-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EGZ8JNw7NwJAJ1HOKE2y7kg88EDQW8GjYRb0Is6WJ6yxJZmIJWJw0KfK2moPRSwS pduM0PUl72XshlCCUB1MZw== 0000898430-95-002620.txt : 19951215 0000898430-95-002620.hdr.sgml : 19951215 ACCESSION NUMBER: 0000898430-95-002620 CONFORMED SUBMISSION TYPE: N-4/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19951213 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEPARATE ACCOUNT A OF PACIFIC MUTUAL LIFE INS CO CENTRAL INDEX KEY: 0000935823 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: N-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-88458 FILM NUMBER: 95601455 FILING VALUES: FORM TYPE: N-4/A SEC ACT: 1940 Act SEC FILE NUMBER: 811-08946 FILM NUMBER: 95601456 BUSINESS ADDRESS: STREET 1: P O BOX 7500 CITY: NEWPORT BEACH STATE: CA ZIP: 92658-7500 BUSINESS PHONE: 7146403743 MAIL ADDRESS: STREET 1: P O BOX 7500 CITY: NEWPORT BEACH STATE: CA ZIP: 92658-7500 N-4/A 1 FORM N-4/A As filed with the Securities and Exchange Commission on December 13, 1995 Registration No. 33-88458 811-8946 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-4/A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_] Pre-Effective Amendment No. 2 [X] Post Effective Amendment No. [_] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_] Amendment No. 2 [X] (Check appropriate box or boxes) SEPARATE ACCOUNT A (Exact Name of Registrant) PACIFIC MUTUAL LIFE INSURANCE COMPANY (Name of Depositor) 700 Newport Center Drive, Newport Beach, California 92660 (Address of Depositor's Principal Executive Offices)(Zip Code) (714) 640-3743 (Depositor's Telephone Number, including Area Code) Diane N. Ledger Assistant Vice President Pacific Mutual Life Insurance Company 700 Newport Center Drive Newport Beach, California 92660 (Name and address of agent for service) Copies of all communications to: John F. Hartigan, Esq. James B. Kimmel, Esq. Morgan, Lewis & Bockius Morgan, Lewis & Bockius 801 South Grand Avenue 2000 One Logan Square Los Angeles, CA 90017-4615 Philadelphia, PA 19103-6993 Approximate Date of Commencement of Proposed Public Offering: As soon as practical after the effective date of the Registration Statement. Title of securities being registered: interests in individual flexible premium variable annuity contracts. DECLARATION PURSUANT TO RULE 24f-2 Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of 1940, the Registrant hereby declares that an indefinite number or amount of securities is hereby being registered under the Securities Act of 1933. This registration statement shall hereafter become effective in accordance with the provisions of Section 8(a) of the Securities Act of 1933. SEPARATE ACCOUNT A FORM N-4 CROSS REFERENCE SHEET PART A Item No. Prospectus Heading 1. Cover Page Cover Page 2. Definitions SPECIAL DEFINITIONS 3. Synopsis SUMMARY; FEE TABLE 4. Condensed Financial Information YOUR INVESTMENT OPTIONS--Variable Investment Option Performance; ADDITIONAL INFORMATION--Financial Statements 5. General Description of Registrant, Depositor and Portfolio Companies SUMMARY--What are My Investment Options?: PACIFIC MUTUAL AND THE SEPARATE ACCOUNT--Pacific Mutual,--Separate Account A; YOUR INVESTMENT OPTIONS--Your Variable Investment Options; ADDITIONAL INFORMATION--Voting Rights 6. Deductions SUMMARY--What Charges Will I Pay?,-- Can I Change My Investment Options?; FEE TABLE; HOW YOUR PAYMENTS ARE INVESTED-- Transfers; CHARGES, FEES AND DEDUCTIONS; WITHDRAWALS--Withdrawal Transaction Fees; ADDITIONAL INFORMATION--Sales Commissions 7. General Description of Variable Annuity Contracts SPECIAL DEFINITIONS; SUMMARY; WHY BUY A CONTRACT; PURCHASING YOUR CONTRACT--How to Apply for your Contract; HOW YOUR PAYMENTS ARE INVESTED; RETIREMENT BENEFITS AND OTHER PAYOUTS-- Annuitization, Fixed and Variable Annuities,--Annuity Periods, Your Annuity Payments,--Death Benefits; ADDITIONAL INFORMATION--Voting Rights,--Changes to Your Contract,--Changes to ALL Contracts,--Investor Inquiries and Submitting Forms and Requests,--Timing of Payments 8. Annuity Period RETIREMENT BENEFITS AND OTHER PAYOUTS 9. Death Benefit RETIREMENT BENEFITS AND OTHER PAYOUTS-- Death Benefits; WITHDRAWALS--Mandatory Distribution on Death 10. Purchases and Contract Value SUMMARY--How Do I Purchase a Contract; PURCHASING YOUR CONTRACT; HOW YOUR PAYMENTS ARE INVESTED; PACIFIC MUTUAL AND THE SEPARATE ACCOUNT--Pacific Mutual 11. Redemptions SUMMARY--Can I Withdraw My Investment?, --Can I Return My Contract?; CHARGES, FEES AND DEDUCTIONS; WITHDRAWALS; ADDITIONAL INFORMATION--Timing of Payments 12. Taxes SUMMARY; CHARGES, FEES AND DEDUCTIONS-- Premium Taxes; WITHDRAWALS--Optional Withdrawals,--Tax Consequences of Withdrawals; FEDERAL TAX STATUS 13. Legal Proceedings Not Applicable 14. Table of Contents of the Statement of Additional Information CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION PART B Item No. Statement of Additional Information Heading 15. Cover Page Cover Page 16. Table of Contents TABLE OF CONTENTS 17. General Information and History Not Applicable 18. Services Not Applicable 19. Purchase of Securities Being Offered THE CONTRACTS AND THE SEPARATE ACCOUNT-- Calculating Subaccount Unit Values,-- Systematic Transfer Programs 20. Underwriters DISTRIBUTION OF THE CONTRACTS--Pacific Equities Network 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. PROSPECTUS FOR PACIFIC ONE ISSUED BY PACIFIC MUTUAL LIFE INSURANCE COMPANY DATED , 1995 -------------- PROSPECTUS FOR PACIFIC SELECT FUND DATED , 1995 PACIFIC ONE AN INDIVIDUAL FLEXIBLE PREMIUM VARIABLE ANNUITY CONTRACT ISSUED BY PACIFIC MUTUAL LIFE INSURANCE COMPANY MAILING ADDRESS: P.O. BOX 7187 PASADENA, CALIFORNIA 91109-7187 1-800-722-2333 This Prospectus describes Pacific One (the "Contract") offered by Pacific Mutual Life Insurance Company ("Pacific Mutual"). The Contracts provide purchasers with flexibility in long-term financial planning, including planning for retirement. Contracts are available both to individuals and under certain tax-qualified retirement plans. Payout options under the Contracts include variable annuities funded through Pacific Mutual's Separate Account A (the "Separate Account") and fixed annuities funded by Pacific Mutual's General Account. Twelve Investment Options are currently available. Each of the eleven Variable Investment Options now in effect is a subaccount of the Separate Account, and provides variable returns by investing in shares of a corresponding Portfolio of Pacific Select Fund: Money Market Portfolio Multi-Strategy Portfolio High Yield Bond Portfolio Equity Portfolio Managed Bond Portfolio Bond and Income Portfolio Government Securities Portfolio Equity Index Portfolio Growth LT Portfolio International Portfolio Equity Income Portfolio A Fixed Option is also available; it provides a fixed rate of return and is funded by Pacific Mutual's General Account. THIS PROSPECTUS PROVIDES INFORMATION THAT A PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING IN A CONTRACT. IN ADDITION, THIS PROSPECTUS IS ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE PACIFIC SELECT FUND. YOU SHOULD READ BOTH OF THESE PROSPECTUSES CAREFULLY AND RETAIN THEM FOR YOUR FUTURE REFERENCE. Additional information about the Contract and the Separate Account has been filed with the Securities and Exchange Commission in a Statement of Additional Information, dated , 1995. You may obtain a free copy of the Statement of Additional Information by writing or calling Pacific Mutual. The information contained in the Statement of Additional Information is incorporated by reference into this Prospectus. The table of contents for the Statement of Additional Information appears on page 35 of this Prospectus. --------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------- THE CONTRACT IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. IT IS NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN A CONTRACT INVOLVES RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL. --------------- THE CONTRACT IS NOT AVAILABLE IN ALL STATES AND THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY JURISDICTION IN WHICH SUCH AN OFFER MAY NOT BE MADE LAWFULLY. NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE RELATED STATEMENT OF ADDITIONAL INFORMATION (OR ANY SALES LITERATURE APPROVED BY PACIFIC MUTUAL), AND ANY SUCH UNAUTHORIZED INFORMATION OR REPRESENTATION IS, IF GIVEN OR MADE, NOT TO BE RELIED UPON. DATED : , 1995 TABLE OF CONTENTS
PAGE ---- SPECIAL DEFINITIONS........................................................ 4 SUMMARY.................................................................... 7 FEE TABLE.................................................................. 8 WHY BUY A CONTRACT......................................................... 10 YOUR INVESTMENT OPTIONS.................................................... 10 Your Variable Investment Options......................................... 10 Variable Investment Option Performance................................... 12 Your Fixed Option........................................................ 12 PURCHASING YOUR CONTRACT................................................... 12 How to Apply for Your Contract........................................... 12 Making Your Purchase Payments............................................ 13 HOW YOUR PAYMENTS ARE INVESTED............................................. 13 Investing in Variable Investment Options................................. 13 When Your Investment is Effective........................................ 14 Choosing Your Investment Options......................................... 14 Transfers................................................................ 14 CHARGES, FEES AND DEDUCTIONS............................................... 15 Premium Taxes............................................................ 15 Annual Fee............................................................... 15 Waivers and Reduced Charges.............................................. 16 Mortality and Expense Risk Charge........................................ 16 Administrative Fee....................................................... 16 Expenses of Pacific Select Fund.......................................... 16 RETIREMENT BENEFITS AND OTHER PAYOUTS...................................... 17 Selecting Your Annuitant................................................. 17 Annuitization............................................................ 17 Choosing Your Annuity Date ("Annuity Start Date")........................ 17 Annuity Option........................................................... 18 Default Annuity Date and Options......................................... 19 Your Annuity Payments.................................................... 19 Age Limitations.......................................................... 20 Death Benefits........................................................... 20 WITHDRAWALS................................................................ 21 Optional Withdrawals..................................................... 21 Mandatory Distribution on Death.......................................... 22 Tax Consequences of Withdrawals.......................................... 23 Short-Term Cancellation Right ("Free Look").............................. 23 PACIFIC MUTUAL AND THE SEPARATE ACCOUNT.................................... 23 Pacific Mutual........................................................... 23 Separate Account A....................................................... 23 FEDERAL TAX STATUS......................................................... 24 Taxes Payable by Contract Owners: General Rules.......................... 25 Qualified Contracts...................................................... 26
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PAGE ---- Loans.................................................................... 27 Withholding.............................................................. 29 Impact of Federal Income Taxes........................................... 29 Taxes on Pacific Mutual.................................................. 29 ADDITIONAL INFORMATION..................................................... 30 Voting Rights............................................................ 30 Changes to Your Contract................................................. 30 Changes to ALL Contracts................................................. 31 Investor Inquiries and Submitting Forms and Requests..................... 32 Telephone Transactions................................................... 32 Timing of Payments....................................................... 33 Confirmation Statements and Other Reports to Contract Owners............. 33 Sales Commissions........................................................ 33 Financial Statements..................................................... 33 THE FIXED OPTION........................................................... 34 General Information...................................................... 34 Guarantee Terms.......................................................... 34 Withdrawals and Transfers................................................ 34 CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION........................ 35 APPENDIX A: STATE LAW VARIATIONS........................................... 36
3 SPECIAL DEFINITIONS In this Prospectus, "we," "our" and "us" refer to Pacific Mutual Life Insurance Company ("Pacific Mutual"); "you" and "your" refer to the Contract Owner. Account Value--The amount of your Contract Value allocated to a specified Subaccount or to the Fixed Option. Annual Fee--A $40 fee charged each year on your Contract Anniversary and at the time of a full withdrawal, if your Contract Value is less than $100,000 on that date. Annuitant--A person on whose life annuity payments may be determined. An Annuitant's life may also be used to determine certain increases in death benefits, and to determine the Annuity Date. A Contract may name a single ("sole") Annuitant or two ("Joint") Annuitants, and may also name a "Contingent" Annuitant. If you name Joint Annuitants or a Contingent Annuitant, "the Annuitant" means the sole surviving Annuitant, unless otherwise stated. Annuity Date--Also called the "Annuity Start Date." The date specified in your Contract for the commencement of annuity payments if your Annuitant (or Joint Annuitants) is (or are) still living and your Contract is in force. You may change your Annuity Date by notifying us as described in this Prospectus. Annuity Option--A set of characteristics of 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, upon the death of the Annuitant following the Annuity Date. Business Day--Any day on which the value of the amount invested in a Subaccount is determined. 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 Statement of Additional Information. Determinations of values are made at or about 4:00 p.m. Eastern time on each day that the New York Stock Exchange is open, provided that Pacific Mutual's offices are also open that day. Any calculation or determination of value called for on or as of any day is effected as of the end of that day. 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 before your Annuity Date. Contingent Owner--A person, named in your Contract, who may succeed to the rights of a Contract Owner of your Contract if all named Contract Owners die before your Annuity Date. Contract Anniversary--The same date, in each subsequent year, as your Contract Date. Contract Date--The date we issue your Contract. Contract Debt--As of the end of any given Business Day, the principal amount you have outstanding on any loan under your Contract, plus any accrued and unpaid interest. Loans are available only on certain Qualified Contracts. 4 Contract Owner--Generally, a person who purchases a Pacific One Contract and makes the Purchase Payments. A Contract Owner has all rights in the Contract before the Annuity Date, 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--At the end of any given Business Day, your Variable Account Value, plus your Fixed Option Value, plus the amount held in the Loan Account to secure your Contract Debt. Contract Year--A year that starts on the Contract Date or on a Contract Anniversary. Fixed Option--If you allocate all or a part of your Purchase Payments or Contract Value to the Fixed Option, such amounts are held in Pacific Mutual's General Account and receive interest at rates declared periodically, but not less than an annual rate of 3%. Fixed Option Value--The aggregate amount under your Contract in the Fixed Option. Fund--Pacific Select Fund. General Account--Pacific Mutual's General Account consists of all assets of Pacific Mutual other than those assets allocated to Separate Account A or to any of our other separate accounts. Guaranteed Interest Rate--The interest rate guaranteed, from time to time, for amounts allocated to the Fixed Option. Guarantee Term--The period during which amounts you allocate to the Fixed Option earn a Guaranteed Interest Rate. Investment Option--A Subaccount or the Fixed Option. 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. Non-Qualified Contract--A Contract other than a Qualified Contract. Portfolio--A separate series or portfolio of the Fund. Primary Annuitant--The individual, named in your Contract, the events in the life of whom are of primary importance in affecting the timing or amount of the payment under the Contract. Purchase Payment--An amount paid to Pacific Mutual by or on behalf of a Contract Owner, as consideration for the benefits provided under the Contract. Qualified Contract--A Contract that qualifies under the Code as an individual retirement annuity ("IRA"), or a Contract purchased 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, 408, 403(a), 403(b) or 457 of the Code. SEC--Securities and Exchange Commission. Separate Account A (the "Separate Account")--A separate account of Pacific Mutual registered as a unit investment trust under the Investment Company Act of 1940. 5 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, should be 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 balance in that Subaccount. The value of Subaccount Units should be 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, and also reflect charges against the Separate Account. Changes in Subaccount Annuity Unit Values also reflect an additional factor that adjusts Subaccount Annuity Unit Values to offset 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 Statement of Additional Information. 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. 6 SUMMARY This brief description is only an overview of the more significant features of your Contract. More detailed information may be found in subsequent sections of this Prospectus, in the Statement of Additional Information, and in the Contract itself. Endorsements to your Contract may contain variations from the standardized information in this Prospectus. In addition, any variations due to requirements particular to your state or jurisdiction are set forth in supplements attached to or accompanying this Prospectus. IF ANY CONTRACT ENDORSEMENTS OR SUPPLEMENTAL VARIATIONS TO THIS PROSPECTUS CONFLICT WITH OTHER INFORMATION IN THE CONTRACT FORM OR IN THIS PROSPECTUS, THE ENDORSEMENTS AND SUPPLEMENTS CONTROL YOUR CONTRACT. WHAT IS THE CONTRACT? Pacific One (the "Contract") is designed to be a long- term financial planning device, permitting you to invest on a tax-deferred basis for retirement or other long-range goals, and to receive a series of regular payments for life or a period of years. See FEDERAL TAX STATUS. HOW DO I PURCHASE A CONTRACT? You must invest at least $25,000 to buy a Contract. After this initial investment you may make additional investments but you are not required to do so. Your initial investment may be payable in automatic installments over your first Contract Year. See PURCHASING YOUR CONTRACT. WHAT ARE MY INVESTMENT OPTIONS? You select your own Investment Options. Eleven of the twelve Investment Options are Variable Investment Options available through Separate Account A. Each Variable Investment Option invests in a corresponding Portfolio of the Fund. Pacific Mutual is the investment adviser to the Fund, and Pacific Mutual and the Fund have retained other portfolio managers for nine of the Portfolios. You bear the investment risk associated with the Variable Investment Options, and you should expect your Contract Value allocated to these Investment Options and the value of any Subaccount Annuity Units attributed to any variable annuity payments to fluctuate. See HOW YOUR PAYMENTS ARE INVESTED. The twelfth option is a Fixed Option, providing a fixed annual interest rate of at least 3%; the portion of your Purchase Payments or Contract Value allocated to the Fixed Option is held in Pacific Mutual's General Account. Additional Investment Options may be available in the future. You may select as many Investment Options as you wish. Prior to your Annuity Date, this selection is made by the Contract Owner(s); after your Annuity Date, if you choose variable-dollar annuity payments, this selection is made by the Annuitant(s). CAN I CHANGE MY INVESTMENT OPTIONS? You may transfer amounts (subject to certain restrictions) from one Investment Option to another at any time on or prior to your Annuity Date; after your Annuity Date, up to four exchanges of Subaccount Annuity Units may be made in any twelve-month period. You may transfer amounts automatically using dollar cost averaging, automatic portfolio rebalancing, or an earnings sweep. See TRANSFERS in this Prospectus and SYSTEMATIC TRANSFER PROGRAMS in the Statement of Additional Information. Transaction fees may be imposed in the future for excessive transfers. WHAT CHARGES WILL I PAY? An Administrative Fee equal to an annual rate of 0.0015, and a mortality and expense risk charge equal to an annual rate of 0.0125, are charged against assets held in the Variable Investment Options. Amounts invested in the Variable Investment Options are also subject to the operating expenses imposed on the corresponding Portfolio of the Fund. Before you annuitize, an Annual Fee of $40 a year is charged if your Contract Value is less than $100,000. You may also be subject to other fees. See CHARGES, FEES AND DEDUCTIONS. CAN I WITHDRAW MY INVESTMENT? Generally, you may withdraw all or part of your Contract Value at any time on or prior to your Annuity Date. Restrictions are imposed on withdrawals from certain Qualified Contracts. Withdrawals may be subject to tax and, in certain circumstances, a tax penalty. See WITHDRAWALS and FEDERAL TAX STATUS. 7 CAN I RETURN MY CONTRACT? For a limited time, usually about 10 days after you receive it, you may return your Contract for a refund in accordance with the terms of its "free look" provision. See SHORT-TERM CANCELLATION RIGHT ("FREE LOOK"). HOW DO I REACH PACIFIC MUTUAL? You can reach our service representatives between 6:00 a.m. and 5:00 p.m., Pacific time, at 1-800-722-2333. To send payments, forms, or requests, see INVESTOR INQUIRIES AND SUBMITTING FORMS AND REQUESTS. FEE TABLE The purpose of this fee table is to assist you in understanding the various costs and expenses that you will bear directly or indirectly under your Contract. The table reflects expenses of the Separate Account as well as expenses of the Fund. In addition to the charges and expenses described below, premium taxes may apply. See PREMIUM TAXES in this Prospectus and the discussion under ORGANIZATION AND MANAGEMENT OF THE FUND in the Fund's Prospectus and under INVESTMENT ADVISER AND PORTFOLIO MANAGEMENT AGREEMENTS in the Fund's Statement of Additional Information. CONTRACT OWNER TRANSACTION EXPENSES Sales Charge Imposed on Purchase Payments........................ None Deferred Sales Charge............................................ None Withdrawal Transaction Fee/1/.................................... None Transfer Fee/2/.................................................. None ANNUAL FEE/3/.................................................... $40.00 SEPARATE ACCOUNT A ANNUAL EXPENSES (as a percentage of average daily Account value) Mortality and Expense Risk Charge................................ 1.25% Administrative Fee............................................... 0.15% ------ Total Separate Account A Annual Expenses......................... 1.40% ======
- -------- /1/ We reserve the right to impose a transaction fee of up to $15 in the future on excess partial withdrawals. See OPTIONAL WITHDRAWALS. /2/ We reserve the right to impose a transaction fee of up to $15 in the future on excess transfers. See TRANSFERS. /3/ This fee will be charged on each Contract Anniversary prior to your Annuity Date and at the time of a full withdrawal of any Contract Value unless your Contract Value is at least $100,000 on that date. 8 PACIFIC SELECT FUND ANNUAL EXPENSES (AS A PERCENTAGE OF PORTFOLIO AVERAGE NET ASSETS)
OTHER EXPENSES ADVISORY (AFTER TOTAL FEE REIMBURSEMENTS) EXPENSES -------- -------------- -------- Money Market.................................. .40% .15% .55% High Yield Bond............................... .60% .23% .83% Managed Bond.................................. .60% .16% .76% Government Securities......................... .60% .24% .84% Growth LT..................................... .75% .24% .99% Equity Income................................. .65% .22% .87% Multi-Strategy................................ .65% .22% .87% Equity........................................ .65% .15% .80% Bond and Income............................... .60% .15% .75% Equity Index.................................. .25% .18% .43% International................................. .85% .26% 1.11%
Example: If, at the end of the applicable time period, you withdraw your entire Variable Account Value or your entire Contract Value, you annuitize, or you do not withdraw or annuitize, you would pay the following cumulative expenses on each $1,000 invested, assuming 5% annual return on assets:
1 YEAR 3 YEARS ------ ------- Money Market..................................................... $20 $63 High Yield Bond.................................................. $23 $71 Managed Bond..................................................... $22 $69 Government Securities............................................ $23 $72 Growth LT........................................................ $25 $76 Equity Income.................................................... $24 $72 Multi-Strategy................................................... $24 $72 Equity........................................................... $23 $70 Bond and Income.................................................. $23 $70 Equity Index..................................................... $19 $59 International.................................................... $26 $80
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES; ACTUAL EXPENSES INCURRED IN ANY GIVEN YEAR MAY BE MORE OR LESS THAN THOSE SHOWN IN THE EXAMPLES. The expenses listed for the Fund Portfolios have been restated to reflect current expenses. Total Expenses for the fiscal year December 31, 1994 expressed as a decimal (where 1.00 is 100%) were equal to the following annual factors (of average daily net assets). Money Market: 0.0064; High Yield Bond: 0.0088; Managed Bond: 0.0084; Government Securities: 0.0088; Growth LT (which began operations January 4, 1994): 0.0108 (annualized); Equity Income: 0.0094; Multi-Strategy: 0.0094; Equity Index: 0.0051; and International 0.0122. The Equity and Bond and Income Portfolios did not begin operations until December 31, 1994. These Total Expenses for the Portfolios reflect the policy, adopted by Pacific Mutual as Investment Adviser to the Fund, to waive its fees and reimburse expenses so that operating expenses (exclusive of advisory fees, additional custodial fees associated with holding foreign securities, foreign taxes on dividends, interest or capital gains, and extraordinary expenses) expressed as a decimal are no greater than 0.0025 of average daily net assets per year. Pacific Mutual intends to continue this policy in effect until at least December 31, 1996, but may discontinue it after that time. If this policy had not been in effect during the fiscal year ended December 31, 1994, Total Expenses for that year expressed as a decimal would have been equal to the following annual factors (of average daily net assets). Money Market: 0.0064; High Yield Bond: 0.0097; Managed Bond: 0.0084; Government Securities: 0.0095; Growth LT: 0.0122 (annualized); Equity Income: 0.0100; Multi-Strategy: 0.0094; Equity Index: 0.0054; and International: 0.0122. 9 The Annual Fee is reflected in the examples, using an assumed Contract Value of $80,000. No Annual Fee is deducted from annuitized amounts on or after full or partial annuitization or if your Contract Value is at least $100,000. WHY BUY A CONTRACT Your Pacific One Contract (your "Contract") provides you with flexibility in tax-deferred retirement planning or other long-term financial planning. You may select among a variety of Variable Investment Options and a Fixed Option. You may choose to add to your Contract Value at any time, and your additional investments may be in any amount you choose (subject to certain limitations). When you annuitize, your Annuitant(s) will receive a series of variable and/or fixed payments for life or for a specified period of years. If you purchase a Contract with after-tax dollars, your Contract is called a "Non-Qualified Contract". If your Contract is purchased through a Qualified Plan, it is called a "Qualified Contract". Either way, your earnings on your Contract are not subject to tax until amounts are withdrawn or distributed (including annuity payments). YOUR INVESTMENT OPTIONS You may choose among twelve different Investment Options. YOUR VARIABLE INVESTMENT OPTIONS Separate Account A, a newly-organized separate account of Pacific Mutual, currently offers you eleven "Variable Investment Options" (also called "Subaccounts"). Each Variable Investment Option invests in a separate Portfolio of the Fund. Your Variable Investment Options are: . Money Market Subaccount . High Yield Bond Subaccount . Managed Bond Subaccount . Government Securities Subaccount . Growth LT Subaccount . Equity Income Subaccount . Multi-Strategy Subaccount . Equity Subaccount . Bond and Income Subaccount . Equity Index Subaccount . International Subaccount 10 What Are Each of These Options? For your convenience, the following chart summarizes some basic data about each Portfolio. THIS CHART IS ONLY A SUMMARY. FOR MORE COMPLETE INFORMATION ON EACH PORTFOLIO, INCLUDING A DISCUSSION OF THE PORTFOLIO'S INVESTMENT TECHNIQUES AND THE RISKS ASSOCIATED WITH ITS INVESTMENTS, SEE THE ACCOMPANYING FUND PROSPECTUS. NO ASSURANCE CAN BE GIVEN THAT A PORTFOLIO WILL ACHIEVE ITS INVESTMENT OBJECTIVE. YOU SHOULD READ THE FUND PROSPECTUS CAREFULLY BEFORE INVESTING.
