-----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, KbjRsQrQZSf+xZNvpuF1xzSQGTEmQgqiCr3rVlEqIlqyqAuzpGzeUIPK8TiNIBMg GJ+gfB0BN9SqwviZp6ki0g== 0000912057-99-009849.txt : 19991221 0000912057-99-009849.hdr.sgml : 19991221 ACCESSION NUMBER: 0000912057-99-009849 CONFORMED SUBMISSION TYPE: N-4 PUBLIC DOCUMENT COUNT: 25 FILED AS OF DATE: 19991220 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEPARATE ACCOUNT A OF PACIFIC LIFE INSURANCE CO CENTRAL INDEX KEY: 0000935823 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-4 SEC ACT: SEC FILE NUMBER: 333-93059 FILM NUMBER: 99777171 FILING VALUES: FORM TYPE: N-4 SEC ACT: SEC FILE NUMBER: 811-08946 FILM NUMBER: 99777172 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 FORMER COMPANY: FORMER CONFORMED NAME: SEPARATE ACCOUNT A OF PACIFIC MUTUAL LIFE INS CO DATE OF NAME CHANGE: 19950119 N-4 1 N-4 As filed with the Securities and Exchange Commission on Registration Nos. 811-08946 333- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X] Pre-Effective Amendment No. [_] Post Effective Amendment No. [_] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ] Amendment No. 10 [X] (Check appropriate box or boxes) SEPARATE ACCOUNT A (Exact Name of Registrant) PACIFIC LIFE INSURANCE COMPANY (Name of Depositor) 700 Newport Center Drive Newport Beach, California 92660 (Address of Depositor's Principal Executive Offices) (Zip Code) (949) 219-3743 (Depositor's Telephone Number, including Area Code) Diane N. Ledger Vice President Pacific Life Insurance Company 700 Newport Center Drive Newport Beach, California 92660 (Name and address of agent for service) Copies of all communications to: Diane N. Ledger Jane A. Kanter, Esq. Pacific Life Insurance Company Dechert, Price & Rhoads P. O. Box 9000 1775 Eye Street, N.W. Newport Beach, CA 92658-9030 Washington, D.C. 20006-2401 Approximate Date of Proposed Public Offering: The Registrant hereby agrees to amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall therefore become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. It is proposed that this filing will become effective (check appropriate box) [ ] immediately upon filing pursuant to paragraph (b) of Rule 485 [ ] on (date) pursuant to paragraph (b) of Rule 485 [ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485 [ ] on (date) pursuant to paragraph (a)(1) of Rule 485 If appropriate, check the following box: [ ] this post-effective amendment designates a new effective date for a previously filed post-effective amendment. Title of Securities Being Registered: interests in the Separate Account under Pacific Innovations individual flexible premium deferred variable annuity contracts. Filing Fee: None DECLARATION PURSUANT TO RULE 24f-2 The Registrant elects to register an indefinite number of securities under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940. SEPARATE ACCOUNT A FORM N-4 CROSS REFERENCE SHEET PART A Item No. Prospectus Heading 1. Cover Page Cover Page 2. Definitions TERMS USED IN THIS PROSPECTUS 3. Synopsis AN OVERVIEW OF PACIFIC INNOVATIONS 4. Condensed Financial Information YOUR INVESTMENT OPTIONS --Variable Investment Option Performance; PACIFIC LIFE AND THE SEPARATE ACCOUNT --Financial Highlights ADDITIONAL INFORMATION --Financial Statements; 5. General Description of Registrant, Depositor and Portfolio Companies AN OVERVIEW OF PACIFIC INNOVATIONS; YOUR INVESTMENT OPTIONS; PACIFIC LIFE AND THE SEPARATE ACCOUNT --Pacific Life, -- Separate Account A; ADDITIONAL INFORMATION --Voting Rights 6. Deductions AN OVERVIEW OF PACIFIC INNOVATIONS; HOW YOUR PAYMENTS ARE ALLOCATED --Transfers, Administrative Fee; CHARGES, FEES AND DEDUCTIONS; WITHDRAWALS -- Optional Withdrawals 7. General Description of Variable Annuity Contracts TERMS USED IN THIS PROSPECTUS; AN OVERVIEW OF PACIFIC INNOVATIONS; PURCHASING YOUR CONTRACT -- How to Apply for Your Contract; HOW YOUR PAYMENTS ARE ALLOCATED; RETIREMENT BENEFITS AND OTHER PAYOUTS -- Choosing Your Annuity Option, -- Your Annuity Payments, -- Death Benefits; ADDITIONAL INFORMATION -- Voting Rights, -- Changes to Your Contract, -- Changes to All Contracts, -- Inquiries and Submitting Forms and Requests, Timing of Payments and Transactions 8. Annuity Period RETIREMENT BENEFITS AND OTHER PAYOUTS 9. Death Benefit RETIREMENT BENEFITS AND OTHER PAYOUTS -- Death Benefits 10. Purchases and Contract Value AN OVERVIEW OF PACIFIC INNOVATIONS; PURCHASING YOUR CONTRACT; HOW YOUR PAYMENTS ARE ALLOCATED; PACIFIC LIFE AND THE SEPARATE ACCOUNT -- Pacific Life; THE GENERAL ACCOUNT -- Withdrawals and Transfers 11. Redemptions AN OVERVIEW OF PACIFIC INNOVATIONS; CHARGES, FEES AND DEDUCTIONS; WITHDRAWALS; ADDITIONAL INFORMATION -- Timing of Payments and Transactions; THE GENERAL ACCOUNT -- Withdrawals and Transfers 12. Taxes AN OVERVIEW OF PACIFIC INNOVATIONS; CHARGES, FEES AND DEDUCTIONS -- Premium Taxes; WITHDRAWALS -- Optional Withdrawals, -- Tax Consequences of Withdrawals; FEDERAL TAX STATUS 13. Legal Proceedings Not Applicable 14. Table of Contents of the Statement of Additional Information CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION PART B Item No. Statement of Additional Information Heading 15. Cover Page Cover Page 16. Table of Contents TABLE OF CONTENTS 17. General Information and History Not Applicable 18. Services Not Applicable 19. Purchase of Securities Being Offered THE CONTRACTS AND THE SEPARATE ACCOUNT -- Calculating Subaccount Unit Values, -- Systematic Transfer Programs 20. Underwriters DISTRIBUTION OF THE CONTRACTS -- Pacific Mutual Distributors, Inc. 21. Calculation of Performance Data PERFORMANCE 22. Annuity Payments THE CONTRACTS AND THE SEPARATE ACCOUNT --Variable Annuity Payment Amounts 23. Financial Statements FINANCIAL STATEMENTS PART C Information required to be included in Part C is set forth under the appropriate Item, so numbered, in Part C to this Registration Statement. Pacific Prospectuses For: Pacific Innovations Variable Annuity Pacific Select Fund Dated [MONTH 1, 2000] Underwritten by: [LOGO OF PACIFIC LIFE] Pacific Life Insurance Company PACIFIC INNOVATIONS [Front Cover Artwork to come] (Sidebar) This Contract is not available in all states. This Prospectus is not an offer in any state or jurisdiction where we're not legally permitted to offer the Contract. The Contract is described in detail in this Prospectus and its Statement of Additional Information (SAI). The Pacific Select Fund is described in its Prospectus and its SAI. No one has the right to describe the Contract or the Pacific Select Fund any differently than they have been described in these documents. You should be aware that the Securities and Exchange Commission (SEC) has not reviewed the Contract and does not guarantee that the information in this Prospectus is accurate or complete. It's a criminal offense to say otherwise. THIS CONTRACT IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. IT'S NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN A CONTRACT INVOLVES RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL. (End Sidebar) PACIFIC INNOVATIONS PROSPECTUS [MONTH] 1, 2000 Pacific Innovations is an INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT issued by Pacific Life Insurance Company. This Prospectus provides information you should know before buying a Contract. It's accompanied by a current Prospectus for the Pacific Select Fund, the Fund that provides the underlying Portfolios for the Variable Investment Options offered under the Contract. The Variable Investment Options are funded by Separate Account A of Pacific Life. Please read both Prospectuses carefully, and keep them for future reference. Here's a list of all the Investment Options available under your Contract:
VARIABLE INVESTMENT OPTIONS Mid-Cap Value Aggressive Equity Equity Index Emerging Markets Small-Cap Index [Diversified Research] REIT Growth [Small-Cap Equity] International [International International Large-Cap Value] Bond and Income Government Securities Equity Managed Bond Multi-Strategy Money Market Equity Income High Yield Bond Growth LT Large-Cap Value FIXED OPTION Fixed
You'll find more information about the Contract and Separate Account A in the SAI dated [Month] 1, 2000. The SAI has been filed with the SEC and is considered to be part of this Prospectus because it's incorporated by reference. You'll find a table of contents for the SAI on page 47 of this Prospectus. You can get a copy of the SAI without charge by calling or writing to Pacific Life. You can also visit the SEC's website at www.sec.gov, which contains the SAI, material incorporated into this Prospectus by reference, and other information about registrants that file electronically with the SEC. YOUR GUIDE TO THIS PROSPECTUS AN OVERVIEW OF PACIFIC INNOVATIONS 3 - ------------------------------------------------------- YOUR INVESTMENT OPTIONS 11 Your Variable Investment Options 11 Variable Investment Option Performance 12 Your Fixed Option 12 - ------------------------------------------------------- PURCHASING YOUR CONTRACT 12 How to Apply for Your Contract 12 Purchasing a Death Benefit Rider (Optional) 13 Making Your Purchase Payments 13 - ------------------------------------------------------- HOW YOUR PAYMENTS ARE ALLOCATED 13 Choosing Your Investment Options 13 Investing in Variable Investment Options 14 When Your Investment is Effective 14 Transfers 14 - ------------------------------------------------------- CHARGES, FEES AND DEDUCTIONS 15 Withdrawal Charge 15 Premium Taxes 17 Annual Fee 17 Waivers and Reduced Charges 18 Mortality and Expense Risk Charge 18 Administrative Fee 18 Expenses of the Fund 19 - ------------------------------------------------------- RETIREMENT BENEFITS AND OTHER PAYOUTS 19 Selecting Your Annuitant 19 Annuitization 19 Choosing Your Annuity Date ("Annuity Start Date") 19 Default Annuity Date and Options 20 Choosing Your Annuity Option 20 Your Annuity Payments 22 Death Benefits 22 - ------------------------------------------------------- WITHDRAWALS 26 Optional Withdrawals 26 Tax Consequences of Withdrawals 28 Right to Cancel ("Free Look") 28 - ------------------------------------------------------- PACIFIC LIFE AND THE SEPARATE ACCOUNT 28 Pacific Life 28 Separate Account A 29 Financial Highlights 30 FEDERAL TAX STATUS 31 Taxes Payable by Contract Owners: General Rules 31 Qualified Contracts 32 Loans 34 Withholding 37 Impact of Federal Income Taxes 37 Taxes on Pacific Life 37 - ------------------------------------------------------- ADDITIONAL INFORMATION 38 Voting Rights 38 Changes to Your Contract 38 Changes to All Contracts 39 Inquiries and Submitting Forms and Requests 40 Telephone and Electronic Transactions 40 Electronic Delivery Authorization 41 Timing of Payments and Transactions 41 Confirmations, Statements and Other Reports to Contract Owners 41 Replacement of Life Insurance or Annuities 42 Financial Statements 42 Preparation for the Year 2000 42 - ------------------------------------------------------- THE GENERAL ACCOUNT 43 General Information 43 Guarantee Terms 43 Withdrawals and Transfers 44 - ------------------------------------------------------- TERMS USED IN THIS PROSPECTUS 45 - ------------------------------------------------------- CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION 47 - ------------------------------------------------------- APPENDIX A: STATE LAW VARIATIONS 48 - ------------------------------------------------------- WHERE TO GO FOR MORE INFORMATION BACK COVER
2 AN OVERVIEW OF PACIFIC INNOVATIONS (SIDEBAR) PACIFIC INNOVATIONS BASICS An annuity contract may be appropriate if you're looking for retirement income or you want to meet other long-term financial objectives. This Contract may not be the right one for you if you need to withdraw money for short-term needs, because withdrawal charges and tax penalties for early withdrawal may apply. You should consider the Contract's investment and income benefits, as well as its costs. (END SIDEBAR) This overview tells you some key things you should know about your Contract. It's designed as a summary only--please read this Prospectus, your Contract and the Statement of Additional Information for more detailed information. Some states have different rules about how annuity contracts are described or administered. The terms of your Contract, or of any endorsement or supplement, prevail over what's in this Prospectus. In this Prospectus, YOU and YOUR mean the Contract Owner or Policyholder. PACIFIC LIFE, WE, US and OUR refer to Pacific Life Insurance Company. CONTRACT means a Pacific Innovations variable annuity contract, unless we state otherwise. Pacific Innovations is an annuity contract between you and Pacific Life Insurance Company. This Contract is designed for long-term financial planning. It allows you to invest money on a tax-deferred basis for retirement or other goals, and to receive income in a variety of ways, including a series of income payments for life or for a specified period of years. Non-Qualified and Qualified Contracts are available. You buy a Non-Qualified Contract with "after-tax" dollars. You buy a Qualified Contract under a qualified retirement or pension plan, or an individual retirement annuity or account (IRA), or form thereof. Pacific Innovations is a variable annuity, which means that the value of your Contract fluctuates depending on the performance of the Investment Options you choose. The Contract allows you to choose how often you make Purchase Payments and how much you add each time. YOUR RIGHT TO CANCEL During the right to cancel period, you have the right to cancel your Contract and return it to us or to your registered representative for a refund. The amount refunded may be more or less than the Purchase Payments you've made, depending on the state where you signed your application and the kind of Contract you buy. 3 AN OVERVIEW OF PACIFIC INNOVATIONS (SIDEBAR) THE ACCUMULATION PHASE The Investment Options you choose and how they perform will affect the value of your Contract during the accumulation phase, as well as the amount of your annuity payments during the income phase if you choose a variable annuitization payout. You can ask your registered representative to help you choose the right Investment Options for your goals and risk tolerance. You'll find more about the Investment Options starting on page 11. You'll find more about transfers starting on page 14. You'll find more about withdrawals starting on page 26. (END SIDEBAR) During the accumulation phase, you can put money in your Contract by making Purchase Payments, and choose Investment Options in which to allocate them. You can also take money out of your Contract by making a withdrawal. The accumulation phase begins on your Contract Date and continues until your Annuity Date. PURCHASE PAYMENTS Your initial Purchase Payment must be at least $10,000 for a Non-Qualified Contract and at least $2,000 for a Qualified Contract. Additional Purchase Payments must be at least $250 for a Non-Qualified Contract and $50 for a Qualified Contract. INVESTMENT OPTIONS You can choose from [20] Variable Investment Options (also called Subaccounts), each of which invests in a corresponding Portfolio of the Pacific Select Fund. We're the investment adviser for the Pacific Select Fund. We oversee the management of all the Fund's Portfolios and manage two of the Portfolios directly. We've retained other portfolio managers to manage the other Portfolios. The value of each Portfolio will fluctuate with the value of the investments it holds, and returns are not guaranteed. You can also choose the Fixed Option that earns a guaranteed rate of interest of at least 3% annually. We allocate your Purchase Payments to the Investment Options you choose. The value of your Contract will fluctuate during the accumulation phase depending on the Investment Options you've chosen. You bear the investment risk of any Variable Investment Options you choose. TRANSFERRING AMONG INVESTMENT OPTIONS You can transfer among Investment Options any time until your Annuity Date without paying any current income tax. You can also make automatic transfers by enrolling in our dollar cost averaging, portfolio rebalancing or earnings sweep programs. Some restrictions apply to transfers to and from the Fixed Option. WITHDRAWALS You can make full and partial withdrawals to supplement your income or for other purposes. You can withdraw a certain amount each year without paying a withdrawal charge, but you may pay a withdrawal charge if you withdraw Purchase Payments that are less than four years old. Some restrictions apply to making withdrawals from the Fixed Option. In general, you may have to pay tax on withdrawals or other distributions from your Contract. If you're under age 59 1/2, a 10% federal penalty tax may also apply to withdrawals. 4 (SIDEBAR) THE INCOME PHASE You'll find more about annuitization starting on page 19. THE DEATH BENEFIT You'll find more about the death benefit starting on page 22. These riders are not available in all states. Ask your registered representative about the current availability status in your state of delivery. (END SIDEBAR) The income phase of your Contract begins on your Annuity Date. Generally, you can choose to surrender your Contract and receive a single payment or you can ANNUITIZE your Contract and receive a series of income payments. You can choose fixed or variable annuity payments, or a combination of both, for life or for a specified period of years. Variable annuity payments may not be available in all states. You can choose monthly, quarterly, semiannual or annual payments. We'll make the income payments to your DESIGNATED PAYEE. If you choose variable annuity payments, the amount of the payments will fluctuate depending on the performance of the Variable Investment Options you choose. After your Annuity Date, if you choose variable annuity payments, you can exchange your Subaccount Annuity Units among the Variable Investment Options up to four times in any 12-month period. The Contract provides a death benefit if the first Owner or last surviving Annuitant dies during the accumulation phase. Death benefit proceeds are payable when we receive proof of death and payment instructions. To whom we pay a death benefit to, and how we calculate the amount of the death benefit depend on who dies first and the type of Contract you own. OPTIONAL RIDERS The Stepped-Up Death Benefit Rider ("SDBR") and Premier Death Benefit Rider ("PDBR") offer the potential for a larger death benefit. You can only buy one of the riders and you can only buy it when you buy your Contract. You cannot buy both riders and you cannot buy a rider after you buy your Contract. 5 AN OVERVIEW OF PACIFIC INNOVATIONS (SIDEBAR) For information about how Separate Account A and Fund Expenses affect accumulation units, see Financial Highlights on page 30. CONTRACT EXPENSES SEPARATE ACCOUNT A ANNUAL EXPENSES (as a percentage of the average daily Account Value) (END SIDEBAR) This section of the overview explains the fees and expenses associated with your Pacific Innovations Contract. - - CONTRACT EXPENSES are expenses that we deduct from your Contract. These expenses are fixed under the terms of your Contract. Premium taxes or other taxes may also apply to your Contract. We generally charge premium taxes when you annuitize your Contract, but there may be other times when we charge them to your Contract instead. Please see your Contract for details. - - SEPARATE ACCOUNT A ANNUAL EXPENSES are expenses that we deduct from the assets of each Variable Investment Option. They are guaranteed not to increase under the terms of your Contract. - - FEES AND EXPENSES PAID BY THE PACIFIC SELECT FUND affect you indirectly if you choose a Variable Investment Option because they reduce Portfolio returns. They can vary from year to year. They are not fixed and are not part of the terms of your Contract. Sales charge on Purchase Payments none Maximum withdrawal charge, as a percentage of Purchase Payments 9.0%(1) Withdrawal transaction fee none(2) Transfer fee none(3) Annual Fee $ 30(4)
WITHOUT WITH WITH RIDER SDBR PDBR - -------------------------------------------------------------------------------- Mortality and Expense Risk Charge(5) 1.25% 1.25% 1.25% Administrative Fee(5) 0.15% 0.15% 0.15% Death Benefit Rider Charge(6) none 0.20% 0.35% ----------- ----- ----- Total Separate Account A Annual Expenses 1.40% 1.60% 1.75% ----------- ----- -----
(1) The withdrawal charge may not apply or may be reduced under certain circumstances. See WITHDRAWALS, and CHARGES, FEES AND DEDUCTIONS. (2) In the future, we may charge a fee of up to $15 for any withdrawal over 15 that you make in a Contract Year. See WITHDRAWALS -- OPTIONAL WITHDRAWALS. (3) In the future, we may charge a fee of up to $15 for any transfer over 15 that you make in a Contract Year. See HOW YOUR PAYMENTS ARE ALLOCATED -- TRANSFERS. (4) We deduct an Annual Fee on each Contract Anniversary up to your Annuity Date and when you make a full withdrawal if the Contract Value on these days is less than $50,000 after deducting any outstanding loan and interest (your Net Contract Value). See CHARGES, FEES, AND DEDUCTIONS. (5) This is an annual rate. The daily rate is calculated by dividing the annual rate by 365. (6) If you buy the Stepped-Up Death Benefit Rider or the Premier Death Benefit Rider (which is subject to state availability), we add this charge to the Mortality and Expense Risk Charge until your Annuity Date. See CHARGES, FEES AND DEDUCTIONS. 6 (SIDEBAR) FEES AND EXPENSES PAID BY THE PACIFIC SELECT FUND You'll find more about the Pacific Select Fund starting on page 11, and in the Fund's Prospectus, which accompanies this Prospectus. (END SIDEBAR) The Pacific Select Fund pays advisory fees and other expenses. These are deducted from the assets of the Fund's Portfolios and may vary from year to year. They are not fixed and are not part of the terms of your Contract. If you choose a Variable Investment Option, these fees and expenses affect you indirectly because they reduce Portfolio returns. ADVISORY FEE Pacific Life is the investment adviser to the Fund. The Fund pays an advisory fee to us for these services. The table below shows the advisory fee as an annual percentage of each Portfolio's average daily net assets. OTHER EXPENSES The table also shows expenses the Fund paid in 1998 as an annual percentage of each Portfolio's average daily net assets. To help limit Fund expenses, we've agreed to waive all or part of our investment advisory fees or otherwise reimburse each Portfolio for expenses (not including advisory fees, additional costs associated with foreign investing and extraordinary expenses) that exceed 0.25% of its average daily net assets. We do this voluntarily, but do not guarantee that we'll continue to do so after December 31, 2000. No reimbursement was necessary for 1998.
- -------------------------------------------------------------------------------------------------------------- PORTFOLIO ADVISORY FEE OTHER EXPENSES TOTAL EXPENSES - -------------------------------------------------------------------------------------------------------------- Aggressive Equity .80% .09% .89% Emerging Markets 1.10% .36% 1.46% [Diversified Research](3) [.90%] [.05%] [.95%] Growth [Small-Cap Equity] .65% .05% .70% [International Large-Cap](3) [1.05%] [.15%] [1.20%] Bond and Income .60% .10% .70% Equity .65% .06% .71% Multi-Strategy(1) .65% .06% .71% Equity Income(1) .65% .05% .70% Growth LT .75% .05% .80% Mid-Cap Value(2) .85% .06% .91% Equity Index .25% .05% .30% Small-Cap Index(2) .50% .06% .56% REIT(2) 1.10% .06% 1.16% International [International Value] .85% .15% 1.00% Government Securities .60% .06% .66% Managed Bond .60% .06% .66% Money Market(1) .37% .06% .43% High Yield Bond(1) .60% .06% .66% Large-Cap Value(2) .85% .06% .91% - --------------------------------------------------------------------------------------------------------------
(1) Total net expenses for these Portfolios in 1998, after deduction of an offset for custodian credits, were: 0.42% for Money Market Portfolio, 0.65% for High Yield Bond Portfolio, 0.69% for Equity Income Portfolio, and 0.70% for Multi-Strategy Portfolio. (2) Expenses are estimated. There were no actual advisory fees or other expenses for these Portfolios in 1998 because the Portfolios started on January 4, 1999. (3) Expenses are estimated. There were no actual advisory fees or other expenses for these Portfolios in 1999 because the Portfolios started on [January 3], 2000. 7 AN OVERVIEW OF PACIFIC INNOVATIONS (SIDEBAR) EXAMPLES (END SIDEBAR) The following table shows the expenses you would pay on each $1,000 you invested if, at the end of each period, you: annuitized your Contract; surrendered your Contract and withdrew the Contract Value, or did not annuitize or surrender, but left the money in your Contract. These examples assume the following: - - the Contract Value starts at $65,000 - - the Investment Options have an annual return of 5% - - the Annual Fee is deducted even when the Contract Value goes over $50,000 and a waiver would normally apply. WITHOUT RIDER reflects the expenses you would pay if you did not buy the optional Stepped-Up Death Benefit Rider (SDBR) or Premier Death Benefit Rider (PDBR). WITH SDBR reflects the expenses you would pay if you bought the optional Stepped-Up Death Benefit Rider. WITH PDBR reflects expenses you would pay if you bought the optional Premier Death Benefit Rider. THESE EXAMPLES DO NOT SHOW PAST OR FUTURE EXPENSES. YOUR ACTUAL EXPENSES IN ANY YEAR MAY BE MORE OR LESS THAN THOSE SHOWN HERE.
- ------------------------------------------------------------------------------------------------------------------- EXPENSES IF YOU DID NOT ANNUITIZE OR EXPENSES IF YOU EXPENSES IF YOU SURRENDER, BUT LEFT ANNUITIZED SURRENDERED THE MONEY IN YOUR YOUR CONTRACT ($) YOUR CONTRACT ($) CONTRACT ($) - ------------------------------------------------------------------------------------------------------------------- VARIABLE ACCOUNT 1 yr 3 yr 5 yr 10 yr 1 yr 3 yr 5 yr 10 yr 1 yr 3 yr 5 yr 10 yr - ------------------------------------------------------------------------------------------------------------------- AGGRESSIVE EQUITY without Rider 105 73 125 266 105 145 125 266 24 73 125 266 with SDBR 107 79 135 286 107 151 135 286 26 79 135 286 with PDBR 108 83 142 301 108 155 142 301 27 83 142 301 - ------------------------------------------------------------------------------------------------------------------- EMERGING MARKETS without Rider 110 90 153 322 110 162 153 322 29 90 153 322 with SDBR 112 96 163 341 112 168 163 341 31 96 163 341 with PDBR 114 100 170 355 114 172 170 355 33 100 170 355 - ------------------------------------------------------------------------------------------------------------------- [DIVERSIFIED RESEARCH] without Rider 105 75 128 272 105 147 128 272 24 75 128 272 with SDBR 107 81 138 292 107 153 138 292 26 81 138 292 with PDBR 109 85 145 307 109 157 145 307 28 85 145 307 - ------------------------------------------------------------------------------------------------------------------- GROWTH [SMALL-CAP EQUITY] without Rider 103 67 115 247 103 139 115 247 22 67 115 247 with SDBR 105 73 125 267 105 145 125 267 24 73 125 267 with PDBR 106 78 133 282 106 150 133 282 25 78 133 282 - -------------------------------------------------------------------------------------------------------------------
8
- ------------------------------------------------------------------------------------------------------------------- EXPENSES IF YOU DID NOT ANNUITIZE OR EXPENSES IF YOU EXPENSES IF YOU SURRENDER, BUT LEFT ANNUITIZED SURRENDERED THE MONEY IN YOUR YOUR CONTRACT ($) YOUR CONTRACT ($) CONTRACT ($) - ------------------------------------------------------------------------------------------------------------------- VARIABLE ACCOUNT 1 yr 3 yr 5 yr 10 yr 1 yr 3 yr 5 yr 10 yr 1 yr 3 yr 5 yr 10 yr - ------------------------------------------------------------------------------------------------------------------- [INTERNATIONAL LARGE-CAP] without Rider 108 82 140 297 108 154 140 297 27 82 140 297 with SDBR 110 88 150 316 110 160 150 316 29 88 150 316 with PDBR 111 93 157 330 111 165 157 330 30 93 157 330 - ------------------------------------------------------------------------------------------------------------------- BOND AND INCOME without Rider 103 67 115 247 103 139 115 247 22 67 115 247 with SDBR 105 73 125 267 105 145 125 267 24 73 125 267 with PDBR 106 78 133 282 106 150 133 282 25 78 133 282 - ------------------------------------------------------------------------------------------------------------------- EQUITY without Rider 103 67 115 248 103 139 115 248 22 67 115 248 with SDBR 105 73 126 268 105 145 126 268 24 73 126 268 with PDBR 106 78 133 283 106 150 133 283 25 78 133 283 - ------------------------------------------------------------------------------------------------------------------- MULTI-STRATEGY without Rider 103 67 115 248 103 139 115 248 22 67 115 248 with SDBR 105 73 126 268 105 145 126 268 24 73 126 268 with PDBR 106 78 133 283 106 150 133 283 25 78 133 283 - ------------------------------------------------------------------------------------------------------------------- EQUITY INCOME without Rider 103 67 115 247 103 139 115 247 22 67 115 247 with SDBR 105 73 125 267 105 145 125 267 24 73 125 267 with PDBR 106 78 133 282 106 150 133 282 25 78 133 282 - ------------------------------------------------------------------------------------------------------------------- GROWTH LT without Rider 104 70 120 257 104 142 120 257 23 70 120 257 with SDBR 106 76 130 277 106 148 130 277 25 76 130 277 with PDBR 107 81 138 292 107 153 138 292 26 81 138 292 - ------------------------------------------------------------------------------------------------------------------- MID-CAP VALUE without Rider 105 73 126 268 105 145 126 268 24 73 126 268 with SDBR 107 79 136 288 107 151 136 288 26 79 136 288 with PDBR 108 84 143 303 108 156 143 303 27 84 143 303 - ------------------------------------------------------------------------------------------------------------------- EQUITY INDEX without Rider 99 55 94 205 99 127 94 205 18 55 94 205 with SDBR 101 61 105 226 101 133 105 226 20 61 105 226 with PDBR 102 66 112 242 102 138 112 242 21 66 112 242 - ------------------------------------------------------------------------------------------------------------------- SMALL-CAP INDEX without Rider 101 63 108 232 101 135 108 232 20 63 108 232 with SDBR 103 69 118 253 103 141 118 253 22 69 118 253 with PDBR 105 73 126 268 105 145 126 268 24 73 126 268 - ------------------------------------------------------------------------------------------------------------------- REIT without Rider 107 81 138 293 107 153 138 293 26 81 138 293 with SDBR 109 87 148 312 109 159 148 312 28 87 148 312 with PDBR 111 91 155 327 111 163 155 327 30 91 155 327 - -------------------------------------------------------------------------------------------------------------------
9 AN OVERVIEW OF PACIFIC INNOVATIONS
- ------------------------------------------------------------------------------------------------------------------- EXPENSES IF YOU DID NOT ANNUITIZE OR EXPENSES IF YOU EXPENSES IF YOU SURRENDER, BUT LEFT ANNUITIZED SURRENDERED THE MONEY IN YOUR YOUR CONTRACT ($) YOUR CONTRACT ($) CONTRACT ($) - ------------------------------------------------------------------------------------------------------------------- VARIABLE ACCOUNT 1 yr 3 yr 5 yr 10 yr 1 yr 3 yr 5 yr 10 yr 1 yr 3 yr 5 yr 10 yr - ------------------------------------------------------------------------------------------------------------------- INTERNATIONAL [INTERNATIONAL VALUE] without Rider 106 76 130 277 106 148 130 277 25 76 130 277 with SDBR 108 82 140 297 108 154 140 297 27 82 140 297 with PDBR 109 87 147 311 109 159 147 311 28 87 147 311 - ------------------------------------------------------------------------------------------------------------------- GOVERNMENT SECURITIES without Rider 102 66 113 243 102 138 113 243 21 66 113 243 with SDBR 104 72 123 263 104 144 123 263 23 72 123 263 with PDBR 106 76 131 278 106 148 131 278 25 76 131 278 - ------------------------------------------------------------------------------------------------------------------- MANAGED BOND without Rider 102 66 113 243 102 138 113 243 21 66 113 243 with SDBR 104 72 123 263 104 144 123 263 23 72 123 263 with PDBR 106 76 131 278 106 148 131 278 25 76 131 278 - ------------------------------------------------------------------------------------------------------------------- MONEY MARKET without Rider 100 59 101 219 100 131 101 219 19 59 101 219 with SDBR 102 65 111 240 102 137 111 240 21 65 111 240 with PDBR 104 70 119 255 104 142 119 255 23 70 119 255 - ------------------------------------------------------------------------------------------------------------------- HIGH YIELD BOND without Rider 102 66 113 243 102 138 113 243 21 66 113 243 with SDBR 104 72 123 263 104 144 123 263 23 72 123 263 with PDBR 106 76 131 278 106 148 131 278 25 76 131 278 - ------------------------------------------------------------------------------------------------------------------- LARGE-CAP VALUE without Rider 105 73 126 268 105 145 126 268 24 73 126 268 with SDBR 107 79 136 288 107 151 136 288 26 79 136 288 with PDBR 108 84 143 303 108 156 143 303 27 84 143 303 - -------------------------------------------------------------------------------------------------------------------
10 YOUR INVESTMENT OPTIONS You may choose among the [twenty] different Variable Investment Options and the Fixed Option. YOUR VARIABLE INVESTMENT OPTIONS Each Variable Investment Option invests in a separate Portfolio of the Fund. For your convenience, the following chart summarizes some basic data about each Portfolio. THIS CHART IS ONLY A SUMMARY. FOR MORE COMPLETE INFORMATION ON EACH PORTFOLIO, INCLUDING A DISCUSSION OF THE PORTFOLIO'S INVESTMENT TECHNIQUES AND THE RISKS ASSOCIATED WITH ITS INVESTMENTS, SEE THE ACCOMPANYING FUND PROSPECTUS. NO ASSURANCE CAN BE GIVEN THAT A PORTFOLIO WILL ACHIEVE ITS INVESTMENT OBJECTIVE. YOU SHOULD READ THE FUND PROSPECTUS CAREFULLY BEFORE INVESTING.
PRIMARY INVESTMENTS PORTFOLIO OBJECTIVE (UNDER NORMAL CIRCUMSTANCES) PORTFOLIO MANAGER Aggressive Equity Capital appreciation. Equity securities of small Alliance Capital Management emerging-growth companies and L.P. medium-sized companies. Emerging Markets Long-term growth of capital. Equity securities of companies that [Alliance Capital Management are located in countries generally L.P.] regarded as "emerging market" countries. [Diversified Research] [Long-term growth of capital.] [Equity securities of U.S. [Capital Guardian Trust companies and securities whose Company] principal markets are in the U.S.] Growth [Small-Cap Equity] Growth of capital. Equity securities of smaller and Capital Guardian Trust medium-sized companies. Company [International Large-Cap] [Long-term growth of capital.] [Equity securities of non-U.S. [Capital Guardian Trust companies and securities whose Company] principal markets are outside of the U.S.] Bond and Income Total return and income consistent A wide range of fixed income Goldman Sachs Asset with prudent investment management. securities. Management Equity Capital appreciation. Current Equity securities of large U.S. Goldman Sachs Asset income is of secondary importance. growth oriented companies. Management Multi-Strategy High total return. A mix of equity and fixed income J.P. Morgan Investment securities. Management Inc. Equity Income Long-term growth of capital and Equity securities of large and J.P. Morgan Investment income. medium-sized dividend-paying U.S. Management Inc. companies. Growth LT Long-term growth of capital Equity securities of a large number Janus Capital Corporation consistent with the preservation of of companies of any size. capital. Mid-Cap Value Capital appreciation. Equity securities of medium-sized Lazard Asset Management U.S. companies believed to be undervalued. Equity Index Investment results that correspond Equity securities of companies that [Mercury Asset Management to the total return of common are included in the Standard & US] stocks publicly traded in the U.S. Poor's 500 Composite Stock Price Index. Small-Cap Index Investment results that correspond Equity securities of companies that [Mercury Asset Management to the total return of an index of are included in the Russell 2000 US] small capitalization companies. Small Stock Index. REIT Current income and long-term Equity securities of real estate Morgan Stanley Asset capital appreciation. investment trusts. Management International [International Long-term capital appreciation Equity securities of companies of Morgan Stanley Asset Value] primarily through investment in any size located in developed Management equity securities of corporations countries outside of the U.S. domiciled in countries other than the United States. Government Securities Maximize total return consistent Fixed income securities that are Pacific Investment with prudent investment management. issued or guaranteed by the U.S. Management Company government, its agencies or government-sponsored enterprises. Managed Bond Maximize total return consistent Medium and high-quality fixed Pacific Investment with prudent investment management. income securities with varying Management Company terms to maturity. Money Market Current income consistent with Highest quality money market Pacific Life preservation of capital. instruments believed to have limited credit risk. High Yield Bond High level of current income. Fixed income securities with lower Pacific Life and medium-quality credit ratings and intermediate to long-terms to maturity. Large-Cap Value Long-term growth of capital. Equity securities of large U.S. Salomon Brothers Asset Current income is of secondary companies. Management Inc importance.
11 PACIFIC INNOVATIONS THE INVESTMENT ADVISER We are the investment adviser for the Fund. We and the Fund have retained other portfolio managers, supervised by us, for [eighteen] of the Portfolios. VARIABLE INVESTMENT OPTION PERFORMANCE Historical performance information can help you understand how investment performance can affect your investment in the Variable Investment Options. Although the Subaccounts were established January 2, 1996 and have no historical performance prior to that date, each Subaccount will be investing in shares of a Portfolio of the Fund, and the majority of these Portfolios do have historical performance data which covers a longer period. Performance data include total returns for each Subaccount, current and effective yields for the Money Market Subaccount, and yields for the other fixed income Subaccounts. Calculations are in accordance with standard formulas prescribed by the SEC which are described in the SAI. Yields do not reflect any charge for premium taxes and/or other taxes; this exclusion may cause yields to show more favorable performance. Total returns may or may not reflect withdrawal charges, Annual Fees or any charge for premium and/or other taxes; data that do not reflect these charges may show more favorable performance. The SAI presents some hypothetical performance data. The SAI also presents some performance benchmarks, based on unmanaged market indices, such as the Standard & Poor's 500 Composite Stock Price Index (S&P 500), and on "peer groups," which use other managed funds with similar investment objectives. These benchmarks may give you a broader perspective when you examine hypothetical or actual Subaccount performance. In addition, we may provide you with reports both as an insurance company and as to our claims paying ability that are produced by rating agencies and organizations. YOUR FIXED OPTION The Fixed Option offers you a guaranteed minimum interest rate on the amount you allocate to this Option. Amounts you allocate to this Option, and your earnings credited are held in our General Account. For more detailed information about this Option, see THE GENERAL ACCOUNT section in this Prospectus. PURCHASING YOUR CONTRACT HOW TO APPLY FOR YOUR CONTRACT To purchase a Contract, fill out an application and submit it along with your initial Purchase Payment to Pacific Life Insurance Company at P.O. Box 100060, Pasadena, California 91189-0060. If your application and payment are complete when received, or once they have become complete, we will issue your Contract within two Business Days. If some information is missing from your application, we may delay issuing your Contract while we obtain the missing information; however, we will not hold your initial Purchase Payment for more than five Business Days unless we specifically obtain your permission. You may also purchase a Contract by exchanging your existing contract. YOU MUST SUBMIT ALL CONTRACTS TO BE EXCHANGED WHEN YOU SUBMIT YOUR APPLICATION. Call your representative, or call us at 1-800-722-2333, if you are interested in this option. We reserve the right to reject any application or Purchase Payment for any reason, subject to any applicable nondiscrimination laws and to our own standards and guidelines. The maximum age of a Contract Owner, including Joint owners and Contingent Owners, for which a Contract will be issued is 80. The Contract Owner's age is calculated as of his or her last birthday. If any Contract Owner or any Annuitant named in the application for a Contract dies prior to our issuance of a Contract, then the application for the Contract and/or any Contract issued shall be deemed null and void; and any premiums we receive, including any proceeds received in connection with an exchange or transfer, will be returned to the applicant/Owner or the applicant/Owner's estate. 12 PACIFIC INNOVATIONS PURCHASING A DEATH BENEFIT RIDER (OPTIONAL) You may purchase either the Stepped-Up Death Benefit Rider (the "SDBR") or Premier Death Benefit Rider (the "PDBR") (subject to state availability) at the time your application is completed. You may not purchase either Rider after the Contract Date. If you select one of these Riders, the SDBR or PDBR, as applicable, will remain in effect until the earliest of: (a) the full withdrawal of the amount available for withdrawal under the Contract; (b) when death benefit proceeds become payable under the Contract; (c) any termination of the Contract in accordance with the provisions of the Contract; or (d) the Annuity Date. The SDBR or PDBR may not otherwise be cancelled. The SDBR or PDBR may only be purchased if the age of each Annuitant is 70 or younger on the Contract Date. MAKING YOUR PURCHASE PAYMENTS MAKING YOUR INITIAL PAYMENT Your initial Purchase Payment must be at least $10,000 if you are buying a Non-Qualified Contract, and at least $2,000 if you are buying a Qualified Contract. You may pay this entire amount when you submit your application, or you may choose our pre-authorized checking plan ("PAC"), which allows you to pay in equal monthly installments over one year (at least $800 per month for Non-Qualified Contracts, and at least $150 per month for Qualified Contracts). If you choose the PAC, you must make your first installment payment when you submit your application. Further requirements for PAC are discussed in the PAC form. You must obtain our consent before making an initial or additional Purchase Payment that will bring your aggregate Purchase Payments over $1,000,000. MAKING ADDITIONAL PAYMENTS You may choose to invest additional amounts in your Contract at any time. Each additional Purchase Payment above the initial Purchase Payment requirements must be at least $250 for Non-Qualified Contracts and $50 for Qualified Contracts. In certain states additional payments are limited. See APPENDIX A: STATE LAW VARIATIONS. FORMS OF PAYMENT Your initial and additional Purchase Payments may be sent by personal or bank check or by wire transfer. You may also make additional PAC Purchase Payments via electronic funds transfer. All checks must be drawn on U.S. funds. If you make Purchase Payments by check other than a cashier's check, your payment of any withdrawal proceeds and any refund during your "free look" period may be delayed until your check has cleared. HOW YOUR PAYMENTS ARE ALLOCATED CHOOSING YOUR INVESTMENT OPTIONS You may allocate your Purchase Payments among the [twenty] Subaccounts and the Fixed Option. Allocations of your initial Purchase Payment to the Investment Options you selected will be effective on your Contract Date. See WITHDRAWALS - RIGHT TO CANCEL ("FREE LOOK"). Each additional Purchase Payment will be allocated to the Investment Options according to your allocation instructions in your application, or most recent instructions, if any, subject to the terms described in the WITHDRAWALS - RIGHT TO CANCEL ("FREE LOOK") section. We reserve the right to require that your allocation to any particular Investment Option must be at least $500. We also reserve the right to transfer any remaining Account Value that is not at least $500 to your other Investment Options on a pro rata basis relative to your most recent allocation instructions. If your Contract is issued in exchange for another annuity contract or a life insurance contract, our administrative procedures may vary depending on the state in which your Contract is delivered. If your initial Purchase Payment is received from multiple sources, we will consider them all your initial Purchase Payment. 13 PACIFIC INNOVATIONS INVESTING IN VARIABLE INVESTMENT OPTIONS Each time we allocate your investment to a Variable Investment Option, your Contract is credited with a number of "Subaccount Units" in that Subaccount. The number of Subaccount Units credited is equal to the amount you have allocated to that Subaccount divided by the "Unit Value" of one Unit of that Subaccount. EXAMPLE: you allocate $600 to the Government Securities Subaccount. At the end of the Business Day on which your allocation is effective, the value of one Unit in the Government Securities Subaccount is $15. As a result, 40 Subaccount Units are credited to your Contract for your $600. YOUR VARIABLE ACCOUNT VALUE WILL CHANGE After we credit your Contract with Subaccount Units, the value of those Units will usually fluctuate. This means that, from time to time, your investment allocated to the Variable Investment Options may be worth more or less than the original allocations to which those amounts can be attributed. Fluctuations in Subaccount Unit Value will not change the number of Units credited to your Contract. Subaccount Unit Values will vary in accordance with the investment performance of the corresponding Portfolio. FOR EXAMPLE, the value of Units in the Managed Bond Subaccount will change to reflect the performance of the Managed Bond Portfolio (including that Portfolio's investment income, its capital gains and losses, and its expenses). Subaccount Unit Values are also adjusted to reflect the Administrative Fee and applicable Risk Charge imposed on the Separate Account. We calculate the value of all Subaccount Units on each Business Day. The SAI contains a detailed discussion of these calculations. WHEN YOUR INVESTMENT IS EFFECTIVE The day your allocation is effective determines the Unit Value at which Subaccount Units are attributed to your Contract. In the case of transfers or withdrawals, the effective day determines the Unit Value at which affected Subaccount Units are debited and/or credited under your Contract. The Unit Value at which purchase, transfer and withdrawal transactions are credited or debited is the value of the Subaccount Units next calculated after your transaction is effective. Your Variable Account Value begins to reflect the investment performance results of your new allocations on the day after your transaction is effective. Your initial Purchase Payment is usually effective on the day we issue your Contract. Any additional allocation is effective on the day we receive your Purchase Payment in proper form. See ADDITIONAL INFORMATION - INQUIRIES AND SUBMITTING FORMS AND REQUESTS. TRANSFERS Once your Payments are allocated to the Investment Options you selected, you may transfer your Account Value from any Investment Option to any other Investment Option. Certain restrictions apply to the Fixed Option. See THE GENERAL ACCOUNT - WITHDRAWALS AND TRANSFERS. Transfer requests are generally effective on the Business Day we receive them in proper form. No transfer fee is currently imposed for transfers among the Investment Options, but we reserve the right to impose a transaction fee for transfers in the future; a fee of up to $15 per transfer may apply to transfers in excess of 15 in any Contract Year. Transfers under the dollar cost averaging and earnings sweep options (but not the portfolio rebalancing option described below) are counted toward your total transfers in a Contract Year. Any such fee would be charged against your Investment Options proportionately, based on your relative Account Value in each immediately after the transfer. AUTOMATIC TRANSFER OPTIONS We offer three automatic transfer options: dollar cost averaging, portfolio rebalancing and earnings sweep. There is no charge for these options, although transfers under the dollar cost averaging and earnings sweep options are counted towards your total transfers in a Contract Year. 14 PACIFIC INNOVATIONS DOLLAR COST AVERAGING Dollar cost averaging is a method in which you buy securities in a series of regular purchases instead of in a single purchase. This allows you to average the securities' prices over time, and may permit a "smoothing" of abrupt peaks and drops in price. Prior to your Annuity Date, you may use dollar cost averaging to transfer amounts, over time, from any Investment Option with an Account Value of at least $5,000 to one or more Variable Investment Options. Each transfer must be for at least $250. Detailed information appears in the SAI. PORTFOLIO REBALANCING You may instruct us to maintain a specific balance of Variable Investment Options under your Contract (E.G., 30% in the Equity Index Subaccount, 40% in the Managed Bond Subaccount, and 30% in the Growth LT Subaccount) prior to your Annuity Date. Periodically, we will "rebalance" your values in the elected Subaccounts to the percentages you have specified. Rebalancing may result in transferring amounts from a Subaccount earning a relatively higher return to one earning a relatively lower return. The Fixed Option is not available for rebalancing. Detailed information appears in the SAI. EARNINGS SWEEP You may instruct us to make automatic periodic transfers of your earnings from the Money Market Subaccount or from the Fixed Option to one or more Variable Investment Options (other than the Money Market Subaccount). Detailed information appears in the SAI. CHARGES, FEES AND DEDUCTIONS WITHDRAWAL CHARGE No sales charge is imposed on any Purchase Payment. Your Purchase Payments may, however, be subject to a withdrawal charge; this charge may apply to amounts you withdraw under your Contract prior to the Annuity Date, depending on the length of time each Purchase Payment has been invested and on the amount you withdraw. Subject to state variation. No withdrawal charge is imposed on: (i) death benefit proceeds, except as provided under the AMOUNT OF THE DEATH BENEFIT: DEATH OF A CONTRACT OWNER Section; (ii) amounts converted after the first Contract Anniversary to a life contingent Annuity Option or an Annuity Option with a period certain of at least five years; (iii) withdrawals by Owners to meet the minimum distribution rules for Qualified Contracts as they apply to amounts held under the Contract; (iv) subject to medical evidence satisfactory to us, after the first Contract Anniversary, full or partial withdrawals if the Owner or Annuitant has been diagnosed with a medically determinable condition that results in a life expectancy of twelve (12) months or less; or (v) subject to medical evidence satisfactory to us, after 90 days from the Contract Date, full or partial withdrawals while the Owner or Annuitant has been confined to an accredited nursing home for 60 days or longer. The waiver of withdrawal charges applies only to withdrawals made while the Owner or Annuitant is in a nursing home or within 90 days after the Owner or Annuitant leaves the nursing home. In addition, the nursing home confinement period for which you seek the waiver must begin after the Contract Date. In order to use this waiver, you must submit with your withdrawal request, the following documents: (1) a physician's note recommending the Owner or Annuitant's admittance to a nursing home; (2) an admittance form which shows the type of facility the Owner or Annuitant entered; and (3) a bill from the nursing home which shows that the Owner or Annuitant met the 60 day nursing home confinement requirement. An accredited nursing home is defined as a home or facility that; (1) is operating in accordance with the law of jurisdiction in which it is located; (2) is primarily engaged in providing, in addition to room and board, skilled nursing care under the supervision of a duly licensed physician; (3) provides continuous 24 hour a day nursing service by or under the supervision of a registered nurse; and maintains a daily record of the patient. FREE WITHDRAWALS During a Contract Year, you may withdraw free of withdrawal charge amounts up to your "Eligible Purchase Payments". Qualified plans have special restrictions on withdrawals. See SPECIAL RESTRICTIONS UNDER QUALIFIED PLANS. Eligible Purchase Payments include 10% annually of your total Purchase Payments that have an "age" of less than four years, plus any remaining portion not withdrawn from the previous Contract Year's Eligible Purchase Payments that are derived from 15 PACIFIC INNOVATIONS Purchase Payments which have an "age" of less than four years, plus 100% of all Purchase Payments that have an "age" of four years or more. Once all Purchase Payments have been deemed withdrawn, any withdrawal will be deemed a withdrawal of your Earnings and will be free of the withdrawal charge. For those Contracts issued to a Charitable Remainder Trust (CRT), the amount available for withdrawal free of withdrawal charges during a Contract Year includes all Eligible Purchase Payments plus all Earnings even if all Purchase Payments have not been deemed withdrawn. EXAMPLE (NON-CRT) CONTRACT YEAR 1 You make an initial Purchase Payment of $100,000 and make no additional Purchase Payments. Your free withdrawal amount available in year 1 equals 10% of the total Purchase Payments made (10% of the total Purchase Payments of $100,000 equals $10,000.) If you withdraw $5,000, the remaining $5,000 of the free withdrawal amount not withdrawn in Contract Year 1 will be carried over to the next Contract Year. CONTRACT YEAR 2 Your free withdrawal amount for Contract Year 2 is equal to 10% of your total Purchase Payments still subject to the withdrawal charge plus any remaining free withdrawal amounts carried over from the previous Contract Year. (10% of $100,000 plus $5,000 equals $15,000) If no withdrawals are taken, the $15,000 free withdrawal amount not withdrawn in Contract Year 2 will be carried over to the next Contract Year. CONTRACT YEAR 3 Your free withdrawal amount for Contract Year 3 is equal to 10% of total Purchase Payments subject to the withdrawal charge plus any remaining free withdrawal amounts carried over from the previous Contract Year. (10% of $100,000 plus $15,000 equals $25,000) If you take a $15,000 withdrawal, the remaining $10,000 of the free withdrawal amount not taken in Contract Year 3 will not be carried over to the next Contract Year because the Purchase Payments will not be subject to the withdrawal charge and the entire amount remaining will be able to be withdrawn free of withdrawal charges. HOW THE CHARGE IS DETERMINED The amount of the charge depends on how long each Purchase Payment was held under your Contract. Each Purchase Payment you make is considered to have a certain "age," depending on the length of time since that Purchase Payment was effective. A Purchase Payment is "age one" from the day it is effective until your next Contract Anniversary; beginning on that Contract Anniversary, your Payment will have an "age of two" for a full Contract Year and increases in age on each Contract Anniversary. When you withdraw an amount subject to the withdrawal charge, the "age" of the Purchase Payments you withdraw determines the level of withdrawal charge as follows:
WITHDRAWAL CHARGE AS A PERCENTAGE "AGE" OF PAYMENT OF THE AMOUNT IN YEARS WITHDRAWN - ---------------- ------------- 1.................................................... 9% 2.................................................... 8% 3.................................................... 8% 4 or more............................................ 0%
We calculate your withdrawal charge by assuming your withdrawal is applied to Purchase Payments first and in the order your Purchase Payments were received. The withdrawal charge will be deducted proportionally among all Investment Options from which your withdrawal occurs. See THE GENERAL ACCOUNT - WITHDRAWALS AND TRANSFERS. We pay sales commissions and other expenses associated with the promotion and sales of the Contracts to broker-dealers. The withdrawal charge is designed to reimburse us for these costs, although we expect that our actual expenses will be greater than the amount of the withdrawal charge. Broker-dealers may receive aggregate commissions of up to 4.75% of your aggregate Purchase Payments. 16 PACIFIC INNOVATIONS Sellers of Contracts will be paid a persistency trail commission which will take into account, among other things, the length of time Purchase Payments have been held under a Contract, and Account Values. A trail commission is not anticipated to exceed 1.00%, on an annual basis, of the Account Values considered in connection with the trail commission. We may also pay override payments, expense allowances, bonuses, wholesaler fees and training allowances. Registered representatives earn commissions from the broker-dealers with which they are affiliated and such arrangements may vary. In addition, registered representatives who meet specified production levels may qualify, under sales incentive programs adopted by us, to receive non-cash compensation such as expense-paid trips, expense-paid educational seminars, and merchandise. WITHDRAWAL ENHANCEMENTS We reserve the right, in our sole discretion, to calculate your withdrawal charge on more favorable terms to you than as otherwise described in the preceding paragraphs. These Withdrawal Enhancements may include an acceleration of the day on which the "age" of any Purchase Payment(s) is considered to occur or a waiver of some or all of the withdrawal charge in the event the Guaranteed Interest Rate is less than a specified rate. Although we retain the discretion to add a Withdrawal Enhancement, once it is added, it is binding on us and effective for any specified period we have designated. In the event of any Withdrawal Enhancement, we will notify the Owner within thirty (30) days of the effective date of the Withdrawal Enhancement. TRANSFERS Transfers of all or part of your Account Value from one Investment Option to another are not considered a withdrawal of an amount from your Contract, so no withdrawal charge is imposed at the time of transfer. See HOW YOUR PAYMENTS ARE ALLOCATED - TRANSFERS and THE GENERAL ACCOUNT - WITHDRAWALS AND TRANSFERS. PREMIUM TAXES Depending on your state of residence (among other factors), a tax may be imposed on your Purchase Payments at the time your payment is made, at the time of a partial or full withdrawal, at the time any death benefit proceeds are paid, at the Annuity Date or at such other time as taxes may be imposed. Tax rates ranging from 0% to 3.5% are currently in effect, but may change in the future. Some local jurisdictions also impose a tax. If we pay any taxes attributable to Purchase Payments ("premium taxes") on your behalf, we will impose a similar charge against your Contract Value. Premium tax is subject to state requirements. We normally will charge you when you annuitize some or all of your Contract Value. We reserve the right to impose this charge for applicable premium taxes when you make a full or partial withdrawal, at the time any death benefit proceeds are paid, or when those taxes are incurred by us. For these purposes, "premium taxes" include any state or local premium or retaliatory taxes and, where approval has been obtained, federal premium taxes and any federal, state or local income, excise, business or any other type of tax (or component thereof) measured by or based upon, directly or indirectly, the amount of Purchase Payments we have received. We will base this charge on the Contract Value, the amount of the transaction, the aggregate amount of Purchase Payments we receive under your Contract, or any other amount, that in our sole discretion we deem appropriate. We may also charge the Separate Account or your Contract Value for taxes attributable to the Separate Account or the Contract, including income taxes attributable to the Separate Account or to our operations with respect to the Contract, or taxes attributable, directly or indirectly, to Purchase Payments. Currently, we do not impose any such charges. ANNUAL FEE We will charge you an Annual Fee of $30 on each Contract Anniversary prior to the Annuity Date, and at the time you withdraw your entire Net Contract Value (on a pro rated basis for that Contract Year), if your Net Contract Value is less than $50,000 on that date. The fee is not imposed on amounts you annuitize or on payment of death benefit proceeds. The fee reimburses certain of our costs in administering the Contracts and the Separate Account; we do not intend to realize a profit from this fee or the Administrative Fee. This fee is guaranteed not to increase for the life of your Contract. 17 PACIFIC INNOVATIONS Your Annual Fee will be charged proportionately against your Investment Options. Assessments against your Variable Investment Options are made by debiting some of the Subaccount Units previously credited to your Contract; that is, assessment of the Annual Fee does not change the Unit Value for those Subaccounts. WAIVERS AND REDUCED CHARGES We may agree to reduce or waive the withdrawal charge or the Annual Fee, or credit additional amounts under our Contracts, in situations where selling and/or maintenance costs associated with the Contracts are reduced, such as the sale of several Contracts to the same Owner(s), sales of large Contracts, sales of Contracts in connection with a group or sponsored arrangement or mass transactions over multiple Contracts. We will only reduce or waive such charges or credit additional amounts on any Contract where expenses associated with the sale of the Contract and/or costs associated with administering and maintaining the Contract are reduced. Any additional amounts will be added to a Contract when we apply Purchase Payments. We reserve the right to terminate waiver, reduced charge and crediting programs at any time, including for issued Contracts. With respect to additional amounts as described above, you will not keep any amounts credited if you return your Contract during the Free Look period as described under WITHDRAWALS - RIGHT TO CANCEL ("FREE LOOK"). MORTALITY AND EXPENSE RISK CHARGE We assess a charge against the assets of each Subaccount to compensate for certain mortality and expense risks that we assume under the Contracts (the "Risk Charge"). The risk that an Annuitant will live longer (and therefore receive more annuity payments) than we predict through our actuarial calculations at the time the Contract is issued is "mortality risk." We also bear mortality risk in connection with death benefits payable under the Contracts. The risk that the expense charges and fees under the Contracts and Separate Account are less than our actual administrative and operating expenses is called "expense risk." This Risk Charge is assessed daily at an annual rate equal to 1.25% of each Subaccount's assets; this charge may not be increased for the duration of your Contract. The Risk Charge will stop at the Annuity Date if you select a fixed annuity; the base Risk Charge, but not any increase in the Risk Charge for an optional Death Benefit Rider, will continue after the Annuity Date if you choose any variable annuity. We will realize a gain if the Risk Charge exceeds our actual cost of expenses and benefits, and will suffer a loss if such actual costs exceed the Risk Charge. Any gain will become part of our General Account; we may use it for any reason, including covering sales expenses on the Contracts. INCREASE IN RISK CHARGE IF AN OPTIONAL DEATH BENEFIT RIDER IS PURCHASED We increase your Risk Charge by an annual rate equal to .20% of each Subaccount's assets if you purchase the Stepped-Up Death Benefit Rider (the "SDBR") or .35% if you purchase the Premier Death Benefit Rider (the "PDBR"). The total Risk Charge annual rate will be 1.45% if the SDBR is purchased or 1.60% if the PDBR is purchased. Any increase in your Risk Charge will not continue after the Annuity Date. See PURCHASING YOUR CONTRACT - PURCHASING AN OPTIONAL DEATH BENEFIT RIDER. ADMINISTRATIVE FEE We charge an Administrative Fee as compensation for costs we incur in operating the Separate Account and issuing and administering the Contracts, including processing applications and payments, and issuing reports to you and to regulatory authorities. The Administrative Fee is assessed daily at an annual rate equal to .15% of the assets of each Subaccount. This rate is guaranteed not to increase for the life of your Contract. A relationship will not necessarily exist between the actual administrative expenses attributable to a particular Contract and the Administrative Fee paid in respect of that particular Contract. The Administrative Fee will continue after the Annuity Date if you choose any variable annuity. 18 PACIFIC INNOVATIONS EXPENSES OF THE FUND Your Variable Account Value reflects advisory fees and other expenses incurred by the various Portfolios of the Fund, net of any applicable waivers and/or reimbursements. These fees and expenses may vary. The Fund is governed by its own Board of Trustees, and your Contract does not fix or specify the level of expenses of any Portfolio. The Fund's fees and expenses are described in detail in the Fund's Prospectus and in its SAI. If your transfer request results in your having a remaining Account Value in an Investment Option that is less than $500 immediately after such transfer, we may transfer that Account Value to your other Investment Options on a pro rata basis, relative to your most recent allocation instructions. Exchanges of Annuity Units in any Subaccount(s) to any other Subaccount(s) after the Annuity Date are limited to four in any twelve-month period. See THE GENERAL ACCOUNT - WITHDRAWALS AND TRANSFERS in the Prospectus and THE CONTRACTS AND THE SEPARATE ACCOUNT in the SAI. RETIREMENT BENEFITS AND OTHER PAYOUTS SELECTING YOUR ANNUITANT When you submit the application for your Contract, you may choose a sole Annuitant or Joint Annuitants. We will send the annuity payments to the payee that you designate. If you are buying a Qualified Contract, you must be the sole Annuitant; if you are buying a Non-Qualified Contract you may choose yourself and/or another person. Whether you choose to have a sole or two Joint Annuitants, you may choose a Contingent Annuitant; more information on these options is provided in the SAI. You will not be able to add or change a sole or Joint Annuitant after your Contract is issued; however, if you are buying a Qualified Contract, you may add a Joint Annuitant on the Annuity Date. You will be able to add or change a Contingent Annuitant until your Annuity Date or the death of your sole Annuitant or both Joint Annuitants, whichever occurs first; however, once your Contingent Annuitant has become the Annuitant under your Contract, no additional Contingent Annuitant may be named. No Annuitant (Primary, Joint or Contingent) may be named upon or after reaching his or her 81st birthday. We reserve the right to require proof of age or survival of the Annuitant(s). ANNUITIZATION You may choose both your Annuity Date and your Annuity Option. At the Annuity Date, you may elect to annuitize some or all of your Net Contract Value, less any applicable charge for premium taxes and/or other taxes, (the "Conversion Amount"), as long as such Conversion Amount annuitized is at least $10,000, subject to any state exceptions. (See APPENDIX A: STATE LAW VARIATIONS). If you annuitize only a portion of this available Contract Value, you may have the remainder distributed, less any applicable charge for premium taxes and/or other taxes, and any applicable withdrawal charge. Any such distribution will be made to you in a single sum if the remaining Conversion Amount is less than $10,000 on your Annuity Date. Distributions under your Contract may have tax consequences. You should consult a qualified tax adviser for information on annuitization. CHOOSING YOUR ANNUITY DATE ("ANNUITY START DATE") You should choose your Annuity Date when you submit your application or we will apply a default Annuity Date to your Contract. You may change your Annuity Date by notifying us, in proper form, at least ten Business Days prior to the earlier of your current Annuity Date or your new Annuity Date. Your Annuity Date cannot be earlier than your first Contract Anniversary and must occur on or before a certain date: If you have a sole Annuitant, your Annuity Date cannot be later than his or her 95th birthday. However, to meet IRS minimum distribution rules, your Annuity Date may need to be earlier. If you have Joint Annuitants and a Non-Qualified Contract, your Annuity Date cannot be later than your younger Joint Annuitant's 95th birthday. Different requirements may apply in some states. If your Contract is a Qualified Contract, you may also be subject to additional restrictions. Adverse federal tax consequences may result if you choose an Annuity Date that is prior to an Annuitant's attained age 59 1/2. See FEDERAL TAX STATUS. 19 PACIFIC INNOVATIONS You should carefully review the Annuity Options with your financial tax adviser, and, for Contracts used in connection with a Qualified Plan, reference should be made to the terms of the particular plan and the requirements of the Code for pertinent limitations respecting annuity payments and other matters. For instance, under requirements for retirement plans that qualify under Section 401 or 408 of the Code, annuity payments generally must begin no later than April 1 of the calendar year following the year in which the Annuitant reaches age 70 1/2. However, if a plan qualified under Section 401(a) of the Code or a 403(b) contract so provides, no distributions are required for individuals who are employed after age 70 1/2 (other than 5% owners) until they retire. If a plan is qualified under Section 408A of the Code, no minimum distributions are required at any time. For retirement plans that qualify under Section 401 or 408 of the Code, the period elected for receipt of annuity payments under Annuity Options 2 and 4 (a) generally may be no longer than the joint life expectancy of the Annuitant and Beneficiary in the year that the Annuitant reaches age 70 1/2, and (b) must be shorter than such joint life expectancy if the Beneficiary is not the Annuitant's spouse and is more than 10 years younger than the Annuitant. Under Option 3, if the secondary or other Annuitant is not the Annuitant's spouse and is more than 10 years younger than the Annuitant, the 66 2/3% and 100% elections specified below may not be available. The restrictions on options for retirement plans that qualify under Sections 401 and 408 also apply to a retirement plan that qualifies under Section 403(b) with respect to amounts that accrued after December 31, 1986. If you annuitize only a portion of your Net Contract Value on your Annuity Date, you may, at that time, have the option to elect not to have the remainder of your Contract Value distributed, but instead to continue your Contract with that remaining Contract Value (a "continuing Contract"). If this option is available, you would then choose a second Annuity Date for your continuing Contract, and all references in this Prospectus to your "Annuity Date" would, in connection with your continuing Contract, be deemed to refer to that second Annuity Date. This option may not be available, or may be available only for certain types of Contracts. You should be aware that some or all of the payments received before the second Annuity Date may be fully taxable. We recommend that you call your tax adviser for more information if you are interested in this option. DEFAULT ANNUITY DATE AND OPTIONS If you have a Non-Qualified Contract and you do not choose an Annuity Date when you submit your application, your Annuity Date will be your Annuitant's 95th birthday or your younger Joint Annuitant's 95th birthday, whichever applies; however some states' laws may require a different Annuity Date. Certain Qualified Plans may require annuitization to occur at an earlier age. If you have not specified an Annuity Option or do not instruct us otherwise, at your Annuity Date your Net Contract Value, less any charges for premium taxes and/or other taxes, will be annuitized (if this net amount is at least $10,000) as follows: the net amount from your Fixed Option will be converted into a fixed-dollar annuity and the net amount from your Variable Account Value will be converted into a variable-dollar annuity directed to the Subaccounts proportionate to your Account Value in each. If you have a Non-Qualified Contract, or if you have a Qualified Contract and are not married, your default Annuity Option will be Life with a ten year Period Certain. If you have a Qualified Contract and you are married, your default Annuity Option will be Joint and Survivor Life with survivor payments of 50%; your spouse will AUTOMATICALLY be named your Joint Annuitant. CHOOSING YOUR ANNUITY OPTION You may make three basic decisions about your annuity payments. First, you may choose whether you want those payments to be a fixed-dollar amount, and/or a variable-dollar amount. Subject to state availability. Second, you may choose the form of annuity payments (see ANNUITY OPTIONS below). Third, you may decide how often you want annuity payments to be made (the "frequency" of the payments). You may not change these selections after the Annuity Date. 20 PACIFIC INNOVATIONS FIXED AND VARIABLE ANNUITIES You may choose a fixed annuity (I.E., with fixed-dollar amounts), a variable annuity (I.E., with variable-dollar amounts), or you may choose both, converting one portion of the net amount you annuitize into a fixed annuity and another portion into a variable annuity. If you select a fixed annuity, each periodic annuity payment received will be equal to the initial annuity payment, unless you select a joint and survivor life annuity with reduced survivor payments and the Primary Annuitant dies. Any net amount you convert to a fixed annuity will be held in our General Account, (but not under the Fixed Option). If you select a variable annuity, you may choose as many Variable Investment Options as you wish; the amount of the periodic annuity payments will vary with the investment results of the Variable Investment Options selected. After the Annuity Date, Annuity Units may be exchanged among available Variable Investment Options up to four times in any twelve-month period. How your Contract converts into a variable annuity is explained in more detail in THE CONTRACTS AND THE SEPARATE ACCOUNT in the SAI. If you choose the Period Certain Only Annuity Option, the variable annuity payment option is not available to you. ANNUITY OPTIONS Four Annuity Options are currently available under the Contracts, although additional options may become available in the future. 1. LIFE ONLY. Periodic payments are made to the designated payee during the Annuitant's lifetime. Payments stop when the Annuitant dies. 2. LIFE WITH PERIOD CERTAIN. Periodic payments are made to the designated payee during the Annuitant's lifetime, with payments guaranteed for a specified period. You may choose to have payments guaranteed for anywhere from 5 through 30 years (in full years only). If the Annuitant dies before the guaranteed payments are completed, the Owner receives the remainder of the guaranteed payments, if living; otherwise the Beneficiary, if living; otherwise the Owner's estate. 3. JOINT AND SURVIVOR LIFE. Periodic payments are made during the lifetime of the Primary Annuitant. After the death of the Primary Annuitant, periodic payments are based on the life of the secondary Annuitant named in the election if and so long as such secondary Annuitant lives. You may choose to have the payments to the surviving secondary Annuitant equal 50%, 66 2/3% or 100% of the original amount payable made during the lifetime of the Primary Annuitant (you must make this election when you choose your Annuity Option). If you elect a reduced payment based on the life of the secondary Annuitant, fixed annuity payments will be equal to 50% or 66 2/3% of the original fixed payment payable during the lifetime of the Primary Annuitant; variable annuity payments will be determined using 50% or 66 2/3%, as applicable, of the number of Annuity Units for each Subaccount credited to the Contract. Payments stop when both Annuitants have died. 4. PERIOD CERTAIN ONLY. Periodic payments are made to the designated payee over a specified period. You may choose to have payments continue for anywhere from 5 through 30 years (in full years only). If the Annuitant dies before the guaranteed payments are completed, we pay the Owner the remainder of the guaranteed payments, if living; otherwise the Beneficiary, if living; otherwise the Owner's estate. If you choose the Period Certain Only Annuity Option, you may only choose the fixed annuity payment option. For Contracts issued in connection with a Qualified Plan, please refer to the discussion above under "Choosing Your Annuity Date". If your Contract was issued in connection with a Qualified Plan subject to Title I of the Employee Retirement Income Security Act of 1974 ("ERISA"), your spouse's consent may be required when you seek any distribution under your Contract, unless your Annuity Option is Joint and Survivor Life with survivor payments of at least 50%, and your spouse is your Joint Annuitant. 21 PACIFIC INNOVATIONS FREQUENCY OF PAYMENTS You may choose to have annuity payments made monthly, quarterly, semiannually, or annually. The amount of a variable payment will be determined in each period on the date corresponding to your Annuity Date, and payment will be made on the next succeeding day. Your initial annuity payment must be at least $250. Depending on the net amount you annuitize, this requirement may limit your options regarding the period and/or frequency of annuity payments. YOUR ANNUITY PAYMENTS AMOUNT OF THE FIRST PAYMENT Your Contract contains tables that we use to determine the amount of the first annuity payment under your Contract, taking into consideration the annuitized portion of your Net Contract Value at the Annuity Date. This amount will vary, depending on the annuity period and payment frequency you select; this amount will be larger in the case of shorter Period Certain annuities and smaller for longer Period Certain annuities. Similarly, this amount will be greater for a Life Only annuity than for a Joint and Survivor Life annuity, because we will expect to make payments for a shorter period of time on a Life Only annuity. If you do not choose the Period Certain Only annuity, this amount will also vary depending on the age of the Annuitant(s) on the Annuity Date and, for some Contracts in some states, the sex of the Annuitant(s). For fixed annuity payments, the guaranteed income factors in our tables are based on an annual interest rate of 3% and the 1983a Annuity Mortality Table with the ages set back 10 years. If you elect a fixed annuity, fixed annuity payments will be based on the periodic income factors in effect for your Contract on the Annuity Date which are at least the guaranteed income factors under the Contract. For variable annuity payments, the tables are based on an assumed annual investment return of 5% and the 1983a Annuity Mortality Table with the ages set back 10 years. If you elect a variable annuity, your initial variable annuity payment will be based on the applicable variable annuity income factors in effect for your Contract or the Annuity Date which are at least the variable annuity income factors under the contract. You may choose any other annuity option we may offer on the option's effective date. A higher assumed investment return would mean a larger first variable annuity payment, but subsequent payments would increase only when actual net investment performance exceeds the higher assumed rate and would fall when actual net investment performance is less than the higher assumed rate. A lower assumed rate would mean a smaller first payment and a more favorable threshold for increases and decreases. If the actual net investment performance is a constant 5% annually, annuity payments will be level. The assumed investment return is explained in more detail in the SAI under THE CONTRACTS AND THE SEPARATE ACCOUNT. DEATH BENEFITS Death benefit proceeds may be payable on proof of death before the Annuity Date of the Annuitant or of any Contract Owner while the Contract is in force. The amount of the death benefit proceeds will be paid according to the DEATH BENEFIT PROCEEDS section below. The "Notice Date" is the day on which we receive proof (in proper form) of death and instructions regarding payment of death benefit proceeds. DEATH BENEFIT PROCEEDS Death benefit proceeds will be payable upon receipt, in proper form, of proof of death and instructions regarding payment of death proceeds. Such proceeds will equal the amount of the death benefit reduced by any charges for premium taxes and/or other taxes and any Contract Debt. The death benefit proceeds will be payable in a single sum, as an Annuity Option under this Contract or towards the purchase of any Annuity Option we then offer, or in accordance with IRS regulations (see DEATH OF OWNER DISTRIBUTION RULES). Any such Annuity Option is subject to all restrictions 22 PACIFIC INNOVATIONS (including minimum amount requirements) as are other annuities under this Contract; in addition, there may be legal requirements that limit the recipient's Annuity Options and the timing of any payments. A recipient should consult a qualified tax adviser before electing to receive an annuity. Additional provisions apply if your Contract names a Joint or Contingent Owner or Annuitant, or if the Beneficiary, Joint Owner, or Contingent Owner is your spouse. Further information about these provisions is contained in the SAI. DEATH OF OWNER DISTRIBUTION RULES If an Owner of a Non-Qualified Contract dies before the Annuity Date, any death benefit proceeds under this Contract must complete distribution within five years after the Owner's death. In order to satisfy this requirement, the designated recipient must receive a lump sum payment or elect to receive an annuity for life or over a period that does not exceed the life expectancy of the designated recipient with annuity payments that start within one year after the Owner's death. If an election to receive an annuity is not made within 60 days of our receipt of proof in proper form of the Owner's death or, if earlier, 60 days (or shorter period as we permit) prior to the first anniversary of the Owner's death, the lump sum option will be deemed elected, unless otherwise required by law. If the lump sum option is deemed elected, we will consider that deemed election as receipt of instructions regarding payment of death benefit proceeds. If a Non-Qualified Contract has Joint Owners, this requirement applies to the first Owner to die. The Owner may designate that the Beneficiary will receive death benefit proceeds through annuity payments for life or over a period that does not exceed the Beneficiary's life expectancy. The Owner must designate the payment method in writing in a form acceptable to us. The Owner may revoke the designation only in writing and only in an acceptable form to us. Once the Owner dies, the Beneficiary cannot revoke or modify the Owner's designation. If the Owner was not an Annuitant but was a Joint Owner and there is a surviving Joint Owner, that surviving Joint Owner is the designated recipient; if no Joint Owner survives but a Contingent Owner is named in the Contract and is living, he or she is the designated recipient, otherwise the designated recipient is the Beneficiary; if no Beneficiary is living, the designated recipient is the Owner's estate. If the Owner was an Annuitant, the designated recipient is the Joint Owner, if living; if not the Beneficiary; if living; if not, the Owner's estate. A sole designated recipient who is the Owner's spouse may elect to become the Owner (and sole Annuitant if the deceased Owner had been the Annuitant) and continue the Contract until the earliest of the spouse's death, the death of the Annuitant, or the Annuity Date. A Joint or Contingent Owner who is the designated recipient but not the Owner's spouse may not continue the Contract. If you are a non-individual Owner of a Contract other than a Contract issued under a Qualified Plan as defined in Section 401 or 403 of the Code, the Primary Annuitant will be treated as the Owner of the Contract for purposes of these Distribution Rules. If there is a change in the Primary Annuitant prior to the Annuity Date, such change will be treated as the death of the Owner. The amount of the death benefit in this situation will be (a) the Contract Value if the non-individual Owner elects to maintain the Contract and reinvest the Contract Value into the Contract in the same amount as immediately prior to the distribution, or (b) the Contract Value less any withdrawal and/or transaction fee, any charges for withdrawals, and/or premium taxes and/or other taxes, if the non-individual Owner elects a cash distribution. The amount of the death benefit will be determined as of the Business Day we receive, in proper form, the request to change the Primary Annuitant and instructions regarding maintaining the Contract or cash distribution. The Contract incorporates all applicable provisions of Code Section 72(s) and any successor provision, as deemed necessary by us to qualify the Contract as an annuity contract for federal income tax purposes, including the requirement that, if the Owner dies before the Annuity Date, any death benefit proceeds under the Contract shall be distributed within five years of the Owner's death (or such other period that we offer and that is permitted under the Code or such shorter period as we may require). QUALIFIED PLAN DEATH OF ANNUITANT DISTRIBUTION RULES Under Internal Revenue Service regulations, if the Contract is owned under a Qualified Plan as defined in Section 401, 403, 408, or 408A of the Code and the Annuitant dies before the commencement of distributions, the payment of any 23 PACIFIC INNOVATIONS death benefit must be made to the designated recipient no later than December 31 of the calendar year in which the fifth anniversary of the Annuitant's death falls. In order to satisfy this requirement, generally the designated recipient must receive a lump sum payment by this date or elect to receive the Annuitant's interest in the Contract in equal or substantially equal installments over a period not exceeding the lifetime or life expectancy of the designated recipient. If the designated recipient elects the installment payment option, the Internal Revenue Service regulations provide that payments must begin no later than December 31 of the calendar year which follows the calendar year in which the Annuitant died. However, if the designated recipient is the spouse of the Annuitant at the time of the Annuitant's death ("surviving spouse"), then, under the regulations, required distributions must begin no later than December 31 of the calendar year in which the Annuitant would have reached age 70 1/2. In the case of Roth IRA, the spouse needs to be the sole designated recipient. Under our administrative procedures, payments must commence either by the end of the fifth year following the Annuitant's death or lifetime distributions beginning no later than the end of the year following the year the Annuitant died; unless the designated recipient is the surviving spouse. If the surviving spouse elects to continue the contract and not do an eligible rollover to an IRA in his or her name, then he or she will be subject to the five year rule. However, the surviving spouse may waive the five year requirement and elect to take distributions over his or her life expectancy, and if the surviving spouse elects to defer the commencement of required distributions beyond the first anniversary of the Annuitant's death, the surviving spouse will be deemed to continue the Contract. In this instance, the surviving spouse may defer required distributions until the later of: (a) December 31 of the year following the year the Annuitant died; or (b) December 31 of the year in which the Annuitant would have turned 70 1/2. Further, under our administrative procedures, if the required distributions election is not received by us in good order by December 31, of the year following the Annuitant's death or, the December of the year in which the Annuitant would have attained age 70 1/2, the lump sum option will be deemed by us to have been elected, unless otherwise required by law. If the lump sum option is deemed elected, we will treat that deemed election as receipt of instructions regarding payment of death benefit proceeds. If the Annuitant dies after the commencement of Required Minimum Distributions but before the Annuitant's entire interest in the Contract (other than a Roth IRA) has been distributed, the remaining interest in the Contract must be distributed to the designated recipient at least as rapidly as under the distribution method in effect at the time of the Annuitant's death. DEATH BENEFIT AMOUNTS The DEATH BENEFIT AMOUNT as of any day (prior to the Annuity Date) is equal to the greater of (a) your Contract Value as of that day, or (b) your aggregate Purchase Payments reduced by an amount for each withdrawal, which is calculated by multiplying the aggregate Purchase Payments received prior to each withdrawal by the ratio of the amount of each withdrawal, including any withdrawal charge, to the Contract Value immediately prior to each withdrawal. We calculate the Death Benefit Amount as of the Notice Date. OPTIONAL STEPPED-UP DEATH BENEFIT RIDER If, at the time your application is completed, you purchase the Stepped-Up Death Benefit Rider (the "SDBR") (subject to state availability), a Guaranteed Minimum Death Benefit is added to your Contract as follows: The GUARANTEED MINIMUM DEATH BENEFIT AMOUNT is calculated only when death benefit proceeds become payable as a result of the death of the Annuitant prior to the Annuity Date, and is determined as follows: First, we calculate what the Death Benefit Amount would have been as of your first Contract Anniversary and each subsequent Contract Anniversary that occurs while the Annuitant is living and before the Annuitant reaches his or her 81st birthday (each of these Contract Anniversaries is a "Milestone Date"). We then adjust the Death Benefit Amount for each Milestone Date by: (i) adding the aggregate amount of any Purchase Payments received by us since that Milestone Date; and (ii) subtracting an amount for each withdrawal that has occurred 24 PACIFIC INNOVATIONS since that Milestone Date, which is calculated by multiplying the Death Benefit Amount by the ratio of the amount of each withdrawal that has occurred since that Milestone Date, including any withdrawal charge, to the Contract Value immediately prior to the withdrawal. The highest of these adjusted Death Benefit Amounts for each Milestone Date, as of the Notice Date, is your Guaranteed Minimum Death Benefit Amount if you purchase the SDBR. CALCULATION OF ANY GUARANTEED MINIMUM DEATH BENEFIT IS ONLY MADE ONCE DEATH BENEFIT PROCEEDS BECOME PAYABLE UNDER YOUR CONTRACT. OPTIONAL PREMIER DEATH BENEFIT RIDER If, at the time your application is completed, you purchase the Premier Death Benefit Rider (the "PDBR") (subject to state availability), the Death Benefit Amounts stated above are replaced with the following: The DEATH BENEFIT AMOUNT as of any day (prior to the Annuity Date) is equal to the greater of (a) your Contract Value as of that day, or (b) your aggregate Purchase Payments less an adjusted amount for each withdrawal increased at an effective annual rate of 6% to that day, subject to a maximum of two times the difference between the aggregate Purchase Payments and withdrawals, including withdrawal charges. The 6% effective annual rate of growth will take into account the timing of when each Purchase Payment and withdrawal occurred by applying a daily factor of 1.00015965 to each day's balance. The 6% effective annual rate of growth will stop accruing as of the earlier of: (i) the Contract Anniversary following the date the Annuitant reaches his or her 80th birthday; (ii) the date of death of the sole Annuitant; or (iii) the Annuity Date. To determine the adjusted amount for each withdrawal; (i) we divide the amount of each withdrawal by your Contract Value immediately before that withdrawal; and (ii) we then multiply the result by your Death Benefit Amount immediately before that withdrawal. The GUARANTEED MINIMUM DEATH BENEFIT AMOUNT is calculated only when death benefit proceeds become payable as a result of the death of the sole Annuitant prior to the Annuity Date, and is determined as follows: First, we calculate what the Death Benefit Amount would have been as of the quarterly anniversary following the Contract Date and as of each subsequent quarterly anniversary that occurs while the Annuitant is living and up to and including the Contract Anniversary following the Annuitant's 65th birthday. Quarterly anniversaries are measured from the Contract Date. After the Contract Anniversary following the Annuitant's 65th birthday, we calculate what the Death Benefit Amount would have been as of each Contract Anniversary that occurs while the Annuitant is living and before the Annuitant reaches his or her 81st birthday. Each quarterly anniversary and each Contract Anniversary in which a Death Benefit Amount is calculated is referred to as a "Milestone Date." We then adjust the Death Benefit Amount for each Milestone Date by: (i) adding the aggregate amount of any Purchase Payments received by us since that Milestone Date; and (ii) subtracting an amount for each withdrawal that has occurred since that Milestone Date, which is calculated by multiplying the Death Benefit Amount by the ratio of the amount of each withdrawal that has occurred since that Milestone Date, including any withdrawal charge, to the Contract Value immediately prior to the withdrawal. The highest of these adjusted Death Benefit Amounts as of the Notice Date is your Guaranteed Minimum Death Benefit if the PDBR is purchased. CALCULATIONS OF ANY GUARANTEED MINIMUM DEATH BENEFIT ARE MADE ONLY ONCE DEATH BENEFIT PROCEEDS BECOME PAYABLE UNDER YOUR CONTRACT. THE AMOUNT OF THE DEATH BENEFIT: DEATH OF ANNUITANT If the sole Annuitant dies prior to the Annuity Date, the death benefit will be equal to the Death Benefit Amount as of the Notice Date. If you purchase the SDBR, the death benefit will be equal to the greater of (a) the Death Benefit Amount as of the Notice Date or (b) the "Guaranteed Minimum Death Benefit Amount" as provided under the SDBR as of the Notice Date. If you purchase the PDBR, the death benefit will be equal to the greater of (a) the Death Benefit Amount as provided under the PDBR as of the Notice Date or (b) the "Guaranteed Minimum Death Benefit Amount" as provided under the PDBR as of the Notice Date. 25 PACIFIC INNOVATIONS The following procedures apply in the event of death of an Annuitant who is NOT also a Contract Owner: If your Contract names Joint Annuitants and only one Joint Annuitant dies, the surviving Joint Annuitant becomes your sole Annuitant and the death benefit is not yet payable. If your sole Annuitant dies (or if no Joint Annuitant survives) and your Contract names a surviving Contingent Annuitant, he or she becomes the sole Annuitant and the death benefit proceeds are not yet payable. If there is no surviving Joint or Contingent Annuitant, the death benefit proceeds are payable to the Owner, if living; if not, death benefit proceeds are payable to the Beneficiary, if living; if not, death benefit proceeds are payble to the Owner's estate. If the Owner is not the Annuitant and they die simultaneously, the death benefit will be calculated under the Death of Annuitant provisions and proceeds will be paid to the Joint Owner if living; if not, to the Contingent Owner, if living; if not to the Beneficiary, if not, to the Owner's estate. THE AMOUNT OF THE DEATH BENEFIT: DEATH OF A CONTRACT OWNER If a Contract Owner who is not the Annuitant dies before the Annuity Date, the amount of the death benefit will be equal to your Contract Value as of the Notice Date and will be paid in accordance with the DEATH BENEFIT PROCEEDS section. The death benefit proceeds will be paid to the Joint Owner, if living; if not, to the Contingent Owner, if living; if not, to the Beneficiary, if living; if not, to the Owner's estate. See THE GENERAL ACCOUNT - WITHDRAWALS AND TRANSFERS. If a Contract Owner who is the Annuitant dies before the Annuity Date, the amount of the death benefit will be determined in accordance with the THE AMOUNT OF THE DEATH BENEFIT: DEATH OF ANNUITANT section above, and will be paid in accordance with the DEATH BENEFIT PROCEEDS section. The death benefit proceeds will be paid to the Joint Owner, if living; if not, death benefit proceeds will be paid to the Beneficiary if living; if not, death benefit proceeds will be paid to the Owner's estate. If both you and the Annuitant(s) are non-individual persons, no death benefit will be payable, and any distribution will be treated as a withdrawal and subject to any applicable Annual Fee, withdrawal fee, withdrawal charge, and charge for premium taxes and/or other taxes. WITHDRAWALS OPTIONAL WITHDRAWALS You may, on or prior to your Annuity Date, withdraw all or a portion of the amount available under your Contract while the Annuitant is living and your Contract is in force. You may surrender your Contract and make a full withdrawal at any time. Except as provided below, beginning 30 days after your Contract Date, you also may make partial withdrawals from your Investment Options at any time. You may request to withdraw a specific dollar amount or a specific percentage of an Account Value or your Net Contract Value. You may choose to make your withdrawal from specified Investment Options; if you do not specify Investment Options, your withdrawal will be made from all of your Investment Options proportionately. Each partial withdrawal must be for $500 or more, except pre-authorized withdrawals, which must be at least $250. If your partial withdrawal from an Investment Option would leave a remaining Account Value in that Investment Option of less than $500, we have the right, at our option, to transfer that remaining amount to your other Investment Options on a proportionate basis relative to your most recent allocation instructions. If your partial withdrawal leaves you with a Net Contract Value of less than $1,000 ($500 in Maryland, New Jersey and Texas), we have the right, at our option, to terminate your Contract and send you the withdrawal proceeds described in the next section below. Partial withdrawals from the Fixed Option in any Contract Year are subject to restrictions. See GENERAL ACCOUNT - WITHDRAWALS AND TRANSFERS. AMOUNT AVAILABLE FOR WITHDRAWAL The amount available for withdrawal is your Net Contract Value at the end of the Business Day on which your withdrawal request is effective, less any applicable Annual Fee, withdrawal charge, withdrawal transaction fee, and any 26 PACIFIC INNOVATIONS charge for premium taxes and/or other taxes. The amount we send to you (your "withdrawal proceeds") will also reflect any required or requested federal and state income tax withholding. See FEDERAL TAX STATUS and THE GENERAL ACCOUNT - WITHDRAWALS AND TRANSFERS. You assume investment risk on investments in the Subaccounts; as a result, the amount available to you for withdrawal from any Subaccount may be more or less than the total Purchase Payments you have allocated to that Subaccount. WITHDRAWAL TRANSACTION FEES There is currently no transaction fee for partial withdrawals. However, we reserve the right to impose a withdrawal transaction fee in the future of up to $15 for each partial withdrawal (including pre-authorized partial withdrawals) in excess of 15 in any Contract Year. Any such fee would be charged against your Investment Options proportionately based on your Account Value in each Investment Option immediately after the withdrawal. PRE-AUTHORIZED WITHDRAWALS If your Contract Value is at least $5,000, you may select the pre-authorized withdrawal option, and you may choose monthly, quarterly, semiannual or annual withdrawals. Each withdrawal must be for at least $250. Each pre-authorized withdrawal is subject to federal income tax on its taxable portion and may be subject to a penalty tax of 10% or more if you have not reached age 59 1/2. See FEDERAL TAX STATUS AND THE GENERAL ACCOUNT - WITHDRAWALS AND TRANSFERS. Additional information and options are set forth in the SAI and in the Pre-Authorized Withdrawal section of your application. SPECIAL REQUIREMENTS FOR FULL WITHDRAWALS If you wish to withdraw the entire amount available under your Contract, you must either return your Contract to us or sign and submit to us a "lost Contract affidavit." SPECIAL RESTRICTIONS UNDER QUALIFIED PLANS Individual Qualified Plans may have additional rules regarding withdrawals from a Contract purchased under such a Plan. In general, if your Contract was issued under certain Qualified Plans, YOU MAY NOT WITHDRAW AMOUNTS attributable to contributions made pursuant to a salary reduction agreement (as defined in Section 402(g)(3)(A) of the Code) or to transfers from a custodial account (as defined in Section 403(b)(7) of the Code) EXCEPT in cases of your (a) separation from service, (b) death, (c) disability as defined in Section 72(m)(7) of the Code, (d) reaching age 59 1/2, or (e) hardship as defined for purposes of Section 401(k) of the Code. These limitations do not affect certain rollovers or exchanges between Qualified Plans, and do not apply to rollovers from these Qualified Plans to an individual retirement account or individual retirement annuity. In the case of tax sheltered annuities, these limitations do not apply to certain salary reduction contributions made, and investment results earned, prior to dates specified in the Code. Hardship withdrawals under the exception provided above are restricted to amounts attributable to salary reduction contributions, and do not include investment results; this additional restriction does not apply to salary reduction contributions made, and investment results earned, prior to dates specified in the Code. Certain distributions, including rollovers, may be subject to mandatory withholding of 20% for federal income tax and to a penalty tax of 10% or more if the distribution is not transferred directly to the trustee of another Qualified Plan, or to the custodian of an individual retirement account or issuer of an individual retirement annuity. See FEDERAL TAX STATUS. Distributions may also trigger withholding for state income taxes. The tax and ERISA rules relating to Contract withdrawals are complex. We are not the administrator of any Qualified Plan. You should consult your tax adviser and/ or your plan administrator before you withdraw any portion of your Contract Value. 27 PACIFIC INNOVATIONS EFFECTIVE DATE OF WITHDRAWAL REQUESTS Withdrawal requests are normally effective on the Business Day we receive them in proper form. If you make Purchase Payments by check and submit a withdrawal request immediately afterwards, payment of your withdrawal proceeds may be delayed until your check clears. TAX CONSEQUENCES OF WITHDRAWALS Withdrawals, including pre-authorized withdrawals, will generally have federal income tax consequences, which could include tax penalties. YOU SHOULD CONSULT WITH A TAX ADVISER BEFORE MAKING ANY WITHDRAWAL OR SELECTING THE PRE-AUTHORIZED WITHDRAWAL OPTION. See FEDERAL TAX STATUS. RIGHT TO CANCEL ("FREE LOOK") During the Free Look Period, you have the right to cancel your Contract and return it to us for a refund. If you return your Contract, it will be canceled and treated as void from your Contract Date. The amount of your refund may be more or less than the Purchase Payments you've made, depending on the state where you signed your application. Generally, the Free Look Period ends 10 days after you receive your Contract. Also, some states may have a different Free Look Period if you are replacing another annuity contract or life insurance policy. For more information, see APPENDIX A: STATE LAW VARIATIONS. In most states, your refund will be your Contract Value as of the end of the Business Day on which we receive your Contract for cancellation, plus a refund of any amount that may have been deducted as Contract charges to pay for premium taxes and/or other taxes. You will bear the investment risk on any gain or loss on funds allocated to the variable investment options. In some states we're required to refund the Purchase Payments you've made (less any amount withdrawn). There are some states that require us to return a different amount if you are replacing another annuity contract or life insurance policy. For any Contract issued as an IRA returned within 7 days after you receive it, we are required to return all Purchase Payments (less any withdrawals made). For more information, see APPENDIX A: STATE LAW VARIATIONS. You'll find a complete description of the Free Look Period and amount to be refunded that applies to your Contract on the Contract's cover page, or on a notice that accompanied your policy. Your Purchase Payments will be allocated in accordance with your application or your most recent allocation instructions. PACIFIC LIFE AND THE SEPARATE ACCOUNT PACIFIC LIFE We are a life insurance company that is based in California. Along with our subsidiaries and affiliates, our operations include life insurance, annuities, pension and institutional products, group employee benefits, broker-dealer operations and any investment and advisory services. As of the end of 1998, we had $89.6 billion of individual life insurance in force and total admitted assets of approximately $37.6 billion. We have been ranked according to admitted assets as the 18th largest life insurance carrier in the nation based on December 31, 1998 assets. The Pacific Life family of companies has total assets and funds under management of $290 billion as of December 31, 1998. We are authorized to conduct life insurance and annuity business in the District of Columbia and all states except New York. Our principal office is located at 700 Newport Center Drive, Newport Beach, California 92660. We were originally organized on January 2, 1868, under the name "Pacific Mutual Life Insurance Company of California" and reincorporated as "Pacific Mutual Life Insurance Company" on July 22, 1936. On September 1, 1997, we converted from a mutual life insurance company to a stock life insurance company ultimately controlled by a mutual holding company and were authorized by California regulatory authorities to change our name to Pacific Life Insurance Company. Pacific Life is a subsidiary of Pacific LifeCorp, a holding company, which, in turn, is a subsidiary of Pacific Mutual Holding Company, a mutual holding company. Under their respective charters, Pacific Mutual Holding Company 28 PACIFIC INNOVATIONS must always hold at least 51% of the outstanding voting stock of Pacific LifeCorp, and Pacific LifeCorp must always own 100% of the voting stock of Pacific Life. Owners of Pacific Life's annuity contracts and life insurance policies have certain membership interests in Pacific Mutual Holding Company, consisting principally of the right to vote on the election of the Board of Directors of the mutual holding company and on other matters, and certain rights upon liquidation or dissolutions of the mutual holding company. Our subsidiary, Pacific Mutual Distributors, Inc. ("PMD"), serves as the principal underwriter (distributor) for the Contracts. PMD is located at 700 Newport Center Drive, Newport Beach, California 92660. We and PMD enter into selling agreements with broker-dealers, under which such broker-dealers act as agents of us and PMD in the sale of the Contracts. We may provide you with reports of our ratings both as an insurance company and as to our claims-paying ability with respect to our General Account assets. The SAI presents more details about these ratings. SEPARATE ACCOUNT A Separate Account A was established on September 7, 1994 as a separate account of ours, and is registered with the SEC under the 1940 Act, as a type of investment company called a "unit investment trust." Obligations arising under your Contract are our general corporate obligations. We are also the legal owner of the assets in the Separate Account. Assets of the Separate Account attributed to the reserves and other liabilities under the Contract and other contracts issued by us that are supported by the Separate Account may not be charged with liabilities arising from any of our other business; any income, gain or loss (whether or not realized) from the assets of the Separate Account are credited to or charged against the Separate Account without regard to our other income, gain or loss. We may invest money in the Separate Account in order to commence its operations and for other purposes, but not to support contracts other than variable annuity contracts. A portion of the Separate Account's assets may include accumulations of charges we make against the Separate Account and investment results of assets so accumulated. These additional assets are ours and we may transfer them to our General Account at any time; however, before making any such transfer, we will consider any possible adverse impact the transfer might have on the Separate Account. Subject to applicable law, we reserve the right to transfer our assets in the Separate Account to our General Account. The Separate Account is not the sole investor in the Fund. Investment in the Fund by other separate accounts in connection with variable annuity and variable life insurance contracts may create conflicts. See the accompanying Prospectus and the SAI for the Fund for more information. 29 PACIFIC INNOVATIONS FINANCIAL HIGHLIGHTS The table below is designed to help you understand how the Variable Investment Options have performed. It shows the value of a Subaccount Unit at the beginning and end of each period, as well as the number of Subaccount Units at the end of each period. A Subaccount Unit is also called an ACCUMULATION UNIT. The information in the table for the period ended December 31, 1998 is included in the financial statements of Separate Account A which have been audited by Deloitte & Touche LLP, independent auditors. You should read the table in conjunction with the financial statements for Separate Account A, which are included in its annual report dated as of December 31, 1998. The information is for periods before the Contract was available and the Units and Unit Values do not support the Contract; but relates to other variable annuity Contracts.
