Document/Exhibit Description Pages Size
1: 485BPOS Pacific Portfolios 485BPOS Filing 129 744K
5: EX-99.10 Independent Auditors' Consent 1 7K
6: EX-99.13 Performance Calculations 6 37K
2: EX-99.8(A) Fund Participation Agreement 28 82K
3: EX-99.8(B) Addendum to Fund Participation Agreement 3 11K
4: EX-99.8(C) Addendum to Fund Participation Agreement 3 11K
As filed with the Securities and Exchange Commission on April 25, 2001
Registration Nos.
33-88460
811-08946
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. 12 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 43 [X]
(Check appropriate box or boxes)
SEPARATE ACCOUNT A
(Exact Name of Registrant)
PACIFIC LIFE INSURANCE COMPANY
(Name of Depositor)
700 Newport Center Drive
Newport Beach, California 92660
(Address of Depositor's Principal Executive Offices) (Zip Code)
(949) 219-3743
(Depositor's Telephone Number, including Area Code)
Diane N. Ledger
Vice President
Pacific Life Insurance Company
700 Newport Center Drive
Newport Beach, California 92660
(Name and address of agent for service)
Copies of all communications to:
Diane N. Ledger Jane A. Kanter, Esq.
Pacific Life Insurance Company Dechert
P. O. Box 9000 1775 Eye Street, N.W.
Newport Beach, CA 92658-9030 Washington, D.C. 20006-2401
Approximate Date of Proposed Public Offering
It is proposed that this filing will become effective (check appropriate box)
[_] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 2001 pursuant to paragraph (b) of Rule 485
[_] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[_] on _______________ pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Interests in the Separate Account under
Pacific Portfolios Variable Annuity individual flexible premium variable annuity
contracts.
Filing Fee: None
SEPARATE ACCOUNT A
FORM N-4
CROSS REFERENCE SHEET
PART A
Item No. Prospectus Heading
1. Cover Page Cover Page
2. Definitions TERMS USED IN THIS PROSPECTUS
3. Synopsis AN OVERVIEW OF PACIFIC PORTFOLIOS
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 AN OVERVIEW OF PACIFIC PORTFOLIOS;
PACIFIC LIFE AND THE SEPARATE
ACCOUNT -- Pacific Life, -- Separate
Account A; YOUR INVESTMENT OPTIONS
-- Your Variable Investment Options;
ADDITIONAL INFORMATION -- Voting
Rights
6. Deductions AN OVERVIEW OF PACIFIC PORTFOLIOS;
FEE TABLE; HOW YOUR INVESTMENTS ARE
ALLOCATED -- Transfers; CHARGES, FEES
AND DEDUCTIONS; WITHDRAWALS --
Optional Withdrawals
7. General Description of Variable
Annuity Contracts AN OVERVIEW OF PACIFIC PORTFOLIOS;
PURCHASING YOUR CONTRACT -- How to
Apply for your Contract; HOW YOUR
INVESTMENTS ARE ALLOCATED; RETIREMENT
BENEFITS AND OTHER PAYOUTS --
Choosing Your Annuity Option, -- Your
Annuity Payments, -- Death Benefits;
ADDITIONAL INFORMATION -- Voting
Rights, -- Changes to Your Contract,
-- Changes to ALL Contracts, --
Inquiries and Submitting Forms and
Requests, -- Timing of Payments and
Transactions
8. Annuity Period RETIREMENT BENEFITS AND OTHER PAYOUTS
9. Death Benefit RETIREMENT BENEFITS AND OTHER PAYOUTS
-- Death Benefits
10. Purchases and Contract Value AN OVERVIEW OF PACIFIC PORTFOLIOS;
PURCHASING YOUR CONTRACT; HOW YOUR
INVESTMENTS ARE ALLOCATED; PACIFIC
LIFE AND THE SEPARATE ACCOUNT --
Pacific Life; THE GENERAL ACCOUNT --
Withdrawals and Transfers
11. Redemptions AN OVERVIEW OF PACIFIC PORTFOLIOS;
CHARGES, FEES AND DEDUCTIONS;
WITHDRAWALS; ADDITIONAL INFORMATION
-- Timing of Payments and
Transactions; THE GENERAL ACCOUNT --
Withdrawals and Transfers
12. Taxes 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 Select Distributors, Inc.
21. Calculation of Performance Data PERFORMANCE
22. Annuity Payments THE CONTRACTS AND THE SEPARATE
ACCOUNT -- Variable Annuity Payment
Amounts
23. Financial Statements FINANCIAL STATEMENTS
PART C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.
PACIFIC PORTFOLIOS
PROSPECTUS MAY 1, 2001
Pacific Portfolios is an individual flexible premium
deferred variable annuity contract issued by Pacific
Life Insurance Company.
This Contract is This Prospectus provides information you should know
not available in before buying a Contract. It's accompanied by a current
all states. This Prospectus for the Pacific Select Fund, the Fund that
Prospectus is not provides the underlying Portfolios for the Variable
an offer in any Investment Options offered under the Contract. The
state or Variable Investment Options are funded by Separate
jurisdiction where Account A of Pacific Life. Please read both
we're not legally Prospectuses carefully, and keep them for future
permitted to offer reference.
the Contract.
Here's a list of all of the Investment Options
The Contract is available under your Contract:
described in detail
in this Prospectus
and its Statement
of Additional VARIABLE INVESTMENT OPTIONS
Information (SAI).
The Pacific Select Blue Chip Growth LT
Fund is described
in its Prospectus Aggressive Growth Focused 30
and its SAI. No one
has the right to Aggressive Equity Mid-Cap Value
describe the
Contract or the Emerging Markets International Value
Pacific Select Fund
any differently Diversified Research Capital Opportunities
than they have been
described in these Small-Cap Equity Mid-Cap Growth
documents.
International Large-Cap Global Growth
You should be aware
that the Securities Equity Equity Index
and Exchange
Commission (SEC) I-Net Tollkeeper(SM) Small-Cap Index
has not reviewed
the Contract and Financial Services REIT
does not guarantee
that the Health Sciences Inflation Managed
information in this (formerly called Government
Prospectus is Technology Securities)
accurate or
complete. It's a Telecommunications Managed Bond
criminal offense to
say otherwise. Multi-Strategy Money Market
This Contract is Equity Income High Yield Bond
not a deposit or
obligation of, or Strategic Value Large-Cap Value
guaranteed or
endorsed by, any FIXED OPTIONS
bank. It's not
federally insured Fixed
by the Federal
Deposit Insurance Guaranteed Interest Options (GIOs) with 3-year, 6-year
Corporation, the and 10-year terms
Federal Reserve
Board, or any other DCA Plus Fixed
government agency.
Investment in a Not all of the Fixed Options are available in every
Contract involves state.
risk, including
possible loss of
principal. You'll find more information about the Contract and
Separate Account A in the SAI dated May 1, 2001. The
SAI has been filed with the SEC and is considered to be
part of this Prospectus because it's incorporated by
reference. You'll find a table of contents for the SAI
on page 60 of this Prospectus. You can get a copy of
the SAI without charge by calling or writing to Pacific
Life. You can also visit the SEC's website at
www.sec.gov, which contains the SAI, material
incorporated into this Prospectus by reference, and
other information about registrants that file
electronically with the SEC.
YOUR GUIDE TO THIS PROSPECTUS
[Enlarge/Download Table]
An Overview of Pacific Portfolios 3 Withdrawals 38
-------------------------------------------------------------- Optional Withdrawals 38
Your Investment Options 16 Tax Consequences of Withdrawals 39
Your Variable Investment Options 16 Right to Cancel ("Free Look") 39
Variable Investment Option Performance 18 --------------------------------------------------------------
Your Fixed Option, DCA Plus Fixed Option and GIOs 18 Pacific Life and the Separate Account 40
-------------------------------------------------------------- Pacific Life 40
Purchasing Your Contract 18 Separate Account A 40
How to Apply for Your Contract 18 Financial Highlights 41
Purchasing the Enhanced Guaranteed Minimum Death --------------------------------------------------------------
Benefit Rider (EGMDBR) (Optional) 18 Federal Tax Status 43
Purchasing the Earnings Enhancement Guarantee (EEG) Rider Taxes Payable by Contract Owners: General Rules 43
(Optional) 19 Qualified Contracts 45
Purchasing the Guaranteed Income Advantage (GIA) Rider Loans 46
(Optional) 19 Withholding 49
Making Your Investments ("Purchase Payments") 20 Impact of Federal Income Taxes 49
-------------------------------------------------------------- Taxes on Pacific Life 49
How Your Investments are Allocated 20 --------------------------------------------------------------
Choosing Your Investment Options 20 Additional Information 49
Investing in Variable Investment Options 20 Voting Rights 49
When Your Investment is Effective 21 Changes to Your Contract 50
Transfers 21 Changes to All Contracts 51
-------------------------------------------------------------- Inquiries and Submitting Forms and Requests 51
Charges, Fees and Deductions 24 Telephone and Electronic Transactions 52
Withdrawal Charge 24 Electronic Delivery Authorization 53
Premium Taxes 25 Timing of Payments and Transactions 53
Annual Fee 25 Confirmations, Statements and Other Reports to
Waivers and Reduced Charges 26 Contract Owners 53
Mortality and Expense Risk Charge 26 Replacement of Life Insurance or Annuities 54
Administrative Fee 27 Financial Statements 54
Annual Enhanced Guaranteed Minimum Death Benefit Rider --------------------------------------------------------------
(EGMDBR) Charge (Optional Rider) 27 The General Account 54
Annual Earnings Enhancement Guarantee (EEG) Charge General Information 54
(Optional Rider) 27 Guarantee Terms 54
Annual Guaranteed Income Advantage (GIA) Charge Withdrawals and Transfers 56
(Optional Rider) 27 --------------------------------------------------------------
Expenses of the Fund 27 Terms Used in This Prospectus 58
-------------------------------------------------------------- --------------------------------------------------------------
Retirement Benefits and Other Payouts 28 Contents of the Statement of Additional Information 60
Selecting Your Annuitant 28 --------------------------------------------------------------
Annuitization 28 Appendix A: State Law Variations 61
Choosing Your Annuity Date ("Annuity Start Date") 28 --------------------------------------------------------------
Default Annuity Date and Options 30 Appendix B: Market Value Adjustment 62
Choosing Your Annuity Option 30 --------------------------------------------------------------
Your Annuity Payments 32 Where to Go for More Information Back Cover
Death Benefits 33
2
AN OVERVIEW OF PACIFIC PORTFOLIOS
This overview tells you some key things you should know
about your Contract. It's designed as a summary only -
please read this Prospectus, your Contract and the
Statement of Additional Information for more detailed
information.