- ------------------------------------------------------------------------------------------- PRIMARY INVESTMENTS (UNDER NORMAL PORTFOLIO INVESTMENT OBJECTIVE CONDITIONS) PORTFOLIO MANAGER =========================================================================================== Money Market Current income Highest quality money Pacific Mutual consistent with market securities. preservation of capital. - ------------------------------------------------------------------------------------------- High Yield Bond High level of current Intermediate--and Pacific Mutual income. long-term high- yielding lower and medium quality ("high risk") fixed income securities. - ------------------------------------------------------------------------------------------- Managed Bond Maximize total return Investment grade Pacific Investment consistent with marketable debt Management Company prudent investment securities. management. - ------------------------------------------------------------------------------------------- Government Securi- Maximize total return Securities that are Pacific Investment ties consistent with obligations of or Management Company prudent investment guaranteed by the U.S. management. Government, its agencies or instrumentalities (including futures contracts and options thereon). - ------------------------------------------------------------------------------------------- Growth LT Long-term growth of Equity securities. Janus Capital capital consistent Corporation with preservation of capital. - ------------------------------------------------------------------------------------------- Equity Income Long-term growth of Dividend-paying common J.P. Morgan Investment capital and income. stock. Management Inc. - ------------------------------------------------------------------------------------------- Multi-Strategy High total return. Equity and fixed J.P. Morgan Investment income securities. Management Inc. - ------------------------------------------------------------------------------------------- Equity Capital appreciation. Common stocks and Greenwich Street securities convertible Advisors Division of into or exchangeable Smith Barney Mutual for common stocks. Fund Management Inc. - ------------------------------------------------------------------------------------------- Bond and Income High level of current Investment grade debt Greenwich Street income consistent securities. Advisors Division of with prudent Smith Barney Mutual investment Fund Management Inc. management and preservation of capital. - ------------------------------------------------------------------------------------------- Equity Index Investment results Stocks included in Bankers Trust Company that correspond to the Standard & Poor's the total return 500 Composite Stock performance of common Price Index (the "S&P stocks publicly 500"). traded in the U.S. - ------------------------------------------------------------------------------------------ International Long-term capital Equity securities of Templeton Investment appreciation. corporations Counsel, Inc. domiciled outside the U.S. - ------------------------------------------------------------------------------------------
11 The Investment Adviser Pacific Mutual is the investment adviser for the Fund. Pacific Mutual and the Fund have retained other portfolio managers, supervised by Pacific Mutual, for nine 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 are newly-established and have no historical performance, each Subaccount will be investing in shares of a Portfolio of the Fund, and the majority of these Portfolios do have historical performance data. 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. 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 Annual Fees or any charge for premium and/or other taxes; data that do not reflect these charges may show more favorable performance. The Statement of Additional Information presents some hypothetical performance data, showing what the performance of each Subaccount would have been if it had been investing in the corresponding Portfolio since that Portfolio's inception. The Statement of Additional Information also presents some performance benchmarks, based on unmanaged market indices, such as the S&P 500, and on "peer groups," which use other managed funds with similar investment objectives. These benchmarks may give you a broader perspective when you examine hypothetical or actual Subaccount performance. In addition, Pacific Mutual may provide you with reports of our ratings both as an insurance company and as to our claims-paying ability. The Statement of Additional Information presents more details about these ratings. YOUR FIXED OPTION The Fixed Option offers you a guaranteed minimum interest rate on the amounts you allocate to this Option. Amounts you allocate to the Fixed Option, and your earnings credited to your Fixed Option Value, are held in Pacific Mutual's General Account. For more detailed information about the Fixed Option, see THE FIXED OPTION 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 Mutual 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, Pacific Mutual will issue your Contract within the next two Business Days. If some information is missing from your Application, we may delay issuing your Contract while we obtain the missing information; however, we will not hold your initial Purchase Payment for more than five Business Days without your permission. If you already own a variable annuity product, you may 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. 12 MAKING YOUR PURCHASE PAYMENTS Making Your Initial Payment Your initial Purchase Payment must be at least $25,000. 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 $2,000 per month). If you choose the PAC, you must make your first installment payment when you submit your Application. Further requirements for the 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 $500,000. Making Additional Payments You may choose to invest additional amounts in your Contract at any time. Each additional Purchase Payment must be at least $1,000. 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 withdrawal requests and any refund under the "free look" may be delayed until your check has cleared. HOW YOUR PAYMENTS ARE INVESTED INVESTING IN VARIABLE INVESTMENT OPTIONS Each time you allocate your investment to a Variable Investment Option, your Contract is credited with a number of "Subaccount Units" in that Subaccount. The number of Subaccount Units credited is equal to the amount you have allocated to that Subaccount, divided by the "Unit Value" of one Unit of that Subaccount. Example: You allocate $3,000 to the Government Securities Subaccount. At the end of the Business Day your investment allocation is effective, the value of one Unit in the Government Securities Subaccount is $15. As a result, 200 Units are credited to your Contract for your $3,000. Your Variable Account Value Will Change After we credit your Contract with Subaccount Units, the value of those Units will usually fluctuate. This means that, from time to time, your investment allocated to the Variable Investment Options may be worth more or less than the original Purchase Payments to which those amounts can be attributed. Fluctuations in Subaccount Unit Value will not change the number of Units credited to your Contract. Subaccount Unit Values will vary in accordance with the investment performance of the corresponding Portfolio. For example, the value of Units in the Managed Bond Subaccount will change to reflect the performance of the Managed Bond Portfolio (including that Portfolio's investment income, its capital gains and losses, and its expenses). Subaccount Unit Values are also adjusted to reflect the Administrative Fee and Risk Charge imposed on the Separate Account. We calculate the value of all Subaccount Units at or about 4:00 p.m., Eastern time on each Business Day. The Statement of Additional Information contains a detailed discussion of these calculations. 13 WHEN YOUR INVESTMENT IS EFFECTIVE The day your investment is effective determines the Unit Value at which Subaccount Units are attributed to your Contract. In the case of transfers or withdrawals, the effective day determines the Unit Value at which affected Subaccount Units are debited and/or credited under your Contract. That value is the value of the Subaccount Units next calculated after your transaction is effective. Your Variable Account Value begins to reflect the investment performance results of your new allocations on the day after your transaction is effective. Your initial Purchase Payment is ordinarily effective on the day we issue your Contract. Any additional investment is effective on the day we receive your Purchase Payment in good form. CHOOSING YOUR INVESTMENT OPTIONS You may allocate your Purchase Payments among the eleven Subaccounts and the Fixed Option. Allocations of your initial Purchase Payment to the Investment Options you selected will be effective either on your Contract Date or on your Free Look Transfer Date. See SHORT-TERM CANCELLATION RIGHT ("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. We reserve the right, in the future, to require that your allocation to any particular Investment Option meet a certain minimum amount. TRANSFERS Once your payments are allocated to the Investment Options you selected, you may transfer your Contract Value from any Investment Option to any other at any time and as often as you like. Transfer requests are normally effective on the Business Day we receive them in good form. If you reside in a state that requires refund of Purchase Payments under your Free Look Right, transfers may be made only on or after your Free Look Transfer Date. See Short Term Cancellation Right ("Free Look"). No charge 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 may apply to transfers in excess of 15 in any Contract Year. Transfers under the dollar cost averaging, portfolio rebalancing, and earnings sweep options are counted toward your total transfers in a Contract Year. Any such fee would be charged against your Investment Options, including the Fixed Option, proportionately based on your relative Account Value in each immediately after the transfer. We have the right, at our option, to require certain minimums in the future in connection with transfers; these may include a minimum transfer amount and a minimum Account Value, if any, for the Investment Option from which the transfer is made or to which the transfer is made. If your transfer request results in your having a remaining Account Value in an Investment Option that is less than such minimum amount, we may transfer that remaining amount to your other Investment Options in the proportions specified in your current allocation instructions. We also reserve the right to limit the size of transfers, to limit the number and frequency of transfers, to restrict transfers, and to suspend transfers. We reserve the right to reject any transfer request. Currently, the only restriction is that we will not accept instructions from agents acting under a power of attorney or otherwise on behalf of multiple Contract Owners. Exchanges of your Annuity Units in any Subaccount(s) to any other Subaccount(s) after annuitization are limited to four in any twelve-month period. See RETIREMENT BENEFITS AND OTHER PAYOUTS. Dollar Cost Averaging Dollar cost averaging is a method in which investors buy securities in a series of regular purchases instead of in a single purchase. This allows the investor to average the securities' price over time, and may permit a 14 "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 $10,000 to one or more other Investment Options. Detailed information appears in the Statement of Additional Information. 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 investment 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 Statement of Additional Information. 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 Statement of Additional Information. CHARGES, FEES AND DEDUCTIONS PREMIUM TAXES Depending on (among other factors) your state of residence, a tax may or may not be imposed on your Purchase Payments at the time your payment is made, at the time of partial or total withdrawal, at the time any death benefit proceeds are paid, at annuitization, or at such other time as taxes may be imposed. Tax rates ranging from 1.0% 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 payments ("premium taxes") on your behalf, we will be reimbursed through a charge imposed against your Contract Value. We normally will charge you when you annuitize some or all of your Contract Value. We reserve the right to impose this charge for applicable premium taxes when you make a full or partial withdrawal, at the time any death benefit proceeds are paid, or when those taxes are incurred. For these purposes, "premium taxes" include any state or local premium taxes and, where approval has been obtained, federal premium taxes and any federal, state or local income, excise, business or any other type of tax (or component thereof) measured by or based upon, directly or indirectly, the amount of payments Pacific Mutual has 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, at our sole discretion we deem appropriate. Pacific Mutual 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 Pacific Mutual's 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 Pacific Mutual will charge you an Annual Fee of $40 on each Contract Anniversary prior to the Annuity Date, and at the time you withdraw your entire Contract Value, if your Contract Value is less than $100,000 on that date. The fee is not imposed on amounts you annuitize or on payment of a death benefit. 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 the Contract. 15 Your Annual Fee will be charged proportionately against your Investment Options, including the Fixed Option. 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. No Annual Fee is charged on payment of a death benefit or on annuitization. WAIVERS AND REDUCED CHARGES Pacific Mutual may reduce or waive the Annual Fee in situations that reduce Contract administrative expenses, such as a sale of several Contracts to the same Contract Owner(s), sales of large Contracts, and sales to groups. MORTALITY AND EXPENSE RISK CHARGE Pacific Mutual assesses 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 a Contract 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." Pacific Mutual also bears 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 of 0.0125 of each Subaccount's assets; this charge may not be increased for the duration of your Contract. Of this amount, 0.0045 is for assuming expense risk, and 0.0080 is for assuming mortality risk. Risk Charges will stop at annuitization if you select a fixed annuity; Risk Charges will continue after annuitization if you choose any variable annuity, even though we do not bear mortality risk if your Annuity Option is Period Certain Only. Pacific Mutual will realize a gain if the Risk Charge exceeds our actual cost of expenses and benefits, and will suffer a loss if actual costs exceed the Risk Charge. Any gain will become part of Pacific Mutual's General Account; we may use it for any reason, including covering sales expenses on the Contracts. ADMINISTRATIVE FEE Pacific Mutual charges 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 Contract Owners and to regulatory authorities. The Administrative Fee is assessed daily at an annual rate of 0.0015 of the assets of each Subaccount. This fee may not be increased 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. EXPENSES OF PACIFIC SELECT FUND Your Variable Account Value reflects advisory fees and other expenses incurred by the various Portfolios of the Fund, net of any applicable reimbursements. These fees and expenses may vary. The Fund is governed by its own Board of Trustees, and your Contract does not fix or specify the level of expenses of any Portfolio. The Fund's fees and expenses are described in detail in the Fund's Prospectus and in its Statement of Additional Information. 16 RETIREMENT BENEFITS AND OTHER PAYOUTS SELECTING YOUR ANNUITANT When you submit the Application for your Contract, you must choose a sole Annuitant or two Joint Annuitants. The Annuitant(s) will receive annuity payments under your Contract when you annuitize. If you are buying a Qualified Contract, you must be your own sole Annuitant or your Primary Joint Annuitant; if you are buying a Non-Qualified Contract you may choose yourself and/or another person. In either case, you may choose a Contingent Annuitant; more information on these options is set out in the Statement of Additional Information. Except in the case of certain Qualified Contracts, you will not be able to add or change a sole or Joint Annuitant after your Contract is issued. 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. If you have a Non-Qualified Contract and wish to name a Joint Annuitant, your younger Annuitant must be your Primary Annuitant. ANNUITIZATION You may choose both your Annuity Date (or "Annuity Start Date") and your Annuity Option. At the Annuity Date, you may elect to annuitize some or all of your Contract Value, less any Contract Debt, any transaction fee, and any charge for premium taxes and/or other taxes, so long as the net amount you annuitize is at least $5,000. If you annuitize only a portion of this available Contract Value, you may have the remainder distributed, less any Contract Debt, any applicable charge for premium taxes and/or other taxes, any transaction fee, and any applicable Annual Fee. We will distribute your Contract Value, less any Contract Debt and any applicable charge for premium taxes and/or other taxes, any transaction fee, and any Annual Fee to you in a single sum if the net amount of your Contract Value available to convert to an annuity is less than $5,000 on your Annuity Date. Distributions under your Contract will have tax consequences. You should consult a qualified tax adviser for information on full or partial annuitization. CHOOSING YOUR ANNUITY DATE ("ANNUITY START DATE") You should choose your Annuity Start Date when you submit your Application or we will apply your default Annuity Date to your Contract. You may change your Annuity Date by notifying us in writing. We must have received your written notice at least 10 Business Days prior to the earlier of your old Annuity Date or your new Annuity Date. Your Annuity Date cannot be earlier than your first Contract Anniversary and must occur on or before a certain date: If you have a sole Annuitant, your Annuity Date cannot be later than his or her 100th birthday; if you have Joint Annuitants and a Non-Qualified Contract, your Annuity Date cannot be later than your younger Joint Annuitant's 100th birthday; if you have Joint Annuitants and a Qualified Contract, your Annuity Date cannot be later than your own 100th birthday. Different requirements may apply in some states. See APPENDIX A: STATE LAW VARIATIONS. 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 59 1/2th birthday. See FEDERAL TAX STATUS. If you annuitize only a portion of your Contract Value on your Annuity Start 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 or may not be available, or may be available only for certain types of Contracts. You should call your tax adviser for more information if you are interested in this option. 17 ANNUITY OPTION You make three basic decisions about your annuity payments. First, you must choose whether you want those payments to be a fixed-dollar amount and/or a variable-dollar amount. Second, you must choose how many payments you want the Annuitant(s) to receive (the "period" of the annuity). Third, you must decide how often you want annuity payments to be made (the "frequency" of the payments). You may not change your Annuity Option after annuitization. Fixed and Variable Annuities You may choose a fixed annuity (i.e., with fixed-dollar amounts), a variable annuity (i.e., with variable-dollar amounts), or you may choose both, converting one portion of the net amount you annuitize into a fixed annuity and another portion into a variable annuity. If you select a fixed annuity, each periodic annuity payment received will be equal to the initial annuity payment, unless you select a joint and survivor life annuity with reduced survivor payments and the Primary Annuitant dies. If you select a variable annuity, you may choose as many Variable Investment Options for your annuity 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. THE CONTRACTS AND THE SEPARATE ACCOUNT in the Statement of Additional Information explains in more detail how your Contract converts into a variable annuity. Annuity Periods Four types of annuity periods are currently available under the Contracts, although additional options may become available in the future. . Life Only. Periodic payments are made to the Annuitant during his or her lifetime. Payments stop when the Annuitant dies. . Life with Period Certain. Periodic payments are made to the Annuitant during his or her lifetime, with payments guaranteed for a specified period. You may choose to have payments guaranteed for anywhere from 5 through 30 years (in full years only). If the Annuitant dies before the guaranteed payments are completed, the Beneficiary receives the remainder of the guaranteed payments. . 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 made to the secondary Annuitant named in the election if and so long as such secondary Annuitant lives. You may choose to have the payments to the surviving secondary Annuitant equal 50%, 66 2/3% or 100% of the payments made during the lifetime of the Primary Annuitant (you must make this election when you choose your Annuity Option). Payments stop when both Annuitants die. . Period Certain Only. Periodic payments are made to the Annuitant 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, the Beneficiary receives the remainder of the guaranteed payments. Frequency of Payments You may choose to have annuity payments made monthly, quarterly, semi-annually, 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. 18 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. 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 100th birthday or your younger Joint Annuitant's 100th birthday, whichever applies (some states' laws may require a different Annuity Date; see APPENDIX A: STATE LAW VARIATIONS). If you have a Qualified Contract and fail to choose an Annuity Date, your Annuity Date will be April 1 of the calendar year following the year you attain age 70 1/2; if you have already attained age 70 1/2 on the Contract Date, your Annuity Date will be April 1 of the calendar year following your first Contract Anniversary. If you have not specified an Annuity Option or do not instruct us otherwise, at your Annuity Date your Contract Value, less any Contract Debt, any applicable transaction fee, and any charge for premium taxes and/or other taxes, will be annuitized (if this net amount is at least $5,000) as follows: the net amount attributed to your Fixed Option Value will be converted into a fixed-dollar annuity and the net amount attributed to 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 Period Certain Only for five years. If you have a Qualified Contract and you are married, your default Annuity Option will be Joint and Survivor Life with survivor payments of 50% and your spouse will automatically be named your Joint Annuitant. 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 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 than 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 annuity purchase rates 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 greater of our current annuity purchase rates in effect for your Contract on the Annuity Date and the guaranteed annuity purchase rates 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 purchase rate in our table. A higher assumed investment return would mean a larger first variable annuity payment, but subsequent payments would increase only when actual net investment performance exceeds the higher assumed rate and would fall when actual net investment performance is less than the higher assumed rate. A lower assumed rate would mean a smaller first payment and a lower threshold for increases and decreases. If the actual net investment performance is 5% annually, annuity payments will be level. The assumed investment return is explained in more detail in the Statement of Additional Information under THE CONTRACTS AND THE SEPARATE ACCOUNT. 19 AGE LIMITATIONS You may not choose an Annuitant who has (or had) reached his or her 86th birthday at the time your Contract is (or was) issued. This restriction applies to Joint and Contingent Annuitants as well as to a sole Annuitant. DEATH BENEFITS A death benefit may be payable on proof of the death, before the Annuity Date, of the Annuitant or of any Contract Owner while the Contract is in force. Defining Our "Death Benefit" Terms Your Death Benefit Amount as of any day (prior to your Annuity Date) is equal to the greater of: . your aggregate Purchase Payments, less any prior partial withdrawals, including any withdrawal fees, as of that day; or . your Contract Value as of that day. Your Guaranteed Minimum Death Benefit Amount is determined as follows: We look at your Contract as of your fifth Contract Anniversary and as of every fifth subsequent Contract Anniversary prior to your Annuity Date, that is, the 10th, 15th, etc., (each of these Anniversaries is a "Milestone Date"). For each Milestone Date, if your Annuitant was living and had not yet reached his or her 76th birthday as of that date, we calculate what your Death Benefit Amount would have been as of that Milestone Date and adjust this amount by (1) adding the aggregate amount of any Purchase Payments received by us after that Milestone Date and (2) subtracting the aggregate amount of any partial withdrawals, any fees for withdrawals and transfers, any Annual Fees, and any previous charges for premium taxes and/or other taxes effected since that Milestone Date. The highest of these adjusted amounts, as of the Notice Date, is your Guaranteed Minimum Death Benefit Amount. Calculations of any "Guaranteed Minimum Death Benefit" are made only once a death benefit is payable under your Contract. The Notice Date is the day on which we receive proof (in good form) of death and instructions regarding payment of death benefit proceeds. The Amount of the Death Benefit: Death of the Annuitant If the Annuitant dies on or before your fifth Contract Anniversary, or if the Annuitant had already reached his or her 76th birthday as of your fifth Contract Anniversary, the death benefit will be equal to your "Death Benefit Amount" as of the "Notice Date." If the Annuitant dies after your fifth Contract Anniversary and had not yet reached his or her 76th birthday as of your fifth Contract Anniversary, the death benefit will be equal to the greater of: . your Death Benefit Amount as of the Notice Date; or . your "Guaranteed Minimum Death Benefit Amount" as of the Notice Date. The following procedures apply in the event of death of an Annuitant who is not also a Contract Owner: If your Contract names Joint Annuitants, and only one Joint Annuitant dies, the surviving Joint Annuitant becomes your sole Annuitant and the death benefit is not yet payable. If your sole Annuitant dies (or if no Joint Annuitant survives) and your Contract names a surviving Contingent Annuitant, he or she becomes the sole Annuitant and the death benefit is not yet payable. 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, a death benefit may be payable equal to your Contract Value as of the Notice Date. 20 Death Benefit Proceeds The proceeds of any death benefit payable will be the amount of the death benefit reduced by any charge for premium taxes and/or other taxes and any Contract Debt. These proceeds will be payable in a single sum or, if the recipient chooses, as an annuity. Any such annuity is subject to all restrictions (including minimum amount requirements) as are other annuities under the Contracts; 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 Statement of Additional Information. WITHDRAWALS OPTIONAL WITHDRAWALS You may, on or prior to your Annuity Date, withdraw all or a portion of the amount available under your Contract, so long as any of your Annuitants is still living. Except as provided below, withdrawals from your Investment Options may be made at any time. You may request to withdraw a specific dollar amount or a specific percentage of an Account Value or your 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 Investment Options proportionately. Each partial withdrawal, including pre- authorized withdrawals, must be for at least $1,000. If your partial withdrawal from an Investment Option would leave a remaining Account Value in that Investment Option of less than any minimum Account Value we may require in the future, we have the right, at our option, to transfer that remaining amount to your other Investment Options on a proportionate basis relative to your most recent allocation instructions. If your partial withdrawal leaves you with a Contract Value of less than $1,000, we have the right, at our option, to terminate your Contract and send you the withdrawal proceeds described in the next section. Amount Available for Withdrawal The amount available to you for withdrawal is your Contract Value at the end of the Business Day on which your withdrawal request is effective, less any applicable Annual Fee, any withdrawal transaction fee, any charges for premium tax and/or other taxes, and your Contract Debt. The amount we send to you (your "withdrawal proceeds") will also reflect any required or requested federal and state income tax withholding. See FEDERAL TAX STATUS. You assume investment risk on investments in the Subaccounts; as a result, the amount available to you for withdrawal from any Subaccount may be more or less than the total Purchase Payments you have allocated to that Subaccount. Withdrawal Transaction Fees There is currently no transaction fee for partial withdrawals. However, we reserve the right to impose a withdrawal transaction fee in the future of up to $15 for each partial withdrawal (including preauthorized partial withdrawals) in excess of 15 in any Contract Year. Any such fee would be charged against your Investment Options, including the Fixed Option, proportionately based on your Account Value in each immediately after the withdrawal. Pre-Authorized Withdrawals If your Contract Value is at least $10,000, 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 $1,000. Each pre-authorized withdrawal is subject to federal income tax on its taxable portion and may be subject to a 10% tax penalty if you have not reached age 59 1/2. See FEDERAL TAX STATUS. Additional information and options are set out in the Statement of Additional Information and in the Pre-Authorized Withdrawal section of your Application. 21 Special Requirements for Full Withdrawals If you wish to withdraw the entire amount available under your Contract, you must either return your Contract to Pacific Mutual or sign and submit to us a "lost contract affidavit." Special Restrictions Under Qualified Plans 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 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. Restrictions Under the Texas Optional Retirement Program Title 8, Section 830.105 of the Texas Government Code restricts withdrawal of contributions and earnings in a variable annuity contract in the Texas Option Retirement Program (ORP) prior to 1) termination of employment in all Texas public institutions of higher education, 2) retirement, 3) death, or 4) the participant's attainment of age 70 1/2. A participant in the Texas ORP will not, therefore, be entitled to make full or partial withdrawals under a Contract unless one of the foregoing conditions has been satisfied. Appropriate certification must be submitted to redeem the participant's account. Restrictions on withdrawal do not apply to transfers of values from one annuity contract to another during participation in the Texas ORP. Loans are not available in the Texas ORP. Effective Date of Withdrawal Requests Withdrawal requests are normally effective on the Business Day we receive them in good form. If you make Purchase Payments by check and submit a withdrawal request immediately afterwards, the effective date of your withdrawal request may be delayed until your check clears. MANDATORY DISTRIBUTION ON DEATH If a Contract Owner of a Non-Qualified Contract dies before the Annuity Date, the entire interest must be distributed within 5 years of death. If a Non- Qualified Contract has Joint Owners, this requirement applies to the first Contract Owner to die. Distribution to a designated recipient beginning no later than 1 year after the Contract Owner's death and continuing over the recipient's life or a period not exceeding the recipient's life expectancy will satisfy this distribution requirement. If the Contract Owner was not an Annuitant but was a Joint Owner and there is a surviving Joint Owner, that surviving Joint Owner is the designated recipient; if no Joint Owner survives but a Contingent Owner is named in the Contract and is living, he or she is the designated recipient. Otherwise, or if the Contract Owner was an Annuitant, the designated recipient is the Beneficiary; if no Beneficiary is living, the designated recipient is the Annuitant or the Annuitant's estate. A sole designated recipient who is the Contract Owner's spouse may elect to become the Contract Owner (and sole Annuitant if the deceased Contract Owner had been the Annuitant) and continue the Contract. A Joint or Contingent Owner who is the designated recipient but not the Contract Owner's spouse may also be able to continue the Contract; however, a distribution will be considered to have been made under the original Contract for federal income tax purposes. 