1998 1997 1996 AGGRESSIVE EQUITY(2) Subaccount Unit Value at beginning of period $10.92 $10.67 $10.00 Subaccount Unit Value as of December 31 $12.19 $10.92 $10.67 Number of Subaccount Units outstanding at end of period 5,808,703 1,711,363 387,987 - ------------------------------------------------------------------------------------------------------- EMERGING MARKETS(2) Subaccount Unit Value at beginning of period $9.28 $9.57 $10.00 Subaccount Unit Value as of December 31 $6.70 $9.28 $9.57 Number of Subaccount Units outstanding at end of period 3,975,851 1,342,086 240,607 - ------------------------------------------------------------------------------------------------------- BOND AND INCOME(1) Subaccount Unit Value at beginning of period $11.23 $9.79 $10.00 Subaccount Unit Value as of December 31 $12.07 $11.23 $9.79 Number of Subaccount Units outstanding at end of period 4,739,580 975,740 154,590 - ------------------------------------------------------------------------------------------------------- EQUITY(1) Subaccount Unit Value at beginning of period $14.68 $12.59 $10.00 Subaccount Unit Value as of December 31 $18.85 $14.68 $12.59 Number of Subaccount Units outstanding at end of period 6,695,038 1,983,738 453,223 - ------------------------------------------------------------------------------------------------------- MULTI-STRATEGY(1) Subaccount Unit Value at beginning of period $13.01 $11.03 $10.00 Subaccount Unit Value as of December 31 $15.17 $13.01 $11.03 Number of Subaccount Units outstanding at end of period 8,073,603 1,830,504 294,936 - ------------------------------------------------------------------------------------------------------- EQUITY INCOME(1) Subaccount Unit Value at beginning of period $14.78 $11.66 $10.00 Subaccount Unit Value as of December 31 $18.10 $14.78 $11.66 Number of Subaccount Units outstanding at end of period 14,764,834 4,189,318 743,123 - ------------------------------------------------------------------------------------------------------- GROWTH LT(1) Subaccount Unit Value at beginning of period $12.71 $11.61 $10.00 Subaccount Unit Value as of December 31 $19.84 $12.71 $11.61 Number of Subaccount Units outstanding at end of period 10,966,264 3,826,332 950,317 - ------------------------------------------------------------------------------------------------------- EQUITY INDEX(1) Subaccount Unit Value at beginning of period $15.69 $11.97 $10.00 Subaccount Unit Value as of December 31 $19.88 $15.69 $11.97 Number of Subaccount Units outstanding at end of period 15,518,412 4,460,482 757,175 - ------------------------------------------------------------------------------------------------------- INTERNATIONAL(1) Subaccount Unit Value at beginning of period $12.76 $11.84 $10.00 Subaccount Unit Value as of December 31 $13.29 $12.76 $11.84 Number of Subaccount Units outstanding at end of period 15,066,242 5,292,436 1,312,817 - ------------------------------------------------------------------------------------------------------- GOVERNMENT SECURITIES(1) Subaccount Unit Value at beginning of period $10.95 $10.14 $10.00 Subaccount Unit Value as of December 31 $11.80 $10.95 $10.14 Number of Subaccount Units outstanding at end of period 4,543,208 1,506,839 673,682 - ------------------------------------------------------------------------------------------------------- MANAGED BOND(1) Subaccount Unit Value at beginning of period $11.14 $10.27 $10.00 Subaccount Unit Value as of December 31 $11.99 $11.14 $10.27 Number of Subaccount Units outstanding at end of period 16,897,325 4,434,069 742,041 - ------------------------------------------------------------------------------------------------------- MONEY MARKET(1) Subaccount Unit Value at beginning of period $10.75 $10.36 $10.00 Subaccount Unit Value as of December 31 $11.16 $10.75 $10.36 Number of Subaccount Units outstanding at end of period 14,823,792 3,041,495 1,478,808 - ------------------------------------------------------------------------------------------------------- HIGH YIELD BOND(1) Subaccount Unit Value at beginning of period $11.83 $10.96 $10.00 Subaccount Unit Value as of December 31 $11.95 $11.83 $10.96 Number of Subaccount Units outstanding at end of period 7,396,859 2,702,260 630,637 - -------------------------------------------------------------------------------------------------------
(1) This Subaccount began operations on January 2, 1996. (2) This Subaccount began operations on April 17, 1996. 30 PACIFIC INNOVATIONS FEDERAL TAX STATUS THE FOLLOWING SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES IS BASED ON OUR UNDERSTANDING OF CURRENT TAX LAWS AND REGULATIONS, WHICH MAY BE CHANGED BY LEGISLATIVE, JUDICIAL OR ADMINISTRATIVE ACTION. THE SUMMARY IS GENERAL IN NATURE AND IS NOT INTENDED AS TAX ADVICE. MOREOVER, IT DOES NOT CONSIDER ANY APPLICABLE STATE OR LOCAL TAX LAWS. WE DO NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS, FEDERAL, STATE OR LOCAL, OF ANY CONTRACT OR ANY TRANSACTION INVOLVING THE CONTRACTS. ACCORDINGLY, YOU SHOULD CONSULT A QUALIFIED TAX ADVISER FOR COMPLETE INFORMATION AND ADVICE BEFORE PURCHASING A CONTRACT. The following rules generally do not apply to variable annuity contracts held by or for non-natural persons (e.g., corporations) unless such an entity holds the contract as nominee for a natural person. If a contract is not owned or held by a natural person or a nominee for a natural person, the contract generally will not be treated as an "annuity" for tax purposes, meaning that the contract owner will be taxed currently on annual increases in Contract Value at ordinary income rates unless some other exception applies. Section 72 of the Code governs the taxation of annuities in general, and we designed the Contracts to meet the requirements of Section 72 of the Code. We believe that, under current law, the Contract will be treated as an annuity for federal income tax purposes if the Contract Owner is a natural person or an agent for a natural person, and that we (as the issuing insurance company), and not the Contract Owner(s), will be treated as the owner of the investments underlying the Contract. Accordingly, generally no tax should be payable by you as a Contract Owner as a result of any increase in Contract Value until you receive money under your Contract. You should, however, consider how amounts will be taxed when you do receive them. The following discussion assumes that your Contract will be treated as an annuity for federal income tax purposes. Section 817(h) of the Code provides that the investments underlying a variable annuity must satisfy certain diversification requirements. Details on these diversification requirements appear in the Fund's SAI. We believe the underlying Variable Investment Options for the Contract meet these requirements. In connection with the issuance of temporary regulations relating to diversification requirements under Section 817(h), the Treasury Department announced that such regulations do not provide guidance concerning the extent to which you may direct your investments to particular divisions of a separate account. Such guidance may be included in regulations or revenue rulings under Section 817(d) relating to the definition of a variable contract. Because of this uncertainty, we reserve the right to make such changes as we deem necessary or appropriate to ensure that your Contract continues to qualify as an annuity for tax purposes. Any such changes will apply uniformly to affected Contract Owners and will be made with such notice to affected Contract Owners as is feasible under the circumstances. TAXES PAYABLE BY CONTRACT OWNERS: GENERAL RULES THESE GENERAL RULES APPLY TO NON-QUALIFIED CONTRACTS. AS DISCUSSED BELOW, HOWEVER, TAX RULES MAY DIFFER FOR QUALIFIED CONTRACTS AND YOU SHOULD CONSULT A QUALIFIED TAX ADVISER IF YOU ARE PURCHASING A QUALIFIED CONTRACT. Distributions of net investment income or capital gains that each Subaccount receives from its corresponding Portfolio are automatically reinvested in such Portfolio unless we, on behalf of the Separate Account, elect otherwise. As noted above, you will be subject to federal income taxes on the investment income from your Contract only when it is distributed to you. MULTIPLE CONTRACTS All Non-Qualified contracts that are issued by us, or our affiliates, to the same Owner during any calendar year are treated as one contract for purposes of determining the amount includible in gross income under Code Section 72(e). Further, the Treasury Department has specific authority to issue regulations that prevent the avoidance of Section 72(e) through the serial purchase of contracts or otherwise. 31 PACIFIC INNOVATIONS TAXES PAYABLE ON WITHDRAWALS Amounts you withdraw before annuitization, including amounts withdrawn from your Contract Value in connection with partial withdrawals for payment of any charges and fees, will be treated first as taxable income to the extent that your Contract Value exceeds the aggregate of your Purchase Payments (reduced by non-taxable amounts previously received), and then as non-taxable recovery of your Purchase Payments. The assignment or pledge of (or agreement to assign or pledge) the value of the Contract for a loan will be treated as a withdrawal subject to these rules. Moreover, all annuity contracts issued to you in any given calendar year by us and any of our affiliates are treated as a single annuity contract for purposes of determining whether an amount is subject to tax under these rules. The Code further provides that the taxable portion of a withdrawal or other distribution may be subject to a penalty tax equal to 10% of that taxable portion unless the withdrawal is: (1) made on or after the date you reach age 59 1/2, (2) made by a Beneficiary after your death, (3) attributable to you becoming disabled, or (4) in the form of level annuity payments under a lifetime annuity. TAXES PAYABLE ON ANNUITY PAYMENTS A portion of each annuity payment you receive under a Contract generally will be treated as a partial recovery of Purchase Payments (as used here, "Purchase Payments" means the aggregate Purchase Payments less any amounts that were previously received under the Contract but not included in income) and will not be taxable. (In certain circumstances, subsequent modifications to an initially-established payment pattern may result in the imposition of a penalty tax.) The remainder of each annuity payment will be taxed as ordinary income. However, after the full amount of aggregate Purchase Payments has been recovered, the full amount of each annuity payment will be taxed as ordinary income. Exactly how an annuity payment is divided into taxable and non-taxable portions depends on the period over which annuity payments are expected to be received, which in turn is governed by the form of annuity selected and, where a lifetime annuity is chosen, by the life expectancy of the Annuitant(s) or payee(s). Such a payment may also be subject to a penalty tax. Should the death of a Contract Owner cause annuity payments to cease before Purchase Payments have been fully recovered, a deduction may be allowed on the final tax return for the unrecovered Purchase Payments; however, if any remaining annuity payments are made to a Beneficiary, the Beneficiary will recover the balance of the Purchase Payments as payments are made. IRC Section 72(b)(3)(A) or (B) or (C). Generally, the same tax rules apply to amounts received by the Beneficiary as those set forth above, except that the early withdrawal penalty tax does not apply. Thus, any annuity payments or lump sum withdrawal will be divided into taxable and non-taxable portions. If the Contract Owner or Annuitant dies and within sixty days after the date on which a lump sum death benefit first becomes payable the designated recipient elects to receive annuity payments in lieu of the lump sum death benefit, then the designated recipient will not be treated for tax purposes as having received the lump sum death benefit in the tax year it first becomes payable. Rather, in that case, the designated recipient will be taxed on the annuity payments as they are received. Any amount payable upon the Contract Owner's death, whether before or after the Annuity Date, will be included in the estate of the Contract Owner for federal estate tax purposes. In addition, designation of a Beneficiary who either is 37 1/2 or more years younger than a Contract Owner or is a grandchild of a Contract Owner may have Generation Skipping Transfer Tax consequences under section 2601 of the Code. Generally, gifts of non-tax qualified contracts prior to the annuity start date will trigger tax on the gain on the contract, with the donee getting a stepped-up basis for the amount included in the donor's income. The 10% penalty tax and gift tax also may be applicable. This provision does not apply to transfers between spouses or incident to a divorce. QUALIFIED CONTRACTS The Contracts are available to a variety of Qualified Plans. Tax restrictions and consequences for Contracts under each type of Qualified Plan differ from each other and from those for Non-Qualified Contracts. In addition, individual Qualified Plans may have terms and conditions that impose additional rules. Therefore, no attempt is made herein to 32 PACIFIC INNOVATIONS provide more than general information about the use of the Contract with the various types of Qualified Plans. Participants under such Qualified Plans, as well as Contract Owners, Annuitants and Beneficiaries, are cautioned that the rights of any person to any benefits under such Qualified Plans may be subject to the terms and conditions of the Plans themselves or limited by applicable law, regardless of the terms and conditions of the Contract issued in connection therewith. THE FOLLOWING IS ONLY A GENERAL DISCUSSION ABOUT TYPES OF QUALIFIED PLANS FOR WHICH THE CONTRACTS ARE AVAILABLE. WE ARE NOT THE ADMINISTRATOR OF ANY QUALIFIED PLAN. THE PLAN ADMINISTRATOR AND/OR CUSTODIAN, WHICHEVER IS APPLICABLE, (BUT NOT US) IS RESPONSIBLE FOR ALL PLAN ADMINISTRATIVE DUTIES INCLUDING, BUT NOT LIMITED TO, NOTIFICATION OF DISTRIBUTION OPTIONS, DISBURSEMENT OF PLAN BENEFITS, COMPLIANCE REGULATORY REQUIREMENTS AND FEDERAL AND STATE TAX REPORTING OF INCOME/DISTRIBUTIONS FROM THE PLAN TO PLAN PARTICIPANTS AND, IF APPLICABLE, BENEFICIARIES OF PLAN PARTICIPANTS AND IRA CONTRIBUTIONS FROM PLAN PARTICIPANTS. OUR ADMINISTRATIVE DUTIES ARE LIMITED TO ADMINISTRATION OF THE CONTRACT AND ANY DISBURSEMENTS OF ANY CONTRACT BENEFITS TO THE OWNER, ANNUITANT, OR BENEFICIARY OF THE CONTRACT, AS APPLICABLE. OUR TAX REPORTING RESPONSIBILITY IS LIMITED TO FEDERAL AND STATE TAX REPORTING OF INCOME/DISTRIBUTIONS TO THE APPLICABLE PAYEE AND IRA CONTRIBUTIONS FROM THE OWNER OF A CONTRACT, AS RECORDED ON OUR BOOKS AND RECORDS. THE QUALIFIED PLAN (THE PLAN ADMINISTRATOR OR THE CUSTODIAN) IS REQUIRED TO PROVIDE US WITH INFORMATION REGARDING INDIVIDUALS WITH SIGNATORY AUTHORITY ON THE CONTRACT(S) OWNED. IF YOU ARE PURCHASING A QUALIFIED CONTRACT, YOU SHOULD CONSULT WITH YOUR PLAN ADMINISTRATOR AND/OR A QUALIFIED TAX ADVISER. YOU SHOULD ALSO CONSULT WITH YOUR TAX ADVISER AND/OR PLAN ADMINISTRATOR BEFORE YOU WITHDRAW ANY PORTION OF YOUR CONTRACT VALUE. INDIVIDUAL RETIREMENT ANNUITIES ("IRAS") Recent federal tax legislation has expanded the type of IRAs available to individuals for tax deferred retirement savings: In addition to "traditional" IRAs established under Code Section 408, there are Roth IRAs governed by Code Section 408A and SIMPLE IRAs established under Code Section 408(p). Contributions to each of these types of IRAs are subject to differing limitations. In addition, distributions from each type of IRA are subject to differing restrictions. The following is a very general description of each type of IRA and other Qualified Plans: TRADITIONAL IRAS Traditional IRAs are subject to limitations on the amount that may be contributed, the persons who may be eligible, and on the time when distributions must commence. Depending upon the circumstances of the individual, contributions to a traditional IRA may be made on a deductible or non-deductible basis. Failure to make mandatory distributions may result in imposition of a 50% penalty tax on any difference between the required distribution amount and the amount actually distributed. A 10% penalty tax is imposed on the amount includable in gross income from distributions that occur before you attain age 59 1/2 and that are not made on account of death or disability, with certain exceptions. These exceptions include distributions that are part of a series of substantially equal periodic payments made over your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your Designated Beneficiary. Distributions of minimum amounts specified by the Code must commence by April 1 of the calendar year following the calendar year in which you attain age 70 1/2. Additional distribution rules apply after your death. You may rollover funds from certain existing Qualified Plans (such as proceeds from existing insurance policies, annuity contracts or securities) into your traditional IRA if those funds are in cash; this will require you to liquidate any value accumulated under the existing Qualified Plan. Mandatory withholding of 20% may apply to any rollover distribution from your existing Qualified Plan if the distribution is not transferred directly to your Traditional IRA; to avoid this withholding you should have cash transferred directly from the insurance company or plan trustee to your traditional IRA. Similar limitations and tax penalties apply to tax sheltered annuities, government plans, 401(k) plans, and pension and profit-sharing plans. SIMPLE IRAS The Small Business Job Protection Act of 1996 created a new retirement plan, the Savings Incentive Match Plan for Employees of Small Employers ("SIMPLE Plans"). Depending upon the SIMPLE Plan, employers may make the plan 33 PACIFIC INNOVATIONS contributions into a SIMPLE retirement account established by each eligible participant. Like other Qualified Plans, a 10% penalty tax is imposed on certain distributions that occur before you attain age 59 1/2. In addition, the penalty tax is increased to 25% for amounts received during the 2-year period beginning on the date any individual first participated in any qualified salary reduction arrangement maintained by the individual's employer under Code Section 408(p)(2). Contributions to a SIMPLE IRA may be either salary deferral contributions or employer contributions. Distributions from a SIMPLE IRA may be rolled over to another SIMPLE IRA tax free or may be eligible for tax free rollover to a traditional IRA after a required two year period. A distribution from a SIMPLE IRA, however, is never eligible to be rolled over to a retirement plan qualified under Code Section 401 or a Section 403(b) annuity contract. ROTH IRAS Section 408A of the Code permits eligible individuals to establish a Roth IRA. Contributions to a Roth IRA are not deductible, but withdrawals of amounts contributed and the earnings thereon that meet certain requirements are not subject to federal income tax. In general, Roth IRAs are subject to limitations on the amount that may be contributed and the persons who may be eligible to contribute and are subject to certain required distribution rules on the death of the Contract Owner. Unlike a traditional IRA, Roth IRAs are not subject to minimum required distribution rules during the Contract Owner's lifetime. Generally, however, the amount remaining in a Roth IRA must be distributed by the end of the fifth year after the death of the Contract Owner/Annuitant or distributed over the life expectancy of the Designated Beneficiary. Beginning in 1998, the owner of a traditional IRA may convert a traditional IRA into a Roth IRA under certain circumstances. The conversion of a traditional IRA to a Roth IRA will subject the amount of the converted traditional IRA to federal income tax. Anyone considering the purchase of a Qualified Contract as a Roth IRA or a "conversion" Roth IRA should consult with a qualified tax adviser. TAX SHELTERED ANNUITIES ("TSAS") Section 403(b) of the Code permits public school systems and certain tax-exempt organizations to adopt annuity plans for their employees; Purchase Payments made on Contracts purchased for these employees are excludable from the employees' gross income (subject to maximum contribution limits). Distributions under these Contracts must comply with certain limitations as to timing, or result in tax penalties. GOVERNMENT PLANS Section 457 of the Code permits employees of a state or local government (or of certain other tax-exempt entities) to defer compensation through an eligible government plan. Contributions to a Contract in connection with an eligible government plan are subject to limitations. 401(k) PLANS; PENSION AND PROFIT-SHARING PLANS Qualified Employer plans may be established by eligible employers for certain eligible employees under Sections 401(a) and 401(k) of the Code. Contributions to these plans are subject to certain limitations. LOANS Certain Owners of Qualified Contracts may borrow against their Contracts; otherwise loans from us are not permitted. If yours is a Qualified Contract issued under Section 401 or 403 of the Code AND the terms of your Qualified Plan permit, you may request a loan from us, using your Contract Value as your only security. TAX AND LEGAL MATTERS The tax and ERISA rules relating to Contract loans are complex and in many cases unclear. For these reasons, and because the rules vary depending on the individual circumstances of each Contract, WE URGE YOU TO CONSULT WITH A QUALIFIED TAX ADVISER PRIOR TO EFFECTING ANY LOAN TRANSACTION UNDER YOUR CONTRACT. 34 PACIFIC INNOVATIONS Generally interest paid on your loan under a 401 plan or 403(b) tax-sheltered annuity will be considered non-deductible "personal interest" under Section 163(h) of the Code, to the extent the loan comes from and is secured by your pre-tax contributions, even if the proceeds of your loan are used to acquire your principal residence. We may change these loan provisions to reflect changes in the Code or interpretations thereof. LOAN PROCEDURES Your loan request must be submitted on our Loan Agreement Form. You may submit a loan request at any time after your first Contract Anniversary and before your Annuity Date; however, before requesting a new loan, you must wait thirty days after the last payment of a previous loan. If approved, your loan will usually be effective as of the end of the Business Day on which we receive all necessary documentation in proper form. We will normally forward proceeds of your loan to you within seven calendar days after the effective date of your loan. In order to secure your loan, on the effective date of your loan, we will transfer an amount equal to the principal amount of your loan into an account called the "Loan Account." To make this transfer, we will transfer amounts proportionately from your Investment Options based on your Account Value in each Investment Option. As your loan is repaid, a portion, corresponding to the amount of the repayment of any amount then held as security for your loan, will be transferred from the Loan Account back into your Investment Options relative to your current allocation instructions. LOAN TERMS You may have only one loan outstanding at any time. The minimum loan amount is $1,000, subject to certain state limitations. Your Contract Debt at the effective date of your loan may not exceed the LESSER of: - 50% of your Contract Value; and - $50,000 less your highest outstanding Contract Debt during the 12-month period immediately preceding the effective date of your loan. You should refer to the terms of your particular Qualified Plan for any additional loan restrictions. If you have other loans outstanding pursuant to other Qualified Plans, the amount you may borrow may be further restricted. We are not responsible for making any determinations (including loan amounts permitted) or any interpretations with respect to your Qualified Plan. QUALIFIED PLAN (NOT SUBJECT TO TITLE I OF ERISA) If your Qualified Plan is not subject to Title I of ERISA regulations, you will be charged interest on your Contract Debt at a fixed annual rate equal to 5%. The amount held in the Loan Account to secure your loan will earn a return equal to an annual rate of 3%. QUALIFIED PLAN (SUBJECT TO TITLE I OF ERISA) If your Qualified Plan is subject to Title I of ERISA regulations, you will be charged interest on your Contract Debt at a fixed annual rate, set at the time the loan is made, equal to the higher of (a) Moody's Corporate Bond Yield Average-Monthly Average Corporates (the "Moody's Rate"), as published by Moody's Investors Service, Inc., or its successor, for the most recently available calendar month, or (b) 5%. In the event that the Moody's Rate is no longer available, we may substitute a substantially similar average rate, subject to compliance with applicable state regulations. The amount held in the Loan Account to secure your loan will earn a return equal to an annual rate that is two percentage points lower than the annual rate of interest charged on your Contract Debt. Interest charges accrue on your Contract Debt daily, beginning on the effective date of your loan. Interest earned on the Loan Account Value accrue daily beginning on the day following the effective date of the loan, and those earnings will be transferred once a year to your Investment Options in accordance with your current allocation instructions. 35 PACIFIC INNOVATIONS REPAYMENT TERMS Your loan, including principal and accrued interest, generally must be repaid in quarterly installments. An installment will be due in each quarter on the date corresponding to the effective date of your loan, beginning with the first such date following the effective date of your loan. EXAMPLE: On May 1, we receive your loan request, and your loan is effective. Your first quarterly payment will be due on August 1. Adverse tax consequences may result if you fail to meet the repayment requirements for your loan. You must repay principal and interest of any loan in substantially equal payments over the term of the loan. Generally, the term of the loan will be five years from the effective date of the loan; however, if you have certified to us that your loan proceeds are to be used to acquire a principal residence for yourself, you may request a loan term of 30 years. In either case, however, you must repay your loan prior to your Annuity Date. If you elect to annuitize (or withdraw) your Net Contract Value while you have an outstanding loan, we will deduct any Contract Debt from your Contract Value at the time of the annuitization (or withdrawal) to repay the Contract Debt. You may prepay your entire loan at any time; if you do so, we will bill you for any unpaid interest that has accrued through the date of payoff. Your loan will be considered repaid only when the interest due has been paid. Subject to any necessary approval of state insurance authorities, while you have Contract Debt outstanding, we will treat all payments you send us as Purchase Payments unless you specifically indicate that your payment is a loan repayment or include your loan stub with your payment. To the extent allowed by law, any loan repayments in excess of the amount then due will be applied to the principal balance of your loan. Such repayments will not change the due dates or the periodic repayment amount due for future periods. If a loan repayment is in excess of the principal balance of your loan, any excess repayment will be refunded to you. Repayments we receive that are less than the amount then due will be returned to you, unless otherwise required by law. If we have not received your full payment by its due date, we will declare the entire remaining loan balance in default. At that time, we will send written notification of the amount needed to bring the loan back to a current status. You will have sixty (60) days from the date on which the loan was declared in default (the "grace period") to make the required payment. If the required payment is not received by the end of the grace period, the defaulted loan balance plus accrued interest and any withdrawal charge will be withdrawn from your Contract Value, IF AMOUNTS UNDER YOUR CONTRACT ARE ELIGIBLE FOR DISTRIBUTION. In order for an amount to be eligible for distribution from a Qualified Plan you must meet one of six triggering events. They are: attainment of age 59 1/2; separation from service; death; disability; plan termination; and financial hardship. If those amounts are not eligible for distribution, the defaulted loan balance plus accrued interest and any withdrawal charge will be considered a Deemed Distribution and will be withdrawn when such Contract Values become eligible. In either case, the Distribution or the Deemed Distribution will be considered a CURRENTLY TAXABLE EVENT, and may be subject to federal tax withholding, the withdrawal charge and the federal early withdrawal penalty tax. If there is a Deemed Distribution under your Contract and to the extent allowed by law, any future withdrawals will first be applied as repayment of the defaulted Contract Debt, including accrued interest and charges for applicable taxes. Any amounts withdrawn and applied as repayment of Contract Debt will first be withdrawn from your Loan Account, and then from your Investment Options on a proportionate basis relative to the Account Value in each Investment Option. If you have an outstanding loan that is in default, the defaulted Contract Debt will be considered a withdrawal for the purpose of calculating any Death Benefit Amount and/or Guaranteed Minimum Death Benefit. The terms of any such loan are intended to qualify for the exception in Code Section 72(p)(2) so that the distribution of the loan proceeds will not constitute a distribution that is taxable to you. To that end, these loan provisions will be interpreted to ensure and maintain such tax qualification, despite any other provisions to the contrary. We reserve the right to amend your Contract to reflect any clarifications that may be needed or are appropriate to maintain such tax qualification or to conform any terms of our loan arrangement with you to any applicable changes in the tax qualification requirements. We will send you a copy of any such amendment. If you refuse such an amendment, it may result in adverse tax consequences to you. 36 PACIFIC INNOVATIONS WITHHOLDING Unless you elect to the contrary, any amounts you receive under your Contract that are attributable to investment income will be subject to withholding to meet federal and state income tax obligations. The rate of withholding on annuity payments made to you will be determined on the basis of the withholding information you provide to us with your application. If you do not provide us with required withholding information, we will withhold, from every withdrawal from your Contract and from every annuity payment to you, the appropriate percentage of the taxable amount of the payment. Please call us at 1-800-722-2333 with any questions about the required withholding information. For purposes of determining your withholding rate on annuity payments, you will be treated as a married person with three exemptions. The rate of withholding on all other payments made to you under your Contract, such as amounts you receive upon withdrawals, will be 10%, unless otherwise specified by the Code. Generally, there will be no withholding for taxes until you actually receive payments under your Contract. Distributions from a Contract under a Qualified Plan (not including an individual retirement annuity subject to Code Section 408 or Code Section 408A) to an employee, surviving spouse, or former spouse who is an alternate payee under a qualified domestic relations order, in the form of a lump sum settlement or periodic annuity payments for a fixed period of fewer than 10 years are subject to mandatory income tax withholding of 20% of the taxable amount of the distribution, unless (1) the distributee directs the transfer of such amounts in cash to another Qualified Plan or a Traditional IRA; or (2) the payment is a minimum distribution required under the Code. The taxable amount is the amount of the distribution less the amount allocable to after-tax contributions. All other types of taxable distributions are subject to withholding unless the distributee elects not to have withholding apply. Certain states have indicated that pension and annuity withholding will apply to payments made to residents. Generally, an election out of federal withholding will also be considered an election out of state withholding. IMPACT OF FEDERAL INCOME TAXES In general, in the case of Non-Qualified Contracts if you expect to accumulate your Contract Value over a relatively long period of time without making significant withdrawals, there should be tax advantages, regardless of your tax bracket, in purchasing such a Contract rather than, for example, a mutual fund with a similar investment policy and approximately the same level of expected investment results. This is because little or no income taxes are incurred by you or by us while you are participating in the Subaccounts, and it is generally advantageous to defer the payment of income taxes, so that the investment return is compounded without any deduction for income taxes. The advantage will be greater if you decide to liquidate your Contract Value in the form of monthly annuity payments after your retirement, or if your tax rate is lower at that time than during the period that you held the Contract, or both. TAXES ON PACIFIC LIFE Although the Separate Account is registered as an investment company, it is not a separate taxpayer for purposes of the Code. The earnings of the Separate Account are taxed as part of our operations. No charge is made against the Separate Account for our federal income taxes (excluding the charge for premium taxes), but we will review, periodically, the question of charges to the Separate Account or your Contract for such taxes. Such a charge may be made in future years for any federal income taxes that would be attributable to the Separate Account or to our operations with respect to your Contract, or attributable, directly or indirectly, to Purchase Payments on your Contract. Under current law, we may incur state and local taxes (in addition to premium taxes) in several states. At present, these taxes are not significant and they are not charged against the Contract or the Separate Account. If there is a material change in applicable state or local tax laws, the imposition of any such taxes upon us that are attributable to the Separate Account or to our operations with respect to your Contract may result in a corresponding charge against the Separate Account or your Contract. 37 PACIFIC INNOVATIONS ADDITIONAL INFORMATION VOTING RIGHTS We are the legal owner of the shares of the Portfolios held by the Subaccounts. We may vote on any matter voted on at Fund shareholders' meetings. However, our current interpretations of applicable law requires us to vote the number of shares attributable to your Variable Account Value (your "voting interest") in accordance with your directions. We will pass proxy materials on to you so that you have an opportunity to give us voting instructions for your voting interest. You may provide your instructions by proxy or in person at the shareholders' meeting. If there are shares of a Portfolio held by a Subaccount for which we do NOT receive timely voting instructions, we will vote those shares in the same proportion as all other shares of that Portfolio held by that Subaccount for which we HAVE received timely voting instructions. If we hold shares of a Portfolio in our General Account, we will vote such shares in the same proportion as the total votes cast for all of our separate accounts, including Separate Account A. We will vote shares of any Portfolio held by our non-insurance affiliates in the same proportion as the total votes for all separate accounts of ours and our insurance affiliates. We may elect, in the future, to vote shares of the Portfolios held in Separate Account A in our own right if we are permitted to do so through a change in applicable federal securities laws or regulations, or in their interpretation. The number of Portfolio shares that form the basis for your voting interest is determined as of the record date set by the Board of Trustees of the Fund. It is equal to (a) your Contract Value allocated to the Subaccount corresponding to that Portfolio, divided by (b) the net asset value per share of that Portfolio. Fractional votes will be counted. We reserve the right, if required or permitted by a change in federal regulations or their interpretation, to amend how we calculate your voting interest. After your Annuity Date, if you have selected a variable annuity, the voting rights under your Contract will continue during the payout period of your annuity, but the number of shares that form the basis for your voting interest, as described above, will decrease throughout the payout period. CHANGES TO YOUR CONTRACT CONTRACT OWNER(S) AND CONTINGENT OWNER You may change your Non-Qualified Contract at any time prior to your Annuity Date to name a different Contract Owner or to add a Joint Owner, or to add or change a Contingent Owner; if yours is a Qualified Contract, you must be the ONLY Contract Owner. Your Contract cannot name more than two Contract Owners (Joint Owners) and one Contingent Owner at any time. Any newly-named Contract Owners, including Joint and/or Contingent Owners, must be under the age of 81 at the time of change or addition. Joint ownership is in the form of a joint tenancy. The Contract Owner(s) may make all decisions regarding the Contract, including making allocation decisions and exercising voting rights. Transactions under jointly owned Contracts require authorization from BOTH Contract Owners. Transfer of Contract ownership may involve federal income tax consequences; you should consult a qualified tax adviser before effecting such a transfer. A change to joint Contract ownership is considered a transfer of ownership. ANNUITANT AND CONTINGENT OR JOINT ANNUITANT Your sole Annuitant cannot be changed, and Joint Annuitants cannot be added or changed, once your Contract is issued. Certain changes may be permitted in connection with Contingent Annuitants. See RETIREMENT BENEFITS AND OTHER PAYOUTS - SELECTING YOUR ANNUITANT. There may be limited exceptions for certain Qualified Contracts. BENEFICIARIES Your Beneficiary is the person(s) who may receive death benefits under your Contract or any remaining annuity payments after the Annuity Date if the Annuitant dies. You may change or remove your Beneficiary or add Beneficiaries at any time prior to the death of the Annuitant or Owner, as applicable. If you have named your Beneficiary irrevocably, you will need to obtain that Beneficiary's consent before making any changes. Qualified Contracts may have additional 38 PACIFIC INNOVATIONS restrictions on naming and changing Beneficiaries; for example, if your Contract was issued in connection with a Qualified Plan subject to Title I of ERISA, your spouse must either be your Beneficiary or consent to your naming of a different Beneficiary. If you leave no surviving Beneficiary, your estate will receive any death benefit proceeds under your Contract. CHANGES TO ALL CONTRACTS If, in the judgment of our management, continued investment by Separate Account A in one or more of the Portfolios becomes unsuitable or unavailable, we may seek to alter the Variable Investment Options available under the Contracts. We do not expect that a Portfolio will become unsuitable, but unsuitability issues could arise due to changes in investment policies, market conditions, or tax laws, or due to marketing or other reasons. Alterations of Variable Investment Options may take differing forms. We reserve the right to substitute shares of any Portfolio that were already purchased under any Contract (or shares that were to be purchased in the future under a Contract) with shares of another Portfolio, shares of another investment company or series of an investment company, or another investment vehicle. We may also purchase, through a Subaccount, other securities for other series or other classes of contracts, and may permit conversions or exchanges between series or classes of contracts on the basis of Contract Owner requests. Required approvals of the SEC and state insurance regulators will be obtained before any such substitutions are effected, and you will be notified of any planned substitution. We may add new Subaccounts to Separate Account A, and any new Subaccounts may invest in Portfolios or in other investment vehicles; availability of any new Subaccounts to existing Contract Owners will be determined at our discretion. We will notify you, and will comply with the filing or other procedures established by applicable state insurance regulators, to the extent required by applicable law. We also reserve the right, after receiving any required regulatory approvals, to do any of the following: - cease offering any Subaccount; - add or change designated investment companies or their portfolios, or other investment vehicles; - add, delete or make substitutions for the securities and other assets that are held or purchased by the Separate Account or any Variable Account; - permit conversion or exchanges between portfolios and/or classes of contracts on the basis of Owners' requests; - add, remove or combine Variable Accounts; - combine the assets of any Variable Account with any other of our separate accounts or of any of our affiliates; - register or deregister Separate Account A or any Variable Account under the 1940 Act; - operate any Variable Account as a managed investment company under the 1940 Act, or any other form permitted by law; - run any Variable Account under the direction of a committee, board, or other group; - restrict or eliminate any voting rights of Owners with respect to any Variable Account or other persons who have voting rights as to any Variable Account; - make any changes required by the 1940 Act or other federal securities laws; - make any changes necessary to maintain the status of the Contracts as annuities under the Code; 39 PACIFIC INNOVATIONS - make other changes required under federal or state law relating to annuities; - suspend or discontinue sale of the Contracts; and - comply with applicable law. INQUIRIES AND SUBMITTING FORMS AND REQUESTS You may reach our service representatives at 1-800-722-2333 between the hours of 6:00 a.m. and 5:00 p.m., Pacific time. Please send your forms and written requests or questions to: Pacific Life Insurance Company P.O. Box 7187 Pasadena, California 91109-7187 If you are submitting a purchase or other payment by mail, please send it, along with your application if you are submitting one, to: Pacific Life Insurance Company P.O. Box 100060 Pasadena, California 91189-0060 If you are using an overnight delivery service to send payments, please send them to: Pacific Life Insurance Company c/o FCNPC 1111 South Arroyo Parkway, First Floor Pasadena, California 91105 The effective date of certain notices or of instructions is determined by the date and time on which we "receive" the notice or instructions. We "receive" this information only when it arrives, in proper form, at the correct mailing address set out above. Please call us at 1-800-722-2333 if you have any questions regarding which address you should use. Purchase Payments after your initial Purchase Payment, loan requests, transfer requests, loan repayments and withdrawal requests we receive before 4:00 p.m. Eastern time will usually be effective on the same Business Day that we receive them in "proper form," unless the transaction or event is scheduled to occur on another day. Generally, whenever you submit any other form, notice or request, your instructions will be effective on the next Business Day after we receive them in "proper form" unless the transaction or event is scheduled to occur on another day. "Proper form" means in a form satisfactory to us and may require, among other things, a signature guarantee or other verification of authenticity. We do not generally require a signature guarantee unless it appears that your signature may have changed over time or the signature does not appear to be yours; an executed application or confirmation of application, as applicable, in proper form is not received by us; or, to protect you or us. Requests regarding death benefits must be accompanied by both proof of death and instructions regarding payment satisfactory to us. You should call your registered representative or us if you have questions regarding the required form of a request. TELEPHONE AND ELECTRONIC TRANSACTIONS After your "free look" period, you are automatically entitled to make certain transactions by telephone or, to the extent available, electronically. You may also authorize other people to make certain transaction requests by telephone or electronically by so indicating on the application or by sending us instructions in writing in a form acceptable to us. We cannot guarantee that you or any other person you authorize will always be able to reach us to complete a telephone or electronic transaction; for example, all telephone lines or our web-site may be busy during certain periods, such as periods of substantial market fluctuations or other drastic economic or market change, or telephones or the internet may be out of service during severe weather conditions or other emergencies. Under these circumstances, you should submit 40 PACIFIC INNOVATIONS your request in writing (or other form acceptable to us). Transaction instructions we receive by telephone or electronically before 4:00 p.m. Eastern time on any Business Day will usually be effective on that day, and we will provide you confirmation of each telephone or electronic transaction. We have established procedures reasonably designed to confirm that instructions communicated by telephone or electronically are genuine. These procedures may require any person requesting a telephone or electronic transaction to provide certain personal identification upon our request. We may also record all or part of any telephone conversation with respect to transaction instructions. We reserve the right to deny any transaction request made by telephone or electronically. You are authorizing us to accept and to act upon instructions received by telephone or electronically with respect to your Contract, and you agree that, so long as we comply with our procedures, neither we, any of our affiliates, nor the Fund, or any of their directors, trustees, officers, employees or agents will be liable for any loss, liability, cost or expense (including attorneys' fees) in connection with requests that we believe to be genuine. This policy means that so long as we comply with our procedures, you will bear the risk of loss arising out of the telephone and electronic transaction privileges of your Contract. If a Contract has Joint Owners, each Owner may individually make transaction requests by telephone. ELECTRONIC DELIVERY AUTHORIZATION You may authorize us to provide prospectuses, statements and other information ("documents") electronically by so indicating on the application, or by sending us an electronic request to receive such documents electronically. You must have internet access to use this service. While we impose no additional charge for this service, there may be potential costs associated with electronic delivery, such as on-line charges. Documents will be available on our Internet Web site. You may access and print all documents provided through this service. As documents become available, we will notify you of this by sending you an e-mail message that will include instructions on how to retrieve the document. If our e-mail notification is returned to us as "undeliverable," we will contact you to obtain your updated e-mail address. If we are unable to obtain a valid e-mail address for you, we will send a paper copy by regular U.S. mail to your address of record. You may revoke your consent for electronic delivery at any time and we will resume providing you with a paper copy of all required documents; however, in order for us to be properly notified, your revocation must be given to us a reasonable time before electronic delivery has commenced. We will provide you with paper copies at any time upon request. Such request will not constitute revocation of your consent to receive required documents electronically. TIMING OF PAYMENTS AND TRANSACTIONS For withdrawals from the Variable Investment Options or for death benefit payments attributable to your Variable Account Value, we will normally send the proceeds within seven calendar days after your withdrawal request is effective or after the Notice Date, as the case may be. Similarly, for transfers from the Variable Investment Options, we will normally send the proceeds within seven calendar days after your transfer (or exchange) request is effective. We will normally effect periodic annuity payments on the day that corresponds to the Annuity Date and will make payment on the following day. Payments or transfers may be suspended for a longer period under certain extraordinary circumstances. These include: a closing of the New York Stock Exchange other than on a regular holiday or weekend; a trading restriction imposed by the SEC; or an emergency declared by the SEC. For (i) withdrawals from the Fixed Option, (ii) death benefit payments attributable to Fixed Option Value, or (iii) fixed periodic annuity payments, payment of proceeds may be delayed for up to six months (thirty days in West Virginia) after the request is effective. Similar delays may apply to loans and transfers from the Fixed Option. See THE GENERAL ACCOUNT for more details. CONFIRMATIONS, STATEMENTS AND OTHER REPORTS TO CONTRACT OWNERS Confirmations will be sent out for unscheduled Purchase Payments and transfers, loans, loan repayments, unscheduled partial withdrawals, a full withdrawal, and on payment of any death benefit proceeds. Each quarter prior to your Annuity Date, we will send you a statement that provides certain information pertinent to your Contract. These statements disclose Contract Value, Subaccount values, values under each Fixed Option, fees and charges applied to your Contract Value, transactions made and specific Contract data that apply to your Contract. Confirmations of your transactions under the pre-authorized checking plan, dollar cost averaging, earnings sweep, portfolio rebalancing, and 41 PACIFIC INNOVATIONS pre-authorized withdrawal options will appear on your quarterly account statements. Your fourth-quarter statement will contain annual information about your Contract Value and transactions. If you suspect an error on a confirmation or quarterly statement, you must notify us in writing within 30 days from the date of the first confirmation or statement on which the transaction you believe to be erroneous appeared. When you write, tell us your name, contract number and a description of the suspected error. You will also be sent an annual report for the Separate Account and the Fund and a list of the securities held in each Portfolio of the Fund, as required by the 1940 Act; or more frequently if required by law. REPLACEMENT OF LIFE INSURANCE OR ANNUITIES The term "replacement" has a special meaning in the life insurance industry and is described more fully below. Before you make your purchase decision, Pacific Life wants you to understand how a replacement may impact your existing plan of insurance. A policy "replacement" occurs when a new policy or contract is purchased and, in connection with the sale, an existing policy or contract is surrendered, lapsed, forfeited, assigned to the replacing insurer, otherwise terminated, or used in a financed purchase. A "financed purchase" occurs when the purchase of a new life insurance policy or annuity contract involves the use of funds obtained from the values of an existing life insurance policy or annuity contract through withdrawal, surrender or loan. There are circumstances in which replacing your existing life insurance policy or annuity contract can benefit you. As a general rule, however, replacement is not in your best interest. Accordingly, you should make a careful comparison of the costs and benefits of your existing policy or contract and the proposed policy or contract to determine whether replacement is in your best interest. FINANCIAL STATEMENTS Audited financial statements of Separate Account A as of December 31, 1998 and for the two years then ended are incorporated by reference in the SAI from the Annual Report of Separate Account A dated as of December 31, 1998. Pacific Life's audited consolidated financial statements as of December 31, 1998 and 1997, and for the three years ended December 31, 1998, are contained in the SAI. PREPARATION FOR THE YEAR 2000 Pacific Life long ago recognized the challenges associated with the Year 2000 date change. This change involves the ability of computer systems to properly recognize the Year 2000. The inability to do so could result in major failures or miscalculations. We began prior to 1995 to assess and plan for the potential impact of the Year 2000. More recently, Pacific Life has been executing a company-wide plan adopted during 1998 which called for correction or replacement of remaining non-compliant systems by December 31, 1998. We have successfully executed this project plan to date. Virtually all affected systems were remediated and tested in time for use during 1998 year-end processing cycles. Although it is not possible to certify that any system will be completely free of Year 2000 problems, we have performed extensive testing to identify and deal with such potential problems. Additionally, most of the company's critical systems were subject to an independent third-party review process which used sophisticated automated tools to identify Year 2000 related bugs. The results have been very positive and we feel the company's internal systems are positioned well for the date change in the century. We plan to continue to test and re-test throughout 1999 and we will respond promptly should any problems arise at any time thereafter. We are continuing to work on contingency plans for critical business processes. When appropriate, alternative methods and procedures are being developed to work around unanticipated problems. 42 PACIFIC INNOVATIONS In addition to the above, we will continue to carefully evaluate responses from vendors and significant business partners regarding the compliance of their critical business processes and products. Although ultimately Pacific Life cannot be responsible for the Year 2000 compliance efforts of these outside entities, we will take appropriate steps wherever possible to develop contingency plans to address vendors and partners deemed non-compliant. Expenses to make our systems Year 2000 compliant are currently estimated to range from $12 million to $15 million, which excludes the cost of our personnel who support Year 2000 compliance efforts. We do not anticipate any other material future costs associated with the Year 2000 compliance projects, although there can be no assurance. These Year 2000 related statements are designated as "Year 2000 Readiness Disclosure" pursuant to the Year 2000 Information Readiness Disclosure Act, enacted October 19, 1998. THE GENERAL ACCOUNT GENERAL INFORMATION All amounts allocated to the Fixed Option become part of our General Account. Subject to applicable law, we exercise sole discretion over the investment of General Account assets, and bear the associated investment risk; you will not share in the investment experience of General Account assets. Because of exemptive and exclusionary provisions, interests in the General Account under the Contract are not registered under the Securities Act of 1933, as amended, and the General Account has not been registered as an investment company under the 1940 Act. Any interest you have in the Fixed Option is not subject to these Acts, and we have been advised that the SEC staff has not reviewed disclosure in this Prospectus relating to the Fixed Option. This disclosure may, however, be subject to certain provisions of federal securities laws relating to the accuracy and completeness of statements made in prospectuses. GUARANTEE TERMS When you allocate any portion of your Purchase Payments or Contract Value to the Fixed Option, we guarantee you an interest rate (a "Guaranteed Interest Rate") for a specified period of time (a "Guarantee Term") of up to one year. Guaranteed Interest Rates for the Fixed Option may be changed periodically for new allocations; your allocation will receive the Guaranteed Interest Rate in effect for the Fixed Option on the effective date of your allocation. All Guaranteed Interest Rates will be expressed as annual effective rates; however, interest will accrue daily. The Guaranteed Interest Rate on your Fixed Option will remain in effect for the Guarantee Term and will never be less than an annual rate of 3%. FIXED OPTION EACH ALLOCATION (OR ROLLOVER) YOU MAKE TO THE FIXED OPTION RECEIVES A GUARANTEE TERM THAT BEGINS ON THE DAY THAT ALLOCATION OR ROLLOVER IS EFFECTIVE AND ENDS AT THE END OF THAT CONTRACT YEAR OR, IF EARLIER, ON YOUR ANNUITY DATE. At the end of that Contract Year, we will roll over your Fixed Option Value on that day into a new Guarantee Term of one year (or, if shorter, the time remaining until your Annuity Date) at the then current Guaranteed Interest Rate, unless you instruct us otherwise. EXAMPLE: Your Contract Anniversary is February 1. On February 1 of year 1, you allocate $1,000 to the Fixed Option and receive a Guarantee Term of one year and a Guaranteed Interest Rate of 5%. On August 1, you allocate another $500 to the Fixed Option and receive a Guaranteed Interest Rate of 6%. Through January 31, year 1, your first allocation of $1,000 earns 5% interest and your second allocation of $500 earns 6% interest. On February 1, year 2, a new interest rate may go into effect for your entire Fixed Option Value. 43 PACIFIC INNOVATIONS WITHDRAWALS AND TRANSFERS Prior to the Annuity Date, you may withdraw amounts from your Fixed Option or transfer amounts from your Fixed Option to one or more of the other Investment Options. In addition, no partial withdrawal or transfer may be made from your Fixed Option within 30 days of the Contract Date. If your withdrawal leaves you with a Net Contract Value of less than $1,000, we have the right, at our option, to terminate your Contract and send you the withdrawal proceeds. Payments or transfers from the Fixed Option may be delayed, as described under ADDITIONAL INFORMATION - TIMING OF PAYMENTS AND TRANSACTIONS; any amount delayed will, as long as it is held under the Fixed Option, continue to earn interest at the Guaranteed Interest Rate then in effect until that Guarantee Term has ended, and the minimum guaranteed interest rate of 3% thereafter, unless state law requires a greater rate be paid. FIXED OPTION After the first Contract Anniversary, you may make one transfer or partial withdrawal from your Fixed Option during any Contract Year, except as provided under the dollar cost averaging, earnings sweep and pre-authorized withdrawal programs. You may make one transfer or one partial withdrawal within the 30 days after the end of each Contract Anniversary. Normally, you may transfer or withdraw up to one-third (33 1/3%) of your Fixed Option Value in any given Contract Year. However, in consecutive Contract Years you may transfer or withdraw up to one-third (33 1/3%) of your Fixed Option Value in one year; you may transfer or withdraw up to one-half (50%) of your remaining Fixed Option Value in the next year; and you may transfer or withdraw up to the entire amount (100%) of any remaining Fixed Option Value in the third year. In addition, if, as a result of a partial withdrawal or transfer, the Fixed Option Value is less than $500, we have the right, at our option, to transfer the entire remaining amount to your other Investment Options on a proportionate basis relative to your most recent allocation instructions. 44 Some of the terms we've used in this Prospectus may be new to you. We've identified them in the Prospectus by capitalizing the first letter of each word. You'll find an explanation of what they mean below. If you have any questions, please ask your registered representative or call us at 1-800-722-2333. ACCOUNT VALUE -- The amount of your Contract Value allocated to a specified Variable Investment Option or the Fixed Option. ANNUITANT -- A person on whose life annuity payments may be determined. An Annuitant's life may also be used to determine certain increases in death benefits, and to determine the Annuity Date. A Contract may name a single ("sole") Annuitant or two ("Joint") Annuitants, and may also name a "Contingent" Annuitant. If you name Joint Annuitants or a Contingent Annuitant, "the Annuitant" means the sole surviving Annuitant, unless otherwise stated. ANNUITY DATE ("ANNUITY START DATE") -- The date specified in your Contract, or the date you later elect, if any, for the start of annuity payments if the Annuitant (or Joint Annuitants) is (or are) still living and your Contract is in force; or if earlier, the date that annuity payments actually begin. ANNUITY OPTION -- Any one of the income options available for a series of payments after your Annuity Date. BENEFICIARY -- A person who may have a right to receive the death benefit payable upon the death of the Annuitant or a Contract Owner prior to the Annuity Date, or has a right to receive remaining guaranteed annuity payments, if any, if the Annuitant dies after the Annuity Date. BUSINESS DAY -- Any day on which the value of an amount invested in a Variable Investment Option is required to be determined, which currently includes each day that the New York Stock Exchange is open for trading and our administrative offices are open. The New York Stock Exchange and our administrative offices are closed on weekends and on the following holidays: New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, July Fourth, Labor Day, Thanksgiving Day and Christmas Day. In this Prospectus, "day" or "date" means Business Day unless otherwise specified. If any transaction or event called for under a Contract is scheduled to occur on a day that is not a Business Day, such transaction or event will be deemed to occur on the next following Business Day unless otherwise specified. Special circumstances such as leap years and months with fewer than 31 days are discussed in the SAI. CODE -- The Internal Revenue Code of 1986, as amended. CONTINGENT ANNUITANT -- A person, named in your Contract, who will become your sole surviving Annuitant if your existing sole Annuitant (or both Joint Annuitants) should die. CONTINGENT OWNER -- A person, named in your Contract, who will succeed to the rights as a Contract Owner of your Contract if all named Contract Owners die before your Annuity Date. CONTRACT ANNIVERSARY -- The same date, in each subsequent year, as your Contract Date. CONTRACT DATE -- The date we issue your Contract. Contract Years, Contract Semiannual Periods, Contract Quarters and Contract Months are measured from this date. CONTRACT DEBT -- As of the end of any given Business Day, the principal amount you have outstanding on any loan under your Contract, plus any accrued and unpaid interest. Loans are only available on certain Qualified Contracts. CONTRACT OWNER, OWNER, POLICYHOLDER, YOU, OR YOUR -- Generally, a person who purchases a Contract and makes the Purchase Payments. A Contract Owner has all rights in the Contract, including the right to make withdrawals, designate and change beneficiaries, transfer amounts among Investment Options, and designate an Annuity Option. If your Contract names Joint Owners, both Joint Owners are Contract Owners and share all such rights. CONTRACT VALUE -- As of the end of any Business Day, the sum of your Variable Account Value, Fixed Option Value, and any Loan Account Value. CONTRACT YEAR -- A year that starts on the Contract Date or on a Contract Anniversary. EARNINGS -- As of the end of any Business Day, your Earnings equal your Contract Value less your aggregate Purchase Payments, which are reduced by withdrawals of prior Purchase Payments. FIXED OPTION -- If you allocate all or part of your Purchase Payments or Contract Value to the Fixed Option, such amounts are held in our General Account and receive the Guaranteed Interest Rates declared periodically, but not less than an annual rate of 3%. FIXED OPTION VALUE -- The aggregate amount of your Contract Value allocated to the Fixed Option. FUND -- Pacific Select Fund. GENERAL ACCOUNT -- Our General Account consists of all of our assets other than those assets allocated to Separate Account A or to any of our other separate accounts. GUARANTEED INTEREST RATE -- The interest rate guaranteed at the time of allocation (or rollover) for the Guarantee Term on amounts allocated to the Fixed Option. Each Guaranteed Interest Rate is expressed as an annual rate and interest is accrued daily. Each rate will not be less than an annual rate of 3%. GUARANTEE TERM -- The period during which an amount you allocate to the Fixed Option earns a Guaranteed Interest Rate. These terms are up to one-year for the Fixed Option. INVESTMENT OPTION -- A Subaccount or the Fixed Option offered under the Contract. JOINT ANNUITANT -- If your Contract is a Non-Qualified Contract, you may name two Annuitants, called "Joint Annuitants," in your application for your Contract. Special restrictions apply for Qualified Contracts. 45 TERMS USED IN THIS PROSPECTUS LOAN ACCOUNT -- The Account in which the amount equal to the principal amount of a loan and any interest accrued is held to secure any Contract Debt. LOAN ACCOUNT VALUE -- The amount, including any interest accrued, held in the Loan Account to secure any Contract Debt. NET CONTRACT VALUE -- Your Contract Value less Contract Debt. NON-QUALIFIED CONTRACT -- A Contract other than a Qualified Contract. POLICYHOLDER -- The Contract Owner. PORTFOLIO -- A separate portfolio of the Fund in which a Subaccount invests its assets. PRIMARY ANNUITANT -- The individual that is named in your Contract, the events in the life of whom are of primary importance in affecting the timing or amount of the payout under the Contract. PURCHASE PAYMENT ("PREMIUM PAYMENT") -- An amount paid to us by or on behalf of a Contract Owner, as consideration for the benefits provided under the Contract. QUALIFIED CONTRACT -- A Contract that qualifies under the Code as an individual retirement annuity or account ("IRA"), or form thereof, or a Contract purchased by a Qualified Plan, qualifying for special tax treatment under the Code. QUALIFIED PLAN -- A retirement plan that receives favorable tax treatment under Section 401, 403, 408, 408A or 457 of the Code. SEC -- Securities and Exchange Commission. SEPARATE ACCOUNT A (THE "SEPARATE ACCOUNT") -- A separate account of ours registered as a unit investment trust under the Investment Company Act of 1940, as amended (the "1940 Act"). SUBACCOUNT -- An investment division of the Separate Account. Each Subaccount invests its assets in shares of a corresponding Portfolio. SUBACCOUNT ANNUITY UNIT -- Subaccount Annuity Units (or "Annuity Units") are used to measure variation in variable annuity payments. To the extent you elect to convert all or some of your Contract Value into variable annuity payments, the amount of each annuity payment (after the first payment) will vary with the value and number of Annuity Units in each Subaccount attributed to any variable annuity payments. At annuitization (after any applicable premium taxes and/or other taxes are paid), the amount annuitized to a variable annuity determines the amount of your first variable annuity payment and the number of Annuity Units credited to your annuity in each Subaccount. The value of Subaccount Annuity Units, like the value of Subaccount Units, is expected to fluctuate daily, as described in the definition of Unit Value. SUBACCOUNT UNIT -- Before your Annuity Date, each time you allocate an amount to a Subaccount, your Contract is credited with a number of Subaccount Units in that Subaccount. These Units are used for accounting purposes to measure your Account Value in that Subaccount. The value of Subaccount Units is expected to fluctuate daily, as described in the definition of Unit Value. UNIT VALUE -- The value of a Subaccount Unit ("Subaccount Unit Value") or Subaccount Annuity Unit ("Subaccount Annuity Unit Value"). Unit Value of any Subaccount is subject to change on any Business Day in much the same way that the value of a mutual fund share changes each day. The fluctuations in value reflect the investment results, expenses of and charges against the Portfolio in which the Subaccount invests its assets. Fluctuations also reflect charges against the Separate Account. Changes in Subaccount Annuity Unit Values also reflect an additional factor that adjusts Subaccount Annuity Unit Values to offset our Annuity Option Table's implicit assumption of an annual investment return of 5%. The effect of this assumed investment return is explained in detail in the SAI. Unit Value of a Subaccount Unit or Subaccount Annuity Unit on any Business Day is measured at or about 4:00 p.m., Eastern time, on that Business Day. VARIABLE ACCOUNT VALUE -- The aggregate amount of your Contract Value allocated to all Subaccounts. VARIABLE INVESTMENT OPTION -- A Subaccount (also called a Variable Account). 46 PACIFIC INNOVATIONS CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
PAGE -------- PERFORMANCE................................................. 1 Total Returns........................................... 1 Yields.................................................. 2 Performance Comparisons and Benchmarks.................. 3 Separate Account Performance............................ 3 DISTRIBUTION OF THE CONTRACTS............................... 7 Pacific Mutual Distributors, Inc........................ 7 THE CONTRACTS AND THE SEPARATE ACCOUNT...................... 8 Calculating Subaccount Unit Values...................... 8 Variable Annuity Payment Amounts........................ 8 Corresponding Dates..................................... 10 Age and Sex of Annuitant................................ 10 Systematic Transfer Programs............................ 11 Pre-Authorized Withdrawals.............................. 13 Death Benefit........................................... 13 Joint Annuitants on Qualified Contracts................. 13 1035 Exchanges.......................................... 14 Safekeeping of Assets................................... 14 FINANCIAL STATEMENTS........................................ 14
47 PACIFIC INNOVATIONS APPENDIX A: STATE LAW VARIATIONS RIGHT TO CANCEL ("FREE LOOK") VARIATIONS TO THE LENGTH OF THE FREE LOOK PERIOD. In most states, the Free Look period is a 10-day period beginning on the day you receive your Contract. If your Contract was issued in one of the following states, the Free Look period is as specified below: Colorado (15 days) Idaho (20 days) North Dakota (20 days) In addition, if you reside in California and are age 60 or older on your Contract Date, the Free Look period is 30 days. There may be extended Free Look periods in some states for replacement business. Please consult with your registered representative if you have any questions regarding your state's Free Look period. STATES THAT REQUIRE US TO REFUND YOUR PURCHASE PAYMENTS ALLOCATED TO THE VARIABLE INVESTMENT OPTIONS INSTEAD OF YOUR VARIABLE ACCOUNT VALUE. If your Contract was issued in one of the following states and you exercise your Free Look right and return your Contract to us within 10 days of your receipt of your Contract (unless specified otherwise below), we will refund your Purchase Payments under your Contract that we received: Georgia Idaho (20 days) Michigan Missouri Nebraska North Carolina Oklahoma South Carolina Utah Washington West Virginia 48 (Sidebar) The Pacific Innovations variable annuity Contract is underwritten by Pacific Life Insurance Company, 700 Newport Center Drive, P.O. Box 9000, Newport Beach, California 92660. If you have any questions about the Contract, please ask your registered representative or contact us. HOW TO CONTACT US HOW TO CONTACT THE SEC (END SIDEBAR) PACIFIC INNOVATIONS WHERE TO GO FOR MORE INFORMATION You'll find more information about the Pacific Innovations variable annuity contract and Separate Account A in the Statement of Additional Information (SAI) dated [Month] 1, 2000. The SAI has been filed with the SEC and is considered to be part of this Prospectus because it's incorporated by reference. You'll find the table of contents for the SAI on page 47 of this Prospectus. You can get a copy of the SAI at no charge by calling or writing to us, or by contacting the SEC. The SEC may charge you a fee for this information. CALL OR WRITE TO US AT: Pacific Life Insurance Company Variable Annuities Department P.O. Box 7187 Pasadena, California 91109-7187 1-800-722-2333 6 a.m. through 5 p.m. Pacific time SEND PURCHASE PAYMENTS, OTHER PAYMENTS AND APPLICATION FORMS: BY MAIL Pacific Life Insurance Company P.O. Box 100060 Pasadena, California 91189-0060 BY OVERNIGHT DELIVERY SERVICE Pacific Life Insurance Company c/o FCNPC 1111 South Arroyo Parkway, Suite 150 Pasadena, California 91105 Public Reference Section of the SEC Washington, D.C. 20549-6009 1-800-SEC-0330 Internet: www.sec.gov PACIFIC INNOVATIONS UNDERWRITTEN BY: [LOGO] HOME OFFICE Pacific Life Insurance Company 700 Newport Center Drive Newport Beach, California 92660 (800) 722-2333 MAILING ADDRESS Variable Annuities Department P.O. Box 7187 Pasadena, California 91109-7187 Form No. 1601-OA Underwritten by: Pacific Life Insurance Company 700 Newport Center Drive Newport Beach, CA 92660 (800) 722-2333 MAILING ADDRESS: Variable Annuities Department P.O. Box 7187 Pasadena, CA 91109-7187 Visit us at our web site: www.pacificlife.com [IMSA LOGO] * Membership promotes ethical market conduct for individual life insurance and annuities 1601-OA Pacific Life Insurance Company PRESORTED Variable Annuities Department STANDARD P.O. Box 7187 U.S. POSTAGE PAID Pasadena, California 91109-7187 PACIFIC LIFE ADDRESS SERVICE REQUESTED LOGO STATEMENT OF ADDITIONAL INFORMATION [MONTH] 1, 2000 PACIFIC INNOVATIONS SEPARATE ACCOUNT A ----------------- Pacific Innovations (the "Contract") is a variable annuity contract underwritten by Pacific Life Insurance Company ("Pacific Life"). This Statement of Additional Information is not a Prospectus and should be read in conjunction with the Contract's Prospectus, dated [MONTH] 1, 2000 which is available without charge upon written or telephone request to Pacific Life. Terms used in this Statement of Additional Information ("SAI") have the same meanings as in the Prospectus, and some additional terms are defined particularly for this SAI. ------------------- Pacific Life Insurance Company Mailing Address: P.O. Box 7187 Pasadena, California 91109-7187 1-800-722-2333 TABLE OF CONTENTS
PAGE NO. -------- PERFORMANCE................................................. 1 Total Returns........................................... 1 Yields.................................................. 2 Performance Comparisons and Benchmarks.................. 2 Separate Account Performance............................ 3 DISTRIBUTION OF THE CONTRACTS............................... 7 Pacific Mutual Distributors, Inc........................ 7 THE CONTRACTS AND THE SEPARATE ACCOUNT...................... 8 Calculating Subaccount Unit Values...................... 8 Variable Annuity Payment Amounts........................ 8 Corresponding Dates..................................... 10 Age and Sex of Annuitant................................ 10 Systematic Transfer Programs............................ 11 Pre-Authorized Withdrawals.............................. 13 Death Benefit........................................... 13 Joint Annuitants on Qualified Contracts................. 13 1035 Exchanges.......................................... 14 Safekeeping of Assets................................... 14 FINANCIAL STATEMENTS........................................ 14
PERFORMANCE From time to time, our reports or other communications to current or prospective Contract Owners or our advertising or other promotional material may quote the performance (yield and total return) of a Subaccount. Quoted results are based on past performance and reflect the performance of all assets held in that Subaccount for the stated time period. QUOTED RESULTS ARE NEITHER AN ESTIMATE NOR A GUARANTEE OF FUTURE INVESTMENT PERFORMANCE, AND DO NOT REPRESENT THE ACTUAL EXPERIENCE OF AMOUNTS INVESTED BY ANY PARTICULAR CONTRACT OWNER. TOTAL RETURNS A Subaccount may advertise its "average annual total return" over various periods of time. "Total return" represents the average percentage change in value of an investment in the Subaccount from the beginning of a measuring period to the end of that measuring period. "Annualized" total return assumes that the total return achieved for the measuring period is achieved for each such period for a full year. "Average annual" total return is computed in accordance with a standard method prescribed by the SEC. AVERAGE ANNUAL TOTAL RETURN To calculate a Subaccount's average annual total return for a specific measuring period, we first take a hypothetical $1,000 investment in that Subaccount, at its then-applicable Subaccount Unit Value (the "initial payment") and we compute the ending redeemable value of that initial payment at the end of the measuring period based on the investment experience of that Subaccount ("withdrawal value"). The withdrawal value reflects the effect of all recurring fees and charges applicable to a Contract Owner under the Contract, including the Risk Charge, the Administrative Fee and the deduction of the applicable withdrawal charge, but does not reflect any charges for applicable premium taxes and/or other taxes, any non-recurring fees or charges or any increase in the Risk Charge for an optional Death Benefit Rider. The Annual Fee is also taken into account, assuming an average Contract Value of $65,000. The redeemable value is then divided by the initial payment and this quotient is taken to the Nth root (N represents the number of days in the measuring period), and 1 is subtracted from this result. Average annual total return is expressed as a percentage. (365/N) T = (ERV/P) - 1 where T = average annual total return ERV = ending redeemable value P = hypothetical initial payment of $1,000 N = number of days Average annual total return figures will be given for recent one-, three-, five-and ten-year periods (if applicable), and may be given for other periods as well (such as from commencement of the Subaccount's operations, or on a year-by-year basis). When considering "average" total return figures for periods longer than one year, it is important to note that the relevant Subaccount's annual total return for any one year in the period might have been greater or less than the average for the entire period. AGGREGATE TOTAL RETURN A Subaccount may use "aggregate" total return figures along with its "average annual" total return figures for various periods; these figures represent the cumulative change in value of an investment in the Subaccount for a specific period. Aggregate total returns may be shown by means of schedules, charts or graphs and may indicate subtotals of the various components of total return. The SEC has not prescribed standard formulas for calculating aggregate total return. Total returns may also be shown for the same periods that do not take into account the withdrawal charge. NON-STANDARDIZED TOTAL RETURNS We may also calculate non-standardized total returns which may or may not reflect any Annual Fee, withdrawal charges and/or increases in Risk Charges, charges for premium and/or other taxes, and any non-recurring fees or charges. Standardized return figures will always accompany any non-standardized returns shown. 1 YIELDS MONEY MARKET SUBACCOUNT The "yield" (also called "current yield") of the Money Market Subaccount is computed in accordance with a standard method prescribed by the SEC. The net change in the Subaccount's Unit Value during a seven-day period is divided by the Unit Value at the beginning of the period to obtain a base rate of return. The current yield is generated when the base rate is "annualized" by multiplying it by the fraction 365/7; that is, the base rate of return is assumed to be generated each week over a 365-day period and is shown as a percentage of the investment. The "effective yield" of the Money Market Subaccount is calculated similarly but, when annualized, the base rate of return is assumed to be reinvested. The effective yield will be slightly higher than the current yield because of the compounding effect of this assumed reinvestment. The formula for effective yield is: [(Base Period Return +1) (To the power of 365/7)] -1. Realized capital gains or losses and unrealized appreciation or depreciation of the assets of the underlying Money Market Portfolio are not included in the yield calculation. Current yield and effective yield do not reflect any deduction of charges for any applicable premium taxes and/or other taxes, or any increase in the Risk Charge for an optional Death Benefit Rider, but do reflect a deduction for the Annual Fee, the Risk Charge and the Administrative Fee and assumes an average Contract Value of $65,000. At December 31, 1998, the Money Market Subaccount's current yield was 3.36% and the effective yield was 3.42%. OTHER SUBACCOUNTS "Yield" of the other Subaccounts is computed in accordance with a different standard method prescribed by the SEC. The net investment income (investment income less expenses) per Subaccount Unit earned during a specified one-month or 30-day period is divided by the Subaccount Unit Value on the last day of the specified period. This result is then annualized (that is, the yield is assumed to be generated each month or each 30-day period for a year), according to the following formula, which assumes semiannual compounding: 6 YIELD = 2[((a-b) + 1) - 1] --- cd where: a = net investment income earned during the period by the Portfolio attributable to the Subaccount. b = expenses accrued for the period (net of reimbursements). c = the average daily number of Subaccount Units outstanding during the period that were entitled to receive dividends. d = the Unit Value of the Subaccount Units on the last day of the period. The yield of each Subaccount reflects the deduction of all recurring fees and charges applicable to the Subaccount, such as the Risk Charge, Administrative Fee, the Annual Fee (assuming an average Contract Value of $65,000), but does not reflect any withdrawal charge, any charge for applicable premium taxes and/or other taxes, any increase in the Risk Charge for an optional Death Benefit Rider, or any non-recurring fees or charges. The Subaccounts' yields will vary from time to time depending upon market conditions, the composition of each Portfolio and operating expenses of the Fund allocated to each Portfolio. Consequently, any given performance quotation should not be considered representative of the Subaccount's performance in the future. Yield should also be considered relative to changes in Subaccount Unit Values and to the relative risks associated with the investment policies and objectives of the various Portfolios. In addition, because performance will fluctuate, it may not provide a basis for comparing the yield of a Subaccount with certain bank deposits or other investments that pay a fixed yield or return for a stated period of time. PERFORMANCE COMPARISONS AND BENCHMARKS In advertisements and sales literature, we may compare the performance of some or all of the Subaccounts to the performance of other variable annuity issuers in general and to the performance of particular types of variable annuities investing in mutual funds, or series of mutual funds, with investment objectives similar to each of the 2 Subaccounts. This performance may be presented as averages or rankings compiled by Lipper Analytical Services, Inc. ("Lipper"), the Variable Annuity Research and Data Service ("VARDS-Registered Trademark-") or Morningstar, Inc. ("Morningstar"), which are independent services that monitor and rank the performance of variable annuity issuers and mutual funds in each of the major categories of investment objectives on an industry-wide basis. Lipper's rankings include variable life issuers as well as variable annuity issuers. VARDS-Registered Trademark- rankings compare only variable annuity issuers. The performance analyses prepared by Lipper and VARDS-Registered Trademark- rank such issuers on the basis of total return, assuming reinvestment of dividends and distributions, but do not take sales charges, redemption fees or certain expense deductions at the separate account level into consideration. In addition, VARDS-Registered Trademark- prepares risk adjusted rankings, which consider the effects of market risk on total return performance. We may also compare the performance of the Subaccounts with performance information included in other publications and services that monitor the performance of insurance company separate accounts or other investment vehicles. These other services or publications may be general interest business publications such as THE WALL STREET JOURNAL, BARRON'S, BUSINESS WEEK, FORBES, FORTUNE, and MONEY. In addition, our reports and communications to Contract Owners, advertisements, or sales literature may compare a Subaccount's performance to various benchmarks that measure the performance of a pertinent group of securities widely regarded by investors as being representative of the securities markets in general or as being representative of a particular type of security. We may also compare the performance of the Subaccounts with that of other appropriate indices of investment securities and averages for peer universes of funds or data developed by us derived from such indices or averages. Unmanaged indices generally assume the reinvestment of dividends or interest but do not generally reflect deductions for investment management or administrative costs and expenses. SEPARATE ACCOUNT PERFORMANCE The Contract was not available prior to 2000. However, in order to help you understand how investment performance can affect your Variable Account Value, we are including performance information based on the historical performance of the Subaccounts. The following table presents the annualized total return for each Variable Account for the period from each such Variable Account's commencement of operations through December 31, 1998. The Accumulated Value (AV) reflects the deductions for all contractual fees and charges, but does not reflect the withdrawal charge, any nonrecurring fees and charges, any increase in the Risk Charge for an optional Death Benefit Rider or any charges for premium and/or other taxes. The Full Withdrawal Value (FWV) reflects the deductions for all contractual fees and charges, but does not reflect any increase in the Risk Charge for an optional Death Benefit Rider, any nonrecurring fees and charges, and any charges for premium and/or other taxes. 3 THE RESULTS SHOWN IN THIS SECTION ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE INVESTMENT PERFORMANCE. HISTORICAL SEPARATE ACCOUNT PERFORMANCE ANNUALIZED RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998** ALL NUMBERS ARE EXPRESSED AS A PERCENTAGE
