497 1 d497.txt PACIFIC LIFE -- PORTFOLIOS Supplement dated January 1, 2002 to Prospectus dated May 1, 2001 for the Pacific Portfolios, a variable annuity contract issued by Pacific Life Insurance Company Capitalized terms used in this Supplement are defined in the Prospectus referred to above unless otherwise defined herein. "We," "us", or "our" refer to Pacific Life Insurance Company; "you" or "your" refer to the Contract Owner. This supplement changes the Prospectus to reflect the following, and restates information contained in a Supplement dated October 12, 2001: --------------------------------------------------------- The portfolio Effective December 1, 2001, Putnam Investment manager for the Management, Inc. became the portfolio manager of the Aggressive Equity Aggressive Equity Portfolio and the Equity Portfolio. Portfolio and the Equity Portfolio has changed. --------------------------------------------------------- The Equity Income Effective January 1, 2002, the name of the Equity variable investment Income Variable Investment Option is changed to the option has changed Large-Cap Core Variable Investment Option. its name. This reflects a change in name of the underlying Equity Income Portfolio managed by J.P. Morgan Investment Management, Inc. Any reference to the Equity Income Portfolio, Subaccount, or Variable Investment Option throughout the Prospectus and/or Supplement is revised to be the Large-Cap Core Portfolio, Subaccount, or Variable Investment Option. --------------------------------------------------------- Two new Variable Effective January 1, 2002, two new Variable Investment Investment Options Options are available and are added to the list on page are available. 1 of the Prospectus: Equity Income Research References to the 31 Variable Investment Options throughout the Prospectus are revised to be 33 Variable Investment Options. --------------------------------------------------------- An OVERVIEW OF The following is added to the Optional Riders section PACIFIC PORTFOLIOS of the Prospectus: is amended. Guaranteed Protection Advantage Rider The optional Guaranteed Protection Advantage Rider provides for an additional amount that may be added to your Contract Value when an asset allocation program, established and maintained by us for this Rider, is used for a 10-year period (the "Term"). The Term begins on the Effective Date of the Rider. Your entire Contract Value must be invested in an asset allocation program during the entire Term for the additional amount to be added to your Contract. If you use our DCA Plus program in conjunction with such an asset allocation program, you will be considered to have met this requirement. Subject to certain limitations, you can buy the Guaranteed Protection Advantage Rider at any time during the Contract Year Anniversary. The Guaranteed Protection Advantage Rider may not be available. Ask your registered representative about its current availability. --------------------------------------------------------- The side note to the Optional Riders section is changed to read as follows: Optional Riders are subject to availability. Ask your registered representative about their current status. --------------------------------------------------------- The Contract Expenses section of the Prospectus is amended by adding the following: Guaranteed Protection Charge, as a percentage of Contract Value 0.10%/8/ /8/ If you buy the Guaranteed Protection Advantage Rider (subject to availability), we deduct this charge from your Investment Options on each Contract Anniversary following the Effective Date of the Rider and while the Rider is in effect. If the Rider is terminated for reasons other than death or annuitization, this charge will be deducted on the effective date of termination. --------------------------------------------------------- An OVERVIEW OF The Pacific Select Fund Annual Expenses is replaced: PACIFIC PORTFOLIOS--Pacific The table below shows the advisory fee and Fund Select Fund Annual expenses as an annual percentage of each Portfolio's Expenses is average daily net assets, based on the year 2000 unless amended. otherwise noted. To help limit Fund expenses, effective July 1, 2000 Pacific Life contractually agreed to waive all or part of its investment advisory fees or otherwise reimburse each Portfolio for operating expenses (including organizational expenses, but not including advisory fees, additional costs associated with foreign investing and extraordinary expenses) that exceed an annual rate of 0.10% of its average daily net assets. Such waiver or reimbursement is subject to repayment to us to the extent such expenses fall below the 0.10% expense cap. Any amounts repaid to us will have the effect of increasing such expenses of the Portfolio, but not above the 0.10% expense cap. For each Portfolio, our right to repayment of amounts waived and/or reimbursed is limited to amounts that do not cause such expenses to exceed the new 0.10% expense cap. There is no guarantee that we will continue to cap expenses after December 31, 2002. In 2000, we reimbursed approximately $13,202 to the I-Net Tollkeeper Portfolio, $36,311 to the Strategic Value Portfolio, $34,134 to the Focused 30 Portfolio and $27,505 to the Small-Cap Index Portfolio.