22 TAX CONSEQUENCES OF WITHDRAWALS Withdrawals, including pre-authorized withdrawals, will generally have federal income tax consequences, which could include tax penalties. YOU SHOULD CONSULT WITH A TAX ADVISER BEFORE MAKING ANY WITHDRAWAL OR SELECTING THE PRE-AUTHORIZED WITHDRAWAL OPTION. See FEDERAL TAX STATUS. SHORT-TERM CANCELLATION RIGHT ("FREE LOOK") You may return your Contract for cancellation and a full refund during your "free look period." Your free look period is usually the 10-day period beginning on the day you receive your Contract, but may vary if required by state law. For more information, see APPENDIX A: STATE LAW VARIATIONS. If you return your Contract, it will be canceled and treated as void from your Contract Date. You will then receive a refund as follows: . All of your Purchase Payments allocated to the Fixed Option, and . your Variable Account Value as of the end of the Business Day on which we receive your Contract for cancellation, plus a refund of any amounts that may have been deducted as Contract fees or charges to pay premium and/or other taxes. Some states' laws require us to refund your Purchase Payments allocated to the Variable Investment Options instead of your Variable Account Value. If you reside in one of these states, the Purchase Payments you have allocated to any Subaccount will usually be allocated to the Money Market Subaccount during your free look period; however, different rules may apply depending on your state of residence. In such cases, we will transfer your Contract Value in the Money Market Account to your chosen Variable Investment Options at the end of the 15th calendar day after your Contract Date ("your Free Look Transfer Date"). We reserve the right to extend your Free Look Transfer Date by the number of days in excess of ten days that your state of residence allows you to return your Contract to us under the Free Look Provision. PACIFIC MUTUAL AND THE SEPARATE ACCOUNT PACIFIC MUTUAL We are a mutual life insurance company organized under California law 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. Our operations include both life insurance and annuity products as well as financial and retirement services. As of the end of 1994, Pacific Mutual had over $38.3 billion of individual life insurance in force and total assets of approximately $14.7 billion. Together with its subsidiaries and affiliated enterprises, Pacific Mutual has total assets and funds under management of over $91.1 billion. It has been ranked according to assets in the top 24 largest life insurance carriers in the nation for 1994. We are authorized to conduct life insurance and annuity business in the District of Columbia and all states except New York. Our principal offices are located at 700 Newport Center Drive, Newport Beach, California 92660. Our indirect wholly-owned subsidiary, Pacific Equities Network ("PEN"), serves as the principal underwriter for the Contracts. PEN is located at 700 Newport Center Drive, Newport Beach, California 92660. PEN and Pacific Mutual enter into selling agreements with broker-dealers, under which such broker-dealers act as agents of Pacific Mutual and PEN in the sale of the Contracts. SEPARATE ACCOUNT A Separate Account A was established on September 7, 1994 as a separate account of Pacific Mutual, and is registered with the SEC under the Investment Company Act of 1940 (the "1940 Act") as a type of investment company called a "unit investment trust." 23 Obligations arising under your Contract are general corporate obligations of Pacific Mutual. 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 Pacific Mutual that are supported by the Separate Account may not be charged with liabilities arising from any other business of Pacific Mutual; 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 Pacific Mutual's other income, gain or loss. We may invest money in the Separate Account in order to commence its operations and for other purposes, but not to support contracts other than variable annuity contracts. A portion of the Separate Account's assets may include accumulations of charges we make against the Separate Account and investment results of assets so accumulated. These additional assets are ours and we may transfer them to our General Account at any time; however, before making any such transfer, we will consider any possible adverse impact the transfer might have on the Separate Account. Subject to applicable law, we reserve the right to transfer our assets in the Separate Account to our General Account. The Separate Account is not the sole investor in the Fund. Investment in the Fund by other separate accounts in connection with variable annuity and variable life insurance contracts may create conflicts. See MORE ON THE FUND'S SHARES in the accompanying Prospectus for the Fund. FEDERAL TAX STATUS The following summary of federal income tax consequences is based on current tax laws and regulations, which may be changed by legislative, judicial or administrative action. The summary is general in nature, and does not consider any applicable state or local tax laws. We do not make any guarantee regarding the tax status, federal, state or local, of any Contract or any transaction involving the Contracts. Accordingly, you should consult a qualified tax adviser for complete information and advice before purchasing a Contract. The following rules generally do not apply to variable annuity contracts held by or for non-natural persons (e.g., corporations) unless such an entity holds the Contract as nominee for a natural person. If a contract is not owned or held by a natural person or a nominee for a natural person, the contract generally will not be treated as an "annuity" for tax purposes, meaning that the contract owner will be taxed currently on annual increases in account value at ordinary income rates unless some other exception applies. Section 72 of the Code governs the taxation of annuities in general, and we designed the Contracts to meet the requirements of Section 72 of the Code. We believe that, under current law, the Contract will be treated as an annuity for federal income tax purposes if the Contract Owner is a natural person or a nominee for a natural person, and that Pacific Mutual (as the issuing insurance company), and not the Contract Owner(s), will be treated as the owner of the investments underlying the Contract. Accordingly, no tax should be payable by you as a Contract Owner as a result of any increase in Contract Value until you receive money under your Contract. You should, however, consider how amounts will be taxed when you do receive them. The following discussion assumes that your Contract will be treated as an annuity for federal income tax purposes. Section 817(h) of the Code provides that the investments underlying a variable annuity must satisfy certain diversification requirements. Details on these diversification requirements appear under OTHER INFORMATION ABOUT THE FUND in the Fund's Prospectus. Pacific Mutual believes 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 Contract Owners may direct their 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 24 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. Taxes Payable on Withdrawals Amounts you withdraw before annuitization, including amounts withdrawn from your Contract Value in connection with partial withdrawals for payment of 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) any portion of 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 Pacific Mutual and any of our affiliates are treated as a single annuity contract for purposes of determining whether an amount is subject to tax under these rules. The Code further provides that the taxable portion of a withdrawal may be subject to a penalty tax equal to 10% of that taxable portion unless the withdrawal is: (1) made on or after the date you reach age 59 1/2, (2) made by a Beneficiary after your death, (3) attributable to your becoming disabled, or (4) in the form of level annuity payments under a lifetime annuity. Taxes Payable on Annuity Payments A portion of each annuity payment you receive under a Contract generally will be treated as a partial recovery of Purchase Payments (as used here, "Purchase Payments" means the aggregate Purchase Payments less any amounts that were previously received under the Contract but not included in income) and will not be taxable. (In certain circumstances, subsequent modifications to an initially-established payment pattern may result in the imposition of a penalty tax.) The remainder of each annuity payment will be taxed as ordinary income. However, after the full amount of aggregate Purchase Payments has been recovered, the full amount of each annuity payment will be taxed as ordinary income. Exactly how an annuity payment is divided into taxable and non-taxable portions depends on the period over which annuity payments are expected to be received, which in turn is governed by the form of annuity selected and, where a lifetime annuity is chosen, by the life expectancy of the Annuitant(s) or payee(s). Should annuity payments cease on account of the death of a Contract Owner before Purchase Payments have been fully recovered, an Annuitant (or in certain cases the Beneficiary) is allowed a deduction on the final tax return for the unrecovered Purchase Payments; however, if any remaining annuity payments are made to a Beneficiary, the Beneficiary will recover the balance of the Purchase Payments as payments are made. A lump sum payment taken in lieu of remaining monthly annuity payments is not considered an annuity payment for tax purposes. The portion of any lump sum payment to a Beneficiary in excess of aggregate unrecovered Purchase Payments would be subject to income tax. Such a lump sum payment may also be subject to a penalty tax. 25 If a Contract Owner dies before annuity payments begin, certain minimum distribution requirements apply. If a Contract Owner dies after the Annuity Date, the remaining interest in the Contract must be distributed at least as rapidly as under the method of distribution in effect on the date of death. Generally, the same tax rules apply to amounts received by the Beneficiary as those set forth above, except that the early withdrawal penalty tax does not apply. Thus, any annuity payments or lump sum withdrawal will be divided into taxable and non-taxable portions. In addition, designation of a Beneficiary who either is 37 1/2 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. Certain transfers of a Contract for less than full consideration, such as a gift, will trigger tax on the investment income in the Contract, and may also trigger tax penalties and, if applicable, gift tax. 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. THE FOLLOWING IS ONLY A GENERAL DISCUSSION ABOUT TYPES OF QUALIFIED PLANS FOR WHICH THE CONTRACTS ARE AVAILABLE. IF YOU ARE PURCHASING A QUALIFIED CONTRACT, YOU SHOULD CONSULT WITH A QUALIFIED TAX ADVISER. Individual Retirement Annuities ("IRAs") Contributions to an IRA are subject to limitations. Because your minimum initial Purchase Payment for a Pacific One Contract is larger than the maximum annual contribution permitted for an IRA, Pacific One Contracts are available as IRAs only through a rollover from an existing Qualified Plan. In addition, distributions from an IRA are subject to certain restrictions. 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 yourself and your Joint Annuitant. Distributions of minimum amounts specified by the Code must commence by April 1 of the calendar year following the calendar year in which you attain age 70 1/2. Additional distribution rules apply after your death. You may rollover funds from an existing Qualified Plan (such as proceeds from existing insurance policies, annuity contracts or securities) into your 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 IRA; to avoid this withholding you should have cash transferred directly from the insurance company or plan trustee to Pacific Mutual. Similar limitations and tax penalties apply to tax sheltered annuities, government plans, and 401(k) and pension and profit-sharing plans. 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 26 excludable from the employees' gross income (subject to maximum contribution limits). Distributions under these Contracts must comply with certain limitations as to timing, or result in tax penalties. Government Plans Section 457 of the Code permits employees of a state or local government (or of certain other tax-exempt entities) to defer compensation through an eligible government plan. Contributions to a Contract in connection with an eligible government plan are subject to limitations. 401(k) Plans; Pension and Profit-Sharing Plans Deferred compensation plans may be established by an employer for certain eligible employees under Sections 401(a) and 401(k) of the Code. Contributions to these plans are subject to limitations. LOANS Certain Qualified Contract Owners may borrow against their Contracts. If yours is a Qualified Contract issued under Section 401(a), 401(k), 403(a) or 403(b) of the Code and the terms of your Qualified Plan permit, you may request a loan from Pacific Mutual, using your Contract Value as your only security. Loan Procedures Your loan request must be submitted on our Loan Request Form. You may submit a loan request at any time after your first Contract Anniversary and before your Annuity Date. If approved, your loan will usually be effective as of the end of the Business Day on which we receive all necessary documentation in good form. We will forward proceeds of your loan to you within seven calendar days after the effective date of your loan. A $500 loan administrative fee will be deducted from your loan proceeds. 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 our "Loan Account". To make this transfer, we will transfer amounts proportionately from your Investment Options, based on your Account Value in each. 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 in accordance with your current allocation instructions. Loan Terms You may have only one loan outstanding at any time. Each loan must be for at least $1,000. Your total Contract Debt at the effective date of your loan, may not exceed the lesser of: . 50% of your Contract Value, or . $50,000 less your highest outstanding Contract Debt during the 12-month period immediately preceding the effective date of your loan. You should refer to the terms of your particular Qualified Plan for any additional loan restrictions. If you have other loans outstanding pursuant to other Qualified Plans, the amount you may borrow may be further restricted. You will be charged interest on your Contract Debt at an annual rate, set at the time of the loan withdrawal, equal to the higher of (a) Moody's Corporate Bond Yield Average-Monthly Average Corporates (the "Moody's Rate"), as published by Moody's Investors Service, Inc., or its successor, for the calendar quarter 27 immediately preceding the calendar month in which your loan is effective, 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; earnings on the amount held in the Loan Account to secure your loan accrue daily beginning on the following day, and those earnings will be transferred once a year to your Investment Options in accordance with your current allocation instructions. Repayment Terms Your loan, including principal and accrued interest, must be repaid in quarterly installments. An installment will be due in each quarter on the date corresponding to the effective date of your loan, beginning with the first such date following the effective date of your loan. Example: On May 1, we receive your loan request, and your loan is effective. Your first quarterly payment will be due on August 1. Adverse tax consequences may result if you fail to meet the repayment requirements for your loan. You must repay principal and interest of any loan in substantially equal payments over the term of the loan. Normally, the term of a 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. You may prepay your loan at any time; if you prepay your entire outstanding principal, we will bill you for any accrued interest, and your loan will be considered repaid only when the interest due has been paid. If we have not received your full payment by its due date, we will, at that time, make your payment to Pacific Mutual by effecting a partial withdrawal from your Contract Value as follows: (1) From the Loan Account attributable to your loan, we will withdraw the amount of principal due. (2) From your Investment Options, proportionate to your Account Value in each, we will withdraw the amount sufficient to pay the interest due. If you send us a payment of less than the amount due, we will effect a partial withdrawal of the remaining amount due as discussed above. ALL WITHDRAWALS EFFECTED TO MAKE YOUR LOAN REPAYMENTS WILL BE TREATED AS TAXABLE DISTRIBUTIONS FROM YOUR CONTRACT. If a payment is received late, it will be applied as the next payment. If your Contract Value is less than $1,000 and we do not receive your full payment by its due date, we may, at our option, effect a partial withdrawal as described and then terminate your Contract and send you the remaining withdrawal proceeds. 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. Any loan repayments in excess of the amount then due will be applied first, to your outstanding principal, and then to accrued interest. Tax and Legal Matters The legal rules, including rules under the Code, that apply to loans under your Contract are complicated and, in many cases, not clearly defined. In addition, the rules that apply may depend on your individual circumstances. FOR THESE REASONS, YOU SHOULD CONSULT WITH A QUALIFIED TAX ADVISER PRIOR TO EFFECTING ANY LOAN TRANSACTION UNDER YOUR CONTRACT. Interest paid on your loan under a 401(k) plan or 403(b) tax sheltered annuity will be considered "personal interest" under Section 163(h) of the Code, to the extent the loan comes from your pre-tax contributions, even if the proceeds of your loan are used to acquire your principal residence. 28 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%. 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) 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 an IRA; or (2) the payment is a minimum distribution required under the Code. The taxable amount is the amount of the distribution less the amount allocable to after-tax contributions. All other types of taxable distributions are subject to withholding unless the distributee elects not to have withholding apply. Certain states have indicated that pension and annuity withholding will apply to payments made to residents. Generally, an election out of federal withholding will also be considered an election out of state withholding. IMPACT OF FEDERAL INCOME TAXES In general, if you expect to accumulate savings over a relatively long period of time without making significant withdrawals, there should be tax advantages, regardless of your tax bracket, in purchasing a Contract rather than, for example, a mutual fund with a similar investment policy and approximately the same level of expected investment results. This is because little or no income taxes are incurred by you or by Pacific Mutual 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 investment 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 MUTUAL 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 Pacific Mutual's operations. No charge is made against the Separate Account for Pacific Mutual's 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, Pacific Mutual 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 Pacific Mutual 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. 29 ADDITIONAL INFORMATION VOTING RIGHTS Pacific Mutual is the legal owner of the shares of the Pacific Select Fund Portfolios held by the Subaccounts, and consequently has the right to vote on any matter voted on at Fund shareholders' meetings. However, our interpretation of applicable law requires us to vote the shares attributable to your Variable Account Value ("your voting interest") in accordance with your directions. We will pass shareholder proxy materials on to you so that you have an opportunity to give us voting instructions for your voting interest. You may provide your instructions by proxy or in person at the shareholders' meeting. If there are shares of a Portfolio held by a Subaccount for which we do not receive timely voting instructions, we will vote those shares in the same proportion as all other shares of that Portfolio held by that Subaccount for which we have received timely voting instructions. If we hold shares of a Portfolio in our General Account, we will vote those shares in the same proportion as other votes cast by all of our separate accounts in the aggregate, including Separate Account A. We may elect, in the future, to vote shares of Pacific Select Fund 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 voting rights will belong to your Annuitant (or Joint Annuitants). The number of shares that form the basis for your Annuitant's (or Joint Annuitants') voting interest will be determined as described above, but will decrease throughout the payout period. CHANGES TO YOUR CONTRACT Contract Owner(s) and Contingent Owner You may change your Non-Qualified Contract at any time prior to your Annuity Date to name a different Contract Owner or to add a Joint Owner, or to add or change a Contingent Owner; if yours is a Qualified Contract, you must be the only Contract Owner, but you may still add or change a Contingent Owner. Your Contract cannot name more than two Contract Owners (Joint Owners) and one Contingent Owner at any time. Joint ownership is in the form of a joint tenancy. Prior to your Annuity Date, 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 SELECTING YOUR ANNUITANT. There may be limited exceptions for certain Qualified Contracts. Beginning at annuitization, all decisions regarding the annuity, including allocation decisions and exercising voting rights, belong to your Annuitant (or, if you have a Joint and Survivor Life annuity, your Annuitants). 30 Beneficiaries Your Beneficiary is a person who may receive death benefits under your Contract. You may change your Beneficiary or add Beneficiaries at any time prior to the death of the Annuitant. If you have named your Beneficiary irrevocably, you will need to obtain the Beneficiary's consent before making any changes. Qualified Contracts may have additional restrictions on naming and changing Beneficiaries; for example, if your Contract was issued in connection with a Qualified Plan subject to Title I of ERISA, your spouse must either be your Beneficiary or consent to your naming a different Beneficiary. If you leave no surviving Beneficiary, the Annuitant or the Annuitant's estate will receive any death benefit proceeds under your Contract. CHANGES TO ALL CONTRACTS If, in the judgment of Pacific Mutual's management, continued investment by Separate Account A in one or more of the Fund Portfolios becomes unsuitable or unavailable, we may seek to alter the Variable Investment Options available under the Contracts. Pacific Mutual does 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. Pacific Mutual reserves the right to replace shares of any Portfolio that were already purchased under any Contract (or shares that were to be purchased in the future under a Contract) with shares of another Portfolio, shares of another investment company or series of another 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 of the Fund or in other investment vehicles; availability of any new Subaccounts to existing Contract Owners will be determined at our discretion. We will notify Contract Owners, 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: . combine Subaccounts . delete or substitute Subaccounts . combine Separate Account A or part of it with another separate account of Pacific Mutual or any of its affiliates . transfer Separate Account A assets attributable to the Contracts to another of our separate accounts . deregister the Separate Account under the 1940 Act . operate Separate Account A as a management investment company under the 1940 Act or another form permitted by law . establish a committee, board or other group to manage aspects of the Separate Account's operations . 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. 31 INVESTOR 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. 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 Mutual Life Insurance Company P.O. Box 100060 Pasadena, California 91189-0060 Please send your other forms and written requests or questions to: Pacific Mutual Life Insurance Company P.O. Box 7187 Pasadena, California 91109-7187 If you are using an overnight delivery service to send payments, please send them to: Pacific Mutual 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 Pacific Mutual "receives" the notice or instructions. We "receive" this information only when it arrives, in good 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, transfer requests, and withdrawal requests we receive before 4:00 p.m. Eastern time (or the close of the New York Stock Exchange, if earlier) will normally be effective on the same Business Day that we receive them in "good 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 "good form" unless the transaction or event is scheduled to occur on another day. "Good form" may require, among other things, a signature guarantee or other verification of authenticity. Pacific Mutual does not generally require a signature guarantee unless it appears that your signature may have changed over time or due to other circumstances. Requests regarding death benefits must be accompanied by both proof of death and instructions regarding payment satisfactory to Pacific Mutual. You should call your registered representative or Pacific Mutual if you have questions regarding the required form of a request. TELEPHONE TRANSACTIONS After your "free look" period, you may make transfer requests by telephone if you have authorized telephone requests (a "telephone authorization"). A telephone authorization for a jointly owned Contract must be approved by both Joint Owners. We cannot guarantee that you will always be able to reach us to complete a telephone transaction; for example, all telephone lines may be busy during certain periods, such as periods of substantial market fluctuations or other drastic economic or market change, or telephones may be out of service during severe weather conditions or other emergencies. Under these circumstances, you should submit your request in writing. Transaction instructions we receive by telephone before 4:00 p.m. Eastern time (1:00 p.m. Pacific time), (or the close of the New York Stock Exchange, if earlier), on any Business Day will normally be effective on that day, and we will send you written confirmation of each telephone transfer. We have established procedures reasonably designed to confirm that instructions communicated by telephone are genuine. These procedures may require any person requesting a telephone transaction to provide certain personal identification upon our request. We may also record all or part of any telephone conversation with 32 respect to transaction instructions. We reserve the right to deny any transaction request made by telephone. When you make a written request for a telephone authorization, you authorize us to accept and to act upon instructions received by telephone with respect to your Contract, and you agree that, so long as we comply with our procedures, none of Pacific Mutual, its affiliates, the Fund, or any of their directors, trustees, officers employees or agents will be liable for any loss, liability, cost or expense (including attorneys' fees) in connection with requests that are effected in accordance with your telephone authorization and that we believe to be genuine. This policy means that you will bear the risk of loss arising out of your telephone transaction privileges. TIMING OF PAYMENTS 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, we will normally effect transfers from the Variable Investment Options or exchanges of Subaccount Annuity Units, within seven calendar days after your transfer or exchange request is effective. We will normally effect periodic annuity payments on the day that corresponds to the Annuity Date and will make payment on the following day. Payments or transfers may be suspended for a longer period under certain abnormal circumstances. These include a closing of the New York Stock Exchange other than on a regular holiday or weekend, a trading restriction imposed by the SEC, or an emergency declared by the SEC. For withdrawals from the Fixed Option, death benefit payments attributable to Fixed Option Value, or fixed periodic annuity payments, payment of proceeds may be delayed for up to six (6) months after the request is effective. Similar delays may apply to transfers from the Fixed Option and to loans. (See THE FIXED OPTION for more details.) CONFIRMATIONS STATEMENTS AND OTHER REPORTS TO CONTRACT OWNERS Confirmations will be sent out for unscheduled purchase payments and transfers, loans, loan repayments, unscheduled partial withdrawals, a full withdrawal, and on payment of any death benefit proceeds. Each quarter prior to your Annuity Date, we will send you a statement that provides certain information pertinent to your Contract. These statements disclose Contract Value, Subaccount values, values under the Fixed Option, transactions made and specific Contract data that apply to your Contract. Confirmations of your transactions under the pre- authorized checking plan, dollar cost averaging, earnings sweep, portfolio rebalancing, and pre-authorized withdrawal options will appear on your quarterly account statements. Your fourth-quarter statement will contain annual information about your Contract Value and transactions. You will also be sent an annual and a semi-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. SALES COMMISSIONS Pacific Mutual pays sales commissions to dealers and other expenses associated with promotion and sales of the Contracts. Broker-dealers may receive aggregate commissions of up to 2.5% of your aggregate Purchase Payments. Pacific Mutual 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 Pacific Mutual, to receive non-cash compensation such as expense-paid trips, expense-paid educational seminars, and merchandise. FINANCIAL STATEMENTS Pacific Mutual's audited financial statements as of and for the years ended December 31, 1994 and 1993, and unaudited financial statements as of June 30, 1995 and for the six months ended June 30, 1995 and 1994, are contained in the Statement of Additional Information. 33 THE FIXED OPTION 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 Fixed Option under the Contract are not registered under the Securities Act of 1933 and the General Account has not been registered as an investment company under the 1940 Act. An interest you have in the Fixed Option is not subject to these Acts, and Pacific Mutual has 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 our General Account under 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 may be reset periodically; your allocation will receive the Guaranteed Interest Rate in effect on the effective date of your allocation. The Guaranteed Interest Rate on your Fixed Option Value will never be less than an annual rate of 3%. 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 on your next Contract Anniversary or, if earlier, on your Annuity Date. Example: Your Contract Anniversary is January 31. 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%. Until January 31, year 2, your first $1,000 earns 5% interest and your second $500 earns 6% interest. On January 31, year 2, a new interest rate may go into effect for your entire Fixed Option Value. All Guaranteed Interest Rates will be expressed as annual rates, and interest will accrue daily. On your Contract Anniversary each 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) with a new Guaranteed Interest Rate or Rate(s), unless you instruct us otherwise. WITHDRAWALS AND TRANSFERS You may withdraw amounts from your Fixed Option Value, or transfer amounts from your Fixed Option Value to one or more Variable Investment Options, at any time on or prior to the Annuity Date; however, if you reside in a state that requires refund of purchase payments under the Free Look Right, transfers may only be made on or after your Free Look Transfer Date. Payments or transfers from the Fixed Option may be delayed, as described under ADDITIONAL INFORMATION--Timing of Payments; any amount delayed will, so long as it is held under the Fixed Option, continue to earn interest at the Guaranteed Interest Rate then in effect until the Guarantee Term in effect has ended, and the minimum guaranteed interest rate of 3% thereafter, unless state law requires a greater rate be paid. 34 CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
