<PAGE>
As filed with the Securities and Exchange Commission on
Registration Nos.
811-08946
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. 10 [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) 219-3743
(Depositor's Telephone Number, including Area Code)
Diane N. Ledger
Vice President
Pacific Life Insurance Company
700 Newport Center Drive
Newport Beach, California 92660
(Name and address of agent for service)
Copies of all communications to:
Diane N. Ledger Jane A. Kanter, Esq.
Pacific Life Insurance Company Dechert, Price & Rhoads
P. O. Box 9000 1775 Eye Street, N.W.
Newport Beach, CA 92658-9030 Washington, D.C. 20006-2401
Approximate Date of Proposed Public Offering:
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.
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on (date) pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: interests in the Separate Account under
Pacific Innovations 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.
<PAGE>
SEPARATE ACCOUNT A
FORM N-4
CROSS REFERENCE SHEET
PART A
Item No. Prospectus Heading
1. Cover Page Cover Page
2. Definitions TERMS USED IN THIS PROSPECTUS
3. Synopsis AN OVERVIEW OF PACIFIC INNOVATIONS
4. Condensed Financial Information YOUR INVESTMENT OPTIONS --Variable
Investment Option Performance;
PACIFIC LIFE AND THE SEPARATE ACCOUNT
--Financial Highlights
ADDITIONAL INFORMATION --Financial
Statements;
5. General Description of Registrant,
Depositor and Portfolio Companies AN OVERVIEW OF PACIFIC INNOVATIONS;
YOUR INVESTMENT OPTIONS;
PACIFIC LIFE AND THE SEPARATE ACCOUNT
--Pacific Life, -- Separate
Account A; ADDITIONAL INFORMATION
--Voting Rights
6. Deductions AN OVERVIEW OF PACIFIC INNOVATIONS;
HOW YOUR PAYMENTS ARE ALLOCATED
--Transfers, Administrative Fee;
CHARGES, FEES AND DEDUCTIONS;
WITHDRAWALS -- Optional Withdrawals
7. General Description of Variable
Annuity Contracts TERMS USED IN THIS PROSPECTUS;
AN OVERVIEW OF PACIFIC INNOVATIONS;
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
10. Purchases and Contract Value AN OVERVIEW OF PACIFIC INNOVATIONS;
PURCHASING YOUR CONTRACT;
HOW YOUR PAYMENTS ARE ALLOCATED;
PACIFIC LIFE AND THE SEPARATE
ACCOUNT -- Pacific Life; THE
GENERAL ACCOUNT -- Withdrawals and
Transfers
<PAGE>
11. Redemptions AN OVERVIEW OF PACIFIC INNOVATIONS;
CHARGES, FEES AND DEDUCTIONS;
WITHDRAWALS; ADDITIONAL INFORMATION
-- Timing of Payments and
Transactions; THE GENERAL ACCOUNT
-- Withdrawals and Transfers
12. Taxes AN OVERVIEW OF PACIFIC INNOVATIONS;
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
Prospectuses For:
Pacific Innovations
Variable Annuity
Pacific Select Fund
Dated [MONTH 1, 2000]
Underwritten by:
[LOGO OF PACIFIC LIFE]
Pacific Life Insurance Company
<PAGE>
PACIFIC INNOVATIONS
[Front Cover Artwork to come]
<PAGE>
(Sidebar)
This Contract is not available in all states. This Prospectus is not an offer in
any state or jurisdiction where we're not legally permitted to offer the
Contract.
The Contract is described in detail in this Prospectus and its Statement of
Additional Information (SAI). The Pacific Select Fund is described in its
Prospectus and its SAI. No one has the right to describe the Contract or the
Pacific Select Fund any differently than they have been described in these
documents.
You should be aware that the Securities and Exchange Commission (SEC) has not
reviewed the Contract and does not guarantee that the information in this
Prospectus is accurate or complete. It's a criminal offense to say otherwise.
THIS CONTRACT IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY,
ANY BANK. IT'S NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN A CONTRACT INVOLVES RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
(End Sidebar)
PACIFIC INNOVATIONS
PROSPECTUS [MONTH] 1, 2000
Pacific Innovations is an INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
CONTRACT issued by Pacific Life Insurance Company.
This Prospectus provides information you should know before buying a Contract.
It's accompanied by a current Prospectus for the Pacific Select Fund, the Fund
that provides the underlying Portfolios for the Variable Investment Options
offered under the Contract. The Variable Investment Options are funded by
Separate Account A of Pacific Life. Please read both Prospectuses carefully, and
keep them for future reference.
Here's a list of all the Investment Options available under your Contract:
<TABLE>
<CAPTION>
VARIABLE INVESTMENT OPTIONS
<S> <C>
Mid-Cap Value
Aggressive Equity Equity Index
Emerging Markets Small-Cap Index
[Diversified Research] REIT
Growth [Small-Cap Equity] International [International
International Large-Cap Value]
Bond and Income Government Securities
Equity Managed Bond
Multi-Strategy Money Market
Equity Income High Yield Bond
Growth LT Large-Cap Value
FIXED OPTION
Fixed
</TABLE>
You'll find more information about the Contract and Separate Account A in the
SAI dated [Month] 1, 2000. The SAI has been filed with the SEC and is considered
to be part of this Prospectus because it's incorporated by reference. You'll
find a table of contents for the SAI on page 47 of this Prospectus. You can get
a copy of the SAI without charge by calling or writing to Pacific Life. You can
also visit the SEC's website at www.sec.gov, which contains the SAI, material
incorporated into this Prospectus by reference, and other information about
registrants that file electronically with the SEC.
<PAGE>
YOUR GUIDE TO THIS PROSPECTUS
<TABLE>
<S> <C>
AN OVERVIEW OF PACIFIC INNOVATIONS 3
- -------------------------------------------------------
YOUR INVESTMENT OPTIONS 11
Your Variable Investment Options 11
Variable Investment Option Performance 12
Your Fixed Option 12
- -------------------------------------------------------
PURCHASING YOUR CONTRACT 12
How to Apply for Your Contract 12
Purchasing a Death Benefit Rider (Optional) 13
Making Your Purchase Payments 13
- -------------------------------------------------------
HOW YOUR PAYMENTS ARE ALLOCATED 13
Choosing Your Investment Options 13
Investing in Variable Investment Options 14
When Your Investment is Effective 14
Transfers 14
- -------------------------------------------------------
CHARGES, FEES AND DEDUCTIONS 15
Withdrawal Charge 15
Premium Taxes 17
Annual Fee 17
Waivers and Reduced Charges 18
Mortality and Expense Risk Charge 18
Administrative Fee 18
Expenses of the Fund 19
- -------------------------------------------------------
RETIREMENT BENEFITS AND OTHER PAYOUTS 19
Selecting Your Annuitant 19
Annuitization 19
Choosing Your Annuity Date ("Annuity Start
Date") 19
Default Annuity Date and Options 20
Choosing Your Annuity Option 20
Your Annuity Payments 22
Death Benefits 22
- -------------------------------------------------------
WITHDRAWALS 26
Optional Withdrawals 26
Tax Consequences of Withdrawals 28
Right to Cancel ("Free Look") 28
- -------------------------------------------------------
PACIFIC LIFE AND THE SEPARATE ACCOUNT 28
Pacific Life 28
Separate Account A 29
Financial Highlights 30
FEDERAL TAX STATUS 31
Taxes Payable by Contract Owners: General Rules 31
Qualified Contracts 32
Loans 34
Withholding 37
Impact of Federal Income Taxes 37
Taxes on Pacific Life 37
- -------------------------------------------------------
ADDITIONAL INFORMATION 38
Voting Rights 38
Changes to Your Contract 38
Changes to All Contracts 39
Inquiries and Submitting Forms and Requests 40
Telephone and Electronic Transactions 40
Electronic Delivery Authorization 41
Timing of Payments and Transactions 41
Confirmations, Statements and Other Reports to
Contract Owners 41
Replacement of Life Insurance or Annuities 42
Financial Statements 42
Preparation for the Year 2000 42
- -------------------------------------------------------
THE GENERAL ACCOUNT 43
General Information 43
Guarantee Terms 43
Withdrawals and Transfers 44
- -------------------------------------------------------
TERMS USED IN THIS PROSPECTUS 45
- -------------------------------------------------------
CONTENTS OF THE STATEMENT OF ADDITIONAL
INFORMATION 47
- -------------------------------------------------------
APPENDIX A: STATE LAW VARIATIONS 48
- -------------------------------------------------------
WHERE TO GO FOR MORE INFORMATION BACK COVER
</TABLE>
2
<PAGE>
AN OVERVIEW OF PACIFIC INNOVATIONS
(SIDEBAR)
PACIFIC INNOVATIONS BASICS
An annuity contract may be appropriate if you're looking for retirement income
or you want to meet other long-term financial objectives.
This Contract may not be the right one for you if you need to withdraw money for
short-term needs, because withdrawal charges and tax penalties for early
withdrawal may apply.
You should consider the Contract's investment and income benefits, as well as
its costs.
(END SIDEBAR)
This overview tells you some key things you should know about your Contract.
It's designed as a summary only--please read this Prospectus, your Contract and
the Statement of Additional Information for more detailed information.
Some states have different rules about how annuity contracts are described or
administered. The terms of your Contract, or of any endorsement or supplement,
prevail over what's in this Prospectus.
In this Prospectus, YOU and YOUR mean the Contract Owner or Policyholder.
PACIFIC LIFE, WE, US and OUR refer to Pacific Life Insurance Company. CONTRACT
means a Pacific Innovations variable annuity contract, unless we state
otherwise.
Pacific Innovations is an annuity contract between you and Pacific Life
Insurance Company.
This Contract is designed for long-term financial planning. It allows you to
invest money on a tax-deferred basis for retirement or other goals, and to
receive income in a variety of ways, including a series of income payments for
life or for a specified period of years.
Non-Qualified and Qualified Contracts are available. You buy a Non-Qualified
Contract with "after-tax" dollars. You buy a Qualified Contract under a
qualified retirement or pension plan, or an individual retirement annuity or
account (IRA), or form thereof.
Pacific Innovations is a variable annuity, which means that the value of your
Contract fluctuates depending on the performance of the Investment Options you
choose. The Contract allows you to choose how often you make Purchase Payments
and how much you add each time.
YOUR RIGHT TO CANCEL
During the right to cancel period, you have the right to cancel your Contract
and return it to us or to your registered representative for a refund. The
amount refunded may be more or less than the Purchase Payments you've made,
depending on the state where you signed your application and the kind of
Contract you buy.
3
<PAGE>
AN OVERVIEW OF PACIFIC INNOVATIONS
(SIDEBAR)
THE ACCUMULATION PHASE
The Investment Options you choose and how they perform will affect the value of
your Contract during the accumulation phase, as well as the amount of your
annuity payments during the income phase if you choose a variable annuitization
payout.
You can ask your registered
representative to help you choose the right Investment Options for your goals
and risk tolerance.
You'll find more about the Investment Options starting on page 11.
You'll find more about transfers starting on page 14.
You'll find more about withdrawals starting on page 26.
(END SIDEBAR)
During the accumulation phase, you can put money in your Contract by making
Purchase Payments, and choose Investment Options in which to allocate them. You
can also take money out of your Contract by making a withdrawal. The
accumulation phase begins on your Contract Date and continues until your Annuity
Date.
PURCHASE PAYMENTS
Your initial Purchase Payment must be at least $10,000 for a Non-Qualified
Contract and at least $2,000 for a Qualified Contract. Additional Purchase
Payments must be at least $250 for a Non-Qualified Contract and $50 for a
Qualified Contract.
INVESTMENT OPTIONS
You can choose from [20] Variable Investment Options (also called Subaccounts),
each of which invests in a corresponding Portfolio of the Pacific Select Fund.
We're the investment adviser for the Pacific Select Fund. We oversee the
management of all the Fund's Portfolios and manage two of the Portfolios
directly. We've retained other portfolio managers to manage the other
Portfolios. The value of each Portfolio will fluctuate with the value of the
investments it holds, and returns are not guaranteed.
You can also choose the Fixed Option that earns a guaranteed rate of interest of
at least 3% annually.
We allocate your Purchase Payments to the Investment Options you choose. The
value of your Contract will fluctuate during the accumulation phase depending on
the Investment Options you've chosen. You bear the investment risk of any
Variable Investment Options you choose.
TRANSFERRING AMONG INVESTMENT OPTIONS
You can transfer among Investment Options any time until your Annuity Date
without paying any current income tax. You can also make automatic transfers by
enrolling in our dollar cost averaging, portfolio rebalancing or earnings sweep
programs. Some restrictions apply to transfers to and from the Fixed Option.
WITHDRAWALS
You can make full and partial withdrawals to supplement your income or for other
purposes. You can withdraw a certain amount each year without paying a
withdrawal charge, but you may pay a withdrawal charge if you withdraw Purchase
Payments that are less than four years old. Some restrictions apply to making
withdrawals from the Fixed Option.
In general, you may have to pay tax on withdrawals or other distributions from
your Contract. If you're under age 59 1/2, a 10% federal penalty tax may also
apply to withdrawals.
4
<PAGE>
(SIDEBAR)
THE INCOME PHASE
You'll find more about annuitization starting on page 19.
THE DEATH BENEFIT
You'll find more about the death benefit starting on page 22.
These riders are not available in all states. Ask your registered representative
about the current availability status in your state of delivery.
(END SIDEBAR)
The income phase of your Contract begins on your Annuity Date. Generally, you
can choose to surrender your Contract and receive a single payment or you can
ANNUITIZE your Contract and receive a series of income payments.
You can choose fixed or variable annuity payments, or a combination of both, for
life or for a specified period of years. Variable annuity payments may not be
available in all states. You can choose monthly, quarterly, semiannual or annual
payments. We'll make the income payments to your DESIGNATED PAYEE.
If you choose variable annuity payments, the amount of the payments will
fluctuate depending on the performance of the Variable Investment Options you
choose. After your Annuity Date, if you choose variable annuity payments, you
can exchange your Subaccount Annuity Units among the Variable Investment Options
up to four times in any 12-month period.
The Contract provides a death benefit if the first Owner or last surviving
Annuitant dies during the accumulation phase. Death benefit proceeds are payable
when we receive proof of death and payment instructions. To whom we pay a death
benefit to, and how we calculate the amount of the death benefit depend on who
dies first and the type of Contract you own.
OPTIONAL RIDERS
The Stepped-Up Death Benefit Rider ("SDBR") and Premier Death Benefit Rider
("PDBR") offer the potential for a larger death benefit. You can only buy one of
the riders and you can only buy it when you buy your Contract. You cannot buy
both riders and you cannot buy a rider after you buy your Contract.
5
<PAGE>
AN OVERVIEW OF PACIFIC INNOVATIONS
(SIDEBAR)
For information about how Separate Account A and Fund Expenses affect
accumulation units, see Financial Highlights on page 30.
CONTRACT EXPENSES
SEPARATE ACCOUNT A ANNUAL EXPENSES
(as a percentage of the average daily Account Value)
(END SIDEBAR)
This section of the overview explains the fees and expenses associated with your
Pacific Innovations Contract.
- - CONTRACT EXPENSES are expenses that we deduct from your Contract. These
expenses are fixed under the terms of your Contract. Premium taxes or other
taxes may also apply to your Contract. We generally charge premium taxes when
you annuitize your Contract, but there may be other times when we charge them
to your Contract instead. Please see your Contract for details.
- - SEPARATE ACCOUNT A ANNUAL EXPENSES are expenses that we deduct from the assets
of each Variable Investment Option. They are guaranteed not to increase under
the terms of your Contract.
- - FEES AND EXPENSES PAID BY THE PACIFIC SELECT FUND affect you indirectly if you
choose a Variable Investment Option because they reduce Portfolio returns.
They can vary from year to year. They are not fixed and are not part of the
terms of your Contract.
<TABLE>
<S> <C>
Sales charge on Purchase Payments none
Maximum withdrawal charge, as a percentage of
Purchase Payments 9.0%(1)
Withdrawal transaction fee none(2)
Transfer fee none(3)
Annual Fee $ 30(4)
</TABLE>
<TABLE>
<CAPTION>
WITHOUT WITH WITH
RIDER SDBR PDBR
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
Mortality and Expense Risk
Charge(5) 1.25% 1.25% 1.25%
Administrative Fee(5) 0.15% 0.15% 0.15%
Death Benefit Rider Charge(6) none 0.20% 0.35%
----------- ----- -----
Total Separate Account A Annual
Expenses 1.40% 1.60% 1.75%
----------- ----- -----
</TABLE>
(1) The withdrawal charge may not apply or may be reduced under certain
circumstances. See WITHDRAWALS, and CHARGES, FEES AND DEDUCTIONS.
(2) In the future, we may charge a fee of up to $15 for any withdrawal over 15
that you make in a Contract Year. See WITHDRAWALS -- OPTIONAL WITHDRAWALS.
(3) In the future, we may charge a fee of up to $15 for any transfer over 15
that you make in a Contract Year. See HOW YOUR PAYMENTS ARE ALLOCATED --
TRANSFERS.
(4) We deduct an Annual Fee on each Contract Anniversary up to your Annuity
Date and when you make a full withdrawal if the Contract Value on these
days is less than $50,000 after deducting any outstanding loan and interest
(your Net Contract Value). See CHARGES, FEES, AND DEDUCTIONS.
(5) This is an annual rate. The daily rate is calculated by dividing the annual
rate by 365.
(6) If you buy the Stepped-Up Death Benefit Rider or the Premier Death Benefit
Rider (which is subject to state availability), we add this charge to the
Mortality and Expense Risk Charge until your Annuity Date. See CHARGES,
FEES AND DEDUCTIONS.
6
<PAGE>
(SIDEBAR)
FEES AND EXPENSES PAID BY THE PACIFIC SELECT FUND
You'll find more about the Pacific Select Fund starting on page 11, and in the
Fund's Prospectus, which accompanies this Prospectus.
(END SIDEBAR)
The Pacific Select Fund pays advisory fees and other expenses. These are
deducted from the assets of the Fund's Portfolios and may vary from year to
year. They are not fixed and are not part of the terms of your Contract. If you
choose a Variable Investment Option, these fees and expenses affect you
indirectly because they reduce Portfolio returns.
ADVISORY FEE
Pacific Life is the investment adviser to the Fund. The Fund pays an advisory
fee to us for these services. The table below shows the advisory fee as an
annual percentage of each Portfolio's average daily net assets.
OTHER EXPENSES
The table also shows expenses the Fund paid in 1998 as an annual percentage of
each Portfolio's average daily net assets. To help limit Fund expenses, we've
agreed to waive all or part of our investment advisory fees or otherwise
reimburse each Portfolio for expenses (not including advisory fees, additional
costs associated with foreign investing and extraordinary expenses) that exceed
0.25% of its average daily net assets. We do this voluntarily, but do not
guarantee that we'll continue to do so after December 31, 2000. No reimbursement
was necessary for 1998.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
PORTFOLIO ADVISORY FEE OTHER EXPENSES TOTAL EXPENSES
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Aggressive Equity .80% .09% .89%
Emerging Markets 1.10% .36% 1.46%
[Diversified Research](3) [.90%] [.05%] [.95%]
Growth [Small-Cap Equity] .65% .05% .70%
[International Large-Cap](3) [1.05%] [.15%] [1.20%]
Bond and Income .60% .10% .70%
Equity .65% .06% .71%
Multi-Strategy(1) .65% .06% .71%
Equity Income(1) .65% .05% .70%
Growth LT .75% .05% .80%
Mid-Cap Value(2) .85% .06% .91%
Equity Index .25% .05% .30%
Small-Cap Index(2) .50% .06% .56%
REIT(2) 1.10% .06% 1.16%
International
[International Value] .85% .15% 1.00%
Government Securities .60% .06% .66%
Managed Bond .60% .06% .66%
Money Market(1) .37% .06% .43%
High Yield Bond(1) .60% .06% .66%
Large-Cap Value(2) .85% .06% .91%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Total net expenses for these Portfolios in 1998, after deduction of an
offset for custodian credits, were: 0.42% for Money Market Portfolio, 0.65% for
High Yield Bond Portfolio, 0.69% for Equity Income Portfolio, and 0.70% for
Multi-Strategy Portfolio.
(2) Expenses are estimated. There were no actual advisory fees or other expenses
for these Portfolios in 1998 because the Portfolios started on January 4, 1999.
(3) Expenses are estimated. There were no actual advisory fees or other expenses
for these Portfolios in 1999 because the Portfolios started on [January 3],
2000.
7
<PAGE>
AN OVERVIEW OF PACIFIC INNOVATIONS
(SIDEBAR)
EXAMPLES
(END SIDEBAR)
The following table shows the expenses you would pay on each $1,000 you invested
if, at the end of each period, you: annuitized your Contract; surrendered your
Contract and withdrew the Contract Value, or did not annuitize or surrender, but
left the money in your Contract.
These examples assume the following:
- - the Contract Value starts at $65,000
- - the Investment Options have an annual return of 5%
- - the Annual Fee is deducted even when the Contract Value goes over $50,000 and
a waiver would normally apply.
WITHOUT RIDER reflects the expenses you would pay if you did not buy the
optional Stepped-Up Death Benefit Rider (SDBR) or Premier Death Benefit Rider
(PDBR).
WITH SDBR reflects the expenses you would pay if you bought the optional
Stepped-Up Death Benefit Rider.
WITH PDBR reflects expenses you would pay if you bought the optional Premier
Death Benefit Rider.
THESE EXAMPLES DO NOT SHOW PAST OR FUTURE EXPENSES. YOUR ACTUAL EXPENSES IN ANY
YEAR MAY BE MORE OR LESS THAN THOSE SHOWN HERE.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
EXPENSES IF YOU DID
NOT ANNUITIZE OR
EXPENSES IF YOU EXPENSES IF YOU SURRENDER, BUT LEFT
ANNUITIZED SURRENDERED THE MONEY IN YOUR
YOUR CONTRACT ($) YOUR CONTRACT ($) CONTRACT ($)
- -------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT 1 yr 3 yr 5 yr 10 yr 1 yr 3 yr 5 yr 10 yr 1 yr 3 yr 5 yr 10 yr
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
AGGRESSIVE EQUITY
without Rider 105 73 125 266 105 145 125 266 24 73 125 266
with SDBR 107 79 135 286 107 151 135 286 26 79 135 286
with PDBR 108 83 142 301 108 155 142 301 27 83 142 301
- -------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS
without Rider 110 90 153 322 110 162 153 322 29 90 153 322
with SDBR 112 96 163 341 112 168 163 341 31 96 163 341
with PDBR 114 100 170 355 114 172 170 355 33 100 170 355
- -------------------------------------------------------------------------------------------------------------------
[DIVERSIFIED RESEARCH]
without Rider 105 75 128 272 105 147 128 272 24 75 128 272
with SDBR 107 81 138 292 107 153 138 292 26 81 138 292
with PDBR 109 85 145 307 109 157 145 307 28 85 145 307
- -------------------------------------------------------------------------------------------------------------------
GROWTH [SMALL-CAP EQUITY]
without Rider 103 67 115 247 103 139 115 247 22 67 115 247
with SDBR 105 73 125 267 105 145 125 267 24 73 125 267
with PDBR 106 78 133 282 106 150 133 282 25 78 133 282
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
EXPENSES IF YOU DID
NOT ANNUITIZE OR
EXPENSES IF YOU EXPENSES IF YOU SURRENDER, BUT LEFT
ANNUITIZED SURRENDERED THE MONEY IN YOUR
YOUR CONTRACT ($) YOUR CONTRACT ($) CONTRACT ($)
- -------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT 1 yr 3 yr 5 yr 10 yr 1 yr 3 yr 5 yr 10 yr 1 yr 3 yr 5 yr 10 yr
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
[INTERNATIONAL LARGE-CAP]
without Rider 108 82 140 297 108 154 140 297 27 82 140 297
with SDBR 110 88 150 316 110 160 150 316 29 88 150 316
with PDBR 111 93 157 330 111 165 157 330 30 93 157 330
- -------------------------------------------------------------------------------------------------------------------
BOND AND INCOME
without Rider 103 67 115 247 103 139 115 247 22 67 115 247
with SDBR 105 73 125 267 105 145 125 267 24 73 125 267
with PDBR 106 78 133 282 106 150 133 282 25 78 133 282
- -------------------------------------------------------------------------------------------------------------------
EQUITY
without Rider 103 67 115 248 103 139 115 248 22 67 115 248
with SDBR 105 73 126 268 105 145 126 268 24 73 126 268
with PDBR 106 78 133 283 106 150 133 283 25 78 133 283
- -------------------------------------------------------------------------------------------------------------------
MULTI-STRATEGY
without Rider 103 67 115 248 103 139 115 248 22 67 115 248
with SDBR 105 73 126 268 105 145 126 268 24 73 126 268
with PDBR 106 78 133 283 106 150 133 283 25 78 133 283
- -------------------------------------------------------------------------------------------------------------------
EQUITY INCOME
without Rider 103 67 115 247 103 139 115 247 22 67 115 247
with SDBR 105 73 125 267 105 145 125 267 24 73 125 267
with PDBR 106 78 133 282 106 150 133 282 25 78 133 282
- -------------------------------------------------------------------------------------------------------------------
GROWTH LT
without Rider 104 70 120 257 104 142 120 257 23 70 120 257
with SDBR 106 76 130 277 106 148 130 277 25 76 130 277
with PDBR 107 81 138 292 107 153 138 292 26 81 138 292
- -------------------------------------------------------------------------------------------------------------------
MID-CAP VALUE
without Rider 105 73 126 268 105 145 126 268 24 73 126 268
with SDBR 107 79 136 288 107 151 136 288 26 79 136 288
with PDBR 108 84 143 303 108 156 143 303 27 84 143 303
- -------------------------------------------------------------------------------------------------------------------
EQUITY INDEX
without Rider 99 55 94 205 99 127 94 205 18 55 94 205
with SDBR 101 61 105 226 101 133 105 226 20 61 105 226
with PDBR 102 66 112 242 102 138 112 242 21 66 112 242
- -------------------------------------------------------------------------------------------------------------------
SMALL-CAP INDEX
without Rider 101 63 108 232 101 135 108 232 20 63 108 232
with SDBR 103 69 118 253 103 141 118 253 22 69 118 253
with PDBR 105 73 126 268 105 145 126 268 24 73 126 268
- -------------------------------------------------------------------------------------------------------------------
REIT
without Rider 107 81 138 293 107 153 138 293 26 81 138 293
with SDBR 109 87 148 312 109 159 148 312 28 87 148 312
with PDBR 111 91 155 327 111 163 155 327 30 91 155 327
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
AN OVERVIEW OF PACIFIC INNOVATIONS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
EXPENSES IF YOU DID
NOT ANNUITIZE OR
EXPENSES IF YOU EXPENSES IF YOU SURRENDER, BUT LEFT
ANNUITIZED SURRENDERED THE MONEY IN YOUR
YOUR CONTRACT ($) YOUR CONTRACT ($) CONTRACT ($)
- -------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT 1 yr 3 yr 5 yr 10 yr 1 yr 3 yr 5 yr 10 yr 1 yr 3 yr 5 yr 10 yr
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL [INTERNATIONAL VALUE]
without Rider 106 76 130 277 106 148 130 277 25 76 130 277
with SDBR 108 82 140 297 108 154 140 297 27 82 140 297
with PDBR 109 87 147 311 109 159 147 311 28 87 147 311
- -------------------------------------------------------------------------------------------------------------------
GOVERNMENT SECURITIES
without Rider 102 66 113 243 102 138 113 243 21 66 113 243
with SDBR 104 72 123 263 104 144 123 263 23 72 123 263
with PDBR 106 76 131 278 106 148 131 278 25 76 131 278
- -------------------------------------------------------------------------------------------------------------------
MANAGED BOND
without Rider 102 66 113 243 102 138 113 243 21 66 113 243
with SDBR 104 72 123 263 104 144 123 263 23 72 123 263
with PDBR 106 76 131 278 106 148 131 278 25 76 131 278
- -------------------------------------------------------------------------------------------------------------------
MONEY MARKET
without Rider 100 59 101 219 100 131 101 219 19 59 101 219
with SDBR 102 65 111 240 102 137 111 240 21 65 111 240
with PDBR 104 70 119 255 104 142 119 255 23 70 119 255
- -------------------------------------------------------------------------------------------------------------------
HIGH YIELD BOND
without Rider 102 66 113 243 102 138 113 243 21 66 113 243
with SDBR 104 72 123 263 104 144 123 263 23 72 123 263
with PDBR 106 76 131 278 106 148 131 278 25 76 131 278
- -------------------------------------------------------------------------------------------------------------------
LARGE-CAP VALUE
without Rider 105 73 126 268 105 145 126 268 24 73 126 268
with SDBR 107 79 136 288 107 151 136 288 26 79 136 288
with PDBR 108 84 143 303 108 156 143 303 27 84 143 303
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
YOUR INVESTMENT OPTIONS
You may choose among the [twenty] different Variable Investment Options and the
Fixed Option.
