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As filed with the Securities and Exchange Commission on February 12, 1999
Registration No 333-14005
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 3 TO
FORM S-6
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF UNIT
INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
PACIFIC SELECT EXEC SEPARATE ACCOUNT OF
PACIFIC LIFE INSURANCE COMPANY
(Exact Name of Registrant)
PACIFIC LIFE INSURANCE COMPANY*
(Name of Depositor)
700 Newport Center Drive
Newport Beach, California 92660
(Address of Depositor's Principal Executive Offices) (Zip Code)
(949) 725-6767
(Depository's Telephone Number, including Area Code)
Robin Yonis-Sandlaufer
Assistant Vice President of
Pacific Life Insurance Company
700 Newport Center Drive
Newport Beach, California 92660
(Name and address of agent for service)
Copies of all communications to:
Jeffrey S. Puretz, Esq.
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
It is proposed that this filing will become effective on April 13, 1999 pursuant
to paragraph (a) of Rule 485.
Title of securities being registered: interests in the Separate Account under
Pacific Select Estate Maximizer Modified Single Premium Variable Life Insurance
Policies.
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Pacific Select Exec Separate Account of Pacific Life Insurance Company
CROSS-REFERENCE SHEET
Pursuant to Rule 404(c) of Regulation C under the Securities Act of 1933
(Form N-8B-2 Items required by Instruction as to the Prospectus in Form S-6)
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Form N-8B-2 Form S-6
Item Number Heading in Prospectus
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1. (a) Name of trust Prospectus front cover
(b) Title of securities issued Prospectus front cover
2. Name and address of each depositor Prospectus front cover
3. Name and address of trustee N/A
4. Name and address of each principal underwriter Pacific Life Insurance
Company, Distribution of the Policy
5. State of organization of trust Pacific Select Exec Separate Account
6. Execution and termination of trust agreement Pacific Select Exec Separate Account
7. Changes of name N/A
8. Fiscal year N/A
9. Litigation N/A
II. General Description of the Trust and Securities of the Trust
10. (a) Registered or bearer securities The Policy
(b) Cumulative or distributive securities The Policy
(c) Conversion, transfer, etc. Transfer of Accumulated Value;
Policy Loans; Surrender; Partial
Withdrawals
(d) Periodic payment plan N/A
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(e) Voting rights Voting of Fund Shares
(f) Notice to security holders Confirmation Statements and Other
Reports to Owners
(g) Consents required Disregard of Voting Instructions;
Substitution of Investments
(h) Other provisions The Policy
11. Type of securities comprising units The Policy
12. Certain information regarding periodic
payment plan certificates N/A
13. (a) Load, fees, expenses, etc. Charges and Deductions
(b) Certain information regarding periodic
payment plan certificates N/A
(c) Certain percentages Charges and Deductions
(d) Certain other profits or benefits The Policy
(e) Certain other profits or benefits The Policy
(f) Ratio of annual charges to income N/A
14. Issuance of trust's securities The Policy
15. Receipt and handling of payments from
purchasers The Policy; Premiums; Additional
Premium Payments
16. Acquisition and disposition of underlying
securities Pacific Select Exec Separate Account;
The Policy
17. Withdrawal or redemption Transfers of Accumulated Value;
Policy Loans; Surrender; Partial
Withdrawals
18. (a) Receipt, custody and disposition
of income The Policy
(b) Reinvestment of distributions N/A
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(c) Reserves or special funds N/A
(d) Schedule of distributions N/A
19. Records, accounts and reports Confirmation Statements and
Other Reports to Owners
20. Certain miscellaneous provisions of trust
agreement
(a) Amendment N/A
(b) Termination N/A
(c) and (d) Trustee, removal and successor N/A
(e) and (f) Depositors, removal and successor N/A
21. Loans to securities holders Policy Loans
22. Limitations on liability N/A
23. Bonding arrangements N/A
24. Other material provisions of trust agreement N/A
III. Organizations, Personnel and Affiliated Persons of Depositor
25. Organization of depositor Pacific Life Insurance Company
26. Fees received by depositor See Items 13(a) and 13(e)
27. Business of depositor Pacific Life Insurance
Company
28. Certain information as to officials and
affiliated persons of depositor More About Pacific Life
29. Voting securities of depositor N/A
30. Persons controlling depositor N/A
31. Payments by depositor for certain services
rendered to trust N/A
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32. Payments by depositor for certain other services
rendered to trust N/A
33. Remuneration of employees of depositor for
certain services rendered to trust Charges and Deductions
34. Remuneration of other persons for certain
services rendered to trust Charges and Deductions
IV. Distribution and Redemption of Securities
35. Distribution of trust's securities by states N/A
36. Suspension of sales of trust's securities N/A
37. Revocation of authority to distribute N/A
38. (a) Method of distribution Distribution of the Policy
(b) Underwriting agreements Distribution of the Policy
(c) Selling agreements Distribution of the Policy
39. (a) Organization of principal underwriters See Item 25
(b) N.A.S.D. membership of principal
underwriters See Item 25
40. Certain fees received by principal underwriters See Items 13(a) and 13(e)
41. (a) Business of each principal underwriter See Item 27
(b) Branch offices of each principal
underwriter N/A
(c) Salesmen of each principal underwriter N/A
42. Ownership of trust's securities by certain
persons N/A
43. Certain brokerage commissions received by
principal underwriters N/A
44. (a) Method of valuation Determination of Accumulated Value
(b) Schedule as to offering price Charges and Deductions
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(c) Variation in offering price to certain
persons Charges and Deductions
45. Suspension of redemption rights Surrender
46. (a) Redemption valuation See Items 10(c) and 10(d)
(b) Schedule as to redemption price Surrender
47. Maintenance of position in underlying securities The Pacific Select Fund
V. Information Concerning the Trustee or Custodian
48. Organization and regulation of trustee N/A
49. Fees and expenses of trustees N/A
50. Trustee's lien N/A
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of trust's securities Pacific Life Insurance
Company; The Policy
52. (a) Provisions of trust agreement with respect
to selection or elimination of underlying
securities Substitution of Investments
(b) Transactions involving elimination of
underlying securities Substitution of Investments
(c) Policy regarding substitution or
elimination of underlying securities See Items 13(a) and 52(a)
(d) Fundamental policy not otherwise
covered N/A
53. Tax status of the trust Federal Income Tax Considerations
VII. Financial and Statistical Information
54. Trust's securities during last ten years N/A
55. N/A
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56. Certain information regarding periodic payment
plan certificates Premiums
57. N/A
58. N/A
59. Financial statements (Instruction 1(c) of
"Instructions as to the Prospectus" of Form S-6) Financial Statements
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[front cover]
[logo]
Pacific Select Estate Maximizer
Prospectus
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Pacific Select Estate Maximizer is a modified single premium
variable life insurance policy issued by Pacific Life Insurance
This Policy is not Company. In Texas, this Policy is called a flexible premium
available in all variable life insurance policy.
states. This
prospectus is not an This prospectus provides information that you should know
offer in any state before buying a Policy. It's accompanied by a current
or jurisdiction prospectus for the Pacific Select Fund, a Fund that provides
where we're not the underlying Portfolios for the Variable Investment Options
legally permitted to offered under the Policy. Please read these prospectuses
offer the Policy. carefully and keep them for future reference.
The Policy is Here's a list of all the Investment Options available under
described in detail your Policy:
in this prospectus.
The Pacific Select Variable Investment Options
Fund is described in Money Market Large-Cap Value
its prospectus and High Yield Bond Mid-Cap Value
in its Statement of Managed Bond Equity
Additional Government Securities Bond and Income
Information (SAI). Growth Equity Index
No one has the right Aggressive Equity Small-Cap Index
to describe the Growth LT REIT
Policy or the Equity Income International
Pacific Select Fund Multi-Strategy Emerging Markets
any differently than
they have been Fixed Option
described in these Fixed Account
documents.
You should be aware
that the Securities
and Exchange
Commission (SEC) has
not reviewed the
Policy for its
investment merit,
and does not
guarantee that the
information in this
prospectus is
accurate or
complete. It's a
criminal offense to
say otherwise.
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Your Guide to this Prospectus
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Terms Used in this Prospectus................................ 4
An Overview of Pacific Select Estate Maximizer............... 7
Information about Pacific Life, the Separate Account,
and the Fund.................................................16
Pacific Life Insurance Company............................16
Pacific Select Exec Separate Account......................16
The Pacific Select Fund...................................17
The Investment Adviser and Portfolio Managers.............19
The Policy...................................................19
Application for a Policy..................................19
Premiums..................................................19
Additional Premium Payments...............................19
Allocation of Premiums....................................20
Portfolio Rebalancing.....................................20
Dollar Cost Averaging Option..............................21
Transfer of Accumulated Value.............................21
Death Benefit.............................................22
Policy Values.............................................23
Determination of Accumulated Value........................23
Policy Loans..............................................24
Duration of Contract......................................25
Surrender.................................................25
Partial Withdrawals.......................................25
Right to Examine a Policy - Free-Look Right...............26
Lapse.....................................................26
Reinstatement.............................................27
Last Survivor Policies....................................27
Charges and Deductions
Load from Premiums........................................27
Surrender Charge..........................................27
Deductions from Accumulated Value.........................28
Other Charges.............................................29
Guarantee of Certain Charges..............................29
Variations in Charges.....................................29
Other Information............................................30
Federal Income Tax Considerations.........................30
Charge for our Income Taxes...............................33
Voting of Fund Shares.....................................33
Disregard of Voting Instructions..........................34
Confirmation Statements and Other Reports to Owners.......34
Substitution of Investments...............................34
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Replacement of Life Insurance or Annuities............ 35
Changes to Comply with Law............................ 35
Performance Information.................................. 35
The Fixed Account........................................ 36
General Description................................... 36
Transfers, Surrenders, Withdrawals, and Policy Loans.. 37
More about the Policy.................................... 37
Ownership............................................. 37
Beneficiary........................................... 37
The Contract.......................................... 38
Payments.............................................. 38
Assignment............................................ 38
Errors on the Application............................. 38
Incontestability...................................... 38
Payment in Case of Suicide............................ 38
Dividends............................................. 39
Policy Illustrations.................................. 39
Payment Plan.......................................... 39
Optional Insurance Benefits and Other Policies........ 39
Life Insurance Retirement Plans....................... 39
Risks of Life Insurance Retirement Plans.............. 40
Distribution of the Policy............................ 40
More about Pacific Life.................................. 41
Management............................................ 41
State Regulation...................................... 43
Telephone Transfer and Loan Privileges................ 43
Legal Proceedings..................................... 43
Legal Matters......................................... 43
Registration Statement................................ 43
Preparation for the Year 2000......................... 44
Independent Auditors.................................. 44
Financial Statements.................................. 44
Appendix................................................. 45
Illustrations............................................ 46
Where to go for more information......................... BACK
COVER
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In this prospectus, Owner, Terms Used in this Prospectus
you and your mean the
Policyholder or Policy Some of the terms we've used in this prospectus may be new to you. We've identified
Owner. We, us and our refer them in this prospectus by capitalizing the first letter of each word. You'll find an
to Pacific Life Insurance explanation of what they mean below.
Company. Policy means a
Pacific Select Estate If you have any questions, please ask your registered representative or call us at
Maximizer variable life 1-800-800-7681.
insurance policy, unless we
state otherwise. Accumulated Value
The total value of the amounts in the Investment Options for the Policy as well as any
amount set aside in the Loan Account, including any accrued earned interest, as of any
Valuation Date.
Age
An Insured's age as of his or her last birthday as of the Policy Date, increased by
the number of complete Policy Years elapsed.
Beneficiary
The person or persons you name in the application or by proper later designation to
receive the death benefit proceeds upon the death of the Insured(s).
Cash Surrender Value
The Accumulated Value, less any applicable surrender charge.
Debt
The unpaid loan balance including accrued loan interest.
Face Amount
You'll find your Policy's Face Amount, which includes any increases or decreases, in
the specification pages in your Policy.
Fixed Account
An account that is part of our General Account. All or a portion of premium payments
may be allocated to the Fixed Account for accumulation at a fixed rate of interest
(which may not be less than 3.0%) declared periodically by us.
Free Withdrawal Amount
The lesser of contract earnings under the Policy or 10% of the initial premium. For
purposes of determining this amount, earnings under the Policy are Accumulated Value
less total premiums paid, plus all prior partial withdrawals deemed to be withdrawals
of premium for surrender charge purposes.
General Account
All of our assets other than those allocated to the Separate Account or to any of our
other segregated separate accounts.
Guideline Single Premium or Guideline Level Premiums
The maximum amount of premium or premiums that can
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be paid for any given Face Amount in order to qualify this Policy as life insurance
for tax purposes as specified in Section 7702 of the Internal Revenue Code.
Home Office
The Client Services Department at our main office. The address is shown on the back
cover.
Insured or Insured(s)
The person or persons whose death is the contingency upon which the death benefit
proceeds are payable.
Investment Option
The Fixed Account or one of the Variable Accounts.
Loan Account
An account that holds Accumulated Value set aside to secure Policy loans.
Monthly Payment Date
The day each month on which monthly deductions and charges are assessed against the
Accumulated Value. The first Monthly Payment Date is the Policy Date.
Net Cash Surrender Value
The Cash Surrender Value less Policy Debt.
Policy Date
The date used to determine the Monthly Payment Date, Policy Years, and Policy Monthly,
Quarterly, Semi-Annual, and Annual Anniversaries. It is usually the later of the date
the application is accepted by us or the date we receive the first premium payment.
The term "Issue Date" is substituted for Policy Date with respect to Policies issued
to residents of the Commonwealth of Massachusetts.
Policyholder, Policy Owner, Owner, you, or your
The person or persons who own the Policy. The Policy Owner will be the Insured(s)
unless otherwise stated in the application. If your Policy has been absolutely
assigned, the assignee
becomes the Owner. A collateral assignee is not the Owner.
Preferred Withdrawal
The amount of the first withdrawal in any Policy Year (including a surrender) that
does not exceed the Free Withdrawal Amount. If there is no Free Withdrawal Amount at
the time of the first withdrawal in a Policy Year, the next withdrawal in the same
Policy Year will be considered the first.
Separate Account - The Pacific Select Exec Separate Account, a separate account of
ours registered as a unit investment trust under the Investment Company Act of 1940.
Survivor
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In a last survivor Policy, the last Insured alive while the Policy is in force.
Valuation Date
Each date on which the Separate Account is valued, which currently includes each day
that the New York Stock Exchange is open for trading and on which our client services
offices are open. The New York Stock Exchange is closed on weekends and on: New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, July
Fourth, Labor Day, Thanksgiving Day, and Christmas Day.
Our administrative offices are normally closed on the following:
. the Monday before New Year's Day, July Fourth, or Christmas Day if any of those
holidays falls on a Tuesday
. the Tuesday before Christmas Day if that holiday falls on a Wednesday
. the Friday after New Year's Day, July Fourth or Christmas Day if any of these
holidays falls on a Thursday
. the Friday after Thanksgiving.
If any transaction or event called for under a Policy is scheduled to occur on a day
that is not a Valuation Date, such transaction or event will be deemed to occur at the
end of the next following Valuation Date unless otherwise specified.
Valuation Period
The period that starts at the close of a Valuation Date and ends at the close of the
next succeeding Valuation Date.
Variable Account
A subaccount of our Separate Account, which is used only to support the variable death
benefits and policy values of variable life insurance policies, and the assets of
which are segregated from our General Account and our other separate accounts. The
Pacific Select Exec Separate Account serves as the funding vehicle for the Policies.
The Money Market Variable Account, High-Yield Bond Variable Account, Managed Bond
Variable Account, Government Securities Variable Account, Growth Variable Account,
Aggressive Equity Variable Account, Growth LT Variable Account, Equity Income Variable
Account, Multi-Strategy Variable Account, Large-Cap Value Variable Account, Mid-Cap
Value Variable Account, Equity Variable Account, Bond and Income Variable Account,
Equity Index Variable Account, Small-Cap Index Variable Account, REIT Variable
Account, International Variable Account, and Emerging Markets Variable Account are
currently all subaccounts of the Separate Account.
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An Overview of Pacific Select Estate Maximizer
This overview tells you some key things you should know about your Policy. It's
designed as a summary only -- please read this prospectus and your Policy for more
detailed information.
Some states have different rules about how life insurance policies are described or
administered. The information in your Policy, or in any endorsement or rider, prevails
over what's in this prospectus.
Modified single premium life Pacific Select Estate Maximizer basics
insurance policies are Pacific Select Estate Maximizer is a modified single premium variable life insurance
usually classified for tax policy.
purposes as modified . Modified single premium means you pay an initial premium and have limited ability
endowment contracts, which to make additional premium payments.
means that withdrawals, . Variable means the Policy's value depends on the performance of the Investment
loans, pledges, assignments, Options you choose.
and surrenders are all . Life insurance means the Policy provides a death benefit to the Beneficiary you
considered distributions and choose.
may be subject to income tax
and a 10% penalty tax. Pacific Select Estate Maximizer can insure the lives of one person or two people. If
it insures the life of one person, it's called a single life policy, and provides a
This Policy may be death benefit after that person dies. If it insures the lives of two people, it's
appropriate if you want to called a last survivor policy, and provides a death benefit after both people have
provide a death benefit or died. Last survivor life insurance may be appropriate for two spouses who want to
to help meet other long-term provide a death benefit for their children. A single life policy may be more
financial objectives. It may appropriate for someone who wants to provide a death benefit for his or her spouse.
not be the right kind of
Policy if you plan to In addition to providing a death benefit that is generally free of federal income tax,
withdraw money for any growth in your Policy's Accumulated Value is tax-deferred. You can choose from 18
short-term needs. Variable Investment Options, each of which invests in a corresponding Portfolio of the
Pacific Select Fund, and a Fixed Option that provides a guaranteed minimum rate of
Please discuss your insurance interest.
needs and financial
objectives with your Please take some time to read the information in this prospectus before you decide if
registered representative. this Policy meets your insurance needs and financial objectives.
Your Right to Examine a Policy -- Free-Look Right
During the Free-Look Period, you have the right to cancel your Policy and return it to
us or your registered representative for a refund of the premiums you've paid. We'll hold the
premium in the Money Market Investment Option
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until the Free-Look Transfer Date.
Your Policy provides a death The Death Benefit
benefit for your Beneficiary The death benefit is the greater of your Policy's Face Amount or its Accumulated Value
after the people insured by multiplied by a specified percentage (called the Guideline Minimum Death Benefit).
the Policy have died, as
long as your Policy is in We'll pay death benefit proceeds to your Beneficiary when we receive proof of death,
force. along with payment instructions.
You'll find more about the
death benefit starting on
page*.
Your first premium must be How Premiums Work
80%, 90% or 100% of your Generally, your first premium payment must be at least $10,000. If the person insured
Policy's Guideline Single by the Policy is 70 years of age or older, your first premium payment must be at least
Premium*. $50,000. If the Policy insures two people, the minimum amount of the first premium
payment is based on the age of the younger of the two people.
In West Virginia the Face
Amount of your Policy must You have limited ability to make additional premium payments, and each additional
be at least $25,000. premium payment must be at least $1,000.
You'll find more about We do not deduct any charges from your premium payments.
premiums on page*.
Limits on the Premium Payments You Can Make
Federal tax law puts limits on the premium payments you can make in relation to your
Policy's death benefit. We may refuse all or part of a premium payment you make, or
remove all or part of a premium from your Policy and return it to you under certain
circumstances.
Accumulated Value is used as Your Policy's Accumulated Value
the basis for determining Accumulated Value is the value of your Policy on any Valuation Date. It is not
Policy benefits and charges. guaranteed--it depends on the performance of the Investment Options you've chosen, the
If there is not enough premium payments you've made, and how much you've borrowed or withdrawn from the
Accumulated Value to cover Policy.
the Policy charges, your
Policy could lapse. Monthly Deductions
We deduct four monthly charges from your Policy's Accumulated Value on each Monthly
You'll find more about Payment Date: a cost of insurance charge, an administrative charge, a tax expense
Accumulated Value on page*. charge and a mortality and expense risk charge.
You'll find more about the
monthly charge on page*.
You'll find more about Lapsing and Reinstatement
lapsing and reinstatement If there is not enough Accumulated Value to cover the monthly charge on the day we
starting on page*. make the deduction, your Policy may lapse--which means you'll no longer have any
insurance coverage. If your Policy is in danger of lapsing, we'll give you a Grace
Period of 61 days to pay the required premium. If your Policy lapses, you have three
years from the end of the Grace
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Period to apply for a reinstatement.