Some states have different rules about how annuity
contracts are described or administered. These rules
are reflected in your Contract, or in endorsements or
supplements to your Contract. The terms of your
Contract, or of any endorsement or supplement, prevail
over what's in this Prospectus.
In this Prospectus, you and your mean the Contract
Owner or Policyholder. Pacific Life, we, us and our
refer to Pacific Life Insurance Company. Contract means
a Pacific Portfolios variable annuity contract, unless
we state otherwise.
---------------------------------------------------------
Pacific Portfolios Pacific Portfolios is an annuity contract between you
Basics and Pacific Life Insurance Company.
An annuity contract This Contract is designed for long-term financial
may be appropriate planning. It allows you to invest money on a tax-
if you're looking deferred basis for retirement or other goals, and to
for retirement receive income in a variety of ways, including a series
income or you want of income payments for life or for a specified period
to meet other long- of years.
term financial
objectives. Non-Qualified and Qualified Contracts are available.
You buy a Non-Qualified Contract with "after-tax"
This Contract may dollars. You buy a Qualified Contract under a qualified
not be the right retirement or pension plan, or an individual retirement
one for you if you annuity or account (IRA), or form thereof.
need to withdraw
money for short-
term needs, because Pacific Portfolios is a variable annuity, which means
withdrawal charges that the value of your Contract fluctuates depending on
and tax penalties the performance of the Investment Options you choose.
for early The Contract allows you to choose how often you make
withdrawal may Investments ("Purchase Payments") and how much you add
apply. each time.
Your Right to Cancel ("Free Look")
You should
consider the During the Free Look period, you have the right to
Contract's cancel your Contract and return it to us or to your
investment and registered representative for a refund. The amount
income benefits, refunded may be more or less than the Investments
as well as its you've made, depending on the state where you signed
costs. your application and the kind of Contract you buy.
3
AN OVERVIEW OF PACIFIC PORTFOLIOS
---------------------------------------------------------
The Accumulation
Phase The accumulation phase begins on your Contract Date and
continues until your Annuity Date. During the
The Investment accumulation phase, you can put money in your Contract
Options you choose by making investments, and choose Investment Options in
and how they which to allocate them. You can also take money out of
perform will affect your Contract by making a withdrawal.
the value of your
Contract during the
accumulation phase, Investments ("Purchase Payments")
as well as the
amount of your Your initial Investment must be at least $5,000 for a
annuity payments Non-Qualified Contract and at least $2,000 for a
during the income Qualified Contract. Additional Investments must be at
phase if you choose least $250 for a Non-Qualified Contract and $50 for a
a variable Qualified Contract. We also call your Investments
annuitization "Purchase Payments".
payout.
Investment Options
You can ask your
registered You can choose from 31 of the Variable Investment
representative to Options (also called Subaccounts), each of which
help you choose the invests in a corresponding Portfolio of the Pacific
right Investment Select Fund. We're the investment adviser for the
Options for your Pacific Select Fund. We oversee the management of all
goals and risk the Fund's Portfolios and manage two of the Portfolios
tolerance. directly. We've retained other managers to manage the
other Portfolios. The value of each Portfolio will
You'll find more fluctuate with the value of the investments it holds,
about the and returns are not guaranteed.
Investment Options
starting on page You can also choose from three Fixed Options that earn
16. a guaranteed rate of interest of at least 3% annually:
the Fixed Option, the DCA Plus Fixed Option when you
elect DCA Plus, and the Guaranteed Interest Option,
which has Guaranteed Terms of three, six or 10 years.
Not all of the Fixed Options are available in every
state.
We allocate your Investments to the Investment Options
you choose. The value of your Contract will fluctuate
during the accumulation phase depending on the
Investment Options you've chosen. You bear the
investment risk of any Variable Investment Options you
choose.
We'll apply a Transferring among Investment Options
Market Value
Adjustment if you You can transfer among Investment Options any time
make a transfer or until your Annuity Date without paying any current
withdrawal from a income tax, subject to certain limitations. As of May
Guaranteed 1, 2001 and continuing through December 31, 2001, you
Interest Option may not make more than 15 transfers; and beginning
before the end of January 1, 2002, and each calendar year thereafter,
its term. See transfers are limited to 25 for each calendar year. You
Appendix B for can also make automatic transfers by enrolling in our
details about how dollar cost averaging, portfolio rebalancing, or
we calculate the earnings sweep programs. Some restrictions apply to
Market Value transfers to and from the Fixed Options.
Adjustment.
Withdrawals
You'll find more You can make full and partial withdrawals to supplement
about transfers your income or for other purposes. You can withdraw a
and transfer certain amount each year without paying a withdrawal
limitations charge, but you may pay a withdrawal charge if you
starting on page withdraw Investments that are less than seven years
21. old. Some restrictions apply to making withdrawals from
the Fixed Options.
You'll find more In general, you may have to pay tax on withdrawals or
about withdrawals other distributions from your Contract. If you're under
starting on page age 59 1/2, a 10% federal penalty tax may also apply to
38. withdrawals.
4
---------------------------------------------------------
The Income Phase The income phase of your Contract begins on your
Annuity Date. Generally, you can choose to surrender
You'll find more your Contract and receive a single payment or you can
about annuitization annuitize your Contract and receive a series of income
starting on page payments.
28.
You can choose fixed or variable annuity payments, or a
combination of both, for life or for a specified period
of years. Variable annuity payments may not be
available in all states. You can choose monthly,
quarterly, semiannual or annual payments. We'll make
the income payments to your designated payee.
If you choose variable annuity payments, the amount of
the payments will fluctuate depending on the
performance of the Variable Investment Options you
choose. After your Annuity Date, if you choose variable
annuity payments, you can exchange your Subaccount
Annuity Units among the Variable Investment Options up
to four times in any 12-month period.
---------------------------------------------------------
The Death Benefit The Contract provides a death benefit upon the first
death of an Owner or the death of the last surviving
You'll find more Annuitant whichever occurs first, during the
about the death accumulation phase. Death benefit proceeds are payable
benefit starting on when we receive proof of death and payment
page 33. instructions. To whom we pay a death benefit, and how
we calculate the amount of the death benefit depends on
Optional riders are who dies first and the type of Contract you own.
not available in
all states. Ask Optional Riders
your registered
representative Enhanced Guaranteed Minimum Death Benefit Rider
about their current
availability status The Enhanced Guaranteed Minimum Death Benefit Rider
in your state of (EGMDBR) offers the potential for a larger death
delivery. benefit. You can buy the rider when you buy your
Contract. You cannot buy the rider after you buy your
Contract.
Earnings Enhancement Guarantee (EEG) Rider
The optional Earnings Enhancement Guarantee (EEG) Rider
provides for an additional amount ("EEG Amount") to be
included in the death benefit proceeds when such
proceeds become payable as a result of the Annuitant's
death. You may buy the EEG Rider on the Contract Date
or on the first Contract Anniversary. For Contracts
issued prior to May 1, 2001, the EEG Rider may be
purchased on any Contract Anniversary through December
31, 2002. The Earnings Enhancement Guarantee (EEG)
Rider is also called the Guaranteed Earnings
Enhancement (GEE) Rider and the EEG Amount is also
called the GEE Amount in the Contract's Rider.
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.
Guaranteed Income Advantage Rider
The Guaranteed Income Advantage Rider (GIA Rider)
offers a guaranteed income advantage annuity option.
You may buy the GIA Rider on the Contract Date or on
any Contract Anniversary.
5
AN OVERVIEW OF PACIFIC PORTFOLIOS
This section of the overview explains the fees and
expenses associated with your Pacific Portfolios
Contract.
For information . Contract Expenses are expenses that we deduct from
about how Separate your Contract. These expenses are fixed under the
Account A and Fund terms of your Contract. Premium taxes or other taxes
expenses affect may also apply to your Contract. We generally charge
accumulation units, premium taxes when you annuitize your Contract, but
see Financial there may be other times when we charge them to your
Highlights on page Contract instead. Please see your Contract for
40. details.
. Separate Account A Annual Expenses are expenses that
we deduct from the assets of each Variable Investment
Option. They are guaranteed not to increase under the
terms of your Contract.
. Pacific Select Fund Annual Expenses affect you
indirectly if you choose a Variable Investment Option
because they reduce Portfolio returns. They can vary
from year to year. They are not fixed and are not
part of the terms of your Contract.