YOUR VARIABLE INVESTMENT OPTIONS
Each Variable Investment Option invests in a separate Portfolio of the Fund. For
your convenience, the following chart summarizes some basic data about each
Portfolio. THIS CHART IS ONLY A SUMMARY. FOR MORE COMPLETE INFORMATION ON EACH
PORTFOLIO, INCLUDING A DISCUSSION OF THE PORTFOLIO'S INVESTMENT TECHNIQUES AND
THE RISKS ASSOCIATED WITH ITS INVESTMENTS, SEE THE ACCOMPANYING FUND PROSPECTUS.
NO ASSURANCE CAN BE GIVEN THAT A PORTFOLIO WILL ACHIEVE ITS INVESTMENT
OBJECTIVE. YOU SHOULD READ THE FUND PROSPECTUS CAREFULLY BEFORE INVESTING.
<TABLE>
<CAPTION>
PRIMARY INVESTMENTS
PORTFOLIO OBJECTIVE (UNDER NORMAL CIRCUMSTANCES) PORTFOLIO MANAGER
<S> <C> <C> <C>
Aggressive Equity Capital appreciation. Equity securities of small Alliance Capital Management
emerging-growth companies and L.P.
medium-sized companies.
Emerging Markets Long-term growth of capital. Equity securities of companies that [Alliance Capital Management
are located in countries generally L.P.]
regarded as "emerging market"
countries.
[Diversified Research] [Long-term growth of capital.] [Equity securities of U.S. [Capital Guardian Trust
companies and securities whose Company]
principal markets are in the U.S.]
Growth [Small-Cap Equity] Growth of capital. Equity securities of smaller and Capital Guardian Trust
medium-sized companies. Company
[International Large-Cap] [Long-term growth of capital.] [Equity securities of non-U.S. [Capital Guardian Trust
companies and securities whose Company]
principal markets are outside of
the U.S.]
Bond and Income Total return and income consistent A wide range of fixed income Goldman Sachs Asset
with prudent investment management. securities. Management
Equity Capital appreciation. Current Equity securities of large U.S. Goldman Sachs Asset
income is of secondary importance. growth oriented companies. Management
Multi-Strategy High total return. A mix of equity and fixed income J.P. Morgan Investment
securities. Management Inc.
Equity Income Long-term growth of capital and Equity securities of large and J.P. Morgan Investment
income. medium-sized dividend-paying U.S. Management Inc.
companies.
Growth LT Long-term growth of capital Equity securities of a large number Janus Capital Corporation
consistent with the preservation of of companies of any size.
capital.
Mid-Cap Value Capital appreciation. Equity securities of medium-sized Lazard Asset Management
U.S. companies believed to be
undervalued.
Equity Index Investment results that correspond Equity securities of companies that [Mercury Asset Management
to the total return of common are included in the Standard & US]
stocks publicly traded in the U.S. Poor's 500 Composite Stock Price
Index.
Small-Cap Index Investment results that correspond Equity securities of companies that [Mercury Asset Management
to the total return of an index of are included in the Russell 2000 US]
small capitalization companies. Small Stock Index.
REIT Current income and long-term Equity securities of real estate Morgan Stanley Asset
capital appreciation. investment trusts. Management
International [International Long-term capital appreciation Equity securities of companies of Morgan Stanley Asset
Value] primarily through investment in any size located in developed Management
equity securities of corporations countries outside of the U.S.
domiciled in countries other than
the United States.
Government Securities Maximize total return consistent Fixed income securities that are Pacific Investment
with prudent investment management. issued or guaranteed by the U.S. Management Company
government, its agencies or
government-sponsored enterprises.
Managed Bond Maximize total return consistent Medium and high-quality fixed Pacific Investment
with prudent investment management. income securities with varying Management Company
terms to maturity.
Money Market Current income consistent with Highest quality money market Pacific Life
preservation of capital. instruments believed to have
limited credit risk.
High Yield Bond High level of current income. Fixed income securities with lower Pacific Life
and medium-quality credit ratings
and intermediate to long-terms to
maturity.
Large-Cap Value Long-term growth of capital. Equity securities of large U.S. Salomon Brothers Asset
Current income is of secondary companies. Management Inc
importance.
</TABLE>
11
<PAGE>
PACIFIC INNOVATIONS
THE INVESTMENT ADVISER
We are the investment adviser for the Fund. We and the Fund have retained other
portfolio managers, supervised by us, for [eighteen] of the Portfolios.
VARIABLE INVESTMENT OPTION PERFORMANCE
Historical performance information can help you understand how investment
performance can affect your investment in the Variable Investment Options.
Although the Subaccounts were established January 2, 1996 and have no historical
performance prior to that date, each Subaccount will be investing in shares of a
Portfolio of the Fund, and the majority of these Portfolios do have historical
performance data which covers a longer period. Performance data include total
returns for each Subaccount, current and effective yields for the Money Market
Subaccount, and yields for the other fixed income Subaccounts. Calculations are
in accordance with standard formulas prescribed by the SEC which are described
in the SAI. Yields do not reflect any charge for premium taxes and/or other
taxes; this exclusion may cause yields to show more favorable performance. Total
returns may or may not reflect withdrawal charges, Annual Fees or any charge for
premium and/or other taxes; data that do not reflect these charges may show more
favorable performance.
The SAI presents some hypothetical performance data. The SAI also presents some
performance benchmarks, based on unmanaged market indices, such as the Standard
& Poor's 500 Composite Stock Price Index (S&P 500), and on "peer groups," which
use other managed funds with similar investment objectives. These benchmarks may
give you a broader perspective when you examine hypothetical or actual
Subaccount performance.
In addition, we may provide you with reports both as an insurance company and as
to our claims paying ability that are produced by rating agencies and
organizations.
YOUR FIXED OPTION
The Fixed Option offers you a guaranteed minimum interest rate on the amount you
allocate to this Option. Amounts you allocate to this Option, and your earnings
credited 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 unless we specifically obtain 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, 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 last birthday. If any
Contract Owner or any 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.
12
<PAGE>
PACIFIC INNOVATIONS
PURCHASING A DEATH BENEFIT RIDER (OPTIONAL)
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 either Rider after the
Contract Date.
If you select one of these Riders, the SDBR or PDBR, as applicable, will remain
in effect until the earliest 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 70 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 the 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 limited. See APPENDIX A: STATE LAW
VARIATIONS.
FORMS OF PAYMENT
Your initial and additional Purchase Payments may be sent by personal or bank
check or by wire transfer. You may also make additional PAC Purchase Payments
via electronic funds transfer. All checks must be drawn on U.S. funds. If you
make Purchase Payments by check other than a cashier's check, your payment of
any withdrawal proceeds and any refund during your "free look" period may be
delayed until your check has cleared.
HOW YOUR PAYMENTS ARE ALLOCATED
CHOOSING YOUR INVESTMENT OPTIONS
You may allocate your Purchase Payments among the [twenty] Subaccounts and the
Fixed Option. Allocations of your initial Purchase Payment to the Investment
Options you selected will be effective on your Contract 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
pro rata 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. If your initial Purchase Payment is received from
multiple sources, we will consider them all your initial Purchase Payment.
13
<PAGE>
PACIFIC INNOVATIONS
INVESTING IN VARIABLE INVESTMENT OPTIONS
Each time we allocate your investment to a Variable Investment Option, your
Contract is credited with a number of "Subaccount Units" in that Subaccount. The
number of Subaccount Units credited is equal to the amount you have allocated to
that Subaccount divided by the "Unit Value" of one Unit of that Subaccount.
EXAMPLE: you allocate $600 to the Government Securities Subaccount. At the
end of the Business Day on which your allocation is effective, the value of
one Unit in the Government Securities Subaccount is $15. As a result, 40
Subaccount Units are credited to your Contract for your $600.
YOUR VARIABLE ACCOUNT VALUE WILL CHANGE
After we credit your Contract with Subaccount Units, the value of those Units
will usually fluctuate. This means that, from time to time, your investment
allocated to the Variable Investment Options may be worth more or less than the
original 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. The Unit Value
at which purchase, transfer and withdrawal transactions are credited or debited
is the value of the Subaccount Units next calculated after your transaction is
effective. Your Variable Account Value begins to reflect the investment
performance results of your new allocations on the day after your transaction is
effective.
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. See ADDITIONAL INFORMATION - INQUIRIES AND
SUBMITTING FORMS AND REQUESTS.
TRANSFERS
Once your Payments are allocated to the Investment Options you selected, you may
transfer your 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.
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 (but not the portfolio rebalancing option described below) 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.
AUTOMATIC TRANSFER OPTIONS
We offer three automatic transfer options: dollar cost averaging, portfolio
rebalancing and earnings sweep. There is no charge for these options, although
transfers under the dollar cost averaging and earnings sweep options are counted
towards your total transfers in a Contract Year.
14
<PAGE>
PACIFIC INNOVATIONS
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.
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.
Subject to state variation. 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 five years; (iii) withdrawals by Owners to
meet the minimum distribution rules for Qualified Contracts as they apply to
amounts held under the Contract; (iv) subject to medical evidence satisfactory
to us, after the first Contract Anniversary, full or partial withdrawals if the
Owner or Annuitant has been diagnosed with a medically determinable condition
that results in a life expectancy of twelve (12) months or less; or (v) subject
to medical evidence satisfactory to us, after 90 days from the Contract Date,
full or partial withdrawals while the Owner or Annuitant has been confined to an
accredited nursing home for 60 days or longer. The waiver of withdrawal charges
applies only to withdrawals made while the Owner or Annuitant is in a nursing
home or within 90 days after the Owner or Annuitant leaves the nursing home. In
addition, the nursing home confinement period for which you seek the waiver must
begin after the Contract Date. In order to use this waiver, you must submit with
your withdrawal request, the following documents: (1) a physician's note
recommending the Owner or Annuitant's admittance to a nursing home; (2) an
admittance form which shows the type of facility the Owner or Annuitant entered;
and (3) a bill from the nursing home which shows that the Owner or Annuitant met
the 60 day nursing home confinement requirement. An accredited nursing home is
defined as a home or facility that; (1) is operating in accordance with the law
of jurisdiction in which it is located; (2) is primarily engaged in providing,
in addition to room and board, skilled nursing care under the supervision of a
duly licensed physician; (3) provides continuous 24 hour a day nursing service
by or under the supervision of a registered nurse; and maintains a daily record
of the patient.
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. Eligible Purchase
Payments include 10% annually of your total Purchase Payments that have an "age"
of less than four years, plus any remaining portion not withdrawn from the
previous Contract Year's Eligible Purchase Payments that are derived from
15
<PAGE>
PACIFIC INNOVATIONS
Purchase Payments which have an "age" of less than four years, plus 100% of all
Purchase Payments that have an "age" of four 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 (NON-CRT)
CONTRACT YEAR 1
You make an initial Purchase Payment of $100,000 and make no additional Purchase
Payments. Your free withdrawal amount available in year 1 equals 10% of the
total Purchase Payments made (10% of the total Purchase Payments of $100,000
equals $10,000.) If you withdraw $5,000, the remaining $5,000 of the free
withdrawal amount not withdrawn in Contract Year 1 will be carried over to the
next Contract Year.
CONTRACT YEAR 2
Your free withdrawal amount for Contract Year 2 is equal to 10% of your total
Purchase Payments still subject to the withdrawal charge plus any remaining free
withdrawal amounts carried over from the previous Contract Year. (10% of
$100,000 plus $5,000 equals $15,000) If no withdrawals are taken, the $15,000
free withdrawal amount not withdrawn in Contract Year 2 will be carried over to
the next Contract Year.
CONTRACT YEAR 3
Your free withdrawal amount for Contract Year 3 is equal to 10% of total
Purchase Payments subject to the withdrawal charge plus any remaining free
withdrawal amounts carried over from the previous Contract Year. (10% of
$100,000 plus $15,000 equals $25,000) If you take a $15,000 withdrawal, the
remaining $10,000 of the free withdrawal amount not taken in Contract Year 3
will not be carried over to the next Contract Year because the Purchase Payments
will not be subject to the withdrawal charge and the entire amount remaining
will be able to be withdrawn free of withdrawal charges.
HOW THE CHARGE IS DETERMINED
The amount of the charge depends on how long each Purchase Payment was held
under your Contract. Each Purchase Payment you make is considered to have a
certain "age," depending on the length of time since that Purchase Payment was
effective. A Purchase Payment is "age one" from the day it is effective until
your next 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.................................................... 9%
2.................................................... 8%
3.................................................... 8%
4 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 4.75% of your aggregate Purchase Payments.
16
<PAGE>
PACIFIC INNOVATIONS
Sellers of Contracts will 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 paragraphs. 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 are not considered a withdrawal of an amount from your Contract, so no
withdrawal charge is imposed at the time of transfer. See HOW YOUR PAYMENTS ARE
ALLOCATED - TRANSFERS and THE GENERAL ACCOUNT - WITHDRAWALS AND TRANSFERS.
PREMIUM TAXES
Depending on your state of residence (among other factors), 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. Premium tax
is subject to state requirements. 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.
ANNUAL FEE
We will charge you an Annual Fee of $30 on each Contract Anniversary prior to
the Annuity Date, and at the time you withdraw your entire Net Contract Value
(on a pro rated basis for that Contract Year), if your Net Contract Value is
less than $50,000 on that date. The fee is not imposed on amounts you annuitize
or on payment of death benefit proceeds. The fee reimburses certain of our costs
in administering the Contracts and the Separate Account; we do not intend to
realize a profit from this fee or the Administrative Fee. This fee is guaranteed
not to increase for the life of your Contract.
17
<PAGE>
PACIFIC INNOVATIONS
Your Annual Fee will be charged proportionately against your Investment Options.
Assessments against your Variable Investment Options are made by debiting some
of the Subaccount Units previously credited to your Contract; that is,
assessment of the Annual Fee does not change the Unit Value for those
Subaccounts.
WAIVERS AND REDUCED CHARGES
We may agree to reduce or waive the withdrawal charge or the Annual Fee, or
credit additional amounts under our Contracts, in situations where selling
and/or maintenance costs associated with the Contracts are reduced, such as the
sale of several Contracts to the same 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. Any
additional amounts will be added to a Contract when we apply Purchase Payments.
We reserve the right to terminate waiver, reduced charge and crediting programs
at any time, including for issued Contracts.
With respect to additional amounts as described above, you will not keep any
amounts credited if you return your Contract during the Free Look period as
described under WITHDRAWALS - RIGHT TO CANCEL ("FREE LOOK").
MORTALITY AND EXPENSE RISK CHARGE
We assess a charge against the assets of each Subaccount to compensate for
certain mortality and expense risks that we assume under the Contracts (the
"Risk Charge"). The risk that an Annuitant will live longer (and therefore
receive more annuity payments) than we predict through our actuarial
calculations at the time the Contract is issued is "mortality risk." We also
bear mortality risk in connection with death benefits payable under the
Contracts. The risk that the expense charges and fees under the Contracts and
Separate Account are less than our actual administrative and operating expenses
is called "expense risk."
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.
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.
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 rate 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.
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PACIFIC INNOVATIONS
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.
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.
RETIREMENT BENEFITS AND OTHER PAYOUTS
SELECTING YOUR ANNUITANT
When you submit the application for your Contract, you may choose a sole
Annuitant or 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 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, 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.
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.
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PACIFIC INNOVATIONS
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 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-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. Subject to state availability. Second, you may choose
the form of annuity payments (see ANNUITY OPTIONS below). 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.
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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. If you choose the Period Certain Only Annuity
Option, the variable annuity payment option is not available to you.
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 Annuitant 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 5 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 5 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. If you choose the
Period Certain Only Annuity Option, you may only choose the fixed annuity
payment option.
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.
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PACIFIC INNOVATIONS
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
effect for your Contract or the Annuity Date which are at least the variable
annuity income factors under the contract. 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 below.
The "Notice Date" is the day on which we receive proof (in proper form) of death
and instructions regarding payment of death benefit proceeds.
DEATH BENEFIT PROCEEDS
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 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
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PACIFIC INNOVATIONS
(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 complete 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.
The Owner may designate that the Beneficiary will receive death benefit proceeds
through annuity payments for life or over a period that does not exceed the
Beneficiary's life expectancy. The Owner must designate the payment method in
writing in a form acceptable to us. The Owner may revoke the designation only in
writing and only in an acceptable form to us. Once the Owner dies, the
Beneficiary cannot revoke or modify the Owner's designation.
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; if not the Beneficiary; if living; if not, 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.
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).
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
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PACIFIC INNOVATIONS
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, if the designated recipient is the
spouse of the Annuitant at the time of the Annuitant's death ("surviving
spouse"), then, under the regulations, required distributions must begin no
later than December 31 of the calendar year in which the Annuitant would have
reached age 70 1/2. In the case of Roth IRA, the spouse needs to be the sole
designated recipient.
Under our administrative procedures, payments must commence either by the end of
the fifth year following the Annuitant's death or lifetime distributions
beginning no later than the end of the year following the year the Annuitant
died; 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 required distributions 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 defer required
distributions 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
required distributions election is not received by us in good order by
December 31, of the year following the Annuitant's death or, the December of the
year in 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 Required Minimum 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.
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
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PACIFIC INNOVATIONS
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 aggregate
Purchase Payments less an adjusted amount for each withdrawal increased at an
effective annual rate of 6% to that day, subject to a maximum of two times the
difference between the aggregate Purchase Payments and 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 following the date the Annuitant reaches his or her 80th birthday;
(ii) the date of death of the sole Annuitant; or (iii) the Annuity Date.
To determine the adjusted amount for each withdrawal; (i) we divide the amount
of each withdrawal by your Contract Value immediately before that withdrawal;
and (ii) we then multiply the result by your Death Benefit Amount immediately
before that withdrawal.
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.
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 the greater of (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 you purchase the
PDBR, the death benefit will be equal to the greater of (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.
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PACIFIC INNOVATIONS
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, death
benefit proceeds are payable to the Beneficiary, if living; if not, death
benefit proceeds are payble to the Owner's estate.
If the Owner is not the Annuitant and they die simultaneously, the death benefit
will be calculated under the Death of Annuitant provisions and proceeds will be
paid to the Joint Owner if living; if not, to the Contingent Owner, if living;
if not to the Beneficiary, 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. 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 THE AMOUNT
OF THE DEATH BENEFIT: DEATH OF ANNUITANT section above, and will be paid in
accordance with the DEATH BENEFIT PROCEEDS section. The death benefit proceeds
will be paid to the Joint Owner, if living; if not, death benefit proceeds will
be paid to the Beneficiary if living; if not, death benefit proceeds will be
paid to the Owner's estate.
If both you and the Annuitant(s) are non-individual persons, no death benefit
will be payable, and any distribution will be treated as a withdrawal and
subject to any applicable Annual Fee, withdrawal 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.
AMOUNT AVAILABLE FOR WITHDRAWAL
The amount available for withdrawal is your Net Contract Value at the end of the
Business Day on which your withdrawal request is effective, less any applicable
Annual Fee, withdrawal charge, withdrawal transaction fee, and any
26
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PACIFIC INNOVATIONS
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
Investment Option 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 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.
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PACIFIC INNOVATIONS
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")
During the Free Look Period, you have the right to cancel your Contract and
return it to us for a refund. If you return your Contract, it will be canceled
and treated as void from your Contract Date. The amount of your refund may be
more or less than the Purchase Payments you've made, depending on the state
where you signed your application. Generally, the Free Look Period ends 10 days
after you receive your Contract. Also, some states may have a different Free
Look Period if you are replacing another annuity contract or life insurance
policy. For more information, see APPENDIX A: STATE LAW VARIATIONS.
In most states, your refund will be your Contract Value as of the end of the
Business Day on which we receive your Contract for cancellation, plus a refund
of any amount that may have been deducted as Contract charges to pay for premium
taxes and/or other taxes. You will bear the investment risk on any gain or loss
on funds allocated to the variable investment options. In some states we're
required to refund the Purchase Payments you've made (less any amount
withdrawn). There are some states that require us to return a different amount
if you are replacing another annuity contract or life insurance policy. For any
Contract issued as an IRA returned within 7 days after you receive it, we are
required to return all Purchase Payments (less any withdrawals made). For more
information, see APPENDIX A: STATE LAW VARIATIONS.
You'll find a complete description of the Free Look Period and amount to be
refunded that applies to your Contract on the Contract's cover page, or on a
notice that accompanied your policy.
Your Purchase Payments will be allocated in accordance with your application or
your most recent allocation instructions.
PACIFIC LIFE AND THE SEPARATE ACCOUNT
PACIFIC LIFE
We are a life insurance company that is based in California. Along with our
subsidiaries and affiliates, our operations include life insurance, annuities,
pension and institutional products, group employee benefits, broker-dealer
operations and any investment and advisory services. As of the end of 1998, we
had $89.6 billion of individual life insurance in force and total admitted
assets of approximately $37.6 billion. We have been ranked according to admitted
assets as the 18th largest life insurance carrier in the nation based on
December 31, 1998 assets. The Pacific Life family of companies has total assets
and funds under management of $290 billion as of December 31, 1998. We are
authorized to conduct life insurance and annuity business in the District of
Columbia and all states except New York. Our principal office is located at 700
Newport Center Drive, Newport Beach, California 92660.
We were originally organized on January 2, 1868, under the name "Pacific Mutual
Life Insurance Company of California" and reincorporated as "Pacific Mutual Life
Insurance Company" on July 22, 1936. On September 1, 1997, we converted from a
mutual life insurance company to a stock life insurance company ultimately
controlled by a mutual holding company and were authorized by California
regulatory authorities to change our name to Pacific Life Insurance Company.
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
28
<PAGE>
PACIFIC INNOVATIONS
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 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 the accompanying Prospectus
and the SAI for the Fund for more information.
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PACIFIC INNOVATIONS
FINANCIAL HIGHLIGHTS
The table below is designed to help you understand how the Variable Investment
Options have performed. It shows the value of a Subaccount Unit at the beginning
and end of each period, as well as the number of Subaccount Units at the end of
each period. A Subaccount Unit is also called an ACCUMULATION UNIT.
The information in the table for the period ended December 31, 1998 is included
in the financial statements of Separate Account A which have been audited by
Deloitte & Touche LLP, independent auditors. You should read the table in
conjunction with the financial statements for Separate Account A, which are
included in its annual report dated as of December 31, 1998. The information is
for periods before the Contract was available and the Units and Unit Values do
not support the Contract; but relates to other variable annuity Contracts.
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
AGGRESSIVE EQUITY(2)
Subaccount Unit Value at beginning of period $10.92 $10.67 $10.00
Subaccount Unit Value as of December 31 $12.19 $10.92 $10.67
Number of Subaccount Units outstanding at end of period 5,808,703 1,711,363 387,987
- -------------------------------------------------------------------------------------------------------
EMERGING MARKETS(2)
Subaccount Unit Value at beginning of period $9.28 $9.57 $10.00
Subaccount Unit Value as of December 31 $6.70 $9.28 $9.57
Number of Subaccount Units outstanding at end of period 3,975,851 1,342,086 240,607
- -------------------------------------------------------------------------------------------------------
BOND AND INCOME(1)
Subaccount Unit Value at beginning of period $11.23 $9.79 $10.00
Subaccount Unit Value as of December 31 $12.07 $11.23 $9.79
Number of Subaccount Units outstanding at end of period 4,739,580 975,740 154,590
- -------------------------------------------------------------------------------------------------------
EQUITY(1)
Subaccount Unit Value at beginning of period $14.68 $12.59 $10.00
Subaccount Unit Value as of December 31 $18.85 $14.68 $12.59
Number of Subaccount Units outstanding at end of period 6,695,038 1,983,738 453,223
- -------------------------------------------------------------------------------------------------------
MULTI-STRATEGY(1)
Subaccount Unit Value at beginning of period $13.01 $11.03 $10.00
Subaccount Unit Value as of December 31 $15.17 $13.01 $11.03
Number of Subaccount Units outstanding at end of period 8,073,603 1,830,504 294,936
- -------------------------------------------------------------------------------------------------------
EQUITY INCOME(1)
Subaccount Unit Value at beginning of period $14.78 $11.66 $10.00
Subaccount Unit Value as of December 31 $18.10 $14.78 $11.66
Number of Subaccount Units outstanding at end of period 14,764,834 4,189,318 743,123
- -------------------------------------------------------------------------------------------------------
GROWTH LT(1)
Subaccount Unit Value at beginning of period $12.71 $11.61 $10.00
Subaccount Unit Value as of December 31 $19.84 $12.71 $11.61
Number of Subaccount Units outstanding at end of period 10,966,264 3,826,332 950,317
- -------------------------------------------------------------------------------------------------------
EQUITY INDEX(1)
Subaccount Unit Value at beginning of period $15.69 $11.97 $10.00
Subaccount Unit Value as of December 31 $19.88 $15.69 $11.97
Number of Subaccount Units outstanding at end of period 15,518,412 4,460,482 757,175
- -------------------------------------------------------------------------------------------------------
INTERNATIONAL(1)
Subaccount Unit Value at beginning of period $12.76 $11.84 $10.00
Subaccount Unit Value as of December 31 $13.29 $12.76 $11.84
Number of Subaccount Units outstanding at end of period 15,066,242 5,292,436 1,312,817
- -------------------------------------------------------------------------------------------------------
GOVERNMENT SECURITIES(1)
Subaccount Unit Value at beginning of period $10.95 $10.14 $10.00
Subaccount Unit Value as of December 31 $11.80 $10.95 $10.14
Number of Subaccount Units outstanding at end of period 4,543,208 1,506,839 673,682
- -------------------------------------------------------------------------------------------------------
MANAGED BOND(1)
Subaccount Unit Value at beginning of period $11.14 $10.27 $10.00
Subaccount Unit Value as of December 31 $11.99 $11.14 $10.27
Number of Subaccount Units outstanding at end of period 16,897,325 4,434,069 742,041
- -------------------------------------------------------------------------------------------------------
MONEY MARKET(1)
Subaccount Unit Value at beginning of period $10.75 $10.36 $10.00
Subaccount Unit Value as of December 31 $11.16 $10.75 $10.36
Number of Subaccount Units outstanding at end of period 14,823,792 3,041,495 1,478,808
- -------------------------------------------------------------------------------------------------------
HIGH YIELD BOND(1)
Subaccount Unit Value at beginning of period $11.83 $10.96 $10.00
Subaccount Unit Value as of December 31 $11.95 $11.83 $10.96
Number of Subaccount Units outstanding at end of period 7,396,859 2,702,260 630,637
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) This Subaccount began operations on January 2, 1996.