------------------------------------------------------------------------------------- Less Advisory Other 12b-1 Total adviser's Total net Portfolio fee expenses amounts+ expenses reimbursement expenses ------------------------------------------------------------------------------------- As an annual % of average daily net assets Blue Chip/1/ 0.95 0.06 -- 1.01 -- 1.01 Aggressive Growth/1/ 1.00 0.06 -- 1.06 -- 1.06 Emerging Markets/2/ 1.10 0.21 -- 1.31 -- 1.31 Diversified Research/2/ 0.90 0.08 0.01 0.99 -- 0.99 Small-Cap Equity/2/ 0.65 0.05 -- 0.70 -- 0.70 International Large-Cap 1.05 0.12 -- 1.17 -- 1.17 I-Net Tollkeeper/2/,/3/ 1.40 0.13 -- 1.53 (0.02) 1.51 Financial Services/1/ 1.10 0.15 -- 1.25 (0.05) 1.20 Health Sciences/1/ 1.10 0.11 -- 1.21 (0.01) 1.20 Technology/1/ 1.10 0.08 -- 1.18 -- 1.18 Telecommunications/1/ 1.10 0.08 -- 1.18 -- 1.18 Multi-Strategy 0.65 0.04 -- 0.69 -- 0.69 Large-Cap Core/2/ 0.65 0.04 0.01 0.70 -- 0.70 Strategic Value 0.95 0.49 -- 1.44 (0.39) 1.05 Growth LT 0.75 0.04 -- 0.79 -- 0.79 Focused 30 0.95 0.42 -- 1.37 (0.32) 1.05 Mid-Cap Value/2/ 0.85 0.03 0.10 0.98 -- 0.98 International Value 0.85 0.11 -- 0.96 -- 0.96 Capital Opportunities/1/ 0.80 0.06 -- 0.86 -- 0.86 Mid-Cap Growth/1/ 0.90 0.06 -- 0.96 -- 0.96 Global Growth/1/ 1.10 0.19 -- 1.29 -- 1.29 Equity Index 0.25 0.04 -- 0.29 -- 0.29 Small-Cap Index/2/ 0.50 0.13 -- 0.63 (0.02) 0.61 REIT 1.10 0.04 -- 1.14 -- 1.14 Inflation Managed/2/ 0.60 0.05 -- 0.65 -- 0.65 Managed Bond/2/ 0.60 0.05 -- 0.65 -- 0.65 Money Market 0.34 0.04 -- 0.38 -- 0.38 High Yield Bond/2/ 0.60 0.05 -- 0.65 -- 0.65 Equity Income/1/ 0.95 0.15 -- 1.10 (0.05) 1.05 Research/1/ 1.00 0.12 -- 1.12 (0.02) 1.10 Equity 0.65 0.04 -- 0.69 -- 0.69 Aggressive Equity/2/ 0.80 0.04 0.02 0.86 -- 0.86 Large-Cap Value/2/ 0.85 0.05 0.05 0.95 -- 0.95 ---------------------------------------------------------------------------------------
/1/ Expenses are estimated. There were no actual advisory fees or expenses for these Portfolios in 2000 because the Portfolios started after December 31, 2000. /2/ Total adjusted net expenses for these Portfolios, after deduction of an offset for custodian credits and the 12b-1 recapture were: 1.30% for Emerging Markets Portfolio, 0.98% for Diversified Research Portfolio, 0.69% for Small-Cap Equity Portfolio, 1.50% for I-Net Tollkeeper Portfolio (adjusted for the reduced advisory fee/3/), 0.69% for Large-Cap Core Portfolio, 0.88% for Mid-Cap Value Portfolio, 0.60% for Small-Cap Index Portfolio, 0.62% for Inflation Managed Portfolio, 0.64% for Managed Bond Portfolio, 0.64% for High Yield Bond Portfolio, 0.84% for Aggressive Equity Portfolio, and 0.90% for Large-Cap Value Portfolio. /3/ Effective January 1, 2002, the advisory fee is reduced from the annual rate of 1.50% of average daily net assets to 1.40%. + The Fund has a brokerage enhancement 12b-1 plan under which brokerage transactions, subject to best price and execution, may be placed with certain broker-dealers in return for credits, cash or other compensation ("recaptured commissions"). While a Portfolio pays the cost of brokerage when it buys or sells a Portfolio security, there are no fees or charges to the Fund under the plan. Recaptured commissions may be used to promote and market Fund shares and the distributor may therefore defray expenses for distribution that it might otherwise incur. The SEC staff requires that the amount of recaptured commissions be shown as an expense in the chart above. 2 --------------------------------------------------------- An OVERVIEW OF The Examples section of the Prospectus is replaced with PACIFIC the following: PORTFOLIOS-- Examples is The following table shows the expenses you would pay on replaced. each $1,000 you invested if, at the end of each period, you: annuitized your Contract; surrendered your Contract and withdrew the Contract Value, or did not annuitize or surrender, but left the money in your Contract. These examples assume the following: . the Contract Value starts at $45,000; . the Variable Investment Options have an annual return of 5%; . the Annual Fee is deducted even when the Contract Value goes over $50,000 and a waiver would normally apply; . our current program to reimburse to Pacific Select Fund Portfolio expenses in excess of the 0.10% expense cap as described in Pacific Select Fund Annual Expenses will continue for at least 10 years. without any Rider reflects the expenses you would pay if you did not buy any of the following optional Riders: Enhanced Guaranteed Minimum Death Benefit Rider (EGMDBR), Earnings Enhancement Guarantee (EEG) Rider, Guaranteed Income Advantage (GIA) Rider, and Guaranteed Protection Advantage Rider, collectively referred to below as "Riders". Riders may be subject to availability. Ask your registered representative about their current status. with Riders reflects the maximum amount of expenses you would pay if you bought the optional combination of Riders whose cumulative expense totaled more than any other optional combination. These examples do not show past or future expenses. Your actual expenses in any year may be more or less than those shown here.