The Investment Options you Your Investment Options
choose will affect your You can choose from 18 Variable Investment Options, each of which invests in a
Policy's Accumulated Value, corresponding portfolio of the Pacific Select Fund. We're the Investment Adviser for
and may affect the death the Pacific Select Fund. We oversee the management of all the Fund's Portfolios and
benefit. manage two of the Portfolios directly. To manage the other Portfolios, we've retained
some of the nation's other leading asset managers. The value of each Portfolio will
Please review the Investment fluctuate with the value of the investments it holds, and returns are not guaranteed.
Options carefully and ask
your registered You can also choose a Fixed Option, called the Fixed Account, that provides a
representative to help you guaranteed minimum annual interest rate of 3%. We may offer a higher rate of interest.
choose the right ones for If we do, we'll guarantee that rate for one year. In the first year, however, we do
your goals and risk not guarantee a rate higher than 6%.
tolerance.
We allocate your premium payments and Accumulated Value to the Investment Options you
You'll find more about the choose. Your Policy's Accumulated Value will fluctuate depending on the Investment
Variable Investment Options Options you've chosen. You bear the investment risk of any Variable Investment Options
on page * and the Fixed you choose.
Account on page*.
You'll find more about Transferring Among Investment Options
transfers on pages * and*. You can transfer among the Investment Options during the life of your Policy without
paying any current income tax. There is currently no charge for transfers.
You can make as many transfers as you like between Variable Investment Options. You
can also make automatic transfers from one Variable Investment Option to another by
using our dollar cost averaging or portfolio rebalancing program. These programs are
not available for the Fixed Account.
You can only make one transfer from the Fixed Account to the Variable Investment
Options in any 12-month period, and each transfer may be no more than $5,000 or 25% of
the Accumulated Value in the Fixed Account, whichever is greater. You can only
transfer to the Fixed Account in the Policy Month right before each Policy Anniversary.
Making a withdrawal, taking a Withdrawals, Surrenders and Loans
loan or surrendering your You can take out all or part of your Policy's Accumulated Value while your Policy is
Policy can generate taxable in force by making withdrawals or surrendering your Policy. You can take out a loan
income, change your Policy's from us using your Policy as security.
tax status, or make your
Policy more susceptible to Making withdrawals
lapsing. Be sure to plan You can withdraw part of your Policy's Net Cash Surrender Value starting on your first
carefully before using these Policy Anniversary. This reduces your Policy's Accumulated Value and could reduce the
Policy benefits. Face Amount and death benefit. We may deduct a Surrender Charge if you make a
withdrawal during the first nine Policy Years. You can make one
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Preferred Withdrawal every Policy Year. There is no Surrender Charge on Preferred Withdrawals.
You'll find more about making Taking Out a Loan
withdrawals on pages * and*. You can take out a loan from us using your Policy's Accumulated Value as security. You
You'll find more about taking pay interest on the amount you borrow. The Accumulated Value used to secure your loan
out loans on pages * and*. is set aside in the Loan Account, where it earns interest. A portion of the amount you
borrow may qualify as a Preferred Loan. We charge a lower rate of interest on
Preferred Loans.
The amount in the Loan Account is not available to help pay for any Policy charges.
Taking out a loan affects the Accumulated Value of your Policy because the amount set
aside in the Loan Account misses out on the potential earnings available through the
Investment Options.
You'll find out more about Surrendering Your Policy
surrendering your Policy on You can surrender or cash in your Policy for its Net Cash Surrender Value while the
pages * and*. Policy is in force. We'll apply a Surrender Charge during the first nine Policy Years.
There are tax issues to Variable Life Insurance and Your Taxes
consider when you own a life Your Beneficiary generally will not have to pay federal income tax on death benefit
insurance policy. These are proceeds. You'll also generally not be taxed on any or all of the growth in your
described in detail starting Policy's Accumulated Value unless you receive a cash distribution.
on page*.
Pacific Select Estate Maximizer is a modified single premium policy. It will probably
be classified for tax purposes as a type of life insurance policy called a modified
endowment contract. Distributions you receive from a modified endowment contract are
taxed differently than under conventional life insurance policies. Withdrawals, loans,
pledges, assignments, and surrenders are all considered distributions and may be
subject to income tax and, if you are under age 59 1/2, may be subject to a 10%
penalty tax.
When you buy a life insurance About Pacific Life
policy, you're relying on Pacific Life is a life insurance company based in California. We issue the Policies.
the insurance company that Pacific Mutual Distributors, Inc., our wholly owned subsidiary, is the distributor of
issues it to be able to meet the policies.
its financial obligations to
you. How Our Accounts Work
We put your premium payments in our General and Separate Accounts. We own the assets
You'll find more about in our Accounts and make the allocations to the Investment Options you've chosen.
Pacific Life, and our
strength as a company, Amounts allocated to the Fixed Account are held in our General Account. Our General
starting on page*. Account includes all of our assets, except for those held in our separate accounts.
Our ability to meet our obligations under the Policy is backed by our strength as an
insurance company.
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Amounts allocated to the Variable Investment Options are held in our Separate Account.
The assets in this Account are kept separate from the assets in our General Account
and our other separate accounts, and are protected from our general creditors.
Processing Payments, Forms and Requests
Effective Date
The effective date of payments, forms and requests you send us is usually determined
by the day and time we receive the item in proper form at the mailing address that
appears on the back cover of this prospectus.
Planned periodic premium payments, loan requests, transfer requests, loan payments or
withdrawal requests that we receive in proper form before 4 p.m. Eastern time on a
Valuation Date will normally be effective as of the end of that day, unless the
transaction is scheduled to occur on another Valuation Date. If we receive your
payment or request on or after 4 p.m. Eastern time on a Valuation Date, your payment
or request will be effective as of the end of the next Valuation Date. If a
transaction is scheduled to occur on a day that is not a Valuation Date, we'll process
it as of the end of the next Valuation Date.
Call us or contact your Proper Form
registered representative if We'll process your requests once we receive all letters, forms or other necessary
you have any questions about documents, completed to our satisfaction. Proper form may require, among other things,
the proper form required for a signature guarantee or some other proof of authenticity. We do not generally require
a request. a signature guarantee unless it appears that your signature has changed, we have not
received a properly completed application or confirmation of an application, or for
To request payment of death other reasons.
benefit proceeds, send us
proof of death and payment
instructions.
</TABLE>
11
<PAGE>
<TABLE>
<C> <S>
This section of the overview explains the fees and expenses
associated with your Pacific Select Estate Maximizer Policy.
Understanding Policy Expenses and Cash Flow
[Flow chart text:]
Your premium
You make a premium payment and we allocate it to the Investment
Options you choose
The chart to the
right illustrates We do not deduct any charges from your premium payments.
how cash normally
flows through a Fixed Option
Pacific Select We hold amounts you allocate to this Option in our General
Estate Maximizer Account
Policy.
Variable Investment Options
The shaded boxes show We hold amounts you allocate to these Options in our Separate
the fees and Account
expenses you pay
directly or Pacific Select Fund
indirectly under The Variable Investment Options invest in the Fund's Portfolios
your Policy. These
are explained in the The Fund deducts advisory fees and other Fund expenses from the
pages that follow. Fund's Portfolios
Accumulated Value
The total value of your Policy
We make monthly deductions
We deduct:
. cost of insurance charge
. administrative charge
. tax expense charge
. mortality and expense risk charge
If you make a withdrawal or surrender your Policy during the
first nine Policy Years
We deduct a Surrender Charge from your Accumulated Value unless
it's a Preferred Withdrawal
Loan Account
Accumulated Value set aside to secure a Policy loan
</TABLE>
12
<PAGE>
<TABLE>
<C> <S>
Deductions from Your Premiums
We do not deduct any charges from your premium payments before
allocating them to your Investment Options.
Monthly Deductions from Your Policy's Accumulated Value
The monthly charge is We deduct four monthly charges from your Policy's Accumulated
explained in more Value in the Investment Options on each Monthly Payment Date:
detail starting on
page*.
Cost of Insurance Charge -- We calculate this charge by
An example multiplying the current cost of insurance rate by a discounted
For a Policy in its net amount at risk at the beginning of each Policy Month.
second Policy Year:
. that insures the Administrative Charge -- We deduct this charge at an annual rate
life of a male age of 0.30% (0.025% monthly) of your Policy's Accumulated Value. If
60 when the policy the Accumulated Value is less than $50,000 on any Policy
was issued Anniversary Date, there will be an additional charge of $40.
. with a Face Amount
of $80,000 Tax Expense Charge -- We deduct this charge at an annual rate of
. with Accumulated 0.40% (0.0333333% monthly) of your Policy's Accumulated Value
Value of $40,000. during the first 10 Policy Years. You no longer pay a tax
expense charge starting in Policy Year 11.
The monthly cost of
insurance charge is Mortality Expense and Risk Charge -- We deduct this charge at an
$61.42. annual rate of 0.90% (0.075% monthly) of your Policy's
(0.00154303 Accumulated Value during the first 10 Policy Years. During
x ($80,000/1.002466 Policy Year 11 and thereafter, we reduce the annual rate to
-$40,000)) 0.70% (0.0583333% monthly).
The Surrender Charge
is explained in more Withdrawal and Surrender Charges
detail on page*. A Preferred Withdrawal is usually the amount of the first
withdrawal in any Policy Year that does not exceed the Free
An example Withdrawal Amount.
If your first premium
is $50,000 and you We may deduct a Surrender Charge if you make a withdrawal or
have not made any surrender your Policy during the first nine Policy Years. The
previous withdrawals, rate we charge is shown in the table below. There is no
the maximum Surrender Surrender Charge on Preferred Withdrawals.
Charge we could deduct
would be: The Surrender Charge rate is applied to the lesser of the amount
of the withdrawal (less any Preferred Withdrawal) or the amount
of the first premium payment considered withdrawn. Total
. $5,000 in Policy cumulative Surrender Charges will never be more than 10% of the
Year 2 if first premium payment.
Accumulated Value
is $50,000 or more We deduct the charge from your Investment Options in proportion
(10% x $50,000) to the Accumulated Value you have in each Option unless you tell
us otherwise.
. $3,150 in Policy
Year 5 if
Accumulated
Value is $45,000
(7% x $45,000)
</TABLE>
<TABLE>
<CAPTION>
Policy Year Surrender Charge Rate
<S> <C> <C>
1-2 10%
</TABLE>
13
<PAGE>
<TABLE>
<S> <C> <C>
3 9%
4 8%
5 7%
6 6%
7 5%
8 4%
9 3%
10 or more 0%
</TABLE>
<TABLE>
<C> <S>
You'll find more Fees and Expenses Paid by the Pacific Select Fund
about the Pacific The Pacific Select Fund pays advisory fees and other expenses.
Select Fund These are deducted from the assets of the Fund's Portfolios and
starting on may vary from year to year. They are not fixed and are not part
page *, and in of the terms of your Policy. If you choose a Variable Investment
the Fund's Option, these fees and expenses affect you indirectly because
prospectus, which they reduce Portfolio returns.
accompanies
this prospectus.
Advisory Fee
Pacific Life is the Investment Adviser to the Fund. The Fund
pays an advisory fee to us for these services. The table below
shows the advisory fee as an annual percentage of each
Portfolio's average daily net assets.
Other Expenses
The table also shows expenses the Fund paid in 1998 as a annual
percentage of each Portfolio's average daily net assets. To help
limit Fund expenses, we've agreed to waive all or part of the
investment advisory fees we receive 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 and guarantee we'll continue to do so until
December 31, 2000, but we do not guarantee to continue to do so
after this date. No reimbursement was necessary for 1998.
</TABLE>
<TABLE>
<S> <C> <C> <C>
Portfolio Advisory Other Total
Fee Expenses Expenses
Money Market *.**% *.**% *.**%
High Yield Bond 0.60% *.**% *.**%
Managed Bond 0.60% *.**% *.**%
Government Securities 0.60% *.**% *.**%
Growth 0.65% *.**% *.**%
Aggressive Equity 0.80% *.**% *.**%
Growth LT 0.75% *.**% *.**%
Equity Income 0.65% *.**% *.**%
Multi-Strategy 0.65% *.**% *.**%
</TABLE>
14
<PAGE>
<TABLE>
<S> <C> <C> <C>
Large-Cap Value* 0.85% *.**% *.**%
Mid-Cap Value* 0.85% *.**% *.**%
Equity 0.65% *.**% *.**%
Bond and Income 0.60% *.**% *.**%
Equity Index *.**% *.**% *.**%
Small-Cap Index* 0.50% *.**% *.**%
REIT* 1.10% *.**% *.**%
International 0.85% *.**% *.**%
Emerging Markets 1.10% *.**% *.**%
</TABLE>
*Other expenses are estimated. There were no actual advisory fees or other
expenses for these Portfolios in 1998 because the Portfolios started on
January 4, 1999.
15
<PAGE>
INFORMATION ABOUT PACIFIC LIFE, THE SEPARATE ACCOUNT, AND THE FUND
Pacific Life Insurance Company
We are a life insurance company that is domiciled in California. Our
operations include both life insurance and annuity products as well as
financial and retirement services. As of the end of 1998, we had
$[ ] billion of individual life insurance in force and total admitted assets
of approximately $[ ] billion. We have been ranked according to admitted
assets as the [ ]th largest life insurance carrier in the nation for 1998.
The Pacific Life family of companies has total assets and funds under
management of over $[ ] billion. We are authorized to conduct life insurance
and annuity business in the District of Columbia and all states except New
York. Our principal offices are located at 700 Newport Center Drive, Newport
Beach, California 92660.
We were originally organized on January 2, 1868, under the name "Pacific
Mutual Life Insurance Company of California" and reincorporated as "Pacific
Mutual Life Insurance Company" on July 22, 1936. On September 1, 1997, we
converted from a mutual life insurance company to a stock life insurance
company ultimately controlled by a mutual holding company and were authorized
by California regulatory authorities to change our name to Pacific Life
Insurance Company.
We are a subsidiary of Pacific LifeCorp, a holding company which, in turn,
is a subsidiary of Pacific Mutual Holding Company, a mutual holding company.
Under their respective charters, Pacific Mutual Holding Company must always
hold 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.
Owners of Pacific Life's annuity contracts and life insurance policies have
certain membership interests in Pacific Mutual Holding Company, consisting
principally of the right to vote on the election of the Board of Directors of
the mutual holding company and on other matters, and certain rights upon
liquidation or dissolutions of the mutual holding company.
The principal underwriter for the Policies is Pacific Mutual Distributors,
Inc. ("PMD"), one of our wholly-owned subsidiaries. PMD is registered as a
broker-dealer with the Securities and Exchange Commission ("SEC").
Pacific Select Exec Separate Account
The Separate Account is a separate investment account of ours used only to
support the variable death benefits and policy values of variable life
insurance policies. The Separate Account supports the Policies as well as
other variable life insurance policies issued by us in addition to the
Policies. The assets in the Separate Account are kept separate from our
General Account assets and our other separate accounts.
We own the assets in the Separate Account and are required to maintain
sufficient assets in the Separate Account to meet anticipated obligations of
the insurance policies funded by the Account. The Separate Account is divided
into subaccounts called Variable Accounts. The income, gains, or losses,
realized or unrealized, of each Variable Account are credited to or charged
against the assets held in the Variable Account without regard to our other
income, gains, or losses. Assets in the Separate Account attributable to the
reserves and other liabilities under the variable life insurance policies
funded by the Separate Account are not chargeable with liabilities arising
from any other business that we conduct. However, we may transfer to our
General Account assets which exceed anticipated obligations of the Separate
Account. All obligations arising under the Policy are our general corporate
obligations. We may accumulate in the Separate Account proceeds from various
Policy charges and investment results applicable to those assets.
16
<PAGE>
The Separate Account was established on May 12, 1988 under California law
under the authority of our Board of Directors. The Separate Account is
registered as a unit investment trust with the SEC. Such registration does not
involve any supervision by the SEC of the administration or investment
practices or policies of the Account.
Each Variable Account invests exclusively in shares of a designated
Portfolio of the Fund. We may in the future establish additional Variable
Accounts within the Separate Account, which may invest in other Portfolios of
the Fund or in other securities.
The Pacific Select Fund
The Fund is a diversified, open-end management investment company of the
series type. The Fund is registered with the SEC under the Investment Company
Act of 1940. Such registration does not involve supervision by the SEC of the
investments or investment policies of the Fund. The Fund currently offers
fourteen separate Portfolios to the Separate Account that fund the Variable
Investment Options available to you. Each Portfolio pursues different
investment objectives and policies. We purchase the shares of each Portfolio
for the corresponding Variable Account at net asset value, i.e., without sales
load. All dividends and capital gains distributions received from a Portfolio
are automatically reinvested in such Portfolio at net asset value, unless we,
on behalf of the Separate Account, elect otherwise. Fund shares will be
redeemed by us at their net asset value to the extent necessary to make
payments under the Policies.
Shares of the Fund currently are offered for purchase only to separate
accounts of ours to serve as an investment medium for variable life insurance
policies and for variable annuity contracts issued or administered by us.
Shares of the Fund may also be sold in the future to separate accounts of
other insurance companies, either affiliated or not affiliated with us.
Investment in the Fund by other separate accounts in connection with variable
annuity and variable life insurance contracts may potentially create
conflicts. See "MORE ON THE FUND'S SHARES" in the accompanying prospectus of
the Fund.
The following chart summarizes some basic data about each Portfolio of the
Fund offered to the Separate Account. There can be no assurance that any
Portfolio will achieve its objective. This chart is only a summary. You should
read the more detailed information which is contained in the accompanying
prospectus of the Fund, including information on the risks associated with the
investments and investment techniques of each of the Portfolios.
17
<PAGE>
THE FUND'S PROSPECTUS ACCOMPANIES THIS PROSPECTUS AND SHOULD BE READ
CAREFULLY BEFORE INVESTING.
<TABLE>
<CAPTION>
Primary Investments
(under normal
Portfolio Objective circumstances) Portfolio Manager
<C> <C> <S> <C>
Money Market Current income consistent with Highest quality money Pacific Life
preservation of capital market
instruments
- -------------------------------------------------------------------------------------------------------
High Yield High level of current income Intermediate and long- Pacific Life
Bond term,
high-yielding, lower and
medium quality (high
risk)
fixed-income securities
- -------------------------------------------------------------------------------------------------------
Managed Bond Maximize total return consistent Investment grade Pacific Investment
with prudent investment marketable Management Company
management debt securities. Will
normally maintain an
average portfolio
duration of 3-7 years
- -------------------------------------------------------------------------------------------------------
Government Maximize total return consistent U.S. Government Pacific Investment
Securities with prudent investment securities Management Company
management including futures and
options
thereon and high-grade
corporate debt
securities. Will
normally maintain an
average portfolio
duration of 3-7 years
- -------------------------------------------------------------------------------------------------------
Growth Growth of capital Common stock Capital Guardian Trust
Company
- -------------------------------------------------------------------------------------------------------
Aggressive Eq- Capital appreciation Common stock of small Alliance Capital
uity emerging growth and Management L.P.
medium
capitalization companies
- -------------------------------------------------------------------------------------------------------
Growth LT Long-term growth of capital Common stock Janus Capital Corporation
consistent with the preservation
of capital
- -------------------------------------------------------------------------------------------------------
Equity Income Long-term growth of capital Dividend paying common J.P. Morgan Investment
and income stock Management Inc.
- -------------------------------------------------------------------------------------------------------
Multi-Strategy High total return Equity and fixed income J.P. Morgan Investment
securities Management Inc.
- -------------------------------------------------------------------------------------------------------
Large-Cap Long-term growth of capital. Equity securities of Salomon Brothers
Value Current income is of secondary large- Asset Management Inc
importance capitalization companies
- -------------------------------------------------------------------------------------------------------
Mid-Cap Value Capital appreciation Equity securities of Lazard Asset Management
medium-
capitalization domestic
companies
believed to be
undervalued
- -------------------------------------------------------------------------------------------------------
Equity Capital appreciation Common stocks and Goldman Sachs
securities Asset Management
convertible into or
exchangeable
for common stocks
- -------------------------------------------------------------------------------------------------------
Bond and In- Provide total return and income Investment grade debt Goldman Sachs
come consistent with prudent securities. Asset Management
investment management Will normally maintain
an
average portfolio
duration within
one-half year of a long-
term
bond index
- -------------------------------------------------------------------------------------------------------
Equity Index Provide investment results that Stocks included in the Bankers Trust Company
correspond to the total return S&P 500
performance of common stocks
publicly traded in the U.S.