(2) This Subaccount began operations on April 17, 1996.
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PACIFIC INNOVATIONS
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 an
agent 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 in the Fund's SAI. We believe the underlying
Variable Investment Options for the Contract meet these requirements. In
connection with the issuance of temporary regulations relating to
diversification requirements under Section 817(h), the Treasury Department
announced that such regulations do not provide guidance concerning the extent to
which you may direct your investments to particular divisions of a separate
account. Such guidance may be included in regulations or revenue rulings under
Section 817(d) relating to the definition of a variable contract. Because of
this uncertainty, we reserve the right to make such changes as we deem necessary
or appropriate to ensure that your Contract continues to qualify as an annuity
for tax purposes. Any such changes will apply uniformly to affected Contract
Owners and will be made with such notice to affected Contract Owners as is
feasible under the circumstances.
TAXES PAYABLE BY CONTRACT OWNERS: GENERAL RULES
THESE GENERAL RULES APPLY TO NON-QUALIFIED CONTRACTS. AS DISCUSSED BELOW,
HOWEVER, TAX RULES MAY DIFFER FOR QUALIFIED CONTRACTS AND YOU SHOULD CONSULT A
QUALIFIED TAX ADVISER IF YOU ARE PURCHASING A QUALIFIED CONTRACT.
Distributions of net investment income or capital gains that each Subaccount
receives from its corresponding Portfolio are automatically reinvested in such
Portfolio unless we, on behalf of the Separate Account, elect otherwise. As
noted above, you will be subject to federal income taxes on the investment
income from your Contract only when it is distributed to you.
MULTIPLE CONTRACTS
All Non-Qualified contracts that are issued by us, or our affiliates, to the
same Owner during any calendar year are treated as one contract for purposes of
determining the amount includible in gross income under Code Section 72(e).
Further, the Treasury Department has specific authority to issue regulations
that prevent the avoidance of Section 72(e) through the serial purchase of
contracts or otherwise.
31
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PACIFIC INNOVATIONS
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 you 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, a deduction may be allowed 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. IRC Section
72(b)(3)(A) or (B) or (C).
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.
Any amount payable upon the Contract Owner's death, whether before or after the
Annuity Date, will be included in the estate of the Contract Owner for federal
estate tax purposes. In addition, designation of a Beneficiary who either is
37 1/2 or more years younger than a Contract Owner or is a grandchild of a
Contract Owner may have Generation Skipping Transfer Tax consequences under
section 2601 of the Code.
Generally, gifts of non-tax qualified contracts prior to the annuity start date
will trigger tax on the gain on the contract, with the donee getting a
stepped-up basis for the amount included in the donor's income. The 10% penalty
tax and gift tax also may be applicable. This provision does not apply to
transfers between spouses or incident to a divorce.
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
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<PAGE>
PACIFIC INNOVATIONS
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 Designated
Beneficiary. Distributions of minimum amounts specified by the Code must
commence by April 1 of the calendar year following the calendar year in which
you attain age 70 1/2. Additional distribution rules apply after your death.
You may rollover funds from certain existing Qualified Plans (such as proceeds
from existing insurance policies, annuity contracts or securities) into your
traditional IRA if those funds are in cash; this will require you to liquidate
any value accumulated under the existing Qualified Plan. Mandatory withholding
of 20% may apply to any rollover distribution from your existing Qualified Plan
if the distribution is not transferred directly to your Traditional IRA; to
avoid this withholding you should have cash transferred directly from the
insurance company or plan trustee to 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 IRAS
The Small Business Job Protection Act of 1996 created a new retirement plan, the
Savings Incentive Match Plan for Employees of Small Employers ("SIMPLE Plans").
Depending upon the SIMPLE Plan, employers may make the plan
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contributions into a SIMPLE retirement account established by each eligible
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/Annuitant or
distributed over the life expectancy of the Designated Beneficiary. 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
Qualified Employer plans may be established by eligible employers for certain
eligible employees under Sections 401(a) and 401(k) of the Code. Contributions
to these plans are subject to certain limitations.
LOANS
Certain Owners of Qualified Contracts may borrow against their Contracts;
otherwise loans from us are not permitted. If yours is a Qualified Contract
issued under Section 401 or 403 of the Code AND the terms of your Qualified Plan
permit, you may request a loan from us, using your Contract Value as your only
security.
TAX AND LEGAL MATTERS
The tax and ERISA rules relating to Contract loans are complex and in many cases
unclear. For these reasons, and because the rules vary depending on the
individual circumstances of each Contract, WE URGE YOU TO CONSULT WITH A
QUALIFIED TAX ADVISER PRIOR TO EFFECTING ANY LOAN TRANSACTION UNDER YOUR
CONTRACT.
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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.
QUALIFIED PLAN (NOT SUBJECT TO TITLE I OF ERISA)
If your Qualified Plan is not subject to Title I of ERISA regulations, you will
be charged interest on your Contract Debt at a fixed annual rate equal to 5%.
The amount held in the Loan Account to secure your loan will earn a return equal
to an annual rate of 3%.
QUALIFIED PLAN (SUBJECT TO TITLE I OF ERISA)
If your Qualified Plan is subject to Title I of ERISA regulations, you will be
charged interest on your Contract Debt at a fixed 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 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.
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PACIFIC INNOVATIONS
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 applied to the principal balance of
your loan. Such repayments will not change the due dates or the periodic
repayment amount due for future periods. If a loan repayment is in excess of the
principal balance of your loan, any excess repayment will be refunded to you.
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.
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.
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PACIFIC INNOVATIONS
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 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.
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PACIFIC INNOVATIONS
ADDITIONAL INFORMATION
VOTING RIGHTS
We are the legal owner of the shares of the Portfolios held by the Subaccounts.
We may vote on any matter voted on at Fund shareholders' meetings. However, our
current interpretations of applicable law requires us to vote the number of
shares attributable to your Variable Account Value (your "voting interest") in
accordance with your directions.
We will pass 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, we will vote such shares in the same proportion as the total
votes cast for all of our separate accounts, including Separate Account A. We
will vote shares of any Portfolio held by our non-insurance affiliates in the
same proportion as the total votes for all separate accounts of ours and our
insurance affiliates.
We may elect, in the future, to vote shares of the Portfolios held in Separate
Account A in our own right if we are permitted to do so through a change in
applicable federal securities laws or regulations, or in their interpretation.
The number of Portfolio shares that form the basis for your voting interest is
determined as of the record date set by the Board of Trustees of the Fund. It is
equal to (a) your Contract Value allocated to the Subaccount corresponding to
that Portfolio, divided by (b) the net asset value per share of that Portfolio.
Fractional votes will be counted. We reserve the right, if required or permitted
by a change in federal regulations or their interpretation, to amend how we
calculate your voting interest.
After your Annuity Date, if you have selected a variable annuity, the voting
rights under your Contract will continue during the payout period of your
annuity, but the number of shares that form the basis for your voting interest,
as described above, will decrease throughout the payout period.
CHANGES TO YOUR CONTRACT
CONTRACT OWNER(S) AND CONTINGENT OWNER
You may change your Non-Qualified Contract at any time prior to your Annuity
Date to name a different Contract Owner or to add a Joint Owner, or to add or
change a Contingent Owner; if yours is a Qualified Contract, you must be the
ONLY Contract Owner. 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. 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
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PACIFIC INNOVATIONS
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;
- 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;
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PACIFIC INNOVATIONS
- 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 your
signature may have changed over time or the signature does not appear to be
yours; an executed application or confirmation of application, as applicable, in
proper form is not received by us; or, to protect you or us. Requests regarding
death benefits must be accompanied by both proof of death and instructions
regarding payment satisfactory to us. You should call your registered
representative or us if you have questions regarding the required form of a
request.
TELEPHONE AND ELECTRONIC TRANSACTIONS
After your "free look" period, you are automatically entitled to make certain
transactions by telephone or, to the extent available, electronically. You may
also authorize other people to make certain transaction requests by telephone or
electronically by so indicating on the application or by sending us instructions
in writing in a form acceptable to us. We cannot guarantee that you or any other
person you authorize will always be able to reach us to complete a telephone or
electronic transaction; for example, all telephone lines or our web-site may be
busy during certain periods, such as periods of substantial market fluctuations
or other drastic economic or market change, or telephones or the internet may be
out of service during severe weather conditions or other emergencies. Under
these circumstances, you should submit
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PACIFIC INNOVATIONS
your request in writing (or other form acceptable to us). Transaction
instructions we receive by telephone or electronically before 4:00 p.m. Eastern
time on any Business Day will usually be effective on that day, and we will
provide you confirmation of each telephone or electronic transaction.
We have established procedures reasonably designed to confirm that instructions
communicated by telephone or electronically are genuine. These procedures may
require any person requesting a telephone or electronic 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 or
electronically. You are authorizing us to accept and to act upon instructions
received by telephone or electronically with respect to your Contract, and you
agree that, so 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 we believe to be
genuine. This policy means that so long as we comply with our procedures, you
will bear the risk of loss arising out of the telephone and electronic
transaction privileges of your Contract. If a Contract has Joint Owners, each
Owner may individually make transaction requests by telephone.
ELECTRONIC DELIVERY AUTHORIZATION
You may authorize us to provide prospectuses, statements and other information
("documents") electronically by so indicating on the application, or by sending
us an electronic request to receive such documents electronically. You must have
internet access to use this service. While we impose no additional charge for
this service, there may be potential costs associated with electronic delivery,
such as on-line charges. Documents will be available on our Internet Web site.
You may access and print all documents provided through this service. As
documents become available, we will notify you of this by sending you an e-mail
message that will include instructions on how to retrieve the document. If our
e-mail notification is returned to us as "undeliverable," we will contact you to
obtain your updated e-mail address. If we are unable to obtain a valid e-mail
address for you, we will send a paper copy by regular U.S. mail to your address
of record. You may revoke your consent for electronic delivery at any time and
we will resume providing you with a paper copy of all required documents;
however, in order for us to be properly notified, your revocation must be given
to us a reasonable time before electronic delivery has commenced. We will
provide you with paper copies at any time upon request. Such request will not
constitute revocation of your consent to receive required documents
electronically.
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, portfolio rebalancing, and
41
<PAGE>
PACIFIC INNOVATIONS
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, 1998 and
for the two years then ended are incorporated by reference in the SAI from the
Annual Report of Separate Account A dated as of December 31, 1998. Pacific
Life's audited consolidated financial statements as of December 31, 1998 and
1997, and for the three years ended December 31, 1998, are contained in the SAI.
PREPARATION FOR THE YEAR 2000
Pacific Life long ago recognized the challenges associated with the Year 2000
date change. This change involves the ability of computer systems to properly
recognize the Year 2000. The inability to do so could result in major failures
or miscalculations. We began prior to 1995 to assess and plan for the potential
impact of the Year 2000. More recently, Pacific Life has been executing a
company-wide plan adopted during 1998 which called for correction or replacement
of remaining non-compliant systems by December 31, 1998.
We have successfully executed this project plan to date. Virtually all affected
systems were remediated and tested in time for use during 1998 year-end
processing cycles. Although it is not possible to certify that any system will
be completely free of Year 2000 problems, we have performed extensive testing to
identify and deal with such potential problems. Additionally, most of the
company's critical systems were subject to an independent third-party review
process which used sophisticated automated tools to identify Year 2000 related
bugs. The results have been very positive and we feel the company's internal
systems are positioned well for the date change in the century.
We plan to continue to test and re-test throughout 1999 and we will respond
promptly should any problems arise at any time thereafter.
We are continuing to work on contingency plans for critical business processes.
When appropriate, alternative methods and procedures are being developed to work
around unanticipated problems.
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<PAGE>
PACIFIC INNOVATIONS
In addition to the above, we will continue to carefully evaluate responses from
vendors and significant business partners regarding the compliance of their
critical business processes and products. Although ultimately Pacific Life
cannot be responsible for the Year 2000 compliance efforts of these outside
entities, we will take appropriate steps wherever possible to develop
contingency plans to address vendors and partners deemed non-compliant.
Expenses to make our systems Year 2000 compliant are currently estimated to
range from $12 million to $15 million, which excludes the cost of our personnel
who support Year 2000 compliance efforts. We do not anticipate any other
material future costs associated with the Year 2000 compliance projects,
although there can be no assurance.
These Year 2000 related statements are designated as "Year 2000 Readiness
Disclosure" pursuant to the Year 2000 Information Readiness Disclosure Act,
enacted October 19, 1998.
THE GENERAL ACCOUNT
GENERAL INFORMATION
All amounts allocated to the Fixed Option 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.
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.
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<PAGE>
PACIFIC INNOVATIONS
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. 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.
44
<PAGE>
Some of the terms we've used in this Prospectus may be new to you. We've
identified them in the Prospectus by capitalizing the first letter of each word.
You'll find an explanation of what they mean below.
If you have any questions, please ask your registered representative or call us
at 1-800-722-2333.
ACCOUNT VALUE -- The amount of your Contract Value allocated to a specified
Variable Investment Option or the Fixed Option.
ANNUITANT -- A person on whose life annuity payments may be determined. An
Annuitant's life may also be used to determine certain increases in death
benefits, and to determine the Annuity Date. A Contract may name a single
("sole") Annuitant or two ("Joint") Annuitants, and may also name a "Contingent"
Annuitant. If you name Joint Annuitants or a Contingent Annuitant, "the
Annuitant" means the sole surviving Annuitant, unless otherwise stated.
ANNUITY DATE ("ANNUITY START DATE") -- The date specified in your Contract, or
the date you later elect, if any, for the start of annuity payments if the
Annuitant (or Joint Annuitants) is (or are) still living and your Contract is in
force; or if earlier, the date that annuity payments actually begin.
ANNUITY OPTION -- Any one of the income options available for a series of
payments after your Annuity Date.
BENEFICIARY -- A person who may have a right to receive the death benefit
payable upon the death of the Annuitant or a Contract Owner prior to the Annuity
Date, or has a right to receive remaining guaranteed annuity payments, if any,
if the Annuitant dies after the Annuity Date.
BUSINESS DAY -- Any day on which the value of an amount invested in a Variable
Investment Option is required to be determined, which currently includes each
day that the New York Stock Exchange is open for trading and our administrative
offices are open. The New York Stock Exchange and our administrative offices are
closed on weekends and on the following holidays: New Year's Day, Martin Luther
King, Jr. Day, President's Day, Good Friday, Memorial Day, July Fourth, Labor
Day, Thanksgiving Day and Christmas Day. In this Prospectus, "day" or "date"
means Business Day unless otherwise specified. If any transaction or event
called for under a Contract is scheduled to occur on a day that is not a
Business Day, such transaction or event will be deemed to occur on the next
following Business Day unless otherwise specified. Special circumstances such as
leap years and months with fewer than 31 days are discussed in the SAI.
CODE -- The Internal Revenue Code of 1986, as amended.
CONTINGENT ANNUITANT -- A person, named in your Contract, who will become your
sole surviving Annuitant if your existing sole Annuitant (or both Joint
Annuitants) should die.
CONTINGENT OWNER -- A person, named in your Contract, who will succeed to the
rights as a Contract Owner of your Contract if all named Contract Owners die
before your Annuity Date.
CONTRACT ANNIVERSARY -- The same date, in each subsequent year, as your Contract
Date.
CONTRACT DATE -- The date we issue your Contract. Contract 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 only available on certain Qualified Contracts.
CONTRACT OWNER, OWNER, POLICYHOLDER, YOU, OR YOUR -- Generally, a person who
purchases a Contract and makes the Purchase Payments. A Contract Owner has all
rights in the Contract, including the right to make withdrawals, designate and
change beneficiaries, transfer amounts among Investment Options, and designate
an Annuity Option. If your Contract names Joint Owners, both Joint Owners are
Contract Owners and share all such rights.
CONTRACT VALUE -- As of the end of any Business Day, the sum of your Variable
Account Value, Fixed Option Value, and any Loan Account Value.
CONTRACT YEAR -- A year that starts on the Contract Date or on a Contract
Anniversary.
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 part of your Purchase Payments or
Contract Value to the Fixed Option, such amounts are held in our General Account
and receive the Guaranteed Interest 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 for the
Fixed Option.
INVESTMENT OPTION -- A Subaccount 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.
45
<PAGE>
TERMS USED IN THIS PROSPECTUS
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.
POLICYHOLDER -- The Contract Owner.
PORTFOLIO -- A separate portfolio of the Fund in which a Subaccount invests its
assets.
PRIMARY ANNUITANT -- The individual that is named in your Contract, the events
in the life of whom are of primary importance in affecting the timing or amount
of the payout under the Contract.
PURCHASE PAYMENT ("PREMIUM PAYMENT") -- An amount paid to us by or on behalf of
a Contract Owner, as consideration for the benefits provided under the Contract.
QUALIFIED CONTRACT -- A Contract that qualifies under the Code as an individual
retirement annuity or account ("IRA"), or form thereof, or a Contract purchased
by a Qualified Plan, qualifying for special tax treatment under the Code.
QUALIFIED PLAN -- A retirement plan that receives favorable tax treatment under
Section 401, 403, 408, 408A or 457 of the Code.
SEC -- Securities and Exchange Commission.
SEPARATE ACCOUNT A (THE "SEPARATE ACCOUNT") -- A separate account of ours
registered as a unit investment trust under the Investment Company Act of 1940,
as amended (the "1940 Act").
SUBACCOUNT -- An investment division of the Separate Account. Each Subaccount
invests its assets in shares of a corresponding Portfolio.
SUBACCOUNT ANNUITY UNIT -- Subaccount Annuity Units (or "Annuity Units") are
used to measure variation in variable annuity payments. To the extent you elect
to convert all or some of your Contract Value into variable annuity payments,
the amount of each annuity payment (after the first payment) will vary with the
value and number of Annuity Units in each Subaccount attributed to any variable
annuity payments. At annuitization (after any applicable premium taxes and/or
other taxes are paid), the amount annuitized to a variable annuity determines
the amount of your first variable annuity payment and the number of Annuity
Units credited to your annuity in each Subaccount. The value of Subaccount
Annuity Units, like the value of Subaccount Units, is expected to fluctuate
daily, as described in the definition of Unit Value.
SUBACCOUNT UNIT -- Before your Annuity Date, each time you allocate an amount to
a Subaccount, your Contract is credited with a number of Subaccount Units in
that Subaccount. These Units are used for accounting purposes to measure your
Account Value in that Subaccount. The value of Subaccount Units is expected to
fluctuate daily, as described in the definition of Unit Value.
UNIT VALUE -- The value of a Subaccount Unit ("Subaccount Unit Value") or
Subaccount Annuity Unit ("Subaccount Annuity Unit Value"). Unit Value of any
Subaccount is subject to change on any Business Day in much the same way that
the value of a mutual fund share changes each day. The fluctuations in value
reflect the investment results, expenses of and charges against the Portfolio in
which the Subaccount invests its assets. Fluctuations also reflect charges
against the Separate Account. Changes in Subaccount Annuity Unit Values also
reflect an additional factor that adjusts Subaccount Annuity Unit Values to
offset our Annuity Option Table's implicit assumption of an annual investment
return of 5%. The effect of this assumed investment return is explained in
detail in the SAI. Unit Value of a Subaccount Unit or Subaccount Annuity Unit on
any Business Day is measured at or about 4:00 p.m., Eastern time, on that
Business Day.
VARIABLE ACCOUNT VALUE -- The aggregate amount of your Contract Value allocated
to all Subaccounts.
VARIABLE INVESTMENT OPTION -- A Subaccount (also called a Variable Account).
46
<PAGE>
PACIFIC INNOVATIONS
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
PERFORMANCE................................................. 1
Total Returns........................................... 1
Yields.................................................. 2
Performance Comparisons and Benchmarks.................. 3
Separate Account Performance............................ 3
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................................ 10
Systematic Transfer Programs............................ 11
Pre-Authorized Withdrawals.............................. 13
Death Benefit........................................... 13
Joint Annuitants on Qualified Contracts................. 13
1035 Exchanges.......................................... 14
Safekeeping of Assets................................... 14
FINANCIAL STATEMENTS........................................ 14
</TABLE>
47
<PAGE>
PACIFIC INNOVATIONS
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
Idaho (20 days)
Michigan
Missouri
Nebraska
North Carolina
Oklahoma
South Carolina
Utah
Washington
West Virginia
48
<PAGE>
(Sidebar)
The Pacific Innovations variable annuity Contract is underwritten by Pacific
Life Insurance Company, 700 Newport Center Drive, P.O. Box 9000, Newport Beach,
California 92660.
If you have any questions about the Contract, please ask your registered
representative or contact us.
HOW TO CONTACT US
HOW TO CONTACT THE SEC
(END SIDEBAR)
PACIFIC INNOVATIONS
WHERE TO GO FOR MORE INFORMATION
You'll find more information about the Pacific Innovations variable annuity
contract and Separate Account A in the Statement of Additional Information (SAI)
dated [Month] 1, 2000.
The SAI has been filed with the SEC and is considered to be part of this
Prospectus because it's incorporated by reference. You'll find the table of
contents for the SAI on page 47 of this Prospectus.
You can get a copy of the SAI at no charge by calling or writing to us, or by
contacting the SEC. The SEC may charge you a fee for this information.
CALL OR WRITE TO US AT:
Pacific Life Insurance Company
Variable Annuities Department
P.O. Box 7187
Pasadena, California 91109-7187
1-800-722-2333
6 a.m. through 5 p.m. Pacific time
SEND PURCHASE PAYMENTS, OTHER PAYMENTS AND APPLICATION FORMS:
BY MAIL
Pacific Life Insurance Company
P.O. Box 100060
Pasadena, California 91189-0060
BY OVERNIGHT DELIVERY SERVICE
Pacific Life Insurance Company
c/o FCNPC
1111 South Arroyo Parkway, Suite 150
Pasadena, California 91105
Public Reference Section of the SEC
Washington, D.C. 20549-6009
1-800-SEC-0330
Internet: www.sec.gov
<PAGE>
PACIFIC INNOVATIONS
UNDERWRITTEN BY:
[LOGO]
HOME OFFICE
Pacific Life Insurance Company
700 Newport Center Drive
Newport Beach, California 92660
(800) 722-2333
MAILING ADDRESS
Variable Annuities Department
P.O. Box 7187
Pasadena, California 91109-7187
Form No. 1601-OA
<PAGE>
Underwritten by:
Pacific Life Insurance Company
700 Newport Center Drive
Newport Beach, CA 92660
(800) 722-2333
MAILING ADDRESS:
Variable Annuities Department
P.O. Box 7187
Pasadena, CA 91109-7187
Visit us at our web site: www.pacificlife.com
[IMSA LOGO]
* Membership promotes ethical
market conduct
for individual life insurance and
annuities
1601-OA
Pacific Life Insurance Company PRESORTED
Variable Annuities Department STANDARD
P.O. Box 7187 U.S. POSTAGE PAID
Pasadena, California 91109-7187 PACIFIC LIFE
ADDRESS SERVICE REQUESTED
<PAGE>
LOGO
STATEMENT OF ADDITIONAL INFORMATION
[MONTH] 1, 2000
PACIFIC INNOVATIONS
SEPARATE ACCOUNT A
-----------------
Pacific Innovations (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 [MONTH] 1, 2000 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............................ 3
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................................ 10
Systematic Transfer Programs............................ 11
Pre-Authorized Withdrawals.............................. 13
Death Benefit........................................... 13
Joint Annuitants on Qualified Contracts................. 13
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 of that initial payment at the end of the measuring
period based on the investment experience of that Subaccount ("withdrawal
value"). The withdrawal value reflects the effect of all recurring fees and
charges applicable to a Contract Owner under the Contract, including the Risk
Charge, the Administrative Fee and the deduction of the applicable withdrawal
charge, but does not reflect any charges for applicable premium taxes and/or
other taxes, any non-recurring fees or charges or any increase in the Risk
Charge for an optional Death Benefit Rider. The Annual Fee is also taken into
account, assuming an average Contract Value of $65,000. The redeemable value is
then divided by the initial payment and this quotient is taken to the Nth root
(N represents the number of days in the measuring period), and 1 is subtracted
from this result. Average annual total return is expressed as a percentage.
(365/N)
T = (ERV/P) - 1
where T = average annual total return
ERV = ending redeemable value
P = hypothetical initial payment of $1,000
N = number of days
Average annual total return figures will be given for recent one-, three-,
five-and ten-year periods (if applicable), and may be given for other periods as
well (such as from commencement of the Subaccount's operations, or on a
year-by-year basis).
When considering "average" total return figures for periods longer than one
year, it is important to note that the relevant Subaccount's annual total return
for any one year in the period might have been greater or less than the average
for the entire period.
AGGREGATE TOTAL RETURN
A Subaccount may use "aggregate" total return figures along with its "average
annual" total return figures for various periods; these figures represent the
cumulative change in value of an investment in the Subaccount for a specific
period. Aggregate total returns may be shown by means of schedules, charts or
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 Annual Fee, withdrawal charges and/or 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
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 Annual Fee, the Risk Charge and the Administrative Fee and
assumes an average Contract Value of $65,000.
At December 31, 1998, the Money Market Subaccount's current yield was 3.36% and
the effective yield was 3.42%.
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:
6
YIELD = 2[((a-b) + 1) - 1]
---
cd
where: a = net investment income earned during the period by the Portfolio
attributable to the Subaccount.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of Subaccount Units outstanding during the
period that were entitled to receive dividends.
d = the Unit Value of the Subaccount Units on the last day of the period.
The yield of each Subaccount reflects the deduction of all recurring fees and
charges applicable to the Subaccount, such as the Risk Charge, Administrative
Fee, the Annual Fee (assuming an average Contract Value of $65,000), but does
not reflect 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-Registered Trademark-") or Morningstar, Inc.