------------------------------------------------------------
Contract Expenses Sales charge on Investments none
Maximum withdrawal charge, as a percentage of
Investments 7.0%/1/
Withdrawal transaction fee (currently waived) $15.00/2/
Transfer fee (currently waived) $15.00/3/
Annual Fee $40.00/4/
Annual Enhanced Death Benefit Charge if you buy
the Enhanced Guaranteed Minimum Death Benefit
Rider (EGMDBR) (calculated as a percentage of
the Contract Value)
If the age of the youngest Annuitant on your
Contract Date is 65 or younger 0.10%/5/
If the age of the youngest Annuitant on your
Contract Date is 66 to 75 0.30%/5/
Annual Earnings Enhancement Guarantee (EEG)
Rider Charge (calculated as a percentage of
Contract Value) 0.25%/6/
Annual Guaranteed Income Advantage (GIA) Rider
Charge (calculated as a percentage of Contract
Value) 0.30%/7/
---------------------------------------------------------
Separate Account A Mortality and Expense Risk Charge 1.25%/8/
Annual Expenses Administrative Fee 0.15%/8/
-----
(as a percentage of Total Separate Account A Annual Expenses 1.40%
the average daily -----
Account Value)
/1/ The withdrawal charge may not apply or may be
reduced under certain circumstances. See
WITHDRAWALS and CHARGES, FEES AND DEDUCTIONS.
/2/ In the future, we may charge a fee of up to $15 for
any withdrawal over 15 that you make in a Contract
Year. See WITHDRAWALS - Optional Withdrawals.
/3/ In the future, we may charge a fee of up to $15 for
any transfer over 15 that you make in a Contract
Year. See HOW YOUR INVESTMENTS ARE ALLOCATED -
Transfers.
/4/ We deduct the Annual Fee on each Contract
Anniversary up to your Annuity Date and when you
make a full withdrawal if the Contract Value on
these days is less than $50,000 after deducting any
outstanding loan and interest (your Net Contract
Value). See CHARGES, FEES AND DEDUCTIONS.
/5/ If you buy the Enhanced Guaranteed Minimum Death
Benefit Rider (EGMDBR), which is subject to state
availability, we deduct this charge on each
Contract Anniversary date that the rider is in
effect and when you make a full withdrawal. See
CHARGES, FEES AND DEDUCTIONS.
/6/ If you buy the EEG Rider (subject to state
availability), we deduct this charge
proportionately from your Investment Options on
each Contract Anniversary following the date you
purchase the Rider and when you make a full
withdrawal, if the EEG Rider is in effect on that
date. See CHARGES, FEES AND DEDUCTIONS.
/7/ If you buy the Guaranteed Income Advantage (GIA)
Rider, which is subject to state availability, we
deduct this charge on each Contract Anniversary
date and the Annuity Date, and when you make a full
withdrawal, if the GIA Rider is in effect on that
date, or when you terminate the GIA Rider.
/8/ This is an annual rate. The daily rate is
calculated by dividing the annual rate by 365.
6
---------------------------------------------------------
Pacific Select Fund The Pacific Select Fund pays advisory fees and other
Annual Expenses expenses. These are deducted from the assets of the
Fund's Portfolios and may vary from year to year. They
are not fixed and are not part of the terms of your
Contract. If you choose a Variable Investment Option,
You'll find more these fees and expenses affect you indirectly because
about the Pacific they reduce Portfolio returns.
Select Fund
starting on page Advisory Fee
16, and in the
Fund's Prospectus, We are the investment adviser to the Fund. The Fund
which accompanies pays an advisory fee to us for these services. The
this Prospectus. table below shows the advisory fee as an annual
percentage of each Portfolio's average daily net
assets.
Other Expenses
The table also shows the advisory fee and other Fund
expenses as an annual percentage of each Portfolio's
average daily net assets based on the year 2000, unless
otherwise noted. To help limit Fund expenses, effective
July 1, 2000 we 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. For each Portfolio, our right to repayment
is limited to amounts waived and/or reimbursed that
exceed the new 0.10% expense cap and, except for
portfolios that started on or after October 2, 2000,
that do not exceed the previously established 0.25%
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. There is no
guarantee that we will continue to cap expenses after
December 31, 2001. 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.
[Enlarge/Download Table]
-------------------------------------------------------------------------------------
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
Aggressive Equity/2/ 0.80 0.04 0.02 0.86 -- 0.86
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
Equity 0.65 0.04 -- 0.69 -- 0.69
I-Net Tollkeeper/2/ 1.50 0.13 -- 1.63 (0.02) 1.61
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
Equity Income/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
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: 0.84% for Aggressive
Equity Portfolio, 1.30% for Emerging Markets
Portfolio, 0.98% for Diversified Research
Portfolio, 0.69% for Small-Cap Equity Portfolio,
1.60% for I-Net Tollkeeper Portfolio, 0.69% for
Equity Income 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, and 0.90% for Large-Cap Value Portfolio.
+ 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.
7
AN OVERVIEW OF PACIFIC PORTFOLIOS
-----------------------------------------------------------
Examples The following table shows the expenses you would pay on
each $1,000 you invested if, at the end of each period,
you: annuitized your Contract; surrendered your Contract
and withdrew the Contract Value, or did not annuitize or
surrender, but left the money in your Contract.
These examples assume the following:
. the Contract Value starts at $45,000
. the Investment Options have an annual return of 5%
. the Annual Fee is deducted even when the Contract Value
goes over $50,000 and a waiver would normally apply.
. 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 the optional Enhanced Guaranteed Minimum
Death Benefit Rider (EGMDBR), or the Earnings Enhancement
Guarantee (EEG) Rider, and/or the Guaranteed Income
Advantage (GIA) Rider.
with EGMDBR reflects the expenses you would pay if you
bought the optional Enhanced Guaranteed Minimum Death
Benefit Rider, but not the EEG or GIA Riders. These
expenses depend on the age of the youngest Annuitant on
the Contract Date.
with EGMDBR and EEG Rider reflects the expenses you would
pay if you bought the optional Enhanced Guaranteed
Minimum Death Benefit Rider and the Earnings Enhancement
Guarantee Rider.
with EGMDBR and GIA Rider reflects the expenses you would
pay if you bought the optional Enhanced Guaranteed
Minimum Death Benefit Rider and the Guaranteed Income
Advantage Rider.
with EGMDBR, EEG, and GIA Riders reflects the expenses
you would pay if you bought the optional Enhanced
Guaranteed Minimum Death Benefit Rider, the Earnings
Enhancement Guarantee Rider, and the Guaranteed Income
Advantage Rider.
with EEG Rider reflects the expenses you would pay if you
bought the optional Earnings Enhancement Guarantee Rider,
but not the optional EGMDBR, and/or GIA riders.
with GIA Rider reflects the expenses you would pay if you
bought the optional Guaranteed Income Advantage Rider,
but not the optional EGMDBR, and/or EEG rider.
with EEG and GIA Riders reflects the expenses you would
pay if you bought the optional Earnings Enhancement
Guarantee Rider and the Guaranteed Income Advantage
Rider.
8
These examples do not show past or future expenses. Your
actual expenses in any year may be more or less than
those shown here.
