, from any Variable Investment Option
with an Account Value of at least $5,000 to one or more other Variable
Investment Options. Each transfer must be for at least $250. The Fixed Option
and DCA Plus Fixed Option are not available for dollar cost averaging. Detailed
information appears in the SAI.
PORTFOLIO REBALANCING
You may instruct us to maintain a specific balance of Variable Investment
Options under your Contract (E.G., 30% in the Equity Index Subaccount, 40% in
the Managed Bond Subaccount, and 30% in the Growth LT Subaccount) prior to your
Annuity Date. Periodically, we will "rebalance" your values in the elected
Subaccounts to the percentages you have
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PACIFIC PORTFOLIOS
specified. Rebalancing may result in transferring amounts from a Subaccount
earning a relatively higher return to one earning a relatively lower return. The
Fixed Option and DCA Plus Fixed Option are not available for rebalancing.
Detailed information appears in the SAI.
EARNINGS SWEEP
You may instruct us to make automatic periodic transfers of your earnings from
the Money Market Subaccount or from the Fixed Option to one or more Variable
Investment Options (other than the Money Market Subaccount). Detailed
information appears in the SAI.
CHARGES, FEES AND DEDUCTIONS
WITHDRAWAL CHARGE
No sales charge is imposed on any Purchase Payment. Your Purchase Payments may,
however, be subject to a withdrawal charge; this charge may apply to amounts you
withdraw under your Contract, depending on the length of time each Purchase
Payment has been invested and on the amount you withdraw. No withdrawal charge
is imposed on (i) amounts annuitized after the first Contract Year, (ii)
payments of death benefits, (iii) withdrawals by Contract Owners to meet the
minimum distribution rules for Qualified Contracts as they apply to amounts held
under the Contract, or, (iv) subject to medical evidence satisfactory to us,
after the first Contract Anniversary, full or partial withdrawals if the
Annuitant has been diagnosed with a medically determinable condition that
results in a life expectancy of twelve (12) months or less.
FREE WITHDRAWALS
We will not impose a withdrawal charge on withdrawals of your Earnings, or on
withdrawals of amounts held under your Contract for at least six Contract Years.
In addition, during each Contract Year we will not impose a withdrawal charge on
your withdrawal of up to 10% of your remaining Purchase Payments at the
beginning of the Contract Year that would otherwise be subject to the withdrawal
charge plus up to 10% of any additional Purchase Payments received during the
Contract Year. Our calculations of the withdrawal charge deduct this "free 10%"
from your "oldest" Purchase Payment that is still otherwise subject to the
charge.
EXAMPLE: You make an initial Purchase Payment of $10,000 in Contract Year 1,
and make additional Purchase Payments of $1,000 and $6,000 in Contract Year
2. With Earnings, your Contract Value in Contract Year 3 is $19,000. In
Contract Year 3, you may withdraw $3,700 free of the withdrawal charges (your
total Purchase Payments were $17,000, so 10% of that total equals $1,700,
plus you had $2,000 of Earnings). After this withdrawal, your Contract Value
is $15,300 (all attributable to Purchase Payments). In Contract Year 4, your
Contract Value falls to $12,500; you may withdraw $1,530 (10% of $15,300)
free of any withdrawal charges.
HOW THE CHARGE IS DETERMINED
The amount of the charge depends on how long each Purchase Payment was held
under your Contract. Each Purchase Payment you make is considered to have a
certain "age," depending on the length of time since that payment was effective.
A payment is "one year old" or has an "age of one" from the day it is effective
until your next Contract
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PACIFIC PORTFOLIOS
Anniversary; beginning on that Contract Anniversary, your payment will have an
"age of two" for a full Contract Year. When you withdraw an amount subject to
the withdrawal charge, the "age" of the Purchase Payment you withdraw determines
the level of withdrawal charge as follows:
<TABLE>
<CAPTION>
"AGE" OF PAYMENT WITHDRAWAL
IN YEARS CHARGE
- -------------------------------------------------- ----------
1............................................. 7%
<S> <C>
2............................................. 7%
3............................................. 6%
4............................................. 5%
5............................................. 3%
6............................................. 1%
7 or more..................................... 0%
</TABLE>
We calculate your withdrawal charge by assuming that your Earnings are withdrawn
first, followed by amounts attributed to Purchase Payments with the "oldest"
Payment withdrawn first. The withdrawal charge will be deducted proportionally
among all Investment Options from which the withdrawal occurs. Any applicable
Annual Fee will be deducted after the withdrawal charge is calculated.
We pay sales commissions and other expenses associated with promotion and sales
of the Contracts to broker-dealers. The withdrawal charge is designed to
reimburse us for these costs, although we expect that our actual expenses will
be greater than the amount of the withdrawal charge. Broker-dealers may receive
aggregate commissions of up to 6.75% of your aggregate Purchase Payments.
Under certain circumstances and in exchange for lower initial commissions,
certain sellers of Contracts may be paid a persistency trail commission which
will take into account, among other things, the length of time Purchase Payments
have been held under a Contract, and Account Values. A trail commission is not
anticipated to exceed 1.00%, on an annual basis, of the Account Values
considered in connection with the trail commission. We may also pay override
payments, expense allowances, bonuses, wholesaler fees and training allowances.
Registered representatives earn commissions from the broker-dealers with which
they are affiliated and such arrangements may vary.
TRANSFERS
Transfers of all or part of your Account Value from one Investment Option to
another are not considered a withdrawal of an amount from your Contract, so no
withdrawal charge is imposed at the time of transfer. See HOW YOUR PAYMENTS ARE
ALLOCATED - TRANSFERS.
PREMIUM TAXES
Depending on (among other factors) your state of residence, a tax may be imposed
on your Purchase Payments at the time your payment is made, at the time of a
partial or full withdrawal, at the time any death benefit proceeds are paid, at
annuitization or at such other time as taxes may be imposed. Tax rates ranging
from 0% to 3.5% are currently in effect, but may change in the future. Some
local jurisdictions also impose a tax.
If we pay any taxes attributable to Purchase Payments ("premium taxes") on your
behalf, we will impose a similar charge against your Contract Value. We normally
will charge you when you annuitize some or all of your Contract Value. We
reserve the right to impose this charge for applicable premium taxes when you
make a full or partial withdrawal, at the time any death benefit proceeds are
paid, or when those taxes are incurred. For these purposes, "premium taxes"
include any state or local premium taxes and, where approval has been obtained,
federal premium taxes and any federal, state or local income, excise, business
or any other type of tax (or component thereof) measured by or based upon,
directly or indirectly, the amount of payments we have received. We will base
this charge on the Contract Value, the amount of the transaction, the aggregate
amount of Purchase Payments we receive under your Contract, or any other amount,
that in our sole discretion we deem appropriate.
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PACIFIC PORTFOLIOS
We may also charge the Separate Account or your Contract Value for taxes
attributable to the Separate Account or the Contract, including income taxes
attributable to the Separate Account or to our operations with respect to the
Contract, or taxes attributable, directly or indirectly, to Purchase Payments.
Currently, we do not impose any such charges.
ANNUAL FEE
We will charge you an Annual Fee of $30 on each Contract Anniversary prior to
the Annuity Date, and at the time you withdraw your entire Net Contract Value,
if your Net Contract Value is less than $50,000 on that date. The fee is not
imposed on amounts you annuitize or on payment of death benefit proceeds. The
fee reimburses certain of our costs in administering the Contracts and the
Separate Account; we do not intend to realize a profit from this fee or the
Administrative Fee. This fee is guaranteed not to increase for the life of your
Contract.
Your Annual Fee will be charged proportionately against your Investment Options.
Assessments against your Variable Investment Options are made by debiting some
of the Subaccount Units previously credited to your Contract; that is,
assessment of the Annual Fee does not change the Unit Value for those
Subaccounts.
WAIVERS AND REDUCED CHARGES
We may agree to reduce or waive the withdrawal charge or the Annual Fee, or
credit additional amounts under our Contracts, in situations where selling
and/or maintenance costs associated with the Contracts are reduced, such as the
sale of several Contracts to the same Contract Owner(s), sales of large
Contracts, sales of Contracts in connection with a group or sponsored
arrangement or mass transactions over multiple Contracts.
In addition, we may agree to reduce or waive some or all of such charges and/or
credit additional amounts under our Contracts, for those Contracts sold to
persons who meet criteria established by us, who may include current and retired
officers, directors and employees of us and our affiliates, trustees of the
Pacific Select Fund, registered representatives and employees of broker/dealers
with a current selling agreement with us and their affiliates, employees of
affiliated asset management firms and certain other service providers, and
immediate family members of such persons ("Eligible Persons"). We will credit
additional amounts to Contracts owned by Eligible Persons if such Contracts are
purchased directly through Pacific Mutual Distributors, Inc. Under such
circumstances, Eligible Persons will not be afforded the benefit of services of
any other broker/dealer nor will commissions be payable to any broker/dealer in
connection with such purchases. Eligible Persons must contact us directly with
servicing questions, Contract changes and other matters relating to their
Contracts. The amount credited to Contracts owned by Eligible Persons will equal
the reduction in expenses we enjoy by not incurring brokerage commissions in
selling such Contracts, with the determination of the expense reduction and of
such crediting being made in accordance with our administrative procedures.
These credits will be added to an Eligible Person's Contract when we apply the
Purchase Payments. We may also agree to waive minimum Purchase Payment
requirements for Eligible Persons.
We will only reduce or waive withdrawal or other charges, reduce or waive
minimums, or credit additional amounts on any Contract where expenses associated
with the sale of the Contract and/or costs associated with administering and
maintaining the Contract are reduced. We reserve the right to terminate waiver,
reduced charge and crediting programs at any time, including for issued
Contracts.
If you are an Eligible Person, you will not keep any amounts credited if you
return your Contract during the Free Look Period as described under WITHDRAWALS
- -SHORT-TERM CANCELLATION RIGHT ("FREE LOOK").
MORTALITY AND EXPENSE RISK CHARGE
We assess a charge against the assets of each Subaccount to compensate for
certain mortality and expense risks that we assume under the Contracts (the
"Risk Charge"). The risk that an Annuitant will live longer (and therefore
receive more annuity payments) than we predict through our actuarial
calculations at the time the Contract is issued is "mortality risk." We also
bear mortality risk in connection with death benefits payable under the
Contracts. The risk that the expense charges and fees under the Contracts and
Separate Account are less than our actual administrative and operating expenses
is called "expense risk."
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PACIFIC PORTFOLIOS
This Risk Charge is assessed daily at an annual rate of 1.25% of each
Subaccount's assets; this charge may not be increased for the duration of your
Contract.
The Risk Charge will stop at annuitization if you select a fixed annuity; the
Risk Charge will continue after annuitization if you choose any variable
annuity, even though we do not bear mortality risk if your Annuity Option is
Period Certain Only.
We will realize a gain if the Risk Charge exceeds our actual cost of expenses
and benefits, and will suffer a loss if such actual costs exceed the Risk
Charge. Any gain will become part of our General Account; we may use it for any
reason, including covering sales expenses on the Contracts.
ADMINISTRATIVE FEE
We charge an Administrative Fee as compensation for costs we incur in operating
the Separate Account and issuing and administering the Contracts, including
processing applications and payments, and issuing reports to you and to
regulatory authorities.
The Administrative Fee is assessed daily at an annual factor expressed as a
decimal (where 1.00 is equal to 100%) of 0.0015 of the assets of each
Subaccount. This fee is guaranteed not to increase for the life of your
Contract. A relationship will not necessarily exist between the actual
administrative expenses attributable to a particular Contract and the
Administrative Fee paid in respect of that particular Contract. The
Administrative Fee will continue after annuitization if you choose any variable
annuity.
EXPENSES OF THE FUND
Your Variable Account Value reflects advisory fees and other expenses incurred
by the various Portfolios of the Fund, net of any applicable reimbursements.
These fees and expenses may vary. The Fund is governed by its own Board of
Trustees, and your Contract does not fix or specify the level of expenses of any
Portfolio. The Fund's fees and expenses are described in detail in the Fund's
Prospectus and in its SAI.
RETIREMENT BENEFITS AND OTHER PAYOUTS
SELECTING YOUR ANNUITANT
When you submit the application for your Contract, you must choose a sole
Annuitant or two Joint Annuitants. We will send the annuity payments to the
payee that you designate. If you are buying a Qualified Contract, you must be
the sole Annuitant; if you are buying a Non-Qualified Contract you may choose
yourself and/or another person. Whether you choose to have a sole or two Joint
Annuitants, you may choose a Contingent Annuitant; more information on these
options is provided in the SAI. You will not be able to add or change a sole or
Joint Annuitant after your Contract is issued; however, if you are buying a
Qualified Contract, you may add a Joint Annuitant at the time of annuitization.
You will be able to add or change a Contingent Annuitant until your Annuity Date
or the death of your sole Annuitant or both Joint Annuitants, whichever occurs
first; however, once your Contingent Annuitant has become the Annuitant under
your Contract, no additional Contingent Annuitant may be named. No Annuitant
(primary, joint or contingent) may be named upon or after reaching his or her
86th birthday. We reserve the right to require proof of age or survival of the
Annuitant(s).
ANNUITIZATION
You may choose both your Annuity Date (or "Annuity Start Date") and your Annuity
Option. At the Annuity Date, you may elect to annuitize some or all of your Net
Contract Value, less any applicable charge for premium taxes and/or other taxes,
(the "Conversion Amount"), as long as such Conversion Amount annuitized is at
least $2,000. If you annuitize only a portion of this available Contract Value,
you may have the remainder distributed, less any applicable charge for premium
taxes and/or other taxes, any applicable withdrawal charge and any Annual Fee.
Any such distribution will be
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made to you in a single sum if the remaining Conversion Amount is less than
$2,000 on your Annuity Date. Distributions under your Contract may have tax
consequences. You should consult a qualified tax adviser for information on
annuitization.
CHOOSING YOUR ANNUITY DATE ("ANNUITY START DATE")
You should choose your Annuity Date when you submit your application or we will
apply a default Annuity Date to your Contract.
You may change your Annuity Date by notifying us, in proper form, at least ten
Business Days prior to the earlier of your old Annuity Date or your new Annuity
Date.
Your Annuity Date cannot be earlier than your first Contract Anniversary and
must occur on or before a certain date: If you have a sole Annuitant, your
Annuity Date cannot be later than his or her 90th birthday however, to meet IRS
minimum distribution rules, your Annuity Date may need to be earlier; if you
have Joint Annuitants and a Non-Qualified Contract, your Annuity Date cannot be
later than your younger Joint Annuitant's 90th birthday; if you have Joint
Annuitants and a Qualified Contract, your Annuity Date cannot be later than your
own 90th birthday. Different requirements may apply in some states. If your
Contract is a Qualified Contract, you may also be subject to additional
restrictions. Adverse federal tax consequences may result if you choose an
Annuity Date that is prior to an Annuitant's attained age 59 1/2. See FEDERAL
TAX STATUS.
You should carefully review the Annuity Options with your financial tax adviser,
and, for Contracts used in connection with a Qualified Plan, reference should be
made to the terms of the particular plan and the requirements of the Code for
pertinent limitations respecting annuity payments and other matters. For
instance, under requirements for retirement plans that qualify under Section 401
or 408 of the Code, annuity payments generally must begin no later than April 1
of the calendar year following the year in which the Annuitant reaches age
70 1/2. However, if a plan qualified under Section 401(a) of the Code or a
403(b) contract so provides, no distributions are required for individuals who
are employed after age 70 1/2 (other than 5% owners) until they retire.
For retirement plans that qualify under Section 401 or 408 of the Code, the
period elected for receipt of annuity payments under Annuity Options 1 and 4
generally may be no longer than the joint life expectancy of the Annuitant and
Beneficiary in the year that the Annuitant reaches age 70 1/2, and must be
shorter than such joint life expectancy if the Beneficiary is not the
Annuitant's spouse and is more than 10 years younger than the Annuitant. Under
Options 2 and 3, if the secondary or other Annuitant is not the Annuitant's
spouse and is more than 10 years younger than the Annuitant, the 66 2/3% and
100% elections specified above may not be available. The restrictions on options
for retirement plans that qualify under Sections 401 and 408 also apply to a
retirement plan that qualifies under Section 403(b) with respect to amounts that
accrued after December 31, 1986.
If you annuitize only a portion of your Net Contract Value on your Annuity Date,
you may, at that time, have the option to elect not to have the remainder of
your Contract Value distributed, but instead to continue your Contract with that
remaining Contract Value (a "continuing Contract"). If this option is available,
you would then choose a second Annuity Date for your continuing Contract, and
all references in this Prospectus to your "Annuity Date" would, in connection
with your continuing Contract, be deemed to refer to that second Annuity Date.
This option may not be available, or may be available only for certain types of
Contracts. You should be aware that some or all of the payments received before
the second Annuity Date may be fully taxable. We recommend that you call your
tax adviser for more information if you are interested in this option.
DEFAULT ANNUITY DATE AND OPTIONS
If you have a Non-Qualified Contract and you do not choose an Annuity Date when
you submit your application, your Annuity Date will be your Annuitant's 90th
birthday or your younger Joint Annuitant's 90th birthday, whichever applies;
however some states' laws may require a different Annuity Date. Certain
Qualified Plans may require annuitization to occur at an earlier age.
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If you have not specified an Annuity Option or do not instruct us otherwise, at
your Annuity Date your Net Contract Value, less any applicable charges for
premium taxes and/or other taxes, will be annuitized (if this net amount is at
least $2,000) as follows: the net amount from your Fixed Option and DCA Plus
Fixed Option Value will be converted into a fixed-dollar annuity and the net
amount from your Variable Account Value will be converted into a variable-dollar
annuity directed to the Subaccounts proportionate to your Account Value in each.
If you have a Non-Qualified Contract, or if you have a Qualified Contract and
are not married, your default Annuity Option will be Life with ten year Period
Certain. If you have a Qualified Contract and you are married, your default
Annuity Option will be Joint and Survivor Life with survivor payments of 50% and
your spouse will AUTOMATICALLY be named your Joint Annuitant.
CHOOSING YOUR ANNUITY OPTION
You may make three basic decisions about your annuity payments. First, you may
choose whether you want those payments to be a fixed-dollar amount and/or a
variable-dollar amount. Second, you may choose the form of annuity payments (see
ANNUITY OPTIONS). Third, you may decide how often you want annuity payments to
be made (the "frequency" of the payments). You may not change these selections
after annuitization.
FIXED AND VARIABLE ANNUITIES
You may choose a fixed annuity (I.E., with fixed-dollar amounts), a variable
annuity (I.E., with variable-dollar amounts), or you may choose both, converting
one portion of the net amount you annuitize into a fixed annuity and another
portion into a variable annuity.
If you select a fixed annuity, each periodic annuity payment received will be
equal to the initial annuity payment, unless you select a joint and survivor
life annuity with reduced survivor payments and the Primary Annuitant dies. Any
net amount you convert to a fixed annuity will be held in our General Account,
(but not under the Fixed Option or DCA Plus Fixed Option).
If you select a variable annuity, you may choose as many Variable Investment
Options as you wish; the amount of the periodic annuity payments will vary with
the investment results of the Variable Investment Options selected. After the
Annuity Date, Annuity Units may be exchanged among available Variable Investment
Options up to four times in any twelve-month period. How your Contract converts
into a variable annuity is explained in more detail in THE CONTRACTS AND THE
SEPARATE ACCOUNT in the SAI.
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ANNUITY OPTIONS
Four Annuity Options are currently available under the Contracts, although
additional options may become available in the future.
- LIFE ONLY. Periodic payments are made to the designated payee during his
or her lifetime. Payments stop when the designated payee dies.
- LIFE WITH PERIOD CERTAIN. Periodic payments are made to the designated
payee during his or her lifetime, with payments guaranteed for a specified
period. You may choose to have payments guaranteed for anywhere from 5
through 30 years (in full years only). If the designated payee dies before
the guaranteed payments are completed, the Beneficiary receives the
remainder of the guaranteed payments, if living; otherwise the Owner, if
living; otherwise the Owner's estate.
- JOINT AND SURVIVOR LIFE. Periodic payments are made to the Primary
Annuitant during the lifetime of the Primary Annuitant. After the death of
the Primary Annuitant, periodic payments are made to the secondary
Annuitant named in the election if and so long as such secondary Annuitant
lives. You may choose to have the payments to the surviving secondary
Annuitant equal 50%, 66 2/3% or 100% of the payments made during the
lifetime of the Primary Annuitant (you must make this election when you
choose your Annuity Option). Payments stop when both Annuitants have died.
- PERIOD CERTAIN ONLY. Periodic payments are made to the designated payee
over a specified period. You may choose to have payments continue for
anywhere from 5 through 30 years (in full years only). If the designated
payee dies before the guaranteed payments are completed, the Beneficiary
receives the remainder of the guaranteed payments, if living; otherwise
the Owner, if living; otherwise the Owner's estate.
If your Contract was issued in connection with a Qualified Plan subject to Title
I of the Employee Retirement Income Security Act of 1974 ("ERISA"), your
spouse's consent may be required when you seek any distribution under your
Contract, unless your Annuity Option is Joint and Survivor Life with survivor
payments of at least 50%, and your spouse is your Joint Annuitant.
FREQUENCY OF PAYMENTS
You may choose to have annuity payments made monthly, quarterly, semiannually,
or annually. The amount of a variable payment will be determined in each period
on the date corresponding to your Annuity Date, and payment will be made on the
next succeeding day.
Your initial annuity payment must be at least $20. Depending on the net amount
you annuitize, this requirement may limit your options regarding the period
and/or frequency of annuity payments.
YOUR ANNUITY PAYMENTS
AMOUNT OF THE FIRST PAYMENT
Your Contract contains tables that we use to determine the amount of the first
annuity payment under your Contract, taking into consideration the annuitized
portion of your Net Contract Value at the Annuity Date. This amount will vary,
depending on the annuity period and payment frequency you select; this amount
will be larger in the case of shorter Period Certain annuities and smaller for
longer Period Certain annuities. Similarly, this amount will be greater for a
Life Only annuity than for a Joint and Survivor Life annuity, because we will
expect to make payments for a shorter period of time on a Life Only annuity. If
you do not choose the Period Certain Only annuity, this amount will also vary
depending on the age of the Annuitant(s) on the Annuity Date and, for some
Contracts in some states, the sex of the Annuitant(s).
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For fixed annuity payments, the guaranteed income factors in our tables are
based on an annual interest rate of 3% and the 1983a Annuity Mortality Table
with the ages set back 10 years. If you elect a fixed annuity, fixed annuity
payments will be based on the periodic income factors in effect for your
Contract on the Annuity Date which are at least the guaranteed income factors
under the Contract.
For variable annuity payments, the tables are based on an assumed annual
investment return of 5% and the 1983a Annuity Mortality Table with the ages set
back 10 years. If you elect a variable annuity, your initial variable annuity
payment will be based on the applicable variable annuity income factors in our
table. A higher assumed investment return would mean a larger first variable
annuity payment, but subsequent payments would increase only when actual net
investment performance exceeds the higher assumed rate and would fall when
actual net investment performance is less than the higher assumed rate. A lower
assumed rate would mean a smaller first payment and a more favorable threshold
for increases and decreases. If the actual net investment performance is a
constant 5% annually, annuity payments will be level. The assumed investment
return is explained in more detail in the SAI under THE CONTRACTS AND THE
SEPARATE ACCOUNT.
DEATH BENEFITS
A death benefit may be payable on proof of death before the Annuity Date of the
Annuitant or of any Contract Owner while the Contract is in force. The amount of
the death benefit will be paid according to the DEATH BENEFIT PROCEEDS section
below.
The "Notice Date" is the day on which we receive proof (in proper form) of death
and instructions regarding payment of death benefit proceeds.
DEATH BENEFIT PROCEEDS
The proceeds of any death benefit payable will be payable upon receipt, in
proper form, of proof of death and instructions regarding payment of death
proceeds. Such proceeds will equal the amount of the death benefit reduced by
any charge for premium taxes and/or other taxes and any Contract Debt. The death
benefit proceeds will be payable in a single sum, as an annuity, or in
accordance with IRS regulations (see DEATH OF OWNER DISTRIBUTION RULES below).
Any such annuity is subject to all restrictions (including minimum amount
requirements) as are other annuities under this Contract; in addition, there may
be legal requirements that limit the recipient's Annuity Options and the timing
of any payments. A recipient should consult a qualified tax adviser before
electing to receive an annuity.
Additional provisions apply if your Contract names a Joint or Contingent Owner
or Annuitant, or if the Beneficiary, Joint Owner, or Contingent Owner is your
spouse. Further information about these provisions is contained in the SAI.
DEATH OF OWNER DISTRIBUTION RULES
If a Contract Owner of a Non-Qualified Contract dies before the Annuity Date,
any death benefit proceeds under this Contract must begin distribution within
five years after the Owner's death. In order to satisfy this requirement, the
designated recipient must receive a lump sum payment or elect to receive an
annuity for life or over a period that does not exceed the life expectancy of
the designated recipient with annuity payments that start within one year after
the Owner's death. If an election to receive an annuity is not made within 60
days of our receipt of proof in proper form of the Owner's death or, if earlier,
60 days (or shorter period as we permit) prior to the first anniversary of the
Owner's death, the lump sum option will be deemed elected, unless otherwise
required by law. If the lump sum option is deemed elected, we will consider that
deemed election as receipt of instructions regarding payment of death benefit
proceeds. If a Non-Qualified Contract has Joint Owners, this requirement applies
to the first Contract Owner to die.
If the Contract Owner was not an Annuitant but was a Joint Owner and there is a
surviving Joint Owner, that surviving Joint Owner is the designated recipient;
if no Joint Owner survives but a Contingent Owner is named in the Contract and
is living, he or she is the designated recipient, otherwise the designated
recipient is the Beneficiary; if no Beneficiary is living, the designated
recipient is the Owner's estate.
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If the Contract Owner was an Annuitant, the designated recipient is the
Beneficiary; if no Beneficiary is living, the designated recipient is the
Owner's estate. A sole designated recipient who is the Contract Owner's spouse
may elect to become the Contract Owner (and sole Annuitant if the deceased
Contract Owner had been the Annuitant) and continue the Contract until the
earliest of the spouse's death, the death of the Annuitant, or the Annuity Date.
A Joint or Contingent Owner who is the designated recipient but not the Contract
Owner's spouse may not continue the Contract, but may purchase a new Contract.
If you are a non-individual Owner of a Contract other than a Contract issued
under a Qualified Plan as defined in Section 401 or 403 of the Code, the Primary
Annuitant will be treated as the Owner of the Contract for purposes of these
Distribution Rules. If there is a change in the Primary Annuitant prior to the
Annuity Date, such change will be treated as the death of the Owner. The amount
of the death benefit in this situation will be (a) the Contract Value if the
non-individual Owner elects to maintain the Contract and reinvest the Contract
Value into the Contract in the same amount as immediately prior to the
distribution, or (b) the Contract Value less any Annual Fee, any charges for
withdrawals, and/or premium taxes and/or other taxes, if the non-individual
Owner elects a cash distribution. The amount of the death benefit will be
determined as of the Business Day we receive, in proper form, the request to
change the Primary Annuitant and instructions regarding maintaining the Contract
or cash distribution.
QUALIFIED PLAN DEATH OF ANNUITANT DISTRIBUTION RULES
Under Internal Revenue Service regulations, if the Contract is owned under a
Qualified Plan as defined in Section 401, 403, 408, or 408A of the Code and the
Annuitant dies before the commencement of distributions, the payment of any
death benefit must be made to the designated recipient no later than December 31
of the calendar year in which the fifth anniversary of the Annuitant's death
falls. In order to satisfy this requirement, the designated recipient must
receive a lump sum payment or elect to receive the Annuitant's interest in the
Contract in equal or substantially equal installments over a period not
exceeding the lifetime or life expectancy of the designated recipient. If the
designated recipient elects the installment payment option, the Internal Revenue
Service regulations provide that payments must begin no later than December 31
of the calendar year which follows the calendar year in which the Annuitant
died. However, (except in the case of a Roth IRA) if the designated recipient is
the spouse of the Annuitant at the time of the Annuitant's death ("surviving
spouse"), then, under the regulations, payments under the installment payment
option must begin no later than December 31 of the calendar year in which the
Annuitant would have reached age 70 1/2.
Under our administrative procedures, payments must commence no later than the
first anniversary of the death of the Annuitant; however, if the designated
recipient is the surviving spouse and if the surviving spouse elects to defer
the commencement of installment payments beyond the first anniversary of the
Annuitant's death, the surviving spouse will be deemed to continue the contract
as the sole Annuitant and will not be entitled to death benefit proceeds as a
result of the death of the Annuitant; instead the Guaranteed Minimum Death
Benefit Amount (defined below) and payment of any death benefit proceeds will be
determined upon our receipt of proof of death and instructions regarding payment
of the surviving spouse as sole Annuitant. Further, under our administrative
procedures, if the installment payment (annuity) option election is not received
by us in good order within 60 days of (or shorter period as we permit) our
receipt of proof in proper form of the Annuitant's death or, if earlier, before
the sixtieth day preceding (1) the first anniversary of the Annuitant's death or
(2) the date on which the Annuitant would have attained age 70 1/2, the lump sum
option will be deemed by us to have been elected, unless otherwise required by
law. If the lump sum option is deemed elected, we will treat that deemed
election as receipt of instructions regarding payment of death benefit proceeds.
If the Annuitant dies after the commencement of distributions but before the
Annuitant's entire interest in the Contract (other than a Roth IRA) has been
distributed, the remaining interest in the Contract must be distributed to the
designated recipient at least as rapidly as under the distribution method in
effect at the time of the Annuitant's death.
DEATH BENEFIT AMOUNTS
The DEATH BENEFIT AMOUNT as of any day (prior to the Annuity Date) is equal to
the greater of (a) your Contract Value as of that day, or (b) your aggregate
Purchase Payments, reduced by any applicable charges and by an amount for each
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withdrawal that is calculated by multiplying the aggregate Purchase Payments
received prior to each withdrawal by the ratio of the amount of each withdrawal,
including applicable withdrawal charges, to the Contract Value immediately prior
to each withdrawal.
We calculate the Death Benefit Amount as of the Notice Date. See ADDITIONAL
INFORMATION - INQUIRIES AND SUBMITTING FORMS AND REQUESTS.
The GUARANTEED MINIMUM DEATH BENEFIT AMOUNT is calculated only when death
benefit proceeds become payable as a result of the death of the sole Annuitant
prior to the Annuity Date, and is determined as follows: First, we calculate
what the Death Benefit Amount would have been as of your sixth Contract
Anniversary and each subsequent Contract Anniversary that occurs while the
Annuitant is living and before the Annuitant reaches his or her 76th birthday
(each of these Contract Anniversaries is a "Milestone Date"). If your Contract
is issued before the Annuitant's 75th birthday, we will calculate what the Death
Benefit Amount would have been as of the Contract Anniversary immediately
following the Annuitant's 75th birthday while the Annuitant is living (also a
Milestone Date) even if such Milestone Date occurs before your sixth Contract
Anniversary. This added feature will benefit Contracts where the Annuitant is
from age 69 through 74 at the time the Contract is issued.
We then adjust the Death Benefit Amount for each Milestone Date by: (i) adding
the aggregate amount of any Purchase Payments received by us since the Milestone
Date; and (ii) subtracting an amount for each withdrawal that has occurred since
that Milestone Date, which is calculated by multiplying the Death Benefit Amount
by the ratio of the amount of each withdrawal that has occurred since that
Milestone Date, including any withdrawal charge, to the Contract Value
immediately prior to the withdrawal.
The highest of these adjusted Death Benefit Amounts for each Milestone Date, as
of the Notice Date, is your Guaranteed Minimum Death Benefit Amount.
CALCULATIONS OF ANY GUARANTEED MINIMUM DEATH BENEFIT ARE ONLY MADE ONCE DEATH
BENEFIT PROCEEDS BECOME PAYABLE UNDER YOUR CONTRACT.
THE AMOUNT OF THE DEATH BENEFIT: DEATH OF ANNUITANT
If the sole Annuitant dies prior to the Annuity Date, the death benefit will be
equal to (a) the Death Benefit Amount as of the Notice Date; or if applicable
(b) the "Guaranteed Minimum Death Benefit Amount" as of the Notice Date, if
greater.
The following procedures apply in the event of death of an Annuitant who is NOT
also a Contract Owner: If your Contract names Joint Annuitants and only one
Joint Annuitant dies, the surviving Joint Annuitant becomes your sole Annuitant
and the death benefit is not yet payable. If your sole Annuitant dies (or if no
Joint Annuitant survives) and your Contract names a surviving Contingent
Annuitant, he or she becomes the sole Annuitant and the death benefit is not yet
payable. If there is no surviving Joint or Contingent Annuitant, the death
benefit is payable to your Beneficiary, if living. To avoid the possibility of
an adverse gift tax situation upon the death of a sole Annuitant with no living
Beneficiary, the death benefit will be paid to the Owner or the Owner's estate.
If both the Owner and Annuitant die simultaneously, the death benefit proceeds
will be paid to the Beneficiary, if living; if not, to the Owner's estate.
THE AMOUNT OF THE DEATH BENEFIT: DEATH OF A CONTRACT OWNER
If a Contract Owner who is not the Annuitant dies before the Annuity Date, the
amount of the death benefit will be equal to your Contract Value as of the
Notice Date and will be paid in accordance with the DEATH BENEFIT PROCEEDS
section above. The death benefit proceeds will be paid to the Joint Owner, if
living; if not, to the Contingent Owner, if living; if not, to the Beneficiary,
if living; if not, to the Owner's estate. See THE GENERAL ACCOUNT - WITHDRAWALS
AND TRANSFERS.
If a Contract Owner who is the Annuitant dies before the Annuity Date, the
amount of the death benefit will be equal to the greater of (a) your Death
Benefit Amount as of the Notice Date, or (b) the "Guaranteed Minimum Death
Benefit
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Amount" as of the Notice Date, and will be paid in accordance with the DEATH
BENEFIT PROCEEDS section above. The death benefit proceeds will be paid to the
Beneficiary if living; if not, to the Owner's estate. Joint and/or Contingent
Owners and/or Annuitants will not be considered in determining the recipient of
death benefit proceeds.
If both you and the Annuitant(s) are non-individual persons, no death benefit
will be payable, and any distribution will be treated as a withdrawal and
subject to any applicable annual fee, withdrawal charge, charge for premium
taxes and/or other taxes.
WITHDRAWALS
OPTIONAL WITHDRAWALS
You may, on or prior to your Annuity Date, withdraw all or a portion of the
amount available under your Contract. You may surrender your Contract and make a
full withdrawal at any time. Except as provided below, beginning 30 days after
your Contract Date, you also may make partial withdrawals from your Investment
Options at any time. You may request to withdraw a specific dollar amount or a
specific percentage of an Account Value or your Net Contract Value. You may
choose to make your withdrawal from specified Investment Options; if you do not
specify Investment Options, your withdrawal will be made from all of your
Investment Options proportionately. Each partial withdrawal must be for $500 or
more, except pre-authorized withdrawals, which must be at least $250. If your
partial withdrawal from an Investment Option would leave a remaining Account
Value in that Investment Option of less than any minimum Account Value we may
require in the future, we have the right, at our option, to transfer that
remaining amount to your other Investment Options on a proportionate basis
relative to your most recent allocation instructions. Any such DCA Plus Fixed
Option balance or any amount that would otherwise be allocated to the DCA Plus
Fixed Option will be allocated to the Variable Investment Options according to
your most recent DCA Plus transfer instructions. If your partial withdrawal
leaves you with a Net Contract Value of less than $1,000, we have the right, at
our option, to terminate your Contract and send you the withdrawal proceeds
described in the next section. Partial withdrawals from the Fixed Option in any
Contract Year are subject to restrictions. See THE GENERAL ACCOUNT - WITHDRAWALS
AND TRANSFERS.
AMOUNT AVAILABLE FOR WITHDRAWAL
The amount available for withdrawal is your Net Contract Value at the end of the
Business Day on which your withdrawal request is effective, less any applicable
Annual Fee, any withdrawal charge, any withdrawal transaction fee, and any
charge for premium taxes and/or other taxes. The amount we send to you (your
"withdrawal proceeds") will also reflect any required or requested federal and
state income tax withholding. See FEDERAL TAX STATUS.
You assume investment risk on investments in the Subaccounts; as a result, the
amount available to you for withdrawal from any Subaccount may be more or less
than the total Purchase Payments you have allocated to that Subaccount.
WITHDRAWAL TRANSACTION FEES
There is currently no transaction fee for partial withdrawals. However, we
reserve the right to impose a withdrawal transaction fee in the future of up to
$15 for each partial withdrawal (including pre-authorized partial withdrawals)
in excess of 15 in any Contract Year. Any such fee would be charged against your
Investment Options proportionately based on your Account Value in each
immediately after the withdrawal.
PRE-AUTHORIZED WITHDRAWALS
If your Contract Value is at least $5,000, you may select the pre-authorized
withdrawal option, and you may choose monthly, quarterly, semiannual or annual
withdrawals. Each withdrawal must be for at least $250. Each pre-authorized
withdrawal is subject to federal income tax on its taxable portion and may be
subject to a 10% penalty tax if you have not reached age 59 1/2. See FEDERAL TAX
STATUS. Additional information and options are set forth in the SAI and in the
Pre-Authorized Withdrawal section of your application.
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SPECIAL REQUIREMENTS FOR FULL WITHDRAWALS
If you wish to withdraw the entire amount available under your Contract, you
must either return your Contract to us or sign and submit to us a "lost Contract
affidavit."
SPECIAL RESTRICTIONS UNDER QUALIFIED PLANS
Individual Qualified Plans may have additional rules regarding withdrawals from
a Contract purchased under such a Plan. In general, if your Contract was issued
under certain Qualified Plans, YOU MAY NOT WITHDRAW AMOUNTS attributable to
contributions made pursuant to a salary reduction agreement (as defined in
Section 402(g)(3)(A) of the Code) or to transfers from a custodial account (as
defined in Section 403(b)(7) of the Code) EXCEPT in cases of your (a) separation
from service, (b) death, (c) disability as defined in Section 72(m)(7) of the
Code, (d) reaching age 59 1/2, or (e) hardship as defined for purposes of
Section 401(k) of the Code.
These limitations do not affect certain rollovers or exchanges between Qualified
Plans, and do not apply to rollovers from these Qualified Plans to an individual
retirement account or individual retirement annuity. In the case of tax
sheltered annuities, these limitations do not apply to certain salary reduction
contributions made, and investment results earned, prior to dates specified in
the Code.
Hardship withdrawals under the exception provided above are restricted to
amounts attributable to salary reduction contributions, and do not include
investment results; this additional restriction does not apply to salary
reduction contributions made, and investment results earned, prior to dates
specified in the Code.
Certain distributions, including rollovers, may be subject to mandatory
withholding of 20% for federal income tax and to a penalty tax of 10% or more if
the distribution is not transferred directly to the trustee of another Qualified
Plan, or to the custodian of an individual retirement account or issuer of an
individual retirement annuity. See FEDERAL TAX STATUS. Distributions may also
trigger withholding for state income taxes. The tax and ERISA rules relating to
Contract withdrawals are complex. We are not the administrator of any Qualified
Plan. You should consult your tax adviser and/ or your plan administrator before
you withdraw any portion of your Contract Value.
EFFECTIVE DATE OF WITHDRAWAL REQUESTS
Withdrawal requests are normally effective on the Business Day we receive them
in proper form. If you make Purchase Payments by check and submit a withdrawal
request immediately afterwards, payment of your withdrawal proceeds may be
delayed until your check clears.
TAX CONSEQUENCES OF WITHDRAWALS
Withdrawals, including pre-authorized withdrawals, will generally have federal
income tax consequences, which could include tax penalties. YOU SHOULD CONSULT
WITH A TAX ADVISER BEFORE MAKING ANY WITHDRAWAL OR SELECTING THE PRE-AUTHORIZED
WITHDRAWAL OPTION. SEE FEDERAL TAX STATUS.
SHORT-TERM CANCELLATION RIGHT ("FREE LOOK")
You may return your Contract for cancellation and a full refund during your
"Free Look Period." Your Free Look Period is usually the 10-day period beginning
on the day you receive your Contract, but may vary if required by state law. If
you return your Contract, it will be canceled and treated as void from your
Contract Date. You will then receive a refund of your Contract Value as of the
end of the Business Day on which we receive your Contract for cancellation, plus
a refund of any amounts that may have been deducted as Contract charges to pay
for premium taxes and/or other taxes. Thus, an Owner who returns a Contract
within the Free Look Period bears only the investment risk on amounts
attributable to Purchase Payments.
If you are an Eligible Person and we credit additional amounts to your Contract
as described in CHARGES, FEES, AND DEDUCTIONS - WAIVERS AND REDUCED CHARGES, if
you return your Contract during the Free Look Period you will not receive any
amounts that we add as a credit or any gains or losses on the amounts credited
(but if the credited amounts and gains on such amounts exceed the withdrawal
charge percentage on your Contract, we will refund the amount of the excess).
You will receive any Contract fees and charges that we deducted from the
credited amounts. We have applied to the Securities and Exchange Commission for
an exemptive order to change the amount you would receive if you
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PACIFIC PORTFOLIOS
return your Contract during the Free Look Period. We can not be sure that the
SEC will grant this order, but if it is granted, you would not receive any
amounts that we add as a credit or Contract fees and charges deducted from those
amounts, but you would keep the gains or losses on the credited amounts.
Some states' laws and IRA Rules require us to refund your Purchase Payments
instead of your Contract Value.
If your Contract is issued in exchange for another annuity contract or a life
insurance policy, our administrative procedures may vary.
PL&A AND THE SEPARATE ACCOUNT
PACIFIC LIFE & ANNUITY COMPANY
Pacific Life & Annuity Company, formerly PM Group Life Insurance Company
("PL&A") is a stock life insurance company with total assets of $337.9 million
at December 31, 1998. PL&A was incorporated in 1982 under the name Pacific
Financial Life Insurance Company. We merged with Pacific Financial Life
Insurance Company of Arizona and assumed the name PM Group Life Insurance
Company in effecting a transfer of domicile from California to Arizona which was
completed in 1990. Effective March 3, 1999, PM Group Life Insurance Company
changed its name to its current name, PL&A. PL&A is a direct, wholly-owned
subsidiary of Pacific Life Insurance Company ("Pacific Life"), formerly Pacific
Mutual Life Insurance Company ("Pacific Mutual"). Pursuant to consent received
from the Insurance Department of the State of California, Pacific Mutual
implemented a plan of conversion to form a mutual holding company structure (the
"Conversion"). The Conversion created Pacific LifeCorp, an intermediate stock
holding company and Pacific Mutual Holding Company ("PMHC"), a mutual holding
company. Pacific Mutual was converted to a stock life insurance company and
renamed Pacific Life. Under their respective charters, PMHC must always own at
least 51% of the outstanding voting stock of Pacific LifeCorp, and Pacific
LifeCorp must always own 100% of the voting stock of Pacific Life.
PL&A's operations include both life insurance and annuity products as well as
group life and health insurance programs and various investment products and
services. PL&A is authorized to conduct life insurance and annuity business in
the District of Columbia and all states except New Hampshire and Vermont. PL&A's
principal offices are located at 700 Newport Center Drive, Newport Beach,
California 92660.
Pacific Life administers the policies sold under this Prospectus. Pacific Life's
operations include both life insurance and annuity products as well as financial
and retirement services. At the end of 1998, Pacific Life had $89.6 billion of
individual life insurance and total admitted assets of approximately $37.6
billion. In 1998, Pacific Life was ranked the 18th largest life insurance
carrier in the U.S. in terms of admitted assets. Pacific Life, together with its
affiliated enterprises, has total assets and funds under management of over $290
billion. It is authorized to conduct life insurance and annuity business in the
District of Columbia and all states except New York. Pacific Life's principal
offices are located at 700 Newport Center Drive, Newport Beach, California
92660.
The principal underwriter for the Policies is Pacific Securities, one of Pacific
Life's subsidiaries. Pacific Securities is registered as a broker-dealer with
the SEC.
SEPARATE ACCOUNT A
Separate Account A was established on September 24, 1998 as a separate account
of ours, and is registered with the SEC under the Investment Company Act of 1940
(the "1940 Act"), as a type of investment company called a "unit investment
trust."
Obligations arising under your Contract are our general corporate obligations.
We are also the legal owner of the assets in the Separate Account. Assets of the
Separate Account attributed to the reserves and other liabilities under the
Contract and other contracts issued by us that are supported by the Separate
Account may not be charged with liabilities arising from any of our other
business; any income, gain or loss (whether or not realized) from the assets of
the Separate Account are credited to or charged against the Separate Account
without regard to our other income, gain or loss.
We may invest money in the Separate Account in order to commence its operations
and for other purposes, but not to support contracts other than variable annuity
contracts. A portion of the Separate Account's assets may include accumulations
of charges we make against the Separate Account and investment results of assets
so accumulated. These
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PACIFIC PORTFOLIOS
additional assets are ours and we may transfer them to our General Account at
any time; however, before making any such transfer, we will consider any
possible adverse impact the transfer might have on the Separate Account. Subject
to applicable law, we reserve the right to transfer our assets in the Separate
Account to our General Account.
The Separate Account is not the sole investor in the Fund. Investment in the
Fund by other separate accounts in connection with variable annuity and variable
life insurance contracts may create conflicts. See the accompanying Prospectus
and SAI for the Fund for additional information.
FEDERAL TAX STATUS
THE FOLLOWING SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES IS BASED ON CURRENT TAX
LAWS AND REGULATIONS, WHICH MAY BE CHANGED BY LEGISLATIVE, JUDICIAL OR
ADMINISTRATIVE ACTION. THE SUMMARY IS GENERAL IN NATURE, AND DOES NOT CONSIDER
ANY APPLICABLE STATE OR LOCAL TAX LAWS. WE DO NOT MAKE ANY GUARANTEE REGARDING
THE TAX STATUS, FEDERAL, STATE OR LOCAL, OF ANY CONTRACT OR ANY TRANSACTION
INVOLVING THE CONTRACTS. ACCORDINGLY, YOU SHOULD CONSULT A QUALIFIED TAX ADVISER
FOR COMPLETE INFORMATION AND ADVICE BEFORE PURCHASING A CONTRACT.
THE FOLLOWING RULES GENERALLY DO NOT APPLY TO VARIABLE ANNUITY CONTRACTS HELD BY
OR FOR NON-NATURAL PERSONS (E.G., CORPORATIONS) UNLESS SUCH AN ENTITY HOLDS THE
CONTRACT AS NOMINEE FOR A NATURAL PERSON. IF A CONTRACT IS NOT OWNED OR HELD BY
A NATURAL PERSON OR A NOMINEE FOR A NATURAL PERSON, THE CONTRACT GENERALLY WILL
NOT BE TREATED AS AN "ANNUITY" FOR TAX PURPOSES, MEANING THAT THE CONTRACT OWNER
WILL BE TAXED CURRENTLY ON ANNUAL INCREASES IN CONTRACT VALUE AT ORDINARY INCOME
RATES UNLESS SOME OTHER EXCEPTION APPLIES.
SECTION 72 OF THE CODE GOVERNS THE TAXATION OF ANNUITIES IN GENERAL, AND WE
DESIGNED THE CONTRACTS TO MEET THE REQUIREMENTS OF SECTION 72 OF THE CODE. WE
BELIEVE THAT, UNDER CURRENT LAW, THE CONTRACT WILL BE TREATED AS AN ANNUITY FOR
FEDERAL INCOME TAX PURPOSES IF THE CONTRACT OWNER IS A NATURAL PERSON OR A
NOMINEE FOR A NATURAL PERSON, AND THAT WE (AS THE ISSUING INSURANCE COMPANY),
AND NOT THE CONTRACT OWNER(S), WILL BE TREATED AS THE OWNER OF THE INVESTMENTS
UNDERLYING THE CONTRACT. ACCORDINGLY, NO TAX SHOULD BE PAYABLE BY YOU AS A
CONTRACT OWNER AS A RESULT OF ANY INCREASE IN CONTRACT VALUE UNTIL YOU RECEIVE
MONEY UNDER YOUR CONTRACT. YOU SHOULD, HOWEVER, CONSIDER HOW AMOUNTS WILL BE
TAXED WHEN YOU DO RECEIVE THEM. THE FOLLOWING DISCUSSION ASSUMES THAT YOUR
CONTRACT WILL BE TREATED AS AN ANNUITY FOR FEDERAL INCOME TAX PURPOSES.
SECTION 817(H) OF THE CODE PROVIDES THAT THE INVESTMENTS UNDERLYING A VARIABLE
ANNUITY MUST SATISFY CERTAIN DIVERSIFICATION REQUIREMENTS. DETAILS ON THESE
DIVERSIFICATION REQUIREMENTS APPEAR IN THE FUND'S SAI. WE BELIEVE THE UNDERLYING
VARIABLE INVESTMENT OPTIONS FOR THE CONTRACT MEET THESE REQUIREMENTS. IN
CONNECTION WITH THE ISSUANCE OF TEMPORARY REGULATIONS RELATING TO
DIVERSIFICATION REQUIREMENTS UNDER SECTION 817(H), THE TREASURY DEPARTMENT
ANNOUNCED THAT SUCH REGULATIONS DO NOT PROVIDE GUIDANCE CONCERNING THE EXTENT TO
WHICH YOU MAY DIRECT YOUR INVESTMENTS TO PARTICULAR DIVISIONS OF A SEPARATE
ACCOUNT. SUCH GUIDANCE MAY BE INCLUDED IN REGULATIONS OR REVENUE RULINGS UNDER
SECTION 817(D) RELATING TO THE DEFINITION OF A VARIABLE CONTRACT. BECAUSE OF
THIS UNCERTAINTY, WE RESERVE THE RIGHT TO MAKE SUCH CHANGES AS WE DEEM NECESSARY
OR APPROPRIATE TO ENSURE THAT YOUR CONTRACT CONTINUES TO QUALIFY AS AN ANNUITY
FOR TAX PURPOSES. ANY SUCH CHANGES WILL APPLY UNIFORMLY TO AFFECTED CONTRACT
OWNERS AND WILL BE MADE WITH SUCH NOTICE TO AFFECTED CONTRACT OWNERS AS IS
FEASIBLE UNDER THE CIRCUMSTANCES.