("Morningstar"), which are independent services that monitor and rank the
performance of variable annuity issuers and mutual funds in each of the major
categories of investment objectives on an industry-wide basis. Lipper's rankings
include variable life issuers as well as variable annuity issuers.
VARDS-Registered Trademark- rankings compare only variable annuity issuers. The
performance analyses prepared by Lipper and VARDS-Registered Trademark- rank
such issuers on the basis of total return, assuming reinvestment of dividends
and distributions, but do not take sales charges, redemption fees or certain
expense deductions at the separate account level into consideration. In
addition, VARDS-Registered Trademark- prepares risk adjusted rankings, which
consider the effects of market risk on total return performance. We may also
compare the performance of the Subaccounts with performance information included
in other publications and services that monitor the performance of insurance
company separate accounts or other investment vehicles. These other services or
publications may be general interest business publications such as THE WALL
STREET JOURNAL, BARRON'S, BUSINESS WEEK, FORBES, FORTUNE, and MONEY.
In addition, our reports and communications to Contract Owners, advertisements,
or sales literature may compare a Subaccount's performance to various benchmarks
that measure the performance of a pertinent group of securities widely regarded
by investors as being representative of the securities markets in general or as
being representative of a particular type of security. We may also compare the
performance of the Subaccounts with that of other appropriate indices of
investment securities and averages for peer universes of funds or data developed
by us derived from such indices or averages. Unmanaged indices generally assume
the reinvestment of dividends or interest but do not generally reflect
deductions for investment management or administrative costs and expenses.
SEPARATE ACCOUNT PERFORMANCE
The Contract was not available prior to 2000. 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, 1998. 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. The Full Withdrawal Value (FWV) reflects the deductions 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,
and any charges for premium and/or other taxes.
3
<PAGE>
THE RESULTS SHOWN IN THIS SECTION ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE
INVESTMENT PERFORMANCE.
HISTORICAL SEPARATE ACCOUNT PERFORMANCE
ANNUALIZED RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998**
ALL NUMBERS ARE EXPRESSED AS A PERCENTAGE
<TABLE>
<CAPTION>
SINCE
1 YEAR* INCEPTION*
---------------- ----------------
VARIABLE ACCOUNTS AV FWV AV FWV
- ----------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Aggressive Equity 4/17/96*........................ 11.65 3.55 7.97 5.59
Emerging Markets 4/17/96*......................... (27.84) (35.94) (14.09) (17.66)
Growth [Small-Cap Equity] 1/2/96*................. 1.27 (6.83) 16.53 14.73
Bond and Income 1/2/96*........................... 7.46 (0.64) 6.47 4.31
Equity 1/2/96*.................................... 28.47 20.37 23.56 21.97
Multi-Strategy 1/2/96*............................ 16.53 8.43 14.91 13.06
Equity Income 1/2/96*............................. 22.46 14.36 21.90 20.26
Growth LT 1/2/96*................................. 56.09 47.99 25.67 24.13
Equity Index 1/2/96*.............................. 26.67 18.57 25.76 24.22
International [International Value] 1/2/96*....... 4.13 (3.97) 9.95 7.93
Government Securities 1/2/96*..................... 7.72 (0.38) 5.67 3.47
Managed Bond 1/2/96*.............................. 7.68 (0.42) 6.25 4.08
Money Market 1/2/96*.............................. 3.83 (4.27) 3.74 1.46
High Yield Bond 1/2/96*........................... 1.04 (7.06) 6.13 3.95
</TABLE>
- ------------
* Date Variable Account commenced operations.
** Effective June 1, 1997 Morgan Stanley Asset Management became the Portfolio
Manager of the International Portfolio. Effective May 1, 1998, Alliance
Capital Management L.P. became the Portfolio Manager of the Aggressive
Equity Portfolio and Goldman Sachs Asset Management became the Portfolio
Manager of the Equity and Bond and Income Portfolios; prior to May 1, 1998
some of the investment policies of the Aggressive Equity, Equity and Bond
and Income Portfolios and the investment objective of the Bond and Income
Portfolio differed.
Prior to January 1, 1999, the Mid-Cap Value, the Small-Cap Index, REIT and the
Large-Cap Value Subaccounts and corresponding Portfolios had not yet begun
operations and there is no historical value available for these Subaccounts and
Portfolios.
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). Historical
performance information for each of the Equity Portfolio and the Bond and Income
Portfolio is based in part on the performance of that Portfolio's predecessor;
each predecessor series was a series of Pacific Corinthian Variable Fund and
began its first full year of operations in 1984, the assets of which were
acquired by the Fund on December 31, 1994. Because the Subaccounts had not
commenced operations until January 2, 1996 or later, as indicated in the chart
above, and because the Contracts were not available until 2000, 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 Full Withdrawal Value ("FWV") that represent the actual performance of the
Portfolios, adjusted to reflect the deductions for the fees and charges
applicable to the Contract; the FWV also includes applicable withdrawal charges.
Any charge for non-recurring fees and charges, premium taxes and/or other taxes,
an optional Death Benefit Rider, are not reflected in these data, and reflection
of the Annual Fee assumes an average Contract size of $65,000. 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.
HISTORICAL AND HYPOTHETICAL SEPARATE ACCOUNT PERFORMANCE
ANNUALIZED RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998
ALL NUMBERS ARE EXPRESSED AS A PERCENTAGE
<TABLE>
<CAPTION>
SINCE
1 YEAR* 3 YEARS* 5 YEARS* 10 YEARS* INCEPTION*
--------------- --------------- --------------- --------------- ---------------
VARIABLE ACCOUNTS AV FWV AV FWV AV FWV AV FWV AV FWV
- ----------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Equity............. 11.65 3.55 7.48 5.12
Emerging Markets.............. (27.84) (35.94) (13.56) (17.06)
Growth [Small-Cap Equity]..... 1.27 (6.83) 16.61 14.82 11.72 11.72 14.09 14.09 14.08 14.08
Bond and Income............... 7.46 (0.64) 6.43 4.27 7.51 7.51 10.01 10.01 10.69 10.69
Equity........................ 28.47 20.37 23.64 22.05 17.19 17.19 15.39 15.39 14.37 14.37
Multi-Strategy................ 16.53 8.43 15.12 13.28 12.85 12.85 11.49 11.49 10.93 10.93
Equity Income................. 22.46 14.36 22.29 20.66 18.48 18.48 14.58 14.58 13.85 13.85
Growth LT..................... 56.09 47.99 25.67 24.14 24.52 24.52
Equity Index.................. 26.67 18.57 26.07 24.54 21.94 21.94 18.28 18.28
International [International
Value]...................... 4.13 (3.97) 10.48 8.48 8.32 8.32 6.59 6.59 7.42 7.42
Government Securities......... 7.72 (0.38) 5.69 3.49 5.29 5.29 7.56 7.56 7.35 7.35
Managed Bond.................. 7.68 (0.42) 6.26 4.09 5.85 5.85 8.15 8.15 7.93 7.93
Money Market.................. 3.83 (4.27) 3.75 1.47 3.53 3.53 3.83 3.83 3.89 3.89
High Yield Bond............... 1.04 (7.06) 6.17 4.00 6.80 6.80 8.98 8.98 8.78 8.78
</TABLE>
<TABLE>
<CAPTION>
MAJOR INDICES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
CS First Boston High Yield
Bond........................ 0.58 8.39 8.16 10.74
Lehman Brothers Aggregate
Bond........................ 8.67 7.29 7.27 9.26
Lehman Brothers Government
Bond........................ 9.85 7.35 7.18 9.17
Lehman Brothers
Government/Corporate Bond... 9.47 7.33 7.30 9.34
Lehman Brothers Long-Term
Government/Corporate Bond... 11.76 8.62 9.12 11.30
Morgan Stanley Capital
International EAFE.......... 20.33 9.31 9.50 5.86
Morgan Stanley Capital
International Emerging
Markets Free................ (25.34) (11.21) (9.27) 10.95
Russell 1000 Growth........... 38.71 30.62 25.70 20.57
Russell 2000 Small-Stock...... (2.55) 11.58 11.86 12.92
Russell 2500.................. 0.38 14.11 14.13 14.61
Standard & Poor's 500
Composite Stock Price....... 28.58 28.27 24.06 19.19
</TABLE>
- ------------
* The performance of the Aggressive Equity, Equity Income, Multi-Strategy,
Equity, Bond and Income, and International Variable Accounts for a portion
of this period occurred at a time when other Portfolio Managers managed the
corresponding Portfolio in which each Variable Account invests. Effective
January 1, 1994, J. P. Morgan Investment Management Inc. became the
Portfolio Manager of the Equity Income and Multi-Strategy Portfolios; prior
to January 1, 1994, some of the investment policies of the Equity Income
Portfolio and the investment objective of the Multi-Strategy Portfolio
differed. Effective June 1, 1997 Morgan Stanley Asset Management became the
Portfolio Manager of the International Portfolio. Effective May 1, 1998,
Alliance Capital Management L.P. became the Portfolio Manager of the
Aggressive Equity Portfolio and Goldman Sachs Asset Management became the
Portfolio Manager of the Equity and Bond and Income Portfolios; prior to
May 1, 1998 some of the investment policies of the Aggressive Equity, Equity
and Bond and Income Portfolios and the investment objective of the Bond and
Income Portfolio differed. Performance of the Equity Portfolio and the Bond
and Income Portfolio is based in part on the performance of predecessor
portfolios of Pacific Corinthian Variable Fund, which began their first full
year of operations in 1984, the assets of which were acquired by the Fund on
December 31, 1994.
5
<PAGE>
TAX DEFERRED ACCUMULATION
In reports or other communications to you or in advertising or sales materials,
we may also describe the effects of tax-deferred compounding on the Separate
Account's investment returns or upon returns in general. These effects may be
illustrated in charts or graphs and may include comparisons at various points in
time of returns under the Contract or in general on a tax-deferred basis with
the returns on a taxable basis. Different tax rates may be assumed.
In general, individuals who own annuity contracts are not taxed on increases in
the value under the annuity contract until some form of distribution is made
from the contract. Thus, the annuity contract will benefit from tax deferral
during the accumulation period, which generally will have the effect of
permitting an investment in an annuity contract to grow more rapidly than a
comparable investment under which increases in value are taxed on a current
basis. The following chart illustrates this benefit by comparing accumulation
under a variable annuity contract with accumulations from an investment on which
gains are taxed on a current 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 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), the Annual
Fee (equal to $30 per year if your Net Contract Value is less than $50,000), 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 9% of the amount withdrawn
attributable to Purchase Payments that are less than one year old, 8% of the
amount withdrawn attributable to Purchase Payments that are less than two years
old, and 8% of the amount withdrawn attributable to Purchase Payments that are
three 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. During a Contract Year, you may withdraw free of withdrawal charge
amounts up to your "Eligible Purchase Payments". Eligible Purchase Payments
include 10% annually of total Purchase Payments that have an "age" of less than
four years, plus any remaining portion not withdrawn from the previous Contract
Year's Eligible Purchase Payments that are derived from Purchase Payments which
have an "age" of less than four years, plus 100% of all Purchase Payments that
have an "age" of four 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. 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%.
6
<PAGE>
POWER OF TAX DEFERRAL
$10,000 investment at annual rates of return of 0%, 4% and 8%, taxed @ 36%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
0% GROWTH TAX DEFERRED 4% GROWTH TAX DEFERRED 8% GROWTH TAX DEFERRED
TAXABLE INVESTMENT TAXABLE INVESTMENT TAXABLE INVESTMENT
INVESTMENT INVESTMENT INVESTMENT
<S> <C> <C> <C> <C> <C> <C>
YEARS Before Tax Before Tax Before Tax Before Tax Before Tax Before Tax
10 $10,000.00 $10,000.00 $12,875.97 $13,073.56 $16,476.07 $17,417.12
20 $10,000.00 $10,000.00 $16,579.07 $17,623.19 $27,146.07 $33,430.13
30 $10,000.00 $10,000.00 $21,347.17 $24,357.74 $44,726.05 $68,001.00
</TABLE>
DISTRIBUTION OF THE CONTRACTS
PACIFIC MUTUAL DISTRIBUTORS, INC.
Pacific Mutual Distributors, Inc. ("PMD"), a 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 1999
with regard to this Contract was $0 of which $0 was retained.
7
<PAGE>
THE CONTRACTS AND THE SEPARATE ACCOUNT
CALCULATING SUBACCOUNT UNIT VALUES
The Unit Value of the Subaccount Units in each Variable Investment Option is
computed at or about 4:00 p.m. Eastern time on each Business Day. The initial
Unit Value of each Subaccount was $10 on the Business Day the Subaccount began
operations. At the end of each Business Day, the Unit Value for a Subaccount is
equal to:
Y X Z
where (Y) = the Unit Value for that Subaccount as of the end of the preceding
Business Day; and
(Z) = the Net Investment Factor for that Subaccount for the period (a
"valuation period") between that Business Day and the immediately
preceding Business Day.
The "Net Investment Factor" for a Subaccount for any valuation period is equal
to:
(A DIVIDED BY B) - C
where (A) = the "per share value of the assets" of that Subaccount as of the end
of that valuation period, which is equal to: a+b+c
where (a) = the net asset value per share of the corresponding Portfolio
shares held by that Subaccount as of the end of that valuation
period;
(b) = the per share amount of any dividend or capital gain
distributions made by the Fund for that Portfolio during that
valuation period; and
(c) = any per share charge (a negative number) or credit (a positive
number) for any income taxes and/ or any other taxes or other
amounts set aside during that valuation period as a reserve for
any income and/or any other taxes which we determine to have
resulted from the operations of the Subaccount or Contract,
and/or any taxes attributable, directly or indirectly, to
Purchase Payments;
(B) = the net asset value per share of the corresponding Portfolio shares
held by the Subaccount as of the end of the preceding valuation
period; and
(C) = a factor that assesses against the Subaccount net assets for each
calendar day in the valuation period the basic Risk Charge plus any
applicable increase in the Risk Charge and the Administrative Fee
(see CHARGES, FEES AND DEDUCTIONS in the Prospectus).
As explained in the Prospectus, the Annual Fee, if applicable, is assessed
against your Variable Account Value through the automatic debit of Subaccount
Units; the Annual Fee decreases the number of Subaccount Units attributed to
your Contract but does not alter the Unit Value for any Subaccount.
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 Annual Fee, withdrawal charge,
and any charges for premium taxes and/or other taxes without converting this
amount into annuity payments.
SECOND: THE FIRST VARIABLE PAYMENT
We begin by referring to your Contract's Option Table for your Annuity Option
(the "Annuity Option Table"). The Annuity Option Table allows us to calculate
the dollar amount of the first variable annuity payment under your Contract,
based on the amount applied toward the variable annuity. The number that the
Annuity Option
8
<PAGE>
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 an annual
rate of 1.25% and the Administrative Fee at an annual rate of 0.15%. In
addition, the calculation of Subaccount Annuity Unit Value incorporates an
additional factor; as discussed in more detail below, this additional factor
adjusts Subaccount Annuity Values to correct for the Option Table's implicit
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 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."
9
<PAGE>
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; 1 - 1 = 0; 0 X 100% = 0%.
----
1.05
If the net investment performance of a Subaccount's assets is at a rate less
than 5.00% per year, the Subaccount Annuity Unit Value will decrease, even if
the Subaccount Unit Value is increasing.
EXAMPLE: Assume the net investment performance of a Subaccount is at a rate
of 2.60% per year (after deduction of the 1.25% Risk Charge and the 0.15%
Administrative Fee). The Subaccount Unit Value for that Subaccount would
increase at a rate of 2.60% per year, BUT THE SUBACCOUNT ANNUITY UNIT VALUE
WOULD DECREASE AT A RATE OF 2.29% PER YEAR. The net investment factor for
that 2.6% return [1.026] is then divided by the factor for the 5% assumed
investment return [1.05] and 1 is subtracted from the result to determine
the adjusted rate of change in Subaccount Annuity Unit Value:
1.026 = 0.9771; 0.9771 - 1 = -0.0229; -0.0229 X 100% = -2.29%.
----
1.05
The assumed investment return will always cause increases in Subaccount Annuity
Unit Values to be somewhat less than if the assumption had not been made, will
cause decreases in Subaccount Annuity Unit Values to be somewhat greater than if
the assumption had not been made, and will (as shown in the example above)
sometimes cause a decrease in Subaccount Annuity Unit Values to take place when
an increase would have occurred if the assumption had not been made. If we had
assumed a higher investment return in our Annuity Option tables, it would
produce annuities with larger first payments, but the increases in subaccount
annuity payments would be smaller and the decreases in subsequent annuity
payments would be greater; a lower assumed investment return would produce
annuities with smaller first payments, and the increases in subsequent annuity
payments would be greater and the decreases in subsequent annuity payments would
be smaller.
CORRESPONDING DATES
If any transaction or event under your Contract is scheduled to occur on a
"corresponding date" that does not exist in a given calendar period, the
transaction or event will be deemed to occur on the following Business Day. In
addition, as stated in the Prospectus, any event scheduled to occur on a day
that is not a Business Day will occur on the next succeeding Business Day.
EXAMPLE: If your Contract is issued on February 29 in year 1 (a leap year),
your Contract Anniversary in years 2, 3 and 4 will be on March 1.
EXAMPLE: If your Annuity Date is July 31 and you select monthly annuity
payments, the payments received will be based on valuations made on
July 31, August 31, October 1 (for September), October 31, December 1 (for
November), December 31, January 31, March 1 (for February), March 31, May 1
(for April), May 31 and July 1 (for June).
AGE AND SEX OF ANNUITANT
As mentioned in the Prospectus, the Contracts generally provide for sex-distinct
annuity income factors in the case of life annuities. Statistically, females
tend to have longer life expectancies than males; consequently, if the amount of
annuity payments is based on life expectancy, they will ordinarily be higher if
an annuitant is male than if an annuitant is female. 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.
10
<PAGE>
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 Variable Investment Option(s) you wish to
transfer amounts to (your "target account(s)"). If you select more than one
target account, your dollar cost averaging request must specify how transferred
amounts should be allocated among the target accounts. Your source account may
not also be a target account.
Your dollar cost averaging transfers will continue until the earlier of
(i) your request to stop dollar cost averaging is effective, or (ii) your source
Account Value is zero, or (iii) your Annuity Date. If, as a result of a dollar
cost
11
<PAGE>
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 to the sweep option Account during the sweep period. The result of
this calculation represents the "total earnings" for the sweep period.
If, during the sweep period, you withdraw or transfer amounts from the sweep
option Account, we assume that earnings are withdrawn or transferred before any
other Account Value. Therefore, your "total earnings" for the sweep period will
be reduced by any amounts withdrawn or transferred during the sweep option
period. The remaining earnings are eligible for the sweep transfer.
Procedures for selecting the earnings sweep are generally the same as those
discussed in detail above for selecting dollar cost averaging and portfolio
rebalancing: You may make your request at any time and it will be effective when
we receive it in a form satisfactory to us. If you stop the earnings sweep, you
must wait 30 days
12
<PAGE>
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 proper form. If you stop the
pre-authorized withdrawals, you must wait 30 days to begin again. You may
specify a date for the first withdrawal, or we will treat your request as if you
selected the request's effective date. If you specify a date fewer than 30 days
after your Contract Date, your first pre-authorized withdrawal will be delayed
one month, and if you request the pre-authorized withdrawals on your application
but do not specify a date for the first withdrawal, it will occur one period
after your Contract Date.
If your pre-authorized withdrawals cause your Account Value in any Investment
Option to fall below $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.
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.
13
<PAGE>
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, 1998 and
for each of the two years in the period then ended are incorporated by reference
in this SAI from the Annual Report of the Separate Account dated as of
December 31, 1998. Pacific Life's audited consolidated financial statements as
of December 31, 1998 and 1997 and for each of the three years in the period
ended December 31, 1998 are set forth beginning on the next page. These
financial statements should be considered only as bearing on the ability of
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, 1998
and 1997 and for each of the three years in the period ended December 31, 1998
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report appearing herein.
The information in Separate Account A's Annual Report relates to variable
annuity contracts other than the Contract that we have issued and that are
funded by Separate Account A.
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
- -----------------------------------
Pacific Life Insurance Company and Subsidiaries:
We have audited the accompanying consolidated statements of financial condition
of Pacific Life Insurance Company and Subsidiaries (the "Company") as of
December 31, 1998 and 1997, 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, 1998. 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, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Costa Mesa, California
February 22, 1999
15
<PAGE>
PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31,
1998 1997
<S> <C> <C>
- --------------------------------------------------------------------------------------
(IN MILLIONS)
ASSETS
Investments:
Securities available for sale at estimated fair value:
Fixed maturity securities $13,617.0 $13,938.5
Equity securities 547.5 346.4
Mortgage loans 2,788.7 1,922.1
Real estate 172.7 192.1
Policy loans 3,901.2 3,769.2
Short-term investments 99.9 83.8
Other investments 948.0 432.4
- --------------------------------------------------------------------------------------
TOTAL INVESTMENTS 22,075.0 20,684.5
Cash and cash equivalents 150.1 110.4
Deferred policy acquisition costs 889.7 716.9
Accrued investment income 252.3 255.4
Other assets 672.8 636.5
Separate account assets 15,844.0 11,605.1
- --------------------------------------------------------------------------------------
TOTAL ASSETS $39,883.9 $34,008.8
======================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Universal life, annuity and other investment contract
deposits $17,973.0 $16,644.5
Future policy benefits 2,131.6 2,133.8
Short-term and long-term debt 445.1 253.6
Other liabilities 1,162.2 1,224.5
Separate account liabilities 15,844.0 11,605.1
- --------------------------------------------------------------------------------------
TOTAL LIABILITIES 37,555.9 31,861.5
- --------------------------------------------------------------------------------------
Commitments and contingencies
Stockholder's Equity:
Common stock - $50 par value; 600,000 shares authorized,
issued and outstanding 30.0 30.0
Paid-in capital 126.2 120.1
Retained earnings 1,663.5 1,422.0
Accumulated other comprehensive income -
Unrealized gain on securities available for sale, net 508.3 575.2
- --------------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY 2,328.0 2,147.3
- --------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $39,883.9 $34,008.8
======================================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16
<PAGE>
PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
(IN MILLIONS)
REVENUES
Policy fees from universal life, annuity and other
investment contract deposits $ 525.3 $ 431.2 $ 348.6
Insurance premiums 514.7 504.3 465.4
Net investment income 1,293.8 1,225.3 1,087.3
Net realized capital gains 38.7 85.3 44.0
Commission revenue 220.1 146.6 79.6
Other income 216.6 181.7 123.1
- ------------------------------------------------------------------------------------------------
TOTAL REVENUES 2,809.2 2,574.4 2,148.0
- ------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Interest credited to universal life, annuity and other
investment contract deposits 880.8 797.8 665.0
Policy benefits paid or provided 719.5 675.7 652.9
Commission expenses 386.1 303.7 233.6
Operating expenses 467.8 507.7 316.2
- ------------------------------------------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES 2,454.2 2,284.9 1,867.7
- ------------------------------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR INCOME TAXES 355.0 289.5 280.3
Provision for income taxes 113.5 113.5 113.7
- ------------------------------------------------------------------------------------------------
NET INCOME $ 241.5 $ 176.0 $ 166.6
================================================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17
<PAGE>
PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Accumulated
Common Stock Other
--------------- Paid-in Retained Comprehensive
Shares Amount Capital Earnings Income Total
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
(IN MILLIONS)
BALANCES,
JANUARY 1, 1996 $1,151.4 $482.0 $1,633.4
Comprehensive income:
Net income 166.6 166.6
Change in unrealized gain on
securities available for sale, net (102.8) (102.8)
--------
Total comprehensive income 63.8
- ----------------------------------------------------------------------------------------------------------
BALANCES,
DECEMBER 31, 1996 1,318.0 379.2 1,697.2
Comprehensive income:
Net income 176.0 176.0
Change in unrealized gain on
securities available for sale, net 196.0 196.0
--------
Total comprehensive income 372.0
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
Comprehensive income:
Net income 241.5 241.5
Change in unrealized gain on
securities available for sale, net (66.9) (66.9)
--------
Total comprehensive income 174.6
Issuance of partnership units by
affiliate 6.1 6.1
- ----------------------------------------------------------------------------------------------------------
BALANCES,
DECEMBER 31, 1998 0.6 $30.0 $126.2 $1,663.5 $508.3 $2,328.0
==========================================================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18
<PAGE>
PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------
(IN MILLIONS)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 241.5 $ 176.0 $ 166.6
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization on fixed maturities (39.4) (26.6) (45.2)
Depreciation and other amortization 26.0 38.3 43.8
Deferred income taxes (20.6) (14.4) (49.8)
Net realized capital gains (38.7) (85.3) (44.0)
Net change in deferred policy acquisition
costs (172.8) (185.4) (140.4)
Interest credited to universal life, annuity
and other investment contract deposits 880.8 797.8 665.0
Change in accrued investment income 3.1 (52.9) (3.7)
Change in future policy benefits (2.2) (372.7) 62.3
Change in other assets and liabilities 99.4 577.4 158.1
- -----------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 977.1 852.2 812.7
- -----------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale:
Purchases (4,302.3) (6,272.3) (4,525.0)
Sales 2,201.9 2,224.1 2,511.0
Maturities and repayments 2,196.1 2,394.6 1,184.7
Repayments of mortgage loans 334.9 179.3 220.4
Proceeds from sales of mortgage loans and real
estate 43.3 104.4 14.5
Purchases of mortgage loans and real estate (1,246.3) (643.7) (414.3)
Distributions from partnerships 119.5 91.6 78.8
Change in policy loans (132.0) (637.4) (338.5)
Change in short-term investments (16.1) (17.7) 37.2
Other investing activity, net (564.2) 43.5 (144.5)
- -----------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (1,365.2) (2,533.6) (1,375.7)
- -----------------------------------------------------------------------------------
(CONTINUED)
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
19
<PAGE>
PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
(CONTINUED) 1998 1997 1996
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------
(IN MILLIONS)
CASH FLOWS FROM FINANCING ACTIVITIES
Policyholder account balances:
Deposits $ 4,007.0 $ 4,373.6 $ 2,105.0
Withdrawals (3,770.7) (2,667.3) (1,756.6)
Net change in short-term debt 191.5 8.5 42.5
Repayment of long-term debt (25.0) (5.0)
Initial capitalization of Pacific Mutual Holding
Company (2.0)
Dividend paid to parent (5.0)
- --------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 427.8 1,682.8 385.9
- --------------------------------------------------------------------------------------
Net change in cash and cash equivalents 39.7 1.4 (177.1)
Cash and cash equivalents, beginning of year 110.4 109.0 286.1
- --------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 150.1 $ 110.4 $ 109.0
======================================================================================
SUPPLEMENTAL SCHEDULE OF INVESTING AND FINANCING ACTIVITIES
In connection with the acquisition of an insurance block of business in 1997, 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 in 1997, 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 to paid-in capital.