- -------------------------------------------------------------------------------------------------------
Small-Cap In- Provide investment results that Stocks included in the Bankers Trust Company
dex correspond to the total return Russell 2000 Small Stock
of an index of small Index
capitalization companies
- -------------------------------------------------------------------------------------------------------
REIT Current income and long-term Real estate investment Morgan Stanley Asset
capital appreciation trusts and Management Inc.
equity securities of
companies
principally engaged in
the
U.S. real estate
industry
- -------------------------------------------------------------------------------------------------------
International Long-term capital appreciation Equity securities of Morgan Stanley Asset
corporations Management Inc.
domiciled outside the
United
States
- -------------------------------------------------------------------------------------------------------
Emerging Mar- Long-term growth of capital Common stocks of Blairlogie Capital
kets companies Management
domiciled in emerging
market
countries
</TABLE>
18
<PAGE>
The Investment Adviser and Portfolio Managers
We serve as Investment Adviser to each Portfolio of the Fund. We are
registered with the SEC as an Investment Adviser. For sixteen of the
Portfolios, we and the Fund have engaged other firms to serve as Portfolio
Managers which are shown in the chart above.
THE POLICY
The variable life insurance benefits provided by your Policy are funded
through your Accumulated Value in the Separate Account and the Fixed Account.
The information included below describes the benefits, features, charges, and
other major provisions of the Policy.
Application for a Policy
Any person or persons wishing to purchase the Policy may submit an
application to us. A Policy can be issued on the life of a single Insured for
issue Ages up to and including age 85 and Insureds under a last survivor
Policy for issue Ages between 20 and 85, and, in both cases, with evidence of
insurability satisfactory to us. The Insured's Age is calculated as of the
Insured's last birthday. Acceptance is subject to our underwriting rules, and
we reserve the right to request additional information and to reject an
application.
After your Policy is issued, insurance coverage under the Policy will be
deemed to have begun as of the Policy Date. Your Policy Date is usually the
date the application is accepted by us. Your Policy Date is the date used to
determine Policy Years, Policy Months, and Policy Monthly, Quarterly, Semi-
Annual and Annual Anniversaries. For purposes of determining the Monthly
Payment Date for all Policies issued, the Policy Date will never be the 29th,
30th, or 31st of any month. We first become obligated under the Policy on the
date the total initial premium is received or on the date the application is
accepted, whichever is later. Any monthly deductions due will be taken on the
Monthly Payment Date on or next following the date we become obligated. The
initial premium must be received within 20 days after the Policy is issued,
although we may waive the 20 day requirement at our discretion. If the initial
premium is not received or the application is rejected by us, the Policy will
be cancelled and any premium received will be refunded.
Subject to our approval, your Policy may be backdated, but the Policy Date
may not be earlier than the date the initial premium is received at our Home
Office. Backdating can be advantageous if the Insured's lower issue Age
results in lower cost of insurance rates. If your Policy is backdated, the
minimum initial premium required will include sufficient premium to cover the
backdating period and will be applied the date the initial premium is received
or the Policy Date, if later. Monthly deductions will be made for the period
the Policy Date is backdated.
Insureds are assigned to underwriting (insurance risk) classes which are
used in calculating the cost of insurance rates. In assigning Insureds to
underwriting classes, we will usually use either simplified or medical
underwriting, although other forms of underwriting may be used when deemed
appropriate by us.
Premiums
The minimum initial premium to purchase a Policy is $10,000 if the Insured's
issue Age is less than 70 and $50,000 if the Insured's issue Age is greater
than 69. If this is a last survivor Policy, the minimum initial premium is
based upon the issue Age of the younger Insured. You may elect the initial
premium to be 80%, 90% or 100% of the Guideline Single Premium. The Guideline
Single Premium is the maximum premium that can be paid for a given Face Amount
in order for an insurance policy to qualify as a life insurance contract for
tax purposes. If you reside in the state of West Virginia the Face Amount of
the Policy must be at least $25,000. We may reduce the minimum initial premium
required under certain circumstances, such as for group or sponsored
arrangements.
Additional Premium Payments
You have limited ability to make additional premium payments. Subsequent
premium payments of at least $1,000 are permitted under the following
circumstances:
19
<PAGE>
1. an additional premium payment is required to keep the Policy in force
(see "Lapse"); or
2. the premium payment would not cause total premiums to exceed the premium
limits prescribed by the Internal Revenue Service ("IRS") to qualify the
Policy as a life insurance contract.
We reserve the right to require satisfactory evidence of insurability before
accepting any additional premium payment that results in an immediate increase
in the death benefit. A premium payment would result in an immediate increase
in the death benefit if the death benefit under your Policy is, or upon
acceptance of the premium would be, greater than the Face Amount. See "Death
Benefit." If satisfactory evidence of insurability is not received, the
payment, or a portion thereof, may be returned. The Company may require that
existing Policy Debt be repaid prior to accepting any additional premium
payments.
All or a portion of a premium payment will be rejected and returned to you
if it would exceed the maximum premium limitations prescribed by federal tax
law. We also reserve the right to make distributions from your Policy to the
extent we deem it necessary to continue to qualify your Policy as life
insurance under the IRC.
If your Policy is issued in exchange for a policy that is not a modified
endowment contract, then in order for your Policy to continue to avoid being
treated as a modified endowment contract, the sum of the premiums less a
portion of any Partial Withdrawals may not exceed the "seven pay premium"
limit as defined in the IRC. See "Federal Income Tax Considerations". If we
receive any premium payment that we believe, if applied to your Policy in that
Policy Year, would cause your Policy to become a modified endowment contract,
the portion of the payment that we believe would cause your Policy to become a
modified endowment contract will not be applied to your Policy but will be
returned to you, unless you have previously notified us that payments that
cause your Policy to become a modified endowment contract may be accepted by
us and applied to your Policy. However, for premium payments received by us at
our Home Office within 20 days before the upcoming Policy Anniversary, we may
apply the portion of the premium payment that we believe would cause your
Policy to become a modified endowment contract to your Policy on the upcoming
Policy Anniversary.
Allocation of Premiums
In the application for your Policy, you select the Investment Options to
which premium payments will be allocated after the Free-Look Transfer Date.
Until the Free-Look Transfer Date, premium payments will be allocated to the
Money Market Variable Account, which invests in the Money Market Portfolio of
the Fund (except for amounts allocated to the Loan Account to secure a Policy
loan). Your Accumulated Value will be automatically allocated according to
your instructions contained in the application (or if received more recently,
in written instructions) the later of 15 days after the Policy is issued or 45
days after the application is completed (the "Free-Look Transfer Date").
Additional premium payments will be allocated among the Variable Accounts
and the Fixed Account according to your most recent instructions. You may
change the allocation of payments by submitting a proper written request to
our Home Office, or by telephone if an Authorization for Telephone Requests
for changes in premium allocation instruction has been completed, signed and
filed at our Home Office.
Portfolio Rebalancing
You may direct us to automatically re-set the percentage of your Accumulated
Value allocated to each Variable Account at a predetermined level. This
process is called portfolio rebalancing. (The Fixed Account is not available
for portfolio rebalancing.) Over time, the variations in each Variable
Account's investment results will shift the percentage allocations of your
Accumulated Value. The portfolio rebalancing feature will automatically
transfer your Accumulated Value among the Variable Accounts back to the preset
percentages. Rebalancing can be made quarterly, semi-annually or annually,
measured from your Policy Date ("frequency period"). Rebalancing may result in
transferring amounts from a Variable Account with relatively higher investment
performance to a Variable Account with relatively lower investment
performance.
You may initiate portfolio rebalancing by sending our Home Office a signed,
written request in good form or a properly completed Automatic Portfolio
Rebalancing form. You must specify the frequency for rebalancing
20
<PAGE>
and a beginning date. The first rebalancing will usually occur on your Monthly
Payment Date that starts the frequency period you elected and that occurs on
or follows the beginning date you elected. If you stop portfolio rebalancing,
you must wait 30 days to begin again. Portfolio rebalancing cannot be used
with the Dollar Cost Averaging Option.
We may modify, terminate or suspend the portfolio rebalancing feature at any
time.
Dollar Cost Averaging Option
We currently offer an option under which you may dollar cost average your
allocations in the Variable Accounts under your Policy by authorizing us to
make periodic allocations of Accumulated Value from any one Variable Account
to one or more of the other Variable Accounts. Dollar cost averaging is a
systematic method of investing in which securities are purchased at regular
intervals in fixed dollar amounts so that the cost of the securities gets
averaged over time and possibly over various market cycles. The option will
result in the allocation of Accumulated Value to one or more Variable
Accounts, and these amounts will be credited at the Accumulation Unit values
as of the end of the Valuation Dates on which the transfers are processed.
Since the value of Accumulation Units will vary, the amounts allocated to a
Variable Account will result in the crediting of a greater number of units
when the Accumulation Unit value is low and a lesser number of units when the
Accumulation Unit value is high. Similarly, the amounts transferred from a
Variable Account will result in a debiting of a greater number of units when
the Accumulation Unit value is low and a lesser number of units when the
Accumulation Unit value is high. Dollar cost averaging does not guarantee
profits, nor does it assure that you will not have losses.
A Dollar Cost Averaging Request form is available upon request. To elect the
Dollar Cost Averaging Option, your Accumulated Value in the Variable Account
from which the Dollar Cost Averaging transfers will be made must be at least
$5,000. After we have received a Dollar Cost Averaging Request in proper form
at our Home Office, we will transfer Accumulated Value in amounts you
designate from the Variable Account from which transfers are to be made to the
Variable Account or Accounts you choose. The minimum amount that may be
transferred to any one Variable Account is $50. After the Free-Look Period,
the first transfer will be effected on your Policy's Monthly, Quarterly, Semi-
Annual, or Annual Anniversary, whichever corresponds to the period you select,
coincident with or next following receipt at our Home Office of a Dollar Cost
Averaging Request in proper form. Subsequent transfers will be processed on
the following Monthly, Quarterly, Semi-Annual, or Annual Anniversary for so
long as you designate, until the total amount elected has been transferred,
until Accumulated Value in the Variable Account from which transfers are made
has been depleted, or until your Policy enters the Grace Period. Amounts
periodically transferred under this option will not be subject to any transfer
charges that may be imposed by us in the future, except as may be required by
applicable law.
You may instruct us at any time to terminate this option by written request
to our Home Office. We may discontinue, modify, or suspend the Dollar Cost
Averaging Option at any time.
Transfer of Accumulated Value
After the Free-Look Transfer Date, you may transfer Accumulated Value among
the Variable Accounts upon proper written request to our Home Office.
Transfers (other than transfers in connection with the Dollar Cost Averaging
Option) may be made by telephone if a properly completed, Authorization for
Telephone Requests is on file at our Home Office. Currently, there are no
limitations on the number of transfers between Variable Accounts, no minimum
amount required for a transfer, nor any minimum amount required to be
remaining in a given Variable Account after a transfer (except as required
under the Dollar Cost Averaging Option). No transfers are allowed during the
Grace Period if the required premium has not been paid. No charges are
currently imposed upon such transfers. We reserve the right, however, at a
future date to limit the size of transfers and remaining balances, to assess
transfer charges, to limit the number and frequency of transfers, and to
modify, suspend and/or discontinue telephone transfers.
Accumulated Value may also be transferred from the Variable Accounts to the
Fixed Account; however, such a transfer will only be permitted in the Policy
Month preceding a Policy Anniversary, except that you may
21
<PAGE>
make such a transfer at any time during the first 18 Policy Months. Transfers
from the Fixed Account to the Variable Accounts are restricted as described in
"The Fixed Account."
Death Benefit
When your Policy is issued, we will determine the initial amount of
insurance for the initial premium payment based on the instructions provided
in your application. That amount will be shown on the specifications page of
the Policy and is called the "Face Amount."
Upon due proof of the death of the Insured(s), we will pay to your named
Beneficiary death benefit proceeds, which will be the death benefit under your
Policy reduced by any outstanding Policy Debt (and if in the Grace Period, any
overdue charges). The death benefit will be the greater of the Face Amount
under your Policy or Accumulated Value multiplied by a specified percentage.
(which is referred to as the Guideline Minimum Death Benefit.) The specified
percentages vary according to the Age of the Insured, or, in the case of a
last survivor Policy, the Youngest Insured, and will be at least equal to the
cash value corridor in Section 7702 of the IRC, which addresses the definition
of a life insurance policy for tax purposes. A table showing the specified
percentages is in the Appendix and in the Policy. Because the specified
percentage is applied to your Accumulated Value, an increase in Accumulated
Value may increase the death benefit. However, because the death benefit will
never be less than the Face Amount, a decrease in Accumulated Value may
decrease the death benefit but never below the Face Amount. The following
examples illustrate how the death benefit will be determined:
Examples
<TABLE>
<CAPTION>
Policy A Policy B
-------- --------
<S> <C> <C>
Face Amount........................................... $100,000 $100,000
Insured's Age......................................... 40 40
Accumulated Value on Date of Death.................... $ 46,500 $ 34,000
Specified Percentage.................................. 250% 250%
</TABLE>
In Policy A, the death benefit equals $116,250, i.e., the greater of
$100,000 (the Face Amount) or $116,250 (the Accumulated Value at the date of
death of $46,500 multiplied by the specified percentage of 250%). Assuming
that there is no outstanding Policy Debt, this amount constitutes the death
benefit proceeds that would be paid to the Beneficiary.
In Policy B, the death benefit is $100,000, i.e., the greater of $100,000
(the Face Amount) or $85,000 (the Accumulated Value of $34,000 multiplied by
the specified percentage of 250%).
If the death benefit is equal to the Guideline Minimum Death Benefit, we
reserve the right to reduce the death benefit by requiring Partial Withdrawals
be made in order to maintain the net amount at risk at a level that will not
exceed three times the death benefit on the Policy Date.
The Policy is intended to qualify as a life insurance contract under the
Internal Revenue Code for Federal tax purposes, and the death benefit under
the Policy is intended to qualify for the income tax exclusion under the
Internal Revenue Code. If your Policy is issued in exchange for another life
insurance policy that was not a modified endowment contract, then unless
otherwise specified by you in writing, it is intended that the Policy will not
be treated as a modified endowment contract under the Internal Revenue Code.
To these ends, the provisions of the Policy, including any other Rider,
Benefit, or endorsement, are to be interpreted to ensure such tax
qualification and to prevent the Policy from being treated as a modified
endowment contract, notwithstanding any other provisions to the contrary.
If at any time the premiums paid under your policy exceed the amount
allowable for such tax qualification, such excess amount shall be removed from
the Policy as of the date of its payment, and any appropriate adjustment in
the death benefit shall be made as of such date. The excess amount shall be
refunded to you no later than 60 days after the end of the applicable Policy
Year. The excess amount removed from the Policy and
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refunded to you may be adjusted for interest or for changes in Accumulated
Value attributable to the excess amount. If for some reason this excess amount
is not refunded by then, the death benefit under this Policy shall be
increased retroactively and prospectively so that at no time is the death
benefit ever less than the amount needed to ensure such tax qualification. To
the extent that the death benefit as of any time is increased by this
provision, appropriate adjustments shall be made retroactively in any cost of
insurance charge or supplemental benefits as of that time that are consistent
with such an increase.
If your Policy is issued in exchange for another life insurance policy that
was not a modified endowment contract, then at any time the premiums or other
amounts paid under the Policy exceed the limit for avoiding modified endowment
contract treatment, and you have not specified in writing that such treatment
is acceptable to you, such excess amount shall be removed from the Policy as
of the date of its payment, and any appropriate adjustment in the Policy's
death benefit shall be made as of such date. This excess amount shall be
refunded to you no later than 60 days after the end of the applicable Policy
Year. The excess amount removed from the Policy and refunded to you may be
adjusted for interest or for changes in Accumulated Value attributable to the
excess amount. If this excess amount is not refunded by then, the death
benefit under your Policy shall be increased retroactively and prospectively
to the minimum amount necessary so that at no time is the death benefit ever
less than the amount needed to avoid modified endowment contract treatment. To
the extent the death benefit as of any time is increased by this provision,
appropriate adjustments shall be made, retroactively or otherwise, in any cost
of insurance or supplemental benefits as of that time that are consistent with
such an increase.
All calculations of death benefit will be made as of the end of the
Valuation Period during which the Insured (or for a last survivor Policy, the
Survivor) dies. Death benefit proceeds may be paid to your Beneficiary in a
lump sum or under a payment plan offered by us under the Policy. The plan
offers monthly income for the lifetime of the Beneficiary with a minimum
period of ten years. The Policy should be consulted for details.
Policy Values
Accumulated Value
Your Accumulated Value is the sum of the amounts under your Policy held in
each Investment Option, as well as the amount set aside in the Loan Account,
including any accrued earned interest to secure any Policy Debt.
On each Valuation Date, the portion of your Accumulated Value allocated to
any particular Variable Account will be adjusted to reflect the investment
experience of that Variable Account. On each Monthly Payment Date, a portion
of your Accumulated Value allocated to a particular Investment Option also
will be adjusted to reflect the assessment of the Monthly Deduction. See
"Determination of Accumulated Value". No minimum amount of Accumulated Value
is guaranteed. You bear the risk for the investment experience of Accumulated
Value allocated to the Variable Accounts.
Cash Surrender Value. The Cash Surrender Value of your Policy equals your
Accumulated Value less any Surrender Charge. Once the duration of the
surrender charge has expired, your Cash Surrender Value will equal your
Accumulated Value.
Net Cash Surrender Value. The Net Cash Surrender Value is the Cash Surrender
Value minus any outstanding Policy Debt. You can surrender your Policy at any
time while the Insured (either Insured if this is a last survivor Policy) is
living and receive your Net Cash Surrender Value.
Determination of Accumulated Value
Although your Policy's death benefit can never be less than the Face Amount
for as long as your Policy is in force, your Accumulated Value in the Separate
Account will vary to a degree that depends upon several factors, including
investment performance of the Variable Accounts to which Accumulated Value has
been allocated, payment of additional premiums, the amount of any outstanding
Policy Debt, any Partial Withdrawals, and the charges assessed in connection
with your Policy.
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The amounts allocated to the Variable Accounts will be invested in shares of
the corresponding Portfolios of the Fund. The investment performance of each
Variable Account will reflect increases or decreases in the net asset value
per share of the corresponding Portfolio and any dividends or distributions
declared by a Portfolio.
Assets in the Variable Accounts are divided into accumulation units, which
are a measure of value used for bookkeeping purposes. When you allocate
premiums to a Variable Account, your Policy is credited with accumulation
units. In addition, other transactions including loans, surrender, partial
withdrawals, transfers, and assessment of charges against your Policy affect
the number of accumulation units credited to your Policy. The number of units
credited or debited in connection with any such transaction is determined by
dividing the dollar amount of such transaction by the unit value of the
affected Variable Account. The unit value of each Variable Account is
determined on each Valuation Date at or about 4:00 p.m. Eastern time. The
number of units credited will not change because of subsequent changes in unit
value.
The accumulation unit value of each Variable Account's unit initially was
$10. The unit value of a Variable Account on any Valuation Date is calculated
by adjusting the unit value from the previous Valuation Date for (1) the
investment performance of the Variable Account, which is based upon the
investment performance of the corresponding Portfolio of the Fund, (2) any
dividends or distributions paid by the corresponding Portfolio, and (3) any
charges that may be assessed by us for income taxes attributable to the
operation of the Variable Account (which are currently not anticipated).
Policy Loans
You may borrow money from us using your Policy as the only security for the
loan by submitting a proper written request to our Home Office. We may in our
discretion permit loans to be made by telephone if a properly completed
Authorization for Telephone Requests has been filed at our Home Office. A loan
may be taken any time your Policy is in force. The minimum loan that can be
taken at any time is $500, ($200 in Connecticut, $250 in Oregon). The maximum
amount that can be borrowed in the first Policy Year is 50% of your
Accumulated Value, and thereafter the maximum at any time is the greater of
(1) 100% of your Accumulated Value in the Fixed Account and 90% in the
Variable Accounts, and (2) 98% of the excess of the Accumulated Value over
twelve times the current monthly deduction. The maximum amount is reduced by
any existing Debt and the amount of any Surrender Charge that would be imposed
if you surrendered your Policy on the date the loan is taken.
When you take a loan, an amount equal to the loan is transferred out of your
Accumulated Value in the Investment Options into the Loan Account to secure
the loan. Unless you request otherwise, loan amounts will be deducted from the
Investment Options proportionately.
The interest rate we charge on loans is 6.00% a year on Policy Debt in the
first ten Policy Years and 5.00% thereafter.
A portion of your Policy Debt may qualify as a Preferred Loan. We charge a
lower rate of interest on Preferred Loans. Subject to the limitations
described above, the maximum amount available as Preferred Loans is the excess
of the Accumulated Value over the premiums paid. We will determine the amount
of a loan that is Preferred on the date of the loan, and we will redetermine
the total amount of Preferred Loans on each Policy Anniversary. Loan
repayments will be considered repayment of Preferred Loans last. We will
charge interest on Preferred Loans at an annual rate of 5.25% in the first ten
Policy Years, and 4.75% thereafter.