[Enlarge/Download Table]
------------------------------------------------------------------------------------------------------------
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 EGMDBR (age 0-65) 89 81 138 292 89 135 165 292 26 81 138 292
with EGMDBR (age 0-65) and EEG Rider 92 88 150 317 92 142 177 317 29 88 150 317
with EGMDBR (age 0-65) and GIA Rider 92 90 153 321 92 144 180 321 29 90 153 321
with EGMDBR (age 0-65), EEG, and GIA Riders 95 97 165 345 95 151 192 345 32 97 165 345
with EGMDBR (age 66-75) 91 87 148 312 91 141 175 312 28 87 148 312
with EGMDBR (age 66-75) and EEG Rider 94 94 160 336 94 148 187 336 31 94 160 336
with EGMDBR (age 66-75) and GIA Rider 94 96 163 341 94 150 190 341 31 96 163 341
with EGMDBR (age 66-75), EEG, and GIA Riders 97 103 175 364 97 157 202 364 34 103 175 364
with EEG Rider 91 85 145 307 91 139 172 307 28 85 145 307
with GIA Rider 91 87 148 312 91 141 175 312 28 87 148 312
with EEG and GIA Riders 94 94 160 336 94 148 187 336 31 94 160 336
-----------------------------------------------------------------------------------------------------------
Aggressive Growth
without any Rider 89 79 135 287 89 133 162 287 26 79 135 287
with EGMDBR (age 0-65) 90 82 140 297 90 136 167 297 27 82 140 297
with EGMDBR (age 0-65) and EEG Rider 92 90 153 321 92 144 180 321 29 90 153 321
with EGMDBR (age 0-65) and GIA Rider 93 91 155 326 93 145 182 326 30 91 155 326
with EGMDBR (age 0-65), EEG, and GIA Riders 95 99 167 350 95 153 194 350 32 99 167 350
with EGMDBR (age 66-75) 92 88 150 316 92 142 177 316 29 88 150 316
with EGMDBR (age 66-75) and EEG Rider 94 96 163 340 94 150 190 340 31 96 163 340
with EGMDBR (age 66-75) and GIA Rider 95 97 165 345 95 151 192 345 32 97 165 345
with EGMDBR (age 66-75), EEG, and GIA Riders 97 105 177 369 97 159 204 369 34 105 177 369
with EEG Rider 91 87 148 312 91 141 175 312 28 87 148 312
with GIA Rider 92 88 150 316 92 142 177 316 29 88 150 316
with EEG and GIA Riders 94 96 163 340 94 150 190 340 31 96 163 340
-----------------------------------------------------------------------------------------------------------
Aggressive Equity
without any Rider 87 73 124 265 87 127 151 265 24 73 124 265
with EGMDBR (age 0-65) 88 76 129 275 88 130 156 275 25 76 129 275
with EGMDBR (age 0-65) and EEG Rider 90 83 142 300 90 137 169 300 27 83 142 300
with EGMDBR (age 0-65) and GIA Rider 91 85 144 305 91 139 171 305 28 85 144 305
with EGMDBR (age 0-65), EEG, and GIA Riders 93 92 157 329 93 146 184 329 30 92 157 329
with EGMDBR (age 66-75) 90 82 139 295 90 136 166 295 27 82 139 295
with EGMDBR (age 66-75) and EEG Rider 92 89 152 320 92 143 179 320 29 89 152 320
with EGMDBR (age 66-75) and GIA Rider 93 91 154 325 93 145 181 325 30 91 154 325
with EGMDBR (age 66-75), EEG, and GIA Riders 95 98 167 348 95 152 194 348 32 98 167 348
with EEG Rider 89 80 137 290 89 134 164 290 26 80 137 290
with GIA Rider 90 82 139 295 90 136 166 295 27 82 139 295
with EEG and GIA Riders 92 89 152 320 92 143 179 320 29 89 152 320
-----------------------------------------------------------------------------------------------------------
Emerging Markets
without any Rider 91 86 147 310 91 140 174 310 28 86 147 310
with EGMDBR (age 0-65) 92 89 152 320 92 143 179 320 29 89 152 320
with EGMDBR (age 0-65) and EEG Rider 95 97 164 344 95 151 191 344 32 97 164 344
with EGMDBR (age 0-65) and GIA Rider 95 98 167 349 95 152 194 349 32 98 167 349
with EGMDBR (age 0-65), EEG, and GIA Riders 98 106 179 372 98 160 206 372 35 106 179 372
with EGMDBR (age 66-75) 94 95 162 339 94 149 189 339 31 95 162 339
with EGMDBR (age 66-75) and EEG Rider 97 103 174 363 97 157 201 363 34 103 174 363
with EGMDBR (age 66-75) and GIA Rider 97 104 177 367 97 158 204 367 34 104 177 367
with EGMDBR (age 66-75), EEG, and GIA Riders 100 112 189 390 100 166 216 390 37 112 189 390
with EEG Rider 94 94 159 334 94 148 186 334 31 94 159 334
with GIA Rider 94 95 162 339 94 149 189 339 31 95 162 339
with EEG and GIA Riders 97 103 174 363 97 157 201 363 34 103 174 363
-----------------------------------------------------------------------------------------------------------
Diversified Research
without any Rider 88 77 131 279 88 131 158 279 25 77 131 279
with EGMDBR (age 0-65) 89 80 136 289 89 134 163 289 26 80 136 289
with EGMDBR (age 0-65) and EEG Rider 92 87 149 314 92 141 176 314 29 87 149 314
with EGMDBR (age 0-65) and GIA Rider 92 89 151 319 92 143 178 319 29 89 151 319
with EGMDBR (age 0-65), EEG, and GIA Riders 95 96 164 342 95 150 191 342 32 96 164 342
with EGMDBR (age 66-75) 91 86 146 309 91 140 173 309 28 86 146 309
with EGMDBR (age 66-75) and EEG Rider 94 93 159 333 94 147 186 333 31 93 159 333
with EGMDBR (age 66-75) and GIA Rider 94 95 161 338 94 149 188 338 31 95 161 338
with EGMDBR (age 66-75), EEG, and GIA Riders 97 102 173 361 97 156 200 361 34 102 173 361
with EEG Rider 91 84 144 304 91 138 171 304 28 84 144 304
with GIA Rider 91 86 146 309 91 140 173 309 28 86 146 309
with EEG and GIA Riders 94 93 159 333 94 147 186 333 31 93 159 333
-----------------------------------------------------------------------------------------------------------
9
AN OVERVIEW OF PACIFIC PORTFOLIOS
[Enlarge/Download Table]
------------------------------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------------------------------
Small-Cap Equity
without any Rider 85 68 117 250 85 122 144 250 22 68 117 250
with EGMDBR (age 0-65) 86 71 122 260 86 125 149 260 23 71 122 260
with EGMDBR (age 0-65) and EEG Rider 89 79 134 285 89 133 161 285 26 79 134 285
with EGMDBR (age 0-65) and GIA Rider 89 80 137 290 89 134 164 290 26 80 137 290
with EGMDBR (age 0-65), EEG, and GIA Riders 92 88 149 315 92 142 176 315 29 88 149 315
with EGMDBR (age 66-75) 88 77 132 280 88 131 159 280 25 77 132 280
with EGMDBR (age 66-75) and EEG Rider 91 85 144 305 91 139 171 305 28 85 144 305
with EGMDBR (age 66-75) and GIA Rider 91 86 147 310 91 140 174 310 28 86 147 310
with EGMDBR (age 66-75), EEG, and GIA Riders 94 94 159 334 94 148 186 334 31 94 159 334
with EEG Rider 88 76 129 275 88 130 156 275 25 76 129 275
with GIA Rider 88 77 132 280 88 131 159 280 25 77 132 280
with EEG and GIA Riders 91 85 144 305 91 139 171 305 28 85 144 305
-----------------------------------------------------------------------------------------------------------
International Large-Cap
without any Rider 90 82 141 298 90 136 168 298 27 82 141 298
with EGMDBR (age 0-65) 91 85 146 308 91 139 173 308 28 85 146 308
with EGMDBR (age 0-65) and EEG Rider 93 93 158 332 93 147 185 332 30 93 158 332
with EGMDBR (age 0-65) and GIA Rider 94 95 161 337 94 149 188 337 31 95 161 337
with EGMDBR (age 0-65), EEG, and GIA Riders 96 102 173 360 96 156 200 360 33 102 173 360
with EGMDBR (age 66-75) 93 92 156 327 93 146 183 327 30 92 156 327
with EGMDBR (age 66-75) and EEG Rider 95 99 168 351 95 153 195 351 32 99 168 351
with EGMDBR (age 66-75) and GIA Rider 96 101 170 355 96 155 197 355 33 101 170 355
with EGMDBR (age 66-75), EEG, and GIA Riders 98 108 183 378 98 162 210 378 35 108 183 378
with EEG Rider 92 90 153 322 92 144 180 322 29 90 153 322
with GIA Rider 93 92 156 327 93 146 183 327 30 92 156 327
with EEG and GIA Riders 95 99 168 351 95 153 195 351 32 99 168 351
-----------------------------------------------------------------------------------------------------------
Equity
without any Rider 85 68 117 250 85 122 144 250 22 68 117 250
with EGMDBR (age 0-65) 86 71 122 260 86 125 149 260 23 71 122 260
with EGMDBR (age 0-65) and EEG Rider 89 79 134 285 89 133 161 285 26 79 134 285
with EGMDBR (age 0-65) and GIA Rider 89 80 137 290 89 134 164 290 26 80 137 290
with EGMDBR (age 0-65), EEG, and GIA Riders 92 88 149 315 92 142 176 315 29 88 149 315
with EGMDBR (age 66-75) 88 77 132 280 88 131 159 280 25 77 132 280
with EGMDBR (age 66-75) and EEG Rider 91 85 144 305 91 139 171 305 28 85 144 305
with EGMDBR (age 66-75) and GIA Rider 91 86 147 310 91 140 174 310 28 86 147 310
with EGMDBR (age 66-75), EEG, and GIA Riders 94 94 159 334 94 148 186 334 31 94 159 334
with EEG Rider 88 76 129 275 88 130 156 275 25 76 129 275