PAGE ---- DISTRIBUTION OF THE CONTRACTS.............................................. 1 Pacific Equities Network................................................. 1 Broker-Dealer Commissions................................................ 1 PERFORMANCE................................................................ 1 Total Returns............................................................ 1 Yields................................................................... 2 Performance Comparisons and Benchmarks................................... 3 Insurance Company Rating Information..................................... 4 Separate Account Performance............................................. 4 THE CONTRACTS AND THE SEPARATE ACCOUNT..................................... 8 Calculating Subaccount Unit Values....................................... 8 Variable Annuity Payment Amounts......................................... 8 Corresponding Dates...................................................... 10 Age and Sex of Annuitant................................................. 11 Systematic Transfer Programs............................................. 11 Pre-Authorized Withdrawals............................................... 13 Death Benefit............................................................ 13 Joint Annuitants on Qualified Contracts.................................. 14 1035 Exchanges........................................................... 14 Safekeeping of Assets.................................................... 14 Participating............................................................ 14 FINANCIAL STATEMENTS....................................................... 14
35 APPENDIX A: STATE LAW VARIATIONS Issue Date--The term "Issue Date" shall be substituted for the term "Contract Date" for Contracts issued to residents of the Commonwealth of Massachusetts. Purchase Payments: No minimum initial or subsequent Purchase Payment requirements will apply to a Contract purchased in connection with the Texas ORP Retirement Program. SHORT-TERM CANCELLATION RIGHT ("FREE-LOOK") If you reside in one of the following states on your Contract Date, you may return your Contract to us for cancellation within 20 days of your receipt of the Contract and receive a refund as described under SHORT-TERM CANCELLATION RIGHT ("FREE-LOOK"): Idaho South Dakota If you reside in one of the following states on your Contract Date and you exercise your Free Look right and return your Contract to us within 10 days of your receipt of your Contract, we will refund your aggregate Purchase Payments under your Contract that we received: Georgia South Carolina Michigan West Virginia North Carolina
If you reside in California and are age 65 or older on your Contract Date, you may return your Contract to us within 30 days of your receipt of your Contract for cancellation and receive a refund as described under SHORT-TERM CANCELLATION RIGHT ("FREE-LOOK"). 36 To receive a current copy of the Pacific One Statement of Additional Information without charge, complete the following and send it to: Pacific Mutual Life Insurance Company Variable Annuities Post Office Box 7187 Pasadena, CA 91109-7187 Name _________________________ Address ______________________ City _________________________State Zip Bar Code - -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- - -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- [PASTE-UP LOGO] Issued By: Principal Underwriter: Pacific Mutual Life Insurance Company Pacific Equities Network 700 Newport Center Drive Member: NASD/SIPC P.O. Box 9000 700 Newport Center Drive Newport Beach, California 92660 P.O. Box 9000 Newport Beach, California 92660 Prospectus dated , 1995 STATEMENT OF ADDITIONAL INFORMATION , 1995 PACIFIC ONE SEPARATE ACCOUNT A ---------------- Pacific One (the "Contract") is a variable annuity contract issued by Pacific Mutual Life Insurance Company ("Pacific Mutual"). This Statement of Additional Information is not a Prospectus and should be read in conjunction with the Contract's Prospectus, dated , 1995, which is available without charge upon written or telephone request to Pacific Mutual. Terms used in this Statement of Additional Information have the same meanings as in the Prospectus, and some additional terms are defined particularly for this Statement of Additional Information. ---------------- Pacific Mutual Life Insurance Company Mailing Address: P.O. Box 7187 Pasadena, California 91109-7187 1-800-722-2333 TABLE OF CONTENTS
PAGE ---- DISTRIBUTION OF THE CONTRACTS.............................................. 1 Pacific Equities Network................................................. 1 Broker-Dealer Commissions................................................ 1 PERFORMANCE................................................................ 1 Total Returns............................................................ 1 Yields................................................................... 2 Performance Comparisons and Benchmarks................................... 3 Insurance Company Rating Information..................................... 4 Separate Account Performance............................................. 4 THE CONTRACTS AND THE SEPARATE ACCOUNT..................................... 8 Calculating Subaccount Unit Values....................................... 8 Variable Annuity Payment Amounts......................................... 8 Corresponding Dates...................................................... 10 Age and Sex of Annuitant................................................. 11 Systematic Transfer Programs............................................. 11 Pre-Authorized Withdrawals............................................... 13 Death Benefit............................................................ 13 Joint Annuitants on Qualified Contracts.................................. 14 1035 Exchanges........................................................... 14 Safekeeping of Assets.................................................... 14 Participating............................................................ 14 FINANCIAL STATEMENTS....................................................... 14
i DISTRIBUTION OF THE CONTRACTS PACIFIC EQUITIES NETWORK Pacific Equities Network ("PEN"), an indirect wholly-owned subsidiary of Pacific Mutual, acts as the principal underwriter of the Contracts and offers the Contracts on a continuous basis. Pacific Mutual and PEN enter into selling agreements with broker-dealers whose registered representatives are authorized by state insurance departments to sell the Contracts. Pursuant to its selling agreement with Pacific Mutual, PEN receives compensation in the amount of 2.5% of aggregate Purchase Payments for distributing the Contracts. In addition, PEN may also receive override payments, expense allowances, bonuses, wholesaler fees and training allowances. BROKER-DEALER COMMISSIONS Broker-dealers may receive compensation of up to 2.5% of aggregate Purchase Payments for sales of the Contracts. Registered representatives earn commissions from the broker-dealers with which they are affiliated and such arrangements vary. In addition, registered representatives who meet certain production levels may qualify, under sales incentive programs adopted by Pacific Mutual, for non-cash compensation such as expense paid trips, expense paid educational seminars and merchandise. 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 GUARANTY 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 ("redeemable value") of that initial payment at the end of the measuring period. The redeemable value reflects the effect of all recurring fees and charges applicable to a Contract Owner under the Contract, including the mortality and expense risk charge and the asset-based Administrative Fee, but does not reflect any charges for applicable premium taxes. The Annual Fee is also taken into account, assuming an average Contract Value of $80,000. The redeemable value is then 1 divided by the initial payment and this quotient is taken to the Nth root (N represents the number of years in the measuring period), and 1 is subtracted from this result. Average annual total return is expressed as a percentage. T = (ERV/P)(/1//N)-1 where T = average annual total return ERV = ending redeemable value P = hypothetical initial payment of $1,000 N = number of years Average annual total return figures will be given for recent one-, 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 Annual Fee. YIELDS Money Market Subaccount The "yield" (also called "current yield") of the Money Market Subaccount is computed in accordance with a standard method prescribed by the SEC. The net change in the Subaccount's Unit Value during a seven-day period is divided by the Unit Value at the beginning of the period to obtain a base rate of return. The current yield is generated when the base rate is "annualized" by multiplying it by the fraction 365/7; that is, the base rate of return is assumed to be generated each week over a 365-day period and is shown as a percentage of the investment. The "effective yield" of the Money Market Subaccount is calculated similarly but, when annualized, the base rate of return is assumed to be reinvested. The effective yield will be slightly higher than the current yield because of the compounding effect of this assumed reinvestment. The formula for effective yield is: (base period return +1)365/7-1. Realized capital gains or losses and unrealized appreciation or depreciation of the assets of the underlying Money Market Portfolio are not included in the yield calculation. Current yield and effective yield do not reflect the deduction of charges for any applicable premium taxes, but do reflect a deduction for the Annual Fee, assuming an average Contract Value of $80,000. 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 2 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 semi-annual compounding: YIELD = 2[(((a-b)/cd) + 1)/6/-1] 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 mortality and expense risk charge, the asset-based Administrative Fee and the Annual Fee (assuming an average Contract Value of $80,000), but does not reflect any charge for applicable premium taxes and/or other taxes. The Subaccounts' yields will vary from time to time depending upon market conditions, the composition of each Portfolio and operating expenses of the Fund allocated to each Portfolio. Consequently, any given performance quotation should not be considered representative of the Subaccount's performance in the future. Yield should also be considered relative to changes in Subaccount Unit Values and to the relative risks associated with the investment policies and objectives of the various Portfolios. In addition, because performance will fluctuate, it may not provide a basis for comparing the yield of a Subaccount with certain bank deposits or other investments that pay a fixed yield or return for a stated period of time. PERFORMANCE COMPARISONS AND BENCHMARKS In advertisements and sales literature, we may compare the performance of some or all of the Subaccounts to the performance of other variable annuity issuers in general and to the performance of particular types of variable annuities investing in mutual funds, or series of mutual funds, with investment objectives similar to each of the Subaccounts. This performance may be presented as averages or rankings compiled by Lipper Analytical Services, Inc. ("Lipper"), the Variable Annuity Research and Data Service ("VARDS(R)") or Morningstar, Inc. ("Morningstar"), which are independent services that monitor and rank the performance of variable annuity issuers and mutual funds in each of the major categories of investment objectives on an industry-wide basis. Lipper's rankings include variable life issuers as well as variable annuity issuers. VARDS(R) rankings compare only variable annuity issuers. The performance analyses prepared by Lipper and VARDS(R) rank such issuers on the basis of total return, assuming reinvestment of dividends and distributions, but do not take sales charges, redemption fees or certain expense deductions at the separate account level into consideration. In addition, VARDS(R) prepares risk adjusted rankings, which consider the effects of market risk on total return performance. We may also compare the performance of the Subaccounts with performance information included in other publications and services that monitor the performance of insurance company separate accounts or other investment vehicles. These other services or publications may be general interest business publications such as The Wall Street Journal, Barron's, Business Week, Forbes, Fortune, and Money. In addition, our reports and communications to Contract Owners, advertisements, or sales literature may compare a Subaccount's performance to various benchmarks that measure the performance of a pertinent group of securities widely regarded by investors as being representative of the securities markets in general or as being representative of a particular type of security. These benchmarks include the following: (1) the Standard & Poor's 500 Composite Stock Price Index ("S&P 500"), an unmanaged weighted index of 500 companies that represent approximately 80% of the market capitalization of the United States equity markets; (2) the Consumer Price Index ("CPI"), published by the U.S. Bureau of Labor Statistics, a statistical 3 measure of change, over time, in the prices of goods and services in major expenditure groups and generally considered to be a measure of inflation; (3) the Dow Jones Industrial Average ("DJIA"); (4) the Donoghue Money Market Institutional Averages; (5) the Lehman Brothers Government Corporate Index; (6) the Lehman Brothers Government Bond Index; (7) the Salomon Brothers High Yield Bond Indexes; and (8) the Morgan Stanley Capital International's EAFE Index. We may also compare the performance of the Subaccounts with that of other appropriate indices of investment securities and averages for peer universes of funds or data developed by us derived from such indices or averages. Unmanaged indexes generally assume the reinvestment of dividends or interest but do not generally reflect deductions for investment management or administrative costs and expenses. INSURANCE COMPANY RATING INFORMATION Pacific Mutual may also advertise or report to Contract Owners its ratings as an insurance company by the A.M. Best Company. Each year, A.M. Best reviews the financial status of thousands of insurers, culminating in the assignment of Best's Ratings. These ratings reflect Best's current opinion of the relative financial strength and operating performance of an insurance company in comparison to the norms of the life/health industry. Best's Ratings range from A++ to F. An A++ rating means, in the opinion of A.M. Best, that the insurer has demonstrated the strongest ability to meet its respective policyholder and other contractual obligations. A.M. Best publishes Best's Insurance Reports, Life-Health Edition. The 1995 Edition reported Pacific Mutual's rating of A+ for financial position and operating performance as of June 1995. In addition, the claims-paying ability of Pacific Mutual as measured by the Standard & Poor's Corporation may be referred to in advertisements or in reports to Contract Owners. A Standard & Poor's insurance claims-paying ability rating is an assessment of an operating insurance company's financial capacity to meet the obligations of its insurance policies in accordance with their terms. Standard & Poor's ratings range from AAA to D. Our claims-paying ability rating is AA+, as of August 1994. Pacific Mutual may additionally advertise its rating from Duff & Phelps Credit Rating Co. A Duff & Phelps rating is an assessment of a company's insurance claims-paying ability. Duff & Phelps ratings range from AAA to CCC. Duff & Phelps rates the claims-paying ability of Pacific Mutual as AA+ as of October 1995. Pacific Mutual may advertise its insurance financial strength rating from Moody's Investors Service, Inc. Moody's ratings range from Aaa to C. As of October, 1994, Moody's gave Pacific Mutual a rating of Aa3. SEPARATE ACCOUNT PERFORMANCE 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 information presented also includes data representing unmanaged market indices. The Subaccounts have not yet commenced operations. Therefore, no historical performance data exist for the Subaccounts. Nine of the Portfolios of the Fund available under the Contract, however, have been in operation since January 4, 1988 (January 30, 1991 in the case of the Equity Index Portfolio and January 4, 1994 in the case of the Growth LT Portfolio). Historical performance information for each of the Equity Portfolio and the Bond and Income Portfolio is based 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 January 1, 1984, the assets of which were acquired by the Fund on December 31, 1994. The following tables represent 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. Because the Subaccounts have not commenced operations, however, and because the Contracts were not available during this period, THESE ARE NOT ACTUAL PERFORMANCE NUMBERS FOR THE SUBACCOUNTS OR FOR THE CONTACT. These are hypothetical total return numbers that represent the actual performance of the Portfolios, adjusted for the fees and charges applicable to the Contract. Any charge for premium taxes and/or other taxes are not reflected in these data, and reflection of the Annual Fee assumes an average Contract size of $80,000. 4 THE RESULTS SHOWN IN THIS SECTION ARE NOT AN ESTIMATE OR GUARANTY OF FUTURE INVESTMENT PERFORMANCE. ANNUALIZED RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1994
SINCE 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION ------ ------- ------- -------- --------- Money Market....................... 2.36% 1.79% 3.21% -- 3.95% High Yield Bond.................... -0.98% 10.65% 10.55% -- 8.87% Managed Bond....................... -5.76% 3.68% 6.66% -- 7.44% Government Securities.............. -6.50% 2.77% 5.93% -- 6.83% Growth LT.......................... 11.90% -- -- -- 11.90% Equity Income...................... -1.68% 2.99% 5.27% -- 8.46% Multi-Strategy..................... -2.90% 2.94% 5.37% -- 7.61% Equity............................. -4.27% 4.81% 7.26% 11.59% 11.29% Bond and Income.................... -9.76% 4.34% 7.30% 9.70% 10.01% Equity Index....................... -0.35% 4.33% -- -- 8.99% International...................... 1.61% 5.08% 1.57% -- 5.94% Donoghue MF........................ 3.76% 3.37% 5.11% -- * EAFE............................... 7.80% 7.86% 1.50% 17.54% * First Boston....................... -0.97% 11.16% 13.08% -- * LBG/Bond........................... -3.37% 4.66% 7.53% -- * LBG/C Bond......................... -3.51% 4.85% 7.70% 9.84% * Russell 2500....................... -1.05% 10.22% 10.86% -- * S&P 500............................ 1.27% 6.23% 8.66% 14.37% * CUMULATIVE RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1994 SINCE 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION ------ ------- ------- -------- --------- Money Market....................... 2.36% 5.45% 17.11% -- 31.16% High Yield Bond.................... -0.98% 35.47% 65.09% -- 81.18% Managed Bond....................... -5.76% 11.44% 38.04% -- 65.24% Government Securities.............. -6.50% 8.54% 33.38% -- 58.79% Growth LT (1)...................... 11.80% -- -- -- 11.80% Equity Income...................... -1.68% 9.26% 29.30% -- 76.51% Multi-Strategy..................... -2.90% 9.09% 29.88% -- 67.04% Equity............................. -4.27% 15.14% 41.97% 199.51% 224.52% Bond and Income.................... -9.76% 13.60% 42.24% 152.36% 185.95% Equity Index....................... -0.35% 13.57% -- -- 40.18% International...................... 1.61% 16.03% 8.12% -- 49.70% Donoghue MF........................ 3.76% 10.45% 28.30% -- * EAFE............................... 7.80% 25.48% 7.73% 403.33% * First Boston....................... -0.97% 37.36% 84.90% -- * LBG/Bond........................... -3.37% 14.64% 43.76% -- * LBG/C Bond......................... -3.51% 15.27% 44.90% 155.63% * Russell 2500....................... -1.05% 33.90% 67.45% -- * S&P 500............................ 1.27% 19.88% 51.48% 282.93% *
- -------- *Not available (1) Cumulative return is for the period January 4, 1994 (commencement of operations) to December 31, 1994. 5 Tax Deferred Accumulation In reports or other communications to you or in advertising or sales materials, we may also describe the effects of tax-deferred compounding on the Separate Account's investment returns or upon returns in general. These effects may be illustrated in charts or graphs and may include comparisons at various points in time of returns under the Contract or in general on a tax-deferred basis with the returns on a taxable basis. Different tax rates may be assumed. In general, individuals who own annuity contracts are not taxed on increases in the value under the annuity contract until some form of distribution is made from the contract. Thus, the annuity contract will benefit from tax deferral during the accumulation period, which generally will have the effect of permitting an investment in an annuity contract to grow more rapidly than a comparable investment under which increases in value are taxed on a current basis. The following chart illustrates this benefit by comparing accumulation under a variable annuity contract with accumulations from an investment on which gains are taxed on a current basis. The chart shows accumulations on an initial investment or Purchase Payment of $25,000, assuming hypothetical annual returns of 0%, 4% and 8%, compounded annually, and a tax rate of 31%. 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 Mortality and Expense Risk Charge, the Administrative Fee and the Annual Fee, any charge for premium taxes and/or other taxes, or the expenses of an underlying investment vehicle, such as the Fund. For a description of the charges and expenses under the Contract, see FEE TABLE and CHARGES, FEES AND DEDUCTIONS in the Prospectus. In addition, these values assume that the Contract Owner does 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 31% rate on the amount in excess of the Purchase Payment. The rates of return illustrated are hypothetical and are not an estimate or guaranty of performance. Actual tax rates may vary for different taxpayers from that illustrated and withdrawals by Contract Owners who have not reached age 59 1/2 may be subject to a tax penalty of 10%. 6 POWER OF TAX DEFERRAL $25,000 investment at annual rates return of 0.00%, 4.00% and 8.00%, taxed @ 31% [CHART APPEARS HERE]
Taxable Tax-Deferred Investment Investment ---------- ------------ 10 Years 0% $25,000.00 $25,000.00 4% $32,823.20 $33,284.21 8% $42,784.64 $44,991.46 20 Years 0% $25,000.00 $25,000.00 4% $43,094.51 $45,546.87 8% $73,221.00 $88,151.51 30 Years 0% $25,000.00 $25,000.00 4% $56,579.99 $63,698.61 8% $125,309.35 $181,330.83
7 THE CONTRACTS AND THE SEPARATE ACCOUNT CALCULATING SUBACCOUNT UNIT VALUES The Unit Value of the Subaccount Units in each Variable Investment Option is computed as of the end of each Business Day. The initial Unit Value of each Subaccount will be $10 on the Business Day the Subaccount begins operations. At the end of each subsequent Business Day, the Unit Value for a Subaccount is equal to: Y multiplied by 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)minus 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 (a)= the net asset value per share of the corresponding Portfolio shares held by that Subaccount as of the end of that valuation period; where (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 of 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 of the valuation period; and (C) = a factor that assesses against the Subaccount assets for each calendar day in the valuation period, the charge for mortality and expense risks at a rate that is equal on an annual basis to an annual rate expressed as a decimal (where 1.0 equals 100%) of 0.0125 and the Administrative Charge at a rate that is equal on an annual basis to an annual rate expressed as a decimal of 0.0015 (see Charges, Fees and Deductions). 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 Contract Value (less Contract Debt) into variable annuity payments, you must pay any applicable charge for premium taxes and or other taxes on your Contract Value (unless applicable law requires those taxes to be paid at a later time). We assess this charge by reducing your Contract Value, proportionately relative to your Account Value in each Subaccount and in the Fixed Option in an amount equal to the aggregate amount of the charges. The remaining amount of your available Contract Value may be used to provide variable annuity payments. Alternatively, your remaining 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 Contract Value (less Contract Debt) and any applicable Annual Fee and charge for premium taxes and or other taxes. 8 Second: The First Variable Payment We begin by referring to your Contract's Option Table for your Annuity Option (the "Annuity Option Table"). The Annuity Option Table allows us to calculate the dollar amount of the first variable annuity payment under your Contract, based on the amount applied toward the variable annuity. The number that the Annuity Option Table yields will be based on the Annuitant's age (and, in certain cases, sex) and assumes a 5% investment return, as described in more detail below. Example: Assume a man is 65 years of age at his Annuity Date and has selected a lifetime annuity with monthly payments guaranteed for 10 years. According to the Annuity Option Table, this man should receive an initial monthly payment of $5.79 for every $1000 of his Contract Value (reduced by applicable charges and any Contract Debt) that he will be using to provide variable payments. Therefore, if his Contract Value after deducting applicable charges and any Contract Debt 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. Third: Subaccount Annuity Units For each Subaccount, we use the amount of the first variable annuity payment under your Contract attributed 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 mortality and expense risk charge at a rate equal on an annual basis to the annual rate expressed as a decimal (where 1.0 equals 100%) of 0.0125 and the Administrative Fee at a rate equal on an annual basis to the annual rate of 0.0015. 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 Unit Values to correct for the Option Table's implicit assumption of a 5% annual investment return on amounts applied but not yet used to furnish annuity benefits. Different Subaccounts may be selected for your Contract before and after your Annuity Date, subject to any restrictions we may establish. Currently, your Annuitant(s) 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 you annuitize. The number of Subaccount Annuity Units in any Subaccount may change due to such exchanges. Exchanges following annuitization 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 9 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 investment return of 5% each year during the payout of your annuity; this 5% is referred to as an "assumed investment return." The Subaccount Annuity Unit Value for a Subaccount will increase only to the extent that the investment performance of that Subaccount exceeds its mortality and expense 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 factor. Example: Assume the investment performance of a Subaccount is at a rate of 6.40% per year. The Subaccount Unit Value for that Subaccount would increase at a rate of 5.00% per year (6.40% minus the mortality and expense risk charge at the annual rate of 1.25% and minus the Administrative Fee at the annual rate of .15% equals 5.00%), 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 = 0%. ------ 1.05 If the investment performance of a Subaccount assets is at a rate less than 6.40% per year, the Subaccount Annuity Unit Value will decrease, even if the Subaccount Unit Value is increasing. Example: Assume the investment performance of a Subaccount is at a rate of 4.00% per year. The Subaccount Unit Value for that Subaccount would increase at a rate of 2.60% per year (4.00% minus the mortality and expense risk charge at the annual rate of 1.25% and minus the Administrative Fee at the annual rate of .15% equals 2.60%), 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 = .9771 -1 = -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 date. 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). 10 AGE AND SEX OF ANNUITANT As mentioned in the Prospectus, the Contracts generally provide for sex- distinct annuity purchase rates 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 purchase rates, and Contracts issued in those states will use unisex rates. In addition, Contracts issued in connection with Qualified Plans are required to use unisex rates. We may require proof of your Annuitant's age and sex before commencing annuity payments. If the age or sex (or both) of your Annuitant are incorrectly stated in your Contract, the amount payable will be corrected to equal the amount that the annuitized portion of the Contract Value under that Contract would have purchased for your Annuitant's correct age and sex. If the correction is effected after annuity payments have commenced, and we have made overpayments based on the incorrect information, 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 sex and/or date of birth. SYSTEMATIC TRANSFER PROGRAMS 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 good 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; semi-annual 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 Variable Investment Option or the Fixed Option as your source account. The Account Value of your source account must be at least $10,000 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, semi-annual or annual transfers. The amount of your transfers may be specified as a dollar amount or a percentage of your source Account Value; however, the first 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 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. 11 Your dollar cost averaging transfers will continue until the earlier of (i) your request to stop dollar cost averaging is effective, or, (ii) your source Account Value is zero, or (iii) you annuitize. If, as a result of a dollar cost averaging transfer, your source Account Value falls below any minimum Account Value we may establish, we have the right, at our option, to transfer that remaining Account Value to your target account(s) on a proportionate basis relative to your most recent allocation instructions. You may not use dollar cost averaging and the earnings sweep at the same time. 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 your Contract Value allocations. If you elect the portfolio rebalancing feature, we will automatically transfer your Contract Value back to the percentages you specify. You may choose to have rebalances made quarterly, semi-annually 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 good 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 $10,000 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, semi-annually 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 semi-annual 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. For the purpose of determining Earnings, transfers, withdrawals, and any applicable annual fees, transaction fees, and charges for premium taxes and/or other taxes imposed on your sweep option will first be attributed to that sweep option's earnings on a last in, first out basis, and then to amounts allocated or transferred to that sweep option. 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 good form. If you stop the earnings sweep, you must wait 30 days to begin again. You may specify a date for your first sweep, or we will treat your request as if you selected the request's effective date. If you specify a date fewer than 30 days after your Contract Date, your first earnings sweep will be delayed one month, and if you request the earnings sweep on your Application but do not specify a 12 date for the first sweep, it will occur one period after your Contract Date, as described above under Dollar Cost Averaging. If you are using the earnings sweep, you may also use portfolio rebalancing only if you select the Fixed Option as your sweep option. You may not use the earnings sweep and dollar cost averaging at the same time. 