We will credit interest monthly on amounts held in the Loan Account to
secure the loan at an annual rate of 4.5%.
You may repay all or part of the loan at any time while your Policy is in
force. Interest on a loan is accrued daily and is due on each Policy
Anniversary for the prior year, or on termination of the Policy. If interest
is not paid when due, it will be added to the amount of the loan principal and
interest will begin accruing thereon from that date. An amount equal to the
loan interest charged will be transferred to the Loan Account from the
Investment Options on a proportional basis.
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Unless you request otherwise, any loan repayment will cause an equal amount
to be transferred from the Loan Account into the Investment Options in
accordance with your current premium allocation instructions. In addition, any
interest earned on the amount held in the Loan Account will be transferred to
each of the Investment Options in accordance with your current premium
allocation instructions on each Policy Anniversary and on full repayment of
your Policy Debt.
While the amount to secure the loan is held in the Loan Account, you forgo
the investment experience of the Variable Accounts and the current interest
rates of the Fixed Account. Thus, a loan, whether or not repaid, will have a
permanent effect on the Policy's values and may have an effect on the amount
and duration of the death benefit. If not repaid, your Policy Debt will be
deducted from the amount of the death benefit payable upon the death of the
Insured (or the Survivor Insured for a last survivor Policy), the Cash
Surrender Value paid upon surrender, or the refund of premium upon exercise of
the Free-Look Right.
A loan may affect the length of time your Policy remains in force. Your
Policy will lapse when Debt equals or exceeds your Cash Surrender Value and
the minimum payment required is not made during the Grace Period. Moreover,
your Policy may enter the Grace Period more quickly when a loan is
outstanding, because the loaned amount is not available to cover monthly
deductions. Additional payments or repayment of a portion of Debt may be
required to keep the Policy in force. See "Lapse".
A loan is treated as a distribution from a Policy that is a modified
endowment contract, and therefore may give rise to taxable income to you. For
information on the tax treatment of loans, see "Federal Income Tax
Considerations."
Duration of Contract
The Policy does not mature. Coverage under a Policy will remain in effect
until the Policy is surrendered; until the death of a single Insured or, for a
last survivor Policy, the Survivor; or until the Policy lapses.
Surrender
You may surrender your Policy at any time during the life of the Insured(s).
The amount received in the event of a full surrender is your Policy's Net Cash
Surrender Value, which is equal to your Accumulated Value less outstanding
Policy Debt, and applicable surrender charges. Surrender could give rise to
taxable income.
Partial Withdrawals
Partial withdrawals may be taken beginning on the first Policy Anniversary
and thereafter. Under this Benefit, you may withdraw a portion of your Net
Cash Surrender Value.
A partial withdrawal must be for at least $1,000. The amount that can be
withdrawn (1) can be no greater than the excess of the Cash Surrender Value
prior to the withdrawal over the Policy Debt divided by 90% and (2) is limited
so that after the withdrawal, your Net Cash Surrender Value is at least
$10,000.
You may make a partial withdrawal by submitting a proper written request to
us. As of the effective date of any withdrawal, your Accumulated Value will be
reduced by the amount of the withdrawal and any applicable Surrender Charge.
The reduction in Accumulated Value will be allocated proportionately to your
Accumulated Value in the Investment Options unless you request otherwise. If
the Insured(s) dies after the request for a withdrawal is sent to us and prior
to the withdrawal being effected, the amount of the withdrawal will be
deducted from the death benefit proceeds, which will be determined without
taking into account the withdrawal.
Preferred Withdrawal. A Preferred Withdrawal is a portion of the first
withdrawal in any Policy Year. This portion is the lesser of the withdrawal
and the Free Withdrawal Amount. No Surrender Charge is imposed on Preferred
Withdrawals. Amounts in excess of the Free Withdrawal Amount and any
subsequent withdrawals in the same Policy Year may be subject to the Surrender
Charge. See "Surrender Charge". If there is no Free Withdrawal Amount at the
time of the first withdrawal in a Policy Year, the next withdrawal in the same
Policy Year will be considered the first.
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When a partial withdrawal is made, the death benefit under the Policy is
decreased by an amount proportionate to the reduction in Accumulated Value
caused by the partial withdrawal, and the Face Amount may also be reduced. For
example, if you withdraw one-half of your Accumulated Value, the death benefit
after the withdrawal will be one-half of the death benefit prior to the
withdrawal. If the death benefit prior to a partial withdrawal is the Face
Amount, the Face Amount will be reduced by the entire amount of the reduction
in death benefit. If the death benefit prior to a partial withdrawal is equal
to a Policy's Accumulated Value multiplied by the applicable specified
percentage, the Face Amount after the withdrawal will be equal to the new
death benefit if the new death benefit is less than the Face Amount prior to
the withdrawal, and to the prior Face Amount otherwise. However decreases in
the Face Amount and death benefit will be limited so that the Policy complies
with the definition of life insurance in the IRC without any additional
distribution from the Policy at the time of the withdrawal.
A partial withdrawal is treated as a distribution from the Policy that may
give rise to taxable income to you. See "Federal Income Tax Considerations."
Right to Examine a Policy--Free-Look Right
You have a Free-Look Right, under which your Policy may be returned within
10 days after you receive it (15 days in Colorado, 20 days in North Dakota,
and 30 days if you are a resident of California and age 60 or older), 10 days
after we mail or deliver this notice of right of withdrawal included in this
prospectus, or within 45 days after you sign the application for insurance,
whichever is later. However, in Pennsylvania, you have a different Free-Look
Right, under which your Policy may be returned only within 10 days after you
receive it. It can be mailed or delivered to us or our agent. The returned
Policy will be treated as if we never issued it and we will promptly refund
the full amount of the premium paid. If you have taken a loan during the Free-
Look Period, your Policy Debt will be deducted from the amount refunded. Until
the Free-Look Transfer Date, premiums will be allocated to the Money Market
Variable Account which invests in the Money Market Portfolio of the Fund
(except for amounts allocated to the Loan Account to secure a Policy loan).
See "Allocation of Premiums."
Lapse
Your Policy will lapse only when your Net Cash Surrender Value is
insufficient to cover Policy charges on a Monthly Payment Date, and a Grace
Period expires without you making a sufficient payment. You must pay during
the Grace Period an amount equal to the amount by which your Cash Surrender
Value less Policy Debt is less than zero plus a minimum of three times the
full charges and deductions due on the Monthly Payment Date when the
insufficiency occurred to avoid termination.
To avoid potential lapse, you may wish to repay a portion of any Policy
Debt. If premium payments have not exceeded the maximum permissible premiums,
you may wish to make a premium payment.
If your Net Cash Surrender Value is insufficient to cover the deductions and
charges on a Monthly Payment Date, we will deduct the amount available to pay
for any portion of the monthly deductions and charges due. Any remaining
Accumulated Value in the Variable Accounts will be transferred to the Money
Market Variable Account. We will notify you (and any assignee of record) of
the payment required to keep the Policy in force. You will then have a "Grace
Period" of 61 days, measured from the date the notice is sent, to make the
required payment. Your Policy will remain in force through the Grace Period.
Failure to make the required payment will result in termination of coverage
under your Policy upon expiration of the Grace Period, and your Policy will
lapse with no value. If the required payment is made during the Grace Period,
any premium paid and any Accumulated Value in the Money Market Variable
Account will be allocated among the Investment Options in accordance with your
current premium allocation instructions. Any monthly deductions and charges
due will be charged to the Investment Options on a proportionate basis. If the
Insured (or Survivor if this is a last survivor Policy) dies during the Grace
Period, the death benefit proceeds will equal the amount of the death benefit
immediately prior to the commencement of the Grace Period, reduced by any
unpaid monthly deductions and charges due and any Policy Debt.
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Reinstatement
We will reinstate a lapsed Policy (but not a Policy which has been
surrendered for its Net Cash Surrender Value) at any time within three years
after the end of the Grace Period provided we receive the following: (1) your
written application; (2) evidence of insurability satisfactory to us; and (3)
payment of all monthly charges and deductions that were due and unpaid during
the Grace Period, payment of the amount by which Net Cash Surrender Value was
less than zero at the beginning of the Grace Period, and payment of a premium
at least equal to three times the most recent monthly deduction.
When your Policy is reinstated, your Accumulated Value will be equal to your
Accumulated Value on the date of the lapse, plus any additional premium
subject to the following: If your Policy is reinstated after your first
Monthly Payment Date following lapse, your Accumulated Value will be reduced
by the amount of Policy Debt on the date of lapse and no Policy Debt will
exist on the date of the reinstatement. If your Policy is reinstated on or
before your Monthly Payment Date next following lapse, any Policy Debt on the
date of lapse will also be reinstated. No interest on amounts held in the Loan
Account to secure Policy Debt will be paid or credited between lapse and
reinstatement. Reinstatement will be effective as of your Monthly Payment Date
on or next following the date of our approval, and your Accumulated Value
minus Policy Debt will be allocated among the Investment Options in accordance
with your current premium allocation instructions.
Last Survivor Policies
Policies are offered that provide insurance protection, either on the life
of one Insured or--as a last survivor Policy--on the lives of two Insureds. A
last survivor Policy provides a death benefit the proceeds of which are paid
on the death of the Survivor Insured. The other significant differences
between single Insured and last survivor Policies are listed below:
1. The cost of insurance charges under last survivor Policies are different
in that they are determined in a manner that reflects the anticipated
mortality of the two Insureds. See "Charges and Deductions" and the last
survivor illustrations in the "Appendix".
2. In an application for a last survivor Policy, we require evidence of
insurability satisfactory to us for both Insureds.
3. For a last survivor Policy to be reinstated, both Insureds must be alive
on the date of reinstatement.
4. The Policy provisions regarding misstatement of age or sex, suicide and
incontestability apply to both Insureds.
CHARGES AND DEDUCTIONS
Load from Premiums
We do not make any deductions from the premium payment before allocating it
to your Accumulated Value.
Surrender Charge
A Surrender Charge may be assessed upon a surrender or a partial withdrawal
within the first nine Policy Years. The Surrender Charge is assessed against
the portion of the resulting reduction in Accumulated Value considered to be a
return of initial premium. For the purpose of determining the Surrender Charge
only, a reduction in Accumulated Value upon a surrender or withdrawal will be
deemed to be a distribution of earnings from the available Free Withdrawal
Amount, if any, first, a return of initial premium next, then a return of
additional premium, and a distribution from remaining earnings last. The
available Free Withdrawal Amount is the amount available as a Preferred
Withdrawal, if any. The Surrender Charge varies with the Policy Year according
to the following schedule:
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<TABLE>
<CAPTION>
Surrender
Time of Withdrawal Charge
------------------ ---------
<S> <C>
Policy Year 1-2 10%
Policy Year 3 9%
Policy Year 4 8%
Policy Year 5 7%
Policy Year 6 6%
Policy Year 7 5%
Policy Year 8 4%
Policy Year 9 3%
Policy Year 10 and thereafter 0%
</TABLE>
In no event will the Surrender Charges imposed exceed the maximum prescribed
by state nonforfeiture laws for life insurance.
Approximately twenty-five percent of the Surrender Charge is assessed to
compensate us for premium taxes. Approximately seventy-five percent is
assessed to compensate us for sales expenses. The Surrender Charge is not
assessed against premiums other than the initial premium.
Deductions from Accumulated Value
The charges described below are deducted from Accumulated Value on the
Policy Date, and on each Monthly Payment date thereafter. Each charge will be
assessed to the Fixed Account and to each Variable Account in proportion to
the Policy's Accumulated Value in that account, unless you specify otherwise
in writing.
Cost of Insurance. A cost of insurance charge is deducted to compensate us
for the anticipated cost of paying death benefits under the Policies. We may
use any profit derived from this charge for any lawful purpose including the
cost of claims processing and investigation.
The guaranteed maximum cost of insurance charge will be the net amount at
risk under the Policy multiplied by the guaranteed maximum cost of insurance
rates shown in your Policy. The net amount at risk is the death benefit less
the Accumulated Value. For the purpose of this charge, the death benefit is
divided by 1.002466 (a discount factor to account for interest deemed to be
earned during the month). Guaranteed maximum cost of insurance rates are based
on the Age, sex (where permissible), and underwriting classification of the
Insured(s). The cost of insurance rates generally increase with the Age of the
Insured(s). If your initial premium was 100% of the Guideline Single Premium
we may charge less than the guaranteed maximum cost of insurance charge.
Administrative Charge. We assess an administrative charge of 0.00025 (0.30%
annually) of the Accumulated Value in the Variable Accounts and the Fixed
Account for administrative expenses. In addition, if the Accumulated Value is
less than $50,000 on any Policy Anniversary Date a $40 fee is charged on that
Monthly Payment Date.
The administrative charge is to cover administrative expenses in connection
with the Policies, including expenses of underwriting and issuing the Policy,
recordkeeping, determining Policy values and benefits, processing death
benefit claims, processing withdrawals and transfers, preparing reports to
Policy Owners, and overhead costs. We do not expect to profit from this
charge.
Tax Expense Charge. A charge equal to 0.000333333 (0.40% annually) of the
Accumulated Value is assessed to pay applicable state and local premium taxes
and federal taxes under Section 848 of the Code. This charge is eliminated
after 10 Policy Years. The deduction over 10 Policy Years approximates our
average expenses for taxes on premiums. Premium taxes vary from state to
state, and in some instances, among municipalities. We do not expect to profit
from this charge.
Mortality and Expense Risk Charges. A charge equal to 0.00075 (0.90%
annually) of Accumulated Value in the Variable Accounts and the Fixed Account
will be assessed to compensate us for mortality and expense risks assumed.
After 10 Policy Years, this charge is reduced to 0.000583333% (0.70%
annually).
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This charge is made to compensate us for assuming certain mortality and
expense risks under the Policies. The mortality risk assumed is that Insureds,
as a group, may live for a shorter period of time than estimated and,
therefore, the cost of insurance charges specified in the Policy will be
insufficient to meet actual claims. The expense risk assumed is that other
expenses incurred in issuing and administering the Policies and operating the
Separate Account will be greater than the charges assessed for such expenses.
We will realize a gain from this charge to the extent it is not needed to
provide the mortality benefits and expenses under the Policies, and will
realize a loss to the extent the charge is not sufficient. We may use any
profit derived from this charge for any lawful purpose, including any
distribution expenses not covered by the Surrender Charge.
Other Charges
We may charge the Variable Accounts for the federal income taxes incurred by
us that are attributable to the Separate Account and its Variable Accounts or
to our operations with respect to the Policies. No such charge is currently
assessed. See "Charge for Our Income Taxes".
We will bear the operating expenses of the Separate Account. Each Variable
Account available to you purchases shares of the corresponding Portfolio of
the underlying Fund. The Fund and each of its Portfolios incur certain
charges, including the investment advisory fee, and certain operating
expenses. The Fund is governed by its Board of Trustees. The Fund's expenses
are not fixed or specified under the terms of the Policy, and they may vary
from year to year. The advisory fees and other expenses are more fully
described in "Summary of the Policy: Fund Annual Expenses After Expense
Limitation" and in the prospectus of the Fund.
Guarantee of Certain Charges
We guarantee that certain charges will not increase, including the
guaranteed rates for the cost of insurance, the administrative charge, the tax
charge, and the charge for mortality and expense risk.
Variations in Charges
We may agree to reduce or waive the Surrender Charge or administrative
charges, or other charges, or credit additional amounts under our Policies, in
situations where selling and/or maintenance costs associated with the Policies
are reduced, such as the sale of several Policies to the same Policyowner(s),
sales of large Policies, sales of Policies in connection with a group or
sponsored arrangement or mass transactions over multiple Policies.
In addition, we may agree to reduce or waive some or all of such charges
and/or credit additional amounts under our Policies, for those Policies sold
to persons who meet criteria established by us, who may include registered
representatives and employees of broker/dealers with a current selling
agreement with us and immediate family members of such persons ("Eligible
Persons"). We will credit additional amounts to Policies owned by Eligible
Persons if such Policies 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 Policies. The amount credited to
Policies owned by Eligible Persons will equal the reduction in expenses we
enjoy by not incurring brokerage commissions in selling such Policies, with
the determination of the expense reduction and of such crediting being made in
accordance with our administrative procedures.
We will only reduce or waive such charges or credit additional amounts on
any Policy where expenses associated with the sale of the Policy and/or costs
associated with administering and maintaining the Policy are reduced. We
reserve the right to terminate waiver, reduced charge and crediting programs
at any time, including for issued Policies.
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OTHER INFORMATION
Federal Income Tax Considerations
The following discussion provides a general description of the federal
income tax considerations relating to the Policy. This discussion is based
upon our understanding of the present federal income tax laws as they are
currently interpreted by the IRS. This discussion is not intended as tax
advice. Because of the inherent complexity of such laws and the fact that tax
results will vary according to the particular circumstances of the individual
involved, tax advice may be needed by a person contemplating the purchase of
the Policy. These comments concerning federal income tax consequences are not
an exhaustive discussion of all tax questions that might arise under the
Policy. Special rules which are not discussed herein may apply in certain
situations. Moreover, no representation is made as to the likelihood of
continuation of federal income tax or estate or gift tax laws or of the
current interpretations by the IRS or the courts. Future legislation may
adversely affect the tax treatment of life insurance policies or other tax
rules described in this discussion or that relate directly or indirectly to
life insurance policies. Finally, these comments do not take into account any
state or local income or other tax considerations which may be involved in the
purchase or ownership of the Policy.
While we believe that the Policy meets the statutory definition of life
insurance under Section 7702 of the Internal Revenue Code ("IRC") and hence
will receive federal income tax treatment consistent with that of traditional
fixed life insurance, the area of the tax law relating to the definition of
life insurance does not explicitly address all relevant issues (including, for
example, the treatment of substandard risk Policies). We reserve the right to
make changes to the Policy if changes are deemed appropriate by us to attempt
to assure qualification of the Policy as a life insurance contract. If a
Policy were determined not to qualify as life insurance, the Policy would not
provide the tax advantages normally provided by life insurance. The discussion
below summarizes the tax treatment of life insurance contracts.
The death benefit under a Policy should be excludable from the gross income
of the Beneficiary (whether the Beneficiary is a corporation, individual or
other entity) under IRC Section 101(a)(1) for purposes of the regular federal
income tax and you generally should not be deemed to be in constructive
receipt of the cash values, including increments thereof, under your Policy
until a full or partial surrender thereof, or lapse of your Policy, or until
receipt of deemed distributions (including, in the case of a modified
endowment contract, policy loans). Prospective Owners that intend to use
Policies to fund deferred compensation arrangements for their employees are
urged to consult their tax advisers with respect to the tax consequences of
such arrangements. Prospective corporate Owners should consult their tax
advisers about the treatment of life insurance in their particular
circumstances for purposes of the alternative minimum tax applicable to
corporations and the environmental tax under IRC Section 59A. Changing the
Policy Owner may also have tax consequences. Exchanging a Policy for another
involving the same Insured generally will not result in the recognition of
gain or loss according to IRC Section 1035(a). Changing the Insured under a
Policy will, however, not be treated as a tax-free exchange under IRC Section
1035, but rather as a taxable exchange.
Diversification Requirements. To comply with regulations under Section
817(h) of the IRC, each Portfolio of the Fund will be required to diversify
its investments. For details on these diversification requirements, see "What
is the Federal Income Tax Status of the Fund" in the Fund's prospectus.
The IRS has stated in published rulings that a variable contract owner will
be considered the owner of separate account assets if the contract owner
possesses incidents of ownership in those assets, such as the ability to
exercise investment control over the assets. In those circumstances, income
and gains from the separate account assets would be includable in the variable
policy owner's gross income. The Treasury Department also announced, in
connection with the issuance of regulations concerning diversification, that
those regulations "do not provide guidance concerning the circumstances in
which investor control of the investments of a segregated asset account may
cause the investor [i.e., the Policy Owner], rather than the insurance
company, to be treated as the owner of the assets in the account." This
announcement also stated that guidance would be issued by way of regulations
or rulings on the "extent to which policyholders may direct their investments
to particular subaccounts without being treated as owners of the underlying
assets." As of the date of this prospectus, no such guidance has been issued.
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The ownership rights under your Policy are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that policy owners were not owners of separate account assets. For
example, you have additional flexibility in allocating premium payments and
Policy Values. These differences could result in you being treated as the
owner of your Policy's pro rata portion of the assets of the Separate Account.
