<PAGE>
As filed with the Securities and Exchange Commission on August 6, 1998
Registration Nos.
811-8946
333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [_]
Post Effective Amendment No. [_]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 6 [X]
(Check appropriate box or boxes)
SEPARATE ACCOUNT A
(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) 640-3743
(Depositor's Telephone Number, including Area Code)
Diane N. Ledger
Vice President
Pacific Life Insurance Company
700 Newport Center Drive
Newport Beach, California 92660
(Name and address of agent for service)
Copies of all communications to:
Diane N. Ledger Jane A. Kanter, Esq.
Pacific Life Insurance Company Dechert, Price & Rhoads
P. O. Box 9000 1775 Eye Street, N.W.
Newport Beach, CA 92658-9030 Washington, D.C. 20006-2401
Approximate Date of Commencement of Proposed Public Offering:
The Registrant hereby agrees to amend this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall therefore become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
Title of Securities being registered: interests in the Separate Account under
Pacific Value individual flexible premium deferred variable annuity contracts.
Filing Fee: None
DECLARATION PURSUANT TO RULE 24f-2
The Registrant elects to register an indefinite number of securities under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940.
*On September 1, 1997, Pacific Mutual Life Insurance Company converted from a
mutual insurance company to a stock insurance company under California law, and
changed its name to Pacific Life Insurance Company.
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SEPARATE ACCOUNT A
FORM N-4
CROSS REFERENCE SHEET
PART A
Item No. Prospectus Heading
1. Cover Page Cover Page
2. Definitions SPECIAL DEFINITIONS
3. Synopsis SUMMARY; FEE TABLE
4. Condensed Financial Information YOUR INVESTMENT OPTIONS --Variable
Investment Option Performance;
ADDITIONAL INFORMATION --Financial
Statements; Financial Highlights
5. General Description of Registrant,
Depositor and Portfolio Companies SUMMARY -- What are My Investment
Options? PACIFIC LIFE AND THE
SEPARATE ACCOUNT -- Pacific Life, --
Separate Account A; YOUR INVESTMENT
OPTIONS -- Your Variable Investment
Options; ADDITIONAL INFORMATION --
Voting Rights
6. Deductions SUMMARY -- What Charges Will I Pay?,
--Can I Change My Investment
Options?; FEE TABLE; HOW YOUR
PAYMENTS ARE ALLOCATED --Transfers;
CHARGES, FEES AND DEDUCTIONS;
WITHDRAWALS -- Optional Withdrawal
7. General Description of Variable
Annuity Contracts SPECIAL DEFINITIONS; SUMMARY; WHY
BUY A CONTRACT; PURCHASING YOUR
CONTRACT -- How to Apply for your
Contract; HOW YOUR PAYMENTS ARE
ALLOCATED; RETIREMENT BENEFITS AND
OTHER PAYOUTS -- Choosing Your
Annuity Option, -- Your Annuity
Payments, -- Death Benefits;
ADDITIONAL INFORMATION -- Voting
Rights, -- Changes to Your Contract,
-- Changes to ALL Contracts, --
Inquiries and Submitting Forms
and Requests, -- Timing of
Payments and Transactions
8. Annuity Period RETIREMENT BENEFITS AND OTHER PAYOUTS
9. Death Benefit RETIREMENT BENEFITS AND OTHER PAYOUTS
-- Death Benefits -- Death of Owner
Distribution Rules
10. Purchases and Contract Value SUMMARY - How Do I Purchase a
Contract; PURCHASING YOUR CONTRACT;
HOW YOUR PAYMENTS ARE ALLOCATED;
PACIFIC LIFE AND THE SEPARATE
ACCOUNT -- Pacific Life; THE
GENERAL ACCOUNT -- Withdrawals and
Transfers
11. Redemptions SUMMARY -- Can I Withdraw My
Contract Value?, -- Can I Return My
Contract?; CHARGES, FEES AND
DEDUCTIONS; WITHDRAWALS; ADDITIONAL
INFORMATION -- Timing of Payments and
Transactions; THE GENERAL ACCOUNT --
Withdrawals and Transfers
12. Taxes SUMMARY; CHARGES, FEES AND DEDUCTIONS
-- Premium Taxes; WITHDRAWALS --
Optional Withdrawals, -- Tax
Consequences of Withdrawals; FEDERAL
TAX STATUS
13. Legal Proceedings Not Applicable
14. Table of Contents of the Statement
of Additional Information CONTENTS OF THE STATEMENT
OF ADDITIONAL INFORMATION
PART B
Item No. Statement of Additional Information
Heading
15. Cover Page Cover Page
16. Table of Contents TABLE OF CONTENTS
17. General Information and History Not Applicable
18. Services Not Applicable
19. Purchase of Securities Being Offered THE CONTRACTS AND THE SEPARATE
ACCOUNT -- Calculating Subaccount
Unit Values, -- Systematic Transfer
Programs
20. Underwriters DISTRIBUTION OF THE CONTRACTS --
Pacific Mutual Distributors, Inc.
21. Calculation of Performance Data PERFORMANCE
22. Annuity Payments THE CONTRACTS AND THE SEPARATE
ACCOUNT --Variable Annuity Payment
Amounts
23. Financial Statements FINANCIAL STATEMENTS
PART C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.
<PAGE>
Pacific
VALUE
Prospectuses For:
Pacific Value
Variable Annuity
Pacific Select Fund
Dated , 1998
Underwritten by:
[LOGO OF PACIFIC LIFE]
Pacific Life Insurance Company
<PAGE>
PACIFIC VALUE
AN INDIVIDUAL FLEXIBLE PREMIUM DEFERRED
VARIABLE ANNUITY CONTRACT
ISSUED BY PACIFIC LIFE INSURANCE COMPANY
MAILING ADDRESS: P.O. BOX 7187
PASADENA, CALIFORNIA 91109-7187
1-800-722-2333
[LOGO OF PACIFIC PORTFOLIOS]
This Prospectus describes Pacific Value (the "Contract") offered by Pacific
Life Insurance Company ("Pacific Life," "we," "us," or "our", formerly known
as Pacific Mutual Life Insurance Company). The Contracts provide Policyholders
("Contract Owners," "Owners," "you" or "your") with flexibility in long-term
financial planning, including planning for retirement, and are designed to
meet the insurance needs and financial objectives of policyholders. Contracts
are available both to individuals and under certain tax-qualified retirement
plans. Payout options under the Contracts include variable annuities funded
through our Separate Account A (the "Separate Account") and fixed annuities
funded through our General Account.
Thirteen Variable Investment Options are currently available; each is a
subaccount of the Separate Account, and provides variable returns by investing
in shares of a corresponding Portfolio of Pacific Select Fund:
<TABLE>
<S> <C>
Money Market Portfolio Multi-Strategy Portfolio
High Yield Bond Portfolio Equity Portfolio
Managed Bond Portfolio Bond and Income Portfolio
Government Securities Portfolio Equity Index Portfolio
Aggressive Equity Portfolio International Portfolio
Growth LT Portfolio Emerging Markets Portfolio
Equity Income Portfolio
</TABLE>
In addition, the Fixed Option is available to you, which provides a fixed
rate of return and is funded through our General Account.
THIS PROSPECTUS PROVIDES INFORMATION THAT YOU SHOULD KNOW BEFORE PURCHASING
A CONTRACT. IN ADDITION, THIS PROSPECTUS IS ACCOMPANIED BY A CURRENT
PROSPECTUS FOR THE PACIFIC SELECT FUND. YOU SHOULD READ BOTH OF THESE
PROSPECTUSES CAREFULLY AND RETAIN THEM FOR YOUR FUTURE REFERENCE.
Additional information about the Contract and the Separate Account has been
filed with the Securities and Exchange Commission in a Statement of Additional
Information ("SAI"), dated 1, 1998. You may obtain a free copy of the
SAI by writing or calling Pacific Life. The information contained in the SAI
is incorporated by reference into this Prospectus. The table of contents for
the SAI appears on page 45 of this Prospectus. The SEC maintains a Web site
(http://www.sec.gov) that contains the SAI material incorporated by reference
and other information regarding registrants that file electronically with the
SEC.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
THE CONTRACT IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK. IT IS NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN A CONTRACT INVOLVES RISK, INCLUDING
POSSIBLE LOSS OF PRINCIPAL.
---------------
THE CONTRACT IS NOT AVAILABLE IN ALL STATES AND THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY JURISDICTION IN WHICH SUCH AN OFFER MAY NOT BE
MADE LAWFULLY. NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE
ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE RELATED SAI (OR
ANY SALES LITERATURE APPROVED BY PACIFIC LIFE), AND ANY SUCH
UNAUTHORIZED INFORMATION OR REPRESENTATION IS, IF GIVEN OR MADE, NOT
TO BE RELIED UPON.
DATED: 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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SPECIAL DEFINITIONS........................................................ 4
SUMMARY.................................................................... 7
FEE TABLE.................................................................. 8
FINANCIAL HIGHLIGHTS....................................................... 11
SELECTED ACCUMULATION UNIT INFORMATION..................................... 11
WHY BUY A CONTRACT......................................................... 12
YOUR INVESTMENT OPTIONS.................................................... 12
Your Variable Investment Options......................................... 12
Variable Investment Option Performance................................... 14
Your Fixed Option........................................................ 14
PURCHASING YOUR CONTRACT................................................... 14
How to Apply for Your Contract........................................... 14
Purchasing an Optional Death Benefit Rider............................... 15
Making Your Purchase Payments............................................ 15
Credit Enhancements...................................................... 15
HOW YOUR PAYMENTS ARE ALLOCATED............................................ 16
Choosing Your Investment Options......................................... 16
Investing in Variable Investment Options................................. 16
When Your Investment is Effective........................................ 17
Transfers................................................................ 17
CHARGES, FEES AND DEDUCTIONS............................................... 18
Withdrawal Charge........................................................ 18
Premium Taxes............................................................ 20
Waivers and Reduced Charges.............................................. 20
Mortality and Expense Risk Charge........................................ 20
Administrative Fee....................................................... 21
Expenses of the Fund..................................................... 21
RETIREMENT BENEFITS AND OTHER PAYOUTS...................................... 21
Selecting Your Annuitant................................................. 21
Annuitization............................................................ 21
Choosing Your Annuity Date ("Annuity Start Date")........................ 22
Default Annuity Date and Options......................................... 22
Choosing Your Annuity Option............................................. 23
Your Annuity Payments.................................................... 24
Death Benefits........................................................... 24
WITHDRAWALS................................................................ 28
Optional Withdrawals..................................................... 28
Tax Consequences of Withdrawals.......................................... 30
Right to Cancel ("Free Look")............................................ 30
PACIFIC LIFE AND THE SEPARATE ACCOUNT...................................... 30
Pacific Life............................................................. 30
Separate Account A....................................................... 31
</TABLE>
2
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<TABLE>
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FEDERAL TAX STATUS......................................................... 32
Taxes Payable by Contract Owners: General Rules.......................... 32
Qualified Contracts...................................................... 34
Loans.................................................................... 36
Withholding.............................................................. 38
Impact of Federal Income Taxes........................................... 38
Taxes on Pacific Life.................................................... 38
ADDITIONAL INFORMATION..................................................... 39
Voting Rights............................................................ 39
Changes to Your Contract................................................. 39
Changes to ALL Contracts................................................. 40
Inquiries and Submitting Forms and Requests.............................. 41
Telephone Transactions................................................... 42
Timing of Payments and Transactions...................................... 42
Confirmations, Statements and Other Reports to Contract Owners........... 42
Replacement of Life Insurance or Annuities............................... 43
Financial Statements..................................................... 43
Preparation for the Year 2000............................................ 43
THE GENERAL ACCOUNT........................................................ 44
General Information...................................................... 44
Guarantee Terms.......................................................... 44
Withdrawals and Transfers................................................ 44
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION........................ 46
APPENDIX A: STATE LAW VARIATIONS........................................... 47
</TABLE>
3
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SPECIAL DEFINITIONS
In this Prospectus, "we," "our" and "us" refer to Pacific Life Insurance
Company ("Pacific Life"); "you" and "your" and "Owner" refer to the Contract
Owner.
Account Value--The amount of your Contract Value allocated to any one of the
Investment Options.
Annuitant--A person on whose life annuity payments may be determined. An
Annuitant's life may also be used to determine certain increases in death
benefits, and to determine the Annuity Date. A Contract may name a single
("sole") Annuitant or two ("Joint") Annuitants, and may also name a
"Contingent" Annuitant. If you name Joint Annuitants or a Contingent
Annuitant, "the Annuitant" means the sole surviving Annuitant, unless
otherwise stated.
Annuity Date ("Annuity Start Date")--The date specified in your Contract, or
the date you later elect, if any, for the start of annuity payments if the
Annuitant (or Joint Annuitants) is (or are) still living and your Contract is
in force; or if earlier, the date that annuity payments actually begin.
Annuity Option--Any one of the income options available for a series of
payments after your Annuity Date.
Beneficiary--A person who has a right to receive the death benefit proceeds
payable as a result of the death of the Annuitant or a Contract Owner prior to
the Annuity Date, or who has a right to receive remaining guaranteed annuity
payments, if any, if the Annuitant dies after the Annuity Date.
Business Day--Any day on which the value of an amount invested in a Variable
Investment Option is required to be determined, which currently includes each
day that the New York Stock Exchange is open for trading and on which our
Annuities administrative offices are open. The New York Stock Exchange is
closed on weekends and on the following holidays: New Year's Day, Martin
Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, July Fourth,
Labor Day, Thanksgiving Day and Christmas Day. We may choose to close our
Annuities administrative offices on other holidays, a day immediately
preceding or following a national holiday, or in emergency situations. In this
Prospectus, "day" or "date" means Business Day unless otherwise specified. If
any transaction or event called for under a Contract is scheduled to occur on
a day that is not a Business Day, such transaction or event will be deemed to
occur on the next following Business Day, unless otherwise specified. Special
circumstances such as leap years and months with fewer than 31 days are
discussed in the SAI.
Code--The Internal Revenue Code of 1986, as amended.
Contingent Annuitant--A person, named in your Contract, who will become your
sole surviving Annuitant if your existing sole Annuitant (or both Joint
Annuitants) should die.
Contingent Owner--A person, if any, you select to succeed to the rights as a
Contract Owner of your Contract if all named Contract Owners die before your
Annuity Date.
Contract Anniversary--The same date, in each subsequent year, as your Contract
Date.
Contract Date--The date we issue your Contract. Contract Years, Contract
Semiannual Periods, Contract Quarters and Contract Months are measured from
this date.
Contract Debt--As of the end of any given Business Day, the principal amount
you have outstanding on any loan under your Contract, plus any accrued and
unpaid interest. Loans are available only on certain Qualified Contracts.
Contract Owner, Owner, Policyholder, you, or your--Generally, a person who
purchases a Contract and makes the Purchase Payments. A Contract Owner has all
rights in the Contract, including the right to make withdrawals, designate and
change beneficiaries, transfer amounts among Investment Options, and designate
an Annuity Option. If your Contract names Joint Owners, both Joint Owners are
Contract Owners and share all such rights.
4
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Contract Value--As of the end of any Business Day, the sum of your Variable
Account Value, Fixed Option Value, and any Loan Account Value. The Contract
Value includes any Credit Enhancements applied to your Contract.
Contract Year--A year that starts on the Contract Date or on a Contract
Anniversary.
Credit Enhancement--An amount we add to your Contract Value at the time a
Purchase Payment is applied and on the first Contract Anniversary, if
applicable. Each Credit Enhancement will be counted as Earnings under your
Contract.
Earnings--As of the end of any Business Day, your Earnings equal your Contract
Value less your aggregate Purchase Payments which are reduced by withdrawals
of prior Purchase Payments.
Fixed Option--If you allocate all or a part of your Purchase Payments or
Contract Value to the Fixed Option, such amounts are held in our General
Account and receive interest at rates declared periodically, but not less than
an annual rate of 3%.
Fixed Option Value--The aggregate amount of your Contract Value allocated to
the Fixed Option.
Fund--Pacific Select Fund.
General Account--Our General Account consists of all of our assets other than
those assets allocated to Separate Account A or to any of our other separate
accounts.
Guaranteed Interest Rate--The interest rate guaranteed at the time of
allocation (or rollover) for the Guarantee Term on amounts allocated to the
Fixed Option. Each Guaranteed Interest Rate is expressed as an annual rate and
interest is accrued daily. Each rate will not be less than an annual rate of
3%.
Guarantee Term--The period during which an amount you allocate to the Fixed
Option earns a Guaranteed Interest Rate. These terms are up to one year.
Investment Option--A Variable Account or the Fixed Option offered under the
Contract.
Joint Annuitant--If your Contract is a Non-Qualified Contract, you may name
two Annuitants, called "Joint Annuitants," in your application for your
Contract. Special restrictions apply for Qualified Contracts.
Loan Account--The Account in which the amount equal to the principal amount of
a loan and any interest accrued is held to secure any Contract Debt.
Loan Account Value--The amount, including any interest accrued, held in the
Loan Account to secure any Contract Debt.
Net Contract Value--Your Contract Value less Contract Debt.
Non-Qualified Contract--A Contract other than a Qualified Contract.
Portfolio--A separate portfolio of the Fund.
Primary Annuitant--The individual that is named in your Contract, the events
in the life of whom are of primary importance in affecting the timing or
amount of the payout under the Contract.
Purchase Payment ("Premium Payment")--An amount paid to us by or on behalf of
a Contract Owner, as consideration for the benefits provided under the
Contract.
Qualified Contract--A Contract that qualifies under the Code as an individual
retirement annuity ("IRA"), or a Contract purchased under a Qualified Plan
that qualifies for special tax treatment under the Code.
5
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Qualified Plan--A retirement plan that receives favorable tax treatment under
Section 401, 403, 408, 408A or 457 of the Code.
Policyholder--The Contract Owner.
Portfolio--A series of the Fund in which a Subaccount invests its assets.
SEC--Securities and Exchange Commission.
Separate Account A (the "Separate Account")--A separate account of ours
registered as a unit investment trust under the Investment Company Act of
1940, as amended (the "1940 Act").
Subaccount--An investment division of the Separate Account. Each Subaccount
invests its assets in shares of a corresponding Portfolio.
Subaccount Annuity Unit--Subaccount Annuity Units (or "Annuity Units") are
used to measure variation in variable annuity payments. To the extent you
elect to convert all or some of your Contract Value into variable annuity
payments, the amount of each annuity payment (after the first payment) will
vary with the value and number of Annuity Units in each Subaccount attributed
to any variable annuity payments. At annuitization (after any applicable
premium taxes and/or other taxes are paid), the amount annuitized to a
variable annuity determines the amount of your first variable annuity payment
and the number of Annuity Units credited to your annuity in each Subaccount.
The value of Subaccount Annuity Units, like the value of Subaccount Units, is
expected to fluctuate daily, as described in the definition of "Unit Value."
Subaccount Unit--Before your Annuity Date, each time you allocate an amount to
a Subaccount, your Contract is credited with a number of Subaccount Units in
that Subaccount; these Units are used for accounting purposes to measure your
Account Value in that Subaccount. The value of Subaccount Units is expected to
fluctuate daily, as described in the definition of Unit Value.
Unit Value--The value of a Subaccount Unit ("Subaccount Unit Value") or
Subaccount Annuity Unit ("Subaccount Annuity Unit Value"). Unit Value of any
Subaccount is subject to change on any Business Day in much the same way that
the value of shares of a Portfolio changes each day; the fluctuations in value
reflect the investment results, expenses of and charges against the Portfolio
in which the Subaccount invests its assets, and also reflect charges against
the Separate Account. Changes in Subaccount Annuity Unit Values also reflect
an additional factor that adjusts Subaccount Annuity Unit Values to offset the
assumed annual investment return used to determine the amount of your first
variable annuity payment. The effect of this assumed investment return is
explained in detail in the SAI. Unit Value of a Subaccount Unit and Subaccount
Annuity Unit is determined on each Business Day.
Variable Account ("Variable Investment Option")--A Subaccount of the Separate
Account or any separate account of ours which is available under your Contract
in which assets of ours are segregated from assets in our General Account and
from assets in our other separate accounts.
Variable Account Value--The aggregate amount of your Contract Value allocated
to all Subaccounts.
6
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SUMMARY
This brief description is only an overview of the more significant features of
your Contract. More detailed information may be found in subsequent sections of
this Prospectus, in the SAI, and in the Contract itself. Endorsements to your
Contract may contain variations from the standardized information in this
Prospectus. In addition, certain variations due to requirements particular to
the delivery state or jurisdiction are set forth in supplements attached to or
accompanying this Prospectus. IF ANY CONTRACT ENDORSEMENTS OR SUPPLEMENTAL
VARIATIONS TO THIS PROSPECTUS CONFLICT WITH OTHER INFORMATION IN THE CONTRACT
FORM OR IN THIS PROSPECTUS, THE ENDORSEMENTS AND SUPPLEMENTS CONTROL YOUR
CONTRACT.
WHAT IS THE CONTRACT? Pacific Value (the "Contract") is an annuity contract
designed to be a long-term financial planning device, permitting you to invest
on a tax-deferred basis for retirement or other long-range goals, and to
receive a series of regular payments for life or a period of years. See FEDERAL
TAX STATUS.
HOW DO I PURCHASE A CONTRACT? Your initial purchase payment must be at least
$10,000 to buy a Non-Qualified Contract ($2,000 for a Qualified Contract).
After this initial payment you may make additional payments but you are not
required to do so. Your initial payment may be payable in automatic
installments over your first Contract Year. See PURCHASING YOUR CONTRACT.
WHAT ARE MY INVESTMENT OPTIONS? You select your Investment Options. Thirteen of
the Investment Options are Variable Investment Options available through
Separate Account A. Each Variable Investment Option invests in a corresponding
Portfolio of the Fund. We are the investment adviser to the Fund, and we and
the Fund have retained other portfolio managers for eleven of the Portfolios.
You bear the investment risk associated with the Variable Investment Options,
and you should expect your Contract Value allocated to these Variable
Investment Options and the value of any Subaccount Annuity Units attributed to
any variable annuity payments to fluctuate. See HOW YOUR PAYMENTS ARE
ALLOCATED.
A Fixed Option is also available. This option provides a fixed annual interest
rate of at least 3%. The portion of your Purchase Payments or Contract Value
allocated to the Fixed Option is held in our General Account. You may select as
many Investment Options as you wish up to the Annuity Date. After the Annuity
Date, the Variable Investment Options may be selected only if you choose
variable annuity payments.
CAN I CHANGE MY INVESTMENT OPTIONS? You may transfer amounts from any
Investment Option to another on or prior to your Annuity Date; after your
Annuity Date, up to four exchanges of Subaccount Annuity Units may be made in
any twelve-month period. Certain restrictions apply to the Fixed Option. You
may transfer amounts automatically using dollar cost averaging, automatic
portfolio rebalancing, or an earnings sweep before your Annuity Date.
Transaction fees may be imposed in the future for excessive transfers. See HOW
YOUR PAYMENTS ARE ALLOCATED--TRANSFERS and THE GENERAL ACCOUNT--WITHDRAWALS AND
TRANSFERS in this Prospectus and THE CONTRACTS AND THE SEPARATE ACCOUNT--
SYSTEMATIC TRANSFER PROGRAMS in the SAI.
WHAT CHARGES WILL I PAY? An Administrative Fee equal to an annual rate of
0.15%, and a mortality and expense risk charge ("Risk Charge") equal to an
annual rate of 1.25%, are charged daily against assets held in the Variable
Investment Options. Amounts invested in the Variable Investment Options are
also subject to the fees and expenses imposed on the corresponding Portfolio of
the Fund. When you withdraw amounts attributed to Purchase Payments from your
Contract Value, you may be subject to a contingent deferred sales charge (or
"withdrawal charge") of up to 7%, which is determined by the amount of your
withdrawal and the length of time you held the Purchase Payment considered
withdrawn under your Contract. If you purchase the optional Stepped-Up Death
Benefit Rider (the "SDBR") or the Premier Death Benefit Rider (the "PDBR")
(subject to state availability) at the time your application is completed, your
Risk Charge, which is assessed daily against assets held in your Variable
Investment Options, is increased until the Annuity Date. The increase in your
Risk Charge is equal to an annual rate of .20% if you select the SDBR or .35%
if you select the PDBR.
7
<PAGE>
You may also be subject to other fees. See PURCHASING YOUR CONTRACT--PURCHASING
AN OPTIONAL DEATH BENEFIT RIDER AND CHARGES, FEES AND DEDUCTIONS.
CAN I WITHDRAW MY CONTRACT VALUE? Generally, you may withdraw all or part of
your Contract Value at any time on or prior to your Annuity Date. Certain
restrictions are imposed on withdrawals from the Fixed Option and certain
Qualified Contracts. Withdrawals may be subject to fees and charges, taxation
and, in certain circumstances, a tax penalty. See WITHDRAWALS, FEDERAL TAX
STATUS and THE GENERAL ACCOUNT--WITHDRAWALS AND TRANSFERS.
CAN I RETURN MY CONTRACT? For a limited time, usually 10 days after you receive
it, you may return your Contract for a refund in accordance with the terms of
its "free look" provision. See WITHDRAWALS-- RIGHT TO CANCEL ("FREE LOOK").
HOW DO I REACH PACIFIC LIFE? You can reach our service representatives between
6:00 a.m. and 5:00 p.m., Pacific time, at 1-800-722-2333. To send payments,
forms, or requests, see ADDITIONAL INFORMATION--INQUIRIES AND SUBMITTING FORMS
AND REQUESTS.
FEE TABLE
The purpose of this fee table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly under your
Contract. The table reflects expenses of the Separate Account as well as
expenses of each Portfolio of the Fund. Expenses shown under "Contract
Expenses" and "Separate Account Annual Expenses" are specified under the terms
of the Contract and are fixed. Expenses shown under "Fund Annual Expenses After
Expense Limitation" are estimated expenses of the Fund; Fund expenses are not
specified under the terms of the Contract and may vary from year to year. In
addition to the charges and expenses described below, a charge for premium
taxes and/or other taxes may apply. See CHARGES, FEES AND DEDUCTIONS--PREMIUM
TAXES in this Prospectus, the discussion under ORGANIZATION AND MANAGEMENT OF
THE FUND in the Fund's Prospectus, and INVESTMENT ADVISER and PORTFOLIO
MANAGEMENT AGREEMENTS in the Fund's SAI.
<TABLE>
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CONTRACT EXPENSES
Sales Charge Imposed on Purchase Payments...................... None
Maximum Withdrawal Charge/1/ .................................. 7.0%
(computed as a percentage of Purchase Payments)
Withdrawal Transaction Fee/2/.................................. None
Transfer Fee/3/................................................ None
Annual Fee..................................................... None
SEPARATE ACCOUNT A ANNUAL EXPENSES
(as a percentage of average daily Variable Account Value)
Mortality and Expense Risk Charge("Risk Charge")............... 1.25%
Stepped-Up Death Benefit Rider Risk Charge--Optional/4/........ .20%
Premier Death Benefit Rider Risk Charge--Optional/4/........... .35%
Administrative Fee............................................. 0.15%
</TABLE>
- ----
/1/The withdrawal charge, also called a "contingent deferred sales charge," may
not apply or may be reduced under certain circumstances. See CHARGES, FEES
AND DEDUCTIONS.
/2/We reserve the right to impose a transaction fee in the future of up to $15
per withdrawal on partial withdrawals in excess of 15 in any Contract Year.
See WITHDRAWALS--OPTIONAL WITHDRAWALS.
/3/We reserve the right to impose a transaction fee in the future of up to $15
per transfer on transfers in excess of 15 in any Contract Year. See HOW YOUR
PAYMENTS ARE ALLOCATED--TRANSFERS.
/4/If the Stepped-Up Death Benefit Rider or Premier Death Benefit Rider (subject
to state availability) is purchased, the applicable Risk Charge will be added
to the Risk Charge for your base Contract until the Annuity Date. See
CHARGES, FEES, AND DEDUCTIONS.
8
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FUND ANNUAL EXPENSES AFTER EXPENSE LIMITATION*
(AS A PERCENTAGE OF PORTFOLIO AVERAGE DAILY NET ASSETS)
<TABLE>
<CAPTION>
ADVISORY OTHER TOTAL
FEE EXPENSES EXPENSES
-------- -------- --------
<S> <C> <C> <C>
Money Market......................................... .38% .06% .44%
High Yield Bond...................................... .60% .05% .65%
Managed Bond......................................... .60% .06% .66%
Government Securities................................ .60% .06% .66%
Aggressive Equity.................................... .80% .06% .86%
Growth LT............................................ .75% .07% .82%
Equity Income........................................ .65% .05% .70%
Multi-Strategy....................................... .65% .06% .71%
Equity............................................... .65% .05% .70%
Bond and Income...................................... .60% .06% .66%
Equity Index......................................... .17% .06% .23%
International........................................ .85%* .19% 1.04%
Emerging Markets..................................... 1.10% .36% 1.46%
</TABLE>
*The expenses listed for the Fund Portfolios reflect current expenses for the
year ending December 31, 1997, except that the Advisory Fee for the
International Portfolio has been adjusted to reflect the Advisory Fee without
any waiver. The Actual Advisory Fee paid by the International Portfolio in
1997 was 0.83% of the Portfolio's average daily net assets. This reflects the
Advisory Fee waived by Pacific Life in connection with the change in the
Portfolio Manager to Morgan Stanley that occurred on June 1, 1997. Pacific
Life, as Investment Adviser to the Fund, adopted the policy to waive our fees
or otherwise reimburse expenses so that operating expenses (exclusive of
advisory fees, additional custodial fees associated with holding foreign
securities, foreign taxes on dividends, interest or capital gains, and
extraordinary expenses) are not greater than 0.25% of the average daily net
assets per year. We began the policy in 1989 and intend to continue this
policy until at least December 31, 1999. No reimbursement to the Portfolios
was necessary for the fiscal year 1997. There can be no assurance that the
expense reimbursement arrangement will continue after December 31, 1999, and
any unreimbursed expenses would be reflected in the Policy Owner's Accumulated
Value and in some instances, the death benefit.
Example: If, at the end of the indicated time period, you annuitize your
Contract Value, you surrender your Contract and withdraw your Contract
Value, or you neither annuitize nor surrender your Contract, you would pay
the following cumulative expenses on each $1,000 invested, assuming 5%
annual return on assets:
<TABLE>
<CAPTION>
NEITHER ANNUITIZED
ANNUITIZED SURRENDERED NOR SURRENDERED
---------------------------- ---------------------------- ----------------------------
W/O SDBR W/O SDBR W/O SDBR
OR OR OR
VARIABLE ACCOUNT PDBR * W/ SDBR * W/ PDBR * PDBR * W/ SDBR * W/ PDBR * PDBR * W/ SDBR * W/ PDBR *
- ---------------- -------- --------- --------- -------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market
1 Year.................. $ 82 $ 84 $ 85 $ 82 $ 84 $ 85 $ 19 $ 21 $ 22
3 Year.................. 58 64 68 121 127 131 58 64 68
5 Year.................. 99 110 117 144 155 162 99 110 117
10 Year................. 215 236 252 215 236 252 215 236 252
High Yield Bond
1 Year.................. 84 86 87 84 86 87 21 23 24
3 Year.................. 64 70 75 127 133 138 64 70 75
5 Year.................. 110 120 128 155 165 173 110 120 128
10 Year................. 237 258 273 237 258 273 237 258 273
Managed Bond
1 Year.................. 84 86 87 84 86 87 21 23 24
3 Year.................. 65 71 75 128 134 138 65 71 75
5 Year.................. 111 121 128 156 166 173 111 121 128
10 Year................. 239 289 274 239 259 274 239 259 274
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
NEITHER ANNUITIZED
ANNUITIZED SURRENDERED NOR SURRENDERED
---------------------------- ---------------------------- ----------------------------
W/O SDBR W/O SDBR W/O SDBR
OR OR OR
VARIABLE ACCOUNT PDBR * W/ SDBR * W/ PDBR * PDBR * W/ SDBR * W/ PDBR * PDBR * W/ SDBR * W/ PDBR *
- ---------------- -------- --------- --------- -------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Government Securities
1 Year.................. $ 84 $ 86 $ 87 $ 84 $ 86 $ 87 $ 21 $ 23 $ 24
3 Year.................. 65 71 75 128 134 138 65 71 75
5 Year.................. 111 121 128 156 166 173 111 121 128
10 Year................. 239 259 274 239 259 274 239 259 274
Aggressive Equity
1 Year.................. 86 88 89 86 88 89 23 25 26
3 Year.................. 71 77 81 134 140 144 71 77 81
5 Year.................. 121 131 138 166 176 183 121 131 138
10 Year................. 259 279 294 259 279 294 259 279 294
Growth LT
1 Year.................. 85 87 89 85 87 89 22 24 26
3 Year.................. 69 75 80 132 138 143 69 75 80
5 Year.................. 119 129 136 164 174 181 119 129 136
10 Year................. 255 275 290 255 275 290 255 275 290
Equity Income
1 Year.................. 84 86 88 84 86 88 21 23 25
3 Year.................. 66 72 76 129 135 139 66 72 76
5 Year.................. 113 123 130 158 168 175 113 123 130
10 Year................. 243 263 278 243 263 278 243 263 278
Multi-Strategy
1 Year.................. 84 86 88 84 86 88 21 23 25
3 Year.................. 66 72 77 129 135 140 66 72 77
5 Year.................. 113 123 131 158 168 176 113 123 131
10 Year................. 244 264 279 244 264 279 244 264 279
Equity
1 Year.................. 84 86 88 84 86 88 21 23 25
3 Year.................. 66 72 76 129 135 139 66 72 76
5 Year.................. 113 123 130 158 168 175 113 123 130
10 Year................. 243 263 278 243 263 278 243 263 278
Bond and Income
1 Year.................. 84 86 87 84 86 87 21 23 24
3 Year.................. 65 71 75 128 134 138 65 71 75
5 Year.................. 111 121 128 156 166 173 111 121 128
10 Year................. 239 259 274 239 259 274 239 259 274
Equity Index
1 Year.................. 80 82 83 80 82 83 17 19 20
3 Year.................. 51 58 62 114 121 125 51 58 62
5 Year.................. 89 99 107 134 144 152 89 99 107
10 Year................. 193 214 230 193 214 230 193 214 230
International
1 Year.................. 88 90 91 88 90 91 25 27 28
3 Year.................. 76 82 86 139 145 149 76 82 86
5 Year.................. 130 140 147 175 185 192 130 140 147
10 Year................. 277 297 311 277 297 311 277 297 311
Emerging Markets
1 Year.................. 92 94 95 92 94 95 29 31 32
3 Year.................. 89 94 99 152 157 162 89 94 99
5 Year.................. 151 160 168 196 205 213 151 160 168
10 Year................. 318 337 351 318 337 351 318 337 351
</TABLE>
* "W/O SDBR or PDBR" means without the Stepped-Up Death Benefit Rider (the
"SDBR") or Premier Death Benefit Rider (the "PDBR") and reflects expenses
for an Owner who has not purchased the SDBR or PDBR. "W/SDBR means with the
Stepped-Up Death Benefit Rider and reflects expenses for an Owner who has
purchased the SDBR. "W/PDBR" means with the Premier Death Benefit Rider and
reflects expenses for an Owner who has purchased the PDBR. Purchase of the
SDBR or PDBR is totally optional.
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES; ACTUAL EXPENSES INCURRED IN ANY GIVEN YEAR MAY BE MORE OR LESS THAN
THOSE SHOWN IN THE EXAMPLES.
10
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables present financial highlights with respect to each
Variable Account of the Separate Account. The information in the tables for
the periods ended December 31, 1996 and 1997 is included in the Separate
Account's financial statements for the respective years that have been audited
by Deloitte & Touche LLP, independent auditors. The tables should be read in
conjunction with the Separate Account's financial statements, which are in the
Separate Account's Annual Report dated as of December 31, 1997.
SELECTED ACCUMULATION UNIT* INFORMATION
Selected accumulation unit information as of the year ended December 31st for
the period:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
ACCUMULATION UNIT VALUE AT BEGINNING OF PERIOD:
Money Market Variable Account(a)....................... $10.36 $10.00
High Yield Bond Variable Account(a).................... 10.96 10.00
Managed Bond Variable Account(a)....................... 10.27 10.00
Government Securities Variable Account(a).............. 10.14 10.00
Aggressive Equity Variable Account(b).................. 10.67 10.00
Growth LT Variable Account(a).......................... 11.61 10.00
Equity Income Variable Account(a)...................... 11.66 10.00
Multi-Strategy Variable Account(a)..................... 11.03 10.00
Equity Variable Account(a)............................. 12.59 10.00
Bond and Income Variable Account(a).................... 9.79 10.00
Equity Index Variable Account(a)....................... 11.97 10.00
International Variable Account(a)...................... 11.84 10.00
Emerging Markets Variable Account(b)................... 9.57 10.00
- ------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE AT END OF PERIOD:
Money Market Variable Account.......................... $10.75 $10.36
High Yield Bond Variable Account....................... 11.83 10.96
Managed Bond Variable Account.......................... 11.14 10.27
Government Securities Variable Account................. 10.95 10.14
Aggressive Equity Variable Account..................... 10.92 10.67
Growth LT Variable Account............................. 12.71 11.61
Equity Income Variable Account......................... 14.78 11.66
Multi-Strategy Variable Account........................ 13.01 11.03
Equity Variable Account................................ 14.68 12.59
Bond and Income Variable Account....................... 11.23 9.79
Equity Index Variable Account.......................... 15.69 11.97
International Variable Account......................... 12.76 11.84
Emerging Markets Variable Accounts..................... 9.28 9.57
- ------------------------------------------------------------------------------
NUMBER OF ACCUMULATION UNITS OUTSTANDING AT END OF
PERIOD:
Money Market Variable Account.......................... 3,041,495 1,478,808
High Yield Bond Variable Account....................... 2,702,260 630,637
Managed Bond Variable Account.......................... 4,434,069 742,041
Government Securities Variable Account................. 1,506,839 673,682
Aggressive Equity Variable Account..................... 1,711,363 387,987
Growth LT Variable Account............................. 3,826,332 950,317
Equity Income Variable Account......................... 4,189,318 743,123
Multi-Strategy Variable Account........................ 1,830,504 294,936
Equity Variable Account................................ 1,983,738 453,223
Bond and Income Variable Account....................... 975,740 154,590
Equity Index Variable Account.......................... 4,460,482 757,175
International Variable Account......................... 5,292,436 1,312,817
Emerging Markets Variable Account...................... 1,342,086 240,607
</TABLE>
* Accumulation Unit: unit of measure used to calculate the value of a Contract
Owner's interest in a Variable Account during the Accumulation Period.
Date Variable Accounts began operations: (a) January 2, 1996 (b) April 17,
1996
11
<PAGE>
WHY BUY A CONTRACT
Your Pacific Value Contract (your "Contract") is an annuity contract that
provides you with flexibility in tax-deferred retirement planning or other
long-term financial planning. You may select among thirteen Variable
Investment Options and the Fixed Option. You may choose to add to your
Contract Value at any time before the Annuity Date, and your additional
Purchase Payments may be in any amount you choose (subject to certain
limitations). When you annuitize, we will send the payee a series of variable
and/or fixed payments for life or for a specified number of years.
Whether you purchase a Contract with after-tax dollars ("Non-Qualified
Contract") or whether your Contract is purchased through a Qualified Plan or
IRA ("Qualified Contract"), your earnings on the Contract are generally not
subject to tax until amounts are withdrawn or distributed (including annuity
payments). See FEDERAL TAX STATUS.
YOUR INVESTMENT OPTIONS
You may choose among thirteen different Variable Investment Options and the
Fixed Option.
YOUR VARIABLE INVESTMENT OPTIONS
Separate Account A, a separate account of ours, currently offers you thirteen
"Variable Investment Options" (also called "Subaccounts"). Each Variable
Investment Option invests in a separate Portfolio of the Fund. Your Variable
Investment Options are:
. Money Market Subaccount
. High Yield Bond Subaccount
. Managed Bond Subaccount
. Government Securities Subaccount
. Aggressive Equity Subaccount
. Growth LT Subaccount
. Equity Income Subaccount
. Multi-Strategy Subaccount
. Equity Subaccount
. Bond and Income Subaccount
. Equity Index Subaccount
. International Subaccount
. Emerging Markets Subaccount
12
<PAGE>
What Are Each of These Options?
For your convenience, the following chart summarizes some basic data about
each Portfolio. THIS CHART IS ONLY A SUMMARY. FOR MORE COMPLETE INFORMATION ON
EACH PORTFOLIO, INCLUDING A DISCUSSION OF THE PORTFOLIO'S INVESTMENT
TECHNIQUES AND THE RISKS ASSOCIATED WITH ITS INVESTMENTS, SEE THE ACCOMPANYING
FUND PROSPECTUS. NO ASSURANCE CAN BE GIVEN THAT A PORTFOLIO WILL ACHIEVE ITS
INVESTMENT OBJECTIVE. YOU SHOULD READ THE FUND PROSPECTUS CAREFULLY BEFORE
INVESTING.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
PRIMARY INVESTMENTS
(UNDER NORMAL
PORTFOLIO INVESTMENT OBJECTIVE CONDITIONS) PORTFOLIO MANAGER
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Current income Highest quality money Pacific Life
consistent with market securities.
preservation of
capital.
- -----------------------------------------------------------------------------------------
High Yield Bond High level of current Intermediate- and Pacific Life
income. long-term high-
yielding lower and
medium quality ("high
risk")
fixed income
securities.
- -----------------------------------------------------------------------------------------
Managed Bond Maximize total return Investment grade Pacific Investment
consistent with marketable debt Management Company
prudent investment securities. Will
management. normally maintain an
average portfolio
duration of 3-7 years.
- -----------------------------------------------------------------------------------------
Government Securi- Maximize total return Securities that are Pacific Investment
ties consistent with obligations of or Management Company
prudent investment guaranteed by the U.S.
management. Government, its
agencies or
instrumentalities
(including futures
contracts and options
thereon). Will
normally maintain an
average portfolio
duration of 3-7 years.
- -----------------------------------------------------------------------------------------
Aggressive Equity Capital appreciation. Common stocks of small Alliance Capital
emerging growth and Management L.P.
medium capitalization
companies.
- -----------------------------------------------------------------------------------------
Growth LT Long-term growth of Equity securities. Janus Capital
capital consistent Corporation
with preservation of
capital.
- -----------------------------------------------------------------------------------------
Equity Income Long-term growth of Dividend-paying common J.P. Morgan Investment
capital and income. stock. Management Inc.
- -----------------------------------------------------------------------------------------
Multi-Strategy High total return. Equity and fixed J.P. Morgan Investment
income securities. Management Inc.
- -----------------------------------------------------------------------------------------
Equity Capital appreciation. Common stocks and Goldman Sachs
securities convertible Asset Management
into or exchangeable
for common stocks.
- -----------------------------------------------------------------------------------------
Bond and Income Provide total return Investment grade debt Goldman Sachs
and income consistent securities. Will Asset Management
with prudent normally maintain an
investment management. average portfolio
duration within one-
half year of a long-
term bond index.
- -----------------------------------------------------------------------------------------
Equity Index Investment results Stocks included in the Bankers Trust Company
that correspond to the Standard & Poor's 500
total return Composite Stock Price
performance of common Index (the "S&P 500").
stocks publicly traded
in the U.S.
- -----------------------------------------------------------------------------------------
International Long-term capital Equity securities of Morgan Stanley Asset
appreciation. corporations domiciled Management Inc.
outside the U.S.
- -----------------------------------------------------------------------------------------
Emerging Markets Long-term growth of Common stocks of Blairlogie Capital
capital. companies domiciled in Management
emerging market
countries.
- -----------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
The Investment Adviser
We are the investment adviser for the Fund. We and the Fund have retained
other portfolio managers, supervised by us, for eleven of the Portfolios.
VARIABLE INVESTMENT OPTION PERFORMANCE
Historical performance information can help you understand how investment
performance can affect your investment in the Variable Investment Options.
Although the Separate Account was established January 2, 1996 and has no
historical performance prior to that date, each Subaccount will be investing
in shares of a Portfolio of the Fund, and the majority of these Portfolios do
have historical performance data which covers a longer period. Performance
data include total returns for each Subaccount, current and effective yields
for the Money Market Subaccount, and yields for the other fixed income
Subaccounts. Calculations are in accordance with standard formulas prescribed
by the SEC which are described in the SAI. Yields do not reflect any increase
in the Risk Charge for an optional Death Benefit Rider, any charge for premium
taxes and/or other taxes; this exclusion may cause yields to show more
favorable performance. SEC standardized total returns will not reflect any
increase in the Risk Charge for an optional Death Benefit Rider, any charge
for premium and/or other taxes, any non-recurring fees or charges or any
Credit Enhancement. Non-standardized total returns may or may not reflect
withdrawal charges, any increase in Risk Charges for an optional Death Benefit
Rider, charges for premium and/or other taxes, any non-recurring fees or
charges, or any Credit Enhancement. Data that do not reflect these charges may
show more favorable performance results. Standardized return figures will
always accompanying any non-standardized returns shown.
The SAI presents some hypothetical performance data. The SAI also presents
some performance benchmarks, based on unmanaged market indices, such as the
S&P 500, and on "peer groups," which use other managed funds with similar
investment objectives. These benchmarks may give you a broader perspective
when you examine hypothetical or actual Subaccount performance.
In addition, we may provide you with reports both as an insurance company and
as to our claims paying ability that are produced by rating agencies and
organizations.
YOUR FIXED OPTION
The Fixed Option offers you a guaranteed minimum interest rate on the amounts
you allocate to this Option. Amounts you allocate to this Option and your
earnings credited to this Option are held in our General Account. For more
detailed information about this Option, see THE GENERAL ACCOUNT section in
this Prospectus.
PURCHASING YOUR CONTRACT
HOW TO APPLY FOR YOUR CONTRACT
To purchase a Contract, fill out an application and submit it along with your
initial Purchase Payment to Pacific Life Insurance Company at P.O. Box 100060,
Pasadena, California 91189-0060. If your application and payment are complete
when received, or once they have become complete, we will issue your Contract
within two Business Days. If some information is missing from your
application, we may delay issuing your Contract while we obtain the missing
information; however, we will not hold your initial Purchase Payment for more
than five Business Days without your permission.
You may also purchase a Contract by exchanging your existing contract. You
must submit all contracts to be exchanged when you submit your application.
Call your representative, or call us at 1-800-722-2333, if you are interested
in this option.
We reserve the right to reject any application or Purchase Payment for any
reason, subject to any applicable nondiscrimination laws and to our own
standards and guidelines. The maximum age of a Contract Owner,
14
<PAGE>
including Joint owners and Contingent Owners, for which a Contract will be
issued is 80. The Contract Owner's age is calculated as of his or her age last
birthday. If the sole Contract Owner or sole Annuitant named in the
application for a Contract dies prior to our issuance of a Contract, then the
application for the Contract and/or any Contract issued shall be deemed null
and void; and any premiums we receive, including any proceeds received in
connection with an exchange or transfer, will be returned to the
applicant/Owner or the applicant/Owner's estate.
PURCHASING AN OPTIONAL DEATH BENEFIT RIDER
You may purchase either the Stepped-Up Death Benefit Rider (the "SDBR") or
Premier Death Benefit Rider (the "PDBR") (subject to state availability) at
the time your application is completed. You may not purchase both Riders nor
may you purchase a SDBR or PDBR after the Contract Date.
If you select one of these Riders, the SDBR or PDBR, as applicable, will
remain in effect until the earlier of: (a) the full withdrawal of the amount
available for withdrawal under the Contract; (b) when death benefit proceeds
become payable under the Contract; (c) any termination of the Contract in
accordance with the provisions of the Contract; or (d) the Annuity Date. The
SDBR or PDBR may not otherwise be cancelled. The SDBR or PDBR may only be
purchased if the age of each Annuitant is 75 or younger on the Contract Date.
MAKING YOUR PURCHASE PAYMENTS
Making Your Initial Payment
Your initial Purchase Payment must be at least $10,000 if you are buying a
Non-Qualified Contract, and at least $2,000 if you are buying a Qualified
Contract. You may pay this entire amount when you submit your application, or
you may choose our pre-authorized checking plan ("PAC"), which allows you to
pay in equal monthly installments over one year (at least $800 per month for
Non-Qualified Contracts, and at least $150 per month for Qualified Contracts).
If you choose PAC, you must make your first installment payment when you
submit your application. Further requirements for PAC are discussed in the PAC
form.
You must obtain our consent before making an initial or additional Purchase
Payment that will bring your aggregate Purchase Payments over $1,000,000.
Making Additional Payments
You may choose to invest additional amounts in your Contract at any time. Each
additional Purchase Payment above the initial Purchase Payment requirements
must be at least $250 for Non-Qualified Contracts and $50 for Qualified
Contracts. In certain states additional payments are allowed only during the
first Contract Year. See APPENDIX A.
Forms of Payment
Your initial and additional Purchase Payments may be sent by personal or bank
check or by wire transfer. You may also make additional PAC Purchase Payments
via electronic funds transfer. All checks must be drawn on U.S. funds. If you
make Purchase Payments by check other than a cashier's check, your payment of
any withdrawal proceeds and any refund during your "free look" period may be
delayed until your check has cleared.
CREDIT ENHANCEMENTS
We will add a Credit Enhancement to your Contract Value at the time each
Purchase Payment is applied to the Contract and on the first Contract
Anniversary, if applicable. The amount of a Credit Enhancement is determined
as a percentage of each Purchase Payment applied to the Contract. The Credit
Enhancement will be allocated
15
<PAGE>
among Investment Options in the same proportion that the applicable Purchase
Payment is allocated. The amount returned if the Contract Owner exercises his
or her right to return the Contract during your Right to Cancel period will be
reduced by any Credit Enhancements applied.
The Credit Enhancement with respect to each Purchase Payment will be based on
total Purchase Payments made into this Contract less total withdrawals,
including any withdrawal charges, from this Contract as of the date the
Purchase Payment is applied. The Credit Enhancement as a percentage of the
Purchase Payment is set forth below:
<TABLE>
<CAPTION>
CREDIT
TOTAL PURCHASE PAYMENTS LESS TOTAL WITHDRAWALS ENHANCEMENT
---------------------------------------------- -----------
<S> <C>
Less than $100,000............................................ 3.0%
At least $100,000 but less than $2,500,000.................... 4.0%
$2,500,000 or more............................................ 5.0%
</TABLE>
On the first Contract Anniversary we will calculate the total Purchase
Payments applied to the Contract, less total withdrawals, including any
withdrawal charges, from the Contract during the first Contract Year. If the
result is at least $100,000, all prior Purchase Payments that received a 3.0%
Credit Enhancement will receive an additional 1% Credit Enhancement on the
first Contract Anniversary. This additional 1% Credit Enhancement will not
apply to those first Year Purchase Payments that received a 4.0% or 5.0%
Credit Enhancement. The additional 1% Credit Enhancement will be allocated
among Investment Options according to your most recent allocation instructions
in effect as of the first Contract Anniversary.
HOW YOUR PAYMENTS ARE ALLOCATED
CHOOSING YOUR INVESTMENT OPTIONS
You may allocate your Purchase Payments among the thirteen Subaccounts and the
Fixed Option. Allocations of your initial Purchase Payment to the Investment
Options you selected will be effective either on your Contract Date or on your
Free Look Transfer Date. See WITHDRAWALS--RIGHT TO CANCEL ("FREE LOOK"). Each
additional Purchase Payment will be allocated to the Investment Options
according to your allocation instructions in your application, or most recent
instructions, if any, subject to the terms described in the WITHDRAWALS--RIGHT
TO CANCEL ("FREE LOOK") section. We reserve the right to require that your
allocation to any particular Investment Option must be at least $500. We also
reserve the right to transfer any remaining Account Value that is not at least
$500 to your other Investment Options on a prorata basis relative to your most
recent allocation instructions. If your Contract is issued in exchange for
another annuity contract or a life insurance contract, our administrative
procedures may vary depending on the state in which your Contract is
delivered.
INVESTING IN VARIABLE INVESTMENT OPTIONS
Each time we allocate your investment, and any Credit Enhancement, to a
Variable Investment Option, your Contract is credited with a number of
"Subaccount Units" in that Subaccount. The number of Subaccount Units credited
is equal to the amount you have allocated to that Subaccount, including any
Credit Enhancement, divided by the "Unit Value" of one Unit of that
Subaccount.
Example: you allocate $600 to the Government Securities Subaccount. At the
end of the Business Day on which your allocation is effective, the value of
one Unit in the Government Securities Subaccount is $15. As a result, 40
Subaccount Units are credited to your Contract for your $600.
Your Variable Account Value Will Change
After we credit your Contract with Subaccount Units, the value of those Units
will usually fluctuate. This means that, from time to time, your investment
allocated to the Variable Investment Options may be worth more or less
16
<PAGE>
than the original allocations to which those amounts can be attributed.
Fluctuations in Subaccount Unit Value will not change the number of Units
credited to your Contract.
Subaccount Unit Values will vary in accordance with the investment performance
of the corresponding Portfolio. For example, the value of Units in the Managed
Bond Subaccount will change to reflect the performance of the Managed Bond
Portfolio (including that Portfolio's investment income, its capital gains and
losses, and its expenses). Subaccount Unit Values are also adjusted to reflect
the Administrative Fee and applicable Risk Charge imposed on the Separate
Account.
We calculate the value of all Subaccount Units on each Business Day. The SAI
contains a detailed discussion of these calculations.
WHEN YOUR INVESTMENT IS EFFECTIVE
The day your allocation is effective determines the Unit Value at which
Subaccount Units are attributed to your Contract. In the case of transfers or
withdrawals, the effective day determines the Unit Value at which affected
Subaccount Units are debited and/or credited under your Contract. That Value
is the value of the Subaccount Units next calculated after your transaction is
effective. Your Variable Account Value begins to reflect the investment
performance results of your new allocations on the day after your transaction
is effective.
Your initial Purchase Payment is usually effective on the day we issue your
Contract. Any additional allocation is effective on the day we receive your
Purchase Payment in proper form.
TRANSFERS
Once your Payments are allocated to the Investment Options you selected, you
may transfer your Account Value from any Investment Option to any other
Investment Option. Certain restrictions apply to the Fixed Option. See THE
GENERAL ACCOUNT--WITHDRAWALS AND TRANSFERS. Transfer requests are generally
effective on the Business Day we receive them in proper form. If your Contract
is delivered in a state that requires refund of Purchase Payments under your
Right to Cancel, we generally may prohibit transfers until 15 days after your
Contract Date. See WITHDRAWALS--RIGHT TO CANCEL ("FREE LOOK").
No transfer fee is currently imposed for transfers among the Investment
Options, but we reserve the right to impose a transaction fee for transfers in
the future; a fee of up to $15 per transfer may apply to transfers in excess
of 15 in any Contract Year. Transfers under the dollar cost averaging and
earnings sweep options are counted toward your total transfers in a Contract
Year. Any such fee would be charged against your Investment Options
proportionately, based on your relative Account Value in each immediately
after the transfer.
If your transfer request results in your having a remaining Account Value in
an Investment Option that is less than $500 immediately after such transfer,
we may transfer that Account Value to your other Investment Options on a pro-
rata basis, relative to your most recent allocation instructions.
Exchanges of Annuity Units in any Subaccount(s) to any other Subaccount(s)
after the Annuity Date are limited to four in any twelve-month period. See THE
GENERAL ACCOUNT--WITHDRAWALS AND TRANSFERS in the Prospectus and THE CONTRACTS
AND THE SEPARATE ACCOUNT in the SAI.
Dollar Cost Averaging
Dollar cost averaging is a method in which you buy securities in a series of
regular purchases instead of in a single purchase. This allows you to average
the securities' prices over time, and may permit a "smoothing" of abrupt peaks
and drops in price. Prior to your Annuity Date, you may use dollar cost
averaging to transfer amounts, over time, from any Investment Option with an
Account Value of at least $5,000 to one or more Variable Investment Options.
Each transfer must be for at least $250. Detailed information appears in the
SAI.
17
<PAGE>
Portfolio Rebalancing
You may instruct us to maintain a specific balance of Variable Investment
Options under your Contract (e.g., 30% in the Equity Index Subaccount, 40% in
the Managed Bond Subaccount, and 30% in the Growth LT Subaccount) prior to
your Annuity Date. Periodically, we will "rebalance" your values in the
elected Subaccounts to the percentages you have specified. Rebalancing may
result in transferring amounts from a Subaccount earning a relatively higher
return to one earning a relatively lower return. The Fixed Option is not
available for rebalancing. Detailed information appears in the SAI.
Earnings Sweep
You may instruct us to make automatic periodic transfers of your earnings from
the Money Market Subaccount or from the Fixed Option to one or more Variable
Investment Options (other than the Money Market Subaccount). Detailed
information appears in the SAI.
CHARGES, FEES AND DEDUCTIONS
WITHDRAWAL CHARGE
No sales charge is imposed on any Purchase Payment. Your Purchase Payments
may, however, be subject to a withdrawal charge; this charge may apply to
amounts you withdraw under your Contract prior to the Annuity Date, depending
on the length of time each Purchase Payment has been invested and on the
amount you withdraw. No withdrawal charge is imposed on: (i) death benefit
proceeds, except as provided under the AMOUNT OF THE DEATH BENEFIT: DEATH OF A
CONTRACT OWNER Section; (ii) amounts converted after the first Contract
Anniversary to a life contingent Annuity Option or an Annuity Option with a
period certain of at least seven years; (iii) withdrawals by Owners to meet
the minimum distribution rules for Qualified Contracts as they apply to
amounts held under the Contract; or, (iv) subject to medical evidence
satisfactory to us, after the first Contract Anniversary, full or partial
withdrawals if the Annuitant has been diagnosed with a medically determinable
condition that results in a life expectancy of twelve (12) months or less.
Free Withdrawals
During a Contract Year, you may withdraw free of withdrawal charge amounts up
to your "Eligible Purchase Payments". Qualified plans have special
restrictions on withdrawals. See Special Restrictions Under Qualified Plans on
page 29. Eligible Purchase Payments include 10% of all Purchase Payments that
have an "age" of less than eight years, plus 100% of all Purchase Payments
that have an "age" of eight years or more. Once all Purchase Payments have
been deemed withdrawn, any withdrawal will be deemed a withdrawal of your
Earnings and will be free of the withdrawal charge. For those Contracts issued
to a Charitable Remainder Trust (CRT), the amount available for withdrawal
free of withdrawal charges during a Contract Year includes all Eligible
Purchase Payments plus all Earnings even if all Purchase Payments have not
been deemed withdrawn.
Example: You make an initial Purchase Payment of $10,000 in Contract Year
1, and make additional Purchase Payments of $1,000 and $6,000 in Contract
Year 2. With Earnings (Credit Enhancements included), your Contract Value
in Contract Year 3 is $19,000. In Contract Year 3, you may withdraw $1,700
free of the withdrawal charge (your total Purchase Payments were $17,000,
so 10% of that equals $1,700). After this withdrawal, your Contract Value
is $17,300. In Contract Year 4, you may withdraw another $1,700 (10% of the
total Purchase Payments of $17,000) free of any withdrawal charge.
How the Charge is Determined
The amount of the charge depends on how long each Purchase Payment was held
under your Contract. Each Purchase Payment you make is considered to have a
certain "age," depending on the length of time since that Purchase Payment was
effective. A Purchase Payment is "age one" from the day it is effective until
your next
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Contract Anniversary; beginning on that Contract Anniversary, your Payment
will have an "age of two" for a full Contract Year and increases in age on
each Contract Anniversary. When you withdraw an amount subject to the
withdrawal charge, the "age" of the Purchase Payments you withdraw determines
the level of withdrawal charge as follows:
<TABLE>
<CAPTION>
WITHDRAWAL
CHARGE AS A
PERCENTAGE
"AGE" OF PAYMENT OF THE AMOUNT
IN YEARS WITHDRAWN
---------------- -------------
<S> <C>
1..................................................... 7%
2..................................................... 7%
3..................................................... 7%
4..................................................... 7%
5..................................................... 5%
6..................................................... 5%
7..................................................... 4%
8 or more............................................. 0%
</TABLE>
We calculate your withdrawal charge by assuming your withdrawal is applied to
Purchase Payments first and in the order your Purchase Payments were received.
The withdrawal charge will be deducted proportionally among all Investment
Options from which your withdrawal occurs. See THE GENERAL ACCOUNT--
WITHDRAWALS AND TRANSFERS.
We pay sales commissions and other expenses associated with the promotion and
sales of the Contracts to broker-dealers. The withdrawal charge is designed to
reimburse us for these costs, although we expect that our actual expenses will
be greater than the amount of the withdrawal charge. Broker-dealers may
receive aggregate commissions of up to 6.25% of your aggregate Purchase
Payments.
Under certain circumstances and in exchange for lower initial commissions,
certain sellers of Contracts may be paid a persistency trail commission which
will take into account, among other things, the length of time Purchase
Payments have been held under a Contract, and Account Values. A trail
commission is not anticipated to exceed 1.00%, on an annual basis, of the
Account Values considered in connection with the trail commission. We may also
pay override payments, expense allowances, bonuses, wholesaler fees and
training allowances. Registered representatives earn commissions from the
broker-dealers with which they are affiliated and such arrangements may vary.
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.
Withdrawal Enhancements
We reserve the right, in our sole discretion, to calculate your withdrawal
charge on more favorable terms to you than as otherwise described in the
preceding paragraph. These Withdrawal Enhancements may include an acceleration
of the day on which the "age" of any Purchase Payment(s) is considered to
occur or a waiver of some or all of the withdrawal charge in the event the
Guaranteed Interest Rate is less than a specified rate. Although we retain the
discretion to add a Withdrawal Enhancement, once it is added, it is binding on
us and effective for any specified period we have designated. In the event of
any Withdrawal Enhancement, we will notify the Owner within thirty (30) days
of the effective date of the Withdrawal Enhancement.
Transfers
Transfers of all or part of your Account Value from one Investment Option to
another is not considered a withdrawal of an amount from your Contract, so no
withdrawal charge is imposed at the time of transfer. See HOW YOUR PAYMENTS
ARE ALLOCATED--TRANSFERS. See THE GENERAL ACCOUNT--WITHDRAWALS AND TRANSFERS.
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PREMIUM TAXES
Depending on (among other factors) your state of residence, a tax may be
imposed on your Purchase Payments at the time your payment is made, at the
time of a partial or full withdrawal, at the time any death benefit proceeds
are paid, at the Annuity Date or at such other time as taxes may be imposed.
Tax rates ranging from 0% to 3.5% are currently in effect, but may change in
the future. Some local jurisdictions also impose a tax.
If we pay any taxes attributable to Purchase Payments ("premium taxes") on
your behalf, we will impose a similar charge against your Contract Value. We
normally will charge you when you annuitize some or all of your Contract
Value. We reserve the right to impose this charge for applicable premium taxes
when you make a full or partial withdrawal, at the time any death benefit
proceeds are paid, or when those taxes are incurred by us. For these purposes,
"premium taxes" include any state or local premium or retaliatory taxes and,
where approval has been obtained, federal premium taxes and any federal, state
or local income, excise, business or any other type of tax (or component
thereof) measured by or based upon, directly or indirectly, the amount of
Purchase Payments we have received. We will base this charge on the Contract
Value, the amount of the transaction, the aggregate amount of Purchase
Payments we receive under your Contract, or any other amount, that in our sole
discretion we deem appropriate.
We may also charge the Separate Account or your Contract Value for taxes
attributable to the Separate Account or the Contract, including income taxes
attributable to the Separate Account or to our operations with respect to the
Contract, or taxes attributable, directly or indirectly, to Purchase Payments.
Currently, we do not impose any such charges.
WAIVERS AND REDUCED CHARGES
We may agree to reduce or waive the withdrawal charge, or credit additional
amounts under our Contracts, in situations where selling and/or maintenance
costs associated with the Contracts are reduced, such as the sale of several
Contracts to the same Owner(s), sales of large Contracts, sales of Contracts
in connection with a group or sponsored arrangement or mass transactions over
multiple Contracts.
We will only reduce or waive such charges or credit additional amounts on any
Contract where expenses associated with the sale of the Contract and/or costs
associated with administering and maintaining the Contract are reduced. We
reserve the right to terminate waiver, reduced charge and crediting programs
at any time, including for issued Contracts.
MORTALITY AND EXPENSE RISK CHARGE
We assess a charge against the assets of each Subaccount to compensate for
certain mortality and expense risks that we assume under the Contracts (the
"Risk Charge"). The risk that an Annuitant will live longer (and therefore
receive more annuity payments) than we predict through our actuarial
calculations at the time the Contract is issued is "mortality risk." We also
bear mortality risk in connection with death benefits payable under the
Contracts. The risk that the expense charges and fees under the Contracts and
Separate Account are less than our actual administrative and operating
expenses is called "expense risk."
This Risk Charge is assessed daily at an annual rate equal to 1.25% of each
Subaccount's assets; this charge may not be increased for the duration of your
Contract.
The Risk Charge will stop at the Annuity Date if you select a fixed annuity;
the base Risk Charge, but not any increase in the Risk Charge for an optional
Death Benefit Rider, will continue after the Annuity Date if you choose any
variable annuity, even though we do not bear mortality risk if your Annuity
Option is Period Certain Only.
We will realize a gain if the Risk Charge exceeds our actual cost of expenses
and benefits, and will suffer a loss if such actual costs exceed the Risk
Charge. Any gain will become part of our General Account; we may use it for
any reason, including covering sales expenses on the Contracts.
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Increase in Risk Charge If an Optional Death Benefit Rider Is Purchased
We increase your Risk Charge by an annual rate equal to .20% of each
Subaccount's assets if you purchase the Stepped-Up Death Benefit Rider (the
"SDBR") or .35% if you purchase the Premier Death Benefit Rider (the "PDBR").
The total Risk Charge annual rate will be 1.45% if the SDBR is purchased or
1.60% if the PDBR is purchased. Any increase in your Risk Charge will not
continue after the Annuity Date. See PURCHASING YOUR CONTRACT--PURCHASING AN
OPTIONAL DEATH BENEFIT RIDER.
ADMINISTRATIVE FEE
We charge an Administrative Fee as compensation for costs we incur in
operating the Separate Account and issuing and administering the Contracts,
including processing applications and payments, and issuing reports to you and
to regulatory authorities.
The Administrative Fee is assessed daily at an annual rate equal to .15% of
the assets of each Subaccount. This fee is guaranteed not to increase for the
life of your Contract. A relationship will not necessarily exist between the
actual administrative expenses attributable to a particular Contract and the
Administrative Fee paid in respect of that particular Contract. The
Administrative Fee will continue after the Annuity Date if you choose any
variable annuity.
EXPENSES OF THE FUND
Your Variable Account Value reflects advisory fees and other expenses incurred
by the various Portfolios of the Fund, net of any applicable waivers and/or
reimbursements. These fees and expenses may vary. The Fund is governed by its
own Board of Trustees, and your Contract does not fix or specify the level of
expenses of any Portfolio. The Fund's fees and expenses are described in
detail in the Fund's Prospectus and in its SAI.
RETIREMENT BENEFITS AND OTHER PAYOUTS
SELECTING YOUR ANNUITANT
When you submit the application for your Contract, you must choose a sole
Annuitant or two Joint Annuitants. We will send the annuity payments to the
payee that you designate. If you are buying a Qualified Contract, you must be
the sole Annuitant; if you are buying a Non-Qualified Contract you may choose
yourself and/or another person. Whether you choose to have a sole or two Joint
Annuitants, you may choose a Contingent Annuitant; more information on these
options is provided in the SAI. You will not be able to add or change a sole
or Joint Annuitant after your Contract is issued; however, if you are buying a
Qualified Contract, you may add a Joint Annuitant on the Annuity Date. You
will be able to add or change a Contingent Annuitant until your Annuity Date
or the death of your sole Annuitant or both Joint Annuitants, whichever occurs
first; however, once your Contingent Annuitant has become the Annuitant under
your Contract, no additional Contingent Annuitant may be named. No Annuitant
(Primary, Joint or Contingent) may be named upon or after reaching his or her
81st birthday. We reserve the right to require proof of age or survival of the
Annuitant(s).
ANNUITIZATION
You may choose both your Annuity Date and your Annuity Option. At the Annuity
Date, you may elect to annuitize some or all of your Net Contract Value, less
any transaction fee and any applicable charge for premium taxes and/or other
taxes, (the "Conversion Amount"), as long as such Conversion Amount annuitized
is at least $10,000, subject to any state exceptions. (See APPENDIX A: STATE
LAW VARIATIONS). If you annuitize only a portion of this available Contract
Value, you may have the remainder distributed, less any applicable charge for
premium taxes and/or other taxes, any transaction fee, and any applicable
withdrawal charge. Any such distribution will be made to you in a single sum
if the remaining Conversion Amount is less than $10,000 on your Annuity Date.
Distributions under your Contract may have tax consequences. You should
consult a qualified tax adviser for information on annuitization.
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CHOOSING YOUR ANNUITY DATE ("ANNUITY START DATE")
You should choose your Annuity Date when you submit your application or we
will apply a default Annuity Date to your Contract.
You may change your Annuity Date by notifying us, in proper form, at least ten
Business Days prior to the earlier of your current Annuity Date or your new
Annuity Date.
Your Annuity Date cannot be earlier than your first Contract Anniversary and
must occur on or before a certain date: If you have a sole Annuitant, your
Annuity Date cannot be later than his or her 95th birthday. However, to meet
IRS minimum distribution rules, your Annuity Date may need to be earlier. If
you have Joint Annuitants and a Non-Qualified Contract, your Annuity Date
cannot be later than your younger Joint Annuitant's 95th birthday. Different
requirements may apply in some states. If your Contract is a Qualified
Contract, you may also be subject to additional restrictions. Adverse federal
tax consequences may result if you choose an Annuity Date that is prior to an
Annuitant's attained age 59 1/2. See FEDERAL TAX STATUS.
You should carefully review the Annuity Options with your financial tax
adviser, and, for Contracts used in connection with a Qualified Plan,
reference should be made to the terms of the particular plan and the
requirements of the Code for pertinent limitations respecting annuity payments
and other matters. For instance, under requirements for retirement plans that
qualify under Section 401 or 408 of the Code, annuity payments generally must
begin no later than April 1 of the calendar year following the year in which
the Annuitant reaches age 70 1/2. However, if a plan qualified under Section
401(a) of the Code or a 403(b) contract so provides, no distributions are
required for individuals who are employed after age 70 1/2 (other than 5%
owners) until they retire. If a plan is qualified under Section 408A of the
Code, no minimum distributions are required at any time.
For retirement plans that qualify under Section 401 or 408 of the Code, the
period elected for receipt of annuity payments under Annuity Options 2 and 4
(a) generally may be no longer than the joint life expectancy of the Annuitant
and Beneficiary in the year that the Annuitant reaches age 70 1/2, and (b)
must be shorter than such joint life expectancy if the Beneficiary is not the
Annuitant's spouse and is more than 10 years younger than the Annuitant. Under
Option 3, if the secondary or other Annuitant is not the Annuitant's spouse
and is more than 10 years younger than the Annuitant, the 66 2/3% and 100%
elections specified below may not be available. The restrictions on options
for retirement plans that qualify under Sections 401 and 408 also apply to a
retirement plan that qualifies under Section 403(b) with respect to amounts
that accrued after December 31, 1986.
If you annuitize only a portion of your Net Contract Value on your Annuity
Date, you may, at that time, have the option to elect not to have the
remainder of your Contract Value distributed, but instead to continue your
Contract with that remaining Contract Value (a "continuing Contract"). If this
option is available, you would then choose a second Annuity Date for your
continuing Contract, and all references in this Prospectus to your "Annuity
Date" would, in connection with your continuing Contract, be deemed to refer
to that second Annuity Date. This option may not be available, or may be
available only for certain types of Contracts. You should be aware that some
or all of the payments received before the second Annuity Date may be fully
taxable. We recommend that you call your tax adviser for more information if
you are interested in this option.
DEFAULT ANNUITY DATE AND OPTIONS
If you have a Non-Qualified Contract and you do not choose an Annuity Date
when you submit your application, your Annuity Date will be your Annuitant's
95th birthday or your younger Joint Annuitant's 95th birthday, whichever
applies; however some states' laws may require a different Annuity Date.
Certain Qualified Plans may require annuitization to occur at an earlier age.
If you have not specified an Annuity Option or do not instruct us otherwise,
at your Annuity Date your Net Contract Value, less any transaction fees and/or
charges for premium taxes and/or other taxes, will be annuitized (if this net
amount is at least $10,000) as follows: the net amount from your Fixed Option
will be converted into a fixed-dollar annuity and the net amount from your
Variable Account Value will be converted into a variable-
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dollar annuity directed to the Subaccounts proportionate to your Account Value
in each. If you have a Non-Qualified Contract, or if you have a Qualified
Contract and are not married, your default Annuity Option will be Life with a
ten year Period Certain. If you have a Qualified Contract and you are married,
your default Annuity Option will be Joint and Survivor Life with survivor
payments of 50%; your spouse will automatically be named your Joint Annuitant.
CHOOSING YOUR ANNUITY OPTION
You may make three basic decisions about your annuity payments. First, you may
choose whether you want those payments to be a fixed-dollar amount and/or a
variable-dollar amount. Second, you may choose the form of annuity payments
(see ANNUITY OPTIONS). Third, you may decide how often you want annuity
payments to be made (the "frequency" of the payments). You may not change
these selections after the Annuity Date.