with GIA Rider 88 77 132 280 88 131 159 280 25 77 132 280
with EEG and GIA Riders 91 85 144 305 91 139 171 305 28 85 144 305
-----------------------------------------------------------------------------------------------------------
I-Net Tollkeeper
without any Rider 94 95 162 339 94 149 189 339 31 95 162 339
with EGMDBR (age 0-65) 95 98 167 348 95 152 194 348 32 98 167 348
with EGMDBR (age 0-65) and EEG Rider 98 106 179 371 98 160 206 371 35 106 179 371
with EGMDBR (age 0-65) and GIA Rider 98 107 181 376 98 161 208 376 35 107 181 376
with EGMDBR (age 0-65), EEG, and GIA Riders 101 115 193 398 101 169 220 398 38 115 193 398
with EGMDBR (age 66-75) 97 104 176 367 97 158 203 367 34 104 176 367
with EGMDBR (age 66-75) and EEG Rider 100 112 188 389 100 166 215 389 37 112 188 389
with EGMDBR (age 66-75) and GIA Rider 100 113 191 394 100 167 218 394 37 113 191 394
with EGMDBR (age 66-75), EEG, and GIA Riders 103 120 203 416 103 174 230 416 40 120 203 416
with EEG Rider 97 103 174 362 97 157 201 362 34 103 174 362
with GIA Rider 97 104 176 367 97 158 203 367 34 104 176 367
with EEG and GIA Riders 100 112 188 389 100 166 215 389 37 112 188 389
-----------------------------------------------------------------------------------------------------------
Financial Services
without any Rider 90 83 142 301 90 137 169 301 27 83 142 301
with EGMDBR (age 0-65) 91 86 147 310 91 140 174 310 28 86 147 310
with EGMDBR (age 0-65) and EEG Rider 94 94 159 335 94 148 186 335 31 94 159 335
with EGMDBR (age 0-65) and GIA Rider 94 95 162 339 94 149 189 339 31 95 162 339
with EGMDBR (age 0-65), EEG, and GIA Riders 97 103 174 363 97 157 201 363 34 103 174 363
with EGMDBR (age 66-75) 93 92 157 330 93 146 184 330 30 92 157 330
with EGMDBR (age 66-75) and EEG Rider 96 100 169 353 96 154 196 353 33 100 169 353
with EGMDBR (age 66-75) and GIA Rider 96 101 172 358 96 155 199 358 33 101 172 358
with EGMDBR (age 66-75), EEG, and GIA Riders 99 109 184 381 99 163 211 381 36 109 184 381
with EEG Rider 93 91 155 325 93 145 182 325 30 91 155 325
with GIA Rider 93 92 157 330 93 146 184 330 30 92 157 330
with EEG and GIA Riders 96 100 169 353 96 154 196 353 33 100 169 353
-----------------------------------------------------------------------------------------------------------
10
[Enlarge/Download Table]
------------------------------------------------------------------------------------------------------------
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 EGMDBR (age 0-65) 91 86 147 310 91 140 174 310 28 86 147 310
with EGMDBR (age 0-65) and EEG Rider 94 94 159 335 94 148 186 335 31 94 159 335
with EGMDBR (age 0-65) and GIA Rider 94 95 162 339 94 149 189 339 31 95 162 339
with EGMDBR (age 0-65), EEG, and GIA Riders 97 103 174 363 97 157 201 363 34 103 174 363
with EGMDBR (age 66-75) 93 92 157 330 93 146 184 330 30 92 157 330
with EGMDBR (age 66-75) and EEG Rider 96 100 169 353 96 154 196 353 33 100 169 353
with EGMDBR (age 66-75) and GIA Rider 96 101 172 358 96 155 199 358 33 101 172 358
with EGMDBR (age 66-75), EEG, and GIA Riders 99 109 184 381 99 163 211 381 36 109 184 381
with EEG Rider 93 91 155 325 93 145 182 325 30 91 155 325
with GIA Rider 93 92 157 330 93 146 184 330 30 92 157 330
with EEG and GIA Riders 96 100 169 353 96 154 196 353 33 100 169 353
-----------------------------------------------------------------------------------------------------------
Technology
without any Rider 90 83 141 299 90 137 168 299 27 83 141 299
with EGMDBR (age 0-65) 91 86 146 309 91 140 173 309 28 86 146 309
with EGMDBR (age 0-65) and EEG Rider 94 93 159 333 94 147 186 333 31 93 159 333
with EGMDBR (age 0-65) and GIA Rider 94 95 161 337 94 149 188 337 31 95 161 337
with EGMDBR (age 0-65), EEG, and GIA Riders 97 102 173 361 97 156 200 361 34 102 173 361
with EGMDBR (age 66-75) 93 92 156 328 93 146 183 328 30 92 156 328
with EGMDBR (age 66-75) and EEG Rider 96 99 168 352 96 153 195 352 33 99 168 352
with EGMDBR (age 66-75) and GIA Rider 96 101 171 356 96 155 198 356 33 101 171 356
with EGMDBR (age 66-75), EEG, and GIA Riders 99 108 183 379 99 162 210 379 36 108 183 379
with EEG Rider 93 90 154 323 93 144 181 323 30 90 154 323
with GIA Rider 93 92 156 328 93 146 183 328 30 92 156 328
with EEG and GIA Riders 96 99 168 352 96 153 195 352 33 99 168 352
-----------------------------------------------------------------------------------------------------------
Telecommunications
without any Rider 90 83 141 299 90 137 168 299 27 83 141 299
with EGMDBR (age 0-65) 91 86 146 309 91 140 173 309 28 86 146 309
with EGMDBR (age 0-65) and EEG Rider 94 93 159 333 94 147 186 333 31 93 159 333
with EGMDBR (age 0-65) and GIA Rider 94 95 161 337 94 149 188 337 31 95 161 337
with EGMDBR (age 0-65), EEG, and GIA Riders 97 102 173 361 97 156 200 361 34 102 173 361
with EGMDBR (age 66-75) 93 92 156 328 93 146 183 328 30 92 156 328
with EGMDBR (age 66-75) and EEG Rider 96 99 168 352 96 153 195 352 33 99 168 352
with EGMDBR (age 66-75) and GIA Rider 96 101 171 356 96 155 198 356 33 101 171 356
with EGMDBR (age 66-75), EEG, and GIA Riders 99 108 183 379 99 162 210 379 36 108 183 379
with EEG Rider 93 90 154 323 93 144 181 323 30 90 154 323
with GIA Rider 93 92 156 328 93 146 183 328 30 92 156 328
with EEG and GIA Riders 96 99 168 352 96 153 195 352 33 99 168 352
-----------------------------------------------------------------------------------------------------------
Multi-Strategy
without any Rider 85 68 117 250 85 122 144 250 22 68 117 250
with EGMDBR (age 0-65) 86 71 122 260 86 125 149 260 23 71 122 260
with EGMDBR (age 0-65) and EEG Rider 89 79 134 285 89 133 161 285 26 79 134 285
with EGMDBR (age 0-65) and GIA Rider 89 80 137 290 89 134 164 290 26 80 137 290
with EGMDBR (age 0-65), EEG, and GIA Riders 92 88 149 315 92 142 176 315 29 88 149 315
with EGMDBR (age 66-75) 88 77 132 280 88 131 159 280 25 77 132 280
with EGMDBR (age 66-75) and EEG Rider 91 85 144 305 91 139 171 305 28 85 144 305
with EGMDBR (age 66-75) and GIA Rider 91 86 147 310 91 140 174 310 28 86 147 310
with EGMDBR (age 66-75), EEG, and GIA Riders 94 94 159 334 94 148 186 334 31 94 159 334
with EEG Rider 88 76 129 275 88 130 156 275 25 76 129 275
with GIA Rider 88 77 132 280 88 131 159 280 25 77 132 280
with EEG and GIA Riders 91 85 144 305 91 139 171 305 28 85 144 305
-----------------------------------------------------------------------------------------------------------
Equity Income
without any Rider 85 68 117 250 85 122 144 250 22 68 117 250
with EGMDBR (age 0-65) 86 71 122 260 86 125 149 260 23 71 122 260
with EGMDBR (age 0-65) and EEG Rider 89 79 134 285 89 133 161 285 26 79 134 285
with EGMDBR (age 0-65) and GIA Rider 89 80 137 290 89 134 164 290 26 80 137 290
with EGMDBR (age 0-65), EEG, and GIA Riders 92 88 149 315 92 142 176 315 29 88 149 315
with EGMDBR (age 66-75) 88 77 132 280 88 131 159 280 25 77 132 280
with EGMDBR (age 66-75) and EEG Rider 91 85 144 305 91 139 171 305 28 85 144 305
with EGMDBR (age 66-75) and GIA Rider 91 86 147 310 91 140 174 310 28 86 147 310
with EGMDBR (age 66-75), EEG, and GIA Riders 94 94 159 334 94 148 186 334 31 94 159 334
with EEG Rider 88 76 129 275 88 130 156 275 25 76 129 275
with GIA Rider 88 77 132 280 88 131 159 280 25 77 132 280
with EEG and GIA Riders 91 85 144 305 91 139 171 305 28 85 144 305
-----------------------------------------------------------------------------------------------------------
11
AN OVERVIEW OF PACIFIC PORTFOLIOS
[Enlarge/Download Table]
------------------------------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------------------------------
Strategic Value
without any Rider 89 79 135 286 89 133 162 286 26 79 135 286
with EGMDBR (age 0-65) 90 82 140 296 90 136 167 296 27 82 140 296
with EGMDBR (age 0-65) and EEG Rider 92 89 152 320 92 143 179 320 29 89 152 320
with EGMDBR (age 0-65) and GIA Rider 93 91 155 325 93 145 182 325 30 91 155 325
with EGMDBR (age 0-65), EEG, and GIA Riders 95 98 167 349 95 152 194 349 32 98 167 349
with EGMDBR (age 66-75) 92 88 150 316 92 142 177 316 29 88 150 316