======================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
</TABLE>
<TABLE>
<S> <C> <C> <C>
Income taxes paid $127.9 $153.0 $189.6
Interest paid $24.0 $26.1 $ 27.3
======================================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20
<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 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 and
institutional products, group employee benefits, broker-dealer operations
and investment management and advisory services. Pacific Life's 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, broker-dealer operations and
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 wholly-owned noninsurance subsidiaries, Pacific
Asset Management LLC ("PAM"), Pacific Mutual Distributors, Inc. ("PMD"),
Pacific Mutual Realty Finance, Inc. and Pacific Mezzanine Associates,
L.L.C. (50% owned). 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.
NEW ACCOUNTING PRONOUNCEMENTS
During 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income," SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related
Information," and SFAS No. 132, "Employers' Disclosures about Pensions and
Other Postretirement Benefits."
21
<PAGE>
PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SFAS No. 130 established standards for the reporting and display of
comprehensive income and its components in financial statements (Note 11).
SFAS No. 131 established standards for the way information about operating
segments is reported in financial statements. It also established standards
for related disclosures about products and services, geographic areas and
major customers (Note 13). SFAS No. 132 standardized disclosure
requirements for employers' pensions and other retiree benefits (Note 14).
Adoption of these accounting standards did not have a significant impact on
the consolidated financial position or results of operations of the
Company.
On January 1, 1998, the Company adopted the American Institute of Certified
Public Accountants ("AICPA") Statement of Position ("SOP") 97-3,
"Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments." SOP 97-3 provides guidance on when a liability should be
recognized for guaranty fund and other assessments and how to measure the
liability. Adoption of this accounting standard did not have a significant
impact on the consolidated financial position or results of operations of
the Company.
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities."
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999.
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments and hedging activities. The Company currently plans to adopt
SFAS No. 133 on January 1, 2000. The impact on the consolidated financial
position or results of operations of the Company due to the adoption of
this statement has not yet been determined.
In March 1998, the AICPA issued SOP 98-1, "Accounting for the Cost of
Computer Software Developed or Obtained for Internal Use." SOP 98-1
requires that certain costs incurred in developing internal use computer
software be capitalized. The Company currently plans to adopt SOP 98-1 on
January 1, 1999. The adoption is not expected to have a significant impact
on the consolidated financial position or results of operations of the
Company.
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 on
the accompanying consolidated statements of operations.
Realized gains and losses on investment transactions are determined on a
specific identification basis and are included in net realized capital
gains on the accompanying consolidated statements of operations.
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 on the accompanying consolidated statements of financial condition,
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 included in net
realized capital gains on the accompanying consolidated statements of
operations.
Mortgage loans and policy loans are stated at unpaid principal balances.
22
<PAGE>
PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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% as of December 31,
1997. During 1998, the Company increased its investment in PIMCO Advisors
to reflect its pro rata share of the increase to PIMCO Advisors partners'
capital due to the issuance of additional partnership units. For the year
ended December 31, 1998, there was a direct increase to the Company's
stockholder's equity of $6.1 million. During 1998, the Company also
acquired the beneficial ownership of additional partnership units which
increased its ownership to 33% as of December 31, 1998. Deferred taxes
resulting from these transactions have been included in the accompanying
consolidated financial statements. The Company's investment in PIMCO
Advisors, 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 recognized, using assumptions consistent
with those used in computing policy reserves. For the years ended
December 31, 1998, 1997 and 1996, net amortization of deferred policy
acquisition costs included in commission expenses amounted to $73.0
million, $50.2 million and $42.6 million, respectively, and included in
operating expenses amounted to $33.5 million, $29.4 million and $27.4
million, respectively, on the accompanying consolidated statements of
operations.
PRESENT VALUE OF FUTURE PROFITS
In connection with the rehabilitation of First Capital Life Insurance
Company ("FCL"-Note 4), an asset was established which represented the
present value of estimated future profits of the acquired business. The
future profits were discounted to provide an appropriate rate of return and
were amortized over the rehabilitation plan period. Amortization for the
years ended December 31, 1997 and 1996 amounted to $16.1 million and
$24.2 million, respectively, and is included in commission expenses on 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.
23
<PAGE>
PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 1998,
1997 and 1996.
FUTURE POLICY BENEFITS
Life insurance reserves are valued using the net level premium method.
Interest rate assumptions ranged from 4.5% to 9.3% for 1998, 1997 and 1996.
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. Dividends to policyholders are
included in policy benefits paid or provided on the accompanying
consolidated statements of operations.
Dividends are accrued 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, 1998
and 1997, participating experience rated policies paying dividends
represented approximately 1% of direct written life insurance in force.
REVENUES AND EXPENSES
Insurance premiums are recognized as revenue when due. Benefits and
expenses, other than deferred policy acquisition costs, are recognized when
incurred.
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 the trade date.
DEPRECIATION AND AMORTIZATION
Depreciation of investment real estate is computed on the straight-line
method over the estimated useful lives which range from 5 to 30 years.
Certain other assets are depreciated or amortized on the straight-line
method over 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. Prior to
1998, Pacific Life was subject to an equity tax calculated by a prescribed
formula that incorporated a differential earnings rate between stock and
mutual life insurance companies. In December 1998, the Internal Revenue
Service released Revenue Ruling 99-3 which exempts Pacific Life from this
tax for taxable years beginning in 1998. 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.
24
<PAGE>
PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments disclosed in Notes 6 and
7 has been determined using available market information and appropriate
valuation methodologies. However, considerable judgment is required to
interpret market data to develop the estimates of fair value. Accordingly,
the estimates presented may not be indicative of the amounts 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 that is subject to various
risks and uncertainties. Such risks and uncertainties include, but are not
limited to, 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. Additionally, the Company includes contractual provisions
limiting withdrawal rights for certain of its products. A substantial
portion of the Company's liabilities are not subject to surrender or can be
surrendered only after deduction of a surrender charge or a market value
adjustment.
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 approval procedures, limits and ongoing monitoring. Real estate and
mortgage loan investment risks are limited by diversification of geographic
location and property type. Management does not believe that significant
concentrations of credit risk 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. The Company manages this risk through credit approvals and
limits on exposure to any specific counterparty. 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 that 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,
cases might be decided or future legislation might be enacted, or if
decided or enacted, whether such cases or 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 1998
financial statement presentation.
25
<PAGE>
PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 on the accompanying consolidated financial
statements:
<TABLE>
<CAPTION>
December 31,
1998 1997
<S> <C> <C>
----------------------
(IN MILLIONS)
Statutory capital and surplus $1,157.4 $ 944.8
Deferred policy acquisition costs 908.0 730.7
Unrealized gain on securities available for
sale, net 508.3 575.2
Deferred income tax 307.1 289.2
Asset valuation reserve 298.7 252.4
Non admitted assets 40.4 25.2
Subsidiary equity 26.5 60.4
Surplus notes (149.6) (149.6)
Insurance and annuity reserves (654.4) (511.5)
Other (114.4) (69.5)
----------------------
Stockholder's equity as reported herein $2,328.0 $2,147.3
======================
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
--------------------------------------
(IN MILLIONS)
Statutory net income $ 187.6 $ 121.5 $ 113.1
Deferred policy acquisition costs 177.3 160.4 111.2
Interest maintenance reserve 24.1 7.6 3.8
Deferred income tax 17.9 41.2 70.9
Net realized gain (loss) on trading
securities 9.2 (5.8) (11.6)
Earnings of subsidiaries (32.8) (40.6) (33.0)
Insurance and annuity reserves (145.1) (107.0) (91.3)
Other 3.3 (1.3) 3.5
--------------------------------------
Net income as reported herein $ 241.5 $ 176.0 $ 166.6
======================================
</TABLE>
26
<PAGE>
PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. STATUTORY RESULTS (CONTINUED)
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, 1998 and 1997, Pacific Life
and PM Group exceeded the minimum risk-based capital requirements.
CODIFICATION
In March 1998, the NAIC adopted the Codification of Statutory Accounting
Principles ("Codification"). The Codification, which is intended to
standardize regulatory accounting and reporting for the insurance industry,
is proposed to be effective January 1, 2001. However, statutory accounting
principles will continue to be established by individual state laws and
permitted practices and it is uncertain when, or if, the states of
California and Arizona will require adoption of Codification for the
preparation of statutory financial statements. The Company has not
finalized the quantification of the effects of Codification on its
statutory financial statements.
DIVIDEND RESTRICTIONS
Dividend payments by Pacific Life to its parent in any 12-month period
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 1998
statutory results, Pacific Life could pay approximately $240.9 million in
dividends in 1999 without prior approval. No dividends were paid during
1998.
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. PM Group received approval to pay
dividends of $14 million and $25 million for the years ended December 31,
1997 and 1996 of which $8 million and $18 million, respectively, were
considered extraordinary. No dividends were paid during 1998.
PERMITTED PRACTICE
As discussed in Note 1, the Company beneficially owns approximately 33% of
the outstanding General and Limited Partner units in PIMCO Advisors L.P. as
of December 31, 1998. Net cash distributions received on these units are
recorded as income as permitted by the Insurance Department of the State of
California for statutory accounting purposes.
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 had an
experience based dividend scale for 1997. The Closed Block was 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
27
<PAGE>
PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. CLOSED BLOCK (CONTINUED)
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 $311.6 million and $316.2 million and total liabilities of
$352.8 million and $356.0 million for the Closed Block are included in
other assets and other liabilities, respectively, on the accompanying
consolidated statements of financial condition as of December 31, 1998 and
1997, respectively. The contribution to income from the Closed Block of
$5.1 million and $5.7 million, consisting of net revenues and expenses
generated by the Closed Block, is included in other income on the
accompanying consolidated statements of operations for the years ended
December 31, 1998 and 1997, respectively.
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 BLOCKS 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
("Confederation Life"), 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.
The remaining cost of acquiring this business, representing the amount
equal to the excess of the estimated fair value of the reserves assumed
over the estimated fair value of the assets acquired, amounted to $36.5
million and $43.4 million as of December 31, 1998 and 1997, respectively,
and is included in deferred policy acquisition costs on the accompanying
consolidated statements of financial condition. Amortization of this asset
for the years ended December 31, 1998 and 1997 was $7.7 million and $0.9
million, respectively, and is included in commission expenses on the
accompanying consolidated statements of operations.
In January 1999, Pacific Life signed a definitive agreement to acquire a
payout annuity block of business from Confederation Life. This block of
business consists of approximately 18,000 policies, having reserves
amounting to approximately $2.0 billion. The transaction is subject to
various regulatory and Court approvals and is anticipated to close during
1999.
28
<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
<S> <C> <C> <C> <C>
-----------------------------------------------------
(IN MILLIONS)
Securities Available for Sale:
--------------------------------------------------------
As of December 31, 1998:
U.S. Treasury securities and obligations of U.S.
government authorities and agencies $ 94.0 $ 24.9 $ 118.9
Obligations of states, political subdivisions and
foreign governments 726.0 118.0 $ 16.1 827.9
Corporate securities 7,766.0 438.0 122.4 8,081.6
Mortgage-backed and asset-backed securities 4,391.7 139.6 52.9 4,478.4
Redeemable preferred stock 104.0 11.3 5.1 110.2
-----------------------------------------------------
Total fixed maturity securities $13,081.7 $731.8 $196.5 $13,617.0
=====================================================
Total equity securities $ 364.4 $202.6 $ 19.5 $ 547.5
=====================================================
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 governments 730.2 89.4 $ 3.0 816.6
Corporate securities 7,658.6 594.3 72.7 8,180.2
Mortgage-backed and asset-backed securities 4,597.2 147.1 15.5 4,728.8
Redeemable preferred stock 102.3 10.3 2.6 110.0
-----------------------------------------------------
Total fixed maturity securities $13,173.7 $858.6 $ 93.8 $13,938.5
=====================================================
Total equity securities $ 226.4 $122.5 $ 2.5 $ 346.4
=====================================================
</TABLE>
29
<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 value of fixed maturity securities as
of December 31, 1998, 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
<S> <C> <C>
-----------------------
(IN MILLIONS)
Securities Available for Sale:
--------------------------------------------------
Due in one year or less $ 479.8 $ 482.6
Due after one year through five years 3,131.7 3,236.6
Due after five years through ten years 2,923.1 3,033.4
Due after ten years 2,155.4 2,386.0
-----------------------
8,690.0 9,138.6
Mortgage-backed and asset-backed securities 4,391.7 4,478.4
-----------------------
Total $13,081.7 $13,617.0
=======================
</TABLE>
Gross gains of $110.6 million, $69.1 million and $89.3 million and gross
losses of $35.9 million, $32.9 million and $29.9 million on securities
available for sale were realized during 1998, 1997 and 1996, respectively.
Major categories of investment income are summarized as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
--------------------------------
(IN MILLIONS)
Fixed maturity securities $ 915.9 $ 925.4 $ 820.7
Equity securities 17.5 12.8 17.8
Mortgage loans 174.6 129.5 109.4
Real estate 38.1 53.6 51.3
Policy loans 154.5 137.1 113.0
Other 100.2 75.5 82.6
--------------------------------
Gross investment income 1,400.8 1,333.9 1,194.8
Investment expense 107.0 108.6 107.5
--------------------------------
Net investment income $1,293.8 $1,225.3 $1,087.3
================================
</TABLE>
30
<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 on investments in available for sale
and trading securities is as follows:
<TABLE>
<CAPTION>
December 31,
1998 1997 1996
<S> <C> <C> <C>
--------------------------------
(IN MILLIONS)
Available for sale securities:
Fixed maturity $(229.5) $223.5 $(168.6)
Equity 63.1 85.7 6.3
--------------------------------
Total $(166.4) $309.2 $(162.3)
================================
Trading securities:
Fixed maturity $ (2.5) $ (1.1) $ (0.5)
Equity 0.2
--------------------------------
Total $ (2.5) $ (1.1) $ (0.3)
================================
</TABLE>
As of December 31, 1998 and 1997, investments in fixed maturity securities
with a carrying value of $13.0 million and $14.4 million, respectively,
were on deposit with state insurance departments to satisfy regulatory
requirements.
No investment, aggregated by issuer, exceeded 10% of total stockholder's
equity as of December 31, 1998.
7. FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
----------------------- -----------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
--------------------------------------------------
(IN MILLIONS)
Assets:
Fixed maturity and equity securities (Note 6) $14,164.5 $14,164.5 $14,284.9 $14,284.9
Mortgage loans 2,788.7 2,911.2 1,922.1 1,990.9
Policy loans 3,901.2 3,901.2 3,769.2 3,769.2
Cash and cash equivalents 150.1 150.1 110.4 110.4
Derivative financial instruments:
Interest rate floors, caps, options and
swaptions 67.9 67.9 22.9 22.9
Interest rate swap contracts 0.5 0.5
Foreign currency derivatives 108.2 108.2 4.1 4.1
Liabilities:
Guaranteed interest contracts 5,665.3 5,751.0 3,982.0 4,035.7
Deposit liabilities 599.9 626.7 733.5 737.4
Annuity liabilities 1,448.0 1,430.1 1,883.5 1,872.6
Short-term debt 295.5 295.5 104.0 104.0
Surplus notes 149.6 176.0 149.6 164.7
Derivative financial instruments:
Options written 1.6 1.6
Interest rate swap contracts 23.3 23.3
Asset swap contracts 3.6 3.6 12.6 12.6
Credit default and total return swaps 9.1 9.1 4.0 4.0
</TABLE>
31
<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, 1998 and 1997:
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 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 at that time. 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.
32
<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
Beginning and Balance
of Year Acquisitions Maturities End
of Year
<S> <C> <C> <C> <C>
-----------------------------------------------------------
(IN MILLIONS)
December 31, 1998:
------------------------------------------------
Interest rate floors, caps, options and
swaptions $2,730.0 $ 160.6 $ 237.6 $2,653.0
Interest rate swap contracts 2,026.1 960.8 378.3 2,608.6
Asset swap contracts 67.4 30.3 34.5 63.2
Credit default and total return swaps 288.5 771.5 410.4 649.6
Financial futures contracts 214.1 4,108.4 3,713.6 608.9
Foreign currency derivatives 207.0 959.4 35.2 1,131.2
December 31, 1997:
------------------------------------------------
Interest rate floors, 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 default 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
</TABLE>
Interest Rate Floors, Caps, Options and Swaptions
- -------------------------------------------------------
The Company uses interest rate floors, caps, options and swaptions to hedge
against fluctuations in interest rates and to take positions in its total
return portfolios. Interest rate floor agreements entitle the Company to
receive the difference when the current rate of the underlying index is
below the strike rate. Interest rate cap agreements entitle the Company to
receive the difference when the current rate of the underlying index is
above the strike rate. 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. Floors, caps and options are
reported as assets and options written are reported as liabilities in the
accompanying 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 in the accompanying consolidated
statements of operations over the term of the agreement. Interest rate
floors and caps, options and swaptions mature during the years 1999 through
2017.
Interest Rate Swap Contracts
---------------------------------
The Company uses interest rate swaps to manage interest rate risk and to
take positions in its total return portfolios. 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 the years 1999 through 2021.
33
<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 fixed income
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 the years 2000
through 2005.
Credit Default and Total Return Swaps
-----------------------------------------
The Company uses credit default and total return swaps to take advantage of
market opportunities. Credit default swaps involve the receipt of fixed
rate payments in exchange for assuming potential credit exposure 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 default and total return swaps mature during the years
1999 through 2028.
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 by delivery of the financial instrument.
Price changes on futures are settled daily through the required 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 losses and gains, respectively, on the related
foreign currency denominated 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 the years 1999 through 2013.
GUARANTEED INTEREST CONTRACTS AND DEPOSIT LIABILITIES
The estimated fair value of fixed maturity guaranteed interest contracts is
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.
34
<PAGE>
PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. FINANCIAL INSTRUMENTS (CONTINUED)
SHORT-TERM DEBT
The carrying amount of short-term debt is a reasonable estimate of its fair
value because the interest rates are variable and based on current market
values.
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 401(k) plans totaling $1.6
billion as of December 31, 1998, pursuant to the terms of which the 401(k)
plan 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
The detail of universal life, annuity and other investment contract deposit
liabilities is as follows:
<TABLE>
<CAPTION>
December 31,
1998 1997
<S> <C> <C>
----------------------
(IN MILLIONS)
Universal life $10,218.0 $10,012.0
Annuity 1,429.0 1,817.4
Other investment contract deposits 6,326.0 4,815.1
----------------------
$17,973.0 $16,644.5
======================
</TABLE>
The detail of universal life, annuity and other investment contract
deposits policy fees and interest credited net of reinsurance ceded is as
follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
------------------------------------
(IN MILLIONS)
Policy fees:
Universal life $439.9 $377.5 $318.4
Annuity 82.1 50.3 26.6
Other investment contract deposits 3.3 3.4 3.6
------------------------------------
Total policy fees $525.3 $431.2 $348.6
====================================
Interest credited:
Universal life $440.8 $368.2 $284.3
Annuity 79.8 116.8 138.7
Other investment contract deposits 360.2 312.8 242.0
------------------------------------
Total interest credited $880.8 $797.8 $665.0
====================================
</TABLE>
35
<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.
Principal of $234.9 million and interest payable of $0.6 million was
outstanding as of December 31, 1998, bearing an average interest rate of
5.22%, and was repaid in January 1999. There was no commercial paper debt
outstanding as of December 31, 1997. Pacific Life has a revolving credit
facility available of $350 million as of December 31, 1998 and 1997. There
was no debt outstanding under the revolving credit facility as of
December 31, 1998 and 1997.
PAM had bank borrowings outstanding of $60 million and $104 million as of
December 31, 1998 and 1997, respectively. The interest rate averaged 5.8%,
5.8% and 5.6% for the years ended December 31, 1998, 1997 and 1996,
respectively. Outstanding debt is due and payable in 1999 and subject to
renewal. The borrowing limit for PAM as of December 31, 1998 and 1997 was
$200 million.
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, 1998,
1997 and 1996 and is included in net investment income on the accompanying
consolidated statements of operations.
10. INCOME TAXES
The Company accounts for income taxes using the liability method. 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 tax law is enacted. Recording the effects of a 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,
1998 1997 1996
<S> <C> <C> <C>
------------------------------------
(IN MILLIONS)
Current $134.1 $127.9 $163.5
Deferred (20.6) (14.4) (49.8)
------------------------------------
$113.5 $113.5 $113.7
====================================
</TABLE>
36
<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,
1998 1997 1996
<S> <C> <C> <C>
--------------------------------------
(IN MILLIONS)
Non deductible reserves $ 28.2 $(27.6) $ (6.4)
Duration hedging 20.8 (2.6) (14.9)
Partnership income 20.8
Deferred policy acquisition costs (12.6) (18.0) 2.1
Investment valuation (24.5) 3.9 (7.3)
Policyholder reserves (29.5) 20.1 (28.5)
Other (2.6) 9.8 5.2
--------------------------------------
Deferred taxes from operations 0.6 (14.4) (49.8)
Release of subsidiary deferred taxes (21.2)
--------------------------------------
Deferred tax provision $(20.6) $(14.4) $(49.8)
======================================
</TABLE>
The Company's acquisition of a controlling interest in a subsidiary allowed
such subsidiary to be included in PMHC's consolidated income tax return.
That inclusion resulted in the release of certain deferred taxes.
A reconciliation of the provision for income taxes based on the prevailing
corporate statutory tax rate to the provision reflected in the consolidated
financial statements is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
--------------------------------------
(IN MILLIONS)
Income taxes at the statutory rate $124.2 $101.3 $ 98.1
Equity tax (5.0) 5.0 16.3
Amortization of intangibles on equity method
investments 4.3 7.6 6.5
Non-taxable investment income (3.6) (2.6) (2.1)
Other (6.4) 2.2 (5.1)
--------------------------------------
Provision for income taxes $113.5 $113.5 $113.7
======================================
</TABLE>
37
<PAGE>
PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. INCOME TAXES (CONTINUED)
The net deferred tax liability is comprised of the following tax effected
temporary differences:
<TABLE>
<CAPTION>
December 31,
1998 1997
<S> <C> <C>
--------------------
(IN MILLIONS)
Policyholder reserves $254.3 $224.8
Investment valuation 44.7 20.2
Deferred compensation 33.7 25.9
Dividends 7.6 7.7
Non deductible reserves 5.9 34.1
Depreciation (2.4) (2.5)
Duration hedging (8.5) 12.3
Deferred policy acquisition costs (13.3) (25.9)
Partnership income (20.8)
Other (1.4) 3.8
--------------------
Deferred taxes from operations 299.8 300.4
Deferred taxes assumed in acquisition of subsidiary 4.8
Issuance of partnership units by affiliate (74.9) (47.9)
Unrealized gain on securities available for sale (272.3) (307.8)
--------------------
Net deferred tax liability $(42.6) $(55.3)
====================
</TABLE>
38
<PAGE>
PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. COMPREHENSIVE INCOME
The Company displays comprehensive income and its components in the
accompanying consolidated statements of stockholder's equity and the note
herein. The Company's only component of other comprehensive income,
unrealized gain (loss) on securities available for sale, is shown net of
reclassification adjustments, as defined by SFAS No. 130, and net of income
tax in the accompanying consolidated statements of stockholder's equity.
The disclosure of the gross components of other comprehensive income is as
follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
--------------------------------------
(IN MILLIONS)
Calculation of Holding Gain (Loss):
--------------------------------------------------
Gross holding gain (loss) on securities
available for sale $(13.4) $ 338.2 $ (75.7)
Tax (expense) benefit 4.5 (117.1) 26.5
--------------------------------------
Holding gain (loss) on securities available
for sale, net of tax $ (8.9) $ 221.1 $ (49.2)
======================================
Calculation of Reclassification Adjustment:
--------------------------------------------------
Realized gain on sale of securities
available for sale $ 89.3 $ 38.9 $ 82.6
Tax expense (31.3) (13.8) (29.0)
--------------------------------------
Reclassification adjustment, net of tax $ 58.0 $ 25.1 $ 53.6
======================================
Amounts Reported in Other Comprehensive Income:
--------------------------------------------------
Holding gain (loss) on securities available
for sale, net of tax $ (8.9) $ 221.1 $ (49.2)
Less reclassification adjustment, net of tax 58.0 25.1 53.6
--------------------------------------
Net unrealized gain (loss) recognized in other
comprehensive income $(66.9) $ 196.0 $(102.8)
======================================
</TABLE>
39
<PAGE>
PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. REINSURANCE
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. 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. 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,
1998 1997
<S> <C> <C>
--------------------
(IN MILLIONS)
Reinsured universal life deposits $(46.0) $(39.6)
Future policy benefits 108.9 92.2
Unpaid claims 12.5 14.0
Paid claims 24.3 10.2
</TABLE>
As of December 31, 1998, 79% 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,
1998 1997 1996
<S> <C> <C> <C>
--------------------------------------
(IN MILLIONS)
Ceded reinsurance netted against insurance premiums $ 82.7 $ 70.7 $ 44.3
Assumed reinsurance included in insurance premiums 17.2 18.1 17.8
Ceded reinsurance netted against policy fees 65.0 77.5 71.0
Ceded reinsurance netted against net investment income 203.3 204.9 192.5
Ceded reinsurance netted against interest credited 162.8 165.8 155.2
Ceded reinsurance netted against policy benefits 121.3 93.4 56.7
Assumed reinsurance included in policy benefits 17.7 12.7 9.9
</TABLE>
40
<PAGE>
PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. SEGMENT INFORMATION
The Company's six operating segments are Individual Insurance,
Institutional Products Group, Annuities, Group Employee Benefits,
Broker-Dealers and Investment Management. These segments have been
identified based on differences in products and services offered. All other
activity is included in Corporate and Other.
The Individual Insurance segment offers universal life, variable universal
life and other life insurance products to individuals, small businesses and
corporations through a network of distribution channels that include branch
offices, marketing organizations, national accounts and a national producer
group. The Institutional Products Group segment offers investment and
annuity products to pension fund sponsors and other institutional investors
primarily through its home office marketing team. The Annuities segment
offers variable and fixed annuities to individuals, small businesses and
qualified plans through financial institutions, National Association of
Securities Dealers ("NASD") firms, and regional and national wirehouses.
The Group Employee Benefits segment offers group life, health and dental
insurance, and stop loss insurance products to corporate, government and
labor-management-negotiated plans. The group life, health and dental
insurance is distributed through a network of sales offices and the stop
loss insurance is distributed through a network of third party
administrators. The Broker-Dealers segment includes five NASD registered
firms that provide securities and affiliated insurance brokerage services
and investment advisory services through more than 3,100 registered
representatives. The Investment Management segment is primarily comprised
of the Company's investment in PIMCO Advisors (Note 1). PIMCO Advisors
offers a diversified range of investment products through separately
managed accounts, and institutional, retail and offshore funds.
Corporate and Other primarily includes investment income, expenses and
assets not attributable to the major segments and the operations of the
Company's reinsurance subsidiary located in the United Kingdom. Corporate
and Other also includes the elimination of intersegment revenues, expenses
and assets.