In addition, we do not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. We therefore reserve the right to modify the Policy, as deemed
appropriate by us, to attempt to prevent you from being considered the owner
of your Policy's pro rata share of the assets of the Separate Account.
Moreover, in the event that regulations are adopted or rulings are issued,
there can be no assurance that the Portfolios will be able to operate as
currently described in the Prospectus, or that the Fund will not have to
change any Portfolio's investment objective or investment policies.
Modified Endowment Contracts. IRC Section 7702A defines a class of insurance
contracts referred to as modified endowment contracts. Under this provision,
the Policies will be treated for federal tax purposes in one of two ways. It
is expected that most of the Policies will be modified endowment contracts.
A life insurance contract becomes a "modified endowment contract" if, at any
time during the first seven contract years, the sum of actual premiums paid
exceeds the sum of the "seven-pay premium." Generally, the "seven-pay premium"
is the level annual premium, such that if paid for each of the first seven
years, will fully pay for all future death and endowment benefits under a
contract. For example, if the "seven-pay premium" were $1,000, the maximum
premiums that could be paid during the first seven years to avoid "modified
endowment" treatment would be $1,000 in the first year; $2,000 through the
first two years; and $3,000 through the first three years, etc.
Pre-death distributions from modified endowment contracts may give rise to
taxable income. Upon full surrender of your Policy, you would recognize
ordinary income for federal income tax purposes equal to the amount by which
the Net Cash Surrender Value plus Debt exceeds the investment in your Policy
(usually the premiums paid plus pre-death distributions that were taxable less
any premiums previously recovered that were excludable from gross income).
Upon partial withdrawals and Policy loans, you would recognize ordinary income
to the extent allocable to income (which includes all previously non-taxed
gains) on your Policy. The amount allocated to income is the amount by which
the Accumulated Value of your Policy exceeds investment in the Policy
immediately before the distribution. Under a tax law provision, if two or more
policies which are classified as modified endowment contracts are purchased
from any one insurance company, including Pacific Life, during any calendar
year, all such policies will be aggregated for purposes of determining the
portion of the pre-death distributions allocable to income on the policies and
the portion allocable to investment in the policies.
If you assign or pledge (or agree to assign or pledge) any portion of the
value of a modified endowment contract, such amount or portion generally will
be treated as a pre-death distribution.
The portion of pre-death distributions that are treated as taxable income
will also be subject to an additional income tax of 10%, except where the
distribution (1) occurs on or after the date on which the taxpayer attains age
59 1/2, (2) is attributable to the taxpayer becoming disabled, or (3) occurs
as part of a series of substantially equal (annual or more frequent) periodic
payments made for the life (or life expectancy) of the taxpayer or the joint
lives (or joint life expectancies) of the taxpayer and his or her beneficiary.
With respect to Policy loans, it is unclear whether interest paid (or
accrued by an accrual basis taxpayer) constitutes interest for federal income
tax purposes. Consult your tax advisor. Tax law provisions may limit the
deduction of interest payable on loan proceeds that are used to purchase or
carry certain life insurance policies.
Policies That Are Not Modified Endowment Contracts. Policies entered into
before June 21, 1988, may not be subject to treatment as modified endowment
contracts even though they fail to meet the seven-pay premium test provided
that such Policies do not experience a "material change." The definition of
"material change" is complex, but, in general, if you do not pay any further
premium or institute any changes to the death benefits, there will be no
material change. In this connection, an additional premium payment necessary
to keep your
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Policy in force should not constitute a material change so long as the death
benefit under the Policy does not increase. If a Policy that was not a
modified endowment contract becomes one, under Treasury Department regulations
which may be prescribed, pre-death distributions received in anticipation of a
failure of a Policy to meet the seven-pay premium test will be treated as pre-
death distributions from a modified endowment contract (and, therefore, will
be taxable as described above) even though, at the time of the
distribution(s), the Policy was not yet a modified endowment contract. For
this purpose, pursuant to the IRC, any distribution made within two years
before the Policy is classified as a modified endowment contract shall be
treated as being made in anticipation of the Policy's failing to meet the
seven-pay premium test.
Pre-death distributions from Policies that are not modified endowment
contracts may also give rise to taxable income. Upon full surrender or
maturity of your Policy for its Net Cash Surrender Value, the excess, if any,
of the Net Cash Surrender Value plus any outstanding Policy Debt over the cost
basis under your Policy will be treated as ordinary income for federal income
tax purposes. Your Policy's cost basis will usually equal the premiums paid
less any premiums previously recovered in partial withdrawals. Under IRC
Section 7702 , if a partial withdrawal is accompanied by a reduction in
benefits under a life insurance contract, special rules apply to determine
whether part or all of the cash received is paid out of the income of the
contract and is taxable. Cash distributed to you on partial withdrawals
occurring more than 15 years after the Policy Date will be taxable as ordinary
income to you to the extent that it exceeds the cost basis under your Policy.
We also believe that loans received under Policies that are not modified
endowment contracts will be treated as Debt of the Owner, and that no part of
any loan under the Policy will constitute income to you unless your Policy is
surrendered or lapses. However, interest on Policy Debt paid (or accrued by an
accrual basis taxpayer) may be deductible. Tax law provisions may limit the
deduction of interest payable on loan proceeds that are used to purchase or
carry certain life insurance policies. Also, new tax law has been proposed in
1998 which contains a provision that could adversely affect the owners of
certain "corporate-owned life insurance policies". (As of the date of this
Prospectus, this proposal has not been introduced as a bill and may or may not
ever become law as currently drafted.) Present law provides that a portion of
the interest deductions on indebtedness is reduced if the taxpayer is a direct
or indirect beneficiary of certain life insurance, endowment, or annuity
contracts (even interest on indebtedness that is completely unrelated to the
contract). This rule does not apply under present law if the contract was
issued on 20% owners, officers or employees. The proposal would repeal the
exception other than for 20% owners for taxable years beginning after the date
of enactment. The effect of the proposal would be to increase the after-tax
cost of such policies in most cases. If you have questions regarding the
proposal, please consult your tax advisor.
Last Survivor Policies. While we believe that last survivor Policies meet
the statutory definition of life insurance under IRC Section 7702 and hence
will receive federal income tax treatment consistent with that of traditional
fixed life insurance, the area of the tax law relating to the definition of
life insurance does not explicitly address all relevant issues relating to
last survivor life insurance policies. We reserve the right to make changes to
the last survivor Policy if changes are deemed appropriate by us to attempt to
assure qualification of the last survivor Policy as a life insurance contract.
If a last survivor Policy were determined not to qualify as life insurance,
the Policy would not provide the tax advantages normally provided by life
insurance, including the excludability of the death benefit from the gross
income of the Beneficiary.
Other. Another provision of the tax law deals with allowable charges for
mortality costs and other expenses that are used in making calculations to
determine whether a contract qualifies as life insurance for federal income
tax purposes. These calculations must be based upon reasonable mortality
charges and other charges reasonably expected to be actually paid. The
Treasury Department has issued proposed regulations and is expected to
promulgate temporary or final regulations governing reasonableness standards
for mortality charges. While we believe under IRS pronouncements currently in
effect, that the mortality costs and other expenses used in making
calculations to determine whether the Policy qualifies as life insurance meet
the current requirements, complete assurance cannot be given that the IRS
would necessarily agree. It is possible that future regulations will contain
standards that would require us to modify our mortality charges used for the
purpose of the calculations in order to retain the qualification of the Policy
as life insurance for federal income tax purposes, and we reserve the right to
make any such modifications.
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Federal estate and gift and state and local estate, inheritance, and other
tax consequences of ownership or receipt of Policy proceeds depend on the
jurisdiction and the circumstances of each Owner or Beneficiary.
For complete information on federal, state, local and other tax
considerations, a qualified tax adviser should be consulted.
Accelerated Living Benefits Rider. Amounts received under the Rider should
be generally excluded from taxable income under Section 101(g) of the tax
code. Benefits under the Rider will be taxed, however, if they are paid to
someone other than an Insured, and an Insured is a director, officer or
employee of the person receiving the benefit, or has a financial interest in a
business of the person receiving the benefit.
WE DO NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF ANY POLICY.
Charge for Our Income Taxes
For federal income tax purposes, variable life insurance generally is
treated in a manner consistent with traditional fixed life insurance. We will
review the question of a charge to the Separate Account or the Policy for our
federal income taxes periodically . A charge may be made for any federal
income taxes incurred by us that are attributable to the Separate Account or
to our operations with respect to the Policy. Charges might become necessary
if our tax treatment is ultimately determined to be other than what we
currently believe it to be, if there are changes made in the federal income
tax treatment of variable life insurance at the insurance company level, or if
there is a change in our tax status.
Under current laws, we may incur state and local taxes (in addition to
premium taxes) in several states. At present, these taxes are not significant.
If there is a material change in applicable state or local tax laws, we
reserve the right to charge the Account for such taxes, if any, attributable
to the Account.
Voting of Fund Shares
In accordance with our view of present applicable law, we will exercise
voting rights attributable to the shares of each Portfolio of the Fund held in
the Variable Accounts at any regular and special meetings of the shareholders
of the Fund on matters requiring shareholder voting under the Investment
Company Act of 1940 or by the fund. We will exercise these voting rights based
on instructions received from persons having the voting interest in
corresponding Variable Accounts of the Separate Account. However, if the
Investment Company Act of 1940 or any regulations thereunder should be
amended, or if the present interpretation thereof should change, and as a
result we determine that it is permitted to vote the shares of the Fund in its
own right, we may elect to do so.
You are the person having the voting interest under a Policy. Unless
otherwise required by applicable law, the number of votes as to which you will
have the right to instruct will be determined by dividing your Accumulated
Value in a Variable Account by the net asset value per share of the
corresponding Portfolio of the Fund. Fractional votes will be counted. The
number of votes as to which you will have the right to instruct will be
determined as of the date coincident with the date established by the Fund for
determining shareholders eligible to vote at the meeting of the Fund. If
required by the Securities and Exchange Commission, we reserve the right to
determine in a different fashion the voting rights attributable to the shares
of the Fund based upon instructions received from Policy Owners. Voting
instructions may be cast in person or by proxy.
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If there are shares of a Portfolio held by a Variable Account for which we
do not receive timely voting instructions, we will vote those shares in the
same proportion as the voting instructions for all other shares of that
Portfolio held by that Variable Account for which we have received timely
voting instructions. If we hold shares of a Portfolio in our General Account,
or hold unvoted shares in the Separate Account, and/or if any of our non-
insurance subsidiaries holds shares of a Portfolio, such shares will be voted
in the same proportion as other votes cast by all of our separate accounts in
the aggregate.
Disregard of Voting Instructions
We may, when required by state insurance regulatory authorities, disregard
voting instructions if the instructions require that voting rights be
exercised so as to cause a change in the subclassification or investment
objective of a Portfolio or to approve or disapprove an investment advisory
contract. In addition, we may disregard voting instructions of changes
initiated by Policy Owners in the investment policy or the investment adviser
(or portfolio manager) of a Portfolio, provided that our disapproval of the
change is reasonable and is based on a good faith determination that the
change would be contrary to state law or otherwise inappropriate, considering
the Portfolio's objectives and purpose, and considering the effect the change
would have on us. In the event we do disregard voting instructions, a summary
of that action and the reasons for such action will be included in the next
report to Owners.
Confirmation Statements and Other Reports to Owners
We will send you confirmations for premium payments and transfers, loans,
loan repayments, loan interest transfers, partial withdrawals, a surrender,
and on payment of any death benefit proceeds. Confirmation of scheduled
transactions under Dollar Cost Averaging, portfolio rebalancing, and monthly
deductions will appear on your quarterly statement.
A statement will be sent quarterly to you setting forth a summary of the
transactions which occurred during the quarter, indicating the death benefit,
Accumulated Value, Cash Surrender Value, and any Policy Debt. In addition, the
statement will indicate the allocation of Accumulated Value among the
Investment Options and any other information required by law.
You will also be sent annual financial statements for the Separate Account
and the Fund, the latter of which will include a list of the portfolio
securities of the Fund, as required by the Investment Company Act of 1940,
and/or such other reports as may be required by federal securities laws.
Substitution of Investments
We reserve the right, subject to compliance with the laws as then in effect,
to make additions to, deletions from, or substitutions for the securities that
are held by the Separate Account or any Variable Account or that the Separate
Account or any Variable Account may purchase. If shares of any or all of the
Portfolios of the Fund should no longer be available for investment, or if, in
the judgment of our management, further investment in shares of any or all
Portfolios of the Fund should become inappropriate in view of the purposes of
the Policies, we may substitute shares of another Portfolio of the Fund or of
a different fund for shares already purchased, or to be purchased in the
future, under the Policies.
Where required, we will not substitute any shares attributable to your
interest in a Variable Account or the Separate Account without notice, your
approval, or prior approval of the SEC and without following the filing or
other procedures established by applicable state insurance regulators.
We also reserve the right to establish additional Variable Accounts which
may include additional subaccounts of the Separate Account to serve as
investment options under the Policies which may be managed separate accounts
or may invest in a new Portfolio of the Fund, or in shares of another
investment company, a portfolio thereof, or suitable investment vehicle with a
specified investment objective. New Variable Accounts may be established when,
at our sole discretion, marketing needs or investment conditions warrant, and
any new Variable Accounts will be made available to existing Policy Owners on
a basis to be determined by us. We may
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also eliminate one or more Variable Accounts if, in our sole discretion,
marketing, tax, or investment conditions so warrant. We may also terminate and
liquidate any Variable Account.
In the event of any such substitution or change, we may, by appropriate
endorsement, make such changes in this and other policies as may be necessary
or appropriate to reflect such substitution or change. If deemed by us to be
in the best interests of persons having voting rights under the Policies, the
Separate Account may be operated as a management investment company under the
Investment Company Act of 1940 or any other form permitted by law; it may be
deregistered under that Act in the event such registration is no longer
required, or it may be combined with other separate accounts of ours or an
affiliate of ours. Subject to compliance with applicable law, we also may
combine one or more Variable Accounts and may establish a committee, board, or
other group to manage one or more aspects of the operation of the Separate
Account.
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,
Pacific Life 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.
Changes to Comply with Law
We reserve the right to make any changes without your consent to the
provisions of the Policy to comply with, or give you the benefit of, any
federal or state statute, rule, or regulation, including but not limited to,
requirements for life insurance contracts and modified endowment contracts
under the IRC, under regulations of the United States Treasury Department or
any state.
PERFORMANCE INFORMATION
Performance information for the Variable Accounts or the Fund may appear in
advertisements, sales literature, or reports to Policy Owners or prospective
purchasers. Performance information in advertisements or sales literature may
be expressed in any fashion permitted under applicable law, which may include
presentation of a change in a Policy Owner's Accumulated Value attributable to
the performance of one or more Variable Accounts, or as a change in a Policy
Owner's death benefit. Performance quotations may be expressed as a change in
a Policy Owner's Accumulated Value over time or in terms of the average annual
compounded rate of return on the Policy Owner's Accumulated Value, based upon
a hypothetical Policy in which premiums have been allocated to a particular
Variable Account over certain periods of time that will include one year or
from the commencement of operation of the Variable Account. If a Portfolio has
been in existence for a longer period of time than its corresponding Variable
Account, we may also present hypothetical returns that the Variable Account
would have achieved had it invested in its corresponding Portfolio for periods
through the commencement of operation of the Portfolio. For the period that a
particular Variable Account has been in existence, the performance will be
actual performance and not hypothetical in nature. Any such quotation may
reflect the deduction of all applicable charges to the Policy including
premium load, the cost of insurance, the administrative charge, and the
mortality and expense risk charge. The cost of insurance charge varies
according to the Insured (or joint Insureds if a last survivor Policy), and
therefore the cost of insurance charge reflected in
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performance for the hypothetical Policy is based on the hypothetical Insured
(or joint Insureds) assumed. The quotation may also reflect the deduction of
the surrender charge, if applicable, by assuming a surrender at the end of the
particular period, although other quotations may simultaneously be given that
do no assume a surrender and do not take into account deduction of the
surrender charge or other charges.
Performance information for a Variable Account may be compared, in
advertisements, sales literature, and reports to Policy Owners to: (i) other
variable life separate accounts, mutual funds, or investment products tracked
by research firms, ratings services, companies, publications, or persons who
rank separate accounts or investment products on overall performance or other
criteria; and (ii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from the purchase of a Policy. Reports and promotional
literature may also contain our rating or a rating of our claim-paying ability
as determined by firms that analyze and rate insurance companies and by
nationally recognized statistical rating organizations.
Performance information for any Variable Account reflects only the
performance of a hypothetical Policy whose Accumulated Value is allocated to
the Variable Account during a particular time period on which the calculations
are based. Performance information should be considered in light of the
investment objectives and policies, characteristics and quality of the
Portfolio of the Fund in which the Variable Account invests, and the market
conditions during the given period of time, and should not be considered as a
representation of what may be achieved in the future.
THE FIXED ACCOUNT
You may allocate all or a portion of your premium payments and transfer
Accumulated Value to our Fixed Account. Amounts allocated to the Fixed Account
become part of our General Account, which supports insurance and annuity
obligations. Because of exemptive and exclusionary provisions, interests in
the Fixed Account have not been registered under the Securities Act of 1933,
and the Fixed Account has not been registered as an investment company under
the Investment Company Act of 1940. Accordingly, neither the Fixed Account nor
any interest therein is generally subject to the provisions of these Acts and,
as a result, the staff of the SEC has not reviewed the disclosure in this
prospectus relating to the Fixed Account. Disclosures regarding the Fixed
Account may, however, be subject to certain generally applicable provisions of
the federal securities laws relating to the accuracy and completeness of
statements made in the prospectus. For more details regarding the Fixed
Account, see the Policy itself.
General Description
Amounts allocated to the Fixed Account become part of our General Account,
which consists of all assets owned by us other than those in the Separate
Account and other separate accounts of ours. Subject to applicable law, we
have sole discretion over the investment of the assets of our General Account.
You may elect to allocate premium payments to the Fixed Account, the
Variable Account, or both. You may also transfer Accumulated Value from the
Variable Accounts to the Fixed Account, or from the Fixed Account to the
Variable Accounts, subject to the limitations described below. We guarantee
that the Accumulated Value in the Fixed Account will be credited with interest
at a rate of 0.24663% per month, compounded monthly, for an effective annual
rate of 3%. Such interest will be paid regardless of the actual investment
experience for the Fixed Account. In addition, we may in our sole discretion
pay current interest in excess of the 3% guarantee. The initial rate of
interest, or 6% if less, will be guaranteed until the first Policy
Anniversary. Current interest rates will be effected thereafter on each Policy
Anniversary. Once declared for a Policy on a Policy's Anniversary, the current
rates are guaranteed for one year until the next Policy Anniversary. The
portion of your Accumulated Value in the Loan Account that is used to secure
Policy Debt will be credited with interest at a rate of 0.36748% per month,
compounded monthly, for an effective annual rate of 4.5%.
We bear the full investment risk for the Accumulated Value allocated to the
Fixed Account.
The death benefit under the Policy will be determined in the same fashion
for an Owner who has Accumulated Value in the Fixed Account as for an Owner
who has Accumulated Value in the Variable Accounts.
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The Surrender Charge and the Policy charges, cost of insurance,
administrative, tax, and mortality and expense risk, will be the same whether
you transfer Accumulated Value to the Fixed Account or to the Variable
Accounts. The administrative charges and mortality and expense risk charges
will not be assessed against the Loan Account, and any amounts that we pay for
income taxes allocable to the Variable Accounts will not be charged against
the Fixed Account. In addition, the investment advisory fees and operating
expenses paid by the Fund will not be paid directly or indirectly by you to
the extent the Accumulated Value is allocated to the Fixed Account; however,
to such extent, you will not participate in the investment experience of the
Variable Accounts.
Transfers, Surrenders, Withdrawals, and Policy Loans
Amounts may be transferred from the Variable Accounts to the Fixed Account
and from the Fixed Account to the Variable Accounts, subject to the following
limitations. No transfer may be made if the Policy is in the grace period and
the required premium has not been paid. You may not make more than one
transfer from the Fixed Account to the Variable Accounts in any twelve month
period. Further, you may not transfer more than the greater of 25% of your
Accumulated Value in the Fixed Account or $5,000 in any year. Currently there
is no charge imposed upon transfers; however, we reserve the right to assess
such a charge in the future and to impose other limitations on the number of
transfers, the amount of transfers, and the amount remaining in the Fixed
Account or Variable Accounts after a transfer. Transfers from the Variable
Accounts to the Fixed Account may only be made in the Policy Month preceding a
Policy Anniversary, except that you may make such a transfer at any time
during the first 18 Policy Months.