TAXES PAYABLE BY CONTRACT OWNERS: GENERAL RULES
THESE GENERAL RULES APPLY TO NON-QUALIFIED CONTRACTS. AS DISCUSSED BELOW,
HOWEVER, TAX RULES MAY DIFFER FOR QUALIFIED CONTRACTS AND YOU SHOULD CONSULT A
QUALIFIED TAX ADVISER IF YOU ARE PURCHASING A QUALIFIED CONTRACT.
DISTRIBUTIONS OF NET INVESTMENT INCOME OR CAPITAL GAINS THAT EACH SUBACCOUNT
RECEIVES FROM ITS CORRESPONDING PORTFOLIO ARE AUTOMATICALLY REINVESTED IN SUCH
PORTFOLIO UNLESS WE, ON BEHALF OF THE SEPARATE ACCOUNT, ELECT OTHERWISE. AS
NOTED ABOVE, YOU WILL BE SUBJECT TO FEDERAL INCOME TAXES ON THE INVESTMENT
INCOME FROM YOUR CONTRACT ONLY WHEN IT IS DISTRIBUTED TO YOU.
MULTIPLE CONTRACTS
All Non-Qualified contracts that are issued by us, or our affiliates, to the
same Owner during any calendar year are treated as one contract for purposes of
determining the amount includible in gross income under Code Section 72(e).
Further, the Treasury Department has specific authority to issue regulations
that prevent the avoidance of Section 72(e) through the serial purchase of
contracts or otherwise.
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PACIFIC PORTFOLIOS
TAXES PAYABLE ON WITHDRAWALS
Amounts you withdraw before annuitization, including amounts withdrawn from your
Contract Value in connection with partial withdrawals for payment of any charges
and fees, will be treated first as taxable income to the extent that your
Contract Value exceeds the aggregate of your Purchase Payments (reduced by
non-taxable amounts previously received), and then as non-taxable recovery of
your Purchase Payments.
The assignment or pledge of (or agreement to assign or pledge) the value of the
Contract for a loan will be treated as a withdrawal subject to these rules.
Moreover, all annuity contracts issued to you in any given calendar year by us
and any of our affiliates are treated as a single annuity contract for purposes
of determining whether an amount is subject to tax under these rules. The Code
further provides that the taxable portion of a withdrawal may be subject to a
penalty tax equal to 10% of that taxable portion unless the withdrawal is: (1)
made on or after the date you reach age 59 1/2, (2) made by a Beneficiary after
your death, (3) attributable to your becoming disabled, or (4) in the form of
level annuity payments under a lifetime annuity.
TAXES PAYABLE ON ANNUITY PAYMENTS
A portion of each annuity payment you receive under a Contract generally will be
treated as a partial recovery of Purchase Payments (as used here, "Purchase
Payments" means the aggregate Purchase Payments less any amounts that were
previously received under the Contract but not included in income) and will not
be taxable. (In certain circumstances, subsequent modifications to an
initially-established payment pattern may result in the imposition of a penalty
tax.) The remainder of each annuity payment will be taxed as ordinary income.
However, after the full amount of aggregate Purchase Payments has been
recovered, the full amount of each annuity payment will be taxed as ordinary
income. Exactly how an annuity payment is divided into taxable and non-taxable
portions depends on the period over which annuity payments are expected to be
received, which in turn is governed by the form of annuity selected and, where a
lifetime annuity is chosen, by the life expectancy of the Annuitant(s) or
payee(s).
Should the death of a Contract Owner cause annuity payments to cease before
Purchase Payments have been fully recovered, an Annuitant (or in certain cases
the Beneficiary) is allowed a deduction on the final tax return for the
unrecovered Purchase Payments; however, if any remaining annuity payments are
made to a Beneficiary, the Beneficiary will recover the balance of the Purchase
Payments as payments are made. A lump sum payment taken in lieu of remaining
monthly annuity payments is not considered an annuity payment for tax purposes.
The portion of any lump sum payment to a Beneficiary in excess of aggregate
unrecovered Purchase Payments would be subject to income tax. Such a lump sum
payment may also be subject to a penalty tax.
If a Contract Owner dies before annuity payments begin, certain minimum
distribution requirements apply. If a Contract Owner dies after the Annuity
Date, the remaining interest in the Contract must be distributed at least as
rapidly as under the method of distribution in effect on the date of death.
Generally, the same tax rules apply to amounts received by the Beneficiary as
those set forth above, except that the early withdrawal penalty tax does not
apply. Thus, any annuity payments or lump sum withdrawal will be divided into
taxable and non-taxable portions. If the Contract Owner or Annuitant dies and
within sixty days after the date on which a lump sum death benefit first becomes
payable the designated recipient elects to receive annuity payments in lieu of
the lump sum death benefit, then the designated recipient will not be treated
for tax purposes as having received the lump sum death benefit in the tax year
it first becomes payable. Rather, in that case, the designated recipient will be
taxed on the annuity payments as they are received.
In addition, designation of a Beneficiary who either is 37 1/2 or more years
younger than a Contract Owner or is a grandchild of a Contract Owner may have
Generation Skipping Transfer Tax consequences under section 2601 of the Code.
Generally, gifts of non-tax qualified contracts prior to the annuity start date
will trigger tax on the gain on the contract, with the donee getting a
stepped-up basis for the amount included in the donor's income. The 10% penalty
tax and gift tax also may be applicable. This provision does not apply to
transfers between spouses or incident to a divorce.
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QUALIFIED CONTRACTS
The Contracts are available to a variety of Qualified Plans. Tax restrictions
and consequences for Contracts under each type of Qualified Plan differ from
each other and from those for Non-Qualified Contracts. In addition, individual
Qualified Plans may have terms and conditions that impose additional rules.
Therefore, no attempt is made herein to provide more than general information
about the use of the Contract with the various types of Qualified Plans.
Participants under such Qualified Plans, as well as Contract Owners, Annuitants
and Beneficiaries, are cautioned that the rights of any person to any benefits
under such Qualified Plans may be subject to the terms and conditions of the
Plans themselves or limited by applicable law, regardless of the terms and
conditions of the Contract issued in connection therewith.
THE FOLLOWING IS ONLY A GENERAL DISCUSSION ABOUT TYPES OF QUALIFIED PLANS FOR
WHICH THE CONTRACTS ARE AVAILABLE. WE ARE NOT THE ADMINISTRATOR OF ANY QUALIFIED
PLAN. THE PLAN ADMINISTRATOR AND/OR CUSTODIAN, WHICHEVER IS APPLICABLE, (BUT NOT
US) IS RESPONSIBLE FOR ALL PLAN ADMINISTRATIVE DUTIES INCLUDING, BUT NOT LIMITED
TO, NOTIFICATION OF DISTRIBUTION OPTIONS, DISBURSEMENT OF PLAN BENEFITS,
COMPLIANCE REGULATORY REQUIREMENTS AND FEDERAL AND STATE TAX REPORTING OF
INCOME/DISTRIBUTIONS FROM THE PLAN TO PLAN PARTICIPANTS AND, IF APPLICABLE,
BENEFICIARIES OF PLAN PARTICIPANTS AND IRA CONTRIBUTIONS FROM PLAN PARTICIPANTS.
OUR ADMINISTRATIVE DUTIES ARE LIMITED TO ADMINISTRATION OF THE CONTRACT AND ANY
DISBURSEMENTS OF ANY CONTRACT BENEFITS TO THE OWNER, ANNUITANT, OR BENEFICIARY
OF THE CONTRACT, AS APPLICABLE. OUR TAX REPORTING RESPONSIBILITY IS LIMITED TO
FEDERAL AND STATE TAX REPORTING OF INCOME/DISTRIBUTIONS TO THE APPLICABLE PAYEE
AND IRA CONTRIBUTIONS FROM THE OWNER OF A CONTRACT, AS RECORDED ON OUR BOOKS AND
RECORDS. THE QUALIFIED PLAN (THE PLAN ADMINISTRATOR OR THE CUSTODIAN) IS
REQUIRED TO PROVIDE US WITH INFORMATION REGARDING INDIVIDUALS WITH SIGNATORY
AUTHORITY ON THE CONTRACT(S) OWNED. IF YOU ARE PURCHASING A QUALIFIED CONTRACT,
YOU SHOULD CONSULT WITH YOUR PLAN ADMINISTRATOR AND/OR A QUALIFIED TAX ADVISER.
YOU SHOULD ALSO CONSULT WITH YOUR TAX ADVISER AND/OR PLAN ADMINISTRATOR BEFORE
YOU WITHDRAW ANY PORTION OF YOUR CONTRACT VALUE.
INDIVIDUAL RETIREMENT ANNUITIES ("IRAS")
Recent federal tax legislation has expanded the type of IRAs available to
individuals for tax deferred retirement savings: In addition to "traditional"
IRAs established under Code Section 408, there are Roth IRAs governed by Code
Section 408A and SIMPLE IRAs established under Code Section 408(p).
Contributions to each of these types of IRAs are subject to differing
limitations. In addition, distributions from each type of IRA are subject to
differing restrictions. The following is a very general description of each type
of IRA:
Traditional IRAs
Traditional IRAs are subject to limitations on the amount that may be
contributed, the persons who may be eligible, and on the time when distributions
must commence. Depending upon the circumstances of the individual, contributions
to a traditional IRA may be made on a deductible or non-deductible basis.
Failure to make mandatory distributions may result in imposition of a 50%
penalty tax on any difference between the required distribution amount and the
amount actually distributed. A 10% penalty tax is imposed on the amount
includable in gross income from distributions that occur before you attain age
59 1/2 and that are not made on account of death or disability, with certain
exceptions. These exceptions include distributions that are part of a series of
substantially equal periodic payments made over your life (or life expectancy)
or the joint lives (or joint life expectancies) of you and your Joint Annuitant.
Distributions of minimum amounts specified by the Code must commence by April 1
of the calendar year following the calendar year in which you attain age 70 1/2.
Additional distribution rules apply after your death.
You may rollover funds from certain existing Qualified Plans (such as proceeds
from existing insurance policies, annuity contracts or securities) into your
Traditional IRA if those funds are in cash; this will require you to liquidate
any value accumulated under the existing Qualified Plan. Mandatory withholding
of 20% may apply to any rollover distribution from your existing Qualified Plan
if the distribution is not transferred directly to your Traditional IRA; to
avoid this withholding you should have cash transferred directly from the
insurance company or plan trustee to us. Similar limitations and tax penalties
apply to tax sheltered annuities, government plans, 401(k) plans, and pension
and profit-sharing plans.
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PACIFIC PORTFOLIOS
SIMPLE IRAs
The Small Business Job Protection Act of 1996 created a new retirement plan, the
Savings Incentive Match Plan for Employees of Small Employers ("SIMPLE Plans").
Depending upon the type of SIMPLE Plan, employers may deposit the plan
contributions into a single trust or into SIMPLE individual retirement annuities
("SIMPLE IRAs") established by each participant. Contributions to a SIMPLE IRA
may be either salary deferral contributions or employer contributions.
Distributions from a SIMPLE IRA may be rolled over to another SIMPLE IRA tax
free or may be eligible for tax free rollover to a traditional IRA after a
required two year period. A distribution from a SIMPLE IRA, however, is never
eligible to be rolled over to a retirement plan qualified under Code Section 401
or a Section 403(b) annuity contract.
Roth IRAs
Section 408A of the Code permits eligible individuals to establish a Roth IRA, a
new type of IRA which became available in 1998. Contributions to a Roth IRA are
not deductible, but withdrawals that meet certain requirements are not subject
to federal income tax. In general, Roth IRAs are subject to limitations on the
amount that may be contributed and the persons who may be eligible to contribute
and are subject to certain required distribution rules on the death of the
Contract Owner. Unlike a traditional IRA, Roth IRAs are not subject to minimum
required distribution rules during the Contract Owner's lifetime. Generally,
however, the amount remaining in a Roth IRA must be distributed by the end of
the fifth year after the death of the Contract Owner. Beginning in 1998, the
owner of a traditional IRA may convert a traditional IRA into a Roth IRA under
certain circumstances. The conversion of a traditional IRA to a Roth IRA will
subject the amount of the converted traditional IRA to federal income tax.
Anyone considering the purchase of a Qualified Contract as a "conversion" Roth
IRA should consult with a qualified tax adviser.
TAX SHELTERED ANNUITIES ("TSAS")
Section 403(b) of the Code permits public school systems and certain tax-exempt
organizations to adopt annuity plans for their employees; Purchase Payments made
on Contracts purchased for these employees are excludable from the employees'
gross income (subject to maximum contribution limits). Distributions under these
Contracts must comply with certain limitations as to timing, or result in tax
penalties.
401(K) PLANS; PENSION AND PROFIT-SHARING PLANS
Deferred compensation plans may be established by an employer for certain
eligible employees under Sections 401(a) and 401(k) of the Code. Contributions
to these plans are subject to limitations.
LOANS
Certain Qualified Contract Owners may borrow against their Contracts; otherwise
loans from us are not permitted. If yours is a Qualified Contract issued under
Section 401 or 403 of the Code AND the terms of your Qualified Plan permit, you
may request a loan from us, using your Contract Value as your only security.
TAX AND LEGAL MATTERS
The tax and ERISA rules relating to Contract loans are complex and in many cases
unclear. For these reasons, and because the rules vary depending on the
individual circumstances of each Contract, WE URGE YOU TO CONSULT WITH A
QUALIFIED TAX ADVISER PRIOR TO EFFECTING ANY LOAN TRANSACTION UNDER YOUR
CONTRACT.
Interest paid on your loan under a 401 plan or 403(b) tax-sheltered annuity will
be considered "personal interest" under Section 163(h) of the Code, to the
extent the loan comes from your pre-tax contributions, even if the proceeds of
your loan are used to acquire your principal residence.
We may change these loan provisions to reflect changes in the Code or
interpretations thereof.
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LOAN PROCEDURES
Your loan request must be submitted on our Loan Agreement Form. You may submit a
loan request at any time after your first Contract Anniversary and before your
Annuity Date; however, before requesting a new loan, you must wait thirty days
after the last payment of a previous loan. If approved, your loan will usually
be effective as of the end of the Business Day on which we receive all necessary
documentation in proper form. We will normally forward proceeds of your loan to
you within seven calendar days after the effective date of your loan. A loan
administration fee of $500 will be deducted from your loan proceeds, although we
reserve the right to waive this fee.
In order to secure your loan, on the effective date of your loan, we will
transfer an amount equal to the principal amount of your loan into an account
called the "Loan Account." To make this transfer, we will transfer amounts
proportionately from your Investment Options, in accordance with the Loan
Agreement.
As your loan is repaid, a portion, corresponding to the amount of the repayment
of any amount then held as security for your loan, will be transferred from the
Loan Account back into your Investment Options relative to your current
allocation instructions.
LOAN TERMS
You may have only one loan outstanding at any time. The minimum loan amount is
$1,000, subject to certain state limitations. Your Contract Debt at the
effective date of your loan may not exceed the lesser of:
- -50% of your Contract Value; or
- -$50,000 less your highest outstanding Contract Debt during the 12-month period
immediately preceding the effective date of your loan.
You should refer to the terms of your particular Qualified Plan for any
additional loan restrictions. If you have other loans outstanding pursuant to
other Qualified Plans, the amount you may borrow may be further restricted. We
are not responsible for making any determinations (including loan amounts
permitted) or any interpretations with respect to your Qualified Plan.
You will be charged interest on your Contract Debt at an annual rate, set at the
time of the loan withdrawal, equal to the higher of (a) Moody's Corporate Bond
Yield Average-Monthly Average Corporates (the "Moody's Rate"), as published by
Moody's Investors Service, Inc., or its successor, for the most recently
available calendar month, or (b) 5%. In the event that the Moody's Rate is no
longer available, we may substitute a substantially similar average rate,
subject to compliance with applicable state regulations. The amount held in the
Loan Account to secure your loan will earn a return equal to an annual rate that
is two percentage points lower than the annual rate of interest charged on your
Contract Debt. Interest charges accrue on your Contract Debt daily, beginning on
the effective date of your loan. Interest earned on the Loan Account Value
accrue daily beginning on the day following the effective date of the loan, and
those earnings will be transferred once a year to your Investment Options in
accordance with your current allocation instructions. Any amounts that would
otherwise be transferred to the DCA Plus Fixed Option will be transferred to the
Variable Investment Options according to your most recent DCA Plus transfer
instructions.
REPAYMENT TERMS
Your loan, including principal and accrued interest, generally must be repaid in
quarterly installments. An installment will be due in each quarter on the date
corresponding to the effective date of your loan, beginning with the first such
date following the effective date of your loan.
EXAMPLE: On May 1, we receive your loan request, and your loan is
effective. Your first quarterly payment will be due on August 1.
Adverse tax consequences may result if you fail to meet the repayment
requirements for your loan. You must repay principal and interest of any loan in
substantially equal payments over the term of the loan. Normally, the term of
the loan will be five years from the effective date of the loan; however, if you
have certified to us that your loan proceeds are
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to be used to acquire a principal residence for yourself, you may request a loan
term of 30 years. In either case, however, you must repay your loan prior to
your Annuity Date. If you elect to annuitize (or withdraw) your Net Contract
Value while you have an outstanding loan, we will deduct any Contract Debt from
your Contract Value at the time of the annuitization (or withdrawal) to repay
the Contract Debt.
You may prepay your entire loan at any time; if you do so, we will bill you for
any unpaid interest that has accrued through the date of payoff. Your loan will
be considered repaid only when the interest due has been paid. Subject to any
necessary approval of state insurance authorities, while you have Contract Debt
outstanding, we will treat all payments you send us as Purchase Payments unless
you specifically indicate that your payment is a loan repayment or include your
loan stub with your payment. To the extent allowed by law, any loan repayments
in excess of the amount then due will be refunded to you, unless such amount is
sufficient to pay the balance of your loan.
If we have not received your full payment by its due date, we will declare the
entire remaining loan balance in default. At that time, we will send written
notification of the amount needed to bring the loan back to a current status.
You will have sixty (60) days from the date on which the loan was declared in
default (the "grace period") to make the required payment.
If the required payment is not received by the end of the grace period, the
defaulted loan balance plus accrued interest and any withdrawal charge will be
withdrawn from your Contract Value, IF AMOUNTS UNDER YOUR CONTRACT ARE ELIGIBLE
FOR DISTRIBUTION. In order for an amount to be eligible for distribution from a
Qualified Plan you must meet one of six triggering events. They are: attainment
of age 59 1/2; separation from service; death; disability; plan termination; and
financial hardship. If those amounts are not eligible for distribution, the
defaulted loan balance plus accrued interest and any withdrawal charge will be
considered a Deemed Distribution and will be withdrawn when such Contract Values
become eligible. In either case, the Distribution or the Deemed Distribution
will be considered a CURRENTLY TAXABLE EVENT, and may be subject to federal tax
withholding, the withdrawal charge and the federal early withdrawal penalty tax.
If there is a Deemed Distribution under your Contract and to the extent allowed
by law, any future withdrawals will first be applied as repayment of the
defaulted Contract Debt, including accrued interest and charges for applicable
taxes. Any amounts withdrawn and applied as repayment of Contract Debt will
first be withdrawn from your Loan Account, and then from your Investment Options
on a proportionate basis relative to the Account Value in each Investment
Option. If you have an outstanding loan that is in default, the defaulted
Contract Debt will be considered a withdrawal for the purpose of calculating any
Death Benefit Amount and/or Guaranteed Minimum Death Benefit.
The terms of any such loan are intended to qualify for the exception in Code
Section 72(p)(2) so that the distribution of the loan proceeds will not
constitute a distribution that is taxable to you. To that end, these loan
provisions will be interpreted to ensure and maintain such tax qualification,
despite any other provisions to the contrary. We reserve the right to amend your
Contract to reflect any clarifications that may be needed or are appropriate to
maintain such tax qualification or to conform any terms of our loan arrangement
with you to any applicable changes in the tax qualification requirements. We
will send you a copy of any such amendment. If you refuse such an amendment, it
may result in adverse tax consequences to you.
WITHHOLDING
Unless you elect to the contrary, any amounts you receive under your Contract
that are attributable to investment income will be subject to withholding to
meet federal and state income tax obligations. The rate of withholding on
annuity payments made to you will be determined on the basis of the withholding
information you provide to us with your application. If you do not provide us
with required withholding information, we will withhold, from every withdrawal
from your Contract and from every annuity payment to you, the appropriate
percentage of the taxable amount of the payment. Please call us at
1-800-748-6907 with any questions about the required withholding information.
For purposes of determining your withholding rate on annuity payments, you will
be treated as a married person with three exemptions. The rate of withholding on
all other payments made to you under your Contract, such as amounts you receive
upon withdrawals, will be 10%, unless otherwise specified by the Code.
Generally, there will be no withholding for taxes until you actually receive
payments under your Contract.
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Distributions from a Contract under a Qualified Plan (not including an
individual retirement annuity subject to Code Section 408 or Code Section 408A)
to an employee, surviving spouse, or former spouse who is an alternate payee
under a qualified domestic relations order, in the form of a lump sum settlement
or periodic annuity payments for a fixed period of fewer than 10 years are
subject to mandatory income tax withholding of 20% of the taxable amount of the
distribution, unless (1) the distributee directs the transfer of such amounts in
cash to another Qualified Plan or a Traditional IRA; or (2) the payment is a
minimum distribution required under the Code. The taxable amount is the amount
of the distribution less the amount allocable to after-tax contributions. All
other types of taxable distributions are subject to withholding unless the
distributee elects not to have withholding apply.
Certain states have indicated that pension and annuity withholding will apply to
payments made to residents. Generally, an election out of federal withholding
will also be considered an election out of state withholding.
IMPACT OF FEDERAL INCOME TAXES
In general, if you expect to accumulate your Contract Value over a relatively
long period of time without making significant withdrawals, there should be tax
advantages, regardless of your tax bracket, in purchasing a Contract rather
than, for example, a mutual fund with a similar investment policy and
approximately the same level of expected investment results. This is because
little or no income taxes are incurred by you or by us while you are
participating in the Subaccounts, and it is generally advantageous to defer the
payment of income taxes, so that the investment return is compounded without any
deduction for income taxes. The advantage will be greater if you decide to
liquidate your Contract Value in the form of monthly annuity payments after your
retirement, or if your tax rate is lower at that time than during the period
that you held the Contract, or both.
TAXES ON PL&A
Although the Separate Account is registered as an investment company, it is not
a separate taxpayer for purposes of the Code. The earnings of the Separate
Account are taxed as part of our operations. No charge is made against the
Separate Account for our federal income taxes (excluding the charge for premium
taxes), but we will review, periodically, the question of charges to the
Separate Account or your Contract for such taxes. Such a charge may be made in
future years for any federal income taxes that would be attributable to the
Separate Account or to our operations with respect to your Contract, or
attributable, directly or indirectly, to Purchase Payments on your Contract.
Under current law, we may incur state and local taxes (in addition to premium
taxes) in several states. At present, these taxes are not significant and they
are not charged against the Contract or the Separate Account. If there is a
material change in applicable state or local tax laws, the imposition of any
such taxes upon us that are attributable to the Separate Account or to our
operations with respect to your Contract may result in a corresponding charge
against the Separate Account or your Contract.
ADDITIONAL INFORMATION
VOTING RIGHTS
We are the legal owner of the shares of the Portfolios held by the Subaccounts,
and consequently have the right to vote on any matter voted on at Fund
shareholders' meetings. However, our current interpretation of applicable law
requires us to vote the shares attributable to your Variable Account Value (your
"voting interest") in accordance with your directions.
We will pass shareholder proxy materials on to you so that you have an
opportunity to give us voting instructions for your voting interest. You may
provide your instructions by proxy or in person at the shareholders' meeting. If
there are shares of a Portfolio held by a Subaccount for which we do NOT receive
timely voting instructions, we will vote those shares in the same proportion as
all other shares of that Portfolio held by that Subaccount for which we HAVE
received timely voting instructions. If we hold shares of a Portfolio in our
General Account, such shares will be voted in the same
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PACIFIC PORTFOLIOS
proportion as other votes cast by all of our separate accounts in the aggregate,
including Separate Account A. We will vote shares of any Portfolio held by our
non-insurance affiliates in the same proportion as the total votes for all
separate accounts of ours and our insurance affiliates.
We may elect, in the future, to vote shares of the Portfolios held in Separate
Account A in our own right if we are permitted to do so through a change in
applicable federal securities laws or regulations, or in their interpretation.
The number of Portfolio shares that form the basis for your voting interest is
determined as of the record date set by the Board of Trustees of the Fund. It is
equal to (a) your Contract Value allocated to the Subaccount corresponding to
that Portfolio, divided by (b) the net asset value per share of that Portfolio.
Fractional votes will be counted. We reserve the right, if required or permitted
by a change in federal regulations or their interpretation, to amend how we
calculate your voting interest.
After your Annuity Date, if you have selected a variable annuity, the voting
rights under your Contract will continue during the payout period of your
annuity, but the number of shares that form the basis for your voting interest,
as described above, will decrease throughout the payout period.
CHANGES TO YOUR CONTRACT
CONTRACT OWNER(S) AND CONTINGENT OWNER
You may change your Non-Qualified Contract at any time prior to your Annuity
Date to name a different Contract Owner or to add a Joint Owner, or to add or
change a Contingent Owner; if yours is a Qualified Contract, you must be the
ONLY Contract Owner, but you may still add or change a Contingent Owner. Your
Contract cannot name more than two Contract Owners (Joint Owners) and one
Contingent Owner at any time. Any newly-named Contract Owners, including Joint
and/or Contingent Owners, must be under the age of 86 at the time of change or
addition. Joint ownership is in the form of a joint tenancy. The Contract
Owner(s) may make all decisions regarding the Contract, including making
allocation decisions and exercising voting rights. Transactions under jointly
owned Contracts require authorization from BOTH Contract Owners. Transfer of
Contract ownership may involve federal income tax consequences; you should
consult a qualified tax adviser before effecting such a transfer. A change to
joint Contract ownership is considered a transfer of ownership.
ANNUITANT AND CONTINGENT OR JOINT ANNUITANT
Your sole Annuitant cannot be changed, and Joint Annuitants cannot be added or
changed, once your Contract is issued. Certain changes may be permitted in
connection with Contingent Annuitants. See RETIREMENT BENEFITS AND OTHER PAYOUTS
- -SELECTING YOUR ANNUITANT. There may be limited exceptions for certain Qualified
Contracts.
BENEFICIARIES
Your Beneficiary is a person(s) who may receive death benefits under your
Contract. You may change or remove your Beneficiary or add Beneficiaries at any
time prior to the death of the Annuitant or Owner, as applicable. If you have
named your Beneficiary irrevocably, you will need to obtain that Beneficiary's
consent before making any changes. Qualified Contracts may have additional
restrictions on naming and changing Beneficiaries; for example, if your Contract
was issued in connection with a Qualified Plan subject to Title I of ERISA, your
spouse must either be your Beneficiary or consent to your naming of a different
Beneficiary. If you leave no surviving Beneficiary, your estate will receive any
death benefit proceeds under your Contract.
CHANGES TO ALL CONTRACTS
If, in the judgment of our management, continued investment by Separate Account
A in one or more of the Portfolios becomes unsuitable or unavailable, we may
seek to alter the Variable Investment Options available under the Contracts. We
do not expect that a Portfolio will become unsuitable, but unsuitability issues
could arise due to changes in investment policies, market conditions, or tax
laws, or due to marketing or other reasons.
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PACIFIC PORTFOLIOS
Alterations of Variable Investment Options may take differing forms. We reserve
the right to replace shares of any Portfolio that were already purchased under
any Contract (or shares that were to be purchased in the future under a
Contract) with shares of another Portfolio, shares of another investment company
or series of an investment company, or another investment vehicle. We may also
purchase, through a Subaccount, other securities for other series or other
classes of contracts, and may permit conversions or exchanges between series or
classes of contracts on the basis of Contract Owner requests. Required approvals
of the SEC and state insurance regulators will be obtained before any such
substitutions are effected, and you will be notified of any planned
substitution.
We may add new Subaccounts to Separate Account A, and any new Subaccounts may
invest in Portfolios or in other investment vehicles; availability of any new
Subaccounts to existing Contract Owners will be determined at our discretion. We
will notify you, and will comply with the filing or other procedures established
by applicable state insurance regulators, to the extent required by applicable
law. We also reserve the right, after receiving any required regulatory
approvals, to do any of the following:
- -cease offering any Subaccount;
- -add or change designated investment companies or their portfolios, or other
investment vehicles;
- -add, delete or make substitutions for the securities and other assets that are
held or purchased by the Separate Account or any Variable Account;
- -permit conversion or exchanges between portfolios and/or classes of contracts
on the basis of Owners' requests;
- -add, remove or combine Variable Accounts;
- -combine the assets of any Variable Account with any other of our separate
accounts or of any of our affiliates;
- -register or deregister Separate Account A or any Variable Account under the
1940 Act;
- -operate any Variable Account as a managed investment company under the 1940
Act; or any other form permitted by law;
- -run any Variable Account under the direction of a committee, board, or other
group;
- -restrict or eliminate any voting rights of Owners with respect to any Variable
Account or other persons who have voting rights as to any Variable Account;
- -make any changes required by the 1940 Act or other federal securities laws;
- -make any changes necessary to maintain the status of the Contracts as annuities
under the Code;
- -make other changes required under federal or state law relating to annuities;
- -suspend or discontinue sale of the Contracts; and
- -comply with applicable law.
INQUIRIES AND SUBMITTING FORMS AND REQUESTS
You may reach our service representatives at 1-800-748-6907 between the hours of
6:00 a.m. and 5:00 p.m., Pacific time.
Please send your forms and written requests or questions to:
Pacific Life & Annuity Company
1111 S. Arroyo Parkway, Suite 205
Pasadena, California 91105
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PACIFIC PORTFOLIOS
If you are submitting a purchase or other payment by mail, please send it, along
with your application if you are submitting one, to:
Pacific Life & Annuity Company
1111 S. Arroyo Parkway, Suite 205
Pasadena, California 92660
If you are using an overnight delivery service to send payments, please send
them to:
Pacific Life & Annuity Company
1111 S. Arroyo Parkway, Suite 205
Pasadena, California 92660
The effective date of certain notices or of instructions is determined by the
date and time on which we "receive" the notice or instructions. We "receive"
this information only when it arrives, in proper form, at the correct mailing
address set out above. Please call us at 1-800-748-6907 if you have any
questions regarding which address you should use.
Purchase Payments after your initial Purchase Payment, loan requests, transfer
requests, loan repayments and withdrawal requests we receive before 4:00 p.m.
Eastern time will normally be effective on the same Business Day that we receive
them in "proper form," unless the transaction or event is scheduled to occur on
another day. Generally, whenever you submit any other form, notice or request,
your instructions will be effective on the next Business Day after we receive
them in "proper form" unless the transaction or event is scheduled to occur on
another day. "Proper form" means in a form satisfactory to us and may require,
among other things, a signature guarantee or other verification of authenticity.
We do not generally require a signature guarantee unless it appears that your
signature may have changed over time or the signature does not appear to be
yours; an executed application, as applicable, in proper form is not received by
us; or, to protect you or us. Requests regarding death benefits must be
accompanied by both proof of death and instructions regarding payment
satisfactory to us. You should call your registered representative or us if you
have questions regarding the required form of a request.
TIMING OF PAYMENTS AND TRANSACTIONS
For withdrawals from the Variable Investment Options or for death benefit
payments attributable to your Variable Account Value, we will normally send the
proceeds within seven calendar days after your withdrawal request is effective
or after the Notice Date, as the case may be. Similarly, for transfers from the
Variable Investment Options, we will normally send the proceeds within seven
calendar days after your transfer (or exchange) request is effective. We will
normally effect periodic annuity payments on the day that corresponds to the
Annuity Date and will make payment on the following day. Payments or transfers
may be suspended for a longer period under certain abnormal circumstances. These
include a closing of the New York Stock Exchange other than on a regular holiday
or weekend, a trading restriction imposed by the SEC, or an emergency declared
by the SEC. For (i) withdrawals from the Fixed Option or DCA Plus Fixed Option,
(ii) death benefit payments attributable to Fixed Option Value or DCA Plus Fixed
Option Value, or (iii) fixed periodic annuity payments, payment of proceeds may
be delayed for up to six months after the request is effective. Similar delays
may apply to loans and transfers from the Fixed Option and the DCA Plus Fixed
Option. See THE GENERAL ACCOUNT for more details.
CONFIRMATIONS, STATEMENTS AND OTHER REPORTS TO CONTRACT OWNERS
Confirmations will be sent out for unscheduled Purchase Payments and transfers,
loans, loan repayments, unscheduled partial withdrawals, a full withdrawal, and
on payment of any death benefit proceeds. Each quarter prior to your Annuity
Date, we will send you a statement that provides certain information pertinent
to your Contract. These statements disclose Contract Value, Subaccount values,
values under the Fixed Option and DCA Plus Fixed Option, fees and charges
applied to your Contract Value, transactions made and specific Contract data
that apply to your Contract. Confirmations of your transactions under the
pre-authorized checking plan, dollar cost averaging, earnings sweep, portfolio
rebalancing, and pre-authorized withdrawal options will appear on your quarterly
account statements. Your fourth-quarter statement will contain annual
information about your Contract Value and transactions. If you suspect an error
on a confirmation or quarterly statement, you must notify us in writing within
30 days from the date of the first
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PACIFIC PORTFOLIOS
confirmation or statement on which the transaction you believe to be erroneous
appeared. When you write, tell us your name, contract number and a description
of the suspected error. You will also be sent an annual report for the Separate
Account and the Fund and a list of the securities held in each Portfolio of the
Fund, as required by the 1940 Act; or more frequently if required by law.
REPLACEMENT OF LIFE INSURANCE OR ANNUITIES
The term "replacement" has a special meaning in the life insurance industry and
is described more fully below. Before you make your purchase decision, PL&A
wants you to understand how a replacement may impact your existing plan of
insurance.
A policy "replacement" occurs when a new policy or contract is purchased and, in
connection with the sale, an existing policy or contract is surrendered, lapsed,
forfeited, assigned to the replacing insurer, otherwise terminated, or used in a
financed purchase. A "financed purchase" occurs when the purchase of a new life
insurance policy or annuity contract involves the use of funds obtained from the
values of an existing life insurance policy or annuity contract through
withdrawal, surrender or loan.
There are circumstances in which replacing your existing life insurance policy
or annuity contract can benefit you. As a general rule, however, replacement is
not in your best interest. Accordingly, you should make a careful comparison of
the costs and benefits of your existing policy or contract and the proposed
policy or contract to determine whether replacement is in your best interest.
FINANCIAL STATEMENTS - STATUTORY BASIS
PM Group's audited financial statements - statutory basis as of December 31,
1998 and for the two years ended December 31, 1998, are contained in the SAI.
Unaudited financial statements - statutory basis for PL&A as of June 30, 1999
and December 31, 1998 and for the six months ended June 30, 1999 and 1998 are
also contained in the SAI.
PREPARATION FOR THE YEAR 2000
We rely significantly on the administrator's computer systems and applications
in our daily operations. The administrator long ago recognized the challenges
associated with the Year 2000 date change. This change involves the ability of
computer systems to properly recognize the Year 2000. The inability to do so
could result in major failures or miscalculations. The administrator began to
assess and plan for the potential impact of the Year 2000 prior to 1995. More
recently, it has been executing a company-wide plan adopted during 1998 which
called for correction or replacement of remaining non-compliant systems by
December 31, 1998.
The administrator successfully executed this project plan to date. Virtually all
affected systems were remediated and tested in time for use during 1998 year-end
processing cycles. Although it is not possible to certify that any system will
be completely free of Year 2000 problems, they have performed extensive testing
to identify and deal with such potential problems. Additionally, most of the
company's critical systems were subject to an independent third-party review
process which used sophisticated automated tools to identify Year 2000 related
bugs. The results have been very positive and the administrator feels the
company's internal systems are positioned well for the date change in the
century.
Pacific Life plans to continue to test and re-test throughout 1999 and will
respond promptly should any problems arise at any time thereafter.
The administrator is continuing to work on contingency plans for critical
business processes. When appropriate, alternative methods and procedures are
being developed to work around unanticipated problems.
In addition to the above, the administrator will continue to carefully evaluate
responses from vendors and significant business partners regarding the
compliance of their critical business processes and products. Although
ultimately PL&A
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PACIFIC PORTFOLIOS
and Pacific Life cannot be responsible for the Year 2000 compliance efforts of
these outside entities, we will take appropriate steps wherever possible to
develop contingency plans to address vendors and partners deemed non-compliant.
Expenses to make the administrator's systems Year 2000 compliant are currently
estimated to range from $12 million to $15 million, which excludes the cost of
personnel who support Year 2000 compliance efforts. We and the administrator do
not anticipate any other material future costs associated with the Year 2000
compliance projects, although there can be no assurance.
These Year 2000 related statements are designated as "Year 2000 Readiness
Disclosure" pursuant to the Year 2000 Information Readiness Disclosure Act,
enacted October 19, 1998.
THE GENERAL ACCOUNT
GENERAL INFORMATION
All amounts allocated to the Fixed Option and DCA Plus Fixed Option become part
of our General Account. Subject to applicable law, we exercise sole discretion
over the investment of General Account assets, and bear the associated
investment risk; you will not share in the investment experience of General
Account assets.
Because of exemptive and exclusionary provisions, interests in the General
Account under the Contract are not registered under the Securities Act of 1933
and the General Account has not been registered as an investment company under
the 1940 Act. Any interest you have in the Fixed Option or DCA Plus Fixed Option
is not subject to these Acts, and we have been advised that the SEC staff has
not reviewed disclosure in this Prospectus relating to the Fixed Option. This
disclosure may, however, be subject to certain provisions of federal securities
laws relating to the accuracy and completeness of statements made in
prospectuses.
GUARANTEE TERMS
When you allocate any portion of your Purchase Payments or Contract Value to the
Fixed Option or the DCA Plus Fixed Option in the General Account, we guarantee
you an interest rate. The Fixed Option and DCA Plus Fixed Option each offer a
separate Guaranteed Interest Rate and Guarantee Term. Guarantee Terms will be
offered at our discretion. Presently, we offer Guarantee Terms of up to one year
for the Fixed Option and the DCA Plus Fixed Option. You should specify the Fixed
Option and/or DCA Plus Fixed Option into which you want us to allocate your
Purchase Payments or Contract Value, if any.
Guaranteed Interest Rates for each Fixed Option and DCA Plus Fixed Option may be
changed periodically for new allocations; your allocation will receive the
Guaranteed Interest Rate in effect for that Fixed Option or DCA Plus Fixed
Option on the effective date of your allocation. All Guaranteed Interest Rates
will be expressed as annual effective rates; however, interest will accrue
daily. The Guaranteed Interest Rate on your Fixed Option and/or DCA Plus Fixed
Option will remain in effect for the Guarantee Term and will never be less than
an annual rate of 3%.
DCA PLUS FIXED OPTION
WHEN YOU ESTABLISH A DCA PLUS PROGRAM AND YOU MAKE YOUR INITIAL PURCHASE PAYMENT
ALLOCATION TO THE DCA PLUS FIXED OPTION, WE ESTABLISH A GUARANTEE TERM THAT ENDS
ONE YEAR FROM THE DAY YOUR ALLOCATION IS EFFECTIVE. We credit each allocation
made to the DCA Plus Fixed Option during that Guarantee Term at the Guaranteed
Interest Rate in effect on the day each allocation is effective through the
earliest of:
(i) the end of the Guarantee Term;
(ii) the day on which the DCA Plus Fixed Option Value is zero;
(iii) the Annuity Date; or
(iv) the day on which death benefit proceeds become payable.
We stop crediting interest on any amount transferred or withdrawn from the DCA
Plus Fixed Option as of the day the transfer or withdrawal is effective.
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PACIFIC PORTFOLIOS
FIXED OPTION
EACH ALLOCATION (OR ROLLOVER) YOU MAKE TO THE FIXED OPTION RECEIVES A GUARANTEE
TERM THAT BEGINS ON THE DAY THAT ALLOCATION OR ROLLOVER IS EFFECTIVE AND ENDS AT
THE END OF THAT CONTRACT YEAR OR, IF EARLIER, ON YOUR ANNUITY DATE. At the end
of that Contract Year, we will roll over your Fixed Option Value on that day
into a new Guarantee Term of one year (or, if shorter, the time remaining until
your Annuity Date) at the then current Guaranteed Interest Rate, unless you
instruct us otherwise.
EXAMPLE: Your Contract Anniversary is February 1. On February 1 of year 1,
you allocate $1,000 to the Fixed Option and receive a Guarantee Term of one
year and a Guaranteed Interest Rate of 5%. On August 1, you allocate another
$500 to the Fixed Option and receive a Guaranteed Interest Rate of 6%.
Through January 31, year 1, your first allocation of $1,000 earns 5% interest
and your second allocation of $500 earns 6% interest. On February 1, year 2,
a new interest rate may go into effect for your entire Fixed Option Value.
WITHDRAWALS AND TRANSFERS
Prior to the Annuity Date, you may withdraw amounts from your Fixed Option
and/or DCA Plus Fixed Option, or transfer amounts from your Fixed Option and/or
DCA Plus Fixed Option to one or more of the other Investment Options, except
that you may not transfer amounts to the DCA Plus Fixed Option. If your Contract
was issued in a state that requires refund of Purchase Payments under the Free
Look Right, transfers may only be made after your Free Look Transfer Date. In
addition, no partial withdrawal or transfer (other than a monthly transfer under
DCA Plus) may be made from your Fixed Option and/or DCA Plus Fixed Option within
30 days of the Contract Date. If your withdrawal leaves you with a Net Contract
Value of less than $1,000, we have the right, at our option, to terminate your
Contract and send you the withdrawal proceeds.
Payments or transfers from the Fixed Option or DCA Plus Fixed Option may be
delayed, as described under ADDITIONAL INFORMATION - TIMING OF PAYMENTS AND
TRANSACTIONS; any amount delayed will, as long as it is held under the Fixed
Option or DCA Plus Fixed Option, continue to earn interest at the Guaranteed
Interest Rate then in effect until that Guarantee Term has ended, and the
minimum guaranteed interest rate of 3% thereafter, unless state law requires a
greater rate be paid.
FIXED OPTION
After the first Contract Anniversary, you may make one transfer or partial
withdrawal from your Fixed Option during any Contract Year, except as provided
under the dollar cost averaging, earnings sweep and pre-authorized withdrawal
programs. You may make one transfer or one partial withdrawal within the 30 days
after the end of each Contract Anniversary. Normally, you may transfer or
withdraw up to one-third (33 1/3%) of your Fixed Option Value in any given
Contract Year. However, in consecutive Contract Years you may transfer or
withdraw up to one-third (33 1/3%) of your Fixed Option Value in one year; you
may transfer or withdraw up to one-half (50%) of your remaining Fixed Option
Value in the next year; and you may transfer or withdraw up to the entire amount
(100%) of any remaining Fixed Option Value in the third year. In addition, if,
as a result of a partial withdrawal or transfer, the Fixed Option Value is less
than $500, we have the right, at our option, to transfer the entire remaining
amount to your other Investment Options on a proportionate basis relative to
your most recent allocation instructions. Any amount that would otherwise be
allocated to the DCA Plus Fixed Option will be allocated to the Variable
Investment Options according to your most recent DCA Plus transfer instructions.
DCA PLUS FIXED OPTION
No transfer to the DCA Plus Fixed Option may be made at any time.
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SPECIAL DEFINITIONS
Some of the terms we've used in this Prospectus may be new to you. We've
identified them in the Prospectus by capitalizing the first letter of each word.
You'll find an explanation of what they mean below.
If you have any questions, please ask your registered representative or call us
at 1-800-748-6907.
ACCOUNT VALUE - The amount of your Contract Value allocated to a specified
Variable Investment Option, the Fixed Option or to a GIO.
ANNUAL FEE - A $30 fee charged each year on your Contract Anniversary and at the
time of a full withdrawal, if your Net Contract Value is less than $50,000 on
that date.
ANNUITANT - A person on whose life annuity payments may be determined. An
Annuitant's life may also be used to determine certain increases in death
benefits, and to determine the Annuity Date. A Contract may name a single
("sole") Annuitant or two ("Joint") Annuitants, and may also name a "Contingent"
Annuitant. If you name Joint Annuitants or a Contingent Annuitant, "the
Annuitant" means the sole surviving Annuitant, unless otherwise stated.
ANNUITY DATE ("ANNUITY START DATE") - The date specified in your Contract, or
the date you later elect, if any, for the start of annuity payments if the
Annuitant (or Joint Annuitants) is (or are) still living and your Contract is in
force; or if earlier, the date that annuity payments actually begin.
ANNUITY OPTION - Any one of the income options available for a series of
payments after your Annuity Date.
BENEFICIARY - A person who may have a right to receive the death benefit payable
upon the death of the Annuitant or a Contract Owner prior to the Annuity Date,
or has a right to receive remaining guaranteed annuity payments, if any, if the
Annuitant dies after the Annuity Date.
BUSINESS DAY - Any day on which the value of an amount invested in a Variable
Investment Option is required to be determined, which currently includes each
day that the New York Stock Exchange is open for trading and our Annuities
administrative offices are open. The New York Stock Exchange and our Annuities
administrative offices are closed on weekends and on the following holidays: New
Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial
Day, July Fourth, Labor Day, Thanksgiving Day and Christmas Day. In this
Prospectus, "day" or "date" means Business Day unless otherwise specified. If
any transaction or event called for under a Contract is scheduled to occur on a
day that is not a Business Day, such transaction or event will be deemed to
occur on the next following Business Day unless otherwise specified. Special
circumstances such as leap years and months with fewer than 31 days are
discussed in the SAI.
CODE - The Internal Revenue Code of 1986, as amended.
CONTINGENT ANNUITANT - A person, named in your Contract, who will become your
sole surviving Annuitant if your existing sole Annuitant (or both Joint
Annuitants) should die.
CONTINGENT OWNER - A person, named in your Contract, who will succeed to the
rights as a Contract Owner of your Contract if all named Contract Owners die
before your Annuity Date.
CONTRACT ANNIVERSARY - The same date, in each subsequent year, as your Contract
Date.
CONTRACT DATE - The date we issue your Contract.
CONTRACT DEBT - As of the end of any given Business Day, the principal amount
you have outstanding on any loan under your Contract, plus any accrued and
unpaid interest. Loans are only available on certain Qualified Contracts.
CONTRACT OWNER, OWNER, POLICYHOLDER, YOU, OR YOUR - Generally, a person who
purchases a contract and makes the Purchase Payments. A Contract Owner has all
rights in the Contract, including the right to make withdrawals, designate and
change beneficiaries, transfer amounts among Investment Options, and designate
an Annuity Option. If your Contract names Joint Owners, both Joint Owners are
Contract Owners and share all such rights.
CONTRACT VALUE - As of the end of any Business Day, the sum of your Variable
Account Value, Fixed Option Value, DCA Plus Fixed Option Value and the Loan
Account Value.
CONTRACT YEAR - A year that starts on the Contract Date or on a Contract
Anniversary.
DCA PLUS FIXED OPTION - If you allocate all or part of your Purchase Payments to
the DCA Plus Fixed Option, such amounts are held in our General Account and
receive interest at rates declared periodically (the "Guaranteed Interest
Rate"), but not less than an annual rate of 3%.
DCA PLUS FIXED OPTION VALUE - The aggregate of your Contract Value allocated to
the DCA Plus Fixed Option.
EARNINGS - As of the end of any Business Day, your Earnings equal your Contract
Value less your aggregate Purchase Payments, which are reduced by withdrawals of
prior Purchase Payments.
FIXED OPTION - If you allocate all or a part of your Purchase Payments or
Contract Value to the Fixed Option, such amounts are held in our General Account
and receive the Guaranteed Interest Rate declared periodically, but not less
than an annual rate of 3%.
FIXED OPTION VALUE - The aggregate amount of your Contract Value allocated to
the Fixed Option.
FUND - Pacific Select Fund.
GENERAL ACCOUNT - Our General Account consists of all of our assets other than
those assets allocated to Separate Account A or to any of our other separate
accounts.
GUARANTEE TERM - The period during which an amount you allocate to the Fixed
Option earns a Guaranteed Interest Rate. These terms are up to one-year for the
Fixed Option and one-year for the DCA Plus Fixed Option.
GUARANTEED INTEREST RATE - The interest rate guaranteed at the time of
allocation (or rollover) for the Guarantee Term on amounts
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SPECIAL DEFINITIONS
allocated to the Fixed Option or DCA Plus Fixed Option. All Guaranteed Interest
Rates are expressed as annual rates and interest is accrued daily. The rate will
not be less than an annual rate of 3%.
INVESTMENT OPTION - A Subaccount, the Fixed Option or the DCA Plus Fixed Option
offered under the Contract.
JOINT ANNUITANT - If your Contract is a Non-Qualified Contract, you may name two
Annuitants, called "Joint Annuitants," in your application for your Contract.
Special restrictions apply for Qualified Contracts.
LOAN ACCOUNT - The account in which the amount equal to the principal amount of
a loan and any interest accrued is held to secure any Contract Debt.
LOAN ACCOUNT VALUE - The amount, including any interest accrued, held in the
Loan Account to secure Contract Debt.
NET CONTRACT VALUE - Your Contract Value less Contract Debt.
NON-QUALIFIED CONTRACT - A Contract other than a Qualified Contract.
POLICYHOLDER - The Contract Owner.
PORTFOLIO - A separate portfolio of the Fund in which a Subaccount invests its
assets.
PRIMARY ANNUITANT - The individual that is named in your Contract, the events in
the life of whom are of primary importance in affecting the timing or amount of
the payout under the Contract.
PURCHASE PAYMENT ("PREMIUM PAYMENT") - An amount paid to us by or on behalf of a
Contract Owner, as consideration for the benefits provided under the Contract.