The Company uses the same accounting policies and procedures to measure
segment income and assets as it uses to measure its consolidated net income
and assets. Net investment income and capital gains are allocated based on
invested assets purchased and held as is required for transacting the
business of that segment. Overhead expenses are allocated based on services
provided. Interest expense is allocated based on the short-term borrowing
needs of the segment and is included in net investment income. The income
tax provision is allocated based on each segment's actual tax liability.
Intersegment revenues include commissions paid by the Individual Insurance
segment and the Annuities segment for variable product sales to the
Broker-Dealers segment. Investment Management segment assets have been
reduced by an intersegment note payable of $110 million as of December 31,
1998. The related intersegment note receivable is included in Corporate and
Other segment assets.
The Company generates substantially all of its revenues and income from
customers located in the United States. Additionally, substantially all of
the Company's assets are located in the United States.
Depreciation expense and capital expenditures are not material and have not
been reported herein. The Company's significant non cash item is interest
credited to universal life, annuity and other investment contract deposits
and is disclosed herein.
41
<PAGE>
PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. SEGMENT INFORMATION (CONTINUED)
Financial information for each of the business segments is as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL GROUP CORPORATE
INDIVIDUAL PRODUCTS EMPLOYEE BROKER- INVESTMENT AND
INSURANCE GROUP ANNUITIES BENEFITS DEALERS MANAGEMENT OTHER TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------
(IN MILLIONS)
External customers and
other revenue
December 31, 1998 $ 414.6 $ 43.3 $ 124.0 $521.2 $236.1 $ 17.1 $ 17.4 $ 1,373.7
December 31, 1997 379.2 61.6 83.3 480.6 154.0 21.8 3.2 1,183.7
December 31, 1996 335.4 36.8 41.4 431.7 82.2 22.2 5.7 955.4
Intersegment revenues
December 31, 1998 185.3 (185.3) -
December 31, 1997 143.3 (143.3) -
December 31, 1996 98.0 (98.0) -
Net investment income
December 31, 1998 565.7 565.5 88.6 23.1 0.9 8.0 42.0 1,293.8
December 31, 1997 485.2 509.6 149.4 24.9 0.8 6.2 49.2 1,225.3
December 31, 1996 404.1 465.5 149.6 21.9 0.8 4.8 40.6 1,087.3
Net realized capital gains
(losses)
December 31, 1998 3.4 (13.6) 4.6 1.7 4.0 38.6 38.7
December 31, 1997 9.8 12.8 0.6 2.0 20.8 39.3 85.3
December 31, 1996 5.7 5.0 (4.5) 2.3 1.1 34.4 44.0
Net income of equity
method investees
December 31, 1998 103.0 103.0
December 31, 1997 80.1 80.1
December 31, 1996 61.3 61.3
Total revenues
December 31, 1998 983.7 595.2 217.2 546.0 422.3 132.1 (87.3) 2,809.2
December 31, 1997 874.2 584.0 233.3 507.5 298.1 128.9 (51.6) 2,574.4
December 31, 1996 745.2 507.3 186.5 455.9 181.0 89.4 (17.3) 2,148.0
Segment profit (loss)
before income
tax provision
December 31, 1998 151.1 74.6 34.1 10.3 9.9 60.1 14.9 355.0
December 31, 1997 132.4 98.3 23.5 28.8 6.4 24.6 (24.5) 289.5
December 31, 1996 109.3 80.7 (16.5) 26.3 4.3 34.1 42.1 280.3
Income tax provision
(benefit)
December 31, 1998 52.6 21.2 11.3 2.9 4.5 2.1 18.9 113.5
December 31, 1997 55.8 33.9 9.4 9.1 2.7 10.1 (7.5) 113.5
December 31, 1996 44.8 27.5 (0.4) 6.2 1.8 21.5 12.3 113.7
Segment net income (loss)
December 31, 1998 98.5 53.4 22.8 7.4 5.4 58.0 (4.0) 241.5
December 31, 1997 76.6 64.4 14.1 19.7 3.7 14.5 (17.0) 176.0
December 31, 1996 64.5 53.2 (16.1) 20.1 2.5 12.6 29.8 166.6
Interest credited on
universal life,
annuity and other
investment contract
deposits
December 31, 1998 449.6 354.1 71.0 6.1 880.8
December 31, 1997 378.8 299.8 106.2 13.0 797.8
December 31, 1996 290.3 232.9 132.8 9.0 665.0
Segment assets
As of December 31,
1998 14,578.2 15,221.0 8,384.2 361.1 55.8 267.3 1,016.3 39,883.9
As of December 31,
1997 13,426.7 12,241.7 6,310.8 368.6 52.4 305.4 1,303.2 34,008.8
</TABLE>
42
<PAGE>
PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. 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 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 mutual funds managed by an
affiliate of Pacific Life.
Components of net periodic pension cost are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
------------------------------------
(IN MILLIONS)
Service cost - benefits earned during the year $ 4.0 $ 3.6 $ 3.7
Interest cost on projected benefit obligation 10.9 10.4 9.8
Expected return on plan assets (15.0) (12.8) (11.2)
Amortization of net obligations and prior
service cost (1.4) (1.4) (1.4)
------------------------------------
Net periodic pension cost (benefit) $ (1.5) $ (0.2) $ 0.9
====================================
</TABLE>
43
<PAGE>
PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. PENSION PLANS, POSTRETIREMENT BENEFITS AND OTHER PLANS (CONTINUED)
The following tables set forth the pension plans' reconciliation of benefit
obligation, plan assets and funded status for the years ended:
<TABLE>
<CAPTION>
December 31,
1998 1997
<S> <C> <C>
--------------------
(IN MILLIONS)
Change in Benefit Obligation:
------------------------------------------------------------
Benefit obligation, beginning of year $157.9 $140.9
Service cost 4.0 3.6
Interest cost 10.9 10.4
Plan expense (0.3) (0.2)
Actuarial loss 11.9 10.1
Benefits paid (6.6) (6.9)
--------------------
Benefit obligation, end of year $177.8 $157.9
====================
Change in Plan Assets:
------------------------------------------------------------
Fair value of plan assets, beginning of year $180.3 $154.2
Actual return on plan assets 21.9 33.2
Plan expense (0.3) (0.2)
Benefits paid (6.6) (6.9)
--------------------
Fair value of plan assets, end of year $195.3 $180.3
====================
Funded Status Reconciliation:
------------------------------------------------------------
Funded status $ 17.5 $ 22.4
Unrecognized transition asset (3.6) (4.8)
Unrecognized prior service cost (1.0) (1.2)
Unrecognized actuarial gain (9.7) (14.7)
--------------------
Prepaid pension cost $ 3.2 $ 1.7
====================
</TABLE>
In determining the actuarial present value of the projected benefit
obligation as of December 31, 1998 and 1997, the weighted average discount
rate used was 6.5% and 7.0%, respectively, and the rate of increase in
future compensation levels was 5.0% and 5.5%, respectively. The expected
long-term rate of return on plan assets was 8.5% in 1998 and 1997.
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.
POSTRETIREMENT BENEFITS
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
44
<PAGE>
PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. PENSION PLANS, POSTRETIREMENT BENEFITS AND OTHER PLANS (CONTINUED)
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 net periodic postretirement benefit cost for the years ended
December 31, 1998, 1997 and 1996 is $0.7 million, $0.8 million and $1.4
million, respectively. As of December 31, 1998 and 1997, the accumulated
benefit obligation is $19.3 million and $20.0 million, respectively. The
fair value of the plan assets as of December 31, 1998 and 1997 is zero. The
amount of accrued benefit cost included in other liabilities on the
accompanying consolidated statements of financial condition is $25.3
million and $26.0 million as of December 31, 1998 and 1997, respectively.
The Plans include both indemnity and HMO coverage. The assumed health care
cost trend rate used in measuring the accumulated benefit obligation for
indemnity coverage was 8% and 9% for 1998 and 1997, respectively, and is
assumed to decrease gradually to 3.5% in 2003 and remain at that level
thereafter. The assumed health care cost trend rate used in measuring the
accumulated benefit obligation for HMO coverage was 7% and 8% for 1998 and
1997, respectively, and is assumed to decrease gradually to 3% 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, 1998 would be increased by 8.0%, and the aggregate of the
service and interest cost components of the net periodic benefit cost would
increase by 7.5%. If the health care cost trend rate assumptions were
decreased by 1%, the accumulated postretirement benefit obligation as of
December 31, 1998 would be decreased by 6.8%, and the aggregate of the
service and interest cost components of the net periodic benefit cost would
decrease by 6.5%.
The discount rate used in determining the accumulated postretirement
benefit obligation is 6.5% and 7.0% for 1998 and 1997, 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 6% 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.
15. 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 $42.1
million, $27.5 million and $14.3 million for the years ended December 31,
1998, 1997 and 1996, respectively. In addition, Pacific Life provides
certain support services to the Pacific Select Fund for an administration
fee which is based on an
45
<PAGE>
PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. TRANSACTIONS WITH AFFILIATES (CONTINUED)
allocation of actual costs. Such administration fees amounted to $232,000,
$165,000 and $108,000 for the years ended December 31, 1998, 1997 and 1996,
respectively.
PIMCO Advisors provides investment advisory services to the Company for
which the fees amounted to $16.9 million, $11.4 million and $6.2 million
for the years ended December 31, 1998, 1997 and 1996, 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 $40.3 million and
$46.5 million as of December 31, 1998 and 1997, 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, $1.2 million and $1.4 million for the years ended
December 31, 1998, 1997 and 1996, respectively.
16. 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.
For the years ended December 31, 1998, 1997 and 1996, approximately
$49.4 million, $85.8 million and $35.3 million, respectively, is included
in operating expenses on the accompanying 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.
17. COMMITMENTS
The Company has outstanding commitments to make investments primarily in
fixed maturities, mortgage loans, limited partnerships and other
investments as follows (IN MILLIONS):
<TABLE>
<S> <C>
Years Ending December 31:
------------------------------------------------------------
1999 $172.7
2000-2003 202.1
2004 and thereafter 55.9
------
Total $430.7
======
</TABLE>
The Company leases office facilities under various non-cancelable operating
leases. Aggregate minimum future commitments as of December 31, 1998
through the term of the leases are approximately $37.5 million.
46
<PAGE>
PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. LITIGATION
The Company was named in civil litigation proceedings similar to other
litigation brought against many life insurers alleging misconduct in the
sale of products, sometimes referred to as market conduct litigation. The
class of plaintiffs included, with some exceptions, all persons who owned,
as of December 31, 1997 (or as of the date of policy termination, if
earlier), individual whole life, universal life or variable life insurance
policies sold by the Company on or after January 1, 1982. The Company has
settled this litigation pursuant to a final settlement agreement approved
by the Court in November 1998. The settlement agreement is currently being
implemented. The cost of the settlement has been included in the
accompanying consolidated statements of operations during the three years
ended December 31, 1998.
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.
---------------------------------------------------------------------------
47
<PAGE>
FORM NO. 1602-OA
<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, 1998
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
(2) Depositor's Financial Statements
Audited Consolidated Financial Statements dated as of
December 31, 1998 and 1997, and for the three year period
ending December 31, 1998, 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
(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 10-12600)
(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 24-123799)
(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 20-12601)
(i) Premier Death Benefit Rider (Form 20-12602)
5. (a) Application Form for Individual Flexible Premium
Deferred Variable Annuity Contract (Form 25-12600)
(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 is the parent company of Pacific Asset
Management LLC (a Delaware Limited Liability Company), Pacific Life &
Annuity Company, formerly known as PM Group Life Insurance Company (an
Arizona Corporation), Pacific Mutual Distributors, Inc., and
World-Wide Holdings Limited (a United Kingdom Corporation). Pacific
Life also 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
a 95% ownership of Grayhawk Golf Holdings, LLC). A subsidiary of
Pacific Mezzanine Associates, L.L.C. is Pacific Mezzanine Investors,
L.L.C., (a Delaware Limited Liability Company) who is the sole general
partner of the PMI Mezzanine Fund, L.P. (a Delaware Limited
Partnership). Subsidiaries of Pacific Asset Management LLC are
PMRealty Advisors Inc., Pacific Financial Products Inc. (a Delaware
Corporation), 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
indirectly beneficially owns approximately 33% 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), 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
Subagents 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 for effectiveness and has caused this Registration
Statement on Form N-4 to be signed on its behalf by the undersigned thereunto
duly authorized in the City of Newport Beach, and the State of California on
this 17th day of December, 1999.
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 Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
_________________ Director, Chairman of the Board December 17, 1999
Thomas C. Sutton* and Chief Executive Officer
_________________ Director and President December 17, 1999
Glenn S. Schafer*
_________________ Director, Senior Vice President December 17, 1999
Khanh T. Tran* and Chief Financial Officer
_________________ Director, Senior Vice President December 17, 1999
David R. Carmichael* and General Counsel
<PAGE>
_________________ Director, Vice President and December 17, 1999
Audrey L. Milfs* Corporate Secretary
_________________ Director December 17, 1999
Richard M. Ferry*
_________________ Director December 17, 1999
Donald E. Guinn*
_________________ Director December 17, 1999
Ignacio E. Lozano, Jr.*
_________________ Director December 17, 1999
Charles D. Miller*
_________________ Director December 17, 1999
Donn B. Miller*
_________________ Director December 17, 1999
Richard M. Rosenberg*
_________________ Director December 17, 1999
James R. Ukropina*
_________________ Director December 17, 1999
Raymond L. Watson*
_________________ Vice President and Controller December 17, 1999
Edward R. Byrd*
_________________ Executive Vice President December 17, 1999
Gerald W. Robinson*
</TABLE>
<TABLE>
<S> <C>
*By: _____________________________ December 17, 1999
David R. Carmichael
as attorney-in-fact
</TABLE>
(Powers of Attorney are contained in this Registration Statement on Form N-4 for
Separate Account A as Exhibit 10(b).)
<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
27th 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 22nd 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
subagents 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 subagents
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.
<PAGE>
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.
2
<PAGE>
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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Date: Date:
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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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Date: Date:
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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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Date: Date:
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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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Date: Date:
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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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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.
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[LOGO]
PACIFIC LIFE
Pacific Life Insurance Company
700 Newport Center Drive
Newport Beach, CA 92660
PACIFIC INNOVATIONS
- --------------------------------------------------------------------------------
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 11.
RIGHT TO CANCEL - YOU MAY RETURN THIS CONTRACT WITHIN 10 DAYS AFTER YOU RECEIVE
IT. TO DO SO, MAIL IT TO US AT OUR SERVICE CENTER OR TO THE AGENT WHO SOLD IT TO
YOU. THIS CONTRACT WILL THEN BE DEEMED VOID FROM THE BEGINNING. NO WITHDRAWAL
CHARGE WILL BE IMPOSED, AND WE WILL REFUND YOUR CONTRACT VALUE, INCLUDING ANY
CHARGES FOR PREMIUM TAXES AND/OR OTHER TAXES THAT WERE DEDUCTED FROM THE
CONTRACT VALUE.
Signed at our Home Office, 700 Newport Center Drive, Newport Beach,
California 92660.
/s/ Thomas C. Sutton /s/ Audrey L. Milfs
Chairman and Chief Executive Officer Secretary
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
<PAGE>
TABLE OF CONTENTS
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
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
THE FIXED OPTION ..........................................10
VARIABLE INVESTMENT OPTIONS ..............................11
Separate Account ............................................11
CONTRACT VALUE ..........................................12
Fixed Option Value ............................................12
Variable Account Value ............................................12
Loan Account Value ............................................13
CHARGES, FEES AND DEDUCTIONS ........................................14
Administrative Fee ............................................14
Annual Fee .........................................14
Mortality and Expense Risk Charge .............................14
Premium Taxes ............................................14
Transfer Fee ............................................14
Withdrawal Fee ............................................14
Withdrawal Charge ............................................14
TRANSFERS ..........................................16
WITHDRAWALS ..........................................17
Amount Available for Withdrawal ................................17
TRANSFER AND WITHDRAWAL RESTRICTIONS ..............................17
Special Restrictions - Fixed Option ................................17
CONTRACT LOANS ..........................................18
Loan Procedures ............................................18
Loan Account ............................................18
Loan Terms ............................................18
Loan Interest Rate ............................................18
Repayment Terms ............................................18
DEATH BENEFIT ..........................................20
Death of Annuitant ............................................20
Death of Owner ............................................20
Death of Owner Distribution Rules ................................20
Interest on Death Benefit Proceeds .............................21
BENEFICIARY ..........................................22
Add or Changing Your Beneficiary ................................22
ANNUITY BENEFITS ..........................................23
Choice of Annuity Date ............................................23
Application of Contract Value ................................23
Your Selections ............................................23
Fixed and Variable Annuities ................................23
Annuity Options ............................................24
Default Annuity Date and Options ................................24
Amount of Payments ............................................24
Fixed Annuity Payments ................................25
Variable Annuity Payments ................................25
Periodic Payments ............................................25
ANNUITY OPTION TABLES ...............................26
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CONTRACT SPECIFICATIONS
SERVICE CENTER: SEND FORMS AND WRITTEN REQUESTS TO:
Pacific Life Insurance Company
P.O. Box 7187
Pasadena, California 91109-7187
SEND PAYMENTS TO:
Pacific Life Insurance Company
P.O. Box 100060
Pasadena, California 91189-0060
Toll-free number: 1-800-722-2333 (between 6:00 a.m. and 5:00 p.m., Pacific time)
Please use our toll-free number to present inquiries or obtain information about
your coverage and for us to provide assistance in resolving complaints.
Basic Contract - [LOBE]
Investment Options:
[FNDNAM01] [FNDNAM02]
[FNDNAM03] [FNDNAM04]
[FNDNAM05] [FNDNAM06]
[FNDNAM07] [FNDNAM08]
[FNDNAM09] [FNDNAM10]
[FNDNAM11] [FNDNAM12]
[FNDNAM13] [FNDNAM14]
[FNDNAM15] [FNDNAM16]
[FNDNAM17] [FNDNAM18]
[FNDNAM19] [FNDNAM20]
[FNDNAM21] [FNDNAM22]
[FNDNAM23] [FNDNAM24]
[FNDNAM25] [FNDNAM26]
[FNDNAM27] [FNDNAM28]
[FNDNAM29] [FNDNAM30]
[FNDNAM31] [FNDNAM32]
[FNDNAM33]
Administrative Fee: 0.15%
Mortality and Expense
Risk Charge: [DBPCT]
Annual Fee: $ 30.00 if contract value is less than $50,000
Withdrawal Charge: Age of Purchase Payment
in Contract Years Charge Percent
1 9%
2 8%
3 8%
4 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]
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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, "Annuitant" means the sole surviving
Annuitant, unless otherwise stated. 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 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.
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.
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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.
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.
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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 its General Account and from
assets in other separate accounts.
VARIABLE ACCOUNT VALUE - The aggregate amount of your Contract Value allocated
to the Variable Accounts.
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GENERAL PROVISIONS
REPORT TO OWNER(S) - At least once per year prior to the Annuity Date, we will
provide you with 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 provide you with 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.
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<PAGE>
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.
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.
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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 providing us with 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.
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.
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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;
- annual fee; and
- charges for premium taxes and/or other taxes.
We do so as of the end of the Business Day any such transaction is effective.
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VARIABLE INVESTMENT OPTIONS
The Variable Investment Options consist of Subaccounts of the Separate Account.
The available Subaccounts as of the Contract Date are shown in the Contract
Specifications.
SEPARATE ACCOUNT - We established and maintain the Separate Account under the
laws of California. Any income, gains or losses (whether or not realized) from
the assets of each Variable Account are credited or charged against such
Variable Account without regard to our other income, gains or losses. Assets may
be put in our Separate Account to support this Contract and other variable
annuity contracts. Assets may be put in our Separate Account for other purposes,
but not to support contracts other than variable annuity contracts. The assets
of our Separate Account are our property. The portion of the Separate Account
assets equal to the reserves and other Contract liabilities with respect to each
Variable Account will not be chargeable with liabilities arising out of any
other business we conduct. We may transfer assets of a separate account in
excess of the reserves and other liabilities with respect to its Variable
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 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.
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;
- annual fee; 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, and
including transfers from the Loan Account.
We debit your Contract with Subaccount Units for a Subaccount as a result of any
deductions from the Subaccount, including those caused by any:
- 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;
- annual fee; 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.
ANNUAL FEE - We charge an annual fee, which is shown in the Contract
Specifications, on each Contract Anniversary prior to your Annuity Date against
your Contract Value, and at the time you make a full withdrawal (on a prorated
basis for the current Contract Year), if your Net Contract Value is less than
$50,000 on that date. 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 contingent option or to an Annuity
Option with a certain payment period of 5 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 Owner or 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.
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- withdrawals (full or partial) while the Owner or Annuitant is confined
to an accredited nursing home for 60 days or longer and this Contract
has been in effect for more than 90 days. The waiver applies only to
withdrawals made while the Owner or Annuitant is in a nursing home or
within 90 days after the Owner or Annuitant leaves the nursing home. In
addition, the confinement period for which you seek the waiver must
begin after the Contract Date. In order to use this waiver, you must
submit with your withdrawal request, the following documents: (1) a
physician's note recommending the Owner's or Annuitant's admittance to
a nursing home; (2) an admittance form which shows the type of facility
the Owner or Annuitant entered; and (3) a bill from the nursing home
which shows that the Owner or Annuitant met the 60 day confinement
requirement. An accredited nursing home shall be defined as a home or
facility that: (1) is operating in accordance with the law of
jurisdiction in which it is located; (2) is primarily engaged in
providing, in addition to room and board, skilled nursing care under
the supervision of a duly licensed physician; (3) provides continuous
24 hour a day nursing service by or under the supervision of a
registered nurse; and maintains a daily record of the patient.
AMOUNT OF WITHDRAWAL CHARGE - The amount of a withdrawal charge depends on how
long your Purchase Payments are held under this Contract. Each Purchase Payment
you make is considered to have a certain "age," depending on the length of time
since that Purchase Payment was effective. A Purchase Payment is "age one" from
the day it was effective until your next Contract Anniversary and increases in
"age" on that and each succeeding Contract Anniversary. When you withdraw an
amount, the "age" of any Purchase Payment(s) you withdraw determines the
level(s) of withdrawal charge as shown in the Contract Specifications. 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% annually of total Purchase Payments that have an "age" of
less than four years, plus any remaining portion not withdrawn from the previous
Contract Year's Eligible Purchase Payments that are derived from Purchase
Payments which have an "age" of less than four years, plus 100% of all Purchase
Payments that have an "age" of four 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 Purchase Payments, 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;
- annual fee; 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.
For those Contracts issued under Qualified Plans that are exempt from the
requirements of Title 1 of the Employee Retirement Income Security Act of 1974
("ERISA"), we will credit interest on amounts in the Loan Account at an annual
rate equal to 3.0%. For those Contracts issued under Qualified Plans that are
subject to the requirements of Title 1 of ERISA, we will credit interest on
amounts in the Loan Account at 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 - For those Contracts issued under Qualified Plans that are
exempt from the requirements of Title 1 of ERISA, you will be charged interest
on your Contract Debt at an annual rate equal to 5%. For those Contracts issued
under Qualified Plans that are subject to the requirements of Title 1 of ERISA,
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 Average 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 Average Corporates
is no longer available, we will use a substantially similar average, subject to
compliance with applicable state regulations. We will notify you of the loan
interest rate when you make a Contract loan. Interest charged will accrue daily
beginning on the day your loan is effective.
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
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unless you specifically indicate that your payment is a loan repayment. To the
extent permitted by law, any loan repayments in excess of the amount then due
will be applied to the principal balance of your loan. Such repayments will not
change the due dates or the periodic repayment amount due for future periods. If
a loan repayment is in excess of the principal balance of your loan, any excess
repayment will be refunded to you. Repayments received that are less than the
amount then due will be returned to you, unless otherwise required by law.
If a loan repayment is not made when due, we will declare the entire remaining
loan balance in default. At that time, we will provide 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 provide you with 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.
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If the Owner dies before the Annuity Date, the designated recipient of the death
benefit proceeds 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.
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.
The Owner may designate that the Beneficiary is to receive the death benefit
proceeds either through an annuity for life or over a period that does not
exceed the life expectancy of the Beneficiary. Such designation must be made in
writing in a form acceptable to us, and may only be revoked by the Owner in
writing in a form acceptable to us. Upon death of the Owner, the Beneficiary
cannot revoke or modify any designation made by the Owner on how the death
benefit proceeds are to be received.
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
providing us with 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.
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ANNUITY BENEFITS
CHOICE OF ANNUITY DATE - Your Annuity Date is shown in the Contract
Specifications. If you did not select an Annuity Date in your application for
this Contract, we assigned an Annuity Date based on the type of this Contract
and the Annuitant's Age (see DEFAULT ANNUITY DATE AND OPTIONS).
You may change your Annuity Date by providing proper notice to us at least ten
(10) Business Days prior to your current Annuity Date or new Annuity Date,
whichever is earlier. Your Annuity Date may not be earlier than your first
Contract Anniversary and must occur on or before the day the younger Annuitant
reaches his or her 95th birthday, or earlier as required by state law or the
Code. You may be subject to additional restrictions under your Qualified Plan.
You should consult with your Qualified Plan administrator before you elect your
Annuity Date.
APPLICATION OF CONTRACT VALUE - Prior to the Annuity Date, you may elect to
convert all or part of your Net Contract Value, 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).
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. If you choose the Period Certain Only
Option (Annuity Option 4), the variable annuity payment option is not available
to you.
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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 5 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 5 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.
IF YOU CHOOSE THE PERIOD CERTAIN ONLY ANNUITY OPTION, YOU MAY CHOOSE THE FIXED
ANNUITY PAYMENT OPTION ONLY.
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.
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.
24
<PAGE>
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 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.
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.
25
<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.
26
<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>
<TABLE>
<CAPTION>
VARIABLE ANNUITY RATES
-----------------------------------------------------------------------------------------------------------
MALE AT 5% FEMALE AT 5% UNISEX AT 5%
--------------------- ---------------------- ----------------------
NONE 10 YR. 20 YR. NONE 10 YR. 20 YR. NONE 10 YR. 20 YR.