SINCE 1 YEAR* INCEPTION* ---------------- ---------------- VARIABLE ACCOUNTS AV FWV AV FWV - ----------------- ------ ------ ------ ------ Aggressive Equity 4/17/96*........................ 11.65 3.55 7.97 5.59 Emerging Markets 4/17/96*......................... (27.84) (35.94) (14.09) (17.66) Growth [Small-Cap Equity] 1/2/96*................. 1.27 (6.83) 16.53 14.73 Bond and Income 1/2/96*........................... 7.46 (0.64) 6.47 4.31 Equity 1/2/96*.................................... 28.47 20.37 23.56 21.97 Multi-Strategy 1/2/96*............................ 16.53 8.43 14.91 13.06 Equity Income 1/2/96*............................. 22.46 14.36 21.90 20.26 Growth LT 1/2/96*................................. 56.09 47.99 25.67 24.13 Equity Index 1/2/96*.............................. 26.67 18.57 25.76 24.22 International [International Value] 1/2/96*....... 4.13 (3.97) 9.95 7.93 Government Securities 1/2/96*..................... 7.72 (0.38) 5.67 3.47 Managed Bond 1/2/96*.............................. 7.68 (0.42) 6.25 4.08 Money Market 1/2/96*.............................. 3.83 (4.27) 3.74 1.46 High Yield Bond 1/2/96*........................... 1.04 (7.06) 6.13 3.95
- ------------ * Date Variable Account commenced operations. ** Effective June 1, 1997 Morgan Stanley Asset Management became the Portfolio Manager of the International Portfolio. Effective May 1, 1998, Alliance Capital Management L.P. became the Portfolio Manager of the Aggressive Equity Portfolio and Goldman Sachs Asset Management became the Portfolio Manager of the Equity and Bond and Income Portfolios; prior to May 1, 1998 some of the investment policies of the Aggressive Equity, Equity and Bond and Income Portfolios and the investment objective of the Bond and Income Portfolio differed. Prior to January 1, 1999, the Mid-Cap Value, the Small-Cap Index, REIT and the Large-Cap Value Subaccounts and corresponding Portfolios had not yet begun operations and there is no historical value available for these Subaccounts and Portfolios. In order to help you understand how investment performance can affect your Variable Account Value, we are including performance information based on the historical performance of the Portfolios. The Separate Account commenced operations as of January 2, 1996. Therefore, no historical performance data exists for the Subaccounts prior to that date. The following table represents what the performance of the Subaccounts would have been if the Subaccounts had been both in existence and invested in the corresponding Portfolio since the date of the Portfolio's (or predecessor series') inception or for the indicated time period. Nine of the Portfolios of the Fund available under the Contract have been in operation since January 4, 1988 (January 30, 1991 in the case of the Equity Index Portfolio, January 4, 1994 in the case of the Growth LT Portfolio and April 1, 1996 in the case of the Aggressive Equity Portfolio and Emerging Markets Portfolio). Historical performance information for each of the Equity Portfolio and the Bond and Income Portfolio is based in part on the performance of that Portfolio's predecessor; each predecessor series was a series of Pacific Corinthian Variable Fund and began its first full year of operations in 1984, the assets of which were acquired by the Fund on December 31, 1994. Because the Subaccounts had not commenced operations until January 2, 1996 or later, as indicated in the chart above, and because the Contracts were not available until 2000, these are not actual performance numbers for the Subaccounts or for the Contract. 4 THESE ARE HYPOTHETICAL TOTAL RETURN NUMBERS based on Accumulated Value ("AV") and Full Withdrawal Value ("FWV") that represent the actual performance of the Portfolios, adjusted to reflect the deductions for the fees and charges applicable to the Contract; the FWV also includes applicable withdrawal charges. Any charge for non-recurring fees and charges, premium taxes and/or other taxes, an optional Death Benefit Rider, are not reflected in these data, and reflection of the Annual Fee assumes an average Contract size of $65,000. The information presented also includes data representing unmanaged market indices. THE RESULTS SHOWN IN THIS SECTION ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE INVESTMENT PERFORMANCE. HISTORICAL AND HYPOTHETICAL SEPARATE ACCOUNT PERFORMANCE ANNUALIZED RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998 ALL NUMBERS ARE EXPRESSED AS A PERCENTAGE
SINCE 1 YEAR* 3 YEARS* 5 YEARS* 10 YEARS* INCEPTION* --------------- --------------- --------------- --------------- --------------- VARIABLE ACCOUNTS AV FWV AV FWV AV FWV AV FWV AV FWV - ----------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Aggressive Equity............. 11.65 3.55 7.48 5.12 Emerging Markets.............. (27.84) (35.94) (13.56) (17.06) Growth [Small-Cap Equity]..... 1.27 (6.83) 16.61 14.82 11.72 11.72 14.09 14.09 14.08 14.08 Bond and Income............... 7.46 (0.64) 6.43 4.27 7.51 7.51 10.01 10.01 10.69 10.69 Equity........................ 28.47 20.37 23.64 22.05 17.19 17.19 15.39 15.39 14.37 14.37 Multi-Strategy................ 16.53 8.43 15.12 13.28 12.85 12.85 11.49 11.49 10.93 10.93 Equity Income................. 22.46 14.36 22.29 20.66 18.48 18.48 14.58 14.58 13.85 13.85 Growth LT..................... 56.09 47.99 25.67 24.14 24.52 24.52 Equity Index.................. 26.67 18.57 26.07 24.54 21.94 21.94 18.28 18.28 International [International Value]...................... 4.13 (3.97) 10.48 8.48 8.32 8.32 6.59 6.59 7.42 7.42 Government Securities......... 7.72 (0.38) 5.69 3.49 5.29 5.29 7.56 7.56 7.35 7.35 Managed Bond.................. 7.68 (0.42) 6.26 4.09 5.85 5.85 8.15 8.15 7.93 7.93 Money Market.................. 3.83 (4.27) 3.75 1.47 3.53 3.53 3.83 3.83 3.89 3.89 High Yield Bond............... 1.04 (7.06) 6.17 4.00 6.80 6.80 8.98 8.98 8.78 8.78
MAJOR INDICES 1 YEAR 3 YEARS 5 YEARS 10 YEARS - ------------- ------ ------- ------- -------- CS First Boston High Yield Bond........................ 0.58 8.39 8.16 10.74 Lehman Brothers Aggregate Bond........................ 8.67 7.29 7.27 9.26 Lehman Brothers Government Bond........................ 9.85 7.35 7.18 9.17 Lehman Brothers Government/Corporate Bond... 9.47 7.33 7.30 9.34 Lehman Brothers Long-Term Government/Corporate Bond... 11.76 8.62 9.12 11.30 Morgan Stanley Capital International EAFE.......... 20.33 9.31 9.50 5.86 Morgan Stanley Capital International Emerging Markets Free................ (25.34) (11.21) (9.27) 10.95 Russell 1000 Growth........... 38.71 30.62 25.70 20.57 Russell 2000 Small-Stock...... (2.55) 11.58 11.86 12.92 Russell 2500.................. 0.38 14.11 14.13 14.61 Standard & Poor's 500 Composite Stock Price....... 28.58 28.27 24.06 19.19
- ------------ * The performance of the Aggressive Equity, Equity Income, Multi-Strategy, Equity, Bond and Income, and International Variable Accounts for a portion of this period occurred at a time when other Portfolio Managers managed the corresponding Portfolio in which each Variable Account invests. Effective January 1, 1994, J. P. Morgan Investment Management Inc. became the Portfolio Manager of the Equity Income and Multi-Strategy Portfolios; prior to January 1, 1994, some of the investment policies of the Equity Income Portfolio and the investment objective of the Multi-Strategy Portfolio differed. Effective June 1, 1997 Morgan Stanley Asset Management became the Portfolio Manager of the International Portfolio. Effective May 1, 1998, Alliance Capital Management L.P. became the Portfolio Manager of the Aggressive Equity Portfolio and Goldman Sachs Asset Management became the Portfolio Manager of the Equity and Bond and Income Portfolios; prior to May 1, 1998 some of the investment policies of the Aggressive Equity, Equity and Bond and Income Portfolios and the investment objective of the Bond and Income Portfolio differed. Performance of the Equity Portfolio and the Bond and Income Portfolio is based in part on the performance of predecessor portfolios of Pacific Corinthian Variable Fund, which began their first full year of operations in 1984, the assets of which were acquired by the Fund on December 31, 1994. 5 TAX DEFERRED ACCUMULATION In reports or other communications to you or in advertising or sales materials, we may also describe the effects of tax-deferred compounding on the Separate Account's investment returns or upon returns in general. These effects may be illustrated in charts or graphs and may include comparisons at various points in time of returns under the Contract or in general on a tax-deferred basis with the returns on a taxable basis. Different tax rates may be assumed. In general, individuals who own annuity contracts are not taxed on increases in the value under the annuity contract until some form of distribution is made from the contract. Thus, the annuity contract will benefit from tax deferral during the accumulation period, which generally will have the effect of permitting an investment in an annuity contract to grow more rapidly than a comparable investment under which increases in value are taxed on a current basis. The following chart illustrates this benefit by comparing accumulation under a variable annuity contract with accumulations from an investment on which gains are taxed on a current ordinary income basis. The chart shows accumulations on a single Purchase Payment of $10,000, assuming hypothetical annual returns of 0%, 4% and 8%, compounded annually, and a tax rate of 36%. The values shown for the taxable investment do not include any deduction for management fees or other expenses but assume that taxes are deducted annually from investment returns. The values shown for the variable annuity do not reflect the deduction of contractual expenses such as the Risk Charge (equal to an annual rate of 1.25% of average daily account value), the Administrative Fee (equal to an annual rate of 0.15% of average daily account value), the Annual Fee (equal to $30 per year if your Net Contract Value is less than $50,000), any increase in the Risk Charge for an optional Death Benefit Rider (equal to a maximum annual rate of .35% of average daily account value), any charge for premium taxes and/or other taxes, or the expenses of an underlying investment vehicle, such as the Fund. The values shown also do not reflect the withdrawal charge. Generally, the withdrawal charge is equal to 9% of the amount withdrawn attributable to Purchase Payments that are less than one year old, 8% of the amount withdrawn attributable to Purchase Payments that are less than two years old, and 8% of the amount withdrawn attributable to Purchase Payments that are three years old. The age of Purchase Payments is considered 1 year old in the Contract Year we receive it and increases by one year on each Contract Anniversary. During a Contract Year, you may withdraw free of withdrawal charge amounts up to your "Eligible Purchase Payments". Eligible Purchase Payments include 10% annually of total Purchase Payments that have an "age" of less than four years, plus any remaining portion not withdrawn from the previous Contract Year's Eligible Purchase Payments that are derived from Purchase Payments which have an "age" of less than four years, plus 100% of all Purchase Payments that have an "age" of four years or more. Once all Purchase Payments have been deemed withdrawn, any withdrawal will be deemed a withdrawal of your Earnings and will be free of the withdrawal charge. If these expenses and fees were taken into account, they would reduce the investment return shown for both the taxable investment and the hypothetical variable annuity contract. In addition, these values assume that you do not surrender the Contract or make any withdrawals until the end of the period shown. The chart assumes a full withdrawal, at the end of the period shown, of all Contract Value and the payment of taxes at the 36% rate on the amount in excess of the Purchase Payment. The rates of return illustrated are hypothetical and are not an estimate or guarantee of performance. Actual tax rates may vary for different assets and taxpayers from that illustrated and withdrawals by and distributions to Contract Owners who have not reached age 59 1/2 may be subject to a tax penalty of 10%. 6 POWER OF TAX DEFERRAL $10,000 investment at annual rates of return of 0%, 4% and 8%, taxed @ 36% EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
0% GROWTH TAX DEFERRED 4% GROWTH TAX DEFERRED 8% GROWTH TAX DEFERRED TAXABLE INVESTMENT TAXABLE INVESTMENT TAXABLE INVESTMENT INVESTMENT INVESTMENT INVESTMENT YEARS Before Tax Before Tax Before Tax Before Tax Before Tax Before Tax 10 $10,000.00 $10,000.00 $12,875.97 $13,073.56 $16,476.07 $17,417.12 20 $10,000.00 $10,000.00 $16,579.07 $17,623.19 $27,146.07 $33,430.13 30 $10,000.00 $10,000.00 $21,347.17 $24,357.74 $44,726.05 $68,001.00
DISTRIBUTION OF THE CONTRACTS PACIFIC MUTUAL DISTRIBUTORS, INC. Pacific Mutual Distributors, Inc. ("PMD"), a subsidiary of ours, acts as the principal underwriter ("distributor") of the Contracts and offers the Contracts on a continuous basis. PMD is registered as a broker-dealer with the SEC and is a member of the National Association of Securities Dealers ("NASD"). We pay PMD for acting as principal underwriter under a Distribution Agreement. We and PMD enter into selling agreements with broker-dealers whose registered representatives are authorized by state insurance departments to sell the Contracts. The aggregate amount of underwriting commissions paid to PMD for 1999 with regard to this Contract was $0 of which $0 was retained. 7 THE CONTRACTS AND THE SEPARATE ACCOUNT CALCULATING SUBACCOUNT UNIT VALUES The Unit Value of the Subaccount Units in each Variable Investment Option is computed at or about 4:00 p.m. Eastern time on each Business Day. The initial Unit Value of each Subaccount was $10 on the Business Day the Subaccount began operations. At the end of each Business Day, the Unit Value for a Subaccount is equal to: Y X Z where (Y) = the Unit Value for that Subaccount as of the end of the preceding Business Day; and (Z) = the Net Investment Factor for that Subaccount for the period (a "valuation period") between that Business Day and the immediately preceding Business Day. The "Net Investment Factor" for a Subaccount for any valuation period is equal to: (A DIVIDED BY B) - C where (A) = the "per share value of the assets" of that Subaccount as of the end of that valuation period, which is equal to: a+b+c where (a) = the net asset value per share of the corresponding Portfolio shares held by that Subaccount as of the end of that valuation period; (b) = the per share amount of any dividend or capital gain distributions made by the Fund for that Portfolio during that valuation period; and (c) = any per share charge (a negative number) or credit (a positive number) for any income taxes and/ or any other taxes or other amounts set aside during that valuation period as a reserve for any income and/or any other taxes which we determine to have resulted from the operations of the Subaccount or Contract, and/or any taxes attributable, directly or indirectly, to Purchase Payments; (B) = the net asset value per share of the corresponding Portfolio shares held by the Subaccount as of the end of the preceding valuation period; and (C) = a factor that assesses against the Subaccount net assets for each calendar day in the valuation period the basic Risk Charge plus any applicable increase in the Risk Charge and the Administrative Fee (see CHARGES, FEES AND DEDUCTIONS in the Prospectus). As explained in the Prospectus, the Annual Fee, if applicable, is assessed against your Variable Account Value through the automatic debit of Subaccount Units; the Annual Fee decreases the number of Subaccount Units attributed to your Contract but does not alter the Unit Value for any Subaccount. VARIABLE ANNUITY PAYMENT AMOUNTS The following steps show how we determine the amount of each variable annuity payment under your Contract. FIRST: PAY APPLICABLE PREMIUM TAXES When you convert your Net Contract Value into annuity payments, you must pay any applicable charge for premium taxes and/or other taxes on your Contract Value (unless applicable law requires those taxes to be paid at a later time). We assess this charge by reducing each Account Value proportionately, relative to your Account Value in each Subaccount and in the Fixed Option, in an amount equal to the aggregate amount of the charges. The remaining amount of your available Net Contract Value may be used to provide variable annuity payments. Alternatively, your remaining available Net Contract Value may be used to provide fixed annuity payments, or it may be divided to provide both fixed and variable annuity payments. You may also choose to withdraw some or all of your remaining Net Contract Value, less any applicable Annual Fee, withdrawal charge, and any charges for premium taxes and/or other taxes without converting this amount into annuity payments. SECOND: THE FIRST VARIABLE PAYMENT We begin by referring to your Contract's Option Table for your Annuity Option (the "Annuity Option Table"). The Annuity Option Table allows us to calculate the dollar amount of the first variable annuity payment under your Contract, based on the amount applied toward the variable annuity. The number that the Annuity Option 8 Table yields will be based on the Annuitant's age (and, in certain cases, sex) and assumes a 5% rate of return, as described in more detail below. EXAMPLE: Assume a man is 65 years of age at his Annuity Date and has selected a lifetime annuity with monthly payments guaranteed for 10 years. According to the Annuity Option Table, this man should receive an initial monthly payment of $5.79 for every $1,000 of his Contract Value (reduced by applicable charges) that he will be using to provide variable payments. Therefore, if his Contract Value after deducting applicable fees and charges is $100,000 on his Annuity Date and he applies this entire amount toward his variable annuity, his first monthly payment will be $579.00. You may choose any other Annuity Option Table that assumes a different rate of return which we offer at the time your Annuity Option is effective. THIRD: SUBACCOUNT ANNUITY UNITS For each Subaccount, we use the amount of the first variable annuity payment under your Contract attributable to each Subaccount to determine the number of Subaccount Annuity Units that will form the basis of subsequent payment amounts. First, we use the Annuity Option Table to determine the amount of that first variable payment for each Subaccount. Then, for each Subaccount, we divide that amount of the first variable annuity payment by the value of one Subaccount Annuity Unit (the "Subaccount Annuity Unit Value") as of the end of the Annuity Date to obtain the number of Subaccount Annuity Units for that particular Subaccount. The number of Subaccount Annuity Units used to calculate subsequent payments under your Contract will not change unless exchanges of Annuity Units are made (or if the Joint and Survivor Annuity Option is elected and the Primary Annuitant dies first), but the value of those Annuity Units will change daily, as described below. FOURTH: THE SUBSEQUENT VARIABLE PAYMENTS The amount of each subsequent variable annuity payment will be the sum of the amounts payable based on each Subaccount. The amount payable based on each Subaccount is equal to the number of Subaccount Annuity Units for that Subaccount multiplied by their Subaccount Annuity Unit Value at the end of the Business Day in each payment period you elected that corresponds to the Annuity Date. Each Subaccount's Subaccount Annuity Unit Value, like its Subaccount Unit Value, changes each day to reflect the net investment results of the underlying investment vehicle, as well as the assessment of the Risk Charge at an annual rate of 1.25% and the Administrative Fee at an annual rate of 0.15%. In addition, the calculation of Subaccount Annuity Unit Value incorporates an additional factor; as discussed in more detail below, this additional factor adjusts Subaccount Annuity Values to correct for the Option Table's implicit assumed annual investment return on amounts applied but not yet used to furnish annuity benefits. Any increase in your Risk Charge for an Optional Death Benefit Rider is not charged on and after the Annuity Date. Different Subaccounts may be selected for your Contract before and after your Annuity Date, subject to any restrictions we may establish. Currently, you may exchange Subaccount Annuity Units in any Subaccount for Subaccount Annuity Units in any other Subaccount(s) up to four times in any twelve month period after your Annuity Date. The number of Subaccount Annuity Units in any Subaccount may change due to such exchanges. Exchanges following your Annuity Date will be made by exchanging Subaccount Annuity Units of equivalent aggregate value, based on their relative Subaccount Annuity Unit Values. UNDERSTANDING THE "ASSUMED INVESTMENT RETURN" FACTOR The Annuity Option Table incorporates a number of implicit assumptions in determining the amount of your first variable annuity payment. As noted above, the numbers in the Annuity Option Table reflect certain actuarial assumptions based on the Annuitant's age, and, in some cases, the Annuitant's sex. In addition, these numbers assume that the amount of your Contract Value that you convert to a variable annuity will have a positive net investment return of 5% (or such other rate of return you may elect) each year during the payout of your annuity; thus 5% is referred to as an "assumed investment return." 9 The Subaccount Annuity Unit Value for a Subaccount will increase only to the extent that the investment performance of that Subaccount exceeds the Risk Charge, the Administrative Fee, and the assumed investment return. The Subaccount Annuity Unit Value for any Subaccount will generally be less than the Subaccount Unit Value for that same Subaccount, and the difference will be the amount of the assumed investment return factor. EXAMPLE: Assume the net investment performance of a Subaccount is at a rate of 5.00% per year (after deduction of the 1.25% Risk Charge and the 0.15% Administrative Fee). The Subaccount Unit Value for that Subaccount would increase at a rate of 5.00% per year, BUT THE SUBACCOUNT ANNUITY UNIT VALUE WOULD NOT INCREASE (OR DECREASE) AT ALL. The net investment factor for that 5% return [1.05] is then divided by the factor for the 5% assumed investment return [1.05] and 1 is subtracted from the result to determine the adjusted rate of change in Subaccount Annuity Unit Value: 1.05 = 1; 1 - 1 = 0; 0 X 100% = 0%. ---- 1.05 If the net investment performance of a Subaccount's assets is at a rate less than 5.00% per year, the Subaccount Annuity Unit Value will decrease, even if the Subaccount Unit Value is increasing. EXAMPLE: Assume the net investment performance of a Subaccount is at a rate of 2.60% per year (after deduction of the 1.25% Risk Charge and the 0.15% Administrative Fee). The Subaccount Unit Value for that Subaccount would increase at a rate of 2.60% per year, BUT THE SUBACCOUNT ANNUITY UNIT VALUE WOULD DECREASE AT A RATE OF 2.29% PER YEAR. The net investment factor for that 2.6% return [1.026] is then divided by the factor for the 5% assumed investment return [1.05] and 1 is subtracted from the result to determine the adjusted rate of change in Subaccount Annuity Unit Value: 1.026 = 0.9771; 0.9771 - 1 = -0.0229; -0.0229 X 100% = -2.29%. ---- 1.05 The assumed investment return will always cause increases in Subaccount Annuity Unit Values to be somewhat less than if the assumption had not been made, will cause decreases in Subaccount Annuity Unit Values to be somewhat greater than if the assumption had not been made, and will (as shown in the example above) sometimes cause a decrease in Subaccount Annuity Unit Values to take place when an increase would have occurred if the assumption had not been made. If we had assumed a higher investment return in our Annuity Option tables, it would produce annuities with larger first payments, but the increases in subaccount annuity payments would be smaller and the decreases in subsequent annuity payments would be greater; a lower assumed investment return would produce annuities with smaller first payments, and the increases in subsequent annuity payments would be greater and the decreases in subsequent annuity payments would be smaller. CORRESPONDING DATES If any transaction or event under your Contract is scheduled to occur on a "corresponding date" that does not exist in a given calendar period, the transaction or event will be deemed to occur on the following Business Day. In addition, as stated in the Prospectus, any event scheduled to occur on a day that is not a Business Day will occur on the next succeeding Business Day. EXAMPLE: If your Contract is issued on February 29 in year 1 (a leap year), your Contract Anniversary in years 2, 3 and 4 will be on March 1. EXAMPLE: If your Annuity Date is July 31 and you select monthly annuity payments, the payments received will be based on valuations made on July 31, August 31, October 1 (for September), October 31, December 1 (for November), December 31, January 31, March 1 (for February), March 31, May 1 (for April), May 31 and July 1 (for June). AGE AND SEX OF ANNUITANT As mentioned in the Prospectus, the Contracts generally provide for sex-distinct annuity income factors in the case of life annuities. Statistically, females tend to have longer life expectancies than males; consequently, if the amount of annuity payments is based on life expectancy, they will ordinarily be higher if an annuitant is male than if an annuitant is female. Certain states' regulations prohibit sex-distinct annuity income factors, and Contracts issued in those states will use unisex factors. In addition, Contracts issued in connection with Qualified Plans are required to use unisex factors. 10 We may require proof of your Annuitant's age and sex before or after starting annuity payments. If the age or sex (or both) of your Annuitant are incorrectly stated in your Contract, we will correct the amount payable based on your Annuitant's correct Age or sex, if applicable. If we make the correction after annuity payments have started, and we have made overpayments, we will deduct the amount of the overpayment, with interest at 3% a year, from any payments due then or later; if we have made underpayments, we will add the amount, with interest at 3% a year, of the underpayments to the next payment we make after we receive proof of the correct Age and/or sex. SYSTEMATIC TRANSFER PROGRAMS The Fixed Account is not available in connection with portfolio rebalancing. If you are using the earnings sweep, you may also use portfolio rebalancing only if you selected the Fixed Option as your sweep option. You may not use dollar cost averaging and the earnings sweep at the same time. DOLLAR COST AVERAGING When you request dollar cost averaging, you are authorizing us to make periodic reallocations of your Contract Value without waiting for any further instruction from you. You may request to begin or stop dollar cost averaging at any time prior to your Annuity Date; the effective date of your request will be the day we receive written notice from you in proper form. Your request may specify the date on which you want your first transfer to be made. If you do not specify a date for your first transfer, we will treat your request as if you had specified the effective date of your request. Your first transfer may not be made until 30 days after your Contract Date, and if you specify an earlier date, your first transfer will be delayed until one calendar month after the date you specify. If you request dollar cost averaging on your application for your Contract and you fail to specify a date for your first transfer, your first transfer will be made one period after your Contract Date (that is, if you specify monthly transfers, the first transfer will occur 30 days after your Contract Date; quarterly transfers, 90 days after your Contract Date; semiannual transfers, 180 days after your Contract Date; and if you specify annual transfers, the first transfer will occur on your Contract Anniversary). If you stop dollar cost averaging, you must wait 30 days before you may begin this option again. Your request to begin dollar cost averaging must specify the Investment Option you wish to transfer money FROM (your "source account"). You may choose any one Investment Option as your source account. The Account Value of your source account must be at least $5,000 for you to begin dollar cost averaging. Your request to begin dollar cost averaging must also specify the amount and frequency of your transfers. You may choose monthly, quarterly, semiannual or annual transfers. The amount of your transfers may be specified as a dollar amount or a percentage of your source Account Value; however, each transfer must be at least $250. Dollar cost averaging transfers are subject to the same requirements and limitations as other transfers. Finally, your request must specify the Variable Investment Option(s) you wish to transfer amounts to (your "target account(s)"). If you select more than one target account, your dollar cost averaging request must specify how transferred amounts should be allocated among the target accounts. Your source account may not also be a target account. Your dollar cost averaging transfers will continue until the earlier of (i) your request to stop dollar cost averaging is effective, or (ii) your source Account Value is zero, or (iii) your Annuity Date. If, as a result of a dollar cost 11 averaging transfer, your source Account Value falls below any minimum Account Value we may establish, we have the right, at our option, to transfer that remaining Account Value to your target account(s) on a proportionate basis relative to your most recent allocation instructions. We may change, terminate or suspend the dollar cost averaging option at any time. PORTFOLIO REBALANCING Portfolio rebalancing allows you to maintain the percentage of your Contract Value allocated to each Variable Investment Option at a pre-set level prior to annuitization. For example, you could specify that 30% of your Contract Value should be in the Equity Index Subaccount, 40% in the Managed Bond Subaccount, and 30% in the Growth LT Subaccount. Over time, the variations in each Subaccount's investment results will shift this balance of these Subaccount Value allocations. If you elect the portfolio rebalancing feature, we will automatically transfer your Subaccount Value back to the percentages you specify. You may choose to have rebalances made quarterly, semiannually or annually until your Annuity Date; portfolio rebalancing is not available after you annuitize. Procedures for selecting portfolio rebalancing are generally the same as those discussed in detail above for selecting dollar cost averaging: You may make your request at any time prior to your Annuity Date and it will be effective when we receive it in proper form. If you stop portfolio rebalancing, you must wait 30 days to begin again. You may specify a date for your first rebalance, or we will treat your request as if you selected the request's effective date. If you specify a date fewer than 30 days after your Contract Date, your first rebalance will be delayed one month, and if you request rebalancing on your application but do not specify a date for the first rebalance, it will occur one period after your Contract Date, as described above under Dollar Cost Averaging. We may change, terminate or suspend the portfolio rebalancing feature at any time. EARNINGS SWEEP An earnings sweep automatically transfers the earnings attributable to a specified Investment Option (the "sweep option") to one or more other Investment Options (your "target option(s)"). If you elect to use the earnings sweep, you may select either the Fixed Option or the Money Market Subaccount as your sweep option. The Account Value of your sweep option will be required to be at least $5,000 when you elect the earnings sweep. You may select one or more Variable Investment Options (but not the Money Market Subaccount) as your target option(s). You may choose to have earnings sweeps occur monthly, quarterly, semiannually or annually until you annuitize. At each earnings sweep, we will automatically transfer your accumulated earnings attributable to your sweep option for the previous period proportionately to your target option(s). That is, if you select a monthly earnings sweep, we will transfer the sweep option earnings from the preceding month; if you select a semiannual earnings sweep, we will transfer the sweep option earnings accumulated over the preceding six months. Earnings sweep transfers are subject to the same requirements and limitations as other transfers. To determine the earnings, we take the change in the sweep option's Account Value during the sweep period, add any withdrawals or transfers out of the sweep option Account that occurred during the sweep period, and subtract any allocations to the sweep option Account during the sweep period. The result of this calculation represents the "total earnings" for the sweep period. If, during the sweep period, you withdraw or transfer amounts from the sweep option Account, we assume that earnings are withdrawn or transferred before any other Account Value. Therefore, your "total earnings" for the sweep period will be reduced by any amounts withdrawn or transferred during the sweep option period. The remaining earnings are eligible for the sweep transfer. Procedures for selecting the earnings sweep are generally the same as those discussed in detail above for selecting dollar cost averaging and portfolio rebalancing: You may make your request at any time and it will be effective when we receive it in a form satisfactory to us. If you stop the earnings sweep, you must wait 30 days 12 to begin again. You may specify a date for your first sweep, or we will treat your request as if you selected the request's effective date. If you specify a date fewer than 30 days after your Contract Date, your first earnings sweep will be delayed one month, and if you request the earnings sweep on your application but do not specify a date for the first sweep, it will occur one period after your Contract Date, as described above under Dollar Cost Averaging. If, as a result of an earnings sweep transfer, your source Account Value falls below $500, we have the right, at our option, to transfer that remaining Account Value to your target account(s) on a proportionate basis relative to your most recent allocation instructions. We may change, terminate or suspend the earnings sweep option at any time. PRE-AUTHORIZED WITHDRAWALS You may specify a dollar amount for your pre-authorized withdrawals, or you may specify a percentage of your Contract Value or an Account Value. You may direct us to make your pre-authorized withdrawals from one or more specific Investment Options; if you do not give us these specific instructions, amounts will be deducted proportionately from your Account Value in each Fixed or Variable Investment Option. Procedures for selecting pre-authorized withdrawals are generally the same as those discussed in detail above for selecting dollar cost averaging, portfolio rebalancing, and earnings sweeps: You may make your request at any time and it will be effective when we receive it in proper form. If you stop the pre-authorized withdrawals, you must wait 30 days to begin again. You may specify a date for the first withdrawal, or we will treat your request as if you selected the request's effective date. If you specify a date fewer than 30 days after your Contract Date, your first pre-authorized withdrawal will be delayed one month, and if you request the pre-authorized withdrawals on your application but do not specify a date for the first withdrawal, it will occur one period after your Contract Date. If your pre-authorized withdrawals cause your Account Value in any Investment Option to fall below $500, we have the right, at our option, to transfer that remaining Account Value to your other Investment Options on a proportionate basis relative to your most recent allocation instructions. If your pre-authorized withdrawals cause your Contract Value to fall below $1,000, we may, at our option, terminate your Contract and send you the remaining withdrawal proceeds. Pre-authorized withdrawals are subject to the same withdrawal charges as are other withdrawals, and each withdrawal is subject to any applicable charge for premium taxes and/or other taxes, to federal income tax on its taxable portion, and, if you have not reached age 59 1/2, a federal tax penalty of at least 10%. DEATH BENEFIT Any death benefit payable will be calculated as of the date we receive proof (in proper form) of the Annuitant's death (or, if applicable, the Contract Owner's death) and instructions regarding payment; any claim of a death benefit must be made in proper form. A recipient of death benefit proceeds may elect to have this benefit paid in one lump sum, in periodic payments, in the form of a lifetime annuity or in some combination of these. Annuity payments will begin within 30 days once we receive all information necessary to process the claim. If your Contract names Joint or Contingent Annuitants, no death benefit proceeds will be payable unless and until the last Annuitant dies prior to the Annuity Date or a Contract Owner dies prior to the Annuity Date. If yours is a Qualified Contract, your Contingent Annuitant or Contingent Owner must be your spouse. JOINT ANNUITANTS ON QUALIFIED CONTRACTS If your Contract was issued in connection with a Qualified Plan subject to Title I of the Employee Retirement Income Security Act of 1974 ("ERISA"), and you change your marital status after your Contract Date, you may be permitted to add a Joint Annuitant on your Annuity Date and to change your Joint Annuitant. Generally speaking, you may be permitted to add a new spouse as a Joint Annuitant, and you may be permitted to remove a Joint Annuitant who is no longer your spouse. You may call us for more information. 13 1035 EXCHANGES You may make your initial Purchase Payment through an exchange of an existing annuity contract. To exchange, you must complete a 1035 Exchange form, which is available by calling your representative, or by calling us at 1-800-722-2333, and mail the form along with the annuity contract you are exchanging (plus your completed application if you are making an initial Purchase Payment) to us. In general terms, Section 1035 of the Code provides that you recognize no gain or loss when you exchange one annuity contract solely for another annuity contract. However, transactions under Section 1035 may be subject to special rules and may require special procedures and record-keeping, particularly if the exchanged annuity contract was issued prior to August 14, 1982. You should consult your tax adviser prior to effecting a 1035 Exchange. SAFEKEEPING OF ASSETS We are responsible for the safekeeping of the assets of the Separate Account. These assets are held separate and apart from the assets of our General Account and our other separate accounts. FINANCIAL STATEMENTS Audited financial statements of Separate Account A as of December 31, 1998 and for each of the two years in the period then ended are incorporated by reference in this SAI from the Annual Report of the Separate Account dated as of December 31, 1998. Pacific Life's audited consolidated financial statements as of December 31, 1998 and 1997 and for each of the three years in the period ended December 31, 1998 are set forth beginning on the next page. These financial statements should be considered only as bearing on the ability of Pacific Life to meet its obligations under the Contracts and not as bearing on the investment performance of the assets held in the Separate Account. The consolidated financial statements of Pacific Life as of December 31, 1998 and 1997 and for each of the three years in the period ended December 31, 1998 have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein. The information in Separate Account A's Annual Report relates to variable annuity contracts other than the Contract that we have issued and that are funded by Separate Account A. 14 INDEPENDENT AUDITORS' REPORT - ----------------------------------- Pacific Life Insurance Company and Subsidiaries: We have audited the accompanying consolidated statements of financial condition of Pacific Life Insurance Company and Subsidiaries (the "Company") as of December 31, 1998 and 1997, and the related consolidated statements of operations, stockholder's equity and cash flows for each of the three years in the period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Pacific Life Insurance Company and Subsidiaries as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Costa Mesa, California February 22, 1999 15 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 1998 1997 - -------------------------------------------------------------------------------------- (IN MILLIONS) ASSETS Investments: Securities available for sale at estimated fair value: Fixed maturity securities $13,617.0 $13,938.5 Equity securities 547.5 346.4 Mortgage loans 2,788.7 1,922.1 Real estate 172.7 192.1 Policy loans 3,901.2 3,769.2 Short-term investments 99.9 83.8 Other investments 948.0 432.4 - -------------------------------------------------------------------------------------- TOTAL INVESTMENTS 22,075.0 20,684.5 Cash and cash equivalents 150.1 110.4 Deferred policy acquisition costs 889.7 716.9 Accrued investment income 252.3 255.4 Other assets 672.8 636.5 Separate account assets 15,844.0 11,605.1 - -------------------------------------------------------------------------------------- TOTAL ASSETS $39,883.9 $34,008.8 ====================================================================================== LIABILITIES AND STOCKHOLDER'S EQUITY Liabilities: Universal life, annuity and other investment contract deposits $17,973.0 $16,644.5 Future policy benefits 2,131.6 2,133.8 Short-term and long-term debt 445.1 253.6 Other liabilities 1,162.2 1,224.5 Separate account liabilities 15,844.0 11,605.1 - -------------------------------------------------------------------------------------- TOTAL LIABILITIES 37,555.9 31,861.5 - -------------------------------------------------------------------------------------- Commitments and contingencies Stockholder's Equity: Common stock - $50 par value; 600,000 shares authorized, issued and outstanding 30.0 30.0 Paid-in capital 126.2 120.1 Retained earnings 1,663.5 1,422.0 Accumulated other comprehensive income - Unrealized gain on securities available for sale, net 508.3 575.2 - -------------------------------------------------------------------------------------- TOTAL STOCKHOLDER'S EQUITY 2,328.0 2,147.3 - -------------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $39,883.9 $34,008.8 ======================================================================================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 16 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1998 1997 1996 - ------------------------------------------------------------------------------------------------ (IN MILLIONS) REVENUES Policy fees from universal life, annuity and other investment contract deposits $ 525.3 $ 431.2 $ 348.6 Insurance premiums 514.7 504.3 465.4 Net investment income 1,293.8 1,225.3 1,087.3 Net realized capital gains 38.7 85.3 44.0 Commission revenue 220.1 146.6 79.6 Other income 216.6 181.7 123.1 - ------------------------------------------------------------------------------------------------ TOTAL REVENUES 2,809.2 2,574.4 2,148.0 - ------------------------------------------------------------------------------------------------ BENEFITS AND EXPENSES Interest credited to universal life, annuity and other investment contract deposits 880.8 797.8 665.0 Policy benefits paid or provided 719.5 675.7 652.9 Commission expenses 386.1 303.7 233.6 Operating expenses 467.8 507.7 316.2 - ------------------------------------------------------------------------------------------------ TOTAL BENEFITS AND EXPENSES 2,454.2 2,284.9 1,867.7 - ------------------------------------------------------------------------------------------------ INCOME BEFORE PROVISION FOR INCOME TAXES 355.0 289.5 280.3 Provision for income taxes 113.5 113.5 113.7 - ------------------------------------------------------------------------------------------------ NET INCOME $ 241.5 $ 176.0 $ 166.6 ================================================================================================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 17 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
Accumulated Common Stock Other --------------- Paid-in Retained Comprehensive Shares Amount Capital Earnings Income Total - ---------------------------------------------------------------------------------------------------------- (IN MILLIONS) BALANCES, JANUARY 1, 1996 $1,151.4 $482.0 $1,633.4 Comprehensive income: Net income 166.6 166.6 Change in unrealized gain on securities available for sale, net (102.8) (102.8) -------- Total comprehensive income 63.8 - ---------------------------------------------------------------------------------------------------------- BALANCES, DECEMBER 31, 1996 1,318.0 379.2 1,697.2 Comprehensive income: Net income 176.0 176.0 Change in unrealized gain on securities available for sale, net 196.0 196.0 -------- Total comprehensive income 372.0 Issuance of partnership units by affiliate $85.1 85.1 Initial member capitalization of Pacific Mutual Holding Company (2.0) (2.0) Issuance of common stock 0.6 $30.0 35.0 (65.0) Dividend paid to parent (5.0) (5.0) - ---------------------------------------------------------------------------------------------------------- BALANCES, DECEMBER 31, 1997 0.6 30.0 120.1 1,422.0 575.2 2,147.3 Comprehensive income: Net income 241.5 241.5 Change in unrealized gain on securities available for sale, net (66.9) (66.9) -------- Total comprehensive income 174.6 Issuance of partnership units by affiliate 6.1 6.1 - ---------------------------------------------------------------------------------------------------------- BALANCES, DECEMBER 31, 1998 0.6 $30.0 $126.2 $1,663.5 $508.3 $2,328.0 ==========================================================================================================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 18 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1998 1997 1996 - ----------------------------------------------------------------------------------- (IN MILLIONS) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 241.5 $ 176.0 $ 166.6 Adjustments to reconcile net income to net cash provided by operating activities: Amortization on fixed maturities (39.4) (26.6) (45.2) Depreciation and other amortization 26.0 38.3 43.8 Deferred income taxes (20.6) (14.4) (49.8) Net realized capital gains (38.7) (85.3) (44.0) Net change in deferred policy acquisition costs (172.8) (185.4) (140.4) Interest credited to universal life, annuity and other investment contract deposits 880.8 797.8 665.0 Change in accrued investment income 3.1 (52.9) (3.7) Change in future policy benefits (2.2) (372.7) 62.3 Change in other assets and liabilities 99.4 577.4 158.1 - ----------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 977.1 852.2 812.7 - ----------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Securities available for sale: Purchases (4,302.3) (6,272.3) (4,525.0) Sales 2,201.9 2,224.1 2,511.0 Maturities and repayments 2,196.1 2,394.6 1,184.7 Repayments of mortgage loans 334.9 179.3 220.4 Proceeds from sales of mortgage loans and real estate 43.3 104.4 14.5 Purchases of mortgage loans and real estate (1,246.3) (643.7) (414.3) Distributions from partnerships 119.5 91.6 78.8 Change in policy loans (132.0) (637.4) (338.5) Change in short-term investments (16.1) (17.7) 37.2 Other investing activity, net (564.2) 43.5 (144.5) - ----------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (1,365.2) (2,533.6) (1,375.7) - ----------------------------------------------------------------------------------- (CONTINUED) SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, (CONTINUED) 1998 1997 1996 - -------------------------------------------------------------------------------------- (IN MILLIONS) CASH FLOWS FROM FINANCING ACTIVITIES Policyholder account balances: Deposits $ 4,007.0 $ 4,373.6 $ 2,105.0 Withdrawals (3,770.7) (2,667.3) (1,756.6) Net change in short-term debt 191.5 8.5 42.5 Repayment of long-term debt (25.0) (5.0) Initial capitalization of Pacific Mutual Holding Company (2.0) Dividend paid to parent (5.0) - -------------------------------------------------------------------------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 427.8 1,682.8 385.9 - -------------------------------------------------------------------------------------- Net change in cash and cash equivalents 39.7 1.4 (177.1) Cash and cash equivalents, beginning of year 110.4 109.0 286.1 - -------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 150.1 $ 110.4 $ 109.0 ====================================================================================== SUPPLEMENTAL SCHEDULE OF INVESTING AND FINANCING ACTIVITIES In connection with the acquisition of an insurance block of business in 1997, as discussed in Note 5, the following assets and liabilities were assumed: Cash $1,215.9 Policy loans 440.3 Other assets 43.4 --------- Total assets assumed $1,699.6 ========= Policyholder account values $1,693.8 Other liabilities 5.8 --------- Total liabilities assumed $1,699.6 ========= ====================================================================================== SUPPLEMENTAL SCHEDULE OF NON CASH FINANCING ACTIVITIES As a result of the Conversion in 1997, as discussed in Note 1, $65 million of retained earnings was allocated for the issuance of 600,000 shares of common stock with a par value totaling $30 million and $35 million to paid-in capital. ====================================================================================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid $127.9 $153.0 $189.6 Interest paid $24.0 $26.1 $ 27.3 ======================================================================================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 20 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES CONVERSION TO MUTUAL HOLDING COMPANY STRUCTURE Pursuant to consent received from the Insurance Department of the State of California, Pacific Mutual Life Insurance Company ("Pacific Mutual") implemented a plan of conversion to form a mutual holding company structure (the "Conversion") on September 1, 1997. The Conversion created Pacific LifeCorp, an intermediate stock holding company and Pacific Mutual Holding Company ("PMHC"), a mutual holding company. Pacific Mutual was converted to a stock life insurance company and renamed Pacific Life Insurance Company ("Pacific Life"). Under their respective charters, PMHC must always own at least 51% of the outstanding voting stock of Pacific LifeCorp, and Pacific LifeCorp must always own 100% of the voting stock of Pacific Life. Owners of Pacific Life's annuity contracts and life insurance policies have certain membership interests in PMHC, consisting principally of the right to vote on the election of the Board of Directors of PMHC and on other matters, and certain rights upon liquidation or dissolution of PMHC. As a result of the Conversion, $65 million of retained earnings was allocated for the issuance of 600,000 shares of common stock with a par value totaling $30 million and $35 million to paid-in capital. DESCRIPTION OF BUSINESS Pacific Life was established in 1868 and is organized under the laws of the State of California as a stock life insurance company. Pacific Life conducts business in every state except New York. Pacific Life and its subsidiaries and affiliates have primary business operations which consist of life insurance, annuities, pension and institutional products, group employee benefits, broker-dealer operations and investment management and advisory services. Pacific Life's primary business operations provide a broad range of life insurance, asset accumulation and investment products for individuals and businesses and offer a range of investment products to institutions and pension plans. Additionally, through its major subsidiaries and affiliates, Pacific Life provides a variety of group employee benefits, broker-dealer operations and investment management and advisory services. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements of Pacific Life Insurance Company and Subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles ("GAAP") and include the accounts of Pacific Life and its wholly-owned insurance subsidiaries, PM Group Life Insurance Company ("PM Group") and World-Wide Holdings Limited, and its wholly-owned noninsurance subsidiaries, Pacific Asset Management LLC ("PAM"), Pacific Mutual Distributors, Inc. ("PMD"), Pacific Mutual Realty Finance, Inc. and Pacific Mezzanine Associates, L.L.C. (50% owned). All significant intercompany transactions and balances have been eliminated. Pacific Life prepares its regulatory financial statements based on accounting practices prescribed or permitted by the Insurance Department of the State of California. These consolidated financial statements differ from those followed in reports to regulatory authorities (Note 2). PAM was initially capitalized on December 31, 1997, when Pacific Life completed a subsidiary restructuring in which all the assets and liabilities of Pacific Financial Asset Management Corporation ("PFAMCo") were contributed into this newly formed limited liability company. PFAMCo was then merged into Pacific Life. On October 30, 1997, Pacific Corinthian Life Insurance Company ("PCL"-Note 4), a wholly-owned insurance subsidiary, was merged into Pacific Life, with Pacific Life as the surviving entity. NEW ACCOUNTING PRONOUNCEMENTS During 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," and SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." 21 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) SFAS No. 130 established standards for the reporting and display of comprehensive income and its components in financial statements (Note 11). SFAS No. 131 established standards for the way information about operating segments is reported in financial statements. It also established standards for related disclosures about products and services, geographic areas and major customers (Note 13). SFAS No. 132 standardized disclosure requirements for employers' pensions and other retiree benefits (Note 14). Adoption of these accounting standards did not have a significant impact on the consolidated financial position or results of operations of the Company. On January 1, 1998, the Company adopted the American Institute of Certified Public Accountants ("AICPA") Statement of Position ("SOP") 97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related Assessments." SOP 97-3 provides guidance on when a liability should be recognized for guaranty fund and other assessments and how to measure the liability. Adoption of this accounting standard did not have a significant impact on the consolidated financial position or results of operations of the Company. In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. SFAS No. 133 establishes accounting and reporting standards for derivative instruments and hedging activities. The Company currently plans to adopt SFAS No. 133 on January 1, 2000. The impact on the consolidated financial position or results of operations of the Company due to the adoption of this statement has not yet been determined. In March 1998, the AICPA issued SOP 98-1, "Accounting for the Cost of Computer Software Developed or Obtained for Internal Use." SOP 98-1 requires that certain costs incurred in developing internal use computer software be capitalized. The Company currently plans to adopt SOP 98-1 on January 1, 1999. The adoption is not expected to have a significant impact on the consolidated financial position or results of operations of the Company. INVESTMENTS Available for sale fixed maturity and equity securities are reported at estimated fair value, with unrealized gains and losses, net of deferred income tax and adjustments related to deferred policy acquisition costs, included as a separate component of equity on the accompanying consolidated statements of financial condition. Trading securities, which are included in short-term investments, are reported at estimated fair value with unrealized gains and losses included in net realized capital gains on the accompanying consolidated statements of operations. For mortgage-backed securities included in fixed maturity securities, the Company recognizes income using a constant effective yield based on anticipated prepayments and the estimated economic life of the securities. When estimates of prepayments change, the effective yield is recalculated to reflect actual payments to date and anticipated future payments. The net investment in the securities is adjusted to the amount that would have existed had the new effective yield been applied since the acquisition of the securities. This adjustment is reflected in net investment income on the accompanying consolidated statements of operations. Realized gains and losses on investment transactions are determined on a specific identification basis and are included in net realized capital gains on the accompanying consolidated statements of operations. Short-term investments are carried at estimated fair value and include all trading securities. Derivative financial instruments are carried at estimated fair value. Unrealized gains and losses of derivatives used to hedge securities classified as available for sale are reflected in a separate component of equity on the accompanying consolidated statements of financial condition, similar to the accounting of the underlying hedged assets. Realized gains and losses on derivatives used for hedging are deferred and amortized over the average life of the related hedged assets or insurance liabilities. Unrealized gains and losses of other derivatives are included in net realized capital gains on the accompanying consolidated statements of operations. Mortgage loans and policy loans are stated at unpaid principal balances. 22 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Real estate is carried at depreciated cost, or for real estate acquired in satisfaction of debt, estimated fair value less estimated selling costs at the date of acquisition if lower than the related unpaid balance. On November 15, 1994, certain of the Company's investment management and advisory subsidiaries entered into an agreement and plan of consolidation with Thomson Advisory Group L.P., a Delaware limited partnership with publicly traded units, to merge into a newly capitalized partnership named PIMCO Advisors L.P. ("PIMCO Advisors"). In December 1997, PIMCO Advisors completed a transaction in which it acquired the assets of Oppenheimer Capital, L.P., including its interest in Oppenheimer Capital, by issuing approximately 33 million PIMCO Advisors General and Limited Partner units. In connection with this transaction, the Company increased its investment in PIMCO Advisors to reflect the excess of the Company's pro rata share of PIMCO Advisors partners' capital subsequent to this transaction over the carrying value of the Company's investment in PIMCO Advisors. The net result of this transaction was to directly increase stockholder's equity by $85.1 million. The Company's beneficial ownership in PIMCO Advisors was approximately 42% prior to this transaction and 31% as of December 31, 1997. During 1998, the Company increased its investment in PIMCO Advisors to reflect its pro rata share of the increase to PIMCO Advisors partners' capital due to the issuance of additional partnership units. For the year ended December 31, 1998, there was a direct increase to the Company's stockholder's equity of $6.1 million. During 1998, the Company also acquired the beneficial ownership of additional partnership units which increased its ownership to 33% as of December 31, 1998. Deferred taxes resulting from these transactions have been included in the accompanying consolidated financial statements. The Company's investment in PIMCO Advisors, which is included in other investments on the accompanying consolidated statements of financial condition, is accounted for using the equity method. CASH AND CASH EQUIVALENTS Cash and cash equivalents include all liquid debt instruments with an original maturity of three months or less. DEFERRED POLICY ACQUISITION COSTS The costs of acquiring new insurance business, principally commissions, medical examinations, underwriting, policy issue and other expenses, all of which vary with and are primarily related to the production of new business, have been deferred. For universal life, annuity and other investment contract products, such costs are generally amortized in proportion to the present value of expected gross profits using the assumed crediting rate. Adjustments are reflected in earnings or equity in the period the Company experiences deviations in gross profit assumptions. Adjustments directly affecting equity result from experience deviations due to changes in unrealized gains and losses in investments classified as available for sale. For life insurance products, such costs are being amortized over the premium-paying period of the related policies in proportion to premium revenues recognized, using assumptions consistent with those used in computing policy reserves. For the years ended December 31, 1998, 1997 and 1996, net amortization of deferred policy acquisition costs included in commission expenses amounted to $73.0 million, $50.2 million and $42.6 million, respectively, and included in operating expenses amounted to $33.5 million, $29.4 million and $27.4 million, respectively, on the accompanying consolidated statements of operations. PRESENT VALUE OF FUTURE PROFITS In connection with the rehabilitation of First Capital Life Insurance Company ("FCL"-Note 4), an asset was established which represented the present value of estimated future profits of the acquired business. The future profits were discounted to provide an appropriate rate of return and were amortized over the rehabilitation plan period. Amortization for the years ended December 31, 1997 and 1996 amounted to $16.1 million and $24.2 million, respectively, and is included in commission expenses on the accompanying consolidated statements of operations. During 1996, the Company changed certain assumptions regarding the estimated life which resulted in an increase in amortization in 1996 of approximately $17.0 million. 23 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) UNIVERSAL LIFE, ANNUITY AND OTHER INVESTMENT CONTRACT DEPOSITS Universal life, annuity and other investment contract deposits are valued using the retrospective deposit method and consist principally of deposits received plus interest credited less accumulated assessments. Interest credited to these policies primarily ranged from 4.0% to 8.4% during 1998, 1997 and 1996. FUTURE POLICY BENEFITS Life insurance reserves are valued using the net level premium method. Interest rate assumptions ranged from 4.5% to 9.3% for 1998, 1997 and 1996. Mortality, morbidity and withdrawal assumptions are generally based on the Company's experience, modified to provide for possible unfavorable deviations. Future dividends for participating business are provided for in the liability for future policy benefits. Dividends to policyholders are included in policy benefits paid or provided on the accompanying consolidated statements of operations. Dividends are accrued based on dividend formulas approved by the Board of Directors and reviewed for reasonableness and equitable treatment of policyholders by an independent consulting actuary. As of December 31, 1998 and 1997, participating experience rated policies paying dividends represented approximately 1% of direct written life insurance in force. REVENUES AND EXPENSES Insurance premiums are recognized as revenue when due. Benefits and expenses, other than deferred policy acquisition costs, are recognized when incurred. Generally, receipts for universal life, annuities and other investment contracts are classified as deposits. Policy fees from these contracts include mortality charges, surrender charges and earned policy service fees. Expenses related to these products include interest credited to account balances and benefit amounts in excess of account balances. Commission revenue from Pacific Life's broker-dealer subsidiaries is generally recorded on the trade date. DEPRECIATION AND AMORTIZATION Depreciation of investment real estate is computed on the straight-line method over the estimated useful lives which range from 5 to 30 years. Certain other assets are depreciated or amortized on the straight-line method over periods ranging from 3 to 40 years. Depreciation of investment real estate is included in net investment income on the accompanying consolidated statements of operations. Depreciation and amortization of other assets is included in operating expenses on the accompanying consolidated statements of operations. INCOME TAXES Pacific Life is taxed as a life insurance company for income tax purposes and is included in the consolidated income tax returns of PMHC. Prior to 1998, Pacific Life was subject to an equity tax calculated by a prescribed formula that incorporated a differential earnings rate between stock and mutual life insurance companies. In December 1998, the Internal Revenue Service released Revenue Ruling 99-3 which exempts Pacific Life from this tax for taxable years beginning in 1998. Deferred income taxes are provided for timing differences in the recognition of revenues and expenses for financial reporting and income tax purposes. SEPARATE ACCOUNTS Separate account assets are recorded at market value and the related liabilities represent segregated contract owner funds maintained in accounts with individual investment objectives. The investment results of separate account assets generally pass through to separate account contract owners. 24 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value of financial instruments disclosed in Notes 6 and 7 has been determined using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented may not be indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts. BUSINESS RISKS The Company operates in a business environment that is subject to various risks and uncertainties. Such risks and uncertainties include, but are not limited to, interest rate risk, credit risk, and legal and regulatory changes. Interest rate risk is the potential for interest rates to change, which can cause fluctuations in the value of investments. To the extent that fluctuations in interest rates cause the duration of assets and liabilities to differ, the Company may have to sell assets prior to their maturity and realize losses. The Company controls its exposure to this risk by, among other things, asset/liability matching techniques which attempt to match the duration of assets and liabilities and utilization of derivative instruments. Additionally, the Company includes contractual provisions limiting withdrawal rights for certain of its products. A substantial portion of the Company's liabilities are not subject to surrender or can be surrendered only after deduction of a surrender charge or a market value adjustment. Credit risk is the risk that issuers of investments owned by the Company may default or that other parties may not be able to pay amounts due to the Company. The Company manages its investments to limit credit risk by diversifying its portfolio among various security types and industry sectors. The credit risk of financial instruments is controlled through credit approval procedures, limits and ongoing monitoring. Real estate and mortgage loan investment risks are limited by diversification of geographic location and property type. Management does not believe that significant concentrations of credit risk exist. The Company is also exposed to credit loss in the event of nonperformance by the counterparties to interest rate swap contracts and other derivative securities. The Company manages this risk through credit approvals and limits on exposure to any specific counterparty. However, the Company does not anticipate nonperformance by the counterparties. The Company is subject to various state and Federal regulatory authorities. The potential exists for changes in regulatory initiatives that can result in additional, unanticipated expense to the Company. Existing Federal laws and regulations affect the taxation of life insurance or annuity products and insurance companies. There can be no assurance as to what, if any, cases might be decided or future legislation might be enacted, or if decided or enacted, whether such cases or legislation would contain provisions with possible negative effects on the Company's life insurance or annuity products. USE OF ESTIMATES The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform to the 1998 financial statement presentation. 25 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. STATUTORY RESULTS The following are reconciliations of statutory capital and surplus and statutory net income for Pacific Life as calculated in accordance with accounting practices prescribed or permitted by the Insurance Department of the State of California, to the amounts reported as stockholder's equity and net income included on the accompanying consolidated financial statements:
December 31, 1998 1997 ---------------------- (IN MILLIONS) Statutory capital and surplus $1,157.4 $ 944.8 Deferred policy acquisition costs 908.0 730.7 Unrealized gain on securities available for sale, net 508.3 575.2 Deferred income tax 307.1 289.2 Asset valuation reserve 298.7 252.4 Non admitted assets 40.4 25.2 Subsidiary equity 26.5 60.4 Surplus notes (149.6) (149.6) Insurance and annuity reserves (654.4) (511.5) Other (114.4) (69.5) ---------------------- Stockholder's equity as reported herein $2,328.0 $2,147.3 ======================
Years Ended December 31, 1998 1997 1996 -------------------------------------- (IN MILLIONS) Statutory net income $ 187.6 $ 121.5 $ 113.1 Deferred policy acquisition costs 177.3 160.4 111.2 Interest maintenance reserve 24.1 7.6 3.8 Deferred income tax 17.9 41.2 70.9 Net realized gain (loss) on trading securities 9.2 (5.8) (11.6) Earnings of subsidiaries (32.8) (40.6) (33.0) Insurance and annuity reserves (145.1) (107.0) (91.3) Other 3.3 (1.3) 3.5 -------------------------------------- Net income as reported herein $ 241.5 $ 176.0 $ 166.6 ======================================
26 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. STATUTORY RESULTS (CONTINUED) RISK-BASED CAPITAL Risk-based capital is a method developed by the National Association of Insurance Commissioners ("NAIC") to measure the minimum amount of capital appropriate for an insurance company to support its overall business operations in consideration of its size and risk profile. The formulas for determining the amount of risk-based capital specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk. The adequacy of a company's actual capital is measured by comparing it to the risk-based capital as determined by the formulas. Companies below minimum risk-based capital requirements are classified within certain levels, each of which requires specified corrective action. As of December 31, 1998 and 1997, Pacific Life and PM Group exceeded the minimum risk-based capital requirements. CODIFICATION In March 1998, the NAIC adopted the Codification of Statutory Accounting Principles ("Codification"). The Codification, which is intended to standardize regulatory accounting and reporting for the insurance industry, is proposed to be effective January 1, 2001. However, statutory accounting principles will continue to be established by individual state laws and permitted practices and it is uncertain when, or if, the states of California and Arizona will require adoption of Codification for the preparation of statutory financial statements. The Company has not finalized the quantification of the effects of Codification on its statutory financial statements. DIVIDEND RESTRICTIONS Dividend payments by Pacific Life to its parent in any 12-month period cannot exceed the greater of 10% of statutory capital and surplus as of the preceding year-end or the statutory net gain from operations for the previous calendar year, without prior approval from the Insurance Department of the State of California. Based on this limitation and 1998 statutory results, Pacific Life could pay approximately $240.9 million in dividends in 1999 without prior approval. No dividends were paid during 1998. Extraordinary dividends to Pacific Life from PM Group are subject to regulatory restrictions and approvals by the Insurance Department of the State of Arizona, PM Group's state of domicile. The maximum amount of ordinary dividends that can be paid by PM Group without restriction cannot exceed the lesser of 10% of surplus as regards policyholders, or the statutory net gain from operations. PM Group received approval to pay dividends of $14 million and $25 million for the years ended December 31, 1997 and 1996 of which $8 million and $18 million, respectively, were considered extraordinary. No dividends were paid during 1998. PERMITTED PRACTICE As discussed in Note 1, the Company beneficially owns approximately 33% of the outstanding General and Limited Partner units in PIMCO Advisors L.P. as of December 31, 1998. Net cash distributions received on these units are recorded as income as permitted by the Insurance Department of the State of California for statutory accounting purposes. 3. CLOSED BLOCK In connection with the Conversion, an arrangement known as a closed block (the "Closed Block"), was established, for dividend purposes only, for the exclusive benefit of certain individual life insurance policies that had an experience based dividend scale for 1997. The Closed Block was designed to give reasonable assurance to holders of Closed Block policies that policy dividends will not change solely as a result of the Conversion. Assets of Pacific Life have been allocated to the Closed Block in an amount that produces cash flows, which, together with anticipated revenues, are expected to be sufficient to support the policies. Pacific Life is not 27 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. CLOSED BLOCK (CONTINUED) required to support the payment of dividends on these policies from its general funds. The Closed Block will continue in effect until either the last policy is no longer in force, or the dissolution of the Closed Block. Total assets of $311.6 million and $316.2 million and total liabilities of $352.8 million and $356.0 million for the Closed Block are included in other assets and other liabilities, respectively, on the accompanying consolidated statements of financial condition as of December 31, 1998 and 1997, respectively. The contribution to income from the Closed Block of $5.1 million and $5.7 million, consisting of net revenues and expenses generated by the Closed Block, is included in other income on the accompanying consolidated statements of operations for the years ended December 31, 1998 and 1997, respectively. 4. REHABILITATION OF FIRST CAPITAL LIFE INSURANCE COMPANY On September 30, 1997, PCL completed the rehabilitation of FCL pursuant to a five-year rehabilitation plan approved by the California Superior Court and the Insurance Department of the State of California (the "Rehabilitation Plan"). Under the terms of the Rehabilitation Plan, FCL's insurance policies in force, primarily individual annuities and universal life insurance, were restructured and assumed by PCL on December 31, 1992, pursuant to an assumption reinsurance agreement and asset purchase agreement. On October 30, 1997, PCL was merged into Pacific Life, with Pacific Life as the surviving entity. 5. ACQUISITION OF INSURANCE BLOCKS OF BUSINESS On June 1, 1997, Pacific Life acquired a block of corporate-owned life insurance ("COLI") policies from Confederation Life Insurance Company (U.S.) in Rehabilitation, which is currently under rehabilitation ("Confederation Life"), which consisted of approximately 38,000 policies having a face amount of insurance of $8.6 billion and reserves of approximately $1.7 billion. The assets received as part of this acquisition amounted to approximately $1.2 billion in cash and approximately $0.4 billion in policy loans. This block is primarily non-leveraged COLI. The remaining cost of acquiring this business, representing the amount equal to the excess of the estimated fair value of the reserves assumed over the estimated fair value of the assets acquired, amounted to $36.5 million and $43.4 million as of December 31, 1998 and 1997, respectively, and is included in deferred policy acquisition costs on the accompanying consolidated statements of financial condition. Amortization of this asset for the years ended December 31, 1998 and 1997 was $7.7 million and $0.9 million, respectively, and is included in commission expenses on the accompanying consolidated statements of operations. In January 1999, Pacific Life signed a definitive agreement to acquire a payout annuity block of business from Confederation Life. This block of business consists of approximately 18,000 policies, having reserves amounting to approximately $2.0 billion. The transaction is subject to various regulatory and Court approvals and is anticipated to close during 1999. 28 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. INVESTMENT IN FIXED MATURITY AND EQUITY SECURITIES The amortized cost, gross unrealized gains and losses, and estimated fair value of fixed maturity and equity securities are shown below. The estimated fair value of publicly traded securities is based on quoted market prices. For securities not actively traded, estimated fair values were provided by independent pricing services specializing in "matrix pricing" and modeling techniques. The Company also estimates certain fair values based on interest rates, credit quality and average maturity or from securities with comparable trading characteristics.