--------------------------------------------------------------------------------- Expenses if you did not annuitize or Expenses if you Expenses if you surrender, but left annuitized surrendered the money in your your Contract ($) your Contract ($) Contract ($) --------------------------------------------------------------------------------- Variable Account 1 yr 3 yr 5 yr 10 yr 1 yr 3 yr 5 yr 10 yr 1 yr 3 yr 5 yr 10 yr --------------------------------------------------------------------------------- Blue Chip without any Rider 88 78 133 282 88 132 160 282 25 78 133 282 with Riders 98 106 180 373 98 160 207 373 35 106 180 373 --------------------------------------------------------------------------------- Aggressive Growth without any Rider 89 79 135 287 89 133 162 287 26 79 135 287 with Riders 98 108 182 378 98 162 209 378 35 108 182 378 --------------------------------------------------------------------------------- Emerging Markets without any Rider 91 86 147 310 91 140 174 310 28 86 147 310 with Riders 101 115 194 399 101 169 221 399 38 115 194 399 --------------------------------------------------------------------------------- Diversified Research without any Rider 88 77 131 279 88 131 158 279 25 77 131 279 with Riders 98 105 178 370 98 159 205 370 35 105 178 370 --------------------------------------------------------------------------------- Small-Cap Equity without any Rider 85 68 117 250 85 122 144 250 22 68 117 250 with Riders 95 97 164 344 95 151 191 344 32 97 164 344 --------------------------------------------------------------------------------- International Large-Cap without any Rider 90 82 141 298 90 136 168 298 27 82 141 298 with Riders 99 111 187 387 99 165 214 387 36 111 187 387 --------------------------------------------------------------------------------- I-Net Tollkeeper without any Rider 93 93 157 330 93 147 184 330 30 93 157 330 with Riders 103 121 203 417 103 175 230 417 40 121 203 417 --------------------------------------------------------------------------------- Financial Services without any Rider 90 83 142 301 90 137 169 301 27 83 142 301 with Riders 100 112 189 390 100 166 216 390 37 112 189 390 ---------------------------------------------------------------------------------
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--------------------------------------------------------------------------------- Expenses if you did not annuitize or Expenses if you Expenses if you surrender, but left annuitized surrendered the money in your your Contract ($) your Contract ($) Contract ($) --------------------------------------------------------------------------------- Variable Account 1 yr 3 yr 5 yr 10 yr 1 yr 3 yr 5 yr 10 yr 1 yr 3 yr 5 yr 10 yr --------------------------------------------------------------------------------- Health Sciences without any Rider 90 83 142 301 90 137 169 301 27 83 142 301 with Riders 100 112 189 390 100 166 216 390 37 112 189 390 --------------------------------------------------------------------------------- Technology without any Rider 90 83 141 299 90 137 168 299 27 83 141 299 with Riders 100 111 188 388 100 165 215 388 37 111 188 388 --------------------------------------------------------------------------------- Telecommunications without any Rider 90 83 141 299 90 137 168 299 27 83 141 299 with Riders 100 111 188 388 100 165 215 388 37 111 188 388 --------------------------------------------------------------------------------- Multi-Strategy without any Rider 85 68 117 250 85 122 144 250 22 68 117 250 with Riders 95 97 164 344 95 151 191 344 32 97 164 344 --------------------------------------------------------------------------------- Large-Cap Core (formerly called Equity Income) without any Rider 85 68 117 250 85 122 144 250 22 68 117 250 with Riders 95 97 164 344 95 151 191 344 32 97 164 344 --------------------------------------------------------------------------------- Strategic Value without any Rider 89 79 135 286 89 133 162 286 26 79 135 286 with Riders 98 107 182 377 98 161 209 377 35 107 182 377 --------------------------------------------------------------------------------- Growth LT without any Rider 86 71 122 260 86 125 149 260 23 71 122 260 with Riders 96 100 169 353 96 154 196 353 33 100 169 353 --------------------------------------------------------------------------------- Focused 30 without any Rider 89 79 135 286 89 