Fixed and Variable Annuities
You may choose a fixed annuity (i.e., with fixed-dollar amounts), a variable
annuity (i.e., with variable-dollar amounts), or you may choose both,
converting one portion of the net amount you annuitize into a fixed annuity
and another portion into a variable annuity.
If you select a fixed annuity, each periodic annuity payment received will be
equal to the initial annuity payment, unless you select a joint and survivor
life annuity with reduced survivor payments and the Primary Annuitant dies.
Any net amount you convert to a fixed annuity will be held in our General
Account, (but not under the Fixed Option).
If you select a variable annuity, you may choose as many Variable Investment
Options as you wish; the amount of the periodic annuity payments will vary
with the investment results of the Variable Investment Options selected. After
the Annuity Date, Annuity Units may be exchanged among available Variable
Investment Options up to four times in any twelve-month period. How your
Contract converts into a variable annuity is explained in more detail in THE
CONTRACTS AND THE SEPARATE ACCOUNT in the SAI.
Annuity Options
Four Annuity Options are currently available under the Contracts, although
additional options may become available in the future.
1. Life Only. Periodic payments are made to the designated payee during the
Annuitant's lifetime. Payments stop when the designated payee dies.
2. Life with Period Certain. Periodic payments are made to the designated
payee during the Annuitant's lifetime, with payments guaranteed for a
specified period. You may choose to have payments guaranteed for
anywhere from 7 through 30 years (in full years only). If the Annuitant
dies before the guaranteed payments are completed, the Owner receives
the remainder of the guaranteed payments, if living; otherwise the
Beneficiary, if living; otherwise the Owner's estate.
3. Joint and Survivor Life. Periodic payments are made during the lifetime
of the Primary Annuitant. After the death of the Primary Annuitant,
periodic payments are based on the life of the secondary Annuitant named
in the election if and so long as such secondary Annuitant lives. You
may choose to have the payments to the surviving secondary Annuitant
equal 50%, 66 2/3% or 100% of the original amount payable made during
the lifetime of the Primary Annuitant (you must make this election when
you choose your Annuity Option). If you elect a reduced payment based on
the life of the secondary Annuitant, fixed annuity payments will be
equal to 50% or 66 2/3% of the original fixed payment payable during the
lifetime of the Primary Annuitant; variable annuity payments will be
determined using 50% or 66 2/3%, as applicable, of the number of Annuity
Units for each Subaccount credited to the Contract. Payments stop when
both Annuitants have died.
4. Period Certain Only. Periodic payments are made to the designated payee
over a specified period. You may choose to have payments continue for
anywhere from 7 through 30 years (in full years only). If the Annuitant
dies before the guaranteed payments are completed, we pay the Owner the
remainder of the guaranteed payments, if living; otherwise the
Beneficiary, if living; otherwise the Owner's estate.
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For Contracts issued in connection with a Qualified Plan, please refer to the
discussion above under "Choosing Your Annuity Date". If your Contract was
issued in connection with a Qualified Plan subject to Title I of the Employee
Retirement Income Security Act of 1974 ("ERISA"), your spouse's consent may be
required when you seek any distribution under your Contract, unless your
Annuity Option is Joint and Survivor Life with survivor payments of at least
50%, and your spouse is your Joint Annuitant.
Frequency of Payments
You may choose to have annuity payments made monthly, quarterly, semiannually,
or annually. The amount of a variable payment will be determined in each
period on the date corresponding to your Annuity Date, and payment will be
made on the next succeeding day.
Your initial annuity payment must be at least $250. Depending on the net
amount you annuitize, this requirement may limit your options regarding the
period and/or frequency of annuity payments.
YOUR ANNUITY PAYMENTS
Amount of the First Payment
Your Contract contains tables that we use to determine the amount of the first
annuity payment under your Contract, taking into consideration the annuitized
portion of your Net Contract Value at the Annuity Date. This amount will vary,
depending on the annuity period and payment frequency you select; this amount
will be larger in the case of shorter Period Certain annuities and smaller for
longer Period Certain annuities. Similarly, this amount will be greater for a
Life Only annuity than for a Joint and Survivor Life annuity, because we will
expect to make payments for a shorter period of time on a Life Only annuity.
If you do not choose the Period Certain Only annuity, this amount will also
vary depending on the age of the Annuitant(s) on the Annuity Date and, for
some Contracts in some states, the sex of the Annuitant(s).
For fixed annuity payments, the guaranteed income factors in our tables are
based on an annual interest rate of 3% and the 1983a Annuity Mortality Table
with the ages set back 10 years. If you elect a fixed annuity, fixed annuity
payments will be based on the periodic income factors in effect for your
Contract on the Annuity Date which are at least the guaranteed income factors
under the Contract.
For variable annuity payments, the tables are based on an assumed annual
investment return of 5% and the 1983a Annuity Mortality Table with the ages
set back 10 years. If you elect a variable annuity, your initial variable
annuity payment will be based on the applicable variable annuity income
factors in our tables. You may choose any other annuity option we may offer on
the option's effective date. A higher assumed investment return would mean a
larger first variable annuity payment, but subsequent payments would increase
only when actual net investment performance exceeds the higher assumed rate
and would fall when actual net investment performance is less than the higher
assumed rate. A lower assumed rate would mean a smaller first payment and a
more favorable threshold for increases and decreases. If the actual net
investment performance is a constant 5% annually, annuity payments will be
level. The assumed investment return is explained in more detail in the SAI
under THE CONTRACTS AND THE SEPARATE ACCOUNT.
DEATH BENEFITS
Death benefit proceeds may be payable on proof of death before the Annuity
Date of the Annuitant or of any Contract Owner while the Contract is in force.
The amount of the death benefit proceeds will be paid according to the DEATH
BENEFIT PROCEEDS section.
Death Benefit Proceeds
Death benefit proceeds will be payable upon receipt, in proper form, of proof
of death and instructions regarding payment of death proceeds. Such proceeds
will equal the amount of the death benefit reduced by any charges for
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premium taxes and/or other taxes and any Contract Debt. The death benefit
proceeds will be payable in a single sum, as an Annuity Option under this
Contract or towards the purchase of any Annuity Option we then offer, or in
accordance with IRS regulations (see DEATH OF OWNER DISTRIBUTION RULES). Any
such Annuity Option is subject to all restrictions (including minimum amount
requirements) as are other annuities under this Contract; in addition, there
may be legal requirements that limit the recipient's Annuity Options and the
timing of any payments. A recipient should consult a qualified tax adviser
before electing to receive an annuity.
Additional provisions apply if your Contract names a Joint or Contingent Owner
or Annuitant, or if the Beneficiary, Joint Owner, or Contingent Owner is your
spouse. Further information about these provisions is contained in the SAI.
Death of Owner Distribution Rules
If an Owner of a Non-Qualified Contract dies before the Annuity Date, any
death benefit proceeds under this Contract must begin distribution within five
years after the Owner's death. In order to satisfy this requirement, the
designated recipient must receive a lump sum payment or elect to receive an
annuity for life or over a period that does not exceed the life expectancy of
the designated recipient with annuity payments that start within one year
after the Owner's death. If an election to receive an annuity is not made
within 60 days of our receipt of proof in proper form of the Owner's death or,
if earlier, 60 days (or shorter period as we permit) prior to the first
anniversary of the Owner's death, the lump sum option will be deemed elected,
unless otherwise required by law. If the lump sum option is deemed elected, we
will consider that deemed election as receipt of instructions regarding
payment of death benefit proceeds. If a Non-Qualified Contract has Joint
Owners, this requirement applies to the first Owner to die.
If the Owner was not an Annuitant but was a Joint Owner and there is a
surviving Joint Owner, that surviving Joint Owner is the designated recipient;
if no Joint Owner survives but a Contingent Owner is named in the Contract and
is living, he or she is the designated recipient, otherwise the designated
recipient is the Beneficiary; if no Beneficiary is living, the designated
recipient is the Owner's estate.
If the Owner was an Annuitant, the designated recipient is the Joint Owner, if
living; otherwise the Contingent Owner, if living; otherwise the Beneficiary;
if no Beneficiary is living, the designated recipient is the Owner's estate. A
sole designated recipient who is the Owner's spouse may elect to become the
Owner (and sole Annuitant if the deceased Owner had been the Annuitant) and
continue the Contract until the earliest of the spouse's death, the death of
the Annuitant, or the Annuity Date. A Joint or Contingent Owner who is the
designated recipient but not the Owner's spouse may not continue the Contract,
but may purchase a new Contract.
If you are a non-individual Owner of a Contract other than a Contract issued
under a Qualified Plan as defined in Section 401 or 403 of the Code, the
Primary Annuitant will be treated as the Owner of the Contract for purposes of
these Distribution Rules. If there is a change in the Primary Annuitant prior
to the Annuity Date, such change will be treated as the death of the Owner.
The amount of the death benefit in this situation will be (a) the Contract
Value if the non-individual Owner elects to maintain the Contract and reinvest
the Contract Value into the Contract in the same amount as immediately prior
to the distribution, or (b) the Contract Value less any withdrawal and/or
transaction fee, any charges for withdrawals, and/or premium taxes and/or
other taxes, if the non-individual Owner elects a cash distribution. The
amount of the death benefit will be determined as of the Business Day we
receive, in proper form, the request to change the Primary Annuitant and
instructions regarding maintaining the Contract or cash distribution.
The Contract incorporates all applicable provisions of Code Section 72(s) and
any successor provision, as deemed necessary by us to qualify the Contract as
an annuity contract for federal income tax purposes, including the requirement
that, if the Owner dies before the Annuity Date, any death benefit proceeds
under the Contract shall be distributed within five years of the Owner's death
(or such other period that we offer and that is permitted under the Code or
such shorter period as we may require).
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Qualified Plan Death of Annuitant Distribution Rules
Under Internal Revenue Service regulations, if the Contract is owned under a
Qualified Plan as defined in Section 401, 403, 408, or 408A of the Code and
the Annuitant dies before the commencement of distributions, the payment of
any death benefit must be made to the designated recipient no later than
December 31 of the calendar year in which the fifth anniversary of the
Annuitant's death falls. In order to satisfy this requirement, generally the
designated recipient must receive a lump sum payment by this date or elect to
receive the Annuitant's interest in the Contract in equal or substantially
equal installments over a period not exceeding the lifetime or life expectancy
of the designated recipient. If the designated recipient elects the
installment payment option, the Internal Revenue Service regulations provide
that payments must begin no later than December 31 of the calendar year which
follows the calendar year in which the Annuitant died. However, (except in the
case of a Roth IRA) if the designated recipient is the spouse of the Annuitant
at the time of the Annuitant's death ("surviving spouse"), then, under the
regulations, payments under the installment payment option must begin no later
than December 31 of the calendar year in which the Annuitant would have
reached age 70 1/2.
Under our administrative procedures, payments must commence no later than the
first anniversary of the death of the Annuitant; unless the designated
recipient is the surviving spouse. If the surviving spouse elects to continue
the contract and not do an eligible rollover to an IRA in his or her name,
then he or she will be subject to the five year rule. However, the surviving
spouse may waive the five year requirement and elect to take distributions
over his or her life expectancy, and if the surviving spouse elects to defer
the commencement of installment payments beyond the first anniversary of the
Annuitant's death, the surviving spouse will be deemed to continue the
Contract. In this instance, the surviving spouse may continue the contract
until the later of: (a) December 31 of the year following the year the
Annuitant died; or (b) December 31 of the year in which the Annuitant would
have turned 70 1/2. Further, under our administrative procedures, if the
installment payment (annuity) option election is not received by us in good
order within 60 days of (or shorter period as we permit) our receipt of proof
in proper form of the Annuitant's death or, if earlier, before the sixtieth
day preceding (1) the first anniversary of the Annuitant's death or (2) the
date on which the Annuitant would have attained age 70 1/2, the lump sum
option will be deemed by us to have been elected, unless otherwise required by
law. If the lump sum option is deemed elected, we will treat that deemed
election as receipt of instructions regarding payment of death benefit
proceeds.
If the Annuitant dies after the commencement of distributions but before the
Annuitant's entire interest in the Contract (other than a Roth IRA) has been
distributed, the remaining interest in the Contract must be distributed to the
designated recipient at least as rapidly as under the distribution method in
effect at the time of the Annuitant's death.
Death Benefit Amounts
The Death Benefit Amount as of any day (prior to the Annuity Date) is equal to
the greater of (a) your Contract Value as of that day, or (b) your aggregate
Purchase Payments reduced by an amount for each withdrawal, which is
calculated by multiplying the aggregate Purchase Payments received prior to
each withdrawal by the ratio of the amount of each withdrawal, including any
withdrawal charge, to the Contract Value immediately prior to each withdrawal.
We calculate the Death Benefit Amount as of the "Notice Date". The "Notice
Date" is the day on which we receive proof (in proper form) of death and
instructions regarding payment of death benefit proceeds.
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Optional Stepped-Up Death Benefit Rider
If, at the time your application is completed, you purchase the Stepped-Up
Death Benefit Rider (the "SDBR") (subject to state availability), a Guaranteed
Minimum Death Benefit is added to your Contract as follows:
The Guaranteed Minimum Death Benefit Amount is calculated only when death
benefit proceeds become payable as a result of the death of the Annuitant
prior to the Annuity Date, and is determined as follows:
First, we calculate what the Death Benefit Amount would have been as of your
first Contract Anniversary and each subsequent Contract Anniversary that
occurs while the Annuitant is living and before the Annuitant reaches his or
her 81st birthday (each of these Contract Anniversaries is a "Milestone
Date").
We then adjust the Death Benefit Amount for each Milestone Date by: (i) adding
the aggregate amount of any Purchase Payments received by us since that
Milestone Date; and (ii) subtracting an amount for each withdrawal that has
occurred since that Milestone Date, which is calculated by multiplying the
Death Benefit Amount by the ratio of the amount of each withdrawal that has
occurred since that Milestone Date, including any withdrawal charge, to the
Contract Value immediately prior to the withdrawal.
The highest of these adjusted Death Benefit Amounts for each Milestone Date,
as of the Notice Date, is your Guaranteed Minimum Death Benefit Amount if you
purchase the SDBR. CALCULATION OF ANY GUARANTEED MINIMUM DEATH BENEFIT IS ONLY
MADE ONCE DEATH BENEFIT PROCEEDS BECOME PAYABLE UNDER YOUR CONTRACT.
Optional Premier Death Benefit Rider
If, at the time your application is completed, you purchase the Premier Death
Benefit Rider (the "PDBR") (subject to state availability), the Death Benefit
Amounts stated above are replaced with the following:
The Death Benefit Amount as of any day (prior to the Annuity Date) is equal to
the greater of (a) your Contract Value as of that day, or (b) your Purchase
Payments less any withdrawals, including withdrawal charges, increased at an
effective annual rate of 6% to that day (and subject to a maximum of two times
the aggregate Purchase Payments less any withdrawals, including withdrawal
charges). The 6% effective annual rate of growth will take into account the
timing of when each Purchase Payment and withdrawal occurred by applying a
daily factor of 1.00015965 to each day's balance. The 6% effective annual rate
of growth will stop accruing as of the earlier of: (i) the Contract
Anniversary before the date the Annuitant reaches his or her 81st birthday;
(ii) the date of death of the sole Annuitant; or (iii) the Annuity Date.
The Guaranteed Minimum Death Benefit Amount is calculated only when death
benefit proceeds become payable as a result of the death of the sole Annuitant
prior to the Annuity Date, and is determined as follows:
First, we calculate what the Death Benefit Amount would have been as of the
quarterly anniversary following the Contract Date and as of each subsequent
quarterly anniversary that occurs while the Annuitant is living and up to and
including the Contract Anniversary following the Annuitant's 65th birthday.
Quarterly anniversaries are measured from the Contract Date. After the
Contract Anniversary following the Annuitant's 65th birthday, we calculate
what the Death Benefit Amount would have been as of each Contract Anniversary
that occurs while the Annuitant is living and before the Annuitant reaches his
or her 81st birthday. Each quarterly anniversary and each Contract Anniversary
in which a Death Benefit Amount is calculated is referred to as a "Milestone
Date." We then adjust the Death Benefit Amount for each Milestone Date by: (i)
adding the aggregate amount of any Purchase Payments received by us since that
Milestone Date; and (ii) subtracting an amount for each withdrawal that has
occurred since that Milestone Date, which is calculated by multiplying the
Death Benefit Amount by the ratio of the amount of each withdrawal that has
occurred since that Milestone Date, including any withdrawal charge, to the
Contract Value immediately prior to the withdrawal.
The highest of these adjusted Death Benefit Amounts as of the Notice Date is
your Guaranteed Minimum Death Benefit if the PDBR is purchased. CALCULATIONS
OF ANY GUARANTEED MINIMUM DEATH BENEFIT ARE MADE ONLY ONCE DEATH BENEFIT
PROCEEDS BECOME PAYABLE UNDER YOUR CONTRACT.
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The Amount of the Death Benefit: Death of Annuitant
If the sole Annuitant dies prior to the Annuity Date, the death benefit will
be equal to the Death Benefit Amount as of the Notice Date. If you purchase
the SDBR, the death benefit will be equal to (a) the Death Benefit Amount as
of the Notice Date or (b) the "Guaranteed Minimum Death Benefit Amount" as
provided under the SDBR as of the Notice Date, if greater. If you purchase the
PDBR, the death benefit will be equal to (a) the Death Benefit Amount as
provided under the PDBR as of the Notice Date or (b) the "Guaranteed Minimum
Death Benefit Amount" as provided under the PDBR as of the Notice Date, if
greater.
The following procedures apply in the event of death of an Annuitant who is
not also a Contract Owner: If your Contract names Joint Annuitants and only
one Joint Annuitant dies, the surviving Joint Annuitant becomes your sole
Annuitant and the death benefit is not yet payable. If your sole Annuitant
dies (or if no Joint Annuitant survives) and your Contract names a surviving
Contingent Annuitant, he or she becomes the sole Annuitant and the death
benefit proceeds are not yet payable. If there is no surviving Joint or
Contingent Annuitant, the death benefit proceeds are payable to the Owner, if
living; if not to the Beneficiary, if living; if not, to the Owner's estate.
If both the Owner and Annuitant die simultaneously, the death benefit proceeds
will be paid to the Beneficiary, if living; if not, to the Owner's estate.
The Amount of the Death Benefit: Death of a Contract Owner
If a Contract Owner who is not the Annuitant dies before the Annuity Date, the
amount of the death benefit will be equal to your Contract Value as of the
Notice Date and will be paid in accordance with the DEATH BENEFIT PROCEEDS
section above. The death benefit proceeds will be paid to the Joint Owner, if
living; if not, to the Contingent Owner, if living; if not, to the
Beneficiary, if living; if not, to the Owner's estate. See THE GENERAL
ACCOUNT--WITHDRAWALS AND TRANSFERS.
If a Contract Owner who is the Annuitant dies before the Annuity Date, the
amount of the death benefit will be determined in accordance with the DEATH OF
ANNUITANT section above, and will be paid in accordance with the DEATH BENEFIT
PROCEEDS section above. The death benefit proceeds will be paid to the
Beneficiary if living; if not, to the Owner's estate. Joint and/or Contingent
Owners and/or Annuitants will not be considered in determining the recipient
of death benefit proceeds.
If both you and the Annuitant(s) are non-individual persons, no death benefit
will be payable, and any distribution will be treated as a withdrawal and
subject to any applicable withdrawal fee, withdrawal charge, and charge for
premium taxes and/or other taxes.
WITHDRAWALS
OPTIONAL WITHDRAWALS
You may, on or prior to your Annuity Date, withdraw all or a portion of the
amount available under your Contract while the Annuitant is living and your
Contract is in force. You may surrender your Contract and make a full
withdrawal at any time. Except as provided below, beginning 30 days after your
Contract Date, you also may make partial withdrawals from your Investment
Options at any time. You may request to withdraw a specific dollar amount or a
specific percentage of an Account Value or your Net Contract Value. You may
choose to make your withdrawal from specified Investment Options; if you do
not specify Investment Options, your withdrawal will be made from all of your
Investment Options proportionately. Each partial withdrawal must be for $500
or more, except pre-authorized withdrawals, which must be at least $250. If
your partial withdrawal from an Investment Option would leave a remaining
Account Value in that Investment Option of less than $500, we have the right,
at our option, to transfer that remaining amount to your other Investment
Options on a proportionate basis relative to your most recent allocation
instructions. If your partial withdrawal leaves you with a Net Contract Value
of less than $1,000 ($500 in Maryland, New Jersey and Texas), we have the
right, at our option, to terminate your Contract and send you the withdrawal
proceeds described in the next section below. Partial withdrawals from the
Fixed Option in any Contract Year are subject to restrictions. See GENERAL
ACCOUNT--WITHDRAWALS AND TRANSFERS.
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Amount Available for Withdrawal
The amount available for withdrawal is your Net Contract Value at the end of
the Business Day on which your withdrawal request is effective, less any
applicable withdrawal charge, withdrawal transaction fee, and any charge for
premium taxes and/or other taxes. The amount we send to you (your "withdrawal
proceeds") will also reflect any required or requested federal and state
income tax withholding. See FEDERAL TAX STATUS and THE GENERAL ACCOUNT--
WITHDRAWALS AND TRANSFERS.
You assume investment risk on investments in the Subaccounts; as a result, the
amount available to you for withdrawal from any Subaccount may be more or less
than the total Purchase Payments you have allocated to that Subaccount.
Withdrawal Transaction Fees
There is currently no transaction fee for partial withdrawals. However, we
reserve the right to impose a withdrawal transaction fee in the future of up
to $15 for each partial withdrawal (including pre-authorized partial
withdrawals) in excess of 15 in any Contract Year. Any such fee would be
charged against your Investment Options proportionately based on your Account
Value in each immediately after the withdrawal.
Pre-Authorized Withdrawals
If your Contract Value is at least $5,000, you may select the pre-authorized
withdrawal option, and you may choose monthly, quarterly, semiannual or annual
withdrawals. Each withdrawal must be for at least $250. Each pre-authorized
withdrawal is subject to federal income tax on its taxable portion and may be
subject to a penalty tax of 10% or more if you have not reached age 59 1/2.
See FEDERAL TAX STATUS and THE GENERAL ACCOUNT--WITHDRAWALS AND TRANSFERS.
Additional information and options are set forth in the SAI and in the Pre-
Authorized Withdrawal section of your application.
Special Requirements for Full Withdrawals
If you wish to withdraw the entire amount available under your Contract, you
must either return your Contract to us or sign and submit to us a "lost
Contract affidavit."
Special Restrictions Under Qualified Plans
Individual Qualified Plans may have additional rules regarding withdrawals
from a Contract purchased under such a Plan. In general, if your Contract was
issued under certain Qualified Plans, you may not withdraw amounts
attributable to contributions made pursuant to a salary reduction agreement
(as defined in Section 402(g)(3)(A) of the Code) or to transfers from a
custodial account (as defined in Section 403(b)(7) of the Code) except in
cases of your (a) separation from service, (b) death, (c) disability as
defined in Section 72(m)(7) of the Code, (d) reaching age 59 1/2, or (e)
hardship as defined for purposes of Section 401(k) of the Code.
These limitations do not affect certain rollovers or exchanges between
Qualified Plans, and do not apply to rollovers from these Qualified Plans to
an individual retirement account or individual retirement annuity. In the case
of tax sheltered annuities, these limitations do not apply to certain salary
reduction contributions made, and investment results earned, prior to dates
specified in the Code.
Hardship withdrawals under the exception provided above are restricted to
amounts attributable to salary reduction contributions, and do not include
investment results; this additional restriction does not apply to salary
reduction contributions made, and investment results earned, prior to dates
specified in the Code.
Certain distributions, including rollovers, may be subject to mandatory
withholding of 20% for federal income tax and to a penalty tax of 10% or more
if the distribution is not transferred directly to the trustee of another
Qualified Plan, or to the custodian of an individual retirement account or
issuer of an individual retirement
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annuity. See FEDERAL TAX STATUS. Distributions may also trigger withholding
for state income taxes. The tax and ERISA rules relating to Contract
withdrawals are complex. We are not the administrator of any Qualified Plan.
You should consult your tax adviser and/or your plan administrator before you
withdraw any portion of your Contract Value.
Effective Date of Withdrawal Requests
Withdrawal requests are normally effective on the Business Day we receive them
in proper form. If you make Purchase Payments by check and submit a withdrawal
request immediately afterwards, payment of your withdrawal proceeds may be
delayed until your check clears.
TAX CONSEQUENCES OF WITHDRAWALS
Withdrawals, including pre-authorized withdrawals, will generally have federal
income tax consequences, which could include tax penalties. YOU SHOULD CONSULT
WITH A TAX ADVISER BEFORE MAKING ANY WITHDRAWAL OR SELECTING THE PRE-
AUTHORIZED WITHDRAWAL OPTION. See FEDERAL TAX STATUS.
RIGHT TO CANCEL ("FREE LOOK")
You may return your Contract for cancellation and a full refund during your
"free look period." Your free look period is usually the 10-day period
beginning on the day you receive your Contract, but may vary if required by
state law. For more information, see APPENDIX A: STATE LAW VARIATIONS. If you
return your Contract, it will be canceled and treated as void from your
Contract Date. You will then receive a refund of your Contract Value, as of
the end of the Business Day on which we receive your Contract for
cancellation, plus a refund of any amounts that may have been deducted as
Contract fees and charges, and minus any Credit Enhancement. Thus, an Owner
who returns a Contract within the Free-Look Period bears only the investment
risk (i.e., the Owner's Contract Value allocated to the Variable Accounts may
increase or decrease based on investment performance), but the Owner will not
be subject to any Contract charges and fees which would otherwise be deducted
from Contract Values. Any amounts credited to your Variable Account as a
result of any variation of charges, as described in WAIVERS AND REDUCED
CHARGES, and any earnings on such amounts, will not be included in the amount
refunded to you.
Some states' laws require us to refund your Purchase Payments instead of your
Contract Value. If your Contract is delivered in one of these states (the
"delivery state"), the Purchase Payments you have allocated to any Subaccount
will usually be allocated to the Money Market Subaccount during your free look
period. In such cases, we will transfer your Contract Value in the Money
Market Subaccount to your chosen Variable Investment Options at the end of the
15th calendar day after your Contract Date (your "Free Look Transfer Date").
We reserve the right to extend your Free Look Transfer Date by the number of
days in excess of ten days that the delivery state allows you to return your
Contract to us pursuant to your "free look" right.
If your Contract is issued in exchange for another annuity contract or a life
insurance policy, our administrative procedures may vary, depending on the
state in which your contract is delivered.
PACIFIC LIFE AND THE SEPARATE ACCOUNT
PACIFIC LIFE
Pacific Life is a life insurance company that is domiciled in California.
Pacific Life's operations include both life insurance and annuity products as
well as financial and retirement services. As of the end of 1997, Pacific Life
had over $80.0 billion of individual life insurance in force and total
admitted assets of approximately $31.8 billion. Pacific Life has been ranked
according to admitted assets as the 20th largest life insurance carrier in the
nation for 1997. The Pacific Life family of companies has total assets and
funds under management of
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over $236 billion. Pacific Life is authorized to conduct life insurance and
annuity business in the District of Columbia and all states except New York.
Its principal offices are located at 700 Newport Center Drive, Newport Beach,
California 92660.
Pacific Life was 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, Pacific Life converted from a mutual life insurance company to a stock
life insurance company ultimately controlled by a mutual holding company.
Pacific Life is 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.
Our wholly-owned subsidiary, Pacific Mutual Distributors, Inc. ("PMD"), serves
as the principal underwriter (distributor) for the Contracts. PMD is located
at 700 Newport Center Drive, Newport Beach, California 92660. We and PMD enter
into selling agreements with broker-dealers, under which such broker-dealers
act as agents of us and PMD in the sale of the Contracts.
We may provide you with reports of our ratings both as an insurance company
and as to our claims-paying ability with respect to our General Account
assets. The SAI presents more details about these ratings.
SEPARATE ACCOUNT A
Separate Account A was established on September 7, 1994 as a separate account
of ours, and is registered with the SEC under the 1940 Act, as a type of
investment company called a "unit investment trust."
Obligations arising under your Contract are our general corporate obligations.
We are also the legal owner of the assets in the Separate Account. Assets of
the Separate Account attributed to the reserves and other liabilities under
the Contract and other contracts issued by us that are supported by the
Separate Account may not be charged with liabilities arising from any of our
other business; any income, gain or loss (whether or not realized) from the
assets of the Separate Account are credited to or charged against the Separate
Account without regard to our other income, gain or loss.
We may invest money in the Separate Account in order to commence its
operations and for other purposes, but not to support contracts other than
variable annuity contracts. A portion of the Separate Account's assets may
include accumulations of charges we make against the Separate Account and
investment results of assets so accumulated. These additional assets are ours
and we may transfer them to our General Account at any time; however, before
making any such transfer, we will consider any possible adverse impact the
transfer might have on the Separate Account. Subject to applicable law, we
reserve the right to transfer our assets in the Separate Account to our
General Account.
The Separate Account is not the sole investor in the Fund. Investment in the
Fund by other separate accounts in connection with variable annuity and
variable life insurance contracts may create conflicts. See MORE ON THE FUND'S
SHARES in the accompanying Prospectus for the Fund.
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FEDERAL TAX STATUS
The following summary of federal income tax consequences is based on our
understanding of current tax laws and regulations, which may be changed by
legislative, judicial or administrative action. The summary is general in
nature and is not intended as tax advice. Moreover, it does not consider any
applicable state or local tax laws. We do not make any guarantee regarding the
tax status, federal, state or local, of any Contract or any transaction
involving the Contracts. Accordingly, you should consult a qualified tax
adviser for complete information and advice before purchasing a Contract.
The following rules generally do not apply to variable annuity contracts held
by or for non-natural persons (e.g., corporations) unless such an entity holds
the contract as nominee for a natural person. If a contract is not owned or
held by a natural person or a nominee for a natural person, the contract
generally will not be treated as an "annuity" for tax purposes, meaning that
the contract owner will be taxed currently on annual increases in Contract
Value at ordinary income rates unless some other exception applies.
Section 72 of the Code governs the taxation of annuities in general, and we
designed the Contracts to meet the requirements of Section 72 of the Code. We
believe that, under current law, the Contract will be treated as an annuity
for federal income tax purposes if the Contract Owner is a natural person or a
nominee for a natural person, and that we (as the issuing insurance company),
and not the Contract Owner(s), will be treated as the owner of the investments
underlying the Contract. Accordingly, generally no tax should be payable by
you as a Contract Owner as a result of any increase in Contract Value until
you receive money under your Contract. You should, however, consider how
amounts will be taxed when you do receive them. The following discussion
assumes that your Contract will be treated as an annuity for federal income
tax purposes.
Section 817(h) of the Code provides that the investments underlying a variable
annuity must satisfy certain diversification requirements. Details on these
diversification requirements appear under OTHER INFORMATION ABOUT THE FUND in
the Fund's Prospectus. We believe the underlying Variable Investment Options
for the Contract meet these requirements. In connection with the issuance of
temporary regulations relating to diversification requirements under Section
817(h), the Treasury Department announced that such regulations do not provide
guidance concerning the extent to which you may direct your investments to
particular divisions of a separate account. Such guidance may be included in
regulations or revenue rulings under Section 817(d) relating to the definition
of a variable contract. Because of this uncertainty, we reserve the right to
make such changes as we deem necessary or appropriate to ensure that your
Contract continues to qualify as an annuity for tax purposes. Any such changes
will apply uniformly to affected Contract Owners and will be made with such
notice to affected Contract Owners as is feasible under the circumstances.
TAXES PAYABLE BY CONTRACT OWNERS: GENERAL RULES
THESE GENERAL RULES APPLY TO NON-QUALIFIED CONTRACTS. AS DISCUSSED BELOW,
HOWEVER, TAX RULES MAY DIFFER FOR QUALIFIED CONTRACTS AND YOU SHOULD CONSULT A
QUALIFIED TAX ADVISER IF YOU ARE PURCHASING A QUALIFIED CONTRACT.
Distributions of net investment income or capital gains that each Subaccount
receives from its corresponding Portfolio are automatically reinvested in such
Portfolio unless we, on behalf of the Separate Account, elect otherwise. As
noted above, you will be subject to federal income taxes on the investment
income from your Contract only when it is distributed to you.
Multiple Contracts
All Non-Qualified contracts that are issued by us, or our affiliates, to the
same Owner during any calendar year are treated as one contract for purposes
of determining the amount includible in gross income under Code Section 72(e).
Further, the Treasury Department has specific authority to issue regulations
that prevent the avoidance of Section 72(e) through the serial purchase of
contracts or otherwise.
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Taxes Payable on Withdrawals
Amounts you withdraw before annuitization, including amounts withdrawn from
your Contract Value in connection with partial withdrawals for payment of any
charges and fees, will be treated first as taxable income to the extent that
your Contract Value exceeds the aggregate of your Purchase Payments (reduced
by non-taxable amounts previously received), and then as non-taxable recovery
of your Purchase Payments.
The assignment or pledge of (or agreement to assign or pledge) the value of
the Contract for a loan will be treated as a withdrawal subject to these
rules. Moreover, all annuity contracts issued to you in any given calendar
year by us and any of our affiliates are treated as a single annuity contract
for purposes of determining whether an amount is subject to tax under these
rules. The Code further provides that the taxable portion of a withdrawal or
other distribution may be subject to a penalty tax equal to 10% of that
taxable portion unless the withdrawal is: (1) made on or after the date you
reach age 59 1/2, (2) made by a Beneficiary after your death, (3) attributable
to your becoming disabled, or (4) in the form of level annuity payments under
a lifetime annuity.
Taxes Payable on Annuity Payments
A portion of each annuity payment you receive under a Contract generally will
be treated as a partial recovery of Purchase Payments (as used here, "Purchase
Payments" means the aggregate Purchase Payments less any amounts that were
previously received under the Contract but not included in income) and will
not be taxable. (In certain circumstances, subsequent modifications to an
initially-established payment pattern may result in the imposition of a
penalty tax.) The remainder of each annuity payment will be taxed as ordinary
income. However, after the full amount of aggregate Purchase Payments has been
recovered, the full amount of each annuity payment will be taxed as ordinary
income. Exactly how an annuity payment is divided into taxable and non-taxable
portions depends on the period over which annuity payments are expected to be
received, which in turn is governed by the form of annuity selected and, where
a lifetime annuity is chosen, by the life expectancy of the Annuitant(s) or
payee(s). Such a payment may also be subject to a penalty tax.
Should the death of a Contract Owner cause annuity payments to cease before
Purchase Payments have been fully recovered, an Annuitant (or in certain cases
the Beneficiary) is allowed a deduction on the final tax return for the
unrecovered Purchase Payments; however, if any remaining annuity payments are
made to a Beneficiary, the Beneficiary will recover the balance of the
Purchase Payments as payments are made. A lump sum payment taken in lieu of
remaining monthly annuity payments is not considered an annuity payment for
tax purposes. The portion of any lump sum payment to a Beneficiary in excess
of aggregate unrecovered Purchase Payments would be subject to income tax.
Such a lump sum payment may also be subject to a penalty tax.
If a Contract Owner dies before annuity payments begin, certain minimum
distribution requirements apply. If a Contract Owner dies after the Annuity
Date, the remaining interest in the Contract must be distributed at least as
rapidly as under the method of distribution in effect on the date of death.
Generally, the same tax rules apply to amounts received by the Beneficiary as
those set forth above, except that the early withdrawal penalty tax does not
apply. Thus, any annuity payments or lump sum withdrawal will be divided into
taxable and non-taxable portions. If the Contract Owner or Annuitant dies and
within sixty days after the date on which a lump sum death benefit first
becomes payable the designated recipient elects to receive annuity payments in
lieu of the lump sum death benefit, then the designated recipient will not be
treated for tax purposes as having received the lump sum death benefit in the
tax year it first becomes payable. Rather, in that case, the designated
recipient will be taxed on the annuity payments as they are received.
In addition, designation of a Beneficiary who either is 37 1/2 or more years
younger than a Contract Owner or is a grandchild of a Contract Owner may have
Generation Skipping Transfer Tax consequences under section 2601 of the Code.
Generally, gifts of non-tax qualified contracts prior to the annuity start
date will trigger tax on the gain on the contract, with the donee getting a
stepped-up basis for the amount included in the donor's income. The 10%
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penalty tax and gift tax also may be applicable. This provision does not apply
to transfers between spouses or incident to a divorce.
QUALIFIED CONTRACTS
The Contracts are available to a variety of Qualified Plans. Tax restrictions
and consequences for Contracts under each type of Qualified Plan differ from
each other and from those for Non-Qualified Contracts. In addition, individual
Qualified Plans may have terms and conditions that impose additional rules.
Therefore, no attempt is made herein to provide more than general information
about the use of the Contract with the various types of Qualified Plans.
Participants under such Qualified Plans, as well as Contract Owners,
Annuitants and Beneficiaries, are cautioned that the rights of any person to
any benefits under such Qualified Plans may be subject to the terms and
conditions of the Plans themselves or limited by applicable law, regardless of
the terms and conditions of the Contract issued in connection therewith.
THE FOLLOWING IS ONLY A GENERAL DISCUSSION ABOUT TYPES OF QUALIFIED PLANS FOR
WHICH THE CONTRACTS ARE AVAILABLE. WE ARE NOT THE ADMINISTRATOR OF ANY
QUALIFIED PLAN. THE PLAN ADMINISTRATOR AND/OR CUSTODIAN, WHICHEVER IS
APPLICABLE, (BUT NOT US) IS RESPONSIBLE FOR ALL PLAN ADMINISTRATIVE DUTIES
INCLUDING, BUT NOT LIMITED TO, NOTIFICATION OF DISTRIBUTION OPTIONS,
DISBURSEMENT OF PLAN BENEFITS, COMPLIANCE REGULATORY REQUIREMENTS AND FEDERAL
AND STATE TAX REPORTING OF INCOME/DISTRIBUTIONS FROM THE PLAN TO PLAN
PARTICIPANTS AND, IF APPLICABLE, BENEFICIARIES OF PLAN PARTICIPANTS AND IRA
CONTRIBUTIONS FROM PLAN PARTICIPANTS. OUR ADMINISTRATIVE DUTIES ARE LIMITED TO
ADMINISTRATION OF THE CONTRACT AND ANY DISBURSEMENTS OF ANY CONTRACT BENEFITS
TO THE OWNER, ANNUITANT, OR BENEFICIARY OF THE CONTRACT, AS APPLICABLE. OUR
TAX REPORTING RESPONSIBILITY IS LIMITED TO FEDERAL AND STATE TAX REPORTING OF
INCOME/DISTRIBUTIONS TO THE APPLICABLE PAYEE AND IRA CONTRIBUTIONS FROM THE
OWNER OF A CONTRACT, AS RECORDED ON OUR BOOKS AND RECORDS. THE QUALIFIED PLAN
(THE PLAN ADMINISTRATOR OR THE CUSTODIAN) IS REQUIRED TO PROVIDE US WITH
INFORMATION REGARDING INDIVIDUALS WITH SIGNATORY AUTHORITY ON THE CONTRACT(S)
OWNED. IF YOU ARE PURCHASING A QUALIFIED CONTRACT, YOU SHOULD CONSULT WITH
YOUR PLAN ADMINISTRATOR AND/OR A QUALIFIED TAX ADVISER. YOU SHOULD ALSO
CONSULT WITH YOUR TAX ADVISER AND/OR PLAN ADMINISTRATOR BEFORE YOU WITHDRAW
ANY PORTION OF YOUR CONTRACT VALUE.
Individual Retirement Annuities ("IRAs")
Recent federal tax legislation has expanded the type of IRAs available to
individuals for tax deferred retirement savings: In addition to "traditional"
IRAs established under Code Section 408, there are Roth IRAs governed by Code
Section 408A and SIMPLE IRAs established under Code Section 408(p).
Contributions to each of these types of IRAs are subject to differing
limitations. In addition, distributions from each type of IRA are subject to
differing restrictions. The following is a very general description of each
type of IRA and other Qualified Plans:
Traditional IRAs
- ----------------
Traditional IRAs are subject to limitations on the amount that may be
contributed, the persons who may be eligible, and on the time when
distributions must commence. Depending upon the circumstances of the
individual, contributions to a traditional IRA may be made on a deductible or
non-deductible basis. Failure to make mandatory distributions may result in
imposition of a 50% penalty tax on any difference between the required
distribution amount and the amount actually distributed. A 10% penalty tax is
imposed on the amount includable in gross income from distributions that occur
before you attain age 59 1/2 and that are not made on account of death or
disability, with certain exceptions. These exceptions include distributions
that are part of a series of substantially equal periodic payments made over
your life (or life expectancy) or the joint lives (or joint life expectancies)
of you and your Joint Annuitant. Distributions of minimum amounts specified by
the Code must commence by April 1 of the calendar year following the calendar
year in which you attain age 70 1/2. Additional distribution rules apply after
your death.
You may rollover funds from certain existing Qualified Plans (such as proceeds
from existing insurance policies, annuity contracts or securities) into your
traditional IRA if those funds are in cash; this will require you to
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liquidate any value accumulated under the existing Qualified Plan. Mandatory
withholding of 20% may apply to any rollover distribution from your existing
Qualified Plan if the distribution is not transferred directly to your
Traditional IRA; to avoid this withholding you should have cash transferred
directly from the insurance company or plan trustee to your traditional IRA.
Similar limitations and tax penalties apply to tax sheltered annuities,
government plans, 401(k) plans, and pension and profit-sharing plans.
SIMPLE Individual Retirement Annuities
- --------------------------------------
The Small Business Job Protection Act of 1996 created a new retirement plan,
the Savings Incentive Match Plan for Employees of Small Employers ("SIMPLE
Plans"). Depending upon the type of SIMPLE Plan, employers may deposit the
plan contributions into a single trust or into SIMPLE individual retirement
annuities ("SIMPLE IRAs") established by each participant. Like other
Qualified Plans, a 10% penalty tax is imposed on certain distributions that
occur before you attain age 59 1/2. In addition, the penalty tax is increased
to 25% for amounts received during the 2-year period beginning on the date any
individual first participated in any qualified salary reduction arrangement
maintained by the individual's employer under Code Section 408(p)(2).
Contributions to a SIMPLE IRA may be either salary deferral contributions or
employer contributions. Distributions from a SIMPLE IRA may be rolled over to
another SIMPLE IRA tax free or may be eligible for tax free rollover to a
traditional IRA after a required two year period. A distribution from a SIMPLE
IRA, however, is never eligible to be rolled over to a retirement plan
qualified under Code Section 401 or a Section 403(b) annuity contract.
Roth IRAs
- ---------
Section 408A of the Code permits eligible individuals to establish a Roth IRA.
Contributions to a Roth IRA are not deductible, but withdrawals of amounts
contributed and the earnings thereon that meet certain requirements are not
subject to federal income tax. In general, Roth IRAs are subject to
limitations on the amount that may be contributed and the persons who may be
eligible to contribute and are subject to certain required distribution rules
on the death of the Contract Owner. Unlike a traditional IRA, Roth IRAs are
not subject to minimum required distribution rules during the Contract Owner's
lifetime. Generally, however, the amount remaining in a Roth IRA must be
distributed by the end of the fifth year after the death of the Contract
Owner. Beginning in 1998, the owner of a traditional IRA may convert a
traditional IRA into a Roth IRA under certain circumstances. The conversion of
a traditional IRA to a Roth IRA will subject the amount of the converted
traditional IRA to federal income tax. Anyone considering the purchase of a
Qualified Contract as a Roth IRA or a "conversion" Roth IRA should consult
with a qualified tax adviser.
Tax Sheltered Annuities ("TSAs")
Section 403(b) of the Code permits public school systems and certain tax-
exempt organizations to adopt annuity plans for their employees; Purchase
Payments made on Contracts purchased for these employees are excludable from
the employees' gross income (subject to maximum contribution limits).
Distributions under these Contracts must comply with certain limitations as to
timing, or result in tax penalties.
Government Plans
Section 457 of the Code permits employees of a state or local government (or
of certain other tax-exempt entities) to defer compensation through an
eligible government plan. Contributions to a Contract in connection with an
eligible government plan are subject to limitations.
401(k) Plans; Pension and Profit-Sharing Plans
Deferred compensation plans may be established by an employer for certain
eligible employees under Sections 401(a) and 401(k) of the Code. Contributions
to these plans are subject to limitations.
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LOANS
Certain Owners of Qualified Contracts may borrow against their Contracts. If
yours is a Qualified Contract issued under Section 401 or 403 of the Code and
the terms of your Qualified Plan permit, you may request a loan from us, using
your Contract Value as your only security.
Tax and Legal Matters
The tax and ERISA rules relating to Contract loans are complex and in many
cases unclear. For these reasons, and because the rules vary depending on the
individual circumstances of each Contract, WE URGE YOU TO CONSULT WITH A
QUALIFIED TAX ADVISER PRIOR TO EFFECTING ANY LOAN TRANSACTION UNDER YOUR
CONTRACT.
Generally interest paid on your loan under a 401 plan or 403(b) tax-sheltered
annuity will be considered non-deductible "personal interest" under Section
163(h) of the Code, to the extent the loan comes from and is secured by your
pre-tax contributions, even if the proceeds of your loan are used to acquire
your principal residence.
We may change these loan provisions to reflect changes in the Code or
interpretations thereof.
Loan Procedures
Your loan request must be submitted on our Loan Agreement Form. You may submit
a loan request at any time after your first Contract Anniversary and before
your Annuity Date; however, before requesting a new loan, you must wait thirty
days after the last payment of a previous loan. If approved, your loan will
usually be effective as of the end of the Business Day on which we receive all
necessary documentation in proper form. We will normally forward proceeds of
your loan to you within seven calendar days after the effective date of your
loan.
In order to secure your loan, on the effective date of your loan, we will
transfer an amount equal to the principal amount of your loan into an account
called the "Loan Account." To make this transfer, we will transfer amounts
proportionately from your Investment Options based on your Account Value in
each Investment Option.
As your loan is repaid, a portion, corresponding to the amount of the
repayment of any amount then held as security for your loan, will be
transferred from the Loan Account back into your Investment Options relative
to your current allocation instructions.
Loan Terms
You may have only one loan outstanding at any time. The minimum loan amount is
$1,000, subject to certain state limitations. Your Contract Debt at the
effective date of your loan may not exceed the lesser of:
. 50% of your Contract Value; and
. $50,000 less your highest outstanding Contract Debt during the 12-month
period immediately preceding the effective date of your loan.
You should refer to the terms of your particular Qualified Plan for any
additional loan restrictions. If you have other loans outstanding pursuant to
other Qualified Plans, the amount you may borrow may be further restricted. We
are not responsible for making any determinations (including loan amounts
permitted) or any interpretations with respect to your Qualified Plan.
You will be charged interest on your Contract Debt at an annual rate, set at
the time the loan is made, equal to the higher of (a) Moody's Corporate Bond
Yield Average-Monthly Average Corporates (the "Moody's Rate"), as published by
Moody's Investors Service, Inc., or its successor, for the most recently
available calendar month, or (b) 5%. In the event that the Moody's Rate is no
longer available, we may substitute a substantially similar average rate,
subject to compliance with applicable state regulations. The amount held in
the Loan Account to
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secure your loan will earn a return equal to an annual rate that is two
percentage points lower than the annual rate of interest charged on your
Contract Debt. Interest charges accrue on your Contract Debt daily, beginning
on the effective date of your loan. Interest earned on the Loan Account Value
accrue daily beginning on the day following the effective date of the loan,
and those earnings will be transferred once a year to your Investment Options
in accordance with your current allocation instructions.
Repayment Terms
Your loan, including principal and accrued interest, generally must be repaid
in quarterly installments. An installment will be due in each quarter on the
date corresponding to the effective date of your loan, beginning with the
first such date following the effective date of your loan.
Example: On May 1, we receive your loan request, and your loan is
effective. Your first quarterly payment will be due on August 1.
Adverse tax consequences may result if you fail to meet the repayment
requirements for your loan. You must repay principal and interest of any loan
in substantially equal payments over the term of the loan. Generally, the term
of the loan will be five years from the effective date of the loan; however,
if you have certified to us that your loan proceeds are to be used to acquire
a principal residence for yourself, you may request a loan term of 30 years.
In either case, however, you must repay your loan prior to your Annuity Date.
If you elect to annuitize (or withdraw) your Net Contract Value while you have
an outstanding loan, we will deduct any Contract Debt from your Contract Value
at the time of the annuitization (or withdrawal) to repay the Contract Debt.
You may prepay your entire loan at any time; if you do so, we will bill you
for any unpaid interest that has accrued through the date of payoff. Your loan
will be considered repaid only when the interest due has been paid. Subject to
any necessary approval of state insurance authorities, while you have Contract
Debt outstanding, we will treat all payments you send us as Purchase Payments
unless you specifically indicate that your payment is a loan repayment or
include your loan stub with your payment. To the extent allowed by law, any
loan repayments in excess of the amount then due will be refunded to you,
unless such amount is sufficient to pay the balance of your loan. Repayments
we receive that are less than the amount then due will be returned to you,
unless otherwise required by law.
If we have not received your full payment by its due date, we will declare the
entire remaining loan balance in default. At that time, we will send written
notification of the amount needed to bring the loan back to a current status.
You will have sixty (60) days from the date on which the loan was declared in
default (the "grace period") to make the required payment.
If the required payment is not received by the end of the grace period, the
defaulted loan balance plus accrued interest and any withdrawal charge will be
withdrawn from your Contract Value, if amounts under your Contract are
eligible for distribution. In order for an amount to be eligible for
distribution from a Qualified Plan you must meet one of six triggering events.
They are: attainment of age 59 1/2; separation from service; death;
disability; plan termination; and financial hardship. If those amounts are not
eligible for distribution, the defaulted loan balance plus accrued interest
and any withdrawal charge will be considered a Deemed Distribution and will be
withdrawn when such Contract Values become eligible. In either case, the
Distribution or the Deemed Distribution will be considered a currently taxable
event, and may be subject to federal tax withholding, the withdrawal charge
and the federal early withdrawal penalty tax.
If there is a Deemed Distribution under your Contract and to the extent
allowed by law, any future withdrawals will first be applied as repayment of
the defaulted Contract Debt, including accrued interest and charges for
applicable taxes. Any amounts withdrawn and applied as repayment of Contract
Debt will first be withdrawn from your Loan Account, and then from your
Investment Options on a proportionate basis relative to the Account Value in
each Investment Option. If you have an outstanding loan that is in default,
the defaulted Contract Debt will be considered a withdrawal for the purpose of
calculating any Death Benefit Amount and/or Guaranteed Minimum Death Benefit.
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The terms of any such loan are intended to qualify for the exception in Code
Section 72(p)(2) so that the distribution of the loan proceeds will not
constitute a distribution that is taxable to you. To that end, these loan
provisions will be interpreted to ensure and maintain such tax qualification,
despite any other provisions to the contrary. We reserve the right to amend
your Contract to reflect any clarifications that may be needed or are
appropriate to maintain such tax qualification or to conform any terms of our
loan arrangement with you to any applicable changes in the tax qualification
requirements. We will send you a copy of any such amendment. If you refuse
such an amendment, it may result in adverse tax consequences to you.
WITHHOLDING
Unless you elect to the contrary, any amounts you receive under your Contract
that are attributable to investment income will be subject to withholding to
meet federal and state income tax obligations. The rate of withholding on
annuity payments made to you will be determined on the basis of the
withholding information you provide to us with your application. If you do not
provide us with required withholding information, we will withhold, from every
withdrawal from your Contract and from every annuity payment to you, the
appropriate percentage of the taxable amount of the payment. Please call us at
1-800-722-2333 with any questions about the required withholding information.
For purposes of determining your withholding rate on annuity payments, you
will be treated as a married person with three exemptions. The rate of
withholding on all other payments made to you under your Contract, such as
amounts you receive upon withdrawals, will be 10%, unless otherwise specified
by the Code. Generally, there will be no withholding for taxes until you
actually receive payments under your Contract.
Distributions from a Contract under a Qualified Plan (not including an
individual retirement annuity subject to Code Section 408 or Code Section
408A) to an employee, surviving spouse, or former spouse who is an alternate
payee under a qualified domestic relations order, in the form of a lump sum
settlement or periodic annuity payments for a fixed period of fewer than 10
years are subject to mandatory income tax withholding of 20% of the taxable
amount of the distribution, unless (1) the distributee directs the transfer of
such amounts in cash to another Qualified Plan or a Traditional IRA; or (2)
the payment is a minimum distribution required under the Code. The taxable
amount is the amount of the distribution less the amount allocable to after-
tax contributions. All other types of taxable distributions are subject to
withholding unless the distributee elects not to have withholding apply.
Certain states have indicated that pension and annuity withholding will apply
to payments made to residents. Generally, an election out of federal
withholding will also be considered an election out of state withholding.
IMPACT OF FEDERAL INCOME TAXES
In general, in the case of Non-Qualified Contracts if you expect to accumulate
your Contract Value over a relatively long period of time without making
significant withdrawals, there should be tax advantages, regardless of your
tax bracket, in purchasing such a Contract rather than, for example, a mutual
fund with a similar investment policy and approximately the same level of
expected investment results. This is because little or no income taxes are
incurred by you or by us while you are participating in the Subaccounts, and
it is generally advantageous to defer the payment of income taxes, so that the
investment return is compounded without any deduction for income taxes. The
advantage will be greater if you decide to liquidate your Contract Value in
the form of monthly annuity payments after your retirement, or if your tax
rate is lower at that time than during the period that you held the Contract,
or both.
TAXES ON PACIFIC LIFE
Although the Separate Account is registered as an investment company, it is
not a separate taxpayer for purposes of the Code. The earnings of the Separate
Account are taxed as part of our operations. No charge is made against the
Separate Account for our federal income taxes (excluding the charge for
premium taxes), but we will review, periodically, the question of charges to
the Separate Account or your Contract for such taxes. Such a charge may
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be made in future years for any federal income taxes that would be
attributable to the Separate Account or to our operations with respect to your
Contract, or attributable, directly or indirectly, to Purchase Payments on
your Contract.
Under current law, we may incur state and local taxes (in addition to premium
taxes) in several states. At present, these taxes are not significant and they
are not charged against the Contract or the Separate Account. If there is a
material change in applicable state or local tax laws, the imposition of any
such taxes upon us that are attributable to the Separate Account or to our
operations with respect to your Contract may result in a corresponding charge
against the Separate Account or your Contract.
ADDITIONAL INFORMATION
VOTING RIGHTS
We are the legal owner of the shares of the Portfolios held by the
Subaccounts, and consequently have the right to vote on any matter voted on at
Fund shareholders' meetings. However, our current interpretations of
applicable law requires us to vote the shares attributable to your Variable
Account Value (your "voting interest") in accordance with your directions.
We will pass shareholder proxy materials on to you so that you have an
opportunity to give us voting instructions for your voting interest. You may
provide your instructions by proxy or in person at the shareholders' meeting.
If there are shares of a Portfolio held by a Subaccount for which we do not
receive timely voting instructions, we will vote those shares in the same
proportion as all other shares of that Portfolio held by that Subaccount for
which we have received timely voting instructions. If we hold shares of a
Portfolio in our General Account, or hold unvoted shares in the Separate
Account, and/or if any of our non-insurance subsidiaries hold 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, including Separate
Account A.
We may elect, in the future, to vote shares of the Portfolios held in Separate
Account A in our own right if we are permitted to do so through a change in
applicable federal securities laws or regulations, or in their interpretation.
The number of Portfolio shares that form the basis for your voting interest is
determined as of the record date set by the Board of Trustees of the Fund. It
is equal to (a) your Contract Value allocated to the Subaccount corresponding
to that Portfolio, divided by (b) the net asset value per share of that
Portfolio. Fractional votes will be counted. We reserve the right, if required
or permitted by a change in federal regulations or their interpretation, to
amend how we calculate your voting interest.
After your Annuity Date, if you have selected a variable annuity, the voting
rights under your Contract will continue during the payout period of your
annuity, but the number of shares that form the basis for your voting
interest, as described above, will decrease throughout the payout period.
CHANGES TO YOUR CONTRACT
Contract Owner(s) and Contingent Owner
You may change your Non-Qualified Contract at any time prior to your Annuity
Date to name a different Contract Owner or to add a Joint Owner, or to add or
change a Contingent Owner; if yours is a Qualified Contract, you must be the
only Contract Owner, but you may still add or change a Contingent Owner. Your
Contract cannot name more than two Contract Owners (Joint Owners) and one
Contingent Owner at any time. Any newly-named Contract Owners, including Joint
and/or Contingent Owners, must be under the age of 81 at the time of change or
addition. Joint ownership is in the form of a joint tenancy. The Contract
Owner(s) may make all decisions regarding the Contract, including making
allocation decisions and exercising voting rights.
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Transactions under jointly owned Contracts require authorization from both
Contract Owners. Transfer of Contract ownership may involve federal income tax
consequences; you should consult a qualified tax adviser before effecting such
a transfer. A change to joint Contract ownership is considered a transfer of
ownership.
Annuitant and Contingent or Joint Annuitant
Your sole Annuitant cannot be changed, and Joint Annuitants cannot be added or
changed, once your Contract is issued. Certain changes may be permitted in
connection with Contingent Annuitants. See RETIREMENT BENEFITS AND OTHER
PAYOUTS--SELECTING YOUR ANNUITANT. There may be limited exceptions for certain
Qualified Contracts.
Beneficiaries
Your Beneficiary is the person(s) who may receive death benefits under your
Contract or any remaining annuity payments after the Annuity Date if the
Annuitant dies. You may change or remove your Beneficiary or add Beneficiaries
at any time prior to the death of the Annuitant or Owner, as applicable. If
you have named your Beneficiary irrevocably, you will need to obtain that
Beneficiary's consent before making any changes. Qualified Contracts may have
additional restrictions on naming and changing Beneficiaries; for example, if
your Contract was issued in connection with a Qualified Plan subject to Title
I of ERISA, your spouse must either be your Beneficiary or consent to your
naming of a different Beneficiary. If you leave no surviving Beneficiary, your
estate will receive any death benefit proceeds under your Contract.
CHANGES TO ALL CONTRACTS
If, in the judgment of our management, continued investment by Separate
Account A in one or more of the Portfolios becomes unsuitable or unavailable,
we may seek to alter the Variable Investment Options available under the
Contracts. We do not expect that a Portfolio will become unsuitable, but
unsuitability issues could arise due to changes in investment policies, market
conditions, or tax laws, or due to marketing or other reasons.
Alterations of Variable Investment Options may take differing forms. We
reserve the right to substitute shares of any Portfolio that were already
purchased under any Contract (or shares that were to be purchased in the
future under a Contract) with shares of another Portfolio, shares of another
investment company or series of an investment company, or another investment
vehicle. We may also purchase, through a Subaccount, other securities for
other series or other classes of contracts, and may permit conversions or
exchanges between series or classes of contracts on the basis of Contract
Owner requests. Required approvals of the SEC and state insurance regulators
will be obtained before any such substitutions are effected, and you will be
notified of any planned substitution.
We may add new Subaccounts to Separate Account A, and any new Subaccounts may
invest in Portfolios or in other investment vehicles; availability of any new
Subaccounts to existing Contract Owners will be determined at our discretion.
We will notify you, and will comply with the filing or other procedures
established by applicable state insurance regulators, to the extent required
by applicable law. We also reserve the right, after receiving any required
regulatory approvals, to do any of the following:
. cease offering any subaccount
. add or change designated investment companies or their portfolios, or
other investment vehicles;
. add, delete or make substitutions for the securities and other assets
that are held or purchased by the Separate Account or any Variable
Account;
. permit conversion or exchanges between portfolios and/or classes of
contracts on the basis of Owners' requests;
. add, remove or combine Variable Accounts;
. combine the assets of any Variable Account with any other of our
separate accounts or of any of our affiliates;
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. register or deregister Separate Account A or any Variable Account under
the 1940 Act;
. operate any Variable Account as a managed investment company under the
1940 Act, or any other form permitted by law;
. run any Variable Account under the direction of a committee, board, or
other group;
. restrict or eliminate any voting rights of Owners with respect to any
Variable Account or other persons who have voting rights as to any
Variable Account;
. make any changes required by the 1940 Act or other federal securities
laws;
. make any changes necessary to maintain the status of the Contracts as
annuities under the Code;
. make other changes required under federal or state law relating to
annuities;
. suspend or discontinue sale of the Contracts; and
. comply with applicable law.
INQUIRIES AND SUBMITTING FORMS AND REQUESTS
You may reach our service representatives at 1-800-722-2333 between the hours
of 6:00 a.m. and 5:00 p.m., Pacific time.
Please send your forms and written requests or questions to:
Pacific Life Insurance Company
P.O. Box 7187
Pasadena, California 91109-7187
If you are submitting a purchase or other payment by mail, please send it,
along with your application if you are submitting one, to:
Pacific Life Insurance Company
P.O. Box 100060
Pasadena, California 91189-0060
If you are using an overnight delivery service to send payments, please send
them to:
Pacific Life Insurance Company
c/o FCNPC
1111 South Arroyo Parkway, First Floor
Pasadena, California 91105
The effective date of certain notices or of instructions is determined by the
date and time on which we "receive" the notice or instructions. We "receive"
this information only when it arrives, in proper form, at the correct mailing
address set out above. Please call us at 1-800-722-2333 if you have any
questions regarding which address you should use.
Purchase Payments after your initial Purchase Payment, loan requests, transfer
requests, loan repayments and withdrawal requests we receive before 4:00 p.m.
Eastern time will usually be effective on the same Business Day that we
receive them in "proper form," unless the transaction or event is scheduled to
occur on another day. Generally, whenever you submit any other form, notice or
request, your instructions will be effective on the next Business Day after we
receive them in "proper form" unless the transaction or event is scheduled to
occur on another day. "Proper form" means in a form satisfactory to us and may
require, among other things, a signature guarantee or other verification of
authenticity. We do not generally require a signature guarantee: unless it
appears that the Owner's signature may have changed over time; an executed
application or confirmation of
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application, as applicable, in proper form is not received by us; or, due to
other circumstances. Requests regarding death benefits must be accompanied by
both proof of death and instructions regarding payment satisfactory to us. You
should call your registered representative or us if you have questions
regarding the required form of a request.
TELEPHONE TRANSACTIONS
After your "free look" period, you may make transfer requests by telephone if
you have authorized telephone requests (a "telephone authorization"). We
cannot guarantee that you will always be able to reach us to complete a
telephone transaction; for example, all telephone lines may be busy during
certain periods, such as periods of substantial market fluctuations or other
drastic economic or market change, or telephones may be out of service during
severe weather conditions or other emergencies. Under these circumstances, you
should submit your request in writing (or other form acceptable to us).
Transaction instructions we receive by telephone before 4:00 p.m. Eastern time
on any Business Day will usually be effective on that day, and we will send
you written confirmation of each telephone transfer.
We have established procedures reasonably designed to confirm that
instructions communicated by telephone are genuine. These procedures may
require any person requesting a telephone transaction to provide certain
personal identification upon our request. We may also record all or part of
any telephone conversation with respect to transaction instructions. We
reserve the right to deny any transaction request made by telephone. When you
make a proper request for a telephone authorization, you authorize us to
accept and to act upon instructions received by telephone with respect to your
Contract, and you agree that, as long as we comply with our procedures,
neither we, any of our affiliates, nor the Fund, or any of their directors,
trustees, officers, employees or agents will be liable for any loss,
liability, cost or expense (including attorneys' fees) in connection with
requests that are effected in accordance with your telephone authorization and
that we believe to be genuine. This policy means that you will bear the risk
of loss arising out of your telephone transaction privileges. If a Contract
has Joint Owners, both Owners must sign the written request for a telephone
authorization, but each Owner individually may make transfer requests by
telephone.
TIMING OF PAYMENTS AND TRANSACTIONS
For withdrawals from the Variable Investment Options or for death benefit
payments attributable to your Variable Account Value, we will normally send
the proceeds within seven calendar days after your withdrawal request is
effective or after the Notice Date, as the case may be. Similarly, for
transfers from the Variable Investment Options, we will normally send the
proceeds within seven calendar days after your transfer (or exchange) request
is effective. We will normally effect periodic annuity payments on the day
that corresponds to the Annuity Date and will make payment on the following
day. Payments or transfers may be suspended for a longer period under certain
extraordinary circumstances. These include: a closing of the New York Stock
Exchange other than on a regular holiday or weekend; a trading restriction
imposed by the SEC; or an emergency declared by the SEC. For (i) withdrawals
from the Fixed Option, (ii) death benefit payments attributable to Fixed
Option Value, or (iii) fixed periodic annuity payments, payment of proceeds
may be delayed for up to six months (thirty days in West Virginia) after the
request is effective. Similar delays may apply to loans and transfers from the
Fixed Option. See THE GENERAL ACCOUNT for more details.
CONFIRMATIONS, STATEMENTS AND OTHER REPORTS TO CONTRACT OWNERS
Confirmations will be sent out for unscheduled Purchase Payments and
transfers, loans, loan repayments, unscheduled partial withdrawals, a full
withdrawal, and on payment of any death benefit proceeds. Each quarter prior
to your Annuity Date, we will send you a statement that provides certain
information pertinent to your Contract. These statements disclose Contract
Value, Subaccount values, values under each Fixed Option, fees and charges
applied to your Contract Value, transactions made and specific Contract data
that apply to your Contract. Confirmations of your transactions under the pre-
authorized checking plan, dollar cost averaging, earnings sweep,
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portfolio rebalancing, and pre-authorized withdrawal options will appear on
your quarterly account statements. Your fourth-quarter statement will contain
annual information about your Contract Value and transactions. If you suspect
an error on a confirmation or quarterly statement, you must notify us in
writing within 30 days from the date of the first confirmation or statement on
which the transaction you believe to be erroneous appeared. When you write,
tell us your name, contract number and a description of the suspected error.
You will also be sent an annual report for the Separate Account and the Fund
and a list of the securities held in each Portfolio of the Fund, as required
by the 1940 Act; or more frequently if required by law.
REPLACEMENT OF LIFE INSURANCE OR ANNUITIES
The term "replacement" has a special meaning in the life insurance industry
and is described more fully below. Before you make your purchase decision,
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.
FINANCIAL STATEMENTS
Audited financial statements of Separate Account A as of December 31, 1997 and
for each of the two years then ended are incorporated by reference in the SAI
from the Annual Report of the Separate Account A as of December 31, 1997.
Unaudited financial statements of Separate Account A as of June 30, 1998 and
for the six month period ended June 30, 1998 are contained in the SAI. Pacific
Life's audited consolidated financial statements as of December 31, 1997 and
1996, and for the three years ended December 31, 1997, and unaudited
consolidated financial statements as of June 30, 1998 and for the six month
periods ended June 30, 1998 and 1997, are contained in the SAI.
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 of ours who is 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
43
<PAGE>
anticipate any other material future costs associated with the 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.
THE GENERAL ACCOUNT
GENERAL INFORMATION
All amounts allocated to the Fixed Option become part of our General Account.
Subject to applicable law, we exercise sole discretion over the investment of
General Account assets, and bear the associated investment risk; you will not
share in the investment experience of General Account assets.
Because of exemptive and exclusionary provisions, interests in the General
Account under the Contract are not registered under the Securities Act of
1933, as amended, and the General Account has not been registered as an
investment company under the 1940 Act. Any interest you have in the Fixed
Option is not subject to these Acts, and we have been advised that the SEC
staff has not reviewed disclosure in this Prospectus relating to the Fixed
Option. This disclosure may, however, be subject to certain provisions of
federal securities laws relating to the accuracy and completeness of
statements made in prospectuses.
GUARANTEE TERMS
When you allocate any portion of your Purchase Payments or Contract Value to
the Fixed Option, we guarantee you an interest rate (a "Guaranteed Interest
Rate") for a specified period of time (a "Guarantee Term") of up to one year.
Guarantee terms will be offered at our discretion.
Guaranteed Interest Rates for the Fixed Option may be changed periodically for
new allocations; your allocation will receive the Guaranteed Interest Rate in
effect for the Fixed Option on the effective date of your allocation. All
Guaranteed Interest Rates will be expressed as annual effective rates;
however, interest will accrue daily. The Guaranteed Interest Rate on your
Fixed Option will remain in effect for the Guarantee Term and will never be
less than an annual rate of 3%.
Fixed Option
EACH ALLOCATION (OR ROLLOVER) YOU MAKE TO THE FIXED OPTION RECEIVES A
GUARANTEE TERM THAT BEGINS ON THE DAY THAT ALLOCATION OR ROLLOVER IS EFFECTIVE
AND ENDS AT THE END OF THAT CONTRACT YEAR OR, IF EARLIER, ON YOUR ANNUITY
DATE. At the end of that Contract Year, we will roll over your Fixed Option
Value on that day into a new Guarantee Term of one year (or, if shorter, the
time remaining until your Annuity Date) at the then current Guaranteed
Interest Rate, unless you instruct us otherwise.
Example: Your Contract Anniversary is February 1. On February 1 of year 1,
you allocate $1,000 to the Fixed Option and receive a Guarantee Term of one
year and a Guaranteed Interest Rate of 5%. On August 1, you allocate
another $500 to the Fixed Option and receive a Guaranteed Interest Rate of
6%. Through January 31, year 1, your first allocation of $1,000 earns 5%
interest and your second allocation of $500 earns 6% interest. On February
1, year 2, a new interest rate may go into effect for your entire Fixed
Option Value.
WITHDRAWALS AND TRANSFERS
Prior to the Annuity Date, you may withdraw amounts from your Fixed Option or
transfer amounts from your Fixed Option to one or more of the other Investment
Options. If your Contract was delivered in a state that requires refund of
Purchase Payments under the Free Look Right, transfers may only be made after
your Free
44
<PAGE>
Look Transfer Date. In addition, no partial withdrawal or transfer may be made
from your Fixed Option within 30 days of the Contract Date. If your withdrawal
leaves you with a Net Contract Value of less than $1,000, we have the right,
at our option, to terminate your Contract and send you the withdrawal
proceeds.
Payments or transfers from the Fixed Option may be delayed, as described under
ADDITIONAL INFORMATION--TIMING OF PAYMENTS AND TRANSACTIONS; any amount
delayed will, as long as it is held under the Fixed Option, continue to earn
interest at the Guaranteed Interest Rate then in effect until that Guarantee
Term has ended, and the minimum guaranteed interest rate of 3% thereafter,
unless state law requires a greater rate be paid.
Fixed Option
After the first Contract Anniversary, you may make one transfer or partial
withdrawal from your Fixed Option during any Contract Year, except as provided
under the dollar cost averaging, earnings sweep and pre-authorized withdrawal
programs. You may make one transfer or one partial withdrawal within the 30
days after the end of each Contract Anniversary. Normally, you may transfer or
withdraw up to one-third (33 1/3%) of your Fixed Option Value in any given
Contract Year. However, in consecutive Contract Years you may transfer or
withdraw up to one-third (33 1/3%) of your Fixed Option Value in one year; you
may transfer or withdraw up to one-half (50%) of your remaining Fixed Option
Value in the next year; and you may transfer or withdraw up to the entire
amount (100%) of any remaining Fixed Option Value in the third year. In
addition, if, as a result of a partial withdrawal or transfer, the Fixed
Option Value is less than $500, we have the right, at our option, to transfer
the entire remaining amount to your other Investment Options on a
proportionate basis relative to your most recent allocation instructions.
45
<PAGE>
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PERFORMANCE................................................................ 1
Total Returns............................................................ 1
Yields................................................................... 2
Performance Comparisons and Benchmarks................................... 2
Separate Account Performance............................................. 4
DISTRIBUTION OF THE CONTRACTS.............................................. 7
Pacific Mutual Distributors, Inc......................................... 7
THE CONTRACTS AND THE SEPARATE ACCOUNT..................................... 8
Calculating Subaccount Unit Values....................................... 8
Variable Annuity Payment Amounts......................................... 8
Corresponding Dates...................................................... 10
Age and Sex of Annuitant................................................. 11
Systematic Transfer Programs............................................. 11
Pre-Authorized Withdrawals............................................... 13
Death Benefit............................................................ 13
Joint Annuitants on Qualified Contracts.................................. 14
1035 Exchanges........................................................... 14
Safekeeping of Assets.................................................... 14
Dividends................................................................ 14
FINANCIAL STATEMENTS....................................................... 14
</TABLE>
46
<PAGE>
APPENDIX A:
STATE LAW VARIATIONS
RIGHT TO CANCEL ("FREE-LOOK")
VARIATIONS TO THE LENGTH OF THE FREE-LOOK PERIOD. In most states, the Free-Look
period is a 10-day period beginning on the day you receive your Contract. If
your Contract was issued in one of the following states, the Free-Look period
is as specified below:
Colorado (15 days)
Idaho (20 days)
North Dakota (20 days)
In addition, if you reside in California and are age 60 or older on your
Contract Date, the Free-Look period is 30 days.
There may be extended Free Look periods in some states for replacement
business. Please consult with your registered representative if you have any
questions regarding your state's Free Look period.