Gross Unrealized Amortized ---------------------- Estimated Cost Gains Losses Fair Value ----------------------------------------------------- (IN MILLIONS) Securities Available for Sale: -------------------------------------------------------- As of December 31, 1998: U.S. Treasury securities and obligations of U.S. government authorities and agencies $ 94.0 $ 24.9 $ 118.9 Obligations of states, political subdivisions and foreign governments 726.0 118.0 $ 16.1 827.9 Corporate securities 7,766.0 438.0 122.4 8,081.6 Mortgage-backed and asset-backed securities 4,391.7 139.6 52.9 4,478.4 Redeemable preferred stock 104.0 11.3 5.1 110.2 ----------------------------------------------------- Total fixed maturity securities $13,081.7 $731.8 $196.5 $13,617.0 ===================================================== Total equity securities $ 364.4 $202.6 $ 19.5 $ 547.5 ===================================================== Securities Available for Sale: -------------------------------------------------------- As of December 31, 1997: U.S. Treasury securities and obligations of U.S. government authorities and agencies $ 85.4 $ 17.5 $ 102.9 Obligations of states, political subdivisions and foreign governments 730.2 89.4 $ 3.0 816.6 Corporate securities 7,658.6 594.3 72.7 8,180.2 Mortgage-backed and asset-backed securities 4,597.2 147.1 15.5 4,728.8 Redeemable preferred stock 102.3 10.3 2.6 110.0 ----------------------------------------------------- Total fixed maturity securities $13,173.7 $858.6 $ 93.8 $13,938.5 ===================================================== Total equity securities $ 226.4 $122.5 $ 2.5 $ 346.4 =====================================================
29 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. INVESTMENT IN FIXED MATURITY AND EQUITY SECURITIES (CONTINUED) The amortized cost and estimated fair value of fixed maturity securities as of December 31, 1998, by contractual repayment date of principal, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Amortized Estimated Cost Fair Value ----------------------- (IN MILLIONS) Securities Available for Sale: -------------------------------------------------- Due in one year or less $ 479.8 $ 482.6 Due after one year through five years 3,131.7 3,236.6 Due after five years through ten years 2,923.1 3,033.4 Due after ten years 2,155.4 2,386.0 ----------------------- 8,690.0 9,138.6 Mortgage-backed and asset-backed securities 4,391.7 4,478.4 ----------------------- Total $13,081.7 $13,617.0 =======================
Gross gains of $110.6 million, $69.1 million and $89.3 million and gross losses of $35.9 million, $32.9 million and $29.9 million on securities available for sale were realized during 1998, 1997 and 1996, respectively. Major categories of investment income are summarized as follows:
Years Ended December 31, 1998 1997 1996 -------------------------------- (IN MILLIONS) Fixed maturity securities $ 915.9 $ 925.4 $ 820.7 Equity securities 17.5 12.8 17.8 Mortgage loans 174.6 129.5 109.4 Real estate 38.1 53.6 51.3 Policy loans 154.5 137.1 113.0 Other 100.2 75.5 82.6 -------------------------------- Gross investment income 1,400.8 1,333.9 1,194.8 Investment expense 107.0 108.6 107.5 -------------------------------- Net investment income $1,293.8 $1,225.3 $1,087.3 ================================
30 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. INVESTMENT IN FIXED MATURITY AND EQUITY SECURITIES (CONTINUED) The change in gross unrealized gain on investments in available for sale and trading securities is as follows:
December 31, 1998 1997 1996 -------------------------------- (IN MILLIONS) Available for sale securities: Fixed maturity $(229.5) $223.5 $(168.6) Equity 63.1 85.7 6.3 -------------------------------- Total $(166.4) $309.2 $(162.3) ================================ Trading securities: Fixed maturity $ (2.5) $ (1.1) $ (0.5) Equity 0.2 -------------------------------- Total $ (2.5) $ (1.1) $ (0.3) ================================
As of December 31, 1998 and 1997, investments in fixed maturity securities with a carrying value of $13.0 million and $14.4 million, respectively, were on deposit with state insurance departments to satisfy regulatory requirements. No investment, aggregated by issuer, exceeded 10% of total stockholder's equity as of December 31, 1998. 7. FINANCIAL INSTRUMENTS The estimated fair values of the Company's financial instruments are as follows:
December 31, 1998 December 31, 1997 ----------------------- ----------------------- Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value -------------------------------------------------- (IN MILLIONS) Assets: Fixed maturity and equity securities (Note 6) $14,164.5 $14,164.5 $14,284.9 $14,284.9 Mortgage loans 2,788.7 2,911.2 1,922.1 1,990.9 Policy loans 3,901.2 3,901.2 3,769.2 3,769.2 Cash and cash equivalents 150.1 150.1 110.4 110.4 Derivative financial instruments: Interest rate floors, caps, options and swaptions 67.9 67.9 22.9 22.9 Interest rate swap contracts 0.5 0.5 Foreign currency derivatives 108.2 108.2 4.1 4.1 Liabilities: Guaranteed interest contracts 5,665.3 5,751.0 3,982.0 4,035.7 Deposit liabilities 599.9 626.7 733.5 737.4 Annuity liabilities 1,448.0 1,430.1 1,883.5 1,872.6 Short-term debt 295.5 295.5 104.0 104.0 Surplus notes 149.6 176.0 149.6 164.7 Derivative financial instruments: Options written 1.6 1.6 Interest rate swap contracts 23.3 23.3 Asset swap contracts 3.6 3.6 12.6 12.6 Credit default and total return swaps 9.1 9.1 4.0 4.0
31 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. FINANCIAL INSTRUMENTS (CONTINUED) The following methods and assumptions were used to estimate the fair value of these financial instruments as of December 31, 1998 and 1997: MORTGAGE LOANS The estimated fair value of the mortgage loan portfolio is determined by discounting the estimated future cash flows, using a year-end market rate which is applicable to the yield, credit quality and average maturity of the composite portfolio. POLICY LOANS The carrying amounts of policy loans are a reasonable estimate of their fair values. CASH AND CASH EQUIVALENTS The carrying amounts of these items are a reasonable estimate of their fair values. DERIVATIVE FINANCIAL INSTRUMENTS Derivatives are financial instruments whose value or cash flows are "derived" from another source, such as an underlying security. They can facilitate total return and, when used for hedging, they achieve the lowest cost and most efficient execution of positions. Derivatives can also be used to leverage by using very large notional amounts or by creating formulas that multiply changes in the underlying security. The Company's approach is to avoid highly leveraged or overly complex investments. The Company utilizes certain derivative financial instruments to diversify its business risk and to minimize its exposure to fluctuations in market prices, interest rates or basis risk as well as for facilitating total return. Risk is limited through modeling derivative performance in product portfolios for hedging and setting loss limits in total return portfolios. Derivatives used by the Company involve elements of credit risk and market risk in excess of amounts recognized in the accompanying consolidated financial statements. The notional amounts of these instruments reflect the extent of involvement in the various types of financial instruments. The estimated fair values of these instruments are based on dealer quotations or internal price estimates believed to be comparable to dealer quotations. These amounts estimate what the Company would have to pay or receive if the contracts were terminated at that time. The Company determines, on an individual counterparty basis, the need for collateral or other security to support financial instruments with off-balance sheet counterparty risk. 32 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. FINANCIAL INSTRUMENTS (CONTINUED) A reconciliation of the notional or contract amounts and discussion of the various derivative instruments is as follows:
Balance Terminations Beginning and Balance of Year Acquisitions Maturities End of Year ----------------------------------------------------------- (IN MILLIONS) December 31, 1998: ------------------------------------------------ Interest rate floors, caps, options and swaptions $2,730.0 $ 160.6 $ 237.6 $2,653.0 Interest rate swap contracts 2,026.1 960.8 378.3 2,608.6 Asset swap contracts 67.4 30.3 34.5 63.2 Credit default and total return swaps 288.5 771.5 410.4 649.6 Financial futures contracts 214.1 4,108.4 3,713.6 608.9 Foreign currency derivatives 207.0 959.4 35.2 1,131.2 December 31, 1997: ------------------------------------------------ Interest rate floors, caps, options and swaptions 4,538.2 1,644.2 3,452.4 2,730.0 Interest rate swap contracts 988.3 1,356.0 318.2 2,026.1 Asset swap contracts 30.0 47.4 10.0 67.4 Credit default and total return swaps 356.5 98.9 166.9 288.5 Financial futures contracts 609.2 3,930.6 4,325.7 214.1 Foreign currency derivatives 41.4 217.0 51.4 207.0
Interest Rate Floors, Caps, Options and Swaptions - ------------------------------------------------------- The Company uses interest rate floors, caps, options and swaptions to hedge against fluctuations in interest rates and to take positions in its total return portfolios. Interest rate floor agreements entitle the Company to receive the difference when the current rate of the underlying index is below the strike rate. Interest rate cap agreements entitle the Company to receive the difference when the current rate of the underlying index is above the strike rate. Options purchased involve the right, but not the obligation, to purchase the underlying securities at a specified price during a given time period. Swaptions are options to enter into a swap transaction at a specified price. The Company uses written covered call options on a limited basis. Gains and losses on covered calls are offset by gains and losses on the underlying position. Floors, caps and options are reported as assets and options written are reported as liabilities in the accompanying consolidated statements of financial condition. Cash requirements for these instruments are generally limited to the premium paid by the Company at acquisition. The purchase premium of these instruments is amortized on a constant effective yield basis and included as a component of net investment income in the accompanying consolidated statements of operations over the term of the agreement. Interest rate floors and caps, options and swaptions mature during the years 1999 through 2017. Interest Rate Swap Contracts --------------------------------- The Company uses interest rate swaps to manage interest rate risk and to take positions in its total return portfolios. The interest rate swap agreements generally involve the exchange of fixed and floating rate interest payments or the exchange of floating to floating interest payments tied to different indexes. Generally, no premium is paid to enter into the contract and no principal payments are made by either party. The amounts to be received or paid pursuant to these agreements are accrued and recognized through an adjustment to net investment income in the accompanying consolidated statements of operations over the life of the agreements. The interest rate swap contracts mature during the years 1999 through 2021. 33 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. FINANCIAL INSTRUMENTS (CONTINUED) Asset Swap Contracts --------------------------- The Company uses asset swap contracts to manage interest rate and equity risk to better match portfolio duration to liabilities. Asset swap contracts involve the exchange of upside equity potential for fixed income streams. The amounts to be received or paid pursuant to these agreements are accrued and recognized through an adjustment to net investment income in the accompanying consolidated statements of operations over the life of the agreements. The asset swap contracts mature during the years 2000 through 2005. Credit Default and Total Return Swaps ----------------------------------------- The Company uses credit default and total return swaps to take advantage of market opportunities. Credit default swaps involve the receipt of fixed rate payments in exchange for assuming potential credit exposure of an underlying security. Total return swaps involve the exchange of floating rate payments for the total return performance of a specified index or market. The amounts to be received or paid pursuant to these agreements are accrued and recognized through an adjustment to net investment income in the accompanying consolidated statements of operations over the life of the agreements. Credit default and total return swaps mature during the years 1999 through 2028. Financial Futures Contracts -------------------------------- The Company uses exchange-traded financial futures contracts to hedge cash flow timing differences between assets and liabilities and overall portfolio duration. Assets and liabilities are rarely acquired or sold at the same time, which creates a need to hedge their change in value during the unmatched period. In addition, foreign currency futures may be used to hedge foreign currency risk on non-U.S. dollar denominated securities. Financial futures contracts obligate the holder to buy or sell the underlying financial instrument at a specified future date for a set price and may be settled in cash or by delivery of the financial instrument. Price changes on futures are settled daily through the required margin cash flows. The notional amounts of the contracts do not represent future cash requirements, as the Company intends to close out open positions prior to expiration. Foreign Currency Derivatives --------------------------------- The Company enters into foreign exchange forward contracts and swaps to hedge against fluctuations in foreign currency exposure. Foreign currency derivatives involve the exchange of foreign currency denominated payments for U.S. dollar denominated payments. Gains and losses on foreign exchange forward contracts offset losses and gains, respectively, on the related foreign currency denominated assets. The amounts to be received or paid under the foreign currency swaps are accrued and recognized through an adjustment to net investment income in the accompanying consolidated statements of operations over the life of the agreements. Foreign currency derivatives expire during the years 1999 through 2013. GUARANTEED INTEREST CONTRACTS AND DEPOSIT LIABILITIES The estimated fair value of fixed maturity guaranteed interest contracts is estimated using the rates currently offered for deposits of similar remaining maturities. The estimated fair value of deposit liabilities with no defined maturities is the amount payable on demand. ANNUITY LIABILITIES The estimated fair value of annuity liabilities approximates carrying value and primarily includes policyholder deposits and accumulated credited interest. 34 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. FINANCIAL INSTRUMENTS (CONTINUED) SHORT-TERM DEBT The carrying amount of short-term debt is a reasonable estimate of its fair value because the interest rates are variable and based on current market values. SURPLUS NOTES The estimated fair value of surplus notes is based on market quotes. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK Pacific Life has issued certain contracts to 401(k) plans totaling $1.6 billion as of December 31, 1998, pursuant to the terms of which the 401(k) plan retains direct ownership and control of the assets related to these contracts. Pacific Life agrees to provide benefit responsiveness in the event that plan benefit requests exceed plan cash flows. In return for this guarantee, Pacific Life receives a fee which varies by contract. Pacific Life sets the investment guidelines to provide for appropriate credit quality and cash flow matching. 8. UNIVERSAL LIFE, ANNUITY AND OTHER INVESTMENT CONTRACT DEPOSITS The detail of universal life, annuity and other investment contract deposit liabilities is as follows:
December 31, 1998 1997 ---------------------- (IN MILLIONS) Universal life $10,218.0 $10,012.0 Annuity 1,429.0 1,817.4 Other investment contract deposits 6,326.0 4,815.1 ---------------------- $17,973.0 $16,644.5 ======================
The detail of universal life, annuity and other investment contract deposits policy fees and interest credited net of reinsurance ceded is as follows:
Years Ended December 31, 1998 1997 1996 ------------------------------------ (IN MILLIONS) Policy fees: Universal life $439.9 $377.5 $318.4 Annuity 82.1 50.3 26.6 Other investment contract deposits 3.3 3.4 3.6 ------------------------------------ Total policy fees $525.3 $431.2 $348.6 ==================================== Interest credited: Universal life $440.8 $368.2 $284.3 Annuity 79.8 116.8 138.7 Other investment contract deposits 360.2 312.8 242.0 ------------------------------------ Total interest credited $880.8 $797.8 $665.0 ====================================
35 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. SHORT-TERM AND LONG-TERM DEBT Pacific Life borrows for short-term needs by issuing commercial paper. Principal of $234.9 million and interest payable of $0.6 million was outstanding as of December 31, 1998, bearing an average interest rate of 5.22%, and was repaid in January 1999. There was no commercial paper debt outstanding as of December 31, 1997. Pacific Life has a revolving credit facility available of $350 million as of December 31, 1998 and 1997. There was no debt outstanding under the revolving credit facility as of December 31, 1998 and 1997. PAM had bank borrowings outstanding of $60 million and $104 million as of December 31, 1998 and 1997, respectively. The interest rate averaged 5.8%, 5.8% and 5.6% for the years ended December 31, 1998, 1997 and 1996, respectively. Outstanding debt is due and payable in 1999 and subject to renewal. The borrowing limit for PAM as of December 31, 1998 and 1997 was $200 million. Pacific Life has $150 million of long-term debt which consists of surplus notes outstanding at an interest rate of 7.9% maturing on December 30, 2023. Interest is payable semiannually on June 30 and December 30. The surplus notes may not be redeemed at the option of Pacific Life or any holder of the surplus notes. The surplus notes are unsecured and subordinated to all present and future senior indebtedness and policy claims of Pacific Life. Each payment of interest on and the payment of principal of the surplus notes may be made only with the prior approval of the Insurance Commissioner of the State of California. Interest expense amounted to $11.8 million for each of the years ended December 31, 1998, 1997 and 1996 and is included in net investment income on the accompanying consolidated statements of operations. 10. INCOME TAXES The Company accounts for income taxes using the liability method. The deferred tax consequences of changes in tax rates or laws must be computed on the amounts of temporary differences and carryforwards existing at the date a new tax law is enacted. Recording the effects of a change involves adjusting deferred tax liabilities and assets with a corresponding charge or credit recognized in the provision for income taxes. The objective is to measure a deferred tax liability or asset using the enacted tax rates and laws expected to apply to taxable income in the periods in which the deferred tax liability or asset is expected to be settled or realized. The provision for income taxes is as follows:
Years Ended December 31, 1998 1997 1996 ------------------------------------ (IN MILLIONS) Current $134.1 $127.9 $163.5 Deferred (20.6) (14.4) (49.8) ------------------------------------ $113.5 $113.5 $113.7 ====================================
36 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. INCOME TAXES (CONTINUED) The sources of the Company's provision for deferred taxes are as follows:
Years Ended December 31, 1998 1997 1996 -------------------------------------- (IN MILLIONS) Non deductible reserves $ 28.2 $(27.6) $ (6.4) Duration hedging 20.8 (2.6) (14.9) Partnership income 20.8 Deferred policy acquisition costs (12.6) (18.0) 2.1 Investment valuation (24.5) 3.9 (7.3) Policyholder reserves (29.5) 20.1 (28.5) Other (2.6) 9.8 5.2 -------------------------------------- Deferred taxes from operations 0.6 (14.4) (49.8) Release of subsidiary deferred taxes (21.2) -------------------------------------- Deferred tax provision $(20.6) $(14.4) $(49.8) ======================================
The Company's acquisition of a controlling interest in a subsidiary allowed such subsidiary to be included in PMHC's consolidated income tax return. That inclusion resulted in the release of certain deferred taxes. A reconciliation of the provision for income taxes based on the prevailing corporate statutory tax rate to the provision reflected in the consolidated financial statements is as follows:
Years Ended December 31, 1998 1997 1996 -------------------------------------- (IN MILLIONS) Income taxes at the statutory rate $124.2 $101.3 $ 98.1 Equity tax (5.0) 5.0 16.3 Amortization of intangibles on equity method investments 4.3 7.6 6.5 Non-taxable investment income (3.6) (2.6) (2.1) Other (6.4) 2.2 (5.1) -------------------------------------- Provision for income taxes $113.5 $113.5 $113.7 ======================================
37 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. INCOME TAXES (CONTINUED) The net deferred tax liability is comprised of the following tax effected temporary differences:
December 31, 1998 1997 -------------------- (IN MILLIONS) Policyholder reserves $254.3 $224.8 Investment valuation 44.7 20.2 Deferred compensation 33.7 25.9 Dividends 7.6 7.7 Non deductible reserves 5.9 34.1 Depreciation (2.4) (2.5) Duration hedging (8.5) 12.3 Deferred policy acquisition costs (13.3) (25.9) Partnership income (20.8) Other (1.4) 3.8 -------------------- Deferred taxes from operations 299.8 300.4 Deferred taxes assumed in acquisition of subsidiary 4.8 Issuance of partnership units by affiliate (74.9) (47.9) Unrealized gain on securities available for sale (272.3) (307.8) -------------------- Net deferred tax liability $(42.6) $(55.3) ====================
38 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. COMPREHENSIVE INCOME The Company displays comprehensive income and its components in the accompanying consolidated statements of stockholder's equity and the note herein. The Company's only component of other comprehensive income, unrealized gain (loss) on securities available for sale, is shown net of reclassification adjustments, as defined by SFAS No. 130, and net of income tax in the accompanying consolidated statements of stockholder's equity. The disclosure of the gross components of other comprehensive income is as follows:
Years Ended December 31, 1998 1997 1996 -------------------------------------- (IN MILLIONS) Calculation of Holding Gain (Loss): -------------------------------------------------- Gross holding gain (loss) on securities available for sale $(13.4) $ 338.2 $ (75.7) Tax (expense) benefit 4.5 (117.1) 26.5 -------------------------------------- Holding gain (loss) on securities available for sale, net of tax $ (8.9) $ 221.1 $ (49.2) ====================================== Calculation of Reclassification Adjustment: -------------------------------------------------- Realized gain on sale of securities available for sale $ 89.3 $ 38.9 $ 82.6 Tax expense (31.3) (13.8) (29.0) -------------------------------------- Reclassification adjustment, net of tax $ 58.0 $ 25.1 $ 53.6 ====================================== Amounts Reported in Other Comprehensive Income: -------------------------------------------------- Holding gain (loss) on securities available for sale, net of tax $ (8.9) $ 221.1 $ (49.2) Less reclassification adjustment, net of tax 58.0 25.1 53.6 -------------------------------------- Net unrealized gain (loss) recognized in other comprehensive income $(66.9) $ 196.0 $(102.8) ======================================
39 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 12. REINSURANCE The Company has reinsurance agreements with other insurance companies for the purpose of diversifying risk and limiting exposure on larger risks or, in the case of a producer-owned reinsurance company, to diversify risk and retain top producing agents. Amounts receivable from reinsurers for reinsurance on future policy benefits, universal life deposits, and unpaid losses is reported as an asset and included in other assets on the accompanying consolidated statements of financial condition. All assets associated with reinsured business remain with, and under the control of the Company. Approximate amounts recoverable (payable) from (to) reinsurers include the following amounts:
December 31, 1998 1997 -------------------- (IN MILLIONS) Reinsured universal life deposits $(46.0) $(39.6) Future policy benefits 108.9 92.2 Unpaid claims 12.5 14.0 Paid claims 24.3 10.2
As of December 31, 1998, 79% of the reinsurance recoverables were from one reinsurer, of which 100% is secured by payables to the reinsurer. To the extent that the assuming companies become unable to meet their obligations under these agreements, the Company remains contingently liable. The Company does not anticipate nonperformance by the assuming companies. Revenues and benefits are shown net of the following reinsurance transactions:
Years Ended December 31, 1998 1997 1996 -------------------------------------- (IN MILLIONS) Ceded reinsurance netted against insurance premiums $ 82.7 $ 70.7 $ 44.3 Assumed reinsurance included in insurance premiums 17.2 18.1 17.8 Ceded reinsurance netted against policy fees 65.0 77.5 71.0 Ceded reinsurance netted against net investment income 203.3 204.9 192.5 Ceded reinsurance netted against interest credited 162.8 165.8 155.2 Ceded reinsurance netted against policy benefits 121.3 93.4 56.7 Assumed reinsurance included in policy benefits 17.7 12.7 9.9
40 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. SEGMENT INFORMATION The Company's six operating segments are Individual Insurance, Institutional Products Group, Annuities, Group Employee Benefits, Broker-Dealers and Investment Management. These segments have been identified based on differences in products and services offered. All other activity is included in Corporate and Other. The Individual Insurance segment offers universal life, variable universal life and other life insurance products to individuals, small businesses and corporations through a network of distribution channels that include branch offices, marketing organizations, national accounts and a national producer group. The Institutional Products Group segment offers investment and annuity products to pension fund sponsors and other institutional investors primarily through its home office marketing team. The Annuities segment offers variable and fixed annuities to individuals, small businesses and qualified plans through financial institutions, National Association of Securities Dealers ("NASD") firms, and regional and national wirehouses. The Group Employee Benefits segment offers group life, health and dental insurance, and stop loss insurance products to corporate, government and labor-management-negotiated plans. The group life, health and dental insurance is distributed through a network of sales offices and the stop loss insurance is distributed through a network of third party administrators. The Broker-Dealers segment includes five NASD registered firms that provide securities and affiliated insurance brokerage services and investment advisory services through more than 3,100 registered representatives. The Investment Management segment is primarily comprised of the Company's investment in PIMCO Advisors (Note 1). PIMCO Advisors offers a diversified range of investment products through separately managed accounts, and institutional, retail and offshore funds. Corporate and Other primarily includes investment income, expenses and assets not attributable to the major segments and the operations of the Company's reinsurance subsidiary located in the United Kingdom. Corporate and Other also includes the elimination of intersegment revenues, expenses and assets. The Company uses the same accounting policies and procedures to measure segment income and assets as it uses to measure its consolidated net income and assets. Net investment income and capital gains are allocated based on invested assets purchased and held as is required for transacting the business of that segment. Overhead expenses are allocated based on services provided. Interest expense is allocated based on the short-term borrowing needs of the segment and is included in net investment income. The income tax provision is allocated based on each segment's actual tax liability. Intersegment revenues include commissions paid by the Individual Insurance segment and the Annuities segment for variable product sales to the Broker-Dealers segment. Investment Management segment assets have been reduced by an intersegment note payable of $110 million as of December 31, 1998. The related intersegment note receivable is included in Corporate and Other segment assets. The Company generates substantially all of its revenues and income from customers located in the United States. Additionally, substantially all of the Company's assets are located in the United States. Depreciation expense and capital expenditures are not material and have not been reported herein. The Company's significant non cash item is interest credited to universal life, annuity and other investment contract deposits and is disclosed herein. 41 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. SEGMENT INFORMATION (CONTINUED) Financial information for each of the business segments is as follows:
INSTITUTIONAL GROUP CORPORATE INDIVIDUAL PRODUCTS EMPLOYEE BROKER- INVESTMENT AND INSURANCE GROUP ANNUITIES BENEFITS DEALERS MANAGEMENT OTHER TOTAL ---------------------------------------------------------------------------------------------------- (IN MILLIONS) External customers and other revenue December 31, 1998 $ 414.6 $ 43.3 $ 124.0 $521.2 $236.1 $ 17.1 $ 17.4 $ 1,373.7 December 31, 1997 379.2 61.6 83.3 480.6 154.0 21.8 3.2 1,183.7 December 31, 1996 335.4 36.8 41.4 431.7 82.2 22.2 5.7 955.4 Intersegment revenues December 31, 1998 185.3 (185.3) - December 31, 1997 143.3 (143.3) - December 31, 1996 98.0 (98.0) - Net investment income December 31, 1998 565.7 565.5 88.6 23.1 0.9 8.0 42.0 1,293.8 December 31, 1997 485.2 509.6 149.4 24.9 0.8 6.2 49.2 1,225.3 December 31, 1996 404.1 465.5 149.6 21.9 0.8 4.8 40.6 1,087.3 Net realized capital gains (losses) December 31, 1998 3.4 (13.6) 4.6 1.7 4.0 38.6 38.7 December 31, 1997 9.8 12.8 0.6 2.0 20.8 39.3 85.3 December 31, 1996 5.7 5.0 (4.5) 2.3 1.1 34.4 44.0 Net income of equity method investees December 31, 1998 103.0 103.0 December 31, 1997 80.1 80.1 December 31, 1996 61.3 61.3 Total revenues December 31, 1998 983.7 595.2 217.2 546.0 422.3 132.1 (87.3) 2,809.2 December 31, 1997 874.2 584.0 233.3 507.5 298.1 128.9 (51.6) 2,574.4 December 31, 1996 745.2 507.3 186.5 455.9 181.0 89.4 (17.3) 2,148.0 Segment profit (loss) before income tax provision December 31, 1998 151.1 74.6 34.1 10.3 9.9 60.1 14.9 355.0 December 31, 1997 132.4 98.3 23.5 28.8 6.4 24.6 (24.5) 289.5 December 31, 1996 109.3 80.7 (16.5) 26.3 4.3 34.1 42.1 280.3 Income tax provision (benefit) December 31, 1998 52.6 21.2 11.3 2.9 4.5 2.1 18.9 113.5 December 31, 1997 55.8 33.9 9.4 9.1 2.7 10.1 (7.5) 113.5 December 31, 1996 44.8 27.5 (0.4) 6.2 1.8 21.5 12.3 113.7 Segment net income (loss) December 31, 1998 98.5 53.4 22.8 7.4 5.4 58.0 (4.0) 241.5 December 31, 1997 76.6 64.4 14.1 19.7 3.7 14.5 (17.0) 176.0 December 31, 1996 64.5 53.2 (16.1) 20.1 2.5 12.6 29.8 166.6 Interest credited on universal life, annuity and other investment contract deposits December 31, 1998 449.6 354.1 71.0 6.1 880.8 December 31, 1997 378.8 299.8 106.2 13.0 797.8 December 31, 1996 290.3 232.9 132.8 9.0 665.0 Segment assets As of December 31, 1998 14,578.2 15,221.0 8,384.2 361.1 55.8 267.3 1,016.3 39,883.9 As of December 31, 1997 13,426.7 12,241.7 6,310.8 368.6 52.4 305.4 1,303.2 34,008.8
42 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. PENSION PLANS, POSTRETIREMENT BENEFITS AND OTHER PLANS PENSION PLANS Pacific Life has defined benefit pension plans which cover all eligible employees who have one year of continuous employment and have attained age 21. The full-benefit vesting period for all participants is five years. Benefits for employees are based on years of service and the highest five consecutive years of compensation during the last ten years of employment. Pacific Life's funding policy is to contribute amounts to the plan sufficient to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974, plus such additional amounts as may be determined appropriate. Contributions are intended to provide not only for benefits attributed to employment to date but also for those expected to be earned in the future. All such contributions are made to a tax-exempt trust. Plan assets consist primarily of group annuity contracts issued by Pacific Life, as well as mutual funds managed by an affiliate of Pacific Life. Components of net periodic pension cost are as follows:
Years Ended December 31, 1998 1997 1996 ------------------------------------ (IN MILLIONS) Service cost - benefits earned during the year $ 4.0 $ 3.6 $ 3.7 Interest cost on projected benefit obligation 10.9 10.4 9.8 Expected return on plan assets (15.0) (12.8) (11.2) Amortization of net obligations and prior service cost (1.4) (1.4) (1.4) ------------------------------------ Net periodic pension cost (benefit) $ (1.5) $ (0.2) $ 0.9 ====================================
43 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. PENSION PLANS, POSTRETIREMENT BENEFITS AND OTHER PLANS (CONTINUED) The following tables set forth the pension plans' reconciliation of benefit obligation, plan assets and funded status for the years ended:
December 31, 1998 1997 -------------------- (IN MILLIONS) Change in Benefit Obligation: ------------------------------------------------------------ Benefit obligation, beginning of year $157.9 $140.9 Service cost 4.0 3.6 Interest cost 10.9 10.4 Plan expense (0.3) (0.2) Actuarial loss 11.9 10.1 Benefits paid (6.6) (6.9) -------------------- Benefit obligation, end of year $177.8 $157.9 ==================== Change in Plan Assets: ------------------------------------------------------------ Fair value of plan assets, beginning of year $180.3 $154.2 Actual return on plan assets 21.9 33.2 Plan expense (0.3) (0.2) Benefits paid (6.6) (6.9) -------------------- Fair value of plan assets, end of year $195.3 $180.3 ==================== Funded Status Reconciliation: ------------------------------------------------------------ Funded status $ 17.5 $ 22.4 Unrecognized transition asset (3.6) (4.8) Unrecognized prior service cost (1.0) (1.2) Unrecognized actuarial gain (9.7) (14.7) -------------------- Prepaid pension cost $ 3.2 $ 1.7 ====================
In determining the actuarial present value of the projected benefit obligation as of December 31, 1998 and 1997, the weighted average discount rate used was 6.5% and 7.0%, respectively, and the rate of increase in future compensation levels was 5.0% and 5.5%, respectively. The expected long-term rate of return on plan assets was 8.5% in 1998 and 1997. In connection with the merger of PCL into Pacific Life as discussed in Note 4, Pacific Life assumed sponsorship of PCL's defined benefit pension plan. This pension plan provides for retirement income benefits at age 65 with reduced benefits for early retirement. Effective December 31, 1997, PCL's defined benefit plan merged into Pacific Life's plan. All benefits associated with PCL's plan remain unchanged subsequent to the merger. POSTRETIREMENT BENEFITS Pacific Life sponsors a defined benefit health care plan and a defined benefit life insurance plan (the "Plans") that provide postretirement benefits for all eligible retirees and their dependents. Generally, qualified employees may become eligible for these benefits if they reach normal retirement age, have been covered under Pacific Life's policy as an active employee for a minimum continuous period prior to the date retired, and have an employment date before January 1, 1990. The Plans contain cost-sharing features such as deductibles and 44 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. PENSION PLANS, POSTRETIREMENT BENEFITS AND OTHER PLANS (CONTINUED) coinsurance, and require retirees to make contributions which can be adjusted annually. Pacific Life's commitment to qualified employees who retire after April 1, 1994 is limited to specific dollar amounts. Pacific Life reserves the right to modify or terminate the Plans at any time. As in the past, the general policy is to fund these benefits on a pay-as-you-go basis. The net periodic postretirement benefit cost for the years ended December 31, 1998, 1997 and 1996 is $0.7 million, $0.8 million and $1.4 million, respectively. As of December 31, 1998 and 1997, the accumulated benefit obligation is $19.3 million and $20.0 million, respectively. The fair value of the plan assets as of December 31, 1998 and 1997 is zero. The amount of accrued benefit cost included in other liabilities on the accompanying consolidated statements of financial condition is $25.3 million and $26.0 million as of December 31, 1998 and 1997, respectively. The Plans include both indemnity and HMO coverage. The assumed health care cost trend rate used in measuring the accumulated benefit obligation for indemnity coverage was 8% and 9% for 1998 and 1997, respectively, and is assumed to decrease gradually to 3.5% in 2003 and remain at that level thereafter. The assumed health care cost trend rate used in measuring the accumulated benefit obligation for HMO coverage was 7% and 8% for 1998 and 1997, respectively, and is assumed to decrease gradually to 3% in 2003 and remain at that level thereafter. The amount reported is materially effected by the health care cost trend rate assumptions. If the health care cost trend rate assumptions were increased by 1%, the accumulated postretirement benefit obligation as of December 31, 1998 would be increased by 8.0%, and the aggregate of the service and interest cost components of the net periodic benefit cost would increase by 7.5%. If the health care cost trend rate assumptions were decreased by 1%, the accumulated postretirement benefit obligation as of December 31, 1998 would be decreased by 6.8%, and the aggregate of the service and interest cost components of the net periodic benefit cost would decrease by 6.5%. The discount rate used in determining the accumulated postretirement benefit obligation is 6.5% and 7.0% for 1998 and 1997, respectively. OTHER PLANS Pacific Life provides a voluntary Retirement Incentive Savings Plan ("RISP") pursuant to Section 401(k) of the Internal Revenue Code covering all eligible employees of the Company. Effective October 1, 1997, Pacific Life's RISP changed the matching percentage of each employee's contributions from 50% to 75%, up to a maximum of 6% of eligible employee compensation and restricted the matched investment to an Employee Stock Ownership Plan ("ESOP") sponsored by Pacific LifeCorp. The ESOP was formed at the time of the Conversion and is currently only available to the participants of the RISP in the form of matching contributions. Pacific Life also has a deferred compensation plan which permits certain employees to defer portions of their compensation and earn a guaranteed interest rate on the deferred amounts. The interest rate is determined annually and is guaranteed for one year. The compensation which has been deferred has been accrued and the primary expense, other than compensation, related to this plan is interest on the deferred amounts. The Company also has performance based incentive compensation plans for its employees. 15. TRANSACTIONS WITH AFFILIATES Pacific Life serves as the investment advisor for the Pacific Select Fund, the investment vehicle provided to the Company's variable life and variable annuity contractholders. Pacific Life charges fees based upon the net asset value of the portfolios of the Pacific Select Fund, which amounted to $42.1 million, $27.5 million and $14.3 million for the years ended December 31, 1998, 1997 and 1996, respectively. In addition, Pacific Life provides certain support services to the Pacific Select Fund for an administration fee which is based on an 45 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. TRANSACTIONS WITH AFFILIATES (CONTINUED) allocation of actual costs. Such administration fees amounted to $232,000, $165,000 and $108,000 for the years ended December 31, 1998, 1997 and 1996, respectively. PIMCO Advisors provides investment advisory services to the Company for which the fees amounted to $16.9 million, $11.4 million and $6.2 million for the years ended December 31, 1998, 1997 and 1996, respectively. Included in equity securities on the accompanying consolidated statements of financial condition are investments in mutual funds and other investments managed by PIMCO Advisors which amounted to $40.3 million and $46.5 million as of December 31, 1998 and 1997, respectively. Pacific Life provides certain support services to PIMCO Advisors. Charges for these services are based on an allocation of actual costs and amounted to $1.2 million, $1.2 million and $1.4 million for the years ended December 31, 1998, 1997 and 1996, respectively. 16. TERMINATION AND NON-COMPETITION AGREEMENTS Effective November 15, 1994, in connection with the PIMCO Advisors transaction (Note 1), termination and non-competition agreements were entered into with certain former key employees of PAM's subsidiaries. These agreements provide terms and conditions for the allocation of future proceeds received from distributions and sales of certain PIMCO Advisors units and other noncompete payments. When the amount of future obligations to be made to a key employee is determinable, a liability for such amount is established. For the years ended December 31, 1998, 1997 and 1996, approximately $49.4 million, $85.8 million and $35.3 million, respectively, is included in operating expenses on the accompanying consolidated statements of operations related to the termination and non-competition agreements. This includes payments of $43.1 million in 1997 to former key employees who elected to sell to PAM's subsidiaries their rights to the future proceeds from the PIMCO Advisors units. 17. COMMITMENTS The Company has outstanding commitments to make investments primarily in fixed maturities, mortgage loans, limited partnerships and other investments as follows (IN MILLIONS): Years Ending December 31: ------------------------------------------------------------ 1999 $172.7 2000-2003 202.1 2004 and thereafter 55.9 ------ Total $430.7 ======
The Company leases office facilities under various non-cancelable operating leases. Aggregate minimum future commitments as of December 31, 1998 through the term of the leases are approximately $37.5 million. 46 PACIFIC LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 18. LITIGATION The Company was named in civil litigation proceedings similar to other litigation brought against many life insurers alleging misconduct in the sale of products, sometimes referred to as market conduct litigation. The class of plaintiffs included, with some exceptions, all persons who owned, as of December 31, 1997 (or as of the date of policy termination, if earlier), individual whole life, universal life or variable life insurance policies sold by the Company on or after January 1, 1982. The Company has settled this litigation pursuant to a final settlement agreement approved by the Court in November 1998. The settlement agreement is currently being implemented. The cost of the settlement has been included in the accompanying consolidated statements of operations during the three years ended December 31, 1998. Further, the Company is a respondent in a number of other legal proceedings, some of which involve allegations for extra-contractual damages. In the opinion of management, the outcome of the foregoing proceedings is not likely to have a material adverse effect on the consolidated financial position or results of operations of the Company. --------------------------------------------------------------------------- 47 FORM NO. 1602-OA PART II Part C: OTHER INFORMATION Item 24. Financial Statements and Exhibits --------------------------------- (a) Financial Statements Part A: Financial highlights for Registrant Part B: (1) Registrant's Financial Statements Audited Financial Statements dated as of December 31, 1998 which are incorporated by reference from the Annual Report include the following for Separate Account A: Statements of Assets and Liabilities Statements of Operations Statements of Changes in Net Assets Notes to Financial Statements (2) Depositor's Financial Statements Audited Consolidated Financial Statements dated as of December 31, 1998 and 1997, and for the three year period ending December 31, 1998, included in Part B include the following for Pacific Life: Consolidated Statements of Financial Position Consolidated Statements of Operations and Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements (b) Exhibits 1. (a) Resolution of the Board of Directors of the Depositor authorizing establishment of Separate Account A and Memorandum establishing Separate Account A. (b) Memorandum Establishing Two New Variable Accounts--Aggressive Equity and Emerging Markets Portfolios. (c) Resolution of the Board of Directors of Pacific Life Insurance Company authorizing conformity to the terms of the current Bylaws. II-1 2. Not applicable 3. (a) Distribution Agreement between Pacific Mutual Life and Pacific Mutual Distributors, Inc. ("PMD") (formerly Pacific Equities Network) (b) Form of Selling Agreement between Pacific Mutual Life, PMD and Various Broker-Dealers 4. (a) Form of Individual Flexible Premium Deferred Variable Annuity Contract (Form 10-12600) (b) Qualified Pension Plan Rider (Form R90-Pen-V) (c) 403(b) Tax-Sheltered Annuity Rider (Form R-403B-9553) (d) Section 457 Plan Rider (Form 24-123799) (e) IRA Rider (Form R-IRA 198) (f) Roth IRA Rider (Form R-RIRA 198) (g) Simple IRA Rider (Form R-SIRA 198) (h) Stepped-Up Death Benefit Rider (Form 20-12601) (i) Premier Death Benefit Rider (Form 20-12602) 5. (a) Application Form for Individual Flexible Premium Deferred Variable Annuity Contract (Form 25-12600) (b) Variable Annuity PAC APP (c) Application/Confirmation Form 6. (a) Pacific Life's Articles of Incorporation (b) By-laws of Pacific Life 7. Not applicable 8. Fund Participation Agreement 9. Opinion and Consent of legal officer of Pacific Life as to the legality of Contracts being registered. II-2 10. (a) Consent of Independent Auditors (b) Powers of Attorney 11. Not applicable 12. Not applicable 13. Performance Calculations 14. Not applicable 15. Not applicable 16. Not applicable Item 25. Directors and Officers of Pacific Life Positions and Offices Name and Address with Pacific Life Thomas C. Sutton Director, Chairman of the Board, and Chief Executive Officer Glenn S. Schafer Director and President Khanh T. Tran Director, Senior Vice President and Chief Financial Officer David R. Carmichael Director, Senior Vice President and General Counsel Audrey L. Milfs Director, Vice President and Corporate Secretary Richard M. Ferry Director Donald E. Guinn Director Ignacio E. Lozano, Jr. Director Charles D. Miller Director Donn B. Miller Director Richard M. Rosenberg Director James R. Ukropina Director II-3 Raymond L. Watson Director Edward R. Byrd Vice President and Controller Gerald W. Robinson Executive Vice President - ------------------------------ The address for each of the persons listed above is as follows: 700 Newport Center Drive Newport Beach, California 92660 Item 26. Persons Controlled by or Under Common Control with Pacific Life or Separate Account A The following is an explanation of the organization chart of Pacific Life's subsidiaries: PACIFIC LIFE, SUBSIDIARIES & AFFILIATED ENTERPRISES LEGAL STRUCTURE Pacific Life is a California Stock Insurance Company wholly-owned by Pacific LifeCorp (a Delaware Stock Holding Company) which is, in turn, 99% owned by Pacific Mutual Holding Company (a California Mutual Holding Company). Pacific Life is the parent company of Pacific Asset Management LLC (a Delaware Limited Liability Company), Pacific Life & Annuity Company, formerly known as PM Group Life Insurance Company (an Arizona Corporation), Pacific Mutual Distributors, Inc., and World-Wide Holdings Limited (a United Kingdom Corporation). Pacific Life also has a 40% ownership of American Maturity Life Insurance Company (a Connecticut Corporation), a 50% ownership of Pacific Mezzanine Associates, L.L.C. (a Delaware Limited Liability Company and a 95% ownership of Grayhawk Golf Holdings, LLC). A subsidiary of Pacific Mezzanine Associates, L.L.C. is Pacific Mezzanine Investors, L.L.C., (a Delaware Limited Liability Company) who is the sole general partner of the PMI Mezzanine Fund, L.P. (a Delaware Limited Partnership). Subsidiaries of Pacific Asset Management LLC are PMRealty Advisors Inc., Pacific Financial Products Inc. (a Delaware Corporation), PPA LLC (a Delaware Limited Liability Company), CCM LLC (a Delaware Limited Liability Company), NFJ LLC (a Delaware Limited Liability Company), and PIMCO Holding LLC (a Delaware Limited Liability Company). Pacific Asset Management LLC directly and indirectly beneficially owns approximately 33% of the outstanding partnership interests in PIMCO Advisors L.P. (a Delaware Limited Partnership). Subsidiaries of Pacific Mutual Distributors, Inc. include: Associated Financial Group, Inc.; Mutual Service Corporation (a Michigan Corporation), along with its subsidiaries Advisors' Mutual Service Center, Inc. (a Michigan Corporation) and Titan Value Equities Group, Inc.; and United Planners' Group, Inc. (an Arizona Corporation), along with its subsidiary United Planners' Financial Services of America (an Arizona Limited Partnership). Subsidiaries of World-Wide Holdings limited include: World-Wide Reassurance Company Limited (a United Kingdom Corporation) and World-Wide Reassurance Company (BVI) Limited (a British Virgin Islands Corporation). All corporations are 100% owned unless otherwise indicated. All entities are California corporations unless otherwise indicated. II-4 Item 27. Number of Contractholders None Item 28. Indemnification (a) The Distribution Agreement between Pacific Life (formerly Pacific Mutual Life) and PMD provides substantially as follows: Pacific Life (formerly Pacific Mutual Life) hereby agrees to indemnify and hold harmless PMD and its officers and directors, and employees for any expenses (including legal expenses), losses, claims, damages, or liabilities incurred by reason of any untrue or alleged untrue statement or representation of a material fact or any omission or alleged omission to state a material fact required to be stated to make other statements not misleading, if made in reliance on any prospectus, registration statement, post-effective amendment thereof, or sales materials supplied or approved by Pacific Life (formerly Pacific Mutual Life) or the Separate Account. Pacific Life (formerly Pacific Mutual Life) shall reimburse each such person for any legal or other expenses reasonably incurred in connection with investigating or defending any such loss, liability, damage, or claim. However, in no case shall Pacific Life (formerly Pacific Mutual Life) be required to indemnify for any expenses, losses, claims, damages, or liabilities which have resulted from the willful misfeasance, bad faith, negligence, misconduct, or wrongful act of PMD. PMD hereby agrees to indemnify and hold harmless Pacific Life (formerly Pacific Mutual Life), its officers, directors, and employees, and the Separate Account for any expenses, losses, claims, damages, or liabilities arising out of or based upon any of the following in connection with the offer or sale of the contracts: (1) except for such statements made in reliance on any prospectus, registration statement or sales material supplied or approved by Pacific Life (formerly Pacific Mutual Life) or the Separate Account, any untrue or alleged untrue statement or representation made; (2) any failure to deliver a currently effective prospectus; (3) the use of any unauthorized sales literature by any officer, employee or agent of PMD or Broker; (4) any willful misfeasance, bad faith, negligence, misconduct or wrongful act. PMD shall reimburse each such person for any legal or other expenses reasonably incurred in connection with investigating or defending II-5 any such loss, liability, damage, or claim. (b) The Form of Selling Agreement between Pacific Life (formerly Pacific Mutual Life), PMD (formerly PEN) and Various Broker- Dealers provides substantially as follows: Pacific Life (formerly Pacific Mutual Life) and PMD agree to indemnify and hold harmless Selling Broker-Dealer and General Agent, their officers, directors, agents and employees, against any and all losses, claims, damages or liabilities to which they may become subject under the 1933 Act, the 1934 Act, or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact or any omission to state a material fact required to be stated or necessary to make the statements made not misleading in the registration statement for the Contracts or for the shares of Pacific Select Fund (the "Fund") filed pursuant to the 1933 Act, or any prospectus included as a part thereof, as from time to time amended and supplemented, or in any advertisement or sales literature approved in writing by Pacific Life (formerly Pacific Mutual Life) and PMD pursuant to Section IV.E. of this Agreement. Selling Broker-Dealer and General Agent agree to indemnify and hold harmless Pacific Life (formerly Pacific Mutual Life), the Fund and PMD, their officers, directors, agents and employees, against any and all losses, claims, damages or liabilities to which they may become subject under the 1933 Act, the 1934 Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (a) any oral or written misrepresentation by Selling Broker-Dealer or General Agent or their officers, directors, employees or agents unless such misrepresentation is contained in the registration statement for the Contracts or Fund shares, any prospectus included as a part thereof, as from time to time amended and supplemented, or any advertisement or sales literature approved in writing by Pacific Life (formerly Pacific Mutual Life) and PMD pursuant to Section IV.E. of this Agreement, (b) the failure of Selling Broker-Dealer or General Agent or their officers, directors, employees or agents to comply with any applicable provisions of this Agreement or (c) claims by Subagents or employees of General Agent or Selling Broker-Dealer for payments of compensation or remuneration of any type. Selling Broker-Dealer and General Agent will reimburse Pacific Life (formerly Pacific Mutual Life) or PMD or any director, officer, agent or employee of either entity for any legal or other expenses reasonably incurred by Pacific Life (formerly Pacific Mutual Life), PMD, or such officer, director, agent or employee in connection with investigating or defending any such loss, claims, damages, liability or action. This indemnity agreement will be in addition to any liability which Broker-Dealer may otherwise have. II-6 Item 29. Principal Underwriters (a) PMD also acts as principal underwriter for Pacific Select Separate Account, Pacific Select Exec Separate Account, Pacific Select Variable Annuity Separate Account, Pacific Corinthian Variable Separate Account, Separate Account B and Pacific Select Fund. (b) For information regarding PMD, reference is made to Form B-D, SEC File No. 8-15264, which is herein incorporated by reference. (c) PMD retains no compensation or net discounts or commissions from the Registrant. Item 30. Location of Accounts and Records The accounts, books and other documents required to be maintained by Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and the rules under that section will be maintained by Pacific Life at 700 Newport Center Drive, Newport Beach, California 92660. Item 31. Management Services Not applicable Item 32. Undertakings The registrant hereby undertakes: (a) to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in this registration statement are never more than 16 months old for so long as payments under the variable annuity contracts may be accepted, unless otherwise permitted. (b) to include either (1) as a part of any application to purchase a contract offered by the prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a post card or similar written communication affixed to or included in the prospectus that the applicant can remove to send for a Statement of Additional Information, or (3) to deliver a Statement of Additional Information with the Prospectus. (c) to deliver any Statement of Additional Information and any financial statements required to be made available under this Form promptly upon written or oral request. Additional Representations II-7 (a) The Registrant and its Depositor are relying upon American Council of Life Insurance, SEC No-Action Letter, SEC Ref. No. 1P-6-88 (November 28, 1988) with respect to annuity contracts offered as funding vehicles for retirement plans meeting the requirements of Section 403(b) of the Internal Revenue Code, and the provisions of paragraphs (1)-(4) of this letter have been complied with. (b) The Registrant and its Depositor are relying upon Rule 6c-7 of the Investment Company Act of 1940 with respect to annuity contracts offered as funding vehicles to participants in the Texas Optional Retirement Program, and the provisions of Paragraphs (a)-(d) of the Rule have been complied with. (c) REPRESENTATION PURSUANT TO SECTION 26(e) OF THE INVESTMENT COMPANY ACT OF 1940: Pacific Life Insurance Company and Registrant represent that the fees and charges to be deducted under the Variable Annuity Contract ("Contract") described in the prospectus contained in this registration statement are, in the aggregate, reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed in connection with the Contract. II-8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets the requirements of Securities Act Rule 485 for effectiveness and has caused this Registration Statement on Form N-4 to be signed on its behalf by the undersigned thereunto duly authorized in the City of Newport Beach, and the State of California on this 17th day of December, 1999. SEPARATE ACCOUNT A (Registrant) By: PACIFIC LIFE INSURANCE COMPANY By: ____________________________________________ Thomas C. Sutton* Chairman and Chief Executive Officer By: PACIFIC LIFE INSURANCE COMPANY (Depositor) By: ____________________________________________ Thomas C. Sutton* Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
Signature Title Date _________________ Director, Chairman of the Board December 17, 1999 Thomas C. Sutton* and Chief Executive Officer _________________ Director and President December 17, 1999 Glenn S. Schafer* _________________ Director, Senior Vice President December 17, 1999 Khanh T. Tran* and Chief Financial Officer _________________ Director, Senior Vice President December 17, 1999 David R. Carmichael* and General Counsel _________________ Director, Vice President and December 17, 1999 Audrey L. Milfs* Corporate Secretary _________________ Director December 17, 1999 Richard M. Ferry* _________________ Director December 17, 1999 Donald E. Guinn* _________________ Director December 17, 1999 Ignacio E. Lozano, Jr.* _________________ Director December 17, 1999 Charles D. Miller* _________________ Director December 17, 1999 Donn B. Miller* _________________ Director December 17, 1999 Richard M. Rosenberg* _________________ Director December 17, 1999 James R. Ukropina* _________________ Director December 17, 1999 Raymond L. Watson* _________________ Vice President and Controller December 17, 1999 Edward R. Byrd* _________________ Executive Vice President December 17, 1999 Gerald W. Robinson*
*By: _____________________________ December 17, 1999 David R. Carmichael as attorney-in-fact
(Powers of Attorney are contained in this Registration Statement on Form N-4 for Separate Account A as Exhibit 10(b).) EX-99.1(A) 2 EXHIBIT 99.1(A) EXHIBIT 99.1(a) Resolution of the Board of Directors of Pacific Mutual authorizing establishment of Separate Account A and Memorandum establishing Separate Account A SECRETARY'S CERTIFICATE PACIFIC MUTUAL LIFE INSURANCE COMPANY RESOLVED, that the Board of Directors of this Corporation hereby authorizes this Corporation to obtain approval from the appropriate regulatory authorities of an amendment to its Certificate of Authority to issue variable life insurance policies and variable annuity contracts and any derivative thereof being herein collectively referred to as "variable contracts"; and RESOLVED FURTHER, that the Board of Directors of this Corporation hereby authorizes and directs the establishment of Separate Accounts ("Separate Accounts") that may be required to which the amounts received by this Corporation in connection with the sale of the Contracts shall be allocated; and RESOLVED FURTHER, that within the Separate Accounts there may be a number of Variable Accounts with different investment policies and objectives into which a policyowner may direct his interests in the Separate Accounts and the Variable Accounts; and RESOLVED FURTHER, that the Separate Accounts are to be established and maintained in accordance with the provisions of Section 10506 of the California Insurance Code and the regulations promulgated under that Section; and RESOLVED FURTHER, that any Officer of this Corporation is authorized and directed to take whatever action may be necessary or advisable to establish and maintain such Separate Accounts and to register, file or qualify the Contracts for sale, including, but not limited to, determining the states or other jurisdictions in which necessary or advisable action shall be taken to qualify, file, or register the Contracts for sale, performing any and all acts as such Officer deems necessary or advisable to comply with the applicable laws of any such state or jurisdiction including making any required filings with the California Insurance Department or any other regulatory authority in California or any other regulatory authority in any state or jurisdiction having jurisdiction over the insurance activities of the Company or over the contracts; performing any and all acts as such Officer deems necessary or advisable to comply with the applicable laws of the United States including, but not limited to, preparing and filing registration statements with the Securities and Exchange Commission to register the Contracts or interests therein under the Securities Act of 1933 and the Investment Company Act of 1940 and to register the Separate Account under the Investment Company Act of 1940, and to file an exemptive application if necessary or advisable under the Investment Company Act of 1940 and to make such other filings or seek any interpretations that are necessary or advisable from the Securities and Exchange Commission or any other agency of the United States Government; or making any filings, seek any interpretations, or make other submissions that such Officer deems necessary or advisable with other regulatory authorities having jurisdiction over the offer and sale of the Contracts and to execute and file all requisite papers and documents, including, but not limited to, applications, reports, surety bonds, irrevocable consents, powers of attorneys, and appointments of agents for service of process, and the paying of all necessary fees and expenses as in such Officer's judgment may be necessary or advisable. * * * * * I, AUDREY L. MILFS, do hereby certify that I am the duly elected, qualified and acting Secretary of Pacific Mutual Life Insurance Company, a California corporation, and I do hereby further certify that the foregoing is a true and correct copy of a resolution adopted at a meeting of the Board of Directors of said corporation, held on November 22, 1989, at which a quorum was present and voted in favor thereof, and that said resolution has not been revoked or amended and is now in full force and effect. IN, WITNESS WHEREOF, I have executed this certificate as Secretary of said corporation on this 24th day of August, 1994. /s/ AUDREY L. MILFS Audrey L. Milfs Secretary #4427 OFFICE MEMORANDUM DATE September 7, 1994 TO Thomas C. Sutton FROM Gerald W. Robinson SUBJECT Separate Account A RECOMMENDATION: That you authorize the establishment of the Separate Account A ("Separate Account") for the Pacific Portfolios, a variable annuity contract, and Pacific One, a variable annuity contract. WHY RECOMMENDATION IS REQUESTED AT THIS TIME: Documentation of the authorization must accompany the registration materials to be filed with the Securities and Exchange Commission and the State of California for the Separate Account. BACKGROUND: Pacific Mutual's Finance Committee has approved the development of the Separate Account to fund the Pacific Portfolios and Pacific One variable annuity contracts. The Separate Account may be offered under other variable contracts in the future. On November 22, 1989, the Board of Pacific Mutual Life Insurance Co. adopted a resolution authorizing any Officer of the corporation to take whatever action necessary to establish and maintain Separate Accounts which may be required in connection with variable life insurance policies and variable annuity contracts and any derivative thereof. Our outside counsel recommends obtaining this authorization from the CEO. AUTHORIZATION: On behalf of Pacific Mutual Life Insurance Co., the establishment of Separate Account A for the Pacific Portfolios and Pacific One variable annuity contracts is hereby authorized. Establishment of Separate Account A Is Authorized: /s/ THOMAS C. SUTTON Thomas C. Sutton Chairman & Chief Executive Officer EX-99.1(B) 3 EXHIBIT 99.1(B) EXHIBIT 99.1(b) Memorandum Establishing Two New Variable Accounts - Aggressive Equity and Emerging Markets Portfolios OFFICE MEMORANDUM [Logo of Pacific Mutual] DATE February 8, 1996 TO Mr. Glenn S. Schafer FROM Ms. Diane N. Ledger SUBJECT Authorization of the Establishment of the Variable Accounts that will each invest in corresponding underlying Emerging Markets and Aggressive Equity Portfolios of Pacific Select Fund The addition of the Emerging Markets Portfolio and Aggressive Equity Portfolio to Pacific Select Fund was approved by the Board of Trustees of the Fund on November 17, 1995. The objective of the Emerging Markets Portfolio is to seek long-term growth of capital. The objective of the Aggressive Equity Portfolio is to seek capital appreciation. The Board of Trustees of Pacific Select Fund also approved the appointment of Blairlogie Capital Management to serve as the Portfolio Manager of the Emerging Markets Portfolio and Columbus Circle Investors to serve as the Portfolio Manager of the Aggressive Equity Portfolio. On behalf of Pacific Mutual Life Insurance Company, the following is hereby authorized: The establishment of two additional Variable accounts within each of the Pacific Select, Pacific Select Exec, Pacific COLI, Pacific Select Variable Annuity and Separate Account A Separate Accounts. Each of the Variable Accounts is to invest exclusively in shares of its corresponding underlying portfolio of the Pacific Select Fund. Authorized by: /s/ GLENN S. SCHAFER Date: February 8, 1996 Glenn S. Schafer President and Director EX-99.1(C) 4 EXHIBIT 99.1(C) EXHIBIT 99.1(c) Resolution of the Board of Directors of Pacific Life Insurance Company authorizing conformity to the terms of the current Bylaws PACIFIC LIFE INSURANCE COMPANY CERTIFIED COPY OF RESOLUTION OF BOARD OF DIRECTORS I, AUDREY L. MILFS, do hereby certify that I am the duly elected, qualified and acting Secretary of Pacific Life Insurance Company (formerly Pacific Mutual Life Insurance Company), a California corporation, and as such I do hereby further certify that the following is a true and correct copy of a resolution adopted at a meeting of the Board of Directors of said corporation held on the 27th day of August, 1997, at which a quorum was present and voted in favor thereof, and that said resolution has not been revoked or amended and is now in full force and effect. RESOLVED, that on and after September 1, 1997, any provision of any resolution of the Board of Directors or consent of the members of this Corporation adopted prior to the date hereof that conflicts or is inconsistent with the Bylaws of this Corporation, be, and they hereby are, without further action of the Board of Directors, amended to the extent necessary to conform such provision to the terms of the current Bylaws of this Corporation. IN WITNESS WHEREOF, I have executed this certificate as Secretary of said corporation on this 22nd day of October, 1997. /s/ AUDREY L. MILFS Secretary EX-99.3(A) 5 EXHIBIT 99.3(A) EXHIBIT 99.3(a) Distribution Agreement between Pacific Mutual and Pacific Mutual Distributors, Inc. ("PMD") (formerly Pacific Equities Network) DISTRIBUTION AGREEMENT AGREEMENT made as of the 2nd day of January, 1996, by and between Pacific Mutual Life Insurance Company, a California company, ("Pacific Mutual") on its own behalf and on behalf of its Separate Account A (the "Separate Account"), and Pacific Equities Network, a California corporation ("PEN"). WHEREAS, Pacific Mutual has established and maintains the Separate Account, a separate investment account, for the purpose of selling variable annuity contracts ("Contracts") to commence after the effectiveness of the Registration Statement relating thereto filed with the Securities and Exchange Commission on Form N-4 pursuant to the Securities Act of 1933, as amended (the "1933 Act"), through PEN, acting as general agent of Pacific Mutual; WHEREAS, the Separate Account is or will be registered as a unit investment trust under the Investment Company Act of 1940 (the "1940 Act"); WHEREAS, PEN is registered as a broker-dealer under the Securities Exchange Act of 1934 (the "1934 Act") and is a member of the National Association of Securities Dealers, Inc. ("NASD"); and WHEREAS, Pacific Mutual desires to retain PEN as the distributor and principal underwriter to provide for the sale and distribution to the public of any Contracts issued by Pacific Mutual and funded by interests in the General Account of Pacific Mutual and in the Separate Account and PEN is willing to render such services; NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, the parties agree as follows: 1. Principal Underwriter. Pacific Mutual hereby appoints PEN, during the term of this Agreement, subject to the registration requirements of the 1933 Act and the 1940 Act and the provisions of the 1934 Act, to be the distributor and principal underwriter for the sale of any Contracts to the public in each state and other jurisdiction in which the Contracts may be lawfully sold. Pacific Mutual also appoints PEN as its independent general agent for sale of its Contracts (including any riders which Pacific Mutual may make available in connection therewith or any contracts for which the Contracts may be exchanged or converted) and for sale of such other annuity contracts or insurance contracts as Pacific Mutual may, from time to time, authorize in writing by amendment hereto. PEN shall offer the Contracts for sale and distribution at premium rates set by Pacific Mutual. Notwithstanding any other provision of this Agreement, it is understood and agreed that Pacific Mutual shall at all times retain the ultimate responsibility for and control of all functions performed pursuant to this Agreement, and for marketing any and all Contracts, and reserves the right to direct, approve or disapprove any action hereunder taken on its behalf by PEN. 1. Selling Agreements. PEN is hereby authorized to enter into separate written agreements, on such terms and conditions as PEN determines are not inconsistent with this Agreement, with such organizations which agree to participate as a general agent and/or broker-dealer in the distribution of the Contracts and to use their best efforts to solicit applications for Contracts. Any such broker-dealer (hereinafter "Broker") shall be both registered as a broker-dealer under the 1934 Act and a member of the NASD. Except as provided in Section 3 hereof, PEN shall be responsible for ensuring that Broker and its agents of representatives and general agent and its sub-agents soliciting applications for Contracts shall be duly and appropriately licensed, registered and otherwise qualified for the sale of any such Contracts (and the riders and other contracts offered in connection therewith) under the annuity laws and any applicable blue sky laws of each state or other jurisdiction in which such Contracts may be lawfully sold and in which Pacific Mutual is licensed to sell such Contracts. Pacific Mutual shall undertake to appoint Broker's qualified agents or representatives and general agent's subagents as life insurance agents of Pacific Mutual, provided that Pacific Mutual reserves the right to refuse to appoint any proposed representative, agent, or sub-agent, or once appointed, to terminate such appointment. PEN shall be responsible for ensuring that Broker and general agent supervise its agents, representatives, or sub-agents. 2. Life Insurance Agents. Pacific Mutual shall be responsible for ensuring that Broker and its agents or representatives and general agent and its subagents meet all qualifications and hold any licenses or authorizations that may be required for the solicitation or sale of any Contracts under the insurance laws of the applicable jurisdictions. 3. Suitability. Pacific Mutual desires to ensure that Contracts will be sold to purchasers for whom the Contract will be suitable. PEN shall take reasonable steps to ensure that the various representatives of Broker and sub-agents of general agents shall not make recommendations to an applicant to purchase a Contract in the absence of reasonable grounds to believe the purchase of the Contract is suitable for such applicant. While not limited to the following, a determination of suitability shall be based on information furnished to a representative or sub-agent after reasonable inquiry of such applicant concerning the applicant's other security holdings, retirement and investment objectives, financial situation and needs, and the likelihood that the applicant will continue to make any premium payments contemplated by the Contracts and will keep the Contract in force for a sufficient period of time so that Pacific Mutual's acquisition costs are amortized over a reasonable period of time. 4. Conformity with Registration Statement and Approved Sales Materials. In performing its duties as distributor, PEN will act in conformity with the registration statement and with the instructions and directions of Pacific Mutual, the requirements of the 1933 Act, the 1940 Act, the 1934 Act, and all other applicable federal and state laws and regulations. PEN shall not give any information nor make any representations, concerning any aspect of the Contract or of Pacific Mutual's operations to any persons or entity unless such information or representations are contained in the registration statement and the pertinent prospectus filed with the Securities and Exchange Commission, or are contained in sales or promotional literature approved by Pacific Mutual. PEN will not use and will take reasonable steps to ensure Broker will not use any sales promotion material and advertising which has not been previously approved by Pacific Mutual. 5. Applications. Completed applications for Contracts solicited by such Broker through its agents or representatives or by general agent through its sub-agents shall be transmitted directly to Pacific Mutual. All payments under the Contracts shall be made by check to Pacific Mutual or by other method acceptable to Pacific Mutual, and if received by PEN, shall be held at all times in a fiduciary capacity and remitted promptly to Pacific Mutual. All such payments will be the property of Pacific Mutual. Pacific Mutual has the sole authority to approve or reject such applications or payments and maintains ultimate responsibility for underwriting. Anything in this Agreement to the contrary notwithstanding, Pacific Mutual retains the ultimate right to control the sale of the Contracts and to appoint and discharge life insurance agents of Pacific Mutual. 6. Standard of Care. PEN shall be responsible for exercising reasonable care in carrying out the provisions of this Agreement. 7. Reports and Records. PEN shall be responsible for maintaining and preserving accurate records relating to matters pertaining to this Agreement and the Broker and general agent and their agents, representatives or sub-agents who are licensed, registered and otherwise qualified to sell the Contracts, as required by applicable laws and regulations, or as Pacific Mutual may reasonable request for its own record-keeping or accounting purposes; calculating and furnishing the fees payable to Brokers or general agents; and for furnishing periodic reports to Pacific Mutual as to the sale of Contracts made pursuant to this Agreement. The books, accounts and records of Pacific Mutual, the Separate Account and PEN shall be maintained so as to clearly and accurately disclose the nature and details of the transactions. 8. Investigation and Procedures. PEN and Pacific Mutual agree to cooperate fully in any regulatory investigation or proceeding or judicial proceeding arising in connection with any Contracts distributed under this Agreement. PEN further agrees to furnish regulatory authorities with any information or reports in connection with such services which may be requested in order to ascertain whether the operations of Pacific Mutual and the Separate Account are being conducted in a manner consistent with applicable laws and regulations. PEN and Pacific Mutual further agree to cooperate fully in any securities regulatory investigation or proceeding with respect to Pacific Mutual, PEN, their affiliates and their agents or representatives to the extent that such investigation or proceeding is in connection with any Contracts distributed under this Agreement. Without limiting the foregoing: (a) PEN will be notified promptly of any customer complaint or notice of any regulatory investigation or proceeding or judicial proceeding received by Pacific Mutual with respect to PEN or any agent, representative, or sub-agent of a Broker or general agent or which may affect Pacific Mutual's issuance of any contract sold under this Agreement; and (b) PEN will promptly notify Pacific Mutual of any customer complaint or notice of any regulatory investigation or proceeding received by PEN or its affiliates with respect to PEN or any agent, representative, or sub-agent of a Broker or general agent in connection with any Contract distributed under this Agreement of any activity in connection with any such contract. In the case of a customer complaint, PEN and Pacific Mutual will cooperate in investigating such complaint and any response will be sent to the other party to this Agreement for approval not less than five business days prior to its being sent to the customer or regulatory authority, except that if a more prompt response is required, the proposed response shall be communicated by telephone, telegraph or telecopier. 1. Indemnification. Pacific Mutual hereby agrees to indemnify and hold harmless PEN and its officers and directors, and employees for any expenses (including legal expenses), losses, claims, damages, or liabilities incurred by reason of any untrue or alleged untrue statement or representation of a material fact or any omission or alleged omission to state a material fact required to be stated to make other statements not misleading, if made in reliance on any prospectus, registration statement, post-effective amendment thereof, or sales materials supplied or approved by Pacific Mutual or the Separate Account. Pacific Mutual shall reimburse each such person for any legal or other expenses reasonably incurred in connection with investigating or defending any such loss, liability, damage, or claim. However, in no case shall Pacific Mutual be required to indemnify for any expenses, losses, claims, damages or liabilities which have resulted from the willful misfeasance, bad faith, negligence, misconduct, or wrongful act of PEN. PEN hereby agrees to indemnify and hold harmless Pacific Mutual, its officers, directors, and employees, and the Separate Account for any expenses, losses, claims, damages, or liabilities arising out of or based upon any of the following in connection with the offer or sale of any Contract: 1) except for such statements made in reliance on any prospectus, registration statement or sales material supplied or approved by Pacific Mutual or the Separate Account, any untrue or alleged untrue statement or representation made; 2) any failure to deliver a currently effective prospectus; 3) the use of any unauthorized sales literature by any officer, employee, agent, or sub-agent of PEN, Broker or general agent; or 4) any willful misfeasance, bad faith, negligence, misconduct or wrongful act. Pen shall reimburse each such person for any legal or other expenses reasonably incurred in connection with investigating or defending any such loss, liability, damage, or claim. Promptly after receipt by a party entitled to indemnification ("Indemnified Party") of notice of the commencement of any action, if a claim for indemnification in respect thereof is to be made against Pacific Mutual or PEN ("Indemnifying Party") such Indemnified Party will notify Indemnifying Party in writing of the commencement thereof, but failure to notify the Indemnifying Party of any claim shall not relieve it from any liability which it may have to the person against whom such action is brought otherwise than on account of this Agreement contained in this Section 10. The Indemnifying Party will be entitled to participate in the defense of the Indemnified Party, but such participation will not relieve such Indemnifying Party of the obligation to reimburse the Indemnified Party for reasonable legal and other expenses incurred by such Indemnified Party in defending himself. 1. Agent of Pacific Mutual or Separate Account. Any person, even though also an officer, director, employee, or agent of PEN, who may be or become an officer, director, employee, or agent of Pacific Mutual or the Separate Account shall be deemed, when rendering services to Pacific Mutual or the Separate Account or acting in any business of Pacific Mutual or the Separate Account, to be rendering such services to or acting solely for Pacific Mutual or the Separate Account and not as an officer, director, employee, or agent or one under the control or direction of PEN even though paid by PEN. Likewise, any person, even though also an officer, director, employee, or agent of Pacific Mutual or the Separate Account, who may be or become an officer, director, employee, or agent of PEN shall be deemed when rendering services to PEN or acting in any business of PEN to be rendering such services to or acting solely for PEN and not as an officer, director, employee, or agent or one under the control or direction of Pacific Mutual or the Separate Account even though paid by Pacific Mutual or the Separate Account. 2. Books and Records. It is expressly understood and agreed that all documents, reports, records, books, files, and other materials relating to this Agreement and the services to be performed hereunder shall be the sole property of Pacific Mutual and the Separate account and that any such property held by PEN shall be held by PEN only as agent, during the effective term of this Agreement. This material shall be delivered to Pacific Mutual upon the termination of this Agreement free from any claim or retention of rights by PEN. During the term of this Agreement and for a period of three years from the date of termination of this Agreement, PEN will not disclose or use any records or information and will regard and preserve as confidential all information related to the business of Pacific Mutual or the Separate account that may be obtained by PEN from any source as a result of this Agreement and will disclose such information only if Pacific Mutual or the Separate Account has authorized such disclosure, or if such disclosure is expressly required by applicable federal or state regulatory authorities. PEN further acknowledges and agrees that, in the event of a breach or threatened breach by it of the provisions of this Section 12, Pacific Mutual will have no adequate remedy in moneys or damages and, accordingly, Pacific Mutual shall be entitled in its discretion to seek an injunction against such breach. However, no specification in this Agreement of a specific legal or equitable remedy shall be construed as a waiver or prohibition against any other legal or equitable remedy in the event of a breach of a provision of this Agreement. 3. Employees. PEN will not employ, except with the prior written approval of the Commissioner of Insurance of the State of California, in any material connection with the handling of the Separate Account's assets any person who, to the knowledge of PEN: (a) in the last 10 years has been convicted of any felony or misdemeanor arising out of conduct involving embezzlement, fraudulent conversion, or misappropriation of funds or securities, or involving violations of Sections 1341, 1342, or 1343 of Title 18, United States Code; or (b) within the last 10 years has been found by any state regulatory authority to have violated or has acknowledged violation of any provision of any state insurance law involving fraud, deceit, or knowing misrepresentation; or (c) within the last 10 years has been found by any federal or state regulatory authorities to have violated or have acknowledged violation of any provision of federal or state securities laws involving fraud, deceit, or knowing misrepresentation. 4. Termination. This Agreement shall terminate automatically upon its assignment without the prior written consent of both parties. This Agreement may be terminated at any time, for any reason, by either party on 60 days' written notice to the other party, without the payment of any penalty. Upon termination of this Agreement, all authorizations, rights and obligations shall cease except the obligation to settle accounts hereunder, including commissions on premiums subsequently received for Contracts in effect at time of termination, and the agreements contained in Sections 9 and 10 hereof. 5. Regulation. This Agreement shall be subject to the provisions of the 1940 Act and the 1934 Act and the rules, regulations and rulings thereunder, and of the applicable rules and regulations of the NASD, and applicable state insurance law and other applicable law, from time to time in effect, and the terms hereof shall be interpreted and construed in accordance therewith. 6. Independent Contractor. PEN shall act as an independent contractor and nothing herein contained shall constitute PEN or its agents, officers or employees as agents, officers, or employees of Pacific Mutual in connection with the sale of any Contract. 7. Notices. Notices of any kind to be given to PEN by Pacific Mutual or the Separate account shall be in writing and shall be duly given if mailed, first class postage prepaid, or delivered to PEN at 700 Newport Center Drive, Newport Beach, California 92660, or at such other address or to such individual as shall be specified by PEN. Notices of any kind to be given to Pacific Mutual or the Separate Account shall be in writing and shall be duly given if mailed, first class postage prepaid, or delivered to them at 700 Newport Center Drive, Post Office Box 9000, Newport Beach, California 92660, at or at such other address or to such individual as shall be specified by Pacific Mutual. If any provisions of this Agreement shall be held or made invalid by a court decision, statute rule or otherwise, the remainder of this Agreement shall not be affected thereby. 1. Entire Agreement; Amendments. This Agreement (a) sets forth the entire understanding of the parties with respect to the subject matter hereof; (b) incorporates and merges any and all previous agreements, understandings, and communications, oral or written; and (c) may not be modified, amended, or waived except by a written instrument duly executed by the party against whom such modification, amendment, or waiver is sought to be enforced. 2. Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. 3. Governing Law. This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of California. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. PACIFIC MUTUAL LIFE INSURANCE COMPANY By: /s/ T. C. SUTTON ------------------------------------ Chairman and Chief Executive Officer ATTEST: /s/ AUDREY L. MILFS - ------------------------------------------ Secretary PACIFIC EQUITIES NETWORK By: /s/ GERALD W. ROBINSON ------------------------------------ President WITNESS: /s/ AUDREY L. MILFS - ------------------------------------------ EX-99.3(B) 6 EXHIBIT 99.3(B) EXHIBIT 99.3(b) Form of Selling Agreement between Pacific Mutual, PEN and Various Broker-Dealers SELLING AGREEMENT AGREEMENT by and between PACIFIC MUTUAL LIFE INSURANCE COMPANY ("Pacific Mutual"), a California corporation; PACIFIC EQUITIES NETWORK ("PEN"), a California corporation, a broker-dealer registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (the "1934 Act"), and a member of the National Association of Securities Dealers, Inc. ("NASD"); - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ("Selling Broker-Dealer"), also a broker-dealer registered under the 1934 Act and a member of the NASD; and each of the undersigned General Agents jointly and severally referred to herein as "General Agent". W I T N E S S E T H: WHEREAS, Pacific Mutual issues certain insurance and annuity contracts listed in Schedule B (the "Contracts"), some of which are registered ("Securities Registered Contracts") under the Securities Act of 1933 (the "1933 Act"); WHEREAS, Pacific Mutual has authorized PEN, as principal underwriter of the Contracts, to enter into agreements, subject to the consent of Pacific Mutual, with broker-dealers and general agents for the distribution of the Contracts; WHEREAS, PEN has agreed to secure duly qualified broker-dealers and general agents to contract with Pacific Mutual and PEN for the distribution of the Contracts, assist these broker-dealers and general agents in obtaining licenses, registrations and appointments to enable their registered representatives and sub-agents to sell the Contracts, and provide educational meetings to familiarize these broker-dealers and general agents and their registered representatives and sub-agents with the provisions and features of the Contracts; and WHEREAS, Selling Broker-Dealer and General Agent have been selected by PEN to distribute the contracts and Selling Broker-Dealer and General Agent wish to participate in the distribution of the Contracts. NOW THEREFORE, in consideration of the promises and the mutual covenants hereinafter contained, the parties hereto agree as follows: I. APPOINTMENT Subject to the terms and conditions of this Agreement, Pacific Mutual and PEN hereby appoint Selling Broker-Dealer and General Agent for the solicitation of applications for the purchase of the Contracts. Selling Broker-Dealer and General Agent accept such appointment and each agrees to use its best efforts to find purchasers for the Contracts acceptable to Pacific Mutual. Selling Broker-Dealer and General Agent will seek purchasers of Securities Related Contracts only while the registration statement relating to such contracts is effective under the 1933 Act. II. AUTHORITY AND DUTIES OF GENERAL AGENT A. LICENSING AND APPOINTMENT OF SUB-AGENTS General Agent is authorized to appoint sub-agents ("Sub-agents") to solicit sales of the Contracts. General Agent agrees to fulfill all requirements set forth in the General Letter of Recommendation attached as Schedule A hereto in conjunction with its submission of licensing and appointment papers for all Sub-agents. General Agent warrants that it and all of its Sub-agents appointed pursuant to this Agreement shall not solicit nor aid, directly or indirectly, in the solicitation of any application for any Contract until they are fully licensed by the proper authorities under the applicable insurance laws within the applicable jurisdictions where General Agent and Sub-agents propose to offer the Contracts, where Pacific Mutual is authorized to conduct business and where the Contracts may be lawfully sold. General Agent shall periodically provide Pacific Mutual with a list of all Sub-agents appointed by General Agent and the jurisdictions where such Sub- agents are licensed to solicit sales of the Contracts. Pacific Mutual shall periodically provide General Agent with a list which shows; (i) the jurisdictions where Pacific Mutual is authorized to do business; and (ii) any limitations on the availability of the Contracts in any of such jurisdictions. General Agent shall prepare and transmit the appropriate appointment forms to Pacific Mutual. General Agent shall pay all fees to state insurance regulatory authorities in connection with obtaining necessary licenses and authorizations for Sub-agents to solicit and sell the Contracts. Pacific Mutual will pay appointment fees for General Agent and resident appointment fees for Sub-agents. Non-resident appointment fees for Sub-agents will be paid by the General Agent. All renewal appointment fees will be paid by the General Agent for Sub-agents who have generated less than $20,000 target premium within the prior 12 months. Pacific Mutual may refuse for any reason to apply for the appointment of a Sub-agent and may cancel any existing appointment at any time. B. REJECTION OF SUB-AGENT Pacific Mutual or PEN may refuse for any reason, by written notice to General Agent, to permit any Sub-agent the right to solicit applications for the sale of any of the Contracts. Upon receipt of such notice, General Agent immediately shall cause such Sub-agent to cease such solicitations of sales and cancel the appointment of any Sub-agent under this agreement. C. SUPERVISION OF SUB-AGENTS General Agent shall supervise all Sub-agents appointed pursuant to this Agreement to solicit sales of the Contracts and bear responsibility for all acts and omissions of each Sub-agent. General Agent shall comply with and exercise all responsibilities required by applicable federal and state law and regulations. General Agent shall train and supervise its Sub-agents to ensure that purchase of a Contract is not recommended to an applicant in the absence of reasonable grounds to believe the purchase of the Contract is suitable for that applicant. While not limited to the following, a determination of suitability shall be based on information furnished to a Sub-agent after reasonable inquiry of such applicant concerning the applicant's insurance and investment objectives, financial situation and needs, and the likelihood that the applicant will continue to make any premium payments contemplated by the Contracts and will keep the Contract in force for a sufficient period of time so that Pacific Mutual's acquisition costs are amortized over a reasonable period of time. Nothing contained in this Agreement or otherwise shall be deemed to make any Sub-agent appointed by General Agent an employee or agent of Pacific Mutual or PEN. Pacific Mutual and PEN shall not have any responsibility for the training and supervision of any Sub-agent or any other employee of General Agent. If the act or omission of a Sub-agent or any other employee of General Agent is the proximate cause of claim, damage or liability (including reasonable attorneys' fees) to Pacific Mutual or PEN, General Agent shall be responsible and liable therefor. 