with EGMDBR (age 66-75) and EEG Rider 94 95 162 340 94 149 189 340 31 95 162 340
with EGMDBR (age 66-75) and GIA Rider 95 97 165 344 95 151 192 344 32 97 165 344
with EGMDBR (age 66-75), EEG, and GIA Riders 97 104 177 368 97 158 204 368 34 104 177 368
with EEG Rider 91 86 147 311 91 140 174 311 28 86 147 311
with GIA Rider 92 88 150 316 92 142 177 316 29 88 150 316
with EEG and GIA Riders 94 95 162 340 94 149 189 340 31 95 162 340
-----------------------------------------------------------------------------------------------------------
Growth LT
without any Rider 86 71 122 260 86 125 149 260 23 71 122 260
with EGMDBR (age 0-65) 87 74 127 270 87 128 154 270 24 74 127 270
with EGMDBR (age 0-65) and EEG Rider 90 82 139 295 90 136 166 295 27 82 139 295
with EGMDBR (age 0-65) and GIA Rider 90 83 142 300 90 137 169 300 27 83 142 300
with EGMDBR (age 0-65), EEG, and GIA Riders 93 91 154 325 93 145 181 325 30 91 154 325
with EGMDBR (age 66-75) 89 80 137 290 89 134 164 290 26 80 137 290
with EGMDBR (age 66-75) and EEG Rider 92 88 149 315 92 142 176 315 29 88 149 315
with EGMDBR (age 66-75) and GIA Rider 92 89 152 320 92 143 179 320 29 89 152 320
with EGMDBR (age 66-75), EEG, and GIA Riders 95 97 164 344 95 151 191 344 32 97 164 344
with EEG Rider 89 79 134 285 89 133 161 285 26 79 134 285
with GIA Rider 89 80 137 290 89 134 164 290 26 80 137 290
with EEG and GIA Riders 92 88 149 315 92 142 176 315 29 88 149 315
-----------------------------------------------------------------------------------------------------------
Focused 30
without any Rider 89 79 135 286 89 133 162 286 26 79 135 286
with EGMDBR (age 0-65) 90 82 140 296 90 136 167 296 27 82 140 296
with EGMDBR (age 0-65) and EEG Rider 92 89 152 320 92 143 179 320 29 89 152 320
with EGMDBR (age 0-65) and GIA Rider 93 91 155 325 93 145 182 325 30 91 155 325
with EGMDBR (age 0-65), EEG, and GIA Riders 95 98 167 349 95 152 194 349 32 98 167 349
with EGMDBR (age 66-75) 92 88 150 316 92 142 177 316 29 88 150 316
with EGMDBR (age 66-75) and EEG Rider 94 95 162 340 94 149 189 340 31 95 162 340
with EGMDBR (age 66-75) and GIA Rider 95 97 165 344 95 151 192 344 32 97 165 344
with EGMDBR (age 66-75), EEG, and GIA Riders 97 104 177 368 97 158 204 368 34 104 177 368
with EEG Rider 91 86 147 311 91 140 174 311 28 86 147 311
with GIA Rider 92 88 150 316 92 142 177 316 29 88 150 316
with EEG and GIA Riders 94 95 162 340 94 149 189 340 31 95 162 340
-----------------------------------------------------------------------------------------------------------
Mid-Cap Value
without any Rider 87 74 126 269 87 128 153 269 24 74 126 269
with EGMDBR (age 0-65) 88 77 131 279 88 131 158 279 25 77 131 279
with EGMDBR (age 0-65) and EEG Rider 91 84 144 304 91 138 171 304 28 84 144 304
with EGMDBR (age 0-65) and GIA Rider 91 86 146 309 91 140 173 309 28 86 146 309
with EGMDBR (age 0-65), EEG, and GIA Riders 94 93 159 333 94 147 186 333 31 93 159 333
with EGMDBR (age 66-75) 90 83 141 299 90 137 168 299 27 83 141 299
with EGMDBR (age 66-75) and EEG Rider 93 90 154 324 93 144 181 324 30 90 154 324
with EGMDBR (age 66-75) and GIA Rider 93 92 156 328 93 146 183 328 30 92 156 328
with EGMDBR (age 66-75), EEG, and GIA Riders 96 99 169 352 96 153 196 352 33 99 169 352
with EEG Rider 90 81 139 294 90 135 166 294 27 81 139 294
with GIA Rider 90 83 141 299 90 137 168 299 27 83 141 299
with EEG and GIA Riders 93 90 154 324 93 144 181 324 30 90 154 324
-----------------------------------------------------------------------------------------------------------
International Value
without any Rider 88 76 130 277 88 130 157 277 25 76 130 277
with EGMDBR (age 0-65) 89 79 135 287 89 133 162 287 26 79 135 287
with EGMDBR (age 0-65) and EEG Rider 91 87 148 312 91 141 175 312 28 87 148 312
with EGMDBR (age 0-65) and GIA Rider 92 88 150 317 92 142 177 317 29 88 150 317
with EGMDBR (age 0-65), EEG, and GIA Riders 94 96 163 341 94 150 190 341 31 96 163 341
with EGMDBR (age 66-75) 91 85 145 307 91 139 172 307 28 85 145 307
with EGMDBR (age 66-75) and EEG Rider 93 93 158 331 93 147 185 331 30 93 158 331
with EGMDBR (age 66-75) and GIA Rider 94 94 160 336 94 148 187 336 31 94 160 336
with EGMDBR (age 66-75), EEG, and GIA Riders 96 102 172 359 96 156 199 359 33 102 172 359
with EEG Rider 90 84 143 302 90 138 170 302 27 84 143 302
with GIA Rider 91 85 145 307 91 139 172 307 28 85 145 307
with EEG and GIA Riders 93 93 158 331 93 147 185 331 30 93 158 331
-----------------------------------------------------------------------------------------------------------
12
[Enlarge/Download Table]
------------------------------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------------------------------
Capital Opportunities
without any Rider 87 73 125 267 87 127 152 267 24 73 125 267
with EGMDBR (age 0-65) 88 76 130 277 88 130 157 277 25 76 130 277
with EGMDBR (age 0-65) and EEG Rider 90 84 143 302 90 138 170 302 27 84 143 302
with EGMDBR (age 0-65) and GIA Rider 91 85 145 307 91 139 172 307 28 85 145 307
with EGMDBR (age 0-65), EEG, and GIA Riders 93 93 158 331 93 147 185 331 30 93 158 331
with EGMDBR (age 66-75) 90 82 140 297 90 136 167 297 27 82 140 297
with EGMDBR (age 66-75) and EEG Rider 92 90 153 322 92 144 180 322 29 90 153 322
with EGMDBR (age 66-75) and GIA Rider 93 91 155 326 93 145 182 326 30 91 155 326
with EGMDBR (age 66-75), EEG, and GIA Riders 95 99 168 350 95 153 195 350 32 99 168 350
with EEG Rider 89 81 138 292 89 135 165 292 26 81 138 292
with GIA Rider 90 82 140 297 90 136 167 297 27 82 140 297
with EEG and GIA Riders 92 90 153 322 92 144 180 322 29 90 153 322
-----------------------------------------------------------------------------------------------------------
Mid-Cap Growth
without any Rider 88 76 130 277 88 130 157 277 25 76 130 277
with EGMDBR (age 0-65) 89 79 135 287 89 133 162 287 26 79 135 287
with EGMDBR (age 0-65) and EEG Rider 91 87 148 312 91 141 175 312 28 87 148 312
with EGMDBR (age 0-65) and GIA Rider 92 88 150 317 92 142 177 317 29 88 150 317
with EGMDBR (age 0-65), EEG, and GIA Riders 94 96 163 341 94 150 190 341 31 96 163 341
with EGMDBR (age 66-75) 91 85 145 307 91 139 172 307 28 85 145 307
with EGMDBR (age 66-75) and EEG Rider 93 93 158 331 93 147 185 331 30 93 158 331
with EGMDBR (age 66-75) and GIA Rider 94 94 160 336 94 148 187 336 31 94 160 336
with EGMDBR (age 66-75), EEG, and GIA Riders 96 102 172 359 96 156 199 359 33 102 172 359
with EEG Rider 90 84 143 302 90 138 170 302 27 84 143 302
with GIA Rider 91 85 145 307 91 139 172 307 28 85 145 307
with EEG and GIA Riders 93 93 158 331 93 147 185 331 30 93 158 331
-----------------------------------------------------------------------------------------------------------
Global Growth
without any Rider 91 86 147 309 91 140 174 309 28 86 147 309
with EGMDBR (age 0-65) 92 89 152 319 92 143 179 319 29 89 152 319
with EGMDBR (age 0-65) and EEG Rider 95 97 164 343 95 151 191 343 32 97 164 343
with EGMDBR (age 0-65) and GIA Rider 95 98 166 348 95 152 193 348 32 98 166 348
with EGMDBR (age 0-65), EEG, and GIA Riders 98 106 179 371 98 160 206 371 35 106 179 371
with EGMDBR (age 66-75) 94 95 161 338 94 149 188 338 31 95 161 338
with EGMDBR (age 66-75) and EEG Rider 97 103 174 362 97 157 201 362 34 103 174 362
with EGMDBR (age 66-75) and GIA Rider 97 104 176 366 97 158 203 366 34 104 176 366
with EGMDBR (age 66-75), EEG, and GIA Riders 100 111 188 389 100 165 215 389 37 111 188 389
with EEG Rider 94 94 159 333 94 148 186 333 31 94 159 333
with GIA Rider 94 95 161 338 94 149 188 338 31 95 161 338
with EEG and GIA Riders 97 103 174 362 97 157 201 362 34 103 174 362
-----------------------------------------------------------------------------------------------------------
Equity Index
without any Rider 81 56 96 208 81 110 123 208 18 56 96 208
with EGMDBR (age 0-65) 82 59 101 218 82 113 128 218 19 59 101 218
with EGMDBR (age 0-65) and EEG Rider 85 67 114 245 85 121 141 245 22 67 114 245
with EGMDBR (age 0-65) and GIA Rider 85 68 117 250 85 122 144 250 22 68 117 250
with EGMDBR (age 0-65), EEG, and GIA Riders 88 76 130 276 88 130 157 276 25 76 130 276
