-----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, Mx0rmy8MtNMyAlQi3V7K+jS+RSRfxC8Z15e2uZWhyzjux/O0mruWMAl2ee+L7+/w 1blR7RddtFM8mT6NurPwuA== 0001017062-98-000939.txt : 19980430 0001017062-98-000939.hdr.sgml : 19980430 ACCESSION NUMBER: 0001017062-98-000939 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 19980429 EFFECTIVENESS DATE: 19980501 SROS: NONE 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: 485BPOS SEC ACT: SEC FILE NUMBER: 033-88458 FILM NUMBER: 98603895 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-08946 FILM NUMBER: 98603896 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 485BPOS 1 POST EFFECTIVE AMENDMENT NO.3 As filed with the Securities and Exchange Commission on April 29, 1998 Registration No. 33-88458 811-8946 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_] Pre-Effective Amendment No. [_] Post Effective Amendment No. 3 [X] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_] Amendment No. 5 [X] (Check appropriate box or boxes) SEPARATE ACCOUNT A (Exact Name of Registrant) PACIFIC LIFE INSURANCE COMPANY* (Name of Depositor) 700 Newport Center Drive, Newport Beach, California 92660 (Address of Depositor's Principal Executive Offices)(Zip Code) (949) 640-3743 (Depositor's Telephone Number, including Area Code) Diane N. Ledger Vice President Pacific Life Insurance Company 700 Newport Center Drive Newport Beach, California 92660 (Name and address of agent for service) Copies of all communications to: Jeffrey S. Puretz, Esq. Dechert Price & Rhoads 1775 Eye Street, N.W. Washington, D.C. 20006-2401 [X] It is proposed that this filing will become effective on May 1, 1998 pursuant to paragraph (b) of Rule 485. Title of securities being registered: interests in individual flexible premium variable annuity contracts. Filing Fee: None DECLARATION PURSUANT TO RULE 24f-2 The Registrant has registered an indefinite number of securities under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940, and will file its Rule 24f-2 Notice for the fiscal year ending December 31, 1998 within the time period required by Section 24 of the Investment Company Act of 1940 and applicable regulations thereunder. *On September 1, 1997, Pacific Mutual Life Insurance Company converted from a mutual insurance company to a stock insurance company under California law, and changed its name to Pacific Life Insurance Company. SEPARATE ACCOUNT A FORM N-4 CROSS REFERENCE SHEET PART A Item No. Prospectus Heading 1. Cover Page Cover Page 2. Definitions SPECIAL DEFINITIONS 3. Synopsis SUMMARY; FEE TABLE 4. Condensed Financial Information YOUR INVESTMENT OPTIONS--Variable Investment Option Performance; ADDITIONAL INFORMATION--Financial Statements; Financial Highlights 5. General Description of Registrant, Depositor and Portfolio Companies SUMMARY--What are My Investment Options?: PACIFIC LIFE AND THE SEPARATE ACCOUNT--Pacific Life,-- Separate Account A; YOUR INVESTMENT OPTIONS--Your Variable Investment Options; ADDITIONAL INFORMATION--Voting Rights 6. Deductions SUMMARY--What Charges Will I Pay?,-- Can I Change My Investment Options?; FEE TABLE; HOW YOUR PAYMENTS ARE INVESTED-- Transfers; CHARGES, FEES AND DEDUCTIONS; WITHDRAWALS--Withdrawal Transaction Fees; ADDITIONAL INFORMATION--Sales Commissions 7. General Description of Variable Annuity Contracts SPECIAL DEFINITIONS; SUMMARY; WHY BUY A CONTRACT; PURCHASING YOUR CONTRACT--How to Apply for your Contract; HOW YOUR PAYMENTS ARE INVESTED; RETIREMENT BENEFITS AND OTHER PAYOUTS-- Annuitization, Fixed and Variable Annuities,--Annuity Options, Your Annuity Payments,--Death Benefits; ADDITIONAL INFORMATION--Voting Rights,--Changes to Your Contract,--Changes to ALL Contracts,--Investor Inquiries and Submitting Forms and Requests,--Timing of Payments and Transactions 8. Annuity Period RETIREMENT BENEFITS AND OTHER PAYOUTS 9. Death Benefit RETIREMENT BENEFITS AND OTHER PAYOUTS-- Death Benefits; WITHDRAWALS--Death of Owner Distribution Rules 10. Purchases and Contract Value SUMMARY--How Do I Purchase a Contract; PURCHASING YOUR CONTRACT; HOW YOUR PAYMENTS ARE INVESTED; PACIFIC LIFE AND THE SEPARATE ACCOUNT--Pacific Life 11. Redemptions SUMMARY--Can I Withdraw My Investment?, --Can I Return My Contract?; CHARGES, FEES AND DEDUCTIONS; WITHDRAWALS; ADDITIONAL INFORMATION--Timing of Payments and Transactions 12. Taxes SUMMARY; CHARGES, FEES AND DEDUCTIONS-- Premium Taxes; WITHDRAWALS--Optional Withdrawals,--Tax Consequences of Withdrawals; FEDERAL TAX STATUS 13. Legal Proceedings Not Applicable 14. Table of Contents of the Statement of Additional Information CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION PART B Item No. Statement of Additional Information Heading 15. Cover Page Cover Page 16. Table of Contents TABLE OF CONTENTS 17. General Information and History Not Applicable 18. Services Not Applicable 19. Purchase of Securities Being Offered THE CONTRACTS AND THE SEPARATE ACCOUNT-- Calculating Subaccount Unit Values,-- Systematic Transfer Programs 20. Underwriters DISTRIBUTION OF THE CONTRACTS--Pacific Mutual Distributors, Inc. 21. Calculation of Performance Data PERFORMANCE 22. Annuity Payments THE CONTRACTS AND THE SEPARATE ACCOUNT-- Variable Annuity Payment Amounts 23. Financial Statements FINANCIAL STATEMENTS PART C Information required to be included in Part C is set forth under the appropriate Item, so numbered, in Part C to this Registration Statement. [LOGO OF PACIFIC ONE] PROSPECTUS FOR PACIFIC ONE UNDERWRITTEN BY PACIFIC LIFE INSURANCE COMPANY DATED MAY 1, 1998 -------------- PROSPECTUS FOR PACIFIC SELECT FUND DATED MAY 1, 1998 [LOGO OF PACIFIC ONE] PACIFIC ONE AN INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT ISSUED BY PACIFIC LIFE INSURANCE COMPANY MAILING ADDRESS: P.O. BOX 7187 PASADENA, CALIFORNIA 91109-7187 1-800-722-2333 This Prospectus describes Pacific One (the "Contract") offered by Pacific Life Insurance Company ("Pacific Life," "we," "us" or "our", formerly known as Pacific Mutual Life Insurance Company). The Contracts provide Policyholders ("Contract Owners," "Owners," "you" or "your") with flexibility in long-term financial planning, including planning for retirement, and are designed to meet the insurance needs or financial objectives of the Policyholder. Contracts are available both to individuals and under certain tax-qualified retirement plans. Payout options under the Contracts include variable annuities funded through our Separate Account A (the "Separate Account") and fixed annuities funded by our General Account. Fourteen Investment Options are currently available. Each of the thirteen Variable Investment Options now in effect is a subaccount of the Separate Account, and provides variable returns by investing in shares of a corresponding Portfolio of Pacific Select Fund: Money Market Portfolio Multi-Strategy Portfolio High Yield Bond Portfolio Equity Portfolio Managed Bond Portfolio Bond and Income Portfolio Government Securities Portfolio Equity Index Portfolio Aggressive Equity Portfolio International Portfolio Growth LT Portfolio Emerging Markets Portfolio Equity Income Portfolio A Fixed Option is also available; it provides a fixed rate of return and is funded by our General Account. THIS PROSPECTUS PROVIDES INFORMATION THAT YOU SHOULD KNOW BEFORE PURCHASING A CONTRACT. IN ADDITION, THIS PROSPECTUS IS ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE PACIFIC SELECT FUND. YOU SHOULD READ BOTH OF THESE PROSPECTUSES CAREFULLY AND RETAIN THEM FOR YOUR FUTURE REFERENCE. Additional information about the Contract and the Separate Account has been filed with the Securities and Exchange Commission in a Statement of Additional Information ("SAI"), dated May 1, 1998. You may obtain a free copy of the SAI by writing or calling Pacific Life at the number and address above. The information contained in the SAI is incorporated by reference into this Prospectus. The table of contents for the SAI appears on page 40 of this Prospectus. The SEC maintains a Web site (http://www.sec.gov) that contains the SAI material incorporated by reference and other information regarding registrants that file electronically with the SEC. --------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------- THE CONTRACT IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. IT IS NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN A CONTRACT INVOLVES RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL. --------------- THE CONTRACT IS NOT AVAILABLE IN ALL STATES AND THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY JURISDICTION IN WHICH SUCH AN OFFER MAY NOT BE MADE LAWFULLY. NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE RELATED STATEMENT OF ADDITIONAL INFORMATION (OR ANY SALES LITERATURE APPROVED BY PACIFIC LIFE), AND ANY SUCH UNAUTHORIZED INFORMATION OR REPRESENTATION IS, IF GIVEN OR MADE, NOT TO BE RELIED UPON. DATED: MAY 1, 1998 TABLE OF CONTENTS
PAGE ---- SPECIAL DEFINITIONS........................................................ 4 SUMMARY.................................................................... 7 FEE TABLE.................................................................. 8 FINANCIAL HIGHLIGHTS....................................................... 10 SELECTED ACCUMULATION UNIT INFORMATION..................................... 10 WHY BUY A CONTRACT......................................................... 11 YOUR INVESTMENT OPTIONS.................................................... 11 Your Variable Investment Options......................................... 11 Variable Investment Option Performance................................... 13 Your Fixed Option........................................................ 13 PURCHASING YOUR CONTRACT................................................... 13 How to Apply for Your Contract........................................... 13 Making Your Purchase Payments............................................ 14 HOW YOUR PAYMENTS ARE ALLOCATED............................................ 14 Choosing Your Investment Options......................................... 14 Investing in Variable Investment Options................................. 14 When Your Investment is Effective........................................ 15 Transfers................................................................ 15 CHARGES, FEES AND DEDUCTIONS............................................... 16 Premium Taxes............................................................ 16 Annual Fee............................................................... 16 Waivers and Reduced Charges.............................................. 17 Mortality and Expense Risk Charge........................................ 17 Administrative Fee....................................................... 18 Expenses of Pacific Select Fund.......................................... 18 RETIREMENT BENEFITS AND OTHER PAYOUTS...................................... 18 Selecting Your Annuitant................................................. 18 Annuitization............................................................ 18 Choosing Your Annuity Date ("Annuity Start Date")........................ 19 Default Annuity Date and Options......................................... 19 Choosing Your Annuity Option............................................. 20 Your Annuity Payments.................................................... 21 Death Benefits........................................................... 22 Death of Owner Distribution Rules........................................ 22 WITHDRAWALS................................................................ 24 Optional Withdrawals..................................................... 24 Tax Consequences of Withdrawals.......................................... 25 Short-Term Cancellation Right ("Free Look").............................. 25 PACIFIC LIFE AND THE SEPARATE ACCOUNT...................................... 26 Pacific Life............................................................. 26 Separate Account A....................................................... 26
2
PAGE ---- FEDERAL TAX STATUS......................................................... 27 Taxes Payable by Contract Owners: General Rules.......................... 28 Qualified Contracts...................................................... 29 Loans.................................................................... 31 Withholding.............................................................. 32 Impact of Federal Income Taxes........................................... 33 Taxes on Pacific Life.................................................... 33 ADDITIONAL INFORMATION..................................................... 33 Voting Rights............................................................ 33 Changes to Your Contract................................................. 34 Changes to ALL Contracts................................................. 34 Investor Inquiries and Submitting Forms and Requests..................... 35 Telephone Transactions................................................... 36 Timing of Payments and Transactions...................................... 36 Confirmations Statements and Other Reports to Contract Owners............ 37 Replacement of Life Insurance or Annuities............................... 37 Sales Commissions........................................................ 37 Financial Statements..................................................... 38 Preparation for the Year 2000............................................ 38 THE FIXED OPTION........................................................... 38 General Information...................................................... 38 Guarantee Terms.......................................................... 38 Withdrawals and Transfers................................................ 39 CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION........................ 40 APPENDIX A: STATE LAW VARIATIONS........................................... 41
3 SPECIAL DEFINITIONS In this Prospectus, "we," "our" and "us" refer to Pacific Life Insurance Company ("Pacific Life"); "you" and "your" refer to the Contract Owner. Account Value--The amount of your Contract Value allocated to any one of the Investment Options. Annual Fee--A $40 fee charged each year on your Contract Anniversary and at the time of a full withdrawal, if your Contract Value is less than $100,000 on that date. Annuitant--A person on whose life annuity payments may be determined. An Annuitant's life may also be used to determine certain increases in death benefits, and to determine the Annuity Date. A Contract may name a single ("sole") Annuitant or two ("Joint") Annuitants, and may also name a "Contingent" Annuitant. If you name Joint Annuitants or a Contingent Annuitant, "the Annuitant" means the sole surviving Annuitant, unless otherwise stated. Annuity Date--Also called the "Annuity Start Date." The date specified in your Contract or the date you later elect, if any for the commencement of annuity payments if your 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. You may change your Annuity Date by notifying us as described in this Prospectus. Annuity Option--Any one of the income options 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 the amount invested in a Variable Investment Option is determined, which currently includes each day that the New York Stock Exchange is open for trading and on which our administrative offices are open. The New York Stock Exchange is closed on weekends and on the following holidays: New Year's Day, President's Day, Good Friday, Memorial Day, July Fourth, Labor Day, Thanksgiving Day, and Christmas Day. We may choose to close on other holidays, a day immediately preceding or following a national holiday, or in emergency situations. In this Prospectus, "day" or "date" means Business Day unless otherwise specified. If any transaction or event called for under a Contract is scheduled to occur on a day that is not a Business Day, such transaction or event will be deemed to occur on the next following Business Day unless otherwise specified. Special circumstances such as leap years and months with fewer than 31 days are discussed in the SAI. Each Business Day ends at 4:00 p.m. Eastern Time. Code--The Internal Revenue Code of 1986, as amended. Contingent Annuitant--A person, named in your Contract, who will become your sole surviving Annuitant if your existing sole Annuitant (or both Joint Annuitants) should die before your Annuity Date. Contingent Owner--A person, named in your Contract, who may succeed to the rights of a Contract Owner of your Contract if all named Contract Owners die. Contract Anniversary--The same date, in each subsequent year, as your Contract Date. Contract Date--The date we issue your Contract. Contract Debt--As of the end of any given Business Day, the principal amount you have outstanding on any loan under your Contract, plus any accrued and unpaid interest. Loans are available only on certain Qualified Contracts. 4 Contract Owner, Owner, Policyholder, you or your--Generally, a person who purchases a Pacific One Contract and makes the Purchase Payments. A Contract Owner has all rights in the Contract before the Annuity Date, including the right to make withdrawals, designate and change beneficiaries, transfer amounts among Investment Options, and designate an Annuity Option. If your Contract names Joint Owners, both Joint Owners are Contract Owners and share all such rights. Contract Value--At the end of any given Business Day, your Variable Account Value, plus your Fixed Option Value, plus the amount held in the Loan Account to secure your Contract Debt increased by interest earned and decreased by any principal repayments and/or withdrawals or transfers of interest earned. Contract Year--A year that starts on the Contract Date or on a Contract Anniversary. Fixed Option--If you allocate all or a part of your Purchase Payments or Contract Value to the Fixed Option, such amounts are held in our General Account and receive interest at rates declared periodically, but not less than an annual rate of 3%. Fixed Option Value--The aggregate amount under your Contract 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, from time to time, for amounts allocated to the Fixed Option. Guarantee Term--The period during which amounts you allocate to the Fixed Option earn a Guaranteed Interest Rate. Investment Option--A Subaccount or the Fixed Option. Joint Annuitant--If your Contract is a Non-Qualified Contract, you may name two Annuitants, called "Joint Annuitants," in your Application for your Contract. Special restrictions apply for Qualified Contracts. 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 series or portfolio of the Fund. Primary Annuitant--The individual, named in your Contract, the events in the life of whom are of primary importance in affecting the timing or amount of the payment under the Contract. Purchase Payment--An amount paid to us by or on behalf of a Contract Owner, as consideration for the benefits provided under the Contract. Qualified Contract--A Contract that qualifies under the Code as an individual retirement annuity ("IRA"), or a Contract purchased by a Qualified Plan, qualifying for special tax treatment under the Code. Qualified Plan--A retirement plan that receives favorable tax treatment under Section 401, 408, 408A, 403(a), 403(b) 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. 5 Subaccount--An investment division of the Separate Account. Each Subaccount invests its assets in shares of a corresponding Portfolio. Subaccount Annuity Unit--Subaccount Annuity Units (or "Annuity Units") are used to measure variation in variable annuity payments. To the extent you elect to convert all or some of your Contract Value into variable annuity payments, the amount of each annuity payment (after the first payment) will vary with the value and number of Annuity Units in each Subaccount attributed to any variable annuity payments. At annuitization (after any applicable premium taxes and/or other taxes are paid), the amount annuitized to a variable annuity determines the amount of your first variable annuity payment and the number of Annuity Units credited to your annuity in each Subaccount. The value of Subaccount Annuity Units, like the value of Subaccount Units, 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 balance 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, and also reflect charges against the Separate Account. Changes in Subaccount Annuity Unit Values also reflect an additional factor that adjusts Subaccount Annuity Unit Values to offset our Annuity Option Table's implicit assumption of an annual investment return of 5%; the effect of this assumed investment return is explained in detail in the 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. 6 SUMMARY This brief description is only an overview of the more significant features of your Contract. More detailed information may be found in subsequent sections of this Prospectus, in the SAI, and in the Contract itself. Endorsements to your Contract may contain variations from the standardized information in this Prospectus. In addition, any variations due to requirements particular to your state or jurisdiction are set forth in supplements attached to or accompanying this Prospectus. IF ANY CONTRACT ENDORSEMENTS OR SUPPLEMENTAL VARIATIONS TO THIS PROSPECTUS CONFLICT WITH OTHER INFORMATION IN THE CONTRACT FORM OR IN THIS PROSPECTUS, THE ENDORSEMENTS AND SUPPLEMENTS CONTROL YOUR CONTRACT. WHAT IS THE CONTRACT? Pacific One (the "Contract") is a deferred annuity designed to be a long-term financial planning device, permitting you to invest on a tax-deferred basis for retirement or other long-range goals, and to receive a series of regular payments for life or a period of years. See FEDERAL TAX STATUS. HOW DO I PURCHASE A CONTRACT? You must invest at least $25,000 to buy a Contract. After this initial investment you may make additional investments but you are not required to do so. Your initial investment may be payable in automatic installments over your first Contract Year. See PURCHASING YOUR CONTRACT. WHAT ARE MY INVESTMENT OPTIONS? You select your own Investment Options. Thirteen of the fourteen Investment Options are Variable Investment Options available through Separate Account A. Each Variable Investment Option invests in a corresponding Portfolio of the Fund. We are the investment adviser to the Fund, and we and the Fund have retained other portfolio managers for eleven of the Portfolios. You bear the investment risk associated with the Variable Investment Options, and you should expect your Contract Value allocated to these Investment Options and the value of any Subaccount Annuity Units attributed to any variable annuity payments to fluctuate. See HOW YOUR PAYMENTS ARE ALLOCATED. The fourteenth option is a Fixed Option, providing a fixed annual interest rate of at least 3%; the portion of your Purchase Payments or Contract Value allocated to the Fixed Option is held in our General Account. You may select as many Investment Options as you wish. Prior to your Annuity Date, this selection is made by the Contract Owner(s); after your Annuity Date, any of the Variable Investment Options may be selected if you choose variable- dollar annuity payments; this selection may be made by the Annuitant(s). CAN I CHANGE MY INVESTMENT OPTIONS? You may transfer amounts (subject to certain restrictions) from one Investment Option to another at any time on or prior to your Annuity Date; after your Annuity Date, up to four exchanges of Subaccount Annuity Units may be made in any twelve-month period. You may transfer amounts automatically using dollar cost averaging, automatic portfolio rebalancing, or an earnings sweep. See TRANSFERS in this Prospectus and SYSTEMATIC TRANSFER PROGRAMS in the SAI. Transaction fees may be imposed in the future for excessive transfers. WHAT CHARGES WILL I PAY? An Administrative Fee equal to an annual factor expressed as a decimal (where 1.00 is equal to 100%) of 0.0015, and a mortality and expense risk charge equal to an annual factor of 0.0125, are charged against assets held in the Variable Investment Options. Amounts invested in the Variable Investment Options are also subject to the operating expenses imposed on the corresponding Portfolio of the Fund. Before you annuitize, an Annual Fee of $40 is charged each year and at the time of a full withdrawal if your Contract Value is less than $100,000. You may also be subject to other fees. See CHARGES, FEES AND DEDUCTIONS. CAN I WITHDRAW MY CONTRACT VALUE? Generally, you may withdraw all or part of your Contract Value at any time on or prior to your Annuity Date. Restrictions are imposed on withdrawals from certain Qualified Contracts. Withdrawals may be subject to tax and, in certain circumstances, a tax penalty. See WITHDRAWALS and FEDERAL TAX STATUS. 7 CAN I RETURN MY CONTRACT? For a limited time, usually about 10 days after you receive it, you may return your Contract for a refund in accordance with the terms of its "free look" provision. See SHORT-TERM CANCELLATION RIGHT ("FREE LOOK"). HOW DO I REACH PACIFIC LIFE? You can reach our service representatives between 6:00 a.m. and 5:00 p.m., Pacific time, at 1-800-722-2333. To send payments, forms, or requests, see INVESTOR INQUIRIES AND SUBMITTING FORMS AND REQUESTS. FEE TABLE The purpose of this fee table is to assist you in understanding the various costs and expenses that you will bear directly or indirectly under your Contract. The table reflects expenses of the Separate Account as well as expenses of the Fund. Expenses shown under "Contract Owner Transaction Expenses" and "Separate Account A Annual Expenses" are specified under the terms of the Contract and are fixed. Expenses shown under "Fund Annual Expenses After Expense Limitation" are estimated expenses of the Fund; Fund expenses are not specified under the terms of the Contract and may vary from year to year. In addition to the charges and expenses described below, premium taxes and/or other taxes may apply. See PREMIUM TAXES in this Prospectus and the discussion under ORGANIZATION AND MANAGEMENT OF THE FUND in the Fund's Prospectus and under INVESTMENT ADVISER AND PORTFOLIO MANAGEMENT AGREEMENTS in the Fund's SAI. CONTRACT OWNER TRANSACTION EXPENSES Sales Charge Imposed on Purchase Payments.................... None Deferred Sales Charge........................................ None Withdrawal Transaction Fee/1/................................ None Transfer Fee/2/.............................................. None ANNUAL FEE/3/................................................ $40.00 SEPARATE ACCOUNT A ANNUAL EXPENSES (as a percentage of average daily Account value) Mortality and Expense Risk Charge............................ 1.25% Administrative Fee........................................... 0.15% ------ Total Separate Account A Annual Expenses..................... 1.40% ======
- ---- /1/We reserve the right to impose a transaction fee of up to $15 in the future on excess partial withdrawals. See OPTIONAL WITHDRAWALS. /2/We reserve the right to impose a transaction fee of up to $15 in the future on excess transfers. See TRANSFERS. /3/This fee will be charged on each Contract Anniversary prior to your Annuity Date and at the time of a full withdrawal of any Contract Value unless your Contract Value is at least $100,000 on that date. 8 FUND ANNUAL EXPENSES AFTER EXPENSE LIMITATION* (AS A PERCENTAGE OF EACH PORTFOLIO'S AVERAGE DAILY NET ASSETS)
ADVISORY OTHER TOTAL PORTFOLIO FEE EXPENSES EXPENSES - --------- -------- -------- -------- Money Market......................................... .38% .06% .44% High Yield Bond...................................... .60% .05% .65% Managed Bond......................................... .60% .06% .66% Government Securities................................ .60% .06% .66% Aggressive Equity.................................... .80% .06% .86% Growth LT............................................ .75% .07% .82% Equity Income........................................ .65% .05% .70% Multi-Strategy....................................... .65% .06% .71% Equity............................................... .65% .05% .70% Bond and Income...................................... .60% .06% .66% Equity Index......................................... .17% .06% .23% International........................................ .85%* .19% 1.04% Emerging Markets..................................... 1.10% .36% 1.46%
Example: If, at the end of the applicable time period, you withdraw your entire Variable Account Value or your entire Contract Value, you annuitize, or you do not withdraw or annuitize, you would pay the following cumulative expenses on each $1,000 invested, assuming 5% annual return on assets:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- Money Market.................................... $19 $59 $102 $220 High Yield Bond................................. $21 $66 $113 $242 Managed Bond.................................... $21 $66 $113 $243 Government Securities........................... $21 $66 $113 $243 Aggressive Equity............................... $23 $72 $123 $263 Growth LT....................................... $23 $71 $121 $259 Equity Income................................... $22 $67 $115 $247 Multi-Strategy.................................. $22 $68 $116 $248 Equity.......................................... $22 $67 $115 $247 Bond and Income................................. $21 $66 $113 $243 Equity Index.................................... $17 $53 $ 91 $198 International................................... $25 $77 $131 $280 Emerging Markets................................ $29 $90 $153 $322
*THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES; ACTUAL EXPENSES INCURRED IN ANY GIVEN YEAR MAY BE MORE OR LESS THAN THOSE SHOWN IN THE EXAMPLES. The expenses listed for the Fund Portfolios reflect current expenses for the year ending December 31, 1997, except that the Advisory Fees of the International Portfolio has been adjusted to reflect the Advisory Fee without any waiver. The Actual Advisory Fee paid by the International Portfolio in 1997 was 0.83% of the Portfolio's average daily net assets. This reflects the Advisory Fee waived by Pacific Life in connection with the change in the Portfolio Manager to Morgan Stanley that occurred in June 1, 1997. Pacific Life, as Investment Adviser to the Fund, adopted the policy to waive our fees or otherwise reimburse expenses so that operating expenses (exclusive of advisory fees, additional custodial fees associated with holding foreign securities, foreign taxes on dividends, interest or capital gains, and extraordinary expenses) are not greater than 0.25% of average daily net assets per year. We began the policy in 1989 and intend to continue this policy until at least December 31, 1999. No reimbursement to the Portfolios was necessary for the Fund's fiscal year 1997. There can be no assurance that the expense reimbursement arrangement will continue after December 31, 1999, and any unreimbursed expenses would be reflected in the Policy Owner's Accumulated Value and in some instances, the death benefit. The examples use an assumed contract value of $80,000, and reflect the deduction of the Annual Fee amount, without regard to the waiver of such fee for Contract Values over $100,000. 9 FINANCIAL HIGHLIGHTS The following tables present financial highlights with respect to each Variable Account of the Separate Account. The information in the tables for the periods ended December 31, 1996 and 1997 is included in the Separate Account's financial statements for the respective years that have been audited by Deloitte & Touche LLP, independent auditors. The tables should be read in conjunction with the Separate Account's financial statements, which are in the Separate Account's Annual Report dated as of December 31, 1997. SELECTED ACCUMULATION UNIT* INFORMATION Selected accumulation unit information as of the year ended December 31st for the period:
1997 1996 ACCUMULATION UNIT VALUE AT BEGINNING OF PERIOD: Money Market Variable Account(a)....................... $10.36 $10.00 High Yield Bond Variable Account(a).................... 10.96 10.00 Managed Bond Variable Account(a)....................... 10.27 10.00 Government Securities Variable Account(a).............. 10.14 10.00 Aggressive Equity Variable Account(b).................. 10.67 10.00 Growth LT Variable Account(a).......................... 11.61 10.00 Equity Income Variable Account(a)...................... 11.66 10.00 Multi-Strategy Variable Account(a)..................... 11.03 10.00 Equity Variable Account(a)............................. 12.59 10.00 Bond and Income Variable Account(a).................... 9.79 10.00 Equity Index Variable Account(a)....................... 11.97 10.00 International Variable Account(a)...................... 11.84 10.00 Emerging Markets Variable Account(b)................... 9.57 10.00 - ------------------------------------------------------------------------------ ACCUMULATION UNIT VALUE AT END OF PERIOD: Money Market Variable Account.......................... 10.75 $10.36 High Yield Bond Variable Account....................... 11.83 10.96 Managed Bond Variable Account.......................... 11.14 10.27 Government Securities Variable Account................. 10.95 10.14 Aggressive Equity Variable Account..................... 10.92 10.67 Growth LT Variable Account............................. 12.71 11.61 Equity Income Variable Account......................... 14.78 11.66 Multi-Strategy Variable Account........................ 13.01 11.03 Equity Variable Account................................ 14.68 12.59 Bond and Income Variable Account....................... 11.23 9.79 Equity Index Variable Account.......................... 15.69 11.97 International Variable Account......................... 12.76 11.84 Emerging Markets Variable Account...................... 9.28 9.57 - ------------------------------------------------------------------------------ NUMBER OF ACCUMULATION UNITS OUTSTANDING AT END OF PERIOD: Money Market Variable Account.......................... 3,041,495 1,478,808 High Yield Bond Variable Account....................... 2,702,260 630,637 Managed Bond Variable Account.......................... 4,434,069 742,041 Government Securities Variable Account................. 1,506,839 673,682 Aggressive Equity Variable Account..................... 1,711,363 387,987 Growth LT Variable Account............................. 3,826,332 950,317 Equity Income Variable Account......................... 4,189,318 743,123 Multi-Strategy Variable Account........................ 1,830,504 294,936 Equity Variable Account................................ 1,983,738 453,223 Bond and Income Variable Account....................... 975,740 154,590 Equity Index Variable Account.......................... 4,460,482 757,175 International Variable Account......................... 5,292,436 1,312,817 Emerging Markets Variable Account...................... 1,342,086 240,607
* Accumulation Unit: unit of measure used to calculate the value of a Contract Owner's interest in a Variable Account during the Accumulation Period. Date Variable Accounts began operations: (a) January 2, 1996 (b) April 17, 1996 10 WHY BUY A CONTRACT Your Pacific One Contract (your "Contract") is a deferred annuity that provides you with flexibility in tax-deferred retirement planning or other long-term financial planning. You may select among a variety of Variable Investment Options and a Fixed Option. You may choose to add to your Contract Value at any time, and your additional investments may be in any amount you choose (subject to certain limitations). When you annuitize, your Annuitant(s) will receive a series of variable and/or fixed payments for life or for a specified number of years. If you purchase a Contract with after-tax dollars, (a "Non-Qualified Contract") or if your Contract is purchased through a Qualified Plan or IRA (a "Qualified Contract"), your earnings on your Contract are not subject to tax until amounts are withdrawn or distributed (including annuity payments). See FEDERAL TAX STATUS. YOUR INVESTMENT OPTIONS You may choose among fourteen different Investment Options. YOUR VARIABLE INVESTMENT OPTIONS Separate Account A, a separate account of ours, currently offers you thirteen "Variable Investment Options" (also called "Subaccounts"). Each Variable Investment Option invests in a separate Portfolio of the Fund. Your Variable Investment Options are: . Money Market Subaccount . High Yield Bond Subaccount . Managed Bond Subaccount . Government Securities Subaccount . Aggressive Equity Subaccount . Growth LT Subaccount . Equity Income Subaccount . Multi-Strategy Subaccount . Equity Subaccount . Bond and Income Subaccount . Equity Index Subaccount . International Subaccount . Emerging Markets Subaccount 11 What Are Each of These Options? For your convenience, the following chart summarizes some basic data about each Portfolio. THIS CHART IS ONLY A SUMMARY. FOR MORE COMPLETE INFORMATION ON EACH PORTFOLIO, INCLUDING A DISCUSSION OF THE PORTFOLIO'S INVESTMENT TECHNIQUES AND THE RISKS ASSOCIATED WITH ITS INVESTMENTS, SEE THE ACCOMPANYING FUND PROSPECTUS. NO ASSURANCE CAN BE GIVEN THAT A PORTFOLIO WILL ACHIEVE ITS INVESTMENT OBJECTIVE. YOU SHOULD READ THE FUND PROSPECTUS CAREFULLY BEFORE INVESTING.