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 directions, amounts will be deducted proportionately from your Account Value in each 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 good 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 pre-authorized withdrawals on your Application but do not specify a date for the first withdrawal, it will occur one period after your Contract Date. If your pre-authorized withdrawals cause your Account Value in any Investment Option to fall below any minimum Account Value we may establish, 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. Each pre-authorized withdrawal is subject to any applicable charge for premium taxes and/or other taxes, to federal income tax on its taxable portion, and, if you have not reached age 59 1/2, a 10% tax penalty. DEATH BENEFIT Any death benefit payable will be calculated as of the date we receive proof (in good 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 writing and in a form satisfactory to us. A recipient of death benefit proceeds may elect to have this benefit paid in one lump sum, in periodic payments, in the form of a lifetime annuity or in some combination of these. Annuity payments will begin within 30 days once we receive all information necessary to process the claim. If your Contract names Joint or Contingent Annuitants, no death benefit will be payable unless and until the last Annuitant dies prior to the Annuity Date or a Contract Owner dies prior to the Annuity Date. If yours is a Qualified Contract, your Contingent Annuitant or Contingent Owner must be your spouse. Death of an Annuitant If a Joint Annuitant who is not a Contract Owner dies prior to the Annuity Date, the surviving Joint Annuitant becomes your Annuitant. If your Annuitant is not a Contract Owner and dies, or if there is no surviving Joint Annuitant, your surviving Contingent Annuitant becomes your Annuitant. If there is no surviving Contingent Annuitant, the death benefit becomes payable. Any death benefit payable on the death of your Annuitant is payable to the surviving Beneficiary. If no Beneficiary survives, any death benefit is payable to the Annuitant's estate. 13 Death of a Contract Owner If any Contract Owner dies prior to the Annuity Date while the Annuitant is still living, a death benefit may be payable. If that Contract Owner was the sole Annuitant or a Joint Annuitant under the Contract, the death benefit will be payable to the surviving Beneficiary, or to that Annuitant's estate if no Beneficiary survives. If that Contract Owner was not an Annuitant under the Contract, the death benefit will be payable to the surviving Joint Owner of your Contract, if there is one; if not, the death benefit will be payable to the surviving Contingent Owner, if there is one; if not the death benefit will be payable to the surviving Beneficiary, or to the Annuitant or the Annuitant's estate if no Beneficiary survives. If the Joint or Contingent Owner is the deceased Contract Owner's surviving spouse, he or she may elect to become the Contract Owner and continue the Contract rather than receive the death benefit proceeds. 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 Pacific Mutual for more information. 1035 EXCHANGES You may make your initial Purchase Payment through an exchange of an existing annuity contract. To exchange, you must complete a 1035 Exchange form, which is available by calling 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 Internal Revenue Code of 1986, as amended (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 recordkeeping, 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 Pacific Mutual is responsible for the safekeeping of the assets of the Separate Account. These assets are held separate and apart from the assets of Pacific Mutual's general account and its other separate accounts. PARTICIPATING The Contract is participating and will share in the surplus earnings of Pacific Mutual. However, the current dividend scale is zero and Pacific Mutual does not anticipate that dividends will be paid. If any dividend is paid, the Contract Owner may elect to receive the dividend in cash or to add the dividend to the Contract's Contract Value. If no election is made by the Contract Owner, the dividend will be added to the Contract Value. Pacific Mutual will allocate any dividend to Contract Value in accordance with the Owner's most recent allocation instructions, unless instructed. The Owner should consult with his or her tax adviser before making an election. FINANCIAL STATEMENTS Separate Account A has not yet commenced operations and therefore no financial statements are included. Pacific Mutual's audited financial statements as of and for the years ended December 31, 1994 and 1993, and unaudited financial statements as of June 30, 1995 and for the six months ended June 30, 1995 and 1994, are set forth below. These financial statements should be considered only as bearing on the ability of Pacific Mutual to meet its obligations under the Contracts and not as bearing on the investment performance of the assets held in the Separate Account. The financial statements of Pacific Mutual as of and for the years ended December 31, 1994 and 1993 have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein. 14 PACIFIC MUTUAL LIFE INSURANCE COMPANY UNAUDITED FINANCIAL STATEMENTS AS OF JUNE 30, 1995 AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994 15 PACIFIC MUTUAL LIFE INSURANCE COMPANY STATEMENT OF FINANCIAL POSITION (UNAUDITED)
JUNE 30, 1995 -------------- (IN THOUSANDS) ASSETS Bonds............................................................ $ 6,990,684 Preferred stocks................................................. 142,982 Common stocks.................................................... 65,722 Unconsolidated subsidiaries...................................... 194,761 Mortgage loans................................................... 1,395,877 Real estate...................................................... 163,570 Home office properties........................................... 50,864 Policy loans..................................................... 2,352,930 Cash and short-term investments.................................. 365,449 Investment income due and accrued................................ 144,609 Premiums due and uncollected, and other assets................... 179,920 Separate account assets.......................................... 4,305,992 ----------- Total Assets................................................. $16,353,360 =========== LIABILITIES AND SURPLUS Liabilities Policy reserves................................................ $ 6,785,662 Deposit funds.................................................. 3,536,023 Other liabilities.............................................. 870,316 Asset valuation reserve........................................ 193,145 Separate account liabilities................................... 4,305,992 ----------- Total liabilities................................................ 15,691,138 Surplus.......................................................... 662,222 ----------- Total Liabilities and Surplus................................ $16,353,360 ===========
See Note to Financial Statements 16 PACIFIC MUTUAL LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND SURPLUS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, --------------------- 1995 1994 ---------- ---------- (IN THOUSANDS) REVENUES Premiums, annuity considerations and deposit funds..... $1,469,814 $1,024,357 Net investment income.................................. 466,763 432,035 Other income........................................... 16,139 11,906 ---------- ---------- Total Revenues........................................ 1,952,716 1,468,298 ---------- ---------- BENEFITS AND EXPENSES Current and future policy benefits..................... 1,733,018 1,272,148 Operating expenses..................................... 120,853 112,481 Premium and other taxes (excluding tax on capital gains)................................................ 15,077 15,024 Dividends to policyowners.............................. 9,363 8,889 ---------- ---------- Total Benefits and Expenses........................... 1,878,311 1,408,542 ---------- ---------- Income before Federal income taxes...................... 74,405 59,756 Federal income taxes.................................... 45,127 17,003 ---------- ---------- Net gain from operations................................ 29,278 42,753 Net realized capital gains.............................. 2,148 6,537 ---------- ---------- NET INCOME.............................................. $ 31,426 $ 49,290 ========== ========== SURPLUS Net income.............................................. $ 31,426 $ 49,290 Other surplus transactions, net......................... 3,172 (36,697) ---------- ---------- Increase in surplus..................................... 34,598 12,593 Surplus, beginning of period............................ 627,624 582,776 ---------- ---------- SURPLUS, END OF PERIOD.................................. $ 662,222 $ 595,369 ========== ==========
See Note to Financial Statements 17 PACIFIC MUTUAL LIFE INSURANCE COMPANY STATEMENTS OF CASH FLOW (UNAUDITED)
SIX MONTHS ENDED JUNE 30, ------------------------ 1995 1994 ----------- ----------- (IN THOUSANDS) CASH FLOW FROM OPERATIONS Receipts Premiums, annuity considerations and deposit funds. $ 1,456,159 $ 786,063 Net investment income.............................. 390,390 343,799 Allowances and reserve adjustments on reinsurance ceded............................................. 28,352 254,737 Payments Policy benefit payments............................ (791,899) (579,351) Net policy loans................................... (40,440) (129,324) Operating expenses................................. (129,968) (82,273) Net transfer to separate accounts.................. (476,532) (167,744) Premium and other taxes............................ (24,477) (21,394) Dividends to policyowners.......................... (9,545) (9,338) Federal income tax................................. (14,230) (22,736) Other applications, net.............................. (23,467) (23,090) ----------- ----------- NET CASH FLOW FROM OPERATIONS........................ 364,343 349,349 ----------- ----------- CASH FLOW FROM INVESTMENTS Proceeds Bonds.............................................. 1,080,201 1,671,810 Stocks............................................. 74,947 69,734 Mortgage loans..................................... 129,865 215,735 Real estate........................................ 3,412 2,385 Other investments.................................. 59,310 12,450 Payments for the purchase of Bonds.............................................. (1,363,710) (2,017,337) Stocks............................................. (87,817) (67,970) Mortgage loans..................................... (115,727) (112,223) Real estate........................................ (1,422) (3,691) Other investments.................................. (33,979) (70,872) ----------- ----------- NET CASH FLOW USED FOR INVESTMENTS................... (254,920) (299,979) ----------- ----------- CASH FLOW FROM BORROWINGS............................ 158,281 0 ----------- ----------- Increase in cash and short-term investments.......... 267,704 49,370 Cash and short-term investments, beginning of period. 97,745 342,401 ----------- ----------- CASH AND SHORT-TERM INVESTMENTS, END OF PERIOD....... $ 365,449 $ 391,771 =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid...................................... $ 7,651 $ 13,782 =========== ===========
See Note to Financial Statements 18 PACIFIC MUTUAL LIFE INSURANCE COMPANY NOTE TO FINANCIAL STATEMENTS JUNE 30, 1995 (UNAUDITED) 1. BASIS OF PRESENTATION The information set forth in the statement of financial position as of June 30, 1995 and the statements of operations and surplus and of cash flow for the six months ended June 30, 1995 and June 30, 1994 is unaudited. The information reflects all adjustments, consisting only of normal recurring adjustments, that, in the opinion of management, are necessary to present fairly the financial position and results of operations of Pacific Mutual Life Insurance Company ("Pacific Mutual") for the periods indicated. Results of operations for the interim periods are not necessarily indicative of the results of operations for the full year. For further information, refer to the financial statements and footnotes thereto included in Pacific Mutual's audited financial statements for the years ended December 31, 1994 and December 31, 1993. In April 1993, the Financial Accounting Standards Boards ("FASB") issued Interpretation No. 40, "Applicability of Generally Accepted Accounting Principles to Mutual Life Insurance and Other Enterprises" (the "Interpretation"). The Interpretation was amended by Statement of Financial Accounting Standards No. 120, "Accounting and Reporting by Mutual Life Insurance Enterprises for Certain Long-Duration Participating Contracts," ("SFAS No. 120") which was issued in January 1995, to further clarify the accounting for mutual life insurance companies and to defer the effective date of general provisions of the Interpretation to fiscal years beginning after December 15, 1995. SFAS No. 120 did not change the disclosure of other transition provisions of the Interpretation. The Interpretation does not preclude mutual life insurance enterprises from issuing financial statements prepared under statutory accounting practices but concludes that those financial statements should not be described as being prepared in conformity with generally accepted accounting principles ("GAAP"). Upon the effective date of the Interpretation, in order for their financial statements to be described as being prepared in accordance with GAAP, mutual life insurance companies and their subsidiaries will be required to adopt all applicable authoritative GAAP pronouncements in any general purpose financial statements that they may elect to issue. Pacific Mutual has not quantified the effects of the application of the Interpretation on its financial statements since the company has not yet determined whether for general purposes it will continue to issue statutory financial statements or statements adopting all applicable authoritative GAAP pronouncements. 19 PACIFIC MUTUAL LIFE INSURANCE COMPANY AUDITED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993 20 INDEPENDENT AUDITORS' REPORT Pacific Mutual Life Insurance Company: We have audited the accompanying statements of financial position of Pacific Mutual Life Insurance Company as of December 31, 1994 and 1993, and the related statements of operations and surplus and of cash flow for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of Pacific Mutual Life Insurance Company as of December 31, 1994 and 1993 and the results of its operations and its cash flow for the years then ended in conformity with accounting practices prescribed or permitted by the Insurance Department of the State of California and with generally accepted accounting principles. DELOITTE & TOUCHE LLP Costa Mesa, California February 21, 1995 21 Pacific Mutual Life Insurance Company STATEMENTS OF FINANCIAL POSITION
December 31, 1994 1993 - ------------------------------------------------------------------------ (In Thousands) ASSETS Bonds $ 6,669,853 $ 5,899,646 Preferred stocks 132,604 143,016 Common stocks 57,874 71,086 Unconsolidated subsidiaries 196,401 141,611 Mortgage loans 1,421,182 1,611,400 Real estate 157,507 134,257 Home office properties 51,419 52,115 Policy loans 2,312,455 1,960,162 Cash and short-term investments 97,745 342,401 Investment income due and accrued 125,534 125,783 Premiums due and uncollected, and other assets 245,243 143,669 Separate account assets 3,260,374 2,720,997 - ------------------------------------------------------------------------ TOTAL ASSETS $14,728,191 $13,346,143 - ------------------------------------------------------------------------ LIABILITIES AND SURPLUS Liabilities Policy reserves $ 6,476,634 $ 5,807,708 Deposit funds 3,298,915 3,485,440 Other liabilities 885,638 583,989 Asset valuation reserve 179,006 165,251 Separate account liabilities 3,260,374 2,720,979 - ------------------------------------------------------------------------ Total Liabilities 14,100,567 12,763,367 Surplus 627,624 582,776 - ------------------------------------------------------------------------ TOTAL LIABILITIES AND SURPLUS $14,728,191 $13,346,143 - ------------------------------------------------------------------------
See Notes to Financial Statements 22 Pacific Mutual Life Insurance Company STATEMENTS OF OPERATIONS AND SURPLUS
Years Ended December 31, 1994 1993 - ------------------------------------------------------------------------------- (In Thousands) REVENUES Premiums, annuity considerations and deposit funds $ 2,180,409 $ 2,325,160 Net investment income 879,116 879,931 Other income 5,073 4,959 - ------------------------------------------------------------------------------- TOTAL REVENUES 3,064,598 3,210,050 - ------------------------------------------------------------------------------- BENEFITS AND EXPENSES Current and future policy benefits 2,686,406 2,818,344 Operating expenses 222,203 218,387 Premium and other taxes (excluding tax on capital gains) 28,715 26,057 Dividends to policyowners 17,162 17,609 - ------------------------------------------------------------------------------- TOTAL BENEFITS AND EXPENSES 2,954,486 3,080,397 - ------------------------------------------------------------------------------- INCOME BEFORE FEDERAL INCOME TAXES 110,112 129,653 Federal income taxes 41,510 22,367 - ------------------------------------------------------------------------------- NET GAIN FROM OPERATIONS 68,602 107,286 NET REALIZED CAPITAL GAINS 12,424 11,226 - ------------------------------------------------------------------------------- NET INCOME $ 81,026 $ 118,512 - ------------------------------------------------------------------------------- SURPLUS Net income $ 81,026 $ 118,512 Contribution certificates 149,589 Other surplus transactions, net (36,178) (57,012) - ------------------------------------------------------------------------------- Increase in surplus 44,848 211,089 Surplus, beginning of year 582,776 371,687 - ------------------------------------------------------------------------------- SURPLUS, END OF YEAR $ 627,624 $ 582,776 - -------------------------------------------------------------------------------
See Notes to Financial Statements 23 Pacific Mutual Life Insurance Company STATEMENTS OF CASH FLOW
Years Ended December 31, 1994 1993 - ------------------------------------------------------------------------------ (In Thousands) CASH FLOW FROM OPERATIONS Receipts Premiums, annuity considerations and deposit funds $ 1,687,583 $ 2,065,646 Net investment income 809,791 839,682 Allowances and reserve adjustments on reinsurance ceded 491,363 230,995 Other 23,862 9,965 Payments Policy benefit payments (1,408,650) (1,530,086) Net policy loans (352,358) (436,216) Operating expenses (247,437) (204,768) Net transfer to separate accounts (594,284) (922,130) Premium and other taxes (34,795) (24,785) Dividends to policyowners (17,319) (17,641) Federal income tax (23,995) (87,162) - ------------------------------------------------------------------------------ NET CASH FLOW FROM OPERATIONS 333,761 (76,500) - ------------------------------------------------------------------------------ CASH FLOW FROM INVESTMENTS Proceeds Bonds 2,937,210 2,696,822 Stocks 139,785 346,072 Mortgage loans 390,642 408,238 Real estate 20,163 90,389 Other investments 47,132 94,874 Payments for the purchase of Bonds (3,673,859) (3,174,986) Stocks (126,823) (278,932) Mortgage loans (230,859) (131,841) Real estate (17,466) (7,087) Other investments (114,106) (37,844) - ------------------------------------------------------------------------------ NET CASH FLOW FROM INVESTMENTS (628,181) 5,705 - ------------------------------------------------------------------------------ CASH FLOW FROM BORROWINGS 49,764 - ------------------------------------------------------------------------------ CASH FLOW FROM CONTRIBUTION CERTIFICATES 149,589 - ------------------------------------------------------------------------------ Increase (decrease) in cash and short-term invest- ments (244,656) 78,794 Cash and short-term investments, beginning of year 342,401 263,607 - ------------------------------------------------------------------------------ CASH AND SHORT-TERM INVESTMENTS, END OF YEAR $ 97,745 $ 342,401 - ------------------------------------------------------------------------------ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid $ 22,120 $ 8,054 - ------------------------------------------------------------------------------
See Notes to Financial Statements 24 Pacific Mutual Life Insurance Company NOTES TO FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS Pacific Mutual Life Insurance Company ("Pacific Mutual") was established in 1868. Its core business consists of life insurance, annuity and pension products. In addition, Pacific Mutual provides other insurance, employee benefits and investment management and advisory services through its subsidiaries. BASIS OF PRESENTATION Pacific Mutual's financial statements are based on accounting practices prescribed or permitted by the Insurance Department of the State of California, which are currently considered generally accepted accounting principles for mutual life insurance companies. Prescribed statutory accounting practices include a variety of publications of the National Association of Insurance Commissioners (NAIC), as well as state laws, regulations, and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so prescribed. The financial statements of Pacific Mutual are not consolidated with those of its subsidiaries. In April 1993, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 40, "Applicability of Generally Accepted Accounting Principles to Mutual Life Insurance and Other Enterprises" (the "Interpretation"). The Interpretation was amended by Statement of Financial Accounting Standards No. 120, "Accounting and Reporting by Mutual Life Insurance Enterprises for Certain Long-Duration Participating Contracts," ("SFAS No. 120") which was issued in January 1995, to further clarify the accounting for mutual life insurance companies and to defer the effective date of the general provisions of the Interpretation to fiscal years beginning after December 15, 1995. SFAS No. 120 did not change the disclosure of other transition provisions of the Interpretation. The Interpretation does not preclude mutual life insurance enterprises from issuing financial statements prepared under statutory accounting practices but concludes that those financial statements should not be described as being prepared in conformity with generally accepted accounting principles ("GAAP"). Upon the effective date of the Interpretation, in order for their financial statements to be described as being prepared in accordance with GAAP, mutual life insurance companies and their subsidiaries will be required to adopt all applicable authoritative GAAP pronouncements in any general purpose financial statements that they may elect to issue. Pacific Mutual has not quantified the effects of the application of the Interpretation on its financial statements since the company has not yet determined whether for general purposes it will continue to issue statutory financial statements or statements adopting all applicable authoritative GAAP pronouncements. CHANGE IN ACCOUNTING POLICIES During 1993, Pacific Mutual implemented the accrual method of accounting for the costs of its postretirement health care and life insurance plans as prescribed by the Insurance Department of the State of California. This change is more fully described in Note 10. INVESTMENTS Investments in bonds are carried at amortized cost. Preferred stocks are principally stated at amortized cost. Common stocks are carried at market value. Investments in unconsolidated subsidiaries are reported on the equity method of accounting, except for PCL (Note 2) which is carried at cost. Mortgage loans and policy loans are stated at unpaid principal balances. Real estate is valued at the lower of depreciated cost or market, less related mortgage debt. Real estate is depreciated using the straight-line method over 30 years. 25 Pacific Mutual Life Insurance Company NOTES TO FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Short-term investments generally mature within a year and are carried at amortized cost which approximates estimated fair value. The Asset Valuation Reserve ("AVR") is computed in accordance with a prescribed formula and is designed to stabilize surplus against valuation and credit-related losses for certain invested assets. Changes to the AVR are reported as direct additions or deductions from surplus. The Interest Maintenance Reserve ("IMR") included in other liabilities on the accompanying statements of financial position, results in the deferral of after-tax realized capital gains and losses attributable to interest rate fluctuations on fixed income investments and these capital gains and losses are amortized into investment income over the remaining life of the investment sold. The IMR was $13.1 million and $22.4 million as of December 31, 1994 and 1993, respectively. Net realized capital gains and losses are determined on the specific identification method and are presented net of federal capital gains tax of $2.2 million and $16.9 million and transfers to the IMR of $(.4) million and $22.4 million for the years ended December 31, 1994 and 1993, respectively. Derivatives which qualify for hedge accounting are valued consistently with the hedged items. Realized gains and losses on fixed income contracts are deferred and amortized over the average life of the related hedged assets or insurance liabilities. Realized gains and losses on equity securities, which are marked to market, are recognized immediately. Derivatives which do not qualify for hedge accounting are valued at market value through surplus while still held and through income when realized. On November 15, 1994, Pacific Financial Asset Management Corporation, a wholly-owned, second-tier subsidiary of Pacific Mutual and five of its subsidiaries (Pacific Investment Management Company and subsidiaries, Parametric Portfolio Associates, Inc., Cadence Capital Management Corporation, NFJ Investment Group, Inc. and Blairlogie Capital Management Limited) 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. Substantially all operations of these entities and net assets of $20.9 million were contributed in exchange for approximately 42% of the newly issued partnership units. POLICY RESERVES AND DEPOSIT FUNDS Life insurance reserves are valued using the net level premium method, the Commissioners' Reserve Valuation Method, or other modified reserve methods. Reserves for individual annuities are maintained principally on the Commissioners' Annuity Reserve Valuation Method. Group annuity contract reserves are valued using the net single premium method. The liability for deposit funds, including guaranteed interest contracts, is based primarily upon, and is not less than, the policyowners' equity in their deposit accounts, including credited interest. REVENUES AND EXPENSES Premiums are recognized as income over the premium paying period. Deposits made in connection with annuity contracts are recognized as revenue when received. Investment income is recorded as earned. Expenses, including policy acquisition costs such as commissions, are charged to operations as incurred. DIVIDENDS Dividends are provided based on dividend formulas approved by the Board of Directors and reviewed for reasonableness and equitable treatment of policyowners by an independent consulting actuary. 26 Pacific Mutual Life Insurance Company NOTES TO FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) FEDERAL INCOME TAXES Pacific Mutual is taxed as a life insurance company for Federal income tax purposes. Pacific Mutual's income tax return is consolidated with all its domestic subsidiaries except PCL. The amount of federal income tax expense includes an equity tax calculated by a prescribed formula that incorporates a differential earnings rate between stock and mutual life insurance companies. The difference between the effective tax rate and the statutory tax rate of 35% for 1994 and 1993 is primarily due to certain policy acquisition costs being deferred and amortized over a ten-year period for tax purposes, reserve differences, non-taxable investment income and the equity tax for 1994. OTHER SURPLUS TRANSACTIONS Other surplus transactions consist primarily of unrealized capital gains and losses, changes in nonadmitted assets, and changes in the AVR. 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 policy owners and contract owners. FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair values of financial instruments disclosed in Notes 3 and 4 have been determined using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented may not be indicative of the amounts Pacific Mutual 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. RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform to the 1994 financial statement presentation. 2. REHABILITATION OF FIRST CAPITAL LIFE INSURANCE COMPANY Pursuant to a five-year rehabilitation agreement approved by a California Superior Court and the Insurance Department of the State of California in July 1992, Pacific Mutual, through its wholly-owned subsidiary, Pacific Corinthian Life Insurance Company ("PCL"), will facilitate the rehabilitation of First Capital Life Insurance Company ("FCL"). In accordance with the rehabilitation agreement, insurance policies of FCL were restructured and assumed by PCL on December 31, 1992. The rehabilitation agreement provides for the holders of restructured policies to share in a substantial percentage of the unallocated surplus of PCL at the end of the rehabilitation period. Policyholders have the option to surrender their restructured policies with reduced benefits during this five-year period. During the rehabilitation plan period, PCL is prohibited from issuing new insurance policies. At the end of the rehabilitation period, PCL will merge into Pacific Mutual, with Pacific Mutual as the surviving entity. Substantially all of the assets and certain of the liabilities of FCL were assumed by PCL on December 31, 1992 pursuant to an assumption reinsurance agreement and asset purchase agreement. 27 Pacific Mutual Life Insurance Company NOTES TO FINANCIAL STATEMENTS 2. REHABILITATION OF FIRST CAPITAL LIFE INSURANCE COMPANY (CONTINUED) In accordance with the rehabilitation agreement, PCL was capitalized by a cash contribution of $8.3 million from Pacific Mutual and a $45 million certificate of contribution provided by Pacific Financial Holding Company, a wholly-owned subsidiary of Pacific Mutual, for a total of $53.3 million initial capitalization. In the event PCL is unable to pay contract benefits, Pacific Mutual is obligated to contribute funds to pay those benefits in accordance with the rehabilitation agreement. 3.INVESTMENTS IN DEBT SECURITIES The statement value, gross unrealized gains and losses and estimated fair value of bonds and redeemable preferred stocks ("debt securities"), including short-term investments, are shown below. The estimated fair value of publicly traded securities was 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. Pacific Mutual also estimates certain fair values based on interest rates, credit quality and average maturity or from securities with comparable trading characteristics.
Gross Unrealized Statement ----------------- Estimated Value Gains Losses Fair Value --------------------------------------- (In Thousands) December 31, 1994: U.S. Treasury securities and obligations of U.S. government authorities and agencies $ 216,201 $ 1,064 $ 37,113 $ 180,152 Obligations of states, political subdivisions and foreign governments 321,798 5,371 16,309 310,860 Corporate securities 3,771,271 104,311 160,712 3,714,870 Mortgage-backed securities 2,480,307 28,911 81,147 2,428,071 Redeemable preferred stock 81,026 343 5,031 76,338 ------------------------------------------ Total $6,870,603 $140,000 $300,312 $6,710,291 ------------------------------------------ December 31, 1993: U.S. Treasury securities and obligations of U.S. government authorities and agencies $ 482,104 $ 10,227 $ 6,788 $ 485,543 Obligations of states, political subdivisions and foreign governments 194,819 16,520 296 211,043 Corporate securities 3,328,988 338,039 6,114 3,660,913 Mortgage-backed securities 2,248,574 120,947 10,875 2,358,646 Redeemable preferred stock 88,456 3,314 359 91,411 ------------------------------------------ Total $6,342,941 $489,047 $ 24,432 $6,807,556 ------------------------------------------
28 Pacific Mutual Life Insurance Company NOTES TO FINANCIAL STATEMENTS 3. INVESTMENTS IN DEBT SECURITIES (CONTINUED) The statement value and estimated fair value of debt securities as of December 31, 1994 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.