QUALIFIED CONTRACT - A Contract that qualifies under the Code as an individual
retirement annuity ("IRA"), or form thereof, or a Contract purchased by a
Qualified Plan, qualifying for special tax treatment under the Code.
QUALIFIED PLAN - A retirement plan that receives favorable tax treatment under
Section 401, 403, 408, or 408A of the Code.
SEC - Securities and Exchange Commission.
SEPARATE ACCOUNT A (THE "SEPARATE ACCOUNT") - A separate account of ours
registered as a unit investment trust under the Investment Company Act of 1940,
as amended (the "1940 Act").
SUBACCOUNT - An investment division of the Separate Account. Each Subaccount
invests its assets in shares of a corresponding Portfolio.
SUBACCOUNT ANNUITY UNIT - Subaccount Annuity Units (or "Annuity Units") are used
to measure variation in variable annuity payments. To the extent you elect to
convert all or some of your Contract Value into variable annuity payments, the
amount of each annuity payment (after the first payment) will vary with the
value and number of Annuity Units in each Subaccount attributed to any variable
annuity payments. At annuitization (after any applicable premium taxes and/or
other taxes are paid), the amount annuitized to a variable annuity determines
the amount of your first variable annuity payment and the number of Annuity
Units credited to your annuity in each Subaccount. The value of Subaccount
Annuity Units, like the value of Subaccount Units, is expected to fluctuate
daily, as described in the definition of Unit Value.
SUBACCOUNT UNIT - Before your Annuity Date, each time you allocate an amount to
a Subaccount, your Contract is credited with a number of Subaccount Units in
that Subaccount. These Units are used for accounting purposes to measure your
Account Value in that Subaccount. The value of Subaccount Units is expected to
fluctuate daily, as described in the definition of Unit Value.
UNIT VALUE - The value of a Subaccount Unit ("Subaccount Unit Value") or
Subaccount Annuity Unit ("Subaccount Annuity Unit Value"). Unit Value of any
Subaccount is subject to change on any Business Day in much the same way that
the value of a mutual fund share changes each day. The fluctuations in value
reflect the investment results, expenses of and charges against the Portfolio in
which the Subaccount invests its assets. Fluctuations also reflect charges
against the Separate Account. Changes in Subaccount Annuity Unit Values also
reflect an additional factor that adjusts Subaccount Annuity Unit Values to
offset our Annuity Option Table's implicit assumption of an annual investment
return of 5%. The effect of this assumed investment return is explained in
detail in the SAI. Unit Value of a Subaccount Unit or Subaccount Annuity Unit on
any Business Day is measured at or about 4:00 p.m., Eastern time, on that
Business Day.
VARIABLE ACCOUNT VALUE - The aggregate amount of your Contract Value allocated
to all Subaccounts.
VARIABLE INVESTMENT OPTION - A Subaccount (also called a Variable Account).
42
<PAGE>
PACIFIC PORTFOLIOS
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
PERFORMANCE....................................... 1
<S> <C>
Total Returns................................. 1
Yields........................................ 2
Performance Comparisons and Benchmarks........ 3
Separate Account Performance - Hypothetical
Total Return................................. 4
DISTRIBUTION OF THE CONTRACTS..................... 7
Pacific Mutual Distributors, Inc.............. 7
THE CONTRACTS AND THE SEPARATE ACCOUNT............ 8
Calculating Subaccount Unit Values............ 8
Variable Annuity Payment Amounts.............. 8
Corresponding Dates........................... 11
Age and Sex of Annuitant...................... 11
Systematic Transfer Programs.................. 11
Pre-Authorized Withdrawals.................... 13
Death Benefit................................. 14
Joint Annuitants on Qualified Contracts....... 14
1035 Exchanges................................ 14
Safekeeping of Assets......................... 14
Dividends..................................... 14
FINANCIAL STATEMENTS - STATUTORY BASIS............ 15
</TABLE>
43
<PAGE>
PACIFIC PORTFOLIOS
----------------------------------
TO RECEIVE A CURRENT COPY OF THE PACIFIC PORTFOLIOS SAI WITHOUT CHARGE,
CALL (800) 748-6907 OR COMPLETE THE FOLLOWING AND SEND IT TO:
PACIFIC LIFE & ANNUITY COMPANY
VARIABLE ANNUITIES
P.O. BOX 7187
PASADENA, CALIFORNIA 91109-7187
NAME ___________________________
ADDRESS ________________________
CITY _____________________________ STATE __________________ ZIP _________
PH02/53003 29
<PAGE>
The Pacific Portfolios variable annuity Contract is underwritten by Pacific Life
& Annuity Company, 700 Newport Center Drive, P.O. Box 9000, Newport Beach,
California 92660.
If you have any questions about the Contract, please ask your registered
representative or contact us.
HOW TO CONTACT US
HOW TO CONTACT THE SEC
PACIFIC PORTFOLIOS
WHERE TO GO FOR MORE INFORMATION
You'll find more information about the Pacific Portfolios variable annuity
contract and Separate Account A in the Statement of Additional Information (SAI)
dated , 1999.
The SAI has been filed with the SEC and is considered to be part of this
Prospectus because it's incorporated by reference. You'll find the table of
contents for the SAI on page 44 of this Prospectus.
You can get a copy of the SAI at no charge by calling or writing to us, or by
contacting the SEC. The SEC may charge you a fee for this information.
-----------------------------------------------------------------
-------------------------------
CALL OR WRITE TO US AT:
Pacific Life & Annuity Company
Variable Annuities Department
P.O. Box 7187
Pasadena, California 91109-7187
1-800-748-6907
6 a.m. through 5 p.m. Pacific time
SEND PURCHASE PAYMENTS, OTHER PAYMENTS AND APPLICATION FORMS:
BY MAIL
Pacific Life & Annuity Company
P.O. Box 100060
Pasadena, California
BY OVERNIGHT DELIVERY SERVICE
Pacific Life & Annuity Company
c/o FCNPC
1111 South Arroyo Parkway, Suite 150
Pasadena, California 91105
-----------------------------------------------------------------
-------------------------------
Public Reference Section of the SEC
Washington, D.C. 20549-6009
1-800-SEC-0330
Internet: www.sec.gov
<PAGE>
PACIFIC PORTFOLIOS
UNDERWRITTEN BY:
[LOGO]
HOME OFFICE
Pacific Life & Annuity Company
700 Newport Center Drive
Newport Beach, California 92660
(800) 748-6907
MAILING ADDRESS
Variable Annuity Department
P.O. Box 7187
Pasadena, California 91109-7187
Form No. N100-9A
<PAGE>
[LOGO]
STATEMENT OF ADDITIONAL INFORMATION
, 1999
-----------------
PACIFIC PORTFOLIOS
SEPARATE ACCOUNT A
-----------------
Pacific Portfolios (the "Contract") is a variable annuity contract underwritten
by Pacific Life & Annuity Company ("PL&A"), formerly known as PM Group Life
Insurance Company.
This Statement of Additional Information is not a Prospectus and should be read
in conjunction with the Contract's Prospectus, dated , 1999, which is
available without charge upon written or telephone request to PL&A. Terms used
in this Statement of Additional Information ("SAI") have the same meanings as in
the Prospectus, and some additional terms are defined particularly for this SAI.
-------------------
Pacific Life & Annuity Company
Mailing Address: 700 Newport Center Drive
Newport Beach, California 92660
1-800-748-6907
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
---------
<S> <C>
PERFORMANCE....................................... 1
Total Returns................................. 1
Yields........................................ 2
Performance Comparisons and Benchmarks........ 3
Separate Account Performance.................. 4
DISTRIBUTION OF THE CONTRACTS..................... 7
Pacific Securities............................ 7
THE CONTRACTS AND THE SEPARATE ACCOUNT............ 8
Calculating Subaccount Unit Values............ 8
Variable Annuity Payment Amounts.............. 8
Corresponding Dates........................... 11
Age and Sex of Annuitant...................... 11
Systematic Transfer Programs.................. 11
Pre-Authorized Withdrawals.................... 13
Death Benefit................................. 14
Joint Annuitants on Qualified Contracts....... 14
1035 Exchanges................................ 14
Safekeeping of Assets......................... 14
Dividends..................................... 14
FINANCIAL STATEMENTS - STATUTORY BASIS............ 15
</TABLE>
<PAGE>
PERFORMANCE
From time to time, our reports or other communications to current or prospective
Contract Owners or our advertising or other promotional material may quote the
performance (yield and total return) of a Subaccount. Quoted results are based
on past performance and reflect the performance of all assets held in that
Subaccount for the stated time period. QUOTED RESULTS ARE NEITHER AN ESTIMATE
NOR A GUARANTEE OF FUTURE INVESTMENT PERFORMANCE, AND DO NOT REPRESENT THE
ACTUAL EXPERIENCE OF AMOUNTS INVESTED BY ANY PARTICULAR CONTRACT OWNER.
TOTAL RETURNS
A Subaccount may advertise its "average annual total return" over various
periods of time. "Total return" represents the average percentage change in
value of an investment in the Subaccount from the beginning of a measuring
period to the end of that measuring period. "Annualized" total return assumes
that the total return achieved for the measuring period is achieved for each
such period for a full year. "Average annual" total return is computed in
accordance with a standard method prescribed by the SEC.
AVERAGE ANNUAL TOTAL RETURN
To calculate a Subaccount's average annual total return for a specific measuring
period, we first take a hypothetical $1,000 investment in that Subaccount, at
its then-applicable Subaccount Unit Value (the "initial payment") and we compute
the ending redeemable value ("Cash Surrender Value") of that initial payment at
the end of the measuring period based on the investment experience of that
subaccount ("withdrawal value"). The withdrawal value reflects the effect of all
recurring fees and charges applicable to a Contract Owner under the Contract,
including the Risk Charge, the asset-based Administrative Fee and the deduction
of the applicable withdrawal charge, but does not reflect any charges for
applicable premium taxes and/or other taxes. The Annual Fee is also taken into
account, assuming an average Contract Value of $45,000. The redeemable value is
then divided by the initial payment and this quotient is taken to the Nth root
(N represents the number of days in the measuring period), and 1 is subtracted
from this result. Average annual total return is expressed as a percentage.
(365/N)
T = (ERV/P) - 1
where T = average annual total return
ERV = ending redeemable value
P = hypothetical initial payment of $1,000
N = number of days
Average annual total return figures will be given for recent one-, three-, five-
and ten-year periods (if applicable), and may be given for other periods as well
(such as from commencement of the Subaccount's operations, or on a year-by-year
basis).
When considering "average" total return figures for periods longer than one
year, it is important to note that the relevant Subaccount's annual total return
for any one year in the period might have been greater or less than the average
for the entire period.
AGGREGATE TOTAL RETURN
A Subaccount may use "aggregate" total return figures along with its "average
annual" total return figures for various periods; these figures represent the
cumulative change in value of an investment in the Subaccount for a specific
period. Aggregate total returns may be shown by means of schedules, charts or
1
<PAGE>
graphs and may indicate subtotals of the various components of total return. The
SEC has not prescribed standard formulas for calculating aggregate total return.
Total returns may also be shown for the same periods that do not take into
account the withdrawal charge, or the Annual Fee.
YIELDS
MONEY MARKET SUBACCOUNT
The "yield" (also called "current yield") of the Money Market Subaccount is
computed in accordance with a standard method prescribed by the SEC. The net
change in the Subaccount's Unit Value during a seven-day period is divided by
the Unit Value at the beginning of the period to obtain a base rate of return.
The current yield is generated when the base rate is "annualized" by multiplying
it by the fraction 365/7; that is, the base rate of return is assumed to be
generated each week over a 365-day period and is shown as a percentage of the
investment. The "effective yield" of the Money Market Subaccount is calculated
similarly but, when annualized, the base rate of return is assumed to be
reinvested. The effective yield will be slightly higher than the current yield
because of the compounding effect of this assumed reinvestment.
The formula for effective yield is: [(Base Period Return +1) (To the power of
365/7)] -1.
Realized capital gains or losses and unrealized appreciation or depreciation of
the assets of the underlying Money Market Portfolio are not included in the
yield calculation. Current yield and effective yield do not reflect the
deduction of charges for any applicable premium taxes and/or other taxes, but do
reflect a deduction for the Annual Fee, the Risk Charge and the asset-based
Administrative Fee and assume an average Contract Value of $45,000.
At December 31, 1998, the Money Market Portfolio current yield was 3.32% and the
effective yield was 3.37%.
OTHER SUBACCOUNTS
"Yield" of the other Subaccounts is computed in accordance with a different
standard method prescribed by the SEC. The net investment income (investment
income less expenses) per Subaccount Unit earned during a specified one-month or
30-day period is divided by the Subaccount Unit Value on the last day of the
specified period. This result is then annualized (that is, the yield is assumed
to be generated each month or each 30-day period for a year), according to the
following formula, which assumes semiannual compounding:
YIELD = 2[((a-b)+1)to the power of 6 - 1]
---
cd
where: a = net investment income earned during the period by the Portfolio
attributable to the Subaccount.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of Subaccount Units outstanding during the
period that were entitled to receive dividends.
d = the Unit Value of the Subaccount Units on the last day of the period.
The yield of each Subaccount reflects the deduction of all recurring fees and
charges applicable to the Subaccount, such as the Risk Charge, the asset-based
Administrative Fee and the Annual Fee (assuming an average Contract Value of
$45,000), but does not reflect any withdrawal charge, any charge for applicable
premium taxes and/or other taxes.
2
<PAGE>
The Subaccounts' yields will vary from time to time depending upon market
conditions, the composition of each Portfolio and operating expenses of the Fund
allocated to each Portfolio. Consequently, any given performance quotation
should not be considered representative of the Subaccount's performance in the
future. Yield should also be considered relative to changes in Subaccount Unit
Values and to the relative risks associated with the investment policies and
objectives of the various Portfolios. In addition, because performance will
fluctuate, it may not provide a basis for comparing the yield of a Subaccount
with certain bank deposits or other investments that pay a fixed yield or return
for a stated period of time.
PERFORMANCE COMPARISONS AND BENCHMARKS
In advertisements and sales literature, we may compare the performance of some
or all of the Subaccounts to the performance of other variable annuity issuers
in general and to the performance of particular types of variable annuities
investing in mutual funds, or series of mutual funds, with investment objectives
similar to each of the Subaccounts. This performance may be presented as
averages or rankings compiled by Lipper Analytical Services, Inc. ("Lipper"),
the Variable Annuity Research and Data Service ("VARDS-Registered Trademark-")
or Morningstar, Inc. ("Morningstar"), which are independent services that
monitor and rank the performance of variable annuity issuers and mutual funds in
each of the major categories of investment objectives on an industry-wide basis.
Lipper's rankings include variable life issuers as well as variable annuity
issuers. VARDS-Registered Trademark-rankings compare only variable annuity
issuers. The performance analyses prepared by Lipper and VARDS-Registered
Trademark- rank such issuers on the basis of total return, assuming reinvestment
of dividends and distributions, but do not take sales charges, redemption fees
or certain expense deductions at the separate account level into consideration.
In addition, VARDS-Registered Trademark- prepares risk adjusted rankings, which
consider the effects of market risk on total return performance. We may also
compare the performance of the Subaccounts with performance information included
in other publications and services that monitor the performance of insurance
company separate accounts or other investment vehicles. These other services or
publications may be general interest business publications such as THE WALL
STREET JOURNAL, BARRON'S, BUSINESS WEEK, FORBES, FORTUNE, and MONEY.
In addition, our reports and communications to Contract Owners, advertisements,
or sales literature may compare a Subaccount's performance to various benchmarks
that measure the performance of a pertinent group of securities widely regarded
by investors as being representative of the securities markets in general or as
being representative of a particular type of security. We may also compare the
performance of the Subaccounts with that of other appropriate indices of
investment securities and averages for peer universes of funds or data developed
by us derived from such indices or averages. Unmanaged indices generally assume
the reinvestment of dividends or interest but do not generally reflect
deductions for investment management or administrative costs and expenses.
3
<PAGE>
SEPARATE ACCOUNT PERFORMANCE
The Contract was not available prior to 1999. However, in order to help you
understand how investment performance can affect your Variable Account Value, we
are including performance information based on the historical performance of the
Subaccounts.
The Separate Account had not yet commenced operations as of , 1999.
Therefore, no historical performance data exists for the Subaccounts prior to
that date. The following table represents what the performance of the
Subaccounts would have been if the Subaccounts had been both in existence and
invested in the corresponding Portfolio since the date of the Portfolio's (or
predecessor series') inception or for the indicated time period. Nine of the
Portfolios of the Fund available under the Contract have been in operation since
January 4, 1988 (January 30, 1991 in the case of the Equity Index Portfolio,
January 4, 1994 in the case of the Growth LT Portfolio and April 1, 1996 in the
case of the Aggressive Equity Portfolio and Emerging Markets Portfolio).
Historical performance information for each of the Equity Portfolio and the Bond
and Income Portfolio is based in part on the performance of that Portfolio's
predecessor; each predecessor series was a series of Pacific Corinthian Variable
Fund that began its first full year of operations in 1984, the assets of which
were acquired by the Fund on December 31, 1994. Because the Subaccounts had not
commenced operations as of December 31, 1998, and because the Contracts were not
available until 1999, THESE ARE NOT ACTUAL PERFORMANCE NUMBERS FOR THE
SUBACCOUNTS OR FOR THE CONTRACT. THE RESULTS SHOWN ARE HYPOTHETICAL RETURNS AS
IF THE SUBACCOUNTS HAD BEEN IN EXISTENCE AND INVESTED IN THE CORRESPONDING
PORTFOLIOS.
THESE ARE HYPOTHETICAL TOTAL RETURN NUMBERS based on Account Value ("AV") and
Full Withdrawal Value ("FWV") that represent the actual performance of the
Portfolios, adjusted for the fees and charges applicable to the Contract; the
FWV also includes applicable withdrawal charges. Any charge for premium taxes
and/or other taxes are not reflected in these data, and reflection of the Annual
Fee assumes an average Contract size of $45,000. The information presented also
includes data representing unmanaged market indices.
4
<PAGE>
THE RESULTS SHOWN IN THIS SECTION ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE
INVESTMENT PERFORMANCE.
ANNUALIZED RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998
ALL NUMBERS ARE EXPRESSED AS A PERCENTAGE
<TABLE>
<CAPTION>
SINCE
1 YEAR* 3 YEARS* 5 YEARS* 10 YEARS* INCEPTION*
-------------- ------------ ------------ ------------ --------------
VARIABLE ACCOUNTS AV FWV AV FWV AV FWV AV FWV AV FWV
- ------------------------- ------ ------ ----- ----- ----- ----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market............. 3.76 (2.54) 3.71 2.01 3.49 3.02 3.83 3.83 3.88 3.88
High Yield Bond.......... 0.97 (5.33) 6.15 4.53 6.78 6.36 8.96 8.96 8.76 8.76
Managed Bond............. 7.62 1.32 6.24 4.62 5.82 5.38 8.15 8.15 7.92 7.92
Government Securities.... 7.65 1.35 5.64 4.00 5.27 4.82 7.56 7.56 7.34 7.34
Aggressive Equity........ 11.65 5.35 7.45 5.69
Growth LT................ 58.09 49.79 25.67 24.52 24.52 24.29
Equity Income............ 22.46 16.16 22.29 21.07 18.47 18.19 14.58 14.58 13.84 13.84
Multi-Strategy........... 16.53 10.23 15.10 13.72 12.84 12.50 11.49 11.49 10.92 10.92
Equity................... 28.47 22.17 23.64 22.45 17.17 16.88 15.39 15.39 14.36 14.36
Bond and Income.......... 7.39 1.09 6.41 4.79 7.50 7.09 10.01 10.01 10.69 10.69
Equity Index............. 26.67 20.37 26.07 24.93 21.92 21.68 18.28 18.28
International............ 4.06 (2.24) 10.48 8.99 8.19 7.90 6.57 6.57 7.42 7.42
Emerging Markets......... (27.91) (34.21) (13.60) (16.24)
</TABLE>
<TABLE>
<CAPTION>
MAJOR INDICES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------ ------ -------- ------- --------
<S> <C> <C> <C> <C>
CS First Boston High Yield
Bond........................ 0.58 8.39 8.16 10.74
Lehman Brothers Aggregate
Bond........................ 8.67 7.29 7.27 9.26
Lehman Brothers Government
Bond........................ 9.85 7.35 7.18 9.17
Lehman Brothers
Government/Corporate Bond... 9.47 7.33 7.30 9.34
Lehman Brothers Long-Term
Government/Corporate Bond... 11.76 8.62 9.12 11.30
Morgan Stanley Capital
International EAFE.......... 20.33 9.31 9.50 5.86
Morgan Stanley Capital
International Emerging
Markets Free................ (25.34) (11.21) (9.27) 10.95
Russell 1000 Growth........... 38.71 30.62 25.70 20.57
Russell 2000 Small-Stock...... (2.55) 11.58 11.86 12.92
Russell 2500.................. 0.38 14.11 14.13 14.61
Standard & Poor's 500
Composite Stock Price....... 28.58 28.27 24.06 19.19
</TABLE>
- ----------
* The performance of the Aggressive Equity, Equity Income, Multi-Strategy,
Equity, Bond and Income, and International Variable Accounts for a portion
of this period occurred at a time when other Portfolio Managers managed the
corresponding Portfolio in which each Variable Account invests. Effective
January 1, 1994, J. P. Morgan Investment Management Inc. became the
Portfolio Manager of the Equity Income and Multi-Strategy Portfolios; prior
to January 1, 1994, some of the investment policies of the Equity Income
Portfolio and the investment objective of the Multi-Strategy Portfolio
differed. Effective June 1, 1997 Morgan Stanley Asset Management became the
Portfolio Manager of the International Portfolio. Effective May 1, 1998,
Alliance Capital Management L.P. became the Portfolio Manager of the
Aggressive Equity Portfolio and Goldman Sachs Asset Management became the
Portfolio Manager of the Equity and Bond and Income Portfolios; prior to May
1, 1998 some of the investment policies of the Aggressive Equity, Equity and
Bond and Income Portfolios and the investment objective of the Bond and
Income Portfolio differed. Performance of the Equity Portfolio and the Bond
and Income Portfolio is based in part on the performance of predecessor
portfolios of Pacific Corinthian Variable Fund, which began their first full
year of operations in 1984 and were acquired by the Fund on December 31,
1994.
Prior to January 1, 1999, the Large-Cap Value, the Mid-Cap Value, the Small-Cap
Index and the REIT Subaccounts and corresponding Portfolios had not yet begun
operations and there is no historical value available for these Subaccounts and
Portfolios.
5
<PAGE>
TAX DEFERRED ACCUMULATION
In reports or other communications to you or in advertising or sales materials,
we may also describe the effects of tax-deferred compounding on the Separate
Account's investment returns or upon returns in general. These effects may be
illustrated in charts or graphs and may include comparisons at various points in
time of returns under the Contract or in general on a tax-deferred basis with
the returns on a taxable basis. Different tax rates may be assumed.
In general, individuals who own annuity contracts are not taxed on increases in
the value under the annuity contract until some form of distribution is made
from the contract. Thus, the annuity contract will benefit from tax deferral
during the accumulation period, which generally will have the effect of
permitting an investment in an annuity contract to grow more rapidly than a
comparable investment under which increases in value are taxed on a current
basis. The following chart illustrates this benefit by comparing accumulation
under a variable annuity contract with accumulations from an investment on which
gains are taxed on a current basis. The chart shows accumulations on an initial
Purchase Payment of $10,000, assuming hypothetical annual returns of 0%, 4% and
8%, compounded annually, and a tax rate of 36%. The values shown for the taxable
investment do not include any deduction for management fees or other expenses
but assume that taxes are deducted annually from investment returns. The values
shown for the variable annuity do not reflect the deduction of contractual
expenses such as the Risk Charge (equal to an annual rate of 1.25% of average
daily account value), the Administrative Fee (equal to an annual rate of 0.15%
of average daily account value) and the Annual Fee (equal to $30 per year if
your Net Contract Value is less than $50,000), any charge for premium taxes
and/or other taxes, or the expenses of an underlying investment vehicle, such as
the Fund. The values shown also do not reflect the withdrawal charge. Generally,
the withdrawal charge is equal to 7% of the amount withdrawn attributable to
Purchase Payments that are one year old, 7% of the amount withdrawn attributable
to Purchase Payments that are two years old, 6% of the amount withdrawn
attributable to Purchase Payments that are three years old, 5% of the amount
withdrawn attributable to Purchase Payments that are four years old, 3% of the
amount withdrawn attributable to Purchase Payments that are five years old, and
1% of the amount withdrawn attributable to Purchase Payments that are six years
old. The age of Purchase Payments is considered 1 year old in the Contract Year
we receive it and increases by one year on each Contract Anniversary. There is
no withdrawal charge on withdrawals of your Earnings, on amounts attributed to
Purchase Payments at least 7 years old, or to the extent that total withdrawals
that are free of charge during the Contract Year do not exceed 10% of the sum of
your remaining Purchase Payments at the beginning of the Contract Year that have
been held under your Contract for less than seven years plus additional Purchase
Payments applied to your Contract during that Contract Year. If these expenses
and fees were taken into account, they would reduce the investment return shown
for both the taxable investment and the hypothetical variable annuity contract.
In addition, these values assume that you do not surrender the Contract or make
any withdrawals until the end of the period shown. The chart assumes a full
withdrawal, at the end of the period shown, of all Contract Value and the
payment of taxes at the 36% rate on the amount in excess of the Purchase
Payment.
The rates of return illustrated are hypothetical and are not an estimate or
guarantee of performance. Actual tax rates may vary for different taxpayers from
that illustrated and withdrawals by Contract Owners who have not reached age
59 1/2 may be subject to a tax penalty of 10%.
6
<PAGE>
POWER OF TAX DEFERRAL
$10,000 investment at annual rates of return of 0%, 4% and 8%, taxed @ 36%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
0% GROWTH 4% GROWTH 8% GROWTH
TAXABLE TAX DEFERRED TAXABLE TAX DEFERRED TAXABLE TAX DEFERRED
INVESTMENT INVESTMENT INVESTMENT INVESTMENT INVESTMENT INVESTMENT
<S> <C> <C> <C> <C> <C> <C>
YEARS Before Tax Before Tax Before Tax Before Tax Before Tax Before Tax
10 $10,000.00 $10,000.00 $12,875.97 $13,073.56 $16,476.07 $17,417.12
20 $10,000.00 $10,000.00 $16,579.07 $17,623.19 $27,146.07 $33,430.13
30 $10,000.00 $10,000.00 $21,347.17 $24,357.74 $44,726.05 $68,001.00
</TABLE>
DISTRIBUTION OF THE CONTRACTS
PACIFIC SECURITIES
Pacific Securities, a subsidiary of Pacific Life; acts as the principal
underwriter ("distributor") of the Contracts and offers the Contracts on a
continuous basis. Pacific Securities is registered as a broker-dealer with the
SEC and is a member of the National Association of Securities Dealers ("NASD").
We pay Pacific Securities for acting as principal underwriter under a
Distribution Agreement. We and Pacific Securities enter into selling agreements
with broker-dealers whose registered representatives are authorized by state
insurance departments to sell the Contracts. The aggregate amount of
underwriting commissions paid to Pacific Securities for 1998 with regard to this
Contract was $0 of which $0 was retained.
7
<PAGE>
THE CONTRACTS AND THE SEPARATE ACCOUNT
CALCULATING SUBACCOUNT UNIT VALUES
The Unit Value of the Subaccount Units in each Variable Investment Option is
computed at or about 4:00 p.m. Eastern time on each Business Day. The initial
Unit Value of each Subaccount was $10 on the Business Day the Subaccount began
operations. At the end of each Business Day, the Unit Value for a Subaccount is
equal to:
Y X Z
where (Y) = the Unit Value for that Subaccount as of the end of the preceding
Business Day; and
(Z) = the Net Investment Factor for that Subaccount for the period (a
"valuation period") between that Business Day and the immediately
preceding Business Day.
The "Net Investment Factor" for a Subaccount for any valuation period is equal
to:
(A DIVIDED BY B) - C
where (A) = the "per share value of the assets" of that Subaccount as of the end
of that valuation period, which is equal to: a+b+c
where (a) = the net asset value per share of the corresponding Portfolio
shares held by that Subaccount as of the end of that valuation
period;
(b) = the per share amount of any dividend or capital gain
distributions made by the Fund for that Portfolio during that
valuation period; and
(c) = any per share charge (a negative number) or credit (a positive
number) for any income taxes and/or any other taxes or other
amounts set aside during that valuation period as a reserve
for any income and/or any other taxes which we determine to
have resulted from the operations of the Subaccount or
Contract, and/or any taxes attributable, directly or
indirectly, to Purchase Payments;
(B) = the net asset value per share of the corresponding Portfolio shares
held by the Subaccount as of the end of the preceding valuation
period; and
(C) = a factor that assesses against the Subaccount net assets for each
calendar day in the valuation period, the basic Risk Charge at a rate
equal to 1.25% annually and the Administrative Fee at a rate equal to
.15% annually (see CHARGES, FEES AND DEDUCTIONS in the Prospectus).
VARIABLE ANNUITY PAYMENT AMOUNTS
The following steps show how we determine the amount of each variable annuity
payment under your Contract.
FIRST: PAY APPLICABLE PREMIUM TAXES
When you convert your Net Contract Value into annuity payments, you must pay any
applicable charge for premium taxes and/or other taxes on your Contract Value
(unless applicable law requires those taxes to be paid at a later time). We
assess this charge by reducing your Contract Value, proportionately, relative to
your Account Value in each Subaccount, in the Fixed Option and in the DCA Plus
Fixed Option, in an
8
<PAGE>
amount equal to the aggregate amount of the charges. The remaining amount of
your available Contract Value may be used to provide variable annuity payments.
Alternatively, your remaining available Contract Value may be used to provide
fixed annuity payments, or it may be divided to provide both fixed and variable
annuity payments. You may also choose to withdraw some or all of your remaining
Net Contract Value, less any applicable Annual Fee, withdrawal charge, and any
charges for premium taxes and/or other taxes without converting this amount into
annuity payments.
SECOND: THE FIRST VARIABLE PAYMENT
We begin by referring to your Contract's Option Table for your Annuity Option
(the "Annuity Option Table"). The Annuity Option Table allows us to calculate
the dollar amount of the first variable annuity payment under your Contract,
based on the amount applied toward the variable annuity. The number that the
Annuity Option Table yields will be based on the Annuitant's age (and, in
certain cases, sex) and assumes a 5% investment return, as described in more
detail below.
EXAMPLE: Assume a man is 65 years of age at his Annuity Date and has
selected a lifetime annuity with monthly payments guaranteed for 10 years.
According to the Annuity Option Table, this man should receive an initial
monthly payment of $5.79 for every $1,000 of his Contract Value (reduced by
applicable charges) that he will be using to provide variable payments.
Therefore, if his Contract Value after deducting applicable fees and charges
is $100,000 on his Annuity Date and he applies this entire amount toward his
variable annuity, his first monthly payment will be $579.00.
You may choose any other Annuity Option Table that assumes a different rate of
return which we offer at the time your Annuity Option is effective.
THIRD: SUBACCOUNT ANNUITY UNITS
For each Subaccount, we use the amount of the first variable annuity payment
under your Contract attributable to each Subaccount to determine the number of
Subaccount Annuity Units that will form the basis of subsequent payment amounts.
First, we use the Annuity Option Table to determine the amount of that first
variable payment for each Subaccount. Then, for each Subaccount, we divide that
amount of the first variable annuity payment by the value of one Subaccount
Annuity Unit (the "Subaccount Annuity Unit Value") as of the end of the Annuity
Date to obtain the number of Subaccount Annuity Units for that particular
Subaccount. The number of Subaccount Annuity Units used to calculate subsequent
payments under your Contract will not change unless exchanges of Annuity Units
are made (or if the Joint and Survivor Annuity Option is elected and the Primary
Annuitant dies first), but the value of those Annuity Units will change daily,
as described below.
FOURTH: THE SUBSEQUENT VARIABLE PAYMENTS
The amount of each subsequent variable annuity payment will be the sum of the
amounts payable based on each Subaccount. The amount payable based on each
Subaccount is equal to the number of Subaccount Annuity Units for that
Subaccount multiplied by their Subaccount Annuity Unit Value at the end of the
Business Day in each payment period you elected that corresponds to the Annuity
Date.
Each Subaccount's Subaccount Annuity Unit Value, like its Subaccount Unit Value,
changes each day to reflect the net investment results of the underlying
investment vehicle, as well as the assessment of the Risk Charge at an annual
rate of 1.25% and the Administrative Fee at an annual rate of 0.15%. In
addition, the calculation of Subaccount Annuity Unit Value incorporates an
additional factor; as discussed in more detail below, this additional factor
adjusts Subaccount Annuity Values to correct for the Option Table's implicit
assumption of a 5% annual investment return on amounts applied but not yet used
to furnish annuity benefits.
Different Subaccounts may be selected for your Contract before and after your
Annuity Date, subject to any restrictions we may establish. Currently, you may
exchange Subaccount Annuity Units in any
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<PAGE>
Subaccount for Subaccount Annuity Units in any other Subaccount(s) up to four
times in any twelve month period after your Annuity Date. The number of
Subaccount Annuity Units in any Subaccount may change due to such exchanges.
Exchanges following your Annuity Date will be made by exchanging Subaccount
Annuity Units of equivalent aggregate value, based on their relative Subaccount
Annuity Unit Values.
UNDERSTANDING THE "ASSUMED INVESTMENT RETURN" FACTOR
The Annuity Option Table incorporates a number of implicit assumptions in
determining the amount of your first variable annuity payment. As noted above,
the numbers in the Annuity Option Table reflect certain actuarial assumptions
based on the Annuitant's age, and, in some cases, the Annuitant's sex. In
addition, these numbers assume that the amount of your Contract Value that you
convert to a variable annuity will have a positive net investment return of 5%
each year during the payout of your annuity; thus 5% is referred to as an
"assumed investment return."
The Subaccount Annuity Unit Value for a Subaccount will increase only to the
extent that the investment performance of that Subaccount exceeds its Risk
Charge, the Administrative Fee, and the assumed investment return. The
Subaccount Annuity Unit Value for any Subaccount will generally be less than the
Subaccount Unit Value for that same Subaccount, and the difference will be the
amount of the assumed investment return factor.
EXAMPLE: Assume the net investment performance of a Subaccount is at a rate
of 5.00% per year (after deduction of the 1.25% Mortality and Expense Risk
Charge and the 0.15% Administrative Fee). The Subaccount Unit Value for that
Subaccount would increase at a rate of 5.00% per year, BUT THE SUBACCOUNT
ANNUITY UNIT VALUE WOULD NOT INCREASE (OR DECREASE) AT ALL. The net
investment factor for that 5% return [1.05] is then divided by the factor
for the 5% assumed investment return [1.05] and 1 is subtracted from the
result to determine the adjusted rate of change in Subaccount Annuity Unit
Value: 1.05 = 1; 1 - 1 = 0; 0 X 100% = 0%.
----
1.05
If the net investment performance of a Subaccount's assets is at a rate less
than 5.00% per year, the Subaccount Annuity Unit Value will decrease, even if
the Subaccount Unit Value is increasing.
EXAMPLE: Assume the net investment performance of a Subaccount is at a rate
of 2.60% per year (after deduction of the 1.25% Mortality and Expense Risk
Charge and the 0.15% Administrative Fee). The Subaccount Unit Value for that
Subaccount would increase at a rate of 2.60% per year, BUT THE SUBACCOUNT
ANNUITY UNIT VALUE WOULD DECREASE AT A RATE OF 2.29% PER YEAR. The net
investment factor for that 2.6% return [1.026] is then divided by the factor
for the 5% assumed investment return [1.05] and 1 is subtracted from the
result to determine the adjusted rate of change in Subaccount Annuity Unit
Value: 1.026 = 0.9771; 0.9771 - 1 = -0.0229; -0.0229 X 100% = -2.29%.
----
1.05
The assumed investment return will always cause increases in Subaccount Annuity
Unit Values to be somewhat less than if the assumption had not been made, will
cause decreases in Subaccount Annuity Unit Values to be somewhat greater than if
the assumption had not been made, and will (as shown in the example above)
sometimes cause a decrease in Subaccount Annuity Unit Values to take place when
an increase would have occurred if the assumption had not been made. If we had
assumed a higher investment return in our Annuity Option tables, it would
produce annuities with larger first payments, but the increases in subaccount
annuity payments would be smaller and the decreases in subsequent annuity
payments would be greater; a lower assumed investment return would produce
annuities with smaller first payments, and the increases in subsequent annuity
payments would be greater and the decreases in subsequent annuity payments would
be smaller.
10
<PAGE>
CORRESPONDING DATES
If any transaction or event under your Contract is scheduled to occur on a
"corresponding date" that does not exist in a given calendar period, the
transaction or event will be deemed to occur on the following Business Day. In
addition, as stated in the Prospectus, any event scheduled to occur on a day
that is not a Business Day will occur on the next succeeding Business Day.
EXAMPLE: If your Contract is issued on February 29 in year 1 (a leap year),
your Contract Anniversary in years 2, 3 and 4 will be on March 1.
EXAMPLE: If your Annuity Date is July 31 and you select monthly annuity
payments, the payments received will be based on valuations made on July 31,
August 31, October 1 (for September), October 31, December 1 (for November),
December 31, January 31, March 1 (for February), March 31, May 1 (for
April), May 31 and July 1 (for June).
AGE AND SEX OF ANNUITANT
As mentioned in the Prospectus, the Contracts generally provide for sex-distinct
annuity income factors in the case of life annuities. Statistically, females
tend to have longer life expectancies than males; consequently, if the amount of
annuity payments is based on life expectancy, they will ordinarily be higher if
an annuitant is male than if an annuitant is female. Contracts issued in
connection with Qualified Plans are required to use unisex factors.
We may require proof of your Annuitant's age and sex before or after commencing
annuity payments. If the age or sex (or both) of your Annuitant are incorrectly
stated in your Contract, we will correct the amount payable to equal the amount
that the annuitized portion of the Contract Value under that Contract would have
purchased for your Annuitant's correct age and sex. If we make the correction
after annuity payments have started, and we have made overpayments, we will
deduct the amount of the overpayment, with interest at 3% a year, from any
payments due then or later; if we have made underpayments, we will add the
amount, with interest at 3% a year, of the underpayments to the next payment we
make after we receive proof of the correct age and/or sex.
SYSTEMATIC TRANSFER PROGRAMS
The DCA Plus Fixed Option is not available for any systematic transfer programs,
except that if you elect DCA Plus, such transfers must be made from the DCA Plus
Fixed Option. For a description of DCA Plus, including its limitations and
restrictions, see HOW YOUR PAYMENTS ARE ALLOCATED - TRANSFERS in the Prospectus.
The Fixed Account is not available in connection with rebalancing and DCA Plus
and may not be used as a source account for dollar cost averaging programs newly
established by you. You may not use dollar cost averaging, DCA Plus and/or the
earnings sweep at the same time.
DOLLAR COST AVERAGING
When you request dollar cost averaging, you are authorizing us to make periodic
reallocations of your Contract Value without waiting for any further instruction
from you. You may request to begin or stop dollar cost averaging at any time
prior to your Annuity Date; the effective date of your request will be the day
we receive written notice from you in proper form. Your request may specify the
date on which you want your first transfer to be made. If you do not specify a
date for your first transfer, we will treat your request as if you had specified
the effective date of your request. Your first transfer may not be made until 30
days after your Contract Date, and if you specify an earlier date, your first
transfer will be delayed until one calendar month after the date you specify. If
you request dollar cost averaging on your application for your Contract and you
fail to specify a date for your first transfer, your first transfer will be made
one period after your Contract Date (that is, if you specify monthly transfers,
the first transfer will occur 30 days after your Contract Date; quarterly
transfers, 90 days after your Contract Date; semiannual transfers, 180 days
after your Contract Date; and if you specify annual transfers, the first
transfer will occur on your
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<PAGE>
Contract Anniversary). If you stop dollar cost averaging, you must wait 30 days
before you may begin this option again.
Your request to begin dollar cost averaging must specify the Investment Option
you wish to transfer money FROM (your "source account"). You may choose any one
Variable Investment Option as your source account. The Account Value of your
source account must be at least $5,000 for you to begin dollar cost averaging.
Your request to begin dollar cost averaging must also specify the amount and
frequency of your transfers. You may choose monthly, quarterly, semiannual or
annual transfers. The amount of your transfers may be specified as a dollar
amount or a percentage of your source Account Value; however, each transfer must
be at least $250. Dollar cost averaging transfers are subject to the same
requirements and limitations as other transfers.
Finally, your request must specify the Fixed or Variable Investment Option(s)
you wish to transfer amounts to (your "target account(s)"). If you select more
than one target account, your dollar cost averaging request must specify how
transferred amounts should be allocated among the target accounts. Your source
account may not also be a target account.
Your dollar cost averaging transfers will continue until the earlier of (i) your
request to stop dollar cost averaging is effective, or (ii) your source Account
Value is zero, or (iii) you annuitize. If, as a result of a dollar cost
averaging transfer, your source Account Value falls below any minimum Account
Value we may establish, we have the right, at our option, to transfer that
remaining Account Value to your target account(s) on a proportionate basis
relative to your most recent allocation instructions. We may change, terminate
or suspend the dollar cost averaging option at any time.
PORTFOLIO REBALANCING
Portfolio rebalancing allows you to maintain the percentage of your Contract
Value allocated to each Variable Investment Option at a pre-set level prior to
annuitization. For example, you could specify that 30% of your Contract Value
should be in the Equity Index Subaccount, 40% in the Managed Bond Subaccount,
and 30% in the Growth LT Subaccount. Over time, the variations in each
Subaccount's investment results will shift this balance of these Subaccount
Value allocations. If you elect the portfolio rebalancing feature, we will
automatically transfer your Subaccount Value back to the percentages you
specify.
You may choose to have rebalances made quarterly, semiannually or annually until
your Annuity Date; portfolio rebalancing is not available after you annuitize.
Procedures for selecting portfolio rebalancing are generally the same as those
discussed in detail above for selecting dollar cost averaging: You may make your
request at any time prior to your Annuity Date and it will be effective when we
receive it in proper form. If you stop portfolio rebalancing, you must wait 30
days to begin again. You may specify a date for your first rebalance, or we will
treat your request as if you selected the request's effective date. If you
specify a date fewer than 30 days after your Contract Date, your first rebalance
will be delayed one month, and if you request rebalancing on your application
but do not specify a date for the first rebalance, it will occur one period
after your Contract Date, as described above under Dollar Cost Averaging. We may
change, terminate or suspend the portfolio rebalancing feature at any time.
EARNINGS SWEEP
An earnings sweep automatically transfers the earnings attributable to a
specified Investment Option (the "sweep option") to one or more other Investment
Options (your "target option(s)"). If you elect to use the earnings sweep, you
may select either the Fixed Option or the Money Market Subaccount as your sweep
option. The Account Value of your sweep option will be required to be at least
$5,000 when you elect the
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<PAGE>
earnings sweep. You may select one or more Variable Investment Options (but not
the Money Market Subaccount) as your target option(s).
You may choose to have earnings sweeps occur monthly, quarterly, semiannually or
annually until you annuitize. At each earnings sweep, we will automatically
transfer your accumulated earnings attributable to your sweep option for the
previous period proportionately to your target option(s). That is, if you select
a monthly earnings sweep, we will transfer the sweep option earnings from the
preceding month; if you select a semiannual earnings sweep, we will transfer the
sweep option earnings accumulated over the preceding six months. Earnings sweep
transfers are subject to the same requirements and limitations as other
transfers.
To determine the earnings, we take the change in the sweep option's Account
Value during the sweep period, add any withdrawals or transfers out of the sweep
option Account that occurred during the sweep period, and subtract any
allocations to the sweep option Account during the sweep period. The result of
this calculation represents the "total earnings" for the sweep period.
If, during the sweep period, you withdraw or transfer amounts from the sweep
option Account, we assume that earnings are withdrawn or transferred before any
other Account Value. Therefore, your "total earnings" for the sweep period will
be reduced by any amounts withdrawn or transferred during the sweep option
period. The remaining earnings are eligible for the sweep transfer.
Procedures for selecting the earnings sweep are generally the same as those
discussed in detail above for selecting dollar cost averaging and portfolio
rebalancing: You may make your request at any time and it will be effective when
we receive it in proper form. If you stop the earnings sweep, you must wait 30
days to begin again. You may specify a date for your first sweep, or we will
treat your request as if you selected the request's effective date. If you
specify a date fewer than 30 days after your Contract Date, your first earnings
sweep will be delayed one month, and if you request the earnings sweep on your
application but do not specify a date for the first sweep, it will occur one
period after your Contract Date, as described above under Dollar Cost Averaging.
If you are using the earnings sweep, you may also use portfolio rebalancing only
if you selected the Fixed Option as your sweep option. You may not use the
earnings sweep, DCA Plus and dollar cost averaging at the same time. If, as a
result of an earnings sweep transfer, your source Account Value falls below any
minimum Account Value we may establish, we have the right, at our option, to
transfer that remaining Account Value to your target account(s) on a
proportionate basis relative to your most recent allocation instructions. We may
change, terminate or suspend the earnings sweep option at any time.
PRE-AUTHORIZED WITHDRAWALS
You may specify a dollar amount for your pre-authorized withdrawals, or you may
specify a percentage of your Contract Value or an Account Value. You may direct
us to make your pre-authorized withdrawals from one or more specific Fixed, DCA
Plus Fixed or Variable Investment Options; if you do not give us these specific
directions, amounts will be deducted proportionately from your Account Value in
each Fixed, DCA Plus Fixed or Variable Investment Option.
Procedures for selecting pre-authorized withdrawals are generally the same as
those discussed in detail above for selecting dollar cost averaging, portfolio
rebalancing, and earnings sweeps: You may make your request at any time and it
will be effective when we receive it in proper form. If you stop the pre-
authorized withdrawals, you must wait 30 days to begin again. You may specify a
date for the first withdrawal, or we will treat your request as if you selected
the request's effective date. If you specify a date fewer than 30 days after
your Contract Date, your first pre-authorized withdrawal will be delayed one
month, and if you request the pre-authorized withdrawals on your application but
do not specify a date for the first withdrawal, it will occur one period after
your Contract Date.
If your pre-authorized withdrawals cause your Account Value in any Investment
Option to fall below any minimum Account Value we establish, we have the right,
at our option, to transfer that remaining Account
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<PAGE>
Value to your other Investment Options on a proportionate basis relative to your
most recent allocation instructions. Any such DCA Plus Fixed Option balance or
any amount that would otherwise be allocated to the DCA Plus Fixed Option will
be allocated to the Variable Investment Options according to your most recent
DCA Plus transfer instructions. If your pre-authorized withdrawals cause your
Contract Value to fall below $1,000, we may, at our option, terminate your
Contract and send you the remaining withdrawal proceeds.
Pre-authorized withdrawals are subject to the same withdrawal charges as are
other withdrawals, and each withdrawal is subject to any applicable charge for
premium taxes and/or other taxes, to federal income tax on its taxable portion,
and, if you have not reached age 59 1/2, a 10% tax penalty.
DEATH BENEFIT
Any death benefit payable will be calculated as of the date we receive proof (in
proper form) of the Annuitant's death (or, if applicable, the Contract Owner's
death) and instructions regarding payment; any claim of a death benefit must be
made in proper form. A recipient of death benefit proceeds may elect to have
this benefit paid in one lump sum, in periodic payments, in the form of a
lifetime annuity or in some combination of these. Annuity payments will begin
within 30 days once we receive all information necessary to process the claim.
If your Contract names Joint or Contingent Annuitants, no death benefit will be
payable unless and until the last Annuitant dies prior to the Annuity Date or a
Contract Owner dies prior to the Annuity Date. If yours is a Qualified Contract,
your Contingent Annuitant or Contingent Owner must be your spouse.
JOINT ANNUITANTS ON QUALIFIED CONTRACTS
If your Contract was issued in connection with a Qualified Plan subject to Title
I of the Employee Retirement Income Security Act of 1974 ("ERISA"), and you
change your marital status after your Contract Date, you may be permitted to add
a Joint Annuitant on your Annuity Date and to change your Joint Annuitant.
Generally speaking, you may be permitted to add a new spouse as a Joint
Annuitant, and you may be permitted to remove a Joint Annuitant who is no longer
your spouse. You may call us for more information.
1035 EXCHANGES
You may make your initial Purchase Payment through an exchange of an existing
annuity contract. To exchange, you must complete a 1035 Exchange form, which is
available by calling your representative, or by calling us at 1-800-748-6907,
and mail the form along with the annuity contract you are exchanging (plus your
completed application if you are making an initial Purchase Payment) to us.
In general terms, Section 1035 of the Code provides that you recognize no gain
or loss when you exchange one annuity contract solely for another annuity
contract. However, transactions under Section 1035 may be subject to special
rules and may require special procedures and record-keeping, particularly if the
exchanged annuity contract was issued prior to August 14, 1982. You should
consult your tax adviser prior to effecting a 1035 Exchange.
SAFEKEEPING OF ASSETS
We are responsible for the safekeeping of the assets of the Separate Account.
These assets are held separate and apart from the assets of our General Account
and our other separate accounts.
DIVIDENDS
The current dividend scale is zero and we do not anticipate that dividends will
be paid. If any dividend is paid, you may elect to receive the dividend in cash
or to add the dividend to your Contract Value. If you
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<PAGE>
make no election, the dividend will be added to your Contract Value. We will
allocate any dividend to Contract Value in accordance with your most recent
allocation instructions, unless instructed otherwise. You should consult with
your tax adviser before making an election.
FINANCIAL STATEMENTS - STATUTORY BASIS
PM Group's audited financial statements - statutory basis as of December 31,
1998 and 1997 and for each of the two years ended December 31, 1998 are set
forth beginning on the next page. These financial statements should be
considered only as bearing on the ability of PM Group to meet its obligations
under the Contracts and not as bearing on the investment performance of the
assets held in the Separate Account.
Financial statements - statutory basis for PL&A as of June 30, 1999 and December
31, 1998 and for the six months ended June 30, 1999 and 1998 are also included.