2 III. AUTHORITY AND DUTIES OF SELLING BROKER-DEALER Selling Broker-Dealer agrees that it has full responsibility for the training and supervision of all persons, including Sub-agents of General Agent, associated with Selling Broker-Dealer who are engaged directly or indirectly in the offer or sale of Securities Regulated Contracts. All such persons shall be registered representatives of Selling Broker-Dealer and shall be subject to the control of Selling Broker-Dealer with respect to their securities regulated activities. Broker-Dealer shall: (i) train and supervise Sub-agents, in their capacity as registered representatives, in the sale of Securities Regulated Contracts; (ii) use its best efforts to cause such Sub-agents to qualify under applicable federal and state laws to engage in the sale of Securities Regulated Contracts; (iii) provide Pacific Mutual and PEN to their satisfaction with evidence of Sub-agents' qualifications to sell Securities Regulated Contracts; (iv) notify Pacific Mutual if any of such Sub-agents ceases to be a registered representative of Selling Broker-Dealer; and (v) train and supervise Sub-agents to ensure compliance with applicable federal and state securities laws, rules, regulations, statements of policy thereunder and with NASD rules. Selling Broker-Dealer shall train and supervise Sub-agents to ensure that purchase of a Contract is not recommended to an applicant in the absence of reasonable grounds to believe the purchase of the Contract is suitable for that applicant. While not limited to the following, a determination of suitability shall be based on information furnished to a Sub-agent after reasonable inquiry of such applicant concerning the applicant's other security holdings, financial situation and needs. Selling Broker-Dealer shall ensure that any offer of a Securities Regulated Contract made by a Sub-agent will be made by means of a currently effective prospectus. Pacific Mutual and PEN shall not have any responsibility for the supervision of any registered representative or any other employee or affiliate of Selling Broker-Dealer. If the act or omission of a registered representative or any other employee or affiliate of Selling Broker-Dealer is the proximate cause of any claim, damage or liability (including reasonable attorney's fees) to Pacific Mutual or PEN, Selling Broker-Dealer shall be responsible and liable therefor. Selling Broker-Dealer at all times shall be duly registered as a broker-dealer under the 1934 Act, a member in good standing of the NASD and duly licensed in all states and jurisdictions where required to perform pursuant to this agreement. Selling Broker-Dealer shall fully comply with the requirements of the 1934 Act and all other applicable federal or state laws and with the rules of the NASD. Selling Broker-Dealer shall establish such rules and procedures as may be necessary to cause diligent supervision of the securities activities of the Sub-agents including ensuring compliance with the prospectus delivery requirements of the 1933 Act. IV. AUTHORITY AND DUTIES OF GENERAL AGENT AND SELLING BROKER-DEALER A. CONTRACTS The securities and insurance regulated Contracts issued by Pacific Mutual to which this Agreement applies are listed in Schedule B, which may be amended from time to time by Pacific Mutual. Pacific Mutual, in its sole discretion, with prior or concurrent written notice to Selling Broker-Dealer and General Agent, may suspend distribution of any Contract. Pacific Mutual also has the right to amend any Contract at any time. B. SECURING APPLICATIONS Each application for a Contract shall be made on an application form provided by Pacific Mutual, and all payments collected by Selling Broker-Dealer, General Agent or any registered representative and Sub-agent shall be remitted promptly in full, together with such application form and any other required documentation, directly to Pacific Mutual at the address indicated on such application or to such other address as may be designated by Pacific Mutual. All such payments and documents shall be the property of Pacific Mutual. Selling Broker-Dealer and 3 General Agent shall review all such applications for completeness and for compliance with the conditions herein, including the suitability and prospectus delivery requirements set forth above under Sections II.C and III. Check or money order in payment of such Contracts should be made payable to the order of "Pacific Mutual". All applications are subject to acceptance or rejection by Pacific Mutual in its sole discretion. C. RECEIPT OF MONEY All money payable in connection with any of the Contracts, whether as premium, purchase payment or otherwise and whether paid by or on behalf of any contract owner or anyone else having an interest in the Contracts, is the property of Pacific Mutual and shall be transmitted immediately in accordance with the administrative procedures of Pacific Mutual without any deduction or offset for any reason including, but not limited to, any deduction or offset for compensation claimed by Selling Broker-Dealer or General Agent, unless there has been a prior arrangement for net wire transmissions between Pacific Mutual and Selling Broker-Dealer or General Agent. D. NOTICE OF SUB-AGENT'S NONCOMPLIANCE Selling Broker-Dealer shall immediately notify PEN and General Agent in the event a Sub-agent fails or refuses to submit to the supervision of Selling Broker-Dealer or General Agent in accordance with this Agreement, the agreement between Selling Broker-Dealer, General Agent and Sub-agent referred to in Section IV.H, below, or otherwise fails to meet the rules and standards imposed by Selling Broker-Dealer or its registered representatives or General Agent or its Sub-agents. Selling Broker-Dealer or General Agent shall also immediately notify such Sub-agent that he or she is no longer authorized to sell the Contracts, and both Selling Broker-Dealer and General Agent shall take whatever additional action may be necessary to terminate the sale activities of such Sub-agent relating to the Contracts. E. SALES PROMOTION, ADVERTISING AND PROSPECTUSES No sales promotion materials, circulars, documents or any advertising relating to any of the Contracts shall be used by Selling Broker-Dealer, General Agent or any Sub-agents unless the specific item has been approved in writing by PEN and Pacific Mutual prior to use. Selling Broker-Dealer shall be provided, without any expense to Selling Broker-Dealer, with prospectuses relating to Securities Regulated Contracts. Selling Broker-Dealer and General Agent shall be provided with such other material as PEN determines necessary or desirable for use in connection with sales of the Contracts. Nothing in these provisions shall prohibit Selling Broker-Dealer or General Agent from advertising life insurance and annuities on a generic basis. Selling Broker-Dealer, General Agent and Sub-agents shall make no material representations relating to the Securities Regulated Contracts, other than those contained in the relevant registration statement, as may be amended, or in sales promotion or other materials approved by Pacific Mutual and PEN as provided in this section. F. CONFIDENTIALITY Selling Broker-Dealer and General Agent shall keep confidential all information obtained pursuant to this Agreement, including, without limitation, names of the purchasers of the Policies, and shall disclose such information, only if Pacific Mutual or PEN have authorized such disclosure in writing, or if such disclosure is expressly required by applicable federal or state regulatory authorities. G. RECORDS Selling Broker-Dealer and General Agent shall have the responsibility for maintaining the records of its Sub-agents and representatives licensed, registered and otherwise qualified to sell the Contracts. Selling Broker-Dealer and General Agent shall maintain such other records as are required of them by applicable laws and regulations. The books, accounts and records of Selling Broker-Dealer and General Agent relating to the sale of the Contracts shall be maintained so as to clearly and accurately disclose the nature and details of the transactions. Selling Broker-Dealer and General Agent each agree to make the books and records relating to the sale of the Contracts available to Pacific Mutual or PEN upon their written request. 4 H. SUB-AGENT AGREEMENTS Before a Sub-agent is permitted to sell the Contracts, General Agent, Selling Broker-Dealer and Sub-agent shall have entered into a written agreement pursuant to which: (i) Sub-agent is appointed a Sub-agent of General Agent and a registered representative of Selling Broker-Dealer; (ii) Sub-agent agrees that his or her selling activities relating to Securities Regulated Contracts shall be under the supervision and control of Selling Broker-Dealer; and (iii) that Sub-agent's right to continue to sell such Contracts is subject to his or her continued compliance with such agreement and any procedures, rules or regulations implemented by Selling Broker-Dealer or General Agent. V. COMPENSATION A. COMMISSIONS AND FEES Commissions and fees payable to General Agent or any Sub-agent in connection with the Contracts shall be paid by Pacific Mutual through PEN to General Agent, or as otherwise permitted by law or regulation. General Agent shall pay Sub-agents. PEN will provide Selling Broker-Dealer and General Agent with a copy of its current Compensation Schedule(s), attached hereto as Schedule B. Unless otherwise provided in Schedule B, compensation will be paid as a percentage of premiums or purchase payments (collectively, "Payments") received in cash or other legal tender and accepted by Pacific Mutual on applications obtained by the various Sub-agents appointed by General Agent hereunder. Upon termination of this Agreement, all compensation to General Agent hereunder shall cease. However, General Agent shall be entitled to receive compensation for all new and additional premium payments which are in process at the time of termination, and shall continue to be liable for any charge-backs pursuant to the provisions of said Schedule B, or for any other amount advanced by or otherwise due Pacific Mutual or PEN hereunder. Pacific Mutual reserves the right not to pay compensation on a policy or contract for which the premium is paid in whole or in part by the loan or surrender value of any other life insurance policy or annuity contract issued by Pacific Mutual. PEN shall deduct any chargebacks from compensation otherwise due General Agent or Selling Broker-Dealer. If any amount to be deducted exceeds compensation otherwise due, General Agent and/or Selling Broker-Dealer shall promptly pay back the amount of the excess following a written demand by PEN or Pacific Mutual. General Agent and Selling Broker-Dealer are jointly and severally liable for such chargebacks. Pacific Mutual reserves the right to reduce first year commissions and renewal commissions, if necessary, on any life policies sold to residents of the State of Kentucky and paid for after May 1, 1991. Such reduction shall be in an amount sufficient to cover any premium tax levied by cities and counties within the State of Kentucky which is over and above the premium tax paid by Pacific Mutual to the State of Kentucky. Pacific Mutual recognizes the Contract owners' right on issued Contracts to terminate Selling Broker-Dealer and/or change a Selling Broker-Dealer, provided that the Contract owner notifies PEN in writing. When a Contract owner terminates Selling Broker-Dealer, no further compensation on any payments due or received, or on any increases in face amount in the existing policy after termination, shall be payable to that Selling Broker-Dealer in accordance with Schedule B after the notice of termination is received and accepted by PEN. However, when a Contract owner designates a Selling Broker-Dealer other than the Selling Broker-Dealer of record, compensation on any payments due or received, or on any increases in face amount in the existing Contract after the change, shall be payable to the new Selling Broker-Dealer in accordance with Schedule B in effect at the time of issuance of the Contract. 5 A change of Selling Broker-Dealer request shall be honored only if there exists a valid Selling Agreement between Pacific Mutual, PEN and the new Selling Broker-Dealer and (1) the Contract owner(s) requests in writing that the Sub-agent remains as representative of record, or (2) both the former and future Selling Broker-Dealers direct Pacific Mutual and PEN in a joint writing to transfer all policies and future compensation to the new Selling Broker-Dealer, or (3) the NASD approves and effects a bulk transfer of all representatives to a new Selling Broker-Dealer. B. TIME OF PAYMENT PEN will pay any commissions due General Agent at least twice monthly in accordance with Schedule B of this Agreement, as it may be amended from time to time. C. AMENDMENT OF SCHEDULES PEN may amend Schedule B upon at least ten (10) days' prior written notice to Selling Broker-Dealer and General Agent. The submission of an application for the Contracts by Selling Broker-Dealer or General Agent after the effective date of any such amendment shall constitute agreement to such amendment. Any such amendment shall apply to compensation due on applications received by Pacific Mutual after the effective date of such notice. D. Prohibition Against Rebates Pacific Mutual or PEN may terminate this Agreement if Selling Broker-Dealer, General Agent or any Sub-agent rebates, offers to rebate or withholds any part of any Payment on the Contracts. If Selling Broker-Dealer, General Agent or any Sub-agent of General Agent shall at any time induce or endeavor to induce any owner of any Contract issued hereunder to discontinue payments or to relinquish any such Contract, except under circumstances where there is reasonable grounds for believing the Contract is not suitable for such person, any and all compensation due General Agent hereunder shall cease and terminate. E. INDEBTEDNESS AND RIGHT OF SET OFF Nothing contained in this Agreement shall be construed as giving Selling Broker-Dealer or General Agent the right to incur any indebtedness on behalf of Pacific Mutual or PEN. Selling Broker-Dealer and General Agent hereby authorize PEN and Pacific Mutual to set off liabilities of Selling Broker-Dealer and General Agent to Pacific Mutual and PEN against any and all amounts otherwise payable to Selling Broker-Dealer or General Agent. VI. GENERAL PROVISIONS A. Waiver Failure of any party to insist upon strict compliance with any of the conditions of this Agreement shall not be construed as a waiver of any of the conditions, but the same shall remain in full force and effect. No waiver of any of the provisions of this Agreement shall be deemed to be, or shall constitute, a waiver of any other provisions, whether or not similar, nor shall any waiver constitute a continuing waiver. 6 B. LIMITATIONS The Selling Broker-Dealer and General Agent are independent contractors with respect to Pacific Mutual and PEN. No party other than Pacific Mutual and or PEN, as the case may be, shall have the authority to: (i) make, alter or discharge any Contract issued by Pacific Mutual; (ii) waive any forfeiture or extend the time of making any payments; (iii) enter into any proceeding in a court of law or before a regulatory agency in the name of or on behalf of Pacific Mutual or PEN; (iv) contract for the expenditure of funds of Pacific Mutual or PEN; (v) alter the forms which PEN prescribes, or substitute other forms in place of those prescribed by PEN. C. FIDELITY BOND AND OTHER LIABILITY COVERAGE Selling Broker-Dealer and General Agent each represent that all directors, officers, agents, employees and Sub-agents who are licensed pursuant to this Agreement as Pacific Mutual agents for state insurance law purposes or who have access to funds of Pacific Mutual, including but not limited to, funds submitted with applications for the Contracts are and shall be covered by a blanket fidelity bond, including coverage for larceny and embezzlement, issued by a reputable bonding company. This bond shall be maintained by Selling Broker- Dealer or General Agent at their expense. Such bond shall be, at a minimum, of the form, type, and amount required under NASD Rules, endorsed to extend coverage to transactions relating to the Contracts. Pacific Mutual may require evidence, satisfactory to it, that such coverage is in force and Selling Broker- Dealer or General Agent, as the case may be, shall give prompt written notice to Pacific Mutual of any notice of cancellation of the bond or change of coverage. Selling Broker-Dealer and General Agent hereby assign any proceeds received from a fidelity bonding company, error and omissions or other liability coverage, to Pacific Mutual or PEN as their interest may appear, to the extent of their loss due to activities covered by the bond, policy or other liability coverage. If there is any deficiency amount, whether due to a deductible or otherwise, Selling Broker-Dealer or General Agent shall promptly pay such amounts on demand. Selling Broker-Dealer and General Agent hereby indemnify and hold harmless Pacific Mutual and PEN from any such deficiency and from the costs of collection thereof (including reasonable attorneys' fees). D. BINDING EFFECT This Agreement shall be binding on and shall inure to the benefit of the parties to it and their respective successors and assigns provided that neither Selling Broker-Dealer nor General Agent may assign this Agreement or any rights or obligations hereunder without the prior written consent of Pacific Mutual. E. REGULATIONS All parties agree to observe and comply with the existing laws and rules or regulations of applicable local, state, or federal regulatory authorities and with those which may be enacted or adopted during the term of this Agreement regulating the business contemplated hereby in any jurisdiction in which the business described herein is to be transacted. F. INDEMNIFICATION Pacific Mutual and PEN agree to indemnify and hold harmless Selling Broker- Dealer and General Agent, their officers, directors, agents and employees, against any and all losses, claims, damages or liabilities to which they may become subject under the 1933 Act, the 1934 Act, or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact or any omission or alleged omission to state a material fact required to be stated or necessary to make the statements made not misleading in the registration statement for the Contracts or for the shares of Pacific Select Fund (the "Fund") filed pursuant to the 1933 Act, or any prospectus included as a part thereof, as from time to time amended and supplemented, or in any advertisement or sales literature approved in writing by Pacific Mutual and PEN pursuant to Section IV.E. of this Agreement 7 Selling Broker-Dealer and General Agent agree to indemnify and hold harmless Pacific Mutual, the Fund and PEN, their officers, directors, agents and employees, against any and all losses, claims, damages or liabilities to which they may become subject under the 1933 Act, the 1934 Act, or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon; (a) any oral or written misrepresentation by Selling Broker-Dealer or General Agent or their officers, directors, employees or agents unless such misrepresentation is contained in the registration statement for the Contracts or Fund shares, any prospectus included as a part thereof, as from time to time amended and supplemented, or any advertisement or sales literature approved in writing by Pacific Mutual and PEN pursuant to Section IV.E. of this Agreement, (b) the failure of Selling Broker-Dealer or General Agent or their officers, directors, employees or agents to comply with any applicable provisions of this Agreement or (c) claims by Sub-agents or employees of General Agent or Selling Broker-Dealer for payments of compensation or remuneration of any type. Selling Broker-Dealer and General Agent will reimburse Pacific Mutual or PEN or any director, officer, agent or employee of either entity for any legal or other expenses reasonably incurred by Pacific Mutual, PEN, or such officer, director, agent or employee in connection with investigating or defending any such loss, claims, damages, liability or action. This indemnity agreement will be in addition to any liability which Broker-Dealer may otherwise have. G. NOTICES All notices or communications shall be sent to the following address for Pacific Mutual or PEN, or to such other address as Pacific Mutual or PEN may request by giving written notice to the other parties: Pacific Mutual Life Insurance Company Pacific Equities Network 700 Newport Center Drive 700 Newport Center Drive Newport Beach, CA 92660 Newport Beach, CA 92660 All notices or communications to the Selling Broker-Dealer or General Agent shall be sent to the last address known to Pacific Mutual or PEN for that party, or to such other address as Selling Broker-Dealer or General Agent may request by giving written notice to the other parties. H. Governing Law This Agreement shall be construed in accordance with and governed by the laws of California. I. AMENDMENT OF AGREEMENT PEN may amend this Agreement upon at least ten (10) days' prior written notice to Selling Broker-Dealer and General Agent. The submission of an application for the Contracts by Selling Broker-Dealer or General Agent after the effective date of any such amendment shall constitute agreement to such amendment. Additional General Agents may be added as parties to this Agreement at any time by a written amendment signed by Pacific Mutual, PEN, Selling Broker-Dealer and such additional General Agents. All General Agents which are parties to this Agreement at the time of such amendment hereby consent and agree in advance to the addition of such additional General Agents. J. GENERAL AGENT AS BROKER-DEALER Selling Broker-Dealer and General Agent shall not have the other entity's authority and shall not be responsible for the other entity's duties hereunder unless Selling Broker-Dealer and General Agent are the same entity. If Selling Broker-Dealer and General Agent are the same person or legal entity, such person or legal entity shall have the rights and obligations hereunder of both Selling Broker-Dealer and General Agent and this Agreement shall be binding and enforceable by and against such person or legal entity in both capacities. 8 K. COMPLAINTS AND INVESTIGATIONS Pacific Mutual, PEN, Selling Broker-Dealer and General Agent agree to cooperate fully in any insurance regulatory investigation or proceeding or judicial proceeding arising in connection with the Contracts distributed under this Agreement. Pacific Mutual, PEN, Selling Broker-Dealer and General Agent further agree to cooperate fully in any securities regulatory investigation or proceeding with respect to Pacific Mutual, PEN, Selling Broker-Dealer and General Agent, their affiliates and their agents or representatives to the extent that such investigation or proceeding is in connection with the Contracts distributed under this Agreement. Without limiting the foregoing: (a) Selling Broker-Dealer or General Agent will be notified promptly of any customer complaint or notice of any regulatory investigation or proceeding or judicial proceeding received by Pacific Mutual or PEN with respect to Selling Broker-Dealer or General Agent or any Sub-agent or which may affect Pacific Mutual's issuance of any contracts sold under this Agreement; and (b) Selling Broker-Dealer and General Agent will promptly notify Pacific Mutual and PEN of any customer complaint or notice of any regulatory investigation or proceeding received by Selling Broker-Dealer, General Agent or their affiliates with respect to Selling Broker-Dealer, General Agent or any Sub-agent in connection with any Contracts distributed under this Agreement or any activity in connection with any such policies. In the case of a substantive customer complaint, Pacific Mutual, PEN, Selling Broker-Dealer and General Agent will cooperate in investigating such complaint and any response will be sent to the other party to this Agreement for approval not less than five business days prior to its being sent to the customer or regulatory authority, except that if a more prompt response is required, the proposed response shall be communicated by telephone or telegraph. L. TERMINATION This Agreement may be terminated, without cause, by any party upon thirty (30) days' prior written notice. This Agreement also may be terminated, for cause, by any party immediately. This Agreement shall be terminated immediately if PEN or Selling Broker-Dealer shall cease to be a registered Broker-Dealer under the 1934 Act or a member in good standing of the NASD, or if there occurs the dissolution, bankruptcy or insolvency of Selling Broker-Dealer or General Agent. Sections VI F and K shall survive termination of this Agreement. Upon termination of this Agreement, Selling Broker-Dealer and General Agent shall each use their best efforts to have all property of Pacific Mutual and PEN in Selling Broker-Dealer, General Agent or Sub-agents' possession promptly returned to Pacific Mutual or PEN, as the case may be. Such property includes prospectuses, applications and other literature supplied by Pacific Mutual or PEN. THIS SPACE INTENTIONALLY LEFT BLANK 9 M. EXCLUSIVITY Selling Broker-Dealer and General Agent each agree that no territory is assigned exclusively hereunder and that Pacific Mutual and PEN reserve the right in their discretion to establish one or more agencies in any jurisdiction in which Selling Broker-Dealer and General Agent transact business hereunder. This Agreement shall be effective as of __________________________________. PACIFIC EQUITIES NETWORK ------------------------------------- (SELLING BROKER-DEALER) By: By: ------------------------------------ ---------------------------------- (Signature) (Signature) Title: Title: --------------------------------- ------------------------------- Date: Date: --------------------------------- ------------------------------- PACIFIC MUTUAL LIFE INSURANCE COMPANY ------------------------------------- (GENERAL AGENT) By: By: ------------------------------------ ---------------------------------- (Signature) (Signature) Title: Title: --------------------------------- ------------------------------- Date: Date: --------------------------------- ------------------------------- - --------------------------------------- ------------------------------------- (GENERAL AGENT) (GENERAL AGENT) By: By: ------------------------------------ ---------------------------------- (Signature) (Signature) Title: Title: --------------------------------- ------------------------------- Date: Date: --------------------------------- ------------------------------- - --------------------------------------- ------------------------------------- (GENERAL AGENT) (GENERAL AGENT) By: By: ------------------------------------ ---------------------------------- (Signature) (Signature) Title: Title: --------------------------------- ------------------------------- Date: Date: --------------------------------- ------------------------------- - --------------------------------------- ------------------------------------- (GENERAL AGENT) (GENERAL AGENT) By: By: ------------------------------------ ---------------------------------- (Signature) (Signature) Title: Title: --------------------------------- ------------------------------- 10 Date: Date: --------------------------------- ------------------------------- - --------------------------------------- ------------------------------------- (GENERAL AGENT) (GENERAL AGENT) By: By: ------------------------------------ ---------------------------------- (Signature) (Signature) Title: Title: --------------------------------- ------------------------------- Date: Date: --------------------------------- ------------------------------- - --------------------------------------- ------------------------------------- (GENERAL AGENT) (GENERAL AGENT) By: By: ------------------------------------ ---------------------------------- (Signature) (Signature) Title: Title: --------------------------------- ------------------------------- Date: Date: --------------------------------- ------------------------------- - --------------------------------------- ------------------------------------- (GENERAL AGENT) (GENERAL AGENT) By: By: ------------------------------------ ---------------------------------- (Signature) (Signature) Title: Title: --------------------------------- ------------------------------- Date: Date: --------------------------------- ------------------------------- - --------------------------------------- ------------------------------------- (GENERAL AGENT) (GENERAL AGENT) By: By: ------------------------------------ ---------------------------------- (Signature) (Signature) Title: Title: --------------------------------- ------------------------------- Date: Date: --------------------------------- ------------------------------- - --------------------------------------- ------------------------------------- (GENERAL AGENT) (GENERAL AGENT) By: By: ------------------------------------ ---------------------------------- (Signature) (Signature) Title: Title: --------------------------------- ------------------------------- Date: Date: --------------------------------- ------------------------------- 11 SCHEDULE A ---------- GENERAL LETTER OF RECOMMENDATION General Agent hereby certifies to Pacific Mutual that all of the following requirements will be fulfilled in conjunction with the submission of licensing/appointment papers for all applicants as Sub-agents ("applicant") submitted by General Agent. General Agent will, upon request, forward proof of compliance with same to Pacific Mutual in a timely manner. 1. We have made a thorough and diligent inquiry and investigation relative to each applicant's identity, residence and business reputation and declare that each applicant is personally known to us, has been examined by us, is known to be of good moral character, has a good business reputation, is reliable, is financially responsible and is worthy of a license. Each individual is trustworthy, competent, and qualified to act as an agent for Pacific Mutual, and to hold himself out in good faith to the general public. We vouch for each applicant. 2. We have on file a B-300, B-301 or U-4 form which was completed by each applicant. We have fulfilled all the necessary investigative requirements for the registration of each applicant as a registered representative through our NASD member firm, and each applicant is presently registered as an NASD registered representative. The above information in our files indicates no fact or condition which would disqualify the applicant from receiving a license, and all the findings of all investigative information is favorable. 3. We certify that all educational requirements have been met for the specific state in which each applicant is requesting a license, and that all such persons have fulfilled the appropriate examination, education and training requirements. 4. If the applicant is required to submit his or her picture, signature, and securities registration in the state in which he or she is applying for a license, we certify that those items forwarded to Pacific Mutual are those of the applicant and the securities registration is a true copy of the original. 5. We hereby warrant that the applicant is not applying for a license with Pacific Mutual in order to place insurance chiefly or solely on his or her life or property, lives or property of his or her relatives, or property or liability of his or her associates. 6. We certify that each applicant will receive close and adequate supervision, and that we will make inspection when needed of any or all risks written by these applicants, to the end that the insurance interest of the public will be properly protected. 7. We will not permit any applicant to transact insurance as an agent until duly licensed therefor. No applicants have been given a contract or furnished supplies, nor have any applicants have permitted to write, solicit business or act as an agent in any capacity, and they will not be so permitted until the certificate of authority or license applied for is received. 8. We certify that General Agent, Selling Broker-Dealer and applicant shall have entered into a written agreement pursuant to which: (i) applicant is appointed a Sub-agent of General Agent and a registered representative of Selling Broker-Dealer; (ii) applicant agrees that his or her selling activities relating to securities regulated Contracts shall be under the supervision and control of Selling Broker-Dealer and his or her selling activities relating to all Contracts shall be under the supervision and control of General Agent; and (iii) that applicant's right to continue to sell such Contracts is subject to his or her continued compliance with such agreement and any procedures, rules or regulations implemented by Selling Broker-Dealer or General Agent. 12 EX-99.4(A) 7 EXHIBIT 99.4(A) [LOGO] PACIFIC LIFE Pacific Life Insurance Company 700 Newport Center Drive Newport Beach, CA 92660 PACIFIC INNOVATIONS - -------------------------------------------------------------------------------- INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT - - Investment Experience Reflected in Benefits - - Variable and Fixed Accumulation Before Annuity Date; Variable and Fixed Annuity Payments Thereafter - - Death Benefit Proceeds Payable Before Annuity Date - - Non-Participating Please read your contract carefully. This is a legal contract between you, the Owner, and us, Pacific Life Insurance Company. We agree to pay the benefits of this Contract according to its provisions. The consideration for this Contract is the application for it, (copy or confirmation is attached) and our receipt of the Purchase Payment(s). CONTRACT LOAN AMOUNT IS LESS THAN 100% OF CONTRACT VALUE. BENEFITS AND VALUES UNDER THIS CONTRACT MAY BE ON A VARIABLE BASIS. AMOUNTS DIRECTED INTO ONE OR MORE OF THE VARIABLE INVESTMENT OPTIONS WILL REFLECT THE INVESTMENT EXPERIENCE OF THOSE INVESTMENT OPTIONS. THESE AMOUNTS MAY INCREASE OR DECREASE, AND ARE NOT GUARANTEED AS TO A DOLLAR AMOUNT. THE DETAILS OF THE VARIABLE PROVISIONS BEGIN ON PAGE 11. RIGHT TO CANCEL - YOU MAY RETURN THIS CONTRACT WITHIN 10 DAYS AFTER YOU RECEIVE IT. TO DO SO, MAIL IT TO US AT OUR SERVICE CENTER OR TO THE AGENT WHO SOLD IT TO YOU. THIS CONTRACT WILL THEN BE DEEMED VOID FROM THE BEGINNING. NO WITHDRAWAL CHARGE WILL BE IMPOSED, AND WE WILL REFUND YOUR CONTRACT VALUE, INCLUDING ANY CHARGES FOR PREMIUM TAXES AND/OR OTHER TAXES THAT WERE DEDUCTED FROM THE CONTRACT VALUE. Signed at our Home Office, 700 Newport Center Drive, Newport Beach, California 92660. /s/ Thomas C. Sutton /s/ Audrey L. Milfs Chairman and Chief Executive Officer Secretary INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT TABLE OF CONTENTS INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT CONTRACT SPECIFICATIONS .......................................3 DEFINITIONS ...........................................4 GENERAL PROVISIONS ...........................................7 PURCHASE PAYMENTS .......................................9 Purchase Payment Allocation .................................9 Allocations During the Right to Cancel Period ..................9 Minimum Investment Option .................................9 THE FIXED OPTION ..........................................10 VARIABLE INVESTMENT OPTIONS ..............................11 Separate Account ............................................11 CONTRACT VALUE ..........................................12 Fixed Option Value ............................................12 Variable Account Value ............................................12 Loan Account Value ............................................13 CHARGES, FEES AND DEDUCTIONS ........................................14 Administrative Fee ............................................14 Annual Fee .........................................14 Mortality and Expense Risk Charge .............................14 Premium Taxes ............................................14 Transfer Fee ............................................14 Withdrawal Fee ............................................14 Withdrawal Charge ............................................14 TRANSFERS ..........................................16 WITHDRAWALS ..........................................17 Amount Available for Withdrawal ................................17 TRANSFER AND WITHDRAWAL RESTRICTIONS ..............................17 Special Restrictions - Fixed Option ................................17 CONTRACT LOANS ..........................................18 Loan Procedures ............................................18 Loan Account ............................................18 Loan Terms ............................................18 Loan Interest Rate ............................................18 Repayment Terms ............................................18 DEATH BENEFIT ..........................................20 Death of Annuitant ............................................20 Death of Owner ............................................20 Death of Owner Distribution Rules ................................20 Interest on Death Benefit Proceeds .............................21 BENEFICIARY ..........................................22 Add or Changing Your Beneficiary ................................22 ANNUITY BENEFITS ..........................................23 Choice of Annuity Date ............................................23 Application of Contract Value ................................23 Your Selections ............................................23 Fixed and Variable Annuities ................................23 Annuity Options ............................................24 Default Annuity Date and Options ................................24 Amount of Payments ............................................24 Fixed Annuity Payments ................................25 Variable Annuity Payments ................................25 Periodic Payments ............................................25 ANNUITY OPTION TABLES ...............................26 2 CONTRACT SPECIFICATIONS SERVICE CENTER: SEND FORMS AND WRITTEN REQUESTS TO: Pacific Life Insurance Company P.O. Box 7187 Pasadena, California 91109-7187 SEND PAYMENTS TO: Pacific Life Insurance Company P.O. Box 100060 Pasadena, California 91189-0060 Toll-free number: 1-800-722-2333 (between 6:00 a.m. and 5:00 p.m., Pacific time) Please use our toll-free number to present inquiries or obtain information about your coverage and for us to provide assistance in resolving complaints. Basic Contract - [LOBE] Investment Options: [FNDNAM01] [FNDNAM02] [FNDNAM03] [FNDNAM04] [FNDNAM05] [FNDNAM06] [FNDNAM07] [FNDNAM08] [FNDNAM09] [FNDNAM10] [FNDNAM11] [FNDNAM12] [FNDNAM13] [FNDNAM14] [FNDNAM15] [FNDNAM16] [FNDNAM17] [FNDNAM18] [FNDNAM19] [FNDNAM20] [FNDNAM21] [FNDNAM22] [FNDNAM23] [FNDNAM24] [FNDNAM25] [FNDNAM26] [FNDNAM27] [FNDNAM28] [FNDNAM29] [FNDNAM30] [FNDNAM31] [FNDNAM32] [FNDNAM33] Administrative Fee: 0.15% Mortality and Expense Risk Charge: [DBPCT] Annual Fee: $ 30.00 if contract value is less than $50,000 Withdrawal Charge: Age of Purchase Payment in Contract Years Charge Percent 1 9% 2 8% 3 8% 4 and over 0% Contract Number: [PNUM] Contract Date: [ISSDT] Owner(s): [O1NAM] [O2NAM] Annuitant(s): Age Sex [A1NAM] [A1AGE] [A1SEX] [A2NAM] [A2AGE] [A2SEX] Initial Purchase Payment: [PAMT] Annuity Start Date: [ACD] 3 DEFINITIONS PL, WE, OUR and US - Pacific Life Insurance Company. YOU and YOUR - The person or persons named as Owner(s) in the Contract Specifications. If there are Joint Owners, you and your means both Joint Owners. ACCOUNT VALUE - The amount of your Contract Value allocated to any one of the Investment Options. AGE - The Owner's or Annuitant's age, as applicable, at his or her last birthday. ANNUITANT - The person you name on whose life annuity payments may be determined. An Annuitant's life may also be used to determine certain increases in death benefits, and to determine the Annuity Date. If you designate Joint Annuitants or a Contingent Annuitant, "Annuitant" means the sole surviving Annuitant, unless otherwise stated. Any named Annuitant, Joint Annuitant, or Contingent Annuitant must be under Age 81 as of your Contract Date. If your Contract is a Non-Qualified Contract, you cannot change the Annuitant or change or add a Joint Annuitant. If your Contract is a Qualified Contract, you may add a Joint Annuitant only on the Annuity Date. ANNUITY DATE ("ANNUITY START DATE") - The date shown in the Contract Specifications, or the date you later elect, if any, for the start of annuity payments if the Annuitant is still living and the Contract is in force; or if earlier, the date that annuity payments actually begin. ANNUITY OPTIONS - Income options available for a series of payments after your Annuity Date. BENEFICIARY - The person you name who may receive any death benefit proceeds or any remaining annuity benefits in accordance with the provisions of this Contract. BUSINESS DAY - Any day on which the value of an amount invested in a Subaccount is required to be determined by applicable law which currently includes each day that both the New York Stock Exchange is open for trading and our administrative offices are open. If any transaction or event under this Contract is scheduled to occur on a day that does not exist in a given calendar period, or on a day that is not a Business Day, such transaction or event will be deemed to occur on the next following Business Day, unless otherwise stated. CODE - The Internal Revenue Code of 1986, as amended. CONTINGENT ANNUITANT - The person, if any, you select to become the Annuitant if the Annuitant dies before your Annuity Date. You may add or change your Contingent Annuitant prior to the Annuity Date provided the Contingent Annuitant is not the sole surviving Annuitant. Any Contingent Annuitant you name must be under Age 81 as of your Contract Date or, if you add or change a Contingent Annuitant, as of the date of that addition or change. CONTINGENT OWNER - The person, if any, you select to succeed to your rights as Owner of this Contract if all named Contract Owners die. CONTRACT ANNIVERSARY - The same date, in each subsequent year, as your Contract Date. CONTRACT DATE - The date we issue your Contract, as shown in the Contract Specifications. Contract Years, Contract Anniversaries, Contract Semiannual Periods, Contract Quarters and Contract Months are measured from this date. CONTRACT DEBT - As of the end of any Business Day, the principal amount you have outstanding on any loan under this Contract, plus any accrued and unpaid interest. CONTRACT VALUE - As of the end of any Business Day, your Variable Account Value, plus your Fixed Option Value, and any Loan Account Value. FIXED OPTION - Amounts allocated under your Contract to the Fixed Option are held in our General Account and receive interest at rates declared periodically (the "Guaranteed Interest Rate"), but not less than an annual rate of 3%. FIXED OPTION VALUE - The aggregate amount of your Contract Value allocated to the Fixed Option. 4 GENERAL ACCOUNT - Our General Account consists of all assets of PL, other than those assets allocated to Separate Account A or to any of our other separate accounts. GUARANTEED INTEREST RATE - The interest rate guaranteed at the time of allocation (or rollover) for the Guarantee Term on amounts allocated to the Fixed Option. The Guaranteed Interest Rate is expressed as an annual rate, and interest is accrued daily. This rate will not be less than an annual rate of 3%. GUARANTEE TERM - The period during which the amount you allocate to the Fixed Option earns a specified Guaranteed Interest Rate. INVESTMENT OPTION - A Variable Account or Fixed Option offered under the Contract. LOAN ACCOUNT - The account in which the amount equal to the principal amount of a loan and any interest accrued is held to secure any Contract Debt. LOAN ACCOUNT VALUE - The amount, including any interest accrued, held in the Loan Account to secure any Contract Debt. NET CONTRACT VALUE - Your Contract Value less any Contract Debt. NOTICE DATE - The day on which we receive, in a form satisfactory to us, proof of death and instructions satisfactory to us regarding payment of death benefit proceeds. NON-NATURAL OWNER - A corporation or other entity that is not a (natural) person. NON-QUALIFIED CONTRACT - A Contract other than a Qualified Contract. OWNER - The person(s) who has (have) all rights under this Contract. If your Contract names two Owners, Owner means both Owners ("Joint Owners"). Any named Owner or Contingent Owner must be under Age 81 as of your Contract Date. If your Contract allows you to change or add Owners after the Contract is issued, any newly-named or added Owners, including Joint and/or Contingent Owners, must be under Age 81 at the time of such change or addition. PRIMARY ANNUITANT - The individual that is named in your Contract, the events in the life of whom are of primary importance in affecting the timing or amount of the payout under the Contract. PURCHASE PAYMENT ("PREMIUM PAYMENT") - An amount paid to us by or on behalf of an Owner as consideration for the benefits provided under this Contract. QUALIFIED CONTRACT - A Contract that qualifies under the Code as an individual retirement annuity ("IRA") or a Contract purchased under a Qualified Plan that qualifies for special tax treatment under the Code. QUALIFIED PLAN - A retirement plan that receives favorable tax treatment under Section 401, 403, 408, 408A, or 457 of the Code. SEC - Securities and Exchange Commission. SEPARATE ACCOUNT OR SEPARATE ACCOUNT A - A separate account of PL registered as a unit investment trust under the Investment Company Act of 1940, as amended ("1940 Act"). SERVICE CENTER - PL's mailing address shown in the Contract Specifications. We will notify you of any change in our mailing address. SUBACCOUNT - An investment division of the Separate Account. Each Subaccount, (a "Variable Investment Option" or "Variable Account") invests its assets in a separate series or class of shares of a designated investment company. SUBACCOUNT ANNUITY UNIT ("ANNUITY UNITS") - Annuity Units are used to measure variation in variable annuity payments. The amount of each variable annuity payment (after the first payment) will vary with the value and number of your Annuity Units in each Subaccount. SUBACCOUNT UNIT - Subaccount Units are used to measure your Variable Account Value in that Subaccount. 5 UNIT VALUE - The value of a Subaccount Unit ("Subaccount Unit Value") or Subaccount Annuity Unit ("Subaccount Annuity Unit Value"). The Unit Value of any Subaccount is subject to change on any Business Day. The fluctuations in value reflect investment results and daily deductions for the mortality and expense risk charge and administrative fee. Changes in Subaccount Annuity Unit Values also reflect an additional adjustment factor that corrects for an assumed investment return. The Unit Value of a Subaccount Unit and of a Subaccount Annuity Unit are determined each Business Day. VARIABLE ACCOUNT ("VARIABLE INVESTMENT OPTION") - A Subaccount of the Separate Account or any separate account of PL which is available under your Contract in which assets of PL are segregated from assets in its General Account and from assets in other separate accounts. VARIABLE ACCOUNT VALUE - The aggregate amount of your Contract Value allocated to the Variable Accounts. 6 GENERAL PROVISIONS REPORT TO OWNER(S) - At least once per year prior to the Annuity Date, we will provide you with a report that will show your Contract Value, any Purchase Payments received, loan repayments, transfers, withdrawals, applicable withdrawal charges and/or other charges and/or fees incurred since the last report, and any other information that may be required. After the Annuity Date, we will provide you with any information that may be required. PAYMENTS, INSTRUCTIONS AND REQUESTS - Unless this Contract provides otherwise, all Purchase Payments, loan repayments, instructions and requests must be received in a form satisfactory to us at our Service Center at its mailing address. (See DEFINITIONS - SERVICE CENTER). Any subsequent Purchase Payments, loan repayments and requests for loans, transfers or withdrawals we receive in a form satisfactory to us on any Business Day usually will be processed the same Business Day unless the transaction or event is scheduled to occur on another day. Generally, all other instructions and requests normally will be effective as of the end of the day next following the Business Day we receive them in a form satisfactory to us, unless the event is scheduled to occur on another day. We may require that you provide signature guarantees or other safeguards for any instruction, request or other document you may send to our Service Center. You acknowledge and agree that we will not be liable for any loss, liability, cost or expense of any kind or character for acting on instructions or requests submitted to us that we reasonably believe to be genuine. ENTIRE CONTRACT - This document, the attached application or confirmation thereof, any subsequent applications to change this Contract or confirmation thereof, and any riders and endorsements, constitute the entire Contract, and supersede any and all prior agreements, whether oral or written, about the terms of this Contract and the application. All statements made in the application are representations and not warranties. CONTRACT MODIFICATIONS - Modifications to this Contract or any waiver of our rights or requirements under this Contract can only be made if in writing by an authorized officer of PL. This Contract is intended to qualify as an annuity contract for federal income tax purposes. In addition, if this Contract is issued in connection with a Qualified Plan, this Contract is intended to qualify as part of such a tax-qualified retirement plan, arrangement or contract. To that end, the provisions of this Contract are to be interpreted and administered to ensure or maintain such tax qualification, notwithstanding any other provisions to the contrary. We reserve the right to amend this Contract and/or our administrative procedures without consent (except for the states of Michigan, Pennsylvania, South Carolina and Washington) to reflect any clarifications that may be needed or are appropriate to maintain its tax qualification or to conform this Contract to any applicable changes in the tax qualification requirements. BASIS OF VALUES - A detailed statement showing how values are determined has been filed with the state insurance departments. All values and reserves are at least equal to those required by the laws of the state in which this Contract is delivered. CLAIMS OF CREDITORS - Your Contract Value and other benefits under this Contract are exempt from the claims of creditors to the extent permitted by law. REMOVAL OF BENEFICIARY OR CONTINGENT ANNUITANT - You may remove a Beneficiary (other than an irrevocable Beneficiary) or a Contingent Annuitant from this Contract by providing proper written instructions to our Service Center. OWNERSHIP - This Contract belongs to the Owner. The Owner is entitled to exercise all rights available to the Owner under this Contract. If this Contract names two Owners, both Owners must join in any request to exercise these rights. The Owner may exercise these rights under this Contract without the consent of the Beneficiary (other than any irrevocable Beneficiary) or any other person, except as otherwise required by law. 7 ASSIGNMENT - You may assign all rights and benefits under this Contract before the Annuity Date. We are not bound by any assignment until we have received at our Service Center written notice satisfactory to us and we record the assignment. We are not responsible for the validity of any assignment. If the Contract has been absolutely assigned, the assignee becomes the Owner. You should consult with your tax adviser to determine the tax consequences of an assignment before taking any action. DELAY OF PAYMENTS - Generally, payments, transfers, or exchanges will be made within seven days from receipt of the payment and/or request in a form satisfactory to us. Payment of your withdrawal proceeds or transfers or exchanges to or from a Variable Account may be delayed after receipt of your withdrawal, transfer, or exchange request under certain circumstances. These include: - a closing of the New York Stock Exchange other than on a regular holiday or weekend; - a trading restriction by the SEC; or - an emergency declared by the SEC. We may delay payments or transfers from our General Account (which would include payment of your withdrawal proceeds and transfers from the Fixed Option, loans, fixed annuity payments, and lump sum death benefit payments unless state law requires otherwise) for up to six months after the requested effective date of the transaction. Any amount delayed will, so long as it is held under the Fixed Option, continue to earn interest at the Guaranteed Interest Rate(s) then in effect until the applicable Guaranteed Term in effect has ended, and not less than 3% on an annual basis thereafter. If you make any Purchase Payment by check, other than a cashier's check, we may delay making payments to you until your check has cleared. INCONTESTABILITY - We will not contest the validity of this Contract. PROOF OF LIFE OR DEATH - Before we make a payment, we have the right to require proof of the life or death of any person on whose life or death determines whether, to whom, or how much we must pay any benefits under this Contract. WITHHOLDING TAXES - We reserve the right to withhold from all payments made or deemed made under this Contract, any taxes required to be withheld by applicable federal or state law, unless the Owner or payee elects otherwise pursuant to applicable withholding rules. MISSTATEMENT OF AGE OR SEX - We may require proof of the Annuitant's or Owner's Age before any payments associated with the Death Benefit provisions of this Contract are made. If the Age of the Annuitant is incorrectly stated in this Contract, we will base any payment associated with the Death Benefit provisions of this Contract on the Annuitant's or Owner's correct Age. We may require proof of the Annuitant's Age and sex before starting annuity payments. If the Age or sex (or both) of the Annuitant are incorrectly stated in this Contract, we will correct the amount payable, based upon the Annuitant's correct Age or sex, if applicable. If we make the correction after annuity payments have started, and we have made overpayments, we will deduct the amount of the overpayment, with interest at 3% per year, from any payments due then or later. If we have made underpayments, we will add the amount, with interest at 3% per year, of the underpayments to the next payment we make after we receive proof of the correct Age and/or sex. 8 PURCHASE PAYMENTS PURCHASE PAYMENTS - This Contract will not be in force until we receive at our Service Center the initial Purchase Payment. Your initial Purchase Payment is shown in the Contract Specifications. You may make additional Purchase Payments at any time before the Annuity Date, while the Annuitant is living and this Contract is in force. Each additional Purchase Payment must be at least $250 for Non-Qualified Contracts and $50 for Qualified Contracts. We may limit the amount of any single Purchase Payment. You must obtain our consent before making a Purchase Payment that will bring your aggregate Purchase Payments over $1,000,000. Purchase Payments are payable in U.S. dollars either at our Service Center or through our agent. Checks should be made payable to Pacific Life Insurance Company. If you make Purchase Payments by check other than a cashier's check, your withdrawal proceeds and any refund under your Right to Cancel may be delayed until your check has cleared. On request, a receipt for the Purchase Payment signed by an officer of PL will be provided after payment. PURCHASE PAYMENT ALLOCATION - Prior to your Annuity Date, you may allocate all or part of your Purchase Payments to one or more of the Investment Options available to you. The Investment Options available to you on the Contract Date are shown on your Contract Specifications page. You may change your allocation by providing us with instructions in a form satisfactory to us. (see GENERAL PROVISIONS: PAYMENTS, INSTRUCTIONS AND REQUESTS). We will allocate any Purchase Payment according to your most recent allocation instructions. We may reject any instruction or Purchase Payment if your instructions are not clear and we cannot determine your allocation instructions. ALLOCATIONS DURING THE RIGHT TO CANCEL PERIOD - We will allocate your initial Purchase Payment in accordance with your most recent allocation instructions. MINIMUM INVESTMENT OPTION VALUE - We reserve the right to require that, as a result of any allocation to an Investment Option, any transfer, or any partial withdrawal, your remaining Account Value in any Investment Option must be at least $500. We also reserve the right to transfer any remaining Account Value that does not meet such minimum amount to your other Investment Options on a pro rata basis relative to your most recent allocation instructions for those Investment Options. 9 THE FIXED OPTION We credit interest at the Guaranteed Interest Rate during each Guarantee Term on the amount of Purchase Payments and/or Contract Value that you allocate or transfer to, or roll over into, the Fixed Option, as described below. Account Values under the Fixed Option are held in our General Account. Subject to applicable law, we have sole discretion over the investment of our General Account assets. We will credit your Contract with a Guaranteed Interest Rate for a Guarantee Term of up to one year on that portion of your Purchase Payment and/or Contract Value allocated to the Fixed Option, while the Annuitant is living and this Contract is in force, and prior to the Annuity Date. We will credit the Guaranteed Interest Rate in effect on the Business Day that the allocation and/or transfer is effective for an initial Guarantee Term that ends at the end of that Contract Year. At the end of an initial Guarantee Term and each succeeding Guarantee Term, we will roll over your Fixed Option Value attributed to that Guarantee Term to a new Guarantee Term of one year, unless you instruct us otherwise. We will credit the Guaranteed Interest Rate in effect at the time of the roll over on the amount of the Fixed Option Value rolled over until the end of such Guarantee Term. We will stop crediting interest on that portion of your Fixed Option Value you withdraw, transfer (including transfers to the Loan Account), or convert to an Annuity Option, including any: - fees for withdrawals or transfers; - withdrawal charges; - annual fee; and - charges for premium taxes and/or other taxes. We do so as of the end of the Business Day any such transaction is effective. 10 VARIABLE INVESTMENT OPTIONS The Variable Investment Options consist of Subaccounts of the Separate Account. The available Subaccounts as of the Contract Date are shown in the Contract Specifications. SEPARATE ACCOUNT - We established and maintain the Separate Account under the laws of California. Any income, gains or losses (whether or not realized) from the assets of each Variable Account are credited or charged against such Variable Account without regard to our other income, gains or losses. Assets may be put in our Separate Account to support this Contract and other variable annuity contracts. Assets may be put in our Separate Account for other purposes, but not to support contracts other than variable annuity contracts. The assets of our Separate Account are our property. The portion of the Separate Account assets equal to the reserves and other Contract liabilities with respect to each Variable Account will not be chargeable with liabilities arising out of any other business we conduct. We may transfer assets of a separate account in excess of the reserves and other liabilities with respect to its Variable Accounts to another separate account or to our General Account. All obligations arising under the Contract are our general corporate obligations. We do not hold ourselves out to be trustees of the Separate Account assets. We reserve the right, subject to compliance with the law then in effect, and after any required regulatory approval, to: - cease offering any Subaccount; - add or change designated investment companies or their portfolios, or other investment vehicles; - add, delete or make substitutions for the securities and other assets that are held or purchased by the Separate Account or any Variable Account; - permit conversion or exchanges between portfolios and/or classes of contracts on the basis of Owners' requests; - add, remove or combine Variable Accounts; - combine the assets of any Variable Account with any other Separate Account of PL or of any of its affiliates; - register or deregister Separate Account A or any Variable Account under the 1940 Act; - operate any Variable Account as a managed investment company under the 1940 Act, or any other form permitted by law; - run any Variable Account under the direction of a committee, board, or other group; - restrict or eliminate any voting rights of Owners with respect to any Variable Account or other persons who have voting rights as to any Variable Account;- - make any changes required by the 1940 Act or other federal securities laws; - make any changes necessary to maintain the status of the Contracts as annuities under the Code; - make other changes required under federal or state law relating to annuities; - suspend or discontinue sale of the Contracts; and - comply with applicable law. If any of these changes result in a material change in the underlying investments of a Variable Account, we will notify you of such change. We will not change the investment policy of the Separate Account without following the filing and other procedures of the Insurance Commissioner in the State of California and the filing and other procedures established by insurance regulators of the state of delivery. Unless required by law or regulation, an investment policy may not be changed without our consent. From time to time we may make other Investment Options available to you. Any new Investment Option may invest in portfolios of the designated investment company, other designated investment companies or their portfolios, or in other investment vehicles. New Investment Options will be made available to existing Owners at our discretion. We will provide you with written notice of all material details, including investment objectives and charges. We will comply with the filing or other procedures established by applicable state insurance regulators, to the extent required by applicable law. 11 CONTRACT VALUE Your Contract Value on any Business Day is the sum of: - your Fixed Option Value on that day; - plus your Variable Account Value on that day; - plus your Loan Account Value on that day. We generally determine values on each day that the New York Stock Exchange is open, provided our administrative offices are also open on that day. FIXED OPTION VALUE - Your Fixed Option Value on any Business Day is your Fixed Option Value on the prior Business Day increased by any additions to your Fixed Option on that day as a result of any: - interest; - Purchase Payments received by us and allocated to the Fixed Option; - transfers to the Fixed Option, including transfers from the Loan Account. decreased by any deductions from the Fixed Option on that day as a result of any: - transfers, including transfers to the Loan Account; - withdrawals, including any withdrawal charges; - amounts converted to an Annuity Option; - charge for premium taxes and/or other taxes; - annual fee; and - fees for withdrawals and/or transfers. VARIABLE ACCOUNT VALUE - Your Variable Account Value on any Business Day is the sum of your Subaccount Values on that day. SUBACCOUNT VALUE - Each Subaccount Value on any Business Day is the number of Subaccount Units in that Subaccount that are credited to your Contract on that day multiplied by the Unit Value of the Subaccount on that day. We credit your Contract with Subaccount Units for a Subaccount as a result of any portion of your Purchase Payments received by us and allocated to that Subaccount; any transfers of your Contract Value to that Subaccount, and including transfers from the Loan Account. We debit your Contract with Subaccount Units for a Subaccount as a result of any deductions from the Subaccount, including those caused by any: - transfers, including transfers to the Loan Account; - withdrawals, including any withdrawal charges; - amounts converted to an Annuity Option; - charge for premium taxes and/or other taxes; - annual fee; and - fees for withdrawals and/or transfers. The number of Subaccount Units we debit or credit to your Contract in connection with a transaction is equal to the amount of the transaction applicable to that Subaccount divided by that Subaccount's Unit Value on that day. The number of your Subaccount Units in a Subaccount will change only if we debit or credit Subaccount Units for the transactions specified above. The number of Subaccount Units will not change because of subsequent changes in the Subaccount Unit Value. SUBACCOUNT UNIT VALUE - The initial Unit Value of each Subaccount was $10 on the Business Day the Subaccount began operations. At the end of each subsequent Business Day, the Unit Value for each Subaccount is equal to (Y) times (Z) where: (Y) is the Unit Value for that Subaccount as of the end of the prior Business Day; and (Z) is the Net Investment Factor for that Subaccount for the period (a "valuation period") between the prior Business Day and that Business Day. 12 NET INVESTMENT FACTOR - Each Subaccount's Net Investment Factor for any valuation period is equal to ( A / B ) - C where: (A) equals: (a) the net asset value per share of the corresponding portfolio shares held by the Subaccount as of the end of that valuation period; (b) plus the per share amount of any dividend or capital gain distributions made during that valuation period on the portfolio shares held by the Subaccount; (c) plus or minus any per share charge or credit for any income taxes, other taxes, or amounts set aside during that valuation period as a reserve for any income and/or any other taxes for which we determine to have resulted from the operations of the Subaccount or Contract, and/or any taxes attributable, directly or indirectly, to Purchase Payments; (B) is the net asset value per share of the portfolio shares held by the Subaccount as of the end of the prior valuation period; and (C) is a factor that we assess against the Subaccount's net assets held by each Subaccount for the mortality and expense risk charge and the administrative fee during that valuation period. LOAN ACCOUNT VALUE - For those Qualified Contracts that permit loans, your Loan Account Value as of the end of any Business Day is your Loan Account Value on the prior Business Day, increased by any: - interest; and - Contract Value loaned on that day; and decreased by any: - loan principal repaid on that day; and - earned interest transferred from the Loan Account on that day. 13 CHARGES, FEES AND DEDUCTIONS ADMINISTRATIVE FEE - We charge an administrative fee against assets held in your Variable Investment Option(s). This fee is assessed daily at the annual rate which is shown in the Contract Specifications. This fee is guaranteed not to increase. ANNUAL FEE - We charge an annual fee, which is shown in the Contract Specifications, on each Contract Anniversary prior to your Annuity Date against your Contract Value, and at the time you make a full withdrawal (on a prorated basis for the current Contract Year), if your Net Contract Value is less than $50,000 on that date. This fee is guaranteed not to increase. MORTALITY AND EXPENSE RISK CHARGE ("RISK CHARGE") - We impose a Risk Charge against assets held in your Variable Investment Option(s). This charge is assessed daily at the annual rate which is shown in the Contract Specifications. The Risk Charge compensates us for the risks we assume that mortality and expenses will vary from those we assumed. This charge is guaranteed not to increase. PREMIUM TAXES - From your Contract Value, we will deduct a charge for any taxes we pay that are attributable to Purchase Payments or withdrawals. Such taxes may include, but are not limited to: any federal, state or local premium or retaliatory taxes; and any federal, state or local income, excise, business or any other type of tax (or component thereof), measured by or based upon, directly or indirectly, the amount of Purchase Payments we receive from you. We will normally deduct this charge when you annuitize, however, we may impose this charge: on any withdrawal; at the time any death benefit is paid; when the taxes are incurred; or when we pay the taxes. We may base this charge on: the Contract Value; the amount of the transaction; the aggregate amount of Purchase Payments we receive under your Contract; or any other amount that, in our sole discretion, we deem appropriate. OTHER TAXES - We reserve the right to charge the Separate Account and/or deduct from your Contract Value a charge for any federal, state or local taxes we pay that are or become attributable to the Separate Account or Contract, including, but not limited to, income taxes attributable to our operation of the Separate Account or to our operations with respect to the Contract, or taxes attributable, directly or indirectly, to Purchase Payments or payments we make under this Contract. TRANSFER FEE - We reserve the right to impose a transfer fee of $15 on each transfer made in excess of fifteen transfers in any Contract Year. For this purpose, we will treat each transfer request as a single transfer, regardless of the number of Investment Options from which or to which portions of Account Values are transferred. We will deduct any transfer fee we impose from the Investment Option(s) from which the transfer is made on a pro rata basis relative to the total amount transferred. WITHDRAWAL FEE - We reserve the right to impose a withdrawal fee of $15 on each partial withdrawal made in excess of fifteen withdrawals in any Contract Year. We will deduct from your Contract Value, on a pro rata basis relative to your Account Value in each Investment Option immediately after the withdrawal, any such fee we impose on a partial withdrawal. For this purpose, we will treat each withdrawal request as a single withdrawal, regardless of the number of Investment Options from which portions of Account Values are withdrawn. CONTINGENT DEFERRED SALES CHARGE ("WITHDRAWAL CHARGE") - Purchase Payments are subject to a withdrawal charge which is shown in the Contract Specifications. This charge may apply to amounts you withdraw under your Contract prior to your Annuity Date, depending on the length of time each Purchase Payment has been allocated to your Contract and on the amount you withdraw. We will not apply the withdrawal charge on: - death benefit proceeds, except as provided under the DEATH OF OWNER provisions for certain Non-Natural Owners; - Contract Values converted to a life contingent option or to an Annuity Option with a certain payment period of 5 years or more after the first Contract Anniversary; - withdrawals by Owners to meet the minimum distribution rules for Qualified Contracts as they apply to amounts held under the Contract; or - withdrawals (full or partial), after the first Contract Anniversary, if the Owner or Annuitant has been diagnosed with a medically determinable condition that results in a life expectancy of twelve (12) months or less, subject to medical evidence satisfactory to us. 14 - withdrawals (full or partial) while the Owner or Annuitant is confined to an accredited nursing home for 60 days or longer and this Contract has been in effect for more than 90 days. The waiver applies only to withdrawals made while the Owner or Annuitant is in a nursing home or within 90 days after the Owner or Annuitant leaves the nursing home. In addition, the confinement period for which you seek the waiver must begin after the Contract Date. In order to use this waiver, you must submit with your withdrawal request, the following documents: (1) a physician's note recommending the Owner's or Annuitant's admittance to a nursing home; (2) an admittance form which shows the type of facility the Owner or Annuitant entered; and (3) a bill from the nursing home which shows that the Owner or Annuitant met the 60 day confinement requirement. An accredited nursing home shall be defined as a home or facility that: (1) is operating in accordance with the law of jurisdiction in which it is located; (2) is primarily engaged in providing, in addition to room and board, skilled nursing care under the supervision of a duly licensed physician; (3) provides continuous 24 hour a day nursing service by or under the supervision of a registered nurse; and maintains a daily record of the patient. AMOUNT OF WITHDRAWAL CHARGE - The amount of a withdrawal charge depends on how long your Purchase Payments are held under this Contract. Each Purchase Payment you make is considered to have a certain "age," depending on the length of time since that Purchase Payment was effective. A Purchase Payment is "age one" from the day it was effective until your next Contract Anniversary and increases in "age" on that and each succeeding Contract Anniversary. When you withdraw an amount, the "age" of any Purchase Payment(s) you withdraw determines the level(s) of withdrawal charge as shown in the Contract Specifications. For the purposes of calculating the withdrawal charge, we assume that withdrawal amounts will be applied to Purchase Payments first and in the order the Purchase Payments were received. The withdrawal charge will be deducted proportionately from each Investment Option selected for withdrawal. WITHDRAWAL ENHANCEMENTS - We reserve the right, in our sole discretion, to calculate your withdrawal charge on more favorable terms to you than as otherwise described in the preceding paragraph. These Withdrawal Enhancements may include an acceleration of the day on which the "age" of any Purchase Payment(s) is considered to occur or a waiver of some or all of the withdrawal charge in the event the Guaranteed Interest Rate is less than a specified rate. Although we retain the discretion to add a Withdrawal Enhancement, once it is added, it is binding on us and effective for any specified period we have designated. In the event of any Withdrawal Enhancement, we will notify the Owner within thirty (30) days of the effective date of the Withdrawal Enhancement. FREE WITHDRAWALS - During a Contract Year, you may withdraw free of withdrawal charge amounts up to your "Eligible Purchase Payments". Eligible Purchase Payments include 10% annually of total Purchase Payments that have an "age" of less than four years, plus any remaining portion not withdrawn from the previous Contract Year's Eligible Purchase Payments that are derived from Purchase Payments which have an "age" of less than four years, plus 100% of all Purchase Payments that have an "age" of four years or more. Once all Purchase Payments have been deemed withdrawn, any withdrawal will be deemed a withdrawal of your Earnings and will be free of the withdrawal charge. For those contracts issued to a Charitable Remainder Trust (CRT), the amount available for withdrawal free of withdrawal charges during a Contract Year includes all Eligible Purchase Payments plus all Earnings even if all Purchase Payments have not been deemed withdrawn. EARNINGS - For the purpose of calculating the withdrawal charge, as of the end of any Business Day, your Earnings equal your Contract Value less your aggregate Purchase Payments which are reduced by withdrawals of prior Purchase Payments. 15 TRANSFERS You may make transfers under this Contract subject to certain restrictions (see TRANSFER AND WITHDRAWAL RESTRICTIONS) and any applicable fees (see CHARGES, FEES AND DEDUCTIONS). By providing a proper transfer request (see GENERAL PROVISIONS - PAYMENTS, INSTRUCTIONS AND REQUESTS), you may request transfer of part or all of your Contract Value, less Loan Account Value, in any Investment Option among other Investment Options while your Annuitant is living and prior to the Annuity Date. If your transfer causes your remaining Account Value in any Investment Option immediately after such transfer to be less than $500, we reserve the right to transfer such remaining Account Value to your other Investment Options on a pro rata basis relative to your most recent allocation instructions. We reserve the right to impose a transfer fee as described in the Transfer Fee provision. Transfers between Investment Options will normally be effective as of the end of the Business Day on which we receive a proper transfer request. If your Contract was delivered in a state that requires a refund of Purchase Payments, we may prohibit transfers up to 15 days after your Contract Date. 16 WITHDRAWALS You may, on or prior to your Annuity Date, withdraw all or a portion of the amount available under your Contract, while the Annuitant is living and your Contract is in force; however, no partial withdrawals are allowed within thirty (30) days of your Contract Date. If you make a full withdrawal, we require return of your Contract or a signed Lost Contract Affidavit with your proper request. You may choose to withdraw from any specific Investment Option(s), or from all Investment Options proportionately. If you do not specify, we will make the withdrawal from your Investment Options on a pro rata basis relative to your Account Value in each. Each partial withdrawal must be for $500 or more. Withdrawals from the Fixed Option are subject to certain additional restrictions described below. If your partial withdrawal causes your Net Contract Value to be less than $1,000 immediately after the withdrawal, we may terminate your Contract and send you the withdrawal proceeds. If your partial withdrawal causes your Account Value remaining in any Investment Option to be less than $500, we reserve the right to transfer such remaining Account Value to your other Investment Options on a pro rata basis relative to your most recent allocation instructions. Withdrawals will normally be effective as of the end of the Business Day on which we receive a proper withdrawal request. AMOUNT AVAILABLE FOR WITHDRAWAL - The amount available for withdrawal is your Net Contract Value as of the end of the Business Day on which your withdrawal request is effective, less any: - withdrawal fee; - withdrawal charge; - annual fee; and - charge for premium taxes and/or other taxes. The amount we send to you (your "withdrawal proceeds") will also reflect any required or requested federal and/or state income tax withholding. If you make a full withdrawal, this Contract will end; we will have no further obligations under this Contract. TRANSFER AND WITHDRAWAL RESTRICTIONS SPECIAL RESTRICTIONS ON WITHDRAWALS OR TRANSFERS FROM THE FIXED OPTION - After the first Contract Anniversary, you may, within thirty (30) days from your Contract Anniversary, withdraw or transfer up to one-third (33-1/3%) of your Fixed Option Value. In consecutive Contract Years, however, you may withdraw or transfer one-third of your Fixed Option Value at the beginning of the first year, one-half (50%) of your remaining Fixed Option Value at the beginning of the second year, and up to the entire amount (100%) of your remaining Fixed Option Value at the beginning of the third year. 17 CONTRACT LOANS If your Contract is issued under a Qualified Plan under Code Sections 401 or 403 and your Qualified Plan permits, you may request a loan of a portion of your Contract Value after your first Contract Year and before your Annuity Date. LOAN PROCEDURES - Your loan request must be submitted on our Loan Request Form. You may submit a loan request at any time after your first Contract Anniversary and before your Annuity Date; however, before requesting a new loan, you must wait thirty (30) days after the last payment of a previous loan. If approved, your loan will usually be effective as of the end of the Business Day on which we receive all necessary documentation in a form satisfactory to us. We will normally forward proceeds of your loan to you within seven calendar days after the effective date of your loan. LOAN ACCOUNT - On the effective date of your loan, we will transfer an amount equal to the principal amount of your loan into an account called the Loan Account. We will transfer amounts to the Loan Account on a pro rata basis from your Fixed and Variable Investment Options based on your Account Value in each. For those Contracts issued under Qualified Plans that are exempt from the requirements of Title 1 of the Employee Retirement Income Security Act of 1974 ("ERISA"), we will credit interest on amounts in the Loan Account at an annual rate equal to 3.0%. For those Contracts issued under Qualified Plans that are subject to the requirements of Title 1 of ERISA, we will credit interest on amounts in the Loan Account at an annual rate that is two percentage points lower than the annual loan interest rate charged on your loan. Interest earned will accrue daily beginning on the day following the effective day of the loan. The interest credited will be transferred from the Loan Account to your Fixed and Variable Investment Options on a pro rata basis relative to your most recent allocation instructions. LOAN TERMS - You may have only one loan outstanding at any time. The minimum loan amount is $1,000 and the maximum loan amount is the lesser of: - 50% of your Contract Value; - $50,000 less your highest outstanding Contract Debt during the 12-month period immediately preceding the effective date of your loan. You should refer to the terms of your particular Qualified Plan for any additional loan restrictions. If you have other loans outstanding pursuant to other Qualified Plans, the amount you may borrow may be further restricted. We are not responsible for making any determinations (including loan amounts permitted) or any interpretations with respect to your Qualified Plan. LOAN INTEREST RATE - For those Contracts issued under Qualified Plans that are exempt from the requirements of Title 1 of ERISA, you will be charged interest on your Contract Debt at an annual rate equal to 5%. For those Contracts issued under Qualified Plans that are subject to the requirements of Title 1 of ERISA, you will be charged interest on your Contract Debt at an annual rate, set at the time the loan is made, equal to the higher of 5% or the Moody's Corporate Bond Yield Average-Monthly Average Corporates, as published by Moody's Investors Service, Inc., or its successor, for the most recent available month. In the event that the Moody's Corporate Bond Yield Average Monthly Average Corporates is no longer available, we will use a substantially similar average, subject to compliance with applicable state regulations. We will notify you of the loan interest rate when you make a Contract loan. Interest charged will accrue daily beginning on the day your loan is effective. REPAYMENT TERMS - You must repay principal and interest of any loan within five years after its effective date. If you have certified to us that your loan proceeds will be used to acquire a principal residence for yourself, you may request a loan for up to thirty (30) years. In either case, you must repay your loan in full prior to the Annuity Date. Your loan, including principal and accrued interest, must be repaid in quarterly installments that are substantially level. An installment will be due each quarter on the date corresponding to your loan effective date, beginning with the first such date following the effective date of your loan. You may, however, repay your entire loan at any time. If you do so, we will bill you for any accrued interest. Your loan will be considered repaid only when the interest due has also been paid. Subject to any necessary approval of state insurance authorities, we will treat all payments you send us as Purchase Payments 18 unless you specifically indicate that your payment is a loan repayment. To the extent permitted by law, any loan repayments in excess of the amount then due will be applied to the principal balance of your loan. Such repayments will not change the due dates or the periodic repayment amount due for future periods. If a loan repayment is in excess of the principal balance of your loan, any excess repayment will be refunded to you. Repayments received that are less than the amount then due will be returned to you, unless otherwise required by law. If a loan repayment is not made when due, we will declare the entire remaining loan balance in default. At that time, we will provide written notification of the amount needed to bring the loan back to the current status. You will have sixty (60) days from the date on which the loan was declared in default (the "grace period") to make the required repayment. If the required repayment is not received by the end of the grace period, the defaulted loan balance plus accrued interest will be repaid by a withdrawal from your Contract Value to the extent that such values are then eligible for distribution. In order for an amount to be eligible for distribution from a Qualified Plan you must meet one of six triggering events. They are: attainment of age 59 1/2, separation from service, death, disability, plan termination, and financial hardship. To the extent such values are not then eligible for distribution, the defaulted loan balance plus accrued interest will be considered a "Deemed Distribution" and that portion of any Contract Value needed to repay the Contract Debt will be withdrawn when such Contract Values become eligible for distribution. The withdrawal will be subject to the withdrawal charge. If there is a "Deemed Distribution" under your Contract any future withdrawals will first be applied as repayment of the defaulted Contract Debt, including accrued interest and withdrawal charges and charges for applicable taxes, to the extent allowed by law. Any amounts withdrawn and applied as repayment of Contract Debt will be withdrawn first from your Loan Account and then from your Investment Options on a proportionate basis relative to the Account Value in each Investment Option. If you have an outstanding loan that is in default, the defaulted Contract Debt will be considered a withdrawal for the purpose of calculating any death benefit proceeds payable under this Contract. The terms of any such loan are intended to qualify for the exception in Code Section 72(p)(2) so that the distribution of the loan proceeds will not constitute a distribution that is taxable to you. To that end, these loan provisions will be interpreted to ensure and maintain such tax qualification, despite any other provisions to the contrary. We reserve the right to amend your Contract to reflect any clarifications that may be needed or are appropriate to maintain such tax qualification or to conform any terms of our loan arrangement with you to any applicable changes in the tax qualification requirements. We will provide you with a copy of any such amendment. If you refuse such an amendment, it may result in adverse tax consequences to you. Adverse tax consequences may result if you fail to meet the repayment requirements of your loan. A "Deemed Distribution" will be considered a currently taxable distribution, and may be subject to federal tax withholding and a federal early withdrawal penalty tax, regardless of when such unpaid amounts are repaid. The tax and other Qualified Plan rules relating to Contract loans are complex and in many cases unclear. For these reasons, and because the rules vary depending on the individual circumstances of each Contract, we advise that you consult with a qualified tax adviser before exercising the loan provisions of your Contract. If your Contract is a Non-Qualified Contract, or if your Qualified Plan does not permit loans, loans under this Contract will not be available to you. 19 DEATH BENEFIT A death benefit may be payable on proof of the death of the Annuitant or any Owner before the Annuity Date, while this Contract is in force. The proceeds of any death benefit payable will be payable upon receipt, in a form satisfactory to us, of proof of death and instruction regarding payment of death benefit proceeds. Such proceeds will equal the Death Benefit Amount reduced by any charges for premium taxes and/or other taxes and any Contract Debt. These proceeds will be payable in a lump sum, as an Annuity Option under this Contract or towards the purchase of any Annuity Option we then offer, or in accordance with the Code (see DEATH OF OWNER DISTRIBUTION RULES). Any such Annuity Option is subject to all restrictions and requirements as are other annuities offered under this Contract. DEATH BENEFIT AMOUNT - The Death Benefit Amount as of any Business Day prior to your Annuity Date is equal to the greater of: (a) your Contract Value as of that day; or (b) your aggregate Purchase Payments reduced by an amount for each withdrawal that has occurred, which is calculated by multiplying the aggregate Purchase Payments received prior to each withdrawal by the ratio of the amount of the withdrawal, including any withdrawal charge, to your Contract Value immediately prior to the withdrawal. DEATH OF ANNUITANT - If an Annuitant dies before the Annuity Date, the Death Benefit Amount will be equal to the Death Benefit Amount as of the Notice Date. Unless there is a surviving Joint or Contingent Annuitant, we will pay the death benefit proceeds to the Owner, if living; otherwise to the Beneficiary, if living; otherwise to the Owner's estate. If an Annuitant dies and there is a surviving Joint Annuitant, the surviving Joint Annuitant becomes the Annuitant. If there is no surviving Joint Annuitant and there is a Contingent Annuitant, the Contingent Annuitant becomes the Annuitant. Death benefit proceeds are payable only for the death of the sole surviving Annuitant prior to the Annuity Date. If you are the Annuitant and you die, we will determine the Death Benefit Amount and to whom it will be paid under the Death of Annuitant provisions; and, if your Contract is a Non-Qualified Contract, we will distribute any death benefit proceeds under the Death of Owner Distribution Rules. DEATH OF OWNER - If you are not the Annuitant, and you die before the Annuitant, the Death Benefit Amount will be equal to your Contract Value as of the Notice Date. If you die while the Annuitant is living and prior to the Annuity Date, we will pay the death benefit proceeds to the surviving Joint Owner, if any. If there is no surviving Joint Owner and there is a Contingent Owner, we will pay the death benefit proceeds to the surviving Contingent Owner, if any. If there is no surviving Contingent Owner, the death benefit proceeds will be paid to the Beneficiary, if living; otherwise to the Owner's estate. If you are not also the Annuitant, then, in the event the deaths of the Owner and Annuitant are under circumstances where it cannot be determined who died first, the Death Benefit will be calculated under the DEATH OF ANNUITANT provision of this Contract and payment will be made in accordance with the DEATH OF OWNER provisions of this Contract. If you are a Non-Natural Owner of a Contract other than a Contract issued under a Qualified Plan as defined in Sections 401 or 403 of the Code, the Primary Annuitant will be treated as the Owner of the Contract for purposes of the DEATH OF OWNER DISTRIBUTION RULES. If there is a change in the Primary Annuitant prior to the Annuity Date, such change will be treated as the death of the Owner. The Death Benefit Amount will be (a) the Contract Value if the Non-Natural Owner elects to maintain the Contract and reinvest the Contract Value into the Contract in the same amount as immediately prior to the distribution, or (b) the Contract Value less any withdrawal fee, withdrawal charge, charge for premium taxes and/or other taxes if the Non-Natural Owner elects a cash distribution. The Death Benefit will be determined as of the Business Day we receive, in a form satisfactory to us, the request to change the Primary Annuitant and instructions regarding continuance of the Contract or cash distribution. DEATH OF OWNER DISTRIBUTION RULES - The following rules will determine when a distribution must be made under this Contract. These rules do not affect our determination of the amount of death benefit proceeds payable or distribution proceeds. If there is more than one Owner, these rules apply on the date on which the first of these Joint Owners dies. 20 If the Owner dies before the Annuity Date, the designated recipient of the death benefit proceeds must receive: - a lump sum payment; or - elect to receive an annuity for life or over a period that does not exceed the life expectancy of the designated recipient, with annuity payments that start within one year after the Owner's death. Unless otherwise required by law, an election to receive an annuity (in lieu of a lump sum payment) must be made within such time frames as we may prescribe from time to time, or the lump sum option will be deemed elected. We will consider that deemed election as our receipt of instruction regarding payment of death benefit proceeds. The Owner may designate that the Beneficiary is to receive the death benefit proceeds either through an annuity for life or over a period that does not exceed the life expectancy of the Beneficiary. Such designation must be made in writing in a form acceptable to us, and may only be revoked by the Owner in writing in a form acceptable to us. Upon death of the Owner, the Beneficiary cannot revoke or modify any designation made by the Owner on how the death benefit proceeds are to be received. If the spouse of the deceased Owner is the sole surviving Beneficiary, or is the sole surviving Joint or Contingent Owner, and has an unrestricted right to receive all death benefit proceeds in one lump sum, the spouse may continue this Contract as Owner rather than receive the death benefit proceeds, provided that we receive instructions to continue the Contract within such time-frames as we may prescribe from time to time. If the Owner dies on or after the Annuity Date, but payments have not yet been completed, then distributions of the remaining amounts payable under this Contract must be made at least as rapidly as the rate that was being used at the date of the Owner's death. If the Owner is a Non-Natural Owner, the rules set forth in these DEATH OF OWNER DISTRIBUTION RULES apply in the event of the death or change of the Primary Annuitant. This Contract incorporates all applicable provisions of Code Section 72(s) and any successor provision, as deemed necessary by us to qualify this Contract as an annuity contract for federal income tax purposes, including the requirement that, if the Owner dies before the Annuity Date, any death benefit proceeds under this Contract shall be distributed within five years of the Owner's death (or such other period that we offer and that is permitted under the Code or such shorter period as we may require). These DEATH OF OWNER DISTRIBUTION RULES do not apply to Qualified Contracts issued under Qualified Plans as defined in Sections 401, 403, 408, or 408A of the Code or to an annuity that is a qualified funding asset as defined in Code Section 130(d) (but without regard to whether there is a qualified assignment). INTEREST ON DEATH BENEFIT PROCEEDS - If payment of death benefit proceeds is unduly delayed after the Notice Date, we will pay interest on the proceeds. Interest will be paid at a rate of not less than 3% per year from the Notice Date until the proceeds are paid or applied under an Annuity Option. If the law in the state in which the Contract is delivered requires payment of a greater amount, we will pay that amount. 