---- ----- ----- ---- ------ ------ ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30 4.38 4.37 4.36 4.29 4.29 4.29 4.34 4.33 4.33
35 4.46 4.46 4.44 4.36 4.35 4.35 4.41 4.41 4.40
40 4.57 4.56 4.54 4.44 4.44 4.42 4.51 4.50 4.49
45 4.71 4.70 4.67 4.55 4.54 4.52 4.63 4.62 4.60
50 4.91 4.89 4.82 4.69 4.68 4.65 4.80 4.78 4.74
55 5.16 5.12 5.02 4.87 4.86 4.81 5.02 4.99 4.92
60 5.48 5.41 5.24 5.12 5.09 5.01 5.30 5.26 5.13
65 5.89 5.79 5.51 5.44 5.40 5.26 5.67 5.60 5.39
70 6.46 6.28 5.80 5.89 5.80 5.55 6.18 6.05 5.68
75 7.27 6.91 6.08 6.51 6.34 5.87 6.89 6.64 5.98
80 8.41 7.68 6.29 7.39 7.05 6.16 7.90 7.38 6.23
85 10.02 8.52 6.43 8.72 7.93 6.37 9.36 8.24 6.40
90 12.29 9.30 6.49 10.71 8.88 6.47 11.49 9.10 6.48
95 15.42 9.90 6.51 13.70 9.68 6.50 14.55 9.80 6.51
</TABLE>
27
<PAGE>
OPTION 3 - JOINT AND 50% SURVIVOR LIFE
<TABLE>
<CAPTION>
PRIMARY ANNUITANT
MALE AGE
60 65 70 75 80 85
--------------------------------------------------------------------------------------------------------------
3% 5% 3% 5% 3% 5% 3% 5% 3% 5% 3% 5%
FIXED VARIABLE FIXED VARIABLE FIXED VARIABLE FIXED VARIABLE FIXED VARIABLE FIXED VARIABLE
----- -------- ----- -------- ----- -------- ----- -------- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
60 3.91 5.12 4.13 5.34 4.39 5.60 4.69 5.92 5.02 6.30 5.38 6.73
FEMALE 65 3.99 5.19 4.25 5.43 4.54 5.73 4.88 6.09 5.26 6.51 5.67 6.98
AGE 70 4.06 5.25 4.36 5.53 4.70 5.87 5.10 6.27 5.55 6.75 6.03 7.29
75 4.12 5.31 4.46 5.62 4.85 6.00 5.32 6.47 5.86 7.03 6.45 7.66
80 4.17 5.36 4.54 5.70 4.98 6.13 5.54 6.67 6.18 7.33 6.91 8.08
85 4.21 5.40 4.60 5.77 5.09 6.24 5.72 6.86 6.49 7.63 7.40 8.54
--------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRIMARY ANNUITANT
UNISEX AGE
60 65 70 75 80 85
--------------------------------------------------------------------------------------------------------------
3% 5% 3% 5% 3% 5% 3% 5% 3% 5% 3% 5%
FIXED VARIABLE FIXED VARIABLE FIXED VARIABLE FIXED VARIABLE FIXED VARIABLE FIXED VARIABLE
----- -------- ----- -------- ----- -------- ----- -------- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
60 3.84 5.05 4.07 5.27 4.34 5.54 4.65 5.86 5.00 6.24 5.39 6.69
UNISEX 65 3.90 5.10 4.17 5.35 4.47 5.65 4.83 6.01 5.23 6.44 5.68 6.94
AGE 70 3.96 5.15 4.25 5.43 4.60 5.76 5.02 6.17 5.49 6.66 6.03 7.24
75 4.00 5.19 4.32 5.49 4.72 5.87 5.20 6.34 5.76 6.91 6.41 7.58
80 4.03 5.23 4.38 5.55 4.81 5.96 5.36 6.49 6.02 7.15 6.81 7.96
85 4.05 5.25 4.42 5.59 4.88 6.04 5.49 6.62 6.25 7.38 7.20 8.33
--------------------------------------------------------------------------------------------------------------
</TABLE>
OPTION 4 - PERIOD CERTAIN ONLY
<TABLE>
<CAPTION>
MONTHLY MONTHLY MONTHLY MONTHLY
INCOME INCOME INCOME INCOME
-------------- ------------ -------------- -------------
3% 3% 3% 3%
YEARS FIXED YEARS FIXED YEARS FIXED YEARS FIXED
-------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
7 13.16 12 8.24 19 5.73 26 4.59
8 11.68 13 7.71 20 5.51 27 4.47
9 10.53 14 7.26 21 5.32 28 4.37
10 9.61 15 6.87 22 5.15 29 4.27
11 8.86 16 6.53 23 4.99 30 4.18
17 6.23 24 4.84
18 5.96 25 4.71
-------------- ------------ -------------- -------------
</TABLE>
28
<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>
[LOGO]
700 Newport Center Drive
Newport Beach, CA 92660
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.
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 be held for the
exclusive benefit of participants and beneficiaries under the IRC section
457(g). In addition, PL annuity contracts comply with IRC section 401(f)
and shall be treated as qualified trusts under that section.
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 (iii) when the
Annuitant is faced with an "unforeseeable emergency" (within the meaning
of Treasury Regulation Section 1.457-2(h)).
<PAGE>
7. Distributions from this Contract must comply with the minimum distribution
rules of Code Section 401(a)(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. This rider is intended to qualify as a 457 contract for federal income
tax purposes. To that end, the provisions of this rider are to be
interpreted to ensure or maintain such tax qualification,
notwithstanding any other provision to the contrary. PL reserves the
right to amend this rider to comply with future changes in the Code,
any regulations or rulings issued thereunder and to reflect any
clarifications that may be needed or are appropriate to maintain such
tax qualification without consent (except for the states of Michigan,
Pennsylvania, South Carolina and Washington, where affirmative consent
is required.) PL shall provide the Owner 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
<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
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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
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[LOGO] PACIFIC LIFE
Pacific Life Insurance Company
700 Newport Center Drive
Newport Beach, CA 92660
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 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 70 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:
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.
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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
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
/s/ Thomas C. Sutton /s/ Audrey L. Milfe
Chairman and Chief Executive Officer Secretary
2
<PAGE>
[LOGO] PACIFIC LIFE
Pacific Life Insurance Company
700 Newport Center Drive
Newport Beach, CA 92660
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 70 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
b) your aggregate Purchase Payments less an adjusted amount for each
withdrawal, increased at an effective annual rate of 6% to that day,
subject to a maximum of two times the difference between the
aggregate Purchase Payments and 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 following the
date the Annuitant reaches his or her 80th birthday; (2) the date
of death of the sole Annuitant; or (3) the Annuity Date.
To determine the adjusted amount for each withdrawal: (i) We divide the
amount of each withdrawal, including withdrawal charges, by your
Contract Value immediately before that withdrawal; and (ii) we then
multiply the result by your Death Benefit Amount (as described in
section (b) of this Death Benefit Amount section), immediately before
that withdrawal.
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
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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 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 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
/s/ Thomas C. Sutton /s/ Audrey L. Milfe
Chairman and Chief Executive Officer Secretary
2
<PAGE>
"DRAFT"
PACIFIC INNOVATIONS VARIABLE ANNUITY APPLICATION INSTRUCTIONS
IF SECTIONS 1,5,18 AND 19 ARE NOT FILLED OUT COMPLETELY, APPLICATION MAY NEED TO
BE RETURNED FOR COMPLETION.
1. ANNUITANTS/OWNERS: Maximum age at issue is 80. There are many combinations
2. of owner and annuitant registrations which may result in different
consequences. For example, the death of an owner/annuitant may have
different consequences than the death of a non-owner annuitant. Joint or
contingent owners and/or joint annuitants cannot be named on qualified
contracts. For IRAs, owner and annuitant must be the participant. For
pension/profit sharing, 401(k) plans, name plan as owner, and participant
as annuitant. For 403(b) plans, name participant as both owner and
annuitant. Use the Special Requests section to clarify registrations.
Spousal signatures may be required for certain actions in qualified
contracts. If qualified plan is owner, also complete Qualified Plan
Certification form. If trust is owner, also complete Trust Certification
form. Consult a tax adviser to properly structure qualified plans and
effect transfers.
3. BENEFICIARY: Beneficiaries will be joint primary if no boxes are checked.
Joint beneficiaries will share equally with rights of survivorship. For
non-qualified contracts, if the owner dies, contract may only be continued
if spouse is sole beneficiary. If beneficiary is left blank, default
beneficiary will be owner's estate if contract is individually owned. If
owner is trust or corporation, default beneficiary will be the owner.
4. CONTRACT TYPE: A conduit IRA is used to move assets from a qualified plan
with intent to move the assets to another qualified plan at a later date;
subsequent contributions are not permitted. Transfer indicates a trustee to
trustee or custodian to custodian transfer only. If initial IRA payment
represents both a rollover and a contribution, indicate amounts for each.
Ensure the total matches the check. For a SIMPLE IRA, Pacific Life will
only act as a non-designated financial institution.
5. ISSUE STATE: Indicate the state where the application is signed.
6. INITIAL PURCHASE PAYMENT: Indicate the initial purchase payment in U.S.
dollars. Initial non-qualified contract minimum $10,000; qualified contract
minimum $2,000.
7. REPLACEMENT: Complete and attach a Transfer/Exchange form and any required
state replacement forms.
8. OPTIONAL DEATH BENEFIT: Must be chosen at time of issue. If not marked, the
option defaults to the standard death benefit. There is an annual charge
for this option. Please consult prospectus for charges.
9. TELEPHONE/ELECTRONIC AUTHORIZATION: By checking this box you authorize your
designee to give Pacific Life instructions telephonically or
electronically. This instruction is valid until you instruct us otherwise.
10. ELECTRONIC DELIVERY AUTHORIZATION: Complete to receive information
electronically from our Web site. Primary owner's e-mail address will be
used for notification. If not checked, communications will be by regular
U.S. mail. This instruction is valid until you instruct us otherwise.
11. ALLOCATION OPTIONS: Allocations must total 100% or equal total purchase
payment. If rebalancing, use percentages only. Portfolio managers are:
Aggressive Equity ......... Alliance Capital
Emerging Markets .......... Alliance Capital
Diversified Research ...... Capital Guardian
Small-Cap Equity .......... Capital Guardian
International Large-Cap ... Capital Guardian
Bond and Income ........... Goldman Sachs
Equity .................... Goldman Sachs
Multi-Strategy ............ J.P. Morgan Investment
Equity Income ............. J.P. Morgan Investment
Growth LT ................. Janus
Mid-Cap Value ............. Lazard
Equity Index .............. Mercury
Small-Cap Index ........... Mercury
REIT ...................... Morgan Stanley
International Value ....... Morgan Stanley
Government Securities ..... PIMCO
Managed Bond .............. PIMCO
Money Market .............. Pacific Life
High Yield Bond ........... Pacific Life
Large-Cap Value ........... Salomon
Fixed ..................... Pacific Life
12. REBALANCING: If no date is chosen, rebalancing will occur on the first
business day of the frequency selected and every period thereafter. Actual
start date may occur after date elected. The Fixed Option may not be
rebalanced. Additional purchase payments to accounts other than those
selected on this application will not be rebalanced. To change allocations,
complete a Transfer and Allocations form.
13. SPECIAL REQUESTS: Use this section to indicate special registrations and
other instructions.
14. ANNUITY DATE (Annuity Start Date): Annuity start date cannot be prior to
first contract anniversary. For non-qualified contracts, if no date is
chosen, annuity date is the annuitant's 95th birthday. For qualified
contracts, if no date is chosen, annuity date is the following April 1 of
the year after the year in which the annuitant reaches age 70 1/2.
15. PRE-AUTHORIZED CHECKING FOR ADDITIONAL PURCHASE PAYMENTS: Initial minimum
purchase may be met over maximum of 12 months. The first purchase payment
must accompany this application. Monthly non-qualified contract minimum
$800; qualified contract minimum $250.
16. TRANSFERS: Contract must be issued for 30 days. Actual start date may occur
after date elected. Minimum source account value $500. 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.
17. PRE-AUTHORIZED WITHDRAWALS: Contract must be issued for 30 days. Actual
start date may occur after date elected. Minimum withdrawal $250. Annual
percentage will be divided by the frequency selected. Payment will be
reduced by any taxes if withholding is applicable, and will be taken from
all investment options if none is selected. Withdrawals may be taken from
qualified contracts if allowed by the plan.
18. STATEMENT OF APPLICANT: Please read this section carefully. All information
and signatures MUST be completed.
19. AGENT'S STATEMENT: Your agent must fully complete and sign this section.
20. MAILING INSTRUCTIONS: Send this completed application as follows:
APPLICATIONS WITH PAYMENT: APPLICATIONS WITHOUT PAYMENT:
AND/OR ADDITIONAL PAYMENTS: REGULAR MAIL:
PACIFIC LIFE INSURANCE COMPANY PACIFIC LIFE INSURANCE COMPANY
P.O. Box 100060 P.O. Box 7187
Pasadena, CA 91189-0060 Pasadena, CA 91109-7187
EXPRESS MAIL DELIVERY: EXPRESS MAIL DELIVERY:
PACIFIC LIFE INSURANCE COMPANY PACIFIC LIFE INSURANCE COMPANY
C/O FCNPC 1111 S. Arroyo Parkway, Ste. 205
1111 S. Arroyo Parkway, Ste. 150 Pasadena, CA 91105
Pasadena, CA 91105
www.PacificLife.com
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[LOGO]
Pacific Life Insurance Company
P.O. Box 7187 Pasadena, CA 91109-7187 PACIFIC INNOVATIONS
www.PacificLife.com
(800)722-2333 (See instructions for mailing addresses) VARIABLE ANNUITY APPLICATION
PLEASE TYPE or PRINT. See instructions to assist you in completing this application.
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1. ANNUITANT Name (FIRST, MIDDLE INITIAL, LAST) Birth Date (MO/DAY/YR) Phone Number
__/__/____ ( )
-------------------------------------------------------------------------------------------------------------------------------
Street Address (NUMBER, STREET NAME AND APARTMENT OR UNIT NUMBER) E-Mail Address Sex
/ / M / / F
-------------------------------------------------------------------------------------------------------------------------------
City, State & ZIP Code SSN/TIN
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L ADDITIONAL ANNUITANT COMPLETE THIS SECTION TO NAME ADDITIONAL ANNUITANT. NOT APPLICABLE FOR QUALIFIED CONTRACTS.
A CHECK ONE / / JOINT / / CONTINGENT
N Name (FIRST, MIDDLE INITIAL, LAST) Birth Date (MO/DAY/YR)
O __/__/____
I -------------------------------------------------------------------------------------------------------------------------------
T Street Address (NUMBER, STREET NAME AND APARTMENT OR UNIT NUMBER) E-Mail Address Sex
P / / M / / F
O -------------------------------------------------------------------------------------------------------------------------------
City, State & ZIP Code SSN/TIN
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2. IF OWNER(S) AND ANNUITANT(S) ARE THE SAME, IT IS NOT NECESSARY TO COMPLETE SECTION 2. IF TRUST IS OWNER, ALSO COMPLETE TRUST
CERTIFICATION FORM.
OWNER Name (FIRST, MIDDLE INITIAL, LAST) Birth Date (MO/DAY/YR) Phone Number
__/__/____ ( )
-------------------------------------------------------------------------------------------------------------------------------
Street Address (NUMBER, STREET NAME AND APARTMENT OR UNIT NUMBER) E-Mail Address Sex
/ / M / / F
-------------------------------------------------------------------------------------------------------------------------------
City, State & ZIP Code SSN/TIN
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L ADDITIONAL OWNER Name (FIRST, MIDDLE INITIAL, LAST) NOT APPLICABLE FOR QUALIFIED CONTRACTS.
A CHECK ONE / / Joint / / Contingent Birth Date (MO/DAY/YR)
N __/__/____
O -------------------------------------------------------------------------------------------------------------------------------
I Street Address (NUMBER, STREET NAME AND APARTMENT OR UNIT NUMBER) E-Mail Address Sex
T / / M / / F
P -------------------------------------------------------------------------------------------------------------------------------
O City, State & ZIP Code SSN/TIN
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3. BENEFICIARY Name (FIRST, MIDDLE INITIAL, LAST) IF NO BOXES ARE CHECKED, DEFAULT WILL BE JOINT PRIMARY BENEFICIARIES
Select One / / Primary / / Contingent
-------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL BENEFICIARY Name (FIRST, MIDDLE INITIAL, LAST) USE SPECIAL REQUESTS SECTION TO PROVIDE ADDITIONAL BENEFICIARIES OR
BENEFICIARY INFORMATION.
Select One / / Primary / / Contingent
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4. CONTRACT TYPE SECLECT ONE.
/ / Non-Qualified / / SIMPLE IRA / / Custodial Held IRA / / 457
/ / Conduit IRA / / SEP-IRA / / 401(a)Pension* / / Keogh/HR10
/ / IRA / / Contributory Roth IRA / / 401(k)* / / TSA/403(b)
/ / Conversion Roth IRA __/__/____ *ALSO COMPLETE QUALIFIED PLAN CERTIFCATION FORM.
COMPLETE ROTH/SIMPLE FORM IF THE SIMPLE IRA BOX IS CHECKED.
QUALIFIED CONTRACT PAYMENT TYPE IF NO YEAR IS
INDICATED, CONTRIBUTION DEFAULTS TO CURRENT TAX YEAR.
/ / Transfer ..........$____________________
/ / Rollover ..........$____________________
/ / Contribution.......$____________________ for tax year_______
$____________________ for tax year_______
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5. ISSUE STATE ABBREVIATE STATE 6. INITIAL PURCHASE PAYMENT INDICATE THE FORM OF INITIAL PAYMENT.
NAME WHERE APPLICATION IS SIGNED. __ __ / / 1035 exchange/est transfer $___________ / / Amt. enclosed $__________
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7. REPLACEMENT Will any existing life insurance or annuity be (or has it been) surrendered, withdrawn from, loaned against,
changed or otherwise reduced in value, or replaced in connection with this transaction, assuming the contract applied for will
be issued?
/ / Yes / / No IF YES, PROVIDE THE INFORMATION BELOW AND ATTACH ANY REQUIRED STATE REPLACEMENT AND/OR 1035 EXCHANGE/TRANSFER
FORMS. USE THE SPECIAL REQUESTS SECTION FOR ADDITIONAL INSURANCE COMPANIES AND CONTRACT NUMBERS.
Insurance Company Name Contract Number Contract Type Being Replaced
/ / Life Insurance / / Fixed Annuity / / Variable Annuity
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8. OPTIONAL DEATH BENEFIT SUBJECT TO STATE AVAILABILITY. ANNUITANT(S) MUST NOT BE OVER 70 AT ISSUE. IF AN OPTION IS NOT
SELECTED, THE STANDARD DEATH BENEFIT IS THE DEFAULT.
/ / Stepped-Up Death Benefit / / Premier Death Benefit.
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25-12600 12/99 1600-OA
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15. PRE-AUTHORIZED CHECKING (PAC) FOR ADDITIONAL PURCHASE PAYMENTS PAC AMOUNT PAC START DATE (MO/DAY/YR)
Each month deduct from my account shown on the ATTACHED VOIDED
CHECK, the amount indicated in the box at the right. PAYMENTS
WILL BE APPLIED ACCORDING TO THE ALLOCATIONS ON THIS APPLICATION _____/_____/_____
OR MORE CURRENT INSTRUCTIONS, IF ANY. TO BEGIN PAC, THE FIRST $ DEFAULT START DATE IS
MINIMUM INSTALLMENT MUST ACCOMPANY THIS APPLICATION. _____________ ONE MONTH FROM ISSUE.
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16. TRANSFERS CHOOSE ONE OF THE FOUR TRANSFER OPTIONS UNDER SECTION A. INDICATE A SINGLE SOURCE ACCOUNT AND DIFFERENT TARGET
ACCOUNTS. IF SECTION 11 IS BLANK, 100% OF PURCHASE PAYMENT WILL BE ALLOCATED TO THE SOURCE ACCOUNT BELOW.
A. DOLLAR COST AVERAGING TRANSFER AND TERM OPTIONS EARNINGS SWEEP TRANSFER OPTION
1. / / Deplete the source account in ______# of transfers 4. / / Sweep the previous period's earnings
2. / / Transfer $__________ each time for ____ years or ____ months Take from one of the following accounts
3. / / Transfer ______% annually for ____ years or ____ months / / Fixed Option / / Money Market
-------------------------------------------------------------------------------------------------------------------------------
B. TRANSFER FREQUENCY DEFAULT IS MONTHLY. C. START DATE (MO/DAY/YR) DEFAULT START DATE
IS ONE MONTH FROM ISSUE
S / / Monthly / / Quarterly / / Semi-Annually / / Annually _____/_____/_____
M -------------------------------------------------------------------------------------------------------------------------------
A D. SOURCE ACCOUNT COMPLETE IF 1, 2, OR 3 IS E. TARGET ACCOUNT MUST BE DIFFERENT THAN SOURCE ACCOUNT. INDICATE
R SELECTED ABOVE FROM SECTION A. CHOOSE ONE. SOURCE EITHER WHOLE PERCENTAGE OR DOLLAR AMOUNTS.
G ACCOUNT CANNOT BE TARGET ACCOUNT.
O / / Mid-Cap Value Aggressive Equity _____________ Mid-Cap Value _____________
R / / Aggressive Equity / / Equity Index Emerging Markets _____________ Equity Index _____________
P / / Emerging Markets / / Small-Cap Index Diversified Research _____________ Small-Cap Index _____________
/ / Diversified Research / / REIT Small-Cap Equity _____________ REIT _____________
L / / Small-Cap Equity / / Intl. Value Intl. Large-Cap _____________ Intl. Value _____________
A / / Intl. Large-Cap / / Govt. Securities Bond and Income _____________ Govt. Securities _____________
N / / Bond and Income / / Managed Bond Equity _____________ Managed Bond _____________
O / / Equity / / Money Market Multi-Strategy _____________ Money Market _____________
I / / Multi-Strategy / / High Yield Bond Equity Income _____________ High Yield Bond _____________
T / / Equity Income / / Large-Cap Value Growth LT _____________ Large-Cap Value _____________
P / / Growth LT / / Fixed
O TOTAL MUST EQUAL 100% OR FULL $ TRANSFER AMOUNT _____________
- ------------------------------------------------------------------------------------------------------------------------------------
17. PRE-AUTHORIZED WITHDRAWALS WITHDRAWAL TO BE ISSUED BY CHECK UNLESS SECTION 1 IS COMPLETED AND VOIDED CHECK ATTACHED.
A. CHOOSE ONE WITHDRAWAL OPTION B. WITHDRAWAL AMOUNT TO BE
% of contract / / Net of Charges / / Gross of charges
/ / $__________ each time / / __________ value annually DEFAULT WILL BE GROSS OF CHARGES.
AVAILABLE FOR DOLLAR AMOUNT ONLY.
-------------------------------------------------------------------------------------------------------------------------------
C. 72(t)/72(q) CHECK BOX IF WITHDRAWAL IS A D. START DATE (MO/DAY/YR) E. FREQUENCY DEFAULT IS MONTHLY.
CONTINUATION OF A SERIES OF SUBSTANTIALLY / / Monthly / / Semi-Annually
EQUAL PERIODIC PAYMENTS UNDER SECTION IRC _____/_____/_____ / / Quarterly / / Annually
/ / 72(t) OR 72(g) NOT CALCULATED BY PACIFIC LIFE. DEFAULT START DATE IS ONE
MONTH FROM ISSUE.
-------------------------------------------------------------------------------------------------------------------------------
F. DURATION ENTER EITHER THE NUMBER OF G. FEDERAL TAXES IF NOT SPECIFIED, THE MINIMUM
MONTHS OR YEARS. 10% FEDERAL TAX ON NON-QUALIFIED CONTRACTS AND / / Do Not Withhold
/ / MONTHS _________ / / YEARS _________ IRAS WILL BE WITHHELD. MANDATORY 20% ON
QUALIFIED CONTRACTS WILL BE WITHHELD. STATE / / Withhold ______%
MANDATED INCOME TAX WILL BE WITHHELD WHERE
REQUIRED BY LAW.
-------------------------------------------------------------------------------------------------------------------------------
H. SOURCE FOR DOLLAR AMOUNT WITHDRAWALS ONLY, CHOOSE ONE OR MORE SOURCES. OTHERWISE, WITHDRAWALS WILL BE TAKEN
PROPORTIONALLY FROM CURRENT ALLOCATIONS. INDICATE DOLLAR AMOUNTS THAT EQUAL THE TOTAL IN 17A.
Aggressive Equity ___________ Equity ___________ Equity Index ___________ Managed Bond ___________
Emerging Markets ___________ Multi-Strategy ___________ Small-Cap Index ___________ Money Market ___________
Diversified Research ___________ Equity Income ___________ REIT ___________ High Yield Bond ___________
Small-Cap Equity ___________ Growth LT ___________ Intl. Value ___________ Large-Cap Value ___________
Intl. Large-Cap ___________ Mid-Cap Value ___________ Govt. Securities ___________ Fixed ___________
Bond and Income ___________
-------------------------------------------------------------------------------------------------------------------------------
I. 3RD PARTY PAYEE - COMPLETE THIS SECTION ONLY IF YOU WANT THE DISTRIBUTIONS TO BE ELECTRONICALLY TRANSFERRED TO YOUR BANK
OR MAILED TO SOMEONE OTHER THAN THE OWNER. IF THE DISTRIBUTIONS ARE BEING ELECTRONICALLY TRANSFERRED TO A CHECKING ACCOUNT,
PLEASE ATTACH A VOIDED CHECK. IF ELECTRONICALLY TRANSFERRED TO A SAVINGS ACCOUNT, PLEASE ATTACH A DEPOSIT SLIP.
Name of Institution/Individual IF INDIVIDUAL, FIRST, MIDDLE, LAST NAME. Account Number
-----------------------------------------------------------------------------------------------------------------------------
Street Address (NUMBER, STREET NAME AND APARTMENT OR UNIT NUMBER)
-----------------------------------------------------------------------------------------------------------------------------
City, State & ZIP Code ABA Number FOR DIRECT DEPOSIT.
- ------------------------------------------------------------------------------------------------------------------------------------
25-12600 12/99 1600-OA
Owner's Signature Date Joint Owner's Signature IF APPLICABLE Date
- ------------------------------------------------------------------------------------------------------------------------------------
19. AGENT'S STATEMENT Do you have reason to believe that any existing life insurance or annuity has been (or will be)
surrendered, withdrawn from, loaned against, changed or otherwise reduced in value, or replaced in connection with this
transaction assuming the contract applied for will be issued?
/ / Yes / / No IF YES, EXPLAIN IN REPLACEMENT SECTION 7.
I certify that I am authorized and qualified to discuss this contract. I have explained to the applicant how the annuity
will meet their insurable needs and financial objectives. I have discussed the appropriateness of replacement, if applicable.
SIGN HERE
-------------------------------------------------------------------------------------------------------------------------------
Agent's Signature Print Agent's Full Name Agent's ID Number
( )
-------------------------------------------------------------------------------------------------------------------------------
Agent's Phone Number Agent's E-Mail Address
-------------------------------------------------------------------------------------------------------------------------------
Broker/Dealer's Name Brokerage Account Number OPTIONAL.
- ------------------------------------------------------------------------------------------------------------------------------------
25-12600 12/99 1600-OA
</TABLE>
<PAGE>
9. TELEPHONE/ELECTRONIC AUTHORIZATION I WILL RECEIVE THIS PRIVILEGE
AUTOMATICALLY. By checking "yes," I am authorizing and directing Pacific
Life to act on telephone or electronic instructions from any other
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. / / Yes
10. ELECTRONIC DELIVERY AUTHORIZATION By checking "yes," I authorize Pacific
Life to provide my statements, prospectuses and other information
electronically. I understand that I must have internet access to use this
service and there may be access fee charges by the internet service
provider. / / Yes
11. ALLOCATION OPTIONS IF REBALANCING, USE PERCENTAGES ONLY. SEE INSTRUCTIONS
FOR PORTFOLIO MANAGER NAMES.