with EGMDBR (age 66-75) 84 65 112 240 84 119 139 240 21 65 112 240
with EGMDBR (age 66-75) and EEG Rider 87 73 124 266 87 127 151 266 24 73 124 266
with EGMDBR (age 66-75) and GIA Rider 87 74 127 271 87 128 154 271 24 74 127 271
with EGMDBR (age 66-75), EEG, and GIA Riders 90 82 140 296 90 136 167 296 27 82 140 296
with EEG Rider 84 64 109 234 84 118 136 234 21 64 109 234
with GIA Rider 84 65 112 240 84 119 139 240 21 65 112 240
with EEG and GIA Riders 87 73 124 266 87 127 151 266 24 73 124 266
-----------------------------------------------------------------------------------------------------------
Small-Cap Index
without any Rider 84 65 112 240 84 119 139 240 21 65 112 240
with EGMDBR (age 0-65) 85 68 117 251 85 122 144 251 22 68 117 251
with EGMDBR (age 0-65) and EEG Rider 88 76 130 276 88 130 157 276 25 76 130 276
with EGMDBR (age 0-65) and GIA Rider 88 78 132 281 88 132 159 281 25 78 132 281
with EGMDBR (age 0-65), EEG, and GIA Riders 91 85 145 306 91 139 172 306 28 85 145 306
with EGMDBR (age 66-75) 87 74 127 271 87 128 154 271 24 74 127 271
with EGMDBR (age 66-75) and EEG Rider 90 82 140 296 90 136 167 296 27 82 140 296
with EGMDBR (age 66-75) and GIA Rider 90 84 142 301 90 138 169 301 27 84 142 301
with EGMDBR (age 66-75), EEG, and GIA Riders 93 91 155 326 93 145 182 326 30 91 155 326
with EEG Rider 87 73 125 266 87 127 152 266 24 73 125 266
with GIA Rider 87 74 127 271 87 128 154 271 24 74 127 271
with EEG and GIA Riders 90 82 140 296 90 136 167 296 27 82 140 296
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13
AN OVERVIEW OF PACIFIC PORTFOLIOS
[Enlarge/Download Table]
------------------------------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------------------------------
REIT
without any Rider 90 82 139 295 90 136 166 295 27 82 139 295
with EGMDBR (age 0-65) 91 85 144 305 91 139 171 305 28 85 144 305
with EGMDBR (age 0-65) and EEG Rider 93 92 157 329 93 146 184 329 30 92 157 329
with EGMDBR (age 0-65) and GIA Rider 94 94 159 334 94 148 186 334 31 94 159 334
with EGMDBR (age 0-65), EEG, and GIA Riders 96 101 171 357 96 155 198 357 33 101 171 357
with EGMDBR (age 66-75) 93 91 154 324 93 145 181 324 30 91 154 324
with EGMDBR (age 66-75) and EEG Rider 95 98 166 348 95 152 193 348 32 98 166 348
with EGMDBR (age 66-75) and GIA Rider 96 100 169 353 96 154 196 353 33 100 169 353
with EGMDBR (age 66-75), EEG, and GIA Riders 98 107 181 376 98 161 208 376 35 107 181 376
with EEG Rider 92 89 152 319 92 143 179 319 29 89 152 319
with GIA Rider 93 91 154 324 93 145 181 324 30 91 154 324
with EEG and GIA Riders 95 98 166 348 95 152 193 348 32 98 166 348
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Inflation Managed (formerly called Government Securities)
without any Rider 84 66 113 242 84 120 140 242 21 66 113 242
nwith EGMDBR (age 0-65) 85 69 118 253 85 123 145 253 22 69 118 253
with EGMDBR (age 0-65) and EEG Rider 88 77 131 278 88 131 158 278 25 77 131 278
with EGMDBR (age 0-65) and GIA Rider 88 78 133 283 88 132 160 283 25 78 133 283
with EGMDBR (age 0-65), EEG, and GIA Riders 91 86 146 308 91 140 173 308 28 86 146 308
with EGMDBR (age 66-75) 87 75 128 273 87 129 155 273 24 75 128 273
with EGMDBR (age 66-75) and EEG Rider 90 83 141 298 90 137 168 298 27 83 141 298
with EGMDBR (age 66-75) and GIA Rider 90 84 143 303 90 138 170 303 27 84 143 303
with EGMDBR (age 66-75), EEG, and GIA Riders 93 92 156 328 93 146 183 328 30 92 156 328
with EEG Rider 87 74 126 268 87 128 153 268 24 74 126 268
with GIA Rider 87 75 128 273 87 129 155 273 24 75 128 273
with EEG and GIA Riders 90 83 141 298 90 137 168 298 27 83 141 298
-----------------------------------------------------------------------------------------------------------
Managed Bond
without any Rider 85 67 114 244 85 121 141 244 22 67 114 244
with EGMDBR (age 0-65) 86 70 119 255 86 124 146 255 23 70 119 255
with EGMDBR (age 0-65) and EEG Rider 88 77 132 280 88 131 159 280 25 77 132 280
with EGMDBR (age 0-65) and GIA Rider 89 79 134 285 89 133 161 285 26 79 134 285
with EGMDBR (age 0-65), EEG, and GIA Riders 91 86 147 310 91 140 174 310 28 86 147 310
with EGMDBR (age 66-75) 88 76 129 275 88 130 156 275 25 76 129 275
with EGMDBR (age 66-75) and EEG Rider 90 83 142 300 90 137 169 300 27 83 142 300
with EGMDBR (age 66-75) and GIA Rider 91 85 144 305 91 139 171 305 28 85 144 305
with EGMDBR (age 66-75), EEG, and GIA Riders 93 92 157 330 93 146 184 330 30 92 157 330
with EEG Rider 87 74 127 270 87 128 154 270 24 74 127 270
with GIA Rider 88 76 129 275 88 130 156 275 25 76 129 275
with EEG and GIA Riders 90 83 142 300 90 137 169 300 27 83 142 300
-----------------------------------------------------------------------------------------------------------
Money Market
without any Rider 82 59 101 217 82 113 128 217 19 59 101 217
with EGMDBR (age 0-65) 83 62 106 228 83 116 133 228 20 62 106 228
with EGMDBR (age 0-65) and EEG Rider 86 69 119 254 86 123 146 254 23 69 119 254
with EGMDBR (age 0-65) and GIA Rider 86 71 121 259 86 125 148 259 23 71 121 259
with EGMDBR (age 0-65), EEG, and GIA Riders 89 79 134 285 89 133 161 285 26 79 134 285
with EGMDBR (age 66-75) 85 68 116 249 85 122 143 249 22 68 116 249
with EGMDBR (age 66-75) and EEG Rider 88 75 129 275 88 129 156 275 25 75 129 275
with EGMDBR (age 66-75) and GIA Rider 88 77 131 280 88 131 158 280 25 77 131 280
with EGMDBR (age 66-75), EEG, and GIA Riders 91 85 144 305 91 139 171 305 28 85 144 305
with EEG Rider 85 66 114 244 85 120 141 244 22 66 114 244
with GIA Rider 85 68 116 249 85 122 143 249 22 68 116 249
with EEG and GIA Riders 88 75 129 275 88 129 156 275 25 75 129 275
-----------------------------------------------------------------------------------------------------------
High Yield Bond
without any Rider 85 67 114 244 85 121 141 244 22 67 114 244
with EGMDBR (age 0-65) 86 70 119 255 86 124 146 255 23 70 119 255
with EGMDBR (age 0-65) and EEG Rider 88 77 132 280 88 131 159 280 25 77 132 280
with EGMDBR (age 0-65) and GIA Rider 89 79 134 285 89 133 161 285 26 79 134 285
with EGMDBR (age 0-65), EEG, and GIA Riders 91 86 147 310 91 140 174 310 28 86 147 310
with EGMDBR (age 66-75) 88 76 129 275 88 130 156 275 25 76 129 275
with EGMDBR (age 66-75) and EEG Rider 90 83 142 300 90 137 169 300 27 83 142 300
with EGMDBR (age 66-75) and GIA Rider 91 85 144 305 91 139 171 305 28 85 144 305
with EGMDBR (age 66-75), EEG, and GIA Riders 93 92 157 330 93 146 184 330 30 92 157 330
with EEG Rider 87 74 127 270 87 128 154 270 24 74 127 270
with GIA Rider 88 76 129 275 88 130 156 275 25 76 129 275
with EEG and GIA Riders 90 83 142 300 90 137 169 300 27 83 142 300
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14
[Enlarge/Download Table]
------------------------------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------------------------------
Large-Cap Value
without any Rider 87 74 127 271 87 128 154 271 24 74 127 271
with EGMDBR (age 0-65) 88 77 132 281 88 131 159 281 25 77 132 281
with EGMDBR (age 0-65) and EEG Rider 91 85 145 306 91 139 172 306 28 85 145 306
with EGMDBR (age 0-65) and GIA Rider 91 87 147 311 91 141 174 311 28 87 147 311
with EGMDBR (age 0-65), EEG, and GIA Riders 94 94 160 335 94 148 187 335 31 94 160 335
with EGMDBR (age 66-75) 90 83 142 301 90 137 169 301 27 83 142 301
with EGMDBR (age 66-75) and EEG Rider 93 91 155 325 93 145 182 325 30 91 155 325
with EGMDBR (age 66-75) and GIA Rider 93 93 157 330 93 147 184 330 30 93 157 330
with EGMDBR (age 66-75), EEG, and GIA Riders 96 100 170 354 96 154 197 354 33 100 170 354
with EEG Rider 90 82 140 296 90 136 167 296 27 82 140 296
with GIA Rider 90 83 142 301 90 137 169 301 27 83 142 301
with EEG and GIA Riders 93 91 155 325 93 145 182 325 30 91 155 325
-----------------------------------------------------------------------------------------------------------
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. For more information on fees
and expenses, see CHARGES, FEES AND DEDUCTIONS,
WITHDRAWALS and Pacific Select Fund Annual Expenses in
this Prospectus and see the Fund's SAI.