- ------------------------------------------------------------------------------------------ PRIMARY INVESTMENTS (UNDER NORMAL PORTFOLIO INVESTMENT OBJECTIVE CONDITIONS) PORTFOLIO MANAGER - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ Money Market Current income Highest quality money Pacific Life consistent with market securities. preservation of capital. - ------------------------------------------------------------------------------------------ High Yield Bond High level of current Intermediate- and Pacific Life income. long-term high- yielding lower and medium quality ("high risk") fixed income securities. - ------------------------------------------------------------------------------------------ Managed Bond Maximize total return Investment grade Pacific Investment consistent with marketable debt Management Company prudent investment securities. Will management. normally maintain an average portfolio duration of 3-7 years. - ------------------------------------------------------------------------------------------ Government Securi- Maximize total return Securities that are Pacific Investment ties consistent with obligations of or Management Company prudent investment guaranteed by the U.S. management. Government, its agencies or instrumentalities (including futures contracts and options thereon). Will normally maintain an average portfolio duration of 3-7 years. - ------------------------------------------------------------------------------------------ Aggressive Equity Capital appreciation. Common stock of small Alliance Capital emerging growth and Management L.P. medium capitalization companies. - ------------------------------------------------------------------------------------------ Growth LT Long-term growth of Equity securities. Janus Capital capital consistent Corporation with preservation of capital. - ------------------------------------------------------------------------------------------ Equity Income Long-term growth of Dividend-paying common J.P. Morgan Investment capital and income. stock. Management Inc. - ------------------------------------------------------------------------------------------ Multi-Strategy High total return. Equity and fixed J.P. Morgan Investment income securities. Management Inc. - ------------------------------------------------------------------------------------------ Equity Capital appreciation. Common stocks and Goldman Sachs Asset securities convertible Management into or exchangeable for common stocks. - ------------------------------------------------------------------------------------------ Bond and Income Provide total return Investment grade debt Goldman Sachs Asset and income consistent securities. Will Management with prudent normally maintain an investment management. average portfolio duration within one- half year of a long- term bond index. - ------------------------------------------------------------------------------------------ Equity Index Investment results Stocks included in the Bankers Trust Company that correspond to the Standard & Poor's 500 total return Composite Stock Price performance of common Index (the "S&P 500"). stocks publicly traded in the U.S. - ------------------------------------------------------------------------------------------ International Long-term capital Equity securities of Morgan Stanley Asset appreciation. corporations domiciled Management Inc. outside the U.S. - ------------------------------------------------------------------------------------------ Emerging Markets Long-term growth of Common stocks of Blairlogie Capital capital. companies domiciled in Management emerging market countries. - ------------------------------------------------------------------------------------------
12 The Investment Adviser We are the investment adviser for the Fund. We and the Fund have retained other portfolio managers, supervised by us, for eleven of the Portfolios. VARIABLE INVESTMENT OPTION PERFORMANCE Historical performance information can help you understand how investment performance can affect your investment in the Variable Investment Options. Although the 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 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 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 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 of our ratings both as an insurance company and as to our claims-paying ability that are produced by rating agencies and organizations. YOUR FIXED OPTION The Fixed Option offers you a guaranteed minimum interest rate on the amounts you allocate to this Option. Amounts you allocate to the Fixed Option, and your earnings credited to your Fixed Option Value, are held in our General Account. For more detailed information about the Fixed Option, see THE FIXED OPTION section in this Prospectus. PURCHASING YOUR CONTRACT HOW TO APPLY FOR YOUR CONTRACT To purchase a Contract, fill out an Application and submit it along with your initial Purchase Payment to Pacific 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 the next two Business Days. If some information is missing from your Application, we may delay issuing your Contract while we obtain the missing information; however, we will not hold your initial Purchase Payment for more than five Business Days without your permission. If you already own a deferred annuity or a life insurance policy, you may purchase a Contract by exchanging your existing contract. You must submit all contracts to be exchanged when you submit your Application. Call your representative, or call us at 1-800-722-2333, if you are interested in this option. We reserve the right to reject any Application or Purchase Payment for any reason, subject to any applicable nondiscrimination laws and to our own standards and guidelines. The maximum age of a Contract Owner for which a Contract will be issued is 85, which is calculated as of his or her age last birthday. If there are Joint and/or Contingent Owners, all must be under the age of 86. If the sole Contract Owner or sole annuitant named in the application for a Contract dies prior to our issuance of a Contract, then the application for the Contract 13 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. MAKING YOUR PURCHASE PAYMENTS Making Your Initial Payment Your initial Purchase Payment must be at least $25,000. You may pay this entire amount when you submit your Application, or you may choose our pre- authorized checking plan ("PAC") which allows you to pay in equal monthly installments over one year (at least $2,000 per month). If you choose 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 must be at least $1,000. Forms of Payment Your initial and additional Purchase Payments may be sent by personal or bank check or by wire transfer. You may also make additional PAC Purchase Payments via electronic funds transfer. All checks must be drawn on U.S. funds. If you make Purchase Payments by check other than a cashier's check, your withdrawal requests and any refund under the "free look" may be delayed until your check has cleared. HOW YOUR PAYMENTS ARE ALLOCATED CHOOSING YOUR INVESTMENT OPTIONS You may allocate your Purchase Payments among the thirteen Subaccounts and the Fixed Option. Allocations of your initial Purchase Payment to the Investment Options you selected will be effective either on your Contract Date or on your Free Look Transfer Date. See WITHDRAWALS: SHORT-TERM CANCELLATION RIGHT ("FREE LOOK"). Each additional Purchase Payment will be allocated to the Investment Options according to your allocation instructions in your Application, or most recent instructions, if any, subject to the terms described in the WITHDRAWALS: SHORT-TERM CANCELLATION RIGHT ("FREE LOOK") SECTION. We reserve the right, in the future, to require that your allocation to any particular Investment Option meet a certain minimum amount. 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 issued. INVESTING IN VARIABLE INVESTMENT OPTIONS Each time you allocate your investment to a Variable Investment Option, your Contract is credited with a number of "Subaccount Units" in that Subaccount. The number of Subaccount Units credited is equal to the amount you have allocated to that Subaccount, divided by the "Unit Value" of one Unit of that Subaccount. Example: You allocate $3,000 to the Government Securities Subaccount. At the end of the Business Day your investment allocation is effective, the value of one Unit in the Government Securities Subaccount is $15. As a result, 200 Units are credited to your Contract for your $3,000. 14 Your Variable Account Value Will Change After we credit your Contract with Subaccount Units, the value of those Units will usually fluctuate. This means that, from time to time, your investment allocated to the Variable Investment Options may be worth more or less than the original Purchase Payments to which those amounts can be attributed. Fluctuations in Subaccount Unit Value will not change the number of Units credited to your Contract. Subaccount Unit Values will vary in accordance with the investment performance of the corresponding Portfolio. For example, the value of Units in the Managed Bond Subaccount will change to reflect the performance of the Managed Bond Portfolio (including that Portfolio's investment income, its capital gains and losses, and its expenses). Subaccount Unit Values are also adjusted to reflect the Administrative Fee and Risk Charge imposed on the Separate Account. We calculate the value of all Subaccount Units at or about 4:00 p.m. Eastern time on each Business Day. The SAI contains a detailed discussion of these calculations. WHEN YOUR INVESTMENT IS EFFECTIVE The day your investment is effective determines the Unit Value at which Subaccount Units are attributed to your Contract. In the case of transfers or withdrawals, the effective day determines the Unit Value at which affected Subaccount Units are debited and/or credited under your Contract. That value is the value of the Subaccount Units next calculated after your transaction is effective. Your Variable Account Value begins to reflect the investment performance results of your new allocations on the day after your transaction is effective. Your initial Purchase Payment is ordinarily effective on the day we issue your Contract. Any additional investment is effective on the day we receive your Purchase Payment in proper form. TRANSFERS Once your payments are allocated to the Investment Options you selected, you may transfer your Contract Value from any Investment Option to any other at any time and as often as you like. Transfer requests are normally effective on the Business Day we receive them in proper form. If your contract is issued in a state that requires refund of Purchase Payments under your Free Look Right, transfers may be made only on or after your Free Look Transfer Date. See WITHDRAWALS--SHORT TERM CANCELLATION RIGHT ("FREE LOOK"). No 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 may apply to transfers in excess of 15 in any Contract Year. Transfers under the dollar cost averaging, and earnings sweep options are counted toward your total transfers in a Contract Year. Any such fee would be charged against your Investment Options, including the Fixed Option, proportionately based on your relative Account Value in each immediately after the transfer. We have the right, at our option (unless otherwise required by law), to require certain minimums in the future in connection with transfers; these may include a minimum transfer amount and a minimum Account Value, if any, for the Investment Option from which the transfer is made or to which the transfer is made. If your transfer request results in your having a remaining Account Value in an Investment Option that is less than such minimum amount, we may transfer that remaining amount to your other Investment Options in the proportions specified in your current allocation instructions. We also reserve the right (unless otherwise required by law) to limit the size of transfers, to limit the number and frequency of transfers, to restrict transfers, and to suspend transfers. We reserve the right to reject any transfer request. Exchanges of your Annuity Units in any Subaccount(s) to any other Subaccount(s) after annuitization are limited to four in any twelve-month period. See RETIREMENT BENEFITS AND OTHER PAYOUTS. 15 Dollar Cost Averaging Dollar cost averaging is a method in which investors buy securities in a series of regular purchases instead of in a single purchase. This allows the investor to average the securities' price over time, and may permit a "smoothing" of abrupt peaks and drops in price. Prior to your Annuity Date, you may use dollar cost averaging to transfer amounts, over time, from any Investment Option with an Account Value of at least $10,000 to one or more other Investment Options. Detailed information appears in the 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 investment to the percentages you have specified. Rebalancing may result in transferring amounts from a Subaccount earning a relatively higher return to one earning a relatively lower return. The Fixed Option is not available for rebalancing. Detailed information appears in the 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 PREMIUM TAXES Depending on (among other factors) your state of residence, a tax may or may not be imposed on your Purchase Payments at the time your payment is made, at the time of partial or total withdrawal, at the time any death benefit proceeds are paid, at annuitization, or at such other time as taxes may be imposed. Tax rates ranging from 1.0% to 3.5% are currently in effect, but may change in the future. Some local jurisdictions also impose a tax. If we pay any taxes attributable to payments ("premium taxes") on your behalf, we will impose a similar charge against your Contract Value. We normally will charge you when you annuitize some or all of your Contract Value. We reserve the right to impose this charge for applicable premium taxes when you make a full or partial withdrawal, at the time any death benefit proceeds are paid, or when those taxes are incurred. For these purposes, "premium taxes" include any state or local premium taxes and, where approval has been obtained, federal premium taxes and any federal, state or local income, excise, business or any other type of tax (or component thereof) measured by or based upon, directly or indirectly, the amount of payments 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 $40 on each Contract Anniversary prior to the Annuity Date, and at the time you withdraw your entire Net Contract Value, if your Contract Value is less than $100,000 on that date. The fee is not imposed on amounts you annuitize or on payment of a death benefit. The fee reimburses certain of 16 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. Your Annual Fee will be charged proportionately against your Investment Options, including the Fixed Option. Assessments against your Variable Investment Options are made by debiting some of the Subaccount Units previously credited to your Contract; that is, assessment of the Annual Fee does not change the Unit Value for those Subaccounts. No Annual Fee is charged on payment of a death benefit or on annuitization. WAIVERS AND REDUCED CHARGES We may agree to reduce or waive 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 Contract Owner(s), sales of large Contracts, sales of Contracts in connection with a group or sponsored arrangement or mass transactions over multiple Contracts. In addition, we may agree to reduce or waive the Annual Fee and/or credit additional amounts under our Contracts, for those Contracts sold to persons who meet criteria established by us, who may include current and retired officers, directors and employees of us and our affiliates, trustees of the Pacific Select Fund, registered representatives and employees of broker/dealers with a current selling agreement with us and their affiliates, employees of affiliated asset management firms and certain other service providers, and immediate family members of such persons ("Eligible Persons"). We will credit additional amounts to Contracts owned by Eligible Persons if such Contracts are purchased directly through Pacific Mutual Distributors, Inc. Under such circumstances, Eligible Persons will not be afforded the benefit of services of any other broker/dealer nor will commissions be payable to any broker/dealer in connection with such purchases. Eligible Persons must contact us directly with servicing questions, Contract changes and other matters relating to their Contracts. The amount credited to Contracts owned by Eligible Persons will equal the reduction in expenses we enjoy by not incurring brokerage commissions in selling such Contracts, with the determination of the expense reduction and of such crediting being made in accordance with our administrative procedures. We may also agree to waive minimum Purchase Payment requirements for Eligible Persons. 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 Contact are reduced. We reserve the right to terminate waiver, reduced charge and crediting programs at any time, including for issued Contracts. MORTALITY AND EXPENSE RISK CHARGE We assess a charge against the assets of each Subaccount to compensate for certain mortality and expense risks that we assume under the Contracts (the "Risk Charge"). The risk that an Annuitant will live longer (and therefore receive more annuity payments) than we predict through our actuarial calculations at the time the Contract is issued is "mortality risk." We also bear mortality risk in connection with death benefits payable under the Contracts. The risk that the expense charges and fees under the Contracts and Separate Account are less than our actual administrative and operating expenses is called "expense risk." This Risk Charge is assessed daily at an annual rate of 0.0125 of each Subaccount's assets; this charge may not be increased for the duration of your Contract. Risk Charges will stop at annuitization if you select a fixed annuity; Risk Charges will continue after annuitization if you choose any variable annuity, even though we do not bear mortality risk if your Annuity Option is Period Certain Only. 17 We will realize a gain if the Risk Charge exceeds our actual cost of expenses and benefits, and will suffer a loss if actual costs exceed the Risk Charge. Any gain will become part of our General Account; we may use it for any reason, including covering sales expenses on the Contracts. 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 Contract Owners and to regulatory authorities. The Administrative Fee is assessed daily at an annual rate of 0.0015 of the assets of each Subaccount. This fee 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. EXPENSES OF PACIFIC SELECT FUND Your Variable Account Value reflects advisory fees and other expenses incurred by the various Portfolios of the Fund, net of any applicable reimbursements. These fees and expenses may vary. The Fund is governed by its own Board of Trustees, and your Contract does not fix or specify the level of expenses of any Portfolio. The Fund's fees and expenses are described in detail in the Fund's Prospectus and in its SAI. RETIREMENT BENEFITS AND OTHER PAYOUTS SELECTING YOUR ANNUITANT When you submit the Application for your Contract, you must choose a sole Annuitant or two Joint Annuitants. The Annuitant(s) will receive annuity payments under your Contract when you annuitize. If you are buying a Qualified Contract, you must be the sole Annuitant or your Primary Joint Annuitant; if you are buying a Non-Qualified Contract you may choose yourself and/or another person. In either case, you may choose a Contingent Annuitant; more information on these options is set out in the SAI. Except in the case of certain Qualified Contracts, you will not be able to add or change a sole or Joint Annuitant after your Contract is issued. You will be able to add or change a Contingent Annuitant until your Annuity Date or the death of your sole Annuitant or both Joint Annuitants, whichever occurs first; however, once your Contingent Annuitant has become the Annuitant under your Contract, no additional Contingent Annuitant may be named. If you have a Non-Qualified Contract and wish to name a Joint Annuitant, your younger Annuitant must be your Primary Annuitant. No Annuitant (primary, joint or contingent) may be named upon or after reaching his or her 86th birthday. We reserve the right to require proof of age or survival of the Annuitant(s). ANNUITIZATION You may choose both your Annuity Date (or "Annuity Start Date") and your Annuity Option. At the Annuity Date, you may elect to annuitize some or all of your Net Contract Value, less any transaction fee and any applicable charge for premium taxes and/or other taxes, ("the Conversion Amount"), so long as the Conversion Amount you annuitize is at least $5,000 (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 Contract Debt, any applicable charge for premium taxes and/or other taxes, any transaction fee, and any applicable Annual Fee. We will distribute your Net Contract Value, less any applicable charge for premium taxes and/or other taxes, any transaction fee, and any Annual Fee to you in a single sum if the net amount of your Contract Value available to convert to an annuity is less than $5,000 on your Annuity Date. Distributions under your Contract will have tax consequences. You should consult a qualified tax adviser for information on full or partial annuitization. 18 CHOOSING YOUR ANNUITY DATE ("ANNUITY START DATE") You should choose your Annuity Date when you submit your Application or we will apply your default Annuity Date to your Contract. You may change your Annuity Date by notifying us in writing or other form acceptable to us. We must have received your written notice at least 10 Business Days prior to the earlier of your old Annuity Date or your new Annuity Date. Your Annuity Date cannot be earlier than your first Contract Anniversary and must occur on or before a certain date: If you have a sole Annuitant, your Annuity Date cannot be later than his or her 100th birthday; if you have Joint Annuitants and a Non-Qualified Contract, your Annuity Date cannot be later than your younger Joint Annuitant's 100th birthday; if you have Joint Annuitants and a Qualified Contract, your Annuity Date cannot be later than your own 100th birthday. Different requirements may apply in some states. See APPENDIX A: STATE LAW VARIATIONS. If your Contract is a Qualified Contract, you may also be subject to additional restrictions. Adverse federal tax consequences may result if you choose an Annuity Date that is prior to an Annuitant's attained age 59 1/2. See FEDERAL TAX STATUS. You should carefully review the Annuity Options with your financial or 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. For retirement plans that qualify under Section 401 or 408 of the Internal Revenue Code, the period elected for receipt of annuity payments under Annuity Options 1 and 4 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 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 Options 2 and 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 above 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 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 or 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 100th birthday or your younger Joint Annuitant's 100th birthday, whichever applies (some states' laws may require a different Annuity Date; see APPENDIX A: STATE LAW VARIATIONS). If you have a Qualified Contract and fail to choose an Annuity Date, your Annuity Date will be April 1 of the calendar year following the year you attain age 70 1/2; if you have already attained age 70 1/2 on the Contract Date, your Annuity Date will be April 1 of the calendar year following your first Contract Anniversary. 19 If you have not specified an Annuity Option or do not instruct us otherwise, at your Annuity Date your Net Contract Value, less any applicable transaction fee and any applicable charge for premium taxes and/or other taxes, will be annuitized (if this net amount is at least $5,000) as follows: the net amount attributed to your Fixed Option Value will be converted into a fixed-dollar annuity and the net amount attributed to your Variable Account Value will be converted into a variable-dollar annuity directed to the Subaccounts proportionate to your Account Value in each. If you have a Non-Qualified Contract, or if you have a Qualified Contract and are not married, your default Annuity Option will be Life with 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% and your spouse will automatically be named your Joint Annuitant. CHOOSING YOUR ANNUITY OPTION You make three basic decisions about your annuity payments. First, you must choose whether you want those payments to be a fixed-dollar amount and/or a variable-dollar amount. Second, you must choose the form of annuity payments (see ANNUITY OPTIONS below). Third, you must decide how often you want annuity payments to be made (the "frequency" of the payments). You may not change these selections after annuitization. Fixed and Variable Annuities You may choose a fixed annuity (i.e., with fixed-dollar amounts), a variable annuity (i.e., with variable-dollar amounts), or you may choose both, converting one portion of the net amount you annuitize into a fixed annuity and another portion into a variable annuity. If you select a fixed annuity, each periodic annuity payment received will be equal to the initial annuity payment, unless you select a joint and survivor life annuity with reduced survivor payments and the Primary Annuitant dies. Any net amount you convert to a fixed annuity will be held in our General Account. If you select a variable annuity, you may choose as many Variable Investment Options for your annuity as you wish; the amount of the periodic annuity payments will vary with the investment results of the Variable Investment Options selected. After the Annuity Date, Annuity Units may be exchanged among available Variable Investment Options up to four times in any twelve-month period. THE CONTRACTS AND THE SEPARATE ACCOUNT in the SAI explains in more detail how your Contract converts into a variable annuity. Annuity Options Four types of annuity options are currently available under the Contracts, although additional options may become available in the future. . Life Only. Periodic payments are made to the designated payee during his or her lifetime. Payments stop when the designated payee dies. . Life with Period Certain. Periodic payments are made to the desginated payee during his or her lifetime, with payments guaranteed for a specified period. You may choose to have payments guaranteed for anywhere from 5 through 30 years (in full years only). If the designated payee dies before the guaranteed payments are completed, the Beneficiary receives the remainder of the guaranteed payments, if living; otherwise the Owner, if living; otherwise the Owner's estate. . Joint and Survivor Life. Periodic payments are made to the Primary Annuitant during the lifetime of the Primary Annuitant. After the death of the Primary Annuitant, periodic payments are made to the secondary Annuitant named in the election if and as long as such secondary Annuitant lives. You may 20 choose to have the payments to the surviving secondary Annuitant equal 50%, 66 2/3% or 100% of the payments made during the lifetime of the Primary Annuitant (you must make this election when you choose your Annuity Option). Payments stop when both Annuitants have died. . 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 designated payee dies before the guaranteed payments are completed, the Beneficiary receives the remainder of the guaranteed payments, if living; otherwise the Owner, if living; otherwise the Owner's estate. If your Contract was issued in connection with a Qualified Plan subject to Title I of the Employee Retirement Income Security Act of 1974 ("ERISA"), your spouse's consent may be required when you seek any distribution under your Contract, unless your Annuity Option is Joint and Survivor Life with survivor payments of at least 50%, and your spouse is your Joint Annuitant. Frequency of Payments You may choose to have annuity payments made monthly, quarterly, semi-annually, or annually. The amount of a variable payment will be determined in each period on the date corresponding to your Annuity Date, and payment will be made on the next succeeding day. Your initial annuity payment must be at least $250. Depending on the net amount you annuitize, this requirement may limit your options regarding the period and/or frequency of annuity payments. 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 our periodic income factors in effect for your Contract on the Annuity Date which are at least the guaranteed periodic 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 income factors in our table. A higher assumed investment return would mean a larger first variable annuity payment, but subsequent payments would increase only when actual net investment performance exceeds the higher assumed rate and would fall when actual net investment performance is less than the higher assumed rate. A lower assumed rate would mean a smaller first payment and a more favorable threshold for increases and decreases. If the actual net investment performance is 5% annually, annuity payments will be level. The assumed investment return is explained in more detail in the SAI under THE CONTRACTS AND THE SEPARATE ACCOUNT. 21 DEATH BENEFITS A death benefit 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 Death Benefit will be paid according to the Death Benefit Proceeds section below. Death Benefit Proceeds The proceeds of any death benefit payable will be the amount of the death benefit reduced by any charge for premium taxes and/or other taxes and any Contract Debt. The Death Benefit proceeds will be payable in a single sum upon receipt of proof (in proper form) of death and instructions regarding payment, or, if the recipient chooses, as an annuity, or in accordance with IRS regulations (see DEATH OF OWNER DISTRIBUTION RULES). Any such annuity is subject to all restrictions (including minimum amount requirements) as are other annuities under this Contract; in addition, there may be legal requirements that limit the recipient's Annuity Options and the timing of any payments. A recipient should consult a qualified tax adviser before electing to receive an annuity. Additional provisions apply if your Contract names a Joint or Contingent Owner or Annuitant, or if the Beneficiary, Joint Owner, or Contingent Owner is your spouse. Further information about these provisions is contained in the SAI. DEATH OF OWNER DISTRIBUTION RULES If a Contract Owner of a Non-Qualified Contract dies before the Annuity Date, any death benefit proceeds under this Contract must begin distribution within five years after the Owner's death. In order to satisfy this requirement, the designated recipient must receive a lump sum payment or elect to receive an annuity for life or over a period that does not exceed the life expectancy of the designated recipient with annuity payments that start within one year after the Owner's death. If an election to receive an annuity is not made within 60 days of our receipt of proof in proper form of the Owner's death or, if earlier, 60 days (or shorter period as we permit) prior to the first anniversary of the Owner's death, the lump sum option will be deemed elected, unless otherwise required by law. If the lump sum option is deemed elected, we will consider that deemed election as receipt of instructions regarding payment of death benefit proceeds. If a Non-Qualified Contract has Joint Owners, this requirement applies to the first Contract Owner to die. If the Contract Owner was not an Annuitant but was a Joint Owner and there is a surviving Joint Owner, that surviving Joint Owner is the designated recipient; if no Joint Owner survives but a Contingent Owner is named in the Contract and is living, he or she is the designated recipient, otherwise the designated recipient is the Beneficiary; if no Beneficiary is living, the designated recipient is the Owner's estate. If the Contract Owner was an Annuitant, the designated recipient is the Beneficiary; if no Beneficiary is living, the designated recipient is the Owner's estate. A sole designated recipient who is the Contract Owner's spouse may elect to become the Contract Owner (and sole Annuitant if the deceased Contract Owner had been the Annuitant) and continue the Contract 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 Contract Owner's spouse may not continue the Contract, but may purchase a new Contract. If you are a non-individual Owner of a Contract other than a Contract issued under a Qualified Plan as defined in Section 401 or 403 of the Code, the Primary Annuitant will be treated as the Owner of the Contract for purposes of these Distribution Rules. If there is a change in the Primary Annuitant prior to the Annuity Date, such change will be treated as the death of the Owner. The amount of the death benefit in this situation will be (a) the Contract Value if the non-individual Owner elects to maintain the Contract and reinvest the Contract Value into the Contract in the same amount as immediately prior to the distribution, or (b) the Contract Value less any Annual Fee, and any withdrawal and/or transaction fee, 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. 22 Death Benefit Amount The Death Benefit Amount as of any day (prior to your Annuity Date) is equal to the greater of: . your aggregate Purchase Payments, less any prior partial withdrawals, including any withdrawal fees, as of that day; or . your Contract Value as of that day. The Guaranteed Minimum Death Benefit Amount is determined as follows: We look at your Contract as of your fifth Contract Anniversary and as of every fifth subsequent Contract Anniversary prior to your Annuity Date, that is, the 10th, 15th, etc., (each of these Anniversaries is a "Milestone Date"). For each Milestone Date, if your Annuitant was living and had not yet reached his or her 76th birthday as of that date, we calculate what your Death Benefit Amount would have been as of that Milestone Date and adjust this amount by (1) adding the aggregate amount of any Purchase Payments received by us after that Milestone Date and (2) subtracting the aggregate amount of any partial withdrawals, any fees for withdrawals and transfers, any Annual Fees, and any previous charges for premium taxes and/or other taxes effected since that Milestone Date. The highest of these adjusted amounts, as of the Notice Date, is your Guaranteed Minimum Death Benefit Amount. CALCULATIONS OF ANY "GUARANTEED MINIMUM DEATH BENEFIT" ARE ONLY MADE ONCE DEATH BENEFIT PROCEEDS BECOME PAYABLE UNDER YOUR CONTRACT. 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: Death of the Annuitant If the Annuitant dies on or before your fifth Contract Anniversary, or if the Annuitant had already reached his or her 76th birthday as of your fifth Contract Anniversary, the death benefit will be equal to your "Death Benefit Amount" as of the "Notice Date." If the Annuitant dies after your fifth Contract Anniversary and had not yet reached his or her 76th birthday as of your fifth Contract Anniversary, the death benefit will be equal to the greater of: . your Death Benefit Amount as of the Notice Date; or . your "Guaranteed Minimum Death Benefit Amount" as of the Notice Date. The following procedures apply in the event of death of an Annuitant who is not also a Contract Owner: If your Contract names Joint Annuitants, and only one Joint Annuitant dies, the surviving Joint Annuitant becomes your sole Annuitant and the death benefit is not yet payable. If your sole Annuitant dies (or if no Joint Annuitant survives) and your Contract names a surviving Contingent Annuitant, he or she becomes the sole Annuitant and the death benefit is not yet payable. If there is no surviving Joint or Contingent Annuitant, the death benefit is payable to your Beneficiary, if living. To avoid the possibility of an adverse gift tax situation upon the death of a sole Annuitant with no living Beneficiary, the death benefit will be paid to the Owner or the Owner's spouse. If both the Owner and the Annuitant die simultaneously the death benefit will be paid to the Beneficiary, if living; if not, to the Owner's estate. 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 Net Contract Value as of the Notice Date and will be paid in accordance with the DEATH BENEFIT PROCEEDS section above. The death benefit proceeds will be paid to the Joint Owner, if living; if not, to the Contingent Owner, if living; if not to the Beneficiary, if living; if not, to the Owner's estate. See THE FIXED OPTION--WITHDRAWALS AND TRANSFERS. 