Estimated Statement Fair Value Value ------------------------ (In Thousands) Due in one year or less $ 429,348 $ 414,074 Due after one year through five years 1,349,078 1,343,824 Due after five years through ten years 1,340,882 1,299,969 Due after ten years 1,270,988 1,224,353 ------------------------ 4,390,296 4,282,220 Mortgage-backed securities 2,480,307 2,428,071 ------------------------ Total $6,870,603 $6,710,291 ------------------------
Proceeds from sales of investments in debt securities were $1.5 billion and $1.2 billion for the years ended December 31, 1994 and 1993, respectively. In 1994 and 1993, gross gains of $30 million and $53 million and gross losses of $43 million and $2 million, respectively, were realized on those sales. 4. FINANCIAL INSTRUMENTS The estimated fair values of Pacific Mutual's financial instruments, including debt securities, are as follows:
December 31, 1994 December 31, 1993 Statement Estimated Statement Estimated Value Fair Value Value Fair Value ---------------------------------------------- (In Thousands) Assets: Debt securities (See note 3) $6,870,603 $6,710,291 $6,342,941 $6,807,556 Preferred and common stocks 109,458 116,993 125,646 143,090 Mortgage loans 1,421,182 1,452,596 1,611,400 1,692,700 Policy loans 2,312,455 2,312,455 1,960,162 1,960,162 Derivative financial instruments: Interest rate swaps 121 (24,809) 25,641 Other 2,672 (2,822) 10,116 47,118 Liabilities: Guaranteed interest contracts 2,635,356 2,614,961 2,586,538 2,669,666 Deposit liabilities 871,548 833,274 929,748 977,285 Other derivative financial instruments 2,270 2,128 440 Contribution certificates 149,593 124,313 149,589 153,480
The following methods and assumptions were used to estimate the fair values of these financial instruments as of December 31, 1994 and 1993: PREFERRED AND COMMON STOCKS The estimated fair values are based on quoted market prices or dealer quotes. 29 Pacific Mutual Life Insurance Company NOTES TO FINANCIAL STATEMENTS 4. FINANCIAL INSTRUMENTS (CONTINUED) MORTGAGE LOANS The estimated fair value of the mortgage loan portfolio is determined by discounting the estimated future cash flows, using a year-end market rate which is applicable to the yield, credit quality and average maturity of the composite portfolio. POLICY LOANS The statement value of policy loans is a reasonable estimate of their fair values. GUARANTEED INTEREST CONTRACTS AND DEPOSIT LIABILITIES The estimated fair values of fixed-maturity guaranteed interest contracts are estimated using the rates currently offered for deposits of similar remaining maturities. The estimated fair values of deposit liabilities with no defined maturities are the amounts payable on demand. Pacific Mutual has issued PRO GIC and Diversifier GIC contracts to plan sponsors totaling $749 million as of December 31, 1994, pursuant to the terms of which the plan sponsor retains direct ownership and control of the assets related to these contracts. Pacific Mutual agrees to provide benefit responsiveness in the event that plan benefit requests exceed plan cash flows. In return for this guarantee, Pacific Mutual receives a fee which varies by contract. Pacific Mutual sets the investment guidelines to provide for appropriate credit quality and cash flow matching. DERIVATIVE FINANCIAL INSTRUMENTS Pacific Mutual utilizes certain derivative financial instruments to diversify its business risk and to minimize its exposure to fluctuations in market prices and interest rates. Pacific Mutual has also set aside a corporate total return portfolio utilizing derivative financial instruments. These instruments include interest rate and currency swaps, forwards, options held, options written, and futures contracts, and involve elements of credit risk and market risk in excess of amounts recognized in the accompanying financial statements. The notional amounts of those instruments reflect the extent of involvement in those various types of financial instruments. The estimated fair values of these instruments are based on market or dealer quotes. Pacific Mutual determines, on an individual counterparty basis, the need for collateral or other security to support financial instruments with off-balance-sheet credit risks. Options and Floors Pacific Mutual uses options and floors to hedge against fluctuations in interest rates and in its corporate total return portfolio. Cash requirements on options held are limited to the premium paid by Pacific Mutual at acquisition. Pacific Mutual uses written options on a limited basis consisting primarily of covered calls. Gains and losses on covered calls are offset by gains and losses on the underlying position. Options and floors held are reported as assets and options written are reported as liabilities. As of December 31, 1994, the notional amount of options held and options written approximated $1.5 billion and $42 million, respectively. Option contracts mature during fiscal years 1995 through 2000. Interest Rate Swap Contracts Pacific Mutual has entered into interest rate swap contracts to reduce the impact of changes in interest rates on its variable short-term and long- term investments. These contracts effectively change the interest rate exposure on variable rate notes to fixed rates which range from 1.9% to 8.6% as of December 31, 1994, and from 1.9% to 12.2% as of December 31, 1993. Interest rate swap contracts mature during fiscal years 1996 through 2013. As of December 31, 1994 and 1993, interest rate swap contracts outstanding with financial institutions had a total notional amount of $477 million and $770 million, respectively. 30 Pacific Mutual Life Insurance Company NOTES TO FINANCIAL STATEMENTS 4. FINANCIAL INSTRUMENTS (CONTINUED) Foreign Currency Exchange Contracts Pacific Mutual enters into foreign currency exchange contracts that are used to hedge against fluctuations in foreign currency-denominated assets and related income. Gains and losses on such agreements offset currency gains and losses on the related assets. As of December 31, 1994, the notional amount of foreign currency exchange contracts approximated $35 million. Foreign currency exchange contracts expire during fiscal years 1995 through 1999. Future Contracts Pacific Mutual uses exchange-traded futures contracts for asset and liability management of fixed maturity securities and insurance liabilities and for hedging market fluctuations on equity securities. Price changes on futures are settled daily through the daily margin cash flows. As of December 31, 1994 and 1993, the notional amounts of futures contracts were $163 million and $573 million, respectively. The notional amounts of the contracts do not represent future cash requirements, as Pacific Mutual intends to close out open positions prior to expiration. CONTRIBUTION CERTIFICATES The estimated fair value of contribution certificates is based on market quotes. 5. CONCENTRATION OF CREDIT RISK Pacific Mutual manages its investments to limit credit risk by diversifying its portfolio among various security types and industry sectors. The credit risk of financial instruments is controlled through credit approvals, limits and monitoring procedures. Real estate and mortgage loan investments are diversified by geographic location and property type. Management believes that significant concentrations of credit risk do not exist. Pacific Mutual is exposed to credit loss in the event of nonperformance by the other parties to the interest rate swaps contracts and other derivative securities. However, Pacific Mutual does not anticipate nonperformance by the counterparties. 6. UNCONSOLIDATED SUBSIDIARIES Pacific Mutual's subsidiary operations primarily include other life and health insurance and investment management and advisory services. As of December 31, 1994 and 1993, subsidiary assets, including PCL, were $4.5 billion and $4.4 billion, respectively, and liabilities were $4.2 billion as of December 31, 1994 and 1993. Revenue and net income, including PCL, were $1.1 billion and $75 million for the year ended December 31, 1994, and $1.0 billion and $57 million for the year ended December 31, 1993. Dividends from subsidiaries totaled $2 million and $24 million for the years ended December 31, 1994 and 1993, respectively. All earnings of the subsidiaries, excluding PCL, and excluding capital gains, are included in net investment income. 7. BORROWINGS Pacific Mutual borrows for short-term needs by issuing commercial paper. Approximately $50 million was outstanding as of December 31, 1994, bearing an interest rate of 5.86%, and was repaid in January, 1995. There were no commercial paper borrowings outstanding as of December 31, 1993. In addition, Pacific Mutual had available lines of credit totaling approximately $250 million and $300 million as of December 31, 1994 and 1993, respectively. There were no borrowings outstanding as of December 31, 1994 and 1993. 31 Pacific Mutual Life Insurance Company NOTES TO FINANCIAL STATEMENTS 8. CONTRIBUTION CERTIFICATES On December 30, 1993, Pacific Mutual issued $150 million of Contribution Certificates (the "Certificates"), also referred to as Surplus Notes, at an interest rate of 7.9% maturing on December 30, 2023. Interest is payable semiannually. The Certificates may not be redeemed at the option of Pacific Mutual or any holder of the Certificates. The Certificates are unsecured and subordinated to all present and future senior indebtedness and policy claims of Pacific Mutual. Each payment of interest on and the payment of principal of the Certificates may be made only out of Pacific Mutual's surplus and with the prior approval of the Insurance Commissioner of the State of California. In accordance with accounting practices prescribed or permitted by the Insurance Department of the State of California, the Certificates are not part of the liabilities of Pacific Mutual and are included in surplus. 9. REINSURANCE Pacific Mutual has reinsurance agreements with other insurance companies for the purpose of diversifying risk and limiting exposure on larger risks. For the years ended December 31, 1994 and 1993, individual life and annuity premiums assumed were $20 million and $22 million and premiums ceded were $363 million and $292 million, respectively. Amounts recoverable from reinsurers for individual life and annuities include reinsured and paid claims of $13 million and $21 million as of December 31, 1994 and 1993, respectively. Policy benefits payable are net of reinsurance on unpaid claims of $(4) million and $0 at December 31, 1994 and 1993, respectively. Pacific Mutual also reinsures substantially all of its group life and health business with a subsidiary insurance company. Premiums of $90 million and $122 million, and benefits of $70 million and $80 million were ceded during the years ended December 31, 1994 and 1993, respectively. Amounts payable to the subsidiary under this agreement were $8 million and $4 million as of December 31, 1994 and 1993, respectively. To the extent that the assuming companies become unable to meet their obligations under these treaties, Pacific Mutual remains contingently liable. However, Pacific Mutual does not anticipate nonperformance by these assuming companies. 10. PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS PENSION PLAN Pacific Mutual maintains a defined benefit pension plan covering eligible employees and agents. No contributions were made during 1994 or 1993 because of the funded status of the plans and related income tax considerations. Accumulated benefits and net assets available for benefits as of the latest valuation dates (March 31 of each year) are as follows:
1994 1993 --------- ---------- (In Thousands) Actuarial present value of accumulated benefits: Vested $ 88,122 $ 83,060 Nonvested 1,115 572 --------------------- Total $ 89,237 $ 83,632 --------------------- Net assets available for benefits $111,089 $109,194 ---------------------
The above present values were determined using an assumed discount rate of 8.5% in 1994 and 1993. 32 Pacific Mutual Life Insurance Company NOTES TO FINANCIAL STATEMENTS 10. PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS (CONTINUED) POSTRETIREMENT HEALTHCARE AND LIFE INSURANCE PLANS Pacific Mutual 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 Mutual's policy as an active employee for a minimum continuous period prior to the date retired, and have an employment date before January 1, 1990. The Plans contain cost-sharing features such as deductibles and coinsurance, and require retirees to make contributions which can be adjusted annually. Pacific Mutual's commitment to qualified employees who retire after April 1, 1994 is limited to specific dollar amounts. Pacific Mutual reserves the right to modify or terminate The Plans at any time. As in the past, the general policy is to fund these benefits on a pay-as-you-go basis. The amount of benefits paid under The Plans for the years ended December 31, 1994 and 1993 was $1.7 million for both years. During 1993, Pacific Mutual implemented the accrual method of accounting for the costs of The Plans as prescribed by the Insurance Department of the State of California, and elected to amortize its transition obligation of $26.7 million over twenty years. Components of net periodic postretirement benefit cost as follows (In Thousands):
Years Ended December 31, 1994 1993 -------------------------- Service cost $ 186 $ 89 Interest cost 1,790 1,907 Amortization (260) (260) -------------------------- 1,716 1,736 Recognized transition obligation--net 1,337 1,336 -------------------------- Net periodic postretirement benefit cost $ 3,053 $ 3,072 --------------------------
The following table presents The Plans' funded status reconciled with amounts recorded in other liabilities on Pacific Mutual's statement of financial position (In Thousands):
1994 1993 ------------------ Accumulated postretirement obligation: Retirees $20,580 $ 22,844 Fully eligible active plan participants 1,346 1,044 Other active plan participants 2,455 1,972 ------------------ 24,381 25,860 Fair value of plan assets 0 0 ------------------ Unfunded accumulated postretirement obligation 24,381 25,860 Unrecognized net gain/(loss) 942 (1,060) Prior service cost 1,849 2,109 Unrecognized transition obligation--net (24,056) (25,393) ------------------ Accrued postretirement benefit liability $ 3,116 $ 1,516 ------------------
33 Pacific Mutual Life Insurance Company NOTES TO FINANCIAL STATEMENTS 10. PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS (CONTINUED) The assumed health care cost trend rate used in measuring the accumulated benefit obligation was 11% for 1994 and 12% for 1993, and is assumed to decrease gradually to 6% in 2005 and remain at that level thereafter. The amount reported is materially affected 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, 1994 and 1993 would be increased by 11.2% and 8.8%, respectively. The effect of this change would increase the aggregate of the service, interest and amortization cost components of the net periodic benefit cost by 13.6% and 8.6%, respectively. The discount rate used in determining the accumulated postretirement benefit obligation was 8.0% and 7.5% for 1994 and 1993, respectively. 11. INVESTMENT COMMITMENTS Pacific Mutual has outstanding commitments to make investments in bonds and other invested assets as follows (In Thousands):
Year Ended December 31: ----------------------- 1995 $55,152 1996-1999 23,588 2000 and thereafter 20,669 ---------- Total $99,409 ----------
12. LITIGATION Pacific Mutual and its subsidiaries are respondents in a number of legal proceedings, some of which involve extra-contractual damages. In the opinion of management, the outcome of these proceedings is not likely to have a material adverse effect on the financial position of Pacific Mutual. 34 Part C: OTHER INFORMATION Item 24. Financial Statements and Exhibits --------------------------------- (a) Financial Statements Part A: None Part B: (1) Registrant's Financial Statements None (2) Depositor's Financial Statements Unaudited financial statements dated as of June 30, 1995 included in Part B include the following for Pacific Mutual ("Pacific Mutual"): Statements of Financial Position Statements of Operations and Surplus Statements of Cash Flow Note to Financial Statements Audited financial statements dated as of December 31, 1994 included in Part B include the following for Pacific Mutual Life Insurance Company: Statements of Financial Position Statements of Operations and Surplus Statements of Cash Flow Notes to Financial Statements Audited financial statements dated as of December 31, 1993 included in Part B include the following for Pacific Mutual: Statements of Financial Position Statements of Operations and Surplus Statements of Cash Flow Notes to Financial Statements (b) Exhibits 1. (a) Resolution of the Board of Directors of Pacific Mutual authorizing establishment of Separate Account A and Memorandum establishing Separate Account A.* II-1 2. Not applicable 3. (a) Distribution Agreement between Pacific Mutual and Pacific Equities Network ("PEN")(Draft)* (b) Form of Selling Agreement between Pacific Mutual, PEN and Various Broker-Dealers* 4. (a) Form of Individual Flexible Premium Variable Accumulation Annuity Contract (b) Qualified Plan Loan Endorsement* (c) Individual Retirement Annuity Rider* (d) Qualified Pension Plan Rider* (e) 403(b) Tax-Sheltered Annuity Rider* (f) Section 457 Plan Rider* (g) Endorsement for 403(b) Texas Optional Retirement Program (ORP)* 5. (a) Application Form for Individual Flexible Premium Variable Accumulation Annuity Contract (b) Variable Annuity PAC APP* (c) Application/Confirmation Form 6. (a) Pacific Mutual's Articles of Incorporation* (b) By-laws of Pacific Mutual* 7. Not applicable 8. (a) Fund Participation Agreement* (b) Addendum to Fund Participation Agreement (to add Growth LT Series)* (c) Addendum to Fund Participation Agreement (to add Equity and Bond and Income Series)* 9. Opinion and Consent of legal officer of Pacific Mutual as to the legality of Contracts being registered.* II-2 10. (a) Consent of Deloitte & Touche LLP (b) Powers of Attorney* 11. Not applicable 12. Not applicable 13. Performance Calculations* - -------------- * Included in Registrant's Form Type N-4/A, Accession No. 0000898430-95-002037 filed on October 19, 1995 and incorporated by reference herein. Item 25. Directors and Officers of Pacific Mutual
Positions and Offices Name and Address with Pacific Mutual Thomas C. Sutton Director, Chairman of the Board, and Chief Executive Officer Harry G. Bubb Director and Chairman Emeritus Glenn S. Schafer Director and President Richard M. Ferry Director Donald E. Guinn Director Ignacio E. Lozano, Jr. Director Charles A. Lynch Director Dr. Allen W. Mathies, Jr. Director Charles D. Miller Director Donn B. Miller Director J. Fernando Niebla Director Susan Westerberg Prager Director James R. Ukropina Director
II-3 Raymond L. Watson Director Edward Byrd Vice President and Controller David R. Carmichael Senior Vice President and General Counsel Audrey L. Milfs Vice President and Corporate Secretary Khan T. Tran Vice President and Treasurer
______________________________ 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 Mutual or Separate Account A The following is an explanation of the organization chart of Pacific Mutual's subsidiaries: PACIFIC MUTUAL, SUBSIDIARIES & AFFILIATED ENTERPRISES LEGAL STRUCTURE Pacific Mutual Life Insurance Company has a 40% ownership of American Maturity Life Insurance Company and is the parent company of Pacific Mutual Realty Finance, Inc., Pacific Financial Holding Company, and Pacific Corinthian Life Insurance Company. Subsidiaries of Pacific Financial Holding Company include: Pacific Equities Network, Group Holding Company, Pacific Financial Asset Management Corporation, and Alliance Health Plan Network, Inc. (a Delaware corporation). Subsidiaries of Pacific Equities Network include: Mutual Service Corporation (a Michigan corporation), along with its subsidiary Advisors' Mutual Service Center, Inc. (a Michigan corporation); and United Planners Group, Inc. (an Arizona corporation) (93.3% owned consisting of 100% of Class A and 71.3% of Class B of the corporation's common stock), along with its subsidiary United Planners' Financial Services of America (an Arizona Limited Partnership). Subsidiaries of Group Holding Company include: PM Group Life Insurance Company (an Arizona corporation) and its subsidiary Employee Benefits America Administration Corp. Subsidiaries of Pacific Financial Asset Management II-4 Corporation include: PMRealty Advisors Inc. and PIMCO Advisors L.P. (a Delaware Limited Partnership which is 42% owned). Subsidiaries of Pacific Corinthian Life Insurance Company include: World-Wide Holdings Limited (a United Kingdom corporation which is 72.4% owned), including its subsidiaries 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. Item 27. Number of Contractholders None Item 28. Indemnification (a) The Distribution Agreement between Pacific Mutual and PEN provides substantially as follows: 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 the contracts: (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 or agent of PEN or Broker; (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 II-5 any such loss, liability, damage, or claim. (b) The Form of Selling Agreement between Pacific Mutual, PEN and Various Broker-Dealers provides substantially as follows: 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 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. 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. II-6 Item 29. Principal Underwriters (a) PEN also acts as principal underwriter for Pacific Select Separate Account, Pacific Select Exec Separate Account, Pacific Select Variable Annuity Separate Account and Pacific Select Fund. (b) For information regarding PEN, reference is made to Form B-D, SEC File No. 8-15264, which is herein incorporated by reference. (c) PEN 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 Mutual 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 (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. II-8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has caused this Pre-Effective Amendment No. 2 to the Registration Statement on Form N-4 to be signed on its behalf by the undersigned thereunto duly authorized in the City of Newport Beach, and the State of California on this 13th day of December, 1995. SEPARATE ACCOUNT A (Registrant) By: PACIFIC MUTUAL LIFE INSURANCE COMPANY By: Thomas C. Sutton* Chairman and Chief Executive Officer By: PACIFIC MUTUAL LIFE INSURANCE COMPANY (Depositor) By: Thomas C. Sutton* Chairman and Chief Executive Officer *By: /s/ Sharon A. Cheever -------------------------- Sharon A. Cheever as attorney-in-fact Pursuant to the requirements of the Securities Act of 1933, this Pre-Effective Amendment No. 2 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
Signature Title Date Thomas C. Sutton* Director, Chairman of the Board ____________, 1995 and Chief Executive Officer Glenn S. Schafer* Director and President ____________, 1995 Harry G. Bubb* Director and Chairman Emeritus ____________, 1995 Richard M. Ferry* Director ____________, 1995
II-9 Donald E. Guinn* Director ____________, 1995 Ignacio E. Lozano, Jr.* Director ____________, 1995 Charles A. Lynch* Director ____________, 1995 Dr. Allen W. Mathies, Jr.* Director ____________, 1995 Charles D. Miller* Director ____________, 1995 Donn B. Miller* Director ____________, 1995 J. Fernando Niebla* Director ____________, 1995 Susan Westerberg Prager* Director ____________, 1995 Richard M. Rosenberg Director ____________, 1995 James R. Ukropina* Director ____________, 1995 Raymond L. Watson* Director ____________, 1995 Edward Byrd* Vice President and Controller ____________, 1995 *By: /s/ Sharon A. Cheever ----------------------- December 13, 1995 Sharon A. Cheever as attorney-in-fact
II-10 EX-99.4(A) 2 ANNUITY CONTRACT EXHIBIT 99.4(a) Form of Individual Flexible Premium Variable Annuity Contract [LOGO OF PACIFIC MUTUAL] LIFE INSURANCE COMPANY 700 Newport Center Drive PACIFIC ONE Newport Beach, CA 92660 ================================================================================ INDIVIDUAL FLEXIBLE PREMIUM 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 . Participating Please read your contract carefully. This is a legal contract between you, the Owner, and us, Pacific Mutual Life Insurance Company, a mutual 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. Free Look Right - You may return this Contract within 10 days after you receive it. To do so, mail it to us at our Service Center or to the agent who sold it to you. This Contract will then be deemed void from the beginning. No withdrawal fee will be imposed, and we will refund: . any Purchase Payments allocated to the Fixed Option; and . any Variable Account Value as of the Business Day we receive the Contract; plus . any Contract fees and charges for premium taxes and or other taxes we deduct from your Contract Value allocated to the Variable Accounts. 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 TABLE OF CONTENTS Contract Specifications 3 Definitions 4 Purchase Payments 6 The Fixed Option 7 Variable Investment Options 8 Contract Value 9 Charges, Fees and Deductions 11 Transfers 12 Withdrawals 12 Contract Loans 12 Death Benefit 13 Beneficiary 15 Annuity Benefits 16 General Provisions 19 Annuity Option Tables 21
CONTRACT SPECIFICATIONS SERVICE CENTER: Send Forms and written requests to: Send Payments to: Pacific Mutual Life Pacific Mutual Life Insurance Company Insurance Company P.O. Box 7187 P.O. Box 100060 Pasadena, California Pasadena, California 91109-7187 91189-0060 Toll-free number: 1-800-722-2333 (between 6:00 a.m. and 5:00 p.m., Pacific time) Please use our toll-free number to present inquiries or obtain information about your coverage and for us to provide assistance in resolving complaints. BASIC CONTRACT - [IRA] INVESTMENT OPTIONS: FIXED OPTION VARIABLE INVESTMENT OPTIONS: MONEY MARKET MULTI-STRATEGY HIGH YIELD BOND EQUITY MANAGED BOND BOND AND INCOME GOVERNMENT SECURITIES EQUITY INDEX GROWTH LT INTERNATIONAL EQUITY INCOME ADMINISTRATIVE CHARGE: 0.15% MORTALITY AND EXPENSE RISKS CHARGE: 1.25% ANNUAL FEE: $40 IF CONTRACT IS LESS THAN $100,000 CONTRACT NUMBER: [XX99999999] CONTRACT DATE: [12-15-1995] OWNER(S): [LELAND K STANFORD] [VICKI L STANFORD] ANNUITANT(S): [LELAND K STANFORD] [VICKI L STANFORD] ANNUITANT'S AGE AND SEX: [43], [MALE] [44], [FEMALE] INITIAL PURCHASE PAYMENT: [$100,000.00] ANNUITY START DATE: [11-07-2052] DEFINITIONS PM, we, our and us - Pacific Mutual 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 a Subaccount(s) or to the Fixed Option. Age - The Owner's or Annuitant's attained age, as applicable, at his or her last birthday. Annuitant - The person you name on whose life annuity payments may be determined. The Annuitant's life may also be used to determine certain minimum death benefits, and the Annuity Date. If you designate Joint Annuitants or a Contingent Annuitant, unless otherwise stated, "Annuitant" means the sole surviving Annuitant. You cannot change the Annuitant or change or add a Joint Annuitant except that if your Contract is a Qualified Contract, you may add or change a Joint Annuitant on the Annuity Date. Annuity Date ("Annuity Start Date") - The date shown in the Contract Specifications, or the date you later elect, if any, for the start of annuity payments if the Annuitant is still living and the Contract is in force. Annuity Options - A set of features of a series of payments after your Annuity Date. Beneficiary - The person you name who may receive any death benefit proceeds payable on the death of the Annuitant or an Owner prior to the Annuity Date; or any remaining annuity benefits payable on the death of the Annuitant after the Annuity Date. If no Beneficiary is named or the Beneficiary does not survive the Annuitant, and the Annuitant dies, then the Annuitant's estate will have the rights of the Beneficiary. If you are not the Annuitant and you die before the Annuitant, and before the Annuity Date, any death benefit proceeds will be payable to the surviving Joint Owner, if any; otherwise to the surviving Contingent Owner, if any; otherwise, to the Beneficiary, if living; otherwise, to the Annuitant or the Annuitant's estate. Business Day - Any day on which the value of the amount invested in a Subaccount is determined. In this Contract, "day" or "date" means Business Day unless otherwise stated. If any transaction or event under this Contract is scheduled to occur on a "corresponding date" that does not exist in a given calendar period, or on a day that is not a Business Day, such transaction or event will be deemed to occur on the next following Business Day, unless otherwise stated. Code - The Internal Revenue Code of 1986, as amended. Contingent Annuitant - The person, if any, you select who may become the Annuitant if the Annuitant dies before your Annuity Date. You may add or change your Contingent Annuitant prior to the Annuity Date provided the existing Contingent Annuitant is not the sole surviving Annuitant. Any Contingent Annuitant you name must not have attained age 86 as of your Contract Date. Contingent Owner - The person, if any, you select who may succeed to your rights as Owner of this Contract if you 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, as shown in the Contract Specifications. Contract Years, Contract Semi-Annual 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, plus the amount held in the Loan Account to secure your Contract Debt, if any, including any interest. 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 3% on an annual basis. General Account - Our General Account consists of all assets of PM, other than those assets allocated to Separate Account A or to any of our other separate accounts. Investment Option - A Variable Account or a Fixed Option offered under the Contract. Loan Amount - As of the end of any Business Day, the Loan Amount equals the amount that is eligible as a loan under the Contract if your Contract is issued under a Qualified Plan under Code Section 401(a), 401(k), 403(a), or 403(b) and your Qualified Plan permits loans. Non-qualified Contract - A Contract other than a Qualified Contract. Owner - The person(s) who has (have) all rights under this Contract before the Annuity Date. If your Contract names Joint Owners, Owner means both Joint Owners. 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 by 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(a) and (b), 408, or 457 of the Code. SEC - Securities and Exchange Commission. Separate Account/The Separate Account A - A separate account of PM that consists of Subaccounts. Service Center - PM's mailing address shown in the Contract Specifications. We will notify you of any change in our mailing address. Subaccount - An investment division of the Separate Account. Each Subaccount, (a "Variable Investment Option" or "Variable Account"), invests its assets in a separate series or class of shares of a designated investment company. Subaccount Annuity Unit (Annuity Units) - Annuity Units are used to measure variation in variable annuity payments. The amount of each variable annuity payment (after the first payment) will vary with the value and number of your Annuity Units in each Subaccount. Subaccount Unit - Subaccount units are used to measure your Contract Value in that Subaccount. Variable Account (A "Variable Investment Option") - A Subaccount of a PM Separate Account or a separate account of PM, which is available under your Contract, in which assets of PM are segregated from assets in its General Account and other separate accounts. PURCHASE PAYMENTS Purchase Payments - This Contract will not be in force until we receive the initial purchase payment. Your initial purchase payment is shown in the Contract Specifications. You may make additional purchase payments at any time before the Annuity Date, while the Annuitant is living and this Contract is in force. Each additional purchase payment must be at least $1,000. 