EXPERTS
The financial statements - statutory basis of PM Group as of December 31, 1998
and 1997 and for each of the two years ended December 31, 1998 included in this
statement of additional information have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and have been
so included in reliance upon the reports of such firm given upon their authority
as experts in accounting and auditing.
15
<PAGE>
PM GROUP LIFE INSURANCE COMPANY
FINANCIAL STATEMENTS -- STATUTORY BASIS AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997
AND INDEPENDENT AUDITORS' REPORT
<PAGE>
INDEPENDENT AUDITORS' REPORT
- -----------------------------------
PM Group Life Insurance Company:
We have audited the accompanying statements of admitted assets, liabilities and
capital and surplus - statutory basis of PM Group Life Insurance Company (the
"Company") as of December 31, 1998 and 1997, and the related statements of
operations - statutory basis, capital and surplus - statutory basis, and cash
flows - statutory basis for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described more fully in Note 1 to the financial statements, the Company
prepared these financial statements using accounting practices prescribed or
permitted by the Insurance Department of the State of Arizona which practices
differ from generally accepted accounting principles. The effects on the
financial statements of the variances between the statutory basis of accounting
and generally accepted accounting principles are presumed to be material.
In our opinion, because of the effects of the matter described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of PM Group Life Insurance Company as of December 31, 1998 and 1997, or the
results of its operations or its cash flows for the years then ended.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the admitted assets, liabilities and capital and surplus
of PM Group Life Insurance Company as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for the years then ended, on the
basis of accounting described in Note 1.
DELOITTE & TOUCHE LLP
Costa Mesa, California
February 22, 1999
16
<PAGE>
PM GROUP LIFE INSURANCE COMPANY
STATEMENTS OF ADMITTED ASSETS,
LIABILITIES AND CAPITAL AND SURPLUS - STATUTORY BASIS
<TABLE>
<CAPTION>
December 31,
1998 1997
- ------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
ADMITTED ASSETS
Bonds $217,096 $227,199
Preferred stocks 5,662 5,215
Common stocks 17,372 9,419
Mortgage loans 11,118 14,079
Real estate 687
Cash and short-term investments 36,922 33,185
Premiums due and uncollected 26,186 25,635
Other assets 23,555 22,761
- ------------------------------------------------------------
TOTAL ADMITTED ASSETS $337,911 $338,180
- ------------------------------------------------------------
- ------------------------------------------------------------
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Policy reserves $119,743 $126,716
Policy benefits payable 83,792 85,338
Deposit funds 7,748 9,882
Accrued general expenses 11,640 13,193
Other liabilities 31,027 24,521
Asset valuation reserve 7,262 6,870
- ------------------------------------------------------------
TOTAL LIABILITIES 261,212 266,520
- ------------------------------------------------------------
Capital and Surplus:
Common stock - $1 par value; 5
million shares authorized; 2.9
million shares issued and
outstanding 2,900 2,900
Paid-in surplus 37,607 37,607
Unassigned surplus 36,192 31,153
- ------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS 76,699 71,660
- ------------------------------------------------------------
TOTAL LIABILITIES AND CAPITAL AND
SURPLUS $337,911 $338,180
- ------------------------------------------------------------
- ------------------------------------------------------------
</TABLE>
SEE INDEPENDENT AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS - STATUTORY
BASIS
17
<PAGE>
PM GROUP LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS - STATUTORY BASIS
<TABLE>
<CAPTION>
Years Ended
December 31,
1998 1997
- ------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
REVENUES
Premiums $499,481 $439,629
Net investment income 23,795 23,143
Other income 4,510 2,695
- ------------------------------------------------------------
TOTAL REVENUES 527,786 465,467
- ------------------------------------------------------------
BENEFITS AND EXPENSES
Current and future policy benefits 404,671 330,435
Operating expenses 114,774 110,288
- ------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES 519,445 440,723
- ------------------------------------------------------------
INCOME BEFORE FEDERAL INCOME TAXES 8,341 24,744
Federal income taxes 2,237 8,581
- ------------------------------------------------------------
NET GAIN FROM OPERATIONS 6,104 16,163
Net realized capital gains (losses) (1,014) 1,228
- ------------------------------------------------------------
NET INCOME $ 5,090 $ 17,391
- ------------------------------------------------------------
- ------------------------------------------------------------
</TABLE>
SEE INDEPENDENT AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS - STATUTORY
BASIS
18
<PAGE>
PM GROUP LIFE INSURANCE COMPANY
STATEMENTS OF CAPITAL AND SURPLUS - STATUTORY BASIS
<TABLE>
<CAPTION>
Common Stock
------------------- Paid-in Unassigned
Shares Amount Surplus Surplus Total
- -------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCES,
JANUARY 1, 1997 2,900 $2,900 $ 37,607 $ 22,685 $ 63,192
Net income 17,391 17,391
Dividend paid to parent (14,000) (14,000)
Other surplus
transactions 5,077 5,077
- -------------------------------------------------------------------------------------
BALANCES,
DECEMBER 31, 1997 2,900 2,900 37,607 31,153 71,660
Net income 5,090 5,090
Other surplus
transactions (51) (51)
- -------------------------------------------------------------------------------------
BALANCES,
DECEMBER 31, 1998 2,900 $2,900 $ 37,607 $ 36,192 $ 76,699
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
SEE INDEPENDENT AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS - STATUTORY
BASIS
19
<PAGE>
PM GROUP LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS - STATUTORY BASIS
<TABLE>
<CAPTION>
Years Ended
December 31,
1998 1997
- ------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts
Premiums $500,017 $444,232
Net investment income 22,048 21,363
Other, net 3,238 8,598
Payments
Policy benefit payments (408,288) (326,113)
Operating expenses (117,981) (106,716)
Federal income taxes (3,377) (9,688)
- ------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES (4,343) 31,676
- ------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds
Bonds 72,754 56,909
Stocks 3,736 3,768
Mortgage loans 3,274 2,469
Other 8,180 2,623
Payments for the purchase of
Bonds (63,816) (79,015)
Stocks (7,608) (3,300)
Other (8,440) (7,649)
- ------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES 8,080 (24,195)
- ------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividend paid to parent (14,000)
- ------------------------------------------------------------
Change in cash and short-term
investments 3,737 (6,519)
Cash and short-term investments,
beginning of year 33,185 39,704
- ------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS, END OF
YEAR $ 36,922 $ 33,185
- ------------------------------------------------------------
- ------------------------------------------------------------
</TABLE>
SEE INDEPENDENT AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS - STATUTORY
BASIS
20
<PAGE>
PM GROUP LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
PM Group Life Insurance Company ("PM Group") is a stock life insurance
company domiciled in the State of Arizona, and a wholly-owned subsidiary of
Pacific Life Insurance Company ("Pacific Life"), formerly Pacific Mutual
Life Insurance Company ("Pacific Mutual"). PM Group offers group health,
dental and life products to three principal market segments in the United
States. Its Group Employee Benefits Operation serves larger employer groups
of fifty or more lives, while the Multiple Employer Trust unit insures
smaller employer groups with less than fifty lives per group. The Pacific
Risk Management Services unit offers stop loss and life products to
self-funded plan sponsors.
Pursuant to consent received from the Insurance Department of the State of
California, Pacific Mutual implemented a plan of conversion to form a
mutual holding company structure (the "Conversion") on September 1, 1997.
The Conversion created Pacific LifeCorp, an intermediate stock holding
company and Pacific Mutual Holding Company ("PMHC"), a mutual holding
company. Pacific Mutual was converted to a stock life insurance company and
renamed Pacific Life. Under their respective charters, PMHC must always own
at least 51% of the outstanding voting stock of Pacific LifeCorp, and
Pacific LifeCorp must always own 100% of the voting stock of Pacific Life.
BASIS OF PRESENTATION
These financial statements have been prepared in accordance with accounting
practices prescribed or permitted by the Insurance Department of the State
of Arizona, which is a comprehensive basis of accounting other than
generally accepted accounting principles ("GAAP"). Prescribed statutory
accounting practices include a variety of publications of the National
Association of Insurance Commissioners ("NAIC"), as well as state laws,
regulations, and general administrative rules. Permitted statutory
accounting practices encompass all accounting practices not so prescribed.
Accounting practices prescribed or permitted by the Insurance Department of
the State of Arizona differ in certain respects, which in some cases are
materially different from GAAP. The significant differences are noted
below:
An interest maintenance reserve ("IMR") is established to capture
realized investment gains and losses, net of tax, on the sale of fixed
income investments resulting from changes in the general level of
interest rates, and is amortized into income over the remaining years to
expected maturity of the assets sold under statutory accounting
practices; no such reserve is required under GAAP.
An asset valuation reserve ("AVR"), based upon a formula prescribed by
the NAIC, is established as a liability to offset potential non-interest
related investment losses, and changes in the AVR are charged or credited
directly to surplus under statutory accounting practices; no such reserve
is required under GAAP.
Investments in bonds and preferred stocks are generally carried at
amortized cost under statutory accounting practices; under GAAP,
investments in bonds and preferred stocks, other than those classified as
held to maturity, are carried at estimated fair value.
21
<PAGE>
PM GROUP LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Certain assets, principally deferred income taxes and furniture and
equipment, are designated as non admitted and excluded from assets by a
direct charge to surplus under statutory accounting practices; under
GAAP, such assets are carried on the statement of financial condition
with appropriate valuation allowances.
In March 1998, the NAIC adopted the Codification of Statutory Accounting
Principles ("Codification"). The Codification, which is intended to
standardize regulatory accounting and reporting for the insurance industry,
is proposed to be effective January 1, 2001. However, statutory accounting
principles will continue to be established by individual state laws and
permitted practices and it is uncertain when, or if, the state of Arizona
will require adoption of Codification for the preparation of statutory
financial statements. PM Group has not finalized the quantification of the
effects of Codification on its statutory financial statements.
The following is a reconciliation of statutory capital and surplus, as
reflected in the accompanying financial statements, to stockholder's equity
on a GAAP basis:
<TABLE>
<CAPTION>
December 31,
1998 1997
------------------
(IN THOUSANDS)
<S> <C> <C>
Statutory capital and surplus as
reported herein $ 76,699 $ 71,660
Non admitted deferred income tax 19,383 16,632
Asset valuation reserve 7,262 6,870
Unrealized gain on securities 3,874 18,740
Other non admitted assets 2,309 3,102
Interest maintenance reserve 1,389 1,186
Deferred tax on unrealized gains on
securities (4,877) (9,380)
Other (1,891) (2,084)
------------------
Stockholder's equity - GAAP basis $104,148 $106,726
------------------
------------------
</TABLE>
There were no significant differences between statutory net income of $5.1
million and GAAP net income of $5.8 million for the year ended December 31,
1998 and statutory net income of $17.4 million and GAAP net income of $17.3
million for the year ended December 31, 1997.
PM Group's significant statutory accounting practices are described below.
INVESTMENTS
Bonds qualifying for amortization are carried at amortized cost; all other
bonds are carried at prescribed values. Preferred stocks are principally
stated at amortized cost. Common stocks are carried at market value.
Mortgage loans are stated at unpaid principal balances. Real estate is
valued at the lower of depreciated cost or market, less related mortgage
debt. Real estate is depreciated using the straight-line method over 5 to
30 years.
22
<PAGE>
PM GROUP LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Short-term investments are carried at amortized cost which approximates
estimated fair value. Short-term investments generally consist of bonds,
commercial paper and money market instruments whose maturities at the time
of acquisition were one year or less.
The AVR is computed in accordance with a prescribed formula and is designed
to stabilize surplus against valuation and credit-related losses for
certain invested assets. Changes to the AVR are reported as direct
additions to, or deductions from, surplus. The IMR results in the deferral
of after-tax realized capital gains and losses attributable to interest
rate fluctuations on fixed income investments. These capital gains and
losses are amortized into investment income over the remaining life of the
investment sold. The IMR of $1.4 million and $1.2 million as of December
31, 1998 and 1997, respectively, is included in other liabilities on the
accompanying statements of admitted assets, liabilities and capital and
surplus - statutory basis.
Net realized capital gains and losses are determined on the specific
identification method and are presented net of Federal capital gains tax
and transfers to the IMR.
Derivatives are used principally for hedging purposes and are valued
consistently with the hedged items.
POLICY RESERVES AND DEPOSIT FUNDS
Medical expense claim reserves are based on PM Group's actual loss
experience. Life insurance reserves, including premium waivers, are based
on various tabular methods and actual loss experience. Disabled life
reserves are determined using various tabular reserve methods.
The liability for deposit funds is based primarily on the policyholders'
equity in their deposit accounts, including credited interest.
REVENUES AND EXPENSES
Premiums are recognized as revenue over the premium paying period.
Investment income is recorded as earned.
Expenses, including policy acquisition costs, and Federal income taxes are
charged to operations as incurred.
FEDERAL INCOME TAXES
PM Group's operations are included in the consolidated Federal income tax
return of PMHC, PM Group's ultimate parent. PM Group is allocated an income
tax expense based on the effect of including its operations in the
consolidated provision. Deferred taxes are provided for as permitted by the
Insurance Department of the State of Arizona. The net deferred tax asset is
non admitted. This practice has no effect on total surplus.
OTHER SURPLUS TRANSACTIONS
Other surplus transactions primarily consist of unrealized capital gains
and losses, changes in non admitted assets and change in the AVR.
23
<PAGE>
PM GROUP LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments disclosed in Notes 2 and
3 has been determined using available market information and appropriate
valuation methodologies. However, considerable judgment is required to
interpret market data to develop the estimates of fair value. Accordingly,
the estimates presented may not be indicative of the amounts PM Group could
realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies could have a significant effect
on the estimated fair value amounts.
RISK-BASED CAPITAL
Risk-based capital is a method developed by the NAIC to measure the minimum
amount of capital appropriate for an insurance company to support its
overall business operations in consideration of its size and risk profile.
The formulas for determining the amount of risk-based capital specify
various weighting factors that are applied to financial balances or various
levels of activity based on the perceived degree of risk. The adequacy of a
company's actual capital is measured by comparing it to the risk-based
capital as determined by the formulas. Companies below minimum risk-based
capital requirements are classified within certain levels, each of which
requires specified corrective action. As of December 31, 1998 and 1997, PM
Group exceeded the minimum risk-based capital requirements.
BUSINESS RISKS
PM Group operates in a business environment which is subject to various
risks and uncertainties. PM Group's group health insurance is subject to
varying levels of regulation. The United States Congress has, from time to
time, considered various health care proposals and several states have
enacted health care reform legislation. Although it is not possible to
predict what changes may be adopted at the state or Federal level, certain
changes could have a negative impact upon the group health business of PM
Group.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
practices prescribed or permitted by regulatory authorities requires
management to make estimates and assumptions that affect the reported
amounts of admitted assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the 1998
financial statement presentation.
24
<PAGE>
PM GROUP LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
2. INVESTMENTS IN DEBT SECURITIES
The statement value, gross unrealized gains and losses, and estimated fair
value of debt securities are shown below. Debt securities include bonds,
redeemable preferred stocks and short-term investments. Short-term
investments amounted to $38.0 million and $31.1 million as of December 31,
1998 and 1997, respectively. The estimated fair value of publicly traded
securities is based on quoted market prices. For securities not actively
traded, estimated fair values were provided by independent pricing services
specializing in "matrix pricing" and modeling techniques. PM Group also
estimates certain fair values based on interest rates, credit quality and
average maturity or from securities with comparable trading
characteristics.
<TABLE>
<CAPTION>
Gross Unrealized
Statement ------------------ Estimated
Value Gains Losses Fair Value
---------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
December 31, 1998:
U.S. Treasury securities and
obligations of U.S.
government authorities and
agencies $ 6,145 $ 114 $ 3 $ 6,256
Obligations of states,
political subdivisions and
foreign governments 8,409 345 16 8,738
Corporate securities 157,844 3,189 952 160,081
Mortgage-backed and
asset-backed securities 82,730 1,462 225 83,967
Redeemable preferred stock 4,862 165 6 5,021
---------------------------------------------
Total $259,990 $ 5,275 $1,202 $264,063
---------------------------------------------
---------------------------------------------
December 31, 1997:
U.S. Treasury securities and
obligations of U.S.
government authorities and
agencies $ 5,907 $ 56 $ 5,963
Obligations of states,
political subdivisions and
foreign governments 7,605 228 7,833
Corporate securities 143,201 20,115 $ 429 162,887
Mortgage-backed and
asset-backed securities 101,613 1,591 274 102,930
Redeemable preferred stock 5,203 165 193 5,175
---------------------------------------------
Total $263,529 $ 22,155 $ 896 $284,788
---------------------------------------------
---------------------------------------------
</TABLE>
The carrying value and estimated fair value of debt securities as of
December 31, 1998, by contractual repayment date of principal, are shown
below. Expected maturities may differ from
25
<PAGE>
PM GROUP LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
2. INVESTMENTS IN DEBT SECURITIES (CONTINUED)
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Statement Estimated
Value Fair Value
------------------------
(IN THOUSANDS)
<S> <C> <C>
Due in one year or less $ 55,829 $ 55,837
Due after one year through five years 95,381 96,983
Due after five years through ten years 20,987 21,652
Due after ten years 5,063 5,624
------------------------
177,260 180,096
Mortgage-backed and asset-backed
securities 82,730 83,967
------------------------
Total $259,990 $264,063
------------------------
------------------------
</TABLE>
Proceeds from sales of investments in debt securities were $35.8 million
and $39.0 million for the years ended December 31, 1998 and 1997,
respectively. Gross gains of $3.0 million and $16,000 and gross losses of
$0 and $715,000 were realized on those sales for the years ended December
31, 1998 and 1997, respectively.
3. FINANCIAL INSTRUMENTS
The estimated fair values of PM Group's financial instruments, including
debt securities (Note 2), are as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
------------------------ ------------------------
Statement Estimated Statement Estimated
Value Fair Value Value Fair Value
---------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Debt securities $259,990 $264,063 $263,529 $284,788
Preferred and common stocks 18,172 18,172 9,431 9,445
Mortgage loans 11,118 12,396 14,079 15,775
Liabilities:
Deposit funds 7,748 7,748 9,882 9,882
Derivative financial
instrument:
Asset swap contract (2,327)
</TABLE>
The following methods and assumptions were used to estimate the fair value
of these financial instruments as of December 31, 1998 and 1997:
PREFERRED AND COMMON STOCKS
The estimated fair values are based on quoted market prices or dealer
quotes.
26
<PAGE>
PM GROUP LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
3. FINANCIAL INSTRUMENTS (CONTINUED)
MORTGAGE LOANS
The estimated fair value of the mortgage loan portfolio is determined by
discounting the estimated future cash flows, using a year-end market rate
which is applicable to the yield, credit quality and average maturity of
the composite portfolio.
DERIVATIVE FINANCIAL INSTRUMENT
PM Group used an asset swap contract to manage interest rate and equity
risk to better match portfolio duration to liabilities. Asset swap
contracts involve the exchange of upside equity potential for fixed income
streams. The amounts to be received or paid pursuant to the agreement are
accrued and recognized through an adjustment to net investment income in
the accompanying statements of operations - statutory basis over the life
of the agreement. The asset swap contract matured during 1998. As of
December 31, 1997 the asset swap contract had a notional principal amount
of $5.0 million.
DEPOSIT FUNDS
The estimated fair value of deposit funds with no defined maturities is the
amount payable on demand.
27
<PAGE>
PM GROUP LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
4. LIABILITY FOR UNPAID CLAIMS AND CLAIM ADJUSTMENT EXPENSES
Activity in the liability for unpaid claims and claim adjustment expenses,
which is included in both policy reserves and policy benefits payable on
the accompanying statements of admitted assets, liabilities and capital and
surplus - statutory basis, is summarized as follows:
<TABLE>
<CAPTION>
Years Ended
December 31,
1998 1997
------------------
(IN THOUSANDS)
<S> <C> <C>
Balance at January 1 $139,533 $118,712
Less reinsurance recoverables 755 1,009
------------------
Net balance at January 1 138,778 117,703
------------------
Incurred related to:
Current year 415,300 350,231
Prior years (18,282) (17,973)
------------------
Total incurred 397,018 332,258
------------------
Paid related to:
Current year 305,894 241,508
Prior years 93,596 68,920
------------------
Total paid 399,490 310,428
------------------
Net balance at December 31 136,306 139,533
Plus reinsurance recoverables 119 755
------------------
Balance at December 31 $136,425 $140,288
------------------
------------------
</TABLE>
As a result of payment of prior years estimated claims, the provision for
claims and claim adjustment expenses decreased by $18.3 million and $18.0
million for the years ended December 31, 1998 and 1997, respectively. This
reduction is primarily due to lower than anticipated settlement of claims
and reduced claim adjustment expenses.
5. RELATED PARTY TRANSACTIONS
Pacific Life provides services of certain management and other personnel,
and other support services to PM Group. Services provided include employee
participation in a pension plan and postretirement health care and life
insurance plans maintained by Pacific Life. Charges for these services
amounted to $12.1 million and $13.1 million for the years ended December
31, 1998 and 1997, respectively, and are included in operating expenses on
the accompanying statements of operations - statutory basis.
PM Group permits certain officers and employees to defer a portion of
current cash compensation under a deferred compensation plan maintained by
Pacific Life. Interest accrued to this plan amounted to $312,375 and
$252,886 for the years ended December 31, 1998 and 1997, respectively.
Under a reinsurance and service agreement, which terminated on January 1,
1999, PM Group assumed substantially all of Pacific Life's group life and
health insurance. Premiums of
28
<PAGE>
PM GROUP LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
5. RELATED PARTY TRANSACTIONS (CONTINUED)
$99.6 million and $98.6 million and benefits of $95.1 million and $82.1
million were assumed for the years ended December 31, 1998 and 1997,
respectively. Amounts receivable under this agreement were $25.0 million
and $16.8 million as of December 31, 1998 and 1997, respectively.
6. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE PLANS
PM Group participates in a defined benefit health care plan and a defined
benefit life insurance plan (the "Plans") sponsored by Pacific Life that
provide postretirement benefits for all eligible retirees and their
dependents. Generally, qualified employees may become eligible for these
benefits if they reach normal retirement age, have been covered under
Pacific Life's policy as an active employee for a minimum continuous period
prior to the date retired, and have an employment date before January 1,
1990. The Plans contain cost-sharing features such as deductibles and
coinsurance, and require retirees to make contributions which can be
adjusted annually. Pacific Life's commitment to qualified employees who
retire after April 1, 1994 is limited to specific dollar amounts. Pacific
Life reserves the right to modify or terminate the Plans at any time.
Pacific Life and PM Group utilize the accrual method of accounting for the
costs of the Plans as prescribed by the Insurance Departments of the States
of California and Arizona, respectively. PM Group has elected to amortize
the transition obligation, which has been allocated from Pacific Life, of
$3.7 million over twenty years. The transition obligation amortization
amounted to $183,000 for each of the years ended December 31, 1998 and
1997.
7. DIVIDEND RESTRICTIONS
Dividend payments by PM Group to its parent cannot exceed the lesser of 10%
of surplus as regards to policyholders or the statutory net gain from
operations, without prior approval from the Insurance Commissioner of the
State of Arizona. During 1997, PM Group received approval to pay an
extraordinary dividend in excess of these limitations. For the year ended
December 31, 1997, PM Group paid a dividend of $14.0 million, of which $8.0
million was considered extraordinary. No dividends were paid during 1998.
During 1999, PM Group can pay dividends amounting to approximately $6.1
million without prior approval from the Insurance Commissioner of the State
of Arizona.
8. COMMITMENTS
PM Group has outstanding commitments to make investments in bonds and
limited partnerships as follows (IN THOUSANDS):
<TABLE>
<S> <C>
Year Ending December 31:
-------------------------
1999 $ 6,248
2000-2003 18,657
2004 and thereafter 5,370
-------
Total $30,275
-------
-------
</TABLE>
29
<PAGE>
PM GROUP LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
8. COMMITMENTS (CONTINUED)
PM Group leases office facilities under various non-cancelable operating
leases. Aggregate minimum future commitments are as follows (IN THOUSANDS):
<TABLE>
<S> <C>
Year Ending December 31:
-------------------------
1999 $ 2,190
2000 1,872
2001 1,443
2002 1,328
-------
Total $ 6,833
-------
-------
</TABLE>
9. LITIGATION
PM Group is a respondent in a number of legal proceedings, some of which
involve extra-contractual damages. In the opinion of management, the
outcome of these proceedings is not likely to have a material adverse
effect on the financial position of PM Group.
10. SUBSEQUENT EVENT
PM Group is in the process of requesting from the New York Insurance
Department authority to transact business in the State of New York. In
connection with this request, the Insurance Department of the State of
Arizona has approved the amendment of PM Group's certificate of authority
to allow the sale of variable annuities and variable life insurance. PM
Group is awaiting approval of its name change to Pacific Life & Annuity
Company.
30
<PAGE>
PACIFIC LIFE & ANNUITY COMPANY
FINANCIAL STATEMENTS -- STATUTORY BASIS
AS OF JUNE 30, 1999 AND DECEMBER 31, 1998
AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
<PAGE>
PACIFIC LIFE & ANNUITY COMPANY
STATEMENTS OF ADMITTED ASSETS,
LIABILITIES AND CAPITAL AND SURPLUS - STATUTORY BASIS
<TABLE>
<CAPTION>
June 30,
1999 December 31,
(Unaudited) 1998
- ------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
ADMITTED ASSETS
Bonds $214,817 $217,096
Preferred stocks 5,676 5,662
Common stocks 11,905 17,372
Mortgage loans 4,807 11,118
Cash and short-term investments 118,243 36,922
Other invested assets 20,931 16,460
Premiums due and uncollected 19,393 26,186
Other assets 12,008 7,095
- ------------------------------------------------------------------------
TOTAL ADMITTED ASSETS $407,780 $337,911
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Policy reserves $114,626 $119,743
Policy benefits payable 65,294 83,792
Deposit funds 6,569 7,748
Accrued general expenses 2,643 11,640
Other liabilities 30,727 31,027
Asset valuation reserve 5,106 7,262
- ------------------------------------------------------------------------
TOTAL LIABILITIES 224,965 261,212
- ------------------------------------------------------------------------
Capital and Surplus:
Common stock - $1 par value; 5 million
shares authorized; 2.9 million
shares issued and outstanding 2,900 2,900
Paid-in surplus 134,607 37,607
Unassigned surplus 45,308 36,192
- ------------------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS 182,815 76,699
- ------------------------------------------------------------------------
TOTAL LIABILITIES AND CAPITAL AND
SURPLUS $407,780 $337,911
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
31
<PAGE>
PACIFIC LIFE & ANNUITY COMPANY
STATEMENTS OF OPERATIONS - STATUTORY BASIS
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
1999 1998
- ------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
REVENUES
Premiums and other income $186,467 $250,119
Net investment income 11,422 12,945
- ------------------------------------------------------------
TOTAL REVENUES 197,889 263,064
- ------------------------------------------------------------
BENEFITS AND EXPENSES
Current and future policy benefits 139,234 197,429
Operating expenses 45,172 58,235
- ------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES 184,406 255,664
- ------------------------------------------------------------
INCOME BEFORE FEDERAL INCOME TAXES 13,483 7,400
Federal income taxes 4,670 2,553
- ------------------------------------------------------------
NET GAIN FROM OPERATIONS 8,813 4,847
Net realized capital gains 2,576 491
- ------------------------------------------------------------
NET INCOME $ 11,389 $ 5,338
- ------------------------------------------------------------
- ------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
32
<PAGE>
PACIFIC LIFE & ANNUITY COMPANY
STATEMENTS OF CAPITAL AND SURPLUS - STATUTORY BASIS
<TABLE>
<CAPTION>
Common Stock
------------------- Paid-in Unassigned
Shares Amount Surplus Surplus Total
- --------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCES,
JANUARY 1, 1998 2,900 $2,900 $ 37,607 $31,153 $ 71,660
Net income 5,090 5,090
Other surplus
transactions (51) (51)
- --------------------------------------------------------------------------------------
BALANCES,
DECEMBER 31, 1998 2,900 2,900 37,607 36,192 76,699
Net income 11,389 11,389
Capital contribution 97,000 97,000
Other surplus
transactions (2,273) (2,273)
- --------------------------------------------------------------------------------------
BALANCES (UNAUDITED),
JUNE 30, 1999 2,900 $2,900 $ 134,607 $45,308 $ 182,815
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
33
<PAGE>
PACIFIC LIFE & ANNUITY COMPANY
STATEMENTS OF CASH FLOWS - STATUTORY BASIS
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
1999 1998
- ------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts
Premiums $193,135 $245,757
Net investment income 10,472 12,911
Payments
Policy benefit payments (163,243) (190,652)
Operating expenses (54,688) (63,058)
Federal income taxes paid (3,675) (2,186)
Other, net (60) (8,777)
- ------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (18,059) (6,005)
- ------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds
Bonds 33,568 44,810
Stocks 4,825 949
Mortgage loans 6,601 602
Other 1,968 5,663
Payments for the purchase of
Bonds (32,317) (34,980)
Other (12,265) (5,200)
- ------------------------------------------------------------
NET CASH PROVIDED BY INVESTING
ACTIVITIES 2,380 11,844
- ------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES
Capital contribution 97,000
- ------------------------------------------------------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 97,000
- ------------------------------------------------------------
Increase in cash and short-term
investments 81,321 5,839
Cash and short-term investments,
beginning of period 36,922 33,185
- ------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS, END OF
PERIOD $118,243 $ 39,024
- ------------------------------------------------------------
- ------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
34
<PAGE>
PACIFIC LIFE & ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
(Unaudited)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
DESCRIPTION OF BUSINESS
Pacific Life & Annuity Company ("PL & A"), formerly PM Group Life Insurance
Company ("PM Group"), is a stock life insurance company domiciled in the
State of Arizona, and a wholly-owned subsidiary of Pacific Life Insurance
Company ("Pacific Life"). PL & A offers group health, dental, vision,
accidental death & dismemberment, critical illness and life products to
three principal market segments in the United States. Its Group Employee
Benefits Operation primarily serves labor-management groups and unions with
300 or more participants and other employer groups with fifty or more
employees. The Multiple Employer Trust unit insures smaller employer groups
with less than fifty lives per group. The Pacific Risk Management Services
unit offers stop loss and life products to self-funded plan sponsors.
BASIS OF PRESENTATION
The information set forth in the statement of admitted assets, liabilities
and capital and surplus - statutory basis as of June 30, 1999 and the
statements of operations - statutory basis and of cash flows - statutory
basis for the six months ended June 30, 1999 and 1998 is unaudited. The
June 30, 1999 and 1998 information reflects all adjustments, consisting
only of normal recurring adjustments, that, in the opinion of management,
are necessary to present fairly the financial position and results of
operations of PL & A for the periods indicated. Results of operations for
the interim periods are not necessarily indicative of the results of
operations for the full year. It is suggested that these unaudited
financial statements be read in conjunction with the audited financial
statements for the years ended December 31, 1998 and 1997.
These financial statements have been prepared in accordance with accounting
practices prescribed or permitted by the Insurance Department of the State
of Arizona, which is a comprehensive basis of accounting other than
generally accepted accounting principles ("GAAP"). Prescribed statutory
accounting practices include a variety of publications of the National
Association of Insurance Commissioners, as well as state laws, regulations,
and general administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed. Accounting practices
prescribed or permitted by the Insurance Department of the State of Arizona
differ in certain respects, which in some cases may be material from GAAP.
GAAP stockholder's equity as of June 30, 1999 and December 31, 1998 was
$206.5 million and $104.1 million, respectively, compared to statutory
capital and surplus as included herein of $182.8 million and $76.7 million,
respectively. GAAP net income for the six months ended June 30, 1999 and
1998 was $10.1 million and $5.7 million, respectively, compared to
statutory net income included herein of $11.4 million and $5.3 million,
respectively.
2. OTHER MATTERS
During the first quarter of 1999, PL & A discontinued sales of medical
insurance plans to companies with more than one hundred employees.
Effective January 1, 1999, PL & A also terminated a reinsurance agreement
with Pacific Life. The reinsurance agreement reinsured a substantial
portion of group operations business written under Pacific Life's name to
PL & A.
35
<PAGE>
PACIFIC LIFE & ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
(Unaudited)
2. OTHER MATTERS (CONTINUED)
During the first quarter of 1999, PL & A received approval from the
Insurance Department of the State of Arizona to change its name from PM
Group to PL & A and to amend PL & A's certificate of authority to allow the
sale of variable annuities and variable life insurance. During the second
quarter of 1999, PL & A received approval from the New York Insurance
Department to transact business in the state of New York. Certain product
approvals are still pending.
36
<PAGE>
FORM NO. N101-9A
<PAGE>
PART II
Part C: OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Part A: None
Part B:
(1) Registrant's Financial Statements
None
(2) Depositor's Financial Statements
Audited Financial Statements - Statutory Basis dated as of
December 31, 1998 and 1997, and for the two year
period ending December 31, 1998, included in
Part B include the following for PM Group Life Insurance
Company:
Statements of Admitted Assets, Liabilities and
Capital - Statutory Basis
Statements of Operations - Statutory Basis
Statements of Capital and Surplus - Statutory Basis
Statements of Cash Flows - Statutory Basis
Notes to Financial Statements - Statutory Basis
(b) Exhibits
1. (a) Minutes of Action of Board of Directors of PM
Group Life Insurance Company (PM Group) dated
July 1, 1998 /1/
II-1
<PAGE>
2. Not applicable
3. (a) Distribution Agreement between PL & A and
Pacific Mutual Distributors, Inc. ("PMD") /1/
(b) Form of Selling Agreement between PL & A, PMD
and Various Broker-Dealers /1/
4. (a) Form of Individual Flexible Premium Variable
Accumulation Annuity Contract
(b) Qualified Plan Loan Endorsement
(c) Qualified Pension Plan Rider
(d) 403(b) Tax-Sheltered Annuity Rider
(e) IRA Rider
(f) Roth IRA Rider
(g) Simple IRA Rider
(h) DCA Plus Fixed Option Endorsement
5. (a) Application Form for Individual Flexible Premium
Variable Accumulation Annuity Contract
6. (a) PL&A's Articles of Incorporation
(b) By-laws of PL&A
7. Not applicable
8. (a) Fund Participation Agreement /1/
(b) Administrative Agreement Between PL & A and
Pacific Life Insurance Company ("Pacific
Life")
9. Opinion and Consent of legal officer of Pacific
Life & Annuity Company as to the legality of Contracts
being registered
II-2
<PAGE>
10. (a) Consent of Independent Auditors'
(b) Powers of Attorney /1/
11. Not applicable
12. Not applicable
13. Performance Calculations
14. Not applicable
/1/ Included in Registrant's Form Type N-4, file No. 333-71081 Accession No.
0001017062-99-000087 filed on January 22, 1999 and incorporated by
reference herein.
Item 25. Directors and Officers of Pacific Life & Annuity
Positions and Offices
Name and Address with Pacific Life & Annuity
William L. Ferris Director, President and Chief Executive
Officer
Thomas C. Sutton Director and Chairman of the Board
David R. Carmichael Director, Senior Vice President and General
Counsel
Audrey L. Milfs Director, Vice President and Secretary
Glenn S. Schafer Director
Khanh T. Tran Senior Vice President, Chief Financial
Officer and Treasurer
Lynn C. Miller Executive Vice President
William J. Doomey Senior Vice President
Gary L. Falde Vice President
II-3
<PAGE>
The address for each of the persons listed above is as follows:
700 Newport Center Drive
Newport Beach, California 92660
Item 26. Persons Controlled by or Under Common Control with Pacific
Life & Annuity or Separate Account A
The following is an explanation of the organization chart of
Pacific Life & Annuity and its affiliates:
PACIFIC LIFE & ANNUITY & AFFILIATED ENTERPRISES
LEGAL STRUCTURE
Pacific Life & Annuity Company (formerly known as PM Group Life
Insurance Company) is an Arizona Corporation and a subsidiary of
Pacific Life Insurance Company, a California Stock Life Insurance
Company that is wholly-owned by Pacific LifeCorp (a Delaware Stock
Holding Company) which is, in turn, approximately 99% owned by
Pacific Mutual Holding Company (a California Mutual Holding
Company). Pacific Life has a 40% ownership of American Maturity
Life Insurance Company (a Connecticut Corporation), a 50% ownership
of Pacific Mezzanine Associates, L.L.C. (a Delaware Limited
Liability Company), and is the parent company of Pacific Asset
Management LLC (a Delaware Limited Liability Company), Pacific
Mutual Realty Finance, Inc., Pacific Mutual Distributors, Inc., and
World-Wide Holdings Limited (a United Kingdom Corporation). A
subsidiary of Pacific Mezzanine Associates, L.L.C. is Pacific
Mezzanine Investors, L.L.C., along with its subsidiary Pacific
Mezzanine Fund, L.P. Subsidiaries of Pacific Asset Management LLC
are PMRealty Advisors Inc., PPA LLC (a Delaware Limited Liability
Company), CCM LLC (a Delaware Limited Liability Company), NFJ LLC
(a Delaware Limited Liability Company), and PIMCO Holding LLC (a
Delaware Limited Liability Company), and its 100% direct and
indirect ownership of Pacific Financial Products, Inc. (a Delaware
Corporation). Pacific Asset Management LLC directly and indirectly
beneficially owns 33.4% of the outstanding partnership interests in
PIMCO Advisors L.P. (a Delaware Limited Partnership). Subsidiaries
of Pacific Mutual Distributors, Inc. include: Associated Financial
Group, Inc.; Mutual Service Corporation (a Michigan Corporation),
along with its subsidiaries Advisors' Mutual Service Center, Inc.
(a Michigan Corporation) and Titan Value Equities Group, Inc.; and
United Planners' Group, Inc. (an Arizona Corporation which is 97%
owned), along with its subsidiary United Planners' Financial
Services of America (an Arizona Limited Partnership). Subsidiaries
of World-Wide Holdings limited include: World-Wide Reassurance
Company Limited (a United Kingdom Corporation) and World-Wide
Reassurance Company (BVI) Limited (a British Virgin Islands
Corporation). All corporations are 100% owned unless otherwise
indicated. All entities are California corporations unless
otherwise indicated.
II-4
<PAGE>
Item 27. Number of Contractholders
None
Item 28. Indemnification
(a) The Distribution Agreement between Pacific Life & Annuity and
Pacific Securities provides substantially as follows:
Pacific Life & Annuity hereby agrees to indemnify and hold
harmless Pacific Securities and its officers and directors, and
employees for any expenses (including legal expenses), losses,
claims, damages, or liabilities incurred by reason of any untrue
or alleged untrue statement or representation of a material fact
or any omission or alleged omission to state a material fact
required to be stated to make other statements not misleading,
if made in reliance on any prospectus, registration statement,
post-effective amendment thereof, or sales materials supplied
or approved by Pacific Life & Annuity or the Separate Account.
Pacific Life & Annuity shall reimburse each such person for
any legal or other expenses reasonably incurred in connection
with investigating or defending any such loss, liability,
damage, or claim. However, in no case shall Pacific Life &
Annuity be required to indemnify for any expenses, losses,
claims, damages, or liabilities which have resulted from the
willful misfeasance, bad faith, negligence, misconduct, or
wrongful act of Pacific Securities.
Pacific Securities hereby agrees to indemnify and hold harmless
Pacific Life & Annuity, its officers, directors, and employees,
and the Separate Account for any expenses, losses, claims,
damages, or liabilities arising out of or based upon any of
the following in connection with the offer or sale of the
contracts: (1) except for such statements made in reliance on
any prospectus, registration statement or sales material
supplied or approved by Pacific Life & Annuity or the Separate
Account, any untrue or alleged untrue statement or
representation made; (2) any failure to deliver a currently
effective prospectus; (3) the use of any unauthorized sales
literature by any officer, employee or agent of Pacific
Securities or Broker; (4) any willful misfeasance, bad faith,
negligence, misconduct or wrongful act. Pacific Securities shall
reimburse each such person for any legal or other expenses
reasonably incurred in connection with investigating or
defending
II-5
<PAGE>
any such loss, liability, damage, or claim.
(b) The Form of Selling Agreement between Pacific Life & Annuity,
Pacific Securities and Various Broker-Dealers provides
substantially as follows:
Pacific Life & Annuity and Pacific Securities agree to indemnify
and hold harmless Selling Broker-Dealer and General Agent, their
officers, directors, agents and employees, against any and all
losses, claims, damages or liabilities to which they may
become subject under the 1933 Act, the 1934 Act, or other
federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue
statement of a material fact or any omission to state a
material fact required to be stated or necessary to make the
statements made not misleading in the registration statement
for the Contracts or for the shares of Pacific Select Fund
(the "Fund") filed pursuant to the 1933 Act, or any prospectus
included as a part thereof, as from time to time amended and
supplemented, or in any advertisement or sales literature
approved in writing by Pacific Life & Annuity and Pacific
Securities pursuant to Section IV.E. of this Agreement.
Selling Broker-Dealer and General Agent agree to indemnify and
hold harmless Pacific Life & Annuity, the Fund and Pacific
Securities, their officers, directors, agents and employees,
against any and all losses, claims, damages or liabilities to
which they may become subject under the 1933 Act, the 1934 Act
or other federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or
are based upon: (a) any oral or written misrepresentation by
Selling Broker-Dealer or General Agent or their officers,
directors, employees or agents unless such misrepresentation
is contained in the registration statement for the Contracts
or Fund shares, any prospectus included as a part thereof, as
from time to time amended and supplemented, or any
advertisement or sales literature approved in writing by Pacific
Life & Annuity and Pacific Securities pursuant to Section IV.E.
of this Agreement, (b) the failure of Selling Broker-Dealer or
General Agent or their officers, directors, employees or
agents to comply with any applicable provisions of this
Agreement or (c) claims by Sub-agents or employees of General
Agent or Selling Broker-Dealer for payments of compensation or
remuneration of any type. Selling Broker-Dealer and General
Agent will reimburse Pacific Life & Annuity or Pacific
Securities or any director, officer, agent or employee of either
entity for any legal or other expenses reasonably incurred by
Pacific Life & Annuity, Pacific Securities, or such officer,
director, agent or employee in connection with investigating or
defending any such loss, claims, damages, liability or action.
This indemnity agreement will be in addition to any liability
which Broker-Dealer may otherwise have.
II-6
<PAGE>
Item 29. Principal Underwriters
(a) Pacific Securities also acts as principal underwriter for
Pacific Select Exec Separate Account of Pacific Life & Annuity
Company, Pacific Select Fund, and the following Separate
Accounts of Pacific Life: Pacific Select Separate Account,
Pacific Select Exec Separate Account, Pacific Select Variable
Annuity Separate Account,Pacific Corinthian Variable Separate
Account, Separate Account A, and Separate Account B.
(b) For information regarding Pacific Securities, reference is made
to Form B-D, SEC File No. 8-15264, which is herein incorporated
by reference.
(c) Pacific Securities retains no compensation or net discounts or
commissions from the Registrant.
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be maintained
by Registrant pursuant to Section 31(a) of the Investment Company
Act of 1940 and the rules under that section will be maintained
by Pacific Life at 700 Newport Center Drive, Newport Beach,
California 92660.
Item 31. Management Services
Not applicable
Item 32. Undertakings
The registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement
as frequently as is necessary to ensure that the audited
financial statements in this registration statement are never
more than 16 months old for so long as payments under the
variable annuity contracts may be accepted, unless otherwise
permitted.
(b) to include either (1) as a part of any application to purchase a
contract offered by the prospectus, a space that an applicant can
check to request a Statement of Additional Information, or (2) a
post card or similar written communication affixed to or included
in the prospectus that the applicant can remove to send for a
Statement of Additional Information, or (3) to deliver a
Statement of Additional Information with the Prospectus.
(c) to deliver any Statement of Additional Information and any
financial statements required to be made available under this
Form promptly upon written or oral request.
Additional Representations
II-7
<PAGE>
(a) The Registrant and its Depositor are relying upon American Council of
Life Insurance, SEC No-Action Letter, SEC Ref. No. 1P-6-88 (November 28, 1988)
with respect to annuity contracts offered as funding vehicles for retirement
plans meeting the requirements of Section 403(b) of the Internal Revenue Code,
and the provisions of paragraphs (1)-(4) of this letter have been complied with.
(b) REPRESENTATION PURSUANT TO SECTION 26(e) OF THE INVESTMENT COMPANY
ACT OF 1940: Pacific Life & Annuity Company, the sponsoring insurance
company of the Registrant, represents that the fees and charges to be
deducted under the Variable Annuity Contract ("Contract") described in the
prospectus contained in this registration statement are, in the aggregate,
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed in connection with the Contract.
II-8
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it has caused this Registration Statement on
Form N-4 to be signed on its behalf by the undersigned thereunto duly authorized
in the City of Newport Beach, and the State of California on this 14th day of
October, 1999.
SEPARATE ACCOUNT A
(Registrant)
By: PACIFIC LIFE & ANNUITY COMPANY
By: William L. Ferris*
President and Chief Executive Officer
By: PACIFIC LIFE & ANNUITY COMPANY
(Depositor)
By: William L. Ferris*
President and Chief Executive Officer
As required by the Securities Act of 1933, this Pre-Effective Amendment No. 1
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
Director, President and Chief October 14th, 1999
- --------------------- Executive Officer -----------
William L. Ferris*
Director and Chairman of the October 14th, 1999
- --------------------- Board -----------
Thomas C. Sutton*
Director, Senior Vice President
- --------------------- and General Counsel October 14th, 1999
David R. Carmichael* -----------
Director, Vice President and October 14th, 1999
- --------------------- Secretary -----------
Audrey L. Milfs*
Director October 14th, 1999
- --------------------- -----------
Glenn S. Schafer*
Senior Vice President, October 14th, 1999
- --------------------- Chief Financial Officer and -----------
Khanh T. Tran* Treasurer
Executive Vice President October 14th, 1999
- --------------------- -----------
Lynn C. Miller*
<PAGE>
Senior Vice President October 14th, 1999
- --------------------- -----------
William J. Doomey*
Vice President October 14th, 1999
- --------------------- -----------
Gary L. Falde*
*By: /s/ DAVID R. CARMICHAEL
David R. Carmichael October 14th, 1999
as attorney-in-fact
<PAGE>
"DRAFT"
[LOGO]
700 Newport Center Drive
Newport Beach, CA 92660
PACIFIC PORTFOLIOS
- --------------------------------------------------------------
Individual Flexible Premium Deferred Variable Annuity Contract
- -- Investment Experience Reflected in Benefits
- -- Variable and Fixed Accumulation Before Annuity Date; Variable and Fixed
Annuity Payments Thereafter
- -- Death Benefit Proceeds Payable Before Annuity Date
- -- Non-Participating
Please read your contract carefully. This is a legal contract between you, the
Owner, and us, Pacific Life & Annuity Insurance Company.
We agree to pay the benefits of this Contract according to its provisions.
The consideration for this Contract is the application for it, (copy or
confirmation is attached) and our receipt of the Purchase Payment(s).
CONTRACT LOAN AMOUNT IS LESS THAN 100% OF CONTRACT VALUE.
BENEFITS AND VALUES UNDER THIS CONTRACT MAY BE ON A VARIABLE BASIS. AMOUNTS
DIRECTED INTO ONE OR MORE OF THE VARIABLE INVESTMENT OPTIONS WILL REFLECT THE
INVESTMENT EXPERIENCE OF THOSE INVESTMENT OPTIONS. THESE AMOUNTS MAY INCREASE OR
DECREASE, AND ARE NOT GUARANTEED AS TO A DOLLAR AMOUNT. THE DETAILS OF THE
VARIABLE PROVISIONS BEGIN ON PAGE 11.
RIGHT TO CANCEL -- YOU MAY RETURN THIS CONTRACT WITHIN 10 DAYS AFTER YOU RECEIVE
IT. TO DO SO, MAIL IT TO US AT OUR SERVICE CENTER OR TO THE AGENT WHO SOLD IT TO
YOU. THIS CONTRACT WILL THEN BE DEEMED VOID FROM THE BEGINNING. NO WITHDRAWAL
FEE WILL BE IMPOSED, AND WE WILL REFUND YOUR CONTRACT VALUE, INCLUDING ANY FEES
AND/OR ANY CHARGES FOR PREMIUM TAXES AND/OR OTHER TAXES THAT WERE DEDUCTED FROM
THAT CONTRACT VALUE.
Signed at our Home Office, 700 Newport Center Drive,
Newport Beach, California 92660.
/s/ THOMAS C. SUTTON /s/ AUDREY L. MILFS
Chairman and Chief Executive Officer Secretary
The smallest gross annual rate of return needed for the dollar amount of the
variable annuity payments to not decrease is equal to the sum of the assumed
interest rate (AIR) of 5% and all product fees and charges. The fees and charges
would include the M & E charges of 1.25% and the Administrative Charge of 0.15%.
Thus, the total gross annual rate of return would be 6.40%.
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
<PAGE>
TABLE OF CONTENTS
CONTRACT SPECIFICATIONS 3
DEFINITIONS 4
GENERAL PROVISIONS 7
PURCHASE PAYMENTS 9
Purchase Payment Allocation 9
Minimum Investment Option Value 9
THE FIXED OPTION 10
DCA PLUS FIXED OPTION 10
VARIABLE INVESTMENT OPTIONS 11
Separate Account 11
CONTRACT VALUE 12
Fixed Option Value 12
DCA Plus Fixed Option Value 12
Variable Account Value 12
Loan Account Value 13
CHARGES, FEES AND DEDUCTIONS 14
Administrative Fee 14
Annual Fee 14
Mortality and Expense Risk Charge 14
Premium Taxes 14
Transfer Fee 14
Withdrawal Fee 14
Withdrawal Charge 14
TRANSFERS 16
WITHDRAWALS 16
Amount Available for Withdrawal 16
Special Restrictions - Fixed Option and DCA Plus Option 17
CONTRACT LOANS 17
DEATH BENEFIT 18
Death of Annuitant 18
Death of Owner 19
Death of Owner Distribution Rules 19
Interest on Death Benefit Proceeds 20
BENEFICIARY 20
Adding or Changing Your Beneficiary 20
ANNUITY BENEFITS 21
Choice of Annuity Date 21
Application of Contract Value 21
Your Selections 21
Fixed and Variable Annuities 21
Annuity Options 22
Default Annuity Date and Options 22
Amount of Payments 23
Fixed Annuity Payments 23
Variable Annuity Payments 23
Periodic Payments 24
Misstatement of Age or Sex 24
ANNUITY OPTION TABLES 25
2
<PAGE>
CONTRACT SPECIFICATIONS
SERVICE CENTER: SEND FORMS AND WRITTEN REQUESTS TO: SEND PAYMENTS TO:
Pacific Life & Pacific Life &
Annuity Company Annuity Company
P.O. Box 7187 P.O. Box 100060
Pasadena, California Pasadena, California
91109-7187 91189-0060
Toll-free number: 1-800-722-2333 (between 6:00 a.m. and 5:00 p.m., Pacific time)
Please use our toll-free number to present inquiries or obtain information about
your coverage and for us to provide assistance in resolving complaints.