23 If a Contract Owner who is the Annuitant dies before the Annuity Date, the amount of the death benefit will be equal to the greater of your Death Benefit Amount or the Guaranteed Minimum Death Benefit Amount as of the Notice Date and will be paid in accordance with the DEATH BENEFIT PROCEEDS section above. The death benefit proceeds will be paid to the Beneficiary if living; if not, to the Owner's estate. Joint and/or Contingent Owners and/or Annuitants will not be considered in determining the recipient of death benefit proceeds. If both the Contract Owner 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, or 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, so long as any of your Annuitants is still living. Except as provided below, withdrawals from your Investment Options may be made at any time. You may request to withdraw a specific dollar amount or a specific percentage of an Account Value or your 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 Investment Options proportionately. Each partial withdrawal, including pre-authorized withdrawals, must be for at least $1,000 ($500 in Texas). If your partial withdrawal from an Investment Option would leave a remaining Account Value in that Investment Option of less than any minimum Account Value we may require in the future, we have the right, at our option, to transfer that remaining amount to your other Investment Options on a proportionate basis relative to your most recent allocation instructions. If your partial withdrawal leaves you with a Contract Value of less than $1,000 ($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. Amount Available for Withdrawal The amount available to you 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, any withdrawal transaction fee, any charges for premium tax and/or other taxes, and your Contract Debt. The amount we send to you (your "withdrawal proceeds") will also reflect any required or requested federal and state income tax withholding. See FEDERAL TAX STATUS. You assume investment risk on investments in the Subaccounts; as a result, the amount available to you for withdrawal from any Subaccount may be more or less than the total Purchase Payments you have allocated to that Subaccount. Withdrawal Transaction Fees There is currently no transaction fee for partial withdrawals. However, we reserve the right to impose a withdrawal transaction fee in the future of up to $15 for each partial withdrawal (including preauthorized partial withdrawals) in excess of 15 in any Contract Year. Any such fee would be charged against your Investment Options, including the Fixed Option, proportionately based on your Account Value in each immediately after the withdrawal. Pre-Authorized Withdrawals If your Contract Value is at least $10,000, you may select the pre-authorized withdrawal option, and you may choose monthly, quarterly, semiannual or annual withdrawals. Each withdrawal must be for at least $1,000. Each pre-authorized withdrawal is subject to federal income tax on its taxable portion and may be subject to a 10% penalty tax if you have not reached age 59 1/2. See FEDERAL TAX STATUS. Additional information and options are set out in the SAI and in the Pre-Authorized Withdrawal section of your Application. 24 Special Requirements for Full Withdrawals If you wish to withdraw the entire amount available under your Contract, you must either return your Contract to Pacific Life 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 10% penalty tax if the distribution is not transferred directly to the trustee of another Qualified Plan, or to the custodian of an individual retirement account or issuer of an individual retirement annuity. See FEDERAL TAX STATUS. Distributions may also trigger withholding for state income taxes. The tax and ERISA rules relating to Contract withdrawals are complex. We are not the administrator of any Qualified Plan. You should consult with your tax advisor and/or your Plan Administrator before you withdraw any portion of your Contract Value. Effective Date of Withdrawal Requests Withdrawal requests are normally effective on the Business Day we receive them in proper form. If you make Purchase Payments by check and submit a withdrawal request immediately afterwards, the 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. SHORT-TERM CANCELLATION RIGHT ("FREE LOOK") You may return your Contract for cancellation and a full refund during your "free look period." Your free look period is usually the 10-day period beginning on the day you receive your Contract, but may vary if required by state law. For more information, see APPENDIX A: STATE LAW VARIATIONS. If you return your Contract, it will be canceled and treated as void from your Contract Date. You will then receive a refund as follows: . All of your Purchase Payments allocated to the Fixed Option, and . your Variable Account Value as of the end of the Business Day on which we receive your Contract for cancellation, plus a refund of any amounts that may have been deducted as Contract fees or charges to pay premium taxes and/or other taxes. 25 Some states' laws require us to refund your Purchase Payments allocated to the Variable Investment Options instead of your Variable Account Value. If you reside in one of these states, the Purchase Payments you have allocated to any Subaccount will usually be allocated to the Money Market Subaccount during your free look period; however, different rules may apply depending on your state of residence. In such cases, we will transfer your Contract Value in the Money Market Account to your chosen Variable Investment Options at the end of the 15th calendar day after your Contract Date ("your Free Look Transfer Date"). We reserve the right to extend your Free Look Transfer Date by the number of days in excess of ten days that your state of residence allows you to return your Contract to us under the Free Look Provision. Any amounts credited to your Variable Account as a result of any variation in charges, as described in WAIVERS AND REDUCED CHARGES, and any earnings on such amounts, will not be included in the amount refunded to you. If your Contract is issued in exchange for another annuity contract or a life insurance policy, our administrative procedures may vary, depending on the state in which your contract is issued. PACIFIC LIFE AND THE SEPARATE ACCOUNT PACIFIC LIFE Pacific Life is a life insurance company that is domiciled in California. Pacific Life's operations include both life insurance and annuity products as well as financial and retirement services. As of the end of 1997, Pacific Life had over $80.0 billion of individual life insurance in force and total admitted assets of approximately $31.8 billion. Pacific Life has been ranked according to admitted assets as the 20th largest life insurance carrier in the nation for 1997. The Pacific Life family of companies has total assets and funds under management of over $236 billion. Pacific Life is authorized to conduct life insurance and annuity business in the District of Columbia and all states except New York. Its principal offices are located at 700 Newport Center Drive, Newport Beach, California 92660. Pacific Life was originally organized on January 2, 1868, under the name "Pacific Mutual Life Insurance Company of California" and reincorporated as "Pacific Mutual Life Insurance Company" on July 22, 1936. On September 1, 1997, Pacific Life converted from a mutual life insurance company to a stock life insurance company ultimately controlled by a mutual holding company. Pacific Life is a subsidiary of Pacific LifeCorp, a holding company which, in turn, is a subsidiary of Pacific Mutual Holding Company, a mutual holding company. Under their respective charters, Pacific Mutual Holding Company must always hold at least 51% of the outstanding voting stock of Pacific LifeCorp, and Pacific LifeCorp must always own 100% of the voting stock of Pacific Life. Owners of Pacific Life's annuity contracts and life insurance policies have certain membership interests in Pacific Mutual Holding Company, consisting principally of the right to vote on the election of the Board of Directors of the mutual holding company and on other matters, and certain rights upon liquidation or dissolutions of the mutual holding company. Our wholly-owned subsidiary, Pacific Mutual Distributors, Inc. ("PMD") (formerly known as Pacific Equities Network), 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. 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 Investment Company Act of 1940 (the "1940 Act") as a type of investment company called a "unit investment trust." Obligations arising under your Contract are general corporate obligations of ours. We are also the legal owner of the assets in the Separate Account. 26 Assets of the Separate Account attributed to the reserves and other liabilities under the Contract and other contracts issued by us that are supported by the Separate Account may not be charged with liabilities arising from any of our other business; any income, gain or loss (whether or not realized) from the assets of the Separate Account are credited to or charged against the Separate Account without regard to our other income, gain or loss. We may invest money in the Separate Account in order to commence its operations and for other purposes, but not to support contracts other than variable annuity contracts. A portion of the Separate Account's assets may include accumulations of charges we make against the Separate Account and investment results of assets so accumulated. These additional assets are ours and we may transfer them to our General Account at any time; however, before making any such transfer, we will consider any possible adverse impact the transfer might have on the Separate Account. Subject to applicable law, we reserve the right to transfer our assets in the Separate Account to our General Account. The Separate Account is not the sole investor in the Fund. Investment in the Fund by other separate accounts in connection with variable annuity and variable life insurance contracts may create conflicts. See MORE ON THE FUND'S SHARES in the accompanying Prospectus for the Fund. FEDERAL TAX STATUS The following summary of federal income tax consequences is based on current tax laws and regulations, which may be changed by legislative, judicial or administrative action. The summary is general in nature, and does not consider any applicable state or local tax laws. We do not make any guarantee regarding the tax status, federal, state or local, of any Contract or any transaction involving the Contracts. Accordingly, you should consult a qualified tax adviser for complete information and advice before purchasing a Contract. The following rules generally do not apply to variable annuity contracts held by or for non-natural persons (e.g., corporations) unless such an entity holds the Contract as nominee for a natural person. If a contract is not owned or held by a natural person or a nominee for a natural person, the contract generally will not be treated as an "annuity" for tax purposes, meaning that the contract owner will be taxed currently on annual increases in account value at ordinary income rates unless some other exception applies. Section 72 of the Code governs the taxation of annuities in general, and we designed the Contracts to meet the requirements of Section 72 of the Code. We believe that, under current law, the Contract will be treated as an annuity for federal income tax purposes if the Contract Owner is a natural person or a nominee for a natural person, and that 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, no tax should be payable by you as a Contract Owner as a result of any increase in Contract Value until you receive money under your Contract. You should, however, consider how amounts will be taxed when you do receive them. The following discussion assumes that your Contract will be treated as an annuity for federal income tax purposes. Section 817(h) of the Code provides that the investments underlying a variable annuity must satisfy certain diversification requirements. Details on these diversification requirements appear under OTHER INFORMATION ABOUT THE FUND in the Fund's Prospectus. We believe the underlying Variable Investment Options for the Contract meet these requirements. In connection with the issuance of temporary regulations relating to diversification requirements under Section 817(h), the Treasury Department announced that such regulations do not provide guidance concerning the extent to which Contract Owners may direct their investments to particular divisions of a separate account. Such guidance may be included in regulations or revenue rulings under Section 817(d) relating to the definition of a variable contract. Because of this uncertainty, we reserve the right to make such changes as we deem necessary or appropriate to ensure 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. 27 TAXES PAYABLE BY CONTRACT OWNERS: GENERAL RULES THESE GENERAL RULES APPLY TO NON-QUALIFIED CONTRACTS. AS DISCUSSED BELOW, HOWEVER, TAX RULES MAY DIFFER FOR QUALIFIED CONTRACTS AND YOU SHOULD CONSULT A QUALIFIED TAX ADVISER IF YOU ARE PURCHASING A QUALIFIED CONTRACT. Distributions of net investment income or capital gains that each Subaccount receives from its corresponding Portfolio are automatically reinvested in such Portfolio unless we, on behalf of the Separate Account, elect otherwise. As noted above, you will be subject to federal income taxes on the investment income from your Contract only when it is distributed to you. Taxes Payable on Withdrawals Amounts you withdraw before annuitization, including amounts withdrawn from your Contract Value in connection with partial withdrawals for payment of fees, will be treated first as taxable income, to the extent that your Contract Value exceeds the aggregate of your Purchase Payments (reduced by non-taxable amounts previously received), and then as non-taxable recovery of your Purchase Payments. The assignment or pledge of (or agreement to assign or pledge) 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 may be subject to a penalty tax equal to 10% of that taxable portion unless the withdrawal is: (1) made on or after the date you reach age 59 1/2, (2) made by a Beneficiary after your death, (3) attributable to your becoming disabled, or (4) in the form of level annuity payments under a lifetime annuity. Taxes Payable on Annuity Payments A portion of each annuity payment you receive under a Contract generally will be treated as a partial recovery of Purchase Payments (as used here, "Purchase Payments" means the aggregate Purchase Payments less any amounts that were previously received under the Contract but not included in income) and will not be taxable. (In certain circumstances, subsequent modifications to an initially-established payment pattern may result in the imposition of a penalty tax.) The remainder of each annuity payment will be taxed as ordinary income. However, after the full amount of aggregate Purchase Payments has been recovered, the full amount of each annuity payment will be taxed as ordinary income. Exactly how an annuity payment is divided into taxable and non-taxable portions depends on the period over which annuity payments are expected to be received, which in turn is governed by the form of annuity selected and, where a lifetime annuity is chosen, by the life expectancy of the Annuitant(s) or payee(s). Should the death of a Contract Owner cause annuity payments to cease before Purchase Payments have been fully recovered, an Annuitant (or in certain cases the Beneficiary) is allowed a deduction on the final tax return for the unrecovered Purchase Payments; however, if any remaining annuity payments are made to a Beneficiary, the Beneficiary will recover the balance of the Purchase Payments as payments are made. A lump sum payment taken in lieu of remaining monthly annuity payments is not considered an annuity payment for tax purposes. The portion of any lump sum payment to a Beneficiary in excess of aggregate unrecovered Purchase Payments would be subject to income tax. Such a lump sum payment may also be subject to a penalty tax. If a Contract Owner dies before annuity payments begin, certain minimum distribution requirements apply. If a Contract Owner dies after the Annuity Date, the remaining interest in the Contract must be distributed at least as rapidly as under the method of distribution in effect on the date of death. Generally, the same tax rules apply to amounts received by the Beneficiary as those set forth above, except that the early withdrawal penalty tax does not apply. Thus, any annuity payments or lump sum withdrawal will be divided into taxable and non-taxable portions. 28 If the Contract Owner or Annuitant dies and within sixty days after the date on which a lump sum death benefit first becomes payable the designated recipient elects to receive annuity payments in lieu of the lump sum death benefit, then the designated recipient will not be treated for tax purposes as having received the lump sum death benefit in the tax year it first becomes payable. Rather, in that case, the designated recipient will be taxed on the annuity payments as they are received. In addition, designation of a Beneficiary who either is 37 1/2 or more years younger than a Contract Owner or is a grandchild of a Contract Owner may have Generation Skipping Transfer Tax consequences under section 2601 of the Code. Generally, gifts of non-tax qualified contracts prior to the annuity start date will trigger tax on the gain on the contract, with the donee getting a stepped-up basis for the amount included in the donor's income. The 10% penalty tax and gift tax also may be applicable. This provision does not apply to transfers between spouses or incident to a divorce. QUALIFIED CONTRACTS The Contracts are available to a variety of Qualified Plans. Tax restrictions and consequences for Contracts under each type of Qualified Plan differ from each other and from those for Non-Qualified Contracts. In addition, individual Qualified Plans may have terms and conditions that impose additional rules. Therefore, no attempt is made herein to provide more than general information about the use of the Contract with the various types of Qualified Plans. Participants under such Qualified Plans, as well as Contract Owners, Annuitants and Beneficiaries, are cautioned that the rights of any person to any benefits under such Qualified Plans may be subject to the terms and conditions of the Plans themselves or limited by applicable law, regardless of the terms and conditions of the Contract issued in connection therewith. THE FOLLOWING IS ONLY A GENERAL DISCUSSION ABOUT TYPES OF QUALIFIED PLANS FOR WHICH THE CONTRACTS ARE AVAILABLE. WE ARE NOT THE ADMINISTRATOR OF ANY QUALIFIED PLAN. IF YOU ARE PURCHASING A QUALIFIED CONTRACT, YOU SHOULD CONSULT WITH YOUR PLAN ADMINISTRATOR 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. 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. Because your minimum initial Purchase Payment for a Pacific One Contract is larger than the maximum annual contribution permitted for an IRA, Pacific One Contracts are available as IRAs only through a rollover from an existing Qualified Plan. In addition, distributions from an IRA are subject to certain restrictions. Failure to make mandatory distributions may result in imposition of a 50% penalty tax on any difference between the required distribution amount and the amount actually distributed. A 10% penalty tax is imposed on the amount includable in gross income from distributions that occur before you attain age 59 1/2 and that are not made on account of death or disability, with certain exceptions. These exceptions include distributions that are part of a series of substantially equal periodic 29 payments made over your life (or life expectancy) or the joint lives (or joint life expectancies) of yourself and your Joint Annuitant. Distributions of minimum amounts specified by the Code must commence by April 1 of the calendar year following the calendar year in which you attain age 70 1/2. Additional distribution rules apply after your death. You may rollover funds from 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 us. Similar limitations and tax penalties apply to tax sheltered annuities, government plans, and 401(k) and pension and profit-sharing plans. SIMPLE Individual Retirement Annuities The Small Business Job Protection Act of 1996 created a new retirement plan, the Savings Incentive Match Plan for Employees of Small Employers ("SIMPLE Plans"). Depending upon the type of SIMPLE Plan, employers may deposit the plan contributions into a single trust or into SIMPLE individual retirement annuities ("SIMPLE IRAS") established by each participant. 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, a new type of IRA which becomes available in 1998. Contributions to a Roth IRA are not deductible, but withdrawals that meet certain requirements are not subject to federal income tax. In general, Roth IRAs are subject to limitations on the amount that may be contributed and the persons who may be eligible to contribute and are subject to certain required distribution rules on the death of the Contract Owner. Unlike a traditional IRA, Roth IRAs are not subject to minimum required distribution rules during the Contract Owner's lifetime. Generally, however, the amount remaining in a Roth IRA must be distributed by the end of the fifth year after the death of the Contract Owner. Beginning in 1998, the owner of a traditional IRA may convert a traditional IRA into a Roth IRA under certain circumstances. The conversion of a traditional IRA to a Roth IRA will subject the amount of the converted traditional IRA to federal income tax. Anyone considering the purchase of a Qualified Contract as a "conversion" Roth IRA should consult with a qualified tax adviser. Tax Sheltered Annuities ("TSAs") Section 403(b) of the Code permits public school systems and certain tax- exempt organizations to adopt annuity plans for their employees; Purchase Payments made on Contracts purchased for these employees are excludable from the employees' gross income (subject to maximum contribution limits). Distributions under these Contracts must comply with certain limitations as to timing, or result in tax penalties. Government Plans Section 457 of the Code permits employees of a state or local government (or of certain other tax-exempt entities) to defer compensation through an eligible government plan. Contributions to a Contract in connection with an eligible government plan are subject to limitations. 401(k) Plans; Pension and Profit-Sharing Plans Deferred compensation plans may be established by an employer for certain eligible employees under Sections 401(a) and 401(k) of the Code. Contributions to these plans are subject to limitations. 30 LOANS Certain Qualified Contract Owners may borrow against their Contracts. If yours is a Qualified Contract issued under Section 401(a), 401(k), 403(a) or 403(b) of the Code and the terms of your Qualified Plan permit, you may request a loan from 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. Interest paid on your loan under a 401(k) plan or 403(b) tax sheltered annuity will be considered "personal interest" under Section 163(h) of the Code, to the extent the loan comes from your pre-tax contributions, even if the proceeds of your loan are used to acquire your principal residence. Loan Procedures Your loan request must be submitted on our Loan Request Form. You may submit a loan request at any time after your first Contract Anniversary and before your Annuity Date. If approved, your loan will usually be effective as of the end of the Business Day on which we receive all necessary documentation in proper form. We will forward proceeds of your loan to you within seven calendar days after the effective date of your loan. A $500 loan administrative fee will be deducted from your loan proceeds. In order to secure your loan, on the effective date of your loan, we will transfer an amount equal to the principal amount of your loan into an account called the "Loan Account". To make this transfer, we will transfer amounts proportionately from your Investment Options, based on your Account Value in each. As your loan is repaid, a portion, corresponding to the amount of the repayment, of any amount then held as security for your loan will be transferred from the Loan Account back into your Investment Options in accordance with your current allocation instructions. Loan Terms You may have only one loan outstanding at any time. The minimum loan amount must be for at least $1,000, subject to certain state limitations. Your total Contract Debt at the effective date of your loan, may not exceed the lesser of: . 50% of your Contract Value, or . $50,000 less your highest outstanding Contract Debt during the 12-month period immediately preceding the effective date of your loan. You should refer to the terms of your particular Qualified Plan for any additional loan restrictions. If you have other loans outstanding pursuant to other Qualified Plans, the amount you may borrow may be further restricted. You will be charged interest on your Contract Debt at an annual rate, set at the time of the loan withdrawal, equal to the higher of (a) Moody's Corporate Bond Yield Average-Monthly Average Corporates (the "Moody's Rate"), as published by Moody's Investors Service, Inc., or its successor, for the calendar month immediately preceding the calendar quarter in which the loan is effective, or (b) 5%. In the event that the Moody's Rate is no longer available, we may substitute a substantially similar average rate, subject to compliance with applicable state regulations. The amount held in the Loan Account to secure your loan will earn a return equal to an annual rate that is two percentage points lower than the annual rate of interest charged on your Contract Debt. Interest charges accrue on your Contract Debt daily, beginning on the effective date of your loan; earnings on the amount held in the Loan Account to secure your loan accrue daily beginning on the following day, and those earnings will be transferred once a year to your Investment Options in accordance with your current allocation instructions. Repayment Terms Your loan, including principal and accrued interest, must be repaid in quarterly installments. An installment will be due in each quarter on the date corresponding to the effective date of your loan, beginning with the first such 31 date following the effective date of your loan. Example: On May 1, we receive your loan request, and your loan is effective. Your first quarterly payment will be due on August 1. Adverse tax consequences may result if you fail to meet the repayment requirements for your loan. You must repay principal and interest of any loan in substantially equal payments over the term of the loan. Normally, the term of a loan will be five years from the effective date of the loan; however, if you have certified to us that your loan proceeds are to be used to acquire a principal residence for yourself, you may request a loan term of 30 years. In either case, however, you must repay your loan prior to your Annuity Date. 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 loan at any time; if you prepay your entire outstanding principal, 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. Any loan repayment in excess of the amount then due will be refunded to you to the extent allowed by law, unless such amount is sufficient to pay the balance of your loan. Repayment less than the loan amount then due will be returned to you unless otherwise required by law. 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. If a loan repayment is not made when due, interest will continue to accrue and 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 repayment. If the required repayment is not received by the end of the grace period, the defaulted loan balance plus accrued interest will be withdrawn from your Contract Value, if amounts under your Contract are eligible for distribution. If those amounts are not eligible for distribution, the defaulted loan balance plus accrued interest will be considered a Deemed Distribution and will be withdrawn when such 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 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 loan principal will be withdrawn from the Loan Account. 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 Accumulated Value in each Investment Option. If you have an outstanding loan that is in default, the defaulted Contract Debt will be counted as a withdrawal for purposes of calculating any Guaranteed Minimum Death Benefit. We may change the loan provisions of your Contract to reflect changes in the Code or interpretations thereof. 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. 32 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, if you expect to accumulate savings over a relatively long period of time without making significant withdrawals, there should be tax advantages, regardless of your tax bracket, in purchasing a Contract rather than, for example, a mutual fund with a similar investment policy and approximately the same level of expected investment results. This is because little or no income taxes are incurred by you or by 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 investment in the form of monthly annuity payments after your retirement, or if your tax rate is lower at that time than during the period that you held the Contract, or both. TAXES ON PACIFIC 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. ADDITIONAL INFORMATION VOTING RIGHTS We are the legal owner of the shares of the Pacific Select Fund Portfolios held by the Subaccounts, and consequently have the right to vote on any matter voted on at Fund shareholders' meetings. However, our interpretation of applicable law requires us to vote the shares attributable to your Variable Account Value ("your voting interest") in accordance with your directions. We will pass shareholder proxy materials on to you so that you have an opportunity to give us voting instructions for your voting interest. You may provide your instructions by proxy or in person at the shareholders' meeting. If there are shares of a Portfolio held by a Subaccount for which we do not receive timely voting instructions, we will vote those shares in the same proportion as all other shares of that Portfolio held by that Subaccount for 33 which we have received timely voting instructions. If we hold shares of a Portfolio in our General Account, or hold unvoted shares in the Separate Account, and/or any of our non-insurance subsidiaries hold shares of a Portfolio, such shares will be voted in the same proportion as other votes cast by all of our separate accounts in the aggregate, including Separate Account A. We may elect, in the future, to vote shares of Pacific Select Fund Portfolios held in Separate Account A in our own right if we are permitted to do so through a change in applicable federal securities laws or regulations, or in their interpretation. The number of Portfolio shares that form the basis for your voting interest is determined as of the record date set by the Board of Trustees of the Fund. It is equal to (a) your Contract Value allocated to the Subaccount corresponding to that Portfolio, divided by (b) the net asset value per share of that Portfolio. Fractional votes will be counted. We reserve the right, if required or permitted by a change in federal regulations or their interpretation, to amend how we calculate your voting interest. After your Annuity Date, if you have selected a variable annuity, the voting rights under your Contract will continue during the payout period of your annuity. The number of shares that form the basis for your voting interest will be determined as described above, but will decrease throughout the payout period. CHANGES TO YOUR CONTRACT Contract Owner(s) and Contingent Owner You may change your Non-Qualified Contract at any time prior to your Annuity Date to name a different Contract Owner or to add a Joint Owner, or to add or change a Contingent Owner; if yours is a Qualified Contract, you must be the only Contract Owner, but you may still add or change a Contingent Owner. Your Contract cannot name more than two Contract Owners (Joint Owners) and one Contingent Owner at any time. Joint ownership is in the form of a joint tenancy. The Contract Owner(s) may make all decisions regarding the Contract, including making allocation decisions and exercising voting rights. Transactions under jointly owned Contracts require authorization from both Contract Owners. Transfer of Contract ownership may involve federal income tax consequences; you should consult a qualified tax adviser before effecting such a transfer. A change to joint Contract ownership is considered a transfer of ownership. Annuitant and Contingent or Joint Annuitant Your sole Annuitant cannot be changed, and Joint Annuitants cannot be added or changed, once your Contract is issued. Certain changes may be permitted in connection with Contingent Annuitants. See SELECTING YOUR ANNUITANT. There may be limited exceptions for certain Qualified Contracts. Beneficiaries Your Beneficiary is a person(s) who may receive death benefits under your Contract. You may change your Beneficiary or add Beneficiaries at any time prior to the death of the Annuitant. If you have named your Beneficiary irrevocably, you will need to obtain the Beneficiary's consent before making any changes. Qualified Contracts may have additional restrictions on naming and changing Beneficiaries; for example, if your Contract was issued in connection with a Qualified Plan subject to Title I of ERISA, your spouse must either be your Beneficiary or consent to your naming a different Beneficiary. If you leave no surviving Beneficiary, 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 Fund 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. 34 Alterations of Variable Investment Options may take differing forms. We reserve the right to replace shares of any Portfolio that were already purchased under any Contract (or shares that were to be purchased in the future under a Contract) with shares of another Portfolio, shares of another investment company or series of another investment company, or another investment vehicle. We may also purchase, through a Subaccount, other securities for other series or other classes of contracts, and may permit conversions or exchanges between series or classes of contracts on the basis of Contract Owner requests. Required approvals of the SEC and state insurance regulators will be obtained before any such substitutions are effected, and you will be notified of any planned substitution. We may add new Subaccounts to Separate Account A, and any new Subaccounts may invest in Portfolios of the Fund or in other investment vehicles; availability of any new Subaccounts to existing Contract Owners will be determined at our discretion. We will notify Contract Owners, and will comply with the filing or other procedures established by applicable state insurance regulators, to the extent required by applicable law. We also reserve the right, after receiving any required regulatory approvals, to do any of the following: . cease offering any Subaccount . combine Subaccounts . delete or substitute Subaccounts . combine Separate Account A or part of it with another separate account of Pacific Life or any of our affiliates . transfer Separate Account A assets attributable to the Contracts to another of our separate accounts . deregister the Separate Account under the 1940 Act . operate Separate Account A as a management investment company under the 1940 Act or another form permitted by law . establish a committee, board or other group to manage aspects of the Separate Account's operations . make any changes required by the 1940 Act or other federal securities laws . make any changes necessary to maintain the status of the Contracts as annuities under the Code . make other changes required under federal or state law relating to annuities . suspend or discontinue sale of the Contracts. INVESTOR INQUIRIES AND SUBMITTING FORMS AND REQUESTS You may reach our service representatives at 1-800-722-2333 between the hours of 6:00 a.m. and 5:00 p.m., Pacific time. If you are submitting a purchase or other payment by mail, please send it, along with your Application if you are submitting one, to: Pacific Life Insurance Company P.O. Box 100060 Pasadena, California 91189-0060 Please send your other forms and written requests or questions to: Pacific Life Insurance Company P.O. Box 7187 Pasadena, California 91109-7187 35 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 good form, at the correct mailing address set out above. Please call us at 1-800-722-2333 if you have any questions regarding which address you should use. Purchase Payments after your initial Purchase Payment, loan requests, loan repayments, transfer requests, and withdrawal requests we receive before 4:00 p.m. Eastern time will normally 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" may require, among other things, a signature guarantee or other verification of authenticity. We do not generally require a signature guarantee unless it appears that the Owner's signature may have changed over time; an executive application or confirmation of application, as applicable, in proper form is not received by us; or, due to other circumstances. Requests regarding death benefits must be accompanied by both proof of death and instructions regarding payment satisfactory to Pacific Life. You should call your registered representative or Pacific Life if you have questions regarding the required form of a request. TELEPHONE TRANSACTIONS After your "free look" period, you may make transfer requests by telephone if you have authorized telephone requests (a "telephone authorization"). A telephone authorization for a jointly owned Contract must be approved by both Joint Owners. We cannot guarantee that you will always be able to reach us to complete a telephone transaction; for example, all telephone lines may be busy during certain periods, such as periods of substantial market fluctuations or other drastic economic or market change, or telephones may be out of service during severe weather conditions or other emergencies. Under these circumstances, you should submit your request in writing. Transaction instructions we receive by telephone before 4:00 p.m. Eastern time (1:00 p.m. Pacific time) on any Business Day will normally be effective on that day, and we will send you written confirmation of each telephone transfer. We have established procedures reasonably designed to confirm that instructions communicated by telephone are genuine. These procedures may require any person requesting a telephone transaction to provide certain personal identification upon our request. We may also record all or part of any telephone conversation with respect to transaction instructions. We reserve the right to deny any transaction request made by telephone. When you make a written request for a telephone authorization, you authorize us to accept and to act upon instructions received by telephone with respect to your Contract, and you agree that, as long as we comply with our procedures, neither we, any of our affiliates, nor the Fund, or any of their directors, trustees, officers, employees or agents will be liable for any loss, liability, cost or expense (including attorneys' fees) in connection with requests that are effected in accordance with your telephone authorization and that we believe to be genuine. This policy means that you will bear the risk of loss arising out of your telephone transaction privileges. 