15
YOUR INVESTMENT OPTIONS
You may choose among the different Variable Investment Options, the Fixed
Option, the DCA Plus Fixed Option and among the three Guarantee Terms under the
Guaranteed Interest Option.
Your Variable Investment Options
Each Variable Investment Option invests in a separate Portfolio of the Fund.
For your convenience, the following chart summarizes some basic data about each
Portfolio. This chart is only a summary. For more complete information on each
Portfolio, including a discussion of the Portfolio's investment techniques and
the risks associated with its investments, see the accompanying Fund
Prospectus. No assurance can be given that a Portfolio will achieve its
investment objective. YOU SHOULD READ THE FUND PROSPECTUS CAREFULLY BEFORE
INVESTING.
[Enlarge/Download Table]
PORTFOLIO INVESTMENT GOAL THE PORTFOLIO'S PORTFOLIO
MAIN INVESTMENTS MANAGER
Blue Chip Long-term growth of Equity securities of "blue chip" A I M Capital
capital. Current income is companies--typically large Management, Inc.
of secondary importance. companies that are well established
in their respective industries.
Aggressive Growth Long-term growth of Equity securities of small- and A I M Capital
capital. medium-sized growth companies. Management, Inc.
Aggressive Equity Capital appreciation. Equity securities of small Alliance Capital
emerging-growth companies and Management L.P.
medium-sized companies.
Emerging Markets Long-term growth of Equity securities of companies that Alliance Capital
capital. are located in countries generally Management L.P.
regarded as "emerging market"
countries.
Diversified Research Long-term growth of Equity securities of U.S. companies Capital Guardian
capital. and securities whose principal Trust Company
markets are in the U.S.
Small-Cap Equity Long-term growth of Equity securities of smaller and Capital Guardian
capital. medium-sized companies. Trust Company
International Large-Cap Long-term growth of Equity securities of non-U.S. Capital Guardian
capital. companies and securities whose Trust Company
principal markets are outside
of the U.S.
Equity Capital appreciation. Equity securities of large U.S. Goldman Sachs
Current income is of growth-oriented companies. Asset Management
secondary importance.
I-Net Tollkeeper Long-term growth of Equity securities of companies Goldman Sachs
capital. which use, support, or relate Asset Management
directly or indirectly to use of
the Internet. Such companies
include those in the media,
telecommunications, and technology
sectors.
Financial Services Long-term growth of Equity securities in the financial INVESCO
capital. services sector. Such companies Funds Group, Inc.
include banks, insurance companies,
brokerage firms and other finance-
related firms.
Health Sciences Long-term growth of Equity securities in the health INVESCO
capital. sciences sector. Such companies Funds Group, Inc.
include medical equipment or
supplies, pharmaceuticals, health
care facilities and other health
sciences-related firms.
Technology Long-term growth of Equity securities in the technology INVESCO
capital. sector. Such companies include Funds Group, Inc.
biotechnology, communications,
computers, electronics, Internet
telecommunications, networking,
robotics, video and other
technology-related firms.
Telecommunications Long-term growth of Equity securities in the INVESCO
capital. Current income is telecommunications sector. Such as Funds Group, Inc.
of secondary importance. companies that offer telephone
service, wireless communications,
satellite communications,
television and movie programming,
broadcasting and Internet access.
Multi-Strategy High total return. A mix of equity and fixed income J.P. Morgan
securities. Investment
Management Inc.
Equity Income Long-term growth of capital Equity securities of large and J.P. Morgan
and income. medium-sized dividend-paying U.S. Investment
companies. Management Inc.
Strategic Value Long-term growth of Equity securities with the Janus Capital
capital. potential for long-term growth of Corporation
capital.
16
[Enlarge/Download Table]
PORTFOLIO INVESTMENT GOAL THE PORTFOLIO'S PORTFOLIO
MAIN INVESTMENTS MANAGER
Growth LT Long-term growth of capital Equity securities of a large Janus Capital
consistent with the number of companies of any size. Corporation
preservation of capital.
Focused 30 Long-term growth of Equity securities selected for Janus Capital
capital. their growth potential. Corporation
Mid-Cap Value Capital appreciation. Equity securities of medium-sized Lazard Asset
U.S. companies believed to be Management
undervalued.
International Value Long-term capital Equity securities of companies of Lazard Asset
appreciation primarily any size located in developed Management
through investment in countries outside of the U.S.
equity securities of
corporations domiciled in
countries other than the
U.S.
Capital Opportunities Long-term growth of Equity securities with the MFS Investment
capital. potential for long-term growth of Management
capital.
Mid-Cap Growth Long-term growth of Equity securities of medium-sized MFS Investment
capital. companies believed to have above- Management
average growth potential.
Global Growth Long-term growth of Equity securities of any size MFS Investment
capital. located within and outside of the Management
U.S.
Equity Index Investment results that Equity securities of companies Mercury Advisors
correspond to the total that are included in the Standard
return of common stocks & Poor's 500 Composite Stock Price
publicly traded in the U.S. Index.
Small-Cap Index Investment results that Equity securities of companies Mercury Advisors
correspond to the total that are included in the Russell
return of an index of small 2000 Small Stock Index.
capitalization companies.
REIT Current income and long- Equity securities of U.S. and non- Morgan Stanley
term capital appreciation. U.S. companies principally engaged Asset Management
in the U.S. real estate industry.
Inflation Managed Maximize total return Inflation-indexed bonds of varying Pacific
(formerly called consistent with prudent maturities issued by the U.S. and Investment
Government Securities) investment management. non U.S. governments, their Management
agencies and government sponsored Company
enterprises, and corporations,
forward contracts and derivative
instruments relating to such
securities.
Managed Bond Maximize total return Medium and high-quality fixed Pacific
consistent with prudent income securities with varying Investment
investment management. terms to maturity. Management
Company
Money Market Current income consistent Highest quality money market Pacific Life
with preservation of instruments believed to have
capital. limited credit risk.
High Yield Bond High level of current Fixed income securities with lower Pacific Life
income. and medium-quality credit ratings
and intermediate to long terms to
maturity.
Large-Cap Value Long-term growth of Equity securities of large U.S. Salomon Brothers
capital. Current income is companies. Asset Management
of secondary importance. Inc
17
The Investment Adviser
We are the investment adviser for the Fund. We and the Fund have retained other
portfolio managers, supervised by us, for 29 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 each Subaccount was established January 2, 1996 or thereafter and has
no historical performance prior to that date, each Subaccount will be investing
in shares of a Portfolio of the Fund, and the majority of these Portfolios do
have historical performance data which covers a longer period. Performance data
include total returns for each Subaccount, current and effective yields for the
Money Market Subaccount, and yields for the other fixed income Subaccounts.
Calculations are in accordance with standard formulas prescribed by the SEC
which are described in the SAI. Yields do not reflect any charge for premium
taxes and/or other taxes; this exclusion may cause yields to show more
favorable performance. Total returns may or may not reflect withdrawal charges,
Annual Fees or any charge for premium and/or other taxes; data that do not
reflect these charges may show more favorable performance.
The SAI presents some hypothetical performance data. The SAI also presents some
performance benchmarks, based on unmanaged market indices, such as the Standard
& Poor's 500 Composite Stock Price Index (S&P 500), and on "peer groups," which
use other managed funds with similar investment objectives. These benchmarks
may give you a broader perspective when you examine hypothetical or actual
Subaccount performance.
In addition, we may provide you with reports both as an insurance company and
as to our financial strength that are produced by rating agencies and
organizations.
Your Fixed Option, DCA Plus Fixed Option and GIOs
The Fixed Option, the DCA Plus Fixed Option and the GIOs each offer you a
guaranteed minimum interest rate on the amounts you allocate to these Options.
Amounts you allocate to these Options, and your earnings credited are held in
our General Account. Subject to state availability, the GIOs are available in
three-, six-, and ten-year terms. If you annuitize, transfer or withdraw
amounts allocated to a GIO before its Guarantee Term has expired, these amounts
are adjusted by the MVA. For more detailed information about these Options, see
THE GENERAL ACCOUNT and APPENDIX A: STATE LAW VARIATIONS sections 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 Investment to Pacific Life Insurance Company at P.O. Box 100060,
Pasadena, California 91189-0060. If your application and payment are complete
when received, or once they have become complete, we will issue your Contract
within two Business Days. If some information is missing from your application,
we may delay issuing your Contract while we obtain the missing information;
however, we will not hold your initial Investment for more than five Business
Days without your permission.
You may also purchase a Contract by exchanging your existing Contract. You must
submit all contracts to be exchanged when you submit your application. Call
your representative, or call us at 1-800-722-2333, if you are interested in
this option.
We reserve the right to reject any application or Investment for any reason,
subject to any applicable nondiscrimination laws and to our own standards and
guidelines. The maximum age of a Contract Owner, including Joint and Contingent
Owners, for which a Contract will be issued is 85. The Contract Owner's age is
calculated as of his or her age last birthday. 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 and/or any
Contract issued shall be deemed null and void; and any Investments 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.
Purchasing the Enhanced Guaranteed Minimum Death Benefit Rider (EGMDBR)
(Optional)
If you purchase the Enhanced Guaranteed Minimum Death Benefit Rider (EGMDBR)
(subject to state availability) at the time your application is completed, we
charge an annual Enhanced Death Benefit Charge on each Contract Anniversary
18
prior to the Annuity Date that the EGMDBR remains in effect. The Charge will be
equal to the pertinent percentage, as described below, multiplied by the
Contract