Basic Contract - [LOBE]
Investment Options:
[FNDNAM01] [FNDNAM02]
[FNDNAM03] [FNDNAM04]
[FNDNAM05] [FNDNAM06]
[FNDNAM07] [FNDNAM08]
[FNDNAM09] [FNDNAM10]
[FNDNAM11] [FNDNAM12]
[FNDNAM13] [FNDNAM14]
[FNDNAM15] [FNDNAM16]
[FNDNAM17] [FNDNAM18]
[FNDNAM19] [FNDNAM20]
[FNDNAM21] [FNDNAM22]
[FNDNAM23] [FNDNAM24]
[FNDNAM25] [FNDNAM26]
[FNDNAM27] [FNDNAM28]
[FNDNAM29] [FNDNAM30]
[FNDNAM31] [FNDNAM32]
[FNDNAM33]
<TABLE>
<S> <C>
Administrative Charge: 0.15%
Mortality and Expense Risk Charge: 1.25%
Annual Fee: $30.00
</TABLE>
<TABLE>
<CAPTION>
Withdrawal Charge: Age of Premium
in contract years Charge Percent
<S> <C> <C>
1 7%
2 7%
3 6%
4 5%
5 3%
6 1%
7 and over 0%
</TABLE>
<TABLE>
<S> <C> <C> <C>
Contract Number: [PNUM] Contract Date: [ISSDT]
</TABLE>
<TABLE>
<S> <C> <C>
Owner(s):
[O1NAM]
[O2NAM]
Annuitant(s): Age Sex
[A1NAM] [A1AGE] [A1SEX]
[A2NAM] [A2AGE] [A2SEX]
</TABLE>
<TABLE>
<S> <C> <C> <C>
Initial Purchase Payment: [PAMT] Annuity Start Date: [ACD]
</TABLE>
3
<PAGE>
DEFINITIONS
PL&A, we, our and us - Pacific Life & Annuity Company
YOU and YOUR -- The person or persons named as Owner(s) in the Contract
Specifications. If there are Joint Owners, you and your means both Joint
Owners.
ACCOUNT VALUE -- The amount of your Contract Value allocated to any one of
the Investment Options.
AGE -- The Owner's or Annuitant's age, as applicable, at his or her last
birthday.
ANNUITANT -- The person you name on whose life annuity payments may be
determined. An Annuitant's life may also be used to determine certain
increases in death benefits, and to determine the Annuity Date. If you
designate Joint Annuitants or a Contingent Annuitant, unless otherwise
stated, "Annuitant" means the sole surviving Annuitant. If your Contract is a
Non-Qualified Contract, you cannot change the Annuitant or change or add a
Joint Annuitant. If your Contract is a Qualified Contract, you may add a
Joint Annuitant on the Annuity Date.
ANNUITY DATE ("ANNUITY START DATE") -- The date shown in the Contract
Specifications, or the date you later elect, if any, for the start of annuity
payments if the Annuitant is still living and the Contract is in force; or if
earlier, the date that annuity payments actually begin.
ANNUITY OPTIONS -- Income options available for a series of payments after
your Annuity Date.
BENEFICIARY -- The person you name who may receive any death benefit proceeds
payable on the death of the Annuitant or any Owner prior to the Annuity Date;
or any remaining annuity benefits payable on the death of the Annuitant after
the Annuity Date. If no Beneficiary is named or the Beneficiary does not
survive the Annuitant, and the Annuitant dies, then the Owner's estate will
have the rights of the Beneficiary. If you are not the Annuitant and you die
before the Annuitant, and before the Annuity Date, any death benefit proceeds
will be payable to the surviving Joint Owner, if any; otherwise to the
surviving Contingent Owner, if any; otherwise, to the Beneficiary, if living;
otherwise, to the Owner's estate.
BUSINESS DAY -- Any day on which the value of an amount invested in a
Subaccount is determined. If any transaction or event under this Contract is
scheduled to occur on a day that does not exist in a given calendar period,
or on a day that is not a Business Day, such transaction or event will be
deemed to occur on the next following Business Day, unless otherwise stated.
CODE -- The Internal Revenue Code of 1986, as amended.
CONTINGENT ANNUITANT -- The person, if any, you select who may become the
Annuitant if the Annuitant dies before your Annuity Date. You may add or
change your Contingent Annuitant prior to the Annuity Date provided the
existing Contingent Annuitant is not the sole surviving Annuitant. Any
Contingent Annuitant you name must not have attained age 86 as of your
Contract Date or, if you add or change a Contingent Annuitant, as of the date
of the addition or change.
CONTINGENT OWNER -- The person, if any, you select who may succeed to your
rights as Owner of this Contract if all named Contract Owners die.
CONTRACT ANNIVERSARY -- The same date, in each subsequent year, as your
Contract Date.
CONTRACT DATE -- The date we issue your Contract, as shown in the Contract
Specifications. Contract Years, Contract Semiannual Periods, Contract
Quarters and Contract Months are measured from this date.
CONTRACT DEBT -- As of the end of any Business Day, the principal amount you
have outstanding on any loan under this Contract, plus any accrued and unpaid
interest.
4
<PAGE>
CONTRACT VALUE -- As of the end of any Business Day, your Variable Account
Value, plus your Fixed Option Value, your DCA Plus Fixed Option Value, and
any Loan Account Value.
DCA PLUS FIXED OPTION -- Amounts allocated under your contract to the DCA
Plus Fixed Option are held in our General Account and receive interest at
rates declared periodically (the "Guaranteed Interest Rate(s)"), but not less
than an annual rate of 3%.
DCA PLUS FIXED OPTION VALUE -- The aggregate of your contract value allocated
to the DCA Plus Fixed Option.
FIXED OPTION -- Amounts allocated under your Contract to the Fixed Option are
held in our General Account and receive interest at rates declared
periodically (the "Guaranteed Interest Rate"), but not less than an annual
rate of 3%.
FIXED OPTION VALUE -- The aggregate amount of your Contract Value allocated
to the Fixed Option.
GENERAL ACCOUNT -- Our General Account consists of all assets of PL&A, other
than those assets allocated to Separate Account A or to any of our other
separate accounts.
GUARANTEED INTEREST RATE -- The interest rate guaranteed at the time of
allocation (or rollover) for the Guarantee Term on amounts allocated to the
Fixed Option or the DCA Plus Fixed Option. All Guaranteed Interest Rates are
expressed as annual rates, and interest is accrued daily. This rate will not
be less than an annual rate of 3%.
GUARANTEE TERM -- The period during which the amount you allocate to the
Fixed Option or the DCA Plus Fixed Option earns a specified Guaranteed
Interest Rate.
INVESTMENT OPTION -- A Variable Account, Fixed Option, or DCA Plus Fixed
Option offered under the Contract.
LOAN ACCOUNT VALUE -- The amount, including any interest accrued, held in the
Loan Account to secure any Contract Debt.
NET CONTRACT VALUE -- Your Contract Value less any Contract Debt.
NON-NATURAL OWNER -- A corporation or other entity which is a non-natural
person, unless the entity demonstrates to our satisfaction, or we otherwise
determine in our sole discretion, that the Contract should be treated for
purposes of Code Section 72(s), as owned by an individual (natural) person.
NON-QUALIFIED CONTRACT -- A Contract other than a Qualified Contract.
OWNER -- The person(s) who has (have) all rights under this Contract. If your
Contract names Joint Owners, Owner means both Joint Owners. Any named Owner
must not have attained age 86 as of your Contract Date. If your Contract
allows you to change or add Owners after the Contract is issued, any
newly-named or added Owners, including Joint and/or Contingent Owners, must
be under the age of 86 at the time of change or addition.
PURCHASE PAYMENT (PREMIUM PAYMENT) -- An amount paid to us by or on behalf of
an Owner as consideration for the benefits provided under this Contract.
QUALIFIED CONTRACT -- A Contract that qualifies under the Code as an
individual retirement annuity ("IRA"), or a Contract purchased under a
Qualified Plan that qualifies for special tax treatment under the Code.
QUALIFIED PLAN -- A retirement plan that receives favorable tax treatment
under Section 401, 403, 408, or 457 of the Code.
SEC -- Securities and Exchange Commission.
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SEPARATE ACCOUNT/SEPARATE ACCOUNT A -- A Separate Account of PL&A registered
as a unit investment trust under the Investment Company Act of 1940.
SERVICE CENTER -- PL&A's mailing address shown in the Contract
Specifications. We will notify you of any change in our mailing address.
SUBACCOUNT -- An investment division of the Separate Account. Each
Subaccount, (a "Variable Investment Option" or "Variable Account") invests
its assets in a separate series or class of shares of a designated investment
company.
SUBACCOUNT ANNUITY UNIT (ANNUITY UNITS) -- Annuity Units are used to measure
variation in variable annuity payments. The amount of each variable annuity
payment (after the first payment) will vary with the value and number of your
Annuity Units in each Subaccount.
SUBACCOUNT UNIT -- Subaccount Units are used to measure your Contract Value
in that Subaccount.
UNIT VALUE -- The value of a Subaccount Unit ("Subaccount Unit Value") or
Subaccount Annuity Unit ("Subaccount Annuity Unit Value"). The Unit Value of
any Subaccount is subject to change on any Business Day. The fluctuations in
value reflect the investment results, and also reflect the daily deductions
for the mortality and expense risk charge and administrative fee. Changes in
Subaccount Annuity Unit Values also reflect an additional adjustment factor
that corrects for an assumed investment return of 5%. The Unit Value of a
Subaccount Unit and of a Subaccount Annuity Unit on any Business Day is
measured at or about 4:00 p.m. Eastern Time on each Business Day.
VARIABLE ACCOUNT (A "VARIABLE INVESTMENT OPTION") -- A Subaccount of the
Separate Account or any separate account of PL&A, which is available under
your Contract in which assets of PL&A are segregated from assets in its
General Account and other separate accounts.
VARIABLE ACCOUNT VALUE -- The aggregate amount of your Contract Value
allocated to the Variable Accounts.
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GENERAL PROVISIONS
REPORTS TO OWNERS -- At least once per year prior to the annuity date, we
will send you a report that will show your Contract Value, any Purchase
Payments received, loan repayments, transfers, withdrawals, applicable
withdrawal charges and/or other charges and/or fees incurred since the last
report, and any other information that may be required.
PAYMENTS, INSTRUCTIONS AND REQUESTS -- Unless this Contract provides
otherwise, all Purchase Payments, loan repayments, instructions and requests
must be received in proper form at our Service Center at its mailing address.
(See DEFINITIONS -- SERVICE CENTER). Any subsequent Purchase Payments, loan
repayments and requests for loans, transfers or withdrawals we receive in
proper form on any Business Day usually will be processed the same Business
Day unless the transaction or event is scheduled to occur on another day.
Generally, all other instructions and requests normally will be effective as
of the end of the day next following the Business Day we receive them in
proper form, unless the event is scheduled to occur on another day. We may
require that you provide signature guarantees or other safeguards for any
instruction, request or other document you may send to our Service Center.
You acknowledge and agree that we will not be liable for any loss, liability,
cost or expense of any kind or character for acting on instructions or
requests submitted to us that we reasonably believe to be genuine, provided
we follow our procedures.
ENTIRE CONTRACT -- This document, the attached application, any subsequent
applications to change this Contract, and any riders and endorsements,
constitute the entire Contract, and supersede any and all prior agreements,
whether oral or written, about the terms of this Contract and the
application. All statements made in the application are representations and
not warranties.
CONTRACT MODIFICATIONS -- Modifications to this Contract or any waiver of our
rights or requirements under this Contract can only be made if in writing by
an authorized officer of PL&A. This Contract is intended to qualify as an
annuity contract for Federal income tax purposes. To that end, the provisions
of this Contract are to be interpreted and administered to ensure or maintain
such tax qualification, notwithstanding any other provisions to the contrary.
We reserve the right to amend this Contract and/or our administrative
procedures without consent to reflect any clarifications that may be needed
or are appropriate to maintain its tax qualification or to conform this
Contract to any applicable changes in the tax qualification requirements.
BASIS OF VALUES -- A detailed statement showing how values are determined has
been filed with the state insurance departments. All values and reserves are
at least equal to those required by the laws of the state in which this
Contract is delivered.
CLAIMS OF CREDITORS -- Your Contract Value and other benefits under this
Contract are exempt from the claims of creditors to the extent permitted by
law.
REMOVAL OF BENEFICIARY OR CONTINGENT ANNUITANT -- You may remove a
Beneficiary (other than an irrevocable Beneficiary) or a Contingent Annuitant
from this Contract by providing proper instructions to our Service Center.
OWNERSHIP -- This Contract belongs to the Owner. The Owner is entitled to
exercise all rights available to the Owner under this Contract. If this
Contract is jointly owned, both Owners must join in any request to exercise
these rights. The Owner may exercise these rights under this Contract without
the consent of the Beneficiary (other than any irrevocable Beneficiary) or
any other person, except as otherwise required by law.
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ASSIGNMENT -- You may assign all rights and benefits under this Contract
before the Annuity Date. We are not bound by any assignment until we have
received written notice satisfactory to us and we record the assignment. We
are not responsible for the validity of any assignment. If the Contract has
been absolutely assigned, the assignee becomes the Owner. You should consult
with your tax adviser before taking any action.
DELAY OF PAYMENTS -- Generally, payments, transfers, or exchanges will be
made within seven days from receipt of the payment and/or request in a form
satisfactory to us. Payment of your withdrawal proceeds or transfers or
exchanges to or from a Variable Account may be delayed after receipt of your
withdrawal, transfer, or exchange request under certain circumstances. These
include:
- -- a closing of the New York Stock Exchange other than on a regular holiday
or weekend;
- -- a trading restriction by the SEC; or
- -- an emergency declared by the SEC.
We may delay payments or transfers from our General Account (which would
include payment of your withdrawal proceeds and transfers from the Fixed
Option, the DCA Plus Fixed Option, loans, fixed annuity payments, and lump
sum death benefit payments unless state law requires otherwise) for up to six
months after the requested effective date of the transaction. Any amount
delayed will, so long as it is held under the Fixed Option, continue to earn
interest at the Guaranteed Interest Rate(s) then in effect until the
applicable Guaranteed Term in effect has ended, and not less than 3% on an
annual basis thereafter. If you make any Purchase Payment by check, other
than a cashier's check, we may delay making payments to you until your check
has cleared.
INCONTESTABILITY -- We will not contest this Contract.
PROOF OF LIFE OR DEATH -- Before we make a payment, we have the right to
require proof of the life or death of any person on whose life or death
determines whether, to whom, or how much we must pay any benefits under this
Contract.
WITHHOLDING TAXES -- We reserve the right to withhold from all payments made
or deemed made under this Contract, any taxes required to be withheld by
applicable Federal or State law, unless the Owner or payee elects otherwise
pursuant to applicable withholding rules.
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PURCHASE PAYMENTS
PURCHASE PAYMENTS -- This Contract will not be in force until we receive the
initial Purchase Payment. Your initial Purchase Payment is shown in the
Contract Specifications.
You may make additional Purchase Payments at any time before the Annuity
Date, while the Annuitant is living and this Contract is in force. Each
additional Purchase Payment must be at least $250 for Non-Qualified Contracts
and $50 for Qualified Contracts. We may limit the amount of any single
Purchase Payment. You must obtain our consent before making a Purchase
Payment that will bring your aggregate Purchase Payments over $1,000,000.
Purchase Payments are payable in U.S. dollars either at our Service Center or
through our agent. Checks should be made payable to Pacific Life & Annuity
Insurance Company. If you make Purchase Payments by check other than a
cashier's check, your withdrawal proceeds and any refund under your Right to
Cancel may be delayed until your check has cleared. On request a receipt for
the Purchase Payment signed by an officer of PL&A will be provided after
payment.
PURCHASE PAYMENT ALLOCATION -- Prior to your Annuity Date, you may allocate
all or part of your Purchase Payments to one or more of the Investment
Options available to you. The Investment Options available to you on the
Contract Date are shown on your Contract Specifications page.
You may change your allocation by sending us proper instructions (see GENERAL
PROVISIONS: INSTRUCTIONS AND REQUESTS). We will allocate any Purchase Payment
according to your most recent allocation instructions. We may reject any
instruction or Purchase Payment if your instructions are not clear and we
cannot determine your allocation instructions.
Prior to the Annuity Date you may allocate all or a part of a Purchase
Payment to the DCA Fixed Option if you have elected to transfer under the DCA
Plus program. Under the DCA Plus program you authorize the automatic transfer
of amounts at monthly intervals from the DCA Plus Fixed Option to one or more
Variable Investment Options. You may terminate DCA Plus at any time. Upon any
termination of DCA Plus, we will transfer any amounts remaining in the DCA
Plus Fixed Option to the Fixed Option, unless you instruct us to transfer
such amounts to other Investment Options. We reserve the right to change the
terms and conditions of the DCA Plus program at any time.
ALLOCATIONS DURING THE RIGHT TO CANCEL PERIOD -- We will allocate your
initial Purchase Payment in accordance with your most recent allocation
instructions. However, if we are required by state or Federal law to refund
all Purchase Payments according to the Right to Cancel provision, we will
allocate the portion of your initial Purchase Payment designated for Variable
Investment Options to the Money Market Portfolio, and the portions of your
initial Purchase Payment designated for the Fixed Option to that respective
option. Any subsequent Purchase Payments that are received before the end of
the Right to Cancel Period will be allocated in the same manner as the
initial Purchase Payment. Fifteen days after the Contract Date, we will
transfer the Account Value in the Money Market Portfolio to your Variable
Investment Options in accordance with your most recent allocation
instructions.
MINIMUM INVESTMENT OPTION VALUE -- We reserve the right to require that, as a
result of any allocation to an Investment Option, any transfer, or any
partial withdrawal, your remaining Account Value in any Investment Option
must be at least $500. We also reserve the right to transfer any remaining
Account Value that does not meet such minimum amount to your other Investment
Options on a prorata basis relative to your most recent allocation
instructions for those Investment Options.
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THE FIXED OPTION
We credit interest at the Guaranteed Interest Rate(s) during each Guarantee
Term on the amount of Purchase Payments and/or Contract Value that you
allocate or transfer to, or roll over in, the Fixed Option, as described
below.
Account Values under the Fixed Option are held in our General Account.
Subject to applicable law, we have sole discretion over the investment of our
General Account assets.
We will credit your Contract with a Guaranteed Interest Rate for a Guarantee
Term of up to one year on that portion of your Purchase Payment and/or
Contract Value allocated to the Fixed Option, while the Annuitant is living
and this Contract is in force, and prior to the Annuity Date. We will credit
the Guaranteed Interest Rate in effect on the Business Day that the
allocation and/or transfer is effective for an initial Guarantee Term that
ends at the end of that Contract Year.
At the end of an initial Guarantee Term and each succeeding Guarantee Term,
we will roll over your Fixed Option Value attributed to that Guarantee Term
to a new Guarantee Term of one year, unless you instruct us otherwise. We
will credit the Guaranteed Interest Rate in effect at the time of the roll
over on the amount of the Fixed Option Value rolled over until the end of
such Guarantee Term.
We will stop crediting interest on that portion of your Fixed Option Value
you withdraw, transfer (including transfers to the Loan Account), or convert
to an Annuity Option, including any: fees for withdrawals or transfers;
withdrawal charges; annual fee; and charges for premium taxes and/or other
taxes. We do so as of the end of the Business Day any such transaction is
effective.
THE DCA PLUS FIXED OPTION
Your initial Purchase Payment allocation to the DCA Plus Fixed Option will
begin a Guarantee Term of up to one year.
Prior to the Annuity Date, we will credit interest at the Guaranteed Interest
Rate(s) during the Guarantee Term on the amount of Purchase Payments that you
allocate to the DCA Plus Fixed Option, while the Annuitant is living and this
Contract is in force. Your DCA Plus Fixed Option value will be transferred
over the remainder of the existing DCA Plus Guarantee Term. We will credit
the Guaranteed Interest Rate in effect on the Business Day that the
allocation is effective until the Guarantee Term has expired.
Account Values under the DCA Plus Fixed Option are held in our General
Account. Subject to applicable law, we have sole discretion over the
investment of our General Account assets.
At the end of a Guarantee Term, the entire DCA Plus Fixed Option will have
been transferred to the Variable Investment Options. If requested, all or a
portion of additional Purchase Payments may be allocated to the DCA Plus
Fixed Option at the Guaranteed Interest rate then in effect.
We will stop crediting interest on that portion of your DCA Plus Fixed Option
Value that is withdrawn, transferred (including transfers to the Loan
Account), or converted to an Annuity Option, including any fees for
withdrawals or transfers; withdrawal charges; annual fee; and charges for any
premium taxes and/or other taxes. We do so as of the end of the Business Day
any such transaction is effective.
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VARIABLE INVESTMENT OPTIONS
The Variable Investment Options consist of Subaccounts of the Separate
Account. The available Subaccounts as of the Contract Date are shown in the
Contract Specifications.
SEPARATE ACCOUNT -- We established and maintain the Separate Account under
the laws of California. Any income, gains or losses (whether or not realized)
from the assets of each Variable Account are credited or charged against such
Variable Account without regard to our other income, gains or losses. Assets
may be put in our Separate Account to support this Contract and other
variable annuity contracts. Assets may be put in our Separate Account for
other purposes, but not to support contracts other than variable annuity
contracts. The assets of our Separate Account are our property. The portion
of the Separate Account assets equal to the reserves and other Contract
liabilities with respect to each Variable Account will not be chargeable with
liabilities arising out of any other business we conduct. We may transfer
assets of a separate account in excess of the reserves and other liabilities
with respect to its Variable Account to another separate account or to our
General Account. All obligations arising under the Contract are our general
corporate obligations. We do not hold ourselves out to be trustees of the
Separate Account assets.
We reserve the right, subject to compliance with the law then in effect, and
after any required regulatory approval, to:
- -- cease offering any Subaccount;
- -- add or change designated investment companies or their portfolios, or
other investment vehicles;
- -- add, delete or make substitutions for the securities and other assets
that are held or purchased by the Separate Account or any Variable
Account;
- -- permit conversion or exchanges between portfolios and/or classes of
contracts on the basis of Owners' requests;
- -- add, remove or combine Variable Accounts;
- -- combine the assets of any Variable Account with any other Separate
Account of PL or of any of its affiliates;
- -- register or deregister Separate Account A or any Variable Account under
the Investment Company Act of 1940 (the "1940 Act");
- -- operate any Variable Account as a managed investment company under the
1940 Act, or any other form permitted by law;
- -- run any Variable Account under the direction of a committee, board, or
other group;
- -- restrict or eliminate any voting rights of Owners with respect to any
Variable Account or other persons who have voting rights as to any
Variable Account;
- -- make any changes required by the 1940 Act or other federal securities
laws;
- -- make any changes necessary to maintain the status of the Contracts as
annuities under the Code;
- -- make other changes required under federal or state law relating to
annuities;
- -- suspend or discontinue sale of the Contracts; and
- -- comply with law.
If any of these changes result in a material change in the underlying
investments of a Variable Account, we will notify you of such change.
We will not change the investment policy of the Separate Account without
following the filing and other procedures of the Insurance Commissioner in
the State of California nor without following the filing and other procedures
established by insurance regulators of the state of delivery. Unless required
by law or regulation, an investment policy may not be changed without our
consent.
From time to time we may make other Investment Options available to you. Any
new Investment Option may invest in portfolios of the designated investment
company, other designated investment companies or their portfolios, or in
other investment vehicles. New Investment Options will be made available to
existing Owners at our discretion. We will provide you with written notice of
all material details, including investment objectives and charges. We will
comply with the filing or other procedures established by applicable state
insurance regulators, to the extent required by applicable law.
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CONTRACT VALUE
Your Contract Value on any Business Day is the sum of:
- -- your Fixed Option Value on that day;
- -- plus your Variable Account Value on that day;
- -- plus your Loan Account Value on that day.
We generally determine values at or about 4:00 p.m., Eastern time, on each
day that the New York Stock Exchange is open, provided our administrative
offices are also open on that day.
FIXED OPTION VALUE -- Your Fixed Option Value on any Business Day is your
Fixed Option Value on the prior Business Day increased by any additions to
your Fixed Option on that day as a result of any:
- -- interest;
- -- Purchase Payments received by us and allocated to the Fixed Option;
- -- transfers to the Fixed Option, including transfers from the Loan Account;
and
decreased by any deductions from the Fixed Option on that day as a result of
any:
- -- transfers, including transfers to the Loan Account;
- -- withdrawals, including any withdrawal charges;
- -- amounts converted to an Annuity Option;
- -- charge for premium taxes and/or other taxes;
- -- fees for withdrawals and/or transfers; and
- -- annual fee.
DCA PLUS FIXED OPTION VALUE: Your DCA Plus Fixed Option Value on any Business
Day is your DCA Plus Fixed Option Value on the prior Business Day increased
by any additions to your DCA Plus Fixed Option on that day as a result of any:
- -- interest;
- -- Purchase Payments received by us and allocated to the DCA Plus Fixed
Option; and
decreased by any deductions from the DCA Plus Fixed Option on that day as a
result of any:
- -- transfers, including transfers to the Loan Account;
- -- withdrawals and withdrawal charges;
- -- amounts converted to an Annuity Option;
- -- charge for any premium taxes and/or other taxes;
- -- fees for withdrawals and/or transfers; and
- -- annual fee.
VARIABLE ACCOUNT VALUE -- Your Variable Account Value on any Business Day is
the sum of your Subaccount Values on that day.
SUBACCOUNT VALUE -- Each Subaccount Value on any Business Day is the number
of Subaccount Units in that Subaccount that are credited to your Contract on
that day multiplied by the Unit Value of the Subaccount on that day.
We credit your Contract with Subaccount Units for a Subaccount as a result of
any portion of your Purchase Payments received by us and allocated to that
Subaccount; and any transfers of your Contract Value to that Subaccount,
including transfers from the Loan Account.
We debit your Contract with Subaccount Units for a Subaccount as a result of
any deductions from the Subaccount, including those caused by any:
- -- withdrawals;
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- -- transfers (including transfers to the Loan Account);
- -- amounts converted to an Annuity Option;
- -- fees for transfers and/or withdrawals;
- -- withdrawal charges;
- -- charge for premium taxes and/or other taxes; and
- -- annual fee.
The number of Subaccount Units we debit or credit to your Contract in
connection with a transaction is equal to the amount of the transaction
applicable to that Subaccount divided by that Subaccount's Unit Value on that
day. The number of your Subaccount Units in a Subaccount will change only if
we debit or credit Subaccount Units for the transactions above. The number of
Subaccount Units will not change because of subsequent changes in the
Subaccount Unit Value.
SUBACCOUNT UNIT VALUE -- The initial Unit Value of each Subaccount was $10 on
the Business Day the Subaccount began operations. At the end of each
subsequent Business Day, the Unit Value for each Subaccount is equal to (Y)
times (Z) where:
(Y) is the Unit Value for that Subaccount as of the end of the prior
Business Day; and
(Z) is the Net Investment Factor for that Subaccount for the period (a
"valuation period") between the prior Business Day and that Business Day.
NET INVESTMENT FACTOR -- Each Subaccount's Net Investment Factor for any
valuation period is equal to ( A / B ) - C where:
(A) is the net result of:
(a) the net asset value per share of the corresponding Portfolio shares
held by the Subaccount as of the end of that valuation period;
(b) plus the per share amount of any dividend or capital gain
distributions made during that valuation period on the Portfolio
shares held by the Subaccount;
(c) plus or minus any per share charge or credit for any income taxes,
other taxes, or amounts set aside during that valuation period as a
reserve for any income and/or any other taxes for which we
determine to have resulted from the operations of the Subaccount or
Contract, and/or any taxes attributable, directly or indirectly, to
Purchase Payments;
(B) is the net asset value per share of the Portfolio shares held by the
Subaccount as of the end of the prior valuation period; and
(C) is a factor that we assess against the Subaccount's net assets held by
each Subaccount for the mortality and expense risk charge and the
administrative fee during that valuation period.
LOAN ACCOUNT VALUE -- For those Qualified Contracts that permit loans, your
Loan Account Value as of the end of any Business Day is your Loan Account
Value on the prior Business Day, increased by any:
- -- interest; and
- -- Contract Value loaned on that day;
and decreased by any:
- -- loan principal repaid on that day; and
- -- earned interest transferred from the Loan Account on that day.
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CHARGES, FEES AND DEDUCTIONS
ADMINISTRATIVE FEE -- We charge an administrative fee against assets held in
your Variable Investment Option(s). This fee is assessed daily at the annual
rate which is shown in the Contract Specifications. This fee is guaranteed
not to increase.
ANNUAL FEE -- We charge an annual fee which is shown in the Contract
Specifications on each Contract Anniversary prior to your Annuity Date
against your Contract Value, and at the time you make a full withdrawal, if
your Net Contract Value is less than $50,000 on that date. This fee is
guaranteed not to increase.
We will deduct the annual fee, if any, from each Investment Option on a
prorata basis relative to your Account Value in each Investment Option. Any
annual fee we deduct from a Subaccount will reduce the number of Subaccount
Units credited to your Contract.
No annual fee is charged when you annuitize or on payment of any death
benefit proceeds.
MORTALITY AND EXPENSE RISK CHARGE ("RISK CHARGE") -- We impose a Risk Charge
against assets held in your Variable Investment Option(s). This charge is
assessed daily at the annual rate which is shown in the Contract
Specifications. The Risk Charge compensates us for the risks we assume that
mortality and expenses will vary from those we assumed. This charge is
guaranteed not to increase.
PREMIUM TAXES -- From your Contract Value, we will deduct a charge for any
taxes we pay that are attributable to Purchase Payments or withdrawals. Such
taxes may include, but are not limited to: any federal, state or local
premium taxes; and any federal, state or local income, excise, business or
any other type of tax (or component thereof), measured by or based upon,
directly or indirectly, the amount of Purchase Payments we receive from you.
We will normally deduct this charge when you annuitize, however, we may
impose this charge: on any withdrawal; at the time any death benefit is paid;
when the taxes are incurred; or when we pay the taxes. We may base this
charge on: the Contract Value; the amount of the transaction; the aggregate
amount of Purchase Payments we receive under your Contract; or any other
amount that, in our sole discretion, we deem appropriate.
OTHER TAXES -- We reserve the right to charge the Separate Account and/or
deduct from your Contract Value a charge for any federal, state or local
taxes we pay that are or become attributable to the Separate Account or
Contract, including, but not limited to, income taxes attributable to our
operation of the Separate Account or to our operations with respect to the
Contract, or taxes attributable, directly or indirectly, to Purchase Payments
or payments we make under this Contract.
TRANSFER FEE -- We reserve the right to impose a transfer fee of $15 on each
transfer made in excess of fifteen transfers in any Contract Year. For this
purpose, we will treat each transfer request as a single transfer, regardless
of the number of Investment Options from which or to which portions of
Account Values are transferred. We will deduct any transfer fee we impose
from your Contract Value on a prorata basis relative to your Account Value in
each Investment Option immediately after the transfer.
WITHDRAWAL FEE -- We reserve the right to impose a withdrawal fee of $15 on
each partial withdrawal made in excess of fifteen withdrawals in any Contract
Year. We will deduct from your Contract Value, on a prorata basis relative to
your Account Value in each Investment Option immediately after the
withdrawal, any such fee we impose on a partial withdrawal. For this purpose,
we will treat each withdrawal request as a single withdrawal, regardless of
the number of Investment Options or Guarantee Terms from which portions of
Account Values are withdrawn.
CONTINGENT DEFERRED SALES CHARGE ("WITHDRAWAL CHARGE") -- Purchase Payments
are subject to a withdrawal charge which is shown in the Contract
Specifications. This charge may apply to amounts you withdraw under your
Contract prior to your Annuity Date, depending on the length of time each
Purchase Payment has been allocated to your Contract and on the amount you
withdraw. We will not apply the withdrawal charge on:
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- -- death benefit proceeds, except as provided under the Death of Owner
provisions for certain non-natural Owners;
- -- Contract Values converted to an Annuity Option;
- -- withdrawals by Contract Owners to meet the minimum distribution rules
for Qualified Contracts as they apply to amounts held under the Contract;
or
- -- withdrawals (full or partial), after the first Contract Anniversary, if
the Annuitant has been diagnosed with a medically determinable condition
that results in a life expectancy of twelve (12) months or less, subject
to medical evidence satisfactory to us.
AMOUNT OF WITHDRAWAL CHARGE -- The amount of a withdrawal charge depends on
how long your Purchase Payments are held under this Contract. Each Purchase
Payment you make is considered to have a certain "age," depending on the
length of time since that Purchase Payment was effective. A Purchase Payment
is "age one" from the day it was effective until your next Contract
Anniversary and increases in "age" on that and each succeeding Contract
Anniversary. When you withdraw an amount, the "age" of any Purchase
Payment(s) you withdraw determines the level(s) of withdrawal charge as shown
in the Contract Specifications. We calculate your withdrawal charge by
assuming that your Earnings are withdrawn first, followed by amounts
attributed to Purchase Payments with the "oldest" Purchase Payment withdrawn
first. The withdrawal charge will be deducted proportionately from each
Investment Option selected for withdrawal.
FREE WITHDRAWALS -- During a Contract Year, you may withdraw free of withdrawal
charge amounts up to the sum of your Earnings plus your "Eligible Purchase
Payments". Eligible Purchase Payments include 10% of all remaining Purchase
Payments at the beginning of a Contract Year that have an "age" of less than
seven years, plus 10% of any Purchase Payments received by us during that
Contract Year, plus 100% of all remaining Purchase Payments that have an age of
seven years or more.
EARNINGS -- FOR THE PURPOSE OF CALCULATING THE WITHDRAWAL CHARGE, as of the end
of any Business Day, your Earnings equal your Contract Value less your aggregate
Purchase Payments which are reduced by withdrawals of prior Purchase Payments.
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TRANSFERS
You may make transfers under this Contract subject to certain restrictions
(see TRANSFER AND WITHDRAWAL RESTRICTIONS) and any applicable fees (see
CHARGES, FEES and DEDUCTIONS).
By providing a proper transfer request (see GENERAL PROVISIONS -- PAYMENTS,
INSTRUCTIONS AND REQUESTS), you may request transfer of part or all of your
Contract Value, less Loan Account Value, in any Investment Option among other
Investment Options while your Annuitant is living and prior to the Annuity
Date.
If your transfer causes your remaining Account Value in any Investment Option
immediately after such transfer to be less than $500, we may transfer such
remaining Account Value to your other Investment Options on a prorata basis
relative to your most recent allocation instructions. We reserve the right to
impose a transfer fee as described in the Transfer Fee provision.
Transfers between Investment Options will normally be effective as of the end
of the Business Day on which we receive a proper transfer request. If your
Contract was delivered in a state that requires a refund of premium, no
transfers will be allowed until 15 days after your Contract Date.
WITHDRAWALS
You may, on or prior to your Annuity Date, withdraw all or a portion of the
amount available under your Contract, while the Annuitant is living and your
Contract is in force; however, no partial withdrawals are allowed within 30
days of your Contract Date. If you make a full withdrawal, we require return
of your Contract or a signed Lost Contract Affidavit with your proper
request. You may choose to withdraw from any specific Investment Option(s),
or from all Investment Options proportionately. If you do not specify, we
will make the withdrawal from your Investment Options on a prorata basis
relative to your Account Value in each. Each partial withdrawal must be for
$500 or more. Withdrawals from the Fixed Option are subject to certain
additional restrictions described below.
If your partial withdrawal causes your Net Contract Value to be less than
$1,000 immediately after the withdrawal, we may terminate your Contract and
send you the withdrawal proceeds. If your partial withdrawal causes your
Account Value remaining in any Investment Option to be less than $500, we
reserve the right to transfer such remaining Account Value to your other
Investment Options on a prorata basis relative to your most recent allocation
instructions.
AMOUNT AVAILABLE FOR WITHDRAWAL -- The amount available for withdrawal is
your Net Contract Value as of the end of the Business Day on which your
withdrawal request is effective, less any:
- -- annual fee;
- -- withdrawal fee;
- -- withdrawal charge; and
- -- charge for premium taxes and/or other taxes.
The amount we send to you (your "withdrawal proceeds") will also reflect any
required or requested federal and/or state income tax withholding.
If you make a full withdrawal, this Contract will end; we will have no
further obligations under this Contract.
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TRANSFER AND WITHDRAWAL RESTRICTIONS
SPECIAL RESTRICTIONS ON WITHDRAWALS OR TRANSFERS FROM THE FIXED OPTION --
After the first Contract Anniversary, you may, within thirty (30) days from
your Contract Anniversary, withdraw or transfer up to one-third (33-1/3%) of
your Fixed Option Value. In consecutive Contract Years, however, you may
withdraw or transfer one-third of your Fixed Option Value at the beginning of
the first year, one-half (50%) of your remaining Fixed Option Value at the
beginning of the second year, and up to the entire amount (100%) of your
remaining Fixed Option Value at the beginning of the third year.
SPECIAL RESTRICTIONS ON TRANSFERS INTO THE DCA PLUS FIXED OPTION -- No
transfers may be made from any other Investment Option to the DCA Plus Fixed
Option
CONTRACT LOANS
If your Contract is issued under a Qualified Plan under Code Section 401 or
403 and your Qualified Plan permits, you may request a loan of a portion of
your Contract Value after your first Contract Year and before your Annuity
Date. If your Contract is a Non-Qualified Contract, or if your Qualified Plan
does not permit loans, loans under this Contract will not be available to you.
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<PAGE>
DEATH BENEFIT
A death benefit may be payable on proof of the death of the Annuitant or any
Owner before the Annuity Date, while this Contract is in force.
The proceeds of any death benefit payable will be payable upon receipt, in
proper form, of proof of death and instruction regarding payment of death
benefit proceeds. Such proceeds will equal the amount of the death benefit
reduced by any charges for premium taxes and/or other taxes and any Contract
Debt. These proceeds will be payable in a lump sum, as an Annuity Option
under this Contract or towards the purchase of any annuity option we then
offer, or in accordance with the Code (see DEATH OF OWNER DISTRIBUTION
RULES). Any such Annuity Option is subject to all restrictions and
requirements as are other annuities offered under this Contract.
DEATH BENEFIT AMOUNT -- The Death Benefit Amount as of any Business Day prior
to your Annuity Date is equal to the greater of: (a) your Contract Value as
of that day; or (b) your aggregate Purchase Payments reduced by (i) an amount
for each withdrawal that has occurred, which is calculated by multiplying the
aggregate Purchase Payments received prior to each withdrawal by the ratio of
the amount of the withdrawal, including any withdrawal charge, to your
Contract Value immediately prior to the withdrawal; and (ii) any applicable
charges, and/or fees, deducted on or before that day.
GUARANTEED MINIMUM DEATH BENEFIT ("GMDB") AMOUNT -- The GMDB Amount will be
calculated only when a death benefit becomes payable as a result of the death
of the sole Annuitant, and is determined as follows:
First, we calculate what the Death Benefit Amount would have been as of your
sixth Contract Anniversary and each subsequent Contract Anniversary that
occurs while the Annuitant is living and before the Annuitant reaches his or
her 76th birthday (each of these Contract Anniversaries is a "Milestone
Date"). We then adjust the Death Benefit Amount for each Milestone Date by:
(i) adding the aggregate amount of any Purchase Payments received by us since
that Milestone Date; (ii) subtracting an amount for each withdrawal that has
occurred since that Milestone Date, which is calculated by multiplying the
Death Benefit Amount by the ratio of the amount of each withdrawal that has
occurred since that Milestone Date, including any withdrawal charge, to the
Contract Value immediately prior to the withdrawal.
If death of the sole Annuitant occurs and the deceased was from the Ages 69
through 74 on the Contract Date, we will calculate what the Death Benefit
Amount would have been on the first Contract Anniversary following his or her
75th birthday (also a "Milestone Date"). We then adjust this Death Benefit
Amount by: (i) adding the aggregate amount of any Purchase Payments received
by us since that Milestone Date; and (ii) subtracting an amount for each
withdrawal that has occurred since that Milestone Date, which is calculated
by multiplying the Death Benefit Amount by the ratio of the amount of each
withdrawal that has occurred since that Milestone Date, including any
withdrawal charge, to the Contract Value immediately prior to the withdrawal.
The highest of these adjusted Death Benefit Amounts as of the Notice Date is
your GMDB Amount. The "Notice Date" is the day on which we receive, in proper
form, proof of death and instructions satisfactory to us regarding payment of
death benefit proceeds.
DEATH OF ANNUITANT -- If the Annuitant dies before the first Milestone Date,
the death benefit will be equal to your Death Benefit Amount as of the Notice
Date.
If the Annuitant dies on or after the first Milestone Date, the death benefit
will be equal to the greater of the Death Benefit Amount or the GMDB Amount
as of the Notice Date. If an Annuitant dies before the Annuity Date, unless
there is a surviving Joint or Contingent Annuitant, we will pay the death
benefit proceeds to the Beneficiary, if living; otherwise to the Owner or the
Owner's estate. If an Annuitant dies and there is a surviving Joint
Annuitant, the surviving Joint Annuitant becomes the Annuitant. If there is
no surviving Joint Annuitant and there is a Contingent Annuitant, the
Contingent Annuitant becomes the Annuitant. Death benefit proceeds are
payable only for the death of the sole surviving Annuitant prior to the
Annuity Date. If you are the Annuitant and you die, we will determine the
amount of any death benefit
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and the Beneficiary under the Death of Annuitant provisions; and, if your
contract is a Non-Qualified Contract, we will distribute any death benefit
proceeds under the Death of Owner Distribution Rules.
DEATH OF OWNER -- If you are not the Annuitant, and you die before the
Annuitant, the amount of the death benefit will be equal to your Contract
Value as of the Notice Date.
If you die while the Annuitant is living and prior to the Annuity Date, we
will pay the death benefit proceeds to the surviving Joint Owner, if any. If
there is no surviving Joint Owner and there is a Contingent Owner, we will
pay the death benefit proceeds to the surviving Contingent Owner, if any. If
there is no surviving Contingent Owner, the death benefit proceeds will be
paid to the Beneficiary, if living; otherwise to the Owner's estate. If you
are not also the Annuitant, then, in the event the deaths of the Owner and
Annuitant are under circumstances where it cannot be determined who died
first, the Death Benefit will be calculated under the DEATH OF ANNUITANT
provision of this Contract and payment will be made in accordance with the
DEATH OF OWNER provisions of this Contract.
If you are a non-natural Owner of a Contract other than a Contract issued
under a Qualified Plan as defined in Section 401 or 403 of the Code, the
Primary Annuitant will be treated as the Owner of the Contract for purposes
of the DEATH OF OWNER DISTRIBUTION RULES. If there is a change in the Primary
Annuitant prior to the Annuity Date, such change will be treated as the death
of the Owner. The amount of the death benefit will be (a) the Contract Value
if the non-natural Owner elects to maintain the Contract and reinvest the
Contract Value into the Contract in the same amount as immediately prior to
the distribution, or (b) the Contract Value less any annual fee, withdrawal
fee, withdrawal charge, charge for premium taxes and/or other taxes, if the
non-natural Owner elects a cash distribution. The amount of the death benefit
will be determined as of the Business Day we receive, in proper form, the
request to change the Primary Annuitant and instructions regarding
maintaining the Contract or cash distribution.
DEATH OF OWNER DISTRIBUTION RULES -- The following rules will determine when
a distribution must be made under this Contract. These rules do not affect
our determination of the amount of benefit payable or distribution proceeds.
If there is more than one Owner, these rules apply on the date on which the
first of these Joint Owners dies.
If the Owner dies before the Annuity Date, the beneficiary (as that term
applies with respect to an Owner's death) must receive:
-- a lump sum payment; or
-- elect to receive an annuity for life or over a period that does not
exceed the life expectancy of the beneficiary with annuity payments
that start within one year after the Owner's death.
Unless otherwise required by law, an election to receive an annuity (in lieu
of a lump sum payment) must be made within such time-frames as we may
prescribe from time to time, or the lump sum option will be deemed elected
and we will consider that deemed election as receipt of instruction regarding
payment of death benefit proceeds.
If the spouse of the deceased Owner is the sole surviving Beneficiary, or is
the sole surviving Joint or Contingent Owner, and has an unrestricted right
to receive all death benefit proceeds in one lump sum, the spouse may
continue this Contract as Owner rather than receive the death benefit
proceeds, provided that we receive instructions to continue the Contract
within such time-frames as we may prescribe from time to time.
If the Owner dies on or after the Annuity Date, but payments have not yet
been completed, then distributions of the remaining amounts payable under
this Contract must be made at least as rapidly as the rate that was being
used at the date of the Owner's death.
If the Owner is a Non-natural Owner, the rules set forth in these DEATH OF
OWNER DISTRIBUTION RULES apply in the event of the death or change of the
Primary Annuitant. Primary Annuitant means the individual, the events in the
life of whom are of primary importance in affecting the timing or amount of
the payout under the Contract.
This Contract incorporates all provisions of Code Section 72(s) and any
successor provision, as deemed necessary by us to qualify this Contract as an
annuity, including the requirement that if the owner dies
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<PAGE>
before the Annuity Date, any death benefit proceeds under this Contract shall
be distributed within five years of the owner's death (or such other period
that we offer and that is permitted under the Code or such shorter period as
we may require).
These DEATH OF OWNER DISTRIBUTION RULES do not apply to Qualified Contracts
issued under Qualified Plans as defined in Section 401, 403 or 408 of the
Code or to an annuity that is a qualified funding asset as defined in Code
Section 130(d) (but without regard to whether there is a qualified
assignment).
INTEREST ON DEATH BENEFIT PROCEEDS -- If payment of death benefit proceeds is
unduly delayed after the Notice Date, we will pay interest on the proceeds.
Interest will be paid at a rate of not less than 3% per year from the Notice
Date until the proceeds are paid or applied under an Annuity Option. If the
law in the state in which the Contract is issued requires payment of a
greater amount, we will pay that amount.
BENEFICIARY
Your Beneficiary is the person you name who may receive any death benefit
proceeds, or any remaining annuity payments after the Annuity Date, under
your Contract if the Annuitant or Owner dies. If you leave no surviving
Beneficiary, your estate may receive the death benefit proceeds under your
Contract.
If the Beneficiary is a trustee, we will neither be responsible for verifying
a trustee's right to receive any death benefit proceeds payable, nor for how
the trustee disposes of any death benefit proceeds. If before payment of any
death benefit proceeds, we receive proper notice that the trust has been
revoked or is not in effect, then any death benefit proceeds payable will be
paid to the Owner's estate.
ADDING OR CHANGING YOUR BENEFICIARY -- You may add, change, or remove any
Beneficiary, other than an irrevocable Beneficiary, subject to the terms of
any assignment, at any time prior to the death of the Annuitant or Owner, as
applicable, by sending us a request in proper form. However, if you have
named an irrevocable Beneficiary, you may not add any new Beneficiary, or
remove or change the irrevocable Beneficiary, without obtaining his or her
written consent in a form acceptable to us. You may remove any
non-irrevocable Beneficiary without obtaining the consent of the irrevocable
Beneficiary. Qualified Contracts may have additional restrictions on naming
and changing Beneficiaries. Any change or addition will take effect only when
we receive all necessary documents and record the change or addition.
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ANNUITY BENEFITS
CHOICE OF ANNUITY DATE -- Your Annuity Date is shown in the Contract
Specifications. If you did not select an Annuity Date in your application for
this Contract, we assigned an Annuity Date based on the type of this Contract
and the Annuitant's Age (see DEFAULT ANNUITY DATE AND OPTIONS).
You may change your Annuity Date by providing proper notice to us at least
ten (10) Business Days prior to your current Annuity Date or new Annuity
Date, whichever is earlier. Your Annuity Date may not be earlier than your
first Contract Anniversary and must occur on or before the day the younger
Annuitant reaches his or her 95th birthday, or earlier as required by state
law or the Code. You may be subject to additional restrictions under your
Qualified Plan. You should consult with your Qualified Plan administrator
before you elect your Annuity Date.
APPLICATION OF CONTRACT VALUE -- Prior to the Annuity Date, you may elect to
convert all or part of your Net Contract Value, and any charge for premium
taxes and/or other taxes, to any currently offered Annuity Option. You may
also elect a full withdrawal (subject to the terms of the withdrawal
provisions) in lieu of annuity payments under an Annuity Option. Before we
make any full withdrawal, we require return of this Contract (or a signed
Lost Contract Affidavit) to us. The aggregate net amount you convert must be
at least $10,000; otherwise, we reserve the right to pay a single amount
equal to your withdrawal proceeds (see AMOUNT AVAILABLE FOR WITHDRAWALS).
If you convert only a portion of your Net Contract Value on your Annuity
Date, you may, at that time, elect not to have the remainder of your Net
Contract Value distributed, but instead to continue your Contract with that
remaining Contract Value. This option may or may not be available, or may be
available only for certain types of Contracts. If this option is available
and you elect it, you would choose a second Annuity Date for such Contract
Value; all references in this Contract to your Annuity Start Date (or Annuity
Date) would, with regard to such Contract Value, be deemed to refer to that
second Annuity Date. You should call your tax adviser for more information if
you desire this option.