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, we will normally effect transfers from the 36 Variable Investment Options or exchanges of Subaccount Annuity Units, within seven calendar days after your transfer or exchange request is effective. We will normally effect periodic annuity payments on the day that corresponds to the Annuity Date and will make payment on the following day. Payments or transfers may be suspended for a longer period under certain abnormal circumstances. These include a closing of the New York Stock Exchange other than on a regular holiday or weekend, a trading restriction imposed by the SEC, or an emergency declared by the SEC. For withdrawals from the Fixed Option, death benefit payments attributable to Fixed Option Value, or fixed periodic annuity payments, payment of proceeds may be delayed for up to six (6) months (thirty days in West Virginia) after the request is effective. Similar delays may apply to transfers from the Fixed Option and to loans. (See THE FIXED OPTION for more details.) CONFIRMATIONS, STATEMENTS AND OTHER REPORTS TO CONTRACT OWNERS Confirmations will be sent out for unscheduled purchase payments and transfers, loans, loan repayments, unscheduled partial withdrawals, a full withdrawal, and on payment of any death benefit proceeds. Each quarter prior to your Annuity Date, we will send you a statement that provides certain information pertinent to your Contract. These statements disclose Contract Value, Subaccount values, values under the Fixed Option, transactions made and specific Contract data that apply to your Contract. Confirmations of your transactions under the pre-authorized checking plan, dollar cost averaging, earnings sweep, portfolio rebalancing, and pre-authorized withdrawal options will appear on your quarterly account statements. Your fourth-quarter statement will contain annual information about your Contract Value and transactions. 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 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. REPLACEMENT OF LIFE INSURANCE OR ANNUITIES The term "replacement" has a special meaning in the life insurance company 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. SALES COMMISSIONS We pay sales commissions directly to broker-dealers and other expenses associated with promotion and sales of the Contracts. Registered representatives earn commissions from the broker-dealers with which they are affiliated and such arrangements may vary. Broker-dealers may receive aggregate commissions of up to 1.25% of your aggregate Purchase Payments. Certain 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 Value 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 37 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. FINANCIAL STATEMENTS Audited Financial Statements of Separate Account A as of December 31, 1997 and for each of the two years then ended are incorporated by reference in the Statement of Additional Information from the Annual Report of Separate Account A dated December 31, 1997. Pacific Life's audited consolidated financial statements as of December 31, 1997 and 1996, and for the three years ended December 31, 1997, are contained in the SAI. PREPARATION FOR THE YEAR 2000 We rely significantly on computer systems and applications in our daily operations. In 1995, we began the process of identifying, evaluating and implementing changes to computer programs necessary to address the year 2000 issue. This issue involves the ability of computer systems to properly recognize the year 2000. The inability to do so could result in major failures or miscalculations. We have a coordinated plan to remediate, or replace if necessary, any non- compliant systems and to obtain assurances of the ability to be year 2000 compliant by our service providers, vendors and those with significant relationships with us. Our plan is directed and overseen by an experienced Vice President dedicated to year 2000 compliance. We completed the identification of all critical systems and are in the process of remediating systems. In addition, we have retained two internationally recognized consultants to assist in reviewing and remediating our systems and interfaces with third parties. Our plan calls for all remediation to be completed by the fourth quarter of 1998 and testing to commence as remediation is completed and throughout 1999. Some testing has already begun. Remediation expenses to make our systems year 2000 compliant are currently estimated to range from $15 to $20 million, which excludes the cost of our personnel who support year 2000 compliance efforts. We do not anticipate any other material future costs associated with the year 2000 compliance project, although there can be no assurance. We currently expect to be year 2000 compliant; however, there can be no assurances that we will succeed. In the event we or our significant service providers, vendors, financial institutions or others with which we conduct business, fail to be year 2000 compliant, there would be a materially adverse effect on us. THE FIXED OPTION GENERAL INFORMATION All amounts allocated to the Fixed Option become part of our General Account. Subject to applicable law, we exercise sole discretion over the investment of General Account assets, and bear the associated investment risk; you will not share in the investment experience of General Account assets. Because of exemptive and exclusionary provisions, interests in the Fixed Option under the Contract are not registered under the Securities Act of 1933 and the General Account has not been registered as an investment company under the 1940 Act. An interest you have in the Fixed Option is not subject to these Acts, and 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 our General Account under the Fixed Option, we guarantee you an interest rate (a "Guaranteed Interest Rate") for a specified period of time (a "Guarantee Term") of up to one year. Guaranteed Interest Rates may be reset periodically; your allocation 38 will receive the Guaranteed Interest Rate in effect on the effective date of your allocation. The Guaranteed Interest Rate on your Fixed Option Value will never be less than an annual rate of 3%. Each allocation (or rollover) you make to the Fixed Option receives a Guarantee Term that begins on the day that allocation or rollover is effective and ends at the end of that Contract Year or, if earlier, on your Annuity Date. Example: Your Contract Anniversary is January 31. On January 31 of year 1, you allocate $1,000 to the Fixed Option and receive a Guarantee Term of one year and a Guaranteed Interest Rate of 5%. On August 1, you allocate another $500 to the Fixed Option and receive a Guaranteed Interest Rate of 6%. Until January 31, year 1, your first $1,000 earns 5% interest and your second $500 earns 6% interest. On January 31, year 2, a new interest rate may go into effect for your entire Fixed Option Value. All Guaranteed Interest Rates will be expressed as annual rates, and interest will accrue daily. At the end of each 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) with a new Guaranteed Interest Rate or Rate(s), unless you instruct us otherwise. WITHDRAWALS AND TRANSFERS You may withdraw amounts from your Fixed Option Value, or transfer amounts from your Fixed Option Value to one or more Variable Investment Options, at any time on or prior to the Annuity Date; however, if you reside in a state that requires refund of purchase payments under the Free Look Right, transfers may only be made on or after your Free Look Transfer Date. Payments or transfers from the Fixed Option may be delayed, as described under ADDITIONAL INFORMATION--Timing of Payments; any amount delayed will, so long as it is held under the Fixed Option, continue to earn interest at the Guaranteed Interest Rate then in effect until the Guarantee Term in effect has ended, and the minimum guaranteed interest rate of 3% thereafter, unless state law requires a greater rate be paid. 39 CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
PAGE ---- PERFORMANCE................................................................ 1 Total Returns............................................................ 1 Yields................................................................... 2 Performance Comparisons and Benchmarks................................... 2 Separate Account Performance............................................. 4 DISTRIBUTION OF THE CONTRACTS.............................................. 7 Pacific Mutual Distributors, Inc. ....................................... 7 THE CONTRACTS AND THE SEPARATE ACCOUNT..................................... 8 Calculating Subaccount Unit Values....................................... 8 Variable Annuity Payment Amounts......................................... 8 Corresponding Dates...................................................... 10 Age and Sex of Annuitant................................................. 11 Systematic Transfer Programs............................................. 11 Pre-Authorized Withdrawals............................................... 13 Death Benefit............................................................ 13 Joint Annuitants on Qualified Contracts.................................. 13 1035 Exchanges........................................................... 14 Safekeeping of Assets.................................................... 14 Dividends................................................................ 14 FINANCIAL STATEMENTS....................................................... 14
40 APPENDIX A: STATE LAW VARIATIONS Issue Date--The term "Issue Date" shall be substituted for the term "Contract Date" for Contracts issued to residents of the Commonwealth of Massachusetts. SHORT-TERM CANCELLATION RIGHT ("FREE-LOOK") ("RIGHT TO CANCEL") 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 you reside in one of the following states on your Contract Date, the Free- Look period is as specified below: Colorado (15 days) Idaho (20 days) North Dakota (20 days) 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 you reside in one of the following states on your Contract Date and you exercise your Free Look right and return your Contract to us within 10 days of your receipt of your Contract (unless specified otherwise below), we will refund at least your aggregate Purchase Payments under your Contract that we received: Georgia Oklahoma Idaho (20 days) South Carolina Michigan Utah Missouri Washington Nebraska West Virginia North Carolina
ANNUITIZATION: In New Jersey, the Conversion Amount you apply to an Annuity Option must result in an initial annuity payment of at least $250. We will reduce your payment frequency if the first annuity payment is less than $250. 41 To receive a current copy of the Pacific One Statement of Additional Information without charge call (800) 722-2333, or complete the following and send it to: Pacific Life Insurance Company Variable Annuities Post Office Box 7187 Pasadena, CA 91109-7187 Name ________________________________________________________ Address _____________________________________________________ City _________________________State __________ Zip __________ PH02/53003.29 [LOGO OF PACIFIC ONE] Underwritten By: Pacific Life Insurance Company 700 Newport Center Drive P.O. Box 9000 Newport Beach, California 92660 Prospectus dated May 1, 1998 Underwritten by: [LOGO OF PACIFIC LIFE] HOME OFFICE PACIFIC LIFE INSURANCE COMPANY 700 NEWPORT CENTER DRIVE NEWPORT BEACH, CA 92660 1-(800) 722-2333 MAILING ADDRESS VARIABLE ANNUITY DEPARTMENT P.O. BOX 7187 PASADENA, CALIFORNIA 91109-7187 VISIT US AT OUR WEBSITE: WWW.PACIFICLIFE.COM [LOGO OF INSURANCE MARKETPLACE STANDARDS ASSOCIATION*] *Membership promotes ethical market conduct for individual life insurance and annuities FORM NO. 287-8A STATEMENT OF ADDITIONAL INFORMATION MAY 1, 1998 PACIFIC ONE SEPARATE ACCOUNT A ---------------- Pacific One (the "Contract") is a variable annuity contract underwritten by Pacific Life Insurance Company ("Pacific Life"). This Statement of Additional Information ("SAI") is not a Prospectus and should be read in conjunction with the Contract's Prospectus, dated May 1, 1998, which is available without charge upon written or telephone request to Pacific Life. Terms used in this 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 ---- PERFORMANCE................................................................ 1 Total Returns............................................................ 1 Yields................................................................... 2 Performance Comparisons and Benchmarks................................... 2 Separate Account Performance............................................. 4 DISTRIBUTION OF THE CONTRACTS.............................................. 7 Pacific Mutual Distributors, Inc. ....................................... 7 THE CONTRACTS AND THE SEPARATE ACCOUNT..................................... 8 Calculating Subaccount Unit Values....................................... 8 Variable Annuity Payment Amounts......................................... 8 Corresponding Dates...................................................... 10 Age and Sex of Annuitant................................................. 11 Systematic Transfer Programs............................................. 11 Pre-Authorized Withdrawals............................................... 13 Death Benefit............................................................ 13 Joint Annuitants on Qualified Contracts.................................. 13 1035 Exchanges........................................................... 14 Safekeeping of Assets.................................................... 14 Dividends................................................................ 14 FINANCIAL STATEMENTS....................................................... 14
i PERFORMANCE From time to time, our reports or other communications to current or prospective Contract Owners or our advertising or other promotional material may quote the performance (yield and total return) of a Subaccount. Quoted results are based on past performance and reflect the performance of all assets held in that Subaccount for the stated time period. QUOTED RESULTS ARE NEITHER AN ESTIMATE NOR A GUARANTY OF FUTURE INVESTMENT PERFORMANCE, AND DO NOT REPRESENT THE ACTUAL EXPERIENCE OF AMOUNTS INVESTED BY ANY PARTICULAR CONTRACT OWNER. TOTAL RETURNS A Subaccount may advertise its "average annual total return" over various periods of time. "Total return" represents the average percentage change in value of an investment in the Subaccount from the beginning of a measuring period to the end of that measuring period. "Annualized" total return assumes that the total return achieved for the measuring period is achieved for each such period for a full year. "Average annual" total return is computed in accordance with a standard method prescribed by the SEC. Average Annual Total Return To calculate a Subaccount's average annual total return for a specific measuring period, we first take a hypothetical $1,000 investment in that Subaccount, at its then-applicable Subaccount Unit Value (the "initial payment") and we compute the ending redeemable value ("redeemable value") of that initial payment at the end of the measuring period. The redeemable value reflects the effect of all recurring fees and charges applicable to a Contract Owner under the Contract, including the mortality and expense risk charge and the asset-based Administrative Fee, but does not reflect any charges for applicable premium taxes. The Annual Fee is also taken into account, assuming an average Contract Value of $80,000. The redeemable value is then divided by the initial payment and this quotient is taken to the Nth root (N represents the number of days in the measuring period), and 1 is subtracted from this result. Average annual total return is expressed as a percentage. T = (ERV/P) (To the power of 365/N)-1 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-, five- and ten-year periods (if applicable), and may be given for other periods as well (such as from commencement of the Subaccount's operations, or on a year-by- year basis). When considering "average" total return figures for periods longer than one year, it is important to note that the relevant Subaccount's annual total return for any one year in the period might have been greater or less than the average for the entire period. Aggregate Total Return A Subaccount may use "aggregate" total return figures along with its "average annual" total return figures for various periods; these figures represent the cumulative change in value of an investment in the Subaccount for a specific period. Aggregate total returns may be shown by means of schedules, charts or graphs and may indicate subtotals of the various components of total return. The SEC has not prescribed standard formulas for calculating aggregate total return. Total returns may also be shown for the same periods that do not take into account the Annual Fee. 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 the deduction of charges for any applicable premium taxes, but do reflect a deduction for the Annual Fee, assuming an average Contract Value of $80,000. At December 31, 1997, the Money Market Portfolio current yield was 4.09% and the effective yield was 4.17%. 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 semi-annual compounding: YIELD = 2[(a-b + 1) (To the power of 6) - 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 mortality and expense risk charge, the asset-based Administrative Fee and the Annual Fee (assuming an average Contract Value of $80,000), but does not reflect any charge for applicable premium taxes and/or other taxes. The Subaccounts' yields will vary from time to time depending upon market conditions, the composition of each Portfolio and operating expenses of the Fund allocated to each Portfolio. Consequently, any given performance quotation should not be considered representative of the Subaccount's performance in the future. Yield should also be considered relative to changes in Subaccount Unit Values and to the relative risks associated with the investment policies and objectives of the various Portfolios. In addition, because performance will fluctuate, it may not provide a basis for comparing the yield of a Subaccount with certain bank deposits or other investments that pay a fixed yield or return for a stated period of time. PERFORMANCE COMPARISONS AND BENCHMARKS In advertisements and sales literature, we may compare the performance of some or all of the Subaccounts to the performance of other variable annuity issuers in general and to the performance of particular types of variable annuities investing in mutual funds, or series of mutual funds, with investment objectives similar to each of the 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(R)") or Morningstar, Inc. ("Morningstar"), which are independent services that monitor and rank the performance of variable annuity issuers and mutual funds in each of the major categories of investment objectives on an industry-wide basis. Lipper's rankings include variable life issuers as well as variable annuity issuers. VARDS(R) rankings compare only variable annuity issuers. The performance analyses prepared by Lipper and VARDS(R) rank such issuers on the basis of total return, assuming reinvestment of dividends and distributions, but do not take sales charges, redemption fees or certain expense deductions at the separate account level into consideration. In addition, VARDS(R) prepares risk adjusted rankings, which consider the effects of market risk on total return performance. We may also compare the performance of the Subaccounts with performance information included in other publications and services that monitor the performance of insurance company separate accounts or other investment vehicles. These other services or publications may be general interest business publications such as The Wall Street Journal, Barron's, Business Week, Forbes, Fortune, and Money. In addition, our reports and communications to Contract Owners, advertisements, or sales literature may compare a Subaccount's performance to various benchmarks that measure the performance of a pertinent group of securities widely regarded by investors as being representative of the securities markets in general or as being representative of a particular type of security. These benchmarks may include the following: (1) the Standard & Poor's 500 Composite Stock Price Index ("S&P 500"), an unmanaged weighted index of 500 companies that represent approximately 80% of the market capitalization of the United States equity markets; (2) the Consumer Price Index ("CPI"), published by the U.S. Bureau of Labor Statistics, a statistical measure of change, over time, in the prices of goods and services in major expenditure groups and generally considered to be a measure of inflation; (3) the Dow Jones Industrial Average ("DJIA"); (4) the Donoghue Money Market Institutional Averages; (5) the Lehman Brothers Government Corporate Index; (6) the Lehman Brothers Government Bond Index; (7) the Salomon Brothers High Yield Bond Indexes; and (8) the Morgan Stanley Capital International's EAFE Index. We may also compare the performance of the Subaccounts with that of other appropriate indices of investment securities and averages for peer universes of funds or data developed by us derived from such indices or averages. Unmanaged indexes generally assume the reinvestment of dividends or interest but do not generally reflect deductions for investment management or administrative costs and expenses. 3 SEPARATE ACCOUNT PERFORMANCE The following table presents the annualized total return for each Variable Account, for the period from each such Variable Account's commencement of operations through December 31, 1997. The table is based on a Contract for which the average initial premium is approximately $80,000 and reflects deduction for all contractual expenses. THE RESULTS SHOWN IN THIS SECTION ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE INVESTMENT PERFORMANCE. ANNUALIZED RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1997 ALL NUMBERS ARE EXPRESSED AS A PERCENTAGE
SINCE VARIABLE ACCOUNTS 1 YEAR INCEPTION - ----------------- ------ --------- Money Market 1/2/96*.......................................... 3.77 3.62 High Yield Bond 1/2/96*....................................... 7.87 8.71 Managed Bond 1/2/96*.......................................... 8.35 5.47 Government Securities 1/2/96*................................. 7.91 4.58 Aggressive Equity 4/17/96*.................................... 2.29 5.81 Growth LT 1/2/96*............................................. 9.37 12.79 Equity Income 1/2/96*......................................... 26.82 21.59 Multi-Strategy 1/2/96*........................................ 17.91 14.08 Equity 1/2/96*................................................ 16.49 21.15 Bond and Income 1/2/96*....................................... 14.66 5.91 Equity Index 1/2/96*.......................................... 31.11 25.28 International 1/2/96*......................................... 7.71 12.97 Emerging Markets 4/17/96*..................................... (3.10) (4.90)
- -------- * Date Variable Account commenced operations. ** Effective June 1, 1997 Morgan Stanley Asset Management Inc. became the Portfolio Manager of the International Portfolio. Effective May 1, 1998, Alliance Capital Management L.P. became the Portfolio Manager of the Aggressive Equity Portfolio and Goldman Sachs Asset Management became the Portfolio Manager of the Equity and Bond and Income Portfolios; prior to May 1, 1998 some of the investment policies of the Aggressive Equity, Equity and Bond and Income Portfolios and the investment objective of the Bond and Income Portfolio differed. In order to help you understand how investment performance can affect your Variable Account Value, we are including performance information based on the historical performance of the Portfolios. The Separate Account commenced operations as of January 2, 1996. Therefore, no historical performance data exists for the Subaccounts prior to that date. The following tables represent what the performance of the Subaccounts would have been, if the Subaccounts had been both in existence and invested in the corresponding Portfolio since the date of the Portfolio's (or predecessor series') inception or for the indicated 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 January 1, 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 during this period, THESE ARE NOT ACTUAL PERFORMANCE NUMBERS FOR THE SUBACCOUNTS OR FOR THE CONTACT. These are hypothetical total return numbers that represent the actual performance of the Portfolios, adjusted for the fees and charges applicable to the Contract. Any charge for premium taxes and/or other taxes are not reflected in these data, and reflection of the Annual Fee assumes an average Contract size of $80,000. The information presented also includes data representing unmanaged market indices. 4 THE RESULTS SHOWN IN THIS SECTION ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE INVESTMENT PERFORMANCE. ANNUALIZED RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1997 ALL NUMBERS ARE EXPRESSED AS A PERCENTAGE
SINCE VARIABLE ACCOUNTS 1 YEAR 3 YEARS* 5 YEARS* 10 YEARS* INCEPTION* - ----------------- ------ -------- -------- --------- ---------- Money Market..................... 3.77 3.79 2.94 3.87 High Yield Bond.................. 7.87 11.55 9.84 9.57 Managed Bond..................... 8.35 9.33 6.29 7.94 Government Securities............ 7.91 8.66 5.56 7.30 Aggressive Equity................ 2.29 5.10 Growth LT........................ 9.37 19.70 17.66 Equity Income.................... 26.82 24.70 15.26 13.01 Multi-Strategy................... 17.91 17.36 11.07 10.37 Equity........................... 16.49 21.54 14.49 13.17 13.42 Bond and Income.................. 14.66 13.94 9.47 9.73 10.92 Equity Index..................... 31.11 28.78 18.06 17.10 International.................... 7.71 12.17 12.96 7.74 Emerging Markets................. (3.10) (4.22) MAJOR INDICES - ------------- EAFE............................. 1.78 6.27 11.39 6.25 First Boston High Yield Bond..... 12.63 14.12 11.84 12.10 LB Aggregate..................... 9.65 10.41 7.48 9.17 LBG/Bond......................... 9.59 10.05 7.34 8.88 LBG/C Bond....................... 9.76 10.43 7.61 9.15 LBG/C LT Bond.................... 14.52 14.22 9.97 11.03 Russell 2500..................... 24.36 24.92 17.59 16.94 MSCI Emerging Markets Free....... (11.59) (3.86) 7.57 S&P 500.......................... 33.36 31.15 20.27 18.05
- -------- * The performance of the Aggressive Equity, Equity Income, Multi-Strategy, Equity, Bond and Income and International Variable Accounts for a portion of this period occurred at a time when other Portfolio Managers managed the corresponding Portfolio in which each Variable Account invests. Effective January 1, 1994, J. P. Morgan Investment Management, Inc. became the Portfolio Manager of the Equity Income and Multi-Strategy Portfolios; Prior to January 1, 1994, some of the investment policies of the Equity Income Portfolio and the investment objective of the Multi-Strategy Portfolio differed. Effective June 1, 1997, Morgan Stanley Asset Management Inc. became the Portfolio Manager of the International Portfolio. Effective May 1, 1998, Alliance Capital Management L.P. became the Portfolio Manager of the Aggressive Equity Portfolio and Goldman Sachs Asset Management became the Portfolio Manager of the Equity and Bond and Income Portfolios; prior to May 1, 1998 some of the investment policies of the Aggressive Equity, Equity and Bond and Income Portfolios and the investment objective of the Bond and Income Portfolio differed. Performance of the Equity Portfolio and the Bond and Income Portfolio is based in part on the performance of predecessor portfolios of Pacific Corinthian Valuable Fund, which began their first full year of operations January 1, 1984 and were acquired by the Fund on December 31, 1994. Tax Deferred Accumulation In reports or other communications to you or in advertising or sales materials, we may also describe the effects of tax-deferred compounding on the Separate Account's investment returns or upon returns in general. These 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 5 on a current basis. The following chart illustrates this benefit by comparing accumulation under a variable annuity contract with accumulations from an investment on which gains are taxed on a current basis. The chart shows accumulations on an initial Purchase Payment or investment 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 Mortality and Expense 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) and the Annual Fee (equal to $40 per year if your Net Contract Value is less than $100,000), any charge for premium taxes and/or other taxes, or the expenses of an underlying investment vehicle, such as the Fund. In addition, these values assume that the Contract Owner does not surrender the Contract or make any withdrawals until the end of the period shown. The chart assumes a full withdrawal, at the end of the period shown, of all Contract Value and the payment of taxes at the 36% rate on the amount in excess of the Purchase Payment or investment. The rates of return illustrated are hypothetical and are not an estimate or guarantee of performance. Actual tax rates may vary for different taxpayers from that illustrated and withdrawals by Contract Owners who have not reached age 59 1/2 may be subject to a tax penalty of 10%. 6 POWER OF TAX DEFERRAL $10,000 investment at annual rates of 0.00%, 4.00% and 8.00%, taxed @ 36% [PERFORMANCE GRAPH APPEARS HERE] DISTRIBUTION OF THE CONTRACTS PACIFIC MUTUAL DISTRIBUTORS, INC. Pacific Mutual Distributors, Inc. ("PMD"), wholly-owned subsidiary of ours, acts as the principal underwriter (distributor) of the Contracts and offers the Contracts on a continuous basis. PMD is registered as a broker-dealer with the SEC and is a member of the National Association of Securities Dealers ("NASD"). We pay PMD for acting as principal underwriter under a Distribution Agreement. The aggregate amount of underwriting commissions paid to PMD for 1997 and 1996, respectively, with regard to this Contract was $2,948,697 and $465,303, of which $0 was retained. We and PMD enter into selling agreements with broker- dealers whose registered representatives are authorized by state insurance departments to sell the Contracts. 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 / 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 of Contract, and/or any taxes attributable directly or indirectly, to Purchase Payments; (B) = the net asset value per share of the corresponding Portfolio shares held by the Subaccount as of the end of the preceding valuation period; and (C) = a factor that assesses against the Subaccount assets for each calendar day in the valuation period, the charge for mortality and expense risks at a rate that is equal on an annual basis to an annual factor expressed as a decimal (where 1.0 equals 100%) of 0.0125 and the Administrative Charge at a rate that is equal on an annual basis to an annual factor of 0.0015 (see Charges, Fees and Deductions). As explained in the Prospectus, the Annual Fee, if applicable, is assessed against your Variable Account Value through the automatic debit of Subaccount Units; the Annual Fee decreases the number of Subaccount Units attributed to your Contract but does not alter the Unit Value for any Subaccount. VARIABLE ANNUITY PAYMENT AMOUNTS The following steps show how we determine the amount of each variable annuity payment under your Contract. First: Pay Applicable Premium Taxes When you convert your 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 your Contract Value, proportionately relative to your Account Value in each Subaccount and in the Fixed Option in an amount equal to the aggregate amount of the charges. The remaining amount of your available Contract Value may be used to provide variable annuity payments. Alternatively, your remaining available 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 and charge for premium taxes and/or other taxes. 