<TABLE>
<S> <C> <C> <C>
Aggressive Equity_____________ Equity_____________ Equity Index______________ Managed Bond____________
Emerging Markets_____________ Multi-Strategy_____________ Small-Cap Index______________ Money Market____________
Diversified Research_____________ Equity Income_____________ REIT______________ High Yield Bond____________
Small-Cap Equity_____________ Growth LT_____________ Intl. Value______________ Large-Cap Value____________
Intl. Large-Cap_____________ Mid-Cap Value_____________ Govt. Securities______________ Fixed____________
Bond and Income______________ MUST EQUAL EITHER 100% OR FULL PURCHASE PAYMENT AMOUNT ____________
</TABLE>
12. REBALANCING / / Yes, rebalance the variable accounts to the allocations
indicated in Section 11.
CHOOSE ONE FREQUENCY. DEFAULT IS QUARTERLY.
/ / Quarterly / / Semi-Annually / / Annually
Start Date (MO/DAY/YR) DEFAULT IS FIRST BUSINESS DAY OF FREQUENCY SELECTED.
__/__/____
13. SPECIAL REQUESTS IF ADDITIONAL SPACE IS NEEDED, ATTACH LETTER SIGNED AND
DATED BY OWNER(S).
14. ANNUITY START DATE CONTRACT WILL ANNUITIZE ON THIS DATE. START DATE CANNOT
BE PRIOR TO THE FIRST CONTRACT ANNIVERSARY. IF NO DATE IS CHOSEN, ANNUITY
START DATE IS THE MAXIMUM DEFERRAL AGE LISTED IN YOUR CONTRACT.
Annuity Start Date (MO/DAY/YR)
__/__/____
18. 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. Any portion of this contract
allocated to one or more of the variable investment options is not covered
by an insurance guaranty fund or other solvency protection arrangement
because that portion of this contract is held in a separate account under
which the risk is borne by the policyholder.
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.
______________________________ __________________________________________
Signed at City State Where Application Signed
_________________ _______ _____________________________________ _______
Owner's Signature Date Joint Owner's Signature IF APPLICABLE Date
19. AGENT'S STATEMENT Do you have reason to believe that any existing life
insurance or annuity has been (or will be) surrendered, withdrawn from,
loaned against, changed or otherwise reduced in value, or replaced in
connection with this transaction assuming the contract applied for will be
issued?
/ / Yes / / No IF YES, EXPLAIN IN REPLACEMENT SECTION 7.
I certify that I am authorized and qualified to discuss this contract. I
have explained to the applicant how the annuity will meet their insurable
needs and financial objectives. I have discussed the appropriateness of
replacement, if applicable.
______________________ __________________________ ______________________
Agent's Signature Print Agent's Full Name Agent's ID Number
( )
_________________________________ ______________________________________
Agent's Phone Number Agent's E-Mail Address
_________________________________ ______________________________________
Broker/Dealer's Name Brokerage Account Number OPTIONAL
<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.
<TABLE>
<S><C>
PRODUCT:
[_] PSVA (Select) [_] Pacific One [_] Pacific Portfolios [_] Pacific Value [_] Pacific Innovations
- -------------------------------------------------------------------------------------------------------------
[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
- -------------------------------------------------------------------------------------------------------------
<PAGE>
CONTRACT TYPE Select one. For SIMPLE IRA, IRA Contribution
write employer name, address and phone
number in Special Remark 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
- -------------------------------------------------------------------------------------------------------------
[9] ALLOCATION OPTIONS Growth LT ___ Emerging Markets ___ Additional Options ___
Allocate payment of Fixed ___ Equity Income ___ [xxxxxxxxxx] ___ FOR PORTFOLIOS ONLY
the amount shown Money Market ___ Multi-Strategy ___ [xxxxxxxxxx] ___
below. Allocations High Yield Bond ___ Equity ___ [xxxxxxxxxx] ___ 3-year GIO ____
must total 100% or Managed Bond ___ Bond & Income ___ [xxxxxxxxxx] ___ 6-year GIO ____
equal total premium Govt. Securities ___ Equity Index ___ [xxxxxxxxxx] ___ 10-year GIO ____
invested. Aggressive Equity ___ International ___ DCA Plus ____
$
- -------------------------------------------------------------------------------------------------------------
[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.
Money Market ___ Aggressive Annuity ___ Equity ___ Emerging Markets ___ [xxxxxxxxxx] ___
High Yield Bond ___ Growth LT ___ Bond & Income ___ [xxxxxxxxxx] ___ [xxxxxxxxxx] ___
Managed Bond ___ Equity Income ___ Equity Index ___ [xxxxxxxxxx] ___ [xxxxxxxxxx] ___
Govt. Securities ___ Multi-Strategy ___ International ___ [xxxxxxxxxx] ___
- -------------------------------------------------------------------------------------------------------------
[12] DEALER INFORMATION SS# Broker/Dealer Name
Registered Representative Name
- -------------------------------------------------------------------------------------------------------------
[13] COMMISSION OPTIONS Check one option for product sold.
PSVA (SELECT) PACIFIC ONE PACIFIC PORTFOLIOS PACIFIC VALUE
Upfront, Ann. Trail Upfront, Ann. Trail Upfront, Ann. Trail Upfront, Ann. Trail
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+
- -------------------------------------------------------------------------------------------------------------
[14] SPECIAL REMARKS
- -------------------------------------------------------------------------------------------------------------
PACP 8/98 [BAR CODE]
</TABLE>
<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] [_FNDALL01] [FNDAM01]
[A1ML2] [_FNDALL02] [FNDAM02]
[A1ML3] [_FNDALL03] [FNDAM03]
[A1SSN] [A1DOB] [A1SEX] [_FNDALL04] [FNDAM04]
[_FNDALL05] [FNDAM05]
- ---------------------------------- [_FNDALL06] [FNDAM06]
Joint/Contingent: [_FNDALL07] [FNDAM07]
[AXNAM] [_FNDALL08] [FNDAM08]
[AXML1] [_FNDALL09] [FNDAM09]
[ASML2] [_FNDALL10] [FNDAM10]
[AXML3] [_FNDALL11] [FNDAM11]
[AXSSN] [AXDOB] [AXSEX] [_FNDALL12] [FNDAM12]
[_FNDALL13] [FNDAM13]
- ---------------------------------- [_FNDALL14] [FNDAM14]
OWNER(S): [_FNDALL15] [FNDAM15]
[O1NAM] [_FNDALL16] [FNDAM16]
[0ML2] [_FNDALL17] [FNDAM17]
[0ML3] [_FNDALL18] [FNDAM18]
[0ML4] [_FNDALL19] [FNDAM19]
[0ML5]
[01SSN] [01DOB] [01SEX]
- ----------------------------------
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 a claim, liability,
logo 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 parpose 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
<S> <C> <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>
<S> <C> <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
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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.
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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
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PACIFIC LIFE INSURANCE COMPANY
BYLAWS
As Amended May 26, 1999
<PAGE>
TABLE OF CONTENTS
Page
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
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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
ii
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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.
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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 shareholders holding ten percent
(10%) or more of the voting power of the corporation. [Cal. Corp. Code Sections
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.
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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 Section 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.
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(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 five (5) nor more than nine (9) directors. (Amended 5/26/99)
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 Section 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.
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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 Section 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
Section 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.
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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 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.
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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 Section 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 Section 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
Section 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.
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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.
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.
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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 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.
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SECTION 4. TRANSFER AGENTS AND REGISTRARS. The board of directors may
appoint one or more transfer agents or transfer clerks, and one or more
registrars, which shall be an incorporated bank or trust company -- either
domestic or foreign, who shall be appointed at such times and places as the
requirements of the corporation may necessitate and the board of directors may
designate.
SECTION 5. CLOSING STOCK TRANSFER BOOKS. The board of directors may close
the transfer books in their discretion for a period not exceeding thirty (30)
days preceding any meeting, annual or special, of the shareholders, or the day
appointed for the payment of a dividend.
Article 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 Section 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 Section 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
Section 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.
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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 number of directors, may be adopted, amended, or
repealed by the board of directors. [Cal. Corp. Code Section 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 Sections 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 Sections 204(a)(11), 317]
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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
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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
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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
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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
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<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
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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
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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
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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.
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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
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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
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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>
[LETTERHEAD OF PACIFIC LIFE]
DAVID R. CARMICHAEL
Senior Vice President
General Counsel
Law Department
(949) 219-3326 TELEPHONE
(949) 219-3706 FACSIMILE
[email protected]
December 17, 1999
Pacific Life Insurance Company
700 Newport Center Drive
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 Innovations
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
Innovations 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 Innovations 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,
David R. Carmichael
Senior Vice President and General Counsel
<PAGE>
EXHIBIT 99.10(a)
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in this Registration Statement on Form N-4 of Separate
Account A of Pacific Life Insurance Company of our report dated February 22,
1999, related to the consolidated financial statements of Pacific Life
Insurance Company and subsidiaries as of December 31, 1998 and 1997, and for
each of the three years in the period ended December 31, 1998, appearing in
the Statement of Additional Information of Pacific Innovations, which is part
of such Registration Statement; and to the incorporation by reference of our
report dated February 5, 1999, related to the financial statements of
Separate Account A of Pacific Life Insurance Company as of December 31, 1998,
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, 1998.
We also consent to the references to us under the heading "Financial
Statements" appearing in such Statement of Additional Information and under
the heading "Financial Highlights" appearing in the Prospectus.
/s/ DELOITTE & TOUCHE LLP
Costa Mesa, California
December 17, 1999
<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>
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 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, 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: April 12, 9999 /s/ Gerald W. Robinson
------------------------------ -------------------------
Gerald W. Robinson
Executive Vice President
<PAGE>
Exhibit 99.13
Performance Calculations
<PAGE>
EXHIBIT 99.13
- --------------------------------------------------------------------------------
PACIFIC INNOVATIONS VARIABLE ANNUITY SEPARATE ACCOUNT
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
AVERAGE INITIAL PREMIUM = $65,000.
- --------------------------------------------------------------------------------
LAST YEAR ENDING 12/31/98
<TABLE>
<CAPTION>
[Diversified Growth [Small [International Bond &
Aggsv Eqty Emerg Mkts Research] Cap Equity] Large Cap] Income Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date 12/31/97 12/31/97 N/A 12/31/97 N/A 12/31/97 12/31/97
Beginning AUV 10.921505 9.281881 15.618726 11.231117 14.676255
End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
Ending AUV 12.193538 6.69746 15.816432 12.068716 18.854959
Annual Fee (none) $ - $ - $ - $ - $ -
CDSC $ 81.00 $ 81.00 $ 81.00 $ 81.00 $ 81.00
Ending ERV 1,035.47 $ 640.56 $ 931.66 $ 993.58 $ 1,203.73
AATR W/Drawal 3.55% -35.94% -6.83% -0.64% 20.37%
AATR Account 11.65% -27.84% 1.27% 7.46% 28.47%
<CAPTION>
Mid-Cap Small-Cap REIT
Multi-Strat Equity Income Growth LT Value Equity Index Index
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date 12/31/97 12/31/97 12/31/97 N/A 12/31/97 N/A N/A
Beginning AUV 13.014333 14.783078 12.707541 15.692570
End Date 12/31/98 12/31/98 12/31/98 12/31/98
Ending AUV 15.16588 18.102886 19.835315 19.877336
Annual Fee (none) $ - $ - $ - $ -
CDSC $ 81.00 $ 81.00 $ 81.00 $ 81.00
Ending ERV $ 1,084.32 $ 1,143.57 $ 1,479.91 $ 1,185.67
AATR W/Drawal 8.43% 14.36% 47.99% 18.57%
AATR Account 16.53% 22.46% 56.09% 26.67%
<CAPTION>
International Large-Cap
[Value] Govt Secty Mgd Bond Money Mkt High Yield Value
<S> <C> <C> <C> <C> <C> <C>
Start Date 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 N/A
Beginning AUV 12.762569 10.951870 11.137453 10.751784 11.829870
End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
Ending AUV 13.289721 11.797236 11.993331 11.163639 11.952791
Annual Fee (none) $ - $ - $ - $ - $ -
CDSC $ 81.00 $ 81.00 $ 81.00 $ 81.00 $ 81.00
Ending ERV $ 960.30 $ 996.19 $ 995.85 $ 957.31 $ 929.39
AATR W/Drawal -3.97% -0.38% -0.42% -4.27% -7.06%
AATR Account 4.13% 7.72% 7.68% 3.83% 1.04%
</TABLE>
DOLLAR VALUES ARE PER $1000 OF INITIAL PREMIUM
AVERAGE ANNUAL TOTAL RETURN (AATR) OF SURRENDER VALUE = [(ERV/$1000)]-1
<PAGE>
- --------------------------------------------------------------------------------
PACIFIC INNOVATIONS VARIABLE ANNUITY SEPARATE ACCOUNT
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
AVERAGE INITIAL PREMIUM = $65,000.
- --------------------------------------------------------------------------------
LAST 3 YEARS ENDING 12/31/98
<TABLE>
<CAPTION>
[Diversified Growth [Small [International Bond &
Aggsv Eqty Emerg Mkts Research] Cap Equity] Large Cap] Income Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date N/A N/A N/A 12/29/95 N/A 12/29/95 12/29/95
Beginning AUV 9.974120 10.010532 9.975743
End Date 12/31/98 12/31/98 12/31/98
Ending AUV 15.816432 12.068716 18.854959
Annual Fee (none) $ - $ - $ -
CDSC $ 72.00 $ 72.00 $ 72.00
Ending ERV $ 1,513.75 $ 1,133.60 $ 1,818.08
AAR W/Drawal 14.82% 4.27% 22.05%
AAR Account 16.61% 6.43% 23.64%
<CAPTION>
Mid-Cap Small-Cap REIT
Multi-Strat Equity Income Growth LT Value Equity Index Index
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date 12/29/95 12/29/95 12/29/95 N/A 12/29/95 N/A N/A
Beginning AUV 9.940604 9.898959 9.992945 9.920654
End Date 12/31/98 12/31/98 12/31/98 12/31/98
Ending AUV 15.16588 18.102886 19.835315 19.877336
Annual Fee (none) $ - $ - $ - $ -
CDSC $ 72.00 $ 72.00 $ 72.00 $ 72.00
Ending ERV $ 1,453.65 $ 1,756.77 $ 1,912.93 $ 1,931.63
AAR W/Drawal 13.28% 20.66% 24.14% 24.54%
AAR Account 15.12% 22.29% 25.67% 26.07%
<CAPTION>
International Large-Cap
[Value] Govt Secty Mgd Bond Money Mkt High Yield Value
<S> <C> <C> <C> <C> <C> <C>
Start Date 12/29/95 12/29/95 12/29/95 12/29/95 12/29/95 N/A
Beginning AUV 9.854125 9.993905 9.995276 9.995846 9.987722
End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
Ending AUV 13.289721 11.797236 11.993331 11.163639 11.952791
Annual Fee (none) $ - $ - $ - $ - $ -
CDSC $ 72.00 $ 72.00 $ 72.00 $ 72.00 $ 72.00
Ending ERV $ 1,276.65 $ 1,108.44 $ 1,127.90 $ 1,044.83 $ 1,124.75
AAR W/Drawal 8.48% 3.49% 4.09% 1.47% 4.00%
AAR Account 10.48% 5.69% 6.26% 3.75% 6.17%
</TABLE>
DOLLAR VALUES ARE PER $1000 OF INITIAL PREMIUM
AVERAGE ANNUAL RETURN (AAR) OF SURRENDER VALUE
= [(ERV/$1000)^(To the power of 1/3)]-1
<PAGE>
- --------------------------------------------------------------------------------
PACIFIC INNOVATIONS VARIABLE ANNUITY SEPARATE ACCOUNT
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
AVERAGE INITIAL PREMIUM = $65,000.
- --------------------------------------------------------------------------------
LAST 5 YEARS ENDING 12/31/98
<TABLE>
<CAPTION>
[Diversified Growth [Small [International Bond &
Aggsv Eqty Emerg Mkts Research] Cap Equity] Large Cap] Income Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date N/A N/A N/A 12/31/93 N/A 12/31/93 12/31/93
Beginning AUV 9.087143 8.401809 8.531330
End Date 12/31/98 12/31/98 12/31/98
Ending AUV 15.816432 12.068716 18.854959
Annual Fee (none) $ - $ - $ -
CDSC $ 0.00 $ 0.00 $ 0.00
Ending ERV $ 1,740.53 $ 1,436.44 $ 2,210.08
AAR W/Drawal 11.72% 7.51% 17.19%
AAR Account 11.72% 7.51% 17.19%
<CAPTION>
Mid-Cap Small-Cap REIT
Multi-Strat Equity Income Growth LT Value Equity Index Index
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date 12/31/93 12/31/93 N/A N/A 12/31/93 N/A N/A
Beginning AUV 8.285226 7.753453 7.373274
End Date 12/31/98 12/31/98 12/31/98
Ending AUV 15.16588 18.102886 19.877336
Annual Fee (none) $ - $ - $ -
CDSC $ 0.00 $ 0.00 $ 0.00
Ending ERV $ 1,830.47 $ 2,334.82 $ 2,695.86
AAR W/Drawal 12.85% 18.48% 21.94%
AAR Account 12.85% 18.48% 21.94%
<CAPTION>
International Large-Cap
[Value] Govt Secty Mgd Bond Money Mkt High Yield Value
<S> <C> <C> <C> <C> <C> <C>
Start Date 12/31/93 12/31/93 12/31/93 12/31/93 12/31/93 N/A
Beginning AUV 8.912374 9.114697 9.027726 9.385727 8.604053
End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
Ending AUV 13.289721 11.797236 11.993331 11.163639 11.952791
Annual Fee (none) $ - $ - $ - $ - $ -
CDSC $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Ending ERV $ 1,491.15 $ 1,294.31 $ 1,328.50 $ 1,189.43 $ 1,389.20
AAR W/Drawal 8.32% 5.29% 5.85% 3.53% 6.80%
AAR Account 8.32% 5.29% 5.85% 3.53% 6.80%
</TABLE>
DOLLAR VALUES ARE PER $1000 OF INITIAL PREMIUM
AVERAGE ANNUAL RETURN (AAR) OF SURRENDER VALUE
= [(ERV/$1000)^(To the power of 1/5)]-1
<PAGE>
- --------------------------------------------------------------------------------
PACIFIC INNOVATIONS VARIABLE ANNUITY SEPARATE ACCOUNT
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
AVERAGE INITIAL PREMIUM = $65,000.
- --------------------------------------------------------------------------------
LAST 10 YEARS ENDING 12/31/98
<TABLE>
<CAPTION>
[Diversified Growth [Small [International Bond &
Aggsv Eqty Emerg Mkts Research] Cap Equity] Large Cap] Income Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date N/A N/A N/A 12/30/88 N/A 12/30/88 12/30/88
Beginning AUV 4.232050 4.647387 4.507096
End Date 12/31/98 12/31/98 12/31/98
Ending AUV 15.816432 12.068716 18.854959
Annual Fee (none) $ - $ - $ -
CDSC $ 0.00 $ 0.00 $ 0.00
Ending ERV $ 3,737.30 $ 2,596.88 $ 4,183.39
AAR W/Drawal 14.09% 10.01% 15.39%
AAR Account 14.09% 10.01% 15.39%
<CAPTION>
Mid-Cap Small-Cap REIT
Multi-Strat Equity Income Growth LT Value Equity Index Index
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date 12/30/88 12/30/88 N/A N/A N/A N/A N/A
Beginning AUV 5.109905 4.642377
End Date 12/31/98 12/31/98
Ending AUV 15.16588 18.102886
Annual Fee (none) $ - $ -
CDSC $ 0.00 $ 0.00
Ending ERV $ 2,967.94 $ 3,899.49
AAR W/Drawal 11.49% 14.58%
AAR Account 11.49% 14.58%
<CAPTION>
International Large-Cap
[Value] Govt Secty Mgd Bond Money Mkt High Yield Value
<S> <C> <C> <C> <C> <C> <C>
Start Date 12/30/88 12/30/88 12/30/88 12/30/88 12/30/88 N/A
Beginning AUV 7.018895 5.689768 5.476500 7.663010 5.060288
End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
Ending AUV 13.289721 11.797236 11.993331 11.163639 11.952791
Annual Fee (none) $ - $ - $ - $ - $ -
CDSC $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Ending ERV $ 1,893.42 $ 2,073.41 $ 2,189.96 $ 1,456.82 $ 2,362.08
AAR W/Drawal 6.59% 7.56% 8.15% 3.83% 8.98%
AAR Account 6.59% 7.56% 8.15% 3.83% 8.98%
</TABLE>
DOLLAR VALUES ARE PER $1000 OF INITIAL PREMIUM
AVERAGE ANNUAL RETURN (AAR) OF SURRENDER VALUE
= [(ERV/$1000)^(To the power of 1/10)]-1
<PAGE>
- --------------------------------------------------------------------------------
PACIFIC INNOVATIONS VARIABLE ANNUITY SEPARATE ACCOUNT
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
AVERAGE INITIAL PREMIUM = $65,000.
- --------------------------------------------------------------------------------
FROM INCEPTION OF FUND
<TABLE>
<CAPTION>
[Diversified Growth [Small [International Bond &
Aggsv Eqty Emerg Mkts Research] Cap Equity] Large Cap] Income Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date 4/1/96 4/1/96 N/A 1/4/88 N/A 1/3/84 1/3/84
Beginning AUV 9.272359 10.224821 3.715777 2.629096 2.515479
End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
Ending AUV 12.193538 6.697460 15.81643 12.068716 18.854959
Days 1004 1004 4014 5476 5476
Annual Fee (none) $ - $ - $ - $ - $ -
CDSC $ 72.00 $ 72.00 $ - $ - $ -
Ending ERV $ 1,147.35 $ 597.75 $ 4,256.56 $ 4,590.44 $ 7,495.57
AAR W/Drawal 5.12% -17.06% 14.08% 10.69% 14.37%
AAR Account 7.48% -13.56% 14.08% 10.69% 14.37%
<CAPTION>
Mid-Cap Small-Cap REIT
Multi-Strat Equity Income Growth LT Value Equity Index Index
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date 1/4/88 1/4/88 1/3/94 N/A 1/30/91 N/A N/A
Beginning AUV 4.848630 4.348104 6.634056 5.257292
End Date 12/31/98 12/31/98 12/31/98 12/31/98
Ending AUV 15.16588 18.102886 19.835315 19.877336
Days 4014 4014 1823 2892
Annual Fee (none) $ - $ - $ - $ -
CDSC $ - $ - $ - $ -
Ending ERV $ 3,127.87 $ 4,163.40 $ 2,989.92 $ 3,780.91
AAR W/Drawal 10.93% 13.85% 24.52% 18.28%
AAR Account 10.93% 13.85% 24.52% 18.28%
<CAPTION>
International Large-Cap
[Value] Govt Secty Mgd Bond Money Mkt High Yield Value
<S> <C> <C> <C> <C> <C> <C>
Start Date 1/4/88 1/4/88 1/4/88 1/4/88 1/4/88 N/A
Beginning AUV 6.046630 5.409269 5.184201 7.340021 4.737509
End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
Ending AUV 13.289721 11.797236 11.993331 11.163639 11.952791
Days 4014 4014 4014 4014 4014
Annual Fee (none) $ - $ - $ - $ - $ -
CDSC $ - $ - $ - $ - $ -
Ending ERV $ 2,197.87 $ 2,180.93 $ 2,313.44 $ 1,520.93 $ 2,523.01
AAR W/Drawal 7.42% 7.35% 7.93% 3.89% 8.78%
AAR Account 7.42% 7.35% 7.93% 3.89% 8.78%
</TABLE>
DOLLAR VALUES ARE PER $1000 OF INITIAL PREMIUM
AVERAGE ANNUAL RETURN (AAR) OF SURRENDER VALUE
= [(ERV/$1000)^(to the power of 365/# DAYS)]-1
<PAGE>
- --------------------------------------------------------------------------------
PACIFIC INNOVATIONS VARIABLE ANNUITY SEPARATE ACCOUNT
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
AVERAGE INITIAL PREMIUM = $65,000.
- --------------------------------------------------------------------------------
FROM INCEPTION OF SEPARATE ACCOUNT
<TABLE>
<CAPTION>
[Diversified Growth [Small [International Bond &
Aggsv Eqty Emerg Mkts Research] Cap Equity] Large Cap] Income Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date 4/17/96 4/17/96 N/A 1/2/96 N/A 1/2/96 1/2/96
Beginning AUV 9.908720 10.102463 10.000000 10.000000 10.000000
End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
Ending AUV 12.193538 6.697460 15.816432 12.068716 18.854959
Days 988 988 1094 1094 1094
Annual Fee (none) $ - $ - $ - $ - $ -
CDSC $ 72.00 $ 72.00 $ 72.00 $ 72.00 $ 72.00
Ending ERV $ 1,158.59 $ 590.95 $ 1,509.64 $ 1,134.87 $ 1,813.50
AAR W/Drawal 5.59% -17.66% 14.73% 4.31% 21.97%
AAR Account 7.97% -14.09% 16.53% 6.47% 23.56%
<CAPTION>
Mid-Cap Small-Cap REIT
Multi-Strat Equity Income Growth LT Value Equity Index Index
<S> <C> <C> <C> <C> <C> <C> <C>
Start Date 1/2/96 1/2/96 1/2/96 N/A 1/2/96 N/A N/A
Beginning AUV 10.000000 10.000000 10.000000 10.000000
End Date 12/31/98 12/31/98 12/31/98 12/31/98
Ending AUV 15.16588 18.102886 19.835315 19.877336
Days 1094 1094 1094 1094
Annual Fee (none) $ - $ - $ - $ -
CDSC $ 72.00 $ 72.00 $ 72.00 $ 72.00
Ending ERV $ 1,444.59 $ 1,738.29 $ 1,911.53 $ 1,915.73
AAR W/Drawal 13.06% 20.26% 24.13% 24.22%
AAR Account 14.91% 21.90% 25.67% 25.76%
<CAPTION>
International Large-Cap
[Value] Govt Secty Mgd Bond Money Mkt High Yield Value
<S> <C> <C> <C> <C> <C> <C>
Start Date 1/2/96 1/2/96 1/2/96 1/2/96 1/2/96 N/A
Beginning AUV 10.000000 10.000000 10.000000 10.000000 10.000000
End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
Ending AUV 13.289721 11.797236 11.993331 11.163639 11.952791
Days 1094 1094 1094 1094 1094
Annual Fee (none) $ - $ - $ - $ - $ -
CDSC $ 72.00 $ 72.00 $ 72.00 $ 72.00 $ 72.00
Ending ERV $ 1,256.97 $ 1,107.72 $ 1,127.33 $ 1,044.36 $ 1,123.28
AAR W/Drawal 7.93% 3.47% 4.08% 1.46% 3.95%
AAR Account 9.95% 5.67% 6.25% 3.74% 6.13%
</TABLE>
DOLLAR VALUES ARE PER $1000 OF INITIAL PREMIUM
AVERAGE ANNUAL RETURN (AAR) OF SURRENDER VALUE
= [(ERV/$1000)^(To the power of 365/# DAYS)]-1