STATES THAT REQUIRE US TO REFUND YOUR PURCHASE PAYMENTS ALLOCATED TO THE
VARIABLE INVESTMENT OPTIONS INSTEAD OF YOUR VARIABLE ACCOUNT VALUE. If your
Contract was issued in one of the following states and you exercise your Free
Look right and return your Contract to us within 10 days of your receipt of
your Contract (unless specified otherwise below), we will refund your Purchase
Payments under your Contract that we received:
Georgia Oklahoma
Idaho (20 days) South Carolina
Michigan Utah
Missouri Washington
Nebraska West Virginia
North Carolina
ADDITIONAL PURCHASE PAYMENT LIMITATION. You may make additional Purchase
Payments only during the first Contract Year if your contract is delivered in
Massachusetts.
47
<PAGE>
To receive a current copy of the Pacific Value SAI without charge, call (800)
722-2333 or complete the following and send it to:
Pacific Life Insurance Company
Variable Annuities
Post Office Box 7187
Pasadena, CA 91109-7187
Name _________________________
Address ______________________
City _________________________State Zip
PH02/53003.29
- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
<PAGE>
[LOGO OF PACIFIC VALUE]
Underwritten By:
Pacific Life Insurance Company
Mailing Address:
Variable Annuity Department
P.O. Box 7187
Pasadena, California 91109-7187
Home Office:
700 Newport Center Drive
P.O. Box 9000
Newport Beach, California 92660
Prospectus dated 1, 1998
<PAGE>
LOGO
OF PACIFIC PORTFOLIOS
STATEMENT OF ADDITIONAL INFORMATION
, 1998
PACIFIC VALUE
SEPARATE ACCOUNT A
----------------
Pacific Value (the "Contract") is a variable annuity contract underwritten by
Pacific Life Insurance Company ("Pacific Life").
This Statement of Additional Information is not a Prospectus and should be
read in conjunction with the Contract's Prospectus, dated , 1998, which
is available without charge upon written or telephone request to Pacific Life.
Terms used in this Statement of Additional Information ("SAI") have the same
meanings as in the Prospectus, and some additional terms are defined
particularly for this SAI.
----------------
Pacific Life Insurance Company
Mailing Address: P.O. Box 7187
Pasadena, California 91109-7187
1-800-722-2333
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PERFORMANCE............................................................ 1
Total Returns........................................................ 1
Yields............................................................... 2
Performance Comparisons and Benchmarks............................... 2
Separate Account Performance......................................... 4
DISTRIBUTION OF THE CONTRACTS.......................................... 7
Pacific Mutual Distributors, Inc. ................................... 7
THE CONTRACTS AND THE SEPARATE ACCOUNT................................. 8
Calculating Subaccount Unit Values................................... 8
Variable Annuity Payment Amounts..................................... 8
Corresponding Dates.................................................. 10
Age and Sex of Annuitant............................................. 11
Systematic Transfer Programs......................................... 11
Pre-Authorized Withdrawals........................................... 13
Death Benefit........................................................ 13
Joint Annuitants on Qualified Contracts.............................. 14
1035 Exchanges....................................................... 14
Safekeeping of Assets................................................ 14
FINANCIAL STATEMENTS................................................... 14
</TABLE>
<PAGE>
PERFORMANCE
From time to time, our reports or other communications to current or
prospective Contract Owners or our advertising or other promotional material
may quote the performance (yield and total return) of a Subaccount. Quoted
results are based on past performance and reflect the performance of all
assets held in that Subaccount for the stated time period. QUOTED RESULTS ARE
NEITHER AN ESTIMATE NOR A GUARANTEE OF FUTURE INVESTMENT PERFORMANCE, AND DO
NOT REPRESENT THE ACTUAL EXPERIENCE OF AMOUNTS INVESTED BY ANY PARTICULAR
CONTRACT OWNER.
TOTAL RETURNS
A Subaccount may advertise its "average annual total return" over various
periods of time. "Total return" represents the average percentage change in
value of an investment in the Subaccount from the beginning of a measuring
period to the end of that measuring period. "Annualized" total return assumes
that the total return achieved for the measuring period is achieved for each
such period for a full year. "Average annual" total return is computed in
accordance with a standard method prescribed by the SEC.
Average Annual Total Return
To calculate a Subaccount's average annual total return for a specific
measuring period, we first take a hypothetical $1,000 investment in that
Subaccount, at its then-applicable Subaccount Unit Value (the "initial
payment") and we compute the ending redeemable value ("withdrawal value") of
that initial payment at the end of the measuring period based on the
investment experience of that Subaccount. The redeemable value reflects the
effect of all recurring fees and charges applicable to a Contract Owner under
the Contract, including the Risk Charge, the Administrative Fee and the
deduction of the applicable withdrawal charge, but does not reflect any Credit
Enhancement, any charges for applicable premium taxes and/or other taxes, non-
recurring fees or charges or any increase in the Risk Charge for an optional
Death Benefit Rider. The redeemable value is then divided by the initial
payment and this quotient is taken to the Nth root (N represents the number of
days in the measuring period), and 1 is subtracted from this result. Average
annual total return is expressed as a percentage.
T = [(ERV/P) to the power of (365/N)]-1
<TABLE>
<C> <C> <C> <S>
where T = average annual total return
ERV = ending redeemable value
P = hypothetical initial payment of $1,000
N = number of days
</TABLE>
Average annual total return figures will be given for recent one-, three-,
five- and ten-year periods (if applicable), and may be given for other periods
as well (such as from commencement of the Subaccount's operations, or on a
year-by-year basis).
When considering "average" total return figures for periods longer than one
year, it is important to note that the relevant Subaccount's annual total
return for any one year in the period might have been greater or less than the
average for the entire period.
Aggregate Total Return
A Subaccount may use "aggregate" total return figures along with its "average
annual" total return figures for various periods; these figures represent the
cumulative change in value of an investment in the Subaccount for a specific
period. Aggregate total returns may be shown by means of schedules, charts or
graphs and may indicate subtotals of the various components of total return.
The SEC has not prescribed standard formulas for calculating aggregate total
return.
Total returns may also be shown for the same periods that do not take into
account the withdrawal charge.
Non-Standardized Total Returns
We may also calculate non-standardized total returns which may or may not
reflect any Credit Enhancement and/or withdrawal charges, increases in Risk
Charges, charges for premium and/or other taxes, and any non-recurring fees or
charges.
Standardized return figures will always accompany any non-standardized returns
shown.
1
<PAGE>
YIELDS
Money Market Subaccount
The "yield" (also called "current yield") of the Money Market Subaccount is
computed in accordance with a standard method prescribed by the SEC. The net
change in the Subaccount's Unit Value during a seven-day period is divided by
the Unit Value at the beginning of the period to obtain a base rate of return.
The current yield is generated when the base rate is "annualized" by
multiplying it by the fraction 365/7; that is, the base rate of return is
assumed to be generated each week over a 365-day period and is shown as a
percentage of the investment. The "effective yield" of the Money Market
Subaccount is calculated similarly but, when annualized, the base rate of
return is assumed to be reinvested. The effective yield will be slightly
higher than the current yield because of the compounding effect of this
assumed reinvestment.
The formula for effective yield is: [(Base Period Return +1) (To the power of
365/7)] -1
Realized capital gains or losses and unrealized appreciation or depreciation
of the assets of the underlying Money Market Portfolio are not included in the
yield calculation. Current yield and effective yield do not reflect any Credit
Enhancement, the deduction of charges for any applicable premium taxes and/or
other taxes, or any increase in the Risk Charge for an optional Death Benefit
Rider, but do reflect a deduction for the Risk Charge and the Administrative
Fee.
Other Subaccounts
"Yield" of the other Subaccounts is computed in accordance with a different
standard method prescribed by the SEC. The net investment income (investment
income less expenses) per Subaccount Unit earned during a specified one-month
or 30-day period is divided by the Subaccount Unit Value on the last day of
the specified period. This result is then annualized (that is, the yield is
assumed to be generated each month or each 30-day period for a year),
according to the following formula, which assumes semiannual compounding:
Yield = 2[((a-b)/(c x d)) + 1)(To the power of 6) - 1]
<TABLE>
<C> <C> <C> <S>
where: a = net investment income earned during the period by the Portfolio
attributable to the Subaccount.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of Subaccount Units outstanding during
the period that were entitled to receive dividends.
d = the Unit Value of the Subaccount Units on the last day of the
period.
</TABLE>
The yield of each Subaccount reflects the deduction of all recurring fees and
charges applicable to the Subaccount, such as the Risk Charge and
Administrative Fee,but does not reflect any Credit Enhancement, any withdrawal
charge, any charge for applicable premium taxes and/or other taxes, any
increase in the Risk Charge for an optional Death Benefit Rider, or any non-
recurring fees or charges.
The Subaccounts' yields will vary from time to time depending upon market
conditions, the composition of each Portfolio and operating expenses of the
Fund allocated to each Portfolio. Consequently, any given performance
quotation should not be considered representative of the Subaccount's
performance in the future. Yield should also be considered relative to changes
in Subaccount Unit Values and to the relative risks associated with the
investment policies and objectives of the various Portfolios. In addition,
because performance will fluctuate, it may not provide a basis for comparing
the yield of a Subaccount with certain bank deposits or other investments that
pay a fixed yield or return for a stated period of time.
PERFORMANCE COMPARISONS AND BENCHMARKS
In advertisements and sales literature, we may compare the performance of some
or all of the Subaccounts to the performance of other variable annuity issuers
in general and to the performance of particular types of variable annuities
investing in mutual funds, or series of mutual funds, with investment
objectives similar to each of the
2
<PAGE>
Subaccounts. This performance may be presented as averages or rankings
compiled by Lipper Analytical Services, Inc. ("Lipper"), the Variable Annuity
Research and Data Service ("VARDS(R)") or Morningstar, Inc. ("Morningstar"),
which are independent services that monitor and rank the performance of
variable annuity issuers and mutual funds in each of the major categories of
investment objectives on an industry-wide basis. Lipper's rankings include
variable life issuers as well as variable annuity issuers. VARDS(R) rankings
compare only variable annuity issuers. The performance analyses prepared by
Lipper and VARDS(R) rank such issuers on the basis of total return, assuming
reinvestment of dividends and distributions, but do not take sales charges,
redemption fees or certain expense deductions at the separate account level
into consideration. In addition, VARDS(R) prepares risk adjusted rankings,
which consider the effects of market risk on total return performance. We may
also compare the performance of the Subaccounts with performance information
included in other publications and services that monitor the performance of
insurance company separate accounts or other investment vehicles. These other
services or publications may be general interest business publications such as
The Wall Street Journal, Barron's, Business Week, Forbes, Fortune, and Money.
In addition, our reports and communications to Contract Owners,
advertisements, or sales literature may compare a Subaccount's performance to
various benchmarks that measure the performance of a pertinent group of
securities widely regarded by investors as being representative of the
securities markets in general or as being representative of a particular type
of security. These benchmarks may include the following: (1) the Standard &
Poor's 500 Composite Stock Price Index ("S&P 500"), an unmanaged weighted
index of 500 companies that represent approximately 80% of the market
capitalization of the United States equity markets; (2) the Consumer Price
Index ("CPI"), published by the U.S. Bureau of Labor Statistics, a statistical
measure of change, over time, in the prices of goods and services in major
expenditure groups and generally considered to be a measure of inflation; (3)
the Dow Jones Industrial Average ("DJIA"); (4) the Donoghue Money Market
Institutional Averages; (5) the Lehman Brothers Government Corporate Index;
(6) the Lehman Brothers Government Bond Index; (7) the Salomon Brothers High
Yield Bond Indexes; and (8) the Morgan Stanley Capital International's EAFE
Index. We may also compare the performance of the Subaccounts with that of
other appropriate indices of investment securities and averages for peer
universes of funds or data developed by us derived from such indices or
averages. Unmanaged indices generally assume the reinvestment of dividends or
interest but do not generally reflect deductions for investment management or
administrative costs and expenses.
3
<PAGE>
SEPARATE ACCOUNT PERFORMANCE
The Contract was not available prior to 1998. However, in order to help you
understand how investment performance can affect your Variable Account Value,
we are including performance information based on the historical performance
of the Subaccounts.
The following table presents the annualized total return for each Variable
Account for the period from each such Variable Account's commencement of
operations through December 31, 1997. The accumulated value (AV) reflects the
deductions for all contractual fees and charges, but does not reflect the
withdrawal charge, any nonrecurring fees and charges, any increase in the Risk
Charge for an optional Death Benefit Rider or any charges for premium and/or
other taxes, and any Credit Enhancement. The withdrawal value (WV) reflects
the deduction for all contractual fees and charges, but does not reflect any
increase in the Risk Charge for an optional Death Benefit Rider, any
nonrecurring fees and charges, any charges for premium and/or other taxes, and
any Credit Enhancement).
THE RESULTS SHOWN IN THIS SECTION ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE
INVESTMENT PERFORMANCE.
ANNUALIZED RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1997
ALL NUMBERS ARE EXPRESSED AS A PERCENTAGE
<TABLE>
<CAPTION>
SINCE
1 YEAR** INCEPTION
------------ ------------
VARIABLE ACCOUNTS AV WV AV WV
- ----------------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
Money Market 1/2/96*................................ 3.82 (2.48) 3.70 0.61
High Yield Bond 1/2/96*............................. 7.92 1.62 8.78 5.84
Managed Bond 1/2/96*................................ 8.40 2.10 5.54 2.51
Government Securities 1/2/96*....................... 7.96 1.66 4.66 1.60
Aggressive Equity 4/17/96*.......................... 2.34 (3.96) 5.87 2.28
Growth LT 1/2/96*................................... 9.42 3.12 12.75 9.91
Equity Income 1/2/96*............................... 26.82 20.52 21.62 19.00
Multi-Strategy 1/2/96*.............................. 17.96 11.66 14.10 11.30
Equity 1/2/96*...................................... 16.54 10.24 21.18 18.54
Bond and Income 1/2/96*............................. 14.71 8.41 5.99 2.97
Equity Index 1/2/96*................................ 31.11 24.81 25.31 22.76
International 1/2/96*............................... 7.76 1.46 12.99 10.16
Emerging Markets 4/17/96*........................... (3.05) (9.35) (4.84) (8.72)
</TABLE>
- --------
* Date Variable Account commenced operations.
** Effective June 1, 1997 Morgan Stanley Asset Management Inc. became the
Portfolio Manager of the International Portfolio. Effective May 1, 1998,
Alliance Capital Management L.P. became the Portfolio Manager of the
Aggressive Equity Portfolio and Goldman Sachs Asset Management became the
Portfolio Manager of the Equity and Bond and Income Portfolios; prior to
May 1, 1998 some of the investment policies of the Aggressive Equity,
Equity and Bond and Income Portfolios and the investment objective of the
Bond and Income Portfolio differed.
In order to help you understand how investment performance can affect your
Variable Account Value, we are including performance information based on the
historical performance of the Portfolios.
The Separate Account commenced operations as of January 2, 1996. Therefore, no
historical performance data exists for the Subaccounts prior to that date. The
following table represents what the performance of the Subaccounts would have
been if the Subaccounts had been both in existence and invested in the
corresponding Portfolio since the date of the Portfolio's (or predecessor
series') inception or for the indicated time period. Nine of the Portfolios of
the Fund available under the Contract have been in operation since January 4,
1988 (January 30, 1991 in the case of the Equity Index Portfolio, January 4,
1994 in the case of the Growth LT Portfolio and April 1, 1996 in the case of
the Aggressive Equity Portfolio and Emerging Markets Portfolio). Because the
Subaccounts had not commenced operations until January 2, 1996 or later, as
indicated in the chart above, and because the Contracts were not available
until 1998, THESE ARE NOT ACTUAL PERFORMANCE NUMBERS FOR THE SUBACCOUNTS OR
FOR THE CONTRACT.
4
<PAGE>
THESE ARE HYPOTHETICAL TOTAL RETURN NUMBERS based on accumulated value ("AV")
and withdrawal value ("WV") that represent the actual performance of the
Portfolios, adjusted for the fees and charges applicable to the Contract and
the Credit Enhancement; the WV also includes applicable withdrawal charges.
Any charge for non-recurring fees and charges, premium taxes and/or other
taxes and an optional Death Benefit Rider are not reflected in these data. The
information presented also includes data representing unmanaged market
indices.
THE RESULTS SHOWN IN THIS SECTION ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE
INVESTMENT PERFORMANCE.
ANNUALIZED RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1997
ALL NUMBERS ARE EXPRESSED AS A PERCENTAGE
<TABLE>
<CAPTION>
SINCE
1 YEAR 3 YEARS* 5 YEARS* 10 YEARS* INCEPTION*
------------ ----------- ----------- ----------- ------------
VARIABLE ACCOUNTS AV WV AV WV AV WV AV WV AV WV
- ----------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market............ 3.82 (2.48) 3.84 1.85 2.99 2.18 3.89 3.89
High Yield Bond......... 7.92 1.62 11.56 9.85 9.86 9.23 9.59 9.59
Managed Bond............ 8.40 2.10 9.36 7.58 6.32 5.60 7.95 7.95
Government Securities... 7.96 1.66 8.69 6.88 5.59 4.86 7.31 7.31
Aggressive Equity....... 2.34 (3.96) 5.16 1.65
Growth LT............... 9.42 3.12 19.70 18.21 17.67 16.69
Equity Income........... 26.82 20.52 24.70 23.33 15.28 14.77 13.02 13.02
Multi-Strategy.......... 17.96 11.66 17.37 15.83 11.09 10.50 10.38 10.38
Equity.................. 16.54 10.24 21.55 20.12 14.51 13.98 13.18 13.18 13.42 13.42
Bond and Income......... 14.71 8.41 13.94 12.30 9.49 8.86 9.75 9.75 10.93 10.93
Equity Index............ 31.11 24.81 28.78 27.50 18.08 17.61 17.11 16.91
International........... 7.76 1.46 12.19 10.49 12.96 12.40 7.76 7.76
Emerging Markets........ (3.05) (9.35) (4.17) (7.94)
</TABLE>
<TABLE>
<CAPTION>
MAJOR INDICES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
EAFE........................................... 1.78 6.27 11.39 6.25
First Boston High Yield Bond................... 12.63 14.12 11.84 12.10
LB Aggregate................................... 9.65 10.41 7.48 9.17
LBG/Bond....................................... 9.59 10.05 7.34 8.88
LBG/C Bond..................................... 9.76 10.43 7.61 9.15
LBG/C LT Bond.................................. 14.52 14.22 9.97 11.03
Russell 2500................................... 24.36 24.92 17.59 16.94
MSCI Emerging Markets Free..................... (11.59) (3.86) 7.57
S&P 500........................................ 33.36 31.15 20.27 18.05
</TABLE>
- --------
* The performance of the Aggressive Equity, Equity Income, Multi-Strategy,
Equity, Bond and Income, and International Variable Accounts for a portion
of this period occurred at a time when other Portfolio Managers managed the
corresponding Portfolio in which each Variable Account invests. Effective
January 1, 1994, J. P. Morgan Investment Management, Inc. became the
Portfolio Manager of the Equity Income and Multi-Strategy Portfolios; prior
to January 1, 1994, some of the investment policies of the Equity Income
Portfolio and the investment objective of the Multi-Strategy Portfolio
differed. Effective June 1, 1997 Morgan Stanley Asset Management Inc.
became the Portfolio Manager of the International Portfolio. Effective May
1, 1998, Alliance Capital Management L.P. became the Portfolio Manager of
the Aggressive Equity Portfolio and Goldman Sachs Asset Management became
the Portfolio Manager of the Equity and Bond and Income Portfolios; prior
to May 1, 1998 some of the investment policies of the Aggressive Equity,
Equity and Bond and Income Portfolios and the investment objective of the
Bond and Income Portfolio differed. Performance of the Equity Portfolio and
the Bond and Income Portfolio is based in part on the performance of
predecessor portfolios of Pacific Corinthian Variable Fund, which began
their first full year of operations January 1, 1984 and were acquired by
the Fund on December 31, 1994.
Tax Deferred Accumulation
In reports or other communications to you or in advertising or sales
materials, we may also describe the effects of tax-deferred compounding on the
Separate Account's investment returns or upon returns in general. These
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effects may be illustrated in charts or graphs and may include comparisons at
various points in time of returns under the Contract or in general on a tax-
deferred basis with the returns on a taxable basis. Different tax rates may be
assumed.
In general, individuals who own annuity contracts are not taxed on increases
in the value under the annuity contract until some form of distribution is
made from the contract. Thus, the annuity contract will benefit from tax
deferral during the accumulation period, which generally will have the effect
of permitting an investment in an annuity contract to grow more rapidly than a
comparable investment under which increases in value are taxed on a current
basis. The following chart illustrates this benefit by comparing accumulation
under a variable annuity contract with accumulations from an investment on
which gains are taxed on a current ordinary income basis. The chart shows
accumulations on a single Purchase Payment of $10,000, assuming hypothetical
annual returns of 0%, 4% and 8%, compounded annually, and a tax rate of 36%.
The values shown for the taxable investment do not include any deduction for
management fees or other expenses but assume that taxes are deducted annually
from investment returns. The values shown for the variable annuity do not
reflect the Credit Enhancement, the deduction of contractual expenses such as
the Risk Charge (equal to an annual rate of 1.25% of average daily account
value), the Administrative Fee (equal to an annual rate of 0.15% of average
daily account value), any increase in the Risk Charge for an optional Death
Benefit Rider (equal to a maximum annual rate of .35% of average daily account
value), any charge for premium taxes and/or other taxes, or the expenses of an
underlying investment vehicle, such as the Fund. The values shown also do not
reflect the withdrawal charge. Generally, the withdrawal charge is equal to 7%
of the amount withdrawn attributable to Purchase Payments that are less than 5
years old, 5% of the amount withdrawn attributable to Purchase Payments that
are five and six years old, and 4% of the amount withdrawn attributable to
Purchase Payments that are seven years old. The age of Purchase Payments is
considered 1 year old in the Contract Year we receive it and increases by one
year on each Contract Anniversary. There is no withdrawal charge on
withdrawals attributed to Purchase Payments at least 8 years old, or to the
extent that total withdrawals that are free of charge during the Contract Year
do not exceed 10% of your Purchase Payments that are less than 8 years old
plus 100% of all Purchase Payments that have an age of 8 years or more, or on
withdrawals of your Earnings. If these expenses and fees were taken into
account, they would reduce the investment return shown for both the taxable
investment and the hypothetical variable annuity contract. In addition, these
values assume that you do not surrender the Contract or make any withdrawals
until the end of the period shown. The chart assumes a full withdrawal, at the
end of the period shown, of all Contract Value and the payment of taxes at the
36% rate on the amount in excess of the Purchase Payment.
The rates of return illustrated are hypothetical and are not an estimate or
guarantee of performance. Actual tax rates may vary for different assets and
taxpayers from that illustrated and withdrawals by and distributions to
Contract Owners who have not reached age 59 1/2 may be subject to a tax
penalty of 10%.
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POWER OF TAX DEFERRAL
$10,000 investment at annual rates of return of 0%, 4% and 8%, taxed @ 36%
[PERFORMANCE GRAPH APPEARS HERE]
DISTRIBUTION OF THE CONTRACTS
PACIFIC MUTUAL DISTRIBUTORS, INC.
Pacific Mutual Distributors, Inc. ("PMD"), a wholly-owned subsidiary of ours,
acts as the principal underwriter ("distributor") of the Contracts and offers
the Contracts on a continuous basis. 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. We and PMD enter into selling agreements with broker-dealers whose
registered representatives are authorized by state insurance departments to
sell the Contracts. The aggregate amount of underwriting commissions paid to
PMD for 1998 with regard to this Contract was $0 of which $0 was retained.
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THE CONTRACTS AND THE SEPARATE ACCOUNT
CALCULATING SUBACCOUNT UNIT VALUES
The Unit Value of the Subaccount Units in each Variable Investment Option is
computed as of the end of each Business Day. The initial Unit Value of each
Subaccount was $10 on the Business Day the Subaccount began operations. At the
end of each Business Day, the Unit Value for a Subaccount is equal to:
Y x Z
where (Y)= the Unit Value for that Subaccount as of the end of the preceding
Business Day; and
(Z)= the Net Investment Factor for that Subaccount for the period (a
"valuation period") between that Business Day and the immediately
preceding Business Day.
The "Net Investment Factor" for a Subaccount for any valuation period is equal
to:
(A/B) - C
where (A)= the "per share value of the assets" of that Subaccount as of the end
of that valuation period, which is equal to: a+b+c
where (a)= the net asset value per share of the corresponding Portfolio
shares held by that Subaccount as of the end of that valuation
period;
(b)= the per share amount of any dividend or capital gain distributions
made by the Fund for that Portfolio during that valuation period;
and
(c)= any per share charge (a negative number) or credit (a positive
number) for any income taxes and/or any other taxes or other
amounts set aside during that valuation period as a reserve for
any income and/or any other taxes which we determine to have
resulted from the operations of the Subaccount or Contract, and/or
any taxes attributable, directly or indirectly, to Purchase
Payments;
(B)= the net asset value per share of the corresponding Portfolio shares
held by the Subaccount as of the end of the preceding valuation
period; and
(C)= a factor that assesses against the Subaccount net assets for each
calendar day in the valuation period the basic Risk Charge plus any
applicable increase in the Risk charge and the Administrative Fee
(see CHARGES, FEES AND DEDUCTIONS in the Prospectus).
VARIABLE ANNUITY PAYMENT AMOUNTS
The following steps show how we determine the amount of each variable annuity
payment under your Contract.
First: Pay Applicable Premium Taxes
When you convert your Net Contract Value into annuity payments, you must pay
any applicable charge for premium taxes and/or other taxes on your Contract
Value (unless applicable law requires those taxes to be paid at a later time).
We assess this charge by reducing each Account Value proportionately, relative
to your Account Value in each Subaccount and in the Fixed Option, in an amount
equal to the aggregate amount of the charges. The remaining amount of your
available Net Contract Value may be used to provide variable annuity payments.
Alternatively, your remaining available Net Contract Value may be used to
provide fixed annuity payments, or it may be divided to provide both fixed and
variable annuity payments. You may also choose to withdraw some or all of your
remaining Net Contract Value, less any applicable withdrawal charge, and any
charges for premium taxes and/or other taxes without converting this amount
into annuity payments.
Second: The First Variable Payment
We begin by referring to your Contract's Option Table for your Annuity Option
(the "Annuity Option Table"). The Annuity Option Table allows us to calculate
the dollar amount of the first variable annuity payment under
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your Contract, based on the amount applied toward the variable annuity. The
number that the Annuity Option Table yields will be based on the Annuitant's
age (and, in certain cases, sex) and assumes a 5% rate of return, as described
in more detail below.
Example: Assume a man is 65 years of age at his Annuity Date and has
selected a lifetime annuity with monthly payments guaranteed for 10 years.
According to the Annuity Option Table, this man should receive an initial
monthly payment of $5.79 for every $1,000 of his Contract Value (reduced by
applicable charges) that he will be using to provide variable payments.
Therefore, if his Contract Value after deducting applicable fees and
charges is $100,000 on his Annuity Date and he applies this entire amount
toward his variable annuity, his first monthly payment will be $579.00.
You may choose any other Annuity Option Table that assumes a different rate of
return which we offer at the time your Annuity Option is effective.
Third: Subaccount Annuity Units
For each Subaccount, we use the amount of the first variable annuity payment
under your Contract attributable to each Subaccount to determine the number of
Subaccount Annuity Units that will form the basis of subsequent payment
amounts. First, we use the Annuity Option Table to determine the amount of
that first variable payment for each Subaccount. Then, for each Subaccount, we
divide that amount of the first variable annuity payment by the value of one
Subaccount Annuity Unit (the "Subaccount Annuity Unit Value") as of the end of
the Annuity Date to obtain the number of Subaccount Annuity Units for that
particular Subaccount. The number of Subaccount Annuity Units used to
calculate subsequent payments under your Contract will not change unless
exchanges of Annuity Units are made (or if the Joint and Survivor Annuity
Option is elected and the Primary Annuitant dies first), but the value of
those Annuity Units will change daily, as described below.
Fourth: The Subsequent Variable Payments
The amount of each subsequent variable annuity payment will be the sum of the
amounts payable based on each Subaccount. The amount payable based on each
Subaccount is equal to the number of Subaccount Annuity Units for that
Subaccount multiplied by their Subaccount Annuity Unit Value at the end of the
Business Day in each payment period you elected that corresponds to the
Annuity Date.
Each Subaccount's Subaccount Annuity Unit Value, like its Subaccount Unit
Value, changes each day to reflect the net investment results of the
underlying investment vehicle, as well as the assessment of the Risk Charge at
a rate equal on an annual basis to 1.25% and the Administrative Fee at a rate
equal on an annual basis to 0.15%. In addition, the calculation of Subaccount
Annuity Unit Value incorporates an additional factor; as discussed in more
detail below, this additional factor adjusts Subaccount Annuity Values to
correct for the Option Table's implicit assumed annual investment return on
amounts applied but not yet used to furnish annuity benefits. Any increase in
your Risk Charge for an Optional Death Benefit Rider is not charged on and
after the Annuity Date.
Different Subaccounts may be selected for your Contract before and after your
Annuity Date, subject to any restrictions we may establish. Currently, you may
exchange Subaccount Annuity Units in any Subaccount for Subaccount Annuity
Units in any other Subaccount(s) up to four times in any twelve month period
after your Annuity Date. The number of Subaccount Annuity Units in any
Subaccount may change due to such exchanges. Exchanges following your Annuity
Date will be made by exchanging Subaccount Annuity Units of equivalent
aggregate value, based on their relative Subaccount Annuity Unit Values.
Understanding the "Assumed Investment Return" Factor
The Annuity Option Table incorporates a number of implicit assumptions in
determining the amount of your first variable annuity payment. As noted above,
the numbers in the Annuity Option Table reflect certain actuarial assumptions
based on the Annuitant's age, and, in some cases, the Annuitant's sex. In
addition, these numbers assume that the amount of your Contract Value that you
convert to a variable annuity will have a positive net
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investment return of 5% (or such other rate of return you may elect) each year
during the payout of your annuity; thus 5% is referred to as an "assumed
investment return."
The Subaccount Annuity Unit Value for a Subaccount will increase only to the
extent that the investment performance of that Subaccount exceeds the Risk
Charge, the Administrative Fee, and the assumed investment return. The
Subaccount Annuity Unit Value for any Subaccount will generally be less than
the Subaccount Unit Value for that same Subaccount, and the difference will be
the amount of the assumed investment return factor.
Example: Assume the net investment performance of a Subaccount is at a rate
of 5.00% per year (after deduction of the 1.25% Risk Charge and the 0.15%
Administrative Fee). The Subaccount Unit Value for that Subaccount would
increase at a rate of 5.00% per year, but the Subaccount Annuity Unit Value
would not increase (or decrease) at all. The net investment factor for that
5% return [1.05] is then divided by the factor for the 5% assumed
investment return [1.05] and 1 is subtracted from the result to determine
the adjusted rate of change in Subaccount Annuity Unit Value: 1.05/1.05 = 1;
1 - 1 = 0; 0 X 100% = 0%.
If the net investment performance of a Subaccount's assets is at a rate less
than 5.00% per year, the Subaccount Annuity Unit Value will decrease, even if
the Subaccount Unit Value is increasing.
Example: Assume the net investment performance of a Subaccount is at a rate
of 2.60% per year (after deduction of the 1.25% Risk Charge and the 0.15%
Administrative Fee). The Subaccount Unit Value for that Subaccount would
increase at a rate of 2.60% per year, but the Subaccount Annuity Unit Value
would decrease at a rate of 2.29% per year. The net investment factor for
that 2.6% return [1.026] is then divided by the factor for the 5% assumed
investment return [1.05] and 1 is subtracted from the result to determine
the adjusted rate of change in Subaccount Annuity Unit Value: 1.026/1.05 =
0.9771; 0.9771 - 1 = -0.0229; -0.0229 x 100% = -2.29%.
The assumed investment return will always cause increases in Subaccount
Annuity Unit Values to be somewhat less than if the assumption had not been
made, will cause decreases in Subaccount Annuity Unit Values to be somewhat
greater than if the assumption had not been made, and will (as shown in the
example above) sometimes cause a decrease in Subaccount Annuity Unit Values to
take place when an increase would have occurred if the assumption had not been
made. If we had assumed a higher investment return in our Annuity Option
tables, it would produce annuities with larger first payments, but the
increases in subaccount annuity payments would be smaller and the decreases in
subsequent annuity payments would be greater; a lower assumed investment
return would produce annuities with smaller first payments, and the increases
in subsequent annuity payments would be greater and the decreases in
subsequent annuity payments would be smaller.
CORRESPONDING DATES
If any transaction or event under your Contract is scheduled to occur on a
"corresponding date" that does not exist in a given calendar period, the
transaction or event will be deemed to occur on the following Business Day. In
addition, as stated in the Prospectus, any event scheduled to occur on a day
that is not a Business Day will occur on the next succeeding Business Day.
Example: If your Contract is issued on February 29 in year 1 (a leap year),
your Contract Anniversary in years 2, 3 and 4 will be on March 1.
Example: If your Annuity Date is July 31 and you select monthly annuity
payments, the payments received will be based on valuations made on July
31, August 31, October 1 (for September), October 31, December 1 (for
November), December 31, January 31, March 1 (for February), March 31, May 1
(for April), May 31 and July 1 (for June).
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AGE AND SEX OF ANNUITANT
As mentioned in the Prospectus, the Contracts generally provide for sex-
distinct annuity income factors in the case of life annuities. Statistically,
females tend to have longer life expectancies than males; consequently, if the
amount of annuity payments is based on life expectancy, they will ordinarily
be higher if an annuitant is male than if an annuitant is female. Certain
states' regulations prohibit sex-distinct annuity income factors, and
Contracts issued in those states will use unisex factors. In addition,
Contracts issued in connection with Qualified Plans are required to use unisex
factors.
We may require proof of your Annuitant's age and sex before or after starting
annuity payments. If the age or sex (or both) of your Annuitant are
incorrectly stated in your Contract, we will correct the amount payable based
on your Annuitant's correct Age or sex, if applicable. If we make the
correction after annuity payments have started, and we have made overpayments,
we will deduct the amount of the overpayment, with interest at 3% a year, from
any payments due then or later; if we have made underpayments, we will add the
amount, with interest at 3% a year, of the underpayments to the next payment
we make after we receive proof of the correct Age and/or sex.
SYSTEMATIC TRANSFER PROGRAMS
The Fixed Account is not available in connection with portfolio rebalancing.
If you are using the earnings sweep, you may also use portfolio rebalancing
only if you selected the Fixed Option as your sweep option. You may not use
dollar cost averaging and the earnings sweep at the same time.
Dollar Cost Averaging
When you request dollar cost averaging, you are authorizing us to make
periodic reallocations of your Contract Value without waiting for any further
instruction from you. You may request to begin or stop dollar cost averaging
at any time prior to your Annuity Date; the effective date of your request
will be the day we receive written notice from you in proper form. Your
request may specify the date on which you want your first transfer to be made.
If you do not specify a date for your first transfer, we will treat your
request as if you had specified the effective date of your request. Your first
transfer may not be made until 30 days after your Contract Date, and if you
specify an earlier date, your first transfer will be delayed until one
calendar month after the date you specify. If you request dollar cost
averaging on your application for your Contract and you fail to specify a date
for your first transfer, your first transfer will be made one period after
your Contract Date (that is, if you specify monthly transfers, the first
transfer will occur 30 days after your Contract Date; quarterly transfers, 90
days after your Contract Date; semiannual transfers, 180 days after your
Contract Date; and if you specify annual transfers, the first transfer will
occur on your Contract Anniversary). If you stop dollar cost averaging, you
must wait 30 days before you may begin this option again.
Your request to begin dollar cost averaging must specify the Investment Option
you wish to transfer money from (your "source account"). You may choose any
one Investment Option as your source account. The Account Value of your source
account must be at least $5,000 for you to begin dollar cost averaging.
Your request to begin dollar cost averaging must also specify the amount and
frequency of your transfers. You may choose monthly, quarterly, semiannual or
annual transfers. The amount of your transfers may be specified as a dollar
amount or a percentage of your source Account Value; however, each transfer
must be at least $250. Dollar cost averaging transfers are subject to the same
requirements and limitations as other transfers.
Finally, your request must specify the Fixed or Variable Investment Option(s)
you wish to transfer amounts to (your "target account(s)"). If you select more
than one target account, your dollar cost averaging request must specify how
transferred amounts should be allocated among the target accounts. Your source
account may not also be a target account.
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Your dollar cost averaging transfers will continue until the earlier of (i)
your request to stop dollar cost averaging is effective, or (ii) your source
Account Value is zero, or (iii) your Annuity Date. If, as a result of a dollar
cost averaging transfer, your source Account Value falls below any minimum
Account Value we may establish, we have the right, at our option, to transfer
that remaining Account Value to your target account(s) on a proportionate
basis relative to your most recent allocation instructions. We may change,
terminate or suspend the dollar cost averaging option at any time.
Portfolio Rebalancing
Portfolio rebalancing allows you to maintain the percentage of your Contract
Value allocated to each Variable Investment Option at a pre-set level prior to
annuitization. For example, you could specify that 30% of your Contract Value
should be in the Equity Index Subaccount, 40% in the Managed Bond Subaccount,
and 30% in the Growth LT Subaccount. Over time, the variations in each
Subaccount's investment results will shift this balance of these Subaccount
Value allocations. If you elect the portfolio rebalancing feature, we will
automatically transfer your Subaccount Value back to the percentages you
specify.
You may choose to have rebalances made quarterly, semiannually or annually
until your Annuity Date; portfolio rebalancing is not available after you
annuitize.
Procedures for selecting portfolio rebalancing are generally the same as those
discussed in detail above for selecting dollar cost averaging: You may make
your request at any time prior to your Annuity Date and it will be effective
when we receive it in proper form. If you stop portfolio rebalancing, you must
wait 30 days to begin again. You may specify a date for your first rebalance,
or we will treat your request as if you selected the request's effective date.
If you specify a date fewer than 30 days after your Contract Date, your first
rebalance will be delayed one month, and if you request rebalancing on your
application but do not specify a date for the first rebalance, it will occur
one period after your Contract Date, as described above under Dollar Cost
Averaging. We may change, terminate or suspend the portfolio rebalancing
feature at any time.
Earnings Sweep
An earnings sweep automatically transfers the earnings attributable to a
specified Investment Option (the "sweep option") to one or more other
Investment Options (your "target option(s)"). If you elect to use the earnings
sweep, you may select either the Fixed Option or the Money Market Subaccount
as your sweep option. The Account Value of your sweep option will be required
to be at least $5,000 when you elect the earnings sweep. You may select one or
more Variable Investment Options (but not the Money Market Subaccount) as your
target option(s).
You may choose to have earnings sweeps occur monthly, quarterly, semiannually
or annually until you annuitize. At each earnings sweep, we will automatically
transfer your accumulated earnings attributable to your sweep option for the
previous period proportionately to your target option(s). That is, if you
select a monthly earnings sweep, we will transfer the sweep option earnings
from the preceding month; if you select a semiannual earnings sweep, we will
transfer the sweep option earnings accumulated over the preceding six months.
Earnings sweep transfers are subject to the same requirements and limitations
as other transfers.
To determine the earnings, we take the change in the sweep option's Account
Value during the sweep period, add any withdrawals or transfers out of the
sweep option Account that occurred during the sweep period, and subtract any
allocations, including Credit Enhancements, to the sweep option Account during
the sweep period. The result of this calculation represents the "total
earnings" for the sweep period.
If, during the sweep period, you withdraw or transfer amounts from the sweep
option Account, we assume that earnings are withdrawn or transferred before
any other Account Value. Therefore, your "total earnings" for the sweep period
will be reduced by any amounts withdrawn or transferred during the sweep
option period. The remaining earnings are eligible for the sweep transfer.
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Procedures for selecting the earnings sweep are generally the same as those
discussed in detail above for selecting dollar cost averaging and portfolio
rebalancing: You may make your request at any time and it will be effective
when we receive it in a form satisfactory to us. If you stop the earnings
sweep, you must wait 30 days to begin again. You may specify a date for your
first sweep, or we will treat your request as if you selected the request's
effective date. If you specify a date fewer than 30 days after your Contract
Date, your first earnings sweep will be delayed one month, and if you request
the earnings sweep on your application but do not specify a date for the first
sweep, it will occur one period after your Contract Date, as described above
under Dollar Cost Averaging.
If, as a result of an earnings sweep transfer, your source Account Value falls
below $500, we have the right, at our option, to transfer that remaining
Account Value to your target account(s) on a proportionate basis relative to
your most recent allocation instructions. We may change, terminate or suspend
the earnings sweep option at any time.
PRE-AUTHORIZED WITHDRAWALS
You may specify a dollar amount for your pre-authorized withdrawals, or you
may specify a percentage of your Contract Value or an Account Value. You may
direct us to make your pre-authorized withdrawals from one or more specific
Investment Options; if you do not give us these specific instructions, amounts
will be deducted proportionately from your Account Value in each Fixed or
Variable Investment Option.
Procedures for selecting pre-authorized withdrawals are generally the same as
those discussed in detail above for selecting dollar cost averaging, portfolio
rebalancing, and earnings sweeps: You may make your request at any time and it
will be effective when we receive it in a form satisfactory to us. If you stop
the pre-authorized withdrawals, you must wait 30 days to begin again. You may
specify a date for the first withdrawal, or we will treat your request as if
you selected the request's effective date. If you specify a date fewer than 30
days after your Contract Date, your first pre-authorized withdrawal will be
delayed one month, and if you request the pre-authorized withdrawals on your
application but do not specify a date for the first withdrawal, it will occur
one period after your Contract Date.
If your pre-authorized withdrawals cause your Account Value in any Investment
Option to fall below $500, we have the right, at our option, to transfer that
remaining Account Value to your other Investment Options on a proportionate
basis relative to your most recent allocation instructions. If your pre-
authorized withdrawals cause your Contract Value to fall below $1,000, we may,
at our option, terminate your Contract and send you the remaining withdrawal
proceeds.
Pre-authorized withdrawals are subject to the same withdrawal charges as are
other withdrawals, and each withdrawal is subject to any applicable charge for
premium taxes and/or other taxes, to federal income tax on its taxable
portion, and, if you have not reached age 59 1/2, a federal tax penalty of at
least 10%.
DEATH BENEFIT
Any death benefit payable will be calculated as of the date we receive proof
(in proper form) of the Annuitant's death (or, if applicable, the Contract
Owner's death) and instructions regarding payment; any claim of a death
benefit must be made in proper form. A recipient of death benefit proceeds may
elect to have this benefit paid in one lump sum, in periodic payments, in the
form of a lifetime annuity or in some combination of these. Annuity payments
will begin within 30 days once we receive all information necessary to process
the claim.
If your Contract names Joint or Contingent Annuitants, no death benefit
proceeds will be payable unless and until the last Annuitant dies prior to the
Annuity Date or a Contract Owner dies prior to the Annuity Date. If yours is a
Qualified Contract, your Contingent Annuitant or Contingent Owner must be your
spouse.
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JOINT ANNUITANTS ON QUALIFIED CONTRACTS
If your Contract was issued in connection with a Qualified Plan subject to
Title I of the Employee Retirement Income Security Act of 1974 ("ERISA"), and
you change your marital status after your Contract Date, you may be permitted
to add a Joint Annuitant on your Annuity Date and to change your Joint
Annuitant. Generally speaking, you may be permitted to add a new spouse as a
Joint Annuitant, and you may be permitted to remove a Joint Annuitant who is
no longer your spouse. You may call us for more information.
1035 EXCHANGES
You may make your initial Purchase Payment through an exchange of an existing
annuity contract. To exchange, you must complete a 1035 Exchange form, which
is available by calling your representative, or by calling us at 1-800-722-
2333, and mail the form along with the annuity contract you are exchanging
(plus your completed application if you are making an initial Purchase
Payment) to us.
In general terms, Section 1035 of the Code provides that you recognize no gain
or loss when you exchange one annuity contract solely for another annuity
contract. However, transactions under Section 1035 may be subject to special
rules and may require special procedures and record-keeping, particularly if
the exchanged annuity contract was issued prior to August 14, 1982. You should
consult your tax adviser prior to effecting a 1035 Exchange.
SAFEKEEPING OF ASSETS
We are responsible for the safekeeping of the assets of the Separate Account.
These assets are held separate and apart from the assets of our General
Account and our other separate accounts.
FINANCIAL STATEMENTS
Audited financial statements of Separate Account A as of December 31, 1997 and
for the two years then ended are incorporated by reference in this SAI from
the Annual Report of the Separate Account dated as of December 31, 1997.
Unaudited financial statements of Separate Account A as of June 30, 1998 and
for the six month period ended June 30, 1998, are set forth beginning on the
next page [to be inserted]. Pacific Life's audited consolidated financial
statements as of December 31, 1997 and 1996 and for the three years ended
December 31, 1997 and unaudited consolidated financial statements as of June
30, 1998 and for the six month periods ended June 30, 1998 and 1997 are set
forth beginning on page 16 [unaudited to be inserted]. These financial
statements should be considered only as bearing on the ability of Pacific Life
to meet its obligations under the Contracts and not as bearing on the
investment performance of the assets held in the Separate Account.
The consolidated financial statements of Pacific Life as of December 31,
1997 and 1996 and for the three years ended December 31, 1997 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein.
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SEPARATE ACCOUNT A UNAUDITED SEMI-ANNUAL REPORT
TO BE INSERTED
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INDEPENDENT AUDITORS' REPORT
Pacific Life Insurance Company and
Subsidiaries:
We have audited the accompanying consolidated statements of financial
condition of Pacific Life Insurance Company (formerly Pacific Mutual Life
Insurance Company) and subsidiaries (the "Company") as of December 31,
1997 and 1996, and the related consolidated statements of operations,
stockholder's equity and cash flows for each of the three years in the
period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Pacific Life Insurance
Company and subsidiaries as of December 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the three years in
the period ended December 31, 1997 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Costa Mesa, California
February 19, 1998
16
<PAGE>
Pacific Life Insurance Company and Subsidiaries
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31,
1997 1996
- ----------------------------------------------------------------------------
(In Millions)
<S> <C> <C>
ASSETS
Investments:
Securities available for sale at estimated fair value:
Fixed maturity securities $13,990.7 $12,193.8
Equity securities 346.4 260.8
Mortgage loans 1,922.1 1,477.3
Real estate 192.1 280.0
Policy loans 3,769.2 3,131.8
Short-term investments 83.8 66.1
Other investments 380.2 208.0
- ----------------------------------------------------------------------------
TOTAL INVESTMENTS 20,684.5 17,617.8
Cash and cash equivalents 110.4 109.0
Deferred policy acquisition costs 716.9 531.5
Accrued investment income 255.4 202.5
Other assets 636.5 462.4
Separate account assets 11,605.1 8,142.1
- ----------------------------------------------------------------------------
TOTAL ASSETS $34,008.8 $27,065.3
============================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Universal life, annuity and other investment
contract deposits $16,644.5 $13,877.4
Future policy benefits 2,133.8 2,506.5
Short-term and long-term debt 253.6 270.1
Other liabilities 1,224.5 572.0
Separate account liabilities 11,605.1 8,142.1
- ----------------------------------------------------------------------------
Total Liabilities 31,861.5 25,368.1
- ----------------------------------------------------------------------------
Commitments and contingencies
Stockholder's Equity:
Common stock - $50 par value; 600,000 shares
authorized, issued and outstanding 30.0
Paid-in capital 120.1
Retained earnings 1,422.0 1,318.0
Unrealized gain on securities available for sale, net 575.2 379.2
- ----------------------------------------------------------------------------
Total Stockholder's Equity 2,147.3 1,697.2
- ----------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $34,008.8 $27,065.3
============================================================================
</TABLE>
See Notes to Consolidated Financial Statements
17
<PAGE>
Pacific Life Insurance Company and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
- ------------------------------------------------------------------------------
(In Millions)
<S> <C> <C> <C>
REVENUES
Insurance premiums $ 504.3 $ 465.4 $ 458.5
Policy fees from universal life, annuity and other
investment contract deposits 431.2 348.6 309.0
Net investment income 1,225.3 1,087.3 1,038.4
Net realized capital gains 85.3 44.0 61.5
Commission revenue 146.6 79.6 62.0
Other income 181.7 123.1 90.3
- ------------------------------------------------------------------------------
TOTAL REVENUES 2,574.4 2,148.0 2,019.7
- ------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Interest credited to universal life, annuity and
other investment contract deposits 797.8 665.0 675.2
Policy benefits paid or provided 675.7 652.9 647.5
Commission expenses 303.7 233.6 197.5
Operating expenses 507.7 316.2 278.6
- ------------------------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES 2,284.9 1,867.7 1,798.8
- ------------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR INCOME TAXES 289.5 280.3 220.9
Provision for income taxes 113.5 113.7 86.1
- ------------------------------------------------------------------------------
NET INCOME $ 176.0 $ 166.6 $ 134.8
==============================================================================
</TABLE>
See Notes to Consolidated Financial Statements
18
<PAGE>
Pacific Life Insurance Company and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Unrealized
Gain (Loss)
Common Stock on Securities
------------- Paid-in Retained Available
Shares Amount Capital Earnings for Sale, net Total
- ---------------------------------------------------------------------------------
(In Millions)
<S> <C> <C> <C> <C> <C> <C>
BALANCES,
JANUARY 1, 1995 $1,016.6 $(207.3) $ 809.3
Net income 134.8 134.8
Change in unrealized
gain (loss) on
securities available
for sale, net 689.3 689.3
- ---------------------------------------------------------------------------------
BALANCES,
DECEMBER 31, 1995 1,151.4 482.0 1,633.4
Net income 166.6 166.6
Change in unrealized
gain on securities
available for sale, net (102.8) (102.8)
- ---------------------------------------------------------------------------------
BALANCES,
DECEMBER 31, 1996 1,318.0 379.2 1,697.2
Net income 176.0 176.0
Change in unrealized
gain on securities
available for sale, net 196.0 196.0
Issuance of partnership
units by affiliate $ 85.1 85.1
Initial member
capitalization of
Pacific Mutual Holding
Company (2.0) (2.0)
Issuance of common stock 0.6 $30.0 35.0 (65.0) --
Dividend paid to parent (5.0) (5.0)
- ---------------------------------------------------------------------------------
BALANCES,
DECEMBER 31, 1997 0.6 $30.0 $120.1 $1,422.0 $ 575.2 $2,147.3
=================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
19
<PAGE>
Pacific Life Insurance Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
- --------------------------------------------------------------------------------
(In Millions)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 176.0 $ 166.6 $ 134.8
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization on fixed maturities (26.6) (45.2) (67.2)
Depreciation and other amortization 38.3 43.8 36.8
Deferred income taxes (14.4) (49.8) (30.3)
Net realized capital gains (85.3) (44.0) (61.5)
Net change in deferred policy acquisition
costs (185.4) (140.4) 48.8
Interest credited to universal life, annuity
and other investment contract deposits 797.8 665.0 675.2
Change in accrued investment income (52.9) (3.7) (16.1)
Change in future policy benefits (372.7) 62.3 88.8
Change in other assets and liabilities 577.4 158.1 151.9
- --------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 852.2 812.7 961.2
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale:
Purchases (6,343.2) (4,525.0) (3,001.3)
Sales 2,247.5 2,511.0 1,940.3
Maturities and repayments 2,406.8 1,184.7 926.9
Held to maturity securities:
Purchases (181.9)
Sales 62.3
Maturities and repayments 111.0
Repayments of mortgage loans 179.3 220.4 267.7
Proceeds from sales of mortgage loans and real
estate 104.4 14.5 27.4
Purchases of mortgage loans and real estate (643.7) (414.3) (244.7)
Distributions from partnerships 91.6 78.8 49.0
Change in policy loans (637.4) (338.5) (389.8)
Change in short-term investments (17.7) 37.2 (66.7)
Other investing activity, net 78.8 (144.5) (137.2)
- --------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (2,533.6) (1,375.7) (637.0)
- --------------------------------------------------------------------------------
</TABLE>
(Continued)
See Notes to Consolidated Financial Statements
20
<PAGE>
Pacific Life Insurance Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
(Continued) 1997 1996 1995
- ------------------------------------------------------------------------------
(In Millions)
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Policyholder account balances:
Deposits $ 4,373.6 $ 2,105.0 $ 1,437.9
Withdrawals (2,667.3) (1,756.6) (1,774.2)
Net change in short-term debt 8.5 42.5 (38.8)
Repayment of long-term debt (25.0) (5.0) (5.0)
Initial capitalization of Pacific Mutual
Holding Company (2.0)
Dividend paid to parent (5.0)
- ------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING AC-
TIVITIES 1,682.8 385.9 (380.1)
- ------------------------------------------------------------------------------
Net change in cash and cash equivalents 1.4 (177.1) (55.9)
Cash and cash equivalents, beginning of year 109.0 286.1 342.0
- ------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 110.4 $ 109.0 $ 286.1
==============================================================================
SUPPLEMENTAL SCHEDULE OF INVESTING AND FINANCING ACTIVITIES
In connection with the acquisition of an insurance block of business as
discussed in Note 5, the following assets and liabilities were assumed:
Cash $1,215.9
Policy loans 440.3
Other assets 43.4
--------
Total assets assumed $1,699.6
========
Policyholder account values $1,693.8
Other liabilities 5.8
--------
Total liabilities assumed $1,699.6
========
================================================================================
SUPPLEMENTAL SCHEDULE OF NON CASH FINANCING ACTIVITIES
As a result of the Conversion as discussed in Note 1, $65 million of retained
earnings was allocated for the issuance of 600,000 shares of common stock with
a par value totaling $30 million and $35 million was allocated to paid-in
capital.
================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid $144.5 $185.9 $96.9
Interest paid $ 26.1 $ 27.2 $23.3
===============================================================================
</TABLE>
See Notes to Consolidated Financial Statements
21
<PAGE>
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
CONVERSION TO MUTUAL HOLDING COMPANY STRUCTURE
Pursuant to consent received from the Insurance Department of the State of
California, Pacific Mutual Life Insurance Company ("Pacific Mutual")
implemented a plan of conversion to form a mutual holding company
structure (the "Conversion") on September 1, 1997. The Conversion created
Pacific LifeCorp, an intermediate stock holding company and Pacific Mutual
Holding Company ("PMHC"), a mutual holding company. Pacific Mutual was
converted to a stock life insurance company and renamed Pacific Life
Insurance Company ("Pacific Life"). Under their respective charters, PMHC
must always own at least 51% of the outstanding voting stock of Pacific
LifeCorp, and Pacific LifeCorp must always own 100% of the voting stock of
Pacific Life. Owners of Pacific Life's annuity contracts and life
insurance policies have certain membership interests in PMHC, consisting
principally of the right to vote on the election of the Board of Directors
of PMHC and on other matters, and certain rights upon liquidation or
dissolution of PMHC.
As a result of the Conversion, $65 million of retained earnings was
allocated for the issuance of 600,000 shares of common stock with a par
value totaling $30 million and $35 million was allocated to paid-in
capital.
DESCRIPTION OF BUSINESS
Pacific Life was established in 1868 and is organized under the laws of
the State of California as a stock life insurance company. Pacific Life
conducts business in every state except New York.
Pacific Life and its subsidiaries and affiliates have primary business
operations which consist of life insurance, annuities, pension products,
group employee benefits and investment management and advisory services.
These primary business operations provide a broad range of life insurance,
asset accumulation and investment products for individuals and businesses
and offer a range of investment products to institutions and pension
plans. Additionally, through its major subsidiaries and affiliates,
Pacific Life provides a variety of group employee benefits, as well as
investment management and advisory services.
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements of Pacific Life
Insurance Company and subsidiaries (the "Company") have been prepared in
accordance with generally accepted accounting principles ("GAAP") and
include the accounts of Pacific Life and its wholly-owned insurance
subsidiaries, PM Group Life Insurance Company ("PM Group") and World-Wide
Holdings Limited, and its noninsurance subsidiaries, Pacific Asset
Management LLC ("PAM"), Pacific Mutual Distributors, Inc. ("PMD"), Pacific
Mutual Realty Finance, Inc. and Pacific Mezzanine Associates, L.L.C. All
significant intercompany transactions and balances have been eliminated.
Pacific Life prepares its regulatory financial statements based on
accounting practices prescribed or permitted by the Insurance Department
of the State of California. These consolidated financial statements differ
from those followed in reports to regulatory authorities (Note 2).
PAM was initially capitalized on December 31, 1997, when Pacific Life
completed a subsidiary restructuring in which all the assets and
liabilities of Pacific Financial Asset Management Corporation ("PFAMCo")
were contributed into this newly formed limited liability company. PFAMCo
was then merged into Pacific Life. On October 30, 1997, Pacific Corinthian
Life Insurance Company ("PCL"-Note 4), a wholly-owned insurance
subsidiary, was merged into Pacific Life, with Pacific Life as the
surviving entity.
ACCOUNTING PRONOUNCEMENTS ADOPTED
In 1996, the Company adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 120, "Accounting and Reporting by Mutual
Life Insurance Enterprises and by Insurance Enterprises for Certain Long-
Duration Participating Contracts", and Interpretation No. 40,
"Applicability of Generally Accepted
22
<PAGE>
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accounting Principles to Mutual Life Insurance and Other Enterprises" (the
"Interpretation") issued by the Financial Accounting Standards Board
("FASB"). SFAS No. 120 and the Interpretation permit mutual life insurance
companies and their insurance subsidiaries to adopt all applicable
authoritative GAAP pronouncements in any general purpose financial
statements that they may issue. This differs from prior years when the
Company issued its regulatory financial statements as general purpose
financial statements. The accompanying consolidated financial statements
for 1997, 1996 and 1995 reflect the effects of implementing SFAS No. 120
and the Interpretation.
On January 1, 1997, the Company adopted SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities", as amended by SFAS No. 127, "Deferral of the Effective Date
of Certain Provisions of FASB Statement No. 125". SFAS No. 125 is
effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996. This
statement provides consistent accounting standards for securitizations and
other transfers of financial assets, determines when financial assets
(liabilities) should be considered sold (settled) and removed from the
statement of financial condition, and determines when related revenues and
expenses should be recognized. Adoption of this accounting standard did
not have a significant impact on the consolidated financial position or
results of operations of the Company.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income". SFAS No. 130 establishes standards for the reporting and display
of comprehensive income and its components in a full set of general
purpose financial statements. The Company currently plans to adopt SFAS
No. 130 on January 1, 1998.
In February 1998, the FASB issued SFAS No. 132 "Employers' Disclosures
about Pensions and Other Postretirement Benefits". SFAS No. 132 revises
current note disclosure requirements for employers' pensions and other
retiree benefits. It does not address recognition or measurement issues.
The Company plans to adopt SFAS No. 132 during 1998.
INVESTMENTS
Available for sale fixed maturity and equity securities are reported at
estimated fair value, with unrealized gains and losses, net of deferred
income tax and adjustments related to deferred policy acquisition costs,
included as a separate component of equity on the accompanying
consolidated statements of financial condition. Trading securities, which
are included in short-term investments, are reported at estimated fair
value with unrealized gains and losses included in net realized capital
gains on the accompanying consolidated statements of operations.
For mortgage-backed securities included in fixed maturity securities, the
Company recognizes income using a constant effective yield based on
anticipated prepayments and the estimated economic life of the securities.
When estimates of prepayments change, the effective yield is recalculated
to reflect actual payments to date and anticipated future payments. The
net investment in the securities is adjusted to the amount that would have
existed had the new effective yield been applied since the acquisition of
the securities. This adjustment is reflected in net investment income.
In the first and second quarter of 1995, Pacific Life sold two securities
from the held to maturity category. The amortized cost of the securities
was $62.3 million and a net after tax loss of $0.7 million was realized on
the sales. The securities were sold due to the significant deterioration
of the issuer's creditworthiness.
Beginning with the third quarter of 1995, Pacific Life transferred
approximately $1.5 billion of securities from the held to maturity
category to the available for sale category. This amount represented the
amortized cost of
23
<PAGE>
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the securities at the date of transfer. The estimated fair value of those
securities was approximately $1.6 billion, resulting in a net after tax
unrealized gain of $52.5 million, which was reflected as a direct increase
to equity. The change in classification was a result of a change in
management's intent with respect to these securities. In order to have the
flexibility to respond to changes in interest rates and to take advantage
of changes in the availability of and the yield on alternative
investments, management determined that the reclassification of these
securities as available for sale was appropriate.
Realized gains and losses on investment transactions are determined on a
specific identification basis and are included in revenues.
Short-term investments are carried at estimated fair value and include all
trading securities.
Derivative financial instruments are carried at estimated fair value.
Unrealized gains and losses of derivatives used to hedge securities
classified as available for sale are reflected in a separate component of
equity, similar to the accounting of the underlying hedged assets.
Realized gains and losses on derivatives used for hedging are deferred and
amortized over the average life of the related hedged assets or insurance
liabilities. Unrealized gains and losses of other derivatives are
reflected in operations.
Mortgage loans and policy loans are stated at unpaid principal balances.
Real estate is carried at depreciated cost, or for real estate acquired in
satisfaction of debt, estimated fair value less estimated selling costs at
the date of acquisition if lower than the related unpaid balance.
On November 15, 1994, certain of the Company's investment management and
advisory subsidiaries entered into an agreement and plan of consolidation
with Thomson Advisory Group L.P., a Delaware limited partnership with
publicly traded units, to merge into a newly capitalized partnership named
PIMCO Advisors L.P. ("PIMCO Advisors"). In December 1997, PIMCO Advisors
completed a transaction in which it acquired the assets of Oppenheimer
Capital, L.P., including its interest in Oppenheimer Capital, by issuing
approximately 33 million PIMCO Advisors General and Limited Partner units.
In connection with this transaction, the Company increased its investment
in PIMCO Advisors to reflect the excess of the Company's pro rata share of
PIMCO Advisors partners' capital subsequent to this transaction over the
carrying value of the Company's investment in PIMCO Advisors. The net
result of this transaction was to directly increase stockholder's equity
by $85.1 million. The Company's beneficial ownership in PIMCO Advisors was
approximately 42% prior to this transaction and 31% subsequent to the
transaction. Deferred taxes as a result of this transaction have been
established on the accompanying consolidated financial statements. This
investment, which is included in other investments on the accompanying
consolidated statements of financial condition, is accounted for using the
equity method.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all liquid debt instruments with an
original maturity of three months or less.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new insurance business, principally commissions,
medical examinations, underwriting, policy issue and other expenses, all
of which vary with and are primarily related to the production of new
business, have been deferred. For universal life, annuity and other
investment contract products, such costs are generally amortized in
proportion to the present value of expected gross profits using the
assumed crediting rate. Adjustments are reflected in earnings or equity in
the period the Company experiences deviations in gross profit assumptions.
Adjustments directly affecting equity result from experience deviations
due to changes in unrealized gains and losses in investments classified as
available for sale. For life insurance products, such costs are being
amortized over the premium-paying period of the related policies in
proportion to premium revenues
24
<PAGE>
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
recognized, using assumptions consistent with those used in computing
policy reserves. For the years ended December 31, 1997, 1996 and 1995, net
amortization of deferred policy acquisition costs included in commission
expenses amounted to $50.2 million, $42.6 million and $39.4 million,
respectively, and included in operating expenses amounted to $29.4
million, $27.4 million and $20.8 million, respectively, on the
accompanying consolidated statements of operations.
PRESENT VALUE OF FUTURE PROFITS
Included in other assets on the accompanying consolidated statement of
financial condition as of December 31, 1996 was $16.1 million which
represented the present value of estimated future profits of acquired
business in connection with the rehabilitation of First Capital Life
Insurance Company ("FCL"-Note 4). The aforementioned future profits were
discounted to provide an appropriate rate of return and were being
amortized over the rehabilitation plan period. Amortization for the years
ended December 31, 1997, 1996 and 1995 amounted to $16.1 million, $24.2
million and $17.1 million, respectively, and is included in commission
expenses in the accompanying consolidated statements of operations. During
1996, the Company changed certain assumptions regarding the estimated life
which resulted in an increase in amortization in 1996 of approximately
$17.0 million.
UNIVERSAL LIFE, ANNUITY AND OTHER INVESTMENT CONTRACT DEPOSITS
Universal life, annuity and other investment contract deposits are valued
using the retrospective deposit method and consist principally of deposits
received plus interest credited less accumulated assessments. Interest
credited to these policies primarily ranged from 4.0% to 8.4% during 1997,
1996 and 1995.
FUTURE POLICY BENEFITS
Life insurance reserves are valued using the net level premium method.
Interest rate assumptions range from 4.5% to 9.3% for 1997, 1996 and 1995.
Mortality, morbidity and withdrawal assumptions are generally based on the
Company's experience, modified to provide for possible unfavorable
deviations. Future dividends for participating business are provided for
in the liability for future policy benefits. Included in policy benefits
paid or provided on the accompanying consolidated statements of operations
are dividends to policyholders.
Dividends are provided based on dividend formulas approved by the Board of
Directors and reviewed for reasonableness and equitable treatment of
policyholders by an independent consulting actuary. As of December 31,
1997 and 1996, participating experience rated policies paying dividends
represented approximately 1% of direct written life insurance in force.
STATE GUARANTY FUND ASSESSMENTS
Insurance companies are subject to assessments by life and health guaranty
associations in most states in which they are licensed to do business.
These assessments are based on the volume and type of business they sell
in those states and may be partially recovered in some states through a
future reduction in premium taxes. Based on current information available
from the National Organization of Life and Health Guaranty Association,
the Company, as of December 31, 1997, has accrued in other liabilities on
the accompanying consolidated statements of financial condition an amount
adequate for anticipated payments of known insolvencies, net of estimated
recoveries of premium tax offsets.
REVENUES AND EXPENSES
Insurance premiums are recognized as revenue when due. Benefits and
expenses, other than deferred policy acquisition costs, are recognized
when incurred.
25
<PAGE>
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Generally, receipts for universal life, annuities and other investment
contracts are classified as deposits. Policy fees from these contracts
include mortality charges, surrender charges and earned policy service
fees. Expenses related to these products include interest credited to
account balances and benefit amounts in excess of account balances.
Commission revenue from Pacific Life's broker dealer subsidiaries is
generally recorded on a settlement basis, generally the third business day
following the trade date. The difference between the settlement date and
trade date is not considered material.
DEPRECIATION AND AMORTIZATION
Depreciation of investment real estate is computed on the straight-line
method over the estimated useful lives which range from 15 to 30 years.
Certain other assets are depreciated or amortized on the straight-line
method over varying periods ranging from 3 to 40 years. Depreciation of
investment real estate is included in net investment income on the
accompanying consolidated statements of operations. Depreciation and
amortization of other assets is included in operating expenses on the
accompanying consolidated statements of operations.
INCOME TAXES
Pacific Life is taxed as a life insurance company for income tax purposes
and is included in the consolidated income tax returns of PMHC. The amount
of income tax expense includes an equity tax calculated by a prescribed
formula that incorporates a differential earnings rate between stock and
mutual life insurance companies. Deferred income taxes are provided for
timing differences in the recognition of revenues and expenses for
financial reporting and income tax purposes.
SEPARATE ACCOUNTS
Separate account assets are recorded at market value and the related
liabilities represent segregated contract owner funds maintained in
accounts with individual investment objectives. The investment results of
separate account assets generally pass through to separate account
contract owners.
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments disclosed in Notes 6 and
7 have been determined using available market information and appropriate
valuation methodologies. However, considerable judgment is required to
interpret market data to develop the estimates of fair value. Accordingly,
the estimates presented may not be indicative of the amounts the Company
could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies could have a significant
effect on the estimated fair value amounts.
BUSINESS RISKS
The Company operates in a business environment which is subject to various
risks and uncertainties. Such risks and uncertainties include interest
rate risk, credit risk and legal and regulatory changes.
Interest rate risk is the potential for interest rates to change, which
can cause fluctuations in the value of investments. To the extent that
fluctuations in interest rates cause the duration of assets and
liabilities to differ, the Company may have to sell assets prior to their
maturity and realize losses. The Company controls its exposure to this
risk by, among other things, asset/liability matching techniques which
attempt to match the duration of assets and liabilities and utilization of
derivative instruments.
26
<PAGE>
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Credit risk is the risk that issuers of investments owned by the Company
may default or that other parties may not be able to pay amounts due to
the Company. The Company manages its investments to limit credit risk by
diversifying its portfolio among various security types and industry
sectors. The credit risk of financial instruments is controlled through
credit approvals, limits and monitoring procedures. Real estate and
mortgage loan investments are diversified by geographic location and
property type. Management believes that significant concentrations of
credit risk do not exist.
The Company is also exposed to credit loss in the event of nonperformance
by the counterparties to interest rate swap contracts and other derivative
securities. However, the Company does not anticipate nonperformance by the
counterparties.
The Company is subject to various state and Federal regulatory
authorities. The potential exists for changes in regulatory initiatives
which can result in additional, unanticipated expense to the Company.
Existing Federal laws and regulations affect the taxation of life
insurance or annuity products and insurance companies. There can be no
assurance as to what, if any, future legislation might be enacted, or if
enacted, whether such legislation would contain provisions with possible
negative effects on the Company's life insurance or annuity products.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the 1997
financial statement presentation.
2. STATUTORY RESULTS
The following are reconciliations of statutory capital and surplus and
statutory net income for Pacific Life as calculated in accordance with
accounting practices prescribed or permitted by the Insurance Department
of the State of California, to the amounts reported as stockholder's
equity and net income included in the accompanying consolidated financial
statements:
<TABLE>
<CAPTION>
December 31,
1997 1996
-----------------
(In Millions)
<S> <C> <C>
Statutory capital and surplus $ 944.8 $ 815.2
Deferred policy acquisition costs 730.7 542.0
Unrealized gain on securities available for
sale, net 575.2 379.2
Asset valuation reserve 252.4 209.5
Deferred income tax 240.9 174.6
Subsidiary equity 108.7 60.7
Non-admitted assets 25.2 22.8
Surplus notes (149.6) (149.6)
Insurance and annuity reserves (511.5) (340.4)
Other (69.5) (16.8)
------------------
Stockholder's equity as reported herein $2,147.3 $1,697.2
==================
</TABLE>
27
<PAGE>
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. STATUTORY RESULTS (CONTINUED)
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
------------------------
(In Millions)
<S> <C> <C> <C>
Statutory net income $ 121.5 $ 113.1 $ 85.1
Deferred policy acquisition costs 160.4 111.2 76.4
Deferred income tax 41.2 70.9 31.5
Interest maintenance reserve 7.6 3.8 12.2
Net realized gain (loss) on trading
securities (5.8) (11.6) 13.2
Earnings of subsidiaries (40.6) (33.0) 5.9
Insurance and annuity reserves (107.0) (91.3) (95.5)
Other (1.3) 3.5 6.0
--------------------------
Net income as reported herein $ 176.0 $ 166.6 $ 134.8
==========================
</TABLE>
RISK-BASED CAPITAL
Risk-based capital is a method developed by the National Association of
Insurance Commissioners ("NAIC") to measure the minimum amount of capital
appropriate for an insurance company to support its overall business
operations in consideration of its size and risk profile. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. The adequacy of a
company's actual capital is measured by comparing it to the risk-based
capital as determined by the formulas. Companies below minimum risk-based
capital requirements are classified within certain levels, each of which
requires specified corrective action. As of December 31, 1997 and 1996,
Pacific Life and PM Group exceeded the minimum risk-based capital
requirements.
DIVIDEND RESTRICTIONS
Dividend payments by Pacific Life to its parent cannot exceed the greater
of 10% of statutory capital and surplus as of the preceding year end or
the statutory net gain from operations for the previous calendar year,
without prior approval from the Insurance Department of the State of
California. Based on this limitation and 1997 statutory results, Pacific
Life could pay approximately $76.5 million in dividends in 1998 without
prior approval.
Extraordinary dividends to Pacific Life from PM Group are subject to
regulatory restrictions and approvals by the Insurance Department of the
State of Arizona, PM Group's state of domicile. The maximum amount of
ordinary dividends that can be paid by PM Group without restriction cannot
exceed the lesser of 10% of surplus as regards policyholders, or the
statutory net gain from operations. During 1997, 1996 and 1995, PM Group
received approval to pay dividends of $14 million, $25 million and $25
million for the years ended December 31, 1997, 1996 and 1995 of which $8
million, $18 million and $17.2 million, respectively, were considered
extraordinary.
In accordance with the terms of the rehabilitation agreement (Note 4), PCL
was precluded from paying any dividends during the rehabilitation period
without the prior consent of the Insurance Department of the State of
California. No such dividends were paid.
28
<PAGE>
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. CLOSED BLOCK
In connection with the Conversion, an arrangement known as a closed block
(the "Closed Block"), was established, for dividend purposes only, for the
exclusive benefit of certain individual life insurance policies that have
an experience based dividend scale for 1997. The Closed Block is designed
to give reasonable assurance to holders of Closed Block policies that
policy dividends will not change solely as a result of the Conversion.
Assets of Pacific Life have been allocated to the Closed Block in an
amount that produces cash flows, which, together with anticipated
revenues, are expected to be sufficient to support the policies. Pacific
Life is not required to support the payment of dividends on these policies
from its general funds. The Closed Block will continue in effect until
either the last policy is no longer in force, or the dissolution of the
Closed Block. Total assets of $316.2 million and total liabilities of
$356.0 million for the Closed Block are included in other assets and other
liabilities, respectively, in the accompanying consolidated statements of
financial condition as of December 31, 1997. The contribution to income
from the Closed Block of $5.7 million, consisting of net revenues and
expenses generated by the Closed Block is included in other income in the
accompanying consolidated statements of operations for the year ended
December 31, 1997.