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 $500,000. Purchase payments are payable in U.S. dollars either at our Service Center or through our agent. Checks should be made payable to Pacific Mutual Life Insurance Company. If you make purchase payments by check other than a cashier's check, your withdrawal requests and any refund under the "free look" period may be delayed until your check has cleared. On written request a receipt for the purchase payment signed by an officer of PM will be provided after payment. Purchase Payment Allocation - You may allocate all or a part of a purchase payment to one or more of the Investment Options prior to the Annuity Date. We will allocate your purchase payments that we receive during the Free Look Period as shown in your application, or most recent allocation instructions received by us, if any. You may change your allocation by sending us proper instructions. See GENERAL PROVISIONS: Instructions and Requests. We will allocate any purchase payment according to your most recent allocation instructions. We may reject any instruction or purchase payment that does not comply with our requirements. Minimum Investment Option Amount - 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 meet a minimum Account Value amount. We also reserve the right to transfer any remaining Account Value that does not meet such minimum amount to your other Investment Options on a prorata basis relative to your most recent allocation instructions. THE FIXED OPTION Under the Fixed Option, we credit interest at the Guaranteed Interest Rate(s) during each Guarantee Term on the amount of purchase payments and/or Contract Value that you allocate or transfer to, or roll over in, the Fixed Option, as described below. Purchase payments and/or Contract Value you allocate or transfer to, or roll over in 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. Guarantee Term - We credit your Contract with a "Guaranteed Interest Rate(s)" for a specified period of time (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 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 on your next Contract Anniversary. At the end of each initial Guarantee Term and each succeeding Guarantee Term, we roll over your Fixed Option Value attributed to that Guarantee Term to a new Guarantee Term of at least one year, unless you instruct us otherwise. We credit the Guaranteed Interest Rate(s) in effect at the time of the rollover on the amount of the Fixed Option Value rolled over until the end of such Guarantee Term. We reserve the right to offer Guarantee Terms for durations other than one year. We 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; any annual fee; and any charges for premium taxes and/or other taxes. We do so as of the end of the Business Day any such transaction is effective. Guaranteed Interest Rate - Guaranteed Interest Rates may be reset periodically, but will never be less than the Minimum Guaranteed Interest Rate of 3% annually. All Guaranteed Interest Rates are expressed as annual rates, and interest is accrued daily. 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 that Variable Account to another separate account or to our General Account. All obligations arising under the Contract are our general corporate obligations. We do not hold ourselves out to be trustees of the Separate Account assets. We reserve the right, subject to compliance with the law then in effect, and after any required regulatory approval, to: . 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 PM or of any of its affiliates ; . register or deregister Separate Account A or any Variable Account under the Investment Company Act of 1940 ("1940 Act"); . operate any Variable Account as a managed investment company under the 1940 Act; . run any Variable Account under the direction of a committee, board, or other group; . restrict or eliminate any voting rights of Owners with respect to any Variable Account or other persons who have voting rights as to any Variable Account; . make any changes required by the 1940 Act or other federal securities laws; . make any changes necessary to maintain the status of the Contracts as annuities under the Code; . make other changes required under federal or state law relating to annuities; . suspend or discontinue sale of the Contracts; and . comply with law. If any of these changes result in a material change in the underlying investments of a Variable Account, we will notify you of such change. We will not change the investment policy of the Separate Account without: (1) the approval of the Insurance Commissioner in the State of California; and (2) following the filing and other procedures established by insurance regulators of the state of issue, with whom the approval process is on file. Unless required by law or regulation, an investment policy may not be changed without our consent. From time to time we may make other Variable Accounts available to you. Any new Variable Accounts may invest in portfolios of the designated investment company, other designated investment companies or their portfolios, or in other investment vehicles. New Variable Accounts 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. 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 to secure any Contract Debt on that day. We generally determine values at or about 4:00 p.m., Eastern time, on each day that the New York Stock Exchange is open, provided our 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 interest; plus the amount of any purchase payments received by us and allocated to the Fixed Option on that day; plus the amount of any transfers to the Fixed Option on that day, including transfers from the Loan Account; minus any deductions from the Fixed Option on that day caused by: transfers, including transfers to the Loan Account; withdrawals; amounts converted to an Annuity Option; any charges for premium taxes and/or other taxes; any fees for withdrawals and/or transfers; and any annual fee. See THE FIXED OPTION. Variable Account Value - Your Variable Account Value on any Business Day is the sum of your Subaccount Values on that day. Subaccount Value - Your Subaccount Value for each Subaccount on any Business Day is the number of Subaccount Units in the 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 the Subaccount; and any transfers of your Contract Value to the Subaccount, including transfers from the Loan Account. We debit your Contract with Subaccount Units for a Subaccount as a result of any deductions from the Subaccount, including those caused by: withdrawals; transfers, (including transfers to the Loan Account); amounts converted to an Annuity Option; any fees for transfers and/or withdrawals; any charges for premium taxes and/or other taxes; and any annual fee. The number of Subaccount Units we debit or credit to your Contract in connection with a transaction is equal to the amount of the transaction applicable to that Subaccount divided by that Subaccount's Unit Value on that day. The number of your Subaccount Units in a Subaccount will change only if we debit or credit Subaccount Units for the transactions above. The number of Subaccount Units will not change because of subsequent changes in the Subaccount Unit Value. Subaccount Unit Value - The initial Unit Value of each Subaccount was $10 on the Business Day the Subaccount began operations. At the end of each subsequent Business Day, the Unit Value for each Subaccount is equal to Y x Z where: (Y) is the Unit Value for that Subaccount as of the end of the prior Business Day; and (Z) is the Net Investment Factor for that Subaccount for the period (a "valuation period") between the prior Business Day and that Business Day. Net Investment Factor - Each Subaccount's Net Investment Factor for any valuation period is equal to (A/B) - C where: (A) is the net result of: (a) the net asset value per share of the 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) minus or plus 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 net assets held by each Subaccount for the mortality and expense risk charge and the administrative fee during that valuation period. Loan Account Value - Your Loan Account Value as of the end of any Business Day is: your Loan Account Value on the prior Business Day, increased by interest; plus any Contract Debt loaned on that day; minus any Contract Debt repaid on that day, including any withdrawal from the Loan Account to repay Contract Debt; and minus any earned interest transferred from the Loan Account on that day. CHARGES, FEES AND DEDUCTIONS Administrative Fee - We charge an administrative fee against assets held in each Subaccount. This fee is assessed daily at the annual rate of .15%. This fee is guaranteed not to increase. Annual Fee - We charge an annual fee of $40 on each Contract Anniversary against your Contract Value, and at the time you make a full withdrawal, if your Contract Value is less than $100,000 on that date. This fee is guaranteed not to increase. We will deduct the annual fee, if any, from each Investment Option on a prorata basis relative to your Account Value in each Investment Option. Any annual fee we deduct from a Subaccount will reduce the number of Subaccount Units credited to your Contract. No annual fee is charged on amounts you annuitize or on payment of any death benefit proceeds. Mortality and Expense Risk Charge - We impose a mortality and expense risk charge against assets held in each Subaccount. This charge is assessed daily at the annual rate of 1.25%. The mortality and expense risk charge is to compensate 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, ("premium taxes"). Such taxes will include, but not be limited to: any federal, state or local premium taxes; and any federal, state or local income, excise, business or any other type of tax, (or component thereof), measured by or based upon, directly or indirectly, the amount of purchase payments we receive from you. We will normally deduct this charge when you annuitize. We may impose this charge on a full withdrawal, a partial withdrawal, at the time any death benefit is paid, or when we pay the taxes. 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, at 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. 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. We will treat each transfer request as a single transfer, regardless of the number of Investment Options or Guarantee Terms from which or to which Account Values are to be transferred. We will deduct any transfer fee we impose from your Contract Value on a prorata basis relative to your Account Value in each Investment Option immediately after the transfer. Withdrawal Fee - We reserve the right to impose a withdrawal fee of $15 on each partial withdrawal made in excess of fifteen withdrawals in any Contract Year. We will deduct from your Contract Value, on a prorata basis relative to your Account Value in each Investment Option immediately after the withdrawal, any such fee we impose on a partial withdrawal. We will treat each withdrawal request as a single withdrawal, regardless of the number of Investment Options or Guarantee Terms from which Account Values are to be withdrawn. TRANSFERS You may make transfers under this Contract subject to certain restrictions and any transfer fees. You may request transfer of part or all of your Contract Value among Investment Options as often as you wish, while your Annuitant is living and prior to the Annuity Date. If your transfer causes your Account Value remaining in any Investment Option immediately after such transfer to be less than any minimum amount we may establish, we may transfer such remaining Account Value to your other Investment Options on a prorata basis relative to your most recent allocation instructions. We may reject any transfer request. We also reserve the right to limit the size of transfers, to limit the number and frequency of transfers, to restrict transfers, and to suspend the right to transfer. WITHDRAWALS You may, 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. If you make a full withdrawal, we require return of your Contract with your written request, or a signed lost Contract affidavit. You may choose to withdraw from any specific Investment Option(s), or from all Investment Options proportionately. If you do not specify, we will make the withdrawal from your Investment Options on a prorata basis relative to your Account Value in each. Each partial withdrawal must be for $1,000 or more. If your partial withdrawal causes your Contract Value to be less than $1000 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 any minimum amount we may establish, we reserve the right to transfer such remaining Account Value to your other Investment Options on a prorata basis relative to your most recent allocation instructions. Amount Available for Withdrawal - The amount available for withdrawal is your Contract Value as of the end of the Business Day on which we receive your proper withdrawal request, less: . any annual fee; . any withdrawal fee; . any charges for premium taxes and/or other taxes; and . any existing Contract Debt. 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. CONTRACT LOANS If your Contract is issued under a Qualified Plan under Code Section 401(a), 401(k), 403(a), or 403(b) and your Qualified Plan permits, you may request a loan of all or part of the Loan Amount, subject to the provisions of the Qualified Plan Loan Endorsement attached to this 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. DEATH BENEFIT A death benefit may be payable on proof of the death of the Annuitant or an Owner before the Annuity Date, while this Contract is in force. Death of Annuitant - The Death Benefit Amount as of any Business Day (before your Annuity Date) is equal to the greater of: . your aggregate purchase payments, less: any withdrawals, any fees for withdrawals or transfers, and any annual fees since your Contract Date; or . your Contract Value as of that day. The Guaranteed Minimum Death Benefit Amount is determined as follows: First, we calculate what the Death Benefit Amount would have been as of your fifth Contract Anniversary and each subsequent fifth Contract Anniversary that occurs while the Annuitant is living and before the Annuitant reaches his or her 76th birthday, (each of these Contract Anniversaries is a "Milestone Date"). We then adjust the Death Benefit Amount for each Milestone Date as follows: (1) we add the aggregate amount of any purchase payments received by us since that Milestone Date; and (2) we subtract any withdrawals, any fees for withdrawals or transfers, any annual fees, and any previous charges for premium taxes and/or other taxes, since that Milestone Date. The highest of these adjusted Death Benefit Amounts as of the Notice Date is your Guaranteed Minimum Death Benefit Amount. If the Annuitant dies on or before your fifth Contract Anniversary (your first Milestone Date), or dies after your first Milestone Date and had reached his or her 76th birthday on or prior to your first Milestone Date, the death benefit will be equal to your Death Benefit Amount as of the Notice Date. The "Notice Date" is the day on which we receive proof (in good form) of death and instructions satisfactory to us regarding payment of death benefit proceeds. If the Annuitant dies after your first Milestone Date and had not yet reached his or her 76th birthday as of your first Milestone Date, the death benefit will be equal to the greater of: . your Death Benefit Amount as of the Notice Date; or . your Guaranteed Minimum Death Benefit Amount as of the Notice Date. The proceeds of any death benefit payable will be the amount of the death benefit reduced by any charges for premium taxes and/or other taxes and any Contract Debt. These proceeds will be payable in a lump sum or, if the recipient chooses, may be applied towards an Annuity Option under this Contract or towards the purchase of any annuity option we then offer. Any such annuity option is subject to the same restrictions and requirements as are Annuity Options under this Contract. If an Annuitant dies before the Annuity Date, unless there is a surviving Joint or Contingent Annuitant, we will pay the death benefit proceeds to the Beneficiary, if living; otherwise to the Annuitant's estate. If an Annuitant dies and there is a surviving Joint Annuitant, the surviving Joint Annuitant becomes the Annuitant. If there is no surviving Joint Annuitant and there is a Contingent Annuitant, the Contingent Annuitant becomes the Annuitant. Death benefit proceeds are payable only for the death of the sole surviving Annuitant prior to the Annuity Date. If you are the Annuitant and you die, we will determine the amount of any death benefit and the Beneficiary under the Death of Annuitant provisions; we will distribute any death benefit proceeds under the Death of Owner Distribution Rules below. Death of Owner - If you are not the Annuitant, and you die before the Annuitant, the death benefit will be equal to your Contract Value as of the Notice Date. The proceeds of any death benefit payable will be the amount of the death benefit reduced by any charges for premium taxes and/or other taxes and any Contract Debt. These proceeds will be payable in a lump sum or, if the recipient chooses, may be applied towards an Annuity Option under this Contract or towards the purchase of any annuity option we then offer. Any such annuity option is subject to the same restrictions and requirements as are Annuity Options under this Contract. 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 Annuitant or the Annuitant'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, payment will be made in accordance with the Death of Owner provisions of this Contract. Death of Owner Distribution Rules - The following rules will control the determination of whether a distribution must be made under this Contract, even if they are inconsistent with any other provisions contained in this Contract. The rules do not effect the determination of the amount of benefit payable or distribution proceeds. Where there is more than one Owner, these rules apply upon the date on which the first of these joint Owners dies. If the Owner dies before the Annuity Date, then any death benefit proceeds under this Contract must be distributed either: (1) within five years after the Owner's death; or (2) over a period that does not exceed the life or life expectancy of the Designated Beneficiary with payments that start within one year after the Owner's death. The Designated Beneficiary is the individual selected by the Owner to succeed to the Owner's interest in the Contract after the death of an Owner of this Contract which includes a Joint or Contingent Owner, if any, a Beneficiary, or the Annuitant or the Annuitant's estate. 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 the death benefit proceeds in one lump sum, the spouse may continue this Contract in force as Owner rather than receive the death benefit proceeds. In this case, if the spouse's death occurs before the Annuity Date, then any death benefit proceeds must be distributed within 5 years of the spouse's death. If the Owner dies 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 death. If the Owner is a Non-individual Owner, the rules set forth in these Death of Owner Distribution Rules apply in the event of the death of the Primary Annuitant. A Non-individual Owner means a corporation or other entity which is a non-natural person, unless the entity demonstrates to our satisfaction, or we otherwise determine at our sole option, that the Contract should be treated, for purposes of Section 72(s) of the Code, as owned by an individual (natural) person. Primary Annuitant means the individual, the events in the life of whom are of primary importance in affecting the timing or amount of the payout under the Contract. The rules set forth in these Distribution Rules are intended to satisfy the distributions-at-death timing requirements of Section 72(s) of the Code. This Contract is deemed to incorporate any provision of Section 72(s) of the Code, or any successor provision, as interpreted by us and deemed necessary to qualify this Contract as an annuity. We reserve the right to amend this Contract without a signed request and to provide a form of amendment (rider) to the Contract to satisfy any changes in these requirements. These Distribution Rules do not apply to Qualified Contracts issued under Qualified Plans as defined in Section 401 (a), 401 (k), 403(a) or 403(b) of the Code. Interest on Death Benefit Proceeds - If proceeds are not paid in one sum or applied under an Annuity Option within 30 days after we receive due proof of the death of the Annuitant or an Owner before the Annuity Date, we will pay interest on the proceeds. Interest will be paid at the rate of 3% a year from the date we receive due proof of death until the proceeds are paid or applied under an Annuity Option. If the law in the state in which you live on the Contract Date requires payment of a greater amount, we will pay that amount. BENEFICIARY Your Beneficiary is the person you name who may receive any death benefit proceeds, or any remaining annuity payments after the Annuity Date, under your Contract if the Annuitant or Owner dies. If you leave no surviving Beneficiary, the Annuitant's estate, (in the event of an Owner's death, the Annuitant or Annuitant's 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 written notice that the trust has been revoked or is not in effect, then any death benefit proceeds payable will be paid to the Annuitant or the Annuitant'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 Annuity Date by sending us a written 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. The change or addition will take effect only when we receive all necessary documents and record the change or addition. ANNUITY BENEFITS On the Annuity Date, your Contract Value will convert into the Annuity Option(s) you have chosen. We will send the first annuity payment under this Contract on the day following the Annuity Date. 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 notifying us in writing at least 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 your younger Annuitant reaches his or her 100th birthday. If your Contract is a Qualified Contract, your Annuity Date cannot be earlier than your first Contract Anniversary, and must occur on or before April 15 of the calendar year following the year in which your Annuitant (who is the Qualified Plan participant) reaches his or her 70 1/2th birthday. 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 Contract Value, less any Contract Debt, any transfer fee, and any charges for premium taxes and/or other taxes, to an Annuity Option we then offer on the Annuity Date. You may also elect a full withdrawal 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 apply must be at least $5,000; otherwise, we will pay a single amount equal to your withdrawal proceeds. See WITHDRAWALS. If you convert only a portion of your 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. 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. This option may or may not be available, or may be available only for certain types of Contracts. You should call your tax advisor 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, semi-annually, or annually. The first annuity payment on the Annuity Date must be at least $250. We will reduce your payment frequency if the first annuity payment is less than $250. If you elect annuity payments for a Period Certain Only, we reserve the right to also 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 both. You may convert one portion of your Contract Value, less any Contract Debt, any transfer fee, and any charges for premium taxes and/or other taxes, into a fixed annuity and another portion into a variable annuity. If you select a variable annuity, you may choose any Subaccounts for your annuity. On your Annuity Date, we will transfer that portion of your Contract Value, less Contract Debt, you indicate to the Subaccount(s) you choose, if you select a variable annuity. 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 for 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, the Annuitant may exchange the Annuity Units in any Subaccount(s) for Annuity Units in any other Subaccount(s) up to four times in any twelve month period. We reserve the right to limit the Subaccounts available, to change the number and frequency of exchanges, and to change the number of Subaccounts you may choose. In choosing an Annuity Option, you must submit your Option request to us in writing on a form provided by us or in another form satisfactory to us. Annuity Options - The following forms of annuity payments are available under this Contract, although additional options may become available in the future: Option 1: Life Only. Periodic payments are made to the Annuitant during his or her lifetime. Payments stop when the Annuitant dies. Option 2: Life with Period Certain. Periodic payments are made to the Annuitant during his or her lifetime, with payments guaranteed for a specified period. You may choose to have payments guaranteed from 5 through 30 years (in full years only). If the Annuitant dies before the guaranteed payments are completed, we pay the Beneficiary the remainder of the guaranteed payments. Option 3: Joint and Survivor Life. Periodic payments are made during the lifetime of the Primary Annuitant. After the death of the Primary Annuitant, periodic payments are made to the secondary Annuitant named in the election if and so long as such secondary Annuitant lives. Payments made to 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 to 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 die. Option 4: Period Certain Only. Periodic payments are made to the Annuitant over a specified period. You may choose to have payments continue from 5 through 30 years (in full years only). If the Annuitant dies before the guaranteed payments are completed, we pay the Beneficiary the remainder of the guaranteed payments. Default Annuity Date and Options - If this is a Non-Qualified Contract and you did not choose an Annuity Date when you submitted your application for this Contract, your Annuity Date is the Annuitant's 100th birthday. If there are Joint Annuitants, the Annuity Date will be based on the younger Annuitant's birthday, unless otherwise required by law. If this is a Qualified Contract and you did not choose an Annuity Date, your Annuity Date is April 1 of the calendar year following your Annuitant's 70 1/2th birthday; if there are Joint Annuitants, the Annuity Date will be based on the birthday of the Annuitant who is the Qualified Plan participant. If the Annuitant has reached his or her 70 1/2th birthday when the Contract is issued, the Annuity Date is April 1 of the calendar year following the first Contract Anniversary. If you do not elect an Annuity Option, your Contract Value, less any Contract Debt, and any charges for premium taxes and/or other taxes, when converted, will be converted as follows, subject to our minimum requirements: (1) the net amount from your Fixed Option Value will be applied to a fixed annuity and held in our General Account; and (2) 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 the Annuitant is not married, your Annuity Option will be Period Certain Only for five years. If this is a Qualified Contract and the Annuitant is married, your Annuity Option will be Joint and Survivor Life, with survivor payments of 50%, and the Annuitant's spouse will 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 - We use the Annuity Option Tables at the end of the Contract to determine the amount of the first annuity payment, based on your net amount from your Contract Value applied to the Annuity Option on the Annuity Date and your selections. 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, this amount also depends on the age of the Annuitant(s) on the Annuity Date and the sex of the Annuitant(s), unless unisex rates apply. Fixed Annuity Payments - The minimum guaranteed income purchased per $1000 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 10 years. The fixed annuity payments made will be based on the greater of: (1) our current annuity purchase rates in effect for this Contract on your Annuity Date; and (2) our guaranteed purchase rates. The dollar amount of any payments after the first annuity payment are specified during the annuity payment period according to the provisions of the Annuity Option you elect. Variable Annuity Payments - Your Subaccount Annuity Units. For each Subaccount, we divide the amount of the initial variable annuity payment from each Subaccount by the Annuity Unit Value for that Subaccount, (the "Annuity Unit Value"), on the Annuity Date, to obtain the number of Annuity Units for that Subaccount. The number of your Annuity Units in each Subaccount will not change unless exchanges of Annuity Units are made (or if the Joint and Survivor Annuity option is elected and the Primary Annuitant dies first), but the Annuity Unit Value of those Annuity Units will vary. Your Subsequent Variable Payments. The amount of each subsequent variable annuity payment will be the sum of the amounts payable based on your Annuity Units in each Subaccount. To determine the amount payable for each Subaccount, we multiply the number of your Annuity Units in that Subaccount by their Annuity Unit Value on the day in each payment period that corresponds to the Annuity Date. Annuity Unit Value - The initial Annuity Unit Value for each Subaccount was arbitrarily set at $10 on the Business Day the Subaccount began operations. At the end of each subsequent Business Day, the Annuity Unit Value for each Subaccount is equal to (A x B) x C where: (A) is the Subaccount's Annuity Unit Value for that Subaccount as of the end of the prior Business Day; (B) is the Net Investment Factor for that Subaccount for that valuation period; and (C) is an interest factor to offset the effect of the assumed interest rate of 5% per year, which is built into the Annuity Option Tables. We generally calculate the Annuity Unit Value of each Subaccount at or about 4:00 p.m., Eastern time, on each day the New York Stock Exchange is open, provided our 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 Designated Beneficiary entitled to a death benefit on account of the Annuitant's death, the first payment will be made on the first day of the calendar month next following the day we receive due proof of the Annuitant's death and instructions regarding payment, and such other documentation as we may require (called the "Annuity Date"). Subsequent payments will be determined on the day in each payment period that corresponds to the Annuity Date and will be made on the following day. Misstatement of Age or Sex - We may require proof of the Annuitant's age and sex before commencing annuity payments. If the age or sex (or both) of the Annuitant are incorrectly stated in this Contract, we will correct the amount payable to equal the amount that the Account Value, less any charges for premium taxes and/or other taxes, under this Contract would have purchased for the Annuitant's correct age and sex, if applicable. If we make the correction after annuity payments have commenced, and we have made overpayments, we will deduct the amount of the overpayment, with interest at 3% per year, from any payments due then or later. If we have made underpayments, we will add the amount, with interest at 3% a year, of the underpayments to the next payment we make after we receive proof of the correct sex and/or date of birth. GENERAL PROVISIONS Reports to Owners - We will send you those reports required by applicable law. Payments, Instructions and Requests - Unless this Contract provides otherwise, all payments, loan repayments, instructions and requests must be received in writing at our Service Center at its mailing address. (See DEFINITIONS: Service Center). Any subsequent purchase payments, loans, loan repayments and requests for transfer or withdrawal we receive in proper form before 4:00 p.m. Eastern time or the close of the New York Stock Exchange, if earlier, on any Business Day usually will be processed the same Business Day unless the transaction or event is scheduled to occur on another day. Generally, all other instructions and requests normally will be effective as of the end of the day next following the Business Day we receive them in proper form, unless the event is scheduled to occur on another day. We may require that you provide signature guarantees or other safeguards for any instruction, request or other document you may send to our Service Center. You acknowledge and agree that we will not be liable for any loss, liability, cost or expense of any kind or character for acting on instructions or requests submitted to us that we reasonably believe to be genuine, provided we follow our procedures. Entire Contract - This document, the attached application 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 subject matter 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 waivers of our rights or requirements under this Contract can only be made if in writing by an authorized officer of PM. Basis of Values - A detailed statement showing how values are determined has been filed with the state insurance departments. All values and reserves are at least equal to those required by the laws of the state in which this Contract is delivered. Claims of Creditors - Your Contract Value and other benefits under this Contract are exempt from the claims of creditors to the extent permitted by law. Removal of Beneficiary or Contingent Annuitant - You may remove a Beneficiary, (other than an irrevocable Beneficiary), or a Contingent Annuitant from this Contract by providing proper instructions to our Service Center. Ownership - This Contract belongs to the Owner. The Owner is entitled to exercise all rights available to the Owner under this Contract. If this Contract is jointly owned, both Owners must join in any request to exercise these rights. The Owner may exercise these rights under this Contract without the consent of the Beneficiary, (other than any irrevocable Beneficiary), or any other person, except as otherwise required by law. Assignment - You may assign all rights and benefits under this Contract before the Annuity Date. We are not bound by any assignment until we have received written notice satisfactory to us and we record the assignment. We are not responsible for the validity of any assignment. If the Contract has been absolutely assigned, the assignee becomes the Owner. You should consult with your tax advisor 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, repayments of Contract Debt from the Loan Account, repayments from the Fixed Option of due and unpaid interest on Contract Debt, 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 Guaranteed Term in effect has ended, and 3% on an annual basis thereafter. If you make purchase payments by check, we may delay making payments to you until your check has cleared. Incontestability - We will not contest this Contract. Proof of Life or Death - Before we make a payment, we have the right to require proof of the life or death of any person whose life or death determines whether, to whom, or how much we must pay any benefits under this Contract. Dividends - We do not expect dividends to become payable. At the end of each Contract Year, we will determine your dividend, if any. You may choose to have it paid in cash or added to your Contract Value. If you do not make a choice, we will add it to your Contract Value. We will allocate any dividend added to your Contract Value in accordance with your most recent allocation instructions, unless you instruct otherwise. You should consult with your tax advisor before making any election. Withholding Taxes - We will withhold any taxes required to be withheld by law or requested to be withheld. ANNUITY OPTION TABLES For the fixed annuity option, the Tables below illustrate the minimum guaranteed monthly income purchased per $1000 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 10 years with interest at 3%. The Tables also illustrate the minimum rates for the first monthly variable annuity payment per $1000 of the net amount applied to the variable annuity payment option. The rates for variable annuity payments are based on interest at the annual rate of 5% and the 1983a Annuity Mortality Table with the ages set back 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 purchase rates for life payment options. For some Qualified Plans and in some states the use of sex- distinct purchase rates are prohibited. For those Qualified Plans and in those states we use blended unisex purchase rates 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 below. OPTIONS 1 AND 2 - SINGLE LIFE ANNUITIES WITH GUARANTEED PAYMENTS FOR: 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. 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