133 162 286 26 79 135 286 with Riders 98 107 182 377 98 161 209 377 35 107 182 377 --------------------------------------------------------------------------------- Mid-Cap Value without any Rider 87 74 126 269 87 128 153 269 24 74 126 269 with Riders 97 102 174 361 97 156 201 361 34 102 174 361 --------------------------------------------------------------------------------- International Value without any Rider 88 76 130 277 88 130 157 277 25 76 130 277 with Riders 97 105 177 369 97 159 204 369 34 105 177 369 --------------------------------------------------------------------------------- Capital Opportunities without any Rider 87 73 125 267 87 127 152 267 24 73 125 267 with Riders 96 102 173 360 96 156 200 360 33 102 173 360 --------------------------------------------------------------------------------- Mid-Cap Growth without any Rider 88 76 130 277 88 130 157 277 25 76 130 277 with Riders 97 105 177 369 97 159 204 369 34 105 177 369 --------------------------------------------------------------------------------- Global Growth without any Rider 91 86 147 309 91 140 174 309 28 86 147 309 with Riders 101 114 193 398 101 168 220 398 38 114 193 398 --------------------------------------------------------------------------------- Equity Index without any Rider 81 56 96 208 81 110 123 208 18 56 96 208 with Riders 91 85 145 306 91 139 172 306 28 85 145 306 --------------------------------------------------------------------------------- Small-Cap Index without any Rider 84 65 112 240 84 119 139 240 21 65 112 240 with Riders 94 94 160 335 94 148 187 335 31 94 160 335 --------------------------------------------------------------------------------- REIT without any Rider 90 82 139 295 90 136 166 295 27 82 139 295 with Riders 99 110 186 385 99 164 213 385 36 110 186 385 --------------------------------------------------------------------------------- Inflation Managed (formerly called Government Securities) without any Rider 84 66 113 242 84 120 140 242 21 66 113 242 with Riders 94 95 161 337 94 149 188 337 31 95 161 337 --------------------------------------------------------------------------------- Managed Bond without any Rider 85 67 114 244 85 121 141 244 22 67 114 244 with Riders 94 95 162 339 94 149 189 339 31 95 162 339 --------------------------------------------------------------------------------- Money Market without any Rider 82 59 101 217 82 113 128 217 19 59 101 217 with Riders 92 88 149 314 92 142 176 314 29 88 149 314 --------------------------------------------------------------------------------- High Yield Bond without any Rider 85 67 114 245 85 121 141 245 22 67 114 245 with Riders 94 96 162 340 94 150 189 340 31 96 162 340 --------------------------------------------------------------------------------- Equity Income without any Rider 89 79 135 287 89 133 162 287 26 79 135 287 with Riders 98 108 182 378 98 162 209 378 35 108 182 378 ---------------------------------------------------------------------------------
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--------------------------------------------------------------------------------- Expenses if you did not annuitize or Expenses if you Expenses if you surrender, but left annuitized surrendered the money in your your Contract ($) your Contract ($) Contract ($) --------------------------------------------------------------------------------- Variable Account 1 yr 3 yr 5 yr 10 yr 1 yr 3 yr 5 yr 10 yr 1 yr 3 yr 5 yr 10 yr --------------------------------------------------------------------------------- Research without any Rider 87 73 124 265 87 127 151 265 24 73 124 265 with Riders 96 101 172 358 96 155 199 358 33 101 172 358 --------------------------------------------------------------------------------- Equity without any Rider 85 68 117 250 85 122 144 250 22 68 117 250 with Riders 95 97 164 344 95 151 191 344 32 97 164 344 --------------------------------------------------------------------------------- Aggressive Equity without any Rider 87 73 124 265 87 127 151 265 24 73 124 265 with Riders 96 101 172 358 96 155 199 358 33 101 172 358 --------------------------------------------------------------------------------- Large-Cap Value without any Rider 87 74 127 271 87 128 154 271 24 74 127 271 with Riders 97 103 174 363 97 157 201 363 34 103 174 363 ---------------------------------------------------------------------------------
The purpose of the preceding table is to help you understand the various costs and expenses that you may bear directly or indirectly. The table reflects expenses of the Separate Account as well as those of the underlying Portfolios. Premium taxes may also be applicable. For more information on fees and expenses, see CHARGES, FEES AND DEDUCTIONS, WITHDRAWALS, and Pacific Select Fund Annual Expenses, in the Prospectus and see the Fund's SAI. 5 --------------------------------------------------------- YOUR INVESTMENT The chart in the Your Variable Investment Options OPTIONS is amended. section is amended to include the following:
PORTFOLIO INVESTMENT GOAL THE PORTFOLIO'S PORTFOLIO MAIN INVESTMENTS MANAGER Equity Income Current income. Equity securities of Putnam Investment Management, Inc. Capital growth is of large U.S. companies secondary importance. with a focus on income-producing securities believed to be undervalued by the market. Research Long-term growth of Equity securities of Putnam Investment Management, Inc. capital. large U.S. companies with potential for capital appreciation. Equity Capital appreciation. Equity securities of Putnam Investment Management, Inc. Current income is of large U.S. growth- secondary importance. oriented companies. Aggressive Equity Capital appreciation. Equity securities of Putnam Investment Management, Inc. small and medium-sized companies.
--------------------------------------------------------- The second sentence of the sub-section The Investment Adviser is revised to read: We and the Fund have retained other portfolio managers, supervised by us, for 31 of the Portfolios. 6 --------------------------------------------------------- PURCHASING YOUR The section Purchasing the Earnings Enhancement CONTRACT is Guarantee (EEG) Rider (Optional) is restated as amended. follows: Purchasing the Earnings Enhancement Guarantee (EEG) Rider (Optional) You may purchase the EEG Rider (subject to availability) on the Contract Date or on the first Contract Anniversary. For Contracts issued prior to May 1, 2001, you may purchase the EEG Rider on any Contract Anniversary through December 31, 2002. If you buy the EEG Rider within 30 days after the Contract Date or Contract Anniversary, we will make the effective date of the EEG Rider to coincide with that Contract Date or Contract Anniversary. The Earnings Enhancement Guarantee (EEG) Rider is also called the Guaranted Earnings Enhancement (GEE) Rider. You may purchase the EEG Rider only if the age of each Annuitant is 75 years or younger on the date of purchase. The date of purchase is the Effective Date of the Rider as shown in your Contract. Once purchased, the Rider will remain in effect until the earlier of: . the date a full withdrawal of the amount available for withdrawal is made under the Contract; . the date a death benefit becomes payable under the Contract; . the date the Contract is terminated in accordance with the provisions of the Contract; or . the Annuity Date. The EEG Rider may not otherwise be cancelled. --------------------------------------------------------- The PURCHASING YOUR CONTRACT section is amended by adding the following: Purchasing the Guaranteed Protection Advantage Rider (Optional) You may purchase the optional Guaranteed Protection Advantage Rider (subject to availability) on the Contract Date or on any subsequent Contract Anniversary if: . the age of each Annuitant is 80 years or younger on the date of purchase; . the date of the purchase is at least 10 years prior to your selected Annuity Date; and . if you use an asset allocation program established and maintained by us for this Rider during the entire period that the Rider is in effect. If you purchase the Guaranteed Protection Advantage Rider within 30 days after the Contract Date or a Contract Anniversary, the Effective Date of the Rider will be that Contract Date or Anniversary. If you purchase the Rider 30 days or more after the Contract Date or the Contract Anniversary, the Effective Date of the Rider will be the next Contract Anniversary. The Rider will remain in effect, unless otherwise terminated, for a 10-year period (the "Term") beginning on the Effective Date of the Rider and, subject to certain limitations, each 10-year period thereafter. On the last day of a Term, we will add an additional amount to your Contract Value if, on that day, the Contract Value is less than a specified amount (the "Guaranteed Protection Amount"). The additional amount will be equal to the difference between the Contract Value on the last day of the Term and the Guaranteed Protection Amount. The additional amount added to the Contract Value will be considered earnings and allocated to your Investment Options according to the allocations used in your most recent asset allocation program. The Guaranteed Protection Amount is equal to (a) plus (b) minus (c) as indicated below: (a) is the Contract Value at the start of a Term; (b) is a percentage of each additional Purchase Payment, as determined from the table below, paid to the Contract during a Term; 7 (c) is a pro rata adjustment for withdrawals made from the