4. REHABILITATION OF FIRST CAPITAL LIFE INSURANCE COMPANY
On September 30, 1997, PCL completed the rehabilitation of FCL pursuant to
a five-year rehabilitation plan approved by the California Superior Court
and the Insurance Department of the State of California (the
"Rehabilitation Plan"). Under the terms of the Rehabilitation Plan, FCL's
insurance policies in force, primarily individual annuities and universal
life insurance, were restructured and assumed by PCL on December 31, 1992,
pursuant to an assumption reinsurance agreement and asset purchase
agreement. On October 30, 1997, PCL was merged into Pacific Life, with
Pacific Life as the surviving entity.
5. ACQUISITION OF INSURANCE BLOCK OF BUSINESS
On June 1, 1997, Pacific Life acquired a block of corporate-owned life
insurance ("COLI") policies from Confederation Life Insurance Company
(U.S.) in Rehabilitation, which is currently under rehabilitation, which
consisted of approximately 38,000 policies having a face amount of
insurance of $8.6 billion and reserves of approximately $1.7 billion. The
assets received as part of this acquisition amounted to approximately $1.2
billion in cash and approximately $0.4 billion in policy loans. This block
is primarily non-leveraged COLI.
As part of this transaction, an amount equal to the excess of the
estimated fair value of the reserves assumed over the estimated fair value
of the assets acquired which represents the cost of acquiring the
business, amounting to $43.4 million at December 31, 1997, is included in
deferred policy acquisition costs in the accompanying consolidated
statements of financial condition. Amortization of this asset for the year
ended December 31, 1997 was $0.9 million and is included in commission
expenses in the accompanying consolidated statements of operations.
29
<PAGE>
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. INVESTMENT IN FIXED MATURITY AND EQUITY SECURITIES
The amortized cost, gross unrealized gains and losses, and estimated fair
value of fixed maturity and equity securities are shown below. The
estimated fair value of publicly traded securities is based on quoted
market prices. For securities not actively traded, estimated fair values
were provided by independent pricing services specializing in "matrix
pricing" and modeling techniques. The Company also estimates certain fair
values based on interest rates, credit quality and average maturity or
from securities with comparable trading characteristics.
<TABLE>
<CAPTION>
Gross Unrealized
Amortized ----------------- Estimated
Cost Gains Losses Fair Value
--------------------------------------
(In Millions)
<S> <C> <C> <C> <C>
Securities Available for Sale:
-----------------------------
As of December 31, 1997:
U.S. Treasury securities and
obligations of U.S. government
authorities and agencies $ 85.4 $ 17.5 $ 102.9
Obligations of states, political
subdivisions and foreign govern-
ments 730.2 89.4 $ 3.0 816.6
Corporate securities 7,704.8 594.3 72.7 8,226.4
Mortgage-backed and asset-backed
securities 4,597.7 147.1 15.5 4,729.3
Redeemable preferred stock 107.8 10.3 2.6 115.5
--------------------------------------
Total fixed maturity securities $13,225.9 $858.6 $ 93.8 $13,990.7
======================================
Total equity securities $ 231.7 $123.6 $ 8.9 $ 346.4
======================================
Securities Available for Sale:
As of December 31, 1996:
U.S. Treasury securities and
obligations of U.S. government
authorities and agencies $ 297.9 $ 11.2 $ 0.3 $ 308.8
Obligations of states, political
subdivisions and foreign
governments 638.1 46.2 1.0 683.3
Corporate securities 6,848.3 506.3 91.9 7,262.7
Mortgage-backed and asset-backed
securities 3,753.6 98.0 19.4 3,832.2
Redeemable preferred stock 102.5 6.4 2.1 106.8
--------------------------------------
Total fixed maturity securities $11,640.4 $668.1 $114.7 $12,193.8
======================================
Total equity securities $ 229.6 $ 40.8 $ 9.6 $ 260.8
======================================
</TABLE>
30
<PAGE>
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. INVESTMENT IN FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
The amortized cost and estimated fair values of fixed maturity securities
as of December 31, 1997, by contractual repayment date of principal, are
shown below. Expected maturities may differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
--------------------
(In Millions)
<S> <C> <C>
Securities Available for Sale:
------------------------------
Due in one year or less $ 969.9 $ 1,075.2
Due after one year through five years 2,678.4 2,823.1
Due after five years through ten years 2,810.1 2,939.3
Due after ten years 2,169.8 2,423.8
--------------------
8,628.2 9,261.4
Mortgage-backed and asset-backed
securities 4,597.7 4,729.3
--------------------
Total $13,225.9 $13,990.7
====================
</TABLE>
Proceeds from sales of all securities available for sale during 1997, 1996
and 1995 were $2.2 billion, $2.5 billion and $1.9 billion, respectively.
Gross gains of $69.1 million, $89.3 million and $58.0 million and gross
losses of $32.9 million, $29.9 million and $32.3 million were realized on
those sales during 1997, 1996 and 1995, respectively.
Major categories of investment income are summarized as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
------------------------
(In Millions)
<S> <C> <C> <C>
Fixed maturity securities $ 935.1 $ 831.6 $ 808.1
Equity securities 12.8 17.8 7.3
Mortgage loans 129.5 109.4 112.9
Real estate 53.6 51.3 43.2
Policy loans 137.1 113.0 105.2
Other 65.8 71.7 63.2
--------------------------
Gross investment income 1,333.9 1,194.8 1,139.9
Investment expense 108.6 107.5 101.5
--------------------------
Net investment income $1,225.3 $1,087.3 $1,038.4
==========================
</TABLE>
31
<PAGE>
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. INVESTMENT IN FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
The change in gross unrealized gain (loss) on investments in available for
sale and trading securities is as follows:
<TABLE>
<CAPTION>
December 31,
1997 1996 1995
------------------------
(In Millions)
<S> <C> <C> <C>
Available for sale and trading securities:
Fixed maturity $222.4 $(169.1) $1,039.3
Equity 85.7 6.5 17.2
------------------------
Total $308.1 $(162.6) $1,056.5
========================
</TABLE>
As of December 31, 1997 and 1996, investments in fixed maturity securities
with a carrying value of $14.4 million and $19.6 million, respectively,
were on deposit with state insurance departments to satisfy regulatory
requirements.
No investment, aggregated by issuer, exceeded 10% of total equity as of
December 31, 1997. The Company has no non-income producing fixed maturity
securities, mortgage loans, real estate or other long-term investments as
of December 31, 1997.
7. FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
-------------------- --------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-----------------------------------------
(In Millions)
<S> <C> <C> <C> <C>
Assets:
Fixed maturity and equity
securities (Note 6) $14,337.1 $14,337.1 $12,454.6 $12,454.6
Mortgage loans 1,922.1 1,990.9 1,477.3 1,533.9
Policy loans 3,769.2 3,769.2 3,131.8 3,131.8
Cash and cash equivalents 110.4 110.4 109.0 109.0
Derivative financial
instruments:
Interest rate floors and
caps, options and swaptions 22.9 22.9 59.3
Interest rate swap contracts 0.5 0.5 1.0 1.0
Credit and total return
swaps 1.1 1.1
Foreign currency derivatives 4.1 4.1
Liabilities:
Guaranteed interest contracts 3,982.0 4,035.7 2,948.3 3,056.1
Deposit liabilities 733.5 737.4 799.6 800.6
Annuity liabilities 1,883.5 1,872.6 2,459.4 2,459.4
Surplus notes 149.6 164.7 149.6 157.5
Derivative financial
instruments:
Options written 1.6 1.6 1.5 1.5
Asset swap contracts 12.6 12.6 12.5 12.5
Credit and total return
swaps 4.0 4.0
Foreign currency derivatives 4.3 4.3
</TABLE>
32
<PAGE>
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. FINANCIAL INSTRUMENTS (CONTINUED)
The following methods and assumptions were used to estimate the fair value
of these financial instruments as of December 31, 1997 and 1996:
MORTGAGE LOANS
The estimated fair value of the mortgage loan portfolio is determined by
discounting the estimated future cash flows, using a year-end market rate
which is applicable to the yield, credit quality and average maturity of
the composite portfolio.
POLICY LOANS
The carrying amounts of policy loans are a reasonable estimate of their
fair values.
CASH AND CASH EQUIVALENTS
The carrying amounts of these items are a reasonable estimate of their
fair values.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivatives are financial instruments whose value or cash flows are
"derived" from another source, such as an underlying security. They can
facilitate total return and, when used for hedging, they achieve the
lowest cost and most efficient execution of positions. Derivatives can
also be used to leverage by using very large notional amounts or by
creating formulas that multiply changes in the underlying security. The
Company's approach is to avoid highly leveraged or overly complex
investments. The Company utilizes certain derivative financial instruments
to diversify its business risk and to minimize its exposure to
fluctuations in market prices, interest rates or basis risk as well as for
facilitating total return. Risk is limited through modeling derivative
performance in product portfolios for hedging and setting loss limits in
total return portfolios.
Derivatives used by the Company involve elements of credit risk and market
risk in excess of amounts recognized in the accompanying consolidated
financial statements. The notional amounts of these instruments reflect
the extent of involvement in the various types of financial instruments.
The estimated fair values of these instruments are based on quoted market
prices, dealer quotations or internal price estimates believed to be
comparable to dealer quotations. These amounts estimate what the Company
would have to pay or receive if the contracts were terminated. The Company
determines, on an individual counterparty basis, the need for collateral
or other security to support financial instruments with off-balance sheet
counterparty risk.
33
<PAGE>
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. FINANCIAL INSTRUMENTS (CONTINUED)
A reconciliation of the notional or contract amounts and discussion of the
various derivative instruments is as follows:
<TABLE>
<CAPTION>
Balance Terminations Balance
Beginning and End
of Year Acquisitions Maturities of Year
--------------------------------------------
(In Millions)
<S> <C> <C> <C> <C>
December 31, 1997:
Interest rate floors and
caps, options and
swaptions $4,538.2 $1,644.2 $3,452.4 $2,730.0
Interest rate swap
contracts 988.3 1,356.0 318.2 2,026.1
Asset swap contracts 30.0 47.4 10.0 67.4
Credit and total return
swaps 356.5 98.9 166.9 288.5
Financial futures contracts 609.2 3,930.6 4,325.7 214.1
Foreign currency
derivatives 41.4 217.0 51.4 207.0
December 31, 1996:
Interest rate floors and
caps, options and
swaptions 1,834.6 3,075.0 371.4 4,538.2
Interest rate swap
contracts 619.6 620.9 252.2 988.3
Asset swap contracts 20.0 15.3 5.3 30.0
Credit and total return
swaps 146.1 307.2 96.8 356.5
Financial futures contracts 310.1 3,358.9 3,059.8 609.2
Foreign currency
derivatives 15.4 43.1 17.1 41.4
</TABLE>
Interest Rate Floors and Caps, Options and Swaptions
----------------------------------------------------
The Company uses interest rate floors and caps, options and swaptions to
hedge against fluctuations in interest rates and in its total return
portfolios. Interest rate floor agreements entitle the Company to receive
the differential, if below, between the specified rate and the current
value of the underlying index. Interest rate cap agreements entitle the
Company to receive the differential, if above, between the specified rate
and the current value of the underlying index. Options purchased involve
the right, but not the obligation, to purchase the underlying securities
at a specified price during a given time period. Swaptions are options to
enter into a swap transaction at a specified price. The Company uses
written covered call options on a limited basis. Gains and losses on
covered calls are offset by gains and losses on the underlying position.
Options and floors are reported as assets and options written are reported
as liabilities in the consolidated statements of financial condition. Cash
requirements for these instruments are generally limited to the premium
paid by the Company at acquisition. The purchase premium of these
instruments is amortized on a constant effective yield basis and included
as a component of net investment income over the term of the agreement.
Interest rate floors and caps, options and swaptions mature during fiscal
years 1998 through 2007.
Interest Rate Swap Contracts
----------------------------
The Company uses interest rate swaps to manage interest rate risk. The
interest rate swap agreements generally involve the exchange of fixed and
floating rate interest payments or the exchange of floating to floating
interest payments tied to different indexes. Generally, no premium is paid
to enter into the contract and no principal payments are made by either
party. The amounts to be received or paid pursuant to these agreements are
accrued and recognized through an adjustment to net investment income in
the accompanying consolidated statements of operations over the life of
the agreements. The interest rate swap contracts mature during fiscal
years 1998 through 2021.
34
<PAGE>
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. FINANCIAL INSTRUMENTS (CONTINUED)
Asset Swap Contracts
--------------------
The Company uses asset swap contracts to manage interest rate and equity
risk to better match portfolio duration to liabilities. Asset swap
contracts involve the exchange of upside equity potential for preferred
cash flow streams. The amounts to be received or paid pursuant to these
agreements are accrued and recognized through an adjustment to net
investment income in the accompanying consolidated statements of
operations over the life of the agreements. The asset swap contracts
mature during fiscal years 1998 through 2003.
Credit and Total Return Swaps
-----------------------------
The Company uses credit and total return swaps to take advantage of market
opportunities. Credit swaps involve the receipt of floating or fixed rate
payments in exchange for assuming potential credit losses of an underlying
security. Total return swaps involve the exchange of floating rate
payments for the total return performance of a specified index or market.
The amounts to be received or paid pursuant to these agreements are
accrued and recognized through an adjustment to net investment income in
the accompanying consolidated statements of operations over the life of
the agreements. Credit and total return swaps mature during fiscal years
1998 through 2013.
Financial Futures Contracts
---------------------------
The Company uses exchange-traded financial futures contracts to hedge cash
flow timing differences between assets and liabilities and overall
portfolio duration. Assets and liabilities are rarely acquired or sold at
the same time, which creates a need to hedge their change in value during
the unmatched period. In addition, foreign currency futures may be used to
hedge foreign currency risk on non-U.S. dollar denominated securities.
Financial futures contracts obligate the holder to buy or sell the
underlying financial instrument at a specified future date for a set price
and may be settled in cash or delivery of the financial instrument. Price
changes on futures are settled daily through the daily margin cash flows.
The notional amounts of the contracts do not represent future cash
requirements, as the Company intends to close out open positions prior to
expiration.
Foreign Currency Derivatives
----------------------------
The Company enters into foreign exchange forward contracts and swaps to
hedge against fluctuations in foreign currency exposure. Foreign currency
derivatives involve the exchange of foreign currency denominated payments
for U.S. dollar denominated payments. Gains and losses on foreign exchange
forward contracts offset currency gains and losses on the related assets.
The amounts to be received or paid under the foreign currency swaps are
accrued and recognized through an adjustment to net investment income in
the accompanying consolidated statements of operations over the life of
the agreements. Foreign currency derivatives expire during fiscal years
1998 through 2011.
GUARANTEED INTEREST CONTRACTS AND DEPOSIT LIABILITIES
The estimated fair values of fixed maturity guaranteed interest contracts
are estimated using the rates currently offered for deposits of similar
remaining maturities. The estimated fair value of deposit liabilities with
no defined maturities is the amount payable on demand.
ANNUITY LIABILITIES
The estimated fair value of annuity liabilities approximates carrying
value and primarily includes policyholder deposits and accumulated
credited interest.
35
<PAGE>
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. FINANCIAL INSTRUMENTS (CONTINUED)
SURPLUS NOTES
The estimated fair value of surplus notes is based on market quotes.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Pacific Life has issued certain contracts to plan sponsors totaling $1.6
billion as of December 31, 1997, pursuant to the terms of which the plan
sponsor retains direct ownership and control of the assets related to
these contracts. Pacific Life agrees to provide benefit responsiveness in
the event that plan benefit requests exceed plan cash flows. In return for
this guarantee, Pacific Life receives a fee which varies by contract.
Pacific Life sets the investment guidelines to provide for appropriate
credit quality and cash flow matching.
8. UNIVERSAL LIFE, ANNUITY AND OTHER INVESTMENT CONTRACT DEPOSITS
Detail of universal life, annuity and other investment contract deposit
liabilities follows:
<TABLE>
<CAPTION>
December 31,
1997 1996
-------------------
(In Millions)
<S> <C> <C>
Universal life $10,012.0 $ 7,562.5
Annuity 1,817.4 2,459.3
Other investment contract
deposits 4,815.1 3,855.6
-------------------
$16,644.5 $13,877.4
===================
</TABLE>
Detail of universal life, annuity and other investment contract deposits
policy fees and interest credited net of reinsurance ceded follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
--------------------------
(In Millions)
<S> <C> <C> <C>
Policy fees
Universal life $ 377.5 $ 318.4 $ 292.6
Annuity 50.3 26.6 12.8
Other investment contract
deposits 3.4 3.6 3.6
--------------------------
Total policy fees $ 431.2 $ 348.6 $ 309.0
==========================
Interest credited
Universal life $ 368.2 $ 284.3 $ 267.3
Annuity 116.8 138.7 137.5
Other investment contract
deposits 312.8 242.0 270.4
--------------------------
Total interest credited $ 797.8 $ 665.0 $ 675.2
==========================
</TABLE>
36
<PAGE>
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. SHORT-TERM AND LONG-TERM DEBT
Pacific Life borrows for short-term needs by issuing commercial paper. There
was no commercial paper debt outstanding as of December 31, 1997 and 1996.
Pacific Life had a revolving credit facility available of $350 million and
$250 million as of December 31, 1997 and 1996, respectively. There was no
debt outstanding under the revolving credit facility as of December 31, 1997
and 1996.
The borrowing limit for PAM as of December 31, 1997 and 1996 was $200
million and $150 million, respectively. The interest rate averaged 5.8%,
5.6% and 6.1% for the years ended December 31, 1997, 1996 and 1995,
respectively. The balance outstanding as of December 31, 1997 and 1996
totaled $104 million and $95.5 million, respectively. Outstanding debt is
due and payable in 1998 and subject to renewal.
During 1992, a wholly-owned subsidiary of Pacific Life entered into a credit
agreement with a group of banks for borrowings of $45 million. Proceeds of
this note were paid to PCL in connection with the issuance of a certificate
of contribution by PCL (Note 4). On December 31, 1996, the applicable
interest rate was 6.2%. The outstanding balance of $25 million was prepaid
per the terms of the agreement on January 27, 1997.
Pacific Life has $150 million of long-term debt which consists of surplus
notes outstanding at an interest rate of 7.9% maturing on December 30, 2023.
Interest is payable semiannually on June 30 and December 30. The surplus
notes may not be redeemed at the option of Pacific Life or any holder of the
surplus notes. The surplus notes are unsecured and subordinated to all
present and future senior indebtedness and policy claims of Pacific Life.
Each payment of interest on and the payment of principal of the surplus
notes may be made only with the prior approval of the Insurance Commissioner
of the State of California. Interest expense amounted to $11.8 million for
each of the years ended December 31, 1997, 1996 and 1995 and is included in
net investment income in the accompanying consolidated statements of
operations.
10. INCOME TAXES
As required by SFAS No. 109, "Accounting for Income Taxes", the Company
accounts for income taxes using the liability method. Under SFAS No. 109,
the deferred tax consequences of changes in tax rates or laws must be
computed on the amounts of temporary differences and carryforwards existing
at the date a new law is enacted. Recording the effects of the change
involves adjusting deferred tax liabilities and assets with a corresponding
charge or credit recognized in the provision for income taxes. The objective
is to measure a deferred tax liability or asset using the enacted tax rates
and laws expected to apply to taxable income in the periods in which the
deferred tax liability or asset is expected to be settled or realized.
The provision for income taxes is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
----------------------------
(In Millions)
<S> <C> <C> <C>
Current $ 127.9 $ 163.5 $ 116.4
Deferred (14.4) (49.8) (30.3)
----------------------------
$ 113.5 $ 113.7 $ 86.1
============================
</TABLE>
37
<PAGE>
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. INCOME TAXES (CONTINUED)
The sources of the Company's provision for deferred taxes are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
----------------------------
(In Millions)
<S> <C> <C> <C>
Reserves $ 20.1 $(28.5) $(28.7)
Investment valuation 3.9 (7.3) 8.1
Deferred policy acquisition costs (18.0) 2.1 (6.0)
Other (20.4) (16.1) (3.7)
-----------------------------
$(14.4) $(49.8) $(30.3)
=============================
</TABLE>
A reconciliation of the provision for income taxes based on the prevailing
corporate tax rate to the provision reflected in the consolidated
financial statements is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
---------------------------
(In Millions)
<S> <C> <C> <C>
Income taxes at the statutory rate $ 101.3 $ 98.1 $ 77.3
Equity tax 5.0 16.3
Amortization of intangibles on equity
method investments 7.6 6.5 6.5
Non-taxable investment income (2.6) (2.1) (2.1)
Other 2.2 (5.1) 4.4
---------------------------
$ 113.5 $ 113.7 $ 86.1
===========================
</TABLE>
The net deferred tax asset (liability) included in other assets on the
accompanying consolidated statements of financial condition was comprised
of the tax effects of the following temporary differences:
<TABLE>
<CAPTION>
December 31,
1997 1996
----------------
(In Millions)
<S> <C> <C>
Reserves $ 224.8 $ 244.9
Deferred compensation 25.9 27.6
Investment valuation 20.1 24.0
Postretirement benefits 9.3 9.8
Dividends 7.7 9.6
Depreciation (2.5) (9.8)
Deferred policy acquisition costs (25.9) (43.9)
Other 41.0 23.8
----------------
Deferred taxes from operations 300.4 286.0
Issuance of partnership units by affiliate (47.9)
Unrealized gain on securities available for
sale (307.8) (204.5)
----------------
Net deferred tax asset (liability) $ (55.3) $ 81.5
================
</TABLE>
38
<PAGE>
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. REINSURANCE
The Company accounts for reinsurance transactions utilizing SFAS No. 113,
"Accounting and Reporting for Reinsurance of Short-Duration And Long-
Duration Contracts". SFAS No. 113 establishes the conditions required for a
contract with a reinsurer to be accounted for as reinsurance and prescribes
accounting and reporting standards for those contracts. Amounts receivable
from reinsurers for reinsurance on future policy benefits, universal life
deposits, and unpaid losses is reported as an asset and included in other
assets on the accompanying consolidated statements of financial condition.
The Company has reinsurance agreements with other insurance companies for
the purpose of diversifying risk and limiting exposure on larger risks or,
in the case of a producer-owned reinsurance company, to diversify risk and
retain top producing agents. All assets associated with reinsured business
remain with, and under the control of the Company. Approximate amounts
recoverable (payable) from (to) reinsurers include the following amounts :
<TABLE>
<CAPTION>
December 31,
1997 1996
--------------
(In Millions)
<S> <C> <C>
Reinsured universal life deposits $(39.6) $(35.9)
Future policy benefits 92.2 90.0
Unpaid claims 14.0 4.6
Paid claims 10.2 8.4
</TABLE>
As of December 31, 1997, 72% of the reinsurance recoverables were from one
reinsurer, of which 100% is secured by payables to the reinsurer. To the
extent that the assuming companies become unable to meet their obligations
under these agreements, the Company remains contingently liable. The Company
does not anticipate nonperformance by the assuming companies.
Revenues and benefits are shown net of the following reinsurance
transactions:
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
--------------------------
(In Millions)
<S> <C> <C> <C>
Ceded reinsurance netted against insurance
premiums $ 70.7 $ 44.3 $ 29.2
Assumed reinsurance included in insurance
premiums 18.1 17.8 15.6
Ceded reinsurance netted against policy fees 77.5 71.0 66.5
Ceded reinsurance netted against net
investment income 204.9 192.5 176.6
Ceded reinsurance netted against interest
credited 165.8 155.2 140.0
Ceded reinsurance netted against policy
benefits 93.4 56.7 51.4
Assumed reinsurance included in policy
benefits 12.7 9.9 14.5
</TABLE>
39
<PAGE>
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. SEGMENT INFORMATION
The operations of the Company have been classified into four business
segments as follows: Individual Life Insurance and Annuities, Pensions,
Group Employee Benefits and Corporate and Other. These segments are based on
the organization of the Company and are generally distinguished by the
products offered. The Corporate and Other segment generally includes the
assets and operations that do not support the other segments such as certain
non-life insurance related subsidiary operations. Depreciation expense and
capital expenditures are not material and have not been reported. Revenues,
income before income taxes and assets by segment are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
---------------------------
(In Millions)
<S> <C> <C> <C>
Revenues:
Individual Life Insurance and Annuities $1,137.7 $ 964.0 $ 927.0
Pensions 584.0 507.3 513.9
Group Employee Benefits 507.5 456.0 419.3
Corporate and Other 345.2 220.7 159.5
---------------------------
Total $2,574.4 $2,148.0 $2,019.7
===========================
Income before provision for income taxes:
Individual Life Insurance and Annuities $ 164.0 $ 93.9 $ 102.3
Pensions 98.3 80.7 53.3
Group Employee Benefits 28.8 26.5 25.2
Corporate and Other (1.6) 79.2 40.1
---------------------------
Total $ 289.5 $ 280.3 $ 220.9
===========================
</TABLE>
<TABLE>
<CAPTION>
December 31,
1997 1996
-------------------
(In Millions)
<S> <C> <C>
Assets:
Individual Life Insurance and Annuities $19,969.2 $15,484.4
Pensions 12,653.6 10,514.8
Group Employee Benefits 368.6 344.4
Corporate and Other 1,017.4 721.7
-------------------
Total $34,008.8 $27,065.3
===================
</TABLE>
13. PENSION PLANS, POSTRETIREMENT BENEFITS AND OTHER PLANS
PENSION PLANS
Pacific Life has defined benefit pension plans which cover all eligible
employees who have one year of continuous employment and have attained age
21. The full-benefit vesting period for all participants is five years.
Benefits for employees are based on years of service and the highest five
consecutive years of compensation during the last ten years of employment.
Pacific Life's funding policy is to contribute amounts to the plan
sufficient to meet the minimum funding requirements set forth in the
Employee Retirement Income Security Act of 1974, plus such additional
amounts as may be determined appropriate. Contributions are intended to
provide.
40
<PAGE>
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. PENSION PLANS, POSTRETIREMENT BENEFITS AND OTHER PLANS (CONTINUED)
not only for benefits attributed to employment to date but also for those
expected to be earned in the future. All such contributions are made to a
tax-exempt trust. Plan assets consist primarily of group annuity contracts
issued by Pacific Life, as well as participating units of a real estate
trust and mutual funds managed by an indirect subsidiary of Pacific Life.
Components of net periodic pension cost are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
----------------------------
(In Millions)
<S> <C> <C> <C>
Service cost - benefits earned during
the year $ 3.6 $ 3.7 $ 2.8
Interest cost on projected benefit
obligation 10.4 9.8 9.3
Actual return on plan assets (33.1) (21.7) (25.0)
Amortization of net obligations and
prior service cost 18.9 9.1 14.0
----------------------------
Net periodic pension cost $ (0.2) $ 0.9 $ 1.1
============================
</TABLE>
The following table sets forth the pension plan's funded status and
amounts recognized on Pacific Life's consolidated statements of financial
condition:
<TABLE>
<CAPTION>
December 31,
1997 1996
---------------
(In Millions)
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefits $ 137.1 $ 121.2
Nonvested benefits 1.2 1.2
----------------
Accumulated benefit obligation 138.3 122.4
Effect of projected future compensation increases 19.6 18.5
----------------
Projected benefit obligation 157.9 140.9
Plan assets at fair value (180.3) (154.2)
----------------
Plan assets in excess of projected benefit
obligation (22.4) (13.3)
Unrecognized net gain 14.7 3.6
Unrecognized transition asset 4.8 6.0
Unrecognized prior service cost 1.2 2.2
----------------
Prepaid pension cost $ (1.7) $ (1.5)
================
</TABLE>
In determining the actuarial present value of the projected benefit
obligation as of December 31, 1997 and 1996, the weighted average discount
rate used was 7.0% and 7.5%, respectively, and the rate of increase in
future compensation levels was 5.5% and 6.0%, respectively. The expected
long-term rate of return on plan assets was 8.5% in 1997 and 1996.
In connection with the merger of PCL into Pacific Life as discussed in
Note 4, Pacific Life assumed sponsorship of PCL's defined benefit pension
plan. This pension plan provides for retirement income benefits at age 65
with reduced benefits for early retirement. Effective December 31, 1997,
PCL's defined benefit plan merged into Pacific Life's plan. All benefits
associated with PCL's plan remain unchanged subsequent to the merger.
41
<PAGE>
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. PENSION PLANS, POSTRETIREMENT BENEFITS AND OTHER PLANS (CONTINUED)
POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE PLANS
Pacific Life sponsors a defined benefit health care plan and a defined
benefit life insurance plan (the "Plans") that provide postretirement
benefits for all eligible retirees and their dependents. Generally,
qualified employees may become eligible for these benefits if they reach
normal retirement age, have been covered under Pacific Life's policy as an
active employee for a minimum continuous period prior to the date retired,
and have an employment date before January 1, 1990. The Plans contain cost-
sharing features such as deductibles and coinsurance, and require retirees
to make contributions which can be adjusted annually. Pacific Life's
commitment to qualified employees who retire after April 1, 1994 is limited
to specific dollar amounts. Pacific Life reserves the right to modify or
terminate the Plans at any time. As in the past, the general policy is to
fund these benefits on a pay-as-you-go basis. The amount of benefits paid
under the programs during 1997, 1996 and 1995 was approximately $1.5
million, $1.6 million and $1.7 million, respectively.
Components of net periodic postretirement benefit cost are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
----------------------------
(In Millions)
<S> <C> <C> <C>
Service cost $ 0.1 $ 0.2 $ 0.2
Interest cost 1.4 1.5 1.9
Amortization (0.7) (0.3) (0.3)
----------------------------
Net periodic postretirement benefit cost $ 0.8 $ 1.4 $ 1.8
============================
</TABLE>
The following table sets forth the Plans' funded status and amounts
recorded in other liabilities on the accompanying consolidated statements
of financial condition:
<TABLE>
<CAPTION>
December 31,
1997 1996
-------------
(In Millions)
<S> <C> <C>
Accumulated postretirement obligation:
Retirees $ 17.6 $ 17.3
Fully eligible active Plan participants 1.4 2.0
Other active Plan participants 1.1 2.5
-------------
Total accumulated postretirement obligation 20.1 21.8
Fair value of Plan assets -- --
-------------
Unfunded accumulated postretirement obligation 20.1 21.8
Unrecognized net gain 3.2 3.7
Prior service cost 2.7 1.3
-------------
Accrued postretirement benefit liability $ 26.0 $ 26.8
=============
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
benefit obligation was 9% for 1997 and 1996 and is assumed to decrease
gradually to 4% in 2003 and remain at that level thereafter. The amount
reported is materially effected by the health care cost trend rate
assumptions. If the health care cost trend rate assumptions were increased
by 1%, the accumulated postretirement benefit obligation as of December
31, 1997 and 1996 would be increased by 8.5% and 11.5%, respectively. The
effect of this change would increase the
42
<PAGE>
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. PENSION PLANS, POSTRETIREMENT BENEFITS AND OTHER PLANS (CONTINUED)
aggregate of the service and interest cost components of the net periodic
benefit cost by 7.7%, 12.3% and 11.4% for 1997, 1996 and 1995, respectively.
The discount rate used in determining the accumulated postretirement
benefit obligation is 7.0% and 7.5% for 1997 and 1996, respectively.
OTHER PLANS
Pacific Life provides a voluntary Retirement Incentive Savings Plan ("RISP")
pursuant to Section 401(k) of the Internal Revenue Code covering all
eligible employees of the Company. Effective October 1, 1997, Pacific Life's
RISP changed the matching percentage of each employee's contributions from
50% to 75%, up to a maximum of six percent of eligible employee compensation
and restricted the matched investment to an Employee Stock Ownership Plan
("ESOP") sponsored by Pacific LifeCorp. The ESOP was formed at the time of
the Conversion and is currently only available to the participants of the
RISP in the form of matching contributions.
Pacific Life also has a deferred compensation plan which permits certain
employees to defer portions of their compensation and earn a guaranteed
interest rate on the deferred amounts. The interest rate is determined
annually and is guaranteed for one year. The compensation which has been
deferred has been accrued and the primary expense, other than compensation,
related to this plan is interest on the deferred amounts .
The Company also has performance based incentive compensation plans for
its employees.
14. TRANSACTIONS WITH AFFILIATES
Pacific Life serves as the investment advisor for the Pacific Select Fund,
the investment vehicle provided to the Company's variable life and variable
annuity contractholders. Pacific Life charges fees based upon the net asset
value of the portfolios of the Pacific Select Fund, which amounted to $27.5
million, $14.3 million and $6.5 million for the years ended December 31,
1997, 1996 and 1995, respectively. In addition, Pacific Life entered into an
agreement with the Pacific Select Fund on October 1, 1995, to provide
certain support services for an administration fee which is based on an
allocation of actual costs. Such administration fees amounted to $165,000,
$108,000 and $28,550 for the years ended December 31, 1997, 1996 and 1995,
respectively.
PIMCO Advisors provides investment advisory services to the Company for
which the fees amounted to $11.4 million, $6.2 million and $5.0 million for
the years ended December 31, 1997, 1996 and 1995, respectively. Included in
equity securities on the accompanying consolidated statements of financial
condition are investments in mutual funds and other investments managed by
PIMCO Advisors which amounted to $46.5 million and $90.8 million as of
December 31, 1997 and 1996, respectively.
Pacific Life provides certain support services to PIMCO Advisors. Charges
for these services are based on an allocation of actual costs and amounted
to $1.2 million, $1.4 million and $1.9 million for the years ended December
31, 1997, 1996 and 1995, respectively.
15. TERMINATION AND NON-COMPETITION AGREEMENTS
Effective November 15, 1994, in connection with the PIMCO Advisors
transaction (Note 1), termination and non-competition agreements were
entered into with certain former key employees of PAM's subsidiaries. These
agreements provide terms and conditions for the allocation of future
proceeds received from distributions and sales of certain PIMCO Advisors
units and other noncompete payments. When the amount of future obligations
to be made to a key employee is determinable, a liability for such amount is
established.
43
<PAGE>
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. TERMINATION AND NON-COMPETITION AGREEMENTS (CONTINUED)
For the years ended December 31, 1997, 1996 and 1995, approximately $85.8
million, $35.3 million and $28.6 million, respectively, is included in
operating expenses in the consolidated statements of operations related to
the termination and non-competition agreements. This includes payments of
$43.1 million in 1997 to former key employees who elected to sell to PAM's
subsidiaries their rights to the future proceeds from the PIMCO Advisors
units.
16. INVESTMENT COMMITMENTS
The Company has outstanding commitments to make investments primarily in
mortgage loans, limited partnerships and other investments as follows (In
Millions):
<TABLE>
<S> <C>
Years Ending December 31:
-------------------------
1998 $245.4
1999-2002 131.8
2003 and thereafter 16.6
------
Total $393.8
=======
</TABLE>
17. LITIGATION
The Company has been named in civil litigation proceedings which appear to
be substantially similar to other litigation brought against many life
insurers alleging misconduct in the sale of products. These matters are
sometimes referred to as market conduct litigation. The litigation against
the Company purports to include all persons in the United States who
purchased life insurance and annuity products from the Company during the
period from 1982 to present. The Company has retained national and local
counsel experienced in the handling of similar matters for other life
insurers. Informal discovery has commenced in these matters. At this time,
it is not feasible to make a meaningful estimate of the amount or range of
loss that could result from an unfavorable outcome in such actions.
Further, the Company is a respondent in a number of other legal proceedings,
some of which involve allegations for extra-contractual damages .
In the opinion of management, the outcome of the foregoing proceedings is
not likely to have a material adverse effect on the consolidated financial
position or results of operations of the Company.
---------------------------------------------------------------------------
44
<PAGE>
PACIFIC LIFE UNAUDITED SEMI-ANNUAL REPORT
TO BE INSERTED
45
<PAGE>
Form No.
<PAGE>
PART II
Part C: OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements
Part A: Financial highlights for Registrant
Part B:
(1) Registrant's Financial Statements
Audited Financial Statements dated as of December 31, 1997
which are incorporated by reference from the Annual Report
include the following for Separate Account A:
Statements of Assets and Liabilities
Statements of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Unaudited Financial Statements dated as of June 30, 1998 and
for the six month period ended June 30, 1998.
(2) Depositor's Financial Statements
Audited Consolidated Financial Statements dated as of
December 31, 1997 and 1996, and for the three year
period ending December 31, 1997, included in
Part B include the following for Pacific Life:
Consolidated Statements of Financial Position
Consolidated Statements of Operations and Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Unaudited Consolidated Financial Statements dated as of June
30, 1998 and for the six month periods ended June 30, 1998
and 1997.
(b) Exhibits
1. (a) Resolution of the Board of Directors of the
Depositor authorizing establishment of Separate
Account A and Memorandum establishing Separate
Account A.
(b) Memorandum Establishing Two New Variable
Accounts--Aggressive Equity and Emerging Markets
Portfolios.
(c) Resolution of the Board of Directors of Pacific
Life Insurance Company authorizing conformity to
the terms of the current Bylaws.
II-1
<PAGE>
2. Not applicable
3. (a) Distribution Agreement between Pacific Mutual Life
and Pacific Mutual Distributors, Inc. ("PMD")
(formerly Pacific Equities Network)
(b) Form of Selling Agreement between Pacific Mutual
Life, PMD and Various Broker-Dealers
4. (a) Form of Individual Flexible Premium Deferred
Variable Annuity Contract (Form PV9808)
(b) Qualified Pension Plan Rider (Form R90-Pen-V)
(c) 403(b) Tax-Sheltered Annuity Rider (Form
R-403B-9553)
(d) Section 457 Plan Rider (Form R95-457)
(e) IRA Rider (Form R-IRA 198)
(f) Roth IRA Rider (Form R-RIRA 198)
(g) Simple IRA Rider (Form R-SIRA 198)
(h) Stepped-Up Death Benefit Rider (Form R9808.SDB)
(i) Premier Death Benefit Rider (Form R9808.PDB)
5. (a) Application Form for Individual Flexible Premium
Deferred Variable Annuity Contract (Form A9808
8/98)
(b) Variable Annuity PAC APP
(c) Application/Confirmation Form
6. (a) Pacific Life's Articles of Incorporation
(b) By-laws of Pacific Life
7. Not applicable
8. Fund Participation Agreement
9. Opinion and Consent of legal officer of Pacific Life as
to the legality of Contracts being registered.
II-2
<PAGE>
10. (a) Consent of Independent Auditors
(b) Powers of Attorney
11. Not applicable
12. Not applicable
13. Performance Calculations
14. Not applicable
15. Not applicable
16. Not applicable
Item 25. Directors and Officers of Pacific Life
Positions and Offices
Name and Address with Pacific Life
Thomas C. Sutton Director, Chairman of the Board, and
Chief Executive Officer
Glenn S. Schafer Director and President
Khanh T. Tran Director, Senior Vice President and
Chief Financial Officer
David R. Carmichael Director, Senior Vice President and
General Counsel
Audrey L. Milfs Director, Vice President and Corporate
Secretary
Richard M. Ferry Director
Donald E. Guinn Director
Ignacio E. Lozano, Jr. Director
Charles D. Miller Director
Donn B. Miller Director
Richard M. Rosenberg Director
James R. Ukropina Director
II-3
<PAGE>
Raymond L. Watson Director
Edward R. Byrd Vice President and Controller
Gerald W. Robinson Executive Vice President
______________________________
The address for each of the persons listed above is as follows:
700 Newport Center Drive
Newport Beach, California 92660
Item 26. Persons Controlled by or Under Common Control with Pacific Life
or Separate Account A
The following is an explanation of the organization chart of Pacific
Life's subsidiaries:
PACIFIC LIFE, SUBSIDIARIES & AFFILIATED ENTERPRISES
LEGAL STRUCTURE
Pacific Life is a California Stock Insurance Company wholly-owned
by Pacific LifeCorp (a Delaware Stock Holding Company) which is,
in turn, 99% owned by Pacific Mutual Holding Company (a California
Mutual Holding Company). Pacific Life has a 40% ownership of American
Maturity Life Insurance Company (a Connecticut Corporation), a 50%
ownership of Pacific Mezzanine Associates, L.L.C. (a Delaware Limited
Liability Company), and is the parent company of Pacific Asset
Management LLC (a Delaware Limited Liability Company), Pacific Mutual
Realty Finance, Inc., PM Group Life Insurance Company (an Arizona
Corporation), Pacific Mutual Distributors, Inc., and World-Wide
Holdings Limited (a United Kingdom Corporation). A subsidiary of
Pacific Mezzanine Associates, L.L.C. is Pacific Mezzanine Investors,
L.L.C., along with its subsidiary Pacific Mezzanine Fund, L.P.
Subsidiaries of Pacific Asset Management LLC are PMRealty Advisors
Inc., PPA LLC (a Delaware Limited Liability Company), CCM LLC (a
Delaware Limited Liability Company), NFJ LLC (a Delaware Limited
Liability Company), and PIMCO Holding LLC (a Delaware Limited
Liability Company). Pacific Asset Management LLC directly and in-
directly owns 31.5% of the outstanding partnership interests in PIMCO
Advisors L.P. (a Delaware Limited Partnership). Subsidiaries of
Pacific Mutual Distributors, Inc. include: Associated Financial
Group, Inc.; Mutual Service Corporation (a Michigan Corporation),
along with its subsidiaries Advisors' Mutual Service Center, Inc.
(a Michigan Corporation) and Titan Value Equities Group, Inc.; and
United Planners' Group, Inc. (an Arizona Corporation which is 97%
owned), along with its subsidiary United Planners' Financial Services
of America (an Arizona Limited Partnership). Subsidiaries of World-
Wide Holdings limited include: World-Wide Reassurance Company Limited
(a United Kingdom Corporation) and World-Wide Reassurance Company
(BVI) Limited (a British Virgin Islands Corporation). All
corporations are 100% owned unless otherwise indicated. All entities
are California corporations unless otherwise indicated.
II-4
<PAGE>
Item 27. Number of Contractholders
None
Item 28. Indemnification
(a) The Distribution Agreement between Pacific Life (formerly Pacific
Mutual Life) and PMD provides substantially as follows:
Pacific Life (formerly Pacific Mutual Life) hereby agrees to
indemnify and hold harmless PMD and its officers and directors,
and employees for any expenses (including legal expenses),
losses, claims, damages, or liabilities incurred by reason of any
untrue or alleged untrue statement or representation of a
material fact or any omission or alleged omission to state a
material fact required to be stated to make other statements not
misleading, if made in reliance on any prospectus, registration
statement, post-effective amendment thereof, or sales materials
supplied or approved by Pacific Life (formerly Pacific Mutual
Life) or the Separate Account. Pacific Life (formerly Pacific
Mutual Life) shall reimburse each such person for any legal or
other expenses reasonably incurred in connection with
investigating or defending any such loss, liability, damage, or
claim. However, in no case shall Pacific Life (formerly Pacific
Mutual Life) be required to indemnify for any expenses, losses,
claims, damages, or liabilities which have resulted from the
willful misfeasance, bad faith, negligence, misconduct, or
wrongful act of PMD.
PMD hereby agrees to indemnify and hold harmless Pacific Life
(formerly Pacific Mutual Life), its officers, directors, and
employees, and the Separate Account for any expenses, losses,
claims, damages, or liabilities arising out of or based upon any
of the following in connection with the offer or sale of the
contracts: (1) except for such statements made in reliance on any
prospectus, registration statement or sales material supplied or
approved by Pacific Life (formerly Pacific Mutual Life) or the
Separate Account, any untrue or alleged untrue statement or
representation made; (2) any failure to deliver a currently
effective prospectus; (3) the use of any unauthorized sales
literature by any officer, employee or agent of PMD or Broker;
(4) any willful misfeasance, bad faith, negligence, misconduct or
wrongful act. PMD shall reimburse each such person for any legal
or other expenses reasonably incurred in connection with
investigating or defending
II-5
<PAGE>
any such loss, liability, damage, or claim.
(b) The Form of Selling Agreement between Pacific Life (formerly
Pacific Mutual Life), PMD (formerly PEN) and Various Broker-
Dealers provides substantially as follows:
Pacific Life (formerly Pacific Mutual Life) and PMD agree to
indemnify and hold harmless Selling Broker-Dealer and General
Agent, their officers, directors, agents and employees, against
any and all losses, claims, damages or liabilities to which they
may become subject under the 1933 Act, the 1934 Act, or other
federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material
fact or any omission to state a material fact required to be
stated or necessary to make the statements made not misleading in
the registration statement for the Contracts or for the shares of
Pacific Select Fund (the "Fund") filed pursuant to the 1933 Act,
or any prospectus included as a part thereof, as from time to
time amended and supplemented, or in any advertisement or sales
literature approved in writing by Pacific Life (formerly Pacific
Mutual Life) and PMD pursuant to Section IV.E. of this Agreement.
Selling Broker-Dealer and General Agent agree to indemnify and
hold harmless Pacific Life (formerly Pacific Mutual Life), the
Fund and PMD, their officers, directors, agents and employees,
against any and all losses, claims, damages or liabilities to
which they may become subject under the 1933 Act, the 1934 Act or
other federal or state statutory law or regulation, at common law
or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon: (a) any oral or written misrepresentation by Selling
Broker-Dealer or General Agent or their officers, directors,
employees or agents unless such misrepresentation is contained in
the registration statement for the Contracts or Fund shares, any
prospectus included as a part thereof, as from time to time
amended and supplemented, or any advertisement or sales
literature approved in writing by Pacific Life (formerly Pacific
Mutual Life) and PMD pursuant to Section IV.E. of this Agreement,
(b) the failure of Selling Broker-Dealer or General Agent or
their officers, directors, employees or agents to comply with any
applicable provisions of this Agreement or (c) claims by Sub-
agents or employees of General Agent or Selling Broker-Dealer for
payments of compensation or remuneration of any type. Selling
Broker-Dealer and General Agent will reimburse Pacific Life
(formerly Pacific Mutual Life) or PMD or any director, officer,
agent or employee of either entity for any legal or other
expenses reasonably incurred by Pacific Life (formerly Pacific
Mutual Life), PMD, or such officer, director, agent or employee
in connection with investigating or defending any such loss,
claims, damages, liability or action. This indemnity agreement
will be in addition to any liability which Broker-Dealer may
otherwise have.
II-6
<PAGE>
Item 29. Principal Underwriters
(a) PMD also acts as principal underwriter for Pacific Select
Separate Account, Pacific Select Exec Separate Account, Pacific
Select Variable Annuity Separate Account, Pacific Corinthian
Variable Separate Account, Separate Account B and Pacific
Select Fund.
(b) For information regarding PMD, reference is made to Form B-D, SEC
File No. 8-15264, which is herein incorporated by reference.
(c) PMD retains no compensation or net discounts or commissions from
the Registrant.
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be maintained
by Registrant pursuant to Section 31(a) of the Investment Company
Act of 1940 and the rules under that section will be maintained
by Pacific Life at 700 Newport Center Drive, Newport Beach,
California 92660.
Item 31. Management Services
Not applicable
Item 32. Undertakings
The registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement
as frequently as is necessary to ensure that the audited
financial statements in this registration statement are never
more than 16 months old for so long as payments under the
variable annuity contracts may be accepted, unless otherwise
permitted.
(b) to include either (1) as a part of any application to purchase a
contract offered by the prospectus, a space that an applicant can
check to request a Statement of Additional Information, or (2) a
post card or similar written communication affixed to or included
in the prospectus that the applicant can remove to send for a
Statement of Additional Information, or (3) to deliver a
Statement of Additional Information with the Prospectus.
(c) to deliver any Statement of Additional Information and any
financial statements required to be made available under this
Form promptly upon written or oral request.
Additional Representations
II-7
<PAGE>
(a) The Registrant and its Depositor are relying upon American Council of
Life Insurance, SEC No-Action Letter, SEC Ref. No. 1P-6-88 (November 28, 1988)
with respect to annuity contracts offered as funding vehicles for retirement
plans meeting the requirements of Section 403(b) of the Internal Revenue Code,
and the provisions of paragraphs (1)-(4) of this letter have been complied with.
(b) The Registrant and its Depositor are relying upon Rule 6c-7 of the
Investment Company Act of 1940 with respect to annuity contracts offered as
funding vehicles to participants in the Texas Optional Retirement Program, and
the provisions of Paragraphs (a)-(d) of the Rule have been complied with.
(c) 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 Annuity Contract
("Contract") described in the prospectus contained in this registration
statement are, in the aggregate, reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed in
connection with the Contract.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets the requirements of
Securities Act Rule 485(b) for effectiveness of this Registration Statement and
has caused this Post-Effective Amendment No. 2 to the Registration Statement on
Form N-4 to be signed on its behalf by the undersigned thereunto duly authorized
in the City of Newport Beach, and the State of California on this 6th day of
August, 1998.
SEPARATE ACCOUNT A
(Registrant)
By: PACIFIC LIFE INSURANCE COMPANY
By:
Thomas C. Sutton*
Chairman and Chief Executive Officer
By: PACIFIC LIFE INSURANCE COMPANY
(Depositor)
By:
Thomas C. Sutton*
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 2 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated:
Signature Title Date
Thomas C. Sutton* Director, Chairman of the Board ___________, 1998
and Chief Executive Officer
Glenn S. Schafer* Director and President ___________, 1998
Khanh T. Tran* Director, Senior Vice ___________, 1998
President and Chief Financial
Officer
David R. Carmichael* Director, Senior Vice ___________, 1998
President and General Counsel
Audrey L. Milfs* Director, Vice President and ___________, 1998
Corporate Secretary
Richard M. Ferry* Director ___________, 1998
<PAGE>
Donald E. Guinn* Director ___________, 1998
Ignacio E. Lozano, Jr.* Director ___________, 1998
Charles D. Miller* Director ___________, 1998
Donn B. Miller* Director ___________, 1998
Richard M. Rosenberg Director ___________, 1998
James R. Ukropina* Director ___________, 1998
Raymond L. Watson* Director ___________, 1998
Edward R. Byrd* Vice President and Controller ___________, 1998
*By: /s/ DAVID R. CARMICHAEL
David R. Carmichael August 6, 1998
as attorney-in-fact
(Powers Of Attorney are contained in this Registration Statement on Form
N-4 for Separate Account A, File No. as Exhibit 10(b) on Form N-4.)
<PAGE>
EXHIBIT 99.1(a)
Resolution of the Board of Directors of Pacific Mutual
authorizing establishment of Separate Account A and
Memorandum establishing Separate Account A
<PAGE>
SECRETARY'S CERTIFICATE
PACIFIC MUTUAL LIFE INSURANCE COMPANY
RESOLVED, that the Board of Directors of this Corporation hereby authorizes this
Corporation to obtain approval from the appropriate regulatory authorities of an
amendment to its Certificate of Authority to issue variable life insurance
policies and variable annuity contracts and any derivative thereof being herein
collectively referred to as "variable contracts"; and
RESOLVED FURTHER, that the Board of Directors of this Corporation hereby
authorizes and directs the establishment of Separate Accounts ("Separate
Accounts") that may be required to which the amounts received by this
Corporation in connection with the sale of the Contracts shall be allocated; and
RESOLVED FURTHER, that within the Separate Accounts there may be a number of
Variable Accounts with different investment policies and objectives into which a
policyowner may direct his interests in the Separate Accounts and the Variable
Accounts; and
RESOLVED FURTHER, that the Separate Accounts are to be established and
maintained in accordance with the provisions of Section 10506 of the California
Insurance Code and the regulations promulgated under that Section; and
RESOLVED FURTHER, that any Officer of this Corporation is authorized and
directed to take whatever action may be necessary or advisable to establish and
maintain such Separate Accounts and to register, file or qualify the Contracts
for sale, including, but not limited to, determining the states or other
jurisdictions in which necessary or advisable action shall be taken to qualify,
file, or register the Contracts for sale, performing any and all acts as such
Officer deems necessary or advisable to comply with the applicable laws of any
such state or jurisdiction including making any required filings with the
California Insurance Department or any other regulatory authority in California
or any other regulatory authority in any state or jurisdiction having
jurisdiction over the insurance activities of the Company or over the contracts;
performing any and all acts as such Officer deems necessary or advisable to
comply with the applicable laws of the United States including, but not limited
to, preparing and filing registration statements with the Securities and
Exchange Commission to register the Contracts or interests therein under the
Securities Act of 1933 and the Investment Company Act of 1940 and to register
the Separate Account under the Investment Company Act of 1940, and to file an
exemptive application if necessary or advisable under the Investment Company Act
of 1940 and to make such other filings or seek any interpretations that are
necessary or advisable from the Securities and Exchange Commission or any other
agency of the United States Government; or making any filings, seek any
interpretations, or make other submissions that such Officer deems necessary or
advisable with other regulatory authorities having jurisdiction over the offer
and sale of the Contracts and to execute and file all requisite papers and
documents, including, but not limited to, applications, reports, surety bonds,
irrevocable consents, powers of attorneys, and appointments of agents for
service of process, and the paying of all necessary fees and expenses as in such
Officer's judgment may be necessary or advisable.
* * * * *
<PAGE>
I, AUDREY L. MILFS, do hereby certify that I am the duly elected, qualified and
acting Secretary of Pacific Mutual Life Insurance Company, a California
corporation, and I do hereby further certify that the foregoing is a true and
correct copy of a resolution adopted at a meeting of the Board of Directors of
said corporation, held on November 22, 1989, at which a quorum was present and
voted in favor thereof, and that said resolution has not been revoked or amended
and is now in full force and effect.
IN, WITNESS WHEREOF, I have executed this certificate as Secretary of said
corporation on this 24th day of August, 1994.
/s/ AUDREY L. MILFS
Audrey L. Milfs
Secretary
#4427
<PAGE>
OFFICE MEMORANDUM
DATE September 7, 1994
TO Thomas C. Sutton
FROM Gerald W. Robinson
SUBJECT Separate Account A
RECOMMENDATION:
That you authorize the establishment of the Separate Account A ("Separate
Account") for the Pacific Portfolios, a variable annuity contract, and Pacific
One, a variable annuity contract.
WHY RECOMMENDATION IS REQUESTED AT THIS TIME:
Documentation of the authorization must accompany the registration materials to
be filed with the Securities and Exchange Commission and the State of California
for the Separate Account.
BACKGROUND:
Pacific Mutual's Finance Committee has approved the development of the Separate
Account to fund the Pacific Portfolios and Pacific One variable annuity
contracts. The Separate Account may be offered under other variable contracts
in the future.
On November 22, 1989, the Board of Pacific Mutual Life Insurance Co. adopted a
resolution authorizing any Officer of the corporation to take whatever action
necessary to establish and maintain Separate Accounts which may be required in
connection with variable life insurance policies and variable annuity contracts
and any derivative thereof. Our outside counsel recommends obtaining this
authorization from the CEO.
AUTHORIZATION:
On behalf of Pacific Mutual Life Insurance Co., the establishment of Separate
Account A for the Pacific Portfolios and Pacific One variable annuity contracts
is hereby authorized.
Establishment of
Separate Account A
Is Authorized:
/s/ THOMAS C. SUTTON
Thomas C. Sutton
Chairman & Chief Executive Officer
<PAGE>
EXHIBIT 99.1(b)
Memorandum Establishing Two New Variable Accounts -
Aggressive Equity and Emerging Markets Portfolios
<PAGE>
OFFICE MEMORANDUM [Logo of Pacific Mutual]
DATE February 8, 1996
TO Mr. Glenn S. Schafer
FROM Ms. Diane N. Ledger
SUBJECT Authorization of the Establishment of the Variable Accounts that will
each invest in corresponding underlying Emerging Markets and Aggressive
Equity Portfolios of Pacific Select Fund
The addition of the Emerging Markets Portfolio and Aggressive Equity Portfolio
to Pacific Select Fund was approved by the Board of Trustees of the Fund on
November 17, 1995. The objective of the Emerging Markets Portfolio is to seek
long-term growth of capital. The objective of the Aggressive Equity Portfolio
is to seek capital appreciation.
The Board of Trustees of Pacific Select Fund also approved the appointment of
Blairlogie Capital Management to serve as the Portfolio Manager of the Emerging
Markets Portfolio and Columbus Circle Investors to serve as the Portfolio
Manager of the Aggressive Equity Portfolio.
On behalf of Pacific Mutual Life Insurance Company, the following is hereby
authorized:
The establishment of two additional Variable accounts within each of the
Pacific Select, Pacific Select Exec, Pacific COLI, Pacific Select Variable
Annuity and Separate Account A Separate Accounts. Each of the Variable
Accounts is to invest exclusively in shares of its corresponding underlying
portfolio of the Pacific Select Fund.
Authorized by: /s/ GLENN S. SCHAFER Date: February 8, 1996
Glenn S. Schafer
President and Director
<PAGE>
EXHIBIT 99.1(c)
Resolution of the Board of Directors of Pacific Life Insurance Company
authorizing conformity to the terms of the current Bylaws
<PAGE>
PACIFIC LIFE INSURANCE COMPANY
CERTIFIED COPY OF RESOLUTION OF BOARD OF DIRECTORS
I, AUDREY L. MILFS, do hereby certify that I am the duly elected, qualified
and acting Secretary of Pacific Life Insurance Company (formerly Pacific Mutual
Life Insurance Company), a California corporation, and as such I do hereby
further certify that the following is a true and correct copy of a resolution
adopted at a meeting of the Board of Directors of said corporation held on the
27/th/ day of August, 1997, at which a quorum was present and voted in favor
thereof, and that said resolution has not been revoked or amended and is now in
full force and effect.
RESOLVED, that on and after September 1, 1997, any provision of any
resolution of the Board of Directors or consent of the members of this
Corporation adopted prior to the date hereof that conflicts or is inconsistent
with the Bylaws of this Corporation, be, and they hereby are, without further
action of the Board of Directors, amended to the extent necessary to conform
such provision to the terms of the current Bylaws of this Corporation.
IN WITNESS WHEREOF, I have executed this certificate as Secretary of said
corporation on this 22/nd/ day of October, 1997.
/s/ AUDREY L. MILFS
Secretary
<PAGE>
EXHIBIT 99.3(a)
Distribution Agreement between Pacific Mutual
and Pacific Mutual Distributors, Inc. ("PMD")
(formerly Pacific Equities Network)
<PAGE>
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 2nd day of January, 1996, by and between Pacific Mutual
Life Insurance Company, a California company, ("Pacific Mutual") on its own
behalf and on behalf of its Separate Account A (the "Separate Account"), and
Pacific Equities Network, a California corporation ("PEN").
WHEREAS, Pacific Mutual has established and maintains the Separate Account, a
separate investment account, for the purpose of selling variable annuity
contracts ("Contracts") to commence after the effectiveness of the Registration
Statement relating thereto filed with the Securities and Exchange Commission on
Form N-4 pursuant to the Securities Act of 1933, as amended (the "1933 Act"),
through PEN, acting as general agent of Pacific Mutual;
WHEREAS, the Separate Account is or will be registered as a unit investment
trust under the Investment Company Act of 1940 (the "1940 Act");
WHEREAS, PEN is registered as a broker-dealer under the Securities Exchange Act
of 1934 (the "1934 Act") and is a member of the National Association of
Securities Dealers, Inc. ("NASD"); and
WHEREAS, Pacific Mutual desires to retain PEN as the distributor and principal
underwriter to provide for the sale and distribution to the public of any
Contracts issued by Pacific Mutual and funded by interests in the General
Account of Pacific Mutual and in the Separate Account and PEN is willing to
render such services;
NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter
set forth, the parties agree as follows:
1. Principal Underwriter. Pacific Mutual hereby appoints PEN, during the term
of this Agreement, subject to the registration requirements of the 1933 Act and
the 1940 Act and the provisions of the 1934 Act, to be the distributor and
principal underwriter for the sale of any Contracts to the public in each state
and other jurisdiction in which the Contracts may be lawfully sold. Pacific
Mutual also appoints PEN as its independent general agent for sale of its
Contracts (including any riders which Pacific Mutual may make available in
connection therewith or any contracts for which the Contracts may be exchanged
or converted) and for sale of such other annuity contracts or insurance
contracts as Pacific Mutual may, from time to time, authorize in writing by
amendment hereto. PEN shall offer the Contracts for sale and distribution at
premium rates set by Pacific Mutual.
Notwithstanding any other provision of this Agreement, it is understood and
agreed that Pacific Mutual shall at all times retain the ultimate responsibility
for and control of all functions performed pursuant to this Agreement, and for
marketing any and all Contracts, and reserves the right to direct, approve or
disapprove any action hereunder taken on its behalf by PEN.
1. Selling Agreements. PEN is hereby authorized to enter into separate written
agreements, on such terms and conditions as PEN determines are not inconsistent
with this Agreement, with such
<PAGE>
organizations which agree to participate as a general agent and/or broker-dealer
in the distribution of the Contracts and to use their best efforts to solicit
applications for Contracts. Any such broker-dealer (hereinafter "Broker") shall
be both registered as a broker-dealer under the 1934 Act and a member of the
NASD. Except as provided in Section 3 hereof, PEN shall be responsible for
ensuring that Broker and its agents of representatives and general agent and its
sub-agents soliciting applications for Contracts shall be duly and appropriately
licensed, registered and otherwise qualified for the sale of any such Contracts
(and the riders and other contracts offered in connection therewith) under the
annuity laws and any applicable blue sky laws of each state or other
jurisdiction in which such Contracts may be lawfully sold and in which Pacific
Mutual is licensed to sell such Contracts. Pacific Mutual shall undertake to
appoint Broker's qualified agents or representatives and general agent's sub-
agents as life insurance agents of Pacific Mutual, provided that Pacific Mutual
reserves the right to refuse to appoint any proposed representative, agent, or
sub-agent, or once appointed, to terminate such appointment. PEN shall be
responsible for ensuring that Broker and general agent supervise its agents,
representatives, or sub-agents.
2. Life Insurance Agents. Pacific Mutual shall be responsible for ensuring
that Broker and its agents or representatives and general agent and its sub-
agents meet all qualifications and hold any licenses or authorizations that may
be required for the solicitation or sale of any Contracts under the insurance
laws of the applicable jurisdictions.
3. Suitability. Pacific Mutual desires to ensure that Contracts will be sold
to purchasers for whom the Contract will be suitable. PEN shall take reasonable
steps to ensure that the various representatives of Broker and sub-agents of
general agents shall not make recommendations to an applicant to purchase a
Contract in the absence of reasonable grounds to believe the purchase of the
Contract is suitable for such applicant. While not limited to the following, a
determination of suitability shall be based on information furnished to a
representative or sub-agent after reasonable inquiry of such applicant
concerning the applicant's other security holdings, retirement and investment
objectives, financial situation and needs, and the likelihood that the applicant
will continue to make any premium payments contemplated by the Contracts and
will keep the Contract in force for a sufficient period of time so that Pacific
Mutual's acquisition costs are amortized over a reasonable period of time.
4. Conformity with Registration Statement and Approved Sales Materials. In
performing its duties as distributor, PEN will act in conformity with the
registration statement and with the instructions and directions of Pacific
Mutual, the requirements of the 1933 Act, the 1940 Act, the 1934 Act, and all
other applicable federal and state laws and regulations. PEN shall not give any
information nor make any representations, concerning any aspect of the Contract
or of Pacific Mutual's operations to any persons or entity unless such
information or representations are contained in the registration statement and
the pertinent prospectus filed with the Securities and Exchange Commission, or
are contained in sales or promotional literature approved by Pacific Mutual.
PEN will not use and will take reasonable steps to ensure Broker will not use
any sales promotion material and advertising which has not been previously
approved by Pacific Mutual.
5. Applications. Completed applications for Contracts solicited by such Broker
through its agents or representatives or by general agent through its sub-agents
shall be transmitted directly to Pacific
<PAGE>
Mutual. All payments under the Contracts shall be made by check to Pacific
Mutual or by other method acceptable to Pacific Mutual, and if received by PEN,
shall be held at all times in a fiduciary capacity and remitted promptly to
Pacific Mutual. All such payments will be the property of Pacific Mutual.
Pacific Mutual has the sole authority to approve or reject such applications or
payments and maintains ultimate responsibility for underwriting. Anything in
this Agreement to the contrary notwithstanding, Pacific Mutual retains the
ultimate right to control the sale of the Contracts and to appoint and discharge
life insurance agents of Pacific Mutual.
6. Standard of Care. PEN shall be responsible for exercising reasonable care
in carrying out the provisions of this Agreement.
7. Reports and Records. PEN shall be responsible for maintaining and
preserving accurate records relating to matters pertaining to this Agreement and
the Broker and general agent and their agents, representatives or sub-agents who
are licensed, registered and otherwise qualified to sell the Contracts, as
required by applicable laws and regulations, or as Pacific Mutual may reasonable
request for its own record-keeping or accounting purposes; calculating and
furnishing the fees payable to Brokers or general agents; and for furnishing
periodic reports to Pacific Mutual as to the sale of Contracts made pursuant to
this Agreement. The books, accounts and records of Pacific Mutual, the Separate
Account and PEN shall be maintained so as to clearly and accurately disclose the
nature and details of the transactions.
8. Investigation and Procedures. PEN and Pacific Mutual agree to cooperate
fully in any regulatory investigation or proceeding or judicial proceeding
arising in connection with any Contracts distributed under this Agreement. PEN
further agrees to furnish regulatory authorities with any information or reports
in connection with such services which may be requested in order to ascertain
whether the operations of Pacific Mutual and the Separate Account are being
conducted in a manner consistent with applicable laws and regulations. PEN and
Pacific Mutual further agree to cooperate fully in any securities regulatory
investigation or proceeding with respect to Pacific Mutual, PEN, their
affiliates and their agents or representatives to the extent that such
investigation or proceeding is in connection with any Contracts distributed
under this Agreement. Without limiting the foregoing:
(a) PEN will be notified promptly of any customer complaint or notice of any
regulatory investigation or proceeding or judicial proceeding received by
Pacific Mutual with respect to PEN or any agent, representative, or sub-agent of
a Broker or general agent or which may affect Pacific Mutual's issuance of any
contract sold under this Agreement; and
(b) PEN will promptly notify Pacific Mutual of any customer complaint or notice
of any regulatory investigation or proceeding received by PEN or its affiliates
with respect to PEN or any agent, representative, or sub-agent of a Broker or
general agent in connection with any Contract distributed under this Agreement
of any activity in connection with any such contract.
In the case of a customer complaint, PEN and Pacific Mutual will cooperate in
investigating such complaint and any response will be sent to the other party to
this Agreement for approval not less than five business days prior to its being
sent to the customer or regulatory authority, except that if
<PAGE>
a more prompt response is required, the proposed response shall be communicated
by telephone, telegraph or telecopier.
1. Indemnification. Pacific Mutual hereby agrees to indemnify and hold
harmless PEN and its officers and directors, and employees for any expenses
(including legal expenses), losses, claims, damages, or liabilities incurred by
reason of any untrue or alleged untrue statement or representation of a material
fact or any omission or alleged omission to state a material fact required to be
stated to make other statements not misleading, if made in reliance on any
prospectus, registration statement, post-effective amendment thereof, or sales
materials supplied or approved by Pacific Mutual or the Separate Account.
Pacific Mutual shall reimburse each such person for any legal or other expenses
reasonably incurred in connection with investigating or defending any such loss,
liability, damage, or claim. However, in no case shall Pacific Mutual be
required to indemnify for any expenses, losses, claims, damages or liabilities
which have resulted from the willful misfeasance, bad faith, negligence,
misconduct, or wrongful act of PEN.
PEN hereby agrees to indemnify and hold harmless Pacific Mutual, its officers,
directors, and employees, and the Separate Account for any expenses, losses,
claims, damages, or liabilities arising out of or based upon any of the
following in connection with the offer or sale of any Contract: 1) except for
such statements made in reliance on any prospectus, registration statement or
sales material supplied or approved by Pacific Mutual or the Separate Account,
any untrue or alleged untrue statement or representation made; 2) any failure to
deliver a currently effective prospectus; 3) the use of any unauthorized sales
literature by any officer, employee, agent, or sub-agent of PEN, Broker or
general agent; or 4) any willful misfeasance, bad faith, negligence, misconduct
or wrongful act. Pen shall reimburse each such person for any legal or other
expenses reasonably incurred in connection with investigating or defending any
such loss, liability, damage, or claim.
Promptly after receipt by a party entitled to indemnification ("Indemnified
Party") of notice of the commencement of any action, if a claim for
indemnification in respect thereof is to be made against Pacific Mutual or PEN
("Indemnifying Party") such Indemnified Party will notify Indemnifying Party in
writing of the commencement thereof, but failure to notify the Indemnifying
Party of any claim shall not relieve it from any liability which it may have to
the person against whom such action is brought otherwise than on account of this
Agreement contained in this Section 10. The Indemnifying Party will be entitled
to participate in the defense of the Indemnified Party, but such participation
will not relieve such Indemnifying Party of the obligation to reimburse the
Indemnified Party for reasonable legal and other expenses incurred by such
Indemnified Party in defending himself.
1. Agent of Pacific Mutual or Separate Account. Any person, even though also
an officer, director, employee, or agent of PEN, who may be or become an
officer, director, employee, or agent of Pacific Mutual or the Separate Account
shall be deemed, when rendering services to Pacific Mutual or the Separate
Account or acting in any business of Pacific Mutual or the Separate Account, to
be rendering such services to or acting solely for Pacific Mutual or the
Separate Account and not as an officer, director, employee, or agent or one
under the control or direction of PEN even though paid by PEN. Likewise, any
person, even though also an officer, director, employee, or agent of Pacific
Mutual or the Separate Account, who may be or become an officer, director,
employee, or agent of
<PAGE>
PEN shall be deemed when rendering services to PEN or acting in any business of
PEN to be rendering such services to or acting solely for PEN and not as an
officer, director, employee, or agent or one under the control or direction of
Pacific Mutual or the Separate Account even though paid by Pacific Mutual or the
Separate Account.
2. Books and Records. It is expressly understood and agreed that all
documents, reports, records, books, files, and other materials relating to this
Agreement and the services to be performed hereunder shall be the sole property
of Pacific Mutual and the Separate account and that any such property held by
PEN shall be held by PEN only as agent, during the effective term of this
Agreement. This material shall be delivered to Pacific Mutual upon the
termination of this Agreement free from any claim or retention of rights by PEN.
During the term of this Agreement and for a period of three years from the date
of termination of this Agreement, PEN will not disclose or use any records or
information and will regard and preserve as confidential all information related
to the business of Pacific Mutual or the Separate account that may be obtained
by PEN from any source as a result of this Agreement and will disclose such
information only if Pacific Mutual or the Separate Account has authorized such
disclosure, or if such disclosure is expressly required by applicable federal or
state regulatory authorities. PEN further acknowledges and agrees that, in the
event of a breach or threatened breach by it of the provisions of this Section
12, Pacific Mutual will have no adequate remedy in moneys or damages and,
accordingly, Pacific Mutual shall be entitled in its discretion to seek an
injunction against such breach. However, no specification in this Agreement of
a specific legal or equitable remedy shall be construed as a waiver or
prohibition against any other legal or equitable remedy in the event of a breach
of a provision of this Agreement.
3. Employees. PEN will not employ, except with the prior written approval of
the Commissioner of Insurance of the State of California, in any material
connection with the handling of the Separate Account's assets any person who, to
the knowledge of PEN:
(a) in the last 10 years has been convicted of any felony or misdemeanor arising
out of conduct involving embezzlement, fraudulent conversion, or
misappropriation of funds or securities, or involving violations of Sections
1341, 1342, or 1343 of Title 18, United States Code; or
(b) within the last 10 years has been found by any state regulatory authority to
have violated or has acknowledged violation of any provision of any state
insurance law involving fraud, deceit, or knowing misrepresentation; or
(c) within the last 10 years has been found by any federal or state regulatory
authorities to have violated or have acknowledged violation of any provision of
federal or state securities laws involving fraud, deceit, or knowing
misrepresentation.
4. Termination. This Agreement shall terminate automatically upon its
assignment without the prior written consent of both parties. This Agreement
may be terminated at any time, for any reason, by either party on 60 days'
written notice to the other party, without the payment of any penalty. Upon
termination of this Agreement, all authorizations, rights and obligations shall
cease except the obligation to settle accounts hereunder, including commissions
on premiums subsequently received for Contracts in effect at time of
termination, and the agreements contained in Sections 9 and 10
<PAGE>
hereof.
5. Regulation. This Agreement shall be subject to the provisions of the 1940
Act and the 1934 Act and the rules, regulations and rulings thereunder, and of
the applicable rules and regulations of the NASD, and applicable state insurance
law and other applicable law, from time to time in effect, and the terms hereof
shall be interpreted and construed in accordance therewith.
6. Independent Contractor. PEN shall act as an independent contractor and
nothing herein contained shall constitute PEN or its agents, officers or
employees as agents, officers, or employees of Pacific Mutual in connection with
the sale of any Contract.
7. Notices. Notices of any kind to be given to PEN by Pacific Mutual or the
Separate account shall be in writing and shall be duly given if mailed, first
class postage prepaid, or delivered to PEN at 700 Newport Center Drive, Newport
Beach, California 92660, or at such other address or to such individual as shall
be specified by PEN. Notices of any kind to be given to Pacific Mutual or the
Separate Account shall be in writing and shall be duly given if mailed, first
class postage prepaid, or delivered to them at 700 Newport Center Drive, Post
Office Box 9000, Newport Beach, California 92660, at or at such other address or
to such individual as shall be specified by Pacific Mutual.