8 Second: The First Variable Payment We begin by referring to your Contract's Option Table for your Annuity Option (the "Annuity Option Table"). The Annuity Option Table allows us to calculate the dollar amount of the first variable annuity payment under your Contract, based on the amount applied toward the variable annuity. The number that the Annuity Option Table yields will be based on the Annuitant's age (and, in certain cases, sex) and assumes a 5% investment return, as described in more detail below. Example: Assume a man is 65 years of age at his Annuity Date and has selected a lifetime annuity with monthly payments guaranteed for 10 years. According to the Annuity Option Table, this man should receive an initial monthly payment of $5.79 for every $1000 of his Contract Value (reduced by applicable charges) that he will be using to provide variable payments. Therefore, if his Contract Value after deducting applicable 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. Third: Subaccount Annuity Units For each Subaccount, we use the amount of the first variable annuity payment under your Contract attributed to each Subaccount to determine the number of Subaccount Annuity Units that will form the basis of subsequent payment amounts. First, we use the Annuity Option Table to determine the amount of that first variable payment for each Subaccount. Then, for each Subaccount, we divide that amount of the first variable annuity payment by the value of one Subaccount Annuity Unit (the "Subaccount Annuity Unit Value") as of the end of the Annuity Date to obtain the number of Subaccount Annuity Units for that particular Subaccount. The number of Subaccount Annuity Units used to calculate subsequent payments under your Contract will not change unless exchanges of Annuity Units are made, (or if the Joint and Survivor Annuity Option is elected and the Primary Annuitant dies first,) but the value of those Annuity Units will change daily, as described below. Fourth: The Subsequent Variable Payments The amount of each subsequent variable annuity payment will be the sum of the amounts payable based on each Subaccount. The amount payable based on each Subaccount is equal to the number of Subaccount Annuity Units for that Subaccount multiplied by their Subaccount Annuity Unit Value at the end of the Business Day in each payment period you elected that corresponds to the Annuity Date. Each Subaccount's Subaccount Annuity Unit Value, like its Subaccount Unit Value, changes each day to reflect the net investment results of the underlying investment vehicle, as well as the assessment of the mortality and expense risk charge at a rate equal on an annual basis to the annual factor expressed as a decimal (where 1.0 equals 100%) of 0.0125 and the Administrative Fee at a rate equal on an annual basis to the annual rate of 0.0015. In addition, the calculation of Subaccount Annuity Unit Value incorporates an additional factor; as discussed in more detail below, this additional factor adjusts Subaccount Annuity Unit Values to correct for the Option Table's implicit assumption of a 5% annual investment return on amounts applied but not yet used to furnish annuity benefits. Different Subaccounts may be selected for your Contract before and after your Annuity Date, subject to any restrictions we may establish. Currently, your Annuitant(s) may exchange Subaccount Annuity Units in any Subaccount for Subaccount Annuity Units in any other Subaccount(s) up to four times in any twelve month period after you annuitize. The number of Subaccount Annuity Units in any Subaccount may change due to such exchanges. Exchanges following annuitization will be made by exchanging Subaccount Annuity Units of equivalent aggregate value, based on their relative Subaccount Annuity Unit Values. Understanding the "Assumed Investment Return" Factor The Annuity Option Table incorporates a number of implicit assumptions in determining the amount of your first variable annuity payment. As noted above, the numbers in the Annuity Option Table reflect certain 9 actuarial assumptions based on the Annuitant's age, and, in some cases, the Annuitant's sex. In addition, these numbers assume that the amount of your Contract Value that you convert to a variable annuity will have a positive net investment return of 5% each year during the payout of your annuity; this 5% is referred to as an "assumed investment return." The Subaccount Annuity Unit Value for a Subaccount will increase only to the extent that the investment performance of that Subaccount exceeds its mortality and expense risk charge, the Administrative Fee, and the assumed investment return. The Subaccount Annuity Unit Value for any Subaccount will generally be less than the Subaccount Unit Value for that same Subaccount, and the difference will be the amount of the assumed investment factor. Example: Assume the net investment performance of a Subaccount is at a rate of 5.00% per year (after deduction of the 1.25% Mortality and Expense 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 (6.40% minus the mortality and expense risk charge at the annual rate of 1.25% and minus the Administrative Fee at the annual rate of .15% equals 5.00%), but the Subaccount Annuity Unit Value would not increase (or decrease) at all. The net investment factor for that 5% return [1.05] is then divided by the factor for the 5% assumed investment return [1.05] and 1 is subtracted from the result to determine the adjusted rate of change in Subaccount Annuity Unit Value: 1.05 = 1; 1-1 = 0; 0 * 100% = 0% ---- 1.05 If the net investment performance of a Subaccount assets is at a rate less than 6.40% per year, the Subaccount Annuity Unit Value will decrease, even if the Subaccount Unit Value is increasing. Example: Assume the net investment performance of a Subaccount is at a rate of 2.60% per year (after deduction of the 1.25% Mortality and Expense 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 = .9771; .9771-1 = -0.0229; - 0.229 * 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 date. In addition, as stated in the Prospectus, any event scheduled to occur on a day that is not a Business Day will occur on the next succeeding Business Day. Example: If your Contract is issued on February 29 in year 1 (a leap year), your Contract Anniversary in years 2, 3 and 4 will be on March 1. Example: If your Annuity Date is July 31 and you select monthly annuity payments, the payments received will be based on valuations made on July 31, August 31, October 1 (for September), October 31, December 1 (for November), December 31, January 31, March 1 (for February), March 31, May 1 (for April), May 31 and July 1 (for June). 10 AGE AND SEX OF ANNUITANT As mentioned in the Prospectus, the Contracts generally provide for sex- distinct annuity purchase rates in the case of life annuities. Statistically, females tend to have longer life expectancies than males; consequently, if the amount of annuity payments is based on life expectancy, they will ordinarily be higher if an annuitant is male than if an annuitant is female. Certain states' regulations prohibit sex-distinct annuity purchase rates, and Contracts issued in those states will use unisex rates. In addition, Contracts issued in connection with Qualified Plans are required to use unisex rates. We may require proof of your Annuitant's age and sex before commencing annuity payments. If the age or sex (or both) of your Annuitant are incorrectly stated in your Contract, the amount payable will be corrected to equal the amount that the annuitized portion of the Contract Value under that Contract would have purchased for your Annuitant's correct age and sex. If the correction is effected after annuity payments have commenced, and we have made overpayments based on the incorrect information, we will deduct the amount of the overpayment, with interest at 3% a year, from any payments due then or later; if we have made underpayments, we will add the amount, with interest at 3% a year, of the underpayments to the next payment we make after we receive proof of the correct sex and/or date of birth. SYSTEMATIC TRANSFER PROGRAMS Dollar Cost Averaging When you request dollar cost averaging, you are authorizing us to make periodic reallocations of your Contract Value without waiting for any further instruction from you. You may request to begin or stop dollar cost averaging at any time prior to your Annuity Date; the effective date of your request will be the day we receive written notice from you in good form. Your request may specify the date on which you want your first transfer to be made. If you do not specify a date for your first transfer, we will treat your request as if you had specified the effective date of your request. Your first transfer may not be made until 30 days after your Contract Date, and if you specify an earlier date, your first transfer will be delayed until one calendar month after the date you specify. If you request dollar cost averaging on your Application for your Contract and you fail to specify a date for your first transfer, your first transfer will be made one period after your Contract Date (that is, if you specify monthly transfers, the first transfer will occur 30 days after your Contract Date; quarterly transfers, 90 days after your Contract Date; semi-annual transfers, 180 days after your Contract Date; and if you specify annual transfers, the first transfer will occur on your Contract Anniversary). If you stop dollar cost averaging, you must wait 30 days before you may begin this option again. Your request to begin dollar cost averaging must specify the Investment Option you wish to transfer money from (your "source account"). You may choose any one Variable Investment Option or the Fixed Option as your source account. The Account Value of your source account must be at least $10,000 for you to begin dollar cost averaging. Your request to begin dollar cost averaging must also specify the amount and frequency of your transfers. You may choose monthly, quarterly, semi-annual or annual transfers. The amount of your transfers may be specified as a dollar amount or a percentage of your source Account Value; however, the first transfer must be at least $250. Dollar cost averaging transfers are subject to the same requirements and limitations as other transfers. Finally, your request must specify the Investment Option(s) you wish to transfer amounts to (your "target account(s)"). If you select more than one target account, your dollar cost averaging request must specify how transferred amounts should be allocated among the target accounts. Your source account may not also be a target account. 11 Your dollar cost averaging transfers will continue until the earlier of (i) your request to stop dollar cost averaging is effective, or, (ii) your source Account Value is zero, or (iii) you annuitize. If, as a result of a dollar cost averaging transfer, your source Account Value falls below any minimum Account Value we may establish, we have the right, at our option, to transfer that remaining Account Value to your target account(s) on a proportionate basis relative to your most recent allocation instructions. You may not use dollar cost averaging and the earnings sweep at the same time. We may change, terminate or suspend the dollar cost averaging option at any time. Portfolio Rebalancing Portfolio rebalancing allows you to maintain the percentage of your Contract Value allocated to each Variable Investment Option at a pre-set level prior to annuitization. For example, you could specify that 30% of your Contract Value should be in the Equity Index Subaccount, 40% in the Managed Bond Subaccount, and 30% in the Growth LT Subaccount. Over time, the variations in each Subaccount's investment results will shift this balance of your 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 good form. If you stop portfolio rebalancing, you must wait 30 days to begin again. You may specify a date for your first rebalance, or we will treat your request as if you selected the request's effective date. If you specify a date fewer than 30 days after your Contract Date, your first rebalance will be delayed one month, and if you request rebalancing on your Application but do not specify a date for the first rebalance, it will occur one period after your Contract Date, as described above under Dollar Cost Averaging. We may change, terminate or suspend the portfolio rebalancing feature at any time. Earnings Sweep An earnings sweep automatically transfers the Earnings attributable to a specified Investment Option (the "sweep option") to one or more other Investment Options (your "target option(s)"). If you elect to use the earnings sweep, you may select either the Fixed Option or the Money Market Subaccount as your sweep option. The Account Value of your sweep option will be required to be at least $10,000 when you elect the earnings sweep. You may select one or more Variable Investment Options (but not the Money Market Subaccount) as your target option(s). You may choose to have earnings sweeps occur monthly, quarterly, semi-annually or annually until you annuitize. At each earnings sweep, we will automatically transfer your accumulated Earnings attributable to your sweep option for the previous period proportionately to your target option(s). That is, if you select a monthly earnings sweep, we will transfer the sweep option Earnings from the preceding month; if you select a semi-annual earnings sweep, we will transfer the sweep option Earnings accumulated over the preceding six months. Earnings sweep transfers are subject to the same requirements and limitations as other transfers. For the purpose of determining Earnings, transfers, withdrawals, and any applicable annual fees, transaction fees, and charges for premium taxes and/or other taxes imposed on your sweep option will first be attributed to that sweep option's earnings on a last in, first out basis, and then to amounts allocated or transferred to that sweep option. Procedures for selecting the earnings sweep are generally the same as those discussed in detail above for selecting dollar cost averaging and portfolio rebalancing: You may make your request at any time and it will be effective when we receive it in good form. If you stop the earnings sweep, you must wait 30 days to begin again. You may specify a date for your first sweep, or we will treat your request as if you selected the request's effective date. If you specify a date fewer than 30 days after your Contract Date, your first earnings sweep will be delayed 12 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 you are using the earnings sweep, you may also use portfolio rebalancing only if you select the Fixed Option as your sweep option. You may not use the earnings sweep and dollar cost averaging at the same time. If, as a result of an earnings sweep 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 earnings sweep option at any time. PRE-AUTHORIZED WITHDRAWALS You may specify a dollar amount for your pre-authorized withdrawals, or you may specify a percentage of your Contract Value or an Account Value. You may direct us to make your pre-authorized withdrawals from one or more specific Investment Options; if you do not give us these specific directions, amounts will be deducted proportionately from your Account Value in each Investment Option. Procedures for selecting pre-authorized withdrawals are generally the same as those discussed in detail above for selecting dollar cost averaging, portfolio rebalancing, and earnings sweeps: You may make your request at any time and it will be effective when we receive it in good form. If you stop the pre- authorized withdrawals, you must wait 30 days to begin again. You may specify a date for the first withdrawal, or we will treat your request as if you selected the request's effective date. If you specify a date fewer than 30 days after your Contract Date, your first pre-authorized withdrawal will be delayed one month, and if you request 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 any minimum Account Value we may establish, we have the right, at our option, to transfer that remaining Account Value to your other Investment Options on a proportionate basis relative to your most recent allocation instructions. If your pre-authorized withdrawals cause your Contract Value to fall below $1,000, we may, at our option, terminate your Contract and send you the remaining withdrawal proceeds. Each pre-authorized withdrawal is subject to any applicable charge for premium taxes and/or other taxes, to federal income tax on its taxable portion, and, if you have not reached age 59 1/2, a 10% tax penalty. DEATH BENEFIT Any death benefit payable will be calculated as of the date we receive proof (in 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 writing and 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 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 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 recordkeeping, particularly if the exchanged annuity contract was issued prior to August 14, 1982. You should consult your tax adviser prior to effecting a 1035 Exchange. SAFEKEEPING OF ASSETS 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. DIVIDENDS The current dividend scale is zero and we do not anticipate that dividends will be paid. If any dividend is paid, you may elect to receive the dividend in cash or to add the dividend to your Contract Value. If you make no election, the dividend will be added to your Contract Value. We will allocate any dividend to Contract Value in accordance with your most recent allocation instructions, unless instructed. You should consult with your tax adviser before making an election. FINANCIAL STATEMENTS Audited financial statements of Separate Account A as of December 31, 1997 and for each of the two years then ended are incorporated by reference in this SAI from the Annual Report of the Separate Account dated as of December 31, 1997. Pacific Life's audited consolidated financial statements as of December 31, 1997 and 1996 and for the three years ended December 31, 1997 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, 1997 and 1996 and for the three years ended December 31, 1997 have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein. 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 (formerly Pacific Mutual Life Insurance Company) and subsidiaries (the "Company") as of December 31, 1997 and 1996, and the related consolidated statements of operations, stockholder's equity and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Pacific Life Insurance Company and subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Costa Mesa, California February 19, 1998 15 Pacific Life Insurance Company and Subsidiaries CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 1997 1996 - ---------------------------------------------------------------------------- (In Millions) ASSETS Investments: Securities available for sale at estimated fair value: Fixed maturity securities $13,990.7 $12,193.8 Equity securities 346.4 260.8 Mortgage loans 1,922.1 1,477.3 Real estate 192.1 280.0 Policy loans 3,769.2 3,131.8 Short-term investments 83.8 66.1 Other investments 380.2 208.0 - ---------------------------------------------------------------------------- TOTAL INVESTMENTS 20,684.5 17,617.8 Cash and cash equivalents 110.4 109.0 Deferred policy acquisition costs 716.9 531.5 Accrued investment income 255.4 202.5 Other assets 636.5 462.4 Separate account assets 11,605.1 8,142.1 - ---------------------------------------------------------------------------- TOTAL ASSETS $34,008.8 $27,065.3 - ----------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDER'S EQUITY Liabilities: Universal life, annuity and other investment contract deposits $16,644.5 $13,877.4 Future policy benefits 2,133.8 2,506.5 Short-term and long-term debt 253.6 270.1 Other liabilities 1,224.5 572.0 Separate account liabilities 11,605.1 8,142.1 - ------------------------------------------------------------------------------- Total Liabilities 31,861.5 25,368.1 - ------------------------------------------------------------------------------- Commitments and contingencies Stockholder's Equity: Common stock - $50 par value; 600,000 shares authorized, issued and outstanding 30.0 Paid-in capital 120.1 Retained earnings 1,422.0 1,318.0 Unrealized gain on securities available for sale, net 575.2 379.2 - ------------------------------------------------------------------------------- Total Stockholder's Equity 2,147.3 1,697.2 - ------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $34,008.8 $27,065.3 - -------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements 16 Pacific Life Insurance Company and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1997 1996 1995 - ------------------------------------------------------------------------------ (In Millions) REVENUES Insurance premiums $ 504.3 $ 465.4 $ 458.5 Policy fees from universal life, annuity and other investment contract deposits 431.2 348.6 309.0 Net investment income 1,225.3 1,087.3 1,038.4 Net realized capital gains 85.3 44.0 61.5 Commission revenue 146.6 79.6 62.0 Other income 181.7 123.1 90.3 - ------------------------------------------------------------------------------ TOTAL REVENUES 2,574.4 2,148.0 2,019.7 - ------------------------------------------------------------------------------ BENEFITS AND EXPENSES Interest credited to universal life, annuity and other investment contract deposits 797.8 665.0 675.2 Policy benefits paid or provided 675.7 652.9 647.5 Commission expenses 303.7 233.6 197.5 Operating expenses 507.7 316.2 278.6 - ------------------------------------------------------------------------------ TOTAL BENEFITS AND EXPENSES 2,284.9 1,867.7 1,798.8 - ------------------------------------------------------------------------------ INCOME BEFORE PROVISION FOR INCOME TAXES 289.5 280.3 220.9 Provision for income taxes 113.5 113.7 86.1 - ------------------------------------------------------------------------------ NET INCOME $ 176.0 $ 166.6 $ 134.8 - ------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements 17 Pacific Life Insurance Company and Subsidiaries CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
Unrealized Gain (Loss) Common Stock on Securities ------------- Paid-in Retained Available Shares Amount Capital Earnings for Sale, net Total - --------------------------------------------------------------------------------- (In Millions) BALANCES, JANUARY 1, 1995 $1,016.6 $(207.3) $ 809.3 Net income 134.8 134.8 Change in unrealized gain (loss) on securities available for sale, net 689.3 689.3 - --------------------------------------------------------------------------------- BALANCES, DECEMBER 31, 1995 1,151.4 482.0 1,633.4 Net income 166.6 166.6 Change in unrealized gain on securities available for sale, net (102.8) (102.8) - --------------------------------------------------------------------------------- BALANCES, DECEMBER 31, 1996 1,318.0 379.2 1,697.2 Net income 176.0 176.0 Change in unrealized gain on securities available for sale, net 196.0 196.0 Issuance of partnership units by affiliate $ 85.1 85.1 Initial member capitalization of Pacific Mutual Holding Company (2.0) (2.0) Issuance of common stock 0.6 $30.0 35.0 (65.0) -- Dividend paid to parent (5.0) (5.0) - --------------------------------------------------------------------------------- BALANCES, DECEMBER 31, 1997 0.6 $30.0 $120.1 $1,422.0 $ 575.2 $2,147.3 - ---------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements 18 Pacific Life Insurance Company and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1997 1996 1995 - -------------------------------------------------------------------------------- (In Millions) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 176.0 $ 166.6 $ 134.8 Adjustments to reconcile net income to net cash provided by operating activities: Amortization on fixed maturities (26.6) (45.2) (67.2) Depreciation and other amortization 38.3 43.8 36.8 Deferred income taxes (14.4) (49.8) (30.3) Net realized capital gains (85.3) (44.0) (61.5) Net change in deferred policy acquisition costs (185.4) (140.4) 48.8 Interest credited to universal life, annuity and other investment contract deposits 797.8 665.0 675.2 Change in accrued investment income (52.9) (3.7) (16.1) Change in future policy benefits (372.7) 62.3 88.8 Change in other assets and liabilities 577.4 158.1 151.9 - -------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 852.2 812.7 961.2 - -------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Securities available for sale: Purchases (6,343.2) (4,525.0) (3,001.3) Sales 2,247.5 2,511.0 1,940.3 Maturities and repayments 2,406.8 1,184.7 926.9 Held to maturity securities: Purchases (181.9) Sales 62.3 Maturities and repayments 111.0 Repayments of mortgage loans 179.3 220.4 267.7 Proceeds from sales of mortgage loans and real estate 104.4 14.5 27.4 Purchases of mortgage loans and real estate (643.7) (414.3) (244.7) Distributions from partnerships 91.6 78.8 49.0 Change in policy loans (637.4) (338.5) (389.8) Change in short-term investments (17.7) 37.2 (66.7) Other investing activity, net 78.8 (144.5) (137.2) - -------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (2,533.6) (1,375.7) (637.0) - --------------------------------------------------------------------------------
(Continued) See Notes to Consolidated Financial Statements 19 Pacific Life Insurance Company and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, (Continued) 1997 1996 1995 - ------------------------------------------------------------------------------ (In Millions) CASH FLOWS FROM FINANCING ACTIVITIES Policyholder account balances: Deposits $ 4,373.6 $ 2,105.0 $ 1,437.9 Withdrawals (2,667.3) (1,756.6) (1,774.2) Net change in short-term debt 8.5 42.5 (38.8) Repayment of long-term debt (25.0) (5.0) (5.0) Initial capitalization of Pacific Mutual Holding Company (2.0) Dividend paid to parent (5.0) - ------------------------------------------------------------------------------ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,682.8 385.9 (380.1) - ------------------------------------------------------------------------------ Net change in cash and cash equivalents 1.4 (177.1) (55.9) Cash and cash equivalents, beginning of year 109.0 286.1 342.0 - ------------------------------------------------------------------------------ CASH AND CASH EQUIVALENTS, END OF YEAR $ 110.4 $ 109.0 $ 286.1 - ------------------------------------------------------------------------------
SUPPLEMENTAL SCHEDULE OF INVESTING AND FINANCING ACTIVITIES In connection with the acquisition of an insurance block of business as discussed in Note 5, the following assets and liabilities were assumed: Cash $1,215.9 Policy loans 440.3 Other assets 43.4 -------- Total assets assumed $1,699.6 -------- Policyholder account values $1,693.8 Other liabilities 5.8 -------- Total liabilities assumed $1,699.6 -------- - --------------------------------------------------------------------------------
SUPPLEMENTAL SCHEDULE OF NON CASH FINANCING ACTIVITIES As a result of the Conversion as discussed in Note 1, $65 million of retained earnings was allocated for the issuance of 600,000 shares of common stock with a par value totaling $30 million and $35 million was allocated to paid-in capital. - -------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Income taxes paid $144.5 $185.9 $96.9 Interest paid $ 26.1 $ 27.2 $23.3 - --------------------------------------------------------------------------------
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 was allocated to paid-in capital. DESCRIPTION OF BUSINESS Pacific Life was established in 1868 and is organized under the laws of the State of California as a stock life insurance company. Pacific Life conducts business in every state except New York. Pacific Life and its subsidiaries and affiliates have primary business operations which consist of life insurance, annuities, pension products, group employee benefits and investment management and advisory services. These primary business operations provide a broad range of life insurance, asset accumulation and investment products for individuals and businesses and offer a range of investment products to institutions and pension plans. Additionally, through its major subsidiaries and affiliates, Pacific Life provides a variety of group employee benefits, as well as investment management and advisory services. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements of Pacific Life Insurance Company and subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles ("GAAP") and include the accounts of Pacific Life and its wholly-owned insurance subsidiaries, PM Group Life Insurance Company ("PM Group") and World-Wide Holdings Limited, and its noninsurance subsidiaries, Pacific Asset Management LLC ("PAM"), Pacific Mutual Distributors, Inc. ("PMD"), Pacific Mutual Realty Finance, Inc. and Pacific Mezzanine Associates, L.L.C. All significant intercompany transactions and balances have been eliminated. Pacific Life prepares its regulatory financial statements based on accounting practices prescribed or permitted by the Insurance Department of the State of California. These consolidated financial statements differ from those followed in reports to regulatory authorities (Note 2). PAM was initially capitalized on December 31, 1997, when Pacific Life completed a subsidiary restructuring in which all the assets and liabilities of Pacific Financial Asset Management Corporation ("PFAMCo") were contributed into this newly formed limited liability company. PFAMCo was then merged into Pacific Life. On October 30, 1997, Pacific Corinthian Life Insurance Company ("PCL"-Note 4), a wholly-owned insurance subsidiary, was merged into Pacific Life, with Pacific Life as the surviving entity. ACCOUNTING PRONOUNCEMENTS ADOPTED In 1996, the Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 120, "Accounting and Reporting by Mutual Life Insurance Enterprises and by Insurance Enterprises for Certain Long- Duration Participating Contracts", and Interpretation No. 40, "Applicability of Generally Accepted 21 Pacific Life Insurance Company and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Accounting Principles to Mutual Life Insurance and Other Enterprises" (the "Interpretation") issued by the Financial Accounting Standards Board ("FASB"). SFAS No. 120 and the Interpretation permit mutual life insurance companies and their insurance subsidiaries to adopt all applicable authoritative GAAP pronouncements in any general purpose financial statements that they may issue. This differs from prior years when the Company issued its regulatory financial statements as general purpose financial statements. The accompanying consolidated financial statements for 1997, 1996 and 1995 reflect the effects of implementing SFAS No. 120 and the Interpretation. On January 1, 1997, the Company adopted SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities", as amended by SFAS No. 127, "Deferral of the Effective Date of Certain Provisions of FASB Statement No. 125". SFAS No. 125 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after December 31, 1996. This statement provides consistent accounting standards for securitizations and other transfers of financial assets, determines when financial assets (liabilities) should be considered sold (settled) and removed from the statement of financial condition, and determines when related revenues and expenses should be recognized. Adoption of this accounting standard did not have a significant impact on the consolidated financial position or results of operations of the Company. NEW ACCOUNTING PRONOUNCEMENTS In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income". SFAS No. 130 establishes standards for the reporting and display of comprehensive income and its components in a full set of general purpose financial statements. The Company currently plans to adopt SFAS No. 130 on January 1, 1998. In February 1998, the FASB issued SFAS No. 132 "Employers' Disclosures about Pensions and Other Postretirement Benefits". SFAS No. 132 revises current note disclosure requirements for employers' pensions and other retiree benefits. It does not address recognition or measurement issues. The Company plans to adopt SFAS No. 132 during 1998. INVESTMENTS Available for sale fixed maturity and equity securities are reported at estimated fair value, with unrealized gains and losses, net of deferred income tax and adjustments related to deferred policy acquisition costs, included as a separate component of equity on the accompanying consolidated statements of financial condition. Trading securities, which are included in short-term investments, are reported at estimated fair value with unrealized gains and losses included in net realized capital gains on the accompanying consolidated statements of operations. For mortgage-backed securities included in fixed maturity securities, the Company recognizes income using a constant effective yield based on anticipated prepayments and the estimated economic life of the securities. When estimates of prepayments change, the effective yield is recalculated to reflect actual payments to date and anticipated future payments. The net investment in the securities is adjusted to the amount that would have existed had the new effective yield been applied since the acquisition of the securities. This adjustment is reflected in net investment income. In the first and second quarter of 1995, Pacific Life sold two securities from the held to maturity category. The amortized cost of the securities was $62.3 million and a net after tax loss of $0.7 million was realized on the sales. The securities were sold due to the significant deterioration of the issuer's creditworthiness. Beginning with the third quarter of 1995, Pacific Life transferred approximately $1.5 billion of securities from the held to maturity category to the available for sale category. This amount represented the amortized cost of 22 Pacific Life Insurance Company and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) the securities at the date of transfer. The estimated fair value of those securities was approximately $1.6 billion, resulting in a net after tax unrealized gain of $52.5 million, which was reflected as a direct increase to equity. The change in classification was a result of a change in management's intent with respect to these securities. In order to have the flexibility to respond to changes in interest rates and to take advantage of changes in the availability of and the yield on alternative investments, management determined that the reclassification of these securities as available for sale was appropriate. Realized gains and losses on investment transactions are determined on a specific identification basis and are included in revenues. Short-term investments are carried at estimated fair value and include all trading securities. Derivative financial instruments are carried at estimated fair value. Unrealized gains and losses of derivatives used to hedge securities classified as available for sale are reflected in a separate component of equity, similar to the accounting of the underlying hedged assets. Realized gains and losses on derivatives used for hedging are deferred and amortized over the average life of the related hedged assets or insurance liabilities. Unrealized gains and losses of other derivatives are reflected in operations. Mortgage loans and policy loans are stated at unpaid principal balances. Real estate is carried at depreciated cost, or for real estate acquired in satisfaction of debt, estimated fair value less estimated selling costs at the date of acquisition if lower than the related unpaid balance. On November 15, 1994, certain of the Company's investment management and advisory subsidiaries entered into an agreement and plan of consolidation with Thomson Advisory Group L.P., a Delaware limited partnership with publicly traded units, to merge into a newly capitalized partnership named PIMCO Advisors L.P. ("PIMCO Advisors"). In December 1997, PIMCO Advisors completed a transaction in which it acquired the assets of Oppenheimer Capital, L.P., including its interest in Oppenheimer Capital, by issuing approximately 33 million PIMCO Advisors General and Limited Partner units. In connection with this transaction, the Company increased its investment in PIMCO Advisors to reflect the excess of the Company's pro rata share of PIMCO Advisors partners' capital subsequent to this transaction over the carrying value of the Company's investment in PIMCO Advisors. The net result of this transaction was to directly increase stockholder's equity by $85.1 million. The Company's beneficial ownership in PIMCO Advisors was approximately 42% prior to this transaction and 31% subsequent to the transaction. Deferred taxes as a result of this transaction have been established on the accompanying consolidated financial statements. This investment, which is included in other investments on the accompanying consolidated statements of financial condition, is accounted for using the equity method. CASH AND CASH EQUIVALENTS Cash and cash equivalents include all liquid debt instruments with an original maturity of three months or less. DEFERRED POLICY ACQUISITION COSTS The costs of acquiring new insurance business, principally commissions, medical examinations, underwriting, policy issue and other expenses, all of which vary with and are primarily related to the production of new business, have been deferred. For universal life, annuity and other investment contract products, such costs are generally amortized in proportion to the present value of expected gross profits using the assumed crediting rate. Adjustments are reflected in earnings or equity in the period the Company experiences deviations in gross profit assumptions. Adjustments directly affecting equity result from experience deviations due to changes in unrealized gains and losses in investments classified as available for sale. For life insurance products, such costs are being amortized over the premium-paying period of the related policies in proportion to premium revenues 23 Pacific Life Insurance Company and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) recognized, using assumptions consistent with those used in computing policy reserves. For the years ended December 31, 1997, 1996 and 1995, net amortization of deferred policy acquisition costs included in commission expenses amounted to $50.2 million, $42.6 million and $39.4 million, respectively, and included in operating expenses amounted to $29.4 million, $27.4 million and $20.8 million, respectively, on the accompanying consolidated statements of operations. PRESENT VALUE OF FUTURE PROFITS Included in other assets on the accompanying consolidated statement of financial condition as of December 31, 1996 was $16.1 million which represented the present value of estimated future profits of acquired business in connection with the rehabilitation of First Capital Life Insurance Company ("FCL"-Note 4). The aforementioned future profits were discounted to provide an appropriate rate of return and were being amortized over the rehabilitation plan period. Amortization for the years ended December 31, 1997, 1996 and 1995 amounted to $16.1 million, $24.2 million and $17.1 million, respectively, and is included in commission expenses in the accompanying consolidated statements of operations. During 1996, the Company changed certain assumptions regarding the estimated life which resulted in an increase in amortization in 1996 of approximately $17.0 million. UNIVERSAL LIFE, ANNUITY AND OTHER INVESTMENT CONTRACT DEPOSITS Universal life, annuity and other investment contract deposits are valued using the retrospective deposit method and consist principally of deposits received plus interest credited less accumulated assessments. Interest credited to these policies primarily ranged from 4.0% to 8.4% during 1997, 1996 and 1995. FUTURE POLICY BENEFITS Life insurance reserves are valued using the net level premium method. Interest rate assumptions range from 4.5% to 9.3% for 1997, 1996 and 1995. Mortality, morbidity and withdrawal assumptions are generally based on the Company's experience, modified to provide for possible unfavorable deviations. Future dividends for participating business are provided for in the liability for future policy benefits. Included in policy benefits paid or provided on the accompanying consolidated statements of operations are dividends to policyholders. Dividends are provided based on dividend formulas approved by the Board of Directors and reviewed for reasonableness and equitable treatment of policyholders by an independent consulting actuary. As of December 31, 1997 and 1996, participating experience rated policies paying dividends represented approximately 1% of direct written life insurance in force. STATE GUARANTY FUND ASSESSMENTS Insurance companies are subject to assessments by life and health guaranty associations in most states in which they are licensed to do business. These assessments are based on the volume and type of business they sell in those states and may be partially recovered in some states through a future reduction in premium taxes. Based on current information available from the National Organization of Life and Health Guaranty Association, the Company, as of December 31, 1997, has accrued in other liabilities on the accompanying consolidated statements of financial condition an amount adequate for anticipated payments of known insolvencies, net of estimated recoveries of premium tax offsets. REVENUES AND EXPENSES Insurance premiums are recognized as revenue when due. Benefits and expenses, other than deferred policy acquisition costs, are recognized when incurred. 