Contract during the Term. The adjustment for each withdrawal is calculated by multiplying the Guaranteed Protection Amount prior to the withdrawal by the ratio of the amount of the withdrawal, including any applicable withdrawal charges, to the Contract Value immediately prior to the withdrawal. --------------------------------------------------------- Contract Year Since Percentage of Purchase Payment Beginning of Added to Guaranteed Protection Current Term Amount --------------------------------------------------------- 1 through 4 100% 5 90% 6 85% 7 80% 8 through 10 75% --------------------------------------------------------- For purposes of determining the Contract Value at the start of the initial Term, if the Effective Date of the Rider is the Contract Date, the Contract Value is equal to the initial Purchase Payment. If the Effective Date of the Rider is a Contract Anniversary, the Contract Value is equal to the Contract Value on that Contract Anniversary. For any subsequent Term, the Contract Value is equal to the Contract Value on the last day of the then prior Term. If, on the last day of a Term, the Contract is annuitized, the first death of an Owner or the death of the last surviving Annuitant occurs, or a full withdrawal is made, the Contract Value will reflect any additional amount owed under the Guaranteed Protection Advantage Rider before the payment of any annuity or death benefits, or full withdrawal. No additional amount will be made if the Contract Value on the last day of the Term is greater than the Guaranteed Protection Amount. On or before the end of the Term, you can elect to either terminate the Rider, or renew the Rider for another Term provided: . all Annuitant(s) are 80 years or younger at the start of each renewed Term; and . the new Term does not extend beyond your selected Annuity Date. We will contact you at least 30 days before the end of each Term. If we do not receive an election from you prior to the end of each Term, we will automatically renew the Rider for another Term, subject to the restrictions set forth above. If you elect to terminate the Rider, the termination will be effective the day immediately following the end of the Term. The Guaranteed Protection Advantage Rider will remain in effect until the earlier of: . the end of a Term, unless the Rider renews for another Term; or . the Contract Anniversary immediately following the date any portion of the Contract Value is no longer invested in an asset allocation program established and maintained by us for this Rider; or . the Contract Anniversary immediately following the date we receive notification from the Owner to terminate this Rider; or . the date a full withdrawal of the amount available for withdrawal is made under the Contract; or . the date of first death of an Owner or the date of death of the last surviving Annuitant; or . the date the Contract is terminated in accordance with the provisions of the Contract; or . the Annuity Date. If the Owner dies during a Term and the surviving spouse of the deceased Owner elects to continue the Contract in accordance with its terms, then the provisions of this Rider will continue until the end of the Term. Subject to the terms of the Rider, the surviving spouse may renew the Rider for another Term, provided the surviving spouse is age 80 or younger at the start of the new Term and the new Term does not extend beyond the selected Annuity Date. 8 --------------------------------------------------------- The PURCHASING YOUR CONTRACT section is amended by adding the following: Information About Optional Riders and IRAs There are special considerations for purchases of any optional death benefit rider. As of the date of this Prospectus Supplement, IRS regulations state that Individual Retirement Accounts (IRAs) may generally not invest in life insurance contracts. We believe that these regulations do not prohibit the optional death benefit riders from being added to your Contract if it is issued as a Traditional IRA, Roth IRA, or SIMPLE IRA. However, the law is unclear and it is possible that a Contract that has an optional death benefit rider and is issued as a Traditional IRA, Roth IRA, or SIMPLE IRA could be disqualified and may result in increased taxes to the Owner. It is our understanding that the charges relating to the optional death benefit riders are not subject to current taxation and we will not report them as such. However, the IRS may determine that these charges should be treated as partial withdrawals subject to current taxation to the extent of any gain and, if applicable, the 10% tax penalty. We reserve the right to report the rider charges as partial withdrawals if we believe that we would be expected to report them in accordance