If any provisions of this Agreement shall be held or made invalid by a court
decision, statute rule or otherwise, the remainder of this Agreement shall not
be affected thereby.
1. Entire Agreement; Amendments. This Agreement (a) sets forth the entire
understanding of the parties with respect to the subject matter hereof; (b)
incorporates and merges any and all previous agreements, understandings, and
communications, oral or written; and (c) may not be modified, amended, or waived
except by a written instrument duly executed by the party against whom such
modification, amendment, or waiver is sought to be enforced.
2. Counterparts. This Agreement may be executed in any number of counterparts,
each of which will be deemed an original, but all of which together will
constitute one and the same instrument.
3. Governing Law. This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
PACIFIC MUTUAL LIFE INSURANCE COMPANY
By: /s/ T. C. SUTTON
____________________________________
Chairman and Chief Executive Officer
ATTEST:
/s/ AUDREY L. MILFS
__________________________________________
<PAGE>
Secretary
PACIFIC EQUITIES NETWORK
By: /s/ GERALD W. ROBINSON
____________________________________
President
WITNESS:
/s/ AUDREY L. MILFS
__________________________________________
<PAGE>
EXHIBIT 99.3(b)
Form of Selling Agreement between Pacific Mutual,
PEN and Various Broker-Dealers
<PAGE>
SELLING AGREEMENT
AGREEMENT by and between PACIFIC MUTUAL LIFE INSURANCE COMPANY ("Pacific
Mutual"), a California corporation; PACIFIC EQUITIES NETWORK ("PEN"), a
California corporation, a broker-dealer registered with the Securities and
Exchange Commission under the Securities Exchange Act of 1934 (the "1934 Act"),
and a member of the National Association of Securities Dealers, Inc. ("NASD");
_______________________________________________________________________________
_______________________________________________________________________________
("Selling Broker-Dealer"), also a broker-dealer registered under the 1934 Act
and a member of the NASD; and each of the undersigned General Agents jointly and
severally referred to herein as "General Agent".
W I T N E S S E T H:
WHEREAS, Pacific Mutual issues certain insurance and annuity contracts listed
in Schedule B (the "Contracts"), some of which are registered ("Securities
Registered Contracts") under the Securities Act of 1933 (the "1933 Act");
WHEREAS, Pacific Mutual has authorized PEN, as principal underwriter of the
Contracts, to enter into agreements, subject to the consent of Pacific Mutual,
with broker-dealers and general agents for the distribution of the Contracts;
WHEREAS, PEN has agreed to secure duly qualified broker-dealers and general
agents to contract with Pacific Mutual and PEN for the distribution of the
Contracts, assist these broker-dealers and general agents in obtaining licenses,
registrations and appointments to enable their registered representatives and
sub-agents to sell the Contracts, and provide educational meetings to
familiarize these broker-dealers and general agents and their registered
representatives and sub-agents with the provisions and features of the
Contracts; and
WHEREAS, Selling Broker-Dealer and General Agent have been selected by PEN to
distribute the contracts and Selling Broker-Dealer and General Agent wish to
participate in the distribution of the Contracts.
NOW THEREFORE, in consideration of the promises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
I.
APPOINTMENT
Subject to the terms and conditions of this Agreement, Pacific Mutual and PEN
hereby appoint Selling Broker-Dealer and General Agent for the solicitation of
applications for the purchase of the Contracts.
Selling Broker-Dealer and General Agent accept such appointment and each
agrees to use its best efforts to find purchasers for the Contracts acceptable
to Pacific Mutual. Selling Broker-Dealer and General Agent will seek purchasers
of Securities Related Contracts only while the registration statement relating
to such contracts is effective under the 1933 Act.
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II.
AUTHORITY AND DUTIES OF GENERAL AGENT
A. LICENSING AND APPOINTMENT OF SUB-AGENTS
General Agent is authorized to appoint sub-agents ("Sub-agents") to solicit
sales of the Contracts. General Agent agrees to fulfill all requirements set
forth in the General Letter of Recommendation attached as Schedule A hereto in
conjunction with its submission of licensing and appointment papers for all Sub-
agents.
General Agent warrants that it and all of its Sub-agents appointed pursuant to
this Agreement shall not solicit nor aid, directly or indirectly, in the
solicitation of any application for any Contract until they are fully licensed
by the proper authorities under the applicable insurance laws within the
applicable jurisdictions where General Agent and Sub-agents propose to offer the
Contracts, where Pacific Mutual is authorized to conduct business and where the
Contracts may be lawfully sold.
General Agent shall periodically provide Pacific Mutual with a list of all
Sub-agents appointed by General Agent and the jurisdictions where such Sub-
agents are licensed to solicit sales of the Contracts. Pacific Mutual shall
periodically provide General Agent with a list which shows; (i) the
jurisdictions where Pacific Mutual is authorized to do business; and (ii) any
limitations on the availability of the Contracts in any of such jurisdictions.
General Agent shall prepare and transmit the appropriate appointment forms to
Pacific Mutual. General Agent shall pay all fees to state insurance regulatory
authorities in connection with obtaining necessary licenses and authorizations
for Sub-agents to solicit and sell the Contracts. Pacific Mutual will pay
appointment fees for General Agent and resident appointment fees for Sub-agents.
Non-resident appointment fees for Sub-agents will be paid by the General Agent.
All renewal appointment fees will be paid by the General Agent for Sub-agents
who have generated less than $20,000 target premium within the prior 12 months.
Pacific Mutual may refuse for any reason to apply for the appointment of a Sub-
agent and may cancel any existing appointment at any time.
B. REJECTION OF SUB-AGENT
Pacific Mutual or PEN may refuse for any reason, by written notice to General
Agent, to permit any Sub-agent the right to solicit applications for the sale of
any of the Contracts. Upon receipt of such notice, General Agent immediately
shall cause such Sub-agent to cease such solicitations of sales and cancel the
appointment of any Sub-agent under this agreement.
C. SUPERVISION OF SUB-AGENTS
General Agent shall supervise all Sub-agents appointed pursuant to this
Agreement to solicit sales of the Contracts and bear responsibility for all acts
and omissions of each Sub-agent. General Agent shall comply with and exercise
all responsibilities required by applicable federal and state law and
regulations. General Agent shall train and supervise its Sub-agents to ensure
that purchase of a Contract is not recommended to an applicant in the absence of
reasonable grounds to believe the purchase of the Contract is suitable for that
applicant. While not limited to the following, a determination of suitability
shall be based on information furnished to a Sub-agent after reasonable inquiry
of such applicant concerning the applicant's insurance and investment
objectives, financial situation and needs, and the likelihood that the applicant
will continue to make any premium payments contemplated by the Contracts and
will keep the Contract in force for a sufficient period of time so that Pacific
Mutual's acquisition costs are amortized over a reasonable period of time.
Nothing contained in this Agreement or otherwise shall be deemed to make any
Sub-agent appointed by General Agent an employee or agent of Pacific Mutual or
PEN. Pacific Mutual and PEN shall not have any responsibility for the training
and supervision of any Sub-agent or any other employee of General Agent. If the
act or omission of a Sub-agent or any other employee of General Agent is the
proximate cause of claim, damage or liability (including reasonable attorneys'
fees) to Pacific Mutual or PEN, General Agent shall be responsible and liable
therefor.
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III.
AUTHORITY AND DUTIES OF SELLING BROKER-DEALER
Selling Broker-Dealer agrees that it has full responsibility for the training
and supervision of all persons, including Sub-agents of General Agent,
associated with Selling Broker-Dealer who are engaged directly or indirectly in
the offer or sale of Securities Regulated Contracts. All such persons shall be
registered representatives of Selling Broker-Dealer and shall be subject to the
control of Selling Broker-Dealer with respect to their securities regulated
activities. Broker-Dealer shall: (i) train and supervise Sub-agents, in their
capacity as registered representatives, in the sale of Securities Regulated
Contracts; (ii) use its best efforts to cause such Sub-agents to qualify under
applicable federal and state laws to engage in the sale of Securities Regulated
Contracts; (iii) provide Pacific Mutual and PEN to their satisfaction with
evidence of Sub-agents' qualifications to sell Securities Regulated Contracts;
(iv) notify Pacific Mutual if any of such Sub-agents ceases to be a registered
representative of Selling Broker-Dealer; and (v) train and supervise Sub-agents
to ensure compliance with applicable federal and state securities laws, rules,
regulations, statements of policy thereunder and with NASD rules. Selling
Broker-Dealer shall train and supervise Sub-agents to ensure that purchase of a
Contract is not recommended to an applicant in the absence of reasonable grounds
to believe the purchase of the Contract is suitable for that applicant. While
not limited to the following, a determination of suitability shall be based on
information furnished to a Sub-agent after reasonable inquiry of such applicant
concerning the applicant's other security holdings, financial situation and
needs. Selling Broker-Dealer shall ensure that any offer of a Securities
Regulated Contract made by a Sub-agent will be made by means of a currently
effective prospectus.
Pacific Mutual and PEN shall not have any responsibility for the supervision
of any registered representative or any other employee or affiliate of Selling
Broker-Dealer. If the act or omission of a registered representative or any
other employee or affiliate of Selling Broker-Dealer is the proximate cause of
any claim, damage or liability (including reasonable attorney's fees) to Pacific
Mutual or PEN, Selling Broker-Dealer shall be responsible and liable therefor.
Selling Broker-Dealer at all times shall be duly registered as a broker-dealer
under the 1934 Act, a member in good standing of the NASD and duly licensed in
all states and jurisdictions where required to perform pursuant to this
agreement. Selling Broker-Dealer shall fully comply with the requirements of
the 1934 Act and all other applicable federal or state laws and with the rules
of the NASD. Selling Broker-Dealer shall establish such rules and procedures as
may be necessary to cause diligent supervision of the securities activities of
the Sub-agents including ensuring compliance with the prospectus delivery
requirements of the 1933 Act.
IV.
AUTHORITY AND DUTIES OF
GENERAL AGENT AND SELLING BROKER-DEALER
A. CONTRACTS
The securities and insurance regulated Contracts issued by Pacific Mutual to
which this Agreement applies are listed in Schedule B, which may be amended from
time to time by Pacific Mutual. Pacific Mutual, in its sole discretion, with
prior or concurrent written notice to Selling Broker-Dealer and General Agent,
may suspend distribution of any Contract. Pacific Mutual also has the right to
amend any Contract at any time.
B. SECURING APPLICATIONS
Each application for a Contract shall be made on an application form provided
by Pacific Mutual, and all payments collected by Selling Broker-Dealer, General
Agent or any registered representative and Sub-agent shall be remitted promptly
in full, together with such application form and any other required
documentation, directly to Pacific Mutual at the address indicated on such
application or to such other address as may be designated by Pacific Mutual.
All such payments and documents shall be the property of Pacific Mutual.
Selling Broker-Dealer and
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General Agent shall review all such applications for completeness and for
compliance with the conditions herein, including the suitability and prospectus
delivery requirements set forth above under Sections II.C and III. Check or
money order in payment of such Contracts should be made payable to the order of
"Pacific Mutual". All applications are subject to acceptance or rejection by
Pacific Mutual in its sole discretion.
C. RECEIPT OF MONEY
All money payable in connection with any of the Contracts, whether as premium,
purchase payment or otherwise and whether paid by or on behalf of any contract
owner or anyone else having an interest in the Contracts, is the property of
Pacific Mutual and shall be transmitted immediately in accordance with the
administrative procedures of Pacific Mutual without any deduction or offset for
any reason including, but not limited to, any deduction or offset for
compensation claimed by Selling Broker-Dealer or General Agent, unless there has
been a prior arrangement for net wire transmissions between Pacific Mutual and
Selling Broker-Dealer or General Agent.
D. NOTICE OF SUB-AGENT'S NONCOMPLIANCE
Selling Broker-Dealer shall immediately notify PEN and General Agent in the
event a Sub-agent fails or refuses to submit to the supervision of Selling
Broker-Dealer or General Agent in accordance with this Agreement, the agreement
between Selling Broker-Dealer, General Agent and Sub-agent referred to in
Section IV.H, below, or otherwise fails to meet the rules and standards imposed
by Selling Broker-Dealer or its registered representatives or General Agent or
its Sub-agents. Selling Broker-Dealer or General Agent shall also immediately
notify such Sub-agent that he or she is no longer authorized to sell the
Contracts, and both Selling Broker-Dealer and General Agent shall take whatever
additional action may be necessary to terminate the sale activities of such Sub-
agent relating to the Contracts.
E. SALES PROMOTION, ADVERTISING AND PROSPECTUSES
No sales promotion materials, circulars, documents or any advertising relating
to any of the Contracts shall be used by Selling Broker-Dealer, General Agent or
any Sub-agents unless the specific item has been approved in writing by PEN and
Pacific Mutual prior to use. Selling Broker-Dealer shall be provided, without
any expense to Selling Broker-Dealer, with prospectuses relating to Securities
Regulated Contracts. Selling Broker-Dealer and General Agent shall be provided
with such other material as PEN determines necessary or desirable for use in
connection with sales of the Contracts. Nothing in these provisions shall
prohibit Selling Broker-Dealer or General Agent from advertising life insurance
and annuities on a generic basis.
Selling Broker-Dealer, General Agent and Sub-agents shall make no material
representations relating to the Securities Regulated Contracts, other than those
contained in the relevant registration statement, as may be amended, or in sales
promotion or other materials approved by Pacific Mutual and PEN as provided in
this section.
F. CONFIDENTIALITY
Selling Broker-Dealer and General Agent shall keep confidential all
information obtained pursuant to this Agreement, including, without limitation,
names of the purchasers of the Policies, and shall disclose such information,
only if Pacific Mutual or PEN have authorized such disclosure in writing, or if
such disclosure is expressly required by applicable federal or state regulatory
authorities.
G. RECORDS
Selling Broker-Dealer and General Agent shall have the responsibility for
maintaining the records of its Sub-agents and representatives licensed,
registered and otherwise qualified to sell the Contracts. Selling Broker-Dealer
and General Agent shall maintain such other records as are required of them by
applicable laws and regulations. The books, accounts and records of Selling
Broker-Dealer and General Agent relating to the sale of the Contracts shall be
maintained so as to clearly and accurately disclose the nature and details of
the transactions. Selling Broker-Dealer and General Agent each agree to make
the books and records relating to the sale of the Contracts available to Pacific
Mutual or PEN upon their written request.
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H. SUB-AGENT AGREEMENTS
Before a Sub-agent is permitted to sell the Contracts, General Agent, Selling
Broker-Dealer and Sub-agent shall have entered into a written agreement pursuant
to which: (i) Sub-agent is appointed a Sub-agent of General Agent and a
registered representative of Selling Broker-Dealer; (ii) Sub-agent agrees that
his or her selling activities relating to Securities Regulated Contracts shall
be under the supervision and control of Selling Broker-Dealer; and (iii) that
Sub-agent's right to continue to sell such Contracts is subject to his or her
continued compliance with such agreement and any procedures, rules or
regulations implemented by Selling Broker-Dealer or General Agent.
V.
COMPENSATION
A. COMMISSIONS AND FEES
Commissions and fees payable to General Agent or any Sub-agent in connection
with the Contracts shall be paid by Pacific Mutual through PEN to General Agent,
or as otherwise permitted by law or regulation. General Agent shall pay Sub-
agents. PEN will provide Selling Broker-Dealer and General Agent with a copy of
its current Compensation Schedule(s), attached hereto as Schedule B. Unless
otherwise provided in Schedule B, compensation will be paid as a percentage of
premiums or purchase payments (collectively, "Payments") received in cash or
other legal tender and accepted by Pacific Mutual on applications obtained by
the various Sub-agents appointed by General Agent hereunder. Upon termination
of this Agreement, all compensation to General Agent hereunder shall cease.
However, General Agent shall be entitled to receive compensation for all new and
additional premium payments which are in process at the time of termination, and
shall continue to be liable for any charge-backs pursuant to the provisions of
said Schedule B, or for any other amount advanced by or otherwise due Pacific
Mutual or PEN hereunder. Pacific Mutual reserves the right not to pay
compensation on a policy or contract for which the premium is paid in whole or
in part by the loan or surrender value of any other life insurance policy or
annuity contract issued by Pacific Mutual.
PEN shall deduct any chargebacks from compensation otherwise due General Agent
or Selling Broker-Dealer. If any amount to be deducted exceeds compensation
otherwise due, General Agent and/or Selling Broker-Dealer shall promptly pay
back the amount of the excess following a written demand by PEN or Pacific
Mutual. General Agent and Selling Broker-Dealer are jointly and severally
liable for such chargebacks.
Pacific Mutual reserves the right to reduce first year commissions and renewal
commissions, if necessary, on any life policies sold to residents of the State
of Kentucky and paid for after May 1, 1991. Such reduction shall be in an
amount sufficient to cover any premium tax levied by cities and counties within
the State of Kentucky which is over and above the premium tax paid by Pacific
Mutual to the State of Kentucky.
Pacific Mutual recognizes the Contract owners' right on issued Contracts to
terminate Selling Broker-Dealer and/or change a Selling Broker-Dealer, provided
that the Contract owner notifies PEN in writing. When a Contract owner
terminates Selling Broker-Dealer, no further compensation on any payments due or
received, or on any increases in face amount in the existing policy after
termination, shall be payable to that Selling Broker-Dealer in accordance with
Schedule B after the notice of termination is received and accepted by PEN.
However, when a Contract owner designates a Selling Broker-Dealer other than the
Selling Broker-Dealer of record, compensation on any payments due or received,
or on any increases in face amount in the existing Contract after the change,
shall be payable to the new Selling Broker-Dealer in accordance with Schedule B
in effect at the time of issuance of the Contract.
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A change of Selling Broker-Dealer request shall be honored only if there
exists a valid Selling Agreement between Pacific Mutual, PEN and the new
Selling Broker-Dealer and (1) the Contract owner(s) requests in writing that the
Sub-agent remains as representative of record, or (2) both the former and future
Selling Broker-Dealers direct Pacific Mutual and PEN in a joint writing to
transfer all policies and future compensation to the new Selling Broker-Dealer,
or (3) the NASD approves and effects a bulk transfer of all representatives to a
new Selling Broker-Dealer.
B. TIME OF PAYMENT
PEN will pay any commissions due General Agent at least twice monthly in
accordance with Schedule B of this Agreement, as it may be amended from time to
time.
C. AMENDMENT OF SCHEDULES
PEN may amend Schedule B upon at least ten (10) days' prior written notice to
Selling Broker-Dealer and General Agent. The submission of an application for
the Contracts by Selling Broker-Dealer or General Agent after the effective date
of any such amendment shall constitute agreement to such amendment. Any such
amendment shall apply to compensation due on applications received by Pacific
Mutual after the effective date of such notice.
D. Prohibition Against Rebates
Pacific Mutual or PEN may terminate this Agreement if Selling Broker-Dealer,
General Agent or any Sub-agent rebates, offers to rebate or withholds any part
of any Payment on the Contracts. If Selling Broker-Dealer, General Agent or any
Sub-agent of General Agent shall at any time induce or endeavor to induce any
owner of any Contract issued hereunder to discontinue payments or to relinquish
any such Contract, except under circumstances where there is reasonable grounds
for believing the Contract is not suitable for such person, any and all
compensation due General Agent hereunder shall cease and terminate.
E. INDEBTEDNESS AND RIGHT OF SET OFF
Nothing contained in this Agreement shall be construed as giving Selling
Broker-Dealer or General Agent the right to incur any indebtedness on behalf of
Pacific Mutual or PEN. Selling Broker-Dealer and General Agent hereby authorize
PEN and Pacific Mutual to set off liabilities of Selling Broker-Dealer and
General Agent to Pacific Mutual and PEN against any and all amounts otherwise
payable to Selling Broker-Dealer or General Agent.
VI.
GENERAL PROVISIONS
A. Waiver
Failure of any party to insist upon strict compliance with any of the
conditions of this Agreement shall not be construed as a waiver of any of the
conditions, but the same shall remain in full force and effect. No waiver of
any of the provisions of this Agreement shall be deemed to be, or shall
constitute, a waiver of any other provisions, whether or not similar, nor shall
any waiver constitute a continuing waiver.
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B. LIMITATIONS
The Selling Broker-Dealer and General Agent are independent contractors with
respect to Pacific Mutual and PEN. No party other than Pacific Mutual and or
PEN, as the case may be, shall have the authority to: (i) make, alter or
discharge any Contract issued by Pacific Mutual; (ii) waive any forfeiture or
extend the time of making any payments; (iii) enter into any proceeding in a
court of law or before a regulatory agency in the name of or on behalf of
Pacific Mutual or PEN; (iv) contract for the expenditure of funds of Pacific
Mutual or PEN; (v) alter the forms which PEN prescribes, or substitute other
forms in place of those prescribed by PEN.
C. FIDELITY BOND AND OTHER LIABILITY COVERAGE
Selling Broker-Dealer and General Agent each represent that all directors,
officers, agents, employees and Sub-agents who are licensed pursuant to this
Agreement as Pacific Mutual agents for state insurance law purposes or who have
access to funds of Pacific Mutual, including but not limited to, funds submitted
with applications for the Contracts are and shall be covered by a blanket
fidelity bond, including coverage for larceny and embezzlement, issued by a
reputable bonding company. This bond shall be maintained by Selling Broker-
Dealer or General Agent at their expense. Such bond shall be, at a minimum, of
the form, type, and amount required under NASD Rules, endorsed to extend
coverage to transactions relating to the Contracts. Pacific Mutual may require
evidence, satisfactory to it, that such coverage is in force and Selling Broker-
Dealer or General Agent, as the case may be, shall give prompt written notice to
Pacific Mutual of any notice of cancellation of the bond or change of coverage.
Selling Broker-Dealer and General Agent hereby assign any proceeds received
from a fidelity bonding company, error and omissions or other liability
coverage, to Pacific Mutual or PEN as their interest may appear, to the extent
of their loss due to activities covered by the bond, policy or other liability
coverage. If there is any deficiency amount, whether due to a deductible or
otherwise, Selling Broker-Dealer or General Agent shall promptly pay such
amounts on demand. Selling Broker-Dealer and General Agent hereby indemnify and
hold harmless Pacific Mutual and PEN from any such deficiency and from the costs
of collection thereof (including reasonable attorneys' fees).
D. BINDING EFFECT
This Agreement shall be binding on and shall inure to the benefit of the
parties to it and their respective successors and assigns provided that neither
Selling Broker-Dealer nor General Agent may assign this Agreement or any rights
or obligations hereunder without the prior written consent of Pacific Mutual.
E. REGULATIONS
All parties agree to observe and comply with the existing laws and rules or
regulations of applicable local, state, or federal regulatory authorities and
with those which may be enacted or adopted during the term of this Agreement
regulating the business contemplated hereby in any jurisdiction in which the
business described herein is to be transacted.
F. INDEMNIFICATION
Pacific Mutual and PEN agree to indemnify and hold harmless Selling Broker-
Dealer and General Agent, their officers, directors, agents and employees,
against any and all losses, claims, damages or liabilities to which they may
become subject under the 1933 Act, the 1934 Act, or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact or any omission or alleged omission to state a material fact required to be
stated or necessary to make the statements made not misleading in the
registration statement for the Contracts or for the shares of Pacific Select
Fund (the "Fund") filed pursuant to the 1933 Act, or any prospectus included as
a part thereof, as from time to time amended and supplemented, or in any
advertisement or sales literature approved in writing by Pacific Mutual and PEN
pursuant to Section IV.E. of this Agreement
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Selling Broker-Dealer and General Agent agree to indemnify and hold harmless
Pacific Mutual, the Fund and PEN, their officers, directors, agents and
employees, against any and all losses, claims, damages or liabilities to which
they may become subject under the 1933 Act, the 1934 Act, or other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon; (a) any oral or written misrepresentation by Selling
Broker-Dealer or General Agent or their officers, directors, employees or agents
unless such misrepresentation is contained in the registration statement for the
Contracts or Fund shares, any prospectus included as a part thereof, as from
time to time amended and supplemented, or any advertisement or sales literature
approved in writing by Pacific Mutual and PEN pursuant to Section IV.E. of this
Agreement, (b) the failure of Selling Broker-Dealer or General Agent or their
officers, directors, employees or agents to comply with any applicable
provisions of this Agreement or (c) claims by Sub-agents or employees of General
Agent or Selling Broker-Dealer for payments of compensation or remuneration of
any type. Selling Broker-Dealer and General Agent will reimburse Pacific Mutual
or PEN or any director, officer, agent or employee of either entity for any
legal or other expenses reasonably incurred by Pacific Mutual, PEN, or such
officer, director, agent or employee in connection with investigating or
defending any such loss, claims, damages, liability or action. This indemnity
agreement will be in addition to any liability which Broker-Dealer may otherwise
have.
G. NOTICES
All notices or communications shall be sent to the following address for
Pacific Mutual or PEN, or to such other address as Pacific Mutual or PEN may
request by giving written notice to the other parties:
Pacific Mutual Life Insurance Company Pacific Equities Network
700 Newport Center Drive 700 Newport Center Drive
Newport Beach, CA 92660 Newport Beach, CA 92660
All notices or communications to the Selling Broker-Dealer or General Agent
shall be sent to the last address known to Pacific Mutual or PEN for that party,
or to such other address as Selling Broker-Dealer or General Agent may request
by giving written notice to the other parties.
H. Governing Law
This Agreement shall be construed in accordance with and governed by the laws
of California.
I. AMENDMENT OF AGREEMENT
PEN may amend this Agreement upon at least ten (10) days' prior written notice
to Selling Broker-Dealer and General Agent. The submission of an application
for the Contracts by Selling Broker-Dealer or General Agent after the effective
date of any such amendment shall constitute agreement to such amendment.
Additional General Agents may be added as parties to this Agreement at any
time by a written amendment signed by Pacific Mutual, PEN, Selling Broker-Dealer
and such additional General Agents. All General Agents which are parties to
this Agreement at the time of such amendment hereby consent and agree in advance
to the addition of such additional General Agents.
J. GENERAL AGENT AS BROKER-DEALER
Selling Broker-Dealer and General Agent shall not have the other entity's
authority and shall not be responsible for the other entity's duties hereunder
unless Selling Broker-Dealer and General Agent are the same entity. If Selling
Broker-Dealer and General Agent are the same person or legal entity, such person
or legal entity shall have the rights and obligations hereunder of both Selling
Broker-Dealer and General Agent and this Agreement shall be binding and
enforceable by and against such person or legal entity in both capacities.
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K. COMPLAINTS AND INVESTIGATIONS
Pacific Mutual, PEN, Selling Broker-Dealer and General Agent agree to
cooperate fully in any insurance regulatory investigation or proceeding or
judicial proceeding arising in connection with the Contracts distributed under
this Agreement. Pacific Mutual, PEN, Selling Broker-Dealer and General Agent
further agree to cooperate fully in any securities regulatory investigation or
proceeding with respect to Pacific Mutual, PEN, Selling Broker-Dealer and
General Agent, their affiliates and their agents or representatives to the
extent that such investigation or proceeding is in connection with the Contracts
distributed under this Agreement. Without limiting the foregoing:
(a) Selling Broker-Dealer or General Agent will be notified promptly of any
customer complaint or notice of any regulatory investigation or proceeding or
judicial proceeding received by Pacific Mutual or PEN with respect to Selling
Broker-Dealer or General Agent or any Sub-agent or which may affect Pacific
Mutual's issuance of any contracts sold under this Agreement; and
(b) Selling Broker-Dealer and General Agent will promptly notify Pacific
Mutual and PEN of any customer complaint or notice of any regulatory
investigation or proceeding received by Selling Broker-Dealer, General Agent
or their affiliates with respect to Selling Broker-Dealer, General Agent or
any Sub-agent in connection with any Contracts distributed under this
Agreement or any activity in connection with any such policies.
In the case of a substantive customer complaint, Pacific Mutual, PEN, Selling
Broker-Dealer and General Agent will cooperate in investigating such complaint
and any response will be sent to the other party to this Agreement for approval
not less than five business days prior to its being sent to the customer or
regulatory authority, except that if a more prompt response is required, the
proposed response shall be communicated by telephone or telegraph.
L. TERMINATION
This Agreement may be terminated, without cause, by any party upon thirty (30)
days' prior written notice. This Agreement also may be terminated, for cause,
by any party immediately. This Agreement shall be terminated immediately if PEN
or Selling Broker-Dealer shall cease to be a registered Broker-Dealer under the
1934 Act or a member in good standing of the NASD, or if there occurs the
dissolution, bankruptcy or insolvency of Selling Broker-Dealer or General Agent.
Sections VI F and K shall survive termination of this Agreement.
Upon termination of this Agreement, Selling Broker-Dealer and General Agent
shall each use their best efforts to have all property of Pacific Mutual and PEN
in Selling Broker-Dealer, General Agent or Sub-agents' possession promptly
returned to Pacific Mutual or PEN, as the case may be. Such property includes
prospectuses, applications and other literature supplied by Pacific Mutual or
PEN.
THIS SPACE INTENTIONALLY LEFT BLANK
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M. EXCLUSIVITY
Selling Broker-Dealer and General Agent each agree that no territory is
assigned exclusively hereunder and that Pacific Mutual and PEN reserve the right
in their discretion to establish one or more agencies in any jurisdiction in
which Selling Broker-Dealer and General Agent transact business hereunder.
This Agreement shall be effective as of __________________________________.
PACIFIC EQUITIES NETWORK -------------------------------------
(SELLING BROKER-DEALER)
By: By:
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(Signature) (Signature)
Title: Title:
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Date: Date:
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PACIFIC MUTUAL LIFE INSURANCE COMPANY -------------------------------------
(GENERAL AGENT)
By: By:
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(Signature) (Signature)
Title: Title:
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Date: Date:
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(GENERAL AGENT) (GENERAL AGENT)
By: By:
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(Signature) (Signature)
Title: Title:
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(GENERAL AGENT) (GENERAL AGENT)
By: By:
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(GENERAL AGENT) (GENERAL AGENT)
By: By:
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(Signature) (Signature)
Title: Title:
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Date: Date:
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(GENERAL AGENT) (GENERAL AGENT)
By: By:
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(Signature) (Signature)
Title: Title:
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(GENERAL AGENT) (GENERAL AGENT)
By: By:
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(GENERAL AGENT) (GENERAL AGENT)
By: By:
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Title: Title:
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(GENERAL AGENT) (GENERAL AGENT)
By: By:
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(Signature) (Signature)
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(GENERAL AGENT) (GENERAL AGENT)
By: By:
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(Signature) (Signature)
Title: Title:
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SCHEDULE A
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GENERAL LETTER OF RECOMMENDATION
General Agent hereby certifies to Pacific Mutual that all of the following
requirements will be fulfilled in conjunction with the submission of
licensing/appointment papers for all applicants as Sub-agents ("applicant")
submitted by General Agent. General Agent will, upon request, forward proof of
compliance with same to Pacific Mutual in a timely manner.
1. We have made a thorough and diligent inquiry and investigation relative to
each applicant's identity, residence and business reputation and declare that
each applicant is personally known to us, has been examined by us, is known to
be of good moral character, has a good business reputation, is reliable, is
financially responsible and is worthy of a license. Each individual is
trustworthy, competent, and qualified to act as an agent for Pacific Mutual, and
to hold himself out in good faith to the general public. We vouch for each
applicant.
2. We have on file a B-300, B-301 or U-4 form which was completed by each
applicant. We have fulfilled all the necessary investigative requirements for
the registration of each applicant as a registered representative through our
NASD member firm, and each applicant is presently registered as an NASD
registered representative.
The above information in our files indicates no fact or condition which would
disqualify the applicant from receiving a license, and all the findings of all
investigative information is favorable.
3. We certify that all educational requirements have been met for the specific
state in which each applicant is requesting a license, and that all such persons
have fulfilled the appropriate examination, education and training requirements.
4. If the applicant is required to submit his or her picture, signature, and
securities registration in the state in which he or she is applying for a
license, we certify that those items forwarded to Pacific Mutual are those of
the applicant and the securities registration is a true copy of the original.
5. We hereby warrant that the applicant is not applying for a license with
Pacific Mutual in order to place insurance chiefly or solely on his or her life
or property, lives or property of his or her relatives, or property or liability
of his or her associates.
6. We certify that each applicant will receive close and adequate supervision,
and that we will make inspection when needed of any or all risks written by
these applicants, to the end that the insurance interest of the public will be
properly protected.
7. We will not permit any applicant to transact insurance as an agent until
duly licensed therefor. No applicants have been given a contract or furnished
supplies, nor have any applicants have permitted to write, solicit business or
act as an agent in any capacity, and they will not be so permitted until the
certificate of authority or license applied for is received.
8. We certify that General Agent, Selling Broker-Dealer and applicant shall
have entered into a written agreement pursuant to which: (i) applicant is
appointed a Sub-agent of General Agent and a registered representative of
Selling Broker-Dealer; (ii) applicant agrees that his or her selling activities
relating to securities regulated Contracts shall be under the supervision and
control of Selling Broker-Dealer and his or her selling activities relating to
all Contracts shall be under the supervision and control of General Agent; and
(iii) that applicant's right to continue to sell such Contracts is subject to
his or her continued compliance with such agreement and any procedures, rules or
regulations implemented by Selling Broker-Dealer or General Agent.
12
<PAGE>
EXHIBIT 99.4(a)
Individual Flexible Premium Deferred Variable Annuity Contract
<PAGE>
[LETTERHEAD OF PACIFIC LIFE]
PACIFIC VALUE
________________________________________________________________________________
Individual Flexible Premium Deferred Variable Annuity Contract
. Investment Experience Reflected in Benefits
. Variable and Fixed Accumulation Before Annuity Date; Variable and Fixed
Annuity Payments Thereafter
. Death Benefit Proceeds Payable Before Annuity Date
. Non-Participating
Please read your contract carefully. This is a legal contract between you, the
Owner, and us, Pacific Life Insurance Company.
We agree to pay the benefits of this Contract according to its provisions.
The consideration for this Contract is the application for it, (copy or
confirmation is attached) and our receipt of the Purchase Payment(s).
Contract Loan Amount is less than 100% of Contract Value.
Benefits and values under this Contract may be on a variable basis. Amounts
directed into one or more of the Variable Investment Options will reflect the
investment experience of those Investment Options. These amounts may increase
or decrease, and are not guaranteed as to a dollar amount. The details of the
variable provisions begin on page 12.
Right to Cancel - You may return this Contract within 10 days after you receive
it. To do so, mail it to us at our Service Center or to the agent who sold it to
you. This Contract will then be deemed void from the beginning. No withdrawal
fee will be imposed, and we will refund your Contract Value, including any fees
and/or charges for premium taxes and/or other taxes that were deducted from that
Contract Value minus any Credit Enhancements made into the Contract.
Signed at our Home Office, 700 Newport Center Drive,
Newport Beach, California 92660.
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
<PAGE>
TABLE OF CONTENTS
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
<TABLE>
<S> <C>
CONTRACT SPECIFICATIONS......................................... 3
DEFINITIONS..................................................... 4
GENERAL PROVISIONS.............................................. 7
PURCHASE PAYMENTS............................................... 9
Purchase Payment Allocation.................................. 9
Allocations During the Right to Cancel Period................ 9
Minimum Investment Option.................................... 9
Credit Enhancement........................................... 9
THE FIXED OPTION................................................ 11
VARIABLE INVESTMENT OPTIONS..................................... 12
Separate Account............................................. 12
CONTRACT VALUE............................................... 13
Fixed Option Value........................................... 13
Variable Account Value....................................... 13
Loan Account Value........................................... 14
CHARGES, FEES AND DEDUCTIONS.................................... 15
Administrative Fee........................................... 15
Mortality and Expense Risk Charge............................ 15
Premium Taxes................................................ 15
Transfer Fee................................................. 15
Withdrawal Fee............................................... 15
Withdrawal Charge............................................ 15
TRANSFERS....................................................... 17
WITHDRAWALS..................................................... 18
Amount Available for Withdrawal.............................. 18
TRANSFER AND WITHDRAWAL RESTRICTIONS............................ 18
Special Restrictions - Fixed Option.......................... 18
CONTRACT LOANS.................................................. 19
Loan Procedures.............................................. 19
Loan Account................................................. 19
Loan Terms................................................... 19
Loan Interest Rate........................................... 19
Repayment Terms.............................................. 19
DEATH BENEFIT................................................... 21
Death of Annuitant........................................... 21
Death of Owner............................................... 21
Death of Owner Distribution Rules............................ 21
Interest on Death Benefit Proceeds........................... 22
BENEFICIARY..................................................... 23
Add or Changing Your Beneficiary............................. 23
ANNUITY BENEFITS................................................ 24
Choice of Annuity Date....................................... 24
Application of Contract Value................................ 24
Your Selections.............................................. 24
Fixed and Variable Annuities................................. 24
Annuity Options.............................................. 25
Default Annuity Date and Options............................. 25
Amount of Payments........................................... 26
Fixed Annuity Payments....................................... 26
Variable Annuity Payments.................................... 26
Periodic Payments............................................ 27
ANNUITY OPTION TABLES........................................... 28
</TABLE>
2
<PAGE>
CONTRACT SPECIFICATIONS
<TABLE>
<S> <C> <C>
SERVICE CENTER: SEND FORMS AND WRITTEN REQUESTS TO: SEND PAYMENTS TO:
Pacific Life Insurance Company Pacific Life Insurance Company
P.O. Box 7187 P.O. Box 100060
Pasadena, California 91109-7187 Pasadena, California 91189-0060
</TABLE>
Toll-free number: 1-800-722-2333 (between 6:00 a.m. and 5:00 p.m., Pacific time)
Please use our toll-free number to present inquiries or obtain information
about your coverage and for us to provide assistance in resolving complaints.
Basic Contract - [LOBE]
<TABLE>
Investment Options:
<S> <C>
Money Market Equity
High Yield Bond Bond and Income
Managed Bond Equity Index
Government Securities International
Aggressive Equity Emerging Markets
Growth LT Fixed Option
Equity Income
Multi-Strategy
</TABLE>
Administrative Fee: 0.15%
Mortality and Expense Risk Charge: 1.25%
Withdrawal Charge: Age of Premium
in Contract Years Charge Percent
1 7%
2 7%
3 7%
4 7%
5 5%
6 5%
7 4%
8 and over 0%
Contract Number: [PNUM] Contract Date: [ISSDT]
Owner(s):
[O1NAM]
[O2NAM]
Annuitant(s): Age Sex
[A1NAM] [A1AGE] [A1SEX]
[A2NAM] [A2AGE] [A2SEX]
Initial Purchase Payment: [PAMT] Annuity Start Date: [ACD]
3
<PAGE>
DEFINITIONS
PL, WE, OUR and US - Pacific Life Insurance Company.
YOU and YOUR - The person or persons named as Owner(s) in the Contract
Specifications. If there are Joint Owners, you and your means both Joint Owners.
ACCOUNT VALUE - The amount of your Contract Value allocated to any one of the
Investment Options.
AGE - The Owner's or Annuitant's age, as applicable, at his or her last
birthday.
ANNUITANT - The person you name on whose life annuity payments may be
determined. An Annuitant's life may also be used to determine certain increases
in death benefits, and to determine the Annuity Date. If you designate Joint
Annuitants or a Contingent Annuitant, unless otherwise stated, "Annuitant" means
the sole surviving Annuitant. Any named Annuitant, Joint Annuitant, or
Contingent Annuitant must be under Age 81 as of your Contract Date. If your
Contract is a Non-Qualified Contract, you cannot change the Annuitant or change
or add a Joint Annuitant. If your Contract is a Qualified Contract, you may add
a Joint Annuitant only on the Annuity Date.
ANNUITY DATE ("ANNUITY START DATE") - The date shown in the Contract
Specifications, or the date you later elect, if any, for the start of annuity
payments if the Annuitant is still living and the Contract is in force; or if
earlier, the date that annuity payments actually begin.
ANNUITY OPTIONS - Income options available for a series of payments after your
Annuity Date.
BENEFICIARY - The person you name who may receive any death benefit proceeds or
any remaining annuity benefits in accordance with the provisions of this
Contract.
BUSINESS DAY - Any day on which the value of an amount invested in a Subaccount
is required to be determined by applicable law which currently includes each day
that both the New York Stock Exchange is open for trading and our Annuities
administrative offices are open. If any transaction or event under this Contract
is scheduled to occur on a day that does not exist in a given calendar period,
or on a day that is not a Business Day, such transaction or event will be deemed
to occur on the next following Business Day, unless otherwise stated.
CODE - The Internal Revenue Code of 1986, as amended.
CONTINGENT ANNUITANT - The person, if any, you select to become the Annuitant if
the Annuitant dies before your Annuity Date. You may add or change your
Contingent Annuitant prior to the Annuity Date provided the Contingent Annuitant
is not the sole surviving Annuitant. Any Contingent Annuitant you name must be
under Age 81 as of your Contract Date or, if you add or change a Contingent
Annuitant, as of the date of that addition or change.
CONTINGENT OWNER - The person, if any, you select to succeed to your rights as
Owner of this Contract if all named Contract Owners die.
CONTRACT ANNIVERSARY - The same date, in each subsequent year, as your Contract
Date.
CONTRACT DATE - The date we issue your Contract, as shown in the Contract
Specifications. Contract Years, Contract Anniversaries, Contract Semiannual
Periods, Contract Quarters and Contract Months are measured from this date.
CONTRACT DEBT - As of the end of any Business Day, the principal amount you have
outstanding on any loan under this Contract, plus any accrued and unpaid
interest.
CONTRACT VALUE - As of the end of any Business Day, your Variable Account Value,
plus your Fixed Option Value, and any Loan Account Value. The Contract Value
includes any Credit Enhancements applied to the Contract.
CREDIT ENHANCEMENT - An amount added to the Contract Value at the time a
Purchase Payment is applied and on the first Contract Anniversary, if
applicable. All Credit Enhancements will be counted as Earnings under this
Contract.
4
<PAGE>
FIXED OPTION - Amounts allocated under your Contract to the Fixed Option are
held in our General Account and receive interest at rates declared periodically
(the "Guaranteed Interest Rate"), but not less than an annual rate of 3%.
FIXED OPTION VALUE - The aggregate amount of your Contract Value allocated to
the Fixed Option.
GENERAL ACCOUNT - Our General Account consists of all assets of PL, other than
those assets allocated to Separate Account A or to any of our other separate
accounts.
GUARANTEED INTEREST RATE - The interest rate guaranteed at the time of
allocation (or rollover) for the Guarantee Term on amounts allocated to the
Fixed Option. The Guaranteed Interest Rate is expressed as an annual rate, and
interest is accrued daily. This rate will not be less than an annual rate of 3%.
GUARANTEE TERM - The period during which the amount you allocate to the Fixed
Option earns a specified Guaranteed Interest Rate.
INVESTMENT OPTION - A Variable Account or Fixed Option offered under the
Contract.
LOAN ACCOUNT - The account in which the amount equal to the principal amount of
a loan and any interest accrued is held to secure any Contract Debt.
LOAN ACCOUNT VALUE - The amount, including any interest accrued, held in the
Loan Account to secure any Contract Debt.
NET CONTRACT VALUE - Your Contract Value less any Contract Debt.
NOTICE DATE - The day on which we receive, in a form satisfactory to us, proof
of death and instructions satisfactory to us regarding payment of death benefit
proceeds.
NON-NATURAL OWNER - A corporation or other entity that is not a (natural)
person.
NON-QUALIFIED CONTRACT - A Contract other than a Qualified Contract.
OWNER - The person(s) who has (have) all rights under this Contract. If your
Contract names two Owners, Owner means both Owners ("Joint Owners"). Any named
Owner or Contingent Owner must be under Age 81 as of your Contract Date. If your
Contract allows you to change or add Owners after the Contract is issued, any
newly-named or added Owners, including Joint and/or Contingent Owners, must be
under Age 81 at the time of such change or addition.
PRIMARY ANNUITANT - The individual that is named in your Contract, the events in
the life of whom are of primary importance in affecting the timing or amount of
the payout under the Contract.
PURCHASE PAYMENT ("PREMIUM PAYMENT") - An amount paid to us by or on behalf of
an Owner as consideration for the benefits provided under this Contract.
QUALIFIED CONTRACT - A Contract that qualifies under the Code as an individual
retirement annuity ("IRA") or a Contract purchased under a Qualified Plan that
qualifies for special tax treatment under the Code.
QUALIFIED PLAN - A retirement plan that receives favorable tax treatment under
Section 401, 403, 408, 408A, or 457 of the Code.
SEC - Securities and Exchange Commission.
SEPARATE ACCOUNT OR SEPARATE ACCOUNT A - A separate account of PL registered as
a unit investment trust under the Investment Company Act of 1940, as amended
("1940 Act").
SERVICE CENTER - PL's mailing address shown in the Contract Specifications. We
will notify you of any change in our mailing address.
5
<PAGE>
SUBACCOUNT - An investment division of the Separate Account. Each Subaccount,
(a "Variable Investment Option" or "Variable Account") invests its assets in a
separate series or class of shares of a designated investment company.
SUBACCOUNT ANNUITY UNIT ("ANNUITY UNITS") - Annuity Units are used to measure
variation in variable annuity payments. The amount of each variable annuity
payment (after the first payment) will vary with the value and number of your
Annuity Units in each Subaccount.
SUBACCOUNT UNIT - Subaccount Units are used to measure your Variable Account
Value in that Subaccount.
UNIT VALUE - The value of a Subaccount Unit ("Subaccount Unit Value") or
Subaccount Annuity Unit ("Subaccount Annuity Unit Value"). The Unit Value of
any Subaccount is subject to change on any Business Day. The fluctuations in
value reflect investment results and daily deductions for the mortality and
expense risk charge and administrative fee. Changes in Subaccount Annuity Unit
Values also reflect an additional adjustment factor that corrects for an assumed
investment return. The Unit Value of a Subaccount Unit and of a Subaccount
Annuity Unit are determined each Business Day.
VARIABLE ACCOUNT ("VARIABLE INVESTMENT OPTION") - A Subaccount of the separate
account or any separate account of PL which is available under your Contract in
which assets of PL are segregated from assets in our General Account and from
assets in our other separate accounts.
VARIABLE ACCOUNT VALUE - The aggregate amount of your Contract Value allocated
to the Variable Accounts.
6
<PAGE>
GENERAL PROVISIONS
REPORT TO OWNER(S) - At least once per year prior to the Annuity Date, we will
send you a report that will show your Contract Value, any Purchase Payments
received, loan repayments, transfers, withdrawals, applicable withdrawal charges
and/or other charges and/or fees incurred since the last report, and any other
information that may be required. After the Annuity Date, we will send you any
information that may be required.
PAYMENTS, INSTRUCTIONS AND REQUESTS - Unless this Contract provides otherwise,
all Purchase Payments, loan repayments, instructions and requests must be
received in a form satisfactory to us at our Service Center at its mailing
address. (See DEFINITIONS - SERVICE CENTER). Any subsequent Purchase Payments,
loan repayments and requests for loans, transfers or withdrawals we receive in a
form satisfactory to us on any Business Day usually will be processed the same
Business Day unless the transaction or event is scheduled to occur on another
day.
Generally, all other instructions and requests normally will be effective as of
the end of the day next following the Business Day we receive them in a form
satisfactory to us, unless the event is scheduled to occur on another day. We
may require that you provide signature guarantees or other safeguards for any
instruction, request or other document you may send to our Service Center. You
acknowledge and agree that we will not be liable for any loss, liability, cost
or expense of any kind or character for acting on instructions or requests
submitted to us that we reasonably believe to be genuine.
ENTIRE CONTRACT - This document, the attached application or confirmation
thereof, any subsequent applications to change this Contract or confirmation
thereof, and any riders and endorsements, constitute the entire Contract, and
supersede any and all prior agreements, whether oral or written, about the terms
of this Contract and the application. All statements made in the application are
representations and not warranties.
CONTRACT MODIFICATIONS - Modifications to this Contract or any waiver of our
rights or requirements under this Contract can only be made if in writing by an
authorized officer of PL. This Contract is intended to qualify as an annuity
contract for federal income tax purposes. In addition, if this Contract is
issued in connection with a Qualified Plan, this Contract is intended to qualify
as part of such a tax-qualified retirement plan, arrangement or contract. To
that end, the provisions of this Contract are to be interpreted and administered
to ensure or maintain such tax qualification, notwithstanding any other
provisions to the contrary. We reserve the right to amend this Contract and/or
our administrative procedures without consent (except for the states of
Michigan, Pennsylvania, South Carolina and Washington) to reflect any
clarifications that may be needed or are appropriate to maintain its tax
qualification or to conform this Contract to any applicable changes in the tax
qualification requirements.
BASIS OF VALUES - A detailed statement showing how values are determined has
been filed with the state insurance departments. All values and reserves are at
least equal to those required by the laws of the state in which this Contract is
delivered.
CLAIMS OF CREDITORS - Your Contract Value and other benefits under this Contract
are exempt from the claims of creditors to the extent permitted by law.
REMOVAL OF BENEFICIARY OR CONTINGENT ANNUITANT - You may remove a Beneficiary
(other than an irrevocable Beneficiary) or a Contingent Annuitant from this
Contract by providing proper written instructions to our Service Center.
OWNERSHIP - This Contract belongs to the Owner. The Owner is entitled to
exercise all rights available to the Owner under this Contract. If this Contract
names two Owners, both Owners must join in any request to exercise these rights.
The Owner may exercise these rights under this Contract without the consent of
the Beneficiary (other than any irrevocable Beneficiary) or any other person,
except as otherwise required by law.
Assignment - You may assign all rights and benefits under this Contract before
the Annuity Date. We are not bound by any assignment until we have received at
our Service Center written notice satisfactory to us and we record the
assignment. We are not responsible for the validity of any assignment. If the
Contract has been absolutely assigned, the assignee becomes the Owner. You
should consult with your tax adviser to determine the tax consequences of an
assignment before taking any action.
7
<PAGE>
DELAY OF PAYMENTS - Generally, payments, transfers, or exchanges will be made
within seven days from receipt of the payment and/or request in a form
satisfactory to us. Payment of your withdrawal proceeds or transfers or
exchanges to or from a Variable Account may be delayed after receipt of your
withdrawal, transfer, or exchange request under certain circumstances. These
include:
. a closing of the New York Stock Exchange other than on a regular holiday
or weekend;
. a trading restriction by the SEC; or
. an emergency declared by the SEC.
We may delay payments or transfers from our General Account (which would include
payment of your withdrawal proceeds and transfers from the Fixed Option, loans,
fixed annuity payments, and lump sum death benefit payments unless state law
requires otherwise) for up to six months after the requested effective date of
the transaction. Any amount delayed will, so long as it is held under the Fixed
Option, continue to earn interest at the Guaranteed Interest Rate(s) then in
effect until the applicable Guaranteed Term in effect has ended, and not less
than 3% on an annual basis thereafter. If you make any Purchase Payment by
check, other than a cashier's check, we may delay making payments to you until
your check has cleared.
INCONTESTABILITY - We will not contest the validity of this Contract.
PROOF OF LIFE OR DEATH - Before we make a payment, we have the right to require
proof of the life or death of any person on whose life or death determines
whether, to whom, or how much we must pay any benefits under this Contract.
WITHHOLDING TAXES - We reserve the right to withhold from all payments made or
deemed made under this Contract, any taxes required to be withheld by applicable
federal or state law, unless the Owner or payee elects otherwise pursuant to
applicable withholding rules.
MISSTATEMENT OF AGE OR SEX - We may require proof of the Annuitant's or Owner's
Age before any payments associated with the Death Benefit provisions of this
Contract are made. If the Age of the Annuitant is incorrectly stated in this
Contract, we will base any payment associated with the Death Benefit provisions
of this Contract on the Annuitant's or Owner's correct Age.
We may require proof of the Annuitant's Age and sex before starting annuity
payments. If the Age or sex (or both) of the Annuitant are incorrectly stated in
this Contract, we will correct the amount payable, based upon the Annuitant's
correct Age or sex, if applicable. If we make the correction after annuity
payments have started, and we have made overpayments, we will deduct the amount
of the overpayment, with interest at 3% per year, from any payments due then or
later. If we have made underpayments, we will add the amount, with interest at
3% per year, of the underpayments to the next payment we make after we receive
proof of the correct Age and/or sex.
8
<PAGE>
PURCHASE PAYMENTS
PURCHASE PAYMENTS - This Contract will not be in force until we receive at our
Service Center the initial Purchase Payment. Your initial Purchase Payment is
shown in the Contract Specifications.
You may make additional Purchase Payments at any time before the Annuity Date,
while the Annuitant is living and this Contract is in force. Each additional
Purchase Payment must be at least $250 for Non-Qualified Contracts and $50 for
Qualified Contracts. We may limit the amount of any single Purchase Payment. You
must obtain our consent before making a Purchase Payment that will bring your
aggregate Purchase Payments over $1,000,000.
Purchase Payments are payable in U.S. dollars either at our Service Center or
through our agent. Checks should be made payable to Pacific Life Insurance
Company. If you make Purchase Payments by check other than a cashier's check,
your withdrawal proceeds and any refund under your Right to Cancel may be
delayed until your check has cleared. On request, a receipt for the Purchase
Payment signed by an officer of PL will be provided after payment.
PURCHASE PAYMENT ALLOCATION - Prior to your Annuity Date, you may allocate all
or part of your Purchase Payments to one or more of the Investment Options
available to you. The Investment Options available to you on the Contract Date
are shown on your Contract Specifications page.
You may change your allocation by sending us instructions in a form satisfactory
to us. (see GENERAL PROVISIONS: PAYMENTS, INSTRUCTIONS AND REQUESTS). We will
allocate any Purchase Payment according to your most recent allocation
instructions. We may reject any instruction or Purchase Payment if your
instructions are not clear and we cannot determine your allocation instructions.
ALLOCATIONS DURING THE RIGHT TO CANCEL PERIOD - We will allocate your initial
Purchase Payment in accordance with your most recent allocation instructions.
However, if we are required by state or federal law to refund all Purchase
Payments according to the Right to Cancel provision, we will allocate the
portion of your initial Purchase Payment designated for Variable Investment
Options to the Money Market Subaccount, and the portion of your initial Purchase
Payment designated for the Fixed Option to that respective Option. Any
subsequent Purchase Payments that are received before the end of the Right to
Cancel Period will be allocated in the same manner as the initial Purchase
Payment. No later than fifteen (15) days after the Contract Date, we will
transfer the Account Value in the Money Market Subaccount to your Variable
Investment Options in accordance with your most recent allocation instructions.
MINIMUM INVESTMENT OPTION VALUE - We reserve the right to require that, as a
result of any allocation to an Investment Option, any transfer, or any partial
withdrawal, your remaining Account Value in any Investment Option must be at
least $500. We also reserve the right to transfer any remaining Account Value
that does not meet such minimum amount to your other Investment Options on a pro
rata basis relative to your most recent allocation instructions for those
Investment Options.
CREDIT ENHANCEMENT - We will add a Credit Enhancement to your Contract Value at
the time each Purchase Payment is applied to this Contract. The amount of a
Credit Enhancement is determined as a percentage of each Purchase Payment made
to this Contract. The Credit Enhancement will be applied at the time the
Purchase Payment is effective. The Credit Enhancement will be allocated among
Investment Options in the same proportion as the applicable Purchase Payment.
The Credit Enhancement for each Purchase Payment will be based on the total
Purchase Payments made into this Contract less the total withdrawals, including
any withdrawal charges, from this Contract, as of the date of the Purchase
Payment. The Credit Enhancement, as a percentage of the Purchase Payment is set
out below.
<TABLE>
<CAPTION>
TOTAL PURCHASE PAYMENTS LESS TOTAL WITHDRAWALS CREDIT ENHANCEMENT
---------------------------------------------- ------------------
<S> <C>
LESS THAN $100,000 3.0%
AT LEAST $100,000 BUT LESS THAN $2,500,000 4.0%
$2,500,000 OR MORE 5.0%
</TABLE>
9
<PAGE>
On the first Contract Anniversary, we will calculate the total Purchase Payments
made into this Contract less the total withdrawals, including withdrawal
charges, from this Contract during the first Contract Year. If that total
amount is at least $100,000, all prior Purchase Payments that received a 3.0%
Credit Enhancement on the date they were made will receive an additional 1.0%
Credit Enhancement on the first Contract Anniversary. We will apply this
additional 1.0% Credit Enhancement as a percentage of any Purchase Payment that
received a 3.0% Credit Enhancement. We will not apply this 1.0% Credit
Enhancement to those first year Purchase Payments that received a 4.0% or 5.0%
Credit Enhancement at the time they were made. We will allocate the additional
1.0% Credit Enhancement among Investment Options according to the most recent
allocation instructions as of the first Contract Anniversary.
10
<PAGE>
THE FIXED OPTION
We credit interest at the Guaranteed Interest Rate during each Guarantee Term on
the amount of Purchase Payments and/or Contract Value that you allocate or
transfer to, or roll over into, the Fixed Option, as described below.
Account Values under the Fixed Option are held in our General Account. Subject
to applicable law, we have sole discretion over the investment of our General
Account assets.
We will credit your Contract with a Guaranteed Interest Rate for a Guarantee
Term of up to one year on that portion of your Purchase Payment and/or Contract
Value allocated to the Fixed Option, while the Annuitant is living and this
Contract is in force, and prior to the Annuity Date. We will credit the
Guaranteed Interest Rate in effect on the Business Day that the allocation
and/or transfer is effective for an initial Guarantee Term that ends at the end
of that Contract Year.
At the end of an initial Guarantee Term and each succeeding Guarantee Term, we
will roll over your Fixed Option Value attributed to that Guarantee Term to a
new Guarantee Term of one year, unless you instruct us otherwise. We will credit
the Guaranteed Interest Rate in effect at the time of the roll over on the
amount of the Fixed Option Value rolled over until the end of such Guarantee
Term.
We will stop crediting interest on that portion of your Fixed Option Value you
withdraw, transfer (including transfers to the Loan Account), or convert to an
Annuity Option, including any:
. fees for withdrawals or transfers;
. withdrawal charges; and
. charges for premium taxes and/or other taxes.
We do so as of the end of the Business Day any such transaction is effective.
11
<PAGE>
VARIABLE INVESTMENT OPTIONS
The Variable Investment Options consist of Subaccounts of the Separate Account.
The available Subaccounts as of the Contract Date are shown in the Contract
Specifications.
SEPARATE ACCOUNT - We established and maintain the Separate Account under the
laws of California. Any income, gains or losses (whether or not realized) from
the assets of each Variable Account are credited or charged against such
Variable Account without regard to our other income, gains or losses. Assets may
be put in our Separate Account to support this Contract and other variable
annuity contracts. Assets may be put in our Separate Account for other purposes,
but not to support contracts other than variable annuity contracts. The assets
of our Separate Account are our property. The portion of the Separate Account
assets equal to the reserves and other Contract liabilities with respect to each
Variable Account will not be chargeable with liabilities arising out of any
other business we conduct. We may transfer assets of a separate account in
excess of the reserves and other liabilities with respect to its Variable
Accounts to another separate account or to our General Account. All obligations
arising under the Contract are our general corporate obligations. We do not hold
ourselves out to be trustees of the Separate Account assets.
We reserve the right, subject to compliance with the law then in effect, and
after any required regulatory approval, to:
. cease offering any Subaccount;
. add or change designated investment companies or their portfolios, or other
investment vehicles;
. add, delete or make substitutions for the securities and other assets that
are held or purchased by the Separate Account or any Variable Account;
. permit conversion or exchanges between portfolios and/or classes of
contracts on the basis of Owners' requests;
. add, remove or combine Variable Accounts;
. combine the assets of any Variable Account with any other Separate Account
of PL or of any of its affiliates;
. register or deregister Separate Account A or any Variable Account under the
1940 Act;
. operate any Variable Account as a managed investment company under the 1940
Act, or any other form permitted by law;
. run any Variable Account under the direction of a committee, board, or
other group;
. restrict or eliminate any voting rights of Owners with respect to any
Variable Account or other persons who have voting rights as to any Variable
Account;
. make any changes required by the 1940 Act or other federal securities laws;
. make any changes necessary to maintain the status of the Contracts as
annuities under the Code;
. make other changes required under federal or state law relating to
annuities;
. suspend or discontinue sale of the Contracts; and
. comply with applicable law.
If any of these changes result in a material change in the underlying
investments of a Variable Account, we will notify you of such change.
We will not change the investment policy of the Separate Account without
following the filing and other procedures of the Insurance Commissioner in the
State of California and the filing and other procedures established by insurance
regulators of the state of delivery. Unless required by law or regulation, an
investment policy may not be changed without our consent.
From time to time we may make other Investment Options available to you. Any new
Investment Option may invest in portfolios of the designated investment company,
other designated investment companies or their portfolios, or in other
investment vehicles. New Investment Options will be made available to existing
Owners at our discretion. We will provide you with written notice of all
material details, including investment objectives and charges. We will comply
with the filing or other procedures established by applicable state insurance
regulators, to the extent required by applicable law.
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CONTRACT VALUE
Your Contract Value on any Business Day is the sum of:
. your Fixed Option Value on that day;
. plus your Variable Account Value on that day;
. plus your Loan Account Value on that day.
We generally determine values on each day that the New York Stock Exchange is
open, provided our Annuities administrative offices are also open on that day.
FIXED OPTION VALUE - Your Fixed Option Value on any Business Day is your Fixed
Option Value on the prior Business Day increased by any additions to your Fixed
Option on that day as a result of any:
. interest;
. Purchase Payments received by us and allocated to the Fixed Option;
. transfers to the Fixed Option, including transfers from the Loan
Account; and
. Credit Enhancements allocated to the Fixed Option.
decreased by any deductions from the Fixed Option on that day as a result of
any:
. transfers, including transfers to the Loan Account;
. withdrawals, including any withdrawal charges;
. amounts converted to an Annuity Option;
. charge for premium taxes and/or other taxes; and
. fees for withdrawals and/or transfers.
VARIABLE ACCOUNT VALUE - Your Variable Account Value on any Business Day is the
sum of your Subaccount Values on that day.
Subaccount Value - Each Subaccount Value on any Business Day is the number of
Subaccount Units in that Subaccount that are credited to your Contract on that
day multiplied by the Unit Value of the Subaccount on that day.
We credit your Contract with Subaccount Units for a Subaccount as a result of
any portion of your Purchase Payments received by us and allocated to that
Subaccount; any transfers of your Contract Value to that Subaccount, including
transfers from the Loan Account; and any Credit Enhancements allocated to that
Subaccount.
We debit your Contract with Subaccount Units for a Subaccount as a result of any
deductions from the Subaccount, including those caused by any:
. transfers, including transfers to the Loan Account;
. withdrawals, including any withdrawal charges;
. amounts converted to an Annuity Option;
. charge for premium taxes and/or other taxes; and
. fees for withdrawals and/or transfers;
The number of Subaccount Units we debit or credit to your Contract in connection
with a transaction is equal to the amount of the transaction applicable to that
Subaccount divided by that Subaccount's Unit Value on that day. The number of
your Subaccount Units in a Subaccount will change only if we debit or credit
Subaccount Units for the transactions specified above. The number of Subaccount
Units will not change because of subsequent changes in the Subaccount Unit
Value.
Subaccount Unit Value - The initial Unit Value of each Subaccount was $10 on the
Business Day the Subaccount began operations. At the end of each subsequent
Business Day, the Unit Value for each Subaccount is equal to (Y) times (Z)
where:
(Y) is the Unit Value for that Subaccount as of the end of the prior
Business Day; and
(Z) is the Net Investment Factor for that Subaccount for the period (a
"valuation period") between the prior Business Day and that Business
Day.
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Net Investment Factor - Each Subaccount's Net Investment Factor for any
valuation period is equal to ( A / B ) - C where:
(A) equals:
(a) the net asset value per share of the corresponding portfolio shares
held by the Subaccount as of the end of that valuation period;
(b) plus the per share amount of any dividend or capital gain distributions
made during that valuation period on the portfolio shares held by the
Subaccount;
(c) plus or minus any per share charge or credit for any income taxes,
other taxes, or amounts set aside during that valuation period as a
reserve for any income and/or any other taxes for which we determine to
have resulted from the operations of the Subaccount or Contract, and/or
any taxes attributable, directly or indirectly, to Purchase Payments;
(B) is the net asset value per share of the portfolio shares held by the
Subaccount as of the end of the prior valuation period; and
(C) is a factor that we assess against the Subaccount's net assets held by
each Subaccount for the mortality and expense risk charge and the
administrative fee during that valuation period.
LOAN ACCOUNT VALUE - For those Qualified Contracts that permit loans, your Loan
Account Value as of the end of any Business Day is your Loan Account Value on
the prior Business Day, increased by any:
. interest; and
. Contract Value loaned on that day;
and decreased by any:
. loan principal repaid on that day; and
. earned interest transferred from the Loan Account on that day.
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CHARGES, FEES AND DEDUCTIONS
ADMINISTRATIVE FEE - We charge an administrative fee against assets held in your
Variable Investment Option(s). This fee is assessed daily at the annual rate
which is shown in the Contract Specifications. This fee is guaranteed not to
increase.
MORTALITY AND EXPENSE RISK CHARGE ("RISK CHARGE") - We impose a Risk Charge
against assets held in your Variable Investment Option(s). This charge is
assessed daily at the annual rate which is shown in the Contract Specifications.
The Risk Charge compensates us for the risks we assume that mortality and
expenses will vary from those we assumed. This charge is guaranteed not to
increase.
PREMIUM TAXES - From your Contract Value, we will deduct a charge for any taxes
we pay that are attributable to Purchase Payments or withdrawals. Such taxes may
include, but are not limited to: any federal, state or local premium or
retaliatory taxes; and any federal, state or local income, excise, business or
any other type of tax (or component thereof), measured by or based upon,
directly or indirectly, the amount of Purchase Payments we receive from you. We
will normally deduct this charge when you annuitize, however, we may impose this
charge: on any withdrawal; at the time any death benefit is paid; when the taxes
are incurred; or when we pay the taxes. We may base this charge on: the
Contract Value; the amount of the transaction; the aggregate amount of Purchase
Payments we receive under your Contract; or any other amount that, in our sole
discretion, we deem appropriate.
Other Taxes - We reserve the right to charge the Separate Account and/or deduct
from your Contract Value a charge for any federal, state or local taxes we pay
that are or become attributable to the Separate Account or Contract, including,
but not limited to, income taxes attributable to our operation of the Separate
Account or to our operations with respect to the Contract, or taxes
attributable, directly or indirectly, to Purchase Payments or payments we make
under this Contract.
TRANSFER FEE - We reserve the right to impose a transfer fee of $15 on each
transfer made in excess of fifteen transfers in any Contract Year. For this
purpose, we will treat each transfer request as a single transfer, regardless of
the number of Investment Options from which or to which portions of Account
Values are transferred. We will deduct any transfer fee we impose from the
Investment Option(s) from which the transfer is made on a pro rata basis
relative to the total amount transferred.
WITHDRAWAL FEE - We reserve the right to impose a withdrawal fee of $15 on each
partial withdrawal made in excess of fifteen withdrawals in any Contract Year.
We will deduct from your Contract Value, on a pro rata basis relative to your
Account Value in each Investment Option immediately after the withdrawal, any
such fee we impose on a partial withdrawal. For this purpose, we will treat each
withdrawal request as a single withdrawal, regardless of the number of
Investment Options from which portions of Account Values are withdrawn.
CONTINGENT DEFERRED SALES CHARGE ("WITHDRAWAL CHARGE") - Purchase Payments are
subject to a withdrawal charge which is shown in the Contract Specifications.
This charge may apply to amounts you withdraw under your Contract prior to your
Annuity Date, depending on the length of time each Purchase Payment has been
allocated to your Contract and on the amount you withdraw. We will not apply
the withdrawal charge on:
. death benefit proceeds, except as provided under the DEATH OF OWNER
provisions for certain Non-Natural Owners;
. Contract Values converted to a Life Only Annuity Option or to an Annuity
Option with a certain payment period of 7 years or more after the first
Contract Anniversary;
. withdrawals by Owners to meet the minimum distribution rules for
Qualified Contracts as they apply to amounts held under the Contract; or
. withdrawals (full or partial), after the first Contract Anniversary, if
the Annuitant has been diagnosed with a medically determinable condition
that results in a life expectancy of twelve (12) months or less, subject
to medical evidence satisfactory to us.
Amount of Withdrawal Charge - The amount of a withdrawal charge depends on how
long your Purchase Payments are held under this Contract. Each Purchase Payment
you make is considered to have a certain "age," depending on the length of time
since that Purchase Payment was effective. A Purchase Payment is "age one" from
the day it was effective until your next Contract Anniversary and increases in
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"age" on that and each succeeding Contract Anniversary. When you withdraw an
amount, the "age" of any Purchase Payment(s) you withdraw determines the
level(s) of withdrawal charge as shown in the Contract Specifications. For the
purposes of calculating the withdrawal charge, we assume that withdrawal amounts
will be applied to Purchase Payments first and in the order the Purchase
Payments were received. The withdrawal charge will be deducted proportionately
from each Investment Option selected for withdrawal.
Withdrawal Enhancements - We reserve the right, in our sole discretion, to
calculate your withdrawal charge on more favorable terms to you than as
otherwise described in the preceding paragraph. These Withdrawal Enhancements
may include an acceleration of the day on which the "age" of any Purchase
Payment(s) is considered to occur or a waiver of some or all of the withdrawal
charge in the event the Guaranteed Interest Rate is less than a specified rate.
Although we retain the discretion to add a Withdrawal Enhancement, once it is
added, it is binding on us and effective for any specified period we have
designated. In the event of any Withdrawal Enhancement, we will notify the
Owner within thirty (30) days of the effective date of the Withdrawal
Enhancement.
Free Withdrawals - During a Contract Year, you may withdraw free of withdrawal
charge amounts up to your "Eligible Purchase Payments". Eligible Purchase
Payments include 10% of all Purchase Payments that have an "age" of less than
eight years, plus 100% of all Purchase Payments that have an "age" of eight
years or more. Once all Purchase Payments have been deemed withdrawn, any
withdrawal will be deemed a withdrawal of your Earnings and will be free of the
withdrawal charge. For those contracts issued to a Charitable Remainder Trust
(CRT), the amount available for withdrawal free of withdrawal charges during a
Contract Year includes all Eligible Purchase Payments plus all Earnings even if
all Purchase Payments have not been deemed withdrawn.
Earnings - For the purpose of calculating the withdrawal charge, as of the end
of any Business Day, your Earnings equal your Contract Value less your aggregate
Purchase Payments which are reduced by withdrawals of prior Purchase Payments.
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TRANSFERS
You may make transfers under this Contract subject to certain restrictions (see
TRANSFER AND WITHDRAWAL RESTRICTIONS) and any applicable fees (see CHARGES, FEES
AND DEDUCTIONS).
By providing a proper transfer request (see GENERAL PROVISIONS - PAYMENTS,
INSTRUCTIONS AND REQUESTS), you may request transfer of part or all of your
Contract Value, less Loan Account Value, in any Investment Option among other
Investment Options while your Annuitant is living and prior to the Annuity Date.
If your transfer causes your remaining Account Value in any Investment Option
immediately after such transfer to be less than $500, we reserve the right to
transfer such remaining Account Value to your other Investment Options on a pro
rata basis relative to your most recent allocation instructions. We reserve
the right to impose a transfer fee as described in the Transfer Fee provision.
Transfers between Investment Options will normally be effective as of the end of
the Business Day on which we receive a proper transfer request. If your
Contract was delivered in a state that requires a refund of premium, we may
prohibit transfers up to 15 days after your Contract Date.
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WITHDRAWALS
You may, on or prior to your Annuity Date, withdraw all or a portion of the
amount available under your Contract, while the Annuitant is living and your
Contract is in force; however, no partial withdrawals are allowed within thirty
(30) days of your Contract Date. If you make a full withdrawal, we require
return of your Contract or a signed Lost Contract Affidavit with your proper
request. You may choose to withdraw from any specific Investment Option(s), or
from all Investment Options proportionately. If you do not specify, we will make
the withdrawal from your Investment Options on a pro rata basis relative to your
Account Value in each. Each partial withdrawal must be for $500 or more.
Withdrawals from the Fixed Option are subject to certain additional restrictions
described below.
If your partial withdrawal causes your Net Contract Value to be less than $1,000
immediately after the withdrawal, we may terminate your Contract and send you
the withdrawal proceeds. If your partial withdrawal causes your Account Value
remaining in any Investment Option to be less than $500, we reserve the right to
transfer such remaining Account Value to your other Investment Options on a pro
rata basis relative to your most recent allocation instructions. Withdrawals
will normally be effective as of the end of the Business Day on which we receive
a proper withdrawal request.
AMOUNT AVAILABLE FOR WITHDRAWAL - The amount available for withdrawal is your
Net Contract Value as of the end of the Business Day on which your withdrawal
request is effective, less any:
. withdrawal fee;
. withdrawal charge; and
. charge for premium taxes and/or other taxes.
The amount we send to you (your "withdrawal proceeds") will also reflect any
required or requested federal and/or state income tax withholding.
If you make a full withdrawal, this Contract will end; we will have no further
obligations under this Contract.