Variable Annuity Rates
Male at 5% Female at 5% Unisex at 5% Age None 10 Yr. 20 Yr. None 10 Yr. 20 Yr. None 10 Yr. 20 Yr. 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
OPTION 3 - JOINT AND SURVIVOR LIFE
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 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
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 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
OPTION 4 - PERIOD CERTAIN ONLY Monthly Monthly Monthly Monthly Years Income Years Income Years Income Years Income 3% 5% 3% 5% 3% 5% 3% 5% Fixed Variable Fixed Variable Fixed Variable Fixed Variable 5 17.91 18.74 12 8.24 9.16 19 5.73 6.71 26 4.59 5.65 6 15.14 15.99 13 7.71 8.64 20 5.51 6.51 27 4.47 5.54 7 13.16 14.02 14 7.26 8.20 21 5.32 6.33 28 4.37 5.45 8 11.68 12.56 15 6.87 7.82 22 5.15 6.17 29 4.27 5.36 9 10.53 11.42 16 6.53 7.49 23 4.99 6.02 30 4.18 5.28 10 9.61 10.51 17 6.23 7.20 24 4.84 5.88 11 8.86 9.77 18 5.96 6.94 25 4.71 5.76
INDIVIDUAL FLEXIBLE PREMIUM 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 . Participating EX-99.5(A) 3 APPLICATION FORM EXHIBIT 99.5(a) Application Form for Individual Flexible Premium Variable Accumulation Annuity Contract [LOGO OF PACIFIC MUTUAL] PACIFIC ONE APPLICATION Pacific Mutual Life Insurance Company, PO Box 100060, Pasadena, CA 91189-0060 (Please print clearly in dark ink) - ------------------------------------------------------------------------------- 1a ANNUITANT (On a qualified plan, the plan participant must be named here.) - --------------------------- --------- ------------------------------- First Name Middle Last - -------------------------------------------------------------------------- Street Address - --------------------------- --------- ------------------------------- City State Zip SSN/TIN --- --- --- --- --- --- --- --- --- Sex: [_]M [_]F Date of Birth:____/____/____ Phone: ( ) ---------------------------- - ------------------------------------------------------------------------------- 1b ANNUITANT (Optional, check one) [_] Joint [_] Contingent - --------------------------- --------- ------------------------------- First Name Middle Last - -------------------------------------------------------------------------- Street Address - --------------------------- --------- ------------------------------- City State Zip SSN/TIN --- --- --- --- --- --- --- --- --- Sex: [_]M [_]F Date of Birth:____/____/____ Annuitant's Spouse? [_] Yes [_] No - ------------------------------------------------------------------------------- 2a OWNER (If same as Annuitant, check here [_]. Owner and Annuitant must be the same on some qualified plans.) - --------------------------- --------- ------------------------------- First Name Middle Last - -------------------------------------------------------------------------- Street Address - --------------------------- --------- ------------------------------- City State Zip SSN/TIN --- --- --- --- --- --- --- --- --- Sex: [_]M [_]F Date of Birth:____/____/____ Phone: ( ) ---------------------------- - ------------------------------------------------------------------------------- 2b OWNER (Optional, check one) [_] Joint [_] Contingent - --------------------------- --------- ------------------------------- First Name Middle Last - -------------------------------------------------------------------------- Street Address - --------------------------- --------- ------------------------------- City State Zip SSN/TIN --- --- --- --- --- --- --- --- --- Sex: [_]M [_]F Date of Birth:____/____/____ Owner's Spouse? [_] Yes [_] No - -------------------------------------------------------------------------- 3 BENEFICIARY (Use Special Requests section or enclose a signed letter of instruction if you need to provide additional information.) - -------------------------------------------------------------------------- Beneficiary Name [_] Primary [_] Contingent - -------------------------------------------------------------------------- Beneficiary Name [_] Primary [_] Contingent - -------------------------------------------------------------------------------- 4 TYPE OF PLAN (Check non-qualified or indicate qualified type.) [_] Non-Qualified - -------------------------------------------------------------------------------- [_] IRA Rollover [_] 401(a) Pension [_] IRA Transfer [_] 401(k) Profit Sharing [_] IRA: Tax Yr. 19__ [_] 403(b) Transfer [_] SEP-IRA: Tax Yr. 19__ [_] Keogh/HR10 [_] Other ________________ - -------------------------------------------------------------------------------- 5 ISSUE STATE --------------------------------------------- Enter the state where application was signed. - -------------------------------------------------------------------------------- 6 INITIAL PREMIUM AMOUNT $ --------------------- - -------------------------------------------------------------------------------- 7 TELEPHONE AUTHORIZATION (Owner/Owners must check and initial.) [_] [_] ---------- ----------- By initialing, Pacific Mutual is authorized and directed to act on telephone instructions from any person(s) who can furnish proper identification. Pacific Mutual will use reasonable procedures to confirm that these instructions are authorized and genuine. As long as these procedures are followed, Pacific Mutual, its affiliates, directors, trustees, officers, employees, representatives and/or agents, will be held harmless for any claim, liability, loss or cost. - -------------------------------------------------------------------------------- 8 REPLACEMENT OF ANNUITY Will the purchase of this annuity replace or change any other insurance or annuity? [_] Yes [_] No (If yes, or 1035 exchange, write insurance company name and contract number in Special Requests section and attach any required state replacement and/or transfer forms.) - -------------------------------------------------------------------------------- (Please complete the following pages) - -------------------------------------------------------------------------------- 9 PRE-AUTHORIZED WITHDRAWALS (Choose one option only, then frequency and term below.) 1 [_] Withdraw $ from the source account(s) indicated below. ------ 2 [_] Withdraw % annually from the source account(s) indicated below. ------ Frequency: (Choose one.) - --------- [_] Monthly [_] Quarterly [_] Semi-Annually [_] Annually Term: [_] Months (Enter no. of months) ----- [_] Years (Enter no. of years) ----- Start date: / / - ---------- ----- ------ ------- Source: (Choose one or more.) Federal Taxes: - ------ ------------- [_] Do Not Withhold Fixed _________ [_] Withhold ______% Money Market _________ (If not specified, a minimum 10% federal tax High Yield Bond _________ on non-qualified plans, 20% on qualified Managed Bond _________ plans, will be withheld. State mandated Govt. Securities _________ income tax will be withheld where required [ ] _________ by law.) Growth LT _________ Equity Income _________ Note: Multi-Strategy _________ ---- Equity _________ Payment will be made and sent to Owner unless Bond and Income _________ otherwise specified in Special Requests Equity Index _________ section. International _________ [ ] _________ _________ - -------------------------------------------------------------------------------- 10 TRANSFERS (Choose only one of the three options, then frequency and start date below.) Earnings Sweep: - -------------- 1 [_] Sweep previous period's earnings of either the Fixed Option or the Money Market account to the target account(s) indicated below. (Choose one source account. If also rebalancing, only Fixed Option available.) [_] Fixed [_] Money Market Dollar Cost Averaging: - --------------------- 2 [_] Transfer $ from the source account to the target account(s) as indicated below. Source account will not be depleted if remaining balance does not equal amount indicated. 3 [_] Transfer % annually from the source account to the target account(s) as indicated below. Source account will be depleted if 100% selected. If Fixed Option is the source account, up to 100% can be depleted over one year or more. Frequency: (Choose one.) - --------- [_] Monthly [_] Quarterly [_] Semi-Annually [_] Annually Start date: / / - ---------- ----- ------ ------- Source: (If option 2 or 3 Target: (Must be different than source - ------ ------ selected above, choose one.) account.) [_] Fixed Fixed ______________ [_] Money Market Money Market ______________ [_] High Yield Bond High Yield Bond ______________ [_] Managed Bond Managed Bond ______________ [_] Govt. Securities Govt. Securities ______________ [_] [ ] [ ] ______________ [_] Growth LT Growth LT ______________ [_] Equity Income Equity Income ______________ [_] Multi-Strategy Multi-Strategy ______________ [_] Equity Equity ______________ [_] Bond and Income Bond and Income ______________ [_] Equity Index Equity Index ______________ [_] International International ______________ [_] [ ] [ ] ______________ [_] ______________ - -------------------------------------------------------------------------------- 11 PRE-AUTHORIZED CHECKING (Please attach a voided check. To begin the plan, the $2,000 minimum must accompany this application.) Collect $ monthly by initiating automatic withdrawals from my account as indicated on the attached voided check. Payments will be applied according to the allocations on this application or more current instructions, if any. Start date: / / -------- ------- -------- - -------------------------------------------------------------------------------- [LOGO OF PACIFIC MUTUAL] PACIFIC ONE APPLICATION INSTRUCTIONS - -------------------------------------------------------------------------------- Send this completed application, with payment or 1035 Tax-Free Exchange or Transfer of Assets form to: Pacific Mutual Life Insurance Company, PO Box 100060, Pasadena, CA 91189-0060. Our phone number is (800) 722-2333. Our express mail address is: Pacific Mutual, C/O FCNPC, 1111 South Arroyo Parkway, 1st Floor, Pasadena, CA 91105. - -------------------------------------------------------------------------------- 1 Annuitants: There are many combinations of owner and annuitant 2 Owners: registrations. Joint owners cannot be named on qualified plans. Other combinations may result in different consequences. For example, the death of an owner/annuitant has different consequences than the death of a non-owner annuitant. Use the Special Requests section to clarify registrations. Some examples include: naming both joint and contingent annuitants; owner as trust for benefit of annuitant; joint owner same as joint annuitant, etc. Spousal signatures may be required for certain actions in qualified plans. Please consult a tax advisor to properly structure qualified plans and effect transfers. - -------------------------------------------------------------------------------- 3 Beneficiary: Beneficiaries will be joint if no boxes are checked. Joint beneficiaries will share equally with the rights of survivorship. In the event of death, with a spouse as a joint beneficiary, the Contract may not be continued. Beneficiary designations may be irrevocable. Please use the Special Requests section to indicate this option. - -------------------------------------------------------------------------------- 4 Type of Plan: The minimum $25,000 must be met. Example: $23,000 IRA rollover and $2,000 annual contribution. Check both IRA Rollover and IRA: Tax Yr. 19__ boxes. - -------------------------------------------------------------------------------- 5 Issue State: Indicate the state where the application is signed. - -------------------------------------------------------------------------------- 6 Initial Purchase: Indicate the initial purchase payment in U.S. dollars. - -------------------------------------------------------------------------------- 7 Telephone Authorization: If the Contract is jointly owned, both owners must check and initial. - -------------------------------------------------------------------------------- 8 Replacement Of Annuity: For 1035 exchanges, a transfer of assets form must also be completed and attached. - -------------------------------------------------------------------------------- 9 Pre-Authorized Contract must be issued for 30 days. Minimum Withdrawals: withdrawal $1,000. Annual percentage will be divided by the frequency selected. Payment will reflect deduction of fees, charges and taxes, if withholding selected and will be prorated from all Investment Options if none selected. Withdrawals may be taken from qualified plans if allowed. Actual start date may occur after date elected. - -------------------------------------------------------------------------------- 10 Transfers: Contract must be issued for at least 30 days. Actual start date may occur after date elected. Minimum source account value $10,000. Earnings sweep: If rebalancing, earnings sweep allowed only from the Fixed Option. If not rebalancing, earnings sweep allowed from either the Fixed Option or the Money Market. Transfer dollars: Select target accounts that are different than the source account. Transfer percentages: Annual percentage will be divided by the frequency selected. Subsequent transfers may be less than the initial minimum of $250. - -------------------------------------------------------------------------------- 11 Pre-Authorized Checking: Contract must be issued for at least 30 days. If no date is chosen, withdrawals will commence 30 days after your Contract is issued. - -------------------------------------------------------------------------------- 12 Annuity Start Date: Annuity date cannot be prior to first Contract anniversary. For non-qualified plans, if no date is chosen, annuity date is the Annuitant's 100th birthday. For qualified plans, if no date is chosen, annuity date is April 1 of year after the Annuitant reaches age 70 1/2. - -------------------------------------------------------------------------------- 13 Allocation Options: Allocations must total 100% or equal total purchase payment. - -------------------------------------------------------------------------------- 14 Rebalancing: Contract must be issued for at least 30 days. Variable account percentages will be prorated, excluding Fixed Option balances. The Fixed Option may not be rebalanced. If variable account rebalancing is chosen, then earnings sweep may be made only from the Fixed Option and not the Money Market. If no date is chosen, rebalancing will occur on the first business day of the frequency selected and every period after. Additional premium to accounts other than those selected on this application will not be rebalanced. To change allocations, please complete a new transfer form. - -------------------------------------------------------------------------------- 15 Special Requests: Use this section to indicate unique registrations and other special instructions. - -------------------------------------------------------------------------------- 16 Statement Of Applicant: This section contains information about the Contract, if issued. Please read it carefully. Some provisions may conflict with qualified plans or with applicable laws and regulations. - -------------------------------------------------------------------------------- 17 Statement Of Agent: Your agent must complete and sign this section. - -------------------------------------------------------------------------------- 12 ANNUITY START DATE (Optional, annuity date cannot be prior to first contract anniversary.) / / ------- ------- --------- - ------------------------------------------------------------------------------- 13 ALLOCATION OPTIONS (Indicate either whole percentages or dollars. Total must equal either 100% or initial purchase payment.) Pacific Mutual......... Fixed _____________ Pacific Mutual......... Money Market _____________ Pacific Mutual......... High Yield Bond _____________ PIMCO.................. Managed Bond _____________ PIMCO.................. Govt. Securities _____________ [ ].............. [ ] _____________ Janus.................. Growth LT _____________ J.P. Morgan Inv. ...... Equity Income _____________ J.P. Morgan Inv. ...... Multi-Strategy _____________ Greenwich.............. Equity _____________ Greenwich.............. Bond and Income _____________ Bankers Trust.......... Equity Index _____________ Templeton.............. International _____________ [ ]............... [ ] _____________ ....................... _____________ - -------------------------------------------------------------------------------- 14 REBALANCING [_] (Variable accounts will be rebalanced to the allocation percentages on this application.) Frequency: (Choose one.) - --------- [_] Quarterly [_] Semi-Annually [_] Annually Start date: / / ----- ------ ------- - -------------------------------------------------------------------------------- 15 SPECIAL REQUESTS - -------------------------------------------------------------------------------- 16. STATEMENT OF APPLICANT I/We believe this Contract will meet my/our financial objectives. I/We 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/We have received prospectuses. I/We hereby represent my/our answers to the above questions to be correct and true to the best of my/our knowledge and belief, and agree that this application will be part of the annuity Contract issued by Pacific Mutual. I/We acknowledge that corrections to my/our Contract may be made from the application. My/Our 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. The following paragraph is not applicable to Maryland residents: The Company is required to provide to the owner, within reasonable time, reasonable factual information regarding the benefits and provisions of the annuity contract. Any person who knowingly and with intent to injure, defraud, or deceive any insurer, files a statement of claim or an application containing any false, incomplete, or misleading information is guilty of a felony of the third degree. 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. Any person who includes any false or misleading information on an application for an insurance policy is subject to civil and criminal penalties. NOTICE: ANY PERSON WHO, WITH INTENT TO DEFRAUD OR KNOWING THAT HE IS FACILITATING A FRAUD AGAINST AN INSURER, SUBMITS AN APPLICATION OR FILES A CLAIM CONTAINING A FALSE OR DECEPTIVE STATEMENT IS GUILTY OF INSURANCE FRAUD. I/WE 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). 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/Our signature(s) also certifies/certify, under penalty of perjury, that my/our taxpayer identification number(s) provided above is/are correct and that I am/we are not subject to backup withholding. - ------------------------------ ------------------------------- -------------- Owner Signature (If different Annuitant Signature Date from Annuitant) - ------------------------------ ------------------------------- -------------- Joint/Contingent Owner Joint/Contingent Annuitant Date Signature Signature - -------------------------------------------------------------------------------- 17. STATEMENT OF AGENT Will this Contract change any existing life insurance or annuity in this or any other company? [_] Yes [_] No If yes, explain under Special Requests section. I certify that I am authorized and qualified to discuss this Contract. - - - ------------------------ ------------------------- -------- ------- -------- Agent Full Name (Print) Agent Signature Agent SSN (Required) ( ) - ------------------------ ------------------------- Agent Phone Number Broker/Dealer Name - ------------------------------------------------------------------------------- EX-99.5(C) 4 CONFIRMATION FORM EXHIBIT 99.5(c) Application/Confirmation Form PACIFIC MUTUAL APPLICATION/CONFIRMATION FORM [LOGO OF PACIFIC MUTUAL] Pacific Mutual Life Insurance Company PO Box 100060, Pasadena, CA 91189-0060 [Pacific One Variable Annuity] [VA12345678] Initial Premium:[$100,000.00] Issue date:[12-01-95] State Of Sale: [CA] This form, when returned to Pacific Mutual Life Insurance Company, completes the transaction by confirming your application for, and receipt of, your Contract. Please verify that this information is correct; sign and date the form at the bottom, and return it to Pacific Mutual in the enclosed postage-paid envelope. Please return this form promptly. Certain transactions on this policy cannot be processed prior to the receipt of this form. ANNUITANT(S): ALLOCATION OPTIONS: [LELAND K STANFORD] [8.00%][Fixed Fund] [700 NEWPORT CENTER DRIVE] [8.00%][Money Market] [NEWPORT BEACH, CA 92660] [8.00%][High Yield Bond] [] [8.00%][Managed Bond] [123-45-6789] [07-06-1953][MALE] [8.00%][Government Securities] - ------------------------------------------------- [8.00%][Growth LT] Joint/Contingent [8.00%][Equity Income] [VICKI L STANFORD] [8.00%][Multi-Strategy] [700 NEWPORT CENTER DRIVE] [8.00%][Equity] [NEWPORT BEACH, CA 92660] [8.00%][Bond & Income] [] [10.00%][Equity Index] [987-65-4321] [11-07-1952] [FEMALE] [10.00%][International] - ------------------------------------------------- [ ][] OWNER(S): [ ][] [LELAND K STANFORD] [ ][] [700 NEWPORT CENTER DRIVE] [ ][] [NEWPORT BEACH, CA 92660] [ ][] [] [ ][] [123-45-6789] [07-06-1953][MALE] - ------------------------------------------------- Joint/Contingent [VICKI L STANFORD] [700 NEWPORT CENTER DRIVE] [NEWPORT BEACH, CA 92660] [] [987-65-4321] [11-07-1952][FEMALE] - ------------------------------------------------- ----------------------------------- BENEFICIARY/BENEFICIARIES (P=Primary; C=Contingent): [][] TYPE OF PLAN: [Non-Qualified] [][] REBALANCING: [NO][] [][] DEALER INFORMATION: [][] [JOHN SMITH] [][]
1 TELEPHONE AUTHORIZATION Owner/Owners must check box and initial to authorize telephone requests. [_] [_] ----------- --------- Please act on telephone instructions from any person purporting to have authority to make transfers between accounts or allocation changes or other transactions. Pacific Mutual will employ reasonable procedures to confirm that instructions communicated by telephone are authorized. So long as these procedures are followed Pacific Mutual, any of its affiliates, Pacific Select Fund, or any directors, trustees, officers, employees representatives or agents of the aforementioned who act on their behalf, will not be subject to any claim, liability, loss, or cost if any request is acted on in good faith upon telephone instructions Pacific Mutual reasonably believes to be genuine in reliance on its procedures; and this signed authorization. ________________________________________________________________________________ 2 STATEMENT OF APPLICANT I/We believe this Contract will meet my/our financial objectives. I/We 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 as to the fixed dollar amounts. I/We have received the Contract referenced above and hereby affirm the information to be true to the best of my/our knowledge and belief. I/We agree that this confirmation form will be part of the Contract issued by Pacific Mutual. I/We have reviewed the Contract and acknowledge that corrections may have been made from the application. My/Our acceptance of this Contract constitutes acceptance of those 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. If there is a Contingent Owner named, the Contingent Owner will become the Owner if the Owner dies prior to the Annuity Start Date. My/Our signature(s) also certifies/certify, under penalty of perjury, that my/our taxpayer identification number(s) provided above is/are correct. I/We certify that this Contract was sold and/or solicited in the state of [California]. - --------------------------------- ------------------------------------ -------- Owner Signature (if different from Annuitant) Annuitant Signature Date - --------------------------------- ------------------------------------ -------- Contingent Owner Signature Joint/Contingent Annuitant Signature Date
[LOGO OF PACIFIC MUTUAL] PACIFIC MUTUAL VARIABLE ANNUITY PAC APP PAC APP is not available for transfers, 1035 exchanges and 401, 403, 457 and Keogh plans. Please use the standard application. =============================================================================== 1 ANNUITANT - --------------------------- --------- ------------------------------- First Name Middle Last - -------------------------------------------------------------------------- Street Address - --------------------------- --------- ------------------------------- City State Zip - ------------------------------------------------ SS# Date Of Birth Sex [_]M [_]F =============================================================================== 2 OWNER - --------------------------- --------- ------------------------------- First Name Middle Last - -------------------------------------------------------------------------- Street Address - --------------------------- --------- ------------------------------- City State Zip - ------------------------------------------------ SS# Date Of Birth Sex [_]M [_]F Check one [_] Joint [_] Contingent - --------------------------- --------- ------------------------------- First Name Middle Last - ------------------------------------------------ SS# Date Of Birth Sex [_]M [_]F =============================================================================== 3 ANNUITANT Optional, check one [_] Joint [_] Contingent - --------------------------- --------- ------------------------------- First Name Middle Last - -------------------------------------------------------------------------- Address - ------------------------------------------------ SS# Date Of Birth Sex [_]M [_]F ================================================================================ 4 BENEFICIARY - -------------------------------------------------------------------------- Primary Beneficiary Name - Annuitant - -------------------------------------------------------------------------- Primary Beneficiary Name - Owner (PSVA Only) ================================================================================ 5 TRADE INFORMATION Product: [_] PSVA [_] One - -------------------------------------------------------------------------- Date Premium Submitted State Of Sale - -------------------------------------------------------------------------- Client Account # Contract # (for additional payments only) ================================================================================ 6 TYPE OF PLAN [_] Non-Qualified OR [_] Qualified (check appropriate box below) [_] IRA Rollover [_] IRA: Tax Yr. 19__ [_] SEP-IRA: Tax Yr. 19__ ================================================================================ 7 ALLOCATION OPTIONS Allocate payment of $ as indicated below. (Allocations must total ---------- 100% or equal total premium invested.) ___ Fixed Account ___ Equity Income ___ ___ Money Market ___ Multi-Strategy ___ ___ High Yield Bond ___ Equity ___ ___ Managed Bond ___ Bond and Income ___ ___ Govt. Securities ___ Equity Income ___ Growth LT ___ International ================================================================================ 8 DEALER INFORMATION Will the purchase of this Annuity replace or change any other insurance or annuity? [_] Yes [_] No --------------------------------------------------------------------------- Registered Representative Name --------------------------------------------------------------------------- SS# ================================================================================ 9 REBALANCING (Optional) [_] Yes [_] No The fixed account is not available for rebalancing. [_] Quarterly [_] Semi-Annually [_] Annually ================================================================================ 10 SPECIAL REMARKS ================================================================================ 11 REPLACEMENT OF ANNUITY Will the purchase of this Annuity replace or change any other insurance or annuity? [_] Yes [_] No ================================================================================ 255-5A-2 PACIFIC MUTUAL LIFE INSURANCE COMPANY - P.O. Box 100060, Pasadena, CA 91189-0060 EX-99.10(A) 5 CONSENT OF D & T EXHIBIT 99.10(a) Consent of Deloitte & Touche LLP Deloitte & Touche LLP Suite 1200 Telephone: (714) 436-7100 695 Town Center Drive Facsimile: (714) 436-7200 Costa Mesa, California 92626-1924 CONSENT OF INDEPENDENT AUDITORS Pacific Mutual Life Insurance Company: We hereby consent to the use in Pre-Effective Amendment No. 2 under the Securities Act of 1933 and Amendment No. 2 under the Investment Company Act of 1940 Registration Statement No. 33-88458 of Separate Account A (for the offering of Pacific One) on Form N-4 of our report dated February 21, 1995, related to Pacific Mutual Life Insurance Company's Financial Statements for the year ended December 31, 1994, which is included in the Statement of Additional Information of such Registration Statement, and to references to us under the heading "Financial Statements" in the Statement of Additional Information for Separate Account A which are part of such Registration Statement. Deloitte & Touche LLP December 13, 1995 Deloitte Touche Tohmatsu International -----END PRIVACY-ENHANCED MESSAGE-----