21 BENEFICIARY Your Beneficiary is the person you name who may receive any death benefit proceeds, or any remaining annuity payments after the Annuity Date, under your Contract if the Annuitant or Owner dies. If you leave no surviving Beneficiary, your estate may receive the death benefit proceeds under your Contract. If the Beneficiary is a trustee, we will neither be responsible for verifying a trustee's right to receive any death benefit proceeds payable, nor for how the trustee disposes of any death benefit proceeds. If before payment of any death benefit proceeds, we receive proper notice that the trust has been revoked or is not in effect, then any death benefit proceeds payable will be paid to the Owner's estate. ADDING OR CHANGING YOUR BENEFICIARY - You may add, change, or remove any Beneficiary, other than an irrevocable Beneficiary, subject to the terms of any assignment, at any time prior to the death of the Annuitant or Owner, by providing us with a request in a form satisfactory to us. However, if you have named an irrevocable Beneficiary, you may not add any new Beneficiary, or remove or change the irrevocable Beneficiary, without obtaining his or her written consent in a form acceptable to us. You may remove any non-irrevocable Beneficiary without obtaining the consent of the irrevocable Beneficiary. Qualified Contracts may have additional restrictions on naming and changing Beneficiaries. Any change or addition will take effect only when we receive all necessary documents and record the change or addition. 22 ANNUITY BENEFITS CHOICE OF ANNUITY DATE - Your Annuity Date is shown in the Contract Specifications. If you did not select an Annuity Date in your application for this Contract, we assigned an Annuity Date based on the type of this Contract and the Annuitant's Age (see DEFAULT ANNUITY DATE AND OPTIONS). You may change your Annuity Date by providing proper notice to us at least ten (10) Business Days prior to your current Annuity Date or new Annuity Date, whichever is earlier. Your Annuity Date may not be earlier than your first Contract Anniversary and must occur on or before the day the younger Annuitant reaches his or her 95th birthday, or earlier as required by state law or the Code. You may be subject to additional restrictions under your Qualified Plan. You should consult with your Qualified Plan administrator before you elect your Annuity Date. APPLICATION OF CONTRACT VALUE - Prior to the Annuity Date, you may elect to convert all or part of your Net Contract Value, less any charge for premium taxes and/or other taxes, to any currently offered Annuity Option. You may also elect a full withdrawal (subject to the terms of the withdrawal provisions) in lieu of annuity payments under an Annuity Option. Before we make any full withdrawal, we require return of this Contract (or a signed Lost Contract Affidavit) to us. The aggregate net amount you convert must be at least $10,000; otherwise, we reserve the right to pay a single amount equal to your withdrawal proceeds (see AMOUNT AVAILABLE FOR WITHDRAWALS). If you convert only a portion of your Net Contract Value on your Annuity Date, you may, at that time, elect not to have the remainder of your Net Contract Value distributed, but instead to continue your Contract with that remaining Contract Value. This option may or may not be available, or may be available only for certain types of Contracts. If this option is available and you elect it, you would choose a second Annuity Date for such Contract Value; all references in this Contract to your Annuity Start Date (or Annuity Date) would, with regard to such Contract Value, be deemed to refer to that second Annuity Date. You should call your tax adviser for more information if you desire this option. YOUR SELECTIONS - Prior to the Annuity Date, you may make three selections about the annuity payments. First, you may choose whether you want those payments to be a fixed-dollar amount or a variable-dollar amount, or both. Second, you may choose the form of annuity payments (Annuity Option). Third, you may choose to have annuity payments made monthly, quarterly, semiannually, or annually. The first annuity payment on the Annuity Date will be sent on the day following the Annuity Date and must be at least $250. We may reduce your payment frequency if the first annuity payment is less than $250. If you elect annuity payments for a Period Certain Only (see ANNUITY OPTIONS), we also reserve the right to reduce the Period Certain to meet the $250 minimum first payment. After the Annuity Date, you may not change the Annuity Option, or surrender the Contract for payment of amounts converted into a variable annuity and/or fixed annuity. FIXED AND VARIABLE ANNUITIES - You may choose a fixed annuity (with fixed-dollar payments), a variable annuity (with variable-dollar payments), or you may choose a combination of both. If you select a variable annuity, you may choose any Subaccounts for your annuity. If you select a variable annuity, on your Annuity Date, we will convert that portion of your Net Contract Value as it is currently allocated among the Subaccount(s). We will apply the net amount you convert to a fixed annuity and/or a variable annuity (and in this instance, to each Subaccount), based on your relative Account Value in each Investment Option on the Annuity Date. Any net amount you convert to a fixed annuity will be held in our General Account (but not under the Fixed Option). Each periodic payment under the fixed annuity will be equal to the amount of your first fixed annuity payment (unless you elect a joint and survivor life annuity with reduced survivor payments). The amount of each variable annuity periodic payment will vary with the investment results of the Subaccount(s) you select. After the Annuity Date, you may exchange the Annuity Units in any Subaccount(s) for Annuity Units in any other Subaccount(s) up to four times in any twelve month period. We reserve the right to limit the Subaccounts available, to change the number and frequency of exchanges, and to change the number of Subaccounts you may choose. If you choose the Period Certain Only Option (Annuity Option 4), the variable annuity payment option is not available to you. 23 In choosing an Annuity Option, you must submit your Option request to us in a form satisfactory to us. ANNUITY OPTIONS - The following forms of annuity payments are available under this Contract. Additional options may become available in the future: Option 1: Life Only. Periodic payments are made to the designated payee during the Annuitant's lifetime. Payments stop when the Annuitant dies. Option 2: Life with Period Certain. Periodic payments are made to the designated payee during the Annuitant's lifetime, with payments guaranteed for a specified period. You may choose to have payments guaranteed 5 through 30 years (in full years only). If the Annuitant dies before the guaranteed payments are completed, we pay the Owner the remainder of the guaranteed payments, if living; if not to the Beneficiary, if living; if not to the Owner's estate. Option 3: Joint and Survivor Life. Periodic payments are made during the lifetime of the Primary Annuitant. After the death of the Primary Annuitant, periodic payments are based on the life of the secondary Annuitant named in the election if and so long as such secondary Annuitant lives. Payments made based on the life of the secondary Annuitant may be in installments equal to 50%, 66-2/3% or 100% (as specified in the election) of the original payment amount payable during the lifetime of the Primary Annuitant. If you elect a reduced payment based on the life of the secondary Annuitant, fixed annuity payments will be equal to 50% or 66-2/3% of the original fixed payment payable during the lifetime of the Primary Annuitant; variable annuity payments will be determined using 50% or 66-2/3%, as applicable, of the number of Annuity Units for each Subaccount credited to the Contract. Payments stop when both Annuitants have died. Option 4: Period Certain Only. Periodic payments are made over a specified period. You may choose to have payments continue 5 through 30 years (in full years only). If the Annuitant dies before the guaranteed payments are completed, we pay to the Owner the remainder of the guaranteed payments, if living; if not to the Beneficiary, if living; if not to the Owner's estate. IF YOU CHOOSE THE PERIOD CERTAIN ONLY ANNUITY OPTION, YOU MAY CHOOSE THE FIXED ANNUITY PAYMENT OPTION ONLY. DEFAULT ANNUITY DATE AND OPTIONS - If you did not choose an Annuity Date when you submitted your application for this Contract, your Annuity Date is the Annuitant's 95th birthday. If there are Joint Annuitants, the Annuity Date will be based on the younger Annuitant's birthday, unless otherwise required by law. If you do not elect an Annuity Option, your Net Contract Value, and any charge for premium taxes and/or other taxes, when converted, will, subject to our minimum requirements, be converted as follows: - the net amount from your Fixed Option Value will be converted to a fixed annuity and held in our General Account, and - the net amount from your Variable Account Value will be applied to a variable annuity and applied to the Subaccounts in proportion to your Account Value in each Subaccount on the Annuity Date. If this is a Non-Qualified Contract, or a Qualified Contract and you are not married, your Annuity Option will be Life with 10 Year Period Certain. If this is a Qualified Contract and you are married, your Annuity Option will be Joint and Survivor Life, with survivor payments of 50%, and your spouse will automatically be named as the secondary Annuitant. If you do not elect your frequency of payments, we will make payments based on our most frequent schedule that results in an initial annuity payment of at least $250. AMOUNT OF PAYMENTS - The first annuity payment amount depends on the form of annuity, the payment frequency you select, and whether you select a fixed annuity and/or a variable annuity. If you do not choose the Period Certain Only Option, the amount will depend on the Age of the Annuitant(s), the Annuity Date, and the sex of the Annuitant(s), unless unisex factors apply. 24 FIXED ANNUITY PAYMENTS - The minimum guaranteed income purchased per $1,000 of the net amount applied to a fixed annuity is based on an annual interest rate of 3% and the 1983a Mortality Table with the ages set back ten (10) years. CONVERSION TO CURRENT RATES - The annuity payments made will be based on the greater of: - our current income factors in effect for this Contract on your Annuity Date; or - our guaranteed income factors. The dollar amount of any payments after the first annuity payment is specified during the annuity payment period according to the provisions of your elected Annuity Option. VARIABLE ANNUITY PAYMENTS - YOUR SUBACCOUNT ANNUITY UNITS. For each Subaccount, we divide the amount of the initial variable annuity payment from each Subaccount by the Annuity Unit Value for that Subaccount (the "Annuity Unit Value") on the Annuity Date, to obtain the number of Annuity Units for that Subaccount. The number of your Annuity Units in each Subaccount will not change unless exchanges of Annuity Units are made (or if the Joint and Survivor Annuity Option is elected and the Primary Annuitant dies first), but the Annuity Unit Value of those Annuity Units will vary. YOUR SUBSEQUENT VARIABLE PAYMENTS. The amount of each subsequent variable annuity payment will be the sum of the amounts payable based on your Annuity Units in each Subaccount. To determine the amount payable for each Subaccount, we multiply the number of your Annuity Units in that Subaccount by their Annuity Unit Value on the day in each payment period that corresponds to the Annuity Date. ANNUITY UNIT VALUE - The initial Annuity Unit Value for each Subaccount was arbitrarily set at $10 on the Business Day the Subaccount began operations. At the end of each subsequent Business Day, the Annuity Unit Value for each Subaccount is equal to (A x B) x C where: (A) is the Subaccount's Annuity Unit Value for that Subaccount as of the end of the prior Business Day; (B) is the Net Investment Factor for that Subaccount for that valuation period; and (C) is an interest factor to offset the effect of the assumed investment return which is built into the Annuity Option Tables. We generally calculate the Annuity Unit Value of each Subaccount on each day the New York Stock Exchange is open, provided our administrative offices are also open that day. We guarantee that the amount of each subsequent annuity payment will not be affected by variations in our expenses or in mortality experience. PERIODIC PAYMENTS - The first payment under these Options will be determined on the Annuity Date and will be made on the day following the Annuity Date. For a Beneficiary entitled to a death benefit due to the death of the Annuitant, the first payment will be made on the first day of the calendar month, or earlier at our option, next following the day we receive due proof of the Annuitant's death and instructions regarding payment, (called the "Payment Start Date"), and such other documentation as we may require. Subsequent payments will be determined on the day in each payment period that corresponds to the Payment Start Date and will be made on the following day. 25 ANNUITY OPTION TABLES For the fixed Annuity Option and the initial variable annuity benefit, the Tables below illustrate the minimum guaranteed monthly income purchased per $1,000 of the net amount applied. The actuarial basis for the fixed Annuity Option Tables is the 1983a Annuity Mortality Table with the ages set back ten (10) years with interest at an annual rate of 3%. The Tables also illustrate the minimum rates for the first monthly variable annuity payment per $1,000 of the net amount applied to the variable annuity payment option. The rates for variable annuity payments are based on an assumed investment return of 5% per year and the 1983a Annuity Mortality Table with the ages set back ten (10) years. Subsequent payments may be higher or lower than the first payment, based on the investment performance of the Subaccount(s) you elect and whether you exchange Subaccount Annuity Units. These Tables provide for sex-distinct and unisex payment income factors for life payment options. For some Qualified Plans and in some states, the use of sex-distinct income factors are prohibited. For those Qualified Plans and in those states, we use blended unisex income factors for life payment options, whether the Annuitant is male or female. We will provide rates for any payment frequency, interest rate, Age or sex, combinations thereof, and/or payout percentage or any Annuity Option, if applicable, that we offer if they are not shown in the Tables that follow. 26 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% --------------------- ---------------------- ---------------------- 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
27 OPTION 3 - JOINT AND 50% 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 INCOME INCOME INCOME INCOME -------------- ------------ -------------- ------------- 3% 3% 3% 3% YEARS FIXED YEARS FIXED YEARS FIXED YEARS FIXED -------------- ------------ -------------- ------------- 7 13.16 12 8.24 19 5.73 26 4.59 8 11.68 13 7.71 20 5.51 27 4.47 9 10.53 14 7.26 21 5.32 28 4.37 10 9.61 15 6.87 22 5.15 29 4.27 11 8.86 16 6.53 23 4.99 30 4.18 17 6.23 24 4.84 18 5.96 25 4.71 -------------- ------------ -------------- -------------
28 EX-99.4(B) 8 EXHIBIT 99.4(B) EXHIBIT 99.4 (b) Qualified Pension Plan Rider QUALIFIED PENSION PLAN RIDER This rider is a part of the Contract to which it is attached by PL. The Contract is hereby modified as specified below in order to comply with the requirements for Qualified Pension and Profit Sharing Plans, as described in Section 401(a)(9) of the Internal Revenue Code of 1986 (The Code) as amended. THE PROVISIONS OF SECTIONS 1-9 OF THIS RIDER SHALL TAKE EFFECT ONLY IF THE ANNUITANT IS, OR BECOMES, THE OWNER. DEFINITIONS ANNUITANT - is the individual named to receive periodic annuity payments purchased under this Contract. ANNUITY START DATE - is the date you choose to have PL begin periodic annuity payments to the Annuitant. The Annuity Start Date may be no later than April 1 of the calendar year following the year in which the Annuitant reaches age 70 1/2. DESIGNATED BENEFICIARY - is any individual designated as a beneficiary under the Plan by the Annuitant. If a person other than an individual (but not a trust that satisfies the conditions stated in 1.401(a)(9)-1 of the Code) is designated a Beneficiary, or if the plan permits any person to change the Annuitant's beneficiaries after his or her death, other than a designation made by the surviving spouse for distributions after the spouse's death, the Annuitant will be treated as having no Designated Beneficiary. PLAN - means the qualified employee benefit plan under which this Contract is issued. The provisions of this rider will control if in conflict with those of the Contract. Notwithstanding any provisions of the Contract to the contrary: 1. Automatic Form of Payment at the Annuity Start Date. If the Annuitant is legally married at the Annuity Start Date, unless an optional form of benefit is selected in accordance with Section 2 below, payments will be made in the form of a Joint and 50% Survivor Annuity, with the Annuitant's spouse as the joint annuitant. Under this form, payments will be made during the lifetime of the Annuitant and, following the Annuitant's death, payments equal to 50% of the original payment amount will continue to the spouse for life. The Annuitant may choose without the consent of any other individual, from the options offered by PL, the amount of the payment continuing to the Annuitant's spouse. The amount of each payment to the spouse will be not less than one half of, nor greater than, the periodic annuity benefit paid to the Annuitant. If the Annuitant is not legally married at the Annuity Start Date, payments will be made in the form of a life annuity with a 10 year period certain unless an optional form of payment is selected in accordance with Section 2 below. Under this form, payments will be made to the Annuitant for life. If the Annuitant dies before the end of the Guaranteed Period, payments will continue to the Designated Beneficiary until the end of the Guaranteed Period. 2. Optional Forms of Annuity Payment. The Annuitant can elect an optional form of payment as provided in the Contract, provided: (a) the Annuitant files a Qualified Election with the Company within the 90 day period ending on the date income commences; (b) the form selected ensures that the present value of payments PL expects to pay over the lifetime of the Annuitant is not less than 51% of the present value of all payments we expect to make under the Contract. To determine whether 51% of the present value of benefits will be paid during the Annuitant's lifetime, his or her life expectancy will be measured from either the Annuitant's Normal Retirement Date, or the actual retirement date, whichever is later, but in no event later than the Annuity Start Date; and (c) the option selected satisfies the requirements of Section 4 below. Life expectancies will be calculated using the expected return multiples contained in Section 1.72 9 of the Income Tax Regulations. 3. Qualified Election In the case of a married Annuitant, "Qualified Election" means a written statement by the Annuitant waiving the Joint and Survivor Annuity option and specifying the form of payment desired, and a written statement from the spouse consenting to the Annuitant's election. The form of payment chosen cannot be changed without spousal consent unless the spouse consents to future designations by the Annuitant without spousal consent. The spouse's consent must be witnessed by a notary public. If the spouse's consent cannot be obtained because the spouse cannot be located, the Annuitant's election will still be deemed to be a Qualified Election. In the case of an unmarried Annuitant, "Qualified Election" means a written statement by the Annuitant attesting to the fact that he or she is not married, and which specifies the optional form of payment desired. 4. Required Beginning Date and Minimum Distribution Requirements In accordance with the requirements of the Code, distribution of the entire interest should be made not later than the April 1 following the close of the calendar year in which the Annuitant attains age 70 1/2. (The Required Beginning Date.) Alternatively, if distribution of the entire interest commences not later than the Required Beginning Date, such distribution may be made in equal or substantially equal amounts, in annual or more frequent installments, over (a) the Annuitant's life or the lives of the Annuitant and his or her Designated Beneficiary, or (b) a period not extending beyond the Annuitant's life expectancy or the joint and last survivor life expectancy of the Annuitant and his or her Designated Beneficiary. The method of distribution selected must also meet the "minimum distribution incidental benefit" rule of Code Section 401(a)(9) and Regulation Section 1.401(a)(9)-2 of the Code. This requires that: (a) where the Annuitant's only Designated Beneficiary is the spouse, the minimum amount that must be distributed in a distribution calendar year is the amount determined under the regular minimum distribution requirements above in this Section 4. (b) where payments are to be made under an annuity Contract purchased on or before the Annuitant's Required Beginning Date and the Annuitant's spouse is not the Designated Beneficiary, the minimum amount that must be distributed is determined as follows: - - Period certain annuity without a life contingency: The period certain may not exceed the appropriate joint and last survivor expectancy described in Regulation Section 1.401(a)(9)-2 of the Code. - - Life annuity: A life annuity on the Annuitant's life which satisfies the regular minimum distribution requirements satisfies the "minimum distribution incidental benefit" rule. - - Joint and survivor annuity: The periodic annuity payment to the survivor under a joint and survivor annuity, may not exceed the applicable percentage of the annuity payment to the Annuitant. These percentages are defined in Regulation Section 1.401(a)(9)-2. - - Life annuity with period certain: The distribution must satisfy the requirements for a single life (or joint and survivor) annuity as well as for a period certain annuity without a life contingency. Only a method of distribution offered by PL that satisfies these conditions can be selected. You must make this selection before the end of the calendar year in which you attain age 70 1/2. 5. Beneficiary for Death Benefit Proceeds Prior to Annuity Start Date If the Annuitant dies prior to the Annuity Start Date and is married at the date of death, the Death Benefit Proceeds will be paid to the surviving spouse, unless the Annuitant names another beneficiary and the spouse consents in writing to such designation. The spouse's consent must be witnessed by a notary public. For this purpose, the consent of an individual who was married to the Annuitant at the time consent was given but is not married to the Annuitant at the date of death will not be considered the consent of the spouse. If the Annuitant is not legally married at the date of death, or designates (as provided above) someone other than the spouse as beneficiary, the Death Benefit Proceeds shall be paid to the Designated Beneficiary. 6. Payment of Death Benefit On the death of the Annuitant, payment shall be made in accordance with the Annuity option provisions described in the Contract or as provided for by the Plan. However, selection of an annuity option that does not satisfy the conditions of this Section 6 shall not be permitted. (a) Death Before the Annuity Start Date If the Annuitant dies before distribution of his or her interest in the Contract commences, the entire interest must be distributed by December 31st of the fifth full year which follows the Annuitant's death unless (i) such interest is paid in equal or substantially equal installments over a period not exceeding the lifetime or life expectancy of the Designated Beneficiary, and (ii) payments begin by December 31st of the calendar year which follows the Annuitant's death. If the Designated Beneficiary of the Annuitant is the Annuitant's surviving spouse, the spouse may elect to receive equal or substantially equal payments over the life or life expectancy of the surviving spouse commencing at any date prior to the close of the calendar year in which the deceased Annuitant would have attained age 70 1/2, if later. The surviving spouse may accelerate these payments at any time, i.e., increase the frequency or amount of such payments. However, if the spouse elects to receive the entire interest as a lump sum, such amount must be received by December 31st of the fifth full year which follows the Annuitant's death. If the surviving spouse dies before payments begin, subsequent distributions shall be made as if the spouse had been the Annuitant. In such event, the rules in this Section 6 apply using the date of death of the surviving spouse rather than that of the Annuitant. (b) Death After the Annuity Start Date If the Annuitant dies after distribution of his or her interest in the plan has commenced, the remaining interest will be distributed at least as rapidly as under the method of distribution in effect at the time of the Annuitant's death. 7. Withdrawal or Loan of Annuity Value Before the Annuity Start Date If the Annuitant is married, withdrawal or loan of all or a portion of the annuity value prior to the Annuity Start Date will be permitted subject to the consent of the spouse. Such consent must be in writing and must be witnessed by a notary public. If the Annuitant is not married, withdrawal will be permitted subject to written notice to PL that the Annuitant is not married. The Term Annuity Value as used in this rider shall mean the appropriate value described in the Contract that the Contract Owner is entitled to withdraw or borrow. 8. Nontransferable No benefits under this Contract may be transferred, sold, alienated, assigned, discounted, subject to garnishment or execution, or pledged as collateral for a loan, or as security for the performance of an obligation or for any other purpose, to any person other than to PL, except as may be provided by a Qualified Domestic Relations Order within the meaning of Section 414 of the Code. 9. Change of Annuitant The Owner shall not be permitted to change the Annuitant. 10. Trustee Owned Contracts While this Contract is owned by the trustee of a plan described in section 401(a) of the Code, the Death Before the Annuity Start Date provision of Section 6 may not apply. 11. Amendment PL reserves the right to amend this rider to comply with future changes in the Internal Revenue Code and any regulations or rulings issued under the provisions of the Code. PL shall provide the Owner of the Contract with a copy of any such amendment. PACIFIC LIFE INSURANCE COMPANY Thomas C Sutton Audrey L. Milfs Chairman and Chief Executive Officer Secretary R90-PEN-V EX-99.4(C) 9 EXHIBIT 99.4(C) EXHIBIT 99.4(c) 403(b) Tax-Sheltered Annuity Rider 403 (B) TAX-SHELTERED ANNUITY RIDER This rider is a part of the Contract to which it is attached by PL. The contract under which it has been issued is hereby modified as specified below in order to qualify as a Tax-Sheltered Annuity ("TSA") under Section 403(b) of the Internal Revenue Code of 1986, as amended (the "Code"). The provisions of this rider will take precedence over any contrary provisions of the Contract. DEFINITIONS ANNUITANT -- is the individual named to receive periodic annuity payments purchased under this Contract. The Annuitant will at all times be the Owner of this Contract. ANNUITY START DATE -- is the date you choose to have PL begin periodic annuity payments to the Annuitant. The Annuity Start Date may be no later than April 1 of the calendar year following the year in which the Annuitant reaches Age 70 1/2. CONTINGENT ANNUITANT -- is the individual who becomes the Annuitant if the Annuitant dies before periodic annuity payments begin under this Contract. Only the spouse of the Annuitant may be named the Contingent Annuitant. CONTINGENT OWNER -- is the individual who becomes the Owner if the Owner dies before periodic annuity payments begin under this Contract. Only the spouse of the Owner may be named the Contingent Owner. DESIGNATED BENEFICIARY -- is the individual designated as a beneficiary by the Owner. TAX-SHELTERED ANNUITY PROVISIONS To ensure treatment as a TSA, this Contract will be subject to the requirements of Code Section 403(b), which are briefly summarized below: 1. The Owner's rights under this Contract shall be nonforfeitable except for failure to pay future premiums. 2. The Contract may not be transferred, sold, assigned, or pledged as collateral for a loan, or as security for the performance of an obligation, or for any other purpose, to any person other than PL. 3. Premiums paid pursuant to a salary reduction agreement and applied to this Contract under a "plan" (within the meaning of Code Section 403(b)) are subject to the annual limitation on "elective deferral" contributions under Section 401(a)(30) of the Code. Such amount is periodically adjusted for inflation. 4. Premiums applied to this Contract which exceed the applicable "exclusion allowance" (within the meaning of Code Section 403(b)(2)) shall not be excludable from gross income. 5. Except if this Contract is purchased by a "church" (within the meaning of Code Section 3121(w)), if this Contract is purchased under a "plan" (within the meaning of Code Section 403(b)), the "plan" must satisfy the nondiscrimination requirements of Code Section 403(b)(12). 6. Distributions attributable to premiums made pursuant to a salary reduction agreement may be made only when the Owner attains age 59 1/2, separates from service, dies, becomes "disabled" (within the meaning of Code Section 72(m)(7)) or incurs a hardship. A distribution made due to a hardship may not include income attributable to such premiums. 7. Distributions from this Contract must comply with the minimum distribution and incidental death benefit rules of Code Section 401(a)(9). Accordingly, the entire interest under the Contract must be distributed: (a) not later than the April 1 next following the close of the calendar year in which the Owner attains age 70 1/2 (the "Required Beginning Date"), or (b) commencing not later than the Required Beginning Date over the life of the Owner or over the lives of the Owner and his or her Designated Beneficiary (or over a period not extending beyond the life expectancy of the Owner or the life expectancy of the Owner and his or her Designated Beneficiary). In addition, if the Owner dies before distribution of his or her interest in the Contract has begun in accordance with paragraph (b) above, the Owner's entire interest must be distributed within five years, unless (i) such interest is distributed to a Designated Beneficiary over his or her life (or over a period not extending beyond such Designated Beneficiary's life expectancy) and (ii) such distribution begins not later than one year after the Owner's death. If the Designated Beneficiary is the Owner's surviving spouse, the date on which the distributions are required to begin shall not be earlier than the date on which the Owner would have attained age 70 1/2. If the Owner dies after distribution of his or her interest in the Contract has begun in accordance with paragraph (b) above but before his or her entire interest has been distributed, the remaining interest will be distributed at least as rapidly as under the method of distribution being used prior to the Owner's death. All distributions must comply with a method of distribution offered by PL under this Contract. In addition, all minimum distributions required under Code Section 401(a)(9) must comply with the proposed Treasury Regulation section 1.403(b)-2. 8. If the Owner or Annuitant receives a distribution from this Contract that qualifies as an "eligible rollover distribution" (within the meaning of Code Section 402(f)(2)(A)) and elects to have such distribution paid directly to an "eligible retirement plan" (within the meaning of Code Section 402(c)), such distribution shall be made in the form of a direct transfer to the eligible retirement plan. PL may establish reasonable administrative rules applicable to such direct transfers. MISCELLANEOUS PROVISIONS 1. PL reserves the right to amend this rider to comply with future changes in the Code and any regulations or rulings issued thereunder. PL shall provide the Owner with a copy of any such amendment. PACIFIC LIFE INSURANCE COMPANY R-403B-9553 EX-99.4(D) 10 EXHIBIT 99.4(D) EXHIBIT 99.4(d) Section 457 Plan Rider [LOGO] 700 Newport Center Drive Newport Beach, CA 92660 SECTION 457 PLAN RIDER This rider is part of the Contract to which it is attached by PL. The Contract to which this rider is attached is hereby modified as specified below in order that it may be utilized under the deferred compensation plan of a State or local government or tax-exempt organization established under Section 457 of the Internal Revenue Code of 1986, as amended (the "Code"). The provisions of this rider will take precedence over any contrary provisions of the Contract. DEFINITIONS ANNUITY START DATE - is the date you chose to have PL begin periodic annuity payments to the Annuitant. OWNER - means the State, political subdivision of a State, any agency or instrumentality of a State or political subdivision of a State or other organization exempt from tax under Subtitle A of the Code (other than a "church" or "qualified church-controlled organization" as defined in Code Section 3121(w)(3)) that has purchased this Contract. The Owner shall control this Contract and may exercise all contractual rights hereunder. SECTION 457 PLAN PROVISIONS This Contract shall be subject to the requirements of Code Section 457, which are briefly summarized below: 1. This Contract may only be purchased under an "eligible deferred compensation plan" (within the meaning of Code Section 457(b)) that has been established and maintained by a State, political subdivision of a State, any agency or instrumentality of a State or a political subdivision of a State or any other organization exempt from tax under Subtitle A of the Code (other than a "church" or "qualified church-controlled organization" as defined in Code Section 3121(w)(3)). 2. All amounts of compensation deferred under an "eligible deferred compensation plan" (within the meaning of Code Section 457(b)), all property and rights purchased with such amounts and all income attributable to such amounts, property or rights shall be held for the exclusive benefit of participants and beneficiaries under the IRC section 457(g). In addition, PL annuity contracts comply with IRC section 401(f) and shall be treated as qualified trusts under that section. 3. Only individuals who perform service for the Owner, either as an employee of the Owner or as an independent contractor, may participate under the "eligible deferred compensation plan" (within the meaning of Code Section 457(b)). 4. Premiums applied to this Contract may not exceed the maximum deferral amount permitted under Code Section 457(b)(2) and (3) or Code Section 457(c). 5. Premiums paid pursuant to a salary reduction agreement may be applied to this Contract for any calendar month only if an agreement providing for such salary reduction was entered into before the beginning of such month. However, with respect to a new employee of the Owner, premiums may be paid for the calendar month during which the individual first becomes an employee, if a salary reduction agreement is entered into on or before the first day on which the individual becomes an employee. 6. Distributions shall not be made under this Contract earlier than (i) the calendar year in which the Annuitant attains age 70 1/2, (ii) when the Annuitant is separated from service with the Owner, or (iii) when the Annuitant is faced with an "unforeseeable emergency" (within the meaning of Treasury Regulation Section 1.457-2(h)). 7. Distributions from this Contract must comply with the minimum distribution rules of Code Section 401(a)(9), including the incidental death benefit rule of Code Section 401(a)(9)(G). Accordingly, the entire interest under the Contract must be distributed: (a) not later than April 1 next following the close of the calendar year in which the Annuitant attains age 70 1/2 (the "Required Beginning Date"), or (b) commencing not later than the Required Beginning Date over the life of the Annuitant or over the lives of the Annuitant and his or her Beneficiary (or over a period not extending beyond the life expectancy of the Annuitant or the life expectancy of the Annuitant and his or her Beneficiary). In addition, if the Annuitant dies before distribution of his or her interest in the Contract has begun in accordance with paragraph (b) above, the Annuitant's entire interest must be distributed within five years, unless (i) such interest is distributed to a Beneficiary over his or her life (or over a period not extending beyond such Beneficiary's life expectancy) and (ii) such distribution begins not later than one year after the Annuitant's death. If the Beneficiary is the Annuitant's surviving spouse, the date on which the distributions are required to begin shall not be earlier than the date on which the Owner would have attained age 70 1/2. However, in all cases where the Annuitant dies before distribution of his or her interest in the Contract has begun, the Annuitant's entire interest must be paid over a period not to exceed 15 years (or the life expectancy of the surviving spouse if such spouse is the Beneficiary). If the Annuitant dies after distribution of his or her interest in the Contract has begun in accordance with paragraph (b) above but before his or her entire interest has been distributed, the remaining interest will be distributed at least as rapidly as under the method of distribution being used prior to the Annuitant's death. All distributions must comply with a method of distribution offered by PL under this Contract. 8. Distributions from this Contract payable over a period of more than one year shall be made in substantially nonincreasing amounts (paid not less frequently than annually). MISCELLANEOUS PROVISIONS 1. This rider is intended to qualify as a 457 contract for federal income tax purposes. To that end, the provisions of this rider are to be interpreted to ensure or maintain such tax qualification, notwithstanding any other provision to the contrary. PL reserves the right to amend this rider to comply with future changes in the Code, any regulations or rulings issued thereunder and to reflect any clarifications that may be needed or are appropriate to maintain such tax qualification without consent (except for the states of Michigan, Pennsylvania, South Carolina and Washington, where affirmative consent is required.) PL shall provide the Owner with a copy of any such amendment. PACIFIC LIFE INSURANCE COMPANY /s/ Thomas C. Sutton /s/ Audrey L. Milfs Chairman and Chief Executive Officer Secretary EX-99.4(E) 11 EXHIBIT 99.4(E) EXHIBIT 99.4(e) IRA Rider (Form R-IRA 198) EXHIBIT 99.4(e) [LOGO OF PACIFIC LIFE] INDIVIDUAL RETIREMENT ANNUITY RIDER This rider is a part of the Contract to which it is attached by Pacific Life Insurance Company ("PL"). The Contract under which it has been issued is hereby modified as specified below in order to qualify as an Individual Retirement Annuity under the terms of the Internal Revenue Code of 1986 (the "Code") as amended. Definitions Annuitant - is the individual named to receive periodic annuity payments purchased under this Contract. Annuity Start Date - is the date you choose to have PL begin periodic annuity payments to the Annuitant. The Annuity Start Date may be no later than April 1 of the calendar year following the year in which the Annuitant reaches age 70 1/2. Contingent Annuitant - is the individual who becomes the Annuitant if the Annuitant dies before periodic annuity payments purchased under this Contract begin. Only the spouse of the Annuitant may be named the Contingent Annuitant. Contingent Owner - is the individual who becomes the Owner if you die before periodic annuity payments purchased under this Contract begin. Only the spouse of the Annuitant may be named the Contingent Owner. Designated Beneficiary - is the individual designated as a beneficiary by the Annuitant. The provisions of this rider will control if in conflict with those of the Contract. Notwithstanding any provisions in the Contract to the contrary: 1. The Annuitant will at all times be the Owner of the Contract. The Owner's rights under the Contract shall be nonforfeitable and for the exclusive benefit of the Owner and his or her beneficiaries. 2. No benefits under the Contract may be transferred, sold, assigned, or pledged as collateral for a loan, or as security for the performance of an obligation, or for any other purpose, to any person; except that the Contract may be transferred to a former spouse of the Owner under a divorce decree or written instrument incident to such divorce. In the event of such transfer, the transferee shall for all purposes be treated as the Owner under this Contract. 3. No contribution will be accepted under a SIMPLE plan established by an employer pursuant to Code section 408(p). No transfer or rollover of funds attributable to contributions made by a particular employer under its SIMPLE plan will be accepted from a SIMPLE IRA, that is, an IRA used in conjunction with a SIMPLE plan, prior to the expiration of the 2-year period beginning on the date the individual first participated in that employer's SIMPLE plan. R-IRA 198 1 4. Except in the case of "rollover contribution" as described in Sections 402(a)(5), 402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8) or 408(d)(3) of the Code, or an employer contribution to a Simplified Employee Pension as defined in Section 408(k) of the Code, the Purchase Payments (or premium) paid under this Contract shall not exceed $2,000 for any taxable year, or such other maximum as the Code may allow, and must be paid in cash. 5. Additional Purchase Payments (or premium payments) under the Contract must be at least the minimum as stated in the Purchase Payment (or Premium) provision of the Contract. 6. If this Contract is issued as part of a Simplified Employee Pension, the Purchase Payment (or premium) paid under this Contract shall not exceed $30,000 or 15% of your allowable compensation, whichever is less, or such other maximum as the Code may allow, and must be paid in cash. 7. Any Purchase Payment (or premium) refund declared by PL, other than refunds attributable to excess contributions will be applied toward the purchase of additional benefits before the close of the calendar year following the refund. 8. In accordance with Regulations prescribed by the Secretary of the Treasury, or his delegate pursuant to the Code ("Regulations"), the entire interest under the Contract must be distributed to the Owner: (a) Not later than the April 1st next following the close of the calendar year in which the Owner attains age 70-1/2 (the "Required Beginning Date"), or (b) Commencing not later than the Required Beginning Date in equal or substantially equal amounts, in annual or more frequent installments, over: (i) the Owner's life or the lives of the Owner and his or her Designated Beneficiary; or (ii) a period not exceeding the Owner's life expectancy or the joint and last survivor life expectancy of the Owner and his or her Designated Beneficiary. (c) If the Owner's entire interest is to be distributed in other than a lump sum, then the amount to be distributed each year, commencing with the Required Beginning Date and then for each succeeding calendar year, shall not be less than the quotient obtained by dividing the Owner's entire interest by the lesser of: (i) the applicable life expectancy; or (ii) if the Owner's spouse is not the Designated Beneficiary, the applicable divisor determined from the table set forth in Q&A-4 of Section 1.401(a)(9)-2 of the proposed Income Tax Regulations. Distributions after the death of the Owner shall be calculated using the applicable life expectancy as the relevant divisor without regard to the proposed Regulation Section 1.401(a)(9)-2. The preceding paragraph shall not apply if distribution is in the form of an annuity with non-increasing payments. Life expectancy is computed by use of the expected return multiples in Tables V and VI of Section 1.72-9 of the Income Tax Regulations. Unless otherwise elected by the Owner by R-IRA 198 2 the time distributions are required to begin, life expectancy shall be recalculated annually. Such election shall be irrevocable as to the Owner and shall apply to all subsequent years. The life expectancy of a non-spouse Beneficiary may not be recalculated. Instead, life expectancy will be calculated using the attained age of such Beneficiary during the calendar year in which distributions are required to begin pursuant to this section, and payments for subsequent years shall be calculated based on such life expectancy reduced by one for each calendar year which has elapsed since the calendar year life expectancy was first calculated. (d) If the Owner's spouse is not the Designated Beneficiary, the form of Annuity elected must assure that at least 50% of the value of the Contract available for distribution is payable within the Owner's life expectancy. (e) The method of distribution shall be made in accordance with the requirements of Section 401(a)(9) of the Code and the Regulations thereunder. Further the method selected must meet the "minimum distribution incidental benefit" rule of Code Section 401(a)(9), and the proposed Regulation Section 1.401(a)(9)-2. This includes the following: (i) where the Owner's only Designated Beneficiary is the spouse, the minimum amount that must be distributed in a distribution calendar year is the amount determined under the regular minimum distribution requirements in this Section 8. (ii) where the distributions are not made as annuity payments under an annuity contract and where the Owner's spouse is not the Designated Beneficiary, the minimum amount that must be distributed in a distribution calendar year is the quotient obtained by dividing the Owner's entire interest by the joint and last survivor expectancy described in the proposed Regulation Section 1.401(a)(9)-2. (iii) where distribution is to be made under an annuity contract purchased on or before the Owner's Required Beginning Date and the Owner's spouse is not the Designated Beneficiary, the minimum amount that must be distributed is determined as follows: - Period certain annuity without a life contingency: The period certain may not exceed the appropriate joint and last survivor expectancy described in the proposed Regulation Section 1.401(a)(9)-2. - Life annuity or a joint and survivor annuity: A life annuity on the Owner's life which satisfies the regular minimum distribution requirements satisfies the "minimum distribution incidental benefit" rule. The periodic annuity payment to the survivor under a joint and survivor annuity may not exceed the applicable percentage of the annuity payment to the Owner. These percentages are defined in the proposed Regulation Section 1.401(a)(9)-2. - Life annuity with period certain: The distribution must satisfy the requirements for a single life (or joint and survivor) annuity and the period certain may not exceed the period determined for non-annuity distributions. Only a method of distribution offered by PL that satisfies these conditions can be selected. You must make this selection before the end of the calendar year in which you attain age 70-1/2. R-IRA 198 3 9. On the death of the Owner, distribution shall be made in accordance with the annuity options described in the Contract. However, selection of an annuity option which does not satisfy the conditions of this Section 9 shall not be permitted. If the Owner dies before distribution of his or her interest in the Contract commences, the entire interest should be distributed by December 31st of the fifth full year which follows the Owner's death unless: (i) such interest is paid in equal or substantially equal installments over a period not exceeding the lifetime, or the life expectancy, of the Designated Beneficiary; and (ii) payments begin by December 31st of the calendar year which follows the Owner's death. If the Designated Beneficiary of the Owner is the Owner's surviving spouse, the spouse may elect to receive equal or substantially equal payments over the life or life expectancy of the surviving spouse commencing at any date prior to the later of: (i) December 31 of the calendar year immediately following the calendar year in which the Owner died; and (ii) December 31 of the calendar year in which Owner would have attained age 70 1/2. Such election must be made no later than the earlier of December 31 of the calendar year containing the fifth anniversary of the Owner's death or the date distributions are required to begin pursuant to the preceding sentence. The surviving spouse may accelerate these payments at any time, i.e., increase the frequency or amount of such payments. If the surviving spouse is the Designated Beneficiary, the spouse may convert this Individual Retirement Annuity to the spouse's own Individual Retirement Annuity by requesting that he or she be made the Annuitant. If the spouse so requests, the spouse shall be Owner and Annuitant for purposes of applying the restrictions contained in this rider. For purposes of the above, life expectancy is computed by use of the expected return multiples in Tables V and VI of Section 1.72-9 of the Income Tax Regulations. For purposes of distributions beginning after the Owner's death, unless otherwise elected by the surviving spouse by the time distributions are required to begin, life expectancies shall be recalculated annually. Such election shall be irrevocable as to the surviving spouse and shall apply to all subsequent years. In the case of any other Designated Beneficiary, life expectancies shall be calculated using the attained age of such Beneficiary during the calendar year in which distributions are required to begin pursuant to this section, and payments for any subsequent calendar year shall be calculated based on such life expectancy reduced by one for each calendar year which has elapsed since the calendar year life expectancy was first calculated. Any amount paid to a child of the Owner will be treated as if it had been paid to the surviving spouse if the remainder of the interest becomes payable to the surviving spouse when the child reaches the age of majority. If the Owner dies after distribution of his or her interest in the Contract has commenced, the remaining interest will be distributed at least as rapidly as under the method of distribution being used prior to the Owner's death. If the Owner dies before his or her entire interest has been distributed to him or her, no additional cash contributions or "rollover contributions" shall be accepted. R-IRA 198 4 10. No one other than the spouse of the Owner may be named as the Contingent Annuitant and/or the Contingent Owner. If the Owner dies, the Contingent Annuitant shall be treated as the Annuitant for purposes of applying the restrictions contained in this rider. If, despite the restrictions contained in this rider, someone other than the spouse is named as a Contingent Annuitant, such person shall be treated as the Primary Beneficiary under the Contract. 11. PL shall furnish annual calendar year reports concerning the status of the Contract. 12. PL reserves the right to amend this rider to comply with future changes in the Code and any regulations or rulings and other published guidance issued under the provisions of the Code or interpretations thereof without consent (except for the states of Michigan, Pennsylvania, South Carolina and Washington, where affirmative consent is required). PL shall provide the Owner of the Contract with a copy of any such amendment. Pacific Life Insurance Company /s/ THOMAS C. SUTTON /s/ AUDREY L. MILFS Chairman and Chief Executive Officer Secretary R-IRA 198 5 EX-99.4(F) 12 EXHIBIT 99.4(F) EXHIBIT 99.4(f) Roth IRA Rider (Form R-RIRA 198) EXHIBIT 99.4(f) [LOGO OF PACIFIC LIFE] ROTH INDIVIDUAL RETIREMENT ANNUITY RIDER This rider is part of the Contract to which it is attached by Pacific Life Insurance Company ("PL"). The Contract under which it has been issued is hereby modified as specified below in order to qualify as a Roth Individual Retirement Annuity (Roth IRA) under the terms of the Internal Revenue Code of 1986 (the "Code") as amended. Definitions Annuitant - is the individual named to receive periodic annuity payments purchased under this Contract. Annuity Start Date - is the date you choose to have PL begin periodic annuity payments to the Annuitant. Contingent Annuitant - is the individual who becomes the Annuitant if the Annuitant dies before periodic annuity payments purchased under the Contract begin. Only the spouse of the Annuitant may be named the Contingent Annuitant. Contingent Owner - is the individual who becomes the Owner if you die before periodic annuity payments purchased under this Contract begin. Only the spouse of the Annuitant may be named the Contingent Owner. Designated Beneficiary - is the individual designated as a beneficiary by the Annuitant. In order to ensure treatment as a Roth IRA, the provisions of this rider will control if in conflict with those of the Contract. Notwithstanding any provisions in the Contract to the contrary: 1. The Annuitant will at all times be the Owner of the Contract. The Owner's rights under the Contract shall be nonforfeitable and for the exclusive benefit of the Owner and his or her beneficiaries. 2. No benefits under the Contract may be transferred, sold, assigned, or pledged as collateral for a loan, or as security for the performance of an obligation, or for any other purpose, to any person; except that the Contract may be transferred to a former spouse of the Owner under a divorce decree or written instrument incident to such divorce. In the event of such a transfer, the transferee shall for all purposes be treated as the Owner under this Contract. 3. The Purchase Payments (or premium) paid under this Contract shall not exceed $2,000 for any taxable year, or such other maximum as the Code may allow, and must be paid in cash. 4. Additional Purchase Payments (or premium payments) under the Contract must be at least equal to the minimum amount stated in the Purchase Payments (or Premiums) provision of the Contract. 5. Other than "qualified rollover contributions", as defined in Section 408A(e) of the Code, no rollover contributions may be made to the Contract. Qualified rollover contributions are excluded from the annual Purchase Payments (or premium) limit set forth in Section 3. R-RIRA 198 1 6. Any Purchase Payments (or premium) refund declared by PL other than refunds attributable to excess contributions will be applied toward the purchase of additional benefits before the close of the calendar year following the refund. 7. If the Owner dies before his or her entire interest in the Contract is distributed to him or her and the Owner's surviving spouse is not the sole beneficiary, the entire remaining interest will, at the election of the Owner or, if the Owner has not so elected, at the election of the beneficiary or beneficiaries, either: (a) Be distributed by December 31 of the year containing the fifth anniversary of the Owner's death, or (b) Be distributed over the life expectancy of the Designated Beneficiary starting no later than December 31 of the year following the year of the Owner's death. If distributions do not begin by the date described in (b), distribution method (a) will apply. For purposes of the above, life expectancy is computed by use of the expected return multiples in Tables V and VI of Section 1.72-9 of the Income Tax Regulations. Life expectancies shall be calculated using the attained age of the Designated Beneficiary during the calendar year in which distributions are required to begin pursuant to this section, and payments for any subsequent calendar year shall be calculated based on such life expectancy reduced by one for each calendar year which has elapsed since the calendar year life expectancy was first calculated. If the Owner's surviving spouse is the Designated Beneficiary on the Owner's date of death, such spouse shall be treated as the Owner and Annuitant for purposes of this requirement. 8. No one other than the spouse of the Owner may be named as the Contingent Annuitant and/or the Contingent Owner. If the Owner dies, the Contingent Annuitant shall be treated as the Annuitant for purposes of applying the restrictions contained in this rider. If, despite the restrictions contained in this rider, someone other than the spouse is named as a Contingent Annuitant, such person shall be treated as the Designated Beneficiary under the Contract. 9. PL shall furnish annual calendar year reports concerning the status of the Contract. 10. PL reserves the right to amend this rider to comply with future changes in the Code and any regulations or rulings and other published guidance issued under the provisions of the Code or interpretations thereof without consent (except for the states of Michigan, Pennsylvania, South Carolina, and Washington, where affirmative consent is required). PL shall provide the Owner of the Contract with a copy of any such amendment. Pacific Life Insurance Company /s/ THOMAS C. SUTTON /s/ AUDREY L. MILFS Chairman and Chief Executive Officer Secretary R-RIRA 198 2 EX-99.4(G) 13 EXHIBIT 99.4(G) EXHIBIT 99.4(g) SIMPLE IRA Rider (Form R-SIRA 198) EXHIBIT 99.4(g) [LOGO OF PACIFIC LIFE] SIMPLE INDIVIDUAL RETIREMENT ANNUITY RIDER This rider is part of the Contract to which it is attached by Pacific Life Insurance Company ("PL"). The Contract under which it has been issued is hereby modified as specified below in order to qualify as a SIMPLE Individual Retirement Annuity under the terms of the Internal Revenue Code of 1986 (the "Code") as amended. DEFINITIONS ANNUITANT - is the individual named to receive periodic annuity payments purchased under this contract. ANNUITY START DATE - is the date you choose to have PL begin periodic annuity payments to the Annuitant. The Annuity Start Date may be no later than April 1 of the calendar year following the year in which the Annuitant reaches age 70 1/2. CONTINGENT ANNUITANT - is the individual who becomes the Annuitant if the Annuitant dies before periodic annuity payments purchased under the Contract begin. Only the spouse of the Annuitant may be named the Contingent Annuitant. CONTINGENT OWNER - is the individual who becomes the Owner if you die before periodic annuity payments purchased under this Contract begin. Only the spouse of the Annuitant may be named the Contingent Owner. DESIGNATED BENEFICIARY - is the individual designated as a beneficiary by the Annuitant. The provisions of this rider will control if in conflict with those of the Contract. Notwithstanding any provisions in the Contract to the contrary: 1. The Annuitant will at all times be the Owner of the Contract. The Owner's rights under the Contract shall be nonforfeitable and for the exclusive benefit of the Owner and his or her beneficiaries. 2. No benefits under the Contract may be transferred, sold, assigned, or pledged as collateral for a loan, or as security for the performance of an obligation, or for any other purpose, to any person; except that the Contract may be transferred to a former spouse of the owner under a divorce decree or written instrument incident to such divorce. In the event of such transfer, the transferee shall for all purposes be treated as the Owner under this Contract. 3. This SIMPLE IRA will accept only cash contributions made on behalf of the Annuitant pursuant to the terms of a SIMPLE IRA Plan described in section 408(p) of the Internal Revenue Code. A rollover contribution or a transfer of assets from another SIMPLE IRA of the Annuitant will also be accepted. No other contributions will be accepted. 4. Prior to the expiration of the 2-year period beginning on the date the Annuitant first participated in any SIMPLE IRA Plan maintained by the Annuitant's employer, any rollover or transfer by the Annuitant R-SIRA 198 Page 1 of funds from this SIMPLE IRA must be made to another SIMPLE IRA of the Annuitant. Any distribution of funds to the Annuitant during this 2-year period may be subject to a 25% additional tax if the Annuitant does not roll over the amount distributed into a SIMPLE IRA. After the expiration of this 2-year period, the Annuitant may roll over or transfer funds to any IRA of the Annuitant that is qualified under section 408(a) or (b) of the Internal Revenue Code. 5. Additional Purchase Payments (or premium payments) under the Contract must be at least the minimum as stated in the Purchase Payments (or Premiums) provision of the Contract. 6. Any Purchase Payments (or premium) refund declared by PL other than refunds attributable to excess contributions will be applied toward the purchase of additional benefits before the close of the calendar year following the refund. 7. In accordance with Regulations prescribed by the Secretary of the Treasury, or his delegate pursuant to the Code ("Regulations"), the entire interest under the Contract must be distributed to the Owner: (a) Not later than the April 1st next following the close of the calendar year in which the Owner attains age 70 1/2 (the "Required Beginning Date"), or (b) Commencing not later than the Required Beginning Date in equal or substantially equal amounts, in annual or more frequent installments, over: (i) the Owner's life or the lives of the Owner and his or her Designated Beneficiary; or (ii) a period not exceeding the Owner's life expectancy or the joint and last survivor life expectancy of the Owner and his or her Designated Beneficiary. (c) If the Owner's entire interest is to be distributed in other than a lump sum, then the amount to be distributed each year, commencing with the Required Beginning Date and then for each succeeding calendar year, shall not be less than the quotient obtained by dividing the Owner's entire interest by the lesser of: (i) the applicable life expectancy; or (ii) if the Owner's spouse is not the Designated Beneficiary, the applicable divisor determined from the table set forth in Q&A- 4 of Section 1.401(a)(9)-2 of the proposed Income Tax Regulations. Distributions after the death of the Owner shall be calculated using the applicable life expectancy as the relevant divisor without regard to the proposed Regulation Section 1.401(a)(9)-2. The preceding paragraph shall not apply if distribution is in the form of an annuity with non-increasing payments. Life expectancy is computed by use of the expected return multiples in Tables V and VI of Section 1.72-9 of the Income Tax Regulations. Unless otherwise elected by the Owner by the time distributions are required to begin, life expectancy shall be recalculated annually. Such election shall be irrevocable as to the Owner and shall apply to all subsequent years. The life expectancy of a non-spouse Beneficiary may not be recalculated. Instead, life expectancy will be calculated using the R-SIRA 198 Page 2 attained age of such Beneficiary during the calendar year in which distributions are required to begin pursuant to this section, and payments for subsequent years shall be calculated based on such life expectancy reduced by one for each calendar year which has elapsed since the calendar year life expectancy was first calculated. (d) If the Owner's spouse is not the Designated Beneficiary, the form of Annuity elected must assure that at least 50% of the value of the Contract available for distribution is payable within the Owner's life expectancy. (e) The method of distribution shall be made in accordance with the requirements of Section 401(a)(9) of the Code and the Regulations thereunder. Further the method selected must meet the "minimum distribution incidental benefit" rule of Code Section 401(a)(9), and the proposed Regulation Section 1.401(a)(9)(2). This includes the following: (i) where the Owner's only Designated Beneficiary is the spouse, the minimum amount that must be distributed in a distribution calendar year is the amount determined under the regular minimum distribution requirements in this Section 7. (ii) where the distributions are not made as annuity payments under an annuity contract and where the Owner's spouse is not the Designated Beneficiary, the minimum amount that must be distributed in a distribution calendar year is the quotient obtained by dividing the Owner's entire interest by the joint and last survivor expectancy described in the proposed Regulation Section 1.401(a)(9)-2. (iii) where distribution is to be made under an annuity contract purchased on or before the Owner's Required Beginning Date and the Owner's spouse is not the Designated Beneficiary, the minimum amount that must be distributed is determined as follows: - Period certain annuity without a life contingency: The period certain may not exceed the appropriate joint and last survivor expectancy described in the proposed Regulation Section 1.401(a)(9)-2. - Life annuity or a joint and survivor annuity: A life annuity on the Owner's life which satisfies the regular minimum distribution requirements satisfies the "minimum distribution incidental benefit" rule. The periodic annuity payment to the survivor under a joint and survivor annuity may not exceed the applicable percentage of the annuity payment to the Owner. These percentages are defined in the proposed Regulation Section 1.401(a)(9)-2. - Life annuity with period certain: The distribution must satisfy the requirements for a single life (or joint and survivor) annuity and the period certain may not exceed the period determined for non-annuity distributions. Only a method of distribution offered by PL that satisfies these conditions can be selected. You must make this selection before the end of the calendar year in which you attain age 70 1/2. 8. On the death of the Owner, distribution shall be made in accordance with the annuity options described in the Contract. However, selection of an annuity option which does not satisfy the conditions of this Section 8 shall not be permitted. R-SIRA 198 Page 3 If the Owner dies before distribution of his or her interest in the Contract commences, the entire interest should be distributed by December 31st of the fifth full year which follows the Owner's death unless: (i) such interest is paid in equal or substantially equal installments over a period not exceeding the lifetime, or the life expectancy, of the Designated Beneficiary; and (ii) payments begin by December 31st of the calendar year which follows the Owner's death. If the Designated Beneficiary of the Owner is the Owner's surviving spouse, the spouse may elect to receive equal or substantially equal payments over the life or life expectancy of the surviving spouse commencing at any date prior to the later of: (i) December 31 of the calendar year immediately following the calendar year in which the Owner died; and (ii) December 31 of the calendar year in which Owner would have attained age 70 1/2. Such election must be made no later than the earlier of December 31 of the calendar year containing the fifth anniversary of the Owner's death or the date distributions are required to begin pursuant to the preceding sentence. The surviving spouse may accelerate these payments at any time, i.e., increase the frequency or amount of such payments. If the surviving spouse is the Designated Beneficiary, the spouse may convert this Individual Retirement Annuity to the spouse's own Individual Retirement Annuity by requesting that he or she be made the Annuitant. If the spouse so requests, the spouse shall be Owner and Annuitant for purposes of applying the restrictions contained in this rider. For purposes of the above, life expectancy is computed by use of the expected return multiples in Tables V and VI of Section 1.72-9 of the Income Tax Regulations. For purposes of distributions beginning after the Owner's death, unless otherwise elected by the surviving spouse by the time distributions are required to begin, life expectancies shall be recalculated annually. Such election shall be irrevocable as to the surviving spouse and shall apply to all subsequent years. In the case of any other Designated Beneficiary, life expectancies shall be calculated using the attained age of such Beneficiary during the calendar year in which distributions are required to begin pursuant to this section, and payments for any subsequent calendar year shall be calculated based on such life expectancy reduced by one for each calendar year which has elapsed since the calendar year life expectancy was first calculated. Any amount paid to a child of the Owner will be treated as if it had been paid to the surviving spouse if the remainder of the interest becomes payable to the surviving spouse when the child reaches the age of majority. If the Owner dies after distribution of his or her interest in the Contract has commenced, the remaining interest will be distributed at least as rapidly as under the method of distribution being used prior to the Owner's death. If the Owner dies before his or her entire interest has been distributed to him or her, no additional cash contributions or "rollover contributions" shall be accepted. 9. No one other than the spouse of the Owner may be named as the Contingent Annuitant and/or the Contingent Owner. If the Owner dies, the Contingent Annuitant shall be treated as the Annuitant for purposes of applying the restrictions contained in this rider. If, despite the restrictions contained in this rider, someone other than the spouse is named as a Contingent Annuitant, such person shall be treated as the Primary Beneficiary under the Contract. R-SIRA 198 Page 4 10. PL shall furnish annual calendar year reports concerning the status of the Contract. 11. If contributions made on behalf of the Annuitant pursuant to a SIMPLE IRA Plan maintained by the Annuitant's employer are received directly by PL from the employer, PL will provide the employer with the summary description required by section 408(l)(2) of the Internal Revenue Code. 12. If this SIMPLE IRA is maintained by a designated financial institution (within the meaning of section 408(p)(7) of the Internal Revenue Code) under the terms of a SIMPLE IRA Plan of the Annuitant's employer, the Annuitant must be permitted to transfer the Annuitant's balance without cost or penalty (within the meaning of section 408(p)(7)) to another IRA. 13. PL reserves the right to amend this rider to comply with future changes in the Code and any regulations or rulings and other published guidance issued under the provisions of the Code or interpretations thereof without consent (except for the states of Michigan, Pennsylvania, South Carolina and Washington, where affirmative consent is required). PL shall provide the Owner of the Contract with a copy of any such amendment. Pacific Life Insurance Company /s/ THOMAS C. SUTTON /s/ AUDREY L. MILFS Chairman and Chief Executive Officer Secretary R-SIRA 198 Page 5 EX-99.4(H) 14 EXHIBIT 99.4(H) [LOGO] PACIFIC LIFE Pacific Life Insurance Company 700 Newport Center Drive Newport Beach, CA 92660 STEPPED-UP DEATH BENEFIT RIDER This Rider is part of your Contract and should be attached to it. Notwithstanding any provision of your Contract to the contrary, the provisions of this Rider shall prevail over the provisions of your Contract. You have elected the Stepped-up Benefit Rider ("SDBR"). The Mortality and Expense Risk Charge shown in the Contract Specifications will be increased by an annual rate equal to 0.20% for expenses related to the SDBR. The entire Mortality and Expense Risk Charge will be an annual rate equal to 1.45% for this Contract. The Risk Charge will be charged daily against assets held in your Variable Investment Options(s). The Risk Charge is guaranteed not to increase. This SDBR may be elected only at the Contract Date and will remain in effect until the earlier of (a) a full withdrawal of the amount available for withdrawal under the Contract, (b) when death benefit proceeds become payable under the Contract, (c) any termination of the Contract in accordance with the provisions of the Contract, or (d) the Annuity Date. This SDBR may only be elected if the Age of each Annuitant is 70 years or younger on the Contract Date. A section entitled GUARANTEED MINIMUM DEATH BENEFIT ("GMDB") AMOUNT is added after the DEATH BENEFIT AMOUNT section of the DEATH BENEFIT provision of your Contract as follows: GUARANTEED MINIMUM DEATH BENEFIT ("GMDB") AMOUNT - The GMDB Amount will be calculated only when death benefit proceeds becomes payable as a result of the death of the Annuitant, and is determined as follows: First, we calculate what the Death Benefit Amount would have been as of your first Contract Anniversary and each subsequent Contract Anniversary that occurs while the Annuitant is living and before the Annuitant reaches his or her 81st birthday (each of these Contract Anniversaries is a "Milestone Date"). We then adjust the Death Benefit Amount for each Milestone Date by: (i) adding the aggregate amount of any Purchase Payments received by us since that Milestone Date; and (ii) subtracting an amount for each withdrawal that has occurred since that Milestone Date, which is calculated by multiplying the Death Benefit Amount by the ratio of the amount of each withdrawal that has occurred since that Milestone Date, including any withdrawal charge, to the Contract Value immediately prior to the withdrawal. The highest of these adjusted Death Benefit Amounts as of the Notice Date is your GMDB Amount. The "Notice Date" is the day on which we receive, in a form satisfactory to us, proof of death and instructions regarding payment of death benefit proceeds. 1 The DEATH OF ANNUITANT section under the DEATH BENEFIT provision of your Contract is replaced in its entirety as follows: DEATH OF ANNUITANT - If the Annuitant dies before the first Milestone Date, the death benefit will be equal to your Death Benefit Amount as of the Notice Date. If the Annuitant dies after your first Milestone Date and prior to your Annuity Date, the death benefit will be equal to the greater of the Death Benefit Amount and the GMDB Amount as of the Notice Date. If an Annuitant dies before the Annuity Date, unless there is a surviving Joint or Contingent Annuitant, we will pay the death benefit proceeds to the Owner, if living; otherwise to the Beneficiary, if living; otherwise to the Owner's estate. If an Annuitant dies and there is a surviving Joint Annuitant, the surviving Joint Annuitant becomes the Annuitant. If there is no surviving Joint Annuitant and there is a Contingent Annuitant, the Contingent Annuitant becomes the Annuitant. Death benefit proceeds are payable only as the result of the death of the sole surviving Annuitant prior to the Annuity Date. If you are the Annuitant and you die, we will determine the amount of any death benefit and the Beneficiary under the Death of Annuitant provisions. If your Contract is a Non-Qualified Contract, we will distribute any death benefit proceeds under the Death of Owner Distribution Rules. All other terms and conditions of your Contract remain unchanged. PACIFIC LIFE INSURANCE COMPANY /s/ Thomas C. Sutton /s/ Audrey L. Milfe Chairman and Chief Executive Officer Secretary 2 EX-99.4(I) 15 EXHIBIT 99.4(I) [LOGO] PACIFIC LIFE Pacific Life Insurance Company 700 Newport Center Drive Newport Beach, CA 92660 PREMIER DEATH BENEFIT RIDER This Rider is part of your Contract and should be attached to it. Notwithstanding any provision of your Contract to the contrary, the provisions of this Rider shall prevail over the provisions of your Contract. You have elected the Premier Death Benefit Rider ("PDBR"). The Mortality and Expense Risk Charge shown in the Contract Specifications will be increased by an annual rate equal to 0.35% for expenses related to the PDBR. The entire Mortality and Expense Risk Charge will be an annual rate equal to 1.60% for this Contract. The Risk Charge will be charged daily against assets held in your Variable Investment Options(s). The Risk Charge is guaranteed not to increase. This PDBR may be elected only at the Contract Date and will remain in effect until the earlier of (a) a full withdrawal of the amount available for withdrawal under the Contract, (b) when death benefit proceeds becomes payable under the Contract, (c) any termination of the Contract in accordance with the provisions of the Contract, or (d) the Annuity Date. This PDBR may only be elected if the Age of each Annuitant is 70 years or younger on the Contract Date. The DEATH BENEFIT AMOUNT section under the DEATH BENEFIT provision of your Contract is replaced in its entirety as follows: DEATH BENEFIT AMOUNT - The Death Benefit Amount as of any Business Day prior to your Annuity Date is equal to the greater of: a) your Contract Value as of that day; and b) your aggregate Purchase Payments less an adjusted amount for each withdrawal, increased at an effective annual rate of 6% to that day, subject to a maximum of two times the difference between the aggregate Purchase Payments and withdrawals, including withdrawal charges. The 6% effective annual rate of growth will take into account the timing of when each Purchase Payment and withdrawal occurred by applying a daily factor of 1.000159654 to each day's balance. The 6% effective annual rate of growth will stop accruing as of the earlier of: (1) the Contract Anniversary following the date the Annuitant reaches his or her 80th birthday; (2) the date of death of the sole Annuitant; or (3) the Annuity Date. To determine the adjusted amount for each withdrawal: (i) We divide the amount of each withdrawal, including withdrawal charges, by your Contract Value immediately before that withdrawal; and (ii) we then multiply the result by your Death Benefit Amount (as described in section (b) of this Death Benefit Amount section), immediately before that withdrawal. A section entitled GUARANTEED MINIMUM DEATH BENEFIT ("GMDB") AMOUNT is added after the DEATH BENEFIT AMOUNT section of the DEATH BENEFIT provision of your Contract as follows: GUARANTEED MINIMUM DEATH BENEFIT ("GMDB") AMOUNT - The GMDB Amount will be calculated only when death benefit proceeds become payable as a result of the death of the Annuitant, and is determined as follows: First, we calculate what the Death Benefit Amount would have been beginning on the quarterly anniversary following the Contract Date and each subsequent quarterly anniversary that occurs while the Annuitant is living and up to and including the Contract Anniversary following the Annuitant's 65th 1 birthday. Quarterly anniversaries are measured from the Contract Date. After the Contract Anniversary following the Annuitant's 65th birthday, we calculate what the Death Benefit Amount would have been as of each Contract Anniversary that occurs while the Annuitant is living and before the Annuitant reaches his or her 81st birthday. Each quarterly anniversary and each Contract Anniversary on which a Death Benefit Amount is calculated is referred to as a "Milestone Date". We then adjust the Death Benefit Amount for each Milestone Date by: (i) adding the aggregate amount of any Purchase Payments received by us since that Milestone Date; and (ii) subtracting an amount for each withdrawal that has occurred since that Milestone Date, which is calculated by multiplying the Death Benefit Amount by the ratio of the amount of each withdrawal that has occurred since that Milestone Date, including any withdrawal charge, to the Contract Value immediately prior to the withdrawal. The highest of these adjusted Death Benefit Amounts as of the Notice Date is your GMDB Amount. The "Notice Date" is the day on which we receive, in a form satisfactory to us, proof of death and instructions regarding payment of death benefit proceeds. The DEATH OF ANNUITANT section under the DEATH BENEFIT provision of your Contract is replaced in its entirety as follows: DEATH OF ANNUITANT - If the Annuitant dies before the first Milestone Date, the death benefit will be equal to your Death Benefit Amount as of the Notice Date. If the Annuitant dies on or after your first Milestone Date and prior to your Annuity Date, the death benefit will be equal to the greater of the Death Benefit Amount and the GMDB Amount as of the Notice Date. If an Annuitant dies before the Annuity Date, unless there is a surviving Joint or Contingent Annuitant, we will pay the death benefit proceeds to the Owner, if living; otherwise to the Beneficiary if living; otherwise to the Owner's estate. If an Annuitant dies and there is a surviving Joint Annuitant, the surviving Joint Annuitant becomes the Annuitant. If there is no surviving Joint Annuitant and there is a Contingent Annuitant, the Contingent Annuitant becomes the Annuitant. Death benefit proceeds are payable only as the result of the death of the sole surviving Annuitant prior to the Annuity Date. If you are the Annuitant and you die, we will determine the amount of any death benefit and the Beneficiary under the Death of Annuitant provisions. If your Contract is a Non-Qualified Contract, we will distribute any death benefit proceeds under the Death of Owner Distribution Rules. All other terms and conditions of your Contract remain unchanged. PACIFIC LIFE INSURANCE COMPANY /s/ Thomas C. Sutton /s/ Audrey L. Milfe Chairman and Chief Executive Officer Secretary 2 EX-99.5(A) 16 EXHIBIT 99.5(A) "DRAFT" PACIFIC INNOVATIONS VARIABLE ANNUITY APPLICATION INSTRUCTIONS IF SECTIONS 1,5,18 AND 19 ARE NOT FILLED OUT COMPLETELY, APPLICATION MAY NEED TO BE RETURNED FOR COMPLETION. 1. ANNUITANTS/OWNERS: Maximum age at issue is 80. There are many combinations 2. of owner and annuitant registrations which may result in different consequences. For example, the death of an owner/annuitant may have different consequences than the death of a non-owner annuitant. Joint or contingent owners and/or joint annuitants cannot be named on qualified contracts. For IRAs, owner and annuitant must be the participant. For pension/profit sharing, 401(k) plans, name plan as owner, and participant as annuitant. For 403(b) plans, name participant as both owner and annuitant. Use the Special Requests section to clarify registrations. Spousal signatures may be required for certain actions in qualified contracts. If qualified plan is owner, also complete Qualified Plan Certification form. If trust is owner, also complete Trust Certification form. Consult a tax adviser to properly structure qualified plans and effect transfers. 3. BENEFICIARY: Beneficiaries will be joint primary if no boxes are checked. Joint beneficiaries will share equally with rights of survivorship. For non-qualified contracts, if the owner dies, contract may only be continued if spouse is sole beneficiary. If beneficiary is left blank, default beneficiary will be owner's estate if contract is individually owned. If owner is trust or corporation, default beneficiary will be the owner. 4. CONTRACT TYPE: A conduit IRA is used to move assets from a qualified plan with intent to move the assets to another qualified plan at a later date; subsequent contributions are not permitted. Transfer indicates a trustee to trustee or custodian to custodian transfer only. If initial IRA payment represents both a rollover and a contribution, indicate amounts for each. Ensure the total matches the check. For a SIMPLE IRA, Pacific Life will only act as a non-designated financial institution. 5. ISSUE STATE: Indicate the state where the application is signed. 6. INITIAL PURCHASE PAYMENT: Indicate the initial purchase payment in U.S. dollars. Initial non-qualified contract minimum $10,000; qualified contract minimum $2,000. 7. REPLACEMENT: Complete and attach a Transfer/Exchange form and any required state replacement forms. 8. OPTIONAL DEATH BENEFIT: Must be chosen at time of issue. If not marked, the option defaults to the standard death benefit. There is an annual charge for this option. Please consult prospectus for charges. 9. TELEPHONE/ELECTRONIC AUTHORIZATION: By checking this box you authorize your designee to give Pacific Life instructions telephonically or electronically. This instruction is valid until you instruct us otherwise. 10. ELECTRONIC DELIVERY AUTHORIZATION: Complete to receive information electronically from our Web site. Primary owner's e-mail address will be used for notification. If not checked, communications will be by regular U.S. mail. This instruction is valid until you instruct us otherwise. 11. ALLOCATION OPTIONS: Allocations must total 100% or equal total purchase payment. If rebalancing, use percentages only. Portfolio managers are: Aggressive Equity ......... Alliance Capital Emerging Markets .......... Alliance Capital Diversified Research ...... Capital Guardian Small-Cap Equity .......... Capital Guardian International Large-Cap ... Capital Guardian Bond and Income ........... Goldman Sachs Equity .................... Goldman Sachs Multi-Strategy ............ J.P. Morgan Investment Equity Income ............. J.P. Morgan Investment Growth LT ................. Janus Mid-Cap Value ............. Lazard Equity Index .............. Mercury Small-Cap Index ........... Mercury REIT ...................... Morgan Stanley International Value ....... Morgan Stanley Government Securities ..... PIMCO Managed Bond .............. PIMCO Money Market .............. Pacific Life High Yield Bond ........... Pacific Life Large-Cap Value ........... Salomon Fixed ..................... Pacific Life 12. REBALANCING: If no date is chosen, rebalancing will occur on the first business day of the frequency selected and every period thereafter. Actual start date may occur after date elected. The Fixed Option may not be rebalanced. Additional purchase payments to accounts other than those selected on this application will not be rebalanced. To change allocations, complete a Transfer and Allocations form. 13. SPECIAL REQUESTS: Use this section to indicate special registrations and other instructions. 14. ANNUITY DATE (Annuity Start Date): Annuity start date cannot be prior to first contract anniversary. For non-qualified contracts, if no date is chosen, annuity date is the annuitant's 95th birthday. For qualified contracts, if no date is chosen, annuity date is the following April 1 of the year after the year in which the annuitant reaches age 70 1/2. 15. PRE-AUTHORIZED CHECKING FOR ADDITIONAL PURCHASE PAYMENTS: Initial minimum purchase may be met over maximum of 12 months. The first purchase payment must accompany this application. Monthly non-qualified contract minimum $800; qualified contract minimum $250. 16. TRANSFERS: Contract must be issued for 30 days. Actual start date may occur after date elected. Minimum source account value $500. Minimum initial transfer amount $250. TRANSFER DOLLARS: Last transfer will occur even if remaining balance is less than the amount selected. TRANSFER PERCENTAGES: Annual percentage will be divided by the frequency selected. 17. PRE-AUTHORIZED WITHDRAWALS: Contract must be issued for 30 days. Actual start date may occur after date elected. Minimum withdrawal $250. Annual percentage will be divided by the frequency selected. Payment will be reduced by any taxes if withholding is applicable, and will be taken from all investment options if none is selected. Withdrawals may be taken from qualified contracts if allowed by the plan. 18. STATEMENT OF APPLICANT: Please read this section carefully. All information and signatures MUST be completed. 19. AGENT'S STATEMENT: Your agent must fully complete and sign this section. 20. MAILING INSTRUCTIONS: Send this completed application as follows: APPLICATIONS WITH PAYMENT: APPLICATIONS WITHOUT PAYMENT: AND/OR ADDITIONAL PAYMENTS: REGULAR MAIL: PACIFIC LIFE INSURANCE COMPANY PACIFIC LIFE INSURANCE COMPANY P.O. Box 100060 P.O. Box 7187 Pasadena, CA 91189-0060 Pasadena, CA 91109-7187 EXPRESS MAIL DELIVERY: EXPRESS MAIL DELIVERY: PACIFIC LIFE INSURANCE COMPANY PACIFIC LIFE INSURANCE COMPANY C/O FCNPC 1111 S. Arroyo Parkway, Ste. 205 1111 S. Arroyo Parkway, Ste. 150 Pasadena, CA 91105 Pasadena, CA 91105 www.PacificLife.com [LOGO] Pacific Life Insurance Company P.O. Box 7187 Pasadena, CA 91109-7187 PACIFIC INNOVATIONS www.PacificLife.com (800)722-2333 (See instructions for mailing addresses) VARIABLE ANNUITY APPLICATION PLEASE TYPE or PRINT. See instructions to assist you in completing this application. - ------------------------------------------------------------------------------------------------------------------------------------ 1. ANNUITANT Name (FIRST, MIDDLE INITIAL, LAST) Birth Date (MO/DAY/YR) Phone Number __/__/____ ( ) ------------------------------------------------------------------------------------------------------------------------------- Street Address (NUMBER, STREET NAME AND APARTMENT OR UNIT NUMBER) E-Mail Address Sex / / M / / F ------------------------------------------------------------------------------------------------------------------------------- City, State & ZIP Code SSN/TIN - ------------------------------------------------------------------------------------------------------------------------------------ L ADDITIONAL ANNUITANT COMPLETE THIS SECTION TO NAME ADDITIONAL ANNUITANT. NOT APPLICABLE FOR QUALIFIED CONTRACTS. A CHECK ONE / / JOINT / / CONTINGENT N Name (FIRST, MIDDLE INITIAL, LAST) Birth Date (MO/DAY/YR) O __/__/____ I ------------------------------------------------------------------------------------------------------------------------------- T Street Address (NUMBER, STREET NAME AND APARTMENT OR UNIT NUMBER) E-Mail Address Sex P / / M / / F O ------------------------------------------------------------------------------------------------------------------------------- City, State & ZIP Code SSN/TIN - ------------------------------------------------------------------------------------------------------------------------------------ 2. IF OWNER(S) AND ANNUITANT(S) ARE THE SAME, IT IS NOT NECESSARY TO COMPLETE SECTION 2. IF TRUST IS OWNER, ALSO COMPLETE TRUST CERTIFICATION FORM. OWNER Name (FIRST, MIDDLE INITIAL, LAST) Birth Date (MO/DAY/YR) Phone Number __/__/____ ( ) ------------------------------------------------------------------------------------------------------------------------------- Street Address (NUMBER, STREET NAME AND APARTMENT OR UNIT NUMBER) E-Mail Address Sex / / M / / F ------------------------------------------------------------------------------------------------------------------------------- City, State & ZIP Code SSN/TIN - ------------------------------------------------------------------------------------------------------------------------------------ L ADDITIONAL OWNER Name (FIRST, MIDDLE INITIAL, LAST) NOT APPLICABLE FOR QUALIFIED CONTRACTS. A CHECK ONE / / Joint / / Contingent Birth Date (MO/DAY/YR) N __/__/____ O ------------------------------------------------------------------------------------------------------------------------------- I Street Address (NUMBER, STREET NAME AND APARTMENT OR UNIT NUMBER) E-Mail Address Sex T / / M / / F P ------------------------------------------------------------------------------------------------------------------------------- O City, State & ZIP Code SSN/TIN - ------------------------------------------------------------------------------------------------------------------------------------ 3. BENEFICIARY Name (FIRST, MIDDLE INITIAL, LAST) IF NO BOXES ARE CHECKED, DEFAULT WILL BE JOINT PRIMARY BENEFICIARIES Select One / / Primary / / Contingent ------------------------------------------------------------------------------------------------------------------------------- ADDITIONAL BENEFICIARY Name (FIRST, MIDDLE INITIAL, LAST) USE SPECIAL REQUESTS SECTION TO PROVIDE ADDITIONAL BENEFICIARIES OR BENEFICIARY INFORMATION. Select One / / Primary / / Contingent - ------------------------------------------------------------------------------------------------------------------------------------ 4. CONTRACT TYPE SECLECT ONE. / / Non-Qualified / / SIMPLE IRA / / Custodial Held IRA / / 457 / / Conduit IRA / / SEP-IRA / / 401(a)Pension* / / Keogh/HR10 / / IRA / / Contributory Roth IRA / / 401(k)* / / TSA/403(b) / / Conversion Roth IRA __/__/____ *ALSO COMPLETE QUALIFIED PLAN CERTIFCATION FORM. COMPLETE ROTH/SIMPLE FORM IF THE SIMPLE IRA BOX IS CHECKED. QUALIFIED CONTRACT PAYMENT TYPE IF NO YEAR IS INDICATED, CONTRIBUTION DEFAULTS TO CURRENT TAX YEAR. / / Transfer ..........$____________________ / / Rollover ..........$____________________ / / Contribution.......$____________________ for tax year_______ $____________________ for tax year_______ - ------------------------------------------------------------------------------------------------------------------------------------ 5. ISSUE STATE ABBREVIATE STATE 6. INITIAL PURCHASE PAYMENT INDICATE THE FORM OF INITIAL PAYMENT. NAME WHERE APPLICATION IS SIGNED. __ __ / / 1035 exchange/est transfer $___________ / / Amt. enclosed $__________ - ---------------------------------------------------------------------------------------------------------------------------------- 7. REPLACEMENT Will any existing life insurance or annuity be (or has it been) surrendered, withdrawn from, loaned against, changed or otherwise reduced in value, or replaced in connection with this transaction, assuming the contract applied for will be issued? / / Yes / / No IF YES, PROVIDE THE INFORMATION BELOW AND ATTACH ANY REQUIRED STATE REPLACEMENT AND/OR 1035 EXCHANGE/TRANSFER FORMS. USE THE SPECIAL REQUESTS SECTION FOR ADDITIONAL INSURANCE COMPANIES AND CONTRACT NUMBERS. Insurance Company Name Contract Number Contract Type Being Replaced / / Life Insurance / / Fixed Annuity / / Variable Annuity - ------------------------------------------------------------------------------------------------------------------------------------ 8. OPTIONAL DEATH BENEFIT SUBJECT TO STATE AVAILABILITY. ANNUITANT(S) MUST NOT BE OVER 70 AT ISSUE. IF AN OPTION IS NOT SELECTED, THE STANDARD DEATH BENEFIT IS THE DEFAULT. / / Stepped-Up Death Benefit / / Premier Death Benefit. - ------------------------------------------------------------------------------------------------------------------------------------ 25-12600 12/99 1600-OA