TRANSFER AND WITHDRAWAL RESTRICTIONS
SPECIAL RESTRICTIONS ON WITHDRAWALS OR TRANSFERS FROM THE FIXED OPTION - After
the first Contract Anniversary, you may, within thirty (30) days from your
Contract Anniversary, withdraw or transfer up to one-third (33-1/3%) of your
Fixed Option Value. In consecutive Contract Years, however, you may withdraw or
transfer one-third of your Fixed Option Value at the beginning of the first
year, one-half (50%) of your remaining Fixed Option Value at the beginning of
the second year, and up to the entire amount (100%) of your remaining Fixed
Option Value at the beginning of the third year.
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CONTRACT LOANS
If your Contract is issued under a Qualified Plan under Code Sections 401 or 403
and your Qualified Plan permits, you may request a loan of a portion of your
Contract Value after your first Contract Year and before your Annuity Date.
LOAN PROCEDURES - Your loan request must be submitted on our Loan Request Form.
You may submit a loan request at any time after your first Contract Anniversary
and before your Annuity Date; however, before requesting a new loan, you must
wait thirty (30) days after the last payment of a previous loan. If approved,
your loan will usually be effective as of the end of the Business Day on which
we receive all necessary documentation in a form satisfactory to us. We will
normally forward proceeds of your loan to you within seven calendar days after
the effective date of your loan.
LOAN ACCOUNT - On the effective date of your loan, we will transfer an amount
equal to the principal amount of your loan into an account called the Loan
Account. We will transfer amounts to the Loan Account on a pro rata basis from
your Fixed and Variable Investment Options based on your Account Value in each.
We will credit interest on amounts in the Loan Account at a rate equal to an
annual rate that is two percentage points lower than the annual loan interest
rate charged on your loan. Interest earned will accrue daily beginning on the
day following the effective day of the loan. The interest credited will be
transferred from the Loan Account to your Fixed and Variable Investment Options
on a pro rata basis relative to your most recent allocation instructions.
LOAN TERMS - You may have only one loan outstanding at any time. The minimum
loan amount is $1,000 and the maximum loan amount is the lesser of:
. 50% of your Contract Value;
. $50,000 less your highest outstanding Contract Debt during the 12-month
period immediately preceding the effective date of your loan.
You should refer to the terms of your particular Qualified Plan for any
additional loan restrictions. If you have other loans outstanding pursuant to
other Qualified Plans, the amount you may borrow may be further restricted. We
are not responsible for making any determinations (including loan amounts
permitted) or any interpretations with respect to your Qualified Plan.
LOAN INTEREST RATE - You will be charged interest on your Contract Debt at an
annual rate, set at the time the loan is made, equal to the higher of 5% or the
Moody's Corporate Bond Yield Average-Monthly Corporates, as published by Moody's
Investors Service, Inc., or its successor, for the most recent available month.
In the event that the Moody's Corporate Bond Yield Average Monthly Corporates is
no longer available, we will use a substantially similar average, subject to
compliance with applicable state regulations. Interest charged will accrue
daily beginning on the day your loan is effective. We will notify you of the
loan interest rate when you make a Contract loan.
REPAYMENT TERMS - You must repay principal and interest of any loan within five
years after its effective date. If you have certified to us that your loan
proceeds will be used to acquire a principal residence for yourself, you may
request a loan for up to thirty (30) years. In either case, you must repay your
loan in full prior to the Annuity Date.
Your loan, including principal and accrued interest, must be repaid in quarterly
installments that are substantially level. An installment will be due each
quarter on the date corresponding to your loan effective date, beginning with
the first such date following the effective date of your loan. You may,
however, repay your entire loan at any time. If you do so, we will bill you for
any accrued interest. Your loan will be considered repaid only when the
interest due has also been paid. Subject to any necessary approval of state
insurance authorities, we will treat all payments you send us as Purchase
Payments unless you specifically indicate that your payment is a loan repayment.
To the extent allowed by law, any repayment in excess of the amount then due
will be refunded to you, unless such amount is sufficient to pay the balance of
your loan. Repayments received that are less than the amount then due will be
returned to you, unless otherwise required by law.
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If a loan repayment is not made when due, we will declare the entire remaining
loan balance in default. At that time, we will send written notification of the
amount needed to bring the loan back to the current status. You will have sixty
(60) days from the date on which the loan was declared in default (the "grace
period") to make the required repayment.
If the required repayment is not received by the end of the grace period, the
defaulted loan balance plus accrued interest will be repaid by a withdrawal from
your Contract Value to the extent that such values are then eligible for
distribution. In order for an amount to be eligible for distribution from a
Qualified Plan you must meet one of six triggering events. They are: attainment
of age 59 1/2, separation from service, death, disability, plan termination,
and financial hardship. To the extent such values are not then eligible for
distribution, the defaulted loan balance plus accrued interest will be
considered a "Deemed Distribution" and that portion of any Contract Value needed
to repay the Contract Debt will be withdrawn when such Contract Values become
eligible for distribution. The withdrawal will be subject to the withdrawal
charge.
If there is a "Deemed Distribution" under your Contract any future withdrawals
will first be applied as repayment of the defaulted Contract Debt, including
accrued interest and withdrawal charges and charges for applicable taxes, to the
extent allowed by law. Any amounts withdrawn and applied as repayment of
Contract Debt will be withdrawn first from your Loan Account and then from your
Investment Options on a proportionate basis relative to the Account Value in
each Investment Option. If you have an outstanding loan that is in default, the
defaulted Contract Debt will be considered a withdrawal for the purpose of
calculating any death benefit proceeds payable under this Contract.
The terms of any such loan are intended to qualify for the exception in Code
Section 72(p)(2) so that the distribution of the loan proceeds will not
constitute a distribution that is taxable to you. To that end, these loan
provisions will be interpreted to ensure and maintain such tax qualification,
despite any other provisions to the contrary. We reserve the right to amend
your Contract to reflect any clarifications that may be needed or are
appropriate to maintain such tax qualification or to conform any terms of our
loan arrangement with you to any applicable changes in the tax qualification
requirements. We will send you a copy of any such amendment. If you refuse
such an amendment, it may result in adverse tax consequences to you.
Adverse tax consequences may result if you fail to meet the repayment
requirements of your loan. A "Deemed Distribution" will be considered a
currently taxable distribution, and may be subject to federal tax withholding
and a federal early withdrawal penalty tax, regardless of when such unpaid
amounts are repaid. The tax and other Qualified Plan rules relating to Contract
loans are complex and in many cases unclear. For these reasons, and because the
rules vary depending on the individual circumstances of each Contract, we advise
that you consult with a qualified tax adviser before exercising the loan
provisions of your Contract.
If your Contract is a Non-Qualified Contract, or if your Qualified Plan does not
permit loans, loans under this Contract will not be available to you.
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DEATH BENEFIT
A death benefit may be payable on proof of the death of the Annuitant or any
Owner before the Annuity Date, while this Contract is in force.
The proceeds of any death benefit payable will be payable upon receipt, in a
form satisfactory to us, of proof of death and instruction regarding payment of
death benefit proceeds. Such proceeds will equal the Death Benefit Amount
reduced by any charges for premium taxes and/or other taxes and any Contract
Debt. These proceeds will be payable in a lump sum, as an Annuity Option under
this Contract or towards the purchase of any Annuity Option we then offer, or in
accordance with the Code (see DEATH OF OWNER DISTRIBUTION RULES). Any such
Annuity Option is subject to all restrictions and requirements as are other
annuities offered under this Contract.
DEATH BENEFIT AMOUNT - The Death Benefit Amount as of any Business Day prior to
your Annuity Date is equal to the greater of: (a) your Contract Value as of that
day; or (b) your aggregate Purchase Payments reduced by an amount for each
withdrawal that has occurred, which is calculated by multiplying the aggregate
Purchase Payments received prior to each withdrawal by the ratio of the amount
of the withdrawal, including any withdrawal charge, to your Contract Value
immediately prior to the withdrawal.
DEATH OF ANNUITANT - If an Annuitant dies before the Annuity Date, the Death
Benefit Amount will be equal to the Death Benefit Amount as of the Notice Date.
Unless there is a surviving Joint or Contingent Annuitant, we will pay the death
benefit proceeds to the Owner, if living; otherwise to the Beneficiary, if
living; otherwise to the Owner's estate. If an Annuitant dies and there is a
surviving Joint Annuitant, the surviving Joint Annuitant becomes the Annuitant.
If there is no surviving Joint Annuitant and there is a Contingent Annuitant,
the Contingent Annuitant becomes the Annuitant. Death benefit proceeds are
payable only for the death of the sole surviving Annuitant prior to the Annuity
Date. If you are the Annuitant and you die, we will determine the Death Benefit
Amount and to whom it will be paid under the Death of Annuitant provisions; and,
if your Contract is a Non-Qualified Contract, we will distribute any death
benefit proceeds under the Death of Owner Distribution Rules.
DEATH OF OWNER - If you are not the Annuitant, and you die before the Annuitant,
the Death Benefit Amount will be equal to your Contract Value as of the Notice
Date.
If you die while the Annuitant is living and prior to the Annuity Date, we will
pay the death benefit proceeds to the surviving Joint Owner, if any. If there is
no surviving Joint Owner and there is a Contingent Owner, we will pay the death
benefit proceeds to the surviving Contingent Owner, if any. If there is no
surviving Contingent Owner, the death benefit proceeds will be paid to the
Beneficiary, if living; otherwise to the Owner's estate. If you are not also the
Annuitant, then, in the event the deaths of the Owner and Annuitant are under
circumstances where it cannot be determined who died first, the Death Benefit
will be calculated under the DEATH OF ANNUITANT provision of this Contract and
payment will be made in accordance with the DEATH OF OWNER provisions of this
Contract.
If you are a Non-Natural Owner of a Contract other than a Contract issued under
a Qualified Plan as defined in Sections 401 or 403 of the Code, the Primary
Annuitant will be treated as the Owner of the Contract for purposes of the DEATH
OF OWNER DISTRIBUTION RULES. If there is a change in the Primary Annuitant prior
to the Annuity Date, such change will be treated as the death of the Owner. The
Death Benefit Amount will be (a) the Contract Value if the Non-Natural Owner
elects to maintain the Contract and reinvest the Contract Value into the
Contract in the same amount as immediately prior to the distribution, or (b) the
Contract Value less any withdrawal fee, withdrawal charge, charge for premium
taxes and/or other taxes if the Non-Natural Owner elects a cash distribution.
The Death Benefit will be determined as of the Business Day we receive, in a
form satisfactory to us, the request to change the Primary Annuitant and
instructions regarding continuance of the Contract or cash distribution.
DEATH OF OWNER DISTRIBUTION RULES - The following rules will determine when a
distribution must be made under this Contract. These rules do not affect our
determination of the amount of death benefit proceeds payable or distribution
proceeds. If there is more than one Owner, these rules apply on the date on
which the first of these Joint Owners dies.
If the Owner dies before the Annuity Date, the Beneficiary (as that term applies
with respect to an Owner's death) must receive:
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. a lump sum payment; or
. elect to receive an annuity for life or over a period that does not
exceed the life expectancy of the Beneficiary, with annuity payments
that start within one year after the Owner's death.
Unless otherwise required by law, an election to receive an annuity (in lieu of
a lump sum payment) must be made within such time-frames as we may prescribe
from time to time, or the lump sum option will be deemed elected. We will
consider that deemed election as our receipt of instruction regarding payment of
death benefit proceeds.
If the spouse of the deceased Owner is the sole surviving Beneficiary, or is the
sole surviving Joint or Contingent Owner, and has an unrestricted right to
receive all death benefit proceeds in one lump sum, the spouse may continue this
Contract as Owner rather than receive the death benefit proceeds, provided that
we receive instructions to continue the Contract within such time-frames as we
may prescribe from time to time.
If the Owner dies on or after the Annuity Date, but payments have not yet been
completed, then distributions of the remaining amounts payable under this
Contract must be made at least as rapidly as the rate that was being used at the
date of the Owner's death.
If the Owner is a Non-Natural Owner, the rules set forth in these DEATH OF OWNER
DISTRIBUTION RULES apply in the event of the death or change of the Primary
Annuitant.
This Contract incorporates all applicable provisions of Code Section 72(s) and
any successor provision, as deemed necessary by us to qualify this Contract as
an annuity contract for federal income tax purposes, including the requirement
that, if the Owner dies before the Annuity Date, any death benefit proceeds
under this Contract shall be distributed within five years of the Owner's death
(or such other period that we offer and that is permitted under the Code or such
shorter period as we may require).
These DEATH OF OWNER DISTRIBUTION RULES do not apply to Qualified Contracts
issued under Qualified Plans as defined in Sections 401, 403, 408, or 408A of
the Code or to an annuity that is a qualified funding asset as defined in Code
Section 130(d) (but without regard to whether there is a qualified assignment).
INTEREST ON DEATH BENEFIT PROCEEDS - If payment of death benefit proceeds is
unduly delayed after the Notice Date, we will pay interest on the proceeds.
Interest will be paid at a rate of not less than 3% per year from the Notice
Date until the proceeds are paid or applied under an Annuity Option. If the law
in the state in which the Contract is delivered requires payment of a greater
amount, we will pay that amount.
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BENEFICIARY
Your Beneficiary is the person you name who may receive any death benefit
proceeds, or any remaining annuity payments after the Annuity Date, under your
Contract if the Annuitant or Owner dies. If you leave no surviving Beneficiary,
your estate may receive the death benefit proceeds under your Contract.
If the Beneficiary is a trustee, we will neither be responsible for verifying a
trustee's right to receive any death benefit proceeds payable, nor for how the
trustee disposes of any death benefit proceeds. If before payment of any death
benefit proceeds, we receive proper notice that the trust has been revoked or is
not in effect, then any death benefit proceeds payable will be paid to the
Owner's estate.
ADDING OR CHANGING YOUR BENEFICIARY - You may add, change, or remove any
Beneficiary, other than an irrevocable Beneficiary, subject to the terms of any
assignment, at any time prior to the death of the Annuitant or Owner, by sending
us a request in a form satisfactory to us. However, if you have named an
irrevocable Beneficiary, you may not add any new Beneficiary, or remove or
change the irrevocable Beneficiary, without obtaining his or her written consent
in a form acceptable to us. You may remove any non-irrevocable Beneficiary
without obtaining the consent of the irrevocable Beneficiary. Qualified
Contracts may have additional restrictions on naming and changing Beneficiaries.
Any change or addition will take effect only when we receive all necessary
documents and record the change or addition.
23
<PAGE>
ANNUITY BENEFITS
CHOICE OF ANNUITY DATE - Your Annuity Date is shown in the Contract
Specifications. If you did not select an Annuity Date in your application for
this Contract, we assigned an Annuity Date based on the type of this Contract
and the Annuitant's Age (see DEFAULT ANNUITY DATE AND OPTIONS).
You may change your Annuity Date by providing proper notice to us at least ten
(10) Business Days prior to your current Annuity Date or new Annuity Date,
whichever is earlier. Your Annuity Date may not be earlier than your first
Contract Anniversary and must occur on or before the day the younger Annuitant
reaches his or her 95th birthday, or earlier as required by state law or the
Code. You may be subject to additional restrictions under your Qualified Plan.
You should consult with your Qualified Plan administrator before you elect your
Annuity Date.
APPLICATION OF CONTRACT VALUE - Prior to the Annuity Date, you may elect to
convert all or part of your Net Contract Value, less any charge for premium
taxes and/or other taxes, to any currently offered Annuity Option. You may also
elect a full withdrawal (subject to the terms of the withdrawal provisions) in
lieu of annuity payments under an Annuity Option. Before we make any full
withdrawal, we require return of this Contract (or a signed Lost Contract
Affidavit) to us. The aggregate net amount you convert must be at least $10,000;
otherwise, we reserve the right to pay a single amount equal to your withdrawal
proceeds (see AMOUNT AVAILABLE FOR WITHDRAWALS).
If you convert only a portion of your Net Contract Value on your Annuity Date,
you may, at that time, elect not to have the remainder of your Net Contract
Value distributed, but instead to continue your Contract with that remaining
Contract Value. This option may or may not be available, or may be available
only for certain types of Contracts. If this option is available and you elect
it, you would choose a second Annuity Date for such Contract Value; all
references in this Contract to your Annuity Start Date (or Annuity Date) would,
with regard to such Contract Value, be deemed to refer to that second Annuity
Date. You should call your tax adviser for more information if you desire this
option.
YOUR SELECTIONS - Prior to the Annuity Date, you may make three selections
about the annuity payments. First, you may choose whether you want those
payments to be a fixed-dollar amount or a variable-dollar amount, or both.
Second, you may choose the form of annuity payments (Annuity Option). Third, you
may choose to have annuity payments made monthly, quarterly, semiannually, or
annually.
The first annuity payment on the Annuity Date will be sent on the day following
the Annuity Date and must be at least $250. We may reduce your payment frequency
if the first annuity payment is less than $250. If you elect annuity payments
for a Period Certain Only (see ANNUITY OPTIONS), we also reserve the right to
reduce the Period Certain to meet the $250 minimum first payment. After the
Annuity Date, you may not change the Annuity Option, or surrender the Contract
for payment of amounts converted into a variable annuity and/or fixed annuity.
FIXED AND VARIABLE ANNUITIES - You may choose a fixed annuity (with fixed-dollar
payments), a variable annuity (with variable-dollar payments), or you may choose
a combination of both. If you select a variable annuity, you may choose any
Subaccounts for your annuity. If you select a variable annuity, on your Annuity
Date, we will convert that portion of your Net Contract Value as it is currently
allocated among the Subaccount(s). We will apply the net amount you convert to
a fixed annuity and/or a variable annuity (and in this instance, to each
Subaccount), based on your relative Account Value in each Investment Option on
the Annuity Date. Any net amount you convert to a fixed annuity will be held in
our General Account (but not under the Fixed Option).
24
<PAGE>
Each periodic payment under the fixed annuity will be equal to the amount of
your first fixed annuity payment (unless you elect a joint and survivor life
annuity with reduced survivor payments). The amount of each variable annuity
periodic payment will vary with the investment results of the Subaccount(s) you
select. After the Annuity Date, you may exchange the Annuity Units in any
Subaccount(s) for Annuity Units in any other Subaccount(s) up to four times in
any twelve month period. We reserve the right to limit the Subaccounts
available, to change the number and frequency of exchanges, and to change the
number of Subaccounts you may choose.
In choosing an Annuity Option, you must submit your Option request to us in a
form satisfactory to us.
ANNUITY OPTIONS - The following forms of annuity payments are available under
this Contract. Additional options may become available in the future:
Option 1: Life Only. Periodic payments are made to the designated payee during
the Annuitant's lifetime. Payments stop when the Annuitant dies.
Option 2: Life with Period Certain. Periodic payments are made to the
designated payee during the Annuitant's lifetime, with payments
guaranteed for a specified period. You may choose to have payments
guaranteed from 7 through 30 years (in full years only). If the
Annuitant dies before the guaranteed payments are completed, we pay
the Owner the remainder of the guaranteed payments, if living; if not
to the Beneficiary, if living; if not to the Owner's estate.
Option 3: Joint and Survivor Life. Periodic payments are made during the
lifetime of the Primary Annuitant. After the death of the Primary
Annuitant, periodic payments are based on the life of the secondary
Annuitant named in the election if and so long as such secondary
Annuitant lives. Payments made based on the life of the secondary
Annuitant may be in installments equal to 50%, 66-2/3% or 100% (as
specified in the election) of the original payment amount payable
during the lifetime of the Primary Annuitant. If you elect a reduced
payment based on the life of the secondary Annuitant, fixed annuity
payments will be equal to 50% or 66-2/3% of the original fixed
payment payable during the lifetime of the Primary Annuitant;
variable annuity payments will be determined using 50% or 66-2/3%, as
applicable, of the number of Annuity Units for each Subaccount
credited to the Contract. Payments stop when both Annuitants have
died.
Option 4: Period Certain Only. Periodic payments are made over a specified
period. You may choose to have payments continue from 7 through 30
years (in full years only). If the Annuitant dies before the
guaranteed payments are completed, we pay to the Owner the remainder
of the guaranteed payments, if living; if not to the Beneficiary, if
living; if not to the Owner's estate.
DEFAULT ANNUITY DATE AND OPTIONS - If you did not choose an Annuity Date when
you submitted your application for this Contract, your Annuity Date is the
Annuitant's 95th birthday. If there are Joint Annuitants, the Annuity Date will
be based on the younger Annuitant's birthday, unless otherwise required by law.
If you do not elect an Annuity Option, your Net Contract Value, and any charge
for premium taxes and/or other taxes, when converted, will, subject to our
minimum requirements, be converted as follows:
. the net amount from your Fixed Option Value will be converted to a fixed
annuity and held in our General Account, and
. the net amount from your Variable Account Value will be applied to a
variable annuity and applied to the Subaccounts in proportion to your
Account Value in each Subaccount on the Annuity Date.
25
<PAGE>
If this is a Non-Qualified Contract, or a Qualified Contract and you are not
married, your Annuity Option will be Life with 10 Year Period Certain. If this
is a Qualified Contract and you are married, your Annuity Option will be Joint
and Survivor Life, with survivor payments of 50%, and your spouse will
automatically be named as the secondary Annuitant. If you do not elect your
frequency of payments, we will make payments based on our most frequent schedule
that results in an initial annuity payment of at least $250.
AMOUNT OF PAYMENTS - The first annuity payment amount depends on the form of
annuity, the payment frequency you select, and whether you select a fixed
annuity and/or a variable annuity. If you do not choose the Period Certain Only
Option, the amount will depend on the Age of the Annuitant(s), the Annuity Date,
and the sex of the Annuitant(s), unless unisex factors apply.
FIXED ANNUITY PAYMENTS - The minimum guaranteed income purchased per $1,000 of
the net amount applied to a fixed annuity is based on an annual interest rate of
3% and the 1983a Mortality Table with the ages set back ten (10) years.
CONVERSION TO CURRENT RATES - The annuity payments made will be based on the
greater of:
. our current income factors in effect for this Contract on your Annuity
Date; or
. our guaranteed income factors.
The dollar amount of any payments after the first annuity payment is specified
during the annuity payment period according to the provisions of your elected
Annuity Option.
VARIABLE ANNUITY PAYMENTS - Your Subaccount Annuity Units. For each Subaccount,
we divide the amount of the initial variable annuity payment from each
Subaccount by the Annuity Unit Value for that Subaccount (the "Annuity Unit
Value") on the Annuity Date, to obtain the number of Annuity Units for that
Subaccount. The number of your Annuity Units in each Subaccount will not change
unless exchanges of Annuity Units are made (or if the Joint and Survivor Annuity
Option is elected and the Primary Annuitant dies first), but the Annuity Unit
Value of those Annuity Units will vary.
Your Subsequent Variable Payments. The amount of each subsequent variable
annuity payment will be the sum of the amounts payable based on your Annuity
Units in each Subaccount. To determine the amount payable for each Subaccount,
we multiply the number of your Annuity Units in that Subaccount by their Annuity
Unit Value on the day in each payment period that corresponds to the Annuity
Date.
Annuity Unit Value - The initial Annuity Unit Value for each Subaccount was
arbitrarily set at $10 on the Business Day the Subaccount began operations. At
the end of each subsequent Business Day, the Annuity Unit Value for each
Subaccount is equal to (A x B) x C where:
(A) is the Subaccount's Annuity Unit Value for that Subaccount as of the
end of the prior Business Day;
(B) is the Net Investment Factor for that Subaccount for that valuation
period; and
(C) is an interest factor to offset the effect of the assumed investment
return which is built into the Annuity Option Tables.
We generally calculate the Annuity Unit Value of each Subaccount on each day the
New York Stock Exchange is open, provided our Annuities administrative offices
are also open that day.
We guarantee that the amount of each subsequent annuity payment will not be
affected by variations in our expenses or in mortality experience.
26
<PAGE>
Periodic Payments - The first payment under these Options will be determined on
the Annuity Date and will be made on the day following the Annuity Date. For a
Beneficiary entitled to a death benefit due to the death of the Annuitant, the
first payment will be made on the first day of the calendar month, or earlier at
our option, next following the day we receive due proof of the Annuitant's death
and instructions regarding payment, (called the "Payment Start Date"), and such
other documentation as we may require. Subsequent payments will be determined on
the day in each payment period that corresponds to the Payment Start Date and
will be made on the following day.
27
<PAGE>
ANNUITY OPTION TABLES
For the fixed Annuity Option and the initial variable annuity benefit, the
Tables below illustrate the minimum guaranteed monthly income purchased per
$1,000 of the net amount applied. The actuarial basis for the fixed Annuity
Option Tables is the 1983a Annuity Mortality Table with the ages set back ten
(10) years with interest at an annual rate of 3%. The Tables also illustrate the
minimum rates for the first monthly variable annuity payment per $1,000 of the
net amount applied to the variable annuity payment option. The rates for
variable annuity payments are based on an assumed investment return of 5% per
year and the 1983a Annuity Mortality Table with the ages set back ten (10)
years. Subsequent payments may be higher or lower than the first payment, based
on the investment performance of the Subaccount(s) you elect and whether you
exchange Subaccount Annuity Units.
These Tables provide for sex-distinct and unisex payment income factors for life
payment options. For some Qualified Plans and in some states, the use of sex-
distinct income factors are prohibited. For those Qualified Plans and in those
states, we use blended unisex income factors for life payment options, whether
the Annuitant is male or female.
We will provide rates for any payment frequency, interest rate, Age or sex,
combinations thereof, and/or payout percentage or any Annuity Option, if
applicable, that we offer if they are not shown in the Tables that follow.
28
<PAGE>
OPTIONS 1 AND 2 - SINGLE LIFE ANNUITIES WITH GUARANTEED PAYMENTS FOR:
<TABLE>
<CAPTION>
FIXED ANNUITY RATES
- -----------------------------------------------------------------------------------------
MALE AT 3% FEMALE AT 3% UNISEX AT 3%
----------------------- ----------------------- -----------------------
Age NONE 10 YR. 20 YR. NONE 10 YR. 20 YR. NONE 10 YR. 20 YR.
--- ----- ------ ------ ----- ------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30 3.04 3.03 3.03 2.93 2.93 2.93 2.99 2.98 2.98
35 3.14 3.14 3.13 3.02 3.02 3.01 3.08 3.08 3.07
40 3.28 3.27 3.26 3.13 3.12 3.12 3.20 3.20 3.19
45 3.44 3.44 3.41 3.26 3.26 3.24 3.35 3.35 3.33
50 3.66 3.64 3.60 3.42 3.42 3.40 3.54 3.54 3.50
55 3.93 3.90 3.82 3.63 3.63 3.59 3.78 3.77 3.71
60 4.27 4.22 4.08 3.90 3.89 3.82 4.09 4.06 3.96
65 4.70 4.62 4.39 4.25 4.22 4.11 4.48 4.43 4.25
70 5.28 5.14 4.71 4.72 4.66 4.44 5.00 4.90 4.58
75 6.10 5.81 5.02 5.35 5.22 4.79 5.73 5.52 4.92
80 7.23 6.61 5.27 6.25 5.96 5.12 6.74 6.30 5.20
85 8.82 7.49 5.42 7.56 6.89 5.35 8.18 7.20 5.39
90 11.06 8.33 5.49 9.53 7.89 5.47 10.28 8.12 5.48
95 14.16 8.97 5.51 12.48 8.74 5.50 13.30 8.86 5.51
</TABLE>
VARIABLE ANNUITY RATES
<TABLE>
<CAPTION>
MALE AT 5% FEMALE AT 5% UNISEX AT 5%
-------------------- --------------------- ---------------------
None 10 YR. 20 YR. NONE 10 YR. 20 YR. NONE 10 YR. 20 YR.
---- ----- ------ ---- ------ ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30 4.38 4.37 4.36 4.29 4.29 4.29 4.34 4.33 4.33
35 4.46 4.46 4.44 4.36 4.35 4.35 4.41 4.41 4.40
40 4.57 4.56 4.54 4.44 4.44 4.42 4.51 4.50 4.49
45 4.71 4.70 4.67 4.55 4.54 4.52 4.63 4.62 4.60
50 4.91 4.89 4.82 4.69 4.68 4.65 4.80 4.78 4.74
55 5.16 5.12 5.02 4.87 4.86 4.81 5.02 4.99 4.92
60 5.48 5.41 5.24 5.12 5.09 5.01 5.30 5.26 5.13
65 5.89 5.79 5.51 5.44 5.40 5.26 5.67 5.60 5.39
70 6.46 6.28 5.80 5.89 5.80 5.55 6.18 6.05 5.68
75 7.27 6.91 6.08 6.51 6.34 5.87 6.89 6.64 5.98
80 8.41 7.68 6.29 7.39 7.05 6.16 7.90 7.38 6.23
85 10.02 8.52 6.43 8.72 7.93 6.37 9.36 8.24 6.40
90 12.29 9.30 6.49 10.71 8.88 6.47 11.49 9.10 6.48
95 15.42 9.90 6.51 13.70 9.68 6.50 14.55 9.80 6.51
</TABLE>
29
<PAGE>
OPTION 3 - JOINT AND 50% SURVIVOR LIFE
PRIMARY ANNUITANT
MALE AGE
<TABLE>
<CAPTION>
60 65 70 75 80
3% 5% 3% 5% 3% 5% 3% 5% 3% 5%
Fixed VARIABLE FIXED VARIABLE FIXED VARIABLE FIXED VARIABLE FIXED VARIABLE
----- -------- ----- -------- ----- -------- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
60 3.91 5.12 4.13 5.34 4.39 5.60 4.69 5.92 5.02 6.30
FEMALE 65 3.99 5.19 4.25 5.43 4.54 5.73 4.88 6.09 5.26 6.51
Age 70 4.06 5.25 4.36 5.53 4.70 5.87 5.10 6.27 5.55 6.75
75 4.12 5.31 4.46 5.62 4.85 6.00 5.32 6.47 5.86 7.03
80 4.17 5.36 4.54 5.70 4.98 6.13 5.54 6.67 6.18 7.33
85 4.21 5.40 4.60 5.77 5.09 6.24 5.72 6.86 6.49 7.63
</TABLE>
<TABLE>
<CAPTION>
85
3% 5%
FIXED VARIABLE
----- --------
<S> <C> <C>
5.38 6.73
FEMALE 5.67 6.98
Age 6.03 7.29
6.45 7.66
6.91 8.08
7.40 8.54
</TABLE>
PRIMARY ANNUITANT
UNISEX AGE
<TABLE>
<CAPTION>
60 65 70 75 80
3% 5% 3% 5% 3% 5% 3% 5% 3% 5%
Fixed VARIABLE FIXED VARIABLE FIXED VARIABLE FIXED VARIABLE FIXED VARIABLE
----- -------- ----- -------- ----- -------- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
60 3.84 5.05 4.07 5.27 4.34 5.54 4.65 5.86 5.00 6.24
UNISEX 65 3.90 5.10 4.17 5.35 4.47 5.65 4.83 6.01 5.23 6.44
Age 70 3.96 5.15 4.25 5.43 4.60 5.76 5.02 6.17 5.49 6.66
75 4.00 5.19 4.32 5.49 4.72 5.87 5.20 6.34 5.76 6.91
80 4.03 5.23 4.38 5.55 4.81 5.96 5.36 6.49 6.02 7.15
85 4.05 5.25 4.42 5.59 4.88 6.04 5.49 6.62 6.25 7.38
</TABLE>
<TABLE>
<CAPTION>
85
3% 5%
FIXED VARIABLE
----- --------
<S> <C> <C>
5.39 6.69
UNISEX 5.68 6.94
Age 6.03 7.24
6.41 7.58
6.81 7.96
7.20 8.33
</TABLE>
<TABLE>
<CAPTION>
OPTION 4 - PERIOD CERTAIN ONLY
MONTHLY MONTHLY MONTHLY MONTHLY
INCOME INCOME INCOME INCOME
3% 5% 3% 5% 3% 5% 3% 5%
Years Fixed Variable YEARS FIXED VARIABLE YEARS FIXED VARIABLE YEARS FIXED VARIABLE
- ------------------------------ ------------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7 13.16 14.02 12 8.24 9.16 19 5.73 6.71 26 4.59 5.65
8 11.68 12.56 13 7.71 8.64 20 5.51 6.51 27 4.47 5.54
9 10.53 11.42 14 7.26 8.20 21 5.32 6.33 28 4.37 5.45
10 9.61 10.51 15 6.87 7.82 22 5.15 6.17 29 4.27 5.36
11 8.86 9.77 16 6.53 7.49 23 4.99 6.02 30 4.18 5.28
17 6.23 7.20 24 4.84 5.88
18 5.96 6.94 25 4.71 5.76
</TABLE>
30
<PAGE>
____________________________________________________________________
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
. Investment Experience Reflected in Benefits
. Variable and Fixed Accumulation Before Annuity Date; Variable
and Fixed Annuity Payments Thereafter
. Death Benefit Proceeds Payable Before Annuity Date
. Non-Participating
<PAGE>
EXHIBIT 99.4 (b)
Qualified Pension Plan Rider
<PAGE>
QUALIFIED PENSION PLAN RIDER
This rider is a part of the Contract to which it is attached by PL.
The Contract is hereby modified as specified below in order to comply with the
requirements for Qualified Pension and Profit Sharing Plans, as described in
Section 401(a)(9) of the Internal Revenue Code of 1986 (The Code) as amended.
THE PROVISIONS OF SECTIONS 1-9 OF THIS RIDER SHALL TAKE EFFECT ONLY IF THE
ANNUITANT IS, OR BECOMES, THE OWNER.
DEFINITIONS
ANNUITANT - is the individual named to receive periodic annuity payments
purchased under this Contract.
ANNUITY START DATE - is the date you choose to have PL begin periodic annuity
payments to the Annuitant. The Annuity Start Date may be no later than April 1
of the calendar year following the year in which the Annuitant reaches age
70 1/2.
DESIGNATED BENEFICIARY - is any individual designated as a beneficiary under the
Plan by the Annuitant. If a person other than an individual (but not a trust
that satisfies the conditions stated in 1.401(a)(9)-1 of the Code) is designated
a Beneficiary, or if the plan permits any person to change the Annuitant's
beneficiaries after his or her death, other than a designation made by the
surviving spouse for distributions after the spouse's death, the Annuitant will
be treated as having no Designated Beneficiary.
PLAN - means the qualified employee benefit plan under which this Contract is
issued.
The provisions of this rider will control if in conflict with those of the
Contract. Notwithstanding any provisions of the Contract to the contrary:
1. Automatic Form of Payment at the Annuity Start Date.
If the Annuitant is legally married at the Annuity Start Date, unless an
optional form of benefit is selected in accordance with Section 2 below,
payments will be made in the form of a Joint and 50% Survivor Annuity, with the
Annuitant's spouse as the joint annuitant. Under this form, payments will be
made during the lifetime of the Annuitant and, following the Annuitant's death,
payments equal to 50% of the original payment amount will continue to the spouse
for life. The Annuitant may choose without the consent of any other individual,
from the options offered by PL, the amount of the payment continuing to the
Annuitant's spouse. The amount of each payment to the spouse will be not less
than one half of, nor greater than, the periodic annuity benefit paid to the
Annuitant.
If the Annuitant is not legally married at the Annuity Start Date, payments will
be made in the form of a life annuity with a 10 year period certain unless an
optional form of payment is selected in
<PAGE>
accordance with Section 2 below. Under this form, payments will be made to the
Annuitant for life. If the Annuitant dies before the end of the Guaranteed
Period, payments will continue to the Designated Beneficiary until the end of
the Guaranteed Period.
2. Optional Forms of Annuity Payment.
The Annuitant can elect an optional form of payment as provided in the Contract,
provided:
(a) the Annuitant files a Qualified Election with the Company within the 90 day
period ending on the date income commences;
(b) the form selected ensures that the present value of payments PL expects to
pay over the lifetime of the Annuitant is not less than 51% of the present value
of all payments we expect to make under the Contract. To determine whether 51%
of the present value of benefits will be paid during the Annuitant's lifetime,
his or her life expectancy will be measured from either the Annuitant's Normal
Retirement Date, or the actual retirement date, whichever is later, but in no
event later than the Annuity Start Date; and
(c) the option selected satisfies the requirements of Section 4 below.
Life expectancies will be calculated using the expected return multiples
contained in Section 1.72 9 of the Income Tax Regulations.
3. Qualified Election
In the case of a married Annuitant, "Qualified Election" means a written
statement by the Annuitant waiving the Joint and Survivor Annuity option and
specifying the form of payment desired, and a written statement from the spouse
consenting to the Annuitant's election. The form of payment chosen cannot be
changed without spousal consent unless the spouse consents to future
designations by the Annuitant without spousal consent. The spouse's consent
must be witnessed by a notary public. If the spouse's consent cannot be
obtained because the spouse cannot be located, the Annuitant's election will
still be deemed to be a Qualified Election.
In the case of an unmarried Annuitant, "Qualified Election" means a written
statement by the Annuitant attesting to the fact that he or she is not married,
and which specifies the optional form of payment desired.
4. Required Beginning Date and Minimum Distribution Requirements
In accordance with the requirements of the Code, distribution of the entire
interest should be made not later than the April 1 following the close of the
calendar year in which the Annuitant attains age 70 1/2. (The Required
Beginning Date.)
Alternatively, if distribution of the entire interest commences not later than
the Required Beginning Date, such distribution may be made in equal or
substantially equal amounts, in annual or more
<PAGE>
frequent installments, over
(a) the Annuitant's life or the lives of the Annuitant and his or her Designated
Beneficiary, or
(b) a period not extending beyond the Annuitant's life expectancy or the joint
and last survivor life expectancy of the Annuitant and his or her Designated
Beneficiary.
The method of distribution selected must also meet the "minimum distribution
incidental benefit" rule of Code Section 401(a)(9) and Regulation Section
1.401(a)(9)-2 of the Code. This requires that:
(a) where the Annuitant's only Designated Beneficiary is the spouse, the minimum
amount that must be distributed in a distribution calendar year is the amount
determined under the regular minimum distribution requirements above in this
Section 4.
(b) where payments are to be made under an annuity Contract purchased on or
before the Annuitant's Required Beginning Date and the Annuitant's spouse is not
the Designated Beneficiary, the minimum amount that must be distributed is
determined as follows:
- - Period certain annuity without a life contingency: The period certain may not
exceed the appropriate joint and last survivor expectancy described in
Regulation Section 1.401(a)(9)-2 of the Code.
- - Life annuity: A life annuity on the Annuitant's life which satisfies the
regular minimum distribution requirements satisfies the "minimum distribution
incidental benefit" rule.
- - Joint and survivor annuity: The periodic annuity payment to the survivor under
a joint and survivor annuity, may not exceed the applicable percentage of the
annuity payment to the Annuitant. These percentages are defined in Regulation
Section 1.401(a)(9)-2.
- - Life annuity with period certain: The distribution must satisfy the
requirements for a single life (or joint and survivor) annuity as well as for a
period certain annuity without a life contingency.
Only a method of distribution offered by PL that satisfies these conditions can
be selected. You must make this selection before the end of the calendar year
in which you attain age 70 1/2.
5. Beneficiary for Death Benefit Proceeds Prior to Annuity Start Date
If the Annuitant dies prior to the Annuity Start Date and is married at the date
of death, the Death Benefit Proceeds will be paid to the surviving spouse,
unless the Annuitant names another beneficiary and the spouse consents in
writing to such designation. The spouse's consent must be witnessed by a notary
public. For this purpose, the consent of an individual who was married to the
Annuitant at the time consent was given but is not married to the Annuitant at
the date of death will not be considered the consent of the spouse.
If the Annuitant is not legally married at the date of death, or designates (as
provided above)
<PAGE>
someone other than the spouse as beneficiary, the Death Benefit Proceeds shall
be paid to the Designated Beneficiary.
6. Payment of Death Benefit
On the death of the Annuitant, payment shall be made in accordance with the
Annuity option provisions described in the Contract or as provided for by the
Plan. However, selection of an annuity option that does not satisfy the
conditions of this Section 6 shall not be permitted.
(a) Death Before the Annuity Start Date
If the Annuitant dies before distribution of his or her interest in the Contract
commences, the entire interest must be distributed by December 31st of the fifth
full year which follows the Annuitant's death unless (i) such interest is paid
in equal or substantially equal installments over a period not exceeding the
lifetime or life expectancy of the Designated Beneficiary, and (ii) payments
begin by December 31st of the calendar year which follows the Annuitant's death.
If the Designated Beneficiary of the Annuitant is the Annuitant's surviving
spouse, the spouse may elect to receive equal or substantially equal payments
over the life or life expectancy of the surviving spouse commencing at any date
prior to the close of the calendar year in which the deceased Annuitant would
have attained age 70 1/2, if later. The surviving spouse may accelerate these
payments at any time, i.e., increase the frequency or amount of such payments.
However, if the spouse elects to receive the entire interest as a lump sum, such
amount must be received by December 31st of the fifth full year which follows
the Annuitant's death.
If the surviving spouse dies before payments begin, subsequent distributions
shall be made as if the spouse had been the Annuitant. In such event, the rules
in this Section 6 apply using the date of death of the surviving spouse rather
than that of the Annuitant.
(b) Death After the Annuity Start Date
If the Annuitant dies after distribution of his or her interest in the plan has
commenced, the remaining interest will be distributed at least as rapidly as
under the method of distribution in effect at the time of the Annuitant's death.
7. Withdrawal or Loan of Annuity Value Before the Annuity Start Date
If the Annuitant is married, withdrawal or loan of all or a portion of the
annuity value prior to the Annuity Start Date will be permitted subject to the
consent of the spouse. Such consent must be in writing and must be witnessed by
a notary public.
If the Annuitant is not married, withdrawal will be permitted subject to written
notice to PL that the Annuitant is not married. The Term Annuity Value as used
in this rider shall mean the appropriate value described in the Contract that
the Contract Owner is entitled to withdraw or borrow.
8. Nontransferable
<PAGE>
No benefits under this Contract may be transferred, sold, alienated, assigned,
discounted, subject to garnishment or execution, or pledged as collateral for a
loan, or as security for the performance of an obligation or for any other
purpose, to any person other than to PL, except as may be provided by a
Qualified Domestic Relations Order within the meaning of Section 414 of the
Code.
9. Change of Annuitant
The Owner shall not be permitted to change the Annuitant.
10. Trustee Owned Contracts
While this Contract is owned by the trustee of a plan described in section
401(a) of the Code, the Death Before the Annuity Start Date provision of Section
6 may not apply.
11. Amendment
PL reserves the right to amend this rider to comply with future changes in the
Internal Revenue Code and any regulations or rulings issued under the provisions
of the Code. PL shall provide the Owner of the Contract with a copy of any such
amendment.
PACIFIC LIFE INSURANCE COMPANY
Thomas C Sutton Audrey L. Milfs
Chairman and Chief Executive Officer Secretary
R90-PEN-V
<PAGE>
EXHIBIT 99.4(c)
403(b) Tax-Sheltered Annuity Rider
<PAGE>
403 (B) TAX-SHELTERED ANNUITY RIDER
This rider is a part of the Contract to which it is attached by PL.
The contract under which it has been issued is hereby modified as specified
below in order to qualify as a Tax-Sheltered Annuity ("TSA") under Section
403(b) of the Internal Revenue Code of 1986, as amended (the "Code").
The provisions of this rider will take precedence over any contrary provisions
of the Contract.
DEFINITIONS
ANNUITANT -- is the individual named to receive periodic annuity payments
purchased under this Contract. The Annuitant will at all times be the Owner of
this Contract.
ANNUITY START DATE -- is the date you choose to have PL begin periodic annuity
payments to the Annuitant. The Annuity Start Date may be no later than April 1
of the calendar year following the year in which the Annuitant reaches Age
70 1/2.
CONTINGENT ANNUITANT -- is the individual who becomes the Annuitant if the
Annuitant dies before periodic annuity payments begin under this Contract. Only
the spouse of the Annuitant may be named the Contingent Annuitant.
CONTINGENT OWNER -- is the individual who becomes the Owner if the Owner dies
before periodic annuity payments begin under this Contract. Only the spouse of
the Owner may be named the Contingent Owner.
DESIGNATED BENEFICIARY -- is the individual designated as a beneficiary by the
Owner.
TAX-SHELTERED ANNUITY PROVISIONS
To ensure treatment as a TSA, this Contract will be subject to the requirements
of Code Section 403(b), which are briefly summarized below:
1. The Owner's rights under this Contract shall be nonforfeitable except
for failure to pay future premiums.
2. The Contract may not be transferred, sold, assigned, or pledged as
collateral for a loan, or as security for the performance of an
obligation, or for any other purpose, to any person other than PL.
3. Premiums paid pursuant to a salary reduction agreement and applied to
this Contract under a "plan" (within the meaning of Code Section
403(b)) are subject to the annual limitation on "elective deferral"
contributions under Section 401(a)(30) of the Code. Such amount is
periodically adjusted for inflation.
4. Premiums applied to this Contract which exceed the applicable
"exclusion allowance" (within the meaning of Code Section 403(b)(2))
shall not be excludable from gross income.
5. Except if this Contract is purchased by a "church" (within the meaning
of Code Section 3121(w)), if this Contract is purchased under a "plan"
(within the meaning of Code Section 403(b)), the "plan" must satisfy
the nondiscrimination requirements of Code Section 403(b)(12).
<PAGE>
6. Distributions attributable to premiums made pursuant to a salary
reduction agreement may be made only when the Owner attains age
59 1/2, separates from service, dies, becomes "disabled" (within the
meaning of Code Section 72(m)(7)) or incurs a hardship. A distribution
made due to a hardship may not include income attributable to such
premiums.
7. Distributions from this Contract must comply with the minimum
distribution and incidental death benefit rules of Code Section
401(a)(9). Accordingly, the entire interest under the Contract must be
distributed:
(a) not later than the April 1 next following the close of the
calendar year in which the Owner attains age 70 1/2 (the "Required
Beginning Date"), or
(b) commencing not later than the Required Beginning Date over the
life of the Owner or over the lives of the Owner and his or her
Designated Beneficiary (or over a period not extending beyond the life
expectancy of the Owner or the life expectancy of the Owner and his or
her Designated Beneficiary).
In addition, if the Owner dies before distribution of his or her
interest in the Contract has begun in accordance with paragraph (b)
above, the Owner's entire interest must be distributed within five
years, unless (i) such interest is distributed to a Designated
Beneficiary over his or her life (or over a period not extending
beyond such Designated Beneficiary's life expectancy) and (ii) such
distribution begins not later than one year after the Owner's death.
If the Designated Beneficiary is the Owner's surviving spouse, the
date on which the distributions are required to begin shall not be
earlier than the date on which the Owner would have attained age
70 1/2.
If the Owner dies after distribution of his or her interest in the
Contract has begun in accordance with paragraph (b) above but before
his or her entire interest has been distributed, the remaining
interest will be distributed at least as rapidly as under the method
of distribution being used prior to the Owner's death.
All distributions must comply with a method of distribution offered by
PL under this Contract. In addition, all minimum distributions
required under Code Section 401(a)(9) must comply with the proposed
Treasury Regulation section 1.403(b)-2.
8. If the Owner or Annuitant receives a distribution from this Contract
that qualifies as an "eligible rollover distribution" (within the
meaning of Code Section 402(f)(2)(A)) and elects to have such
distribution paid directly to an "eligible retirement plan" (within
the meaning of Code Section 402(c)), such distribution shall be made
in the form of a direct transfer to the eligible retirement plan. PL
may establish reasonable administrative rules applicable to such
direct transfers.
MISCELLANEOUS PROVISIONS
1. PL reserves the right to amend this rider to comply with future
changes in the Code and any regulations or rulings issued thereunder.
PL shall provide the Owner with a copy of any such amendment.
PACIFIC LIFE INSURANCE COMPANY
R-403B-9553
<PAGE>
EXHIBIT 99.4(d)
Section 457 Plan Rider
<PAGE>
EXHIBIT 99.4(d)
SECTION 457 PLAN RIDER
This rider is part of the Contract to which it is attached by PL.
The Contract to which this rider is attached is hereby modified as specified
below in order that it may be utilized under the deferred compensation plan of a
State or local government or tax-exempt organization established under Section
457 of the Internal Revenue Code of 1986, as amended (the "Code").
The provisions of this rider will take precedence over any contrary provisions
of the Contract.
Definitions
Annuity Start Date -- is the date you chose to have PL begin periodic annuity
payments to the Annuitant. The Annuity Start Date may be no later than April 1
of the calendar year following the year in which the Annuitant reaches age 70
1/2.
Owner -- means the State, political subdivision of a State, any agency or
instrumentality of a State or political subdivision of a State or other
organization exempt from tax under Subtitle A of the Code (other than a "church"
or "qualified church-controlled organization" as defined in Code Section
3121(w)(3)) that has purchased this Contract. The Owner shall control this
Contract and may exercise all contractual rights hereunder.
Section 457 Plan Provisions
This Contract shall be subject to the requirements of Code Section 457, which
are briefly summarized below:
1. This Contract may only be purchased under an "eligible deferred compensation
plan" (within the meaning of Code Section 457(b)) that has been established
and maintained by a State, political subdivision of a State, any agency or
instrumentality of a State or a political subdivision of a State or any other
organization exempt from tax under Subtitle A of the Code (other than a
"church" or "qualified church-controlled organization" as defined in Code
Section 3121(w)(3)).
2. All amounts of compensation deferred under an "eligible deferred compensation
plan" (within the meaning of Code Section 457(b)), all property and rights
purchased with such amounts and all income attributable to such amounts,
property or rights shall remain (until made available to the Annuitant or
other Beneficiary) solely the property and rights of the Owner (without being
restricted to the provision of benefits under the plan), subject only to the
claims of the Owner's general creditors.
3. Only individuals who perform service for the Owner, either as an employee of
the Owner or as an independent contractor, may participate under the
"eligible deferred compensation plan" (within the meaning of Code Section
457(b)).
4. Premiums applied to this Contract may not exceed the maximum deferral amount
permitted under Code Section 457(b)(2) and (3) or Code Section 457(c).
5. Premiums paid pursuant to a salary reduction agreement may be applied to this
Contract for any calendar month only if an agreement providing for such
salary reduction was entered into before the beginning of such month.
However, with respect to a new employee of the Owner, premiums may be paid
for the calendar month during which the individual first becomes an employee,
if a salary reduction agreement is entered into on or before the first day on
which the individual becomes an employee.
6. Distributions shall not be made under this Contract earlier than (i) the
calendar year in which the Annuitant attains age 70 1/2, (ii) when the
Annuitant is separated from service with the Owner, or
<PAGE>
(iii) when the Annuitant is faced with an "unforeseeable emergency" (within
the meaning of Treasury Regulation Section 1.457-2(h)).
7. Distributions from this Contract must comply with the minimum distribution
rules of Code Section 401(1)(9), including the incidental death benefit rule
of Code Section 401(a)(9)(G). Accordingly, the entire interest under the
Contract must be distributed:
(a) not later than April 1 next following the close of the calendar year in
which the Annuitant attains age 70 1/2 (the "Required Beginning Date"),
or
(b) commencing not later than the Required Beginning Date over the life of
the Annuitant or over the lives of the Annuitant and his or her
Beneficiary (or over a period not extending beyond the life expectancy of
the Annuitant or the life expectancy of the Annuitant and his or her
Beneficiary).
In addition, if the Annuitant dies before distribution of his or her interest
in the Contract has begun in accordance with paragraph (b) above, the
Annuitant's entire interest must be distributed within five years, unless (i)
such interest is distributed to a Beneficiary over his or her life (or over a
period not extending beyond such Beneficiary's life expectancy) and (ii) such
distribution begins not later than one year after the Annuitant's death. If
the Beneficiary is the Annuitant's surviving spouse, the date on which the
distributions are required to begin shall not be earlier than the date on
which the Owner would have attained age 70 1/2. However, in all cases where
the Annuitant dies before distribution of his or her interest in the Contract
has begun, the Annuitant's entire interest must be paid over a period not to
exceed 15 years (or the life expectancy of the surviving spouse if such
spouse is the Beneficiary).
If the Annuitant dies after distribution of his or her interest in the
Contract has begun in accordance with paragraph (b) above but before his or
her entire interest has been distributed, the remaining interest will be
distributed at least as rapidly as under the method of distribution being
used prior to the Annuitant's death.
All distributions must comply with a method of distribution offered by PL
under this Contract.
8. Distributions from this Contract payable over a period of more than one year
shall be made in substantially nonincreasing amounts (paid not less
frequently than annually).
Miscellaneous Provisions
1. PL reserves the right to amend this rider to comply with future changes in
the Code and any regulations or rulings issued thereunder. PL shall
provide the Owner with a copy of any such amendment.
PACIFIC LIFE INSURANCE COMPANY
R-95-457
<PAGE>
EXHIBIT 99.4(e)
IRA Rider (Form R-IRA 198)
<PAGE>
EXHIBIT 99.4(e)
[LOGO OF PACIFIC LIFE]
INDIVIDUAL RETIREMENT ANNUITY RIDER
This rider is a part of the Contract to which it is attached by Pacific Life
Insurance Company ("PL").
The Contract under which it has been issued is hereby modified as specified
below in order to qualify as an Individual Retirement Annuity under the terms of
the Internal Revenue Code of 1986 (the "Code") as amended.
Definitions
Annuitant - is the individual named to receive periodic annuity payments
purchased under this Contract.
Annuity Start Date - is the date you choose to have PL begin periodic annuity
payments to the Annuitant. The Annuity Start Date may be no later than April 1
of the calendar year following the year in which the Annuitant reaches age 70
1/2.
Contingent Annuitant - is the individual who becomes the Annuitant if the
Annuitant dies before periodic annuity payments purchased under this Contract
begin. Only the spouse of the Annuitant may be named the Contingent Annuitant.
Contingent Owner - is the individual who becomes the Owner if you die before
periodic annuity payments purchased under this Contract begin. Only the spouse
of the Annuitant may be named the Contingent Owner.
Designated Beneficiary - is the individual designated as a beneficiary by the
Annuitant.
The provisions of this rider will control if in conflict with those of the
Contract. Notwithstanding any provisions in the Contract to the contrary:
1. The Annuitant will at all times be the Owner of the Contract. The Owner's
rights under the Contract shall be nonforfeitable and for the exclusive
benefit of the Owner and his or her beneficiaries.
2. No benefits under the Contract may be transferred, sold, assigned, or
pledged as collateral for a loan, or as security for the performance of an
obligation, or for any other purpose, to any person; except that the Contract
may be transferred to a former spouse of the Owner under a divorce decree or
written instrument incident to such divorce. In the event of such transfer,
the transferee shall for all purposes be treated as the Owner under this
Contract.
3. No contribution will be accepted under a SIMPLE plan established by an
employer pursuant to Code section 408(p). No transfer or rollover of funds
attributable to contributions made by a particular employer under its SIMPLE
plan will be accepted from a SIMPLE IRA, that is, an IRA used in conjunction
with a SIMPLE plan, prior to the expiration of the 2-year period beginning on
the date the individual first participated in that employer's SIMPLE plan.
R-IRA 198 1
<PAGE>
4. Except in the case of "rollover contribution" as described in Sections
402(a)(5), 402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8) or 408(d)(3) of the
Code, or an employer contribution to a Simplified Employee Pension as defined
in Section 408(k) of the Code, the Purchase Payments (or premium) paid under
this Contract shall not exceed $2,000 for any taxable year, or such other
maximum as the Code may allow, and must be paid in cash.
5. Additional Purchase Payments (or premium payments) under the Contract must
be at least the minimum as stated in the Purchase Payment (or Premium)
provision of the Contract.
6. If this Contract is issued as part of a Simplified Employee Pension, the
Purchase Payment (or premium) paid under this Contract shall not exceed
$30,000 or 15% of your allowable compensation, whichever is less, or such
other maximum as the Code may allow, and must be paid in cash.
7. Any Purchase Payment (or premium) refund declared by PL, other than refunds
attributable to excess contributions will be applied toward the purchase of
additional benefits before the close of the calendar year following the
refund.
8. In accordance with Regulations prescribed by the Secretary of the Treasury,
or his delegate pursuant to the Code ("Regulations"), the entire interest
under the Contract must be distributed to the Owner:
(a) Not later than the April 1st next following the close of the calendar
year in which the Owner attains age 70-1/2 (the "Required Beginning
Date"), or
(b) Commencing not later than the Required Beginning Date in equal or
substantially equal amounts, in annual or more frequent installments,
over:
(i) the Owner's life or the lives of the Owner and his or her
Designated Beneficiary; or
(ii) a period not exceeding the Owner's life expectancy or the joint and
last survivor life expectancy of the Owner and his or her
Designated Beneficiary.
(c) If the Owner's entire interest is to be distributed in other than a lump
sum, then the amount to be distributed each year, commencing with the
Required Beginning Date and then for each succeeding calendar year, shall
not be less than the quotient obtained by dividing the Owner's entire
interest by the lesser of:
(i) the applicable life expectancy; or
(ii) if the Owner's spouse is not the Designated Beneficiary, the
applicable divisor determined from the table set forth in Q&A-4 of
Section 1.401(a)(9)-2 of the proposed Income Tax Regulations.
Distributions after the death of the Owner shall be calculated
using the applicable life expectancy as the relevant divisor
without regard to the proposed Regulation Section 1.401(a)(9)-2.
The preceding paragraph shall not apply if distribution is in the form of
an annuity with non-increasing payments.
Life expectancy is computed by use of the expected return multiples in Tables
V and VI of Section 1.72-9 of the Income Tax Regulations. Unless otherwise
elected by the Owner by
R-IRA 198 2
<PAGE>
the time distributions are required to begin, life expectancy shall be
recalculated annually. Such election shall be irrevocable as to the Owner and
shall apply to all subsequent years. The life expectancy of a non-spouse
Beneficiary may not be recalculated. Instead, life expectancy will be
calculated using the attained age of such Beneficiary during the calendar
year in which distributions are required to begin pursuant to this section,
and payments for subsequent years shall be calculated based on such life
expectancy reduced by one for each calendar year which has elapsed since the
calendar year life expectancy was first calculated.
(d) If the Owner's spouse is not the Designated Beneficiary, the form of
Annuity elected must assure that at least 50% of the value of the
Contract available for distribution is payable within the Owner's life
expectancy.
(e) The method of distribution shall be made in accordance with the
requirements of Section 401(a)(9) of the Code and the Regulations
thereunder. Further the method selected must meet the "minimum
distribution incidental benefit" rule of Code Section 401(a)(9), and the
proposed Regulation Section 1.401(a)(9)-2. This includes the following:
(i) where the Owner's only Designated Beneficiary is the spouse, the
minimum amount that must be distributed in a distribution calendar
year is the amount determined under the regular minimum
distribution requirements in this Section 8.
(ii) where the distributions are not made as annuity payments under an
annuity contract and where the Owner's spouse is not the Designated
Beneficiary, the minimum amount that must be distributed in a
distribution calendar year is the quotient obtained by dividing the
Owner's entire interest by the joint and last survivor expectancy
described in the proposed Regulation Section 1.401(a)(9)-2.
(iii) where distribution is to be made under an annuity contract
purchased on or before the Owner's Required Beginning Date and the
Owner's spouse is not the Designated Beneficiary, the minimum
amount that must be distributed is determined as follows:
- Period certain annuity without a life contingency: The period certain
may not exceed the appropriate joint and last survivor expectancy
described in the proposed Regulation Section 1.401(a)(9)-2.
- Life annuity or a joint and survivor annuity: A life annuity on the
Owner's life which satisfies the regular minimum distribution requirements
satisfies the "minimum distribution incidental benefit" rule. The periodic
annuity payment to the survivor under a joint and survivor annuity may not
exceed the applicable percentage of the annuity payment to the Owner.
These percentages are defined in the proposed Regulation Section
1.401(a)(9)-2.
- Life annuity with period certain: The distribution must satisfy the
requirements for a single life (or joint and survivor) annuity and the
period certain may not exceed the period determined for non-annuity
distributions.
Only a method of distribution offered by PL that satisfies these conditions
can be selected. You must make this selection before the end of the calendar
year in which you attain age 70-1/2.
R-IRA 198 3
<PAGE>
9. On the death of the Owner, distribution shall be made in accordance with the
annuity options described in the Contract. However, selection of an annuity
option which does not satisfy the conditions of this Section 9 shall not be
permitted.
If the Owner dies before distribution of his or her interest in the Contract
commences, the entire interest should be distributed by December 31st of the
fifth full year which follows the Owner's death unless: (i) such interest is
paid in equal or substantially equal installments over a period not exceeding
the lifetime, or the life expectancy, of the Designated Beneficiary; and (ii)
payments begin by December 31st of the calendar year which follows the
Owner's death.
If the Designated Beneficiary of the Owner is the Owner's surviving spouse,
the spouse may elect to receive equal or substantially equal payments over
the life or life expectancy of the surviving spouse commencing at any date
prior to the later of: (i) December 31 of the calendar year immediately
following the calendar year in which the Owner died; and (ii) December 31 of
the calendar year in which Owner would have attained age 70 1/2. Such
election must be made no later than the earlier of December 31 of the
calendar year containing the fifth anniversary of the Owner's death or the
date distributions are required to begin pursuant to the preceding sentence.
The surviving spouse may accelerate these payments at any time, i.e.,
increase the frequency or amount of such payments.
If the surviving spouse is the Designated Beneficiary, the spouse may convert
this Individual Retirement Annuity to the spouse's own Individual Retirement
Annuity by requesting that he or she be made the Annuitant. If the spouse so
requests, the spouse shall be Owner and Annuitant for purposes of applying
the restrictions contained in this rider.
For purposes of the above, life expectancy is computed by use of the expected
return multiples in Tables V and VI of Section 1.72-9 of the Income Tax
Regulations. For purposes of distributions beginning after the Owner's death,
unless otherwise elected by the surviving spouse by the time distributions
are required to begin, life expectancies shall be recalculated annually. Such
election shall be irrevocable as to the surviving spouse and shall apply to
all subsequent years. In the case of any other Designated Beneficiary, life
expectancies shall be calculated using the attained age of such Beneficiary
during the calendar year in which distributions are required to begin
pursuant to this section, and payments for any subsequent calendar year shall
be calculated based on such life expectancy reduced by one for each calendar
year which has elapsed since the calendar year life expectancy was first
calculated.
Any amount paid to a child of the Owner will be treated as if it had been
paid to the surviving spouse if the remainder of the interest becomes payable
to the surviving spouse when the child reaches the age of majority.
If the Owner dies after distribution of his or her interest in the Contract
has commenced, the remaining interest will be distributed at least as rapidly
as under the method of distribution being used prior to the Owner's death.
If the Owner dies before his or her entire interest has been distributed to
him or her, no additional cash contributions or "rollover contributions"
shall be accepted.
R-IRA 198 4
<PAGE>
10. No one other than the spouse of the Owner may be named as the Contingent
Annuitant and/or the Contingent Owner. If the Owner dies, the Contingent
Annuitant shall be treated as the Annuitant for purposes of applying the
restrictions contained in this rider.
If, despite the restrictions contained in this rider, someone other than the
spouse is named as a Contingent Annuitant, such person shall be treated as
the Primary Beneficiary under the Contract.
11. PL shall furnish annual calendar year reports concerning the status of the
Contract.
12. PL reserves the right to amend this rider to comply with future changes in
the Code and any regulations or rulings and other published guidance issued
under the provisions of the Code or interpretations thereof without consent
(except for the states of Michigan, Pennsylvania, South Carolina and
Washington, where affirmative consent is required). PL shall provide the
Owner of the Contract with a copy of any such amendment.
Pacific Life Insurance Company
/s/ THOMAS C. SUTTON /s/ AUDREY L. MILFS
Chairman and Chief Executive Officer Secretary
R-IRA 198 5
<PAGE>
EXHIBIT 99.4(f)
Roth IRA Rider (Form R-RIRA 198)
<PAGE>
EXHIBIT 99.4(f)
[LOGO OF PACIFIC LIFE]
ROTH INDIVIDUAL RETIREMENT ANNUITY RIDER
This rider is part of the Contract to which it is attached by Pacific Life
Insurance Company ("PL").
The Contract under which it has been issued is hereby modified as specified
below in order to qualify as a Roth Individual Retirement Annuity (Roth IRA)
under the terms of the Internal Revenue Code of 1986 (the "Code") as amended.
Definitions
Annuitant - is the individual named to receive periodic annuity payments
purchased under this Contract.
Annuity Start Date - is the date you choose to have PL begin periodic annuity
payments to the Annuitant.
Contingent Annuitant - is the individual who becomes the Annuitant if the
Annuitant dies before periodic annuity payments purchased under the Contract
begin. Only the spouse of the Annuitant may be named the Contingent Annuitant.
Contingent Owner - is the individual who becomes the Owner if you die before
periodic annuity payments purchased under this Contract begin. Only the spouse
of the Annuitant may be named the Contingent Owner.
Designated Beneficiary - is the individual designated as a beneficiary by the
Annuitant.
In order to ensure treatment as a Roth IRA, the provisions of this rider will
control if in conflict with those of the Contract. Notwithstanding any
provisions in the Contract to the contrary:
1. The Annuitant will at all times be the Owner of the Contract. The Owner's
rights under the Contract shall be nonforfeitable and for the exclusive
benefit of the Owner and his or her beneficiaries.
2. No benefits under the Contract may be transferred, sold, assigned, or
pledged as collateral for a loan, or as security for the performance of an
obligation, or for any other purpose, to any person; except that the Contract
may be transferred to a former spouse of the Owner under a divorce decree or
written instrument incident to such divorce. In the event of such a transfer,
the transferee shall for all purposes be treated as the Owner under this
Contract.
3. The Purchase Payments (or premium) paid under this Contract shall not
exceed $2,000 for any taxable year, or such other maximum as the Code may
allow, and must be paid in cash.
4. Additional Purchase Payments (or premium payments) under the Contract must
be at least equal to the minimum amount stated in the Purchase Payments (or
Premiums) provision of the Contract.
5. Other than "qualified rollover contributions", as defined in Section
408A(e) of the Code, no rollover contributions may be made to the Contract.
Qualified rollover contributions are excluded from the annual Purchase
Payments (or premium) limit set forth in Section 3.
R-RIRA 198 1
<PAGE>
6. Any Purchase Payments (or premium) refund declared by PL other than
refunds attributable to excess contributions will be applied toward the
purchase of additional benefits before the close of the calendar year
following the refund.
7. If the Owner dies before his or her entire interest in the Contract is
distributed to him or her and the Owner's surviving spouse is not the sole
beneficiary, the entire remaining interest will, at the election of the Owner
or, if the Owner has not so elected, at the election of the beneficiary or
beneficiaries, either:
(a) Be distributed by December 31 of the year containing the fifth
anniversary of the Owner's death, or
(b) Be distributed over the life expectancy of the Designated Beneficiary
starting no later than December 31 of the year following the year of the
Owner's death.
If distributions do not begin by the date described in (b), distribution
method (a) will apply.
For purposes of the above, life expectancy is computed by use of the expected
return multiples in Tables V and VI of Section 1.72-9 of the Income Tax
Regulations. Life expectancies shall be calculated using the attained age of
the Designated Beneficiary during the calendar year in which distributions are
required to begin pursuant to this section, and payments for any subsequent
calendar year shall be calculated based on such life expectancy reduced by one
for each calendar year which has elapsed since the calendar year life
expectancy was first calculated.
If the Owner's surviving spouse is the Designated Beneficiary on the Owner's
date of death, such spouse shall be treated as the Owner and Annuitant for
purposes of this requirement.
8. No one other than the spouse of the Owner may be named as the Contingent
Annuitant and/or the Contingent Owner. If the Owner dies, the Contingent
Annuitant shall be treated as the Annuitant for purposes of applying the
restrictions contained in this rider.
If, despite the restrictions contained in this rider, someone other than the
spouse is named as a Contingent Annuitant, such person shall be treated as the
Designated Beneficiary under the Contract.
9. PL shall furnish annual calendar year reports concerning the status of the
Contract.
10. PL reserves the right to amend this rider to comply with future changes
in the Code and any regulations or rulings and other published guidance issued
under the provisions of the Code or interpretations thereof without consent
(except for the states of Michigan, Pennsylvania, South Carolina, and
Washington, where affirmative consent is required). PL shall provide the
Owner of the Contract with a copy of any such amendment.
Pacific Life Insurance Company
/s/ THOMAS C. SUTTON /s/ AUDREY L. MILFS
Chairman and Chief Executive Officer Secretary
R-RIRA 198 2
<PAGE>
EXHIBIT 99.4(g)
SIMPLE IRA Rider (Form R-SIRA 198)
<PAGE>
EXHIBIT 99.4(g)
[LOGO OF PACIFIC LIFE]
SIMPLE INDIVIDUAL RETIREMENT ANNUITY RIDER
This rider is part of the Contract to which it is attached by Pacific Life
Insurance Company ("PL").
The Contract under which it has been issued is hereby modified as specified
below in order to qualify as a SIMPLE Individual Retirement Annuity under the
terms of the Internal Revenue Code of 1986 (the "Code") as amended.
DEFINITIONS
ANNUITANT - is the individual named to receive periodic annuity payments
purchased under this contract.
ANNUITY START DATE - is the date you choose to have PL begin periodic annuity
payments to the Annuitant. The Annuity Start Date may be no later than April 1
of the calendar year following the year in which the Annuitant reaches age
70 1/2.
CONTINGENT ANNUITANT - is the individual who becomes the Annuitant if the
Annuitant dies before periodic annuity payments purchased under the Contract
begin. Only the spouse of the Annuitant may be named the Contingent Annuitant.
CONTINGENT OWNER - is the individual who becomes the Owner if you die before
periodic annuity payments purchased under this Contract begin. Only the spouse
of the Annuitant may be named the Contingent Owner.
DESIGNATED BENEFICIARY - is the individual designated as a beneficiary by the
Annuitant.
The provisions of this rider will control if in conflict with those of the
Contract. Notwithstanding any provisions in the Contract to the contrary:
1. The Annuitant will at all times be the Owner of the Contract. The Owner's
rights under the Contract shall be nonforfeitable and for the exclusive benefit
of the Owner and his or her beneficiaries.
2. No benefits under the Contract may be transferred, sold, assigned, or
pledged as collateral for a loan, or as security for the performance of an
obligation, or for any other purpose, to any person; except that the Contract
may be transferred to a former spouse of the owner under a divorce decree or
written instrument incident to such divorce. In the event of such transfer, the
transferee shall for all purposes be treated as the Owner under this Contract.
3. This SIMPLE IRA will accept only cash contributions made on behalf of the
Annuitant pursuant to the terms of a SIMPLE IRA plan described in section 408(p)
of the Internal Revenue Code. A rollover contribution or a transfer of assets
from another SIMPLE IRA of the Annuitant will also be accepted. No other
contributions will be accepted.
4. Prior to the expiration of the 2-year period beginning on the date the
Annuitant first participated in any SIMPLE IRA plan maintained by the
Annuitant's employer, any rollover or transfer by the Annuitant
R-SIRA 198 Page 1
<PAGE>
of funds from this SIMPLE IRA must be made to another SIMPLE IRA of the
Annuitant. Any distribution of funds to the Annuitant during this 2-year period
may be subject to a 25% additional tax if the Annuitant does not roll over the
amount distributed into a SIMPLE IRA. After the expiration of this 2-year
period, the Annuitant may roll over or transfer funds to any IRA of the
Annuitant that is qualified under section 408(a) or (b) of the Internal Revenue
Code.
5. Additional Purchase Payments (or premium payments) under the Contract must
be at least the minimum as stated in the Purchase Payments (or Premiums)
provision of the Contract.
6. Any Purchase Payments (or premium) refund declared by PL other than refunds
attributable to excess contributions will be applied toward the purchase of
additional benefits before the close of the calendar year following the refund.
7. In accordance with Regulations prescribed by the Secretary of the Treasury,
or his delegate pursuant to the code ("Regulations"), the entire interest under
the Contract must be distributed to the Owner:
(a) Not later than the April 1st next following the close of the calendar
year in which the Owner attains age 70 1/2 (the "Required Beginning
Date"), or
(b) Commencing not later than the Required Beginning Date in equal or
substantially equal amounts, in annual or more frequent installments,
over:
(i) the Owner's life or the lives of the Owner and his or her
Designated Beneficiary; or
(ii) a period not exceeding the Owner's life expectancy or the
joint and last survivor life expectancy of the Owner and his
or her Designated Beneficiary.
(c) If the Owner's entire interest is to be distributed in other than a
lump sum, then the amount to be distributed each year, commencing with
the Required Beginning Date and then for each succeeding calendar year,
shall not be less than the quotient obtained by dividing the Owner's
entire interest by the lesser of:
(i) the applicable life expectancy; or
(ii) if the Owner's spouse is not the Designated Beneficiary, the
applicable divisor determined from the table set forth in Q&A-
4 of Section 1.401(a)(9)-2 of the proposed Income Tax
Regulations. Distributions after the death of the Owner shall
be calculated using the applicable life expectancy as the
relevant divisor without regard to the proposed Regulation
Section 1.401(a)(9)-2.
The preceding paragraph shall not apply if distribution is in the form of an
annuity with non-increasing payments.
Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations. Unless
otherwise elected by the Owner by the time distributions are required to begin,
life expectancy shall be recalculated annually. Such election shall be
irrevocable as to the Owner and shall apply to all subsequent years. The life
expectancy of a non-spouse Beneficiary may not be recalculated. Instead, life
expectancy will be calculated using the
R-SIRA 198 Page 2
<PAGE>
attained age of such Beneficiary during the calendar year in which distributions
are required to begin pursuant to this section, and payments for subsequent
years shall be calculated based on such life expectancy reduced by one for each
calendar year which has elapsed since the calendar year life expectancy was
first calculated.