24 Pacific Life Insurance Company and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Generally, receipts for universal life, annuities and other investment contracts are classified as deposits. Policy fees from these contracts include mortality charges, surrender charges and earned policy service fees. Expenses related to these products include interest credited to account balances and benefit amounts in excess of account balances. Commission revenue from Pacific Life's broker dealer subsidiaries is generally recorded on a settlement basis, generally the third business day following the trade date. The difference between the settlement date and trade date is not considered material. DEPRECIATION AND AMORTIZATION Depreciation of investment real estate is computed on the straight-line method over the estimated useful lives which range from 15 to 30 years. Certain other assets are depreciated or amortized on the straight-line method over varying periods ranging from 3 to 40 years. Depreciation of investment real estate is included in net investment income on the accompanying consolidated statements of operations. Depreciation and amortization of other assets is included in operating expenses on the accompanying consolidated statements of operations. INCOME TAXES Pacific Life is taxed as a life insurance company for income tax purposes and is included in the consolidated income tax returns of PMHC. The amount of income tax expense includes an equity tax calculated by a prescribed formula that incorporates a differential earnings rate between stock and mutual life insurance companies. Deferred income taxes are provided for timing differences in the recognition of revenues and expenses for financial reporting and income tax purposes. SEPARATE ACCOUNTS Separate account assets are recorded at market value and the related liabilities represent segregated contract owner funds maintained in accounts with individual investment objectives. The investment results of separate account assets generally pass through to separate account contract owners. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value of financial instruments disclosed in Notes 6 and 7 have been determined using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented may not be indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts. BUSINESS RISKS The Company operates in a business environment which is subject to various risks and uncertainties. Such risks and uncertainties include interest rate risk, credit risk and legal and regulatory changes. Interest rate risk is the potential for interest rates to change, which can cause fluctuations in the value of investments. To the extent that fluctuations in interest rates cause the duration of assets and liabilities to differ, the Company may have to sell assets prior to their maturity and realize losses. The Company controls its exposure to this risk by, among other things, asset/liability matching techniques which attempt to match the duration of assets and liabilities and utilization of derivative instruments. 25 Pacific Life Insurance Company and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Credit risk is the risk that issuers of investments owned by the Company may default or that other parties may not be able to pay amounts due to the Company. The Company manages its investments to limit credit risk by diversifying its portfolio among various security types and industry sectors. The credit risk of financial instruments is controlled through credit approvals, limits and monitoring procedures. Real estate and mortgage loan investments are diversified by geographic location and property type. Management believes that significant concentrations of credit risk do not exist. The Company is also exposed to credit loss in the event of nonperformance by the counterparties to interest rate swap contracts and other derivative securities. However, the Company does not anticipate nonperformance by the counterparties. The Company is subject to various state and Federal regulatory authorities. The potential exists for changes in regulatory initiatives which can result in additional, unanticipated expense to the Company. Existing Federal laws and regulations affect the taxation of life insurance or annuity products and insurance companies. There can be no assurance as to what, if any, future legislation might be enacted, or if enacted, whether such legislation would contain provisions with possible negative effects on the Company's life insurance or annuity products. USE OF ESTIMATES The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform to the 1997 financial statement presentation. 2. STATUTORY RESULTS The following are reconciliations of statutory capital and surplus and statutory net income for Pacific Life as calculated in accordance with accounting practices prescribed or permitted by the Insurance Department of the State of California, to the amounts reported as stockholder's equity and net income included in the accompanying consolidated financial statements:
December 31, 1997 1996 ------------------ (In Millions) Statutory capital and surplus $ 944.8 $ 815.2 Deferred policy acquisition costs 730.7 542.0 Unrealized gain on securities available for sale, net 575.2 379.2 Asset valuation reserve 252.4 209.5 Deferred income tax 240.9 174.6 Subsidiary equity 108.7 60.7 Non-admitted assets 25.2 22.8 Surplus notes (149.6) (149.6) Insurance and annuity reserves (511.5) (340.4) Other (69.5) (16.8) ------------------ Stockholder's equity as reported herein $2,147.3 $1,697.2 ------------------
26 Pacific Life Insurance Company and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. STATUTORY RESULTS (CONTINUED)
Years Ended December 31, 1997 1996 1995 -------------------------- (In Millions) Statutory net income $ 121.5 $ 113.1 $ 85.1 Deferred policy acquisition costs 160.4 111.2 76.4 Deferred income tax 41.2 70.9 31.5 Interest maintenance reserve 7.6 3.8 12.2 Net realized gain (loss) on trading se- curities (5.8) (11.6) 13.2 Earnings of subsidiaries (40.6) (33.0) 5.9 Insurance and annuity reserves (107.0) (91.3) (95.5) Other (1.3) 3.5 6.0 -------------------------- Net income as reported herein $ 176.0 $ 166.6 $ 134.8 --------------------------
RISK-BASED CAPITAL Risk-based capital is a method developed by the National Association of Insurance Commissioners ("NAIC") to measure the minimum amount of capital appropriate for an insurance company to support its overall business operations in consideration of its size and risk profile. The formulas for determining the amount of risk-based capital specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk. The adequacy of a company's actual capital is measured by comparing it to the risk-based capital as determined by the formulas. Companies below minimum risk-based capital requirements are classified within certain levels, each of which requires specified corrective action. As of December 31, 1997 and 1996, Pacific Life and PM Group exceeded the minimum risk-based capital requirements. DIVIDEND RESTRICTIONS Dividend payments by Pacific Life to its parent cannot exceed the greater of 10% of statutory capital and surplus as of the preceding year end or the statutory net gain from operations for the previous calendar year, without prior approval from the Insurance Department of the State of California. Based on this limitation and 1997 statutory results, Pacific Life could pay approximately $76.5 million in dividends in 1998 without prior approval. Extraordinary dividends to Pacific Life from PM Group are subject to regulatory restrictions and approvals by the Insurance Department of the State of Arizona, PM Group's state of domicile. The maximum amount of ordinary dividends that can be paid by PM Group without restriction cannot exceed the lesser of 10% of surplus as regards policyholders, or the statutory net gain from operations. During 1997, 1996 and 1995, PM Group received approval to pay dividends of $14 million, $25 million and $25 million for the years ended December 31, 1997, 1996 and 1995 of which $8 million, $18 million and $17.2 million, respectively, were considered extraordinary. In accordance with the terms of the rehabilitation agreement (Note 4), PCL was precluded from paying any dividends during the rehabilitation period without the prior consent of the Insurance Department of the State of California. No such dividends were paid. 27 Pacific Life Insurance Company and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. CLOSED BLOCK In connection with the Conversion, an arrangement known as a closed block (the "Closed Block"), was established, for dividend purposes only, for the exclusive benefit of certain individual life insurance policies that have an experience based dividend scale for 1997. The Closed Block is designed to give reasonable assurance to holders of Closed Block policies that policy dividends will not change solely as a result of the Conversion. Assets of Pacific Life have been allocated to the Closed Block in an amount that produces cash flows, which, together with anticipated revenues, are expected to be sufficient to support the policies. Pacific Life is not required to support the payment of dividends on these policies from its general funds. The Closed Block will continue in effect until either the last policy is no longer in force, or the dissolution of the Closed Block. Total assets of $316.2 million and total liabilities of $356.0 million for the Closed Block are included in other assets and other liabilities, respectively, in the accompanying consolidated statements of financial condition as of December 31, 1997. The contribution to income from the Closed Block of $5.7 million, consisting of net revenues and expenses generated by the Closed Block is included in other income in the accompanying consolidated statements of operations for the year ended December 31, 1997. 4. REHABILITATION OF FIRST CAPITAL LIFE INSURANCE COMPANY On September 30, 1997, PCL completed the rehabilitation of FCL pursuant to a five-year rehabilitation plan approved by the California Superior Court and the Insurance Department of the State of California (the "Rehabilitation Plan"). Under the terms of the Rehabilitation Plan, FCL's insurance policies in force, primarily individual annuities and universal life insurance, were restructured and assumed by PCL on December 31, 1992, pursuant to an assumption reinsurance agreement and asset purchase agreement. On October 30, 1997, PCL was merged into Pacific Life, with Pacific Life as the surviving entity. 5. ACQUISITION OF INSURANCE BLOCK OF BUSINESS On June 1, 1997, Pacific Life acquired a block of corporate-owned life insurance ("COLI") policies from Confederation Life Insurance Company (U.S.) in Rehabilitation, which is currently under rehabilitation, which consisted of approximately 38,000 policies having a face amount of insurance of $8.6 billion and reserves of approximately $1.7 billion. The assets received as part of this acquisition amounted to approximately $1.2 billion in cash and approximately $0.4 billion in policy loans. This block is primarily non-leveraged COLI. As part of this transaction, an amount equal to the excess of the estimated fair value of the reserves assumed over the estimated fair value of the assets acquired which represents the cost of acquiring the business, amounting to $43.4 million at December 31, 1997, is included in deferred policy acquisition costs in the accompanying consolidated statements of financial condition. Amortization of this asset for the year ended December 31, 1997 was $0.9 million and is included in commission expenses in the accompanying consolidated statements of operations. 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, 1997: U.S. Treasury securities and obligations of U.S. government authorities and agencies $ 85.4 $ 17.5 $ 102.9 Obligations of states, political subdivisions and foreign govern- ments 730.2 89.4 $ 3.0 816.6 Corporate securities 7,704.8 594.3 72.7 8,226.4 Mortgage-backed and asset-backed securities 4,597.7 147.1 15.5 4,729.3 Redeemable preferred stock 107.8 10.3 2.6 115.5 -------------------------------------- Total fixed maturity securities $13,225.9 $ 858.6 $ 93.8 $13,990.7 -------------------------------------- Total equity securities $ 231.7 $ 123.6 $ 8.9 $ 346.4 -------------------------------------- Securities Available for Sale: ----------------------------- As of December 31, 1996: U.S. Treasury securities and obligations of U.S. government authorities and agencies $ 297.9 $ 11.2 $ 0.3 $ 308.8 Obligations of states, political subdivisions and foreign govern- ments 638.1 46.2 1.0 683.3 Corporate securities 6,848.3 506.3 91.9 7,262.7 Mortgage-backed and asset-backed securities 3,753.6 98.0 19.4 3,832.2 Redeemable preferred stock 102.5 6.4 2.1 106.8 -------------------------------------- Total fixed maturity securities $11,640.4 $ 668.1 $ 114.7 $12,193.8 -------------------------------------- Total equity securities $ 229.6 $ 40.8 $ 9.6 $ 260.8 --------------------------------------
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 values of fixed maturity securities as of December 31, 1997, by contractual repayment date of principal, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Amortized Estimated Cost Fair Value ---------------------- (In Millions) Securities Available for Sale: ----------------------------- Due in one year or less $ 969.9 $ 1,075.2 Due after one year through five years 2,678.4 2,823.1 Due after five years through ten years 2,810.1 2,939.3 Due after ten years 2,169.8 2,423.8 ---------------------- 8,628.2 9,261.4 Mortgage-backed and asset-backed securities 4,597.7 4,729.3 ---------------------- Total $13,225.9 $13,990.7 ----------------------
Proceeds from sales of all securities available for sale during 1997, 1996 and 1995 were $2.2 billion, $2.5 billion and $1.9 billion, respectively. Gross gains of $69.1 million, $89.3 million and $58.0 million and gross losses of $32.9 million, $29.9 million and $32.3 million were realized on those sales during 1997, 1996 and 1995, respectively. Major categories of investment income are summarized as follows:
Years Ended December 31, 1997 1996 1995 -------------------------- (In Millions) Fixed maturity securities $ 935.1 $ 831.6 $ 808.1 Equity securities 12.8 17.8 7.3 Mortgage loans 129.5 109.4 112.9 Real estate 53.6 51.3 43.2 Policy loans 137.1 113.0 105.2 Other 65.8 71.7 63.2 -------------------------- Gross investment income 1,333.9 1,194.8 1,139.9 Investment expense 108.6 107.5 101.5 -------------------------- Net investment income $1,225.3 $1,087.3 $1,038.4 --------------------------
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 (loss) on investments in available for sale and trading securities is as follows:
December 31, 1997 1996 1995 ------------------------ (In Millions) Available for sale and trading securities: Fixed maturity $222.4 $(169.1) $1,039.3 Equity 85.7 6.5 17.2 ------------------------ Total $308.1 $(162.6) $1,056.5 ------------------------
As of December 31, 1997 and 1996, investments in fixed maturity securities with a carrying value of $14.4 million and $19.6 million, respectively, were on deposit with state insurance departments to satisfy regulatory requirements. No investment, aggregated by issuer, exceeded 10% of total equity as of December 31, 1997. The Company has no non-income producing fixed maturity securities, mortgage loans, real estate or other long-term investments as of December 31, 1997. 7. FINANCIAL INSTRUMENTS The estimated fair values of the Company's financial instruments are as follows:
December 31, 1997 December 31, 1996 -------------------- -------------------- Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value ---------------------------------------- (In Millions) Assets: Fixed maturity and equity se- curities (Note 6) $14,337.1 $14,337.1 $12,454.6 $12,454.6 Mortgage loans 1,922.1 1,990.9 1,477.3 1,533.9 Policy loans 3,769.2 3,769.2 3,131.8 3,131.8 Cash and cash equivalents 110.4 110.4 109.0 109.0 Derivative financial instru- ments: Interest rate floors and caps, options and swaptions 22.9 22.9 59.3 Interest rate swap contracts 0.5 0.5 1.0 1.0 Credit and total return swaps 1.1 1.1 Foreign currency derivatives 4.1 4.1 Liabilities: Guaranteed interest contracts 3,982.0 4,035.7 2,948.3 3,056.1 Deposit liabilities 733.5 737.4 799.6 800.6 Annuity liabilities 1,883.5 1,872.6 2,459.4 2,459.4 Surplus notes 149.6 164.7 149.6 157.5 Derivative financial instru- ments: Options written 1.6 1.6 1.5 1.5 Asset swap contracts 12.6 12.6 12.5 12.5 Credit and total return swaps 4.0 4.0 Foreign currency derivatives 4.3 4.3
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, 1997 and 1996: MORTGAGE LOANS The estimated fair value of the mortgage loan portfolio is determined by discounting the estimated future cash flows, using a year-end market rate which is applicable to the yield, credit quality and average maturity of the composite portfolio. POLICY LOANS The carrying amounts of policy loans are a reasonable estimate of their fair values. CASH AND CASH EQUIVALENTS The carrying amounts of these items are a reasonable estimate of their fair values. DERIVATIVE FINANCIAL INSTRUMENTS Derivatives are financial instruments whose value or cash flows are "derived" from another source, such as an underlying security. They can facilitate total return and, when used for hedging, they achieve the lowest cost and most efficient execution of positions. Derivatives can also be used to leverage by using very large notional amounts or by creating formulas that multiply changes in the underlying security. The Company's approach is to avoid highly leveraged or overly complex investments. The Company utilizes certain derivative financial instruments to diversify its business risk and to minimize its exposure to fluctuations in market prices, interest rates or basis risk as well as for facilitating total return. Risk is limited through modeling derivative performance in product portfolios for hedging and setting loss limits in total return portfolios. Derivatives used by the Company involve elements of credit risk and market risk in excess of amounts recognized in the accompanying consolidated financial statements. The notional amounts of these instruments reflect the extent of involvement in the various types of financial instruments. The estimated fair values of these instruments are based on quoted market prices, dealer quotations or internal price estimates believed to be comparable to dealer quotations. These amounts estimate what the Company would have to pay or receive if the contracts were terminated. The Company determines, on an individual counterparty basis, the need for collateral or other security to support financial instruments with off-balance sheet counterparty risk. 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 Balance Beginning and End of Year Acquisitions Maturities of Year -------------------------------------------- (In Millions) December 31, 1997: Interest rate floors and caps, options and swaptions $4,538.2 $1,644.2 $3,452.4 $2,730.0 Interest rate swap con- tracts 988.3 1,356.0 318.2 2,026.1 Asset swap contracts 30.0 47.4 10.0 67.4 Credit and total return swaps 356.5 98.9 166.9 288.5 Financial futures contracts 609.2 3,930.6 4,325.7 214.1 Foreign currency deriva- tives 41.4 217.0 51.4 207.0 December 31, 1996: Interest rate floors and caps, options and swaptions 1,834.6 3,075.0 371.4 4,538.2 Interest rate swap con- tracts 619.6 620.9 252.2 988.3 Asset swap contracts 20.0 15.3 5.3 30.0 Credit and total return swaps 146.1 307.2 96.8 356.5 Financial futures contracts 310.1 3,358.9 3,059.8 609.2 Foreign currency deriva- tives 15.4 43.1 17.1 41.4
Interest Rate Floors and Caps, Options and Swaptions ---------------------------------------------------- The Company uses interest rate floors and caps, options and swaptions to hedge against fluctuations in interest rates and in its total return portfolios. Interest rate floor agreements entitle the Company to receive the differential, if below, between the specified rate and the current value of the underlying index. Interest rate cap agreements entitle the Company to receive the differential, if above, between the specified rate and the current value of the underlying index. Options purchased involve the right, but not the obligation, to purchase the underlying securities at a specified price during a given time period. Swaptions are options to enter into a swap transaction at a specified price. The Company uses written covered call options on a limited basis. Gains and losses on covered calls are offset by gains and losses on the underlying position. Options and floors are reported as assets and options written are reported as liabilities in the consolidated statements of financial condition. Cash requirements for these instruments are generally limited to the premium paid by the Company at acquisition. The purchase premium of these instruments is amortized on a constant effective yield basis and included as a component of net investment income over the term of the agreement. Interest rate floors and caps, options and swaptions mature during fiscal years 1998 through 2007. Interest Rate Swap Contracts ---------------------------- The Company uses interest rate swaps to manage interest rate risk. The interest rate swap agreements generally involve the exchange of fixed and floating rate interest payments or the exchange of floating to floating interest payments tied to different indexes. Generally, no premium is paid to enter into the contract and no principal payments are made by either party. The amounts to be received or paid pursuant to these agreements are accrued and recognized through an adjustment to net investment income in the accompanying consolidated statements of operations over the life of the agreements. The interest rate swap contracts mature during fiscal years 1998 through 2021. 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 preferred cash flow streams. The amounts to be received or paid pursuant to these agreements are accrued and recognized through an adjustment to net investment income in the accompanying consolidated statements of operations over the life of the agreements. The asset swap contracts mature during fiscal years 1998 through 2003. Credit and Total Return Swaps ----------------------------- The Company uses credit and total return swaps to take advantage of market opportunities. Credit swaps involve the receipt of floating or fixed rate payments in exchange for assuming potential credit losses of an underlying security. Total return swaps involve the exchange of floating rate payments for the total return performance of a specified index or market. The amounts to be received or paid pursuant to these agreements are accrued and recognized through an adjustment to net investment income in the accompanying consolidated statements of operations over the life of the agreements. Credit and total return swaps mature during fiscal years 1998 through 2013. Financial Futures Contracts --------------------------- The Company uses exchange-traded financial futures contracts to hedge cash flow timing differences between assets and liabilities and overall portfolio duration. Assets and liabilities are rarely acquired or sold at the same time, which creates a need to hedge their change in value during the unmatched period. In addition, foreign currency futures may be used to hedge foreign currency risk on non-U.S. dollar denominated securities. Financial futures contracts obligate the holder to buy or sell the underlying financial instrument at a specified future date for a set price and may be settled in cash or delivery of the financial instrument. Price changes on futures are settled daily through the daily margin cash flows. The notional amounts of the contracts do not represent future cash requirements, as the Company intends to close out open positions prior to expiration. Foreign Currency Derivatives ---------------------------- The Company enters into foreign exchange forward contracts and swaps to hedge against fluctuations in foreign currency exposure. Foreign currency derivatives involve the exchange of foreign currency denominated payments for U.S. dollar denominated payments. Gains and losses on foreign exchange forward contracts offset currency gains and losses on the related assets. The amounts to be received or paid under the foreign currency swaps are accrued and recognized through an adjustment to net investment income in the accompanying consolidated statements of operations over the life of the agreements. Foreign currency derivatives expire during fiscal years 1998 through 2011. GUARANTEED INTEREST CONTRACTS AND DEPOSIT LIABILITIES The estimated fair values of fixed maturity guaranteed interest contracts are estimated using the rates currently offered for deposits of similar remaining maturities. The estimated fair value of deposit liabilities with no defined maturities is the amount payable on demand. ANNUITY LIABILITIES The estimated fair value of annuity liabilities approximates carrying value and primarily includes policyholder deposits and accumulated credited interest. 34 Pacific Life Insurance Company and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. FINANCIAL INSTRUMENTS (CONTINUED) SURPLUS NOTES The estimated fair value of surplus notes is based on market quotes. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK Pacific Life has issued certain contracts to plan sponsors totaling $1.6 billion as of December 31, 1997, pursuant to the terms of which the plan sponsor retains direct ownership and control of the assets related to these contracts. Pacific Life agrees to provide benefit responsiveness in the event that plan benefit requests exceed plan cash flows. In return for this guarantee, Pacific Life receives a fee which varies by contract. Pacific Life sets the investment guidelines to provide for appropriate credit quality and cash flow matching. 8. UNIVERSAL LIFE, ANNUITY AND OTHER INVESTMENT CONTRACT DEPOSITS Detail of universal life, annuity and other investment contract deposit liabilities follows:
December 31, 1997 1996 ------------------- (In Millions) Universal life $10,012.0 $ 7,562.5 Annuity 1,817.4 2,459.3 Other investment contract deposits 4,815.1 3,855.6 ------------------- $16,644.5 $13,877.4 -------------------
Detail of universal life, annuity and other investment contract deposits policy fees and interest credited net of reinsurance ceded follows:
Years Ended December 31, 1997 1996 1995 -------------------------- (In Millions) Policy fees Universal life $ 377.5 $ 318.4 $ 292.6 Annuity 50.3 26.6 12.8 Other investment contract de- posits 3.4 3.6 3.6 -------------------------- Total policy fees $ 431.2 $ 348.6 $ 309.0 -------------------------- Interest credited Universal life $ 368.2 $ 284.3 $ 267.3 Annuity 116.8 138.7 137.5 Other investment contract de- posits 312.8 242.0 270.4 -------------------------- Total interest credited $ 797.8 $ 665.0 $ 675.2 --------------------------
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. There was no commercial paper debt outstanding as of December 31, 1997 and 1996. Pacific Life had a revolving credit facility available of $350 million and $250 million as of December 31, 1997 and 1996, respectively. There was no debt outstanding under the revolving credit facility as of December 31, 1997 and 1996. The borrowing limit for PAM as of December 31, 1997 and 1996 was $200 million and $150 million, respectively. The interest rate averaged 5.8%, 5.6% and 6.1% for the years ended December 31, 1997, 1996 and 1995, respectively. The balance outstanding as of December 31, 1997 and 1996 totaled $104 million and $95.5 million, respectively. Outstanding debt is due and payable in 1998 and subject to renewal. During 1992, a wholly-owned subsidiary of Pacific Life entered into a credit agreement with a group of banks for borrowings of $45 million. Proceeds of this note were paid to PCL in connection with the issuance of a certificate of contribution by PCL (Note 4). On December 31, 1996, the applicable interest rate was 6.2%. The outstanding balance of $25 million was prepaid per the terms of the agreement on January 27, 1997. Pacific Life has $150 million of long-term debt which consists of surplus notes outstanding at an interest rate of 7.9% maturing on December 30, 2023. Interest is payable semiannually on June 30 and December 30. The surplus notes may not be redeemed at the option of Pacific Life or any holder of the surplus notes. The surplus notes are unsecured and subordinated to all present and future senior indebtedness and policy claims of Pacific Life. Each payment of interest on and the payment of principal of the surplus notes may be made only with the prior approval of the Insurance Commissioner of the State of California. Interest expense amounted to $11.8 million for each of the years ended December 31, 1997, 1996 and 1995 and is included in net investment income in the accompanying consolidated statements of operations. 10. INCOME TAXES As required by SFAS No. 109, "Accounting for Income Taxes", the Company accounts for income taxes using the liability method. Under SFAS No. 109, the deferred tax consequences of changes in tax rates or laws must be computed on the amounts of temporary differences and carryforwards existing at the date a new law is enacted. Recording the effects of the change involves adjusting deferred tax liabilities and assets with a corresponding charge or credit recognized in the provision for income taxes. The objective is to measure a deferred tax liability or asset using the enacted tax rates and laws expected to apply to taxable income in the periods in which the deferred tax liability or asset is expected to be settled or realized. The provision for income taxes is as follows:
Years Ended December 31, 1997 1996 1995 ---------------------------- (In Millions) Current $ 127.9 $ 163.5 $ 116.4 Deferred (14.4) (49.8) (30.3) ---------------------------- $ 113.5 $ 113.7 $ 86.1 ----------------------------
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, 1997 1996 1995 ---------------------------- (In Millions) Reserves $ 20.1 $(28.5) $(28.7) Investment valuation 3.9 (7.3) 8.1 Deferred policy acquisition costs (18.0) 2.1 (6.0) Other (20.4) (16.1) (3.7) ---------------------------- $(14.4) $(49.8) $(30.3) ----------------------------
A reconciliation of the provision for income taxes based on the prevailing corporate tax rate to the provision reflected in the consolidated financial statements is as follows:
Years Ended December 31, 1997 1996 1995 --------------------------- (In Millions) Income taxes at the statutory rate $ 101.3 $ 98.1 $ 77.3 Equity tax 5.0 16.3 Amortization of intangibles on equity method investments 7.6 6.5 6.5 Non-taxable investment income (2.6) (2.1) (2.1) Other 2.2 (5.1) 4.4 --------------------------- $ 113.5 $ 113.7 $ 86.1 ---------------------------
The net deferred tax asset (liability) included in other assets on the accompanying consolidated statements of financial condition was comprised of the tax effects of the following temporary differences:
December 31, 1997 1996 ---------------- (In Millions) Reserves $ 224.8 $ 244.9 Deferred compensation 25.9 27.6 Investment valuation 20.1 24.0 Postretirement benefits 9.3 9.8 Dividends 7.7 9.6 Depreciation (2.5) (9.8) Deferred policy acquisition costs (25.9) (43.9) Other 41.0 23.8 ---------------- Deferred taxes from operations 300.4 286.0 Issuance of partnership units by affiliate (47.9) Unrealized gain on securities available for sale (307.8) (204.5) ---------------- Net deferred tax asset (liability) $ (55.3) $ 81.5 ----------------
37 Pacific Life Insurance Company and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. REINSURANCE The Company accounts for reinsurance transactions utilizing SFAS No. 113, "Accounting and Reporting for Reinsurance of Short-Duration And Long- Duration Contracts". SFAS No. 113 establishes the conditions required for a contract with a reinsurer to be accounted for as reinsurance and prescribes accounting and reporting standards for those contracts. Amounts receivable from reinsurers for reinsurance on future policy benefits, universal life deposits, and unpaid losses is reported as an asset and included in other assets on the accompanying consolidated statements of financial condition. The Company has reinsurance agreements with other insurance companies for the purpose of diversifying risk and limiting exposure on larger risks or, in the case of a producer-owned reinsurance company, to diversify risk and retain top producing agents. All assets associated with reinsured business remain with, and under the control of the Company. Approximate amounts recoverable (payable) from (to) reinsurers include the following amounts:
December 31, 1997 1996 -------------- (In Millions) Reinsured universal life deposits $(39.6) $(35.9) Future policy benefits 92.2 90.0 Unpaid claims 14.0 4.6 Paid claims 10.2 8.4
As of December 31, 1997, 72% of the reinsurance recoverables were from one reinsurer, of which 100% is secured by payables to the reinsurer. To the extent that the assuming companies become unable to meet their obligations under these agreements, the Company remains contingently liable. The Company does not anticipate nonperformance by the assuming companies. Revenues and benefits are shown net of the following reinsurance transactions:
Years Ended December 31, 1997 1996 1995 -------------------------- (In Millions) Ceded reinsurance netted against insurance premiums $ 70.7 $ 44.3 $ 29.2 Assumed reinsurance included in insurance premiums 18.1 17.8 15.6 Ceded reinsurance netted against policy fees 77.5 71.0 66.5 Ceded reinsurance netted against net invest- ment income 204.9 192.5 176.6 Ceded reinsurance netted against interest credited 165.8 155.2 140.0 Ceded reinsurance netted against policy bene- fits 93.4 56.7 51.4 Assumed reinsurance included in policy bene- fits 12.7 9.9 14.5
38 Pacific Life Insurance Company and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 12. SEGMENT INFORMATION The operations of the Company have been classified into four business segments as follows: Individual Life Insurance and Annuities, Pensions, Group Employee Benefits and Corporate and Other. These segments are based on the organization of the Company and are generally distinguished by the products offered. The Corporate and Other segment generally includes the assets and operations that do not support the other segments such as certain non-life insurance related subsidiary operations. Depreciation expense and capital expenditures are not material and have not been reported. Revenues, income before income taxes and assets by segment are as follows:
Years Ended December 31, 1997 1996 1995 --------------------------- (In Millions) Revenues: Individual Life Insurance and Annuities $1,137.7 $ 964.0 $ 927.0 Pensions 584.0 507.3 513.9 Group Employee Benefits 507.5 456.0 419.3 Corporate and Other 345.2 220.7 159.5 --------------------------- Total $2,574.4 $2,148.0 $2,019.7 --------------------------- Income before provision for income taxes: Individual Life Insurance and Annuities $ 164.0 $ 93.9 $ 102.3 Pensions 98.3 80.7 53.3 Group Employee Benefits 28.8 26.5 25.2 Corporate and Other (1.6) 79.2 40.1 --------------------------- Total $ 289.5 $ 280.3 $ 220.9 ---------------------------
December 31, 1997 1996 ------------------- (In Millions) Assets: Individual Life Insurance and Annuities $19,969.2 $15,484.4 Pensions 12,653.6 10,514.8 Group Employee Benefits 368.6 344.4 Corporate and Other 1,017.4 721.7 ------------------- Total $34,008.8 $27,065.3 -------------------
13.PENSION PLANS, POSTRETIREMENT BENEFITS AND OTHER PLANS PENSION PLANS Pacific Life has defined benefit pension plans which cover all eligible employees who have one year of continuous employment and have attained age 21. The full-benefit vesting period for all participants is five years. Benefits for employees are based on years of service and the highest five consecutive years of compensation during the last ten years of employment. Pacific Life's funding policy is to contribute amounts to the plan sufficient to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974, plus such additional amounts as may be determined appropriate. Contributions are intended to provide 39 Pacific Life Insurance Company and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. PENSION PLANS, POSTRETIREMENT BENEFITS AND OTHER PLANS (CONTINUED) not only for benefits attributed to employment to date but also for those expected to be earned in the future. All such contributions are made to a tax-exempt trust. Plan assets consist primarily of group annuity contracts issued by Pacific Life, as well as participating units of a real estate trust and mutual funds managed by an indirect subsidiary of Pacific Life. Components of net periodic pension cost are as follows:
Years Ended December 31, 1997 1996 1995 ---------------------------- (In Millions) Service cost - benefits earned during the year $ 3.6 $ 3.7 $ 2.8 Interest cost on projected benefit obligation 10.4 9.8 9.3 Actual return on plan assets (33.1) (21.7) (25.0) Amortization of net obligations and prior service cost 18.9 9.1 14.0 ---------------------------- Net periodic pension cost $ (0.2) $ 0.9 $ 1.1 ----------------------------
The following table sets forth the pension plan's funded status and amounts recognized on Pacific Life's consolidated statements of financial condition:
December 31, 1997 1996 ---------------- (In Millions) Actuarial present value of benefit obligation: Vested benefits $ 137.1 $ 121.2 Nonvested benefits 1.2 1.2 ---------------- Accumulated benefit obligation 138.3 122.4 Effect of projected future compensation increases 19.6 18.5 ---------------- Projected benefit obligation 157.9 140.9 Plan assets at fair value (180.3) (154.2) ---------------- Plan assets in excess of projected benefit obligation (22.4) (13.3) Unrecognized net gain 14.7 3.6 Unrecognized transition asset 4.8 6.0 Unrecognized prior service cost 1.2 2.2 ---------------- Prepaid pension cost $ (1.7) $ (1.5) ----------------
In determining the actuarial present value of the projected benefit obligation as of December 31, 1997 and 1996, the weighted average discount rate used was 7.0% and 7.5%, respectively, and the rate of increase in future compensation levels was 5.5% and 6.0%, respectively. The expected long-term rate of return on plan assets was 8.5% in 1997 and 1996. In connection with the merger of PCL into Pacific Life as discussed in Note 4, Pacific Life assumed sponsorship of PCL's defined benefit pension plan. This pension plan provides for retirement income benefits at age 65 with reduced benefits for early retirement. Effective December 31, 1997, PCL's defined benefit plan merged into Pacific Life's plan. All benefits associated with PCL's plan remain unchanged subsequent to the merger. 40 Pacific Life Insurance Company and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13.PENSION PLANS, POSTRETIREMENT BENEFITS AND OTHER PLANS (CONTINUED) POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE PLANS Pacific Life sponsors a defined benefit health care plan and a defined benefit life insurance plan (the "Plans") that provide postretirement benefits for all eligible retirees and their dependents. Generally, qualified employees may become eligible for these benefits if they reach normal retirement age, have been covered under Pacific Life's policy as an active employee for a minimum continuous period prior to the date retired, and have an employment date before January 1, 1990. The Plans contain cost-sharing features such as deductibles and coinsurance, and require retirees to make contributions which can be adjusted annually. Pacific Life's commitment to qualified employees who retire after April 1, 1994 is limited to specific dollar amounts. Pacific Life reserves the right to modify or terminate the Plans at any time. As in the past, the general policy is to fund these benefits on a pay-as-you-go basis. The amount of benefits paid under the programs during 1997, 1996 and 1995 was approximately $1.5 million, $1.6 million and $1.7 million, respectively. Components of net periodic postretirement benefit cost are as follows:
Years Ended December 31, 1997 1996 1995 ---------------------------- (In Millions) Service cost $ 0.1 $ 0.2 $ 0.2 Interest cost 1.4 1.5 1.9 Amortization (0.7) (0.3) (0.3) ---------------------------- Net periodic postretirement benefit cost $ 0.8 $ 1.4 $ 1.8 ----------------------------
The following table sets forth the Plans' funded status and amounts recorded in other liabilities on the accompanying consolidated statements of financial condition:
December 31, 1997 1996 ------------- (In Millions) Accumulated postretirement obligation: Retirees $ 17.6 $ 17.3 Fully eligible active Plan participants 1.4 2.0 Other active Plan participants 1.1 2.5 ------------- Total accumulated postretirement obligation 20.1 21.8 Fair value of Plan assets -- -- ------------- Unfunded accumulated postretirement obligation 20.1 21.8 Unrecognized net gain 3.2 3.7 Prior service cost 2.7 1.3 ------------- Accrued postretirement benefit liability $ 26.0 $ 26.8 -------------
The assumed health care cost trend rate used in measuring the accumulated benefit obligation was 9% for 1997 and 1996 and is assumed to decrease gradually to 4% in 2003 and remain at that level thereafter. The amount reported is materially effected by the health care cost trend rate assumptions. If the health care cost trend rate assumptions were increased by 1%, the accumulated postretirement benefit obligation as of December 31, 1997 and 1996 would be increased by 8.5% and 11.5%, respectively. The effect of this change would increase the 41 Pacific Life Insurance Company and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. PENSION PLANS, POSTRETIREMENT BENEFITS AND OTHER PLANS (CONTINUED) aggregate of the service and interest cost components of the net periodic benefit cost by 7.7%, 12.3% and 11.4% for 1997, 1996 and 1995, respectively. The discount rate used in determining the accumulated postretirement benefit obligation is 7.0% and 7.5% for 1997 and 1996, respectively. OTHER PLANS Pacific Life provides a voluntary Retirement Incentive Savings Plan ("RISP") pursuant to Section 401(k) of the Internal Revenue Code covering all eligible employees of the Company. Effective October 1, 1997, Pacific Life's RISP changed the matching percentage of each employee's contributions from 50% to 75%, up to a maximum of six percent of eligible employee compensation and restricted the matched investment to an Employee Stock Ownership Plan ("ESOP") sponsored by Pacific LifeCorp. The ESOP was formed at the time of the Conversion and is currently only available to the participants of the RISP in the form of matching contributions. Pacific Life also has a deferred compensation plan which permits certain employees to defer portions of their compensation and earn a guaranteed interest rate on the deferred amounts. The interest rate is determined annually and is guaranteed for one year. The compensation which has been deferred has been accrued and the primary expense, other than compensation, related to this plan is interest on the deferred amounts. The Company also has performance based incentive compensation plans for its employees. 14. TRANSACTIONS WITH AFFILIATES Pacific Life serves as the investment advisor for the Pacific Select Fund, the investment vehicle provided to the Company's variable life and variable annuity contractholders. Pacific Life charges fees based upon the net asset value of the portfolios of the Pacific Select Fund, which amounted to $27.5 million, $14.3 million and $6.5 million for the years ended December 31, 1997, 1996 and 1995, respectively. In addition, Pacific Life entered into an agreement with the Pacific Select Fund on October 1, 1995, to provide certain support services for an administration fee which is based on an allocation of actual costs. Such administration fees amounted to $165,000, $108,000 and $28,550 for the years ended December 31, 1997, 1996 and 1995, respectively. PIMCO Advisors provides investment advisory services to the Company for which the fees amounted to $11.4 million, $6.2 million and $5.0 million for the years ended December 31, 1997, 1996 and 1995, respectively. Included in equity securities on the accompanying consolidated statements of financial condition are investments in mutual funds and other investments managed by PIMCO Advisors which amounted to $46.5 million and $90.8 million as of December 31, 1997 and 1996, respectively. Pacific Life provides certain support services to PIMCO Advisors. Charges for these services are based on an allocation of actual costs and amounted to $1.2 million, $1.4 million and $1.9 million for the years ended December 31, 1997, 1996 and 1995, respectively. 15. TERMINATION AND NON-COMPETITION AGREEMENTS Effective November 15, 1994, in connection with the PIMCO Advisors transaction (Note 1), termination and non-competition agreements were entered into with certain former key employees of PAM's subsidiaries. These agreements provide terms and conditions for the allocation of future proceeds received from distributions and sales of certain PIMCO Advisors units and other noncompete payments. When the amount of future obligations to be made to a key employee is determinable, a liability for such amount is established. 42 Pacific Life Insurance Company and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. TERMINATION AND NON-COMPETITION AGREEMENTS (CONTINUED) For the years ended December 31, 1997, 1996 and 1995, approximately $85.8 million, $35.3 million and $28.6 million, respectively, is included in operating expenses in the consolidated statements of operations related to the termination and non-competition agreements. This includes payments of $43.1 million in 1997 to former key employees who elected to sell to PAM's subsidiaries their rights to the future proceeds from the PIMCO Advisors units. 16. INVESTMENT COMMITMENTS The Company has outstanding commitments to make investments primarily in mortgage loans, limited partnerships and other investments as follows (In Millions): Years Ending December 31: ------------------------ 1998 $245.4 1999-2002 131.8 2003 and thereafter 16.6 ------ Total $393.8 ------
17. LITIGATION The Company has been named in civil litigation proceedings which appear to be substantially similar to other litigation brought against many life insurers alleging misconduct in the sale of products. These matters are sometimes referred to as market conduct litigation. The litigation against the Company purports to include all persons in the United States who purchased life insurance and annuity products from the Company during the period from 1982 to present. The Company has retained national and local counsel experienced in the handling of similar matters for other life insurers. Informal discovery has commenced in these matters. At this time, it is not feasible to make a meaningful estimate of the amount or range of loss that could result from an unfavorable outcome in such actions. Further, the Company is a respondent in a number of other legal proceedings, some of which involve allegations for extra-contractual damages. In the opinion of management, the outcome of the foregoing proceedings is not likely to have a material adverse effect on the consolidated financial position or results of operations of the Company. --------------------------------------------------------------------------- 43 FORM NO. 288-8A Part C: OTHER INFORMATION Item 24. Financial Statements and Exhibits --------------------------------- (a) Financial Statements Part A: None Part B: (1) Registrant's Financial Statements Audited Financial Statements dated as of December 31, 1997 which are incorporated by reference from the Annual Report include the following for Separate Account A: Statements of Assets and Liabilities Statements of Operations Statements of Changes in Net Assets Notes to Financial Statements (2) Depositor's Financial Statements Audited Consolidated Financial Statements dated as of December 31, 1997 and 1996, and for the three years ended December 31, 1997 included in Part B include the following for Pacific Life: Consolidated Statements of Financial Position Consolidated Statements of Operations and Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements (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. /1/ (b) Memorandum Establishing Two New Variable Accounts - Aggressive Equity and Emerging Markets Portfolios /3/ (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., formerly Pacific Equities Network ("PMD")/3/ (b) Form of Selling Agreement between Pacific Mutual Life, PMD and Various Broker-Dealers/1/ 4. (a) Form of Individual Flexible Premium Variable Accumulation Annuity Contract/2/ (b) Qualified Plan Loan Endorsement/1/ (c) Individual Retirement Annuity Rider/1/ (d) Qualified Pension Plan Rider/1/ (e) 403(b) Tax-Sheltered Annuity Rider/4/ (f) Section 457 Plan Rider/1/ (g) Endorsement for 403(b) Texas Optional Retirement Program (ORP)/1/ (h) Qualified Plan Loan Endorsement/1/ (i) IRA Rider (Form R-IRA 198) (j) Roth IRA Rider (Form R-RIRA 198) (k) Simple IRA Rider (Form R-SIRA 198) 5. (a) Application Form for Individual Flexible Premium Variable Accumulation Annuity Contract (b) Variable Annuity PAC APP/1/ (c) Application/Confirmation Form/2/ 6. (a) Pacific Life's Articles of Incorporation (b) By-laws of Pacific Life 7. Not applicable 8. (a) Fund Participation Agreement/1/ (b) Addendum to Fund Participation Agreement (to add Growth LT Series)/1/ (c) Addendum to Fund Participation Agreement (to add Equity and Bond and Income Series)/1/ (d) Addendum to Fund Participation Agreement (to add Aggressive Equity and Emerging Markets Portfolios)/3/ 9. Opinion and Consent of legal officer of Pacific Mutual Life as to the legality of Contracts being registered./1/ II-2 10. (a) Consent of Independent Auditors (b) Powers of Attorney 11. Not applicable 12. Not applicable 13. Performance Calculations 14. Inapplicable 15. Inapplicable 16. Inapplicable - -------------- /1/ Included in Registrant's Form Type N-4/A, Accession No. 0000898430-95-002620 filed on October 19, 1995 and incorporated by reference herein. /2/ Included in Registrant's Form Type N-4/A, Accession No. 0000898430-95-002620 filed on December 13, 1995 and incorporated by reference herein. /3/ Included in Registrant's Form Type N-4/A, Accession No. 0000898430-96-001094 filed on March 29, 1996 and incorporated by reference herein. /4/ Included in Registrant's Form Type N-4/A, Accession No. 0001017062-97-000787 filed on April 30, 1997 and incorporated by reference herein. 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 has a 40% ownership of American Maturity Life Insurance Company (a Connecticut Corporation), a 50% ownership of Pacific Mezzanine Associates, L.L.C. (a Delaware Limited Liability Company), and is the parent company of Pacific Asset Management LLC (a Delaware Limited Liability Company), Pacific Mutual Realty Finance, Inc., PM Group Life Insurance Company (an Arizona Corporation), Pacific Mutual Distributors, Inc., and World-Wide Holdings Limited (a United Kingdom Corporation). A subsidiary of Pacific Mezzanine Associates, L.L.C. is Pacific Mezzanine Investors, L.L.C., along with its subsidiary Pacific Mezzanine Fund, L.P. Subsidiaries of Pacific Asset Management LLC are PMRealty Advisors Inc., PPA LLC (a Delaware Limited Liability Company), CCM LLC (a Delaware Limited Liability Company), NFJ LLC (a Delaware Limited Liability Company), and PIMCO Holding LLC (a Delaware Limited Liability Company). Pacific Asset Management LLC directly and indirectly owns 31.5% of the outstanding partnership interests in PIMCO Advisors L.P. (a Delaware Limited Partnership). Subsidiaries of Pacific Mutual Distributors, Inc. include: Associated Financial Group, Inc.; Mutual Service Corporation (a Michigan Corporation), along with its subsidiaries Advisors' Mutual Service Center, Inc. (a Michigan Corporation) and Titan Value Equities Group, Inc.; and United Planners' Group, Inc. (an Arizona Corporation which is 97% owned), along with its subsidiary United Planners' Financial Services of America (an Arizona Limited Partnership). Subsidiaries of World-Wide Holdings limited include: World-Wide Reassurance Company Limited (a United Kingdom Corporation) and World-Wide Reassurance Company (BVI) Limited (a British Virgin Islands Corporation). All corporations are 100% owned unless otherwise indicated. All entities are California corporations unless otherwise indicated. II-4 Item 27. Number of Contractholders Approximately 1,407 Qualified Approximately 4,383 Non-Qualified Item 28. Indemnification (a) The Distribution Agreement between Pacific Mutual Life and PMD provides substantially as follows: 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 Mutual Life or the Separate Account. 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 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 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 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 Mutual Life, PMD and Various Broker-Dealers provides substantially as follows: 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 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 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 Mutual Life and PMD pursuant to Section IV.E. of this Agreement, (b) the failure of Selling Broker-Dealer or General Agent or their officers, directors, employees or agents to comply with any applicable provisions of this Agreement or (c) claims by Sub-agents or employees of General Agent or Selling Broker-Dealer for payments of compensation or remuneration of any type. Selling Broker-Dealer and General Agent will reimburse Pacific Mutual Life or PMD or any director, officer, agent or employee of either entity for any legal or other expenses reasonably incurred by 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, Separate Account B, Pacific Corinthian Variable Separate Account 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(b) for effectiveness of this Registration Statement and has caused this Post-Effective Amendment No. 3 to the Registration Statement on Form N-4 to be signed on its behalf by the undersigned thereunto duly authorized in the City of Newport Beach, and the State of California on this 29th day of April, 1998. SEPARATE ACCOUNT A (Registrant) By: PACIFIC LIFE INSURANCE COMPANY By: Thomas C. Sutton* Chairman and Chief Executive Officer By: PACIFIC LIFE INSURANCE COMPANY (Depositor) By: Thomas C. Sutton* Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 3 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
Signature Title Date Thomas C. Sutton* Director, Chairman of the Board ____________, 1998 and Chief Executive Officer Glenn S. Schafer* Director and President ____________, 1998 Khanh T. Tran* Director, Senior Vice President ____________, 1998 and Chief Financial Officer David R. Carmichael* Director, Senior Vice President ____________, 1998 and General Counsel Audrey L. Milfs* Director, Vice President and ____________, 1998 Corporate Secretary Richard M. Ferry* Director ____________, 1998
II-9 Donald E. Guinn* Director ____________, 1998 Ignacio E. Lozano, Jr.* Director ____________, 1998 Charles D. Miller* Director ____________, 1998 Donn B. Miller* Director ____________, 1998 Richard M. Rosenberg* Director ____________, 1998 James R. Ukropina* Director ____________, 1998 Raymond L. Watson* Director ____________, 1998 Edward R. Byrd* Vice President and Controller ____________, 1998 *By: /s/ David R. Carmichael ----------------------- April 29, 1998 DAVID R. CARMICHAEL as attorney-in-fact
(Powers of Attorney are contained in this Post Effective Amendment No. 3 to Registration Statement for Separate Account A, File No. 33-88458, as Exhibit 10(b)). II-10 EX-99.1(C) 2 RESOLUTION OF THE BOARD OF DIRECTORS OF PAC LIFE 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 27/th/ day of August, 1997, at which a quorum was present and voted in favor thereof, and that said resolution has not been revoked or amended and is now in full force and effect. RESOLVED, that on and after September 1, 1997, any provision of any resolution of the Board of Directors or consent of the members of this Corporation adopted prior to the date hereof that conflicts or is inconsistent with the Bylaws of this Corporation, be, and they hereby are, without further action of the Board of Directors, amended to the extent necessary to conform such provision to the terms of the current Bylaws of this Corporation. IN WITNESS WHEREOF, I have executed this certificate as Secretary of said corporation on this 22/nd/ day of October, 1997. /s/ AUDREY L. MILFS Secretary EX-99.4(I) 3 IRA RIDER (FORM R-IRA 198) EXHIBIT 99.4(i) IRA Rider (Form R-IRA 198) EXHIBIT 99.4(i) [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(J) 4 ROTH IRA RIDER (FORM R-RIRA 198) EXHIBIT 99.4(j) Roth IRA Rider (Form R-RIRA 198) EXHIBIT 99.4(j) [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(K) 5 SIMPLE IRA RIDER (FORM R-SIRA 198) EXHIBIT 99.4(k) Simple IRA Rider (Form R-SIRA 198) EXHIBIT 99.4(k) [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 ontract. 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-99.5(A) 6 APPLICATION FORM PREMIUM VARIABLE ANNUITY CONTRACT EXHIBIT 99.5(a) Application Form for Individual Flexible Premium Variable Accumulation Annuity Contract EXHIBIT 99.5(a) PACIFIC ONE APPLICATION [LOGO OF PACIFIC LIFE] Pacific Life Insurance Company, PO Box 100060, Pasadena, CA 91189-0060 Express mail address: Pacific Life, C/O FCNPC, 1111 South Arroyo Parkway, Suite 430, Pasadena, CA 91105 - -------------------------------------------------------------------------------- 1a ANNUITANT (On a qualified plan, the plan participant must be named here.) - ------------------------------- ------------------- -------------------------- First Name Middle Last - -------------------------------------------------------------------------------- Street Address - -------------------------------- ----------------------- ------------------- City State Zip SSN/TIN ___ ___ ___ ___ ___ ___ ___ ___ ___ Sex: [_]M [_]F Date of Birth: _____ - _____ - _____ Phone: ( ) ----------------------------------------------- - -------------------------------------------------------------------------------- 1b ANNUITANT (Optional, check one.) [_] Joint [_] Contingent (Not applicable for qualified plans.) - ------------------------------- ------------------- -------------------------- First Name Middle Last - -------------------------------------------------------------------------------- Street Address - -------------------------------- ----------------------- ------------------- City State Zip SSN/TIN ___ ___ ___ ___ ___ ___ ___ ___ ___ Sex: [_]M [_]F Date of Birth: _____ - _____ - _____ Annuitant's Spouse? [_] Yes [_] No - -------------------------------------------------------------------------------- 2a OWNER (If same as Annuitant, check here [_]. See instructions for qualified plans.) - ------------------------------- ------------------- -------------------------- First Name Middle Last - -------------------------------------------------------------------------------- Street Address - -------------------------------- ----------------------- ------------------- City State Zip SSN/TIN ___ ___ ___ ___ ___ ___ ___ ___ ___ Sex: [_]M [_]F Date of Birth: _____ - _____ - _____ Phone: ( ) ----------------------------------------------- - -------------------------------------------------------------------------------- 2b OWNER (Optional, check one.) [_] Joint [_] Contingent - ------------------------------- ------------------- -------------------------- First Name Middle Last - -------------------------------------------------------------------------------- Street Address - -------------------------------- ----------------------- ------------------- City State Zip SSN/TIN ___ ___ ___ ___ ___ ___ ___ ___ ___ Sex: [_]M [_]F Date of Birth: _____ - _____ - _____ Owner's Spouse? [_] Yes [_] No - -------------------------------------------------------------------------------- 3 BENEFICIARY (Use Special Requests section or enclose a signed and dated letter of instruction if you need to provide additional information.) - -------------------------------------------------------------------------------- Beneficiary Name [_] Primary [_] Contingent - -------------------------------------------------------------------------------- Beneficiary Name [_] Primary [_] Contingent - -------------------------------------------------------------------------------- Beneficiary Name [_] Primary [_] Contingent - -------------------------------------------------------------------------------- 4 TYPE OF PLAN [_] Non-qualified [_] SEP-IRA [_] 457 [_] Conduit IRA [_] 401(a)/Pension [_] Keogh/HR10 [_] IRA [_] 401(k) [_] 403(b)/TSA Transfer [_] Roth IRA [_] SIMPLE IRA (Also complete the SIMPLE/Roth form for either of these IRAs.) Payment Type: (See instructions.) - ------------ [_] Transfer (Attach transfer form/s.) [_] Rollover $________________ [_] Contribution $________________ for tax year ____ $________________ for tax year ____ - -------------------------------------------------------------------------------- 5 ISSUE STATE 6 INITIAL PURCHASE PAYMENT ___________________ [_] Amount with application Enter the state $________________ where application [_] 1035 exchange/estimated transfer was signed. $________________ - -------------------------------------------------------------------------------- 7 TELEPHONE AUTHORIZATION (Owner/Owners must check and initial.) [_] _______________ [_] _______________ 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, its affiliates, directors, trustees, officers, employees, representatives and/ or agents, will be held harmless for any claim, liability, loss or cost. - -------------------------------------------------------------------------------- 8 REPLACEMENT Will the purchase of this annuity replace or change any existing life insurance or annuity? [_] Yes [_] No (If yes, write insurance company name, contract number, and contract type (e.g. life insurance, fixed annuity, or variable annuity) in Special Requests section and attach any required state replacement and/or 1035 exchange/transfer forms.) - -------------------------------------------------------------------------------- *279-7C1* 95-01 11/97 (Please complete the following pages) 279-7C 11/97 - ------------------------------------------------------------------------------ 9 TRANSFERS (Choose only one of the four options, then frequency, start date, number of transfers and accounts below.) A. Transfer Options - -------------------- Earnings Sweep: 1 [_] Sweep previous period's earnings of either the Fixed Option or the Money Market account to the target account(s) indicated below. (Choose one source account. If also rebalancing, only Fixed Option available.) [_] Fixed [_] Money Market Dollar Cost Averaging: 2 [_] Deplete the source account in (indicate number) __________ transfers to the target account(s) indicated below. (If Fixed Option is source account, up to 100% can be transferred over one year or more.) 3 [_] Transfer $____________ each time from the source account to the target account(s) indicated below. 4 [_] Transfer ________% annually from the source account to the target account(s) indicated below. B. Frequency: (Choose one.) - ------------ [_] Monthly [_] Quarterly [_] Semi-Annually [_] Annually C. Start Date: __-__-__ - ------------- D. Number of Transfers: (If option 1, 3 or 4 selected above, - ---------------------- indicate number.) ________ E. Accounts: - ----------- Source: (If option 2, Target: (Must be different than - ------ ------ 3 or 4 selected above, source. Total must equal either choose one.) 100% or total $ transfer amount.) [_] Fixed Fixed __________ [_] Money Market Money Market __________ [_] High Yield Bond High Yield Bond __________ [_] Managed Bond Managed Bond __________ [_] Govt. Securities Govt. Securities __________ [_] Aggressive Equity Aggressive Equity __________ [_] Growth LT Growth LT __________ [_] Equity Income Equity Income __________ [_] Multi-Strategy Multi-Strategy __________ [_] Equity Equity __________ [_] Bond and Income Bond and Income __________ [_] Equity Index Equity Index __________ [_] International International __________ [_] Emerging Markets Emerging Markets __________ - ------------------------------------------------------------------------------ 10 PRE-AUTHORIZED WITHDRAWALS (Choose one option only, then frequency, start date, term, taxes, source and payee below. Attach a voided check for electronic transfers.) Withdrawal Options: - ------------------ 1 [_] Withdraw $__________ each time from the source account(s) indicated below. 2 [_] Withdraw __________% annually from the source account(s) indicated below. Frequency: (Choose one.) - --------- [_] Monthly [_] Quarterly [_] Semi-Annually [_] Annually Start Date: __-__-__ - ---------- Term: [_]_____ Months (Enter number of months.) [_]_____ Years (Enter number of years.) Federal Taxes: Source: (Choose one or more. - ------------- ------ [_] Do Not Withhold Total must equal either 100% or [_] Withhold _____% total $ withdrawal amount.) (If not specified, a Fixed ___________ minimum 10% federal tax Money Market ___________ on non-qualified plans High Yield Bond ___________ and IRAs will be withheld. Managed Bond ___________ Mandatory 20% on Govt. Securities ___________ qualified plans will be Aggressive Equity ___________ withheld. State mandated Growth LT ___________ income tax will be Equity Income ___________ withheld where required Multi-Strategy ___________ by law.) Equity ___________ Bond and Income ___________ Equity Index ___________ International ___________ Emerging Markets ___________ Third Party Payee: - ----------------- Indicate name and address of payee, if other than owner: - ------------------------- ------------ ---------------------------- First Name Middle Last - ----------------------------------------------------------------------- Street Address - --------------------------------------- ------- ------------------- City State Zip - ------------------------------------------------------------------------------ 11 PRE-AUTHORIZED CHECKING (Please attach a voided check. To begin the plan, the first minimum installment must accompany this application.) Collect $__________ monthly by initiating automatic withdrawals from my account as indicated on the attached voided check. Payments will be applied according to the allocations on this application or more current instructions, if any. Start Date: __-__-__ - ---------- - ------------------------------------------------------------------------------ 279-7C 11/97 *279-7C2* PACIFIC ONE APPLICATION INSTRUCTIONS [LOGO OF PACIFIC LIFE] Send this completed application, with payment or 1035 Tax-Free Exchange or Transfer of Assets form to: Pacific Life Insurance Company, PO Box 100060, Pasadena, CA 91189-0060. Our phone number is (800) 722-2333. Our express mail address is: Pacific Life, C/O FCNPC, 1111 South Arroyo Parkway, Suite 430, Pasadena, CA 91105. 1 Annuitants: There are many combinations of owner and annuitant registrations which may result in different 2 Owners: 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 retirement plans. For IRAs, owner and annuitant must be the participant. For pension/profit sharing, 401(k) and Keogh/HR10 plans, name plan as owner and 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 plans. Consult a tax adviser to properly structure qualified plans and effect transfers. 3 Beneficiary: Beneficiaries will be joint if no boxes are checked. Joint beneficiaries will share equally with the rights of survivorship. In the event of death, with a spouse as a joint beneficiary, the Contract may not be continued. Beneficiary designations may be irrevocable. Please use the Special Requests section to indicate this option. 4 Type Of Plan: A conduit IRA is used to move from a qualified plan with intent to move to another qualified plan at a later date. Subsequent contributions are not permitted. Transfer indicates a trustee to trustee or custodian to custodian transfer only. If initial payment represents both a rollover and a contribution, indicate amounts for each. Ensure the total matches the check. 5 Issue State: Indicate the state where the application is signed. 6 Initial Purchase: Indicate the initial purchase payment in U.S. dollars. Initial minimum $25,000, $1,000 subsequent. 7 Telephone Authorization: If the Contract is jointly owned, both owners must check and initial. 8 Replacement: Complete and attach a Transfer/Exchange form and any required state replacement forms. 9 Transfers: Contract must be issued for at least 30 days. Actual start date may occur after date elected. Minimum source account value $10,000. Minimum initial transfer amount $250. Select target accounts that are different than the source account. Target accounts must total either 100% for options 1, 2 and 4 or transfer amount for option 3. Earnings sweep: If rebalancing, earnings sweep allowed only from the Fixed Option. If not rebalancing, earnings sweep allowed from either the Fixed Option or the Money Market. Deplete source account: If Fixed Option is source account, up to 100% can be transferred over one year or more. Transfer dollars: Last transfer will not occur if remaining balance is less than amount selected. Transfer percentages: Annual percentage will be divided by the frequency selected. 10 Pre-Authorized Contract must be issued for 30 days. Actual start date may occur after date elected. Minimum Withdrawals: withdrawal $1,000. Annual percentage will be divided by the frequency selected. Net payment reflects deduction of fees and charges but will be further reduced by any taxes, if withholding is applicable and will be pro-rated from all investment options if none is selected. Withdrawals may be taken from qualified plans if allowed. 11 Pre-Authorized Checking: Initial minimum purchase may be met over maximum 12 months. The first installment must accompany this application. Monthly minimum $2,000. 12 Annuity Start Date: Annuity date cannot be prior to first Contract anniversary. For non-qualified plans, if no date is chosen, annuity date is the Annuitant's 100th birthday. For qualified plans, if no date is chosen, annuity date is April 1 of year after the Annuitant reaches age 70 1/2. 13 Allocation Options: Allocations must total 100% or equal total purchase payment. 14 Rebalancing: Contract must be issued for at least 30 days. Actual start date may occur after date elected. If no date is chosen, rebalancing will occur on the first business day of the frequency selected and every period after. Variable account percentages will be prorated, excluding Fixed Option balances. The Fixed Option may not be rebalanced. If variable account rebalancing is chosen, then earnings sweep may be made only from the Fixed Option and not the Money Market. Additional purchase payments to accounts other than those selected on this application will not be rebalanced. To change allocations, complete a new transfer form. 15 Special Requests: Use this section to indicate unique registrations and other special instructions. 16 Statement Of Applicant: This section contains information about the Contract, if issued. Please read it carefully. Some provisions may conflict with qualified plans or with applicable laws and regulations. 17 Statement Of Agent: Your agent must complete and sign this section.