You may also make full surrenders and partial withdrawals from the Fixed
Account to the same extent as an Owner who has invested in the Variable
Accounts. See "Surrender"and "Partial Withdrawals". In addition, to the same
extent as Policy Owners with Accumulated Value in the Variable Accounts, you
may obtain a Policy Loan and borrow up to 100% of your Accumulated Value in
the Fixed Account (50% in the first Policy Year) less Policy Debt. See "Policy
Loans". Transfers, surrenders, and withdrawals payable from the Fixed Account,
and the payment of Policy loans allocated to the Fixed Account may be delayed
for up to six months.
MORE ABOUT THE POLICY
Ownership
The Policy Owner is the individual named as such in the application or in
any later change shown in our records. While the Insured is living, the Policy
Owner alone has the right to receive all benefits and exercise all rights that
the Policy grants or we allow.
Joint Owners. If more than one person is named as Policy Owner, they are
joint Owners. Any Policy transaction requires the signature of all persons
named jointly. Unless otherwise provided, if a joint Owner dies, ownership
passes to the surviving joint Owner(s). When the last joint Owner dies,
ownership passes through that person's estate, unless otherwise provided.
Beneficiary
The Beneficiary is the individual named as such in the application or any
later change shown in our records. You may change the Beneficiary at any time
during the life of the Insured (or either Insured, if this is a last survivor
Policy) by written request on forms provided by us, which must be received by
us at our Home Office. The change will be effective as of the date this form
is signed. Contingent and/or concurrent Beneficiaries may be designated. You
may designate a permanent Beneficiary, whose rights under the Policy cannot be
changed without his or her consent. Unless otherwise provided, if no
designated Beneficiary is living upon the death of the Insured (or Survivor,
if this is a last survivor Policy), you are the Beneficiary, if living;
otherwise your estate is the Beneficiary.
We will pay the death benefit proceeds to the Beneficiary. Unless otherwise
provided, in order to receive proceeds at the Insured's (or Survivor's, if
this is a last survivor Policy) death, the Beneficiary must be living at the
time of the Insured's (or Survivor's) death.
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The Contract
The Policy is a contract between you and us. The entire contract consists of
the Policy, a copy of the initial application, all subsequent applications to
change the Policy, any endorsements, any Riders and Benefits and all
additional Policy information sections (specification pages) added to the
Policy.
Payments
We ordinarily will pay death benefit proceeds, Net Cash Surrender Value on
surrender, partial withdrawals, and loan proceeds based on allocations made to
the Variable Accounts, and will effect a transfer between Variable Accounts or
from a Variable Account to the Fixed Account within seven days after we
receive all the information needed to process a payment or transfer or, if
sooner, other period required by law.
However, we can postpone the calculation or payment of such a payment or
transfer of amounts based on investment performance of the Variable Accounts
if:
. The New York Stock Exchange is closed on other than customary weekend
and holiday closing or trading on the New York Stock Exchange is
restricted as determined by the SEC; or
. An emergency exists, as determined by the SEC, as a result of which
disposal of securities is not reasonably practicable or it is not
reasonably practicable to determine the value of a Variable Account's
net assets; or
. The SEC by order permits postponement for the protection of Policy
Owners.
Assignment
You may assign a Policy as collateral security for a loan or other
obligation. No assignment will bind us unless the original, or a copy, is
received and recorded by our Home Office. An assignment does not change the
ownership of the Policy. However, after an assignment, the rights of any Owner
or Beneficiary will be subject to the assignment. The entire Policy, including
any attached payment option or Rider, Benefit, and Endorsement, will be
subject to the assignment. We will rely solely on the assignee's statement as
to the amount of the assignee's interest. We will not be responsible for the
validity of any assignment. Unless otherwise provided, the assignee may
exercise all rights this Policy grants except (a) the right to change the
Owner or Beneficiary; and (b) the right to elect a payment option. Assignment
of a Policy that is a modified endowment contract may generate taxable income.
See "Federal Income Tax Considerations".
Errors on the Application
If the Age of an Insured has been misstated, the death benefit under this
Policy will be the greater of that which would be purchased by the original
initial premium, using the Guideline Single Premium at issue for the correct
Age and the original elected percent of the Guideline Single Premium, or the
death benefit derived by multiplying Accumulated Value by the specified
percentage for the correct Age.
Incontestability
We may contest the validity of this Policy if any material misstatements are
made in the application. However, your Policy will be incontestable after the
expiration of the following: the initial Face Amount cannot be contested with
respect to an Insured after the Policy has been in force during that Insured's
lifetime for two years from the Policy Date; and reinstatement cannot be
contested after it has been in force during an Insured's lifetime for two
years from the date of reinstatement.
Payment in Case of Suicide
If the Insured (or either Insured, if this is a last survivor Policy) dies
by suicide, while sane or insane, within two years from the Policy Date, we
will limit the death benefit proceeds to the premium payments less any Policy
Debt and less the amount of any partial withdrawals.
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Dividends
The current dividend scale is zero and we do not anticipate that dividends
will be paid. Any dividends that do become payable will be paid in cash.
Policy Illustrations
Upon request, we will send you an illustration of estimated future benefits
under your Policy based on both guaranteed and current cost factor
assumptions. However, we reserve the right to charge a $25 fee for requests
for illustrations in excess of one per Policy Year.
Payment Plan
Surrender or withdrawal benefits may be used to purchase a payment plan
providing monthly income for the lifetime of the Insured, and death benefit
proceeds may be used to purchase a payment plan providing monthly income for
the lifetime of the Beneficiary. The monthly payments consisting of proceeds
plus interest will be paid in equal installments for at least ten years. The
purchase rates for the payment plan are guaranteed not to exceed those shown
in the Policy, but current rates that are lower (i.e., providing greater
income) may be established by us from time to time. This benefit is not
available if the income would be less than $100 a month. Surrender,
withdrawal, or death benefit proceeds may be used to purchase any other
Payment Plan that we make available at that time.
Optional Insurance Benefits and Other Policies
Subject to certain requirements, you may elect to add an Accelerated Living
Benefit Rider at any time while this Policy is in force. This Rider provides
Policy Owner access to a portion of the Policy's proceeds if the Insured (or
the Survivor Insured in the case of a last survivor Policy) has been diagnosed
with a terminal illness resulting in a life expectancy of six months or less
(or such other period that may be required by state insurance authorities). We
offer other variable life insurance policies that provide insurance protection
on the lives of two insureds or on the life of a single insured, whose loads
and charges may vary. A registered representative authorized to sell the
Policy can describe other policies further.
Life Insurance Retirement Plans
Any Policy Owners or applicants who wish to consider using the Policy as a
funding vehicle for (non-qualified) retirement purposes may obtain additional
information from us. An Owner could pay premiums under a Policy for a number
of years, and upon retirement could utilize a Policy's loan and partial
withdrawal features to access Accumulated Value as a source of retirement
income for a period of time. This use of a Policy does not alter an Owner's
rights or our obligations under a Policy; the Policy would remain a life
insurance contract that, so long as it remains in force, provides for a death
benefit payable when the Survivor dies.
Ledger illustrations are available upon request that portray how the Policy
can be used as a funding mechanism for (non-qualified) retirement plans,
referred to herein as "life insurance retirement plans," for individuals.
Ledger illustrations provided upon request show the effect on Accumulated
Value, Net Cash Surrender Value, and the net death benefit of premiums paid
under a Policy and Partial Withdrawals and loans taken for retirement income;
or reflecting allocation of premiums to specified Variable Accounts. This
information will be portrayed at hypothetical rates of return that are
requested. Charts and graphs presenting the results of the ledger comparisons
or a comparison of retirement strategies will also be furnished upon request.
Any graphic presentations and retirement strategy charts must be accompanied
by a corresponding ledger illustration; ledger illustrations must always
include or be accompanied by comparable information that is based on
guaranteed cost of insurance rates and that presents a hypothetical gross rate
of return of 0%. Retirement illustrations will not be furnished with a
hypothetical gross rate of return in excess of 12%.
The hypothetical rates of return in ledger illustrations are illustrative
only and should not be interpreted as a representation of past or future
investment results. Policy values and benefits shown in the ledger
illustrations
39
<PAGE>
would be different if the gross annual investment rates of return were
different from the hypothetical rates portrayed, if premiums were not paid
when due, and loan interest was paid when due. Withdrawals or loans may have
an adverse effect on Policy benefits.
Risks of Life Insurance Retirement Plans
Using the Policy as a funding vehicle for retirement income purposes
presents several risks, including the risk that if the Policy is
insufficiently funded in relation to the income stream from the Policy, the
Policy can lapse prematurely and result in significant income tax liability to
the Owner in the year in which the lapse occurs. Other risks associated with
borrowing from the Policy also apply. Loans will be automatically repaid from
the gross death benefit at the death of the Survivor, resulting in the
estimated payment to the Beneficiary of the net death benefit, which will be
less than the gross death benefit and may be less than the Face Amount. Upon
surrender, the loan will be automatically repaid, resulting in the payment to
you of the Net Cash Surrender Value. Similarly, upon lapse, the loan will be
automatically repaid. The automatic repayment of the loan upon lapse or
surrender will cause the recognition of taxable income to the extent that Net
Cash Surrender Value plus the amount of the repaid loan exceeds your basis in
the Policy. Thus, under certain circumstances, surrender or lapse of the
Policy could result in tax liability to you. In addition, to reinstate a
lapsed Policy, you would be required to make certain payments as described
under "Reinstatement". Thus, you should be careful to fashion a life insurance
plan so that the Policy will not lapse prematurely under various market
scenarios as a result of withdrawals and loans taken from your Policy.
The Policy will lapse if your Net Cash Surrender Value less Policy Debt is
insufficient to cover the current monthly deduction on any Monthly Payment
Date, and a grace period expires without your making a sufficient payment. To
avoid lapse of your Policy, it is important to fashion a payment stream that
does not leave your Policy with insufficient Accumulated Value. Determinations
as to the amount to withdraw or borrow each year warrant careful
consideration. Careful consideration should also be given to any assumptions
respecting the hypothetical rate of return, to the duration of withdrawals and
loans, and to the amount of Accumulated Value that should remain in your
Policy upon its maturity. Poor investment performance can contribute to the
risk that your Policy may lapse. In addition, the cost of insurance generally
increases with the Age of the Insured, which can further erode existing
Accumulated Value and contribute to the risk of lapse.
Further, interest on a Policy loan is due to us for any Policy Year on the
Policy Anniversary. If this interest is not paid when due, it is added to the
amount of the outstanding Policy Debt, and interest will begin accruing
thereon from that date. This can have a compounding effect, and to the extent
that the outstanding loan balance exceeds your basis in the Policy, the
amounts attributable to interest due on the loans can add to your federal (and
possibly state) income tax liability.
You should consult with your attorney and financial advisers in designing a
life insurance retirement plan that is suitable. Further, you should continue
to monitor the Accumulated Value net of loans remaining in a Policy to assure
that the Policy is sufficiently funded to continue to support the desired
income stream and so that it will not lapse. In this regard, you should
consult your periodic statements to determine the amount of their remaining
Accumulated Value minus the outstanding loan balance. Illustrations showing
the effect of charges under the Policy upon existing Accumulated Value or the
effect of future withdrawals or loans upon the Policy's Accumulated Value and
death benefit are available from your agent. Consideration should be given
periodically to whether the Policy is sufficiently funded so that it will not
lapse prematurely.
Because of the potential risks associated with borrowing from a Policy, use
of the Policy in connection with a life insurance retirement plan may not be
suitable for all Policy Owners. These risks should be carefully considered
before borrowing from the Policy to provide an income stream.
Distribution of the Policy
PMD is principal underwriter (distributor) of the Policies. PMD is
registered as a broker-dealer with the SEC and is a member of the National
Association of Securities Dealers ("NASD"). We pay PMD for acting as principal
underwriter under a Distribution Agreement. PMD is a wholly-owned subsidiary
of ours. PMD's principal business address is 700 Newport Center Drive, Newport
Beach, California 92660.
40
<PAGE>
We and PMD have sales agreements with various broker-dealers under which the
Policy will be sold by registered representatives of the broker-dealers. The
registered representatives are required to be authorized under applicable
state regulations to sell variable life insurance. The broker-dealers are
required to be registered with the SEC. We pay compensation directly to
broker-dealers for promotion and sales of the Policy. The compensation payable
to a broker-dealer by Pacific Life and PMD for sales of the product may vary
with the Sales Agreement, but is not expected to exceed 6.75% of the initial
premium payment. Broker-dealers may also receive an annual renewal
compensation of approximately 0.25% of Accumulated Value less Policy Debt. In
addition, we may also pay override payments, expense allowances, bonuses,
wholesaler fees and training allowances. Registered representatives earn
commissions from the broker-dealers with whom they are affiliated for selling
our Policies. Compensation arrangements vary among broker-dealers. In
addition, registered representatives who meet specified production levels may
qualify, under sales incentive programs adopted by us, to receive non-cash
compensation such as expense-paid trips, expense-paid educational seminars and
merchandise and may elect to receive compensation on a deferred basis. We make
no separate deductions, other than as previously described, from premiums to
pay sales commissions or sales expenses.
MORE ABOUT PACIFIC LIFE
Management
Our directors and officers are listed below together with information as to
their principal occupations during the past five years and certain other
current affiliations. Unless otherwise indicated, the business address of each
director and officer is c/o Pacific Life Insurance Company, 700 Newport Center
Drive, Newport Beach, California 92660.
<TABLE>
<CAPTION>
Name and Position Principal Occupation During the Last Five Years
----------------- -----------------------------------------------
<S> <C>
Thomas C. Sutton Director, Chairman of the Board and Chief Executive Officer
Director, Chairman of of Pacific Life; Director, Chairman of the Board and Chief
the Board and Executive Officer of Pacific LifeCorp, August 1997 to
Chief Executive Officer present; Director, Chairman of the Board and Chief
Executive Officer of Pacific Mutual Holding Company, August
1997 to present; Member, Management Board of PIMCO Advisors
L.P., December 1997 to present; Former Equity Board Member
of PIMCO Advisors L.P.; Former Director of Pacific
Corinthian Life Insurance Company; Director of: Newhall
Land & Farming; The Irvine Company; Edison International;
PM Group Life Insurance Company; and similar positions with
other affiliated companies of Pacific Life.
Glenn S. Schafer Director (since November 1994) and President (since January
Director and President 1995) of Pacific Life; Executive Vice President and Chief
Financial Officer of Pacific Life, April 1991 to January
1995; Director and President of Pacific LifeCorp, August
1997 to present; Director and President of Pacific Mutual
Holding Company, August 1997 to present; Member, Management
Board of PIMCO Advisors L.P., December 1997 to present;
Former Equity Board Member of PIMCO Advisors L.P.; Former
Director of Pacific Corinthian Life Insurance Company;
Director of PM Group Life Insurance Company; and similar
positions with other affiliated companies of Pacific Life.
Khanh T. Tran Director (since August 1997), Senior Vice President and
Director, Senior Vice Chief Financial Officer of Pacific Life, June 1996 to
President and Chief present; Vice President and Treasurer of Pacific Life,
Financial Officer November 1991 to June 1996; Senior Vice President and Chief
Financial Officer of Pacific LifeCorp, August 1997 to
present; Senior Vice President and Chief Financial Officer
of Pacific Mutual Holding Company, August 1997 to present;
Chief Financial Officer and Treasurer to other affiliated
companies of Pacific Life.
David R. Carmichael Director (since August 1997), Senior Vice President and
Director, Senior Vice General Counsel of Pacific Life; Senior Vice President and
President and General General Counsel of Pacific LifeCorp, August 1997 to
Counsel present; Senior Vice President and General Counsel of
Pacific Mutual Holding Company, August 1997 to present;
Director of: PM Group Life Insurance Company; Association
of California Life and Health Insurance Companies and
Association of Life Insurance Counsel.
Audrey L. Milfs Director (since August 1997), Vice President and Corporate
Director, Vice President Secretary of Pacific Life; Vice President and Secretary of
and Corporate Secretary Pacific LifeCorp, August 1997 to present; Vice President
and Secretary of Pacific Mutual Holding Company, August
1997 to present; similar positions with other affiliated
companies of Pacific Life.
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
Name and Position Principal Occupation During the Last Five Years
----------------- -----------------------------------------------
<S> <C>
Richard M. Ferry Director of Pacific Life; Director of Pacific LifeCorp,
Director August 1997 to present; Director of Pacific Mutual Holding
Company, August 1997 to present; Director and Chairman of
Korn/Ferry International; Director of: Avery Dennison
Corporation; Broco, Inc.; ConAm Management; Mullin
Consulting, Inc.; Northwestern Restaurants, Inc.; Dole Food
Co.; Mrs. Fields' Original Cookies Inc.; Rainier Bells,
Inc; Mellon West Coast Advisory Board and Former Director
of First Business Bank Address: 1800 Century Park East,
Suite 900, Los Angeles, California 90067.
Donald E. Guinn Director of Pacific Life; Director of Pacific LifeCorp,
Director August 1997 to present; Director of Pacific Mutual Holding
Company, August 1997 to present; Chairman Emeritus and
Former Director of Pacific Telesis Group; Director of: The
Dial Corp.; BankAmerica Corporation; Former Director of
Bank of America NT&SA. Address: Pacific Telesis Center, 130
Kearny Street, Room 3704, San Francisco, California 94108-
4818.
Ignacio E. Lozano, Jr. Director of Pacific Life; Director of Pacific LifeCorp,
Director August 1997 to present; Director of Pacific Mutual Holding
Company, August 1997 to present; Director, Chairman and
Former Editor-In-Chief of La Opinion; Former Director of:
BankAmerica Corporation; Bank of America NT&SA; and Pacific
Enterprises; Director of: The Walt Disney Company; Southern
California Gas Company; Lozano Communications, Inc.; Sempra
Energy and San Diego Gas and Electric Company Address:
411 West Fifth Street, 12th Floor, Los Angeles, California
90013.
Charles D. Miller Director of Pacific Life; Director of Pacific LifeCorp,
Director August 1997 to present; Director of Pacific Mutual Holding
Company, August 1997 to present; Director, Chairman and
Former Chief Executive Officer of Avery Dennison
Corporation; Former Director of Great Western Financial
Corporation; Advisory Board Member of: Korn/Ferry
International; Mellon Bank; Director of: Nationwide Health
Properties, Inc.; Edison International. Address: 150 North
Orange Grove Boulevard, Pasadena, California 91103.
Donn B. Miller Director of Pacific Life; Director of Pacific LifeCorp,
Director August 1997 to present; Director of Pacific Mutual Holding
Company, August 1997 to present; Director, President and
Chief Executive Officer of Pearson-Sibert Oil Co. of Texas;
Director of: The Irvine Company; Automobile Club of
Southern California; Former Director of St. John's Hospital
& Health Care Foundation. Address: 136 El Camino, Suite
216, Beverly Hills, California 90212.
Richard M. Rosenberg Director of Pacific Life (since October 1997 and previously
Director from November 1995 to August 1997); Director of Pacific
LifeCorp, August 1997 to present; Director of Pacific
Mutual Holding Company, October 1997 to present; Chairman
and Chief Executive Officer (Retired) of BankAmerica
Corporation; Director of: BankAmerica Corporation; Airborne
Express Corporation; Northrop Grumman Corporation; Potlatch
Corporation; SBC Communications; Chronicle Publishing;
Pollo Rey/Unamas; Age Wave; Former Director of K-2
Incorporated. Address: 555 California Street, 11th Floor,
Unit 3001B, San Francisco, California 94104.
James R. Ukropina Director of Pacific Life; Director of Pacific LifeCorp,
Director August 1997 to present; Director of Pacific Mutual Holding
Company, August 1997 to present; Partner with the law firm
of O'Melveny & Meyers LLP; Director of Lockheed Martin
Corporation; Trustee of Stanford University. Address: 400
South Hope Street, 16th Floor, Los Angeles, California
90071-2899.
Raymond L. Watson Director of Pacific Life; Director of Pacific LifeCorp,
Director August 1997 to present; Director of Pacific Mutual Holding
Company, August 1997 to present; Vice Chairman and Director
of The Irvine Company; Director of: The Walt Disney
Company; The Mitchell Energy and Development Company; The
Irvine Apartment Communities; and Former Director of The
Tejon Ranch. Address: 550 Newport Center Drive, 3rd Floor,
Newport Beach, California 92660.
Lynn C. Miller Executive Vice President, Individual Insurance, of Pacific
Executive Vice President Life, January 1995 to present; Senior Vice President,
Individual Insurance, of Pacific Life, 1989 to 1995.