with IRS regulations. --------------------------------------------------------- PURCHASING YOUR The sub-section Forms of Investment is replaced with CONTRACT--Making the following: Your Investments ("Purchase Forms of Investment Payments") is amended. Your initial and additional Investments may be sent by personal or bank check or by wire transfer. You may also make additional PAC Investments via electronic funds transfer. All checks must be drawn on U.S. funds. We reserve the right to reject: . cash; . credit card or checks drawn against a credit card account; . cashier's check, money orders or travelers checks in single denominations of less than $10,000; . cashier's checks, money orders, traveler's checks or personal checks drawn on non-U.S. banks (even if payment may be effected through a U.S. bank); . third party checks when there is not a clear connection of the third party to the underlying transaction; and . wires that originate from foreign banks. If you make Investments by check other than a cashier's check, your payment of any withdrawal proceeds and any refund during the "Right to Cancel" period may be delayed until your check has cleared. --------------------------------------------------------- CHARGES, FEES AND The CHARGES, FEES AND DEDUCTIONS section is amended by DEDUCTIONS is adding the following: amended. Annual Guaranteed Protection Charge (Optional Rider) If you purchase the Guaranteed Protection Advantage Rider, we will deduct a Guaranteed Protection Charge from your Investment Options on a proportionate basis on each Contract Anniversary that the Rider remains in effect following the Effective Date of the Rider, and if you terminate the Rider. The Guaranteed Protection Charge is equal to 0.10% multiplied by your Contract Value on the date the Charge is deducted. Any portion of the Guaranteed Protection Charge we deduct from the Fixed Option will not be greater than the annual interest credited in excess of 3%. If you make a full withdrawal during a Contract Year, we will deduct the entire Guaranteed Protection Charge for the Contract Year from the final payment made to you. 9 --------------------------------------------------------- FEDERAL TAX The sub-section Taxes Payable on Optional Riders is STATUS--Taxes replaced with the following: Payable by Contract Owners: General It is our understanding that the charges relating to Rules is amended. any optional death benefit rider (EGMDBR and/or EEG) are not subject to current taxation and we will not report them as such. However, the IRS may determine that these charges should be treated as partial withdrawals subject to current taxation to the extent of any gain and, if applicable, the 10% tax penalty. We reserve the right to report any optional death benefit rider charges as partial withdrawals if we believe that we would be expected to report them in accordance with IRS regulations. Additionally, as of the date of this Prospectus Supplement, IRS regulations state that Individual Retirement Accounts (IRAs) may not invest in life insurance contracts. However, a Contract that is used as an IRA may provide for a death benefit that equals the greater of the Purchase Payments made and the Contract Value. The Contract offers various optional death benefits riders that, when combined with the Contract, may exceed the death benefit allowable under IRS Regulations. Although, we believe that these regulations do not prohibit the optional death benefit riders from being added to your Contract if it is issued as a Traditional IRA, Roth IRA, or SIMPLE IRA, the law is unclear. It is possible that the IRS may disqualify the Contract if it is issued with an optional death benefit rider, which may result in certain deemed distributions, increases in taxes, or, possibly, tax penalties. You should consult with a qualified tax advisor before deciding to purchase any optional death benefit rider in connection with any IRA Contract. --------------------------------------------------------- THE GENERAL The sub-section Fixed Option is amended to include the ACCOUNT-- following: Withdrawals and Transfers is We currently waive the restrictions that limits amended. transfers from the Fixed Option to one transfer within the 30 days after the end of each Contract Anniversary. We also currently waive the limitations on the maximum amount you may transfer from the Fixed Option in any given Contract year. Our current procedure is to process requests for transfers from the Fixed Option that are within the maximum number of allowable transfers among the Investment Options each calendar year; i.e. beginning January 1, 2002, transfers are limited to 25 for each calendar year. We reserve the right to discontinue this waiver program at any time.