(d) If the Owner's spouse is not the Designated Beneficiary, the form of
Annuity elected must assure that at least 50% of the value of the
Contract available for distribution is payable within the Owner's life
expectancy.
(e) The method of distribution shall be made in accordance with the
requirements of Section 401(a)(9) of the Code and the Regulations
thereunder. Further the method selected must meet the "minimum
distribution incidental benefit" rule of Code Section 401(a)(9), and
the proposed Regulation Section 1.401(a)(9)(2). This includes the
following:
(i) where the Owner's only Designated Beneficiary is the spouse,
the minimum amount that must be distributed in a distribution
calendar year is the amount determined under the regular
minimum distribution requirements in this Section 7.
(ii) where the distributions are not made as annuity payments under
an annuity contract and where the Owner's spouse is not the
Designated Beneficiary, the minimum amount that must be
distributed in a distribution calendar year is the quotient
obtained by dividing the Owner's entire interest by the joint
and last survivor expectancy described in the proposed
Regulation Section 1.401(a)(9)-2.
(iii) where distribution is to be made under an annuity contract
purchased on or before the Owner's Required Beginning Date and
the Owner's spouse is not the Designated Beneficiary, the
minimum amount that must be distributed is determined as
follows:
- Period certain annuity without a life contingency: The
period certain may not exceed the appropriate joint and
last survivor expectancy described in the proposed
Regulation Section 1.401(a)(9)-2.
- Life annuity or a joint and survivor annuity: A life
annuity on the Owner's life which satisfies the regular
minimum distribution requirements satisfies the "minimum
distribution incidental benefit" rule. The periodic annuity
payment to the survivor under a joint and survivor annuity
may not exceed the applicable percentage of the annuity
payment to the Owner. These percentages are defined in the
proposed Regulation Section 1.401(a)(9)-2.
- Life annuity with period certain: The distribution must
satisfy the requirements for a single life (or joint and
survivor) annuity and the period certain may not exceed the
period determined for non-annuity distributions.
Only a method of distribution offered by PL that satisfies these conditions
can be selected. You must make this selection before the end of the calendar
year in which you attain age 70 1/2.
8. On the death of the Owner, distribution shall be made in accordance with the
annuity options described in the Contract. However, selection of an annuity
option which does not satisfy the conditions of this Section 8 shall not be
permitted.
R-SIRA 198 Page 3
<PAGE>
If the Owner dies before distribution of his or her interest in the Contract
commences, the entire interest should be distributed by December 31st of the
fifth full year which follows the Owner's death unless: (i) such interest is
paid in equal or substantially equal installments over a period not exceeding
the lifetime, or the life expectancy, of the Designated Beneficiary; and (ii)
payments begin by December 31st of the calendar year which follows the Owner's
death.
If the Designated Beneficiary of the Owner is the Owner's surviving spouse,
the spouse may elect to receive equal or substantially equal payments over the
life or life expectancy of the surviving spouse commencing at any date prior to
the later of: (i) December 31 of the calendar year immediately following the
calendar year in which the Owner died; and (ii) December 31 of the calendar year
in which Owner would have attained age 70 1/2. Such election must be made no
later than the earlier of December 31 of the calendar year containing the fifth
anniversary of the Owner's death or the date distributions are required to begin
pursuant to the preceding sentence. The surviving spouse may accelerate these
payments at any time, i.e., increase the frequency or amount of such payments.
If the surviving spouse is the Designated Beneficiary, the spouse may
convert this Individual Retirement Annuity to the spouse's own Individual
Retirement Annuity by requesting that he or she be made the Annuitant. If the
spouse so requests, the spouse shall be Owner and Annuitant for purposes of
applying the restrictions contained in this rider.
For purposes of the above, life expectancy is computed by use of the
expected return multiples in Tables V and VI of Section 1.72-9 of the Income Tax
Regulations. For purposes of distributions beginning after the Owner's death,
unless otherwise elected by the surviving spouse by the time distributions are
required to begin, life expectancies shall be recalculated annually. Such
election shall be irrevocable as to the surviving spouse and shall apply to all
subsequent years. In the case of any other Designated Beneficiary, life
expectancies shall be calculated using the attained age of such Beneficiary
during the calendar year in which distributions are required to begin pursuant
to this section, and payments for any subsequent calendar year shall be
calculated based on such life expectancy reduced by one for each calendar year
which has elapsed since the calendar year life expectancy was first calculated.
Any amount paid to a child of the Owner will be treated as if it had been
paid to the surviving spouse if the remainder of the interest becomes payable to
the surviving spouse when the child reaches the age of majority.
If the Owner dies after distribution of his or her interest in the Contract
has commenced, the remaining interest will be distributed at least as rapidly as
under the method of distribution being used prior to the Owner's death.
If the Owner dies before his or her entire interest has been distributed to
him or her, no additional cash contributions or "rollover contributions" shall
be accepted.
9. No one other than the spouse of the Owner may be named as the Contingent
Annuitant and/or the Contingent Owner. If the Owner dies, the Contingent
Annuitant shall be treated as the Annuitant for purposes of applying the
restrictions contained in this rider.
If, despite the restrictions contained in this rider, someone other than the
spouse is named as a Contingent Annuitant, such person shall be treated as the
Primary Beneficiary under the Contract.
R-SIRA 198 Page 4
<PAGE>
10. PL shall furnish annual calendar year reports concerning the status of the
Contract.
11. If contributions made on behalf of the Annuitant pursuant to a SIMPLE IRA
Plan maintained by the Annuitant's employer are received directly by PL from the
employer, PL will provide the employer with the summary description required by
section 408(l)(2) of the Internal Revenue Code.
12. If this SIMPLE IRA is maintained by a designated financial institution
(within the meaning of section 408(p)(7) of the Internal Revenue Code) under the
terms of a SIMPLE IRA Plan of the Annuitant's employer, the Annuitant must be
permitted to transfer the Annuitant's balance without cost or penalty (within
the meaning of section 408(p)(7)) to another IRA.
13. PL reserves the right to amend this rider to comply with future changes in
the Code and any regulations or rulings and other published guidance issued
under the provisions of the Code or interpretations thereof without consent
(except for the states of Michigan, Pennsylvania, South Carolina and Washington,
where affirmative consent is required). PL shall provide the Owner of the
Contract with a copy of any such amendment.
Pacific Life Insurance Company
/s/ THOMAS C. SUTTON /s/ AUDREY L. MILFS
Chairman and Chief Executive Officer Secretary
R-SIRA 198 Page 5
<PAGE>
EXHIBIT 99.4(h)
Stepped-Up Death Benefit Rider
<PAGE>
STEPPED-UP DEATH BENEFIT RIDER
This Rider is part of your Contract and should be attached to it.
Notwithstanding any provision of your Contract to the contrary, the provisions
of this Rider shall prevail over the provisions of your Contract.
You have elected the Stepped-Up Death Benefit Rider ("SDBR"). The Mortality and
Expense Risk Charge shown in the Contract Specifications will be increased by an
annual rate equal to 0.20% for expenses related to the SDBR. The entire
Mortality and Expense Risk Charge will be an annual rate equal to 1.45% for this
Contract. The Risk Charge will be charged daily against assets held in your
Variable Investment Options(s). The Risk Charge is guaranteed not to increase.
This SDBR may be elected only at the Contract Date and will remain in effect
until the earlier of (a) a full withdrawal of the amount available for
withdrawal under the Contract, (b) when death benefit proceeds become payable
under the Contract, (c) any termination of the Contract in accordance with the
provisions of the Contract, or (d) the Annuity Date. This SDBR may only be
elected if the Age of each Annuitant is 75 years or younger on the Contract
Date.
A section entitled GUARANTEED MINIMUM DEATH BENEFIT ("GMDB") AMOUNT is added
after the DEATH BENEFIT AMOUNT section of the DEATH BENEFIT provision of your
Contract as follows:
GUARANTEED MINIMUM DEATH BENEFIT ("GMDB") AMOUNT - The GMDB Amount will be
calculated only when death benefit proceeds becomes payable as a result of the
death of the Annuitant, and is determined as follows:
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<PAGE>
First, we calculate what the Death Benefit Amount would have been as of your
first Contract Anniversary and each subsequent Contract Anniversary that occurs
while the Annuitant is living and before the Annuitant reaches his or her 81st
birthday (each of these Contract Anniversaries is a "Milestone Date"). We then
adjust the Death Benefit Amount for each Milestone Date by: (i) adding the
aggregate amount of any Purchase Payments received by us since that Milestone
Date; and (ii) subtracting an amount for each withdrawal that has occurred since
that Milestone Date, which is calculated by multiplying the Death Benefit Amount
by the ratio of the amount of each withdrawal that has occurred since that
Milestone Date, including any withdrawal charge, to the Contract Value
immediately prior to the withdrawal.
The highest of these adjusted Death Benefit Amounts as of the Notice Date is
your GMDB Amount. The "Notice Date" is the day on which we receive, in a form
satisfactory to us, proof of death and instructions regarding payment of death
benefit proceeds.
The DEATH OF ANNUITANT section under the DEATH BENEFIT provision of your
Contract is replaced in its entirety as follows:
DEATH OF ANNUITANT - If the Annuitant dies before the first Milestone Date, the
death benefit will be equal to your Death Benefit Amount as of the Notice Date.
If the Annuitant dies after your first Milestone Date and prior to your Annuity
Date, the death benefit will be equal to the greater of the Death Benefit Amount
and the GMDB Amount as of the Notice Date. If an Annuitant dies before the
Annuity Date, unless there is a surviving Joint or Contingent Annuitant, we will
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<PAGE>
pay the death benefit proceeds to the Owner, if living; otherwise to the
Beneficiary, if living; otherwise to the Owner's estate. If an Annuitant dies
and there is a surviving Joint Annuitant, the surviving Joint Annuitant becomes
the Annuitant. If there is no surviving Joint Annuitant and there is a
Contingent Annuitant, the Contingent Annuitant becomes the Annuitant. Death
benefit proceeds are payable only as the result of the death of the sole
surviving Annuitant prior to the Annuity Date. If you are the Annuitant and you
die, we will determine the amount of any death benefit and the Beneficiary under
the Death of Annuitant provisions. If your Contract is a Non-Qualified
Contract, we will distribute any death benefit proceeds under the Death of Owner
Distribution Rules.
All other terms and conditions of your Contract remain unchanged.
PACIFIC LIFE INSURANCE COMPANY
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<PAGE>
If the Owner dies before distribution of his or her interest in the Contract
commences, the entire interest should be distributed by December 31st of the
fifth full year which follows the Owner's death unless: (i) such interest is
paid in equal or substantially equal installments over a period not exceeding
the lifetime, or the life expectancy, of the Designated Beneficiary; and (ii)
payments begin by December 31st of the calendar year which follows the Owner's
death.
If the Designated Beneficiary of the Owner is the Owner's surviving spouse,
the spouse may elect to receive equal or substantially equal payments over the
life or life expectancy of the surviving spouse commencing at any date prior to
the later of: (i) December 31 of the calendar year immediately following the
calendar year in which the Owner died; and (ii) December 31 of the calendar year
in which Owner would have attained age 70 1/2. Such election must be made no
later than the earlier of December 31 of the calendar year containing the fifth
anniversary of the Owner's death or the date distributions are required to begin
pursuant to the preceding sentence. The surviving spouse may accelerate these
payments at any time, i.e., increase the frequency or amount of such payments.
If the surviving spouse is the Designated Beneficiary, the spouse may
convert this Individual Retirement Annuity to the spouse's own Individual
Retirement Annuity by requesting that he or she be made the Annuitant. If the
spouse so requests, the spouse shall be Owner and Annuitant for purposes of
applying the restrictions contained in this rider.
For purposes of the above, life expectancy is computed by use of the
expected return multiples in Tables V and VI of Section 1.72-9 of the Income Tax
Regulations. For purposes of distributions beginning after the Owner's death,
unless otherwise elected by the surviving spouse by the time distributions are
required to begin, life expectancies shall be recalculated annually. Such
election shall be irrevocable as to the surviving spouse and shall apply to all
subsequent years. In the case of any other Designated Beneficiary, life
expectancies shall be calculated using the attained age of such Beneficiary
during the calendar year in which distributions are required to begin pursuant
to this section, and payments for any subsequent calendar year shall be
calculated based on such life expectancy reduced by one for each calendar year
which has elapsed since the calendar year life expectancy was first calculated.
Any amount paid to a child of the Owner will be treated as if it had been
paid to the surviving spouse if the remainder of the interest becomes payable to
the surviving spouse when the child reaches the age of majority.
If the Owner dies after distribution of his or her interest in the Contract
has commenced, the remaining interest will be distributed at least as rapidly as
under the method of distribution being used prior to the Owner's death.
If the Owner dies before his or her entire interest has been distributed to
him or her, no additional cash contributions or "rollover contributions" shall
be accepted.
9. No one other than the spouse of the Owner may be named as the Contingent
Annuitant and/or the Contingent Owner. If the Owner dies, the Contingent
Annuitant shall be treated as the Annuitant for purposes of applying the
restrictions contained in this rider.
If, despite the restrictions contained in this rider, someone other than the
spouse is named as a Contingent Annuitant, such person shall be treated as the
Primary Beneficiary under the Contract.
R-SIRA 198 Page 4
<PAGE>
10. PL shall furnish annual calendar year reports concerning the status of the
Contract.
11. If contributions made on behalf of the Annuitant pursuant to a SIMPLE IRA
Plan maintained by the Annuitant's employer are received directly by PL from the
employer, PL will provide the employer with the summary description required by
section 408(l)(2) of the Internal Revenue Code.
12. If this SIMPLE IRA is maintained by a designated financial institution
(within the meaning of section 408(p)(7) of the Internal Revenue Code) under the
terms of a SIMPLE IRA Plan of the Annuitant's employer, the Annuitant must be
permitted to transfer the Annuitant's balance without cost or penalty (within
the meaning of section 408(p)(7)) to another IRA.
13. PL reserves the right to amend this rider to comply with future changes in
the Code and any regulations or rulings and other published guidance issued
under the provisions of the Code or interpretations thereof without consent
(except for the states of Michigan, Pennsylvania, South Carolina and Washington,
where affirmative consent is required). PL shall provide the Owner of the
Contract with a copy of any such amendment.
Pacific Life Insurance Company
/s/ THOMAS C. SUTTON /s/ AUDREY L. MILFS
Chairman and Chief Executive Officer Secretary
R-SIRA 198 Page 5
<PAGE>
EXHIBIT 99.4(i)
Premier Death Benefit Rider
<PAGE>
PREMIER DEATH BENEFIT RIDER
This Rider is part of your Contract and should be attached to it.
Notwithstanding any provision of your Contract to the contrary, the provisions
of this Rider shall prevail over the provisions of your Contract.
You have elected the Premier Death Benefit Rider ("PDBR"). The Mortality and
Expense Risk Charge shown in the Contract Specifications will be increased by an
annual rate equal to 0.35% for expenses related to the PDBR. The entire
Mortality and Expense Risk Charge will be an annual rate equal to 1.60% for this
Contract. The Risk Charge will be charged daily against assets held in your
Variable Investment Options(s). The Risk Charge is guaranteed not to increase.
This PDBR may be elected only at the Contract Date and will remain in effect
until the earlier of (a) a full withdrawal of the amount available for
withdrawal under the Contract, (b) when death benefit proceeds becomes payable
under the Contract, (c) any termination of the Contract in accordance with the
provisions of the Contract, or (d) the Annuity Date. This PDBR may only be
elected if the Age of each Annuitant is 75 years or younger on the Contract
Date.
The DEATH BENEFIT AMOUNT section under the DEATH BENEFIT provision of your
Contract is replaced in its entirety as follows:
DEATH BENEFIT AMOUNT - The Death Benefit Amount as of any Business Day prior
to your Annuity Date is equal to the greater of:
a) your Contract Value as of that day; and
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b) your Purchase Payments less any withdrawals, including withdrawal
charges, increased at an effective annual rate of 6% to that day,
subject to a maximum of two times the aggregate Purchase Payments less
any withdrawals, including withdrawal charges. The 6% effective annual
rate of growth will take into account the timing of when each Purchase
Payment and withdrawal occurred by applying a daily factor of
1.000159654 to each day's balance. The 6% effective annual rate of
growth will stop accruing as of the earlier of: (1) the Contract
Anniversary before the date the sole Annuitant reaches his or her 81st
birthday; (2) the date of death of the sole Annuitant; or (3) the
Annuity Date.
A section entitled GUARANTEED MINIMUM DEATH BENEFIT ("GMDB") AMOUNT is added
after the DEATH BENEFIT AMOUNT section of the DEATH BENEFIT provision of your
Contract as follows:.
GUARANTEED MINIMUM DEATH BENEFIT ("GMDB") AMOUNT - - The GMDB Amount will be
calculated only when death benefit proceeds become payable as a result of the
death of the Annuitant, and is determined as follows:
First, we calculate what the Death Benefit Amount would have been beginning on
the quarterly anniversary following the Contract Date and each subsequent
quarterly anniversary that occurs while the Annuitant is living and up to and
including the Contract Anniversary following the Annuitant's 65th birthday.
Quarterly anniversaries are measured from the Contract Date. After the Contract
Anniversary following the Annuitant's 65th birthday, we calculate what the Death
Benefit Amount would have been as of each Contract Anniversary that occurs while
the Annuitant is living and before the Annuitant reaches his or her 81st
birthday. Each quarterly anniversary and each Contract Anniversary on which a
Death Benefit Amount is calculated is referred to as a "Milestone Date". We
then adjust the Death
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Benefit Amount for each Milestone Date by: (i) adding the aggregate amount of
any Purchase Payments received by us since that Milestone Date; and (ii)
subtracting an amount for each withdrawal that has occurred since that Milestone
Date, which is calculated by multiplying the Death Benefit Amount by the ratio
of the amount of each withdrawal that has occurred since that Milestone Date,
including any withdrawal charge, to the Contract Value immediately prior to the
withdrawal.
The highest of these adjusted Death Benefit Amounts as of the Notice Date is
your GMDB Amount. The "Notice Date" is the day on which we receive, in a form
satisfactory to us, proof of death and instructions regarding payment of death
benefit proceeds.
The DEATH OF ANNUITANT section under the DEATH BENEFIT provision of your
Contract is replaced in its entirety as follows:
DEATH OF ANNUITANT - If the Annuitant dies before the first Milestone Date, the
death benefit will be equal to your Death Benefit Amount as of the Notice Date.
If the Annuitant dies on or after your first Milestone Date and prior to your
Annuity Date, the death benefit will be equal to the greater of the Death
Benefit Amount and the GMDB Amount as of the Notice Date. If an Annuitant dies
before the Annuity Date, unless there is a surviving Joint or Contingent
Annuitant, we will pay the death benefit proceeds to the Owner, if living;
otherwise to the Beneficiary if living; otherwise to the Owner's estate. If an
Annuitant dies and there is a surviving Joint Annuitant, the surviving Joint
Annuitant becomes the Annuitant. If there is no surviving Joint Annuitant and
there is a Contingent Annuitant, the Contingent Annuitant becomes the Annuitant.
Death benefit proceeds are payable only as the result of the death of the sole
surviving Annuitant prior to the Annuity Date. If you are
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<PAGE>
the Annuitant and you die, we will determine the amount of any death benefit and
the Beneficiary under the Death of Annuitant provisions. If your Contract is a
Non-Qualified Contract, we will distribute any death benefit proceeds under the
Death of Owner Distribution Rules.
All other terms and conditions of your Contract remain unchanged.
PACIFIC LIFE INSURANCE COMPANY
4
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EXHIBIT 99.5 (a)
Application Form for Individual Flexible Premium Deferred Variable Annuity
Contract (Form A9808 8/98)
<PAGE>
EXHIBIT 99.5(a)
"DRAFT" PACIFIC VALUE
[PACIFIC LIFE LOGO] VARIABLE ANNUITY
APPLICATION
PLEASE TYPE or PRINT. See instructions to assist you in completing this
application.
_______________________________________________________________________________
[1] ANNUITANT Name Birth Date Phone Number
(First, Middle Initial, Last) (mo/day/yr) ( )
_______________________________________________________________________________
Street Address Sex
(Number, Street Name and Apartment or Unit Number) [_] M [_] F
_______________________________________________________________________________
City, State & ZIP Code Social Security/Tax ID Number
_______________________________________________________________________________
OPTIONAL
ADDITIONAL ANNUITANT Complete this section to name additional Annuitants.
Not applicable for Qualified Contracts.
Check one [_] Joint [_] Contingent
Name (First, Middle Initial, Last) Birth Date Annuitant's Spouse
(mo/day/yr) [_] Yes [_] No
_______________________________________________________________________________
Street Address Sex
(Number, Street Name and Apartment or Unit Number) [_] M [_] F
_______________________________________________________________________________
City, State & ZIP Code Social Security/Tax ID Number
_______________________________________________________________________________
[2] If Owner(s) and Annuitant(s) are the same, it is not necessary to
complete Section 2. If Trust is Owner, complete Trust Certification Form.
OWNER Name (First, Middle Initial, Last) Birth Date Phone Number
(mo/day/yr) ( )
_______________________________________________________________________________
Street Address Sex
(Number, Street Name and Apartment or Unit Number) [_] M [_] F
_______________________________________________________________________________
City, State & ZIP Code Social Security/Tax ID Number
_______________________________________________________________________________
OPTIONAL
ADDITIONAL OWNER Name Birth Date Owner's Spouse
(First, Middle Initial, Last) Complete (mo/day/yr) [_] Yes [_] No
this section to name additional owners.
_______________________________________________________________________________
Street Address Sex
(Number, Street Name and Apartment or Unit Number) [_] M [_] F
_______________________________________________________________________________
City, State & ZIP Code Social Security/Tax ID Number
_______________________________________________________________________________
[3] BENEFICIARY Name (First, Middle Initial, Last) Use Special Requests
section to provide additional Beneficiaries or Beneficiary information.
--
Select One [_] Primary [_] Contingent
_______________________________________________________________________________
ADDITIONAL BENEFICIARY Name (First, Middle Initial, Last)
Select One [_] Primary [_] Contingent
________________________________________________________________________________
[4] CONTRACT TYPE Select one
[_] Non-Qualified [_] SIMPLE IRA [_] 401 (k) [_] Keogh/HR10
[_] Conduit IRA [_] SEP-IRA [_] 457 [_] TSA Transfer/403(b)
[_] Contributory Roth IRA [_] Conversion Roth IRA [_] 401(a) Pension
[_] IRA
Also complete the SIMPLE/Roth form if the Contributory Roth IRA or SIMPLE
IRA box is checked.
_______________________________________________________________________________
QUALIFIED CONTRACT PAYMENT TYPE
If no year is indicated, contribution defaults to current tax year.
[_] Rollover. ........ $ ______
[_] Contribution...... $ ______ for tax year _____
$ ______ for tax year _____
_______________________________________________________________________________
[5] ISSUE STATE Abbreviate state name where application is signed
_______________________________________________________________________________
[6] INITIAL PURCHASE PAYMENT Indicate the form of initial payment.
[_] 1035 exchange/estimated transfer $______ [_] Amt. enclosed $______
_______________________________________________________________________________
[7] REPLACEMENT Will the purchase of this annuity replace or exchange any
existing life insurance or annuity?
[_] Yes [_] No If yes, provide the information below and attach any
required state replacement and/or 1035 exchange/transfer
forms. Use the Special Requests section for additional
insurance companies and contract numbers.
Insurance Company Name Contract Number Contract Type Being Replaced
[_] Life Insurance
[_] Fixed Annuity
[_] Variable Annuity
_______________________________________________________________________________
[8] DEATH BENEFIT OPTION Subject to Select One
state availability and age restric- [_] Stepped-Up Death Benefit Rider
tions. If an optional rider is not [_] Premier Death Benefit Rider
selected, the Standard Death Benefit
is the default.
_______________________________________________________________________________
A9808 8/98 Page 1 of 3 [BAR CODE]
<PAGE>
OPTIONAL PROGRAMS
________________________________________________________________________________
[14] PRE-AUTHORIZED CHECKING FOR ADDITIONAL DEPOSITS Each month deduct from my
account shown on the ATTACHED VOIDED CHECK, the amount indicated in the
box at the right. Payments will be applied according to the allocations on
this application or more current instructions, if any. To begin the plan,
the first minimum installment must accompany this application.
AMOUNT START DATE (mo/day/yr)
Default Start Date is 30 days from issue date.
$_____________________
________________________________________________________________________________
[15] TRANSFERS
Choose one of the four transfer options under Section A, then indicate a
single source account and different target accounts.
A. DOLLAR COST AVERAGING TRANSFER OPTIONS
1. [_] Deplete the source account
2. [_] Transfer $_______________ each time
3. [_] Transfer __________% annually
EARNINGS SWEEP TRANSFER OPTION
4. [_] Sweep the previous period's earnings. Take from one of the
following accounts.
[_] Fixed Option [_] Money Market Not available if also
rebalancing.
________________________________________________________________________________
B. NUMBER OF TRANSFERS If option 2, 3 or 4 selected above, indicate
number of transfers. _____________________
________________________________________________________________________________
C. TRANSFER FREQUENCY [_] Monthly
[_] Quarterly [_] Semi-Annually [_] Annually
________________________________________________________________________________
D. START DATE (mo/day/yr)
Default Start Date is 30 days from issue date.
________________________________________________________________________________
E. SOURCE ACCOUNT Complete if 1, 2 or 3 is selected above. Choose one.
[_] Fixed [_] Equity
[_] Money Market [_] Bond & Income
[_] High Yield Bond [_] Equity Index
[_] Managed Bond [_] International
[_] Govt. Securities [_] Emerging Markets
[_] Aggressive Equity [_] [xxxxxxxxxxxxx]
[_] Growth LT [_] [xxxxxxxxxxxxx]
[_] Equity Income [_] [xxxxxxxxxxxxx]
[_] Multi-Strategy
________________________________________________________________________________
F. TARGET ACCOUNT Must be different than source account.
Indicate either whole percentage or dollar amounts.
Money Market _______________ Equity ______________
High Yield Bond _______________ Bond & Income ______________
Managed Bond _______________ Equity Index ______________
Govt. Securities _______________ International ______________
Aggressive Equity _______________ Emerging Markets ______________
Growth LT _______________ [xxxxxxxxxxx] ______________
Equity Income _______________ [xxxxxxxxxxx] ______________
Multi-Strategy _______________ [xxxxxxxxxxx] ______________
Total must equal 100% or total $ transfer amount ______________
________________________________________________________________________________
[16] PRE-AUTHORIZED WITHDRAWALS Withdrawal to be issued by check unless
section G is completed and voided check attached.
A. CHOOSE ONE WITHDRAWAL OPTION
[_] $_____________ each time [_] ________% annually
________________________________________________________________________________
B. WITHDRAWAL AMOUNT TO BE Will be "gross" if not selected
[_] Net of Charges [_] Gross of Charges
________________________________________________________________________________
C. START DATE (mo/day/yr) Default Start Date is 30 days from issue
date.
________________________________________________________________________________
D. TIME PERIOD Enter either the number of months or years
[_] Months ______________ [_] Years _______________
________________________________________________________________________________
E. FEDERAL TAXES If not specified, the minimum 10% federal tax on Non-
Qualified Contracts and IRAs will be withheld. Mandatory 20% on
Qualified Contracts will be withheld. State mandated income tax will
be withheld where required by law.
[_] Do Not Withhold [_] Withhold _________%.
________________________________________________________________________________
F. SOURCE Choose one or more. Indicate either whole percentages or
dollar amounts.
<TABLE>
<S> <C> <C>
Money Market ____________ Equity Income ____________ Emerging Markets ____________
High Yield Bond ____________ Multi-Strategy ____________ [xxxxxxxxxxxxx] ____________
Managed Bond ____________ Bond & Income ____________ [xxxxxxxxxxxxx] ____________
Govt. Securities ____________ Equity Index ____________ [xxxxxxxxxxxxx] ____________
Aggressive Equity ____________ International ____________ [xxxxxxxxxxxxx] ____________
Growth LT ____________ Total must equal either 100% or total $ withdrawal amount ____________
</TABLE>
________________________________________________________________________________
G. 3RD PARTY PAYEE - Name (First, Middle Initial, Last) Indicate name
and address of payee, if other than owner. For direct deposit, a
voided check must be attached.
Name of Institution/Individual Account Number
____________________________________________________________________
Street Address (Number, Street Name and Apartment or Unit Number)
____________________________________________________________________
City, State & ZIP Code
____________________________________________________________________
________________________________________________________________________________
A9808 8/98 Page 2 of 3 1400-8A [BAR CODE APPEARS HERE]
<PAGE>
________________________________________________________________________________
[9] TELEPHONE AUTHORIZATION By initialing, Pacific Life is authorized and
directed to act on telephone instructions from any person(s) who can
furnish proper identification. Pacific Life will use reasonable procedures
to confirm that these instructions are authorized and genuine. As long as
these procedures are followed, Pacific Life and its affiliates and their
directors, trustees, officers, employees, representatives and/or agents,
will be held harmless for any claim, liability, loss or cost.
______________________
Owner's Initials
______________________
Joint Owner's Initials
________________________________________________________________________________
[10] ALLOCATION OPTIONS Indicate either whole percentages or dollar amounts. See
instructions for portfolio manager name.
<TABLE>
<S> <C> <C> <C>
Fixed __________ Aggressive Equity __________ Bond & Income __________ [XXXXXXXXXXXX] __________
Money Market __________ Growth LT __________ Equity Index __________ [XXXXXXXXXXXX] __________
High Yield Bond __________ Equity Income __________ International __________ [XXXXXXXXXXXX] __________
Managed Bond __________ Multi-Strategy __________ Emerging Markets __________ [XXXXXXXXXXXX] __________
Govt. Securities __________ Equity __________
Total must equal either 100% or total purchase payment amount __________
___________________________________________________________________________________________________________________
</TABLE>
[11] REBALANCING [_] Yes, rebalance the variable accounts to the allocation
percentages shown in Section 10.
Choose one frequency. [_] Quarterly [_] Semi-Annually [_] Annually
Start Date (mo/day/yr)
________________________________________________________________________________
[12] SPECIAL REQUESTS Attach letter if additional space is needed.
________________________________________________________________________________
[13] ANNUITY START DATE Contract will annuitize on this date.
Start date cannot be prior to the first Contract Anniversary.
Annuity Start Date (mo/day/yr)
________________________________________________________________________________
[17] STATEMENT OF APPLICANT My agent and I discussed my financial background and
as a result I believe this Contract will meet my insurable needs and
financial objectives. I have considered the appropriateness of full or
partial replacement of any existing life insurance or annuity, if
applicable. I understand that Contract Values may increase or decrease
depending on the investment experience of the Variable Accounts. Contract
Values under the Variable Accounts are variable and are not guaranteed. I
UNDERSTAND THAT ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT MAY VARY
AS TO DOLLAR AMOUNT TO THE EXTENT THAT THEY ARE BASED ON THE INVESTMENT
EXPERIENCE OF THE SELECTED PORTFOLIO(S).
I have received prospectuses. I hereby represent my answers to the
above questions to be correct and true to the best of my knowledge and
belief, and agree that this application will be part of the annuity
Contract issued by Pacific Life. I acknowledge that corrections to my
Contract may be made from the application. My acceptance of this Contract
constitutes acceptance of these corrections. If there are joint applicants,
the Contract, if issued, will be owned by the joint applicants as Joint
Tenants With The Right of Survivorship and not as Tenants In Common.
Any person who knowingly and with intent to defraud any insurance
company or other person files an application for insurance or statement of
claim containing any materially false information or conceals for the
purpose of misleading, information concerning any fact material thereto
commits a fraudulent insurance act, which is a crime and subjects such
person to criminal and civil penalties. This Contract is not covered by an
insurance guaranty fund or other solvency protection arrangement, therefore
the policyholder bears the risk that the company will not fulfill its
obligations under the Contract.
My signature certifies, under penalty of perjury, that the taxpayer
identification number provided is correct. I am not subject to backup
withholding because: I am exempt; or I have not been notified that I am
subject to backup withholding resulting from failure to report all interest
or dividends; or I have been notified that I am no longer subject to backup
withholding. (Strike out the preceding sentence if subject to backup
withholding.) The IRS does not require my consent to any provision of this
document other than the certifications required to avoid backup
withholding.
________ _________________ ________ __________________________________
Date Owner's Signature Date Joint/Contingent Owner's Signature
______________________________________ __________________________________
Signed at City and State
___________________________________________________________________________
[18] AGENT'S STATEMENT Will this Contract replace or change any existing life
insurance or annuity in this or any other company? [_] Yes [_] No
If yes, explain in Replacement section. I certify that I am authorized and
qualified to discuss this Contract.
I have explained to the applicant how the annuity will meet their insurable
needs and financial objectives. I have discussed the appropriateness of
replacement, if applicable.
_______________________________ _________________ ____________________
Agent's Full Name Please print. Agent's Signature Agent's SSN Required.
( ) -
____________________ ____________________ ________________________
Agent's Phone Number Broker/Dealer's Name Brokerage Account Number
Optional
Option [_] A [_] B [_] C
___________________________________________________________________________
A9808 8/98 Page 3 of 3 [BAR CODE]
<PAGE>
PACIFIC VALUE VARIABLE ANNUITY APPLICATION INSTRUCTIONS
[1] ANNUITANTS/OWNERS: There are many combinations of Owner and Annuitant
registrations which may result in different consequences.
[2] For example, the death of an Owner/Annuitant may have different
consequences than the death of a nonowner annuitant. Joint or Contingent
owners and/or Joint Annuitants cannot be named on qualified contracts. For
IRAs, Owner and Annuitant must be the participant. For pension/profit
sharing, 401(k) and Keogh/HR10 plans, name plan as Owner. For 403(b) plans,
name participant as both Owner and Annuitant. Use the Special Requests
section to clarify registrations. Spousal signatures may be required for
certain actions in qualified contracts. Consult a tax adviser to properly
structure qualified plans and effect transfers.
[3] BENEFICIARY: Beneficiaries will be joint if no boxes are checked. Joint
beneficiaries will share equally with the rights of survivorship. In the
event of death, with a spouse as a joint beneficiary, the Contract may not
be continued. Beneficiary designations may be irrevocable. Please indicate
this in the Special Requests section.
[4] TYPE OF PLAN: A Conduit IRA is used to move from a qualified plan with
intent to move to another qualified plan at a later date. Subsequent
contributions are not permitted. Transfer indicates a trustee to trustee or
custodian to custodian transfer only. If initial payment represents both a
rollover and a contribution, indicate amounts for each. Ensure the total
matches the check. For a SIMPLE IRA, Pacific Life will only act as a
Non-Designated Financial Institution.
[5] ISSUE STATE: Indicate the state where the application is signed.
[6] INITIAL PURCHASE: Indicate the initial purchase payment in U.S. dollars.
Initial Non-Qualified Contract minimum $10,000, $250 subsequent; Qualified
minimum $2,000, $50 subsequent.
[7] REPLACEMENT: Complete and attach a Transfer/Exchange form and any required
state replacement forms. Maximum purchase age of Annuitant is 75 years of
age.
[8] DEATH BENEFIT ENHANCEMENT OPTIONS: Must be chosen at time of issue. If not
marked, the option defaults to Standard Death Benefit. Please consult
prospectus for charges.
[9] TELEPHONE AUTHORIZATION: If the Contract is jointly owned, both Owners must
initial.
[10] ALLOCATION OPTIONS: Allocations must total 100% or equal total purchase
payment. Portfolio managers are:
Money Market...............Pacific Life
High Yield Bond............Pacific Life
Managed Bond...............PIMCO
Govt. Securities...........PIMCO
Aggressive Equity..........Alliance Capital
Growth LT..................Janus
Equity Income..............J.P. Morgan Investment
Multi-Strategy.............J.P. Morgan Investment
Equity.....................Goldman Sachs
Bond & Income..............Goldman Sachs
Equity Index...............Bankers Trust
International..............Morgan Stanley
Emerging Markets...........Blairlogie
[xxxxxxxxxxxxxx]...........[xxxxxxxxxx]
[xxxxxxxxxxxxxx]...........[xxxxxxxxxx]
[xxxxxxxxxxxxxx]...........[xxxxxxxxxx]
[xxxxxxxxxxxxxx]...........[xxxxxxxxxx]
[11] REBALANCING: Contract must be issued for at least 30 days. Actual start
date may occur after date elected. If no date is chosen, rebalancing will
occur on the first Business Day of the frequency selected and every period
after. Variable account percentages will be prorated, excluding Fixed
Option balances. The Fixed Option may not be rebalanced. If variable
account rebalancing is chosen, then earnings sweep may be made only from
the Fixed Option and not the Money Market. Additional purchase payments to
accounts other than those selected on this application will not be
rebalanced. To change allocations, complete a new transfer form.
[12] SPECIAL REQUESTS: Use this section to indicate special registrations and
other instructions.
[13] ANNUITY START DATE: Annuity date cannot be prior to first Contract
anniversary. For Non-Qualified plans, if no date is chosen, Annuity Date is
the Annuitant's 95th birthday. For Qualified Plans, if no date is chosen,
Annuity Date is April 1 of year after the Annuitant reaches age 70.
[14] PRE-AUTHORIZED CHECKING: Initial minimum purchase may be met over maximum
of 12 months. The first installment must accompany this application.
Monthly Non-Qualified Contract minimum $834, Qualified Contract minimum
$167.
[15] TRANSFERS: Contract must be issued for at least 30 days. Actual start date
may occur after date elected. Minimum source account value $5,000. Minimum
initial transfer amount $250. TRANSFER DOLLARS: Last transfer will occur
even if remaining balance is less than the amount selected. TRANSFER
PERCENTAGES: Annual percentage will be divided by the frequency selected.
EARNINGS SWEEP: if rebalancing, earnings sweep allowed only from the Fixed
Option. If not rebalancing, earnings sweep allowed from either the Fixed
Option or the Money Market Option.
[16] PRE-AUTHORIZED WITHDRAWALS: Contract must be issued for 30 days. Actual
start date may occur after date elected. Minimum withdrawal $250. Annual
percentage will be divided by the frequency selected. Net payment reflects
deduction of fees and charges but will be further reduced by any taxes, if
withholding is applicable and will be prorated from all investment options
if none is selected. Withdrawals may be taken from Qualified Contracts if
allowed by the plan.
[17] STATEMENT OF APPLICANT: This section contains information about the
Contract, if issued. Please read it carefully.
[18] STATEMENT OF AGENT: Your agent must complete and sign this section.
[19] MAILING INSTRUCTIONS: Send this completed application with payment to:
PACIFIC LIFE INSURANCE COMPANY
PO Box 100060
Pasadena, CA 91189-0060
Send 1035 Exchange/Transfers to:
PACIFIC LIFE INSURANCE COMPANY
PO Box 7187
1111 South Arroyo Parkway, Suite 430
Pasadena, CA 91109-7187
Or express mail address is:
PACIFIC LIFE
c/o FCNPC
1111 South Arroyo Parkway, Suite 430
Pasadena, CA 91105
<PAGE>
EXHIBIT 99.5 (b)
Variable Annuity PAC APP
<PAGE>
EXHIBIT 99.5(b)
"DRAFT" PACIFIC LIFE
[LOGO OF PACIFIC LIFE] VARIABLE ANNUITY
PAC APP is not available for transfers, 1035 exchanges PAC APP
and 401, 403, 457 and Keogh Plans. Please use the
standard application.
PRODUCT:
[_] PSVA (Select) [_] Pacific One [_] Pacific Portfolios [_] Pacific Value
________________________________________________________________________________
[1] ANNUITANT Name Birth Date (mo/day/yr) Phone Number
(First, Middle Initial, Last) ( )
________________________________________________________________________________
Street Address Sex
(Number, Street Name and Apartment or Unit Number) [_]M [_]F
_______________________________________________________________________________
City, State & ZIP Code Social Security/Tax ID Number
_______________________________________________________________________________
OPTIONAL
[2] ADDITIONAL ANNUITANT
Check one [_] Joint [_] Contingent
Name (First, Middle Initial, Last) Birth Date Annuitant's Spouse?
(mo/day/yr) [_] Yes [_] No
_______________________________________________________________________________
Street Address Sex
(Number, Street Name and Apartment or Unit Number) [_] M [_] F
_______________________________________________________________________________
City, State & ZIP Code Social Security/Tax ID Number
_______________________________________________________________________________
[3] OWNER Name (First, Middle Initial, Last) Birth Date Phone Number
complete if different than annuitant. (mo/day/yr) ( )
_______________________________________________________________________________
Street Address Sex
(Number, Street Name and Apartment or Unit Number) [_] M [_] F
_______________________________________________________________________________
City, State & ZIP Code Social Security/Tax ID Number
_______________________________________________________________________________
OPTIONAL
[4] OWNER Name Birth Date Annuitant's Spouse?
(First, Middle Initial, Last) (mo/day/yr) [_] Yes [_] No
_______________________________________________________________________________
Street Address Sex
(Number, Street Name and Apartment or Unit Number) [_] M [_] F
_______________________________________________________________________________
City, State & ZIP Code Social Security/Tax ID Number
_______________________________________________________________________________
[5] BENEFICIARY Name Relationship Select One
(First, Middle Initial, Last) [_] Primary [_] Contingent
_______________________________________________________________________________
Name Relationship Select One
(First, Middle Initial, Last) [_] Primary [_] Contingent
_______________________________________________________________________________
[6] CONTRACT TYPE Select one. For SIMPLE IRA, IRA Contribution
write employer name, address and phone
number in Special Remarks section below. $ ______ for tax year _____
$ ______ for tax year _____
[_] Non-Qualified [_] Conduit IRA
[_] Roth IRA [_] IRA
[_] SEP-IRA [_] SIMPLE IRA
_______________________________________________________________________________
[7] REPLACEMENT OF ANNUITY Will the purchase of this annuity replace or
exchange any existing life insurance or annuity? [_] Yes [_] No
_______________________________________________________________________________
[8] TRADE INFORMATION DEATH BENEFITS Subject to state
Premium Submitted State of Sale approval. Call (800) 722-2333 for
state availability.
__________________________________________
Client Acct.# Contract # (for add'l. PACIFIC PORTFOLIOS: [_] Standard
pmts. only) [_] Enhanced
PACIFIC VALUE: [_] Standard
[_] Stepped-Up
[_] Premier
_______________________________________________________________________________
<TABLE>
<S> <C> <C> <C> <C> <C>
[9] ALLOCATION OPTIONS Growth LT _____ Emerging Markets _____ Additional Options
Allocate payment of Fixed _____ Equity Income _____ [xxxxxxxxxxx] _____ FOR PORTFOLIOS ONLY
the amount shown Money Market _____ Multi-Strategy _____ [xxxxxxxxxxx] _____
below. Allocations High Yield Bond _____ Equity _____ [xxxxxxxxxxx] _____ 3-year GIO _____
must total 100% or Managed Bond _____ Bond & Income _____ [xxxxxxxxxxx] _____ 6-year GIO _____
equal total premium Govt. Securities _____ Equity Index _____ [xxxxxxxxxxx] _____ 10-year GIO _____
invested. Aggressive Equity _____ International _____ DCA Plus _____
$
</TABLE>
_______________________________________________________________________________
[10] REBALANCING Optional. Choose one frequency.
[_] Yes [_] No [_] Quarterly [_] Semi-Annually [_] Annually
_______________________________________________________________________________
[11] DOLLAR COST AVERAGING Choose one of the three following methods
1 [_] Deplete the source account in _____ transfers;
2 [_] Transfer $_____ or _____% annually from each source account; OR
3 [_] Earnings Sweep.
START DATE:__________ FREQUENCY: [_] Monthly [_] Quarterly
[_] Semi-Annually [_] Annually TERM: [_] _____ Months [_] _____ Yrs.
<TABLE>
<S> <C> <C> <C> <C> <C>
Money Market _____ Aggressive Equity _____ Equity _____ Emerging Markets _____ [xxxxxxxxxxx] _____
High Yield Bond _____ Growth LT _____ Bond & Income _____ [xxxxxxxxxxx] _____ [xxxxxxxxxxx] _____
Managed Bond _____ Equity Income _____ Equity Index _____ [xxxxxxxxxxx] _____ [xxxxxxxxxxx] _____
Govt. Securities _____ Multi-Strategy _____ International _____ [xxxxxxxxxxx] _____
</TABLE>
_______________________________________________________________________________
[12] DEALER INFORMATION SS# Broker/Dealer Name
Registered Representative Name
_______________________________________________________________________________
[13] COMMISSION OPTIONS Check one option for product sold.
<TABLE>
<CAPTION>
PSVA (SELECT) PACIFIC ONE PACIFIC PORTFOLIOS PACIFIC VALUE
Upfront, Ann. Trail Upfront, Ann. Trail Upfront, Ann. Trail Upfront, Ann. Trail
<S> <C> <C> <C> <C>
A [_] 6%, NA [_] 1%, .25% Q5+ [_] 6.5%, NA [_] TBD
B [_] 5%, .25% Q5-20 [_] .25%, .25% Q2+ [_] 5%, .25% Q5-24 [_] TBD
1% Q21+ 1% Q25+ [_] TBD
C [_] NA [_] NA [_] 3.5%, .5% Q5-24 [_] TBD
1% Q25+
</TABLE>
_______________________________________________________________________________
[14] SPECIAL REMARKS
_______________________________________________________________________________
PACP 8/98 [BAR CODE]
<PAGE>
EXHIBIT 99.5 (c)
Application/Confirmation Form
<PAGE>
EXHIBIT 99.5(c)
"DRAFT"
PACIFIC LIFE APPLICATION/CONFIRMATION FORM
Pacific Life Insurance Company
PO Box 7187, Pasadena, CA 91109-7187 [LOGO OF PACIFIC LIFE]
[PROD]
[PNUM] Initial Premium: [PAMT] Issue Date: [ISSDT] State of Sale: [ISSST]
Please verify that all information is correct. Sign and date the form on the
reverse and return it promptly to Pacific Life in the enclosed postage-paid
envelope. When you sign and return this form, you acknowledge and agree to the
terms of the contract. Financial transactions will not be processed prior to our
receipt of this form.
_______________________________________ _____________________________________
ANNUITANT(S): ALLOCATION OPTIONS:
[A1NAM]
[A1ML1]
[A1ML2] [_FNDALL01] [FNDAMO1]
[A1ML3] [_FNDALL02] [FNDAMO2]
[A1SSN] [A1DOB] [A1SEX] [_FNDALL03] [FNDAMO3]
_______________________________________ [_FNDALL04] [FNDAMO4]
Joint/Contingent: [_FNDALL05] [FNDAMO5]
[AXNAM] [_FNDALL06] [FNDAMO6]
[AXML1] [_FNDALL07] [FNDAMO7]
[ASML2] [_FNDALL08] [FNDAMO8]
[AXML3] [_FNDALL09] [FNDAMO9]
[AXSSN] [AXDOB] [AXSEX] [_FNDALL10] [FNDAM10]
_______________________________________ [_FNDALL11] [FNDAM11]
OWNER(S): [_FNDALL12] [FNDAM12]
[O1NAM] [_FNDALL13] [FNDAM13]
[OML2] [_FNDALL14] [FNDAM14]
[OML3] [_FNDALL15] [FNDAM15]
[OML4] [_FNDALL16] [FNDAM16]
[OML5] [_FNDALL17] [FNDAM17]
[O1SSN] [O1DOB] [O1SEX] [_FNDALL18] [FNDAM18]
_______________________________________ [_FNDALL19] [FNDAM19]
Joint/Contingent:
[OXNAM]
[OXML2]
[OXML3]
[OXML4]
[OXML5] _____________________________________
[OXSSN] [OXDOB] [OXSEX]
_______________________________________ _____________________________________
BENEFICIARY/BENEFICIARIES TYPE OF PLAN: [LOBE]
(P=Primary; C=Contingent): REBALANCING: [RBYN] [RBFREQ]
DEALER INFORMATION: [AGNAM]
[B1NAM] [B1PRI] DEATH BENEFIT OPTION: [OPTION]
[B2NAM] [B2PRI]
[B3NAM] [B3PRI]
[B4NAM] [B4PRI]
[B5NAM] [B5PRI]
_______________________________________ _____________________________________
Please see reverse side
<PAGE>
TELEPHONE AUTHORIZATION
Owner's initials _________ Joint Owner's initials _________
By initialing, Pacific Life is authorized and directed to act on telephone
instructions from any person(s) who can furnish proper identification. Pacific
Life will use reasonable procedures to confirm that these instructions are
authorized and genuine. As long as these procedures are followed, Pacific Life
and its affiliates and their directors, trustees, officers, employees,
representatives and/or agents, will be held harmless for any claim, liability,
loss or cost.
STATEMENT OF APPLICANT
My agent and I discussed my financial background and as a result I believe this
Contract will meet my insurable needs and financial objectives. I have
considered the appropriateness of full or partial replacement of any existing
life insurance or annuity, if applicable. I understand that Contract Values may
increase or decrease depending on the investment experience of the Variable
Accounts. Contract Values under the Variable Accounts are variable and are not
guaranteed. I UNDERSTAND THAT ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT
MAY VARY AS TO DOLLAR AMOUNT TO THE EXTENT THAT THEY ARE BASED ON THE INVESTMENT
EXPERIENCE OF THE SELECTED PORTFOLIO(S).
I have received prospectuses. I hereby represent my answers to the above
questions to be correct and true to the best of my knowledge and belief, and
agree that this application will be part of the annuity Contract issued by
Pacific Life. I acknowledge that corrections to my Contract may be made from the
application. my acceptance of this contract constitutes acceptance of these
corrections. if there are joint applicants, the Contract, if issued, will be
owned by the Joint Applicants as Joint Tenants With The Right Of Survivorship
and not as Tenants In Common.
Any person who knowingly and with intent to defraud any insurance company or
other person files an application for insurance or statement of claim containing
any materially false information or conceals for the purpose of misleading,
information concerning any fact material thereto commits a fraudulent insurance
act, which is a crime and subjects such person to criminal and civil penalties.
This Contract is not covered by an insurance guaranty fund or other solvency
protection arrangement, therefore the policyholder bears the risk that the
company will not fulfill its obligations under the Contract.
My signature certifies, under penalty of perjury, that the taxpayer
identification number provided is correct. I am not subject to backup
withholding because: I am exempt; or I have not been notified that I am subject
to backup withholding resulting from failure to report all interest or
dividends; or I have been notified that I am no longer subject to backup
withholding. (Strike out the preceding sentence if subject to backup
withholding.) The IRS does not require my consent to any provision of this
document other than the certifications required to avoid backup withholding.
I certify that this Contract was sold and/or solicited in the state of [ISSSTE].
________________ ________________________________________________
DATE OWNER SIGNATURE
________________ ________________________________________________
DATE JOINT/CONTINGENT OWNER'S SIGNATURE
<PAGE>
EXHIBIT 99.6(a)
Pacific Life's Articles of Incorporation
<PAGE>
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
PACIFIC LIFE INSURANCE COMPANY
Thomas C. Sutton and Audrey L. Milfs certify that:
1. They are the Chief Executive Officer and Secretary, respectively, of
Pacific Mutual Life Insurance Company (the "Company"), a mutual life insurance
company organized under the laws of the State of California.
2. The Articles of Incorporation of this Corporation are amended and restated
to read as follows:
AMENDED AND
RESTATED ARTICLES OF INCORPORATION
of
PACIFIC LIFE INSURANCE COMPANY
I.
The name of the Corporation is PACIFIC LIFE INSURANCE COMPANY.
II.
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code. The business of the Corporation is to be an insurer, subject
to the provisions of the California Insurance Code. This insurer is organized
to transact life and disability insurance as specifically authorized by its
California Certificate of Authority.
1
<PAGE>
III.
The Corporation is authorized to issue six hundred thousand shares of
Common Stock with a par value of fifty dollars ($50.00) per share, having an
aggregate par value of thirty million dollars ($30,000,000). Common Stock shall
only be issued to Pacific LifeCorp.
IV.
(a) The liability of the directors of the Corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law.
(b) The Corporation is authorized to provide indemnification of
agents (as defined in Section 317 of the California Corporations Code) for
breach of duty to the Corporation and its shareholders through Bylaw provisions,
agreements with agents, vote of shareholders or disinterested directors, or
otherwise, in excess of the indemnification otherwise permitted by Section 317
of the California Corporations Code, provided that any such excess
indemnification involving a breach of duty to the Corporation and its
shareholders shall be subject to the limits on such excess indemnification set
forth in Section 204 of the Corporations Code and shall be paid only from
realized or realizable earned surplus as specified in Section 10530 of the
California Insurance Code.
V.
The number of directors of this Corporation shall be not less than 9
or greater than 17. The exact number of directors shall be fixed within these
specified limits by the Board of Directors or the shareholders in the manner
provided in the Bylaws.
VI.
Any action which may be taken at a meeting of the shareholders,
may be taken without a meeting if authorized by a writing signed by all of the
holders of shares who would be entitled to vote at a meeting for such purpose,
and filed with the secretary of the Corporation.
3. The foregoing Amendment and Restatement of Articles of Incorporation has
been duly approved by the Board of Directors.
4. The foregoing amendment and restatement of Articles of Incorporation has
been duly approved by the required vote of members.
2
<PAGE>
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this Certificate are true and correct
of our own knowledge.
IN WITNESS WHEREOF, each of the undersigned, being the duly authorized
Chief Executive Officer and the Secretary of the Company, for the purpose of
amending the Articles of Incorporation of the Corporation pursuant to Section
11542 of the California Insurance Code, declares under penalty of perjury that
the statements contained in the foregoing Certificate are true of his or her own
knowledge, and makes and files this Certificate, and accordingly has set his or
her hand, this 27th day of August, 1997. Executed at Newport Beach, California.
/s/ TC SUTTON
-------------------------------------------------
Thomas C. Sutton
Chief Executive Officer
/s/ AUDREY L. MILFS
-------------------------------------------------
Audrey L. Milfs
Secretary
3
<PAGE>
EXHIBIT 99.6(b)
BYLAWS OF
PACIFIC LIFE INSURANCE COMPANY
AS ADOPTED ON AUGUST 27, 1997
(EFFECTIVE SEPTEMBER 1, 1997)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <S> <C>
Article I. OFFICES............................... 1
SECTION 1. Principal Executive Office............ 1
SECTION 2. Other Offices......................... 1
Article II. MEETINGS OF SHAREHOLDERS.............. 1
SECTION 1. Place of Meetings..................... 1
SECTION 2. Annual Meetings....................... 1
SECTION 3. Notice of Meetings.................... 1
SECTION 4. Special Meetings...................... 2
SECTION 5. Adjourned Meetings and Notice Thereof. 2
SECTION 6. Consent to Shareholders' Meetings..... 2
SECTION 7. Voting Rights; Cumulative Voting...... 2
SECTION 8. Quorum................................ 2
SECTION 9. Proxies............................... 2
SECTION 10. Conduct of Meeting.................... 3
Article III. BOARD OF DIRECTORS.................... 3
SECTION 1. Powers................................ 3
SECTION 2. Number of Directors................... 4
SECTION 3. Term of Office and Election........... 4
SECTION 4. Resignation........................... 4
SECTION 5. Vacancies............................. 4
SECTION 6. Place of Meetings..................... 4
SECTION 7. Regular Annual Meetings............... 5
SECTION 8. Other Regular Meetings................ 5
SECTION 9. Special Meetings...................... 5
SECTION 10. Adjournment........................... 5
SECTION 11. Entry of Notice....................... 5
SECTION 12. Waiver of Notice...................... 6
SECTION 13. Quorum................................ 6
SECTION 14. Action by Telephonic Communications... 6
SECTION 15. Action Without a Meeting.............. 6
SECTION 16. Fees and Compensation................. 6
Article IV. OFFICERS.............................. 7
SECTION 1. Number and Qualifications............. 7
SECTION 2. Election, Term of Office.............. 7
SECTION 3. Other Officers, etc................... 7
SECTION 4. Removal............................... 7
SECTION 5. Resignation........................... 7
SECTION 6. Vacancies............................. 7
SECTION 7. Chairman of the Board................. 7
SECTION 8. President............................. 8
SECTION 9. Vice Presidents....................... 8
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
SECTION 10. Secretary............................. 8
SECTION 11. Treasurer............................. 8
Article V. INSURANCE POLICIES, CONTRACTS, CHECKS,
DRAFTS,BANK ACCOUNTS, ETC......... 8
SECTION 1. Insurance Policies, How Signed........ 8
SECTION 2. Checks, Drafts, etc................... 8
SECTION 3. Contracts, etc., How Executed......... 8
SECTION 4. Bank Accounts......................... 9
Article VI. INVESTMENTS........................... 9
SECTION 1. Investments in the Corporation's Name. 9
Article VII. CERTIFICATES AND TRANSFER OF SHARES... 9
SECTION 1. Certificates for Shares............... 9
SECTION 2. Transfer on the Books................. 9
SECTION 3. Lost or Destroyed Certificates........ 9
SECTION 4. Transfer Agents and Registrars........ 10
SECTION 5. Closing Stock Transfer Books.......... 10
Article VIII. CORPORATE RECORDS, REPRESENTATION OF
SHARES OF OTHER CORPORATIONS...... 10
SECTION 1. Inspection of Bylaws.................. 10
SECTION 2. Inspection of Corporate Records....... 10
SECTION 3. Annual Reports........................ 10
SECTION 4. Representation of Shares of
Other Corporations................ 10
Article IX. AMENDMENTS............................ 11
SECTION 1. Amendment of Bylaws................... 11
Article X. INDEMNIFICATION....................... 11
SECTION 1. Liability of Directors................ 11
SECTION 2. Indemnification of Agents............. 11
</TABLE>
ii
<PAGE>
BYLAWS
FOR THE REGULATION, EXCEPT AS
OTHERWISE PROVIDED BY STATUTE
OR ITS ARTICLES OF INCORPORATION,
OF
PACIFIC LIFE INSURANCE COMPANY
Article I.
OFFICES
-------
SECTION 1. Principal Executive Office. The principal executive office for
--------------------------
the transaction of business of the corporation is hereby fixed and located at
700 Newport Center Drive, City of Newport Beach, County of Orange, State of
California.
SECTION 2. Other Offices. Branch or subordinate offices may at any time
-------------
be established by the board of directors at any place or places where the
corporation is qualified to do business.
Article II.
MEETINGS OF SHAREHOLDERS
------------------------
SECTION 1. Place of Meetings. All meetings of shareholders shall be held
-----------------
at either the principal executive office of the corporation or any other place
within the State of California designated by the board of directors pursuant to
authority hereinafter granted to said board.
SECTION 2. Annual Meetings. The annual meetings of shareholders shall be
---------------
held at such date and time as designated by the board of directors.
SECTION 3. Notice of Meetings. Notice of all meetings of shareholders,
------------------
whether annual or special, shall be given in writing to the shareholders
entitled to vote. The notice shall be given by the secretary, assistant
secretary, or other persons charged with that duty. If there is no such
officer, or if he or she neglects or refuses this duty, notice may be given by
any director. Notice of any meeting of shareholders shall be given to each
shareholder entitled to notice not less than ten (10) nor more than sixty (60)
days before a meeting. Notice of any meeting of shareholders shall specify the
place, the day, and the hour of the meeting and the general nature of the
business to be transacted. A notice may be given to a shareholder either
personally, or by mail, or other means of written communication, charges
prepaid, addressed to the shareholder at his or her address appearing on the
books of the corporation or given by the shareholder to the corporation for the
purpose of notice.
SECTION 4. Special Meetings. Special meetings of shareholders, for any
----------------
purpose or purposes whatsoever, may be called at any time by the chief executive
officer or by the board of directors or by
1
<PAGE>
shareholders holding ten percent (10%) or more of the voting power of the
corporation. [Cal. Corp. Code (S)(S) 600, 601]/1/
SECTION 5. Adjourned Meetings and Notice Thereof. Any shareholders'
-------------------------------------
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shareholders who are either
present in person or represented by proxy thereat, but in the absence of a
quorum no other business may be transacted at any such meeting.
When any shareholders' meeting, either annual or special, is adjourned for
forty-five (45) days or more, notice of the adjourned meeting shall be given as
in the case of an original meeting. Save as aforesaid, it shall not be
necessary to give any notice of the time and place of the adjourned meeting or
of the business to be transacted at an adjourned meeting, other than by
announcement at the meeting at which such adjournment is taken.
SECTION 6. Consent to Shareholders' Meetings. The transactions of any
---------------------------------
meeting of shareholders, however called and noticed, shall be valid as though
had at a meeting duly held after regular call and notice if a quorum be present
either in person or by proxy, and if, either before or after the meeting, each
of the shareholders entitled to vote, not present in person or by proxy, sign a
written waiver of notice, or a consent to the holding of such a meeting, or an
approval of the minutes thereof. All such waivers, consents or approvals shall
be filed with the corporation records or made a part of the minutes of the
meeting.
Any action which may be taken at a meeting of the shareholders, may be
taken without a meeting if authorized by a writing signed by all of the holders
of shares who would be entitled to vote at a meeting for such purpose, and filed
with the secretary of the corporation.
SECTION 7. Voting Rights; Cumulative Voting. Only persons in whose names
--------------------------------
shares entitled to vote stand on the stock records of the corporation on the day
of any meeting of shareholders, unless some other day be fixed by the board of
directors for the determination of shareholders of record, then on such other
day, shall be entitled to vote at such meeting.
Every shareholder entitled to vote shall be entitled to one vote for each
of said shares and in any election of directors he or she shall have the right
to cumulate his or her votes as provided in Section 708, of the Corporations
Code of California.
SECTION 8. Quorum. The presence in person or by proxy of the holders of a
------
majority of the shares entitled to vote at any meeting shall constitute a quorum
for the transaction of business.
SECTION 9. Proxies. Every shareholder entitled to vote or execute consents
-------
shall have the right to do so either in person or by an agent or agents
authorized by a written proxy executed by such shareholder or his or her duly
authorized agent and filed with the secretary of the corporation; provided that
no such proxy shall be valid after the expiration of eleven (11) months from the
date of its execution unless the shareholder executing it specifies therein the
length of time for which such proxy is to continue in force. Any proxy duly
executed is not revoked, and continues in full force and effect, until an
instrument revoking it, or a duly executed proxy bearing a later date, is filed
with the secretary.
_______________
/1/ Citations are inserted for reference only, and do not constitute a part of
the Bylaws.
2
<PAGE>
SECTION 10. Conduct of Meeting. The chairman of the board shall preside
------------------
as chairman at all meetings of the shareholders. The chairman shall conduct
each such meeting in a businesslike and fair manner, but shall not be obligated
to follow any technical, formal or parliamentary rules or principles of
procedure. The chairman's rulings on procedural maters shall be conclusive and
binding on all shareholders unless at the time of a ruling a request for a vote
is made to the shareholders entitled to vote and which are represented in person
or by proxy at the meeting, in which case the decision of a majority of such
shareholders shall be conclusive and binding. Without limiting the generality
of the foregoing, the chairman shall have all the powers usually vested in the
chairman of a meeting of shareholders.
Article III.
BOARD OF DIRECTORS
------------------
SECTION 1. Powers. Subject to limitations of the articles of
------
incorporation and of these bylaws, and of any statutory provisions as to action
to be authorized or approved by the shareholders, all corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
corporation shall be controlled by or under the direction of, the board of
directors. [Corp. Code (S) 300] Without prejudice to such general powers, but
subject to the same limitations, it is hereby expressly declared that the
directors shall have the following powers, to-wit:
First. Corporate Business. To delegate the management of the day-to-day
----- ------------------
operation of the business and affairs of the corporation to persons,
provided that the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised under the ultimate direction of
the board of directors.
Second. Select and Remove Officers, Agents and Employees. To select and
------ ------------------------------------------------
remove all officers, agents and employees of the corporation, prescribe the
powers and duties for them as may not be inconsistent with law, the
articles of incorporation or these bylaws, fix their compensation and
require from them security for faithful service.
Third. Appoint Committees. To appoint, by resolution adopted by a
----- ------------------
majority of the authorized number of directors, one or more committees, each
consisting of two or more directors, and to fix, by resolution or
resolutions, the quorum for the transaction of business of committees, other
than the executive committee, which may be less than a majority, but not
less than one-third of the authorized number of committee members. Any such
committee, to the extent provided in the resolution of the board, shall have
all the authority of the board, except with respect to:
(a) The approval of any action for which shareholders' approval or
approval of the outstanding shares is required by law.
(b) The filing of vacancies on the board or in any committee.
(c) The fixing of compensation of the directors for serving on the board
or any committee.
(d) The amendment or repeal of bylaws or the adoption of new bylaws.
3
<PAGE>
(e) The amendment or repeal of any resolution of the board which by its
express terms is not so amendable or repealable.
(f) A dividend or other distribution to shareholders of the corporation,
except at a rate, in a periodic amount or within a price range set forth in
the articles or determined by the board.
(g) The appointment of other committees of the board or the members
thereof.
Fourth. Incur Indebtedness. To borrow money and incur indebtedness for
------ ------------------
the purposes of the corporation and to cause to be executed and delivered
therefor, in the corporate name, promissory notes, bonds, debentures, deeds
of trust, pledges, hypothecations, or other evidences of debt and
securities therefor.
SECTION 2. Number of Directors. The number of directors of the
-------------------
corporation shall be fixed from time to time exclusively pursuant to a
resolution adopted by a majority of the board, but shall consist of not less
than nine (9) nor more than seventeen (17) directors.
SECTION 3. Term of Office and Election. At each annual meeting of
---------------------------
shareholders, directors shall be elected to hold office until the next annual
meeting. All directors shall hold office for the term for which they are
elected and until their respective successors are elected and qualified, except
that each director who attains retirement age, as determined by the board of
directors, during the term for which elected shall hold office only until the
next annual meeting of shareholders following attainment of retirement age at
which time a person may be elected as director to complete the unexpired term of
office, if any, for which the director attaining retirement age had been
elected.
SECTION 4. Resignation. Any director may resign at any time by giving
-----------
written notice to the board of directors or to the chairman of the board, the
president or the secretary of the corporation. Any such resignation shall take
effect at the date of receipt of such notice or at any later time specified
therein; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 5. Vacancies. If any vacancies occur in the board of directors by
---------
reason of death, resignation, removal or otherwise, or if the authorized number
of directors shall be increased, the directors then in office shall continue to
act, and such vacancies and newly created directorships may be filled by a
majority of the directors then in office, although less than a quorum. A
director elected to fill a vacancy or a newly created directorship shall hold
office until his or her successor has been elected and qualified or until his or
her earlier death, resignation or removal. The shareholders may elect a
director at any time to fill any vacancy not filled by the directors. [Cal.
Corp. Code (S) 305]
SECTION 6. Place of Meetings. Regular meetings of the board of directors
-----------------
shall be held at any place within or without the State of California which has
been designated from time to time by resolution of the board of directors. In
the absence of such designation, regular meetings, other than the annual
meeting, shall be held at the principal executive office of the corporation,
unless not less than ten (10) days prior to said meeting a written notice
designating another location is mailed to each director at the address as shown
upon the records of the corporation. Special meetings of the board may be held
either at a place so designated or at the principal executive office of the
corporation.
4
<PAGE>
SECTION 7. Regular Annual Meetings. Unless otherwise provided by
-----------------------
resolution of the board of directors, immediately following each annual meeting
of shareholders, the board of directors shall hold a regular annual meeting for
the purpose of organization, election of officers, and the transaction of other
business. The regular annual meeting shall be held at the principal executive
office of the corporation or at such other place as designated by resolution of
the board. Notice of such meeting is hereby dispensed with.
SECTION 8. Other Regular Meetings. Other regular meetings of the board of
----------------------
directors shall be held without call, on such dates and at such times as may be
fixed by the board. Call and notice of all regular meetings of the board of
directors are hereby dispensed with.
SECTION 9. Special Meetings. Special meetings of the board of directors
----------------
for any purpose or purposes shall be called at any time by the chief executive
officer or, if he or she is absent or unable or refuses to act, by any three (3)
directors.
Special meetings of the board shall be held upon six days' notice by mail
or forty-eight (48) hours' notice delivered personally or by telephone,
including a voice messaging system or other system or technology designed to
record and communicate messages, telegraph, facsimile, electronic mail or other
electronic means. Any such notice shall be addressed or delivered to each
director at such director's address as it is shown upon the records of the
corporation or as may have been given to the corporation by the director for
purposes of notice or, if such address is not shown on such records or is not
readily ascertainable, at the place in which the meetings of the directors are
regularly held. [Cal. Corp. Code (S) 307]
Notice by mail shall be deemed to have been given at the time a written
notice is deposited in the United States mail, postage prepaid. Any other
written notice shall be deemed to have been given at the time it is personally
delivered to the recipient or is delivered to a common carrier for transmission,
or actually transmitted by the person given the notice by electronic means, to
the recipient. Oral notice shall be deemed to have been given at the time it is
communicated, in person or by telephone or wireless, to the recipient or to a
person at the office of the recipient who the person given the notice has reason
to believe will promptly communicate it to the recipient. [Cal. Corp. Code (S)
307]
SECTION 10. Adjournment. A majority of the directors present, whether or
-----------
not a quorum is present, may adjourn any directors meeting to another time and
place. Notice of the time and place of holding an adjourned meeting need not be
given to absent directors if the time and place be fixed at the meeting
adjourned, except as provided in the next sentence. If the meeting is adjourned
for more than twenty-four (24) hours, notice of any adjournment to another time
or place shall be given prior to the time of the adjourned meeting to the
directors who were not present at the time of the adjournment.
SECTION 11. Entry of Notice. Whenever any director has been absent from
---------------
any special meeting of the board of directors, an entry in the minutes to the
effect that notice has been duly given shall be prima facie evidence that due
notice of such special meeting was given to such director as required by law and
these bylaws.
SECTION 12. Waiver of Notice. The transactions of any meeting of the
----------------
board of directors, however called and noticed or wherever held, shall be as
valid as though had at a meeting duly held after regular call and notice if a
quorum be present and if, either before or after the meeting, each of the
directors not present signs a written waiver of notice of or consent to holding
such meeting or an approval of the
5
<PAGE>
minutes thereof. All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
SECTION 13. Quorum. A majority of the total number of directors then in
------
office constitutes a quorum of the board for the transaction of business, except
to adjourn, as provided in Section 10 of this Article III. Every act or
decision done or made by a majority of the directors present at a meeting duly
held at which a quorum is present shall be regarded as an act of the board,
unless a greater number be required by law or by the articles of incorporation.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for such meeting.
SECTION 14. Action by Telephonic Communications. Members of the board may
-----------------------------------
participate in a meeting through use of conference telephone or similar
communications equipment, and participation in a meeting pursuant to this
provision shall constitute presence in person at such meeting if all of the
following apply:
(a) Each member participating in the meeting can communicate with all of
the other members concurrently.
(b) Each member is provided the means of participating in all matters
before the board, including the capacity to propose, or to interpose an
objection, to a specific action to be taken by the corporation.
(c) The corporation adopts and implements some means of verifying both of
the following:
(i) A person communicating by telephone, electronic video screen, or
other communications equipment is a director entitled to participate
in the board meeting; and
(ii) All statements, questions, actions, or votes were made by
that director and not by another person not permitted to participate
as a director.
SECTION 15. Action Without a Meeting. Any action required or permitted to
------------------------
be taken by the board may be taken without a meeting, if all members of the
board shall individually or collectively consent in writing to that action.
Such consent or consents shall have the same effect as a unanimous vote of the
board and shall be filed with the minutes of the proceedings of the board.
SECTION 16. Fees and Compensation. Directors and members of committees
---------------------
may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by the board.
Directors who are salaried officers of the corporation shall not receive
additional fees or compensation for their services as directors. Nothing herein
contained shall be construed to preclude any director from serving the
corporation in any other capacity as an officer, agent, employee, or otherwise,
and receiving compensation therefor.
6
<PAGE>
Article IV.
OFFICERS
--------
SECTION 1. Number and Qualifications. The officers of the corporation
-------------------------
shall be a chairman of the board, a president, a secretary, a treasurer, and
such other officers as may be appointed in accordance with the provisions of
Section 3 of this Article IV. One person may hold one or more offices and
perform the duties thereof. The president or chairman of the board shall be
designated by the board as the chief executive officer of the corporation, and
one officer shall be designated by the board as the chief financial officer of
the corporation. [Cal. Corp. Code (S) 312(a)]
SECTION 2. Election, Term of Office. Each officer, except such officers
------------------------
as may be appointed in accordance with the provisions of Section 3 of this
Article IV, shall be chosen annually by and serve at the pleasure of the board
of directors and shall hold their respective office until their resignation,
removal or other disqualification from service or until their successor shall
have been duly chosen and qualified. [Cal. Corp. Code (S) 312(b)]
SECTION 3. Other Officers, etc. The board of directors may elect, and may
-------------------
empower the chief executive officer to appoint, such other officers as the
business of the corporation may require, each of whom shall hold office for such
period, have such authority and perform such duties as are provided in these
bylaws or as the board may from time to time determine. [Cal. Corp. Code (S)
312(b)]
SECTION 4. Removal. Any officer chosen under Section 2 of this Article IV
-------
may be removed, either with or without cause, by a majority vote of the
directors present at any regular meeting of the board of directors. Any
officer, except an officer chosen by the board of directors pursuant to Section
2 of this Article IV, may also be removed at any time, with or without cause, by
the chief executive officer, if such powers of removal have been conferred by
the board of directors.