Edward Byrd Vice President and Controller of Pacific Life; Vice
Vice President and President and Controller of Pacific LifeCorp, August 1997
Controller to present; Vice President and Controller of Pacific Mutual
Holding Company, August 1997 to present; and similar
positions with other affiliated companies of Pacific Life.
</TABLE>
42
<PAGE>
No officer or director listed above receives any compensation from the
Separate Account. No separately allocable compensation has been paid by us or
any of our affiliates to any person listed for services rendered to the
Separate Account.
State Regulation
We are subject to the laws of the state of California governing insurance
companies and to regulation by the Commissioner of Insurance of California. In
addition, we are subject to the insurance laws and regulations of the other
states and jurisdictions in which we are licensed or may become licensed to
operate. An annual statement in a prescribed form must be filed with the
Commissioner of Insurance of California and with regulatory authorities of
other states on or before March 1st in each year. This statement covers our
operations for the preceding year and our financial condition as of December
31st of that year. Our affairs are subject to review and examination at any
time by the Commissioner of Insurance or his agents, and subject to full
examination of our operations at periodic intervals.
Telephone Transfer and Loan Privileges
You may request a transfer of Accumulated Value or a Policy Loan by
telephone if a properly completed Authorization for Telephone Requests
("Telephone Authorization") has been filed at our Home Office. All or part of
any telephone conversation with respect to transfer or loan instructions may
be recorded by us. Telephone instructions received by us by 1:00 P.M. Pacific
time on any Valuation Date will be effected as of the end of that Valuation
Date in accordance with your instructions (presuming that the Free-Look Period
has expired). We reserve the right to deny any telephone transfer or loan
request. If all telephone lines are busy (which might occur, for example,
during periods of substantial market fluctuations), you might not be able to
request transfers and loans by telephone and would have to submit written
requests.
We have established procedures to confirm that instructions communicated by
telephone are genuine. Under the procedures, any person requesting a transfer
by telephone must provide certain personal identification as requested by us,
and we will send a written confirmation of all transfers requested by
telephone within 7 days of the transfer. Upon your submission of a Telephone
Authorization, you authorize us to accept and act upon telephonic instructions
for transfers or loans involving your Policy, and agree that neither we, any
of our affiliates, Pacific Select Fund, nor any of our or their directors,
trustees, officers, employees or agents, will be liable for any loss, damages,
cost, or expense (including attorneys fees) arising out of any requests
effected in accordance with the Telephone Authorization and believed by us to
be genuine, provided that we have complied with our procedures. As a result of
this policy on telephonic requests, you will bear the risk of loss arising
from the telephone transfer and loan privileges.
Legal Proceedings
There are no legal proceedings pending to which the Separate Account is a
party, or which would materially affect the Separate Account.
Legal Matters
Legal matters in connection with the issue and sale of the Policies
described in this Prospectus and our organization, our authority to issue the
Policies under California law, and the validity of the forms of the Policies
under California law have been passed on by our General Counsel.
Legal matters relating to the federal securities and federal income tax laws
have been passed upon by Dechert Price & Rhoads.
Registration Statement
A registration statement under the Securities Act of 1933 has been filed
with the SEC relating to the offering described in this prospectus. This
prospectus does not include all of the information set forth in the
registration
43
<PAGE>
statement, as portions have been omitted pursuant to the rules and regulations
of the SEC. The omitted information may be obtained at the SEC's principal
office in Washington, D.C., upon payment of the SEC's prescribed fees.
Preparation for the Year 2000
We rely significantly on computer systems and applications in our daily
operations. In 1995, we began the process of identifying, evaluating and
implementing changes to computer programs necessary to address the year 2000
issue. This issue involves the ability of computer systems to properly
recognize the year 2000. The inability to do so could result in major failures
or miscalculations.
We have a coordinated plan to remediate, or replace if necessary, any non-
compliant systems and to obtain assurances of the ability to be year 2000
compliant by our service providers, vendors and those with significant
relationships with us. Our plan is directed and overseen by an experienced
Vice President dedicated to year 2000 compliance. We completed the
identification of all critical systems and are in the process of remediating
systems. In addition, we have retained two internationally recognized
consultants to assist in reviewing and remediating our systems and interfaces
with third parties. Our plan calls for all remediation to be completed by the
fourth quarter of 1998 and testing to commence as remediation is completed and
throughout 1999. Some testing has already begun.
Remediation expenses to make our systems year 2000 compliant are currently
estimated to range from $15 to $20 million, which excludes the cost of our
personnel who support year 2000 compliance efforts. We do not anticipate any
other material future costs associated with the year 2000 compliance project,
although there can be no assurance. We currently expect to be year 2000
compliant; however, there can be no assurances that we will succeed. In the
event we or our significant service providers, vendors, financial institutions
or others with which we conduct business, fail to be year 2000 compliant,
there would be a materially adverse effect on us.
Independent Auditors
The audited consolidated financial statements for Pacific Life as of
December 31, 1998 and 1997 and for the three years ended December 31, 1998 and
the audited financial statements for Pacific Select Exec Separate Account as
of December 31, 1998 and for the two years ended December 31, 1998 included in
this prospectus have been audited by [ ], independent auditors, as
indicated in their reports appearing herein, and have been so included in
reliance upon their authority as experts in accounting and auditing.
Financial Statements
The audited financial statements of Pacific Select Exec Separate Account as
of December 31, 1998 and for the two years then ended are set forth herein,
starting on page [ ]. The audited consolidated financial statements of
Pacific Life as of December 31, 1998 and 1997 and for the three years ended
December 31, 1998 are set forth herein starting on page [ ].
The financial statements of Pacific Life should be distinguished from the
financial statements of the Pacific Select Exec Separate Account and should be
considered only as bearing upon our ability to meet our obligations under the
Policies.
[1998 Financials to be inserted]
44
<PAGE>
APPENDIX
DEATH BENEFIT PERCENTAGES
<TABLE>
<CAPTION>
Age Percentage Age Percentage Age Percentage Age Percentage
---- ---------- --- ---------- --- ---------- --- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
0-40 250% 50 185% 60 130% 70 115%
41 243 51 178 61 128 71 113
42 236 52 171 62 126 72 111
43 229 53 164 63 124 73 109
44 222 54 157 64 122 74 107
45 215 55 150 65 120 75-90 105
46 209 56 146 66 119 91 104
47 203 57 142 67 118 92 103
48 197 58 138 68 117 93 102
49 191 59 134 69 116 94+ 101
</TABLE>
45
<PAGE>
ILLUSTRATIONS
The following tables illustrate how the death benefits, Accumulated Values
and Net Cash Surrender Values of a hypothetical policy may vary over an
extended period of time assuming a single premium that is 100% of the
Guideline Single Premium and hypothetical rates of return equivalent to
constant gross annual rates of 0%, 6% and 12%.
The policies illustrated include the following:
1. Age 60, Male Nonsmoker, $40,000 initial premium, Current Cost of
Insurance Rates.
2. Age 60, Male Nonsmoker, $40,000 initial premium, Guaranteed Cost of
Insurance Rates.
3. Age 60, Female Nonsmoker, $40,000 initial premium, Current Cost of
Insurance Rates.
4. Age 60, Female Nonsmoker, $40,000 initial premium, Guaranteed Cost of
Insurance Rates.
5. Age 60, Male/Female Nonsmoker, $40,000 initial premium, Current Cost
of Insurance Rates.
6. Age 60, Male/Female Nonsmoker, $40,000 initial premium, Guaranteed
Cost of Insurance Rates.
The values would be different from those shown if the gross annual
investment rates of return averaged 0%, 6% or 12% over a period of years, but
also fluctuated above or below those averages for individual Policy Years.
The second column of each table, labeled "Premium Paid Plus Interest at 5%,"
shows the amount which would accumulate if an amount equal to the initial
premium (after taxes) were invested to earn interest at 5% compounded
annually. The premium payment is illustrated as if made at the beginning of
the year. These illustrations assume that no Policy loans have been made.
The amounts shown for the death benefits, Accumulated Values and Net Cash
Surrender Values, reflect the fact that the net investment return on the
Variable Accounts is lower than the gross investment return on the assets as a
result of charges levied against the Variable Accounts. These values also take
into account any administration charges, and Net Cash Surrender Value takes
into account any Surrender Charge. The Fund's daily investment advisory fee is
assumed to be equivalent to an annual weighted rate of [ ]% of the
aggregate average daily net assets of the Fund. This hypothetical rate is
representative of the weighted average investment advisory fee applicable to
the Portfolios of the Fund available as options under the Policy. The amounts
shown would differ if unisex rates were used. On those illustrations assuming
current rates, the amount would also differ if either Insured were a smoker
and smoker rates were used.
The tables also reflect other expenses of the Fund at the weighted rate of
[ ]% of the average daily net assets of a Portfolio, which amounts to
[ ]% of the average daily net assets of a Portfolio including the
investment advisory fees, operating expenses, and exclusive of any foreign
taxes. Foreign taxes for the year ended December 31, 1998 were the following
percentages of the average daily net assets of the Portfolios: for the
Growth Portfolio; for the Aggressive Equity Portfolio; for the
Growth LT Portfolio; for the Equity Income Portfolio; for
the Multi-Strategy Portfolio; for the Equity Portfolio; for the
Equity Index Portfolio; for the International Portfolio; and for
the Emerging Markets Portfolio.
For more information on annual expenses of the fund, please refer to the
chart in "An Overview of Pacific Select Estate Maximizer" and in the Fund's
Prospectus.
After deduction of the charges and Fund expenses described above, the
illustrated gross annual investment rates of return of 0%, 6%, and 12%
correspond to approximate net annual rates of return of [ ], [ ],
and [ ]. The hypothetical values shown in the tables do not reflect any
charges against the Variable Accounts for income taxes that may be
attributable to the Variable Accounts in the future, since we are not
currently making these charges.
46
<PAGE>
We will furnish upon request a comparable illustration reflecting the
proposed Insured's Age, Face Amount, death benefit and premium amounts
requested. In addition, upon request, illustrations will be furnished
reflecting allocation of premiums to specified Variable Accounts. Such
illustrations will reflect the expenses of the Portfolio of the Fund in which
the Variable Account invests. Illustrations that use a hypothetical gross rate
of return in excess of 12% are available to certain large institutional
investors upon request.
[Illustrations to be updated]
47
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE
Illustration of Death Benefits, Accumulated Values and Net Cash Surrender
Values
Based on Current Cost of Insurance Rates
SINGLE LIFE OPTION
ISSUE AGE: 60 FACE AMOUNT: $80,044
CLASS: MALE NONSMOKER INITIAL PREMIUM: $40,000
GUIDELINE SINGLE PREMIUM %: 100%
<TABLE>
<CAPTION>
Premium End of Year DEATH BENEFIT Assuming
End of Paid Plus Hypothetical Gross Annual Investment Return of
Policy Interest at -----------------------------------------------
Year 5% 0% 6% 12%
------ ----------- ------------------------------ ----------------
<S> <C> <C> <C> <C>
1 $ 42,000 $80,042 $ 80,042 $ 80,042
2 $ 44,100 $80,042 $ 80,042 $ 80,042
3 $ 46,305 $80,042 $ 80,042 $ 80,042
4 $ 48,620 $80,042 $ 80,042 $ 80,042
5 $ 51,051 $80,042 $ 80,042 $ 80,042
6 $ 53,604 $80,042 $ 80,042 $ 80,042
7 $ 56,284 $80,042 $ 80,042 $ 86,443
8 $ 59,098 $80,042 $ 80,042 $ 93,367
9 $ 62,053 $80,042 $ 80,042 $100,838
10 $ 65,156 $80,042 $ 80,042 $108,899
15 $ 83,157 $80,042 $ 80,042 $160,317
20 $106,132 $80,042 $ 83,105 $251,083
25 $135,454 $80,042 $100,716 $400,728
30 $172,877 $80,042 $122,059 $639,560
35 $220,640 $80,042 $142,325 $982,101
</TABLE>
<TABLE>
<CAPTION>
End of Year ACCUMULATED VALUE End of Year NET CASH SURRENDER VALUE
Assuming Hypothetical Gross Annual Assuming Hypothetical Gross Annual
End of Investment Return of Investment Return of
Policy ------------------------------------------------------------------------
Year 0% 6% 12% 0% 6% 12%
- ------ ---------------------- ----------------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
1 $38,902 $ 41,236 $ 43,570 $35,012 $ 37,236 $ 39,570
2 $37,795 $ 42,469 $ 47,415 $34,015 $ 38,469 $ 43,415
3 $36,718 $ 43,739 $ 51,603 $33,413 $ 40,139 $ 48,003
4 $35,671 $ 45,049 $ 56,208 $32,817 $ 41,849 $ 53,008
5 $34,652 $ 46,400 $ 61,225 $32,227 $ 43,600 $ 58,425
6 $33,662 $ 47,792 $ 66,689 $31,642 $ 45,392 $ 64,289
7 $32,699 $ 49,227 $ 72,641 $31,064 $ 47,227 $ 70,641
8 $31,762 $ 50,707 $ 79,124 $30,491 $ 49,107 $ 77,524
9 $30,851 $ 52,274 $ 86,186 $29,925 $ 51,074 $ 84,986
10 $29,965 $ 53,889 $ 93,878 $29,965 $ 53,889 $ 93,878
15 $26,947 $ 65,308 $149,829 $26,947 $ 65,308 $149,829
20 $24,215 $ 79,148 $239,127 $24,215 $ 79,148 $239,127
25 $21,741 $ 95,920 $381,645 $21,741 $ 95,920 $381,645
30 $19,500 $116,247 $609,105 $19,500 $116,247 $609,105
35 $17,470 $140,916 $972,377 $17,470 $140,916 $972,377
</TABLE>
- -------
This illustration assumes no policy loans or partial withdrawals have been
made.
THE DEATH BENEFITS, ACCUMULATED VALUES AND CASH SURRENDER VALUES WILL DIFFER
IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR AT DIFFERENT TIMES.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL RATES MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE TO
VARIABLE ACCOUNTS AND THE EXPERIENCE OF THE ACCOUNTS. NO REPRESENTATION CAN BE
MADE BY US, THE SEPARATE ACCOUNT OR THE FUND THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
THIS IS AN ILLUSTRATION ONLY. AN ILLUSTRATION IS NOT INTENDED TO PREDICT
ACTUAL PERFORMANCE. INTEREST RATES, DIVIDENDS, AND VALUES SET FORTH IN THE
ILLUSTRATION ARE NOT GUARANTEED.
48
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE
Illustration of Death Benefits, Accumulated Values and Net Cash Surrender
Values
Based on Guaranteed Cost of Insurance Rates
SINGLE LIFE OPTION
ISSUE AGE: 60 FACE AMOUNT: $80,042
CLASS: MALE NONSMOKER INITIAL PREMIUM: $40,000
GUIDELINE SINGLE PREMIUM %: 100%
<TABLE>
<CAPTION>
Premium End of Year DEATH BENEFIT Assuming
End of Paid Plus Hypothetical Gross Annual Investment Return of
Policy Interest at ----------------------------------------------
Year 5% 0% 6% 12%
------ ----------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
1 $ 42,000 $80,042 $80,042 $ 80,042
2 $ 44,100 $80,042 $80,042 $ 80,042
3 $ 46,305 $80,042 $80,042 $ 80,042
4 $ 48,620 $80,042 $80,042 $ 80,042
5 $ 51,051 $80,042 $80,042 $ 80,042
6 $ 53,604 $80,042 $80,042 $ 80,042
7 $ 56,284 $80,042 $80,042 $ 82,574
8 $ 59,098 $80,042 $80,042 $ 89,124
9 $ 62,053 $80,042 $80,042 $ 96,170
10 $ 65,156 $80,042 $80,042 $103,749
15 $ 83,157 * $80,042 $150,941
20 $106,132 * $80,042 $235,245
25 $135,454 * $80,042 $369,443
30 $172,877 * * $570,211
35 $220,640 * * $854,424
</TABLE>
<TABLE>
<CAPTION>
End of Year ACCUMULATED VALUE End of Year NET CASH SURRENDER VALUE
Assuming Hypothetical Gross Annual Assuming Hypothetical Gross Annual
End of Investment Return of Investment Return of
Policy ------------------------------------ ------------------------------------
Year 0% 6% 12% 0% 6% 12%
- ------ ----------- ----------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
1 $38,418 $40,760 $ 43,103 $34,576 $36,760 $ 39,103
2 $36,738 $41,456 $ 46,455 $33,064 $37,456 $ 42,455
3 $34,987 $42,120 $ 50,132 $31,838 $38,520 $ 46,532
4 $33,149 $42,744 $ 54,225 $30,497 $39,544 $ 51,025
5 $31,206 $43,321 $ 58,752 $29,021 $40,521 $ 55,952
6 $29,140 $43,843 $ 63,781 $27,391 $41,443 $ 61,381
7 $26,932 $44,304 $ 69,390 $25,585 $42,304 $ 67,390
8 $24,561 $44,695 $ 75,529 $23,578 $43,095 $ 73,929
9 $22,000 $45,006 $ 82,196 $21,340 $43,806 $ 80,996
10 $19,213 $45,223 $ 89,439 $19,213 $45,223 $ 89,439
15 * $45,633 $141,066 * $45,633 $141,066
20 * $38,851 $224,043 * $38,851 $224,043
25 * $ 9,318 $351,851 * $ 9,318 $351,851
30 * * $543,058 * * $543,058
35 * * $845,964 * * $845,964
</TABLE>
- -------
This illustration assumes no policy loans or partial withdrawals have been
made.
*Additional payment will be required to prevent policy termination.
THE DEATH BENEFITS, ACCUMULATED VALUES AND CASH SURRENDER VALUES WILL DIFFER
IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR AT DIFFERENT TIMES.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL RATES MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE TO
VARIABLE ACCOUNTS AND THE EXPERIENCE OF THE ACCOUNTS. NO REPRESENTATION CAN BE
MADE BY US, THE SEPARATE OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
THIS IS AN ILLUSTRATION ONLY. AN ILLUSTRATION IS NOT INTENDED TO PREDICT
ACTUAL PERFORMANCE. INTEREST RATES, DIVIDENDS, AND VALUES SET FORTH IN THE
ILLUSTRATION ARE NOT GUARANTEED.
49
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE
Illustration of Death Benefits, Accumulated Values and Net Cash Surrender
Values
Based on Current Cost of Insurance Rates
SINGLE LIFE OPTION
ISSUE AGE: 60 FACE AMOUNT: $94,464
CLASS: FEMALE NONSMOKER INITIAL PREMIUM: $40,000
GUIDELINE SINGLE PREMIUM %: 100%
<TABLE>
<CAPTION>
Premium End of Year DEATH BENEFIT Assuming
End of Paid Plus Hypothetical Gross Annual Investment Return of
Policy Interest at ----------------------------------------------
Year 5% 0% 6% 12%
------ ----------- ------------------------------ ----------------
<S> <C> <C> <C> <C>
1 $ 42,000 $94,464 $ 94,464 $ 94,464
2 $ 44,100 $94,464 $ 94,464 $ 94,464
3 $ 46,305 $94,464 $ 94,464 $ 94,464
4 $ 48,620 $94,464 $ 94,464 $ 94,464
5 $ 51,051 $94,464 $ 94,464 $ 94,464
6 $ 53,604 $94,464 $ 94,464 $ 94,464
7 $ 56,284 $94,464 $ 94,464 $ 94,464
8 $ 59,098 $94,464 $ 94,464 $ 94,464
9 $ 62,053 $94,464 $ 94,464 $101,057
10 $ 65,156 $94,464 $ 94,464 $109,313
15 $ 83,157 $94,464 $ 94,464 $161,040
20 $106,132 $94,464 $ 94,464 $252,881
25 $135,454 $94,464 $100,716 $403,598
30 $172,877 $94,464 $122,059 $644,140
35 $220,640 $94,464 $142,347 $989,287
</TABLE>
<TABLE>
<CAPTION>
End of Year ACCUMULATED VALUE End of Year NET CASH SURRENDER VALUE
Assuming Hypothetical Gross Annual Assuming Hypothetical Gross Annual
End of Investment Return of Investment Return of
Policy ------------------------------------------------------------------------
Year 0% 6% 12% 0% 6% 12%
- ------ ---------------------- ----------------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
1 $38,902 $ 41,236 $ 43,570 $35,012 $ 37,236 $ 39,570
2 $37,795 $ 42,469 $ 47,415 $34,015 $ 38,469 $ 43,415
3 $36,718 $ 43,739 $ 51,603 $33,413 $ 40,139 $ 48,003
4 $35,671 $ 45,049 $ 56,208 $32,817 $ 41,849 $ 53,008
5 $34,652 $ 46,400 $ 61,225 $32,227 $ 43,600 $ 58,425
6 $33,662 $ 47,792 $ 66,689 $31,642 $ 45,392 $ 64,289
7 $32,699 $ 49,227 $ 72,641 $31,064 $ 47,227 $ 70,641
8 $31,762 $ 50,707 $ 79,167 $30,491 $ 49,107 $ 77,567
9 $30,851 $ 52,274 $ 86,373 $29,925 $ 51,074 $ 85,173
10 $29,965 $ 53,889 $ 94,236 $29,965 $ 53,889 $ 94,236
15 $26,947 $ 65,308 $150,504 $26,947 $ 65,308 $150,504
20 $24,215 $ 79,148 $240,839 $24,215 $ 79,148 $240,839
25 $21,741 $ 95,920 $384,379 $21,741 $ 95,920 $384,379
30 $19,500 $116,247 $613,467 $19,500 $116,247 $613,467
35 $17,470 $140,938 $979,492 $17,470 $140,938 $979,492
</TABLE>
- -------
This illustration assumes no policy loans or partial withdrawals have been
made.