YOUR SELECTIONS -- Prior to the Annuity Date, you may make three selections
about the annuity payments. First, you may choose whether you want those
payments to be a fixed-dollar amount or a variable-dollar amount, or both.
Second, you may choose the form of annuity payments (Annuity Option). Third,
you may choose to have annuity payments made monthly, quarterly,
semiannually, or annually.
The first annuity payment on the Annuity Date will be sent on the day
following the Annuity Date and must be at least $250. We may reduce your
payment frequency if the first annuity payment is less than $250. If you
elect annuity payments for a Period Certain Only, we also reserve the right
to reduce the Period Certain to meet the $250 minimum first payment. After
the Annuity Date, you may not change the Annuity Option, or surrender the
Contract for payment of amounts converted into a variable annuity and/or
fixed annuity.
FIXED AND VARIABLE ANNUITIES -- You may choose a fixed annuity (with
fixed-dollar payments), a variable annuity (with variable-dollar payments),
or you may choose a combination of both. If you select a variable annuity,
you may choose any Subaccounts for your annuity. If you select a variable
annuity, on your Annuity Date, we will transfer that portion of your Net
Contract Value that you indicate to the Subaccount(s) you choose. We will
apply the net amount you convert to a fixed annuity and/or a variable annuity
(and in this instance, to each Subaccount), based on your relative Account
Value in each Investment Option on the Annuity Date. Any net amount you
convert to a fixed annuity will be held in our General Account (but not under
the Fixed Option or the DCA Plus Fixed Option).
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Each periodic payment under the fixed annuity will be equal to the amount of
your first fixed annuity payment (unless you elect a joint and survivor life
annuity with reduced survivor payments). The amount of each variable annuity
periodic payment will vary with the investment results of the Subaccount(s)
you select. After the Annuity Date, you may exchange the Annuity Units in any
Subaccount(s) for Annuity Units in any other Subaccount(s) up to four times
in any twelve month period. We reserve the right to limit the Subaccounts
available, to change the number and frequency of exchanges, and to change the
number of Subaccounts you may choose.
In choosing an Annuity Option, you must submit your Option request to us in
proper form.
ANNUITY OPTIONS -- The following forms of annuity payments are available
under this Contract. Additional options may become available in the future:
Option 1: Life Only. Periodic payments are made to the designated payee
during the Annuitant's lifetime. Payments stop when the Annuitant
dies.
Option 2: Life with Period Certain. Periodic payments are made to the
designated payee during the Annuitant's lifetime, with payments
guaranteed for a specified period. You may choose to have payments
guaranteed from 5 through 30 years (in full years only). If the
Annuitant dies before the guaranteed payments are completed, we pay
the Beneficiary the remainder of the guaranteed payments.
Option 3: Joint and Survivor Life. Periodic payments are made during the
lifetime of the Primary Annuitant. After the death of the Primary
Annuitant, periodic payments are based on the life of the
secondary Annuitant named in the election if and so long as such
secondary Annuitant lives. Payments made based on the life of the
secondary Annuitant may be in installments equal to 50%, 66-2/3% or
100% (as specified in the election) of the original payment amount
payable during the lifetime of the Primary Annuitant. If you
elect a reduced payment based on the life of the secondary
Annuitant, fixed annuity payments will be equal to 50% or 66-2/3%
of the original fixed payment payable during the lifetime of the
Primary Annuitant; variable annuity payments will be determined
using 50% or 66-2/3%, as applicable, of the number of Annuity
Units for each Subaccount credited to the Contract. Payments stop
when both Annuitants have died.
Option 4: Period Certain Only. Periodic payments are made over a specified
period. You may choose to have payments continue from 5 through 30
years (in full years only). If the Annuitant dies before the
guaranteed payments are completed, we pay to the Beneficiary the
remainder of the guaranteed payments.
DEFAULT ANNUITY DATE AND OPTIONS -- If you did not choose an Annuity Date
when you submitted your application for this Contract, your Annuity Date is
the Annuitant's 95th birthday. If there are Joint Annuitants, the Annuity
Date will be based on the younger Annuitant's birthday, unless otherwise
required by law.
If you do not elect an Annuity Option, your Net Contract Value, and any
charge for premium taxes and/or other taxes, when converted, will, subject to
our minimum requirements, be converted as follows:
-- the net amount from your Fixed Option Value or DCA Plus Fixed
Option will be converted to a fixed annuity and held in our
General Account, and
-- the net amount from your Variable Account Value will be applied to
a variable annuity and applied to the Subaccounts in proportion to
your Account Value in each Subaccount on the Annuity Date.
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If this is a Non-Qualified Contract, or a Qualified Contract and you are not
married, your Annuity Option will be Life with 10 Year Period Certain. If
this is a Qualified Contract and you are married, your Annuity Option will be
Joint and Survivor Life, with survivor payments of 50%, and your spouse will
automatically be named as the secondary Annuitant. If you do not elect your
frequency of payments, we will make payments based on our most frequent
schedule that results in an initial annuity payment of at least $250.
AMOUNT OF PAYMENTS -- The first annuity payment amount depends on the form of
annuity, the payment frequency you select, and whether you select a fixed
annuity and/or a variable annuity. If you do not choose the Period Certain
Only Option, the amount will depend on the Age of the Annuitant(s), the
Annuity Date, and the sex of the Annuitant(s), unless unisex factors apply.
FIXED ANNUITY PAYMENTS -- The minimum guaranteed income purchased per $1,000
of the net amount applied to a fixed annuity is based on an annual interest
rate of 3% and the 1983a Mortality Table with the ages set back ten (10)
years.
CONVERSION TO CURRENT RATES -- The annuity payments made will be based on the
greater of:
-- our current income factors in effect for this Contract on your
Annuity Date; or
-- our guaranteed income factors.
The dollar amount of any payments after the first annuity payment is
specified during the annuity payment period according to the provisions of
your elected Annuity Option.
VARIABLE ANNUITY PAYMENTS -- YOUR SUBACCOUNT ANNUITY UNITS. For each
Subaccount, we divide the amount of the initial variable annuity payment from
each Subaccount by the Annuity Unit Value for that Subaccount (the "Annuity
Unit Value") on the Annuity Date, to obtain the number of Annuity Units for
that Subaccount. The number of your Annuity Units in each Subaccount will not
change unless exchanges of Annuity Units are made (or if the Joint and
Survivor Annuity option is elected and the Primary Annuitant dies first), but
the Annuity Unit Value of those Annuity Units will vary.
YOUR SUBSEQUENT VARIABLE PAYMENTS. The amount of each subsequent variable
annuity payment will be the sum of the amounts payable based on your Annuity
Units in each Subaccount. To determine the amount payable for each
Subaccount, we multiply the number of your Annuity Units in that Subaccount
by their Annuity Unit Value on the day in each payment period that
corresponds to the Annuity Date.
ANNUITY UNIT VALUE -- The initial Annuity Unit Value for each Subaccount was
arbitrarily set at $10 on the Business Day the Subaccount began operations.
At the end of each subsequent Business Day, the Annuity Unit Value for each
Subaccount is equal to (A x B) x C where:
(A) is the Subaccount's Annuity Unit Value for that Subaccount as of the
end of the prior Business Day;
(B) is the Net Investment Factor for that Subaccount for that valuation
period; and
(C) is an interest factor to offset the effect of the assumed interest rate
of 5% per year, which is built into the Annuity Option Tables.
We generally calculate the Annuity Unit Value of each Subaccount at or about
4:00 p.m., Eastern time, on each day the New York Stock Exchange is open,
provided our administrative offices are also open that day.
We guarantee that the amount of each subsequent annuity payment will not be
affected by variations in our expenses or in mortality experience.
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PERIODIC PAYMENTS -- The first payment under these Options will be determined
on the Annuity Date and will be made on the day following the Annuity Date.
For a Designated Beneficiary entitled to a death benefit due to the death of
the Annuitant, the first payment will be made on the first day of the
calendar month, or earlier at our option, next following the day we receive
due proof of the Annuitant's death and instructions regarding payment,
(called the "Payment Start Date"), and such other documentation as we may
require. Subsequent payments will be determined on the day in each payment
period that corresponds to the Payment Start Date and will be made on the
following day.
MISSTATEMENT OF AGE OR SEX -- We may require proof of the Annuitant's Age and
sex before starting annuity payments. If the Age or sex (or both) of the
Annuitant are incorrectly stated in this Contract, we will correct the amount
payable to equal the amount that the Net Contract Value, and any charge for
premium taxes and/or other taxes, under this Contract would have purchased
for the Annuitant's correct Age and sex, if applicable. If we make the
correction after annuity payments have started, and we have made
overpayments, we will deduct the amount of the overpayment, with interest at
3% per year, from any payments due then or later. If we have made
underpayments, we will add the amount, with interest at 3% a year, of the
underpayments to the next payment we make after we receive proof of the
correct sex and/or date of birth.
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ANNUITY OPTION TABLES
For the fixed annuity option and the initial variable annuity benefit, the
Tables below illustrate the minimum guaranteed monthly income purchased per
$1,000 of the net amount applied. The actuarial basis for the fixed annuity
option Tables is the 1983a Annuity Mortality Table with the ages set back ten
(10) years with interest at an annual rate of 3%. The Tables also illustrate
the minimum rates for the first monthly variable annuity payment per $1,000
of the net amount applied to the variable annuity payment option. The rates
for variable annuity payments are based on interest at the annual rate of 5%
and the 1983a Annuity Mortality Table with the ages set back ten (10) years.
Subsequent payments may be higher or lower than the first payment, based on
the investment performance of the Subaccount(s) you elect and whether you
exchange Subaccount Annuity Units.
These Tables provide for sex-distinct and unisex payment income factors for
life payment options. For some Qualified Plans and in some states, the use of
sex-distinct income factors are prohibited. For those Qualified Plans and in
those states, we use blended unisex income factors for life payment options,
whether the Annuitant is male or female.
We will provide rates for any payment frequency, interest rate, age or sex,
combinations thereof, and/or payout percentage or any annuity option, if
applicable, that we offer if they are not shown in the Tables that follow.
Annuity benefits will not be less than those that would be provided by the
application of an amount to purchase any single consideration immediate
annuity offered by the Company at the time annuity payments commence.
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OPTIONS 1 AND 2 -- SINGLE LIFE ANNUITIES WITH GUARANTEED PAYMENTS FOR:
<TABLE>
<CAPTION>
Fixed Annuity Rates
-----------------------------------------------------------------------------------------------------------
Male at 3% Female at 3% Unisex at 3%
---------------------- ---------------------- ----------------------
Age None 10 Yr. 20 Yr. None 10 Yr. 20 Yr. None 10 Yr. 20 Yr.
--- ---- ----- ----- ---- ----- ------ ---- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30 3.04 3.03 3.03 2.93 2.93 2.93 2.99 2.98 2.98
35 3.14 3.14 3.13 3.02 3.02 3.01 3.08 3.08 3.07
40 3.28 3.27 3.26 3.13 3.12 3.12 3.20 3.20 3.19
45 3.44 3.44 3.41 3.26 3.26 3.24 3.35 3.35 3.33
50 3.66 3.64 3.60 3.42 3.42 3.40 3.54 3.54 3.50
55 3.93 3.90 3.82 3.63 3.63 3.59 3.78 3.77 3.71
60 4.27 4.22 4.08 3.90 3.89 3.82 4.09 4.06 3.96
65 4.70 4.62 4.39 4.25 4.22 4.11 4.48 4.43 4.25
70 5.28 5.14 4.71 4.72 4.66 4.44 5.00 4.90 4.58
75 6.10 5.81 5.02 5.35 5.22 4.79 5.73 5.52 4.92
80 7.23 6.61 5.27 6.25 5.96 5.12 6.74 6.30 5.20
85 8.82 7.49 5.42 7.56 6.89 5.35 8.18 7.20 5.39
90 11.06 8.33 5.49 9.53 7.89 5.47 10.28 8.12 5.48
95 14.16 8.97 5.51 12.48 8.74 5.50 13.30 8.86 5.51
</TABLE>
<TABLE>
<CAPTION>
Variable Annuity Rates
-----------------------------------------------------------------------------------------------------------
Male at 5% Female at 5% Unisex at 5%
---------------------- ---------------------- ----------------------
None 10 Yr. 20 Yr. None 10 Yr. 20 Yr. None 10 Yr. 20 Yr.
---- ----- ----- ---- ------ ------ ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30 4.38 4.37 4.36 4.29 4.29 4.29 4.34 4.33 4.33
35 4.46 4.46 4.44 4.36 4.35 4.35 4.41 4.41 4.40
40 4.57 4.56 4.54 4.44 4.44 4.42 4.51 4.50 4.49
45 4.71 4.70 4.67 4.55 4.54 4.52 4.63 4.62 4.60
50 4.91 4.89 4.82 4.69 4.68 4.65 4.80 4.78 4.74
55 5.16 5.12 5.02 4.87 4.86 4.81 5.02 4.99 4.92
60 5.48 5.41 5.24 5.12 5.09 5.01 5.30 5.26 5.13
65 5.89 5.79 5.51 5.44 5.40 5.26 5.67 5.60 5.39
70 6.46 6.28 5.80 5.89 5.80 5.55 6.18 6.05 5.68
75 7.27 6.91 6.08 6.51 6.34 5.87 6.89 6.64 5.98
80 8.41 7.68 6.29 7.39 7.05 6.16 7.90 7.38 6.23
85 10.02 8.52 6.43 8.72 7.93 6.37 9.36 8.24 6.40
90 12.29 9.30 6.49 10.71 8.88 6.47 11.49 9.10 6.48
95 15.42 9.90 6.51 13.70 9.68 6.50 14.55 9.80 6.51
</TABLE>
26
<PAGE>
OPTION 3 -- JOINT AND 50% SURVIVOR LIFE
Primary Annuitant
Male Age
<TABLE>
<CAPTION>
60 65 70 75 80 85
---------------- --------------- ---------------- ---------------- ---------------- ----------------
3% 5% 3% 5% 3% 5% 3% 5% 3% 5% 3% 5%
Fixed Variable Fixed Variable Fixed Variable Fixed Variable Fixed Variable Fixed Variable
----- -------- ----- -------- ----- -------- ----- -------- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
60 3.91 5.12 4.13 5.34 4.39 5.60 4.69 5.92 5.02 6.30 5.38 6.73
Female 65 3.99 5.19 4.25 5.43 4.54 5.73 4.88 6.09 5.26 6.51 5.67 6.98
Age 70 4.06 5.25 4.36 5.53 4.70 5.87 5.10 6.27 5.55 6.75 6.03 7.29
75 4.12 5.31 4.46 5.62 4.85 6.00 5.32 6.47 5.86 7.03 6.45 7.66
80 4.17 5.36 4.54 5.70 4.98 6.13 5.54 6.67 6.18 7.33 6.91 8.08
85 4.21 5.40 4.60 5.77 5.09 6.24 5.72 6.86 6.49 7.63 7.40 8.54
</TABLE>
Primary Annuitant
Unisex Age
<TABLE>
<CAPTION>
60 65 70 75 80 85
---------------- --------------- ---------------- ---------------- ---------------- ----------------
3% 5% 3% 5% 3% 5% 3% 5% 3% 5% 3% 5%
Fixed Variable Fixed Variable Fixed Variable Fixed Variable Fixed Variable Fixed Variable
----- -------- ----- -------- ----- -------- ----- -------- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
60 3.84 5.05 4.07 5.27 4.34 5.54 4.65 5.86 5.00 6.24 5.39 6.69
Unisex 65 3.90 5.10 4.17 5.35 4.47 5.65 4.83 6.01 5.23 6.44 5.68 6.94
Age 70 3.96 5.15 4.25 5.43 4.60 5.76 5.02 6.17 5.49 6.66 6.03 7.24
75 4.00 5.19 4.32 5.49 4.72 5.87 5.20 6.34 5.76 6.91 6.41 7.58
80 4.03 5.23 4.38 5.55 4.81 5.96 5.36 6.49 6.02 7.15 6.81 7.96
85 4.05 5.25 4.42 5.59 4.88 6.04 5.49 6.62 6.25 7.38 7.20 8.33
</TABLE>
OPTION 4 -- PERIOD CERTAIN ONLY
<TABLE>
<CAPTION>
Monthly Monthly Monthly Monthly
Income Income Income Income
------------------ ---------------- ---------------- ---------------
3% 5% 3% 5% 3% 5% 3% 5%
Years Fixed Variable Years Fixed Variable Years Fixed Variable Years Fixed Variable
-------------------------- ---------------------- ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5 17.91 18.74 12 8.24 9.16 19 5.73 6.71 26 4.59 5.65
6 15.14 15.99 13 7.71 8.64 20 5.51 6.51 27 4.47 5.54
7 13.16 14.02 14 7.26 8.20 21 5.32 6.33 28 4.37 5.45
8 11.68 12.56 15 6.87 7.82 22 5.15 6.17 29 4.27 5.36
9 10.53 11.42 16 6.53 7.49 23 4.99 6.02 30 4.18 5.28
10 9.61 10.51 17 6.23 7.20 24 4.84 5.88
11 8.86 9.77 18 5.96 6.94 25 4.71 5.76
</TABLE>
27
<PAGE>
"DRAFT"
[LOGO]
700 Newport Center Drive
Newport Beach, CA 92660
QUALIFIED PLAN LOAN ENDORSEMENT
This Endorsement is part of your Contract and should be attached to it. All
terms of the Contract which do not conflict with this Endorsement's terms apply
to this Endorsement. In the event of any conflict between the terms of this
Endorsement and the terms of the Contract, the terms of this Endorsement shall
prevail over the terms of the Contract.
Adverse tax consequences may result if you fail to meet the repayment
requirements for your loan. The tax and ERISA rules relating to Contract loans
are complex and in many cases unclear. For these reasons, and because the rules
vary depending on the individual circumstances of each Contract, WE ADVISE THAT
YOU CONSULT WITH A QUALIFIED TAX ADVISER before exercising the loan provisions
of your Contract.
CONTRACT LOANS
If your Contract is issued under a Qualified Plan under code Section 401 or 403
and your Qualified Plan permits, you may request a loan using your Contract
Value as the only security.
LOAN PROCEDURES - Your loan request must be submitted on our Loan Request Form.
You may submit a loan request at any time after your first Contract Anniversary
and before your Annuity Date however, before requesting a new loan, you must
wait thirty (30) days after the last payment of a previous loan. If approved,
your loan will usually be effective as of the end of the Business Day on which
we receive all necessary documentation in proper form. We will normally forward
proceeds of your loan to you within seven calendar days after the effective date
of your loan. A $100 loan administrative fee will be deducted from your loan
proceeds; however, we reserve the right to increase this fee up to a maximum of
$500.
LOAN ACCOUNT - On the effective date of your loan, we will transfer an amount
equal to the principal amount of your loan into an account called the Loan
Account. We will transfer amounts to the Loan Account on a prorata basis from
your Fixed and Variable Investment Options based on your Account Value in each.
We will credit interest on amounts in the Loan Account at a rate equal to an
annual rate that is two percentage points lower than the annual loan interest
rate charged on your loan. Interest earned will accrue daily beginning on the
day following the effective day of the loan. The interest credited will be
transferred from the Loan Account to your Fixed and Variable Investment Options
once per year on a prorata basis relative to your most recent allocation
instructions. As your loan is repaid, the amount of the repayment will be
transferred from the Loan Account to your Fixed and Variable Investment Options
on a prorata basis relative to your most recent allocation instructions.
LOAN TERMS - You may have only one loan outstanding at any time. The minimum
loan amount is $1,000 and the maximum loan amount is the lesser of:
- 50% of your Contract Value;
- $50,000 less your highest outstanding Contract Debt during the
12-month period immediately preceding the effective date of your loan.
You should refer to the terms of your particular Qualified Plan for any
additional loan restrictions. If you have other loans outstanding pursuant to
other Qualified Plans, the amount you may borrow may be further restricted.
LOAN INTEREST RATE - You will be charged interest on your Contract Debt at an
annual rate, set at the time the loan is made, equal to the higher of 5% or the
Moody's Corporate Bond Yield Average-Monthly Corporates, as published by Moody's
Investors Service, Inc., or its successor,
1
<PAGE>
for the calendar month ending two months before the date on which the rate is
determined. In the event that the Moody's Corporate Bond Yield Average Monthly
Corporates is no longer available, we will use a substantially similar average,
subject to compliance with applicable state regulations. Interest charged will
accrue daily beginning on the day your loan is effective. We will notify you of
the loan interest rate when you make a Contract loan.
REPAYMENT TERMS - You must repay principal and interest of any loan within five
years after its effective date. If you have certified to us that your loan
proceeds will be used to acquire a principal residence for yourself, you may
request a loan for up to thirty years. In either case, you must repay your loan
in full prior to your Annuity Date.
Your loan, including principal and accrued interest, must be repaid in quarterly
installments that are substantially level. An installment will be due each
quarter on the date corresponding to your loan effective date, beginning with
the first such date following the effective date of your loan. You may prepay
your loan at any time; if you do so, we will bill you for any accrued interest.
You loan will be considered repaid only when the interest due has also been
paid. Subject to any necessary approval of state insurance authorities, we will
treat all payments you send us as Purchase Payments unless you specifically
indicate that your payment is a loan repayment. To the extent allowed by law,
any repayment in excess of the amount then due will be refunded to you, unless
such amount is sufficient to pay the balance of your loan. Repayments received
that are less than the amount then due will be returned to you, unless otherwise
required by law.
If a loan repayment is not made when due, we will declare the entire remaining
loan balance in default. At that time, we will send written notification of the
amount needed to bring the loan back to a current status. You will have sixty
(60) days from the date on which the loan was declared in default (the "grace
period") to make the required repayment.
If the required repayment is not received by the end of the grace period, the
defaulted loan balance plus accrued interest will be repaid by a withdrawal from
your Contract Value to the extent that such values are then eligible for
distribution. In order for an amount to be eligible for distribution from a
Qualified Plan you must meet one of six triggering events. They are: attainment
of age 591/2, separation from service, death, disability, plan termination, and
financial hardship. To the extent such values are not then eligible for
distribution, the defaulted loan balance plus accrued interest will be
considered a "Deemed Distribution" and that portion of any Contract Value needed
to repay the Contract Debt will be withdrawn when such Contract Values become
eligible for distribution. The withdrawal will be subject to the withdrawal
charge.
If there is a "Deemed Distribution" under your Contract, any future withdrawals
will first be applied as repayment of the defaulted Contract Debt, including
accrued interest and withdrawal charges and charges for applicable taxes, to the
extent allowed by law. Any amounts withdrawn and applied as repayment of
Contract Debt will be withdrawn first from your Loan Account and then from your
Investment Options on a proportionate basis relative to the Account Value in
each Investment Option. If you have an outstanding loan that is in default, the
defaulted Contract Debt will be considered a withdrawal for the purpose of
calculating any death benefit proceeds payable under this Contract.
The terms of any such loan are intended to qualify for the exception in Code
Section 72(p)(2) so that the distribution of the loan proceeds will not
constitute a distribution that is taxable to you. To that end, these loan
provisions will be interpreted to ensure and maintain such tax qualification,
despite any other provisions to the contrary. We reserve the right to amend your
Contract to reflect any clarifications that may be needed or are appropriate to
maintain such tax qualification or to conform any terms of our loan arrangement
with you to any applicable changes in the tax qualification requirements. We
will send you a copy of any such amendment. If you refuse such an amendment, it
may result in adverse tax consequences to you.
2
<PAGE>
Adverse tax consequences may result if you fail to meet the repayment
requirements of you loan. A "Deemed Distribution" may be considered a currently
taxable distribution, and may be subject to federal tax withholding and a
federal early withdrawal penalty tax, regardless of when such unpaid amounts are
repaid. The tax and other Qualified Plan rules relating to Contract loans are
complex and in many cases unclear. For these reasons, and because the rules vary
depending on the individual circumstances of each Contract, we advise that your
consult with a qualified tax adviser before exercising the loan provisions of
your Contract.
SIGNED FOR PACIFIC LIFE & ANNUITY COMPANY,
/s/ William L. Farris, /s/ Audrey L. Milfs
President and Chief Executive Officer Secretary
3
<PAGE>
"DRAFT"
[LOGO]
700 Newport Center Drive
Newport Beach, CA 92660
QUALIFIED PENSION PLAN RIDER
This rider is a part of the Contract to which it is attached by Pacific Life &
Annuity Company ("PL&A").
The Contract is hereby modified as specified below in order to comply with the
requirements for Qualified Retirement Plans, as described in Section 401(a)(2)
of the Internal Revenue Code of 1986 (the "Code") as amended.
THE PROVISIONS OF SECTIONS 1-9 OF THIS RIDER SHALL TAKE EFFECT ONLY IF THE
ANNUITANT IS, OR BECOMES, THE OWNER OF THE CONTRACT (THE "OWNER").
DEFINITIONS
ANNUITANT - is an individual named to receive periodic annuity payments
purchased under this Contract.
ANNUITY START DATE - is the date you choose to have PL&A begin periodic annuity
payments to the Annuitant. The Annuity Start Date may be no later than April 1
of the calendar year following the year in which the Annuitant reaches age
70 1/2.
DESIGNATED BENEFICIARY - is any individual designated as a beneficiary under the
Plan by the Annuitant. If a person other than an individual (or a trust that
satisfies the conditions stated in proposed regulations section
1.401 (a)(9)-1,D-5 is designated a Beneficiary, or if the plan permits any
person to change the Annuitant's beneficiaries after his or her death, other
than a designation made by the surviving spouse for distributions after the
spouse's death, the Annuitant will be treated as having no Designated
Beneficiary.
PLAN - means the qualified retirement plan under the Code pursuant to which this
Contract is issued.
REGULATION - means a U.S. Treasury regulation interpreting the Code.
YOU - means the Owner of the Contract.
The provisions of this rider will control if in conflict with those of the
Contract. Notwithstanding any provisions of the Contract to the contrary:
1. Automatic Form of Payment at the Annuity Start Date.
If the Annuitant is married at the Annuity Start Date and an optional
form of benefit is not timely selected as of such date, payments will
be made in the form of a Joint and 50% Survivor Annuity, with the
Annuitant's spouse as the joint Annuitant. Under this form, payments
will be made during the lifetime of the Annuitant and, following the
Annuitant's death, payments equal to 50% of the original payment
amount will continue to the spouse for life.
2. Required Beginning Date and Minimum Distribution Requirements
In accordance with the requirements of the Code, distribution of the
entire interest should be made not later than the April 1 following
the close of the calendar year in which the Annuitant attains age
70-1/2. (the "Required Beginning Date".)
Alternatively, if distribution of the entire interest commences not
later than the Required Beginning Date, such distribution may be made
in equal or substantially equal amounts, in annual or more frequent
installments, over
1
<PAGE>
(a) the Annuitant's life or the lives of the Annuitant and his or her
Designated Beneficiary, or
(b) a period not extending beyond the Annuitant's life expectancy or
the joint and last survivor life expectancy of the Annuitant and
his or her Designated Beneficiary.
The method of distribution selected must also meet the "minimum
distribution incidental benefit" rule of Code Section 401(a)(9) and
proposed Regulation Section 1.401(a)(9)-2. This requires that:
(a) where the Annuitant's only Designated Beneficiary is the spouse,
the minimum amount that must be distributed in a distribution
calendar year is the amount determined under the regular minimum
distribution requirements above in this Section 4.
(b) where non-increasing payments are to be made under an annuity
Contract purchased on or before the Annuitant's Required
Beginning Date and the Annuitant's spouse is not the Designated
Beneficiary, the minimum amount that must be distributed is
determined as follows:
- Period certain annuity without a life contingency: The period
certain may not exceed the maximum period specified in Regulation
Section 1.401 (a)(9)-2, Q&A-5.
- Life annuity: A life annuity on the Annuitant's life which
satisfies the regular minimum distribution requirements satisfies
the "minimum distribution incidental benefit" rule.
- Joint and survivor annuity: The periodic annuity payment to the
survivor under a joint and survivor annuity, may not exceed the
applicable percentage of the annuity payment to the Annuitant, as
provided in proposed Regulation Section 1.401 (a)(9)-2, Q&A-6(b).
- Life annuity with period certain: The distribution must satisfy
the requirements for a single life (or joint and survivor)
annuity as well as for a period certain, as provided in proposed
Regulation Section 1.40 (a)(9)-2, Q&A-6(c).
Only a method of distribution offered by PL&A that satisfies these
conditions can be selected. You must make this selection before the
end of the calendar year in which you attain age 70 1/2.
3. Beneficiary for Death Benefit Proceeds Prior to Annuity Start Date
If the Annuitant dies prior to the Annuity Start Date and is married
at the date of death, the Death Benefit Proceeds will be paid to the
surviving spouse, unless the Annuitant names another beneficiary and
such spouse consents in writing to such designation. Such spouse's
consent must be witnessed by a notary public. For this purpose, the
consent of an individual who was married to the Annuitant at the time
consent was given but is not married to the Annuitant at the date of
death will not be considered the consent of the surviving spouse.
If the Annuitant is not legally married at the date of death, or
designates (as provided above) someone other than the surviving spouse
as the Designated Beneficiary, the Death Benefit Proceeds shall be
paid to the Designated Beneficiary.
4. Payment of Death Benefit
On the death of the Annuitant, payment shall be made in accordance
with the Annuity option provisions described in the Contract or as
provided for by the Plan. However, selection of an annuity option that
does not satisfy the conditions of this Section 4 set out below shall
not be permitted.
(a) Death Before the Annuity Start Date
2
<PAGE>
If the Annuitant dies before distribution of his or her interest in
the Contract commences, the entire interest must be distributed by
December 31st of the fifth full year which follows the Annuitant's
death unless (i) such interest is paid in equal or substantially equal
installments over a period not exceeding the lifetime or life
expectancy of the Designated Beneficiary, and (ii) payments begin by
December 31st of the calendar year which follows the Annuitant's
death. If the Designated Beneficiary of the Annuitant is the
Annuitant's surviving spouse, the spouse may elect to receive equal or
substantially equal payments over the life or life expectancy of the
surviving spouse commencing at any date prior to the close of the
calendar year in which the deceased Annuitant would have attained age
70 1/2, if later. The surviving spouse may accelerate these payments
at any time, i.e., increase the frequency or amount of such payments.
However, if the spouse elects to receive the entire interest as a lump
sum, such amount must be received by December 31st of the fifth full
year which follows the Annuitant's death.
If the surviving spouse dies before payments begin, subsequent
distributions shall be made as if the spouse had been the Annuitant.
In such event, the rules in this Section 6 apply using the date of
death of the surviving spouse rather than that of the Annuitant.
(b) Death After the Annuity Start Date
If the Annuitant dies after distribution of his or her interest in the
plan has commenced, the remaining interest will be distributed at
least as rapidly as under the method of distribution in effect at the
time of the Annuitant's death.
(c) Trustee Owned Contracts
While this Contract is owned by the trustee of a plan described in
section 401 (a) of the Code, the provisions of this Section may not
apply.
5. Withdrawal or Loan of Annuity Value Before the Annuity Start Date
If the Annuitant is married, withdrawal or loan of all or a portion of
the annuity value prior to the Annuity Start Date will be permitted
subject to the consent of the spouse. Such consent must be in writing
and must be witnessed by a notary public.
If the Annuitant is not married, withdrawal will be permitted subject
to written notice to PL&A that the Annuitant is not married. The term
"Annuity Value" as used in this rider shall mean the appropriate value
described in the Contract that the Contract Owner is entitled to
withdraw or borrow.
6. Nontransferable
No benefits under this Contract may be transferred, sold, alienated,
assigned, discounted, subject to garnishment or execution, or pledged
as collateral for a loan, or as security for the performance of an
obligation or for any other purpose, to any person other than to PL&A,
except as may be provided by a Qualified Domestic Relations Order
within the meaning of Section 414 of the Code.
7. Change of Annuitant
The Owner shall not be permitted to change the Annuitant.
8. Tax Qualification
The Contract as amended by this rider is intended to qualify as part
of a tax-qualified retirement plan, arrangement or contract that meets
the requirements of Code Section 401(a) [and any applicable
regulations relating thereto]. To that end, the provisions of this
rider and the Contract
3
<PAGE>
(including any other rider or endorsement) are to be interpreted to
ensure or maintain such tax qualification, notwithstanding any other
provision to the contrary.
PL&A reserves the right to amend this rider to comply with future
changes in the Code and any regulations or rulings issued under the
provisions of the Code. PL&A shall provide the Owner of the Contract
with a copy of any such amendment.
SIGNED FOR PACIFIC LIFE & ANNUITY COMPANY,
/s/ William L. Farris, /s/ Audrey L. Milfs
President and Chief Executive Officer Secretary
4
<PAGE>
"DRAFT"
[LOGO]
700 Newport Center Drive
Newport Beach, CA 92660
403 (b) TAX-SHELTERED ANNUITY RIDER
This rider is a part of the Contract to which it is attached by PL&A.
The contract under which it has been issued is hereby modified as specified
below in order to qualify as a Tax-Sheltered Annuity ("TSA") under Section
403(b) of the Internal Revenue Code of 1986, as amended (the "Code").
The provisions of this rider will take precedence over any contrary provisions
of the Contract.
DEFINITIONS
ANNUITANT - is an individual named as a measuring life for periodic payments
under this Contract.
ANNUITY START DATE - is the date you choose to have PL&A begin periodic annuity
payments to the Annuitant. The Annuity Start Date may be no later than April 1
of the calendar year following the year in which the Annuitant reaches age
70 1/2.
CONTINGENT ANNUITANT - is an individual who is designated as a successor
Annuitant when the Annuitant dies. Absent a contrary indication by the Owner at
such time, any individual Owner shall be a Contingent Annuitant.
CONTINGENT OWNER - is an individual who is designated as a successor Owner when
the Owner dies.
DESIGNATED BENEFICIARY - is an individual designated as a beneficiary by the
Owner.
YOU - is the Owner of the Contract.
TAX-SHELTERED ANNUITY PROVISIONS
To ensure treatment as a TSA, this Contract will be subject to the requirements
of Code Section 403(b), which include the following:
1. The Owner's rights under this Contract shall be nonforfeitable.
2. The Contract may not be transferred, sold, assigned, or pledged as
collateral for a loan, or as security for the performance of an obligation,
or for any other purpose, to any person other than PL&A.
3. Premiums paid pursuant to a salary reduction agreement and applied to this
Contract under a "plan" (within the meaning of Code Section 403(b)) are
subject to the annual limitation on "elective deferral" contributions under
Code Section 401(a)(30) and Section 402(q)(1) for the applicable year.
4. Premiums applied to this Contract which exceed the applicable "exclusion
allowance" (within the meaning of Code Section 403(b)(2)) may not be
excludable from gross income.
5. Distributions attributable to premiums made pursuant to a salary reduction
agreement may be made only when the Owner attains age 59 1/2, separates
from service, dies, becomes "disabled" (within the meaning of Code Section
72(m)(7)) or incurs a hardship. A distribution made due to a hardship is
limited to premiums and may not include income thereon.
<PAGE>
6. If the Owner is married on the Annuity Start Date, a joint and survivor
annuity for the Owner and his spouse will be selected automatically as a
settlement option as of such date if no other option has been timely [and
validly] elected as of such date.
7. Distributions from this Contract must comply with the minimum
distribution and incidental death benefit rules of Code Section
401(a)(9). Accordingly, the entire interest under the Contract must be
distributed:
(a) not later than the April 1 next following the close of the
calendar year in which the Owner attains age 70 1/2 (the
"Required Beginning Date"), or
(b) commencing not later than the Required Beginning Date over the
life of the Owner or over the lives of the Owner and his or her
Designated Beneficiary (or over a period not extending beyond the
life expectancy of the Owner or the life expectancy of the Owner
and his or her Designated Beneficiary).
In addition, if the Owner dies before distribution of his or her
interest in the Contract has begun in accordance with paragraph
(b) above, the Owner's entire interest must be distributed within
five years, unless (i) such interest is distributed to a
Designated Beneficiary over his or her life (or over a period not
extending beyond such Designated Beneficiary's life expectancy)
and (ii) such distribution begins not later than one year after
the Owner's death. If the Designated Beneficiary is the Owner's
surviving spouse, the date on which the distributions are
required to begin shall not be earlier than the date on which the
Owner would have attained age 70 1/2.
For purposes of this Section 5 above, life expectancy is computed
by use of the expected return multiples in Table V and VI of
Regulation Section 1.72-9. For purposes of distributions
beginning after the Owner's death, unless otherwise elected by
the Owner's surviving spouse by the time distributions are
required to begin, life expectancies shall be recalculated
annually. Such election shall be irrevocable as to such spouse
and shall apply to all subsequent years. In the case of any other
Designated Beneficiary, life expectancies shall be calculated
using the attained age of such Beneficiary during the calendar
year in which distributions are required to begin pursuant to
this section, and payments for any subsequent calendar year shall
be calculated based on such life expectancy reduced by one for
such calendar year which has elapsed since the calendar year life
expectancy was first calculated.
If the Owner dies after distribution of his or her interest in
the Contract has begun in accordance with paragraph (b) above but
before his or her entire interest has been distributed, the
remaining interest will be distributed at least as rapidly as
under the method of distribution being used immediately prior to
the Owner's death.
All distributions must comply with a method of distribution
offered by PL&A under this Contract. In addition, all minimum
distributions required under Code Section 401(a)(9) must comply
with the proposed Treasury Regulation section 1.403(b)-2.
8. If the Owner Annuitant is eligible to receive a distribution from
this Contract that qualifies as an "eligible rollover
distribution" (within the meaning of Code Section 402(f)(2)(A))
and elects to have such distribution paid directly to an
"eligible retirement plan" (within the meaning of Code Section
402(c)), such distribution shall be paid directly to the eligible
retirement plan. PL&A may establish reasonable administrative
rules applicable to such direct transfers.
MISCELLANEOUS PROVISIONS
1. This rider is intended to qualify the contract as a Code Section
403(b) tax-sheltered annuity contract for federal income tax
purposes. To that end, the provisions of this rider are to be
interpreted to ensure or maintain such tax qualification,
notwithstanding any other provision to the contrary. PL&A
reserves the right to amend this rider to comply with future
changes in the Code, any regulations or rulings issued thereunder
and reflect any clarifications that may be
<PAGE>
needed or are appropriate to maintain such tax qualification such
tax qualification without consent (except for the states of
Michigan, Pennsylvania, South Carolina and Washington, where
affirmative consent is required). PL&A shall provide the Owner
with a copy of any such amendment.
SIGNED FOR PACIFIC LIFE & ANNUITY COMPANY,
/s/ William L. Ferns' /s/ Audrey L. Milfs
President and Chief Executive Officer Secretary
<PAGE>
"DRAFT"
[LOGO]
700 Newport Center Drive
Newport Beach, CA 92660
INDIVIDUAL RETIREMENT ANNUITY RIDER
This rider is a part of the Contract to which it is attached by Pacific Life &
Annuity Company ("PL&A").
The Contract under which it has been issued is hereby modified as specified
below in order to qualify as an Individual Retirement Annuity under section 408
of the Internal Revenue Code of 1986 (the "Code") as amended.
DEFINITIONS
ANNUITANT - is an individual named as a measuring life for periodic annuity
payments under this Contract.
ANNUITY START DATE - is the date you choose to have PL&A begin periodic annuity
payments to the Annuitant. The Annuity Start Date may be no later than April 1
of the calendar year following the year in which the Annuitant reaches age
70 1/2.
CONTINGENT ANNUITANT - is an individual who is designated as a successor
Annuitant when the Annuitant dies. Absent a contrary indication by the Owner at
such time, any individual Owner shall be a Contingent Annuitant.
CONTINGENT OWNER - is an individual who is designated as a successor Owner when
the Owner dies.
DESIGNATED BENEFICIARY - is an individual designated as a beneficiary by the
Owner.
YOU - is the Owner of the Contract.
The provisions of this rider will control if in conflict with those of the
Contract. Notwithstanding any provisions in the Contract to the contrary:
1. The Annuitant will at all times be the Owner of the Contract (or its
beneficial Owner where a fiduciary is its legal Owner). Such individual
Owner's rights under the Contract shall be nonforfeitable and for the
exclusive benefit of such Owner and his or her beneficiaries.
2. No benefits under the Contract may be transferred, sold, assigned, or
pledged as collateral for a loan, or as security for the performance of an
obligation, or for any other purpose, to any person; except that the
Contract may be transferred to a former or separated spouse of the Owner
under a divorce decree or written instrument incident to such divorce. In
the event of such transfer, the transferee shall for all purposes be
treated as the Owner under this Contract.
3. No contribution will be accepted under a SIMPLE plan established by an
employer pursuant to Code section 408(p). No transfer or rollover of funds
attributable to contributions made by a particular employer under its
SIMPLE plan will be allowed into this Contract from a SIMPLE IRA, that is,
an IRA used in conjunction with a SIMPLE plan, prior to the expiration
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of the 2-year period beginning on the date the individual Owner first
participated in that employer's SIMPLE plan.
4. Except in the case of "rollover contribution" as described in Sections
402(c),403(a)(4), 403(b)(8) or 408(d)(3) of the Code, or an employer
contribution to a Simplified Employee Pension as defined in Section 408(k)
of the Code, the Purchase Payments (or premium) paid under this Contract
shall not exceed $2,000 for any taxable year, or such other maximum as the
Code may allow, and must be paid in cash.
5. Additional Purchase Payments (or premium payments) under the Contract must
be at least the minimum as stated in the Purchase Payment (or Premium)
provision of the Contract.
6. If this Contract is issued as part of a Simplified Employee Pension, the
Purchase Payment (or premium) paid under this Contract shall not exceed
$30,000 or 15% of your allowable compensation, whichever is less, or such
other maximum as the Code may allow, and must be paid in cash.
7. Any Purchase Payment (or premium) refund declared by PL&A, other than
refunds attributable to excess contributions will be applied toward the
purchase of additional benefits before the close of the calendar year
following the refund.
8. In accordance with Regulations prescribed by the Secretary of the Treasury,
or his delegate, pursuant to the Code ("Regulations"), the entire interest
under the Contract must be distributed to the Owner:
(a) Not later than the April 1st next following the close of the calendar
year in which the Owner attains age 70-1/2 (the "Required Beginning
Date"), or
(b) Commencing not later than the Required Beginning Date in equal or
substantially equal amounts, in annual or more frequent installments,
over:
(i) the Owner's life or the lives of the Owner and his or her
Designated Beneficiary; or
(ii) a period not exceeding the Owner's life expectancy or the joint
and last survivor life expectancy of the Owner and his or her
Designated Beneficiary.
Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Regulations Section 1.72-9. Unless otherwise elected by
the Owner by the time distributions are required to begin, life expectancy
shall be recalculated annually. Such election shall be irrevocable as to
the Owner and shall apply to all subsequent years. The life expectancy of a
non-spouse Designated Beneficiary may not be recalculated. Instead, life
expectancy will be calculated using the attained age of such Beneficiary
during the calendar year in which distributions are required to begin
pursuant to this section, and payments for subsequent years shall be
calculated based on such life expectancy reduced by one for each calendar
year which has elapsed since the calendar year life expectancy was first
calculated.
(c) The method of distribution shall be made in accordance with the
requirements of Section 401(a)(9) of the Code and the Regulations
thereunder. Further the method selected must meet the "minimum
distribution incidental benefit" or "MDIB" rule of Code
2
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Section 401(a)(9), and proposed Regulation Section 1.401(a)(9)-2. This
MDIB rule includes the following requirements:
(i) where the Owner's only Designated Beneficiary is the spouse, the
minimum amount that must be distributed in a distribution
calendar year is the amount determined under the regular minimum
distribution requirements in this Section 8.
(ii) where the distributions are not made as substantially equal
annuity payments under an annuity contract that is purchased on
or before the Oners's Required Beginnng Date and where the
Owner's spouse is not the only Designated Beneficiary, the
minimum amount that must be distributed in a distribution
calendar year is the quotient obtained by dividing the Owner's
entire interest by the applicable division specified in proposed
Regulation Section 1.401(a)(9)-2, Q & A - 4.
(iii)where distribution is to be made under an annuity contract with
substantially equal payments that is purchased on or before the
Owner's Required Beginning Date and the Owner's spouse is not the
only Designated Beneficiary, the minimum amount that must be
distributed is determined as follows:
- Period certain annuity without a life contingency: The period
certain may not exceed the maximum period specified in proposed
Regulation Section 1.401(a)(9)-2, Q & A - 5.
- Life annuity or a joint and survivor annuity: A life annuity on
the Owner's life which satisfies the regular minimum distribution
requirements satisfies the "minimum distribution incidental
benefit" rule. The periodic annuity payment to the survivor under
a joint and survivor annuity may not exceed the applicable
percentage of the annuity payment to the Owner, as provided in
proposed Regulation Section 1.401(a)(9)-2, Q & A - 6(b).
- Life annuity with period certain: The distribution must satisfy
the requirements for a single life (or joint and survivor)
annuity and the period certain may not exceed the period
determined for non-annuity distributions.
Required annuity payments must be made at intervals of no longer than
one year and may not be in increasing amounts except as allowed by
proposed Regulation Section 1.401(a)(9), F-3.
Only a method of distribution offered by PL&A that satisfies these
conditions can be selected. You must make this selection before the
end of the calendar year in which you attain age 70-1/2.
9. On the death of the Owner, distribution shall be made in accordance with
the annuity options described in the Contract. However, selection of an
annuity option which does not satisfy the conditions of this Section 9
shall not be permitted.
If the Owner dies before distribution of his or her interest in the
Contract commences, the entire interest should be distributed by December
31st of the fifth full year which follows the Owner's death unless:
(i) such interest is paid in equal or substantially equal installments
over a period not exceeding the lifetime, or the life expectancy, of the
Designated
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Beneficiary; and (ii) payments begin by December 31st of the calendar year
which follows the Owner's death.
If the Designated Beneficiary of the Owner is the Owner's surviving spouse,
such spouse may elect to receive equal or substantially equal payments over
the life or life expectancy of such spouse commencing at any date prior to
the later of: (i) December 31 of the calendar year immediately following
the calendar year in which the Owner died; and (ii) December 31 of the
calendar year in which the Owner would have attained age 70 1/2. Such
election must be made no later than the earlier of December 31 of the
calendar year containing the fifth anniversary of the Owner's death or the
date distributions are required to begin pursuant to the preceding
sentence. Such surviving spouse may accelerate these payments at any time,
i.e., increase the frequency or amount of such payments.
If the surviving spouse is the Designated Beneficiary, such spouse may
convert this Individual Retirement Annuity to such spouse's own Individual
Retirement Annuity by requesting such a conversion in writing to PL. If
such spouse so requests, such spouse shall be Owner and Annuitant for
purposes of applying the restrictions contained in this rider.
For purposes of this Section 9, life expectancy is computed by use of the
expected return multiples in Tables V and VI of Regulations Section 1.72-9.
For purposes of distributions beginning after the Owner's death, unless
otherwise elected by the Owner's surviving spouse by the time distributions
are required to begin, life expectancies shall be recalculated annually.
Such election shall be irrevocable as to such spouse and shall apply to all
subsequent years. In the case of any other Designated Beneficiary, life
expectancies shall be calculated using the attained age of such Beneficiary
during the calendar year in which distributions are required to begin
pursuant to this section, and payments for any subsequent calendar year
shall be calculated based on such life expectancy reduced by one for each
calendar year which has elapsed since the calendar year life expectancy was
first calculated.
Any amount paid to a child of the Owner will be treated as if it had been
paid to the Owner's surviving spouse if the remainder of the interest
becomes payable to such spouse when the child reaches the age of majority.
If the Owner dies after distribution of his or her interest in the Contract
has commenced, the remaining interest will be distributed at least as
rapidly as under the method of distribution being used immediately prior to
the Owner's death.
If the Owner dies before his or her entire interest has been distributed to
him or her, no additional cash contributions or "rollover contributions"
shall be accepted unless the Owner's surviving spouse elects to convert
this Contract to be his or her own Individual Retirement Annuity, as
specified above in this Section 9.
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If the Owner dies, the Contingent Annuitant shall be treated as the Owner
for purposes of applying the restrictions contained in this rider.
If someone other than the Owner's surviving spouse is named as a Contingent
Annuitant, such person shall be treated as the Primary Beneficiary under
the Contract.
10. PL&A shall furnish annual calendar year reports concerning the status of
the Contract.
11. The Contract as amended by this rider is intended to qualify as part of a
tax-qualified individual retirement arrangement, plan or contract that
meets the requirements of Code Section 408 [and any applicable regulations
relating thereto]. To that end, the provisions of this rider and the
Contract (including any other rider or endorsement) are to be interpreted
to ensure or maintain such tax qualification, notwithstanding any other
provision to the contrary. PL&A reserves the right to amend this rider to
comply with future changes in the Code and any regulations or rulings and
other published guidance issued under the provisions of the Code or
interpretations thereof without consent (except for the states of Michigan,
Pennsylvania, South Carolina and Washington, where affirmative consent is
required). PL shall provide the Owner of the Contract with a copy of any
such amendment.
SIGNED FOR PACIFIC LIFE & ANNUITY COMPANY,
/s/ William L. Ferris /s/ Audrey L.Milfs
President and Chief Executive Officer Secretary
5
<PAGE>
"DRAFT"
[LOGO]
700 Newport Center Drive
Newport Beach, CA 92660
ROTH INDIVIDUAL RETIREMENT RIDER
This rider is part of the Contract to which it is attached by Pacific Life &
Annuity Company ("PL&A").
The Contract under which it has been issued is hereby modified as specified
below in order to qualify as a Roth Individual Retirement Annuity (Roth IRA)
under section 408A of the Internal Revenue Code of 1986 (the "Code") as amended.
DEFINITIONS
ANNUITANT - is an individual named as a measuring life for periodic annuity
payments under this Contract.
ANNUITY START DATE - is the date you choose to have PL&A begin periodic annuity
payments to the Annuitant.
CONTINGENT ANNUITANT - is an individual who is designated as a successor when
the Annuitant dies. Absent a contrary indication by the Owner at such time, any
individual Owner shall be a Contingent Annuitant.