- ------------------------------------------------------------------------------------------------------------------------------------ 15. PRE-AUTHORIZED CHECKING (PAC) FOR ADDITIONAL PURCHASE PAYMENTS PAC AMOUNT PAC START DATE (MO/DAY/YR) Each month deduct from my account shown on the ATTACHED VOIDED CHECK, the amount indicated in the box at the right. PAYMENTS WILL BE APPLIED ACCORDING TO THE ALLOCATIONS ON THIS APPLICATION _____/_____/_____ OR MORE CURRENT INSTRUCTIONS, IF ANY. TO BEGIN PAC, THE FIRST $ DEFAULT START DATE IS MINIMUM INSTALLMENT MUST ACCOMPANY THIS APPLICATION. _____________ ONE MONTH FROM ISSUE. - ------------------------------------------------------------------------------------------------------------------------------------ 16. TRANSFERS CHOOSE ONE OF THE FOUR TRANSFER OPTIONS UNDER SECTION A. INDICATE A SINGLE SOURCE ACCOUNT AND DIFFERENT TARGET ACCOUNTS. IF SECTION 11 IS BLANK, 100% OF PURCHASE PAYMENT WILL BE ALLOCATED TO THE SOURCE ACCOUNT BELOW. A. DOLLAR COST AVERAGING TRANSFER AND TERM OPTIONS EARNINGS SWEEP TRANSFER OPTION 1. / / Deplete the source account in ______# of transfers 4. / / Sweep the previous period's earnings 2. / / Transfer $__________ each time for ____ years or ____ months Take from one of the following accounts 3. / / Transfer ______% annually for ____ years or ____ months / / Fixed Option / / Money Market ------------------------------------------------------------------------------------------------------------------------------- B. TRANSFER FREQUENCY DEFAULT IS MONTHLY. C. START DATE (MO/DAY/YR) DEFAULT START DATE IS ONE MONTH FROM ISSUE S / / Monthly / / Quarterly / / Semi-Annually / / Annually _____/_____/_____ M ------------------------------------------------------------------------------------------------------------------------------- A D. SOURCE ACCOUNT COMPLETE IF 1, 2, OR 3 IS E. TARGET ACCOUNT MUST BE DIFFERENT THAN SOURCE ACCOUNT. INDICATE R SELECTED ABOVE FROM SECTION A. CHOOSE ONE. SOURCE EITHER WHOLE PERCENTAGE OR DOLLAR AMOUNTS. G ACCOUNT CANNOT BE TARGET ACCOUNT. O / / Mid-Cap Value Aggressive Equity _____________ Mid-Cap Value _____________ R / / Aggressive Equity / / Equity Index Emerging Markets _____________ Equity Index _____________ P / / Emerging Markets / / Small-Cap Index Diversified Research _____________ Small-Cap Index _____________ / / Diversified Research / / REIT Small-Cap Equity _____________ REIT _____________ L / / Small-Cap Equity / / Intl. Value Intl. Large-Cap _____________ Intl. Value _____________ A / / Intl. Large-Cap / / Govt. Securities Bond and Income _____________ Govt. Securities _____________ N / / Bond and Income / / Managed Bond Equity _____________ Managed Bond _____________ O / / Equity / / Money Market Multi-Strategy _____________ Money Market _____________ I / / Multi-Strategy / / High Yield Bond Equity Income _____________ High Yield Bond _____________ T / / Equity Income / / Large-Cap Value Growth LT _____________ Large-Cap Value _____________ P / / Growth LT / / Fixed O TOTAL MUST EQUAL 100% OR FULL $ TRANSFER AMOUNT _____________ - ------------------------------------------------------------------------------------------------------------------------------------ 17. PRE-AUTHORIZED WITHDRAWALS WITHDRAWAL TO BE ISSUED BY CHECK UNLESS SECTION 1 IS COMPLETED AND VOIDED CHECK ATTACHED. A. CHOOSE ONE WITHDRAWAL OPTION B. WITHDRAWAL AMOUNT TO BE % of contract / / Net of Charges / / Gross of charges / / $__________ each time / / __________ value annually DEFAULT WILL BE GROSS OF CHARGES. AVAILABLE FOR DOLLAR AMOUNT ONLY. ------------------------------------------------------------------------------------------------------------------------------- C. 72(t)/72(q) CHECK BOX IF WITHDRAWAL IS A D. START DATE (MO/DAY/YR) E. FREQUENCY DEFAULT IS MONTHLY. CONTINUATION OF A SERIES OF SUBSTANTIALLY / / Monthly / / Semi-Annually EQUAL PERIODIC PAYMENTS UNDER SECTION IRC _____/_____/_____ / / Quarterly / / Annually / / 72(t) OR 72(g) NOT CALCULATED BY PACIFIC LIFE. DEFAULT START DATE IS ONE MONTH FROM ISSUE. ------------------------------------------------------------------------------------------------------------------------------- F. DURATION ENTER EITHER THE NUMBER OF G. FEDERAL TAXES IF NOT SPECIFIED, THE MINIMUM MONTHS OR YEARS. 10% FEDERAL TAX ON NON-QUALIFIED CONTRACTS AND / / Do Not Withhold / / MONTHS _________ / / YEARS _________ IRAS WILL BE WITHHELD. MANDATORY 20% ON QUALIFIED CONTRACTS WILL BE WITHHELD. STATE / / Withhold ______% MANDATED INCOME TAX WILL BE WITHHELD WHERE REQUIRED BY LAW. ------------------------------------------------------------------------------------------------------------------------------- H. SOURCE FOR DOLLAR AMOUNT WITHDRAWALS ONLY, CHOOSE ONE OR MORE SOURCES. OTHERWISE, WITHDRAWALS WILL BE TAKEN PROPORTIONALLY FROM CURRENT ALLOCATIONS. INDICATE DOLLAR AMOUNTS THAT EQUAL THE TOTAL IN 17A. Aggressive Equity ___________ Equity ___________ Equity Index ___________ Managed Bond ___________ Emerging Markets ___________ Multi-Strategy ___________ Small-Cap Index ___________ Money Market ___________ Diversified Research ___________ Equity Income ___________ REIT ___________ High Yield Bond ___________ Small-Cap Equity ___________ Growth LT ___________ Intl. Value ___________ Large-Cap Value ___________ Intl. Large-Cap ___________ Mid-Cap Value ___________ Govt. Securities ___________ Fixed ___________ Bond and Income ___________ ------------------------------------------------------------------------------------------------------------------------------- I. 3RD PARTY PAYEE - COMPLETE THIS SECTION ONLY IF YOU WANT THE DISTRIBUTIONS TO BE ELECTRONICALLY TRANSFERRED TO YOUR BANK OR MAILED TO SOMEONE OTHER THAN THE OWNER. IF THE DISTRIBUTIONS ARE BEING ELECTRONICALLY TRANSFERRED TO A CHECKING ACCOUNT, PLEASE ATTACH A VOIDED CHECK. IF ELECTRONICALLY TRANSFERRED TO A SAVINGS ACCOUNT, PLEASE ATTACH A DEPOSIT SLIP. Name of Institution/Individual IF INDIVIDUAL, FIRST, MIDDLE, LAST NAME. Account Number ----------------------------------------------------------------------------------------------------------------------------- Street Address (NUMBER, STREET NAME AND APARTMENT OR UNIT NUMBER) ----------------------------------------------------------------------------------------------------------------------------- City, State & ZIP Code ABA Number FOR DIRECT DEPOSIT. - ------------------------------------------------------------------------------------------------------------------------------------ 25-12600 12/99 1600-OA Owner's Signature Date Joint Owner's Signature IF APPLICABLE Date - ------------------------------------------------------------------------------------------------------------------------------------ 19. AGENT'S STATEMENT Do you have reason to believe that any existing life insurance or annuity has been (or will be) surrendered, withdrawn from, loaned against, changed or otherwise reduced in value, or replaced in connection with this transaction assuming the contract applied for will be issued? / / Yes / / No IF YES, EXPLAIN IN REPLACEMENT SECTION 7. I certify that I am authorized and qualified to discuss this contract. I have explained to the applicant how the annuity will meet their insurable needs and financial objectives. I have discussed the appropriateness of replacement, if applicable. SIGN HERE ------------------------------------------------------------------------------------------------------------------------------- Agent's Signature Print Agent's Full Name Agent's ID Number ( ) ------------------------------------------------------------------------------------------------------------------------------- Agent's Phone Number Agent's E-Mail Address ------------------------------------------------------------------------------------------------------------------------------- Broker/Dealer's Name Brokerage Account Number OPTIONAL. - ------------------------------------------------------------------------------------------------------------------------------------ 25-12600 12/99 1600-OA
9. TELEPHONE/ELECTRONIC AUTHORIZATION I WILL RECEIVE THIS PRIVILEGE AUTOMATICALLY. By checking "yes," I am authorizing and directing Pacific Life to act on telephone or electronic instructions from any other person(s) who can furnish proper identification. Pacific Life will use reasonable procedures to confirm that these instructions are authorized and genuine. As long as these procedures are followed, Pacific Life and its affiliates and their directors, trustees, officers, employees, representatives and/or agents, will be held harmless for any claim, liability, loss or cost. / / Yes 10. ELECTRONIC DELIVERY AUTHORIZATION By checking "yes," I authorize Pacific Life to provide my statements, prospectuses and other information electronically. I understand that I must have internet access to use this service and there may be access fee charges by the internet service provider. / / Yes 11. ALLOCATION OPTIONS IF REBALANCING, USE PERCENTAGES ONLY. SEE INSTRUCTIONS FOR PORTFOLIO MANAGER NAMES. Aggressive Equity_____________ Equity_____________ Equity Index______________ Managed Bond____________ Emerging Markets_____________ Multi-Strategy_____________ Small-Cap Index______________ Money Market____________ Diversified Research_____________ Equity Income_____________ REIT______________ High Yield Bond____________ Small-Cap Equity_____________ Growth LT_____________ Intl. Value______________ Large-Cap Value____________ Intl. Large-Cap_____________ Mid-Cap Value_____________ Govt. Securities______________ Fixed____________ Bond and Income______________ MUST EQUAL EITHER 100% OR FULL PURCHASE PAYMENT AMOUNT ____________
12. REBALANCING / / Yes, rebalance the variable accounts to the allocations indicated in Section 11. CHOOSE ONE FREQUENCY. DEFAULT IS QUARTERLY. / / Quarterly / / Semi-Annually / / Annually Start Date (MO/DAY/YR) DEFAULT IS FIRST BUSINESS DAY OF FREQUENCY SELECTED. __/__/____ 13. SPECIAL REQUESTS IF ADDITIONAL SPACE IS NEEDED, ATTACH LETTER SIGNED AND DATED BY OWNER(S). 14. ANNUITY START DATE CONTRACT WILL ANNUITIZE ON THIS DATE. START DATE CANNOT BE PRIOR TO THE FIRST CONTRACT ANNIVERSARY. IF NO DATE IS CHOSEN, ANNUITY START DATE IS THE MAXIMUM DEFERRAL AGE LISTED IN YOUR CONTRACT. Annuity Start Date (MO/DAY/YR) __/__/____ 18. STATEMENT OF APPLICANT MY AGENT AND I DISCUSSED MY FINANCIAL BACKGROUND AND AS A RESULT I BELIEVE THIS CONTRACT WILL MEET MY INSURABLE NEEDS AND FINANCIAL OBJECTIVES. I HAVE CONSIDERED THE APPROPRIATENESS OF FULL OR PARTIAL REPLACEMENT OF ANY EXISTING LIFE INSURANCE OR ANNUITY, IF APPLICABLE. I UNDERSTAND THAT CONTRACT VALUES MAY INCREASE OR DECREASE DEPENDING ON THE INVESTMENT EXPERIENCE OF THE VARIABLE ACCOUNTS. CONTRACT VALUES UNDER THE VARIABLE ACCOUNTS ARE VARIABLE AND ARE NOT GUARANTEED. I UNDERSTAND THAT ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT MAY VARY AS TO DOLLAR AMOUNT TO THE EXTENT THAT THEY ARE BASED ON THE INVESTMENT EXPERIENCE OF THE SELECTED PORTFOLIO(S). I have received prospectuses. I hereby represent my answers to the above questions to be correct and true to the best of my knowledge and belief, and agree that this application will be part of the annuity contract issued by Pacific Life. I acknowledge that corrections to my contract may be made from the application. My acceptance of this contract constitutes acceptance of these corrections. If there are joint applicants, the contract, if issued, will be owned by the joint applicants as Joint Tenants With The Right Of Survivorship and not as Tenants In Common. ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE COMPANY OR OTHER PERSON FILES AN APPLICATION FOR INSURANCE OR STATEMENT OF CLAIM CONTAINING ANY MATERIALLY FALSE INFORMATION OR CONCEALS FOR THE PURPOSE OF MISLEADING, INFORMATION CONCERNING ANY FACT MATERIAL THERETO COMMITS A FRAUDULENT INSURANCE ACT, WHICH IS A CRIME AND SUBJECTS SUCH PERSON TO CRIMINAL AND CIVIL PENALTIES. Any portion of this contract allocated to one or more of the variable investment options is not covered by an insurance guaranty fund or other solvency protection arrangement because that portion of this contract is held in a separate account under which the risk is borne by the policyholder. MY SIGNATURE CERTIFIES, UNDER PENALTY OF PERJURY, THAT THE TAXPAYER IDENTIFICATION NUMBER PROVIDED IS CORRECT. I AM NOT SUBJECT TO BACKUP WITHHOLDING BECAUSE: I AM EXEMPT; OR I HAVE NOT BEEN NOTIFIED THAT I AM SUBJECT TO BACKUP WITHHOLDING RESULTING FROM FAILURE TO REPORT ALL INTEREST OR DIVIDENDS; OR I HAVE BEEN NOTIFIED THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING. (STRIKE OUT THE PRECEDING SENTENCE IF SUBJECT TO BACKUP WITHHOLDING.) THE IRS DOES NOT REQUIRE MY CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING. ______________________________ __________________________________________ Signed at City State Where Application Signed _________________ _______ _____________________________________ _______ Owner's Signature Date Joint Owner's Signature IF APPLICABLE Date 19. AGENT'S STATEMENT Do you have reason to believe that any existing life insurance or annuity has been (or will be) surrendered, withdrawn from, loaned against, changed or otherwise reduced in value, or replaced in connection with this transaction assuming the contract applied for will be issued? / / Yes / / No IF YES, EXPLAIN IN REPLACEMENT SECTION 7. I certify that I am authorized and qualified to discuss this contract. I have explained to the applicant how the annuity will meet their insurable needs and financial objectives. I have discussed the appropriateness of replacement, if applicable. ______________________ __________________________ ______________________ Agent's Signature Print Agent's Full Name Agent's ID Number ( ) _________________________________ ______________________________________ Agent's Phone Number Agent's E-Mail Address _________________________________ ______________________________________ Broker/Dealer's Name Brokerage Account Number OPTIONAL EX-99.5(B) 17 EXHIBIT 99.5(B) EXHIBIT 99.5(b) "DRAFT" PACIFIC LIFE [LOGO OF PACIFIC LIFE] VARIABLE ANNUITY PAC APP is not available for transfers, 1035 exchanges PAC APP and 401, 403, 457 and Keogh Plans. Please use the standard application. PRODUCT: [_] PSVA (Select) [_] Pacific One [_] Pacific Portfolios [_] Pacific Value [_] Pacific Innovations - ------------------------------------------------------------------------------------------------------------- [1] ANNUITANT Name Birth Date (mo/day/yr) Phone Number (First, Middle Initial, Last) ( ) - ------------------------------------------------------------------------------------------------------------- Street Address Sex (Number, Street Name and Apartment or Unit Number) [_]M [_]F - ------------------------------------------------------------------------------------------------------------- City, State & ZIP Code Social Security/Tax ID Number - ------------------------------------------------------------------------------------------------------------- OPTIONAL [2] ADDITIONAL ANNUITANT Check one [_] Joint [_] Contingent Name (First, Middle Initial, Last) Birth Date Annuitant's Spouse? (mo/day/yr) [_] Yes [_] No - ------------------------------------------------------------------------------------------------------------- Street Address Sex (Number, Street Name and Apartment or Unit Number) [_]M [_]F - ------------------------------------------------------------------------------------------------------------- City, State & ZIP Code Social Security/Tax ID Number - ------------------------------------------------------------------------------------------------------------- [3] OWNER Name (First, Middle Initial, Last) Birth Date Phone Number complete if different than annuitant. (mo/day/yr) ( ) - ------------------------------------------------------------------------------------------------------------- Street Address Sex (Number, Street Name and Apartment or Unit Number) [_]M [_]F - ------------------------------------------------------------------------------------------------------------- City, State & ZIP Code Social Security/Tax ID Number - ------------------------------------------------------------------------------------------------------------- OPTIONAL [4] OWNER Name Birth Date Annuitant's Spouse? (First, Middle Initial, Last) (mo/day/yr) [_] Yes [_] No - ------------------------------------------------------------------------------------------------------------- Street Address Sex (Number, Street Name and Apartment or Unit Number) [_]M [_]F - ------------------------------------------------------------------------------------------------------------- City, State & ZIP Code Social Security/Tax ID Number - ------------------------------------------------------------------------------------------------------------- [5] BENEFICIARY Name Relationship Select One (FIrst, Middle Initial, Last) [_] Primary [_] Contingent - ------------------------------------------------------------------------------------------------------------- CONTRACT TYPE Select one. For SIMPLE IRA, IRA Contribution write employer name, address and phone number in Special Remark section below. $ __________ for tax year ____ $ __________ for tax year ____ [_] Non-Qualified [_] Conduit IRA [_] Roth IRA [_] IRA [_] SEP-IRA [_] SIMPLE IRA - ------------------------------------------------------------------------------------------------------------- [7] REPLACEMENT OF ANNUITY Will the purchase of this annuity replace or exchange any existing life insurance or annuity? [_] Yes [_] No - ------------------------------------------------------------------------------------------------------------- [8] TRADE INFORMATION DEATH BENEFITS Subject to state Premium Submitted State of Sale approval. Call (800) 722-2333 for state availability. - ------------------------------------------- Client Acct. # Contract # (for add'l. PACIFIC PORTFOLIOS: [_] Standard pmts. only) [_] Enhanced PACIFIC VALUE: [_] Standard [_] Stepped-Up [_] Premier - ------------------------------------------------------------------------------------------------------------- [9] ALLOCATION OPTIONS Growth LT ___ Emerging Markets ___ Additional Options ___ Allocate payment of Fixed ___ Equity Income ___ [xxxxxxxxxx] ___ FOR PORTFOLIOS ONLY the amount shown Money Market ___ Multi-Strategy ___ [xxxxxxxxxx] ___ below. Allocations High Yield Bond ___ Equity ___ [xxxxxxxxxx] ___ 3-year GIO ____ must total 100% or Managed Bond ___ Bond & Income ___ [xxxxxxxxxx] ___ 6-year GIO ____ equal total premium Govt. Securities ___ Equity Index ___ [xxxxxxxxxx] ___ 10-year GIO ____ invested. Aggressive Equity ___ International ___ DCA Plus ____ $ - ------------------------------------------------------------------------------------------------------------- [10] REBALANCING Optional. Choose one frequency. [_] Yes [_] No [_] Quarterly [_] Semi-Annually [_] Annually - ------------------------------------------------------------------------------------------------------------- [11] DOLLAR COST AVERAGING Choose one of the three following methods 1 [_] Deplete the source account in ____ transfers; 2 [_] Transfer $____ or ____% annually from each source account; OR 3 [_] Earnings Sweep. START DATE:__________ FREQUENCY: [_] Monthly [_] Quarterly [_] Semi-Annually [_] Annually TERM: [_] ______ Months [_] _______ Yrs. Money Market ___ Aggressive Annuity ___ Equity ___ Emerging Markets ___ [xxxxxxxxxx] ___ High Yield Bond ___ Growth LT ___ Bond & Income ___ [xxxxxxxxxx] ___ [xxxxxxxxxx] ___ Managed Bond ___ Equity Income ___ Equity Index ___ [xxxxxxxxxx] ___ [xxxxxxxxxx] ___ Govt. Securities ___ Multi-Strategy ___ International ___ [xxxxxxxxxx] ___ - ------------------------------------------------------------------------------------------------------------- [12] DEALER INFORMATION SS# Broker/Dealer Name Registered Representative Name - ------------------------------------------------------------------------------------------------------------- [13] COMMISSION OPTIONS Check one option for product sold. PSVA (SELECT) PACIFIC ONE PACIFIC PORTFOLIOS PACIFIC VALUE Upfront, Ann. Trail Upfront, Ann. Trail Upfront, Ann. Trail Upfront, Ann. Trail A [_] 6%, NA [_] 1%, .25% Q5+ [_] 6.5%, NA [_] TBD B [_] 5%, .25% Q5-20 [_] .25%, .25% Q2+ [_] 5%, .25% Q5-24 [_] TBD 1% Q21+ 1% Q25+ [_] TBD C [_] NA [_] NA [_] 3.5%, .5% Q5-24 [_] TBD 1% Q25+ - ------------------------------------------------------------------------------------------------------------- [14] SPECIAL REMARKS - ------------------------------------------------------------------------------------------------------------- PACP 8/98 [BAR CODE]
EX-99.5(C) 18 EXHIBIT 99.5(C) EXHIBIT 99.5 (c) Application/Confirmation Form EXHIBIT 99.5(c) "DRAFT" PACIFIC LIFE APPLICATION/CONFIRMATION FORM Pacific Life Insurance Company PO Box 7187, Pasadena, CA 91109-7187 (LOGO OF PACIFIC LIFE] [PROD] [PNUM] Initial Premium: [PAMT) Issue Date: [ISSDT] State of Sale: [ISSST] Please verify that all information is correct. Sign and date the form on the reverse and return it promptly to Pacific Life in the enclosed postage-paid envelope. When you sign and return this form, you acknowledge and agree to the terms of the Contract. Financial transactions will not be processed prior to our receipt of this form. - ---------------------------------- ----------------------------------------- ANNUITANT(S): ALLOCATION OPTIONS: [A1NAM] [A1ML1] [_FNDALL01] [FNDAM01] [A1ML2] [_FNDALL02] [FNDAM02] [A1ML3] [_FNDALL03] [FNDAM03] [A1SSN] [A1DOB] [A1SEX] [_FNDALL04] [FNDAM04] [_FNDALL05] [FNDAM05] - ---------------------------------- [_FNDALL06] [FNDAM06] Joint/Contingent: [_FNDALL07] [FNDAM07] [AXNAM] [_FNDALL08] [FNDAM08] [AXML1] [_FNDALL09] [FNDAM09] [ASML2] [_FNDALL10] [FNDAM10] [AXML3] [_FNDALL11] [FNDAM11] [AXSSN] [AXDOB] [AXSEX] [_FNDALL12] [FNDAM12] [_FNDALL13] [FNDAM13] - ---------------------------------- [_FNDALL14] [FNDAM14] OWNER(S): [_FNDALL15] [FNDAM15] [O1NAM] [_FNDALL16] [FNDAM16] [0ML2] [_FNDALL17] [FNDAM17] [0ML3] [_FNDALL18] [FNDAM18] [0ML4] [_FNDALL19] [FNDAM19] [0ML5] [01SSN] [01DOB] [01SEX] - ---------------------------------- Joint/Contingent: [OXNAM] [OXML2] [OXML3] [OXML4] [OXML5] [OXSSN] [OXDOB] [OXSEX] ----------------------------------------- - ----------------------------------- ----------------------------------------- BENEFICIARY/BENEFICIARIES TYPE OF PLAN: [LOBE] (P=Primary; C=Contingent): REBALANCING: [RBYN] [RBFREQ] DEALER INFORMATION: [AGNAM] [B1NAM] [B1PRI] DEATH BENEFIT OPTION: [OPTION] [B2NAM] [B2PRI] [B3NAM] [B3PRI] [B4NAM] [B4PRI] [B5NAM] [B5PRI] - ----------------------------------- ----------------------------------------- Please see reverse side TELEPHONE AUTHORIZATION Owner's initials Joint Owner's initials --------------- ------------- By initialing, Pacific Life is authorized and directed to act on telephone instructions from any person(s) who can furnish proper identification. Pacific Life will use reasonable procedures to confirm that these instructions are authorized and genuine. As long as these procedures are followed, Pacific Life and its affiliates and their directors, trustees, officers, employees, representatives and/or agents, will be held harmless for a claim, liability, logo or cost. STATEMENT OF APPLICANT My agent and I discussed my financial background and as a result I believe this Contract will meet my insurable needs and financial objectives. I have considered the appropriateness of full or partial replacement of any existing life insurance or annuity, if applicable. I understand that Contract Values may increase or decrease depending on the investment experience of the Variable Accounts. Contract values under the Variable Accounts are variable and are not guaranteed. I UNDERSTAND THAT ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT MAY VARY AS TO DOLLAR AMOUNT TO THE EXTENT THAT THEY ARE BASED ON THE INVESTMENT EXPERIENCE OF THE SELECTED PORTFOLIO(S). I have received prospectuses. I hereby represent my answers to the above questions to be correct and true to the best of my knowledge and belief, and agree that this application will be part of the annuity Contract issued by Pacific Life. I acknowledge that corrections to my Contract may be made from the application. my acceptance of this contract constitutes acceptance of these corrections. if there are joint applicants, the Contract, if issued, will be owned by the Joint Applicants as Joint Tenants With The Right Of Survivorship and not as Tenants In Common, Any Person who knowingly and with intent to defraud any insurance company or other person files an application for insurance or statement of Claim containing any materially false information or conceals for the parpose of misleading, information concerning any fact material thereto commits a fraudulent insurance act, which is a crime and subjects such person to criminal and civil penalties. This Contract is not covered by an insurance guaranty fund or other solvency protection arrangement, therefore the policyholder bears the risk that the company will not fulfill its obligations under the Contract. My signature certifies, under penalty of perjury, that the taxpayer identification number provided is correct. I am not subject to backup withholding because I am exempt; or I have not been notified that I am subject to backup withholding resulting from failure to report all Interest or dividends; or I have been notified that I am no longer subject to backup withholding, (Strike out the preceding sentence if subject to backup withholding.) The IRS does not require my consent to any provision of this document other than the certifications required to avoid backup withholding. I certify that this Contract was sold and/or solicited in the state of [ISSSTE]. - ----------------- ------------------------------------------------- DATE OWNER SIGNATURE - ----------------- ------------------------------------------------- DATE JOINT/CONTINGENT OWNER'S SIGNATURE EX-99.6(A) 19 EXHIBIT 99.6(A) EXHIBIT 99.6(a) Pacific Life's Articles of Incorporation AMENDED AND RESTATED ARTICLES OF INCORPORATION OF PACIFIC LIFE INSURANCE COMPANY Thomas C. Sutton and Audrey L. Milfs certify that: 1. They are the Chief Executive Officer and Secretary, respectively, of Pacific Mutual Life Insurance Company (the "Company"), a mutual life insurance company organized under the laws of the State of California. 2. The Articles of Incorporation of this Corporation are amended and restated to read as follows: AMENDED AND RESTATED ARTICLES OF INCORPORATION of PACIFIC LIFE INSURANCE COMPANY I. The name of the Corporation is PACIFIC LIFE INSURANCE COMPANY. II. The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code. The business of the Corporation is to be an insurer, subject to the provisions of the California Insurance Code. This insurer is organized to transact life and disability insurance as specifically authorized by its California Certificate of Authority. 1 III. The Corporation is authorized to issue six hundred thousand shares of Common Stock with a par value of fifty dollars ($50.00) per share, having an aggregate par value of thirty million dollars ($30,000,000). Common Stock shall only be issued to Pacific LifeCorp. IV. (a) The liability of the directors of the Corporation for monetary damages shall be eliminated to the fullest extent permissible under California law. (b) The Corporation is authorized to provide indemnification of agents (as defined in Section 317 of the California Corporations Code) for breach of duty to the Corporation and its shareholders through Bylaw provisions, agreements with agents, vote of shareholders or disinterested directors, or otherwise, in excess of the indemnification otherwise permitted by Section 317 of the California Corporations Code, provided that any such excess indemnification involving a breach of duty to the Corporation and its shareholders shall be subject to the limits on such excess indemnification set forth in Section 204 of the Corporations Code and shall be paid only from realized or realizable earned surplus as specified in Section 10530 of the California Insurance Code. V. The number of directors of this Corporation shall be not less than 9 or greater than 17. The exact number of directors shall be fixed within these specified limits by the Board of Directors or the shareholders in the manner provided in the Bylaws. VI. Any action which may be taken at a meeting of the shareholders, may be taken without a meeting if authorized by a writing signed by all of the holders of shares who would be entitled to vote at a meeting for such purpose, and filed with the secretary of the Corporation. 3. The foregoing Amendment and Restatement of Articles of Incorporation has been duly approved by the Board of Directors. 4. The foregoing amendment and restatement of Articles of Incorporation has been duly approved by the required vote of members. 2 We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this Certificate are true and correct of our own knowledge. IN WITNESS WHEREOF, each of the undersigned, being the duly authorized Chief Executive Officer and the Secretary of the Company, for the purpose of amending the Articles of Incorporation of the Corporation pursuant to Section 11542 of the California Insurance Code, declares under penalty of perjury that the statements contained in the foregoing Certificate are true of his or her own knowledge, and makes and files this Certificate, and accordingly has set his or her hand, this 27th day of August, 1997. Executed at Newport Beach, California. /s/ TC SUTTON ------------------------------------------------- Thomas C. Sutton Chief Executive Officer /s/ AUDREY L. MILFS ------------------------------------------------- Audrey L. Milfs Secretary 3 EX-99.6(B) 20 EXHIBIT 99.6(B) EXHIBIT 99.6(b) BYLAWS OF PACIFIC LIFE INSURANCE COMPANY AS ADOPTED ON AUGUST 27, 1997 (EFFECTIVE SEPTEMBER 1, 1997) TABLE OF CONTENTS
Page Article I. OFFICES............................... 1 SECTION 1. Principal Executive Office............ 1 SECTION 2. Other Offices......................... 1 Article II. MEETINGS OF SHAREHOLDERS.............. 1 SECTION 1. Place of Meetings..................... 1 SECTION 2. Annual Meetings....................... 1 SECTION 3. Notice of Meetings.................... 1 SECTION 4. Special Meetings...................... 2 SECTION 5. Adjourned Meetings and Notice Thereof. 2 SECTION 6. Consent to Shareholders' Meetings..... 2 SECTION 7. Voting Rights; Cumulative Voting...... 2 SECTION 8. Quorum................................ 2 SECTION 9. Proxies............................... 2 SECTION 10. Conduct of Meeting.................... 3 Article III. BOARD OF DIRECTORS.................... 3 SECTION 1. Powers................................ 3 SECTION 2. Number of Directors................... 4 SECTION 3. Term of Office and Election........... 4 SECTION 4. Resignation........................... 4 SECTION 5. Vacancies............................. 4 SECTION 6. Place of Meetings..................... 4 SECTION 7. Regular Annual Meetings............... 5 SECTION 8. Other Regular Meetings................ 5 SECTION 9. Special Meetings...................... 5 SECTION 10. Adjournment........................... 5 SECTION 11. Entry of Notice....................... 5 SECTION 12. Waiver of Notice...................... 6 SECTION 13. Quorum................................ 6 SECTION 14. Action by Telephonic Communications... 6 SECTION 15. Action Without a Meeting.............. 6 SECTION 16. Fees and Compensation................. 6 Article IV. OFFICERS.............................. 7 SECTION 1. Number and Qualifications............. 7 SECTION 2. Election, Term of Office.............. 7 SECTION 3. Other Officers, etc................... 7 SECTION 4. Removal............................... 7 SECTION 5. Resignation........................... 7 SECTION 6. Vacancies............................. 7 SECTION 7. Chairman of the Board................. 7 SECTION 8. President............................. 8 SECTION 9. Vice Presidents....................... 8
i SECTION 10. Secretary............................. 8 SECTION 11. Treasurer............................. 8 Article V. INSURANCE POLICIES, CONTRACTS, CHECKS, DRAFTS,BANK ACCOUNTS, ETC......... 8 SECTION 1. Insurance Policies, How Signed........ 8 SECTION 2. Checks, Drafts, etc................... 8 SECTION 3. Contracts, etc., How Executed......... 8 SECTION 4. Bank Accounts......................... 9 Article VI. INVESTMENTS........................... 9 SECTION 1. Investments in the Corporation's Name. 9 Article VII. CERTIFICATES AND TRANSFER OF SHARES... 9 SECTION 1. Certificates for Shares............... 9 SECTION 2. Transfer on the Books................. 9 SECTION 3. Lost or Destroyed Certificates........ 9 SECTION 4. Transfer Agents and Registrars........ 10 SECTION 5. Closing Stock Transfer Books.......... 10 Article VIII. CORPORATE RECORDS, REPRESENTATION OF SHARES OF OTHER CORPORATIONS...... 10 SECTION 1. Inspection of Bylaws.................. 10 SECTION 2. Inspection of Corporate Records....... 10 SECTION 3. Annual Reports........................ 10 SECTION 4. Representation of Shares of Other Corporations................ 10 Article IX. AMENDMENTS............................ 11 SECTION 1. Amendment of Bylaws................... 11 Article X. INDEMNIFICATION....................... 11 SECTION 1. Liability of Directors................ 11 SECTION 2. Indemnification of Agents............. 11
ii BYLAWS FOR THE REGULATION, EXCEPT AS OTHERWISE PROVIDED BY STATUTE OR ITS ARTICLES OF INCORPORATION, OF PACIFIC LIFE INSURANCE COMPANY Article I. OFFICES ------- SECTION 1. PRINCIPAL EXECUTIVE OFFICE. The principal executive office for the transaction of business of the corporation is hereby fixed and located at 700 Newport Center Drive, City of Newport Beach, County of Orange, State of California. SECTION 2. OTHER OFFICES. Branch or subordinate offices may at any time be established by the board of directors at any place or places where the corporation is qualified to do business. Article II. MEETINGS OF SHAREHOLDERS ------------------------ SECTION 1. PLACE OF MEETINGS. All meetings of shareholders shall be held at either the principal executive office of the corporation or any other place within the State of California designated by the board of directors pursuant to authority hereinafter granted to said board. SECTION 2. ANNUAL MEETINGS. The annual meetings of shareholders shall be held at such date and time as designated by the board of directors. SECTION 3. NOTICE OF MEETINGS. Notice of all meetings of shareholders, whether annual or special, shall be given in writing to the shareholders entitled to vote. The notice shall be given by the secretary, assistant secretary, or other persons charged with that duty. If there is no such officer, or if he or she neglects or refuses this duty, notice may be given by any director. Notice of any meeting of shareholders shall be given to each shareholder entitled to notice not less than ten (10) nor more than sixty (60) days before a meeting. Notice of any meeting of shareholders shall specify the place, the day, and the hour of the meeting and the general nature of the business to be transacted. A notice may be given to a shareholder either personally, or by mail, or other means of written communication, charges prepaid, addressed to the shareholder at his or her address appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice. SECTION 4. SPECIAL MEETINGS. Special meetings of shareholders, for any purpose or purposes whatsoever, may be called at any time by the chief executive officer or by the board of directors or by 1 shareholders holding ten percent (10%) or more of the voting power of the corporation. [Cal. Corp. Code (S)(S) 600, 601]/1/ SECTION 5. ADJOURNED MEETINGS AND NOTICE THEREOF. Any shareholders' meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of a majority of the shareholders who are either present in person or represented by proxy thereat, but in the absence of a quorum no other business may be transacted at any such meeting. When any shareholders' meeting, either annual or special, is adjourned for forty-five (45) days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid, it shall not be necessary to give any notice of the time and place of the adjourned meeting or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which such adjournment is taken. SECTION 6. CONSENT TO SHAREHOLDERS' MEETINGS. The transactions of any meeting of shareholders, however called and noticed, shall be valid as though had at a meeting duly held after regular call and notice if a quorum be present either in person or by proxy, and if, either before or after the meeting, each of the shareholders entitled to vote, not present in person or by proxy, sign a written waiver of notice, or a consent to the holding of such a meeting, or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporation records or made a part of the minutes of the meeting. Any action which may be taken at a meeting of the shareholders, may be taken without a meeting if authorized by a writing signed by all of the holders of shares who would be entitled to vote at a meeting for such purpose, and filed with the secretary of the corporation. SECTION 7. VOTING RIGHTS; CUMULATIVE VOTING. Only persons in whose names shares entitled to vote stand on the stock records of the corporation on the day of any meeting of shareholders, unless some other day be fixed by the board of directors for the determination of shareholders of record, then on such other day, shall be entitled to vote at such meeting. Every shareholder entitled to vote shall be entitled to one vote for each of said shares and in any election of directors he or she shall have the right to cumulate his or her votes as provided in Section 708, of the Corporations Code of California. SECTION 8. QUORUM. The presence in person or by proxy of the holders of a majority of the shares entitled to vote at any meeting shall constitute a quorum for the transaction of business. SECTION 9. PROXIES. Every shareholder entitled to vote or execute consents shall have the right to do so either in person or by an agent or agents authorized by a written proxy executed by such shareholder or his or her duly authorized agent and filed with the secretary of the corporation; provided that no such proxy shall be valid after the expiration of eleven (11) months from the date of its execution unless the shareholder executing it specifies therein the length of time for which such proxy is to continue in force. Any proxy duly executed is not revoked, and continues in full force and effect, until an instrument revoking it, or a duly executed proxy bearing a later date, is filed with the secretary. _______________ /1/ Citations are inserted for reference only, and do not constitute a part of the Bylaws. 2 SECTION 10. CONDUCT OF MEETING. The chairman of the board shall preside as chairman at all meetings of the shareholders. The chairman shall conduct each such meeting in a businesslike and fair manner, but shall not be obligated to follow any technical, formal or parliamentary rules or principles of procedure. The chairman's rulings on procedural maters shall be conclusive and binding on all shareholders unless at the time of a ruling a request for a vote is made to the shareholders entitled to vote and which are represented in person or by proxy at the meeting, in which case the decision of a majority of such shareholders shall be conclusive and binding. Without limiting the generality of the foregoing, the chairman shall have all the powers usually vested in the chairman of a meeting of shareholders. Article III. BOARD OF DIRECTORS ------------------ SECTION 1. POWERS. Subject to limitations of the articles of incorporation and of these bylaws, and of any statutory provisions as to action to be authorized or approved by the shareholders, all corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be controlled by or under the direction of, the board of directors. [Corp. Code (S) 300] Without prejudice to such general powers, but subject to the same limitations, it is hereby expressly declared that the directors shall have the following powers, to-wit: FIRST. CORPORATE BUSINESS. To delegate the management of the day-to-day operation of the business and affairs of the corporation to persons, provided that the business and affairs of the corporation shall be managed and all corporate powers shall be exercised under the ultimate direction of the board of directors. SECOND. SELECT AND REMOVE OFFICERS, AGENTS AND EMPLOYEES. To select and remove all officers, agents and employees of the corporation, prescribe the powers and duties for them as may not be inconsistent with law, the articles of incorporation or these bylaws, fix their compensation and require from them security for faithful service. THIRD. APPOINT COMMITTEES. To appoint, by resolution adopted by a majority of the authorized number of directors, one or more committees, each consisting of two or more directors, and to fix, by resolution or resolutions, the quorum for the transaction of business of committees, other than the executive committee, which may be less than a majority, but not less than one-third of the authorized number of committee members. Any such committee, to the extent provided in the resolution of the board, shall have all the authority of the board, except with respect to: (a) The approval of any action for which shareholders' approval or approval of the outstanding shares is required by law. (b) The filing of vacancies on the board or in any committee. (c) The fixing of compensation of the directors for serving on the board or any committee. (d) The amendment or repeal of bylaws or the adoption of new bylaws. 3 (e) The amendment or repeal of any resolution of the board which by its express terms is not so amendable or repealable. (f) A dividend or other distribution to shareholders of the corporation, except at a rate, in a periodic amount or within a price range set forth in the articles or determined by the board. (g) The appointment of other committees of the board or the members thereof. FOURTH. INCUR INDEBTEDNESS. To borrow money and incur indebtedness for the purposes of the corporation and to cause to be executed and delivered therefor, in the corporate name, promissory notes, bonds, debentures, deeds of trust, pledges, hypothecations, or other evidences of debt and securities therefor. SECTION 2. NUMBER OF DIRECTORS. The number of directors of the corporation shall be fixed from time to time exclusively pursuant to a resolution adopted by a majority of the board, but shall consist of not less than nine (9) nor more than seventeen (17) directors. SECTION 3. TERM OF OFFICE AND ELECTION. At each annual meeting of shareholders, directors shall be elected to hold office until the next annual meeting. All directors shall hold office for the term for which they are elected and until their respective successors are elected and qualified, except that each director who attains retirement age, as determined by the board of directors, during the term for which elected shall hold office only until the next annual meeting of shareholders following attainment of retirement age at which time a person may be elected as director to complete the unexpired term of office, if any, for which the director attaining retirement age had been elected. SECTION 4. RESIGNATION. Any director may resign at any time by giving written notice to the board of directors or to the chairman of the board, the president or the secretary of the corporation. Any such resignation shall take effect at the date of receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 5. VACANCIES. If any vacancies occur in the board of directors by reason of death, resignation, removal or otherwise, or if the authorized number of directors shall be increased, the directors then in office shall continue to act, and such vacancies and newly created directorships may be filled by a majority of the directors then in office, although less than a quorum. A director elected to fill a vacancy or a newly created directorship shall hold office until his or her successor has been elected and qualified or until his or her earlier death, resignation or removal. The shareholders may elect a director at any time to fill any vacancy not filled by the directors. [Cal. Corp. Code (S) 305] SECTION 6. PLACE OF MEETINGS. Regular meetings of the board of directors shall be held at any place within or without the State of California which has been designated from time to time by resolution of the board of directors. In the absence of such designation, regular meetings, other than the annual meeting, shall be held at the principal executive office of the corporation, unless not less than ten (10) days prior to said meeting a written notice designating another location is mailed to each director at the address as shown upon the records of the corporation. Special meetings of the board may be held either at a place so designated or at the principal executive office of the corporation. 4 SECTION 7. REGULAR ANNUAL MEETINGS. Unless otherwise provided by resolution of the board of directors, immediately following each annual meeting of shareholders, the board of directors shall hold a regular annual meeting for the purpose of organization, election of officers, and the transaction of other business. The regular annual meeting shall be held at the principal executive office of the corporation or at such other place as designated by resolution of the board. Notice of such meeting is hereby dispensed with. SECTION 8. OTHER REGULAR MEETINGS. Other regular meetings of the board of directors shall be held without call, on such dates and at such times as may be fixed by the board. Call and notice of all regular meetings of the board of directors are hereby dispensed with. SECTION 9. SPECIAL MEETINGS. Special meetings of the board of directors for any purpose or purposes shall be called at any time by the chief executive officer or, if he or she is absent or unable or refuses to act, by any three (3) directors. Special meetings of the board shall be held upon six days' notice by mail or forty-eight (48) hours' notice delivered personally or by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, telegraph, facsimile, electronic mail or other electronic means. Any such notice shall be addressed or delivered to each director at such director's address as it is shown upon the records of the corporation or as may have been given to the corporation by the director for purposes of notice or, if such address is not shown on such records or is not readily ascertainable, at the place in which the meetings of the directors are regularly held. [Cal. Corp. Code (S) 307] Notice by mail shall be deemed to have been given at the time a written notice is deposited in the United States mail, postage prepaid. Any other written notice shall be deemed to have been given at the time it is personally delivered to the recipient or is delivered to a common carrier for transmission, or actually transmitted by the person given the notice by electronic means, to the recipient. Oral notice shall be deemed to have been given at the time it is communicated, in person or by telephone or wireless, to the recipient or to a person at the office of the recipient who the person given the notice has reason to believe will promptly communicate it to the recipient. [Cal. Corp. Code (S) 307] SECTION 10. ADJOURNMENT. A majority of the directors present, whether or not a quorum is present, may adjourn any directors meeting to another time and place. Notice of the time and place of holding an adjourned meeting need not be given to absent directors if the time and place be fixed at the meeting adjourned, except as provided in the next sentence. If the meeting is adjourned for more than twenty-four (24) hours, notice of any adjournment to another time or place shall be given prior to the time of the adjourned meeting to the directors who were not present at the time of the adjournment. SECTION 11. ENTRY OF NOTICE. Whenever any director has been absent from any special meeting of the board of directors, an entry in the minutes to the effect that notice has been duly given shall be prima facie evidence that due notice of such special meeting was given to such director as required by law and these bylaws. SECTION 12. WAIVER OF NOTICE. The transactions of any meeting of the board of directors, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice if a quorum be present and if, either before or after the meeting, each of the directors not present signs a written waiver of notice of or consent to holding such meeting or an approval of the 5 minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. SECTION 13. QUORUM. A majority of the total number of directors then in office constitutes a quorum of the board for the transaction of business, except to adjourn, as provided in Section 10 of this Article III. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as an act of the board, unless a greater number be required by law or by the articles of incorporation. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for such meeting. SECTION 14. ACTION BY TELEPHONIC COMMUNICATIONS. Members of the board may participate in a meeting through use of conference telephone or similar communications equipment, and participation in a meeting pursuant to this provision shall constitute presence in person at such meeting if all of the following apply: (a) Each member participating in the meeting can communicate with all of the other members concurrently. (b) Each member is provided the means of participating in all matters before the board, including the capacity to propose, or to interpose an objection, to a specific action to be taken by the corporation. (c) The corporation adopts and implements some means of verifying both of the following: (i) A person communicating by telephone, electronic video screen, or other communications equipment is a director entitled to participate in the board meeting; and (ii) All statements, questions, actions, or votes were made by that director and not by another person not permitted to participate as a director. SECTION 15. ACTION WITHOUT A MEETING. Any action required or permitted to be taken by the board may be taken without a meeting, if all members of the board shall individually or collectively consent in writing to that action. Such consent or consents shall have the same effect as a unanimous vote of the board and shall be filed with the minutes of the proceedings of the board. SECTION 16. FEES AND COMPENSATION. Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement for expenses, as may be fixed or determined by the board. Directors who are salaried officers of the corporation shall not receive additional fees or compensation for their services as directors. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation therefor. 6 Article IV. OFFICERS -------- SECTION 1. NUMBER AND QUALIFICATIONS. The officers of the corporation shall be a chairman of the board, a president, a secretary, a treasurer, and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article IV. One person may hold one or more offices and perform the duties thereof. The president or chairman of the board shall be designated by the board as the chief executive officer of the corporation, and one officer shall be designated by the board as the chief financial officer of the corporation. [Cal. Corp. Code (S) 312(a)] SECTION 2. ELECTION, TERM OF OFFICE. Each officer, except such officers as may be appointed in accordance with the provisions of Section 3 of this Article IV, shall be chosen annually by and serve at the pleasure of the board of directors and shall hold their respective office until their resignation, removal or other disqualification from service or until their successor shall have been duly chosen and qualified. [Cal. Corp. Code (S) 312(b)] SECTION 3. OTHER OFFICERS, ETC. The board of directors may elect, and may empower the chief executive officer to appoint, such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in these bylaws or as the board may from time to time determine. [Cal. Corp. Code (S) 312(b)] SECTION 4. REMOVAL. Any officer chosen under Section 2 of this Article IV may be removed, either with or without cause, by a majority vote of the directors present at any regular meeting of the board of directors. Any officer, except an officer chosen by the board of directors pursuant to Section 2 of this Article IV, may also be removed at any time, with or without cause, by the chief executive officer, if such powers of removal have been conferred by the board of directors. SECTION 5. RESIGNATION. Any officer may resign at any time by giving written notice to the board of directors or to the chairman of the board or to the secretary of the corporation. Any such resignation shall take effect at the date of receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 6. VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these bylaws for regular election or appointment to such office. SECTION 7. CHAIRMAN OF THE BOARD. The chairman of the board shall, if present, preside at all meetings of the board and exercise and perform such other powers and duties as may be from time to time assigned by the board. SECTION 8. PRESIDENT. The president shall have such powers and duties as may be prescribed from time to time by the board of directors, the chairman of the board, or elsewhere in these bylaws. In the absence or disability of the chairman of the board, he or she shall exercise the powers and perform the duties of the chairman of the board. 7 SECTION 9. VICE PRESIDENTS. Vice presidents shall have such powers and perform such duties as may be prescribed from time to time by the chief executive officer, the board of directors, or elsewhere in these bylaws. SECTION 10. SECRETARY. The secretary shall keep, or cause to be kept, a book of minutes at the principal executive office, or such other place as the board of directors may order, of all meetings of the directors, committees and shareholders with the time and place of holding, whether regular or special, and if special, how authorized, the notice thereof given, the names of those present at directors' and committee meetings, the number of shareholders present or represented at shareholders' meetings and the proceedings thereof. The secretary shall give, or cause to be given, notice of all meetings of the shareholders and of the board and any committees thereof required by these bylaws or by law to be given, shall keep the seal of the corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the board. SECTION 11. TREASURER. The treasurer shall have custody of all the funds, securities and other valuables of the corporation which may have or shall come into his or her hands. He or she shall have such powers and perform such duties as may be prescribed by the chief executive officer, the board of directors or elsewhere in these bylaws. Article V. INSURANCE POLICIES, CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC. --------------------------- SECTION 1. INSURANCE POLICIES, HOW SIGNED. All policies issued by this corporation shall be signed by the chairman or president and countersigned by the secretary, both either personally or by facsimile. SECTION 2. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, except as in these bylaws otherwise provided, issued in the name of or payable to the corporation shall be signed or endorsed by such person or persons and in such manner as from time to time shall be determined by resolution of the board of directors or by resolution of a committee thereof, if the board of directors delegate such authority to it. SECTION 3. CONTRACTS, ETC., HOW EXECUTED. The board of directors, or a committee thereof if such authority is delegated to it by the board of directors, except as by law or in these bylaws otherwise provided, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to special instances; and unless so authorized, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit to render it liable for any purpose or to any amount. SECTION 4. BANK ACCOUNTS. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation, and in its name, in such banks, trust companies, or other depositories as the board of directors may select or as may be selected by any committee, officer or officers, agent or agents of the corporation to whom such powers may from time to time be delegated by the 8 board of directors; and for the purpose of such deposits the chairman of the board, the president, any vice president, the secretary, the treasurer, or any other officer or agent or employee of the corporation to whom such power may be delegated by the board of directors or by a committee thereof, if such authority be delegated to it by the board of directors, may endorse, assign and deliver checks, drafts and other orders for the payments of monies which are payable to the order of the corporation. Article VI. INVESTMENTS ----------- SECTION 1. INVESTMENTS IN THE CORPORATION'S NAME. All investments of the corporation shall be made in the name of Pacific Life Insurance Company or its nominee. Article VII. CERTIFICATES AND TRANSFER OF SHARES ----------------------------------- SECTION 1. CERTIFICATES FOR SHARES. Certificates for shares shall be of such form and device as the board of directors may designate and shall state the name of the record holder of the shares represented thereby; its number; date of issuance; the number of shares for which it is issued; the par value; a statement of the rights, privileges, preferences and restrictions, if any; a statement as to redemption or conversion, if any; a statement of liens or restrictions upon transfer or voting, if any; if the shares be assessable, or, if assessments are collectible by personal action, a plain statement of such facts. Every certificate for shares must be signed in the name of the corporation by the chairman, and the secretary or an assistant secretary or must be authenticated by facsimiles of the signatures of the chairman and secretary or by a facsimile of the signature of its chairman and the written signature of its secretary or an assistant secretary. SECTION 2. TRANSFER ON THE BOOKS. Upon surrender to the secretary or transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. SECTION 3. LOST OR DESTROYED CERTIFICATES. Any person claiming a certificate of stock to be lost or destroyed shall make an affidavit or affirmation of that fact and advertise the same in such a manner as the board of directors may require, and shall, if the directors so require, give the corporation a bond of indemnity, in form, in such amount and with one or more sureties satisfactory to the board, whereupon a new certificate may be issued of the same tenor and for the same number of shares as the one alleged to be lost or destroyed. SECTION 4. TRANSFER AGENTS AND REGISTRARS. The board of directors may appoint one or more transfer agents or transfer clerks, and one or more registrars, which shall be an incorporated bank or trust company -- either domestic or foreign, who shall be appointed at such times and places as the requirements of the corporation may necessitate and the board of directors may designate. 9 SECTION 5. CLOSING STOCK TRANSFER BOOKS. The board of directors may close the transfer books in their discretion for a period not exceeding thirty (30) days preceding any meeting, annual or special, of the shareholders, or the day appointed for the payment of a dividend. Article VIII. CORPORATE RECORDS, REPRESENTATION OF SHARES OF OTHER CORPORATIONS ---------------------------- SECTION 1. INSPECTION OF BYLAWS. The corporation shall keep in its principal executive office for the transaction of business the original or a copy of these bylaws as amended or otherwise altered to date, certified by the secretary, which shall be open to inspection by the shareholders at all reasonable times during office hours. SECTION 2. INSPECTION OF CORPORATE RECORDS. (a) The accounting books and records and minutes of proceedings of the shareholders and the board and committees of the board of the corporation shall be open to inspection upon the written demand on the corporation of any shareholder at any reasonable time during usual business hours, for a purpose reasonably related to such shareholder's interests. The right of inspection created by this subsection shall extend to the records of each subsidiary of the corporation keeping any such records in California or having its principal executive office in California. [SEE Cal. Corp. Code (S) 1601] (b) Such inspection may be made in person or by agent or attorney, and the right of inspection includes the right to copy and make extracts. [SEE Cal. Corp. Code (S) 1601] (c) Demand of inspection shall be made in writing upon the chief executive officer, secretary or assistant secretary of the corporation. [Cal. Corp. Code (S) 1601] SECTION 3. ANNUAL REPORTS. The making of annual reports to shareholders is hereby waived. SECTION 4. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The chief executive officer or any other officer is authorized to vote, represent and exercise on behalf of the corporation all rights incident to any and all shares or other evidence of ownership of any other business entities such as corporations, business trusts and partnerships standing in the name of the corporation. The authority herein granted to said officers to vote or represent on behalf of the corporation any and all such evidences of ownership held by the corporation may be exercised either by such officers in person or by any person authorized so to do by proxy or power of attorney duly executed by said officers. Article IX. AMENDMENTS ---------- SECTION 1. AMENDMENT OF BYLAWS. A bylaw or bylaws may be adopted, amended, or repealed by the vote of shareholders entitled to exercise a majority of the voting power of the corporation or by the written assent of such shareholders. Subject to the rights of the shareholders as provided in this Section 1 of this Article IX, a bylaw or bylaws, other than a bylaw or amendment thereof changing the authorized 10 number of directors, may be adopted, amended, or repealed by the board of directors. [Cal. Corp. Code (S) 211] Article X. INDEMNIFICATION --------------- SECTION 1. LIABILITY OF DIRECTORS. The liability of the directors of the corporation for monetary damages shall be eliminated to the fullest extent permissible under California law. [Cal. Corp. Code (S)(S) 204(a)(10), 309] SECTION 2. INDEMNIFICATION OF AGENTS. The corporation is authorized to provide indemnification of agents (as defined in Section 317 of the California Corporations Code) through agreements with agents, vote of shareholders or disinterested directors, or otherwise, to the fullest extent possible under California Law, provided that any excess indemnification permitted by Section 317, involving a breach of duty to the corporation and its shareholders shall be subject to the limits of such excess indemnification set forth in Section 204 of the California Corporations Code and shall be paid only with such funds as may be distributed as dividends to shareholders under applicable law. [Cal. Corp. Code (S)(S) 204(a)(11), 317] 11 PACIFIC LIFE INSURANCE COMPANY BYLAWS As Amended May 26, 1999 TABLE OF CONTENTS Page Article I. OFFICES............................... 1 SECTION 1. Principal Executive Office............ 1 SECTION 2. Other Offices......................... 1 Article II. MEETINGS OF SHAREHOLDERS.............. 1 SECTION 1. Place of Meetings..................... 1 SECTION 2. Annual Meetings....................... 1 SECTION 3. Notice of Meetings.................... 1 SECTION 4. Special Meetings...................... 2 SECTION 5. Adjourned Meetings and Notice Thereof. 2 SECTION 6. Consent to Shareholders' Meetings..... 2 SECTION 7. Voting Rights; Cumulative Voting...... 2 SECTION 8. Quorum................................ 2 SECTION 9. Proxies............................... 2 SECTION 10. Conduct of Meeting.................... 3 Article III. BOARD OF DIRECTORS.................... 3 SECTION 1. Powers................................ 3 SECTION 2. Number of Directors................... 4 SECTION 3. Term of Office and Election........... 4 SECTION 4. Resignation........................... 4 SECTION 5. Vacancies............................. 4 SECTION 6. Place of Meetings..................... 4 SECTION 7. Regular Annual Meetings............... 5 SECTION 8. Other Regular Meetings................ 5 SECTION 9. Special Meetings...................... 5 SECTION 10. Adjournment........................... 5 SECTION 11. Entry of Notice....................... 5 SECTION 12. Waiver of Notice...................... 6 SECTION 13. Quorum................................ 6 SECTION 14. Action by Telephonic Communications... 6 SECTION 15. Action Without a Meeting.............. 6 SECTION 16. Fees and Compensation................. 6 Article IV. OFFICERS.............................. 7 SECTION 1. Number and Qualifications............. 7 SECTION 2. Election, Term of Office.............. 7 SECTION 3. Other Officers, etc................... 7 SECTION 4. Removal............................... 7 SECTION 5. Resignation........................... 7 SECTION 6. Vacancies............................. 7 SECTION 7. Chairman of the Board................. 7 SECTION 8. President............................. 8 SECTION 9. Vice Presidents....................... 8 i SECTION 10. Secretary............................. 8 SECTION 11. Treasurer............................. 8 Article V. INSURANCE POLICIES, CONTRACTS, CHECKS, DRAFTS,BANK ACCOUNTS, ETC......... 8 SECTION 1. Insurance Policies, How Signed........ 8 SECTION 2. Checks, Drafts, etc................... 8 SECTION 3. Contracts, etc., How Executed......... 8 SECTION 4. Bank Accounts......................... 9 Article VI. INVESTMENTS........................... 9 SECTION 1. Investments in the Corporation's Name. 9 Article VII. CERTIFICATES AND TRANSFER OF SHARES... 9 SECTION 1. Certificates for Shares............... 9 SECTION 2. Transfer on the Books................. 9 SECTION 3. Lost or Destroyed Certificates........ 9 SECTION 4. Transfer Agents and Registrars........ 10 SECTION 5. Closing Stock Transfer Books.......... 10 Article VIII. CORPORATE RECORDS, REPRESENTATION OF SHARES OF OTHER CORPORATIONS...... 10 SECTION 1. Inspection of Bylaws.................. 10 SECTION 2. Inspection of Corporate Records....... 10 SECTION 3. Annual Reports........................ 10 SECTION 4. Representation of Shares of Other Corporations................ 10 Article IX. AMENDMENTS............................ 11 SECTION 1. Amendment of Bylaws................... 11 Article X. INDEMNIFICATION....................... 11 SECTION 1. Liability of Directors................ 11 SECTION 2. Indemnification of Agents............. 11 ii BYLAWS FOR THE REGULATION, EXCEPT AS OTHERWISE PROVIDED BY STATUTE OR ITS ARTICLES OF INCORPORATION, OF PACIFIC LIFE INSURANCE COMPANY Article I. OFFICES SECTION 1. PRINCIPAL EXECUTIVE OFFICE. The principal executive office for the transaction of business of the corporation is hereby fixed and located at 700 Newport Center Drive, City of Newport Beach, County of Orange, State of California. SECTION 2. OTHER OFFICES. Branch or subordinate offices may at any time be established by the board of directors at any place or places where the corporation is qualified to do business. Article II. MEETINGS OF SHAREHOLDERS SECTION 1. PLACE OF MEETINGS. All meetings of shareholders shall be held at either the principal executive office of the corporation or any other place within the State of California designated by the board of directors pursuant to authority hereinafter granted to said board. SECTION 2. ANNUAL MEETINGS. The annual meetings of shareholders shall be held at such date and time as designated by the board of directors. SECTION 3. NOTICE OF MEETINGS. Notice of all meetings of shareholders, whether annual or special, shall be given in writing to the shareholders entitled to vote. The notice shall be given by the secretary, assistant secretary, or other persons charged with that duty. If there is no such officer, or if he or she neglects or refuses this duty, notice may be given by any director. Notice of any meeting of shareholders shall be given to each shareholder entitled to notice not less than ten (10) nor more than sixty (60) days before a meeting. Notice of any meeting of shareholders shall specify the place, the day, and the hour of the meeting and the general nature of the business to be transacted. A notice may be given to a shareholder either personally, or by mail, or other means of written communication, charges prepaid, addressed to the shareholder at his or her address appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice. 1 SECTION 4. SPECIAL MEETINGS. Special meetings of shareholders, for any purpose or purposes whatsoever, may be called at any time by the chief executive officer or by the board of directors or by shareholders holding ten percent (10%) or more of the voting power of the corporation. [Cal. Corp. Code Sections 600, 601](1) SECTION 5. ADJOURNED MEETINGS AND NOTICE THEREOF. Any shareholders' meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of a majority of the shareholders who are either present in person or represented by proxy thereat, but in the absence of a quorum no other business may be transacted at any such meeting. When any shareholders' meeting, either annual or special, is adjourned for forty-five (45) days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid, it shall not be necessary to give any notice of the time and place of the adjourned meeting or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which such adjournment is taken. SECTION 6. CONSENT TO SHAREHOLDERS' MEETINGS. The transactions of any meeting of shareholders, however called and noticed, shall be valid as though had at a meeting duly held after regular call and notice if a quorum be present either in person or by proxy, and if, either before or after the meeting, each of the shareholders entitled to vote, not present in person or by proxy, sign a written waiver of notice, or a consent to the holding of such a meeting, or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporation records or made a part of the minutes of the meeting. Any action which may be taken at a meeting of the shareholders, may be taken without a meeting if authorized by a writing signed by all of the holders of shares who would be entitled to vote at a meeting for such purpose, and filed with the secretary of the corporation. SECTION 7. VOTING RIGHTS; CUMULATIVE VOTING. Only persons in whose names shares entitled to vote stand on the stock records of the corporation on the day of any meeting of shareholders, unless some other day be fixed by the board of directors for the determination of shareholders of record, then on such other day, shall be entitled to vote at such meeting. Every shareholder entitled to vote shall be entitled to one vote for each of said shares and in any election of directors he or she shall have the right to cumulate his or her votes as provided in Section 708, of the Corporations Code of California. SECTION 8. QUORUM. The presence in person or by proxy of the holders of a majority of the shares entitled to vote at any meeting shall constitute a quorum for the transaction of business. SECTION 9. PROXIES. Every shareholder entitled to vote or execute consents shall have the right to do so either in person or by an agent or agents authorized by a written proxy executed by such shareholder or his or her duly authorized agent and filed with the secretary of the corporation; provided that no such proxy shall be valid after the expiration of eleven (11) months from the date of its execution unless the shareholder executing it specifies therein the length of time for which such proxy is to continue in force. Any proxy duly executed is not revoked, and continues in full force and effect, until an instrument revoking it, or a duly executed proxy bearing a later date, is filed with the secretary. - --------------- (1) Citations are inserted for reference only, and do not constitute a part of the Bylaws. 2 SECTION 10. CONDUCT OF MEETING. The chairman of the board shall preside as chairman at all meetings of the shareholders. The chairman shall conduct each such meeting in a businesslike and fair manner, but shall not be obligated to follow any technical, formal or parliamentary rules or principles of procedure. The chairman's rulings on procedural maters shall be conclusive and binding on all shareholders unless at the time of a ruling a request for a vote is made to the shareholders entitled to vote and which are represented in person or by proxy at the meeting, in which case the decision of a majority of such shareholders shall be conclusive and binding. Without limiting the generality of the foregoing, the chairman shall have all the powers usually vested in the chairman of a meeting of shareholders. Article III. BOARD OF DIRECTORS SECTION 1. POWERS. Subject to limitations of the articles of incorporation and of these bylaws, and of any statutory provisions as to action to be authorized or approved by the shareholders, all corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be controlled by or under the direction of, the board of directors. [Corp. Code Section 300] Without prejudice to such general powers, but subject to the same limitations, it is hereby expressly declared that the directors shall have the following powers, to-wit: FIRST. CORPORATE BUSINESS. To delegate the management of the day-to-day operation of the business and affairs of the corporation to persons, provided that the business and affairs of the corporation shall be managed and all corporate powers shall be exercised under the ultimate direction of the board of directors. SECOND. SELECT AND REMOVE OFFICERS, AGENTS AND EMPLOYEES. To select and remove all officers, agents and employees of the corporation, prescribe the powers and duties for them as may not be inconsistent with law, the articles of incorporation or these bylaws, fix their compensation and require from them security for faithful service. THIRD. APPOINT COMMITTEES. To appoint, by resolution adopted by a majority of the authorized number of directors, one or more committees, each consisting of two or more directors, and to fix, by resolution or resolutions, the quorum for the transaction of business of committees, other than the executive committee, which may be less than a majority, but not less than one-third of the authorized number of committee members. Any such committee, to the extent provided in the resolution of the board, shall have all the authority of the board, except with respect to: (a) The approval of any action for which shareholders' approval or approval of the outstanding shares is required by law. (b) The filing of vacancies on the board or in any committee. (c) The fixing of compensation of the directors for serving on the board or any committee. (d) The amendment or repeal of bylaws or the adoption of new bylaws. 3 (e) The amendment or repeal of any resolution of the board which by its express terms is not so amendable or repealable. (f) A dividend or other distribution to shareholders of the corporation, except at a rate, in a periodic amount or within a price range set forth in the articles or determined by the board. (g) The appointment of other committees of the board or the members thereof. FOURTH. INCUR INDEBTEDNESS. To borrow money and incur indebtedness for the purposes of the corporation and to cause to be executed and delivered therefor, in the corporate name, promissory notes, bonds, debentures, deeds of trust, pledges, hypothecations, or other evidences of debt and securities therefor. SECTION 2. NUMBER OF DIRECTORS. The number of directors of the corporation shall be fixed from time to time exclusively pursuant to a resolution adopted by a majority of the board, but shall consist of not less than five (5) nor more than nine (9) directors. (Amended 5/26/99) SECTION 3. TERM OF OFFICE AND ELECTION. At each annual meeting of shareholders, directors shall be elected to hold office until the next annual meeting. All directors shall hold office for the term for which they are elected and until their respective successors are elected and qualified, except that each director who attains retirement age, as determined by the board of directors, during the term for which elected shall hold office only until the next annual meeting of shareholders following attainment of retirement age at which time a person may be elected as director to complete the unexpired term of office, if any, for which the director attaining retirement age had been elected. SECTION 4. RESIGNATION. Any director may resign at any time by giving written notice to the board of directors or to the chairman of the board, the president or the secretary of the corporation. Any such resignation shall take effect at the date of receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 5. VACANCIES. If any vacancies occur in the board of directors by reason of death, resignation, removal or otherwise, or if the authorized number of directors shall be increased, the directors then in office shall continue to act, and such vacancies and newly created directorships may be filled by a majority of the directors then in office, although less than a quorum. A director elected to fill a vacancy or a newly created directorship shall hold office until his or her successor has been elected and qualified or until his or her earlier death, resignation or removal. The shareholders may elect a director at any time to fill any vacancy not filled by the directors. [Cal. Corp. Code Section 305] SECTION 6. PLACE OF MEETINGS. Regular meetings of the board of directors shall be held at any place within or without the State of California which has been designated from time to time by resolution of the board of directors. In the absence of such designation, regular meetings, other than the annual meeting, shall be held at the principal executive office of the corporation, unless not less than ten (10) days prior to said meeting a written notice designating another location is mailed to each director at the address as shown upon the records of the corporation. Special meetings of the board may be held either at a place so designated or at the principal executive office of the corporation. 4 SECTION 7. REGULAR ANNUAL MEETINGS. Unless otherwise provided by resolution of the board of directors, immediately following each annual meeting of shareholders, the board of directors shall hold a regular annual meeting for the purpose of organization, election of officers, and the transaction of other business. The regular annual meeting shall be held at the principal executive office of the corporation or at such other place as designated by resolution of the board. Notice of such meeting is hereby dispensed with. SECTION 8. OTHER REGULAR MEETINGS. Other regular meetings of the board of directors shall be held without call, on such dates and at such times as may be fixed by the board. Call and notice of all regular meetings of the board of directors are hereby dispensed with. SECTION 9. SPECIAL MEETINGS. Special meetings of the board of directors for any purpose or purposes shall be called at any time by the chief executive officer or, if he or she is absent or unable or refuses to act, by any three (3) directors. Special meetings of the board shall be held upon six days' notice by mail or forty-eight (48) hours' notice delivered personally or by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, telegraph, facsimile, electronic mail or other electronic means. Any such notice shall be addressed or delivered to each director at such director's address as it is shown upon the records of the corporation or as may have been given to the corporation by the director for purposes of notice or, if such address is not shown on such records or is not readily ascertainable, at the place in which the meetings of the directors are regularly held. [Cal. Corp. Code Section 307] Notice by mail shall be deemed to have been given at the time a written notice is deposited in the United States mail, postage prepaid. Any other written notice shall be deemed to have been given at the time it is personally delivered to the recipient or is delivered to a common carrier for transmission, or actually transmitted by the person given the notice by electronic means, to the recipient. Oral notice shall be deemed to have been given at the time it is communicated, in person or by telephone or wireless, to the recipient or to a person at the office of the recipient who the person given the notice has reason to believe will promptly communicate it to the recipient. [Cal. Corp. Code Section 307] SECTION 10. ADJOURNMENT. A majority of the directors present, whether or not a quorum is present, may adjourn any directors meeting to another time and place. Notice of the time and place of holding an adjourned meeting need not be given to absent directors if the time and place be fixed at the meeting adjourned, except as provided in the next sentence. If the meeting is adjourned for more than twenty-four (24) hours, notice of any adjournment to another time or place shall be given prior to the time of the adjourned meeting to the directors who were not present at the time of the adjournment. SECTION 11. ENTRY OF NOTICE. Whenever any director has been absent from any special meeting of the board of directors, an entry in the minutes to the effect that notice has been duly given shall be prima facie evidence that due notice of such special meeting was given to such director as required by law and these bylaws. 5 SECTION 12. WAIVER OF NOTICE. The transactions of any meeting of the board of directors, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice if a quorum be present and if, either before or after the meeting, each of the directors not present signs a written waiver of notice of or consent to holding such meeting or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. SECTION 13. QUORUM. A majority of the total number of directors then in office constitutes a quorum of the board for the transaction of business, except to adjourn, as provided in Section 10 of this Article III. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as an act of the board, unless a greater number be required by law or by the articles of incorporation. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for such meeting. SECTION 14. ACTION BY TELEPHONIC COMMUNICATIONS. Members of the board may participate in a meeting through use of conference telephone or similar communications equipment, and participation in a meeting pursuant to this provision shall constitute presence in person at such meeting if all of the following apply: (a) Each member participating in the meeting can communicate with all of the other members concurrently. (b) Each member is provided the means of participating in all matters before the board, including the capacity to propose, or to interpose an objection, to a specific action to be taken by the corporation. (c) The corporation adopts and implements some means of verifying both of the following: (i) A person communicating by telephone, electronic video screen, or other communications equipment is a director entitled to participate in the board meeting; and (ii) All statements, questions, actions, or votes were made by that director and not by another person not permitted to participate as a director. SECTION 15. ACTION WITHOUT A MEETING. Any action required or permitted to be taken by the board may be taken without a meeting, if all members of the board shall individually or collectively consent in writing to that action. Such consent or consents shall have the same effect as a unanimous vote of the board and shall be filed with the minutes of the proceedings of the board. SECTION 16. FEES AND COMPENSATION. Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement for expenses, as may be fixed or determined by the board. Directors who are salaried officers of the corporation shall not receive additional fees or compensation for their services as directors. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation therefor. 6 Article IV. OFFICERS SECTION 1. NUMBER AND QUALIFICATIONS. The officers of the corporation shall be a chairman of the board, a president, a secretary, a treasurer, and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article IV. One person may hold one or more offices and perform the duties thereof. The president or chairman of the board shall be designated by the board as the chief executive officer of the corporation, and one officer shall be designated by the board as the chief financial officer of the corporation. [Cal. Corp. Code Section 312(a)] SECTION 2. ELECTION, TERM OF OFFICE. Each officer, except such officers as may be appointed in accordance with the provisions of Section 3 of this Article IV, shall be chosen annually by and serve at the pleasure of the board of directors and shall hold their respective office until their resignation, removal or other disqualification from service or until their successor shall have been duly chosen and qualified. [Cal. Corp. Code Section 312(b)] SECTION 3. OTHER OFFICERS, ETC. The board of directors may elect, and may empower the chief executive officer to appoint, such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in these bylaws or as the board may from time to time determine. [Cal. Corp. Code Section 312(b)] SECTION 4. REMOVAL. Any officer chosen under Section 2 of this Article IV may be removed, either with or without cause, by a majority vote of the directors present at any regular meeting of the board of directors. Any officer, except an officer chosen by the board of directors pursuant to Section 2 of this Article IV, may also be removed at any time, with or without cause, by the chief executive officer, if such powers of removal have been conferred by the board of directors. SECTION 5. RESIGNATION. Any officer may resign at any time by giving written notice to the board of directors or to the chairman of the board or to the secretary of the corporation. Any such resignation shall take effect at the date of receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 6. VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these bylaws for regular election or appointment to such office. 7 SECTION 7. CHAIRMAN OF THE BOARD. The chairman of the board shall, if present, preside at all meetings of the board and exercise and perform such other powers and duties as may be from time to time assigned by the board. SECTION 8. PRESIDENT. The president shall have such powers and duties as may be prescribed from time to time by the board of directors, the chairman of the board, or elsewhere in these bylaws. In the absence or disability of the chairman of the board, he or she shall exercise the powers and perform the duties of the chairman of the board. SECTION 9. VICE PRESIDENTS. Vice presidents shall have such powers and perform such duties as may be prescribed from time to time by the chief executive officer, the board of directors, or elsewhere in these bylaws. SECTION 10. SECRETARY. The secretary shall keep, or cause to be kept, a book of minutes at the principal executive office, or such other place as the board of directors may order, of all meetings of the directors, committees and shareholders with the time and place of holding, whether regular or special, and if special, how authorized, the notice thereof given, the names of those present at directors' and committee meetings, the number of shareholders present or represented at shareholders' meetings and the proceedings thereof. The secretary shall give, or cause to be given, notice of all meetings of the shareholders and of the board and any committees thereof required by these bylaws or by law to be given, shall keep the seal of the corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the board. SECTION 11. TREASURER. The treasurer shall have custody of all the funds, securities and other valuables of the corporation which may have or shall come into his or her hands. He or she shall have such powers and perform such duties as may be prescribed by the chief executive officer, the board of directors or elsewhere in these bylaws. Article V. INSURANCE POLICIES, CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC. SECTION 1. INSURANCE POLICIES, HOW SIGNED. All policies issued by this corporation shall be signed by the chairman or president and countersigned by the secretary, both either personally or by facsimile. SECTION 2. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, except as in these bylaws otherwise provided, issued in the name of or payable to the corporation shall be signed or endorsed by such person or persons and in such manner as from time to time shall be determined by resolution of the board of directors or by resolution of a committee thereof, if the board of directors delegate such authority to it. SECTION 3. CONTRACTS, ETC., HOW EXECUTED. The board of directors, or a committee thereof if such authority is delegated to it by the board of directors, except as by law or in these bylaws otherwise provided, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to special instances; and unless so authorized, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit to render it liable for any purpose or to any amount. 8 SECTION 4. BANK ACCOUNTS. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation, and in its name, in such banks, trust companies, or other depositories as the board of directors may select or as may be selected by any committee, officer or officers, agent or agents of the corporation to whom such powers may from time to time be delegated by the board of directors; and for the purpose of such deposits the chairman of the board, the president, any vice president, the secretary, the treasurer, or any other officer or agent or employee of the corporation to whom such power may be delegated by the board of directors or by a committee thereof, if such authority be delegated to it by the board of directors, may endorse, assign and deliver checks, drafts and other orders for the payments of monies which are payable to the order of the corporation. Article VI. INVESTMENTS SECTION 1. INVESTMENTS IN THE CORPORATION'S NAME. All investments of the corporation shall be made in the name of Pacific Life Insurance Company or its nominee. Article VII. CERTIFICATES AND TRANSFER OF SHARES SECTION 1. CERTIFICATES FOR SHARES. Certificates for shares shall be of such form and device as the board of directors may designate and shall state the name of the record holder of the shares represented thereby; its number; date of issuance; the number of shares for which it is issued; the par value; a statement of the rights, privileges, preferences and restrictions, if any; a statement as to redemption or conversion, if any; a statement of liens or restrictions upon transfer or voting, if any; if the shares be assessable, or, if assessments are collectible by personal action, a plain statement of such facts. Every certificate for shares must be signed in the name of the corporation by the chairman, and the secretary or an assistant secretary or must be authenticated by facsimiles of the signatures of the chairman and secretary or by a facsimile of the signature of its chairman and the written signature of its secretary or an assistant secretary. SECTION 2. TRANSFER ON THE BOOKS. Upon surrender to the secretary or transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. SECTION 3. LOST OR DESTROYED CERTIFICATES. Any person claiming a certificate of stock to be lost or destroyed shall make an affidavit or affirmation of that fact and advertise the same in such a manner as the board of directors may require, and shall, if the directors so require, give the corporation a bond of indemnity, in form, in such amount and with one or more sureties satisfactory to the board, whereupon a new certificate may be issued of the same tenor and for the same number of shares as the one alleged to be lost or destroyed. 9 SECTION 4. TRANSFER AGENTS AND REGISTRARS. The board of directors may appoint one or more transfer agents or transfer clerks, and one or more registrars, which shall be an incorporated bank or trust company -- either domestic or foreign, who shall be appointed at such times and places as the requirements of the corporation may necessitate and the board of directors may designate. SECTION 5. CLOSING STOCK TRANSFER BOOKS. The board of directors may close the transfer books in their discretion for a period not exceeding thirty (30) days preceding any meeting, annual or special, of the shareholders, or the day appointed for the payment of a dividend. Article VIII. CORPORATE RECORDS, REPRESENTATION OF SHARES OF OTHER CORPORATIONS SECTION 1. INSPECTION OF BYLAWS. The corporation shall keep in its principal executive office for the transaction of business the original or a copy of these bylaws as amended or otherwise altered to date, certified by the secretary, which shall be open to inspection by the shareholders at all reasonable times during office hours. SECTION 2. INSPECTION OF CORPORATE RECORDS. (a) The accounting books and records and minutes of proceedings of the shareholders and the board and committees of the board of the corporation shall be open to inspection upon the written demand on the corporation of any shareholder at any reasonable time during usual business hours, for a purpose reasonably related to such shareholder's interests. The right of inspection created by this subsection shall extend to the records of each subsidiary of the corporation keeping any such records in California or having its principal executive office in California. [SEE Cal. Corp. Code Section 1601] (b) Such inspection may be made in person or by agent or attorney, and the right of inspection includes the right to copy and make extracts. [SEE Cal. Corp. Code Section 1601] (c) Demand of inspection shall be made in writing upon the chief executive officer, secretary or assistant secretary of the corporation. [Cal. Corp. Code Section 1601] SECTION 3. ANNUAL REPORTS. The making of annual reports to shareholders is hereby waived. SECTION 4. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The chief executive officer or any other officer is authorized to vote, represent and exercise on behalf of the corporation all rights incident to any and all shares or other evidence of ownership of any other business entities such as corporations, business trusts and partnerships standing in the name of the corporation. The authority herein granted to said officers to vote or represent on behalf of the corporation any and all such evidences of ownership held by the corporation may be exercised either by such officers in person or by any person authorized so to do by proxy or power of attorney duly executed by said officers. 10 Article IX. AMENDMENTS SECTION 1. AMENDMENT OF BYLAWS. A bylaw or bylaws may be adopted, amended, or repealed by the vote of shareholders entitled to exercise a majority of the voting power of the corporation or by the written assent of such shareholders. Subject to the rights of the shareholders as provided in this Section 1 of this Article IX, a bylaw or bylaws, other than a bylaw or amendment thereof changing the authorized number of directors, may be adopted, amended, or repealed by the board of directors. [Cal. Corp. Code Section 211] Article X. INDEMNIFICATION SECTION 1. LIABILITY OF DIRECTORS. The liability of the directors of the corporation for monetary damages shall be eliminated to the fullest extent permissible under California law. [Cal. Corp. Code Sections 204(a)(10), 309] SECTION 2. INDEMNIFICATION OF AGENTS. The corporation is authorized to provide indemnification of agents (as defined in Section 317 of the California Corporations Code) through agreements with agents, vote of shareholders or disinterested directors, or otherwise, to the fullest extent possible under California Law, provided that any excess indemnification permitted by Section 317, involving a breach of duty to the corporation and its shareholders shall be subject to the limits of such excess indemnification set forth in Section 204 of the California Corporations Code and shall be paid only with such funds as may be distributed as dividends to shareholders under applicable law. [Cal. Corp. Code Sections 204(a)(11), 317] 11 EX-99.8 21 EXHIBIT 99.8 EXHIBIT 99.8 Fund Participation Agreement FUND PARTICIPATION AGREEMENT This AGREEMENT is made this 6th day of November, 1992, by and between Pacific Mutual Life Insurance Company (the "Company"), a life insurance company domiciled in California, on its behalf and on behalf of the segregated asset accounts of the Company listed on Exhibit A to this Agreement (the "Separate Accounts"); Pacific Select Fund (the "Fund"), a Massachusetts business trust; and Pacific Equities Network ("Distributor"), a California corporation. WITNESSETH WHEREAS, the Fund is registered with the Securities and Exchange Commission ("SEC") as an open-end management investment company under the Investment Company Act of 1940, as amended ("1940 Act") and the Fund is authorized to issue separate classes of shares of beneficial interests ("shares"), each representing an interest in a separate portfolio of assets known as a "series" and each series has its own investment objective, policies, and limitations; and WHEREAS, the Fund is available to offer shares of one or more of its series to separate accounts of insurance companies that fund variable life insurance policies and variable annuity contracts ("Variable Contracts") and to serve as an investment medium for Variable Contracts offered by insurance companies that have entered into participation agreements substantially similar to this agreement ("Participating Insurance Companies"), and the Fund is currently comprised of nine separate series, and other series may be established in the future; and WHEREAS, the Fund has obtained an order from the SEC granting Participating Insurance Companies, separate accounts funding Variable Contracts of Participating Insurance Companies, and the Fund exemptions from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the 1940 Act and paragraph (b)(15) of Rule 6e-3(T) under the 1940 Act, to the extent necessary to permit such persons to rely on the exemptive relief provided under paragraph (b)(15) of Rule 6e-3(T), even though shares of the Fund may be offered to and held by separate accounts funding variable annuity contracts or scheduled or flexible premium variable life insurance contracts of both affiliated and unaffiliated life insurance companies (the "Shared Funding Exemptive Order"); and WHEREAS, the Distributor is registered as a broker-dealer with the SEC under the Securities Exchange Act of 1934, as amended ("1934 Act"), and is a member in good standing of the National Association of Securities Dealers, Inc. ("NASD"); and WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company wishes to purchase shares of one or more of the Fund's series on behalf of its Separate Accounts to serve as an investment medium for Variable Contracts funded by the Separate Accounts, and the Distributor is authorized to sell shares of the Fund's series; NOW, THEREFORE, in consideration of the foregoing and the mutual promises and covenants hereinafter set forth, the parties hereby agree as follows: ARTICLE I. Sale of Fund Shares 1 1.1. The Distributor agrees to sell to the Company those shares of the series offered and made available by the Fund and identified on Exhibit B ("Series") that the Company orders on behalf of its Separate Accounts, and agrees to execute such orders on each day on which the Fund calculates its net asset value pursuant to rules of the SEC ("business day") at the net asset value next computed after receipt and acceptance by the Fund or its agent of the order for the shares of the Fund. 1.2. The Fund agrees to make available on each business day shares of the Series for purchase at the applicable net asset value per share by the Company on behalf of its Separate Accounts' provided, however, that the Board of Trustees of the Fund may refuse to sell shares of any Series to any person, or suspend or terminate the offering of shares of any Series, if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Trustees, acting in good faith and in light of the Trustees' fiduciary duties under applicable law, necessary in the best interests of the shareholders of any Series. 1.3. The Fund and the Distributor agree that shares of the Series of the Fund will be sold only to Participating Insurance Companies, their separate accounts, and other persons consistent with each Series being adequately diversified pursuant to Section 817(h) of the Internal Revenue Code of 1986, as amended ("Code") and the regulations thereunder. No shares of any Series will be sold directly to the general public. 1.4. The Fund and the Distributor will not sell shares of the Series to any insurance company or separate account unless an agreement containing provisions substantially the same as this Agreement is in effect to govern such sales. 1.5. Upon receipt of a request for redemption in proper form from the Company, the Fund agrees to redeem any full or fractional shares of the Series held by the Company, ordinarily executing such requests on each business day at the net asset value next computed after receipt and acceptance by the Fund or its agent of the request for redemption, except that the Fund reserves the right to suspend the right of redemption, consistent with Section 22(e) of the 1940 Act and any rules thereunder. Such redemption shall be paid consistent with applicable rules of the SEC and procedures and policies of the Fund as described in the current prospectus. 1.6. The Company agrees to purchase and redeem the shares of each Series in accordance with the provisions of the current prospectus for the Fund. 1.7. The Company shall pay for shares of the Series on the same day that it places an order to purchase shares of the Series. Payment shall be in federal funds transmitted by wire. 1.8. Issuance and transfer of shares of the Series will be by book entry only unless otherwise agreed by the Fund. Stock certificates will not be issued to the Company or the Separate Accounts unless otherwise agreed by the Fund. Shares ordered from the Fund will be recorded in an appropriate title for the Separate Accounts or the appropriate subaccounts of the Separate Accounts. 1.9. The Fund shall promptly furnish notice (by wire or telephone, followed by written confirmation) to the Company of any income dividends or capital gain distributions payable on the 2 shares of the Series. The Company hereby elects to reinvest in the Series all such dividends and distributions as are payable on a Series' shares and to receive such dividends and distributions in additional shares of that Series. The Company reserves the right to revoke this election in writing and to receive all such dividends and distributions in cash. The Fund shall notify the Company of the number of shares so issued as payment of such dividends and distributions. 1.10. The Fund shall instruct its recordkeeping agent to advise the Company on each business day of the net asset value per share for each Series as soon as reasonably practical after the net asset value per share is calculated. ARTICLE II. Representations and Warranties 2.1. The Company represents and warrants that it is an insurance company duly organized and in good standing under applicable law and that it is taxed as an insurance company under Subchapter L of the Code. 2.2. The Company represents and warrants that it has legally and validly established each of the Separate Accounts as a segregated asset account under the ________________________ Insurance Code, and that each of the Separate Accounts is a validly existing segregated asset account under applicable federal and state law. 2.3. The Company represents and warrants that the Variable Contracts issued by the Company or interests in the Separate Accounts under such Variable Contracts (1) are or, prior to issuance, will be registered as securities under the Securities Act of 1933 ("1933 Act") or, alternatively (2) are not registered because they are properly exempt from registration under the 1933 Act or will be offered exclusively in transactions that are properly exempt from registration under the 1933 Act. 2.4. The Company represents and warrants that each of the Separate Accounts (1) has been registered as a unit investment trust in accordance with the provisions of the 1940 Act or, alternatively (2) has not been registered in proper reliance upon an exclusion from registration under the 1940 Act. 2.5. The Company represents that it believes, in good faith, that the Variable Contracts issued by the Company are currently treated as annuity contracts or life insurance policies (which may include modified endowment contracts), whichever is appropriate, under applicable provisions of the Code. 2.6. The Company represents and warrants that any of its Separate Accounts that fund variable life insurance contracts and that are registered with the SEC as investment companies rely on the exemptions provided by Rule 6e-3(T), or any successor thereto, and not on Rule 6e-2 under the 1940 Act. 2.7. The Fund represents and warrants that it is duly organized as a business trust under the laws of the Commonwealth of Massachusetts, and is in good standing under applicable law. 2.8. The Fund represents and warrants that the shares of the Series are duly authorized for issuance 3 in accordance with applicable law and that the Fund is registered as an open-end management investment company under the 1940 Act. 2.9. The Fund represents that it believes, in good faith, that the Series currently comply with the diversification provisions of Section 817(h) of the Code and the regulations issued thereunder relating to the diversification requirements for variable life insurance policies and variable annuity contracts. 2.10. The Distributor represents and warrants that it is a member in good standing of the NASD and is registered as a broker-dealer with the SEC. ARTICLE III. General Duties 3.1. The Fund shall take all such actions as are necessary to permit the sale of the shares of each Series to the Separate Accounts, including maintaining its registration as an investment company under the 1940 Act, and registering the shares of the Series sold to the Separate Accounts under the 1933 Act for so long as required by applicable law. The Fund shall amend its Registration Statement filed with the SEC under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of the shares of the Series. The Fund shall register and qualify the shares for sale in accordance with the laws of the various states to the extent deemed necessary by the Fund or the Distributor. 3.2. The Fund shall make every effort to maintain qualification of each Series as a Regulated Investment Company under Subchapter M of the Code (or any successor or similar provision) and shall notify the Company immediately upon having a reasonable basis for believing that a Series has ceased to so qualify or that it might not so qualify in the future. 3.3. The Fund shall make every effort to enable each Series to comply with the diversification provisions of Section 817(h) of the Code and the regulations issued thereunder relating to the diversification requirements for variable life insurance policies and variable annuity contracts and any prospective amendments or other modifications to Section 817 or regulations thereunder, and shall notify the Company immediately upon having a reasonable basis for believing that any Series has ceased to comply. 3.4. The Fund shall be entitled to receive and act upon advice of its General Counsel or its outside counsel in meeting the requirements specified in Sections 3.2 and 3.3 hereof. 3.5 The Company shall take all such actions as are necessary under applicable federal and state law to permit the sale of the Variable Contracts issued by the Company, including registering each Separate Account as an investment company to the extent required under the 1940 Act, and registering the Variable Contracts or interests in the Separate Accounts under the Variable Contracts to the extent required under the 1933 Act, and obtaining all necessary approvals to offer the Variable Contracts from state insurance commissioners. 3.6. The Company shall make every effort to maintain the treatment of the Variable Contracts issued 4 by the Company as annuity contracts or life insurance policies, whichever is appropriate, under applicable provisions of the Code, and shall notify the Fund and the Distributor immediately upon having a reasonable basis for believing that such Variable Contracts have ceased to be so treated or that they might not be so treated in the future. 3.7. The Company shall offer and sell the Variable Contracts issued by the Company in accordance with applicable provisions of the 1933 Act, the 1934 Act, the 1940 Act, the NASD Rules of Fair Practice, and state law respecting the offering of variable life insurance policies and variable annuity contracts. 3.8. The Distributor shall sell and distribute the shares of the Series of the Fund in accordance with the applicable provisions of the 1933 Act, the 1934 Act, the 1940 Act, the NASD Rules of Fair Practice, and state law. 3.9. A majority of the Board of Trustees of the Fund shall consist of persons who are not "interested persons" of the Fund ("disinterested Trustees"), as defined by Section 2(a)(19) of the 1940 Act, except that if this provision of this Section 3.9 is not met by reason of the death, disqualification, or bona fide resignation of any Trustee or Trustees, then the operation of this provision shall be suspended (a) for a period of 45 days if the vacancy or vacancies may be filled by the Fund's Board; (b) for a period of 60 days if a vote of shareholders is required to fill the vacancy or vacancies; or (c) for such longer period as the SEC may prescribe by order upon application. 3.10. The Company agrees to provide, as promptly as possible, notice to the Fund and to the Distributor if the Company has reason to know about a meeting of some or all of the owners of the Variable Contracts or shareholders of the Fund, where the agenda or purpose of the meeting relates, in whole or in part, to the Fund and that has not been called by the Fund's Board of Trustees (and which shall not include a vote of Variable Contract Owners having an interest in a Separate Account to substitute shares of another investment company for corresponding shares of the Fund or a Series, as described in Section 9(e) and to which the notice provision of Section 9.2 shall apply). In such an event, the Company agrees to distribute proxy statements and any additional solicitation materials upon the request of the Fund or the Distributor to the owners of the Variable Contracts issued by the Company at least 30 days prior to the meeting. The Company further agrees that it shall take no action, directly or indirectly, in furtherance of shareholders of the Fund or Contract Owners taking any action with respect to the Fund by written consent and without a meeting. 3.11. Each party hereto shall cooperate with each other party and all appropriate governmental authorities having jurisdiction (including, without limitation, the SEC, the NASD, and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. ARTICLE IV. Potential Conflicts 4.1. The Fund's Board of Trustees shall monitor the Fund for the existence of any material irreconcilable conflict (1) between the interests of owners of variable annuity contracts and variable 5 life insurance policies, and (2) between the interests of owners of Variable Contracts ("Variable Contract Owners") issued by different Participating Insurance Companies that invest in the Fund. An irreconcilable material conflict may arise for a variety of reasons, including: (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretive letter, or any similar action by insurance, tax, or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of the Fund or any Series are being managed; or (e) a decision by a Participating Insurance Company to disregard the voting instructions of Variable Contract Owners. 4.2. The Company agrees that it shall be responsible for reporting any potential or existing conflicts to the Fund's Board of Trustees. The Company will be responsible for assisting the Board of Trustees of the Fund in carrying out its responsibilities under this agreement, by providing the Board with all information reasonably necessary for the Board to consider any issues raised. This includes, but is not limited to, an obligation by the Company to inform the Board whenever Variable Contract Owner voting instructions are disregarded. The Company shall carry out its responsibility under this Section 4.2 with a view only to the interests of the Variable Contract Owners. 4.3. The Company agrees that in the event that it is determined by a majority of the Board of Trustees of the Fund or a majority of the Fund's disinterested Trustees that a material irreconcilable conflict exists, the Company shall, to the extent reasonably practicable (as determined by a majority of the disinterested Trustees of the Board of the Fund), take whatever steps are necessary to eliminate the irreconcilable material conflict, including: (1) withdrawing the assets allocable to some or all of the Separate Accounts from the Fund or any Series and reinvesting such assets in a different investment medium, which may include another series of the Fund, or submitting the question of whether such segregation should be implemented to a vote of all affected Variable Contract Owners and, as appropriate, segregating the assets of any appropriate group (i.e., Contract Owners of Variable Contracts issued by one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected Variable Contract Owners the option of making such a change; and (2) establishing a new registered management investment company or managed separate account. If a material irreconcilable conflict arises because of the Company's decision to disregard Variable Contract Owners' voting instructions and that decision represents a minority position or would preclude a majority vote, the Company shall be required, at the Fund's election, to withdraw the Separate Accounts' investment in the Fund, and no charge or penalty will be imposed as a result of such withdrawal. The Fund shall neither be required to bear the costs of remedial actions taken to remedy a material irreconcilable conflict nor shall it be requested to pay a higher investment advisory fee for the sole purpose of covering such costs. In addition, no Variable Contract Owner shall be required directly or indirectly to bear the direct or indirect costs of remedial actions taken to remedy a material irreconcilable conflict. A new funding medium for any Variable Contract need not be established pursuant to this Section 4.3, if an offer to do so has been declined by vote of a majority of Variable Contract Owners materially adversely affected by the irreconcilable material conflict. All reports received by the Fund's Board of Trustees of potential or existing conflicts, and all Board action with regard to determining the existence of a conflict, notifying Participating Insurance Companies and the Fund's investment adviser of a conflict, and determining whether any proposed action adequately remedies a conflict, shall be properly recorded 6 in the minutes of the Board of Trustees of the Fund or other appropriate records, and such minutes or other records shall be made available to the SEC upon request. The Company and the Fund shall carry out their responsibilities under this Section 4.3 with a view only to the interests of the Variable Contract Owners. 4.4. The Board of Trustees of the Fund shall promptly notify the Company in writing of its determination of the existence of an irreconcilable material conflict and its implications. ARTICLE V. Prospectuses and Proxy Statements; Voting 5.1. The Company shall distribute such prospectuses, proxy statements and periodic reports of the Fund to the owners of Variable Contracts issued by the Company as required to be distributed to such Variable Contract Owners under applicable federal or state law. 5.2. The Distributor shall provide the Company with as many copies of the current prospectus of the Fund as the Company may reasonably request. If requested by the Company in lieu thereof, the Fund shall provide such documentation (including a final copy of the Fund's prospectus as set in type or in camera-ready copy) and other assistance as is reasonably necessary in order for the Company to print together in one document the current prospectus for the Variable Contracts issued by the Company and the current prospectus for the Fund. The Fund shall bear the expense of printing copies of its current prospectus that will be distributed to existing Variable Contract Owners, and the Company shall bear the expense of printing copies of the Fund's prospectus that are used in connection with offering the Variable Contracts issued by the Company. 5.3. The Fund and the Distributor shall provide (1) at the Fund's expense, one copy of the Fund's current Statement of Additional Information ("SAI") to the Company and to any owner of a Variable Contract issued by the Company who requests such SAI, (2) at the Company's expense, such additional copies of the Fund's current SAI as the Company shall reasonably request and that the Company shall require in accordance with applicable law in connection with offering the Variable Contracts issued by the Company. 5.4. The Fund, at its expense, shall provide the Company with copies of its proxy material, periodic reports to shareholders and other communications to shareholders in such quantity as the Company shall reasonably require for purposes of distributing to owners of Variable Contracts issued by the Company. The Fund, at the Company's expense, shall provide the Company with copies of its periodic reports to shareholders and other communications to shareholders in such quantity as the Company shall reasonably request for use in connection with offering the Variable Contracts issued by the Company. If requested by the Company in lieu thereof, the Fund shall provide such documentation (including a final copy of the Fund's proxy materials, periodic reports to shareholders and other communications to shareholders, as set in type or in camera-ready copy) and other assistance as reasonably necessary in order for the Company to print such shareholder communications for distribution to owners of Variable Contracts issued by the Company. 5.5. For so long as the SEC interprets the 1940 Act to require pass-through voting by Participating Insurance Companies whose Separate Accounts are registered as investment companies under the 7 1940 Act, the Company shall vote shares of each Series of the Fund held in a Separate Account or a subaccount thereof, whether or not registered under the 1940 Act, at regular and special meetings of the Fund in accordance with instructions timely received by the Company (or its designated agent) from owners of Variable Contracts funded by such Separate Account or subaccount thereof having a voting interest in the Series. The Company shall vote shares of a Series of the Fund held in a Separate Account or a subaccount thereof that are attributable to the Variable Contracts as to which no timely instructions are received, as well as shares held in such Separate Account or subaccount thereof that are not attributable to the Variable Contracts and owned beneficially by the Company (resulting from charges against the Variable Contracts or otherwise), in the same proportion as the votes cast by owners of the Variable Contracts funded by that Separate Account or subaccount thereof having a voting interest in the Series from whom instructions have been timely received. The Company shall vote shares of each Series of the Fund held in its general account, if any, in the same proportion as the votes cast with respect to shares of the Series held in all Separate Accounts of the Company or subaccounts thereof, in the aggregate. 5.6. The Fund shall disclose in its prospectus that (1) shares of the Series of the Fund are offered to affiliated or unaffiliated insurance company separate accounts which fund both annuity and life insurance contracts, (2) due to differences in tax treatment or other considerations, the interests of various Variable Contract Owners participating in the Fund or a Series might at some time be in conflict, and (3) the Board of Trustees of the Fund will monitor for any material conflicts and determine what action, if any, should be taken. The Fund hereby notifies the Company that prospectus disclosure may be appropriate regarding potential risks of offering shares of the Fund to separate accounts funding both variable annuity contracts and variable life insurance policies and to separate accounts funding Variable Contracts of unaffiliated life insurance companies. ARTICLE VI. Sales Material and Information 6.1. The Company shall furnish, or shall cause to be furnished, to the Fund or its designee, each piece of sales literature or other promotional material in which the Fund (or any Series thereof) or its investment adviser or the Distributor is named, and no such sales literature or other promotional material shall be used without the approval of the Fund and the Distributor or the designee of either. 6.2. The Company agrees that neither it nor any of its affiliates or agents shall give any information or make any representations or statements on behalf of the Fund or concerning the Fund other than the information or representations contained in the Registration Statement or prospectus for the Fund shares, as such registration statement and prospectus may be amended or supplemented from time to time, or in reports or proxy statements for the Fund, or in sales literature or other promotional material approved by the Fund or its designee and by the Distributor or its designee, except with the permission of the Fund or its designee and the Distributor or its designee. 6.3. The Fund or the Distributor or the designee of either shall furnish to the Company or its designee, each piece of sales literature or other promotional material in which the Company or its Separate Accounts are named, and no such material shall be used without the approval of the Company or its designee. 8 6.4. The Fund and the Distributor agree that each and the affiliates and agents of each shall not give any information or make any representations on behalf of the Company or concerning the Company, the Separate Accounts, or the Variable Contracts issued by the Company, other than the information or representations contained in a registration statement or prospectus for such Variable Contracts, as such registration statement and prospectus may be amended or supplemented from time to time, or in reports for the Separate Accounts or prepared for distribution to owners of such Variable Contracts, or in sales literature or other promotional material approved by the Company or its designee, except with the permission of the Company. 6.5. The Fund will provide to the Company at least one complete copy of all prospectuses, Statements of Additional Information, reports, proxy statements and other voting solicitation materials, and all amendments and supplements to any of the above, that relate to the Fund or its shares, promptly after the filing of such document with the SEC or other regulatory authorities. 6.6. The Company will provide to the Fund at least one complete copy of all prospectuses (which shall include an offering memorandum if the Variable Contracts issued by the Company or interests therein are not registered under the 1933 Act), Statements of Additional Information, reports, solicitations for voting instructions, and all amendments or supplements to any of the above, that relate to the Variable Contracts issued by the Company or the Separate Accounts promptly after the filing of such document with the SEC or other regulatory authority. 6.7. For purposes of this Article VI, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, computerized media, or other public media), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees. ARTICLE VII. Indemnification 7.1. Indemnification By The Company 7.1(a). The Company agrees to indemnify and hold harmless the Fund, each of its Trustees and officers, any affiliated person of the Fund within the meaning of Section 2(a)(3) of the 1940 Act, and the Distributor (collectively, the "Indemnified Parties" for purposes of this Section 7.1) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Company) or litigation expenses (including legal and other expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or litigation expenses are related to the sale or acquisition of the Fund's shares or the Variable Contracts issued by the Company and: (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material 9 fact contained in the registration statement or prospectus (which shall include an offering memorandum) for the Variable Contracts issued by the Company or sales literature for such Variable Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Company by or on behalf of the Fund for use in the registration statement or prospectus for the Variable Contracts issued by the Company or sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of such Variable Contracts or Fund shares; or (ii) arise out of or as a result of any statement or representation (other than statements or representations contained in the registration statement, prospectus or sales literature of the Fund not supplied by the Company or persons under its control) or wrongful conduct of the Company or any of its affiliates, employees or agents with respect to the sale or distribution of the Variable Contracts issued by the Company or the Fund shares; or (iii) arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, or sales literature of the Fund or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such a statement or omission was made in reliance upon information furnished to the Fund by or on behalf of the Company; except to the extent provided in Sections 7.1(b) and 7.1(c) hereof. 7.1(b). The Company shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation expenses to which an Indemnified Party would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of his or her duties or by reason of his or her reckless disregard of obligations or duties under this Agreement or to the Fund. 7.1(c). The Company shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Party shall have notified the Company in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Party shall have received notice of such service on any designated agent), but failure to notify the Company of any such claim shall not relieve the Company from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Company shall be entitled to participate, at its own expense, in the defense of such action. The Company also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Company to such party of the Company's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Company will not be liable to such party under this Agreement for 10 any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 7.1(d). The Indemnified Parties shall promptly notify the Company of the commencement of any litigation or proceedings against them in connection with the issuance or sale of the Fund shares or the Variable Contracts issued by the Company or the operation of the Fund. 7.2 Indemnification By the Distributor 7.2(a). The Distributor agrees to indemnify and hold harmless the Company and each of its directors and officers and each person, if any, who is an affiliated person of the Company within the meaning of Section 2(a)(3) of the 1940 Act (collectively, the "Indemnified Parties" for purposes of this Section 7.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Distributor) or litigation expenses (including legal and other expenses) to which the Indemnified Parties may become subject under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or litigation expenses are related to the sale or acquisition of the Fund's shares or the Variable Contracts issued by the Company and: (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement or prospectus or sales literature of the Fund (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Distributor or the Fund or the designee of either by or on behalf of the Company for use in the registration statement or prospectus for the Fund or in sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Variable Contracts issued by the Company or Fund shares; or (ii) arise out of or as a result of any statement or representation (other than statements or representations contained in the registration statement, prospectus or sales literature for the Variable Contracts not supplied by the Distributor or any employees or agents thereof) or wrongful conduct of the Fund or Distributor, or the affiliates, employees, or agents of the Fund or the Distributor with respect to the sale or distribution of the Variable Contracts issued by the Company or Fund shares; or (iii) arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, or sales literature covering the Variable Contracts issued by the Company, or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement or statements therein not misleading, if such statement or omission was made in reliance upon information furnished to the Company by or on behalf of the Fund; except to the extent provided in Sections 7.2(b) and 7.2(c) hereof. 11 7.2(b). The Distributor shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation expenses to which an Indemnified Party would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of his or her duties or by reason of his or her reckless disregard of obligations and duties under this Agreement or to the Company or the Separate Accounts. 7.2(c). The Distributor shall not be liable under this indemnification provision with respect to any claim made against the Indemnified Party unless such Party shall have notified the Distributor in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Party shall have received notice of such service on any designated agent), but failure to notify the Distributor of any such claim shall not relieve the Distributor from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this Indemnification Provision. In case any such action is brought against the Indemnified Parties, the Distributor will be entitled to participate, at its own expense, in the defense thereof. The Distributor also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Distributor to such party of the Distributor's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Distributor will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 7.2(d). The Company shall promptly notify the Distributor of the commencement of any litigation or proceedings against it or any of its officers or directors in connection with the issuance or sale of the Variable Contracts issued by the Company or the operation of the Separate Accounts. ARTICLE VIII. Applicable Law 8.1. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the State of California. 8.2. This Agreement shall be subject to the provisions of the 1933, 1934, and 1940 Acts, and the rules and regulations and rulings thereunder, including such exemptions from those statutes, rules and regulations as the SEC may grant (including, but not limited to, the Shared Funding Exemptive Order) and the terms hereof shall be interpreted and construed in accordance therewith. ARTICLE IX. Termination 9.1. This Agreement shall terminate: (a) at the option of any party upon 180 days advance written notice to the other parties; or (b) at the option of the Company if shares of the Series are not reasonably available to meet the requirements of the Variable Contracts issued by the Company, as determined by the Company, and upon prompt notice by the Company to the other parties; or 12 (c) at the option of the Fund or the Distributor upon institution of formal proceedings against the Company or its agent by the NASD, the SEC, or any state securities or insurance department or any other regulatory body regarding the Company's duties under this Agreement or related to the sale of the Variable Contracts issued by the Company, the operation of the Separate Accounts, or the purchase of the Fund shares; or (d) at the option of the Company upon institution of formal proceedings against the Fund or the Distributor by the NASD, the SEC, or any state securities or insurance department or any other regulatory body; or (e) upon requisite vote of the Variable Contract Owners having an interest in the Separate Accounts (or any subaccounts thereof) to substitute the shares of another investment company for the corresponding shares of the Fund or a Series in accordance with the terms of the Variable Contracts for which those shares had been selected to serve as the underlying investment media; or (f) in the event any of the shares of a Series are not registered, issued or sold in accordance with applicable state and/or federal law, or such law precludes the use of such shares as the underlying investment media of the Variable Contracts issued or to be issued by the Company; or (g) by any party to the Agreement upon a determination by a majority of the Trustees of the Fund, or a majority of its disinterested Trustees, that an irreconcilable conflict exists; or (h) at the option of the Company if the Fund or a Series fails to meet the diversification requirements specified in Section 3.3 hereof. 9.2. Each party to this Agreement shall promptly notify the other parties to the Agreement of the institution against such party of any such formal proceedings as described in Sections 9.1(c) and (d) hereof. The Company shall give 60 day's prior written notice to the Fund of the date of any proposed vote of Variable Contract Owners to replace the Fund's shares as described in Section 9.1(e) hereof. 9.3. Except as necessary to implement Variable Contract Owner initiated transactions, or as required by state insurance laws or regulations, the Company shall not redeem Fund shares attributable to the Variable Contracts issued by the Company (as opposed to Fund shares attributable to the Company's assets held in the Separate Accounts), and the Company shall not prevent Variable Contract Owners from allocating payments to a Series, until 60 days after the Company shall have notified the Fund or Distributor of its intention to do so. 9.4. If this Agreement terminates, any provision of this Agreement necessary to the orderly windup of business under it will remain in effect as to that business, after termination. ARTICLE X. Notices Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party. 13 If to the Fund: Pacific Select Fund Attn: SEC Regulatory Compliance Department 700 Newport Center Drive P.O. Box 7500 Newport Beach, CA 92260 If to the Distributor: Pacific Equities Network Attn: Compliance Officer 700 Newport Center Drive, NB-4 Newport Beach, CA 92660 If to the Company: Pacific Mutual Life Insurance Company Attn: SEC Regulatory Compliance Department 700 Newport Center Drive P.O. Box 7500 Newport Beach, CA 92660 ARTICLE XI. Miscellaneous 11.1. The Fund and the Company agree that if and to the extent Rule 6e-3(T) under the 1940 Act is amended or if Rule 6e-3 is adopted in final form, to the extent applicable, ,the Fund and the Company shall each take such steps as may be necessary to comply with the Rule as amended or adopted in final form. 11.2. A copy of the Fund's Agreement and Declaration of Trust is on file with the Secretary of the Commonwealth of Massachusetts and notice is hereby given that the Agreement has been executed on behalf of the Fund by a Trustee of the Fund in his or her capacity as Trustee and not individually. The obligations of this Agreement shall only be binding upon the assets and property of the Fund and shall not be binding upon any Trustee, officer or shareholder of the Fund individually. 11.3. Nothing in this Agreement shall impede the Fund's Trustees or shareholders of the shares of the Fund's Series from exercising any of the rights provided to such Trustees or shareholders in the Fund's Agreement and Declaration of Trust, as amended, a copy of which will be provided to the Company upon request. 11.4. It is understood that the name "Pacific", "Pacific Mutual", "Pacific Select" or any derivative thereof or logo associated with that name is the valuable property of the Distributor and its affiliates, and that the Company has the right to use such name (or derivative or logo) only so long as this Agreement is in effect. Upon termination of this Agreement the Company shall forthwith cease to 14 use such name (or derivative or logo). 11.5. The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 11.6. This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument. 11.7. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 11.8. This Agreement may not be assigned by any party to the Agreement except with the written consent of the other parties to the Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. PACIFIC SELECT FUND ATTEST: /s/ AUDREY L. MILFS BY: /s/ THOMAS C. SUTTON Name: AUDREY L. MILFS Name: THOMAS C. SUTTON Title: SECRETARY Title: PRESIDENT PACIFIC EQUITIES NETWORK ATTEST: /s/ AUDREY L. MILFS BY: /s/ ARTHUR M. KESSELHAUT Name: AUDREY L. MILFS Name: ARTHUR M. KESSELHAUT Title: SECRETARY Title: PRESIDENT PACIFIC MUTUAL LIFE INSURANCE CO. ATTEST: /s/ AUDREY L. MILFS BY: /s/ WILLIAM D. CVENGROS Name: AUDREY L. MILFS Name: WILLIAM D. CVENGROS Title: SECRETARY Title: CHIEF INVESTMENT OFFICER 15 EXHIBIT A PACIFIC SELECT SEPARATE ACCOUNT PACIFIC SELECT EXEC SEPARATE ACCOUNT PACIFIC SELECT VARIABLE ANNUITY SEPARATE ACCOUNT PACIFIC COLI SEPARATE ACCOUNT SEPARATE ACCOUNT A 16 IN WITNESS WHEREOF, the parties hereto have caused this Exhibit A to be executed by their Officers designated below on this 3rd day of January, 1995. PACIFIC SELECT FUND Attest: /s/ AUDREY L. MILFS By: /s/ THOMAS C. SUTTON Name: Audrey L. Milfs Name: Thomas C. Sutton Title: Secretary Title: President PACIFIC EQUITIES NETWORK Attest: /s/ AUDREY L. MILFS By: /s/ GERALD W. ROBINSON Name: Audrey L. Milfs Name: Gerald W. Robinson Title: Secretary Title: President PACIFIC MUTUAL LIFE INSURANCE COMPANY Attest: /s/ DIANE N. LEDGER By: /s/ GLENN S. SCHAFER Name: Diane N. Ledger Name: Glenn S. Schafer Title: Assistant Vice President Title: President 17 EXHIBIT B MONEY MARKET SERIES MANAGED BOND SERIES GOVERNMENT SECURITIES SERIES HIGH YIELD BOND SERIES GROWTH SERIES GROWTH LT SERIES EQUITY INCOME SERIES MULTI-STRATEGY SERIES EQUITY SERIES BOND AND INCOME SERIES EQUITY INDEX SERIES INTERNATIONAL SERIES 18 IN WITNESS WHEREOF, the parties hereto have caused this Exhibit B to be executed by their Officers designated below on this 3rd day of January, 1995. PACIFIC SELECT FUND Attest: /s/ AUDREY L. MILFS By: /s/ THOMAS C. SUTTON Name: Audrey L. Milfs Name: Thomas C. Sutton Title: Secretary Title: President PACIFIC EQUITIES NETWORK Attest: /s/ AUDREY L. MILFS By: /s/ GERALD W. ROBINSON Name: Audrey L. Milfs Name: Gerald W. Robinson Title: Secretary Title: President PACIFIC MUTUAL LIFE INSURANCE COMPANY Attest: /s/ DIANE N. LEDGER By: /s/ GLENN S. SCHAFER Name: Diane N. Ledger Name: Glenn S. Schafer Title: Assistant Vice President Title: President 19 ADDENDUM TO PARTICIPATION AGREEMENT The Participation Agreement, made the 6th day of November, 1992 by and between PACIFIC MUTUAL LIFE INSURANCE COMPANY (the "Company"), a life insurance company domiciled in California, on its behalf and on behalf of the segregated asset accounts of the Company listed on Exhibit A to this Agreement (the "Separate Accounts"); Pacific Select Fund (the "Fund"), a Massachusetts business trust; and Pacific Equities Network ("Distributor"), a California Corporation ("the Agreement") is hereby amended by the addition of the provisions set forth in this Addendum to the Agreement ("Addendum"), which is made this 4th day of January, 1994. WITNESSETH: WHEREAS, the Fund is authorized to issue separate classes of shares of beneficial interest ("shares") each representing an interest in a separate portfolio of assets known as a "series" and each series has its own investment objective, policies, and limitations; and WHEREAS, the Fund is available to offer shares of one or more of its series to separate accounts of insurance companies that fund variable life insurance policies and variable annuity contracts ("Variable Contracts"); and WHEREAS, the Fund currently consists of nine separate series designated as the Money Market Series, Managed Bond Series, High Yield Bond Series, Government Securities Series, Growth Series, Equity Income Series, Multi-Strategy Series, International Series and Equity Index Series; and WHEREAS, the Fund intends to establish one additional Series to be designated as the Growth LT Series; and NOW THEREFORE, in consideration of the mutual promises and covenants contained in this Addendum, it is agreed between the parties hereto as follows: The Agreement is amended by replacing the second paragraph with the following language: "WHEREAS, the Fund is available to offer shares of one or more of its series to separate accounts of insurance companies that fund variable life insurance policies and variable annuity contracts ("Variable Contracts') and to serve as an investment medium for Variable Contracts offered by insurance companies that have entered into participation agreements substantially similar to this agreement ("Participating Insurance Companies"), and the Fund is comprised of multiple separate series, and other series may be established in the future; and" IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be executed by their officers designated below on the date written above. 1 PACIFIC SELECT FUND Attest: /s/ AUDREY L. MILFS By: /s/ THOMAS C. SUTTON Name: Audrey L. Milfs Name: Thomas C. Sutton Title: Secretary Title: President PACIFIC EQUITIES NETWORK Attest: /s/ AUDREY L. MILFS By: /s/ GLENN S. SCHAFER Name: Audrey L. Milfs Name: Glenn S. Schafer Title: Secretary Title: President Attest: /s/ AUDREY L. MILFS By: /s/ DIANE N. LEDGER Name: Audrey L. Milfs Name: Diane N. Ledger Title: Secretary Title: Assistant Vice President PACIFIC MUTUAL LIFE INSURANCE COMPANY Attest: /s/ DIANE N. LEDGER By: /s/ WILLIAM D. CVENGROS Name: Diane N. Ledger Name: William D. Cvengros Title: Assistant Vice President Title: Chief Investment Officer Attest: /s/ DIANE N. LEDGER By: /s/ GLENN S. SCHAFER Name: Diane N. Ledger Name: Glenn S. Schafer Title: Assistant Vice President Title: Chief Financial Officer 2 ADDENDUM TO PARTICIPATION AGREEMENT The Participation Agreement, made the 6th day of November, 1992, by and between PACIFIC MUTUAL LIFE INSURANCE COMPANY (the "Company"), a life insurance company domiciled in California, on its behalf and on behalf of the segregated asset accounts of the company listed on Exhibit A to this Agreement (the "Separate Accounts"); Pacific Select Fund (the "Fund"), a Massachusetts business trust; and Pacific Equities Network ("Distributor"), a California Corporation ("the Agreement") is hereby amended by the addition of the provisions set forth in this Addendum to the Agreement ("Addendum"), which is made this 15th day of August, 1994. WITNESSETH: WHEREAS, the Fund is authorized to issue separate classes of shares of beneficial interest ("shares") each representing an interest in a separate portfolio of assets known as a "series" and each series has its own investment objective, policies, and limitations; and WHEREAS, the Fund is available to offer shares of one or more of its series to separate accounts of insurance companies that fund variable life insurance policies and variable annuity contracts ("Variable Contracts"); and WHEREAS, the Fund currently consists of ten separate series designated as the Money Market Series, Managed Bond Series, High Yield Bond Series, Government Securities Series, Growth Series, Equity Income Series, Multi-Strategy Series, International Series, Equity Index Series and Growth LT Series; and WHEREAS, the Fund intends to establish two additional Series to be designated as the Equity Series and Bond and Income Series; and NOW THEREFORE, in consideration of the mutual promises and covenants contained in this addendum, it is agreed between the parties hereto as follows: The Agreement is amended by replacing the second paragraph with the following language: "WHEREAS, the Fund is available to offer shares of one or more of its series to separate accounts of insurance companies that fund variable life insurance policies and variable annuity contracts ("Variable Contracts") and to serve as an investment medium for Variable Contracts offered by insurance companies that have entered into participation agreements substantially similar to this agreement ("Participating Insurance Companies"), and the Fund is comprised of multiple separate series, and other series may be established in the future; and" IN WITNESS WHEREOF, the parties hereto have caused this addendum to be executed by their officers designated below on the date written above. PACIFIC SELECT FUND 1 PACIFIC SELECT FUND Attest: /s/ AUDREY L. MILFS By: /s/ THOMAS C. SUTTON Name: Audrey L. Milfs Name: Thomas C. Sutton Title: Secretary Title: President PACIFIC EQUITIES NETWORK Attest: /s/ AUDREY L. MILFS By: /s/ GLENN S. SCHAFER Name: Audrey L. Milfs Name: Glenn S. Schafer Title: Secretary Title: President Attest: /s/ AUDREY L. MILFS By: /s/ DIANE N. LEDGER Name: Audrey L. Milfs Name: Diane N. Ledger Title: Secretary Title: Assistant Vice President PACIFIC MUTUAL LIFE INSURANCE COMPANY Attest: /s/ DIANE N. LEDGER By: /s/ WILLIAM D. CVENGROS Name: Diane N. Ledger Name: William D. Cvengros Title: Assistant Vice President Title: Chief Investment Officer Attest: /s/ DIANE N. LEDGER By: /s/ GLENN S. SCHAFER Name: Diane N. Ledger Name: Glenn S. Schafer Title: Assistant Vice President Title: Chief Financial Officer 2 ADDENDUM TO PARTICIPATION AGREEMENT The Participation Agreement, made the 6th day of November, 1992 and subsequently amended on January 4, 1994 and August 15, 1994, by and between PACIFIC MUTUAL LIFE INSURANCE COMPANY (the "Company"), a life insurance company domiciled in California, on its behalf and on behalf of the segregated asset accounts of the Company listed on Exhibit A to this Agreement (the "Separate Accounts"); Pacific Select Fund (the "Fund"), a Massachusetts business trust; and Pacific Equities Network ("Distributor"), a California Corporation (the "Agreement") is hereby amended by the addition of the provisions set forth in this Addendum to the Agreement ("Addendum"), which is made this 20th day of November, 1995. WITNESSETH: WHEREAS, the Fund is authorized to issue separate classes of shares of beneficial interest ("Shares") each representing an interest in a separate portfolio of assets known as a "series" and each series has its own investment objective, policies, and limitations; and WHEREAS, the Fund is available to offer shares of one or more of its series to separate accounts of insurance companies that fund variable life insurance policies and variable annuity contracts ("Variable Contracts"); and WHEREAS, the Fund currently consists of twelve separate series designated as the Money Market Portfolio, Managed Bond Portfolio, High Yield Bond Portfolio, Government Securities Portfolio, Growth Portfolio, Equity Income Portfolio, Multi-Strategy Portfolio, International Portfolio, Equity Index Portfolio, Growth LT Portfolio, Equity Portfolio and Bond and Income Portfolio (each referred to as a "Series" in the Agreement, and hereinafter referred to as a "Portfolio"); and WHEREAS, the Fund intends to establish two additional Portfolios to be designated as the Emerging Markets Portfolio and Aggressive Equity Portfolio; and NOW THEREFORE, in consideration of the mutual promises and covenants contained in this Addendum, it is agreed between the parties hereto as follows: The Agreement is amended by replacing the second paragraph with the following language: "WHEREAS, the Fund is available to offer shares of one or more of its Portfolios to separate accounts of insurance companies that fund variable life insurance policies and variable annuity contracts ("Variable Contracts") and to serve as an investment medium for Variable Contracts offered by insurance companies that have entered into participation agreements substantially similar to this agreement ("Participating Insurance Companies"), and the Fund is comprised of multiple separate Portfolios, and other Portfolios may be established in the future; and" IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be executed by their officers designated below on the date written above. PACIFIC SELECT FUND Attest: /s/ AUDREY L. MILFS By: /s/ THOMAS C. SUTTON Name: Audrey L. Milfs Name: Thomas C. Sutton Title: Secretary Title: President PACIFIC EQUITIES NETWORK Attest: /s/ AUDREY L. MILFS By: /s/ GERALD W. ROBINSON Name: Audrey L. Milfs Name: Gerald W. Robinson Title: Secretary Title: President, Director & CEO Attest: /s/ AUDREY L. MILFS By: /s/ EDWARD R. BYRD Name: Audrey L. Milfs Name: Edward R. Byrd Title: Secretary Title: CFO & Treasurer PACIFIC MUTUAL LIFE INSURANCE COMPANY Attest: /s/ DIANE N. LEDGER By: /s/ THOMAS C. SUTTON Name: Diane N. Ledger Name: Thomas C. Sutton Title: Assistant Vice President Title: Chairman and CEO Attest: /s/ DIANE N. LEDGER By: /s/ GLENN S. SCHAFER Name: Diane N. Ledger Name: Glenn S. Schafer Title: Assistant Vice President Title: Chief Financial Officer EXHIBIT B MONEY MARKET PORTFOLIO MANAGED BOND PORTFOLIO GOVERNMENT SECURITIES PORTFOLIO HIGH YIELD BOND PORTFOLIO GROWTH PORTFOLIO GROWTH LT PORTFOLIO EQUITY INCOME PORTFOLIO MULTI-STRATEGY PORTFOLIO EQUITY PORTFOLIO BOND AND INCOME PORTFOLIO EQUITY INDEX PORTFOLIO INTERNATIONAL PORTFOLIO EMERGING MARKETS PORTFOLIO AGGRESSIVE EQUITY PORTFOLIO EX-99.9 22 EXHIBIT 99.9 [LETTERHEAD OF PACIFIC LIFE] DAVID R. CARMICHAEL Senior Vice President General Counsel Law Department (949) 219-3326 TELEPHONE (949) 219-3706 FACSIMILE dcarmichael@pacificlife.com December 17, 1999 Pacific Life Insurance Company 700 Newport Center Drive Newport Beach, California 92660 Dear Sirs: In my capacity as Senior Vice President and General Counsel of Pacific Life Insurance Company ("Pacific Life"), I, or attorneys employed by Pacific Life under my general supervision, have supervised the establishment of Separate Account A of Pacific Life Insurance Company on September 7, 1994, which has been authorized by resolution of the Board of Directors of Pacific Life adopted on November 22, 1989, and Memorandum dated September 7, 1994 concerning Separate Account A as the separate account for assets applicable to Pacific Innovations individual flexible premium deferred variable annuity contracts ("Contracts"), pursuant to the provisions of Section 10506 of the Insurance Code of the State of California. Moreover, I have been associated with the preparation of the Registration Statement on Form N-4 ("Registration Statement"), filed by Pacific Life and Separate Account A (File No. pending) with the Securities and Exchange Commission under the Securities Act of 1933, as amended, for the registration of interests in the Separate Account A funding the Contracts. I have made such examination of the law and examined such corporate records and such other documents as in my judgment are necessary and appropriate to enable me to render the following opinion that: 1. Pacific Life has been duly organized under the laws of the State of California and is a validly existing corporation. 2. Pacific Select Separate Account A is duly created and validly existing as a separate account pursuant to the aforesaid provisions of California law. 3. The portion of the assets to be held in Separate Account A equal to the reserves and other liabilities under the Pacific Innovations Contracts and any other contracts issued by Pacific Life that are supported by Separate Account A is not chargeable with liabilities arising out of any other business Pacific Life may conduct. 4. The Pacific Innovations Contracts have been duly authorized by Pacific Life and, when issued as contemplated by the Registration Statement, will constitute legal, validly issued and binding obligations of Pacific Life, except as limited by bankruptcy or insolvency laws affecting the rights of creditors generally. I hereby consent to the filing of this opinion as an exhibit to the Registration Statement. Very truly yours, David R. Carmichael Senior Vice President and General Counsel EX-99.10(A) 23 EXHIBIT 99.10(A) EXHIBIT 99.10(a) INDEPENDENT AUDITOR'S CONSENT We consent to the use in this Registration Statement on Form N-4 of Separate Account A of Pacific Life Insurance Company of our report dated February 22, 1999, related to the consolidated financial statements of Pacific Life Insurance Company and subsidiaries as of December 31, 1998 and 1997, and for each of the three years in the period ended December 31, 1998, appearing in the Statement of Additional Information of Pacific Innovations, which is part of such Registration Statement; and to the incorporation by reference of our report dated February 5, 1999, related to the financial statements of Separate Account A of Pacific Life Insurance Company as of December 31, 1998, and for each of the two years in the period then ended appearing in the Annual Report of Separate Account A of Pacific Life Insurance Company for the year ended December 31, 1998. We also consent to the references to us under the heading "Financial Statements" appearing in such Statement of Additional Information and under the heading "Financial Highlights" appearing in the Prospectus. /s/ DELOITTE & TOUCHE LLP Costa Mesa, California December 17, 1999 EX-99.10(B) 24 EXHIBIT 99.10(B) EXHIBIT 99.10(b) Powers of Attorney POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N. Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for him/her in his/her name, place, and stead, in any and all Registration Statements applicable to Pacific Select Separate Account of Pacific Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company, Separate Account A of Pacific Life Insurance Company, Separate Account B of Pacific Life Insurance Company and Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company and any amendments or supplements thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: 2/25/98 /s/ TC SUTTON Thomas C. Sutton Director POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N. Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for him/her in his/her name, place, and stead, in any and all Registration Statements applicable to Pacific Select Separate Account of Pacific Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company, Separate Account A of Pacific Life Insurance Company, Separate Account B of Pacific Life Insurance Company and Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company and any amendments or supplements thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: February 25, 1998 /s/ GLENN S. SCHAFER Glenn S. Schafer Director POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N. Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for him/her in his/her name, place, and stead, in any and all Registration Statements applicable to Pacific Select Separate Account of Pacific Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company, Separate Account A of Pacific Life Insurance Company, Separate Account B of Pacific Life Insurance Company and Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company and any amendments or supplements thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: 2/25/98 /s/ RICHARD M. FERRY Richard M. Ferry Director POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N. Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for him/her in his/her name, place, and stead, in any and all Registration Statements applicable to Pacific Select Separate Account of Pacific Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company, Separate Account A of Pacific Life Insurance Company, Separate Account B of Pacific Life Insurance Company and Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company and any amendments or supplements thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: 2/25/98 /s/ DONALD E. GUINN Donald E. Guinn Director POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N. Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for him/her in his/her name, place, and stead, in any and all Registration Statements applicable to Pacific Select Separate Account of Pacific Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company, Separate Account A of Pacific Life Insurance Company, Separate Account B of Pacific Life Insurance Company and Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company and any amendments or supplements thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: 2/25/98 /s/ IGNACIO E. LOZANO, JR. Ignacio E. Lozano, Jr. Director POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N. Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for him/her in his/her name, place, and stead, in any and all Registration Statements applicable to Pacific Select Separate Account of Pacific Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company, Separate Account A of Pacific Life Insurance Company, Separate Account B of Pacific Life Insurance Company and Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company and any amendments or supplements thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: 2/25/98 /s/ CHARLES D. MILLER Charles D. Miller Director POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N. Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for him/her in his/her name, place, and stead, in any and all Registration Statements applicable to Pacific Select Separate Account of Pacific Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company, Separate Account A of Pacific Life Insurance Company, Separate Account B of Pacific Life Insurance Company and Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company and any amendments or supplements thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: Feb 25, 1998 /s/ DONN B. MILLER Donn B. Miller Director POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N. Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for him/her in his/her name, place, and stead, in any and all Registration Statements applicable to Pacific Select Separate Account of Pacific Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company, Separate Account A of Pacific Life Insurance Company, Separate Account B of Pacific Life Insurance Company and Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company and any amendments or supplements thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: 2/25/1998 /s/ RICHARD M. ROSENBERG Richard M. Rosenberg Director POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N. Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for him/her in his/her name, place, and stead, in any and all Registration Statements applicable to Pacific Select Separate Account of Pacific Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company, Separate Account A of Pacific Life Insurance Company, Separate Account B of Pacific Life Insurance Company and Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company and any amendments or supplements thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: 2/25/98 /s/ JAMES R. UKROPINA James R. Ukropina Director POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N. Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for him/her in his/her name, place, and stead, in any and all Registration Statements applicable to Pacific Select Separate Account of Pacific Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company, Separate Account A of Pacific Life Insurance Company, Separate Account B of Pacific Life Insurance Company and Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company and any amendments or supplements thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: Feb 25, 1998 /s/ RAYMOND L. WATSON Raymond L. Watson Director POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N. Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for him/her in his/her name, place, and stead, in any and all Registration Statements applicable to Pacific Select Separate Account of Pacific Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company, Separate Account A of Pacific Life Insurance Company, Separate Account B of Pacific Life Insurance Company and Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company and any amendments or supplements thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: February 25, 1998 /s/ DAVID R. CARMICHAEL David R. Carmichael Director POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N. Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for him/her in his/her name, place, and stead, in any and all Registration Statements applicable to Pacific Select Separate Account of Pacific Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company, Separate Account A of Pacific Life Insurance Company, Separate Account B of Pacific Life Insurance Company and Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company and any amendments or supplements thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: 2/25/98 /s/ AUDREY L. MILFS Audrey L. Milfs Director POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N. Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for him/her in his/her name, place, and stead, in any and all Registration Statements applicable to Pacific Select Separate Account of Pacific Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company, Separate Account A of Pacific Life Insurance Company, Separate Account B of Pacific Life Insurance Company and Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company and any amendments or supplements thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: 02-25-98 /s/ KHANH T. TRAN Khanh T. Tran Director POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N. Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for him/her in his/her name, place, and stead, in any and all Registration Statements applicable to Pacific Select Separate Account of Pacific Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company, Separate Account A of Pacific Life Insurance Company, Separate Account B of Pacific Life Insurance Company and Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company and any amendments or supplements thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: March 10, 1998 /s/ EDWARD R. BYRD Edward R. Byrd POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N. Ledger, Jeffrey S. Puretz and Robin Yonis Sandlaufer his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for him/her in his/her name, place, and stead, in any and all Registration Statements applicable to Pacific Select Separate Account of Pacific Life Insurance Company, Pacific Select Exec Separate Account of Pacific Life Insurance Company, Separate Account A of Pacific Life Insurance Company, Separate Account B of Pacific Life Insurance Company and Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company and any amendments or supplements thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: April 12, 9999 /s/ Gerald W. Robinson ------------------------------ ------------------------- Gerald W. Robinson Executive Vice President EX-99.13 25 EXHIBIT 99.13 Exhibit 99.13 Performance Calculations EXHIBIT 99.13 - -------------------------------------------------------------------------------- PACIFIC INNOVATIONS VARIABLE ANNUITY SEPARATE ACCOUNT SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS AVERAGE INITIAL PREMIUM = $65,000. - -------------------------------------------------------------------------------- LAST YEAR ENDING 12/31/98
[Diversified Growth [Small [International Bond & Aggsv Eqty Emerg Mkts Research] Cap Equity] Large Cap] Income Equity Start Date 12/31/97 12/31/97 N/A 12/31/97 N/A 12/31/97 12/31/97 Beginning AUV 10.921505 9.281881 15.618726 11.231117 14.676255 End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 Ending AUV 12.193538 6.69746 15.816432 12.068716 18.854959 Annual Fee (none) $ - $ - $ - $ - $ - CDSC $ 81.00 $ 81.00 $ 81.00 $ 81.00 $ 81.00 Ending ERV 1,035.47 $ 640.56 $ 931.66 $ 993.58 $ 1,203.73 AATR W/Drawal 3.55% -35.94% -6.83% -0.64% 20.37% AATR Account 11.65% -27.84% 1.27% 7.46% 28.47% Mid-Cap Small-Cap REIT Multi-Strat Equity Income Growth LT Value Equity Index Index Start Date 12/31/97 12/31/97 12/31/97 N/A 12/31/97 N/A N/A Beginning AUV 13.014333 14.783078 12.707541 15.692570 End Date 12/31/98 12/31/98 12/31/98 12/31/98 Ending AUV 15.16588 18.102886 19.835315 19.877336 Annual Fee (none) $ - $ - $ - $ - CDSC $ 81.00 $ 81.00 $ 81.00 $ 81.00 Ending ERV $ 1,084.32 $ 1,143.57 $ 1,479.91 $ 1,185.67 AATR W/Drawal 8.43% 14.36% 47.99% 18.57% AATR Account 16.53% 22.46% 56.09% 26.67% International Large-Cap [Value] Govt Secty Mgd Bond Money Mkt High Yield Value Start Date 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 N/A Beginning AUV 12.762569 10.951870 11.137453 10.751784 11.829870 End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 Ending AUV 13.289721 11.797236 11.993331 11.163639 11.952791 Annual Fee (none) $ - $ - $ - $ - $ - CDSC $ 81.00 $ 81.00 $ 81.00 $ 81.00 $ 81.00 Ending ERV $ 960.30 $ 996.19 $ 995.85 $ 957.31 $ 929.39 AATR W/Drawal -3.97% -0.38% -0.42% -4.27% -7.06% AATR Account 4.13% 7.72% 7.68% 3.83% 1.04%
DOLLAR VALUES ARE PER $1000 OF INITIAL PREMIUM AVERAGE ANNUAL TOTAL RETURN (AATR) OF SURRENDER VALUE = [(ERV/$1000)]-1 - -------------------------------------------------------------------------------- PACIFIC INNOVATIONS VARIABLE ANNUITY SEPARATE ACCOUNT SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS AVERAGE INITIAL PREMIUM = $65,000. - -------------------------------------------------------------------------------- LAST 3 YEARS ENDING 12/31/98
[Diversified Growth [Small [International Bond & Aggsv Eqty Emerg Mkts Research] Cap Equity] Large Cap] Income Equity Start Date N/A N/A N/A 12/29/95 N/A 12/29/95 12/29/95 Beginning AUV 9.974120 10.010532 9.975743 End Date 12/31/98 12/31/98 12/31/98 Ending AUV 15.816432 12.068716 18.854959 Annual Fee (none) $ - $ - $ - CDSC $ 72.00 $ 72.00 $ 72.00 Ending ERV $ 1,513.75 $ 1,133.60 $ 1,818.08 AAR W/Drawal 14.82% 4.27% 22.05% AAR Account 16.61% 6.43% 23.64% Mid-Cap Small-Cap REIT Multi-Strat Equity Income Growth LT Value Equity Index Index Start Date 12/29/95 12/29/95 12/29/95 N/A 12/29/95 N/A N/A Beginning AUV 9.940604 9.898959 9.992945 9.920654 End Date 12/31/98 12/31/98 12/31/98 12/31/98 Ending AUV 15.16588 18.102886 19.835315 19.877336 Annual Fee (none) $ - $ - $ - $ - CDSC $ 72.00 $ 72.00 $ 72.00 $ 72.00 Ending ERV $ 1,453.65 $ 1,756.77 $ 1,912.93 $ 1,931.63 AAR W/Drawal 13.28% 20.66% 24.14% 24.54% AAR Account 15.12% 22.29% 25.67% 26.07% International Large-Cap [Value] Govt Secty Mgd Bond Money Mkt High Yield Value Start Date 12/29/95 12/29/95 12/29/95 12/29/95 12/29/95 N/A Beginning AUV 9.854125 9.993905 9.995276 9.995846 9.987722 End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 Ending AUV 13.289721 11.797236 11.993331 11.163639 11.952791 Annual Fee (none) $ - $ - $ - $ - $ - CDSC $ 72.00 $ 72.00 $ 72.00 $ 72.00 $ 72.00 Ending ERV $ 1,276.65 $ 1,108.44 $ 1,127.90 $ 1,044.83 $ 1,124.75 AAR W/Drawal 8.48% 3.49% 4.09% 1.47% 4.00% AAR Account 10.48% 5.69% 6.26% 3.75% 6.17%
DOLLAR VALUES ARE PER $1000 OF INITIAL PREMIUM AVERAGE ANNUAL RETURN (AAR) OF SURRENDER VALUE = [(ERV/$1000)^(To the power of 1/3)]-1 - -------------------------------------------------------------------------------- PACIFIC INNOVATIONS VARIABLE ANNUITY SEPARATE ACCOUNT SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS AVERAGE INITIAL PREMIUM = $65,000. - -------------------------------------------------------------------------------- LAST 5 YEARS ENDING 12/31/98
[Diversified Growth [Small [International Bond & Aggsv Eqty Emerg Mkts Research] Cap Equity] Large Cap] Income Equity Start Date N/A N/A N/A 12/31/93 N/A 12/31/93 12/31/93 Beginning AUV 9.087143 8.401809 8.531330 End Date 12/31/98 12/31/98 12/31/98 Ending AUV 15.816432 12.068716 18.854959 Annual Fee (none) $ - $ - $ - CDSC $ 0.00 $ 0.00 $ 0.00 Ending ERV $ 1,740.53 $ 1,436.44 $ 2,210.08 AAR W/Drawal 11.72% 7.51% 17.19% AAR Account 11.72% 7.51% 17.19% Mid-Cap Small-Cap REIT Multi-Strat Equity Income Growth LT Value Equity Index Index Start Date 12/31/93 12/31/93 N/A N/A 12/31/93 N/A N/A Beginning AUV 8.285226 7.753453 7.373274 End Date 12/31/98 12/31/98 12/31/98 Ending AUV 15.16588 18.102886 19.877336 Annual Fee (none) $ - $ - $ - CDSC $ 0.00 $ 0.00 $ 0.00 Ending ERV $ 1,830.47 $ 2,334.82 $ 2,695.86 AAR W/Drawal 12.85% 18.48% 21.94% AAR Account 12.85% 18.48% 21.94% International Large-Cap [Value] Govt Secty Mgd Bond Money Mkt High Yield Value Start Date 12/31/93 12/31/93 12/31/93 12/31/93 12/31/93 N/A Beginning AUV 8.912374 9.114697 9.027726 9.385727 8.604053 End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 Ending AUV 13.289721 11.797236 11.993331 11.163639 11.952791 Annual Fee (none) $ - $ - $ - $ - $ - CDSC $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Ending ERV $ 1,491.15 $ 1,294.31 $ 1,328.50 $ 1,189.43 $ 1,389.20 AAR W/Drawal 8.32% 5.29% 5.85% 3.53% 6.80% AAR Account 8.32% 5.29% 5.85% 3.53% 6.80%
DOLLAR VALUES ARE PER $1000 OF INITIAL PREMIUM AVERAGE ANNUAL RETURN (AAR) OF SURRENDER VALUE = [(ERV/$1000)^(To the power of 1/5)]-1 - -------------------------------------------------------------------------------- PACIFIC INNOVATIONS VARIABLE ANNUITY SEPARATE ACCOUNT SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS AVERAGE INITIAL PREMIUM = $65,000. - -------------------------------------------------------------------------------- LAST 10 YEARS ENDING 12/31/98
[Diversified Growth [Small [International Bond & Aggsv Eqty Emerg Mkts Research] Cap Equity] Large Cap] Income Equity Start Date N/A N/A N/A 12/30/88 N/A 12/30/88 12/30/88 Beginning AUV 4.232050 4.647387 4.507096 End Date 12/31/98 12/31/98 12/31/98 Ending AUV 15.816432 12.068716 18.854959 Annual Fee (none) $ - $ - $ - CDSC $ 0.00 $ 0.00 $ 0.00 Ending ERV $ 3,737.30 $ 2,596.88 $ 4,183.39 AAR W/Drawal 14.09% 10.01% 15.39% AAR Account 14.09% 10.01% 15.39% Mid-Cap Small-Cap REIT Multi-Strat Equity Income Growth LT Value Equity Index Index Start Date 12/30/88 12/30/88 N/A N/A N/A N/A N/A Beginning AUV 5.109905 4.642377 End Date 12/31/98 12/31/98 Ending AUV 15.16588 18.102886 Annual Fee (none) $ - $ - CDSC $ 0.00 $ 0.00 Ending ERV $ 2,967.94 $ 3,899.49 AAR W/Drawal 11.49% 14.58% AAR Account 11.49% 14.58% International Large-Cap [Value] Govt Secty Mgd Bond Money Mkt High Yield Value Start Date 12/30/88 12/30/88 12/30/88 12/30/88 12/30/88 N/A Beginning AUV 7.018895 5.689768 5.476500 7.663010 5.060288 End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 Ending AUV 13.289721 11.797236 11.993331 11.163639 11.952791 Annual Fee (none) $ - $ - $ - $ - $ - CDSC $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Ending ERV $ 1,893.42 $ 2,073.41 $ 2,189.96 $ 1,456.82 $ 2,362.08 AAR W/Drawal 6.59% 7.56% 8.15% 3.83% 8.98% AAR Account 6.59% 7.56% 8.15% 3.83% 8.98%
DOLLAR VALUES ARE PER $1000 OF INITIAL PREMIUM AVERAGE ANNUAL RETURN (AAR) OF SURRENDER VALUE = [(ERV/$1000)^(To the power of 1/10)]-1 - -------------------------------------------------------------------------------- PACIFIC INNOVATIONS VARIABLE ANNUITY SEPARATE ACCOUNT SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS AVERAGE INITIAL PREMIUM = $65,000. - -------------------------------------------------------------------------------- FROM INCEPTION OF FUND
[Diversified Growth [Small [International Bond & Aggsv Eqty Emerg Mkts Research] Cap Equity] Large Cap] Income Equity Start Date 4/1/96 4/1/96 N/A 1/4/88 N/A 1/3/84 1/3/84 Beginning AUV 9.272359 10.224821 3.715777 2.629096 2.515479 End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 Ending AUV 12.193538 6.697460 15.81643 12.068716 18.854959 Days 1004 1004 4014 5476 5476 Annual Fee (none) $ - $ - $ - $ - $ - CDSC $ 72.00 $ 72.00 $ - $ - $ - Ending ERV $ 1,147.35 $ 597.75 $ 4,256.56 $ 4,590.44 $ 7,495.57 AAR W/Drawal 5.12% -17.06% 14.08% 10.69% 14.37% AAR Account 7.48% -13.56% 14.08% 10.69% 14.37% Mid-Cap Small-Cap REIT Multi-Strat Equity Income Growth LT Value Equity Index Index Start Date 1/4/88 1/4/88 1/3/94 N/A 1/30/91 N/A N/A Beginning AUV 4.848630 4.348104 6.634056 5.257292 End Date 12/31/98 12/31/98 12/31/98 12/31/98 Ending AUV 15.16588 18.102886 19.835315 19.877336 Days 4014 4014 1823 2892 Annual Fee (none) $ - $ - $ - $ - CDSC $ - $ - $ - $ - Ending ERV $ 3,127.87 $ 4,163.40 $ 2,989.92 $ 3,780.91 AAR W/Drawal 10.93% 13.85% 24.52% 18.28% AAR Account 10.93% 13.85% 24.52% 18.28% International Large-Cap [Value] Govt Secty Mgd Bond Money Mkt High Yield Value Start Date 1/4/88 1/4/88 1/4/88 1/4/88 1/4/88 N/A Beginning AUV 6.046630 5.409269 5.184201 7.340021 4.737509 End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 Ending AUV 13.289721 11.797236 11.993331 11.163639 11.952791 Days 4014 4014 4014 4014 4014 Annual Fee (none) $ - $ - $ - $ - $ - CDSC $ - $ - $ - $ - $ - Ending ERV $ 2,197.87 $ 2,180.93 $ 2,313.44 $ 1,520.93 $ 2,523.01 AAR W/Drawal 7.42% 7.35% 7.93% 3.89% 8.78% AAR Account 7.42% 7.35% 7.93% 3.89% 8.78%
DOLLAR VALUES ARE PER $1000 OF INITIAL PREMIUM AVERAGE ANNUAL RETURN (AAR) OF SURRENDER VALUE = [(ERV/$1000)^(to the power of 365/# DAYS)]-1 - -------------------------------------------------------------------------------- PACIFIC INNOVATIONS VARIABLE ANNUITY SEPARATE ACCOUNT SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS AVERAGE INITIAL PREMIUM = $65,000. - -------------------------------------------------------------------------------- FROM INCEPTION OF SEPARATE ACCOUNT
[Diversified Growth [Small [International Bond & Aggsv Eqty Emerg Mkts Research] Cap Equity] Large Cap] Income Equity Start Date 4/17/96 4/17/96 N/A 1/2/96 N/A 1/2/96 1/2/96 Beginning AUV 9.908720 10.102463 10.000000 10.000000 10.000000 End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 Ending AUV 12.193538 6.697460 15.816432 12.068716 18.854959 Days 988 988 1094 1094 1094 Annual Fee (none) $ - $ - $ - $ - $ - CDSC $ 72.00 $ 72.00 $ 72.00 $ 72.00 $ 72.00 Ending ERV $ 1,158.59 $ 590.95 $ 1,509.64 $ 1,134.87 $ 1,813.50 AAR W/Drawal 5.59% -17.66% 14.73% 4.31% 21.97% AAR Account 7.97% -14.09% 16.53% 6.47% 23.56% Mid-Cap Small-Cap REIT Multi-Strat Equity Income Growth LT Value Equity Index Index Start Date 1/2/96 1/2/96 1/2/96 N/A 1/2/96 N/A N/A Beginning AUV 10.000000 10.000000 10.000000 10.000000 End Date 12/31/98 12/31/98 12/31/98 12/31/98 Ending AUV 15.16588 18.102886 19.835315 19.877336 Days 1094 1094 1094 1094 Annual Fee (none) $ - $ - $ - $ - CDSC $ 72.00 $ 72.00 $ 72.00 $ 72.00 Ending ERV $ 1,444.59 $ 1,738.29 $ 1,911.53 $ 1,915.73 AAR W/Drawal 13.06% 20.26% 24.13% 24.22% AAR Account 14.91% 21.90% 25.67% 25.76% International Large-Cap [Value] Govt Secty Mgd Bond Money Mkt High Yield Value Start Date 1/2/96 1/2/96 1/2/96 1/2/96 1/2/96 N/A Beginning AUV 10.000000 10.000000 10.000000 10.000000 10.000000 End Date 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 Ending AUV 13.289721 11.797236 11.993331 11.163639 11.952791 Days 1094 1094 1094 1094 1094 Annual Fee (none) $ - $ - $ - $ - $ - CDSC $ 72.00 $ 72.00 $ 72.00 $ 72.00 $ 72.00 Ending ERV $ 1,256.97 $ 1,107.72 $ 1,127.33 $ 1,044.36 $ 1,123.28 AAR W/Drawal 7.93% 3.47% 4.08% 1.46% 3.95% AAR Account 9.95% 5.67% 6.25% 3.74% 6.13%
DOLLAR VALUES ARE PER $1000 OF INITIAL PREMIUM AVERAGE ANNUAL RETURN (AAR) OF SURRENDER VALUE = [(ERV/$1000)^(To the power of 365/# DAYS)]-1 -----END PRIVACY-ENHANCED MESSAGE-----