THE DEATH BENEFITS, ACCUMULATED VALUES AND CASH SURRENDER VALUES WILL DIFFER
IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR AT DIFFERENT TIMES.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL RATES MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE TO
VARIABLE ACCOUNTS AND THE EXPERIENCE OF THE ACCOUNTS. NO REPRESENTATION CAN BE
MADE BY US, THE SEPARATE OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
THIS IS AN ILLUSTRATION ONLY. AN ILLUSTRATION IS NOT INTENDED TO PREDICT
ACTUAL PERFORMANCE. INTEREST RATES, DIVIDENDS, AND VALUES SET FORTH IN THE
ILLUSTRATION ARE NOT GUARANTEED.
50
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE
Illustration of Death Benefits, Accumulated Values and Net Cash Surrender
Values
Based on Guaranteed Cost of Insurance Rates
SINGLE LIFE OPTION
ISSUE AGE: 60 FACE AMOUNT: $94,464
CLASS: FEMALE NONSMOKER INITIAL PREMIUM: $40,000
GUIDELINE SINGLE PREMIUM %: 100%
<TABLE>
<CAPTION>
Premium End of Year DEATH BENEFIT Assuming
End of Paid Plus Hypothetical Gross Annual Investment Return of
Policy Interest at ----------------------------------------------
Year 5% 0% 6% 12%
------ ----------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
1 $ 42,000 $94,464 $94,464 $ 94,464
2 $ 44,100 $94,464 $94,464 $ 94,464
3 $ 46,305 $94,464 $94,464 $ 94,464
4 $ 48,620 $94,464 $94,464 $ 94,464
5 $ 51,051 $94,464 $94,464 $ 94,464
6 $ 53,604 $94,464 $94,464 $ 94,464
7 $ 56,284 $94,464 $94,464 $ 94,464
8 $ 59,098 $94,464 $94,464 $ 94,464
9 $ 62,053 $94,464 $94,464 $ 97,501
10 $ 65,156 $94,464 $94,464 $105,467
15 $ 83,157 $94,464 $94,464 $155,245
20 $106,132 * $94,464 $243,768
25 $135,454 * $94,464 $386,376
30 $172,877 * * $602,239
35 $220,640 * * $906,414
</TABLE>
<TABLE>
<CAPTION>
End of Year ACCUMULATED VALUE End of Year NET CASH SURRENDER VALUE
Assuming Hypothetical Gross Annual Assuming Hypothetical Gross Annual
End of Investment Return of Investment Return of
Policy ------------------------------------ ------------------------------------
Year 0% 6% 12% 0% 6% 12%
- ------ ----------- ----------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
1 $38,563 $40,902 $ 43,242 $34,706 $36,902 $ 39,242
2 $37,062 $41,763 $ 46,743 $33,356 $37,763 $ 42,743
3 $35,525 $42,614 $ 50,569 $32,328 $39,014 $ 46,969
4 $33,937 $43,445 $ 54,801 $31,222 $40,245 $ 51,601
5 $32,285 $44,249 $ 59,440 $30,025 $41,449 $ 56,640
6 $30,561 $45,023 $ 64,543 $28,728 $42,623 $ 62,143
7 $28,758 $45,765 $ 70,175 $27,320 $43,765 $ 68,175
8 $26,869 $46,476 $ 76,412 $25,795 $44,876 $ 74,812
9 $24,888 $47,153 $ 83,334 $24,142 $45,953 $ 82,134
10 $22,796 $47,788 $ 90,920 $22,796 $47,788 $ 90,920
15 $ 9,713 $51,435 $145,089 $ 9,713 $51,435 $145,089
20 * $50,984 $232,160 * $50,984 $232,160
25 * $37,955 $367,977 * $37,955 $367,977
30 * * $573,561 * * $573,561
35 * * $897,439 * * $897,439
</TABLE>
- -------
This illustration assumes no policy loans or partial withdrawals have been
made.
*Additional payment will be required to prevent policy termination.
THE DEATH BENEFITS, ACCUMULATED VALUES AND CASH SURRENDER VALUES WILL DIFFER
IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR AT DIFFERENT TIMES.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL RATES MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE TO
VARIABLE ACCOUNTS AND THE EXPERIENCE OF THE ACCOUNTS. NO REPRESENTATION CAN BE
MADE BY US, THE SEPARATE ACCOUNT OR THE FUND THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
THIS IS AN ILLUSTRATION ONLY. AN ILLUSTRATION IS NOT INTENDED TO PREDICT
ACTUAL PERFORMANCE. INTEREST RATES, DIVIDENDS, AND VALUES SET FORTH IN THE
ILLUSTRATION ARE NOT GUARANTEED.
51
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE
Illustration of Death Benefits, Accumulated Values and Net Cash Surrender
Values
Based on Current Cost of Insurance Rates
LAST SURVIVOR OPTION
ISSUE AGE: 60 FACE AMOUNT: $114,737
CLASS: MALE/FEMALE NONSMOKER INITIAL PREMIUM: $40,000
GUIDELINE SINGLE PREMIUM %: 100%
<TABLE>
<CAPTION>
Premium End of Year DEATH BENEFIT Assuming
End of Paid Plus Hypothetical Gross Annual Investment Return of
Policy Interest at ----------------------------------------------
Year 5% 0% 6% 12%
------ ----------- ----------------------------------------------
<S> <C> <C> <C> <C>
1 $ 42,000 $114,737 $114,737 $ 114,737
2 $ 44,100 $114,737 $114,737 $ 114,737
3 $ 46,305 $114,737 $114,737 $ 114,737
4 $ 48,620 $114,737 $114,737 $ 114,737
5 $ 51,051 $114,737 $114,737 $ 114,737
6 $ 53,604 $114,737 $114,737 $ 114,737
7 $ 56,284 $114,737 $114,737 $ 114,737
8 $ 59,098 $114,737 $114,737 $ 114,737
9 $ 62,053 $114,737 $114,737 $ 114,737
10 $ 65,156 $114,737 $114,737 $ 114,737
15 $ 83,157 $114,737 $114,737 $ 167,067
20 $106,132 $114,737 $114,737 $ 263,338
25 $135,454 $114,737 $114,737 $ 422,395
30 $172,877 $114,737 $128,843 $ 677,524
35 $220,640 $114,737 $150,951 $1,045,352
</TABLE>
<TABLE>
<CAPTION>
End of Year ACCUMULATED VALUE End of Year NET CASH SURRENDER VALUE
Assuming Hypothetical Gross Annual Assuming Hypothetical Gross Annual
End of Investment Return of Investment Return of
Policy ------------------------------------ ------------------------------------
Year 0% 6% 12% 0% 6% 12%
- ------ ---------------------- ------------- ---------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
1 $39,085 $ 41,430 $ 43,776 $35,176 $ 37,430 $ 39,776
2 $38,123 $ 42,843 $ 47,839 $34,310 $ 38,843 $ 43,839
3 $37,148 $ 44,275 $ 52,258 $33,805 $ 40,675 $ 48,658
4 $36,198 $ 45,738 $ 57,108 $33,302 $ 42,538 $ 53,908
5 $35,271 $ 47,252 $ 62,393 $32,802 $ 44,452 $ 59,593
6 $34,367 $ 48,817 $ 68,166 $32,305 $ 46,417 $ 65,766
7 $33,485 $ 50,435 $ 74,473 $31,810 $ 48,435 $ 72,473
8 $32,624 $ 52,150 $ 81,364 $31,319 $ 50,550 $ 79,764
9 $31,785 $ 53,923 $ 88,892 $30,831 $ 52,723 $ 87,692
10 $30,966 $ 55,756 $ 97,131 $30,966 $ 55,756 $ 97,131
15 $27,994 $ 67,911 $ 156,137 $27,994 $ 67,911 $ 156,137
20 $25,290 $ 82,715 $ 250,798 $25,290 $ 82,715 $ 250,798
25 $22,828 $100,746 $ 402,281 $22,828 $100,746 $ 402,281
30 $20,588 $122,707 $ 645,261 $20,588 $122,707 $ 645,261
35 $18,549 $149,456 $1,035,002 $18,549 $149,456 $1,035,002
</TABLE>
- -------
This illustration assumes no policy loans or partial withdrawals have been
made.
THE DEATH BENEFITS, ACCUMULATED VALUES AND CASH SURRENDER VALUES WILL DIFFER
IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR AT DIFFERENT TIMES.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL RATES MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE TO
VARIABLE ACCOUNTS AND THE EXPERIENCE OF THE ACCOUNTS. NO REPRESENTATION CAN BE
MADE BY US, THE SEPARATE ACCOUNT OR THE FUND THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
THIS IS AN ILLUSTRATION ONLY. AN ILLUSTRATION IS NOT INTENDED TO PREDICT
ACTUAL PERFORMANCE. INTEREST RATES, DIVIDENDS, AND VALUES SET FORTH IN THE
ILLUSTRATION ARE NOT GUARANTEED.
52
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE
Illustration of Death Benefits, Accumulated Values and Net Cash Surrender
Values
Based on Guaranteed Cost of Insurance Rates
LAST SURVIVOR OPTION
ISSUE AGE: 60 FACE AMOUNT: $114,737
CLASS: MALE/FEMALE NONSMOKER INITIAL PREMIUM: $40,000
GUIDELINE SINGLE PREMIUM %: 100%
<TABLE>
<CAPTION>
Premium End of Year DEATH BENEFIT Assuming
End of Paid Plus Hypothetical Gross Annual Investment Return of
Policy Interest at ----------------------------------------------
Year 5% 0% 6% 12%
------ ----------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
1 $ 42,000 $114,737 $114,737 $114,737
2 $ 44,100 $114,737 $114,737 $114,737
3 $ 46,305 $114,737 $114,737 $114,737
4 $ 48,620 $114,737 $114,737 $114,737
5 $ 51,051 $114,737 $114,737 $114,737
6 $ 53,604 $114,737 $114,737 $114,737
7 $ 56,284 $114,737 $114,737 $114,737
8 $ 59,098 $114,737 $114,737 $114,737
9 $ 62,053 $114,737 $114,737 $114,737
10 $ 65,156 $114,737 $114,737 $114,737
15 $ 83,157 $114,737 $114,737 $166,715
20 $106,132 * $114,737 $262,638
25 $135,454 * $114,737 $417,269
30 $172,877 * $114,737 $650,907
35 $220,640 * * $979,557
</TABLE>
<TABLE>
<CAPTION>
End of Year ACCUMULATED VALUE End of Year NET CASH SURRENDER VALUE
Assuming Hypothetical Gross Annual Assuming Hypothetical Gross Annual
End of Investment Return of Investment Return of
Policy ------------------------------------ ------------------------------------
Year 0% 6% 12% 0% 6% 12%
- ------ ----------- ----------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
1 $39,085 $41,430 $ 43,776 $35,176 $37,430 $ 39,776
2 $38,123 $42,843 $ 47,839 $34,310 $38,843 $ 43,839
3 $37,147 $44,275 $ 52,258 $33,803 $40,675 $ 48,658
4 $36,147 $45,718 $ 57,108 $33,255 $42,518 $ 53,908
5 $35,113 $47,166 $ 62,385 $32,656 $44,366 $ 59,585
6 $34,033 $48,612 $ 68,130 $31,991 $46,212 $ 65,730
7 $32,893 $50,047 $ 74,392 $31,248 $48,047 $ 72,392
8 $31,679 $51,464 $ 81,231 $30,411 $49,864 $ 79,631
9 $30,374 $52,897 $ 88,716 $29,463 $51,697 $ 87,516
10 $28,960 $54,293 $ 96,927 $28,960 $54,293 $ 96,927
15 $19,619 $62,023 $155,808 $19,619 $62,023 $155,808
20 * $65,714 $250,131 * $65,714 $250,131
25 * $57,513 $397,399 * $57,513 $397,399
30 * $ 1,420 $619,911 * $ 1,420 $619,911
35 * * $969,858 * * $969,858
</TABLE>
- -------
This illustration assumes no policy loans or partial withdrawals have been
made.
*Additional payment will be required to prevent policy termination.
THE DEATH BENEFITS, ACCUMULATED VALUES AND CASH SURRENDER VALUES WILL DIFFER
IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR AT DIFFERENT TIMES.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL RATES MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE TO
VARIABLE ACCOUNTS AND THE EXPERIENCE OF THE ACCOUNTS. NO REPRESENTATION CAN BE
MADE BY US, THE SEPARATE ACCOUNT OR THE FUND THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
THIS IS AN ILLUSTRATION ONLY. AN ILLUSTRATION IS NOT INTENDED TO PREDICT
ACTUAL PERFORMANCE. INTEREST RATES, DIVIDENDS, AND VALUES SET FORTH IN THE
ILLUSTRATION ARE NOT GUARANTEED.
53
<PAGE>
[back cover]
<TABLE>
<C> <S>
The Pacific Select Estate Pacific Select Estate Maximizer
Maximizer variable life
insurance policy is
underwritten by Pacific Life
Insurance Company, 700 Where to go for more information
Newport Center Drive, P.O. For more information about Pacific Select Estate Maximizer, please call or write to us
Box 9000, Newport Beach, at the address below. You should also use this address to send us any notices, forms
California 92660. or requests about your Policy.
Pacific Life Insurance Company
Client Services Department
700 Newport Center Drive
P.O. Box 7500
Newport Beach, California 92658-7500
1-800-800-7681
7 a.m. through 5 p.m. Pacific time
You can find reports and other information about the Policy and Separate Account on
the Securities and Exchange Commission's website: www.sec.gov
</TABLE>
<PAGE>
PART II. ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet.
The cross-reference sheet.
The prospectus consisting of 54 pages (including illustrations).
The undertaking to file reports.
Representation pursuant to Section 26(e) of the Investment Company Act
of 1940.
The signatures.
The following exhibits:
1. (1) (a) Resolution of the Board of Directors of the Depositor dated
November 22, 1989 and copies of the Memoranda concerning
Pacific Select Exec Separate Account dated May 12, 1988 and
January 26, 1993./1/
(b) Resolution of the Board of Directors of Pacific Life Insurance
Company authorizing conformity to the terms of the current
Bylaws./1/
(2) Inapplicable
(3) (a) Distribution Agreement Between Pacific Mutual Life Insurance
Company and Pacific Mutual Distributors, Inc. (formerly known
as Pacific Equities Network)/1/
(b) Form of Selling Agreement Between Pacific Mutual Distributors,
Inc. and Various Broker-Dealers/1/
(4) Inapplicable
(5) (a) Pacific Select Estate Maximizer Modified Single Premium
Variable Life Insurance Policy (Form 97-50)/1/
(b) Last Survivor Pacific Select Estate Maximizer Modified Single
Premium Variable Life Insurance Policy (Form 97-50-J)/1/
(c) Accelerated Living Benefit Rider (Form R92-ABR)/1/
(6) (a) Articles of Incorporation of Pacific Life Insurance
Company/3/
(b) Bylaws of Pacific Life Insurance Company/3/
(7) Inapplicable
(8) Inapplicable
(9) (a) Participation Agreement Between Pacific Mutual Life Insurance
Company and Pacific Select Fund/3/
(b) M Fund Inc. Participation Agreement with Pacific Mutual Life
Insurance Company/2/
(10) Applications and General Questionnaire/1/
2. Form of Opinion and Consent of Legal Officer of Pacific Mutual as to
Legality of Policies Being Registered/1/ (Incorporated by reference to
Exhibit No. 3 filed in Registrant's Registration Statement on Form S-6
filed via EDGAR on October 11, 1996, File No. 333-14005, Accession Number
0001017062-96-000287.)
3. Inapplicable
4. Inapplicable
<PAGE>
5. Inapplicable
6. (a) Inapplicable
(b) Consent of Dechert Price & Rhoads/1/
7. Opinion of Actuary/3/
8. Memorandum Describing Issuance, Transfer, and Redemption
Procedures/1/
9. Powers of Attorney/3/
/1/ Filed as part of the Registration Statement on Form S-6 filed via EDGAR on
October 11, 1996, File No. 333-14005, Accession Number 0001017062-96-000287.
/2/ Filed as part of the Post-Effective Amendment No. 1 to the Registration
Statement on Form S-6 filed via EDGAR on April 25, 1997, File No. 333-14005,
Accession Number 0001017062-97-000739.
/3/ Filed as part of the Post-Effective Amendment No. 2 to the Registration
Statement on Form S-6 filed via EDGAR on April 24, 1998, File No. 333-14005,
Accession Number 0001017062-98-000894.
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
REPRESENTATION PURSUANT TO SECTION 26(e) OF THE INVESTMENT COMPANY ACT OF 1940
Pacific Life Insurance Company and Registrant represent that the fees and
charges to be deducted under the Variable Life Insurance Policy ("Policy")
described in the prospectus contained in this registration statement are, in the
aggregate, reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed in connection with the
Policy.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Pacific Select Exec Separate Account of Pacific Life Insurance Company, has duly
caused this Post-Effective Amendment No. 3 to the Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized, all in the
City of Newport Beach, and State of California, on this 12th day of February,
1999.
PACIFIC SELECT EXEC SEPARATE ACCOUNT
(Registrant)
BY: PACIFIC LIFE INSURANCE COMPANY
(Depositor)
BY: _____________________________________
Thomas C. Sutton*
Chairman & Chief Executive Officer
BY: /s/ DAVID R. CARMICHAEL
David R. Carmichael
as attorney-in-fact
(Power of attorney is contained as Exhibit 9 in Post-Effective Amendment No. 2
to the Registration Statement on Form S-6 for the Pacific Select Exec Separate
Account filed via EDGAR on April 24, 1998, File No. 333-14005 Accession Number
0001017062-98-000894.)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Pacific Life
Insurance Company has duly caused this Post-Effective Amendment No. 3 to the
Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, all in the City of Newport Beach, and State of
California, on this 12th day of February, 1999.
PACIFIC LIFE INSURANCE COMPANY
(Registrant)
BY: _____________________________________
Thomas C. Sutton*
Chairman & Chief Executive Officer
BY: /s/ DAVID R. CARMICHAEL
David R. Carmichael
as attorney-in-fact
(Power of attorney is contained as Exhibit 9 in Post-Effective Amendment
No. 2 to the Registration Statement on Form S-6 for the Pacific Select Exec
Separate Account filed via EDGAR on April 24, 1998, File No. 333-14005
Accession Number 0001017062-98-000894.)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
Thomas C Sutton* Director, Chairman of the Board ___________, 1999
and Chief Executive Officer
Glenn S. Schafer* Director and President ___________, 1999
Khanh T. Tran* Director, Senior Vice President ___________, 1999
and Chief Financial Officer
David R. Carmichael* Director, Senior Vice President ___________, 1999
and General Counsel
Audrey L. Milfs* Director, Vice President and ___________, 1999
Corporate Secretary
Richard M. Ferry* Director ___________, 1999
Donald E. Guinn* Director ___________, 1999
Ignacio E. Lozano, Jr.* Director ___________, 1999
Charles D. Miller* Director ___________, 1999
Donn B. Miller* Director ___________, 1999
Richard M. Rosenberg* Director ___________, 1999
James R. Ukropina* Director ___________, 1999
Raymond L. Watson* Director ___________, 1999
Edward R. Byrd* Vice President and Controller ___________, 1999
By: /s/DAVID R. CARMICHAEL
David R. Carmichael
as attorney-in-fact February 12, 1999
</TABLE>
(Powers of Attorney are contained as Exhibit 9 in Post-Effective Amendment No. 2
to the Registration Statement on Form S-6 for the Pacific Select Exec Separate
Account filed via EDGAR on April 24, 1998, File No. 333-14005 Accession Number
0001017062-98-000894.)