DESIGNATED BENEFICIARY - is an individual designated as a beneficiary by the
Owner.
YOU - is the Owner of the Contract.
In order to ensure treatment of the Contract as a Roth IRA the provisions of
this rider will control if in conflict with those of the Contract.
Notwithstanding any provisions in the contract to the contrary:
1. The Annuitant will at all times be the Owner of the Contract. Such Owner's
rights under the Contract shall be nonforfeitable and for the exclusive
benefit of such Owner and his or her beneficiaries.
2. No benefits under the Contract may be transferred, sold, assigned, or
pledged as collateral for a loan, or as security for the performance of an
obligation, or for any other purpose, to any person; except that the
Contract may be transferred to a former or separated spouse of the Owner
under a qualified domestic relations order. In the event of such a
transfer, the transferee shall for all purposes be treated as the Owner
under this Contract.
3. (a) MAXIMUM PERMISSIBLE AMOUNT. Except in the case of a qualified rollover
contribution or a recharacterization (as defined in 3(e) below), no
contribution will be accepted unless it is in cash and the total of such
contributions to all the individual Owner's Roth IRAs for a taxable year
does not exceed the lesser of $2,000, or such Owner's compensation
[Pub 590 p.37]. This contribution is referred to as a "regular
contribution." A "qualified rollover contribution" is a rollover
contribution that meets the requirements of section 408(d)(3) of the Code,
except that the one-rollover-per-year rule of section 408(d)(3)(B) does
not apply if the rollover contribution is from an IRA other than a
Roth IRA (a "nonRoth IRA"). Contributions may be limited under 3(b)
through (d) below.
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(b) REGULAR CONTRIBUTION LIMIT. If (i) and/or (ii) below apply, the maximum
regular contribution that can be made to all the Owner's Roth IRAs for a
taxable year is the smaller of the amounts determined under (i) or (ii)
below.
(i) The maximum regular contribution is phased out ratably between
certain levels of modified adjusted gross income ("modified AGI,"
defined in (f) below) in accordance with the following table:
<TABLE>
<CAPTION>
Full Phase-out No
Filing Status Contribution Range Contribution
- ----------------------------------------------------------------------------------------------------
Modified AGI
----------------------------------------------------------
<S> <C> <C> <C>
Single or Head $95,000 or less Between $95,000 $110,000
Of Household and $110,000 or more
Joint Return $150,000 or less Between $150,000 $160,000
Or Qualifying and $160,000 or more
Widow(er)
Married- $0 Between $0 $10,000
Separate Return and $10,000 or more
</TABLE>
If the Owner's modified AGI for a taxable year is in the phase-out range, the
maximum regular contribution determined under this table for that taxable year
is rounded up to the next multiple of $10 and is not reduced below $200. The
preceding limits may change as indexed for inflation or amended by tax law.
(ii) If the Owner makes regular contributions to both Roth and
nonRoth IRAs for a taxable year, the maximum regular
contribution that can be made to all the Owner's Roth IRAs
for that taxable year is reduced by the regular
contributions made to the Owner's nonRoth IRAs for the
taxable year.
(c) QUALIFIED ROLLOVER CONTRIBUTION LIMIT. A rollover from a nonRoth IRA
cannot be made to this IRA if, for the year the amount is distributed
from the nonRoth IRA, (i) the Owner is married and files a separate
return, (ii) the Owner is not married and has modified AGI in excess
of $100,000 or (iii) the Owner is married and together the Owner and
the Owner's spouse have modified AGI in excess of $100,000. For
purposes of the preceding sentence, a husband and wife are not treated
as married for a taxable year if they have lived apart at all times
during that taxable year and file separate returns for the taxable
year.
(d) SIMPLE IRA LIMITS. No contributions to this Roth IRA Contract will be
accepted under a SIMPLE IRA Plan established by any employer pursuant
to Code section 408(p). Also, no transfer or rollover of funds to this
Roth IRA Contract and attributable to contributions made by a
particular employer under its SIMPLE IRA Plan will be accepted from a
SIMPLE IRA Plan prior to the expiration of the 2-year period beginning
on the date the Owner first participated in that employer's SIMPLE IRA
Plan.
(e) RECHARACTERIZATION. A regular contribution to a nonRoth IRA may be
recharacterized pursuant to the rules in section 1.408A-5 of the
regulations as regular contribution to this Roth IRA, subject to the
limits in (b) above.
(f) MODIFIED AGI. For purposed of (b) and (c) above, an Owner's modified
AGI for a taxable year is defined in Code section 408A(c)(3)(C)(i) and
does not include any amount included in adjusted gross income as a
result of a rollover from a nonRoth IRA (a "conversion").
2
<PAGE>
4. Additional Purchase Payments (or premium payments) under the Contract must
be at least equal to the minimum amount stated in the Purchase Payments (or
Premiums) provision of the Contract.
5. Any Purchase Payments (or premiums) refund declared by PL&A other than
refunds attributable to excess contributions will be applied toward the
purchase of additional benefits before the close of the calendar year
following the refund.
6. (a) Upon the death of the Owner, distribution of the Owner's entire
interest in this Contract shall be completed by December 31 of
the calendar year containing the fifth anniversary of the Owner's
death except to the extent that an election is made to receive
distribution in accordance with (i) or (ii) below:
(i) If the Owner's interest is payable to a designated beneficiary,
then the entire interest of the Owner may be distributed over the
life, or over a period certain not greater than the life
expectancy of the designated beneficiary, commencing on or before
December 31 of the calendar year immediately following the
calendar year in which the Owner died.
(ii) If the designated beneficiary is the Owner's surviving spouse,
the date distributions are required to begin in accordance with
(i) above shall not be earlier than the later of (A) December 31
of the calendar year immediately following the calendar year in
which the Owner died or the date on which the Owner would have
attained age 70 1/2.
(b) If the designated beneficiary is the Owner's surviving spouse, such spouse
may elect to treat the contract as his or her own Roth IRA. This election
will be deemed to have been made if such surviving spouse makes regular
contributions to the contract, makes a rollover to or from such contract,
or fails to take distributions under (a) above.
(c) Payments required under (a)(i) or (a)(ii) above must be made at intervals
of no longer than 1 year and must be either nonincreasing or increasing as
provided in Q&A F-3 of section 1.401(a)(9)-1 of the proposed regulations.
(d) Life expectancy is computed by use of the expected return multiples in
Table V of section 1.72-9 of the Income Tax Regulations. If the designated
beneficiary is the Owner's surviving spouse, then, unless otherwise elected
by such surviving spouse by the time distributions are required to begin,
such surviving spouse's life expectancy shall be recalculated annually.
Such election shall be irrevocable by such surviving spouse and shall apply
to all subsequent years. In the case of any other designated beneficiary,
life expectancies shall be calculated using the attained age of such
beneficiary during the calendar year in which distributions are required to
begin pursuant to (a)(i) or (a)(ii) above, and payments for any subsequent
calendar year shall be calculated based on such life expectancy reduced by
one for each calendar year which has elapsed since the calendar year life
expectancy was first calculated.
7. PL&A shall furnish annual calendar year reports concerning the status of
the Contract.
8. The Contract as amended by this rider is intended to qualify as a Roth IRA
contract for federal income tax purposes. To that end, the provisions of
this rider and the Contract (including any other rider or endorsement) are
to be interpreted to ensure or maintain such tax qualification,
notwithstanding any other provision to the contrary. PL&A reserves the
right to amend this rider to comply with future changes in the Code, any
regulations or
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<PAGE>
rulings issued thereunder and to reflect any clarifications that may be
needed or are appropriate to maintain such tax qualification without
consent (except for the states of Michigan, Pennsylvania, South Carolina
and Washington, where affirmative consent is required). PL&A shall provide
the Owner with a copy of any such amendment.
SIGNED FOR PACIFIC LIFE & ANNUITY COMPANY,
/s/ William L. Ferris, /s/ Audrey L. Milfs
President and Chief Executive Officer Secretary
4
<PAGE>
"DRAFT"
[LOGO]
700 Newport Center Drive
Newport Beach, CA 92660
SIMPLE INDIVIDUAL RETIREMENT ANNUITY RIDER
This rider is part of the Contract to which it is attached by Pacific Life &
Annuity Company ("PL&A").
The Contract under which it has been issued is hereby modified as specified
below in order to qualify as a SIMPLE Individual Retirement Annuity under the
terms of the Internal Revenue Code of 1986 (the "Code") as amended.
DEFINITIONS
ANNUITANT - is the individual named to receive periodic annuity payments
purchased under this Contract.
ANNUITY START DATE - is the date you choose to have PL&A begin periodic annuity
payments to the Annuitant. The Annuity Start Date may be no later than April 1
of the calendar year following the year in which the Annuitant reaches age
70 1/2.
CONTINGENT ANNUITANT - is the individual who becomes the Annuitant if the
Annuitant dies before periodic annuity payments purchased under the Contract
begin. Only the spouse of the Annuitant may be named the Contingent Annuitant.
CONTINGENT OWNER - is the individual who becomes the Owner if you die before
periodic annuity payments purchased under this Contract begin. Only the spouse
of the Annuitant may be named the Contingent Owner.
DESIGNATED BENEFICIARY - is the individual designated as a beneficiary by the
Annuitant.
The provisions of this rider will control if in conflict with those of the
Contract. Notwithstanding any provisions in the Contract to the contrary:
1. The Annuitant will at all times be the Owner of the Contract. The Owner's
rights under the Contract shall be nonforfeitable and for the exclusive benefit
of the Owner and his or her beneficiaries.
2. No benefits under the Contract may be transferred, sold, assigned, or
pledged as collateral for a loan, or as security for the performance of an
obligation, or for any other purpose, to any person; except that the Contract
may be transferred to a former spouse of the Owner under a divorce decree or
written instrument incident to such divorce. In the event of such transfer, the
transferee shall for all purposes be treated as the Owner under this Contract.
3. This SIMPLE IRA will accept only cash contributions made on behalf of the
Annuitant pursuant to the terms of a SIMPLE IRA Plan described in section 408(p)
of the Internal Revenue Code. A rollover contribution or a transfer of assets
from another SIMPLE IRA of the Annuitant will also be accepted. No other
contributions will be accepted.
4. Prior to the expiration of the 2-year period beginning on the date the
Annuitant first participated in any SIMPLE IRA Plan maintained by the
Annuitant's employer, any rollover or transfer by the Annuitant
Page 1
<PAGE>
of funds from this SIMPLE IRA must be made to another SIMPLE IRA of the
Annuitant. Any distribution of funds to the Annuitant during this 2-year period
may be subject to a 25% additional tax if the Annuitant does not roll over the
amount distributed into a SIMPLE IRA. After the expiration of this 2-year
period, the Annuitant may roll over or transfer funds to any IRA of the
Annuitant that is qualified under section 408(a) or (b) of the Internal Revenue
Code.
5. Additional Purchase Payments (or premium payments) under the Contract must
be at least the minimum as stated in the Purchase Payments (or Premiums)
provision of the Contract.
6. Any Purchase Payments (or premium) refund declared by PL&A other than
refunds attributable to excess contributions will be applied toward the purchase
of additional benefits before the close of the calendar year following the
refund.
7. In accordance with Regulations prescribed by the Secretary of the Treasury,
or his delegate pursuant to the Code ("Regulations"), the entire interest under
the Contract must be distributed to the Owner:
(a) Not later than the April 1st next following the close of the calendar
year in which the Owner attains age 70 1/2 (the "Required Beginning
Date"), or
(b) Commencing not later than the Required Beginning Date in equal or
substantially equal amounts, in annual or more frequent installments,
over:
(i) the Owner's life or the lives of the Owner and his or her
Designated Beneficiary; or
(ii) a period not exceeding the Owner's life expectancy or the joint
and last survivor life expectancy of the Owner and his or her
Designated Beneficiary.
(c) If the Owner's entire interest is to be distributed in other than a
lump sum, then the amount to be distributed each year, commencing with
the Required Beginning Date and then for each succeeding calendar
year, shall not be less than the quotient obtained by dividing the
Owner's entire interest by the lesser of:
(i) the applicable life expectancy; or
(ii) if the Owner's spouse is not the Designated Beneficiary, the
applicable divisor determined from the table set forth in Q&A-4
of Section 1.401(a)(9)-2 of the proposed Income Tax Regulations.
Distributions after the death of the Owner shall be calculated
using the applicable life expectancy as the relevant divisor
without regard to the proposed Regulation Section 1.401(a)(9)-2.
The preceding paragraph shall not apply if distribution is in the form of
an annuity with non-increasing payments.
Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations. Unless
otherwise elected by the Owner by the time distributions are required to begin,
life expectancy shall be recalculated annually. Such election shall be
irrevocable as to the Owner and shall apply to all subsequent years. The life
expectancy of a non-spouse Beneficiary may not be recalculated. Instead, life
expectancy will be calculated using the attained age of
Page 2
<PAGE>
such Beneficiary during the calendar year in which distributions are required to
begin pursuant to this section, and payments for subsequent years shall be
calculated based on such life expectancy reduced by one for each calendar year
which has elapsed since the calendar year life expectancy was first calculated.
(d) If the Owner's spouse is not the Designated Beneficiary, the form
of Annuity elected must assure that at least 50% of the value of
the Contract available for distribution is payable within the
Owner's life expectancy.
(e) The method of distribution shall be made in accordance with the
requirements of Section 401(a)(9) of the Code and the Regulations
thereunder. Further the method selected must meet the "minimum
distribution incidental benefit" rule of Code Section 401(a)(9),
and the proposed Regulation Section 1.401(a)(9)(2). This includes
the following:
(i) where the Owner's only Designated Beneficiary is the
spouse, the minimum amount that must be distributed in a
distribution calendar year is the amount determined under
the regular minimum distribution requirements in this
Section 7.
(ii) where the distributions are not made as annuity payments
under an annuity contract and where the Owner's spouse is
not the Designated Beneficiary, the minimum amount that
must be distributed in a distribution calendar year is the
quotient obtained by dividing the Owner's entire interest
by the joint and last survivor expectancy described in the
proposed Regulation Section 1.401(a)(9)-2.
(iii) where distribution is to be made under an annuity contract
purchased on or before the Owner's Required Beginning Date
and the Owner's spouse is not the Designated Beneficiary,
the minimum amount that must be distributed is determined
as follows:
- Period certain annuity without a life contingency:
The period certain may not exceed the appropriate
joint and last survivor expectancy described in the
proposed Regulation Section 1.401(a)(9)-2.
- Life annuity or a joint and survivor annuity: A
life annuity on the Owner's life which satisfies the
regular minimum distribution requirements satisfies
the "minimum distribution incidental benefit" rule.
The periodic annuity payment to the survivor under a
joint and survivor annuity may not exceed the
applicable percentage of the annuity payment to the
Owner. These percentages are defined in the proposed
Regulation Section 1.401(a)(9)-2.
- Life annuity with period certain: The distribution
must satisfy the requirements for a single life (or
joint and survivor) annuity and the period certain
may not exceed the period determined for non-annuity
distributions.
Only a method of distribution offered by PL&A that satisfies these
conditions can be selected. You must make this selection before the end of the
calendar year in which you attain age 70 1/2.
8. On the death of the Owner, distribution shall be made in accordance with
the annuity options described in the Contract. However, selection of an annuity
option which does not satisfy the conditions of this Section 8 shall not be
permitted.
Page 3
<PAGE>
If the Owner dies before distribution of his or her interest in the
Contract commences, the entire interest should be distributed by December 31st
of the fifth full year which follows the Owner's death unless: (i) such interest
is paid in equal or substantially equal installments over a period not exceeding
the lifetime, or the life expectancy, of the Designated Beneficiary; and (ii)
payments begin by December 31st of the calendar year which follows the Owner's
death.
If the Designated Beneficiary of the Owner is the Owner's surviving spouse,
the spouse may elect to receive equal or substantially equal payments over the
life or life expectancy of the surviving spouse commencing at any date prior to
the later of: (i) December 31 of the calendar year immediately following the
calendar year in which the Owner died; and (ii) December 31 of the calendar year
in which Owner would have attained age 70 1/2. Such election must be made no
later than the earlier of December 31 of the calendar year containing the fifth
anniversary of the Owner's death or the date distributions are required to begin
pursuant to the preceding sentence. The surviving spouse may accelerate these
payments at any time, i.e., increase the frequency or amount of such payments.
If the surviving spouse is the Designated Beneficiary, the spouse may
convert this Individual Retirement Annuity to the spouse's own Individual
Retirement Annuity by requesting that he or she be made the Annuitant. If the
spouse so requests, the spouse shall be Owner and Annuitant for purposes of
applying the restrictions contained in this rider.
For purposes of the above, life expectancy is computed by use of the
expected return multiples in Tables V and VI of Section 1.72-9 of the Income Tax
Regulations. For purposes of distributions beginning after the Owner's death,
unless otherwise elected by the surviving spouse by the time distributions are
required to begin, life expectancies shall be recalculated annually. Such
election shall be irrevocable as to the surviving spouse and shall apply to all
subsequent years. In the case of any other Designated Beneficiary, life
expectancies shall be calculated using the attained age of such Beneficiary
during the calendar year in which distributions are required to begin pursuant
to this section, and payments for any subsequent calendar year shall be
calculated based on such life expectancy reduced by one for each calendar year
which has elapsed since the calendar year life expectancy was first calculated.
Any amount paid to a child of the Owner will be treated as if it had been
paid to the surviving spouse if the remainder of the interest becomes payable to
the surviving spouse when the child reaches the age of majority.
If the Owner dies after distribution of his or her interest in the Contract
has commenced, the remaining interest will be distributed at least as rapidly as
under the method of distribution being used prior to the Owner's death.
If the Owner dies before his or her entire interest has been distributed to
him or her, no additional cash contributions or "rollover contributions" shall
be accepted.
9. No one other than the spouse of the Owner may be named as the Contingent
Annuitant and/or the Contingent Owner. If the Owner dies, the Contingent
Annuitant shall be treated as the Annuitant for purposes of applying the
restrictions contained in this rider.
If, despite the restrictions contained in this rider, someone other than
the spouse is named as a Contingent Annuitant, such person shall be treated as
the Primary Beneficiary under the Contract.
Page 4
<PAGE>
10. PL&A shall furnish annual calendar year reports concerning the status of
the Contract.
11. If contributions made on behalf of the Annuitant pursuant to a SIMPLE IRA
Plan maintained by the Annuitant's employer are received directly by PL&A from
the employer, PL&A will provide the employer with the summary description
required by section 408(l)(2) of the Internal Revenue Code.
12. If this SIMPLE IRA is maintained by a designated financial institution
(within the meaning of section 408(p)(7) of the Internal Revenue Code) under the
terms of a SIMPLE IRA Plan of the Annuitant's employer, the Annuitant must be
permitted to transfer the Annuitant's balance without cost or penalty (within
the meaning of section 408(p)(7)) to another IRA.
13. PL&A reserves the right to amend this rider to comply with future changes
in the Code and any regulations or rulings and other published guidance issued
under the provisions of the Code or interpretations thereof without consent
(except for the states of Michigan, Pennsylvania, South Carolina and Washington,
where affirmative consent is required). PL&A shall provide the Owner of the
Contract with a copy of any such amendment.
SIGNED FOR PACIFIC LIFE & ANNUITY COMPANY,
/s/ William L. Ferris /s/ Audrey L. Milfs
President and Chief Executive Officer Secretary
Page 5
<PAGE>
"DRAFT"
DCA PLUS FIXED OPTION ENDORSEMENT
This Endorsement is part of the Contract and should be attached to it. All terms
of the Contract which do not conflict with this Endorsement's terms apply to
this Endorsement. In the event of any conflict between the terms of this
Endorsement and the terms of the Contract, the terms of this Endorsement shall
prevail over the terms of the Contract.
This Endorsement provides an additional Investment Option called the DCA Plus
Fixed Option.
The Contract is amended by adding or revising the following provisions
(revisions are italicized):
DEFINITIONS
DCA PLUS FIXED OPTION: Amounts allocated under your Contract to the DCA
Plus Fixed Option are held in our General Account and receive interest at
rates declared periodically (the `Guaranteed Interest Rate(s)'), but not
less than an annual rate of 3%.
DCA PLUS FIXED OPTION VALUE: The aggregate of your Contract Value allocated
to the DCA Plus Fixed Option.
CONTRACT VALUE: As of the end of any Business Day, your Variable Account
Value, plus your Fixed Option Value, your DCA Plus Fixed Option Value, your
Guaranteed Interest Option Value, and any Loan Account Value.
GUARANTEED INTEREST RATE: The interest rate guaranteed at the time of
allocation (or rollover for the Guarantee Term on amounts allocated to the
Fixed Option, the DCA Plus Fixed Option, or a Guaranteed Interest Option).
All Guaranteed Interest rates are expressed as annual rates, and interest
is accrued daily. This rate will not be less than an annual rate of 3%.
GUARANTEE TERM: The period during which the amount you allocate to the
Fixed Option, the DCA Plus Fixed Option, or to a GIO earns a specified
Guaranteed Interest Rate.
INVESTMENT OPTION: A Variable Account, Fixed Option, DCA Plus Fixed Option,
or GIO offered under the Contract.
GENERAL PROVISIONS
DELAY OF PAYMENTS: Generally, payments, transfers or exchanges will be made
within seven days from receipt of the payment and/or request in a form
satisfactory to us. Payment of your withdrawal proceeds or transfers or
exchanges to or from a Variable Account may be delayed after receipt of
your withdrawal, transfer, or exchange request under certain circumstances.
These include:
- a closing of the New York Stock Exchange other than on a regular
holiday or weekend;
- a trading restriction by the SEC; or
- an emergency declared by the SEC.
We may delay payments or transfers from our General Account (which would
include payment of your withdrawal proceeds and transfers from the Fixed
Option, the DCA Plus Fixed Option, or any GIO, loans, fixed annuity
payments, and lump sum death benefit payments unless state law requires
otherwise) for up to six months after the requested effective date of the
transaction. Any amount delayed will, so long as it is held under the Fixed
Option, the DCA Plus Fixed Option, or in any of the GIOs, continue to earn
interest at the Guaranteed Interest Rate(s) then in effect until the
applicable Guaranteed Term in effect has ended, and not less than 3% on an
annual basis thereafter. If you make any Purchase Payment by check, other
<PAGE>
than a cashier's check, we may delay making payments to you until your
check has cleared.
PURCHASE PAYMENTS
This paragraph is added to the PURCHASE PAYMENT ALLOCATION provision:
Prior to the Annuity Date you may allocate all or part of a Purchase
Payment to the DCA Plus Fixed Option if you have elected to transfer under
the DCA Plus program. Under the DCA Plus program you authorize the
automatic transfer of amounts at monthly intervals from the DCA Plus Fixed
Option to one or more Variable Investment Options. You may terminate DCA
Plus at any time. Upon any termination of DCA Plus, we will transfer any
amounts remaining in the DCA Plus Fixed Option to the Fixed Option, unless
you instruct us to transfer such amounts to other Investment Options. We
reserve the right to change the terms and conditions of the DCA Plus
program at any time.
THE DCA PLUS FIXED OPTION
This section is added following the FIXED OPTION provisions:
Your initial Purchase Payment allocation to the DCA Plus Fixed Option will
begin a Guarantee Term of up to one year.
Prior to the Annuity Date, we will credit interest at the Guaranteed
Interest Rate(s) during the Guarantee Term on the amount of Purchase
Payments that you allocate to the DCA Plus Fixed Option, while the
Annuitant is living and this Contract is in force. Your DCA Plus Fixed
Option value will be transferred over the remainder of the existing DCA
Plus Guarantee Term. We will credit the Guaranteed Interest Rate in effect
on the Business Day that the allocation is effective until the Guarantee
Term has expired.
Account Values under the DCA Plus Fixed Option are held in our General
Account. Subject to applicable law, we have sole discretion over the
investment of our General Account assets.
At the end of a Guarantee Term, the entire DCA Plus Fixed Option will have
been transferred to the Variable Investment Options. If requested, all or a
portion of additional Purchase Payments may be allocated to the DCA Plus
Fixed Option at the Guaranteed Interest rate then in effect.
We will stop crediting interest on that portion of your DCA Plus Fixed
Option Value that is withdrawn, transferred (including transfers to the
Loan Account), or converted to an Annuity Option, including any fees for
withdrawals or transfers; withdrawal charges; annual fee; and charges for
any premium taxes and/or other taxes. We do so as of the end of the
Business Day any such transaction is effective.
CONTRACT VALUE
This provision is added:
DCA PLUS FIXED OPTION VALUE: Your DCA Plus Fixed Option Value on any
Business Day is your DCA Plus Fixed Option Value on the prior Business Day
increased by any additions to your DCA Plus Fixed Option on that day as a
result of any:
- interest;
- Purchase Payments received by us and allocated to the DCA Plus
Fixed Option; and
decreased by any deductions from the DCA Plus Fixed Option on that day as a
result of any
- transfers, including transfers to the Loan Account;
- withdrawals and withdrawal charges;
- amounts converted to an Annuity Option;
- charge for any premium taxes and/or other taxes;
- fees for withdrawals and/or transfers; and
- annual fee.
<PAGE>
TRANSFER AND WITHDRAWAL RESTRICTIONS
This provision is added:
SPECIAL RESTRICTIONS ON TRANSFERS INTO THE DCA PLUS FIXED OPTION: No
transfers may be made from any other Investment Option to the DCA Plus
Fixed Option.
ANNUITY BENEFITS
The last sentence FIXED AND VARIABLE ANNUITIES is revised as follows:
Any net amount you convert to a fixed annuity will be held in our General
Account (but not under the Fixed Option, the DCA Plus Fixed Option, or
GIOs).
The second paragraph of the DEFAULT ANNUITY DATE AND OPTIONS is revised as
follows:
If you do not elect an Annuity Option, your Net Contract Value, less any
applicable MVA, and any charge for any premium taxes and or other taxes,
when converted, will, subject to our minimum requirements, be converted as
follows:
- - the net amount from your Fixed Option Value, DCA Plus Fixed Option Value,
and your GIO Value will be converted to a fixed annuity and held in our
General Account, and
- - the net amount from your Variable Account Value will be applied to the
variable annuity and applied to the Subaccounts in proportion to your
Account Value in each Subaccount on the Annuity Date.
Signed for Pacific Life & Annuity Company,
President and Chief Executive Officer Secretary
<PAGE>
<TABLE>
<S><C>
"DRAFT"
| Pacific Life and Annuity PACIFIC PORTFOLIOS
[LOGO] PACIFIC LIFE & ANNUITY | P.O. Box 7187 VARIABLE ANNUITY
| Pasadena, CA 91109-7187 APPLICATION
| (800)748-6907 NEW YORK
SEE INSTRUCTIONS FOR MAILING ADDRESS
PLEASE TYPE or PRINT. SEE INSTRUCTIONS TO ASSIST YOU IN COMPLETING THIS APPLICATION.
- ------------------------------------------------------------------------------------------------------------------------------------
/ 1/ ANNUITANT Name (FIRST, MIDDLE INITIAL, LAST) | Birth Date (MO/DAY/YR) | Phone Number
| ____/____/____________ | ( )
-------------------------------------------------------------------------------------------------------------------------------
Street Address (NUMBER, STREET NAME AND APARTMENT OR UNIT NUMBER) | Sex
| / / M / / F
-------------------------------------------------------------------------------------------------------------------------------
City, State & ZIP Code | SSN/TIN
|
- ------------------------------------------------------------------------------------------------------------------------------------
[SIDENOTE:] OPTIONAL
ADDITIONAL ANNUITANT COMPLETE THIS SECTION TO NAME ADDITIONAL ANNUITANT. NOT APPLICABLE FOR QUALIFIED CONTRACTS.
CHECK ONE / / Joint / / Contingent
ADDITIONAL OWNER Name (FIRST, MIDDLE INITIAL, LAST) | Birth Date (MO/DAY/YR)
| ____/____/____________
-------------------------------------------------------------------------------------------------------------------------------
Street Address (NUMBER, STREET NAME AND APARTMENT OR UNIT NUMBER) | Sex
| / / M / / F
-------------------------------------------------------------------------------------------------------------------------------
City, State & ZIP Code | SSN/TIN
|
- ------------------------------------------------------------------------------------------------------------------------------------
/ 2/ IF OWNER(S) AND ANNUITANT(S) ARE THE SAME, IT IS NOT NECESSARY TO COMPLETE SECTION 2. IF TRUST IS OWNER, ALSO
COMPLETE TRUST CERTIFICATION FORM.
OWNER Name (FIRST, MIDDLE INITIAL, LAST) | Birth Date (MO/DAY/YR) | Phone Number
| ____/____/____________ | ( )
-------------------------------------------------------------------------------------------------------------------------------
Street Address (NUMBER, STREET NAME AND APARTMENT OR UNIT NUMBER) | Sex
| / / M / / F
-------------------------------------------------------------------------------------------------------------------------------
City, State & ZIP Code | SSN/TIN
|
- ------------------------------------------------------------------------------------------------------------------------------------
[SIDENOTE:] OPTIONAL
Name (FIRST, MIDDLE INITIAL, LAST) Not Applicable for Qualified Contracts
CHECK ONE / / Joint / / Contingent | Birth Date (MO/DAY/YR)
| ____/____/____________
-------------------------------------------------------------------------------------------------------------------------------
Street Address (NUMBER, STREET NAME AND APARTMENT OR UNIT NUMBER) | Sex
| / / M / / F
-------------------------------------------------------------------------------------------------------------------------------
City, State & ZIP Code | SSN/TIN
|
- ------------------------------------------------------------------------------------------------------------------------------------
/ 3/ BENEFICIARY Name (FIRST, MIDDLE INITIAL, LAST) USE SPECIAL REQUESTS SECTION TO PROVIDE ADDITIONAL BENEFICIARIES OR
BENEFICIARY INFORMATION.
Select one / / Primary / / Contingent
-------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL BENEFICIARY (FIRST, MIDDLE INITIAL, LAST) IF NO BOXES ARE CHECKED, DEFAULT WILL BE JOINT PRIMARY
BENEFICIARIES.
Select one / / Primary / / Contingent
- ------------------------------------------------------------------------------------------------------------------------------------
/ 4/ CONTRACT TYPE SELECT ONE | QUALIFIED CONTRACT PAYMENT TYPE IF NO
| YEAR IS INDICATED, CONTRIBUTION DEFAULTS
/ / Non-Qualified / / SIMPLE IRA / / Custodial Held IRA / / Ksogh/HR10 | TO CURRENT TAX YEAR.
|
/ / Conduit IRA / / SEP-IRA / / 401(a) Pension * / / TSA/403(b) |
| / / Rollover ... $_______
/ / IRA / / Conversion Roth IRA/ / 401(k) * |
| / / Contribution $_______for tax year____
/ / Contributory Roth IRA * ALSO COMPLETE QUALIFIED PLAN CERTIFICATION FORM. |
| $_______for tax year____
COMPLETE ROTH/SIMPLE FORM IF THE SIMPLE IRA BOX IS CHECKED. |
- ------------------------------------------------------------------------------------------------------------------------------------
/ 5/ ISSUE STATE ABBREVIATE STATE NAME N Y |/ 6/ INITIAL PURCHASE PAYMENT INDICATE THE FORM OF INITIAL PAYMENT.
IN WHICH APPLICATION IS SIGNED - - | / / 1035 exchange/estimate transfer $________ / / Amt. enclosed $__________
- ------------------------------------------------------------------------------------------------------------------------------------
/ 7/ REPLACEMENT Will any existing life insurance or annuity be (or has it been) surrendered, withdrawn from, loaned against,
changed or otherwise reduced in value, or replaced in connection with this transaction, assuming the Contract applied for will
be issued?
/ / Yes / / No IF YES, PROVIDE THE INFORMATION BELOW AND ATTACH ANY REQUIRED STATE REPLACEMENT AND/OR 1035 EXCHANGE/
TRANSFER FORMS. USE THE SPECIAL REQUESTS SECTION FOR ADDITIONAL INSURANCE COMPANIES AND CONTRACT NUMBERS.
Insurance Company Name | Contract Number | Contract Type Being Replaced
| | / / Life Insurance / / Fixed Annuity / / Variable Annuity
- ------------------------------------------------------------------------------------------------------------------------------------
G95-00NY 9/99 [BARCODE]
1600-9A * 1 6 0 0 - 9 A 1 *
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
/ 8/ ALLOCATION OPTIONS IF REBALANCING, USE PERCENTAGES ONLY. SEE INSTRUCTIONS FOR PORTFOLIO MANAGER NAMES.
Fixed ...............................PACIFIC LIFE _________ | Large-Cap Value ..........................SALOMON _________
DCA Plus ............................PACIFIC LIFE _________ | Mid-Cap Value .............................LAZARD _________
Money Market ........................PACIFIC LIFE _________ | Equity .............................GOLDMAN SACHS _________
High Yield Bond .....................PACIFIC LIFE _________ | Bond and Income ....................GOLDMAN SACHS _________
Managed Bond ...............................PIMCO _________ | Equity Index .......................BANKERS TRUST _________
Growth ..........................CAPITAL GUARDIAN _________ | Small-Cap Index ....................BANKERS TRUST _________
Govt. Securities ...........................PIMCO _________ | REIT ..............................MORGAN STANLEY _________
Aggressive Equity ...............ALLIANCE CAPITAL _________ | International .....................MORGAN STANLEY _________
Growth LT ..................................JANUS _________ | Emerging Markets ......................BLAIRLOGIE _________
Equity Income ...................J.P. MORGAN INV. _________ | [XXXXXXXX ......................................X _________]
Multi-Strategy ..................J.P. MORGAN INV. _________ | [XXXXXXXX ......................................X _________]
MUST EQUAL 100% OR FULL PURCHASE PAYMENT AMOUNT. _________
- ------------------------------------------------------------------------------------------------------------------------------------
/ 9/ REBALANCING / / Yes, rebalance the variable accounts to the allocation percentages shown | Start Date (MO/DAY/YR) Default is
in Section 10. CHOOSE ONE FREQUENCY. / / Quarterly / / Semi-Annually / / Annually | first business day of frequency
| selected ____/____/____________
- ------------------------------------------------------------------------------------------------------------------------------------
/10/ SPECIAL REQUESTS IF ADDITIONAL SPACE IS NEEDED, ATTACH LETTER SIGNED AND DATED BY OWNER(S).
- ------------------------------------------------------------------------------------------------------------------------------------
/11/ ANNUITY START DATE CONTRACT WILL ANNUITIZE ON THIS DATE. | Annuity Start Date (MO/DAY/YR)
START DATE CANNOT BE PRIOR TO THE FIRST CONTRACT ANNIVERSARY. | ____/____/____________
- ------------------------------------------------------------------------------------------------------------------------------------
/12/ PRE-AUTHORIZED CHECKING (PAC) FOR ADDITIONAL PURCHASE PAYMENTS | PAC AMOUNT | PAC START DATE (MO/DAY/YR)
Each month deduct from my account shown on the attached voided check, the | |
amount indicated in the box at the right. PAYMENTS WILL BE APPLIED ACCORDING | | ____/____/____________
TO THE ALLOCATIONS ON THIS APPLICATION OR MORE CURRENT INSTRUCTIONS, IF ANY. | | DEFAULT START DATE IS ONE
TO BEGIN PAC, THE FIRST MINIMUM INSTALLMENT MUST ACCOMPANY THIS APPLICATION. | $_____________ | MONTH FROM ISSUE.
- ------------------------------------------------------------------------------------------------------------------------------------
[SIDENOTE:] OPTIONAL PROGRAM
/13/ TRANSFERS CHOOSE ONE OF THE FOUR TRANSFER OPTIONS UNDER SECTION A, THEN INDICATE A SINGLE SOURCE ACCOUNT AND DIFFERENT TARGET
ACCOUNTS. IF SECTION 8 IS BLANK, 100% OF PURCHASE PAYMENT WILL BE ALLOCATED TO THE SOURCE ACCOUNT BELOW. FOR DCA PLUS, TERM
MUST BE LESS THAN OR EQUAL TO THE MAXIMUM TERM AVAILABLE. IF NOT SPECIFIED, DEFAULT IS MAXIMUM TERM AVAILABLE.
A. DOLLAR COST AVERAGING TRANSFER AND TERM OPTIONS EARNINGS SWEEP TRANSFER OPTION
|
1. / / DCA Plus for _____ # of months | 5. / / Sweep the previous period's earnings.
|
2. / / Deplete the source account in _____ # of transfers | Take from one of the following accounts.
| / / Fixed Option / / Money Market
3. / / Transfer $_________ each time for _____ years |
|
4. / / Transfer _______% annually for _____ years |
-------------------------------------------------------------------------------------------------------------------------------
B. TRANSFER FREQUENCY | C. START DATE (MO/DAY/YR)
| ____/____/____________
/ / Monthly / / Quarterly / / Semi-Annually / / Annually | DEFAULT START DATE IS ONE MONTH FROM ISSUE.
-------------------------------------------------------------------------------------------------------------------------------
D. SOURCE ACCOUNT COMPLETE IF 1, 2, OR 3 IS SELECTED | E. TARGET ACCOUNT MUST BE DIFFERENT THAN SOURCE ACCOUNT.
ABOVE FROM SECTION A. CHOOSE ONE. SOURCE ACCOUNT | INDICATE EITHER WHOLE PERCENTAGE OR DOLLAR AMOUNTS.
CANNOT BE TARGET ACCOUNT. |
/ / DCA Plus OPTION 1 ONLY | / / Large-Cap Value | Money Market __________ | Large-Cap Value __________
/ / Money Market | / / Mid-Cap Value | High Yield Bond __________ | Mid-Cap Value __________
/ / High Yield Bond | / / Equity | Managed Bond __________ | Equity __________
/ / Managed Bond | / / Bond and Income | Govt. Securities __________ | Bond and Income __________
/ / Govt. Securities | / / Equity Index | Growth __________ | Equity Index __________
/ / Growth | / / Small-Cap Index | Aggressive Equity __________ | Small-Cap Index __________
/ / Aggressive Equity | / / REIT | Growth LT __________ | REIT __________
/ / Growth LT | / / Emerging Markets | Equity Income __________ | INTERNATIONAL __________
/ / Equity Income | / / Emerging Markets | Multi-Strategy __________ | Emerging Markets __________
/ / Multi-Strategy | [/ / XXXXXXXXX] | [XXXXXXXXX __________] | [XXXXXXXXX __________]
TOTAL MUST EQUAL 100% OR FULL $ TRANSFER AMOUNT __________
-------------------------------------------------------------------------------------------------------------------------------
G95-00NY 9/99 [BARCODE]
1600-9A * 1 6 0 0 - 9 A 2 *
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
/14/ PRE-AUTHORIZED WITHDRAWALS WITHDRAWAL TO BE ISSUED BY CHECK UNLESS SECTION I IS COMPLETED AND VOIDED CHECK ATTACHED.
A. CHOOSE ONE WITHDRAWAL OPTION | B. WITHDRAWAL AMOUNT TO BE WILL BE GROSS IF SELECTED.
% of contract | / / Net of Charges / / Gross of charges
/ /$_________each time / /________ value annually | AVAILABLE FOR DOLLAR AMOUNT ONLY.
- ------------------------------------------------------------------------------------------------------------------------------------
C. 72(t)/72(q) CHECK BOX IF WITHDRAWAL IS A | D. START DATE (MO/DAY/YR) |E. FREQUENCY
CONTINUATION OF A SERIES OF SUBSTANTIALLY| |
EQUAL PERIODIC PAYMENTS | ____/____/____________ | / / Monthly / / Semi-Annually
/ / UNDER SECTION IRC 72(t)OR 72(q) NOT | |
CALCULATED BY PACIFIC LIFE. | DEFAULT START DATE IS |
| ONE MONTH FROM ISSUE. | / / QUARTERLY / / ANNUALLY
- ------------------------------------------------------------------------------------------------------------------------------------
F. DURATION ENTER EITHER THE NUMBER OF | G. FEDERAL TAXES IF NOT SPECIFIED, THE MINIMUM
MONTHS OR YEARS. | 10% FEDERAL TAX ON NON-QUALIFIED CONTRACTS AND IRAS
| WILL BE WITHHELD. MANDATORY 20% ON QUALIFIED / / Do Not Withhold
| CONTRACTS WILL BE WITHHELD STATE MANDATED INCOME
/ / Months____ / / Years_____ | TAX WILL BE WITHHELD WHERE REQUIRED BY LAW / / Withhold____ %
- ------------------------------------------------------------------------------------------------------------------------------------
H. SOURCE SOURCES MAY BE SELECTED FOR DOLLAR AMOUNT WITHDRAWALS ONLY. INDICATE DOLLAR AMOUNTS THAT EQUAL THE TOTAL
IN 16A. CHOOSE ONE OR MORE SOURCES, OTHERWISE, WITHDRAWALS WILL BE TAKEN EQUALLY FROM CURRENT ALLOCATIONS.
Fixed __________ | Aggressive Equity __________ | Mid-Cap Value __________ | Small-Cap Index __________
Money Market __________ | Growth LT __________ | Equity __________ | REIT __________
High Yield Bond __________ | Equity Income __________ | Bond and Income __________ | International __________
Managed Bond __________ | Multi-Strategy __________ | Equity Index __________ | Emerging Markets __________
Govt. Securities __________ | Large-Cap Value __________ | [xxxxxxx __________] | [xxxxxxx __________]
Growth __________
- ------------------------------------------------------------------------------------------------------------------------------------
I. 3RD PARTY PAYEE - Name (FIRST, MIDDLE INITIAL, LAST) INDICATE NAME AND ADDRESS OF PAYEE, IF OTHER THAN OWNER.
FOR DIRECT DEPOSIT, A VOIDED CHECK MUST BE ATTACHED OF ABA NUMBER INDICATED
Name of Institution/Individual | Account Number
|
-----------------------------------------------------------------------------------------------------------------------------
Street Address (NUMBER, STREET NAME AND APARTMENT OR UNIT NUMBER)
-----------------------------------------------------------------------------------------------------------------------------
City, State & ZIP Code | ABA Number FOR DIRECT DEPOSIT
|
-----------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
/15/ STATEMENT OF APPLICANT MY AGENT AND I DISCUSSED MY corrections to my Contract may be made from the application.
FINANCIAL BACKGROUND AND AS A RESULT I BELIEVE THIS | My acceptance of this Contract constitutes acceptance of
CONTRACT WILL MEET MY INSURABLE NEEDS AND FINANCIAL | these corrections. If there are joint applicants, the
OBJECTIVES. I HAVE CONSIDERED THE APPROPRIATENESS OF | Contract, if issued, will be owned by the joint applicants
FULL OR PARTIAL REPLACEMENT OF ANY EXISTING LIFE | as Joint Tenants With The Right Of Survivorship and not as
INSURANCE OR ANNUITY, IF APPLICABLE. I UNDERSTAND THAT | Tenants In Common.
CONTRACT VALUES MAY INCREASE OF DECREASE DEPENDING ON | MY SIGNATURE CERTIFIES, UNDER PENALTY OF PERJURY, THAT
THE INVESTMENT EXPERIENCE OF THE VARIABLE ACCOUNTS. | THE TAXPAYER IDENTIFICATION NUMBER PROVIDED IS CORRECT.
CONTRACT VALUES UNDER THE VARIABLE ACCOUNTS ARE | I AM NOT SUBJECT TO BACKUP WITHHOLDING BECAUSE: I AM EXEMPT;
VARIABLE AND ARE NOT GUARANTEED. I UNDERSTAND THAT ALL | OR I HAVE NOT BEEN NOTIFIED THAT I AM SUBJECT TO BACKUP
PAYMENTS AND VALUES PROVIDED BY THE CONTRACT MAY VARY | WITHHOLDING RESULTING FROM FAILURE TO REPORT ALL INTEREST OR
AS TO DOLLAR AMOUNT TO THE EXTENT THAT THEY ARE BASED ON | DIVIDENDS; OR I HAVE BEEN NOTIFIED THAT I AM NO LONGER
THE INVESTMENT EXPERIENCE OF THE SELECTED PORTFOLIO(S). | SUBJECT TO BACKUP WITHHOLDING. (STRIKE OUT THE PRECEDING
I have received prospectuses. I hereby represent my | SENTENCE IF SUBJECT TO BACKUP WITHHOLDING.) THE IRS DOES
answers to the above questions to be correct and true | NOT REQUIRE MY CONSENT TO ANY PROVISION OF THIS DOCUMENT
to the best of my knowledge and belief, and agree | OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP
that this application will be part of the annuity | WITHHOLDING.
Contract issued by Pacific Life. I acknowledge that
----------------------------------------------------------------------------- -----------------------------------------------
Signed at City State Where Application Signed
---------------------------------------- ----------- -------------------------------------------------- --------------------
Owner's Signature Date Joint Owner's Signature Date
- ------------------------------------------------------------------------------------------------------------------------------------
/16/ AGENT'S STATEMENT Do You Have Reason to believe that any existing life insurance or annuity has been (or will be) surrendered,
withdrawn from, loaned against, changed or otherwise reduced in value, or replaced in connection with this transaction
assuming the Contract applied for will be issued?
/ / Yes / / No IF YES , EXPLAIN IN REPLACEMENT SECTION 7.
I certify that I am authorized and qualified to discuss this Contract. I have explained to the applicant how the annuity will
meet their insurable needs and financial objectives. I have discussed the appropriateness of replacement, if applicable.
-------------------------- ---------------------------------------------------------- -------------------------------------
Agent's Signature Print Agent's Full Name Agent's SSN REQUIRED
( ) -
----------------------- ---------------------------------------------------------------- -----------------------------------
Agent's Phone Number Broker/Dealer's Name Brokerage Account Number
Option / / A / / B / / C OPTIONAL
- ------------------------------------------------------------------------------------------------------------------------------------
G95-00NY 9/99 [BARCODE]
1600-9A * 1 6 0 0 - 9 A 3 *
</TABLE>
<PAGE>
PACIFIC PORTFOLIO VARIABLE ANNUITY APPLICATION INSTRUCTIONS
/ 1/ ANNUITANTS/OWNERS: Maximum age at issue is 85. There are many combinations
of Owner and Annuitant registrations which may result in different
/ 2/ consequences. For example, the death of an Owner/Annuitant may have
different consequences than the death of a non-owner Annuitant Joint or
Contingent Owners and/or Joint Annuitants cannot be named on qualified
contracts. For IRAs, Owner and Annuitant must be the participant. For
pension/profit sharing, 401(k) and Keogh/HR10 plans, name plan as Owner.
For 403(b) plans, name participant as both Owner and Annuitant. Use the
Special Requests Section to clarify registrations. Spousal signatures may
be required for certain actions in qualified contracts. If qualified plan
is owner, also complete Qualified Plan Certification form. Consult a tax
adviser to properly structure qualified plans and effect transfers.
/ 3/ BENEFICIARY: Beneficiaries will be joint primary if no boxes are checked.
Joint beneficiaries will share equally with rights of survivorship. For
non-qualified contracts, if the Owner dies, Contract may only be continued
if spouse is sole beneficiary.
/ 4/ CONTRACT TYPE: A conduit IRA is used to move assets from a qualified plan
with intent to move the assets to another qualified plan at a later date.
Subsequent contributions are not permitted. Transfer indicates a trustee
to trustee or custodian to custodian transfer only. If initial IRA payment
represents both a rollover and a contribution, indicate amounts for each.
Ensure the total matches the check. For a SIMPLE IRA, Pacific Life will
only act as a Non-Designated Financial Institution.
/ 5/ ISSUE STATE: Indicate the state where the application is signed.
/ 6/ INITIAL PURCHASE PAYMENTS: Indicate the initial purchase payment in U.S.
Dollars. Initial Non-qualified Contract minimum $5,000; Qualified minimum
$2,000.
/ 7/ REPLACEMENT: Complete and attach a Transfer/Exchange form and any required
state replacement forms.
/ 8/ ALLOCATION OPTIONS: Allocations must total 100% or equal purchase payment.
If rebalancing, use percentages only. Portfolio managers are:
<TABLE>
<CAPTION>
<S> <C>
Fixed ..............................Pacific Life
Money Market .......................Pacific Life
High Yield Bond ....................Pacific Life
Managed Bond .......................PIMCO
Govt. Securities ...................PIMCO
Growth .............................Capital Guardian
Aggressive Equity ..................Alliance Capital
Growth LT ..........................Janus
Equity Income ......................J.P. Morgan Investment
Multi-Strategy .....................J.P. Morgan Investment
Large-Cap Value ....................Salomon
Mid-Cap Value ......................Lazard
Equity .............................Goldman Sachs
Bond and Income ....................Goldman Sachs
Equity Index .......................Bankers Trust
Small-Cap Index ....................Bankers Trust
REIT ...............................Morgan Stanley
International ......................Morgan Stanley
Emerging Markets ...................Blairlogie
[XXXXXXX ...........................XXXXXXX]
[XXXXXXX ...........................XXXXXXX]
</TABLE>
/ 9/ REBALANCING: If no date is chosen, rebalancing will occur on the first
business day of the frequency selected and every period after. Actual
Start date may occur after date elected. The Fixed Option may not be
rebalanced. Additional purchase payments to accounts other than those
selected on this application will not be rebalanced. To change
allocations, complete a new transfer form.
/10/ SPECIAL REQUESTS: Use this section to indicate special registrations and
other instructions.
/11/ ANNUITY DATE (ANNUITY START DATE): Annuity start date cannot be prior to
first Contract Anniversary. For non-qualified contracts, if no date is
chosen, Annuity Date is the Annuitant's 90th birthday. For qualified
contracts, if no date is chosen, Annuity Date is April 1 of year Annuitant
reaches age 70.
/12/ PRE-AUTHORIZED CHECKING FOR ADDITIONAL PURCHASE PAYMENTS: Initial minimum
purchase may be met over maximum of 12 months. The first purchase payment
must accompany this application. Monthly Non-Qualified Contract minimum
$400, Qualified Contract minimum $250.
/13/ TRANSFERS: Contracts must be issued for 30 days. Actual start date may
occur after date elected. Minimum source account value $5,000. Minimum
initial transfer $250. TRANSFER DOLLARS: Last transfer will occur even if
remaining balance is less than the amount selected. TRANSFER PERCENTAGES:
Annual percentage will be divided by the frequency selected.