SECTION 5. Resignation. Any officer may resign at any time by giving
-----------
written notice to the board of directors or to the chairman of the board or to
the secretary of the corporation. Any such resignation shall take effect at the
date of receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 6. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these bylaws for regular election or appointment to such
office.
SECTION 7. Chairman of the Board. The chairman of the board shall, if
---------------------
present, preside at all meetings of the board and exercise and perform such
other powers and duties as may be from time to time assigned by the board.
SECTION 8. President. The president shall have such powers and duties as
---------
may be prescribed from time to time by the board of directors, the chairman of
the board, or elsewhere in these bylaws. In the absence or disability of the
chairman of the board, he or she shall exercise the powers and perform the
duties of the chairman of the board.
7
<PAGE>
SECTION 9. Vice Presidents. Vice presidents shall have such powers and
---------------
perform such duties as may be prescribed from time to time by the chief
executive officer, the board of directors, or elsewhere in these bylaws.
SECTION 10. Secretary. The secretary shall keep, or cause to be kept, a
---------
book of minutes at the principal executive office, or such other place as the
board of directors may order, of all meetings of the directors, committees and
shareholders with the time and place of holding, whether regular or special, and
if special, how authorized, the notice thereof given, the names of those present
at directors' and committee meetings, the number of shareholders present or
represented at shareholders' meetings and the proceedings thereof.
The secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the board and any committees thereof required by these
bylaws or by law to be given, shall keep the seal of the corporation in safe
custody, and shall have such other powers and perform such other duties as may
be prescribed by the board.
SECTION 11. Treasurer. The treasurer shall have custody of all the funds,
---------
securities and other valuables of the corporation which may have or shall come
into his or her hands. He or she shall have such powers and perform such duties
as may be prescribed by the chief executive officer, the board of directors or
elsewhere in these bylaws.
Article V.
INSURANCE POLICIES, CONTRACTS, CHECKS,
DRAFTS, BANK ACCOUNTS, ETC.
---------------------------
SECTION 1. Insurance Policies, How Signed. All policies issued by this
------------------------------
corporation shall be signed by the chairman or president and countersigned by
the secretary, both either personally or by facsimile.
SECTION 2. Checks, Drafts, etc. All checks, drafts or other orders for
-------------------
payment of money, notes or other evidences of indebtedness, except as in these
bylaws otherwise provided, issued in the name of or payable to the corporation
shall be signed or endorsed by such person or persons and in such manner as from
time to time shall be determined by resolution of the board of directors or by
resolution of a committee thereof, if the board of directors delegate such
authority to it.
SECTION 3. Contracts, etc., How Executed. The board of directors, or a
-----------------------------
committee thereof if such authority is delegated to it by the board of
directors, except as by law or in these bylaws otherwise provided, may authorize
any officer or officers, agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to special instances; and unless so
authorized, no officer, agent or employee shall have any power or authority to
bind the corporation by any contract or engagement or to pledge its credit to
render it liable for any purpose or to any amount.
SECTION 4. Bank Accounts. All funds of the corporation not otherwise
-------------
employed shall be deposited from time to time to the credit of the corporation,
and in its name, in such banks, trust companies, or other depositories as the
board of directors may select or as may be selected by any committee, officer or
officers, agent or agents of the corporation to whom such powers may from time
to time be delegated by the
8
<PAGE>
board of directors; and for the purpose of such deposits the chairman of the
board, the president, any vice president, the secretary, the treasurer, or any
other officer or agent or employee of the corporation to whom such power may be
delegated by the board of directors or by a committee thereof, if such authority
be delegated to it by the board of directors, may endorse, assign and deliver
checks, drafts and other orders for the payments of monies which are payable to
the order of the corporation.
Article VI.
INVESTMENTS
-----------
SECTION 1. Investments in the Corporation's Name. All investments of the
-------------------------------------
corporation shall be made in the name of Pacific Life Insurance Company or its
nominee.
Article VII.
CERTIFICATES AND TRANSFER OF SHARES
-----------------------------------
SECTION 1. Certificates for Shares. Certificates for shares shall be of
-----------------------
such form and device as the board of directors may designate and shall state the
name of the record holder of the shares represented thereby; its number; date of
issuance; the number of shares for which it is issued; the par value; a
statement of the rights, privileges, preferences and restrictions, if any; a
statement as to redemption or conversion, if any; a statement of liens or
restrictions upon transfer or voting, if any; if the shares be assessable, or,
if assessments are collectible by personal action, a plain statement of such
facts.
Every certificate for shares must be signed in the name of the corporation
by the chairman, and the secretary or an assistant secretary or must be
authenticated by facsimiles of the signatures of the chairman and secretary or
by a facsimile of the signature of its chairman and the written signature of its
secretary or an assistant secretary.
SECTION 2. Transfer on the Books. Upon surrender to the secretary or
---------------------
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
SECTION 3. Lost or Destroyed Certificates. Any person claiming a
------------------------------
certificate of stock to be lost or destroyed shall make an affidavit or
affirmation of that fact and advertise the same in such a manner as the board of
directors may require, and shall, if the directors so require, give the
corporation a bond of indemnity, in form, in such amount and with one or more
sureties satisfactory to the board, whereupon a new certificate may be issued of
the same tenor and for the same number of shares as the one alleged to be lost
or destroyed.
SECTION 4. Transfer Agents and Registrars. The board of directors may
------------------------------
appoint one or more transfer agents or transfer clerks, and one or more
registrars, which shall be an incorporated bank or trust company -- either
domestic or foreign, who shall be appointed at such times and places as the
requirements of the corporation may necessitate and the board of directors may
designate.
9
<PAGE>
SECTION 5. Closing Stock Transfer Books. The board of directors may close
----------------------------
the transfer books in their discretion for a period not exceeding thirty (30)
days preceding any meeting, annual or special, of the shareholders, or the day
appointed for the payment of a dividend.
Article VIII.
CORPORATE RECORDS, REPRESENTATION OF
SHARES OF OTHER CORPORATIONS
----------------------------
SECTION 1. Inspection of Bylaws. The corporation shall keep in its
--------------------
principal executive office for the transaction of business the original or a
copy of these bylaws as amended or otherwise altered to date, certified by the
secretary, which shall be open to inspection by the shareholders at all
reasonable times during office hours.
SECTION 2. Inspection of Corporate Records. (a) The accounting books and
-------------------------------
records and minutes of proceedings of the shareholders and the board and
committees of the board of the corporation shall be open to inspection upon the
written demand on the corporation of any shareholder at any reasonable time
during usual business hours, for a purpose reasonably related to such
shareholder's interests. The right of inspection created by this subsection
shall extend to the records of each subsidiary of the corporation keeping any
such records in California or having its principal executive office in
California. [See Cal. Corp. Code (S) 1601]
---
(b) Such inspection may be made in person or by agent or attorney, and the
right of inspection includes the right to copy and make extracts. [See Cal.
---
Corp. Code (S) 1601]
(c) Demand of inspection shall be made in writing upon the chief executive
officer, secretary or assistant secretary of the corporation. [Cal. Corp. Code
(S) 1601]
SECTION 3. Annual Reports. The making of annual reports to shareholders
--------------
is hereby waived.
SECTION 4. Representation of Shares of Other Corporations. The chief
----------------------------------------------
executive officer or any other officer is authorized to vote, represent and
exercise on behalf of the corporation all rights incident to any and all shares
or other evidence of ownership of any other business entities such as
corporations, business trusts and partnerships standing in the name of the
corporation. The authority herein granted to said officers to vote or represent
on behalf of the corporation any and all such evidences of ownership held by the
corporation may be exercised either by such officers in person or by any person
authorized so to do by proxy or power of attorney duly executed by said
officers.
Article IX.
AMENDMENTS
----------
SECTION 1. Amendment of Bylaws. A bylaw or bylaws may be adopted,
-------------------
amended, or repealed by the vote of shareholders entitled to exercise a
majority of the voting power of the corporation or by the written assent of
such shareholders. Subject to the rights of the shareholders as provided in
this Section 1 of this Article IX, a bylaw or bylaws, other than a bylaw or
amendment thereof changing the authorized
10
<PAGE>
number of directors, may be adopted, amended, or repealed by the board of
directors. [Cal. Corp. Code (S) 211]
Article X.
INDEMNIFICATION
---------------
SECTION 1. Liability of Directors. The liability of the directors of the
----------------------
corporation for monetary damages shall be eliminated to the fullest extent
permissible under California law. [Cal. Corp. Code (S)(S) 204(a)(10), 309]
SECTION 2. Indemnification of Agents. The corporation is authorized to
-------------------------
provide indemnification of agents (as defined in Section 317 of the California
Corporations Code) through agreements with agents, vote of shareholders or
disinterested directors, or otherwise, to the fullest extent possible under
California Law, provided that any excess indemnification permitted by Section
317, involving a breach of duty to the corporation and its shareholders shall be
subject to the limits of such excess indemnification set forth in Section 204 of
the California Corporations Code and shall be paid only with such funds as may
be distributed as dividends to shareholders under applicable law. [Cal. Corp.
Code (S)(S) 204(a)(11), 317]
11
<PAGE>
EXHIBIT 99.8
Fund Participation Agreement
<PAGE>
FUND PARTICIPATION AGREEMENT
This AGREEMENT is made this 6th day of November, 1992, by and between Pacific
Mutual Life Insurance Company (the "Company"), a life insurance company
domiciled in California, on its behalf and on behalf of the segregated asset
accounts of the Company listed on Exhibit A to this Agreement (the "Separate
Accounts"); Pacific Select Fund (the "Fund"), a Massachusetts business trust;
and Pacific Equities Network ("Distributor"), a California corporation.
WITNESSETH
WHEREAS, the Fund is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended ("1940 Act") and the Fund is authorized to issue
separate classes of shares of beneficial interests ("shares"), each representing
an interest in a separate portfolio of assets known as a "series" and each
series has its own investment objective, policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its series to
separate accounts of insurance companies that fund variable life insurance
policies and variable annuity contracts ("Variable Contracts") and to serve as
an investment medium for Variable Contracts offered by insurance companies that
have entered into participation agreements substantially similar to this
agreement ("Participating Insurance Companies"), and the Fund is currently
comprised of nine separate series, and other series may be established in the
future; and
WHEREAS, the Fund has obtained an order from the SEC granting Participating
Insurance Companies, separate accounts funding Variable Contracts of
Participating Insurance Companies, and the Fund exemptions from the provisions
of sections 9(a), 13(a), 15(a), and 15(b) of the 1940 Act and paragraph (b)(15)
of Rule 6e-3(T) under the 1940 Act, to the extent necessary to permit such
persons to rely on the exemptive relief provided under paragraph (b)(15) of Rule
6e-3(T), even though shares of the Fund may be offered to and held by separate
accounts funding variable annuity contracts or scheduled or flexible premium
variable life insurance contracts of both affiliated and unaffiliated life
insurance companies (the "Shared Funding Exemptive Order"); and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC under the
Securities Exchange Act of 1934, as amended ("1934 Act"), and is a member in
good standing of the National Association of Securities Dealers, Inc. ("NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company wishes to purchase shares of one or more of the Fund's series on
behalf of its Separate Accounts to serve as an investment medium for Variable
Contracts funded by the Separate Accounts, and the Distributor is authorized to
sell shares of the Fund's series;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises and
covenants hereinafter set forth, the parties hereby agree as follows:
ARTICLE I. Sale of Fund Shares
1
<PAGE>
1.1. The Distributor agrees to sell to the Company those shares of the series
offered and made available by the Fund and identified on Exhibit B ("Series")
that the Company orders on behalf of its Separate Accounts, and agrees to
execute such orders on each day on which the Fund calculates its net asset value
pursuant to rules of the SEC ("business day") at the net asset value next
computed after receipt and acceptance by the Fund or its agent of the order for
the shares of the Fund.
1.2. The Fund agrees to make available on each business day shares of the
Series for purchase at the applicable net asset value per share by the Company
on behalf of its Separate Accounts' provided, however, that the Board of
Trustees of the Fund may refuse to sell shares of any Series to any person, or
suspend or terminate the offering of shares of any Series, if such action is
required by law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the Trustees, acting in good faith and in light of the
Trustees' fiduciary duties under applicable law, necessary in the best interests
of the shareholders of any Series.
1.3. The Fund and the Distributor agree that shares of the Series of the Fund
will be sold only to Participating Insurance Companies, their separate accounts,
and other persons consistent with each Series being adequately diversified
pursuant to Section 817(h) of the Internal Revenue Code of 1986, as amended
("Code") and the regulations thereunder. No shares of any Series will be sold
directly to the general public.
1.4. The Fund and the Distributor will not sell shares of the Series to any
insurance company or separate account unless an agreement containing provisions
substantially the same as this Agreement is in effect to govern such sales.
1.5. Upon receipt of a request for redemption in proper form from the Company,
the Fund agrees to redeem any full or fractional shares of the Series held by
the Company, ordinarily executing such requests on each business day at the net
asset value next computed after receipt and acceptance by the Fund or its agent
of the request for redemption, except that the Fund reserves the right to
suspend the right of redemption, consistent with Section 22(e) of the 1940 Act
and any rules thereunder. Such redemption shall be paid consistent with
applicable rules of the SEC and procedures and policies of the Fund as described
in the current prospectus.
1.6. The Company agrees to purchase and redeem the shares of each Series in
accordance with the provisions of the current prospectus for the Fund.
1.7. The Company shall pay for shares of the Series on the same day that it
places an order to purchase shares of the Series. Payment shall be in federal
funds transmitted by wire.
1.8. Issuance and transfer of shares of the Series will be by book entry only
unless otherwise agreed by the Fund. Stock certificates will not be issued to
the Company or the Separate Accounts unless otherwise agreed by the Fund.
Shares ordered from the Fund will be recorded in an appropriate title for the
Separate Accounts or the appropriate subaccounts of the Separate Accounts.
1.9. The Fund shall promptly furnish notice (by wire or telephone, followed by
written confirmation) to the Company of any income dividends or capital gain
distributions payable on the
2
<PAGE>
shares of the Series. The Company hereby elects to reinvest in the Series all
such dividends and distributions as are payable on a Series' shares and to
receive such dividends and distributions in additional shares of that Series.
The Company reserves the right to revoke this election in writing and to receive
all such dividends and distributions in cash. The Fund shall notify the Company
of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall instruct its recordkeeping agent to advise the Company on
each business day of the net asset value per share for each Series as soon as
reasonably practical after the net asset value per share is calculated.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it is taxed as an
insurance company under Subchapter L of the Code.
2.2. The Company represents and warrants that it has legally and validly
established each of the Separate Accounts as a segregated asset account under
the ________________________ Insurance Code, and that each of the Separate
Accounts is a validly existing segregated asset account under applicable federal
and state law.
2.3. The Company represents and warrants that the Variable Contracts issued by
the Company or interests in the Separate Accounts under such Variable Contracts
(1) are or, prior to issuance, will be registered as securities under the
Securities Act of 1933 ("1933 Act") or, alternatively (2) are not registered
because they are properly exempt from registration under the 1933 Act or will be
offered exclusively in transactions that are properly exempt from registration
under the 1933 Act.
2.4. The Company represents and warrants that each of the Separate Accounts (1)
has been registered as a unit investment trust in accordance with the provisions
of the 1940 Act or, alternatively (2) has not been registered in proper reliance
upon an exclusion from registration under the 1940 Act.
2.5. The Company represents that it believes, in good faith, that the Variable
Contracts issued by the Company are currently treated as annuity contracts or
life insurance policies (which may include modified endowment contracts),
whichever is appropriate, under applicable provisions of the Code.
2.6. The Company represents and warrants that any of its Separate Accounts that
fund variable life insurance contracts and that are registered with the SEC as
investment companies rely on the exemptions provided by Rule 6e-3(T), or any
successor thereto, and not on Rule 6e-2 under the 1940 Act.
2.7. The Fund represents and warrants that it is duly organized as a business
trust under the laws of the Commonwealth of Massachusetts, and is in good
standing under applicable law.
2.8. The Fund represents and warrants that the shares of the Series are duly
authorized for issuance
3
<PAGE>
in accordance with applicable law and that the Fund is registered as an open-end
management investment company under the 1940 Act.
2.9. The Fund represents that it believes, in good faith, that the Series
currently comply with the diversification provisions of Section 817(h) of the
Code and the regulations issued thereunder relating to the diversification
requirements for variable life insurance policies and variable annuity
contracts.
2.10. The Distributor represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC.
ARTICLE III. General Duties
3.1. The Fund shall take all such actions as are necessary to permit the sale
of the shares of each Series to the Separate Accounts, including maintaining its
registration as an investment company under the 1940 Act, and registering the
shares of the Series sold to the Separate Accounts under the 1933 Act for so
long as required by applicable law. The Fund shall amend its Registration
Statement filed with the SEC under the 1933 Act and the 1940 Act from time to
time as required in order to effect the continuous offering of the shares of the
Series. The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states to the extent deemed necessary by the Fund
or the Distributor.
3.2. The Fund shall make every effort to maintain qualification of each Series
as a Regulated Investment Company under Subchapter M of the Code (or any
successor or similar provision) and shall notify the Company immediately upon
having a reasonable basis for believing that a Series has ceased to so qualify
or that it might not so qualify in the future.
3.3. The Fund shall make every effort to enable each Series to comply with the
diversification provisions of Section 817(h) of the Code and the regulations
issued thereunder relating to the diversification requirements for variable life
insurance policies and variable annuity contracts and any prospective amendments
or other modifications to Section 817 or regulations thereunder, and shall
notify the Company immediately upon having a reasonable basis for believing that
any Series has ceased to comply.
3.4. The Fund shall be entitled to receive and act upon advice of its General
Counsel or its outside counsel in meeting the requirements specified in Sections
3.2 and 3.3 hereof.
3.5 The Company shall take all such actions as are necessary under applicable
federal and state law to permit the sale of the Variable Contracts issued by the
Company, including registering each Separate Account as an investment company to
the extent required under the 1940 Act, and registering the Variable Contracts
or interests in the Separate Accounts under the Variable Contracts to the extent
required under the 1933 Act, and obtaining all necessary approvals to offer the
Variable Contracts from state insurance commissioners.
3.6. The Company shall make every effort to maintain the treatment of the
Variable Contracts issued
4
<PAGE>
by the Company as annuity contracts or life insurance policies, whichever is
appropriate, under applicable provisions of the Code, and shall notify the Fund
and the Distributor immediately upon having a reasonable basis for believing
that such Variable Contracts have ceased to be so treated or that they might not
be so treated in the future.
3.7. The Company shall offer and sell the Variable Contracts issued by the
Company in accordance with applicable provisions of the 1933 Act, the 1934 Act,
the 1940 Act, the NASD Rules of Fair Practice, and state law respecting the
offering of variable life insurance policies and variable annuity contracts.
3.8. The Distributor shall sell and distribute the shares of the Series of the
Fund in accordance with the applicable provisions of the 1933 Act, the 1934 Act,
the 1940 Act, the NASD Rules of Fair Practice, and state law.
3.9. A majority of the Board of Trustees of the Fund shall consist of persons
who are not "interested persons" of the Fund ("disinterested Trustees"), as
defined by Section 2(a)(19) of the 1940 Act, except that if this provision of
this Section 3.9 is not met by reason of the death, disqualification, or bona
fide resignation of any Trustee or Trustees, then the operation of this
provision shall be suspended (a) for a period of 45 days if the vacancy or
vacancies may be filled by the Fund's Board; (b) for a period of 60 days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
3.10. The Company agrees to provide, as promptly as possible, notice to the
Fund and to the Distributor if the Company has reason to know about a meeting of
some or all of the owners of the Variable Contracts or shareholders of the Fund,
where the agenda or purpose of the meeting relates, in whole or in part, to the
Fund and that has not been called by the Fund's Board of Trustees (and which
shall not include a vote of Variable Contract Owners having an interest in a
Separate Account to substitute shares of another investment company for
corresponding shares of the Fund or a Series, as described in Section 9(e) and
to which the notice provision of Section 9.2 shall apply). In such an event,
the Company agrees to distribute proxy statements and any additional
solicitation materials upon the request of the Fund or the Distributor to the
owners of the Variable Contracts issued by the Company at least 30 days prior to
the meeting. The Company further agrees that it shall take no action, directly
or indirectly, in furtherance of shareholders of the Fund or Contract Owners
taking any action with respect to the Fund by written consent and without a
meeting.
3.11. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities having jurisdiction (including, without
limitation, the SEC, the NASD, and state insurance regulators) and shall permit
such authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
ARTICLE IV. Potential Conflicts
4.1. The Fund's Board of Trustees shall monitor the Fund for the existence of
any material irreconcilable conflict (1) between the interests of owners of
variable annuity contracts and variable
5
<PAGE>
life insurance policies, and (2) between the interests of owners of Variable
Contracts ("Variable Contract Owners") issued by different Participating
Insurance Companies that invest in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretive letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of the Fund or any Series are being managed; or (e) a decision by a
Participating Insurance Company to disregard the voting instructions of Variable
Contract Owners.
4.2. The Company agrees that it shall be responsible for reporting any
potential or existing conflicts to the Fund's Board of Trustees. The Company
will be responsible for assisting the Board of Trustees of the Fund in carrying
out its responsibilities under this agreement, by providing the Board with all
information reasonably necessary for the Board to consider any issues raised.
This includes, but is not limited to, an obligation by the Company to inform the
Board whenever Variable Contract Owner voting instructions are disregarded. The
Company shall carry out its responsibility under this Section 4.2 with a view
only to the interests of the Variable Contract Owners.
4.3. The Company agrees that in the event that it is determined by a majority
of the Board of Trustees of the Fund or a majority of the Fund's disinterested
Trustees that a material irreconcilable conflict exists, the Company shall, to
the extent reasonably practicable (as determined by a majority of the
disinterested Trustees of the Board of the Fund), take whatever steps are
necessary to eliminate the irreconcilable material conflict, including: (1)
withdrawing the assets allocable to some or all of the Separate Accounts from
the Fund or any Series and reinvesting such assets in a different investment
medium, which may include another series of the Fund, or submitting the question
of whether such segregation should be implemented to a vote of all affected
Variable Contract Owners and, as appropriate, segregating the assets of any
appropriate group (i.e., Contract Owners of Variable Contracts issued by one or
more Participating Insurance Companies) that votes in favor of such segregation,
or offering to the affected Variable Contract Owners the option of making such a
change; and (2) establishing a new registered management investment company or
managed separate account. If a material irreconcilable conflict arises because
of the Company's decision to disregard Variable Contract Owners' voting
instructions and that decision represents a minority position or would preclude
a majority vote, the Company shall be required, at the Fund's election, to
withdraw the Separate Accounts' investment in the Fund, and no charge or penalty
will be imposed as a result of such withdrawal. The Fund shall neither be
required to bear the costs of remedial actions taken to remedy a material
irreconcilable conflict nor shall it be requested to pay a higher investment
advisory fee for the sole purpose of covering such costs. In addition, no
Variable Contract Owner shall be required directly or indirectly to bear the
direct or indirect costs of remedial actions taken to remedy a material
irreconcilable conflict. A new funding medium for any Variable Contract need
not be established pursuant to this Section 4.3, if an offer to do so has been
declined by vote of a majority of Variable Contract Owners materially adversely
affected by the irreconcilable material conflict. All reports received by the
Fund's Board of Trustees of potential or existing conflicts, and all Board
action with regard to determining the existence of a conflict, notifying
Participating Insurance Companies and the Fund's investment adviser of a
conflict, and determining whether any proposed action adequately remedies a
conflict, shall be properly recorded
6
<PAGE>
in the minutes of the Board of Trustees of the Fund or other appropriate
records, and such minutes or other records shall be made available to the SEC
upon request. The Company and the Fund shall carry out their responsibilities
under this Section 4.3 with a view only to the interests of the Variable
Contract Owners.
4.4. The Board of Trustees of the Fund shall promptly notify the Company in
writing of its determination of the existence of an irreconcilable material
conflict and its implications.
ARTICLE V. Prospectuses and Proxy Statements; Voting
5.1. The Company shall distribute such prospectuses, proxy statements and
periodic reports of the Fund to the owners of Variable Contracts issued by the
Company as required to be distributed to such Variable Contract Owners under
applicable federal or state law.
5.2. The Distributor shall provide the Company with as many copies of the
current prospectus of the Fund as the Company may reasonably request. If
requested by the Company in lieu thereof, the Fund shall provide such
documentation (including a final copy of the Fund's prospectus as set in type or
in camera-ready copy) and other assistance as is reasonably necessary in order
for the Company to print together in one document the current prospectus for the
Variable Contracts issued by the Company and the current prospectus for the
Fund. The Fund shall bear the expense of printing copies of its current
prospectus that will be distributed to existing Variable Contract Owners, and
the Company shall bear the expense of printing copies of the Fund's prospectus
that are used in connection with offering the Variable Contracts issued by the
Company.
5.3. The Fund and the Distributor shall provide (1) at the Fund's expense, one
copy of the Fund's current Statement of Additional Information ("SAI") to the
Company and to any owner of a Variable Contract issued by the Company who
requests such SAI, (2) at the Company's expense, such additional copies of the
Fund's current SAI as the Company shall reasonably request and that the Company
shall require in accordance with applicable law in connection with offering the
Variable Contracts issued by the Company.
5.4. The Fund, at its expense, shall provide the Company with copies of its
proxy material, periodic reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably require for
purposes of distributing to owners of Variable Contracts issued by the Company.
The Fund, at the Company's expense, shall provide the Company with copies of its
periodic reports to shareholders and other communications to shareholders in
such quantity as the Company shall reasonably request for use in connection with
offering the Variable Contracts issued by the Company. If requested by the
Company in lieu thereof, the Fund shall provide such documentation (including a
final copy of the Fund's proxy materials, periodic reports to shareholders and
other communications to shareholders, as set in type or in camera-ready copy)
and other assistance as reasonably necessary in order for the Company to print
such shareholder communications for distribution to owners of Variable Contracts
issued by the Company.
5.5. For so long as the SEC interprets the 1940 Act to require pass-through
voting by Participating Insurance Companies whose Separate Accounts are
registered as investment companies under the
7
<PAGE>
1940 Act, the Company shall vote shares of each Series of the Fund held in a
Separate Account or a subaccount thereof, whether or not registered under the
1940 Act, at regular and special meetings of the Fund in accordance with
instructions timely received by the Company (or its designated agent) from
owners of Variable Contracts funded by such Separate Account or subaccount
thereof having a voting interest in the Series. The Company shall vote shares
of a Series of the Fund held in a Separate Account or a subaccount thereof that
are attributable to the Variable Contracts as to which no timely instructions
are received, as well as shares held in such Separate Account or subaccount
thereof that are not attributable to the Variable Contracts and owned
beneficially by the Company (resulting from charges against the Variable
Contracts or otherwise), in the same proportion as the votes cast by owners of
the Variable Contracts funded by that Separate Account or subaccount thereof
having a voting interest in the Series from whom instructions have been timely
received. The Company shall vote shares of each Series of the Fund held in its
general account, if any, in the same proportion as the votes cast with respect
to shares of the Series held in all Separate Accounts of the Company or
subaccounts thereof, in the aggregate.
5.6. The Fund shall disclose in its prospectus that (1) shares of the Series of
the Fund are offered to affiliated or unaffiliated insurance company separate
accounts which fund both annuity and life insurance contracts, (2) due to
differences in tax treatment or other considerations, the interests of various
Variable Contract Owners participating in the Fund or a Series might at some
time be in conflict, and (3) the Board of Trustees of the Fund will monitor for
any material conflicts and determine what action, if any, should be taken. The
Fund hereby notifies the Company that prospectus disclosure may be appropriate
regarding potential risks of offering shares of the Fund to separate accounts
funding both variable annuity contracts and variable life insurance policies and
to separate accounts funding Variable Contracts of unaffiliated life insurance
companies.
ARTICLE VI. Sales Material and Information
6.1. The Company shall furnish, or shall cause to be furnished, to the Fund or
its designee, each piece of sales literature or other promotional material in
which the Fund (or any Series thereof) or its investment adviser or the
Distributor is named, and no such sales literature or other promotional material
shall be used without the approval of the Fund and the Distributor or the
designee of either.
6.2. The Company agrees that neither it nor any of its affiliates or agents
shall give any information or make any representations or statements on behalf
of the Fund or concerning the Fund other than the information or representations
contained in the Registration Statement or prospectus for the Fund shares, as
such registration statement and prospectus may be amended or supplemented from
time to time, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material approved by the Fund or its designee
and by the Distributor or its designee, except with the permission of the Fund
or its designee and the Distributor or its designee.
6.3. The Fund or the Distributor or the designee of either shall furnish to the
Company or its designee, each piece of sales literature or other promotional
material in which the Company or its Separate Accounts are named, and no such
material shall be used without the approval of the Company or its designee.
8
<PAGE>
6.4. The Fund and the Distributor agree that each and the affiliates and agents
of each shall not give any information or make any representations on behalf of
the Company or concerning the Company, the Separate Accounts, or the Variable
Contracts issued by the Company, other than the information or representations
contained in a registration statement or prospectus for such Variable Contracts,
as such registration statement and prospectus may be amended or supplemented
from time to time, or in reports for the Separate Accounts or prepared for
distribution to owners of such Variable Contracts, or in sales literature or
other promotional material approved by the Company or its designee, except with
the permission of the Company.
6.5. The Fund will provide to the Company at least one complete copy of all
prospectuses, Statements of Additional Information, reports, proxy statements
and other voting solicitation materials, and all amendments and supplements to
any of the above, that relate to the Fund or its shares, promptly after the
filing of such document with the SEC or other regulatory authorities.
6.6. The Company will provide to the Fund at least one complete copy of all
prospectuses (which shall include an offering memorandum if the Variable
Contracts issued by the Company or interests therein are not registered under
the 1933 Act), Statements of Additional Information, reports, solicitations for
voting instructions, and all amendments or supplements to any of the above, that
relate to the Variable Contracts issued by the Company or the Separate Accounts
promptly after the filing of such document with the SEC or other regulatory
authority.
6.7. For purposes of this Article VI, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, computerized media, or other public
media), sales literature (i.e., any written communication distributed or made
generally available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees.
ARTICLE VII. Indemnification
7.1. Indemnification By The Company
7.1(a). The Company agrees to indemnify and hold harmless the Fund, each of its
Trustees and officers, any affiliated person of the Fund within the meaning of
Section 2(a)(3) of the 1940 Act, and the Distributor (collectively, the
"Indemnified Parties" for purposes of this Section 7.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation expenses (including legal and
other expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or litigation expenses are related to the sale or
acquisition of the Fund's shares or the Variable Contracts issued by the Company
and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material
9
<PAGE>
fact contained in the registration statement or prospectus (which shall include
an offering memorandum) for the Variable Contracts issued by the Company or
sales literature for such Variable Contracts (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or on behalf
of the Fund for use in the registration statement or prospectus for the Variable
Contracts issued by the Company or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of such Variable
Contracts or Fund shares; or
(ii) arise out of or as a result of any statement or representation (other than
statements or representations contained in the registration statement,
prospectus or sales literature of the Fund not supplied by the Company or
persons under its control) or wrongful conduct of the Company or any of its
affiliates, employees or agents with respect to the sale or distribution of the
Variable Contracts issued by the Company or the Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or sales
literature of the Fund or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading if
such a statement or omission was made in reliance upon information furnished to
the Fund by or on behalf of the Company;
except to the extent provided in Sections 7.1(b) and 7.1(c) hereof.
7.1(b). The Company shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation expenses
to which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his or her
duties or by reason of his or her reckless disregard of obligations or duties
under this Agreement or to the Fund.
7.1(c). The Company shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such Party
shall have notified the Company in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after such Party
shall have received notice of such service on any designated agent), but failure
to notify the Company of any such claim shall not relieve the Company from any
liability which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In case
any such action is brought against the Indemnified Parties, the Company shall be
entitled to participate, at its own expense, in the defense of such action. The
Company also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Company to
such party of the Company's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Company will not be liable to such party under this
Agreement for
10
<PAGE>
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
7.1(d). The Indemnified Parties shall promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Variable Contracts issued by the
Company or the operation of the Fund.
7.2 Indemnification By the Distributor
7.2(a). The Distributor agrees to indemnify and hold harmless the Company and
each of its directors and officers and each person, if any, who is an affiliated
person of the Company within the meaning of Section 2(a)(3) of the 1940 Act
(collectively, the "Indemnified Parties" for purposes of this Section 7.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Distributor) or litigation
expenses (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or litigation expenses are related to
the sale or acquisition of the Fund's shares or the Variable Contracts issued by
the Company and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement or
prospectus or sales literature of the Fund (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Distributor or the Fund
or the designee of either by or on behalf of the Company for use in the
registration statement or prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection with the sale of the
Variable Contracts issued by the Company or Fund shares; or
(ii) arise out of or as a result of any statement or representation (other than
statements or representations contained in the registration statement,
prospectus or sales literature for the Variable Contracts not supplied by the
Distributor or any employees or agents thereof) or wrongful conduct of the Fund
or Distributor, or the affiliates, employees, or agents of the Fund or the
Distributor with respect to the sale or distribution of the Variable Contracts
issued by the Company or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or sales
literature covering the Variable Contracts issued by the Company, or any
amendment thereof or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statement or statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to the Company by or on
behalf of the Fund;
except to the extent provided in Sections 7.2(b) and 7.2(c) hereof.
11
<PAGE>
7.2(b). The Distributor shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of his or
her duties or by reason of his or her reckless disregard of obligations and
duties under this Agreement or to the Company or the Separate Accounts.
7.2(c). The Distributor shall not be liable under this indemnification
provision with respect to any claim made against the Indemnified Party unless
such Party shall have notified the Distributor in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Party shall have received notice of such service on any designated agent),
but failure to notify the Distributor of any such claim shall not relieve the
Distributor from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
Indemnification Provision. In case any such action is brought against the
Indemnified Parties, the Distributor will be entitled to participate, at its own
expense, in the defense thereof. The Distributor also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Distributor to such party of the Distributor's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Distributor
will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
7.2(d). The Company shall promptly notify the Distributor of the commencement
of any litigation or proceedings against it or any of its officers or directors
in connection with the issuance or sale of the Variable Contracts issued by the
Company or the operation of the Separate Accounts.
ARTICLE VIII. Applicable Law
8.1. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of California.
8.2. This Agreement shall be subject to the provisions of the 1933, 1934, and
1940 Acts, and the rules and regulations and rulings thereunder, including such
exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, the Shared Funding Exemptive Order) and the
terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE IX. Termination
9.1. This Agreement shall terminate:
(a) at the option of any party upon 180 days advance written notice to the other
parties; or
(b) at the option of the Company if shares of the Series are not reasonably
available to meet the requirements of the Variable Contracts issued by the
Company, as determined by the Company, and upon prompt notice by the Company to
the other parties; or
12
<PAGE>
(c) at the option of the Fund or the Distributor upon institution of formal
proceedings against the Company or its agent by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of the Variable
Contracts issued by the Company, the operation of the Separate Accounts, or the
purchase of the Fund shares; or
(d) at the option of the Company upon institution of formal proceedings against
the Fund or the Distributor by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body; or
(e) upon requisite vote of the Variable Contract Owners having an interest in
the Separate Accounts (or any subaccounts thereof) to substitute the shares of
another investment company for the corresponding shares of the Fund or a Series
in accordance with the terms of the Variable Contracts for which those shares
had been selected to serve as the underlying investment media; or
(f) in the event any of the shares of a Series are not registered, issued or
sold in accordance with applicable state and/or federal law, or such law
precludes the use of such shares as the underlying investment media of the
Variable Contracts issued or to be issued by the Company; or
(g) by any party to the Agreement upon a determination by a majority of the
Trustees of the Fund, or a majority of its disinterested Trustees, that an
irreconcilable conflict exists; or
(h) at the option of the Company if the Fund or a Series fails to meet the
diversification requirements specified in Section 3.3 hereof.
9.2. Each party to this Agreement shall promptly notify the other parties to
the Agreement of the institution against such party of any such formal
proceedings as described in Sections 9.1(c) and (d) hereof. The Company shall
give 60 day's prior written notice to the Fund of the date of any proposed vote
of Variable Contract Owners to replace the Fund's shares as described in Section
9.1(e) hereof.
9.3. Except as necessary to implement Variable Contract Owner initiated
transactions, or as required by state insurance laws or regulations, the Company
shall not redeem Fund shares attributable to the Variable Contracts issued by
the Company (as opposed to Fund shares attributable to the Company's assets held
in the Separate Accounts), and the Company shall not prevent Variable Contract
Owners from allocating payments to a Series, until 60 days after the Company
shall have notified the Fund or Distributor of its intention to do so.
9.4. If this Agreement terminates, any provision of this Agreement necessary to
the orderly windup of business under it will remain in effect as to that
business, after termination.
ARTICLE X. Notices
Any notice shall be sufficiently given when sent by registered or certified mail
to the other party at the address of such party set forth below or at such other
address as such party may from time to time specify in writing to the other
party.
13
<PAGE>
If to the Fund:
Pacific Select Fund
Attn: SEC Regulatory Compliance Department
700 Newport Center Drive
P.O. Box 7500
Newport Beach, CA 92260
If to the Distributor:
Pacific Equities Network
Attn: Compliance Officer
700 Newport Center Drive, NB-4
Newport Beach, CA 92660
If to the Company:
Pacific Mutual Life Insurance Company
Attn: SEC Regulatory Compliance Department
700 Newport Center Drive
P.O. Box 7500
Newport Beach, CA 92660
ARTICLE XI. Miscellaneous
11.1. The Fund and the Company agree that if and to the extent Rule 6e-3(T)
under the 1940 Act is amended or if Rule 6e-3 is adopted in final form, to the
extent applicable, ,the Fund and the Company shall each take such steps as may
be necessary to comply with the Rule as amended or adopted in final form.
11.2. A copy of the Fund's Agreement and Declaration of Trust is on file with
the Secretary of the Commonwealth of Massachusetts and notice is hereby given
that the Agreement has been executed on behalf of the Fund by a Trustee of the
Fund in his or her capacity as Trustee and not individually. The obligations of
this Agreement shall only be binding upon the assets and property of the Fund
and shall not be binding upon any Trustee, officer or shareholder of the Fund
individually.
11.3. Nothing in this Agreement shall impede the Fund's Trustees or
shareholders of the shares of the Fund's Series from exercising any of the
rights provided to such Trustees or shareholders in the Fund's Agreement and
Declaration of Trust, as amended, a copy of which will be provided to the
Company upon request.
11.4. It is understood that the name "Pacific", "Pacific Mutual", "Pacific
Select" or any derivative thereof or logo associated with that name is the
valuable property of the Distributor and its affiliates, and that the Company
has the right to use such name (or derivative or logo) only so long as this
Agreement is in effect. Upon termination of this Agreement the Company shall
forthwith cease to
14
<PAGE>
use such name (or derivative or logo).
11.5. The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect.
11.6. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.7. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
11.8. This Agreement may not be assigned by any party to the Agreement except
with the written consent of the other parties to the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
PACIFIC SELECT FUND
ATTEST: /s/ AUDREY L. MILFS BY: /s/ THOMAS C. SUTTON
Name: AUDREY L. MILFS Name: THOMAS C. SUTTON
Title: SECRETARY Title: PRESIDENT
PACIFIC EQUITIES NETWORK
ATTEST: /s/ AUDREY L. MILFS BY: /s/ ARTHUR M. KESSELHAUT
Name: AUDREY L. MILFS Name: ARTHUR M. KESSELHAUT
Title: SECRETARY Title: PRESIDENT
PACIFIC MUTUAL LIFE INSURANCE CO.
ATTEST: /s/ AUDREY L. MILFS BY: /s/ WILLIAM D. CVENGROS
Name: AUDREY L. MILFS Name: WILLIAM D. CVENGROS
Title: SECRETARY Title: CHIEF INVESTMENT OFFICER
15
<PAGE>
EXHIBIT A
PACIFIC SELECT SEPARATE ACCOUNT
PACIFIC SELECT EXEC SEPARATE ACCOUNT
PACIFIC SELECT VARIABLE ANNUITY SEPARATE ACCOUNT
PACIFIC COLI SEPARATE ACCOUNT
SEPARATE ACCOUNT A
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Exhibit A to be executed
by their Officers designated below on this 3rd day of January, 1995.
PACIFIC SELECT FUND
Attest: /s/ AUDREY L. MILFS By: /s/ THOMAS C. SUTTON
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
PACIFIC EQUITIES NETWORK
Attest: /s/ AUDREY L. MILFS By: /s/ GERALD W. ROBINSON
Name: Audrey L. Milfs Name: Gerald W. Robinson
Title: Secretary Title: President
PACIFIC MUTUAL LIFE INSURANCE COMPANY
Attest: /s/ DIANE N. LEDGER By: /s/ GLENN S. SCHAFER
Name: Diane N. Ledger Name: Glenn S. Schafer
Title: Assistant Vice President Title: President
17
<PAGE>
EXHIBIT B
MONEY MARKET SERIES
MANAGED BOND SERIES
GOVERNMENT SECURITIES SERIES
HIGH YIELD BOND SERIES
GROWTH SERIES
GROWTH LT SERIES
EQUITY INCOME SERIES
MULTI-STRATEGY SERIES
EQUITY SERIES
BOND AND INCOME SERIES
EQUITY INDEX SERIES
INTERNATIONAL SERIES
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Exhibit B to be executed
by their Officers designated below on this 3rd day of January, 1995.
PACIFIC SELECT FUND
Attest: /s/ AUDREY L. MILFS By: /s/ THOMAS C. SUTTON
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
PACIFIC EQUITIES NETWORK
Attest: /s/ AUDREY L. MILFS By: /s/ GERALD W. ROBINSON
Name: Audrey L. Milfs Name: Gerald W. Robinson
Title: Secretary Title: President
PACIFIC MUTUAL LIFE INSURANCE COMPANY
Attest: /s/ DIANE N. LEDGER By: /s/ GLENN S. SCHAFER
Name: Diane N. Ledger Name: Glenn S. Schafer
Title: Assistant Vice President Title: President
19
<PAGE>
ADDENDUM TO PARTICIPATION AGREEMENT
The Participation Agreement, made the 6th day of November, 1992 by and between
PACIFIC MUTUAL LIFE INSURANCE COMPANY (the "Company"), a life insurance company
domiciled in California, on its behalf and on behalf of the segregated asset
accounts of the Company listed on Exhibit A to this Agreement (the "Separate
Accounts"); Pacific Select Fund (the "Fund"), a Massachusetts business trust;
and Pacific Equities Network ("Distributor"), a California Corporation ("the
Agreement") is hereby amended by the addition of the provisions set forth in
this Addendum to the Agreement ("Addendum"), which is made this 4th day of
January, 1994.
WITNESSETH:
WHEREAS, the Fund is authorized to issue separate classes of shares of
beneficial interest ("shares") each representing an interest in a separate
portfolio of assets known as a "series" and each series has its own investment
objective, policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its series to
separate accounts of insurance companies that fund variable life insurance
policies and variable annuity contracts ("Variable Contracts"); and
WHEREAS, the Fund currently consists of nine separate series designated as the
Money Market Series, Managed Bond Series, High Yield Bond Series, Government
Securities Series, Growth Series, Equity Income Series, Multi-Strategy Series,
International Series and Equity Index Series; and
WHEREAS, the Fund intends to establish one additional Series to be designated as
the Growth LT Series; and
NOW THEREFORE, in consideration of the mutual promises and covenants contained
in this
Addendum, it is agreed between the parties hereto as follows:
The Agreement is amended by replacing the second paragraph with the following
language:
"WHEREAS, the Fund is available to offer shares of one or more of its series to
separate accounts of insurance companies that fund variable life insurance
policies and variable annuity contracts ("Variable Contracts') and to serve as
an investment medium for Variable Contracts offered by insurance companies that
have entered into participation agreements substantially similar to this
agreement ("Participating Insurance Companies"), and the Fund is comprised of
multiple separate series, and other series may be established in the future;
and"
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be executed
by their officers designated below on the date written above.
1
<PAGE>
PACIFIC SELECT FUND
Attest: /s/ AUDREY L. MILFS By: /s/ THOMAS C. SUTTON
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
PACIFIC EQUITIES NETWORK
Attest: /s/ AUDREY L. MILFS By: /s/ GLENN S. SCHAFER
Name: Audrey L. Milfs Name: Glenn S. Schafer
Title: Secretary Title: President
Attest: /s/ AUDREY L. MILFS By: /s/ DIANE N. LEDGER
Name: Audrey L. Milfs Name: Diane N. Ledger
Title: Secretary Title: Assistant Vice President
PACIFIC MUTUAL LIFE INSURANCE COMPANY
Attest: /s/ DIANE N. LEDGER By: /s/ WILLIAM D. CVENGROS
Name: Diane N. Ledger Name: William D. Cvengros
Title: Assistant Vice President Title: Chief Investment Officer
Attest: /s/ DIANE N. LEDGER By: /s/ GLENN S. SCHAFER
Name: Diane N. Ledger Name: Glenn S. Schafer
Title: Assistant Vice President Title: Chief Financial Officer
2
<PAGE>
ADDENDUM TO PARTICIPATION AGREEMENT
The Participation Agreement, made the 6th day of November, 1992, by and between
PACIFIC MUTUAL LIFE INSURANCE COMPANY (the "Company"), a life insurance company
domiciled in California, on its behalf and on behalf of the segregated asset
accounts of the company listed on Exhibit A to this Agreement (the "Separate
Accounts"); Pacific Select Fund (the "Fund"), a Massachusetts business trust;
and Pacific Equities Network ("Distributor"), a California Corporation ("the
Agreement") is hereby amended by the addition of the provisions set forth in
this Addendum to the Agreement ("Addendum"), which is made this 15th day of
August, 1994.
WITNESSETH:
WHEREAS, the Fund is authorized to issue separate classes of shares of
beneficial interest ("shares") each representing an interest in a separate
portfolio of assets known as a "series" and each series has its own investment
objective, policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its series to
separate accounts of insurance companies that fund variable life insurance
policies and variable annuity contracts ("Variable Contracts"); and
WHEREAS, the Fund currently consists of ten separate series designated as the
Money Market Series, Managed Bond Series, High Yield Bond Series, Government
Securities Series, Growth Series, Equity Income Series, Multi-Strategy Series,
International Series, Equity Index Series and Growth LT Series; and
WHEREAS, the Fund intends to establish two additional Series to be designated as
the Equity Series and Bond and Income Series; and
NOW THEREFORE, in consideration of the mutual promises and covenants contained
in this addendum, it is agreed between the parties hereto as follows:
The Agreement is amended by replacing the second paragraph with the following
language:
"WHEREAS, the Fund is available to offer shares of one or more of its series to
separate accounts of insurance companies that fund variable life insurance
policies and variable annuity contracts ("Variable Contracts") and to serve as
an investment medium for Variable Contracts offered by insurance companies that
have entered into participation agreements substantially similar to this
agreement ("Participating Insurance Companies"), and the Fund is comprised of
multiple separate series, and other series may be established in the future;
and"
IN WITNESS WHEREOF, the parties hereto have caused this addendum to be executed
by their officers designated below on the date written above.
PACIFIC SELECT FUND
1
<PAGE>
PACIFIC SELECT FUND
Attest: /s/ AUDREY L. MILFS By: /s/ THOMAS C. SUTTON
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
PACIFIC EQUITIES NETWORK
Attest: /s/ AUDREY L. MILFS By: /s/ GLENN S. SCHAFER
Name: Audrey L. Milfs Name: Glenn S. Schafer
Title: Secretary Title: President
Attest: /s/ AUDREY L. MILFS By: /s/ DIANE N. LEDGER
Name: Audrey L. Milfs Name: Diane N. Ledger
Title: Secretary Title: Assistant Vice President
PACIFIC MUTUAL LIFE INSURANCE COMPANY
Attest: /s/ DIANE N. LEDGER By: /s/ WILLIAM D. CVENGROS
Name: Diane N. Ledger Name: William D. Cvengros
Title: Assistant Vice President Title: Chief Investment Officer
Attest: /s/ DIANE N. LEDGER By: /s/ GLENN S. SCHAFER
Name: Diane N. Ledger Name: Glenn S. Schafer
Title: Assistant Vice President Title: Chief Financial Officer
2
<PAGE>
ADDENDUM TO PARTICIPATION AGREEMENT
-----------------------------------
The Participation Agreement, made the 6th day of November, 1992 and
subsequently amended on January 4, 1994 and August 15, 1994, by and between
PACIFIC MUTUAL LIFE INSURANCE COMPANY (the "Company"), a life insurance
company domiciled in California, on its behalf and on behalf of the segregated
asset accounts of the Company listed on Exhibit A to this Agreement (the
"Separate Accounts"); Pacific Select Fund (the "Fund"), a Massachusetts
business trust; and Pacific Equities Network ("Distributor"), a California
Corporation (the "Agreement") is hereby amended by the addition of the
provisions set forth in this Addendum to the Agreement ("Addendum"), which
is made this 20th day of November, 1995.
WITNESSETH:
WHEREAS, the Fund is authorized to issue separate classes of shares of
beneficial interest ("Shares") each representing an interest in a separate
portfolio of assets known as a "series" and each series has its own
investment objective, policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its
series to separate accounts of insurance companies that fund variable
life insurance policies and variable annuity contracts ("Variable
Contracts"); and
WHEREAS, the Fund currently consists of twelve separate series
designated as the Money Market Portfolio, Managed Bond Portfolio, High
Yield Bond Portfolio, Government Securities Portfolio, Growth Portfolio,
Equity Income Portfolio, Multi-Strategy Portfolio, International
Portfolio, Equity Index Portfolio, Growth LT Portfolio, Equity Portfolio
and Bond and Income Portfolio (each referred to as a "Series" in the
Agreement, and hereinafter referred to as a "Portfolio"); and
WHEREAS, the Fund intends to establish two additional Portfolios to
be designated as the Emerging Markets Portfolio and Aggressive Equity
Portfolio; and
NOW THEREFORE, in consideration of the mutual promises and covenants
contained in this Addendum, it is agreed between the parties hereto as
follows:
The Agreement is amended by replacing the second paragraph
with the following language:
"WHEREAS, the Fund is available to offer shares of one or more
of its Portfolios to separate accounts of insurance companies that
fund variable life insurance policies and variable annuity contracts
("Variable Contracts") and to serve as an investment medium for
Variable Contracts offered by insurance companies that have entered
into participation agreements substantially similar to this
agreement ("Participating Insurance Companies"), and the Fund is
comprised of multiple separate Portfolios, and other Portfolios may
be established in the future; and"
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
executed by their officers designated below on the date written above.
PACIFIC SELECT FUND
Attest: /s/ AUDREY L. MILFS By: /s/ THOMAS C. SUTTON
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
PACIFIC EQUITIES NETWORK
Attest: /s/ AUDREY L. MILFS By: /s/ GERALD W. ROBINSON
Name: Audrey L. Milfs Name: Gerald W. Robinson
Title: Secretary Title: President, Director & CEO
Attest: /s/ AUDREY L. MILFS By: /s/ EDWARD R. BYRD
Name: Audrey L. Milfs Name: Edward R. Byrd
Title: Secretary Title: CFO & Treasurer
PACIFIC MUTUAL LIFE INSURANCE COMPANY
Attest: /s/ DIANE N. LEDGER By: /s/ THOMAS C. SUTTON
Name: Diane N. Ledger Name: Thomas C. Sutton
Title: Assistant Vice President Title: Chairman and CEO
Attest: /s/ DIANE N. LEDGER By: /s/ GLENN S. SCHAFER
Name: Diane N. Ledger Name: Glenn S. Schafer
Title: Assistant Vice President Title: Chief Financial Officer
<PAGE>
EXHIBIT B
MONEY MARKET PORTFOLIO
MANAGED BOND PORTFOLIO
GOVERNMENT SECURITIES PORTFOLIO
HIGH YIELD BOND PORTFOLIO
GROWTH PORTFOLIO
GROWTH LT PORTFOLIO
EQUITY INCOME PORTFOLIO
MULTI-STRATEGY PORTFOLIO
EQUITY PORTFOLIO
BOND AND INCOME PORTFOLIO
EQUITY INDEX PORTFOLIO
INTERNATIONAL PORTFOLIO
EMERGING MARKETS PORTFOLIO
AGGRESSIVE EQUITY PORTFOLIO
<PAGE>
EXHIBIT 99.9
Opinion and Consent of Pacific Life re legality
<PAGE>
[LETTERHEAD OF PACIFIC LIFE]
DAVID R. CARMICHAEL
Senior Vice President
General Counsel
Law Department
(949) 640-3326 Telephone
(949) 640-3706 Facsimile
[email protected]
July 29, 1998
Pacific Life Insurance Company
700 Newport Center Drive
Post Office Box 9000
Newport Beach, California 92660
Dear Sirs:
In my capacity as Senior Vice President and General Counsel of Pacific Life
Insurance Company ("Pacific Life"), I, or attorneys employed by Pacific Life
under my general supervision, have supervised the establishment of Separate
Account A of Pacific Life Insurance Company on September 7, 1994, which has been
authorized by resolution of the Board of Directors of Pacific Life adopted on
November 22, 1989, and Memorandum dated September 7, 1994 concerning Separate
Account A as the separate account for assets applicable to Pacific Value
Individual Flexible Premium Deferred Variable Annuity Contracts ("Contracts"),
pursuant to the provisions of Section 10506 of the Insurance Code of the State
of California. Moreover, I have been associated with the preparation of the
Registration Statement on Form N-4 ("Registration Statement"), filed by Pacific
Life and Separate Account A (File No. pending) with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, for the registration of
interests in the Separate Account A funding the Contracts.
I have made such examination of the law and examined such corporate records and
such other documents as in my judgment are necessary and appropriate to enable
me to render the following opinion that:
1. Pacific Life has been duly organized under the laws of the State of
California and is a validly existing corporation.
2. Pacific Select Separate Account A is duly created and validly existing
as a separate account pursuant to the aforesaid provisions of
California law.
3. The portion of the assets to be held in Separate Account A equal to
the reserves and other liabilities under the Pacific Value Contracts
and any other contracts issued by Pacific Life that are supported by
Separate Account A is not chargeable with liabilities arising out of
any other business Pacific Life may conduct.
4. The Pacific Value Contracts have been duly authorized by Pacific Life
and, when issued as contemplated by the Registration Statement, will
constitute legal, validly issued and binding obligations of Pacific
Life, except as limited by bankruptcy or insolvency laws affecting the
rights of creditors generally.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ DAVID R. CARMICHAEL
- -------------------------
David R. Carmichael
Senior Vice President and
General Counsel
DRC/evm
<PAGE>
EXHIBIT 99.10(a)
Consent of Independent Auditors
<PAGE>
EXHIBIT 99.10(a)
[LETTERHEAD OF DELOITTE & TOUCHE LLP]
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement on Form N-4 of our report
dated February 19, 1998 related to the consolidated financial statements of
Pacific Life Insurance Company and subsidiaries as of December 31, 1997 and
1996 and for each of the three years in the period ended December 31, 1997,
appearing in the Statement of Additional Information of Pacific Value, which is
part of such Registration Statement; and to the incorporation by reference of
our report dated February 6, 1998 related to the financial statements of
Separate Account A of Pacific Life Insurance Company as of December 31, 1997
and for each of the two years in the period then ended appearing in the Annual
Report of Separate Account A of Pacific Life Insurance Company for the year
ended December 31, 1997.
We also consent to the reference to us under the heading "Financial Statements"
appearing in such Statement of Additional Information.
/s/ DELOITTE & TOUCHE LLP
Costa Mesa, California
August 5, 1998
<PAGE>
EXHIBIT 99.10(b)
Powers of Attorney
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him/her in his/her name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life
Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific
Life Insurance Company, Separate Account A of Pacific Life Insurance Company,
Separate Account B of Pacific Life Insurance Company and Pacific Corinthian
Variable Separate Account of Pacific Life Insurance Company and any amendments
or supplements thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his/her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Dated: 2/25/98 /s/ TC SUTTON
Thomas C. Sutton
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him/her in his/her name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life
Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific
Life Insurance Company, Separate Account A of Pacific Life Insurance Company,
Separate Account B of Pacific Life Insurance Company and Pacific Corinthian
Variable Separate Account of Pacific Life Insurance Company and any amendments
or supplements thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his/her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Dated: February 25, 1998 /s/ GLENN S. SCHAFER
Glenn S. Schafer
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him/her in his/her name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life
Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific
Life Insurance Company, Separate Account A of Pacific Life Insurance Company,
Separate Account B of Pacific Life Insurance Company and Pacific Corinthian
Variable Separate Account of Pacific Life Insurance Company and any amendments
or supplements thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his/her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Dated: 2/25/98 /s/ RICHARD M. FERRY
Richard M. Ferry
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him/her in his/her name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life
Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific
Life Insurance Company, Separate Account A of Pacific Life Insurance Company,
Separate Account B of Pacific Life Insurance Company and Pacific Corinthian
Variable Separate Account of Pacific Life Insurance Company and any amendments
or supplements thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his/her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Dated: 2/25/98 /s/ DONALD E. GUINN
Donald E. Guinn
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him/her in his/her name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life
Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific
Life Insurance Company, Separate Account A of Pacific Life Insurance Company,
Separate Account B of Pacific Life Insurance Company and Pacific Corinthian
Variable Separate Account of Pacific Life Insurance Company and any amendments
or supplements thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his/her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Dated: 2/25/98 /s/ IGNACIO E. LOZANO, JR.
Ignacio E. Lozano, Jr.
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him/her in his/her name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life
Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific
Life Insurance Company, Separate Account A of Pacific Life Insurance Company,
Separate Account B of Pacific Life Insurance Company and Pacific Corinthian
Variable Separate Account of Pacific Life Insurance Company and any amendments
or supplements thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his/her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Dated: 2/25/98 /s/ CHARLES D. MILLER
Charles D. Miller
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him/her in his/her name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life
Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific
Life Insurance Company, Separate Account A of Pacific Life Insurance Company,
Separate Account B of Pacific Life Insurance Company and Pacific Corinthian
Variable Separate Account of Pacific Life Insurance Company and any amendments
or supplements thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his/her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Dated: Feb 25, 1998 /s/ DONN B. MILLER
Donn B. Miller
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him/her in his/her name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life
Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific
Life Insurance Company, Separate Account A of Pacific Life Insurance Company,
Separate Account B of Pacific Life Insurance Company and Pacific Corinthian
Variable Separate Account of Pacific Life Insurance Company and any amendments
or supplements thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his/her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Dated: 2/25/1998 /s/ RICHARD M. ROSENBERG
Richard M. Rosenberg
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him/her in his/her name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life
Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific
Life Insurance Company, Separate Account A of Pacific Life Insurance Company,
Separate Account B of Pacific Life Insurance Company and Pacific Corinthian
Variable Separate Account of Pacific Life Insurance Company and any amendments
or supplements thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his/her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Dated: 2/25/98 /s/ JAMES R. UKROPINA
James R. Ukropina
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him/her in his/her name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life
Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific
Life Insurance Company, Separate Account A of Pacific Life Insurance Company,
Separate Account B of Pacific Life Insurance Company and Pacific Corinthian
Variable Separate Account of Pacific Life Insurance Company and any amendments
or supplements thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his/her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Dated: Feb 25, 1998 /s/ RAYMOND L. WATSON
Raymond L. Watson
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him/her in his/her name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life
Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific
Life Insurance Company, Separate Account A of Pacific Life Insurance Company,
Separate Account B of Pacific Life Insurance Company and Pacific Corinthian
Variable Separate Account of Pacific Life Insurance Company and any amendments
or supplements thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his/her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Dated: February 25, 1998 /s/ DAVID R. CARMICHAEL
David R. Carmichael
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him/her in his/her name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life
Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific
Life Insurance Company, Separate Account A of Pacific Life Insurance Company,
Separate Account B of Pacific Life Insurance Company and Pacific Corinthian
Variable Separate Account of Pacific Life Insurance Company and any amendments
or supplements thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his/her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Dated: 2/25/98 /s/ AUDREY L. MILFS
Audrey L. Milfs
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him/her in his/her name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life
Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific
Life Insurance Company, Separate Account A of Pacific Life Insurance Company,
Separate Account B of Pacific Life Insurance Company and Pacific Corinthian
Variable Separate Account of Pacific Life Insurance Company and any amendments
or supplements thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his/her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Dated: 02-25-98 /s/ KHANH T. TRAN
Khanh T. Tran
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him/her in his/her name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life
Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific
Life Insurance Company, Separate Account A of Pacific Life Insurance Company,
Separate Account B of Pacific Life Insurance Company and Pacific Corinthian
Variable Separate Account of Pacific Life Insurance Company and any amendments
or supplements thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his/her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Dated: March 10, 1998 /s/ EDWARD R. BYRD
Edward R. Byrd
<PAGE>
Exhibit 99.13
Performance Calculations
<PAGE>
EXHIBIT 99.13
- --------------------------------------------------------------------------------
Pacific Value Variable Annuity Separate Account
Schedule for Computation of Performance Quotations
- --------------------------------------------------------------------------------
Last Year Ending 12/31/97
<TABLE>
<CAPTION>
Money Mkt Mgd Bond Govt Secty High Yield Equity Income Multi-Strat Intern'l
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96
Beginning AUV 10.356036 10.274757 10.144127 10.961721 11.657031 11.032656 11.843494
End Date 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
Ending AUV 10.751784 11.137453 10.95187 11.82987 14.783078 13.014333 12.762569
Annual Fee ($0) $ - $ - $ - $ - $ - $ - $ -
CDSC $ 63.00 $ 63.00 $ 63.00 $ 63.00 $ 63.00 $ 63.00 $ 63.00
Ending ERV $ 975.21 $ 1,020.96 $ 1,016.63 $ 1,016.20 $ 1,205.17 $ 1,116.62 $ 1,014.60
AATR W/Drawal -2.48% 2.10% 1.66% 1.62% 20.52% 11.66% 1.46%
AATR Account 3.82% 8.40% 7.96% 7.92% 26.82% 17.96% 7.76%
<CAPTION>
Equity Index Growth LT Equity Bond + Income Emerg Mkts Aggsv Eqty
<S> <C> <C> <C> <C> <C> <C>
Start Date 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96
Beginning AUV 11.968901 11.613700 12.593450 9.791233 9.574244 10.672142
End Date 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
Ending AUV 15.69257 12.707541 14.676255 11.231117 9.281881 10.921505
Annual Fee ($0) $ - $ - $ - $ - $ - $ -
CDSC $ 63.00 $ 63.00 $ 63.00 $ 63.00 $ 63.00 $ 63.00
Ending ERV $ 1,248.11 $ 1,031.19 $ 1,102.39 $ 1,084.06 $ 906.46 960.37
AATR W/Drawal 24.81% 3.12% 10.24% 8.41% -9.35% -3.96%
AATR Account 31.11% 9.42% 16.54% 14.71% -3.05% 2.34%
</TABLE>
Dollar Values are per $1000 of initial premium
Average Annual Total Return (AATR) of Surrender Value = [(ERV/$1000) (To the
power of 365/# days)]-1
<PAGE>
Pacific Value Variable Annuity Separate Account
Schedule for Computation of Performance Quotations
- --------------------------------------------------------------------------------
Last 3 Years ending 12/31/97
<TABLE>
<CAPTION>
Money Mkt Mgd Bond Govt Secty High Yield Equity Income Multi-Strat Intern'l
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date 12/30/94 12/30/94 12/30/94 12/30/94 12/30/94 12/30/94 12/30/94
Beginning AUV 9.603907 8.514737 8.530157 8.519994 7.624217 8.048181 9.038482
End Date 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
Ending AUV 10.751784 11.137453 10.951870 11.829870 14.783078 13.014333 12.762569
Annual Fee ($0) $ - $ - $ - $ - $ - $ - $ -
CDSC $ 63.00 $ 63.00 $ 63.00 $ 63.00 $ 63.00 $ 63.00 $ 63.00
Ending ERV $ 1,056.52 $ 1,245.02 $ 1,220.90 $ 1,325.48 $ 1,875.96 $ 1,554.05 $ 1,349.03
AATR W/Drawal 1.85% 7.58% 6.88% 9.85% 23.33% 15.83% 10.49%
AATR Account 3.84% 9.36% 8.69% 11.56% 24.70% 17.37% 12.19%
<CAPTION>
Bond +
Equity Index Growth LT Equity Income Emerg Mkts Aggsv Eqty
<S> <C> <C> <C> <C> <C> <C>
Start Date 12/30/94 12/30/94 12/30/94 12/30/94 N/A N/A
Beginning AUV 7.347206 7.409890 8.171504 7.592276
End Date 12/31/97 12/31/97 12/31/97 12/31/97
Ending AUV 15.692570 12.707541 14.676255 11.231117
Annual Fee ($0) $ - $ - $ - $ -
CDSC $ 63.00 $ 63.00 $ 63.00 $ 63.00
Ending ERV $ 2,072.86 $ 1,651.94 $ 1,733.03 $ 1,416.28
AATR W/Drawal 27.50% 18.21% 20.12% 12.30%
AATR Account 28.78% 19.70% 21.55% 13.94%
</TABLE>
Dollar Values are per $1000 of initial premium
Average Annual Total Return (AATR) of Surrender Value = [(ERV/$1000)(To the
power of 365/# days)]-1
<PAGE>
- --------------------------------------------------------------------------------
Pacific Value Variable Annuity Separate Account
Schedule for Computation of Performance Quotations
- --------------------------------------------------------------------------------
Last 5 Years ending 12/31/97
<TABLE>
<CAPTION>
Money Mkt Mgd Bond Govt Secty High Yield Equity Income Multi-Strat Intern'l
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date 12/31/92 12/31/92 12/31/92 12/31/92 12/31/92 12/31/92 12/31/92
Beginning AUV 9.278833 8.199955 8.342795 7.393702 7.260880 7.690714 6.940174
End Date 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
Ending AUV 10.751784 11.137453 10.951870 11.829870 14.783078 13.014333 12.762569
Annual Fee ($0) $ - $ - $ - $ - $ - $ - $ -
CDSC $ 45.00 $ 45.00 $ 45.00 $ 45.00 $ 45.00 $ 45.00 $ 45.00
Ending ERV $1,113.74 $1,313.23 $1,267.73 $1,554.99 $1,990.99 $1,647.21 $1,793.94
AATR W/Drawal 2.18% 5.60% 4.86% 9.23% 14.77% 10.50% 12.40%
AATR Account 2.99% 6.32% 5.59% 9.86% 15.28% 11.09% 12.96%
<CAPTION>
Equity Index Growth LT Equity Bond + Income Emerg Mkts Aggsv Eqty
<S> <C> <C> <C> <C> <C> <C>
Start Date 12/31/92 N/A 12/31/92 12/31/92 N/A N/A
Beginning AUV 6.835878 7.454115 7.136625
End Date 12/31/97 12/31/97 12/31/97
Ending AUV 15.692570 14.676255 11.231117
Annual Fee ($0) $ - $ - $ -
CDSC $ 45.00 $ 45.00 $ 45.00
Ending ERV $2,250.62 $1,923.88 $1,528.73
AATR W/Drawal 17.61% 13.98% 8.86%
AATR Account 18.08% 14.51% 9.49%
</TABLE>
Dollar Values are per $1000 of initial premium
Average Annual Total Return (AATR) of Surrender Value =
[(ERV/$1000) (To the power of 365/# days)]-1
<PAGE>
Pacific Value Variable Annuity Separate Account
Schedule for Computation of Performance Quotations
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Last 10 Years ending 12/31/97
Money Mkt Mgd Bond Govt Secty High Yield Equity Income Multi-Strat Intern'l
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date N/A N/A N/A N/A N/A N/A N/A
Beginning AUV
End Date
Ending AUV
Annual Fee ($0)
CDSC
Ending ERV
AATR W/Drawal
AATR Account
<CAPTION>
Bond +
Equity Index Growth LT Equity Income Emerg Mkts Aggsv Eqty
Start Date N/A N/A 12/31/87 12/31/87 N/A N/A
Beginning AUV 4.255963 4.430472
End Date 12/31/97 12/31/97
Ending AUV 14.676255 11.231117
Annual Fee ($0) $ - $ -
CDSC $ - $ -
Ending ERV $ 3,448.40 $ 2,534.97
AATR W/Drawal 13.18% 9.75%
AATR Account 13.18% 9.75%
</TABLE>
Dollar Values are per $1000 of initial premium
Average Annual Total Return (AATR) of Surrender Value = [(ERV/$1000)(To the
power of 365/# days)]-1
<PAGE>
- --------------------------------------------------------------------------------
Pacific Value Variable Annuity Separate Account
Schedule for Computation of Performance Quotations
- --------------------------------------------------------------------------------
From Inception of Separate Account
<TABLE>
<CAPTION>
Money Mkt Mgd Bond Govt Secty High Yield Equity Income Multi-Strat Intern'l
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date 1/2/96 1/2/96 1/2/96 1/2/96 1/2/96 1/2/96 1/2/96
Beginning AUV 10.000000 10.000000 10.000000 10.000000 10.000000 10.000000 10.000000
End Date 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
Ending AUV 10.751784 11.137453 10.95187 11.82987 14.783078 13.014333 12.762569
Days 729 729 729 729 729 729 729
Annual Fee ($0) $ - $ - $ - $ - $ - $ - $ -
CDSC $ 63.00 $ 63.00 $ 63.00 $ 63.00 $ 63.00 $ 63.00 $ 63.00
Ending ERV $1,012.18 $1,050.75 $1,032.19 $1,119.99 $1,415.31 $1,238.43 $1,213.26
AATR W/Drawal 0.61% 2.51% 1.60% 5.84% 19.00% 11.30% 10.16%
AATR Account 3.70% 5.54% 4.66% 8.78% 21.62% 14.10% 12.99%
<CAPTION>
Equity Index Growth LT Equity Bond + Income Emerg Mkts Aggsv Eqty
<S> <C> <C> <C> <C> <C> <C>
Start Date 1/2/96 1/2/96 1/2/96 1/2/96 4/17/96 4/17/96
Beginning AUV 10.000000 10.000000 10.000000 10.000000 10.102463 9.908720
End Date 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
Ending AUV 15.69257 12.707541 14.676255 11.231117 9.281881 10.921505
Days 729 729 729 729 623 623
Annual Fee ($0) $ - $ - $ - $ - $ - $ -
CDSC $ 63.00 $ 63.00 $ 63.00 $ 63.00 $ 63.00 $ 63.00
Ending ERV $1,506.26 $1,207.75 $1,404.63 $1,060.11 $ 855.77 $1,039.21
AATR W/Drawal 22.76% 9.91% 18.54% 2.97% -8.72% 2.28%
AATR Account 25.31% 12.75% 21.18% 5.99% -4.84% 5.87%
</TABLE>
Dollar Values are per $1000 of initial premium
Average Annual Total Return (AATR) of Surrender Value =
[(ERV/$1000)(To the power of 365/# days)]-1
<PAGE>
- --------------------------------------------------------------------------------
Pacific Value Variable Annuity Separate Account
Schedule for Computation of Performance Quotations
- --------------------------------------------------------------------------------
From Inception of Fund
<TABLE>
<CAPTION>
Money Mkt Mgd Bond Govt Secty High Yield Equity Income Multi-Strat Intern'l
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date 1/4/88 1/4/88 1/4/88 1/4/88 1/4/88 1/4/88 1/4/88
Beginning AUV 7.340021 5.184201 5.409269 4.737509 4.348104 4.848630 6.046630
End Date 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
Ending AUV 10.751784 11.137453 10.95187 11.82987 14.783078 13.014333 12.762569
Days 3649 3649 3649 3649 3649 3649 3649
Annual Fee ($0) $ - $ - $ - $ - $ - $ - $ -
CDSC $ - $ - $ - $ - $ - $ - $ -
Ending ERV $1,464.82 $2,148.35 $2,024.65 $2,497.07 $3,399.89 $2,684.13 $2,110.69
AATR W/Drawal 3.89% 7.95% 7.31% 9.59% 13.02% 10.38% 7.76%
AATR Account 3.89% 7.95% 7.31% 9.59% 13.02% 10.38% 7.76%
<CAPTION>
Equity Index Growth LT Equity Bond + Income Emerg Mkts Aggsv Eqty
<S> <C> <C> <C> <C> <C> <C>
Start Date 1/30/91 1/3/94 1/3/84 1/3/84 4/1/96 4/1/96
Beginning AUV 5.257292 6.634056 2.515479 2.629096 10.000000 10.000000
End Date 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
Ending AUV 15.69257 12.707541 14.676255 11.231117 9.281881 10.921505
Days 2527 1458 5111 5111 639 639
Annual Fee ($0) $ - $ - $ - $ - $ - $ -
CDSC $ 36.00 $ 63.00 $ - $ - $ 63.00 $ 63.00
Ending ERV $2,948.92 $1,852.50 $5,834.38 $4,271.86 $ 865.19 $1,029.15
AATR W/Drawal 16.91% 16.69% 13.42% 10.93% -7.94% 1.65%
AATR Account 17.11% 17.67% 13.42% 10.93% -4.17% 5.16%
</TABLE>
Dollar Values are per $1000 of initial premium
Average Annual Total Return (AATR) of Surrender Value =
[(ERV/$1000)(To the power of 365/# days)]-1