- ------------------------------------------------------------------------------ 12 ANNUITY START DATE (Optional, annuity date cannot be prior to first contract anniversary.) __-__-__ - ------------------------------------------------------------------------------ 13 ALLOCATION OPTIONS (Indicate either whole percentages or dollars. Total must equal either 100% or initial purchase payment.) Pacific Life ................ Fixed _________ Pacific Life ................ Money Market _________ Pacific Life ................ High Yield Bond _________ PIMCO ....................... Managed Bond _________ PIMCO ....................... Govt. Securities _________ Alliance Capital ............ Aggressive Equity _________ Janus ....................... Growth LT _________ J.P. Morgan Inv. ............ Equity Income _________ J.P. Morgan Inv. ............ Multi-Strategy _________ Goldman Sachs ............... Equity _________ Goldman Sachs ............... Bond and Income _________ Bankers Trust ............... Equity Index _________ Morgan Stanley .............. International _________ Blairlogie .................. Emerging Markets _________ - ------------------------------------------------------------------------------ 14 REBALANCING [_] (Variable accounts will be rebalanced to the allocation percentages on this application.) Frequency: (Choose one.) --------- [_] Quarterly [_] Semi-Annually [_] Annually Start Date: __-__-__ ---------- - ------------------------------------------------------------------------------ 15 SPECIAL REQUESTS - ------------------------------------------------------------------------------ 16 STATEMENT OF APPLICANT 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 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. 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). 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. - ------------------------------ ------------------------------ ---------- Owner Signature (If different Annuitant Signature Date from Annuitant) - ------------------------------ ------------------------------ ---------- Joint/Contingent Owner Joint/Contingent Annuitant Date Signature Signature Signed at ---------------------------------------------------------------------- City State - -------------------------------------------------------------------------------- 17 STATEMENT OF AGENT Will this Contract replace or change any existing life insurance or annuity in this or any other company? [_] Yes [_] No If yes, explain in Special Requests section. I certify that I am authorized and qualified to discuss this Contract. I have explained to the applicant how the annuity will meet their insurable needs and financial objectives. I have discussed the appropriateness of replacement, if applicable. _________________________ _____________________________ ___-__-____ Agent Full Name (Print) Agent Signature Agent SSN (Required) ( ) _________________________ _____________________________ _____________________ Agent Phone Number Broker/Dealer Name Brokerage Account Number Option [_] A [_] B - -------------------------------------------------------------------------------- 279-7C 11/97 *279-7C3* [Logo of Pacific Life] PACIFIC SELECT VARIABLE ANNUITY APPLICATION Pacific Life Insurance Company VARIABLE ACCUMULATION ANNUITY Post Office Box 100060 Pasadena, CA 91189-0060 ANNUITANT NAME NAME JOINT OR CONTINGENT ANNUITANT ADDRESS ADDRESS SOCIAL SECURITY NUMBER SOCIAL SECURITY NUMBER SEX DATE OF BIRTH TELEPHONE SEX DATE OF BIRTH TELEPHONE MALE FEMALE MALE FEMALE CONTRACT OWNER (If other than the Annuitant(s) named above) NAME NAME JOINT OR CONTINGENT ANNUITANT ADDRESS ADDRESS SOCIAL SECURITY NUMBER SOCIAL SECURITY NUMBER SEX DATE OF BIRTH TELEPHONE SEX DATE OF BIRTH TELEPHONE MALE FEMALE MALE FEMALE BENEFICIARY DESIGNATION PRIMARY BENEFICIARY CONTINGENT BENEFICIARY OWNER BENEFICIARY NAME NAME NAME RELATIONSHIP RELATIONSHIP RELATIONSHIP PREMIMUM ALLOCATIONS: The total of the percentages must be 100% (use whole numbers only)
PACIFIC LIFE ALLIANCE CAPITAL GOLDMAN SACHS MORGAN STANLEY ___% High Yield Bond ___% Agressive Equity ___% Bond & Income ___% International ___% Money Market ___% Equity ___% Fixed Account JANUS ___% Growth LT BANKERS TRUST CO. BLAIRLOGIE ___% Equity Index ___% Emerging Markets
PACIFIC INVESTMENT MGMT. CO. JP MORGAN INVESTMENT ___% Government Securities ___% Equity Income ___% Managed Bond ___% Multi-Strategy PREMIUM AMOUNT: Amount Submitted With Application ___ Yes $ ______ __ No (CHECK ONLY IF 1035 EXCHANGE/TRANSFER) ESTIMATED AMOUNT $__________ OPTIONAL: Annuity Start Date: ____/____/____ REPLACEMENT: Will this Annuity applied for replace any existing Life Insurance or Annuity? ____ Yes ____ No If Yes, give company, amount, type of policy and termination date: TAX STATUS OF ANNUITY: Certain tax qualifications require the submission of additional forms with application. ___ Non-qualified ___ IRA: Tax Yr. 19__ ___ SEP-IRA: Tax Yr. 19__ ___ 401(a) Pension ___ Keogh/HR10 ___ Conduit IRA ___ 403(b)/TSA Transfer ___ 401(k) ___ Roth IRA ___ SIMPLE IRA ___ 457
PROSPECTUS RECEIPT: I have received prospectuses. REMARKS: HOME OFFICE ENDORSEMENTS: (NOT APPLICABLE IN KENTUCKY, PENNSYLVANIA & WEST VIRGINIA) AGREEMENT: To the best of my knowledge the statements and answers given in this application are true, complete and correct. I agree that: 1. This application is the basis of any contract issued as a result of it. 2. No agent has the authority to waive or complete any answer to any question in the application, make or alter any contract or waive any of PL's other rights of requirements. 3. If there are Joint Applicants, the contract if issued will be owned by the Joint Applicants as joint tenants with the right of survivorship and not as tenants in common. If there is a Contingent Owner named, the Contingent Owner will become the Owner if the Owner dies prior to the Annuity Start Date. 4. 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 fac material thereto commits a fraudulent insurance act, which is a crime and subjects such person to criminal and civil penalties. 5. MY AGENT AND I DISCUSSED MY FINANCIAL BACKGROUND AND AS A RESULT I BELIEVE THIS CONTRACT WILL MEET MY INSURABLE NEEDS AND FINANCIAL OBJECTIVES AND HAVE CONSIDERED THE APPROPRIATENESS OF FULL OR PARTIAL REPLACEMENT OF ANY EXISTING LIFE INSURANCE OF ANNUITY, IF APPLICABLE. 6. I UNDERSTAND THAT CONTRACT VALUES MAY INCREASE OR DECREASE DEPENDING ON THE INVESTMENT EXPERIENCE OF THE VARIABLE ACCOUNTS. 7. ACCUMULATED VALUES UNDER THE VARIABLE ACCOUNTS ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNTS. Dated by Annuitant/Owner at: _______________________________ this _________ Day City State of __________ 19__ ____________________________________________ _____________________________________________________ Signature of Annuitant Signature of Applicant/Owner (If other than Annuitant) ____________________________________________ _____________________________________________________ Signature of Joint or Contingent Annuitant Signature of Joint or Contingent Applicant/Owner
I have explained to the applicant how the annuity will meet their insurable needs and financial objectives and have discussed the appropriateness of replacement, if applicable. ____________________________________________ _____________________________________________________ Agent's Signature Agent's Name (Print) _____________________________________________________ Brokerage Account Number
To your knowledge of belief, will replacement of life insurance of annuities be involved? ____ Yes ____ No AGENT INFORMATION: Agent Name % Agent Code Agency or Broker/Dealer Broker/Dealer Code Name Option: ___ A ___ B 137-7C [Bar Code] EX-99.6(A) 7 PACIFIC LIFE'S ARTICLE OF INCORPORATION 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) 8 BYLAWS OF PACIFIC LIFE INSURANCE COMPANY 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 EX-99.10(A) 9 CONSENT OF INDEPENDENT AUDITORS EXHIBIT 99.10(a) Consent of Independent Auditors EXHIBIT 99.10(a) [LETTERHEAD OF DELOITTE & TOUCHE LLP] CONSENT OF INDEPENDENT AUDITORS Pacific Life Insurance Company: We consent to the use in this Post-Effective Amendment No. 3 to Registration Statement No. 33-88458 on Form N-4 of our report dated February 19, 1998 related to the consolidated financial statements of Pacific Life Insurance Company and subsidiaries as of December 31, 1997 and 1996 and for each of the three years in the period ended December 31, 1997, appearing in the Statement of Additional Information of Pacific One, which is a part of such Registration Statement; and to the incorporation by reference of our report dated February 6, 1998 related to the financial statements of Separate Account A of Pacific Life Insurance Company as of December 31, 1997 and for each of the two years in the period then ended appearing in the Annual Report of Separate Account A of Pacific Life Insurance Company for the year ended December 31, 1997. We also consent to the reference to us under the heading "Financial Highlights" appearing in such Prospectus and to the reference to us under the heading "Financial Statements" appearing in such Statement of Additional Information. /s/ DELOITTE & TOUCHE LLP April 28, 1998 EX-99.10(B) 10 POWERS OF ATTORNEY 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 EX-99.13 11 PERFORMANCE CALCULATIONS EXHIBIT 99.13 PERFORMANCE CALCULATIONS EXHIBIT 99.13 Edgar1Yr Pacific One Variable Annuity Separate Account Schedule for Computation of Performance Quotations Average Initial Premium = $80,000. - -------------------------------------------------------------------------------- Last Year Ending 12/31/97
Money Mkt Mgd Bond Govt Secty High Yield Equity Income Multi-Strat Intern'l Start Date 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 Beginning AUV 10.356036 10.274757 10.144127 10.961721 11.657031 11.032656 11.843494 End Date 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 Ending AUV 10.751784 11.137453 10.95187 11.82987 14.783078 13.014333 12.762569 Annual Fee ($40) $ 0.50 $ 0.50 $ 0.50 $ 0.50 $ - $ 0.50 $ 0.50 CDSC $ - $ - $ - $ - $ - $ - $ - Ending ERV $ 1,037.71 $ 1,083.46 $ 1,079.13 $ 1,078.70 $ 1,268.17 $ 1,179.12 $ 1,077.10 AATR W/Drawal 3.77% 8.35% 7.91% 7.87% 26.82% 17.91% 7.71% Equity Index Growth LT Equity Bond + Income Emerg Mkts Aggsv Eqty Start Date 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 Beginning AUV 11.968901 11.613700 12.593450 9.791233 9.574244 10.672142 End Date 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 Ending AUV 15.69257 12.707541 14.676255 11.231117 9.281881 10.921505 Annual Fee ($40) $ - $ 0.50 $0.50 $ 0.50 $ 0.50 $ 0.50 CDSC $ - $ - $ - $ - $ 0.00 $ 0.00 Ending ERV $ 1,311.11 $ 1,093.69 $1,164.89 $ 1,146.56 $ 968.96 1,022.87 AATR W/Drawal 31.11% 9.37% 16.49% 14.66% -3.10% 2.29%
Dollar Values are per $1000 of initial premium Average Annual Total Return (AATR) of Surrender Value = [ERV/$1000]-1 $40 Annual Fee waived if contract value over $100,000 Edgar3Yr Pacific One Variable Annuity Separate Account Schedule for Computation of Performance Quotations Average Initial Premium = $80,000. - -------------------------------------------------------------------------------- Last 3 Years ending 12/31/97
Money Mkt Mgd Bond Govt Secty High Yield Equity Income Multi-Strat Intern'l Start Date 12/30/94 12/30/94 12/30/94 12/30/94 12/30/94 12/30/94 12/30/94 Beginning AUV 9.603907 8.514737 8.530157 8.519994 7.624217 8.048181 9.038482 End Date 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 Ending AUV 10.751784 11.137453 10.951870 11.829870 14.783078 13.014333 12.762569 Annual Fee ($40) $ 1.50 $1.00 $ 1.00 $ 0.50 $ - $ 0.50 $ 0.50 CDSC $ - $ - $ - $ - $ - $ - $ - Ending ERV $ 1,117.96 $ 1,306.92 $ 1,282.81 $ 1,387.89 $ 1,938.96 $ 1,616.40 $ 1,411.38 AATR W/Drawal 3.79% 9.33% 8.66% 11.55% 24.70% 17.36% 12.17% Equity Index Growth LT Equity Bond + Income Emerg Mkts Aggsv Eqty Start Date 12/30/94 12/30/94 12/30/94 12/30/94 N/A N/A Beginning AUV 7.347206 7.409890 8.171504 7.592276 End Date 12/31/97 12/31/97 12/31/97 12/31/97 Ending AUV 15.692570 12.707541 14.676255 11.231117 Annual Fee ($40) $ - $ - $ 0.50 $ - CDSC $ - $ 0.00 $ - $ - Ending ERV $ 2,135.86 $ 1,714.94 $ 1,795.29 $ 1,479.28 AATR W/Drawal 28.78% 19.70% 21.54% 13.94%
Dollar Values are per $1000 of initial premium Average Annual Total Return (AATR) of Surrender Value = [(ERV/$1000) to the power of (1/3)]-1 $40 Annual Fee waived if contract value over $100,000 Edgar5Yr Pacific One Variable Annuity Separate Account Schedule for Computation of Performance Quotations Average Initial Premium = $80,000. - -------------------------------------------------------------------------------- Last 5 Years ending 12/31/97
Money Mkt Mgd Bond Govt Secty High Yield Equity Income Multi-Strat Intern'l Start Date 12/31/92 12/31/92 12/31/92 12/31/92 12/31/92 12/31/92 12/31/92 Beginning AUV 9.278833 8.199955 8.342795 7.393702 7.260880 7.690714 6.940174 End Date 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 Ending AUV 10.751784 11.137453 10.951870 11.829870 14.783078 13.014333 12.762569 Annual Fee ($40) $ 2.50 $ 1.50 $ 2.00 $ 1.00 $ 1.00 $ 1.00 $ - CDSC $ - $ - $ - $ - $ - $ - $ - Ending ERV $ 1,156.05 $ 1,356.41 $ 1,310.40 $ 1,598.61 $ 2,034.07 $ 1,690.62 $ 1,838.94 AATR W/Drawal 2.94% 6.29% 5.56% 9.84% 15.26% 11.07% 12.96% Equity Index Growth LT Equity Bond + Income Emerg Mkts Aggsv Eqty Start Date 12/31/92 N/A 12/31/92 12/31/92 N/A N/A Beginning AUV 6.835878 7.454115 7.136625 End Date 12/31/97 12/31/97 12/31/97 Ending AUV 15.692570 14.676255 11.231117 Annual Fee ($40) $ 1.00 $ 1.00 $ 1.00 CDSC $ - $ - $ - Ending ERV $ 2,293.49 $ 1,967.12 $ 1,572.32 AATR W/Drawal 18.06% 14.49% 9.47%
Dollar Values are per $1000 of initial premium Average Annual Total Return (AATR) of Surrender Value = [(ERV/$1000) to the power of (1/5)]-1 $40 Annual Fee waived if contract value over $100,000 Edgar10Yr Pacific One Variable Annuity Separate Account Schedule for Computation of Performance Quotations Average Initial Premium = $80,000. - -------------------------------------------------------------------------------- Last 10 Years ending 12/31/97
Money Mkt Mgd Bond Govt Secty High Yield Equity Income Multi-Strat Intern'l Start Date N/A N/A N/A N/A N/A N/A N/A Beginning AUV End Date Ending AUV Annual Fee ($40) CDSC Ending ERV AATR W/Drawal Equity Index Growth LT Equity Bond + Income Emerg Mkts Aggsv Eqty Start Date N/A N/A 12/31/87 12/31/87 N/A N/A Beginning AUV 4.255963 4.430472 End Date 12/31/97 12/31/97 Ending AUV 14.676255 11.231117 Annual Fee ($40) $ 0.50 $ 1.50 CDSC $ - $ - Ending ERV $ 3,446.77 $ 2,531.69 AATR W/Drawal 13.17% 9.73%
Dollar Values are per $1000 of initial premium Average Annual Total Return (AATR) of Surrender Value = [(ERV/$1000) to the power of (1/10)]-1 $40 Annual Fee waived if contract value over $100,000 EdgarFundIncep Pacific One Variable Annuity Separate Account Schedule for Computation of Performance Quotations Average Initial Premium = $80,000. - -------------------------------------------------------------------------------- From Inception of Fund
Money Mkt Mgd Bond Govt Secty High Yield Equity Income Multi-Strat Intern'l Start Date 1/4/88 1/4/88 1/4/88 1/4/88 1/4/88 1/4/88 1/4/88 Beginning AUV 7.340021 5.184201 5.409269 4.737509 4.348104 4.848630 6.046630 End Date 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 Ending AUV 10.751784 11.137453 10.95187 11.82987 14.783078 13.014333 12.762569 Days 3649 3649 3649 3649 3649 3649 3649 Annual Fee ($40) $ 2.00 $ 1.00 $ 1.00 $ 1.50 $ 1.00 $ 1.00 $ 1.50 CDSC $ - $ - $ - $ - $ - $ - $ - Ending ERV $ 1,462.26 $ 2,146.43 $ 2,022.83 $2,493.62 $ 3,396.92 $ 2,681.78 $ 2,107.97 AATR W/Drawal 3.87% 7.94% 7.30% 9.57% 13.01% 10.37% 7.74% Equity Index Growth LT Equity Bond + Income Emerg Mkts Aggsv Eqty Start Date 1/30/91 1/3/94 1/3/84 1/3/84 4/1/96 4/1/96 Beginning AUV 5.257292 6.634056 2.515479 2.629096 10.000000 10.000000 End Date 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 Ending AUV 15.69257 12.707541 14.676255 11.231117 9.281881 10.921505 Annual Fee ($40) 2527 1458 5111 5111 639 639 CDSC $ 0.50 $ 0.50 $ 0.50 $ 0.50 $ 1.00 $ 1.00 Ending ERV $ - $ - $ - $ - $ - $ - AATR W/Drawal $2,983.69 $ 1,914.64 $ 5,831.69 $ 4,269.98 $ 927.23 $ 1,091.06 17.10% 17.66% 13.42% 10.92% -4.22% 5.10%
Dollar Values are per $1000 of initial premium Average Annual Total Return (AATR) of Surrender Value = [(ERV/$1000) to the power of (365/# of days)]-1 $40 Annual Fee waived if contract value over $100,000 EdgarSepAcctincep Pacific One Variable Annuity Separate Account Schedule for Computation of Performance Quotations Average Initial Premium = $80,000. - -------------------------------------------------------------------------------- From Inception of Separate Account
Money Mkt Mgd Bond Govt Secty High Yield Equity Income Multi-Strat Intern'l Start Date 1/2/96 1/2/96 1/2/96 1/2/96 1/2/96 1/2/96 1/2/96 Beginning AUV 10.000000 10.000000 10.000000 10.000000 10.000000 10.000000 10.000000 End Date 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 Ending AUV 10.751784 11.137453 10.95187 11.82987 14.783078 13.014333 12.762569 Days 729 729 729 729 729 729 729 Annual Fee ($40) $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 0.50 $ 0.50 $ 0.50 CDSC $ - $ - $ - $ - $ - $ - $ - Ending ERV $ 1,073.66 $ 1,112.20 $ 1,093.64 $ 1,181.45 $ 1,477.67 $ 1,300.84 $ 1,275.71 AATR W/Drawal 3.62% 5.47% 4.58% 8.71% 21.59% 14.08% 12.97% Equity Index Growth LT Equity Bond + Income Emerg Mkts Aggsv Eqty Start Date 1/2/96 1/2/96 1/2/96 1/2/96 4/17/96 4/17/96 Beginning AUV 10.000000 10.000000 10.000000 10.000000 10.102463 9.908720 End Date 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 Ending AUV 15.69257 12.707541 14.676255 11.231117 9.281881 10.921505 Annual Fee ($40) 729 729 729 729 623 623 CDSC $ 0.50 $ 0.50 $ 0.50 $ 1.00 $ 1.00 $ 1.00 Ending ERV $ - $ - $ - $ - $ - $ - AATR W/Drawal $ 1,568.60 $ 1,270.20 $ 1,467.04 $ 1,121.53 $ 917.82 $ 1,101.12 25.28% 12.72% 21.15% 5.91% -4.90% 5.81%
Dollar Values are per $1000 of initial premium Average Annual Total Return (AATR) of Surrender Value = [(ERV/$1000) to the power of (365/# of days)]-1 $40 Annual Fee waived if contract value over $100,000 -----END PRIVACY-ENHANCED MESSAGE-----