/14/ PRE-AUTHORIZED WITHDRAWALS: Contract must be issued for 30 days. Actual
start date may occur after date elected. Minimum withdrawal $250. Annual
percentage will be divided by the frequency selected. Payment will be
reduced by any taxes if withholding is applicable, and will be taken from
all investment options if none is selected. Withdrawals may be taken from
qualified contracts if allowed by the plan.
/15/ STATEMENT OF APPLICANT: Please read this section carefully.
/16/ STATEMENT OF AGENT: Your agent must fully complete and sign this section.
/17/ MAILING INSTRUCTIONS: Send this completed application as follows:
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APPLICATION WITH PAYMENT APPLICATION WITHOUT PAYMENT
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AND/OR ADDITIONAL PAYMENTS AND/OR REGULAR MAIL
PACIFIC LIFE & ANNUITY PACIFIC LIFE & ANNUITY
P.O. Box 100060 P.O. Box 7187
Pasadena, CA 91189-0060 Pasadena, CA 91109-7187
EXPRESS MAIL DELIVERY: EXPRESS MAIL DELIVERY:
PACIFIC LIFE & ANNUITY PACIFIC LIFE & ANNUITY
C/O FCNPC 1111 S. Arroyo Parkway, Ste. 250
1111 S. Arroyo Parkway, Ste. 150 Pasadena, CA 91105
Pasadena, CA 91105
<PAGE>
AMENDED & RESTATED
ARTICLES OF INCORPORATION FOR
PM GROUP LIFE INSURANCE COMPANY
William L Ferris and Audrey L. Milfs certify that:
1. They are the President and Chief Executive Officer, and Secretary,
respectively, of PM Group Life Insurance Company, an Arizona corporation.
2. Article I of the restated articles of incorporation of this corporation is
amended to read as follows: "the name of this Corporation shall be
PACIFIC LIFE & ANNUITY COMPANY."
3. The foregoing amendment of the Amended and Restated Articles of
Redomestication was duly approved by the board of directors on November 1,
1998.
4. The foregoing amendment of the restated articles of incorporation has been
duly approved by the required vote of shareholders in accordance with
Section 10-1006 of the Arizona Revised Statutes. The total number of
outstanding shares of the corporation is 2,900,000. The total number of
shares voting in favor of the amendment equaled or exceeded the vote
required. The percentage vote required was more than 50%.
We further declare under penalty of perjury under the laws of the State of
Arizona that the matters set forth in this certificate are true and correct of
our own knowledge.
Dated: January 4, 1999
------------------------------------
William L. Ferris
President & Chief Executive Officer
------------------------------------
Audrey L. Milfs
Secretary
<PAGE>
BYLAWS
OF
PACIFIC LIFE & ANNUITY COMPANY
As Amended January 4, 1999
<PAGE>
BYLAWS OF
PACIFIC LIFE & ANNUITY COMPANY
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL EXECUTIVE OFFICE.
The principal executive office of the corporation is fixed at 700 Newport
Center Drive, Newport Beach, California 92660.
The board of directors may relocate the principal executive office by
amendment to these bylaws.
SECTION 2. OTHER OFFICES.
The board of directors may establish branch or subordinate offices wherever
the corporation is authorized to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS.
All meetings of shareholders shall be held at the principal office or at
such other place as may be designated for that purpose from time to time by the
board of directors.
SECTION 2. ANNUAL MEETINGS.
The annual meeting of the shareholders shall be held on the fourth Tuesday
of February in each year at 10:00 a.m. However, if this day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At this meeting, directors shall be elected, and
any other proper business within the power of the shareholders shall be
transacted.
SECTION 3. SPECIAL MEETINGS.
Special meetings of the shareholders, for any purpose or purposes
whatsoever, may be called at any time by the chairman of the board, the
president or by the board of directors, or by any two or more members thereof,
or by one or more shareholders holding not less than one-tenth (1/10) of the
voting power of the corporation.
<PAGE>
SECTION 4. NOTICE OF MEETINGS.
Notices of annual or special meetings shall be given in writing to
shareholders entitled to vote by the secretary or the assistant secretary, or if
there be no such officer, or in case of his neglect or refusal, by any director
or shareholder.
Such notices shall be sent to the shareholder's address appearing on the
books of the corporation or supplied by him to the corporation for the purpose
of notice, or shall be delivered personally, not less than ten (10) days before
such meeting.
Notice of any meeting of shareholders shall specify the place, the day and
the hour of meeting, and in case of special meeting, as provided by the general
corporation law of Arizona, the purpose or purposes for which the meeting is
called.
When a meeting is adjourned for forty-five (45) days or more, notice of the
adjourned meeting shall be given as in case of an original meeting. If the
meeting is adjourned for less than forty-five days, it shall not be necessary to
give any notice of the adjournment or of the business to be transacted at any
adjourned meeting other than by announcement at the meeting at which such
adjournment is taken.
SECTION 5. CONSENT TO SHAREHOLDERS' MEETINGS.
The transactions of any meeting of shareholders, however called and
noticed, shall be valid as though had at a meeting duly held after regular call
and notice if a quorum be present either in person or by proxy, and if, either
before or after the meeting, each of the shareholders entitled to vote, not
present in person or by proxy, sign a written waiver of notice, or a consent to
the holding of such meeting, or an approval of the minutes thereof. All such
waivers, consents or approvals shall be filed with the corporate records or made
a part of the minutes of the meeting.
Any action which may be taken at a meeting of the shareholders, may be
taken without a meeting if authorized by a writing signed by all of the holders
of shares who would be entitled to vote at a meeting for such purpose, and filed
with the secretary of the corporation.
SECTION 6. QUORUM.
The holders of a majority of the shares entitled to vote thereat, present
in person, or represented by proxy, shall be requisite and shall constitute a
quorum at all meetings of the shareholders for the transaction of business
except as otherwise provided by law, by the articles of incorporation, or by
these bylaws. If however, such majority shall not be present or represented at
any meeting of the shareholders, the shareholders entitled to vote thereat,
present in person, or by proxy, shall have power to adjourn the meeting from
time to time, until the requisite amount of voting shares shall be present. At
such adjourned meeting at which the requisite amount of voting shares shall be
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. No notice of the adjourned meeting need be
given, other than an announcement at the meeting at which the adjournment is
taken, unless the meeting is adjourned for forty-five (45) days or more in which
case notice of the adjourned meeting shall be given as in the case of an
original meeting.
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SECTION 7. VOTING RIGHTS; CUMULATIVE VOTING.
Only persons in whose names shares entitled to vote stand on the stock
records of the corporation on the day of any meeting of shareholders, unless
some other day be fixed by the board of directors for the determination of
shareholders of record, then on such other day, shall be entitled to vote at
such meeting.
Every shareholder entitled to vote shall be entitled to one vote for each
said share and in any election of directors he shall have the right to cumulate
his votes as provided in A.R.S.
S 10-033.
SECTION 8. PROXIES.
Every person entitled to vote or execute consents shall have the right to
do so either in person or by one or more agents authorized by a written proxy
executed by such person or his duly authorized agent and filed with the
secretary of the corporation. Any proxy duly executed is not revoked and
continues in full force and effect until an instrument revoking it or a duly
executed proxy bearing a later date is filed with the secretary of the
corporation; provided that no such proxy shall be valid after the expiration of
eleven months from the date of its execution, unless the person executing it
specifies therein the length of time for which such proxy is to continue in
force, which in no case shall exceed seven years from the date of its execution.
SECTION 9. INSPECTORS OF ELECTION.
In advance of any meeting of shareholders, the board of directors may
appoint any persons, other than nominees for office, inspectors of election to
act at such meeting or any adjournment thereof. If inspectors of election be not
so appointed, the chairman of any such meeting may, and on the request of any
shareholder or his proxy shall, make such appointment at the meeting. The
number of inspectors shall be either one or three. If appointed at a meeting on
the request of one or more shareholders or proxies, the majority of shares
present shall determine whether one or three inspectors are to be appointed. In
case any person appointed as inspector fails to appear or fails or refuses to
act, the vacancy may be filled by appointment by the board of directors in
advance of the meeting, or at the meeting by the chairman.
The duties of such inspectors shall include: determining the number of
shares outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, the authenticity, validity and effect of
proxies; receiving votes, ballots or consents, hearing and determining all
challenges and questions in any way arising in connection with the right to
vote; counting and tabulating all votes or consents; determining the result; and
such acts as may be proper to conduct the election or vote with fairness to all
shareholders.
ARTICLE III
DIRECTORS; MANAGEMENT
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SECTION 1. POWERS.
Subject to the articles of incorporation, the bylaws and the laws of the
State of Arizona as to action to be authorized or approved by the shareholders,
all corporate powers shall be exercised by or under authority of, and the
business and affairs of this corporation shall be controlled by, a board of
directors.
SECTION 2. NUMBERS AND QUALIFICATION OF DIRECTORS.
The authorized number of directors of the corporation shall be not less
than five (5) nor more than fifteen (15). The exact number of directors shall
be five (5) until changed, within the limits specified herein, by a bylaw
amending this Section 2, duly adopted by the board of directors or by the
shareholders.
SECTION 3. ELECTION AND TENURE OF OFFICE.
The directors shall be elected by ballot at the annual meeting of the
shareholders, to serve for one (1) year and until their successors are elected
and have qualified. Their term of office shall begin immediately after
election.
SECTION 4. VACANCIES.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, though less than a quorum, or by a sole remaining director,
and each director so elected shall hold office until his successor is elected at
an annual meeting of shareholders or at a special meeting called for that
purpose.
The shareholders may at any time elect a director to fill any vacancy not
filled by the directors, and may elect the additional directors at the meeting
at which an amendment of the bylaws is voted authorizing an increase in the
number of directors.
A vacancy or vacancies shall be deemed to exist in case of the death,
resignation or removal of any director, or if the shareholders shall increase
the authorized number of directors but shall fail at the meeting at which such
increase is authorized, or at an adjournment thereof, to elect the additional
director so provided for, or in case the shareholders fail at any time to elect
the full number of authorized directors.
If the board of directors accepts the resignation of a director tendered to
take effect at a future time, the board, or the shareholders, shall have power
to elect a successor to take office when the resignation shall become effective.
No reduction of the number of directors shall have the effect of removing
any director prior to the expiration of his term of office.
SECTION 5. REMOVAL OF DIRECTORS.
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The entire board of directors or any individual director may be removed
from office as provided by A.R.S.S 10-039.
SECTION 6. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE.
Meetings of the board of directors shall be held at the principal office of
the corporation in the State of California, or at any place within or without
the State of California as may be designated for that purpose, from time to
time, by resolution of the board of directors, or written consent of all of the
members of the board. Any meeting shall be valid, wherever held, if held by the
written consent of all members of the board of directors, given either before or
after the meeting and filed with the secretary of the corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, as long as all directors participating in the
meeting can hear one another, and all such directors shall be deemed to be
present in person at the meeting.
SECTION 7. ORGANIZATION MEETINGS AND REGULAR MEETINGS.
The organization meetings of the board of directors shall be held
immediately following the adjournment of the annual meetings of the shareholders
at the place where the annual meeting of the shareholders was held or at any
other place that shall have been designated by the board of directors, for the
purpose of organization, any desired election of officers, and the transaction
of other business. Notice of this meeting shall not be required. Regular
meetings of the board of directors as scheduled by the board of directors may be
held without notice.
SECTION 8. SPECIAL MEETINGS--NOTICES.
Special meetings of the board of directors for any purpose or purposes
shall be called at any time by the chairman of the board, the president or by
any vice president, or by any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to the directors or sent to each director by letter
or by telegram, charges prepaid, addressed to him at his address as it is shown
upon the records of the corporation, or if it is not so shown on such records or
is not readily ascertainable, at the place in which the meetings of the
directors are regularly held. In case such notice is mailed or telegraphed, it
shall be deposited in the United States mail or delivered to the telegraph
company in the place in which the principal office of the corporation is located
at least ninety-six (96) hours prior to the time of the holding of the meeting
if sent by mail and at least forty-eight (48) hours prior to the time of the
holding of the meeting if sent by telegram or if personally delivered, it shall
be so delivered at least forty-eight (48) hours prior to the time of the holding
of the meeting. Such mailing, telegraphing, personal delivery, or telephonic
notice above provided shall be due, legal and personal notice to such director.
SECTION 9. WAIVER OF NOTICE.
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<PAGE>
When all the directors are present at any directors' meeting, however
called or noticed, and sign a written consent thereto on the records of such
meeting, or, if a quorum of the directors are present, and if those not present
sign in writing a waiver of notice of such meeting, whether prior to or after
the holding of such meeting, which said waiver shall be filed with secretary of
the corporation, the transactions thereof are as valid as if had at a meeting
regularly called and noticed. Any such waiver of notice of consent need not
specify the purpose of the meeting.
SECTION 10. NOTICE OF ADJOURNMENT.
Notice of the time and place of holding an adjourned meeting need not be
given to absent directors if the time and place be fixed at the meeting
adjourned, unless the meeting is adjourned for more than twenty-four (24) hours,
in which case notice of the time and place shall be given to the absent
directors in the manner specified in Section 8 of this Article III.
SECTION 11. QUORUM.
A majority of the authorized number of directors shall constitute a quorum
for the transaction of business. The action of a majority of the directors
present at any meeting at which there is a quorum, when duly assembled, is valid
as a corporate act; provided that the directors present in the absence of a
quorum, may adjourn from time to time, but may not transact any business.
SECTION 12. ACTION WITHOUT MEETING BY UNANIMOUS CONSENT.
Notwithstanding anything to the contrary contained in these bylaws, any
action required or permitted to be taken by the board of directors may be taken
without a meeting, if all members of the board of directors shall individually
or collectively consent in writing to such action. Such written consent or
consents shall be filed with the minutes of the proceedings of the board. Such
action by written consent shall have the same force and effect as a unanimous
vote of such directors.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS.
The officers shall be a chairman of the board, a president, one or more
vice presidents, a secretary, a chief financial officer/treasurer, and such
other officers as the board of directors may from time to time determine, which
officers shall be elected by, and hold office at the pleasure of, the board of
directors.
SECTION 2. ELECTION.
After their election, the directors shall meet and organize by electing a
chairman of the board, a president, one or more vice presidents, a secretary and
a chief financial officer/treasurer, who may, but need not be, members of the
board of directors. The directors shall also elect such
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<PAGE>
other officers as they may from time to time determine. Any two or more of such
offices, except those of president and secretary, may be held by the same
person.
SECTION 3. COMPENSATION AND TENURE OF OFFICE.
The compensation and tenure of office of all the officers of the
corporation shall be fixed by the board of directors.
SECTION 4. REMOVAL AND RESIGNATION.
Any officer may be removed, either with or without cause, by a majority of
the directors at the time in office, at any regular or special meeting of the
board, or, except in case of any officer chosen by the board of directors, by
any officer upon whom such power of removal may be conferred by the board of
directors.
Any officer may resign at any time by giving written notice to the board of
directors, or to the chairman of the board, or to the president, or to the
secretary of the corporation. Any such resignation shall take effect at the
date of the receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 5. VACANCIES.
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
the bylaws for regular appointments to such office.
SECTION 6. CHAIRMAN OF THE BOARD.
The chairman of the board shall preside at all meetings of the board of
directors, shall preside at all meetings of the shareholders, shall be an
ex-officio member of all standing committees, including the executive committee,
if any, shall be the chief executive officer of the corporation and shall
exercise and perform such other powers and duties as may be from time to time
assigned to him by the board of directors or prescribed by the bylaws.
SECTION 7. PRESIDENT.
Subject to such supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, the president shall have general
supervision, direction and control of the business and affairs of the
corporation, subject only to the control of the board of directors and subject
to any supervisory power granted the chairman of the board. In the absence of
the chairman of the board, he shall preside at meetings of the shareholders and
at meetings of the board of directors. He shall be ex-officio a member of all
the standing committees, including the executive committee, if any, and shall
have the general powers and duties of management usually vested in the office of
president of a corporation, and shall have such other powers and duties as may
be prescribed by the board of directors or the bylaws.
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<PAGE>
SECTION 8. VICE PRESIDENTS.
In the absence or disability of the president, the vice presidents in order
of their rank as fixed by the board of directors or, if not ranked, the
vice-president designated by the board of directors, shall perform all the
duties of the president, and when so acting shall have all the powers of, and be
subject to all the restrictions upon the president. The vice-presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors or by the bylaws.
SECTION 9. SECRETARY.
The secretary shall keep or cause to be kept, at the principal office or
such other place as the board of directors may order, a book of minutes of all
meetings of directors and shareholders, with the time and place of holding,
whether regular or special, and, if special, how authorized, the notice thereof
given, the names of those present at directors' meetings, the number of shares
present or represented at shareholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal office or
at the office of the corporation's transfer agent, a share register, or a
duplicate share register, showing the names of the shareholders and their
addresses, the number and classes of shares held by each, the number and date of
certificates issued for the same, and the number and date of cancellation of
every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all the meetings
of the shareholders and of the board of directors required by the bylaws or by
law to be given, and shall keep the seal of the corporation in safe custody, and
shall have such other powers and perform such other duties as may be prescribed
by the board of directors or by the bylaws.
SECTION 10. CHIEF FINANCIAL OFFICER/TREASURER.
The chief financial officer/treasurer shall keep and maintain, or cause to
be kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts disbursements, gains, losses, capital, surplus and shares.
Any surplus, including earned surplus, paid-in surplus and surplus arising from
a reduction of stated capital, shall be classified according to source and shown
in a separate account. The books of account shall at all reasonable times be
open to inspection by any director.
The chief financial officer/treasurer shall deposit all monies and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the board of directors. He shall disburse
the funds of the corporation as may be ordered by the board of directors, shall
render to the president and directors, whenever they request it, an account of
all of his transactions as treasurer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or the bylaws.
SECTION 11. ASSISTANTS.
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Any assistant secretary or assistant treasurer, respectively, may exercise
any of the powers of secretary or treasurer, respectively, as provided in these
bylaws or as directed by the board of directors, and shall perform such other
duties as may be prescribed by the bylaws or the board of directors.
SECTION 12. OTHER.
The board of directors may from time to time appoint such other officers or
agents as the business of the corporation may require, fix their tenure of
office and allow them suitable compensation.
ARTICLE V
EXECUTIVE AND OTHER COMMITTEES
The board of directors may appoint an executive committee, and such other
committees as may be necessary from time to time, consisting of such number of
its members and with such powers as it may designate, consistent with the
articles of incorporation and bylaws and the general corporation laws of the
State of Arizona. Such committees shall hold office at the pleasure of the
board.
ARTICLE VI
CORPORATE RECORDS AND REPORTS--INSPECTION
SECTION 1. RECORDS.
The corporation shall maintain adequate and correct accounts, books and
records of its business and properties. All of such books, records and accounts
shall be kept at its principal place of business in the State of California, as
fixed by the board of directors from time to time.
SECTION 2. INSPECTION BY DIRECTORS.
Every director shall have the absolute right at any reasonable time to
inspect all books, records and documents of every kind and the physical
properties of the corporation and each of its subsidiary corporations. This
inspection by a director may be made in person or by an agent or attorney and
the right of inspection includes the right to copy and make extracts of
documents.
SECTION 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE
RECORDS.
The accounting books and records and minutes of proceedings of the
shareholders and the board of directors and any committee or committees of the
board of directors shall be kept at such place or places designated by the board
of directors, or, in the absence of such designation, at the principal executive
office of the corporation. The minutes shall be kept either in written form or
in any other form capable of being converted into written form. The minutes and
accounting
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books and records shall be open to inspection upon the written demand of any
shareholder or holder of a voting trust certificate, at any reasonable time
during usual business hours, for a purpose reasonably related to the holder's
interest as a shareholder or as the holder of a voting trust certificate. The
inspection may be made in person or by an agent or attorney, and shall include
the right to copy and make extracts. These rights of inspection shall extend to
the records of each subsidiary corporation of the corporation.
SECTION 4. MAINTENANCE AND INSPECTION OF BYLAWS.
The corporation shall keep at its principal business office in California,
the original or a copy of these bylaws as amended to date, which shall be open
to inspection by the shareholders at all reasonable times during office hours.
SECTION 5. INSURANCE POLICIES -- HOW SIGNED.
All policies issued by the corporation shall be signed by the president and
countersigned by the secretary either personally or by facsimile.
SECTION 6. CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness, issued in the name of or payable to the corporation,
shall be signed or endorsed by such person or persons and in such manner as
shall be determined from time to time by resolution of the board of directors.
SECTION 7. CONTRACTS, ETC. -- HOW EXECUTED.
The board of directors, except as in the bylaws otherwise provided, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the corporation, and
this authority may be general or confined to specific instances; and, unless so
authorized or ratified by the board of directors or within the authority of an
officer, no office, agent or employee shall have any power or authority to bind
the corporation by any contract or engagement or to pledge its credit or to
render it liable for any purpose or for any amount.
SECTION 8. ANNUAL REPORTS.
Unless dispensed with by resolution of the board of directors as to any
calendar year or waived by written consent of all shareholders entitled to vote
as to any calendar year, the board of directors shall cause annual reports to be
made to the shareholders as provided by the general corporation law of Arizona.
If made, the board of directors shall cause such annual reports to be sent to
the shareholders not later than one hundred twenty (120) days after the close of
the calendar year.
ARTICLE VII
INVESTMENTS
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SECTION 1. INVESTMENTS IN THE CORPORATION'S NAME.
All investments of the corporation shall be made in the name of the
corporation or its nominee.
SECTION 2. INVESTMENTS BY THE CORPORATION.
All investments of the corporation shall be authorized or approved by the
board of directors or by a committee of the board charged with the duty of
supervising or making such investments. If authorized or approved by such a
committee, a report shall be submitted to the board of directors at its next
meeting. The approval of investments shall be entered on the records of the
corporation in such form and detail as required by the general corporation law
of Arizona.
ARTICLE VIII
CERTIFICATES AND TRANSFER OF SHARES
SECTION 1. CERTIFICATES FOR SHARES.
Certificates for shares shall be of such form and device as the board of
directors may designate and shall state the name of the record holder of the
shares represented thereby; its number; date of issuance; the number of shares
for which it is issued; the par value; a statement of the rights, privileges,
preferences and restrictions, if any; a statement as to redemption or
conversion, if any; a statement of liens or restrictions upon transfer or
voting, if any; if the shares be assessable, or, if assessments are collectible
by personal action, a plain statement of such facts.
Every certificate for shares must be signed in the name of the corporation
by the president, or a vice president and the secretary or an assistant
secretary or must be authenticated by facsimiles of the signatures of the
president and secretary or by a facsimile of the signature of its president and
the written signature of its secretary or an assistant secretary.
SECTION 2. TRANSFER ON THE BOOKS.
Upon surrender to the secretary or transfer agent of the corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
SECTION 3. LOST OR DESTROYED CERTIFICATES.
Any person claiming a certificate of stock to be lost or destroyed shall
make an affidavit or affirmation of that fact and advertise the same in such
manner as the board of directors may require, and shall, if the directors so
require, give the corporation a bond of indemnity, in form and with one or more
sureties satisfactory to the board, in at least double the value of the stock
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represented by said certificate, whereupon, a new certificate may be issued of
the same tenor and for the same number of shares as the one alleged to be lost
or destroyed.
SECTION 4. TRANSFER AGENTS AND REGISTRARS.
The board of directors may appoint one or more transfer agents or transfer
clerks, and one or more registrars, which shall be an incorporated bank or trust
company--either domestic or foreign, who shall be appointed at such times and
places as the requirements of the corporation may necessitate and the board of
directors may designate.
SECTION 5. CLOSING STOCK TRANSFER BOOKS.
The board of directors may close the transfer books in their discretion for
a period not exceeding thirty (30) days preceding any meeting, annual or
special, of the shareholders, or the day appointed for the payment of a
dividend.
ARTICLE IX
CORPORATE SEAL
The corporate seal shall be circular in form, and shall have inscribed
thereon the name of the corporation, the date of its incorporation, and the word
Arizona.
ARTICLE X
AMENDMENTS TO BYLAWS
SECTION 1. BY SHAREHOLDERS.
New bylaws may be adopted or these bylaws may be repealed or amended at
their annual meeting, or at any other meeting of the shareholders called for
that purpose, by a vote of shareholders entitled to exercise a majority of the
voting power of the corporation, or by written assent of such shareholders.
SECTION 2. POWERS OF DIRECTORS.
Subject to the rights of the shareholders to adopt, amend or repeal bylaws,
as provided in Section 1 of this Article X, the board of directors may adopt,
amend or repeal any of these bylaws or amendment thereof, provided, however that
the board of directors may adopt a bylaw or amendment of a bylaw changing the
authorized number of directors only for the purpose of fixing the exact number
of directors within the limits specified in Section 2 of Articles III of the
bylaws.
SECTION 3. RECORD OF AMENDMENTS.
Whenever an amendment or new bylaw is adopted, it shall be copied in the
Book of Bylaws with the original bylaw, in the appropriate place. If any bylaw
is repealed, the fact of
12
<PAGE>
repeal with the date of the meeting at which the repeal was enacted or written
assent was filed shall be stated in said book.
13
<PAGE>
SERVICES AGREEMENT
THIS Services Agreement ("Agreement") is made this 8th day of July 1999,
by and between Pacific Life & Annuity Co. ("PLA"), an Arizona corporation, and
Pacific Life Insurance Company (PLIC), a California corporation.
WHEREAS, PLA desires to contract with PLIC to provide certain services for
certain individual life, individual annuity, and institutional product
contracts; and
WHEREAS, PLIC desires to provide such administrative services for PLA on
the following terms and conditions;
NOW THEREFORE, in consideration of the mutual promises and agreements
contained herein, the parties do mutually agree as follows:
1. Services. Subject to the terms and conditions set forth in this
Agreement, PLIC agrees with respect to certain PLA contracts,
specifically, any and all individual life, individual annuity, and
institutional product contracts (collectively "the Contracts"), to provide
the administrative services described in Schedule A, attached hereto and
made a part hereof, together with such other services that PLA may
reasonably request (collectively "the Services") with respect to the
Contracts.
2. Charges for Services. As consideration for the Services provided by PLIC
pursuant to the Agreement, PLA agrees to pay PLIC a fee based on actual
costs, determined in a fair and reasonable manner, which costs will not
include a profit factor and which will be allocated equitably in
accordance with customary insurance accounting practices, where
applicable, consistently applied. For purposes of this Agreement, the
parties agree that at no time will charges for Services exceed the amounts
reflected in the Contract Specifications provided by PLA from time to time
to PLIC.
3. Subcontractors. PLIC may subcontract with any subsidiary or affiliate of
PLIC to provide Services; provided that subcontracting shall not result in
an increase in the amount charged for such Services or a decrease in the
quality of such Services provided.
4. Indemnification. PLA agrees to defend, indemnify and hold PLIC harmless
from and against all costs, reasonable expenses, losses, damages,
attorneys' fees, claims, obligations and liabilities imposed upon,
incurred or asserted against PLIC which arise out of or in any manner are
connected with Contracts administered by PLIC under this Agreement, except
if the conduct of PLIC constitutes an intentional tort, reckless conduct,
gross negligence or bad faith, or if PLIC issues a Contract which is
inconsistent with the approved policy specifications.
5. Underwriting and Claims Services. All underwriting and claims services
provided to PLA under this Agreement are to be based upon the written
criteria, standard and guidelines of PLA. PLA shall have the ultimate and
final authority over decisions
1
<PAGE>
and policies relating to the Contracts; to include but not limited to the
acceptance, rejection or canceling of risks relating to or with respect to
such Contracts.
6. Supervision by the Company. PLIC acknowledges that (a) the Board of
Directors and officers of PLA are vested with the power, authority, and
responsibility for managing the business and affairs of PLA, and (b) any
and all actions taken or advice or services provided pursuant to this
Agreement by PLIC are subject to the continuous supervision and approval
of the Board of Directors and the officers of PLA.
7. Billing. All charges made pursuant to this Agreement shall be billed by
PLIC monthly, if feasible, but in no event less frequently than quarterly.
Payment is due as soon as practicable, but in no event later than 60 days
after presentation of the billing. Interest may be assessed by PLIC 61
days after presentment of the billing, at a 3-month LIBOR rate. Billings
shall be accompanied by sufficient documentation to support the charges
and to meet all state insurance regulatory requirements. Statements are
subject to final adjustment only if mutually agreed upon by both parties.
8. Accounting Records and Documents.
(a) The books, accounts, and records of each party to all transactions shall
be maintained so as to clearly and accurately disclose the precise nature
and details of the transactions, including accounting information that is
necessary to support the reasonableness of the charges or fees to the
parties. PLIC shall keep such account and records insofar as they pertain
to the computation of charges hereunder available at its principal offices
for audit, inspection, and copying, during reasonable business hours, by
PLA and persons authorized by it and any governmental agency having
jurisdiction over PLA.
(b) All books, records and files established and maintained by PLIC by reason
of its performance under this Agreement which, absent this Agreement,
would have been held by PLA, shall be deemed the property of PLA, and
shall be subject to audit, inspection, and copying, during reasonable
business hours, by PLA and persons authorized by it and any governmental
agency having jurisdiction over PLA. All such books, records and files
shall be promptly transferred to PLA by PLIC upon termination of this
Agreement, at PLA's expense.
9. Notices. All written notices, requests, and other communications
hereunder shall be delivered to the addresses set forth on the signature
page of this Agreement, or any address hereinafter agreed upon by the
parties.
10. Governing Law. This Agreement shall be construed and governed in
accordance with the laws of the State of Arizona.
2
<PAGE>
11. Entire Agreement; Amendment. This Agreement shall constitute the entire
agreement among the parties and supersedes all prior agreements and
understandings, whether written or verbal, to the extent such agreements
pertain to the rights and responsibilities set forth herein.
Notwithstanding the foregoing, this Agreement does not supersede either of
the Pacific Life Insurance Company Administrative Services Agreement with
the Pacific Life Insurance Company and its Subsidiaries and Affiliates
dated September 1, 1997 and the Investment Management dated January 1,
1990. This Agreement may be amended only in writing executed by all
parties.
12. Arbitration. In the event any dispute arises between the parties related
in any way to this Agreement on which agreement between the parties cannot
be reached, the dispute shall be decided by arbitration in accordance with
procedures agreed upon by the parties after such dispute arises.
13. Termination. This Agreement may be terminated upon 60 days written notice
by written agreement of either party hereto. PLA may terminate the
contract in the event PLIC fails to perform its responsibilities hereunder
in a satisfactory manner.
14. Assignment. Except as set forth in Section 3 hereof, PLIC cannot assign
its duties or obligation, in whole or in part, under this Agreement to any
other firm, organization or individuals without the express written
consent of PL&A, which consent shall not be unreasonably withheld.
15. Severability. To the extent this Agreement may be in conflict with any
applicable law or regulation, this Agreement shall be construed in a
manner consistent with such law or regulation. The invalidity or
illegality of any provision of this Agreement shall not be deemed to
affect the validity or legality of any other provision of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
PACIFIC LIFE & ANNUITY COMPANY PACIFIC LIFE INSURANCE COMPANY
17360 Brookhurst 700 Newport Center Drive
Fountain Valley, CA 92708 Newport Beach, CA 92660
By: /s/ WILLIAM L. FERRIS By: /s/ THOMAS C. SUTTON
-------------------------- -------------------------
William L. Ferris Thomas C. Sutton
President & Chief Executive Chairman & Chief Executive
Officer Officer
By: /s/ AUDREY L. MILFS By: /s/ AUDREY L. MILFS
-------------------------- --------------------------
Audrey L. Milfs Audrey L. Milfs
Vice President & Secretary Vice President & Secretary
3
<PAGE>
SCHEDULE A
SERVICES PROVIDED BY PLIC
PURSUANT TO THIS AGREEMENT FOR THE CONTRACTS
1. Marketing
Supervision, recruiting and product training. Preparation and
distribution of illustrations and marketing materials. Communications
with the field. Contest qualification and production credit tracking.
2. Compliance
Provide contracts and policies in compliance with applicable state and
federal laws.
File PLA contracts and policies with insurance departments and other
regulatory agencies.
3. Policy Administration
Prepares in accordance with Section 5, and deliver and maintain contracts
and policies.
Obtain clients' acceptance of contracts and policies.
Maintain originals of all contracts and policies.
Provide customer service in relation to all contracts and policies.
Prepare and issue reports required by state and federal law.
4. Accounting and Financial Reporting
Prepares billings and collect premiums and other fees in relation to
contracts and policies.
Provide accounting for contracts and policies.
Provide financial reporting results for inclusion in PLA financial
statements.
Provide valuation and compliance with valuation and actuarial requirements
for business subject to this Agreement.
Provide support for PLA examinations and audits.
5. Claims Processing
In accordance with Section 5, process all claims arising under policies
and contracts.
Maintain claim documents, files and related information.
Maintain and update beneficiary designations and life assignments.
Control and maintain all draft and check stock, claim forms and other
forms and documents incidental to claims processing.
Maintain claims procedural manuals and other instructions.
Monitor claims for possible fraud.
4
<PAGE>
Page 2
Schedule A
6. Licensing and Commission Payment
Process and issue licenses and commission agreements, and pay applicable
fees.
Calculate and pay commissions.
Maintain commission payment information, and report such information as
required by applicable laws.
7. Separate Accounts
Provide services necessary for the maintenance of separate accounts,
including but not limited to state and federal regulations as applicable.
5
<PAGE>
[LETTERHEAD]
October 14, 1999
Pacific Life & Annuity Company
700 Newport Center Drive
Newport Beach, California 92660
Dear Sirs:
In my capacity as Senior Vice President and General Counsel of Pacific Life &
Annuity Company ("PL&A"), I, or attorneys employed by PL&A under my general
supervision, have supervised the establishment of Separate Account A of Pacific
Life & Annuity Company on September 24, 1998, which has been authorized by
resolution of the Board of Directors of PL&A adopted on July 1, 1998, concerning
Separate Account A as the separate account for assets applicable to Pacific
Portfolios individual flexible premium deferred variable annuity contracts
("contracts"), pursuant to the provisions of A.R.S. Section(s) 20-2633, 20-651,
20-515 and 20-536.01 of the Insurance Code of the State of Arizona. Moreover, I
have been associated with the preparation of the Registration Statement on Form
N-4 ("Registration Statement"), filed by PL&A and Separate Account A (File No.
333-71081) with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, for the registration of interests in the Separate Account A
funding the contracts.
I have made such examination of the law and examined such corporate records and
such other documents as in my judgment are necessary and appropriate to enable
me to render the following opinion that:
1. PL&A has been duly organized under the laws of the State of
Arizona and is a validly existing corporation.
2. Pacific Select Separate Account A is duly created and validly
existing as a separate account pursuant to the aforesaid
provisions of Arizona law.
3. The portion of the assets to be held in Separate Account A equal
to the reserves and other liabilities under the Pacific
Portfolios Contracts and any other contracts issued by PL&A that
are supported by Separate Account A is not chargeable with
liabilities arising out of any other business PL&A may conduct.
4. The Pacific Portfolios Contracts have been duly authorized by
PL&A and, when issued as contemplated by the Registration
Statement, will constitute legal, validly issued and binding
obligations of PL&A, except as limited by bankruptcy or
insolvency laws affecting the rights of creditors generally.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ David R. Carmichael
David R. Carmichael
Senior Vice President and
General Counsel
DRC/evm
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Pre-Effective Amendment No. 1 to Registration
Statement No. 333-71081 of Separate Account A of Pacific Life & Annuity
Company (formerly PM Group Life Insurance Company) on Form N-4 of our report
dated February 22, 1999, related to the financial statements - statutory
basis of PM Group Life Insurance Company as of December 31, 1998 and 1997,
and for each of the two years in the period ended December 31, 1998,
appearing in the Statement of Additional Information of Pacific Portfolios,
which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" appearing
in such Statement of Additional Information.
DELOITTE & TOUCHE LLP
Costa Mesa, California
October 14, 1999
<PAGE>
- --------------------------------------------------------------------------------
PACIFIC PORTFOLIOS VARIABLE ANNUITY SEPARATE ACCOUNT
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
AVERAGE INITIAL PREMIUM = $45,000.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAST YEAR ENDING 12/31/98
Equity
Money Mkt Mgd Bond Govt Secty High Yield Income Multi-Strat Intern'l
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96
Beginning AUV 10.751784 11.137453 10.951870 11.829870 14.783078 13.014333 12.762569
End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
Ending AUV 11.163639 11.993331 11.797236 11.952791 18.102886 15.16588 13.289721
Annual Fee ($30) $ 0.67 $ 0.67 $ 0.67 $ 0.67 $ - $ - $ 0.67
CDSC $ 63.00 $ 63.00 $ 63.00 $ 63.00 $ 63.00 $ 63.00 $ 63.00
Ending ERV $ 974.64 $ 1,013.18 $ 1,013.52 $ 946.72 $1,161.57 $ 1,102.32 $ 977.64
AATR W/Drawal -2.54% 1.32% 1.35% -5.33% 16.16% 10.23% -2.24%
AATR Account 3.76% 7.62% 7.65% 0.97% 22.46% 16.53% 4.06%
<CAPTION>
Equity Index Growth LT Equity Bond + Income Emerg Mkts Aggsv Eqty
<S> <C> <C> <C> <C> <C> <C>
Start Date 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96
Beginning AUV 15.692570 12.707541 14.676255 11.231117 9.281881 10.921505
End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
Ending AUV 19.877336 19.835315 18.854959 12.068716 6.69746 12.193538
Annual Fee ($30) $ - $ - $ - $ 0.67 $ 0.67 $ -
CDSC $ 63.00 $ 63.00 $ 63.00 $ 63.00 $ 63.00 $ 63.00
Ending ERV $ 1,203.67 $ 1,497.91 $ 1,221.73 $ 1,010.91 $ 657.90 1,053.47
AATR W/Drawal 20.37% 49.79% 22.17% 1.09% -34.21% 5.35%
AATR Account 26.67% 56.09% 28.47% 7.39% -27.91% 11.65%
</TABLE>
Dollar Values are per $1000 of initial premium
Average Annual Total Return (AATR) of Surrender Value = [ERV/$1000]-1
$30 Annual Fee waived if contract value over $50,000
Page 1
<PAGE>
- --------------------------------------------------------------------------------
PACIFIC PORTFOLIOS VARIABLE ANNUITY SEPARATE ACCOUNT
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
AVERAGE INITIAL PREMIUM = $45,000.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAST 3 YEARS ENDING 12/31/98
Equity
Money Mkt Mgd Bond Govt Secty High Yield Income Multi-Strat Intern'l
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date 12/29/95 12/29/95 12/29/95 12/29/95 12/29/95 12/29/95 12/29/95
Beginning AUV 9.995846 9.995276 9.993905 9.987722 9.898959 9.940604 9.854125
End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
Ending AUV 11.163639 11.993331 11.797236 11.952791 18.102886 15.165880 13.289721
Annual Fee ($30) $ 1.33 $ 0.67 $ 1.33 $ 0.67 $ - $ 0.67 $ -
CDSC $ 54.00 $ 54.00 $ 54.00 $ 54.00 $ 54.00 $ 54.00 $ 54.00
Ending ERV $1,061.42 $1,145.12 $ 1,124.95 $ 1,142.02 $ 1,774.77 $1,470.73 $ 1,294.65
AATR W/Drawal 2.01% 4.62% 4.00% 4.53% 21.07% 13.72% 8.99%
AATR Account 3.71% 6.24% 5.64% 6.15% 22.29% 15.10% 10.48%
<CAPTION>
Equity Index Growth LT Equity Bond + Income Emerg Mkts Aggsv Eqty
<S> <C> <C> <C> <C> <C> <C>
Start Date 12/29/95 12/29/95 12/29/95 12/29/95 N/A N/A
Beginning AUV 9.920654 9.992945 9.975743 10.010532
End Date 12/31/98 12/31/98 12/31/98 12/31/98
Ending AUV 19.877336 19.835315 18.854959 12.068716
Annual Fee ($30) $ - $ - $ - $ 0.67
CDSC $ 54.00 $ 54.00 $ 54.00 $ 54.00
Ending ERV $1,949.63 $1,930.93 $ 1,836.08 $ 1,150.78
AATR W/Drawal 24.93% 24.52% 22.45% 4.79%
AATR Account 26.07% 25.67% 23.64% 6.41%
</TABLE>
Dollar Values are per $1000 of initial premium
Average Annual Return (AAR) of Surrender Value = [(ERV/$1000)to the
power of (1/3)]-1
$30 Annual Fee waived if contract value over $50,000
Page 2
<PAGE>
- --------------------------------------------------------------------------------
PACIFIC PORTFOLIOS VARIABLE ANNUITY SEPARATE ACCOUNT
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
AVERAGE INITIAL PREMIUM = $45,000.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAST 5 YEARS ENDING 12/31/98
Equity
Money Mkt Mgd Bond Govt Secty High Yield Income Multi-Strat Intern'l
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date 12/31/93 12/31/93 12/31/93 12/31/93 12/31/93 12/31/93 12/31/93
Beginning AUV 9.385727 9.027726 9.114697 8.604053 7.753453 8.285226 8.912374
End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
Ending AUV 11.163639 11.993331 11.797236 11.952791 18.102886 15.165880 13.289721
Annual Fee ($30) $ 2.00 $ 1.33 $ 1.33 $ 0.67 $ 0.67 $ 0.67 $ 1.33
CDSC $ 27.00 $ 27.00 $ 27.00 $ 27.00 $ 27.00 $ 27.00 $ 27.00
Ending ERV $ 1,160.19 $ 1,299.76 $ 1,265.60 $ 1,361.27 $ 2,306.23 $ 1,802.22 $ 1,462.27
AATR W/Drawal 3.02% 5.38% 4.82% 6.36% 18.19% 12.50% 7.90%
AATR Account 3.49% 5.82% 5.27% 6.78% 18.47% 12.84% 8.29%
<CAPTION>
Equity Bond +
Index Growth LT Equity Income Emerg Mkts Aggsv Eqty
<S> <C> <C> <C> <C> <C> <C>
Start Date 12/31/93 N/A 12/31/93 12/31/93 N/A N/A
Beginning AUV 7.373274 8.531330 8.401809
End Date 12/31/98 12/31/98 12/31/98
Ending AUV 19.877336 18.854959 12.068716
Annual Fee ($30) $ 0.67 $ 0.67 $ 0.67
CDSC $ 27.00 $ 27.00 $ 27.00
Ending ERV $ 2,667.06 $ 2,181.55 $ 1,408.38
AATR W/Drawal 21.68% 16.88% 7.09%
AATR Account 21.92% 17.17% 7.50%
</TABLE>
Dollar Values are per $1000 of initial premium
Average Annual Return (AAR) of Surrender Value = [(ERV/$1000)to the power
of (1/5)]-1
$30 Annual Fee waived if contract value over $50,000
Page 3
<PAGE>
- --------------------------------------------------------------------------------
PACIFIC PORTFOLIOS VARIABLE ANNUITY SEPARATE ACCOUNT
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
AVERAGE INITIAL PREMIUM = $45,000.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAST 10 YEARS ENDING 12/31/98
Equity
Money Mkt Mgd Bond Govt Secty High Yield Income Multi-Strat Intern'l
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date 12/30/88 12/30/88 12/30/88 12/30/88 12/30/88 12/30/88 12/30/88
Beginning AUV 7.663010 5.476500 5.689768 5.060288 4.642377 5.109905 7.018895
End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
Ending AUV 11.163639 11.993331 11.797236 11.952791 18.102886 15.165880 13.289721
Annual Fee ($30) $ 0.67 $ - $ - $ 1.33 $ - $ - $ 2.00
CDSC $ - $ - $ - $ - $ - $ - $ -
Ending ERV $1,455.92 $2,189.96 $2,073.41 $2,358.99 $3,899.49 $2,967.94 $ 1,889.77
AATR W/Drawal 3.83% 8.15% 7.56% 8.96% 14.58% 11.49% 6.57%
AATR Account 3.83% 8.15% 7.56% 8.96% 14.58% 11.49% 6.57%
<CAPTION>
Bond +
Equity Index Growth LT Equity Income Emerg Mkts Aggsv Eqty
<S> <C> <C> <C> <C> <C> <C>
Start Date N/A N/A 12/30/88 12/30/88 N/A N/A
Beginning AUV 4.507096 4.647387
End Date 12/31/98 12/31/98
Ending AUV 18.854959 12.068716
Annual Fee ($30) $ - $ -
CDSC $ - $ -
Ending ERV $4,183.39 $2,596.88
AATR W/Drawal 15.39% 10.01%
AATR Account 15.39% 10.01%
</TABLE>
Dollar Values are per $1000 of initial premium
Average Annual Return (AAR) of Surrender Value = [(ERV/$1000)to the
power of (1/10)]-1
$30 Annual Fee waived if contract value over $50,000
Page 4
<PAGE>
- --------------------------------------------------------------------------------
PACIFIC PORTFOLIOS VARIABLE ANNUITY SEPARATE ACCOUNT
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
AVERAGE INITIAL PREMIUM = $45,000.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FROM INCEPTION OF FUND
Equity
Money Mkt Mgd Bond Govt Secty High Yield Income Multi-Strat Intern'l
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date 1/4/88 1/4/88 1/4/88 1/4/88 1/4/88 1/4/88 1/4/88
Beginning AUV 7.340021 5.184201 5.409269 4.737509 4.348104 4.848630 6.046630
End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
Ending AUV 11.163639 11.993331 11.797236 11.952791 18.102886 15.16588 13.289721
Days 4014 4014 4014 4014 4014 4014 4014
Annual Fee ($30) $ 0.67 $ 0.67 $ 0.67 $ 2.00 $ 0.67 $ 0.67 $ -
CDSC $ - $ - $ - $ - $ - $ - $ -
Ending ERV $ 1,519.96 $ 2,311.98 $2,179.55 $ 2,518.37 $ 4,160.80 $ 3,125.89 $2,197.87
AATR W/Drawal 3.88% 7.92% 7.34% 8.76% 13.84% 10.92% 7.42%
AATR Account 3.88% 7.92% 7.34% 8.76% 13.84% 10.92% 7.42%
<CAPTION>
Equity Bond +
Index Growth LT Equity Income Emerg Mkts Aggsv Eqty
<S> <C> <C> <C> <C> <C> <C>
Start Date 1/30/91 1/3/94 1/3/84 1/3/84 4/1/96 4/1/96
Beginning AUV 5.257292 6.634056 2.731843 3.000505 10.224821 9.272359
End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
Ending AUV 19.877336 19.835315 18.854959 12.068716 6.697460 12.193538
Days 2892 1823 5476 5476 1004 1004
Annual Fee ($30) $ - $ - $ 0.67 $ - $ 2.00 $ 0.67
CDSC $ - $ 27.00 $ - $ - $ 54.00 $ 54.00
Ending ERV $ 3,780.91 $ 2,962.92 $7,490.97 $ 4,590.44 $ 614.17 $ 1,164.48
AATR W/Drawal 18.28% 24.29% 14.36% 10.69% -16.24% 5.69%
AATR Account 18.28% 24.52% 14.36% 10.69% -13.60% 7.45%
</TABLE>
Dollar Values are per $1000 of initial premium
Average Annual Return (AAR) of Surrender Value = [(ERV/$1000)^(365/# days)]-1
$30 Annual Fee waived if contract value over $50,000
Page 5
<PAGE>
- --------------------------------------------------------------------------------
PACIFIC PORTFOLIOS VARIABLE ANNUITY SEPARATE ACCOUNT
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
AVERAGE INITIAL PREMIUM = $45,000.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FROM INCEPTION OF SEPARATE ACCOUNT
Equity
Money Mkt Mgd Bond Govt Secty High Yield Income Multi-Strat Intern'l
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date 1/2/96 1/2/96 1/2/96 1/2/96 1/2/96 1/2/96 1/2/96
Beginning AUV 10.000000 10.000000 10.000000 10.000000 10.000000 10.000000 10.000000
End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
Ending AUV 11.163639 11.993331 11.797236 11.952791 18.102886 15.16588 13.289721
Days 1094 1094 1094 1094 1094 1094 1094
Annual Fee ($30) $ 1.33 $ 0.67 $ 1.33 $ 0.67 $ - $ 0.67 $ -
CDSC $ 54.00 $ 54.00 $ 54.00 $ 54.00 $ 54.00 $ 54.00 $ 54.00
Ending ERV $ 1,060.95 $ 1,144.55 $ 1,124.23 $ 1,140.55 $ 1,756.29 $ 1,461.67 $ 1,274.97
AATR W/Drawal 1.99% 4.61% 3.98% 4.49% 20.67% 13.50% 8.44%
AATR Account 3.70% 6.23% 5.62% 6.11% 21.90% 14.88% 9.95%
<CAPTION>
Equity Bond +
Index Growth LT Equity Income Emerg Mkts Aggsv Eqty
<S> <C> <C> <C> <C> <C> <C>
Start Date 1/2/96 1/2/96 1/2/96 1/2/96 4/17/96 4/17/96
Beginning AUV 10.000000 10.000000 10.000000 10.000000 10.102463 9.908720
End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
Ending AUV 19.877336 19.835315 18.854959 12.068716 6.69746 12.193538
Days 1094 1094 1094 1094 988 988
Annual Fee ($30) $ - $ - $ - $ 0.67 $ 2.00 $ 2.00
CDSC $ 54.00 $ 54.00 $ 54.00 $ 54.00 $ 54.00 $ 54.00
Ending ERV $ 1,933.73 $ 1,929.53 $ 1,831.50 $ 1,152.04 $ 607.39 $ 1,175.71
AATR W/Drawal 24.61% 24.52% 22.37% 4.84% -16.82% 6.16%
AATR Account 25.76% 25.67% 23.56% 6.45% -14.13% 7.94%
</TABLE>
Dollar Values are per $1000 of initial premium
Average Annual Return (AAR) of Surrender Value = [(ERV/$1000)^(365/# days)]-1
$30 Annual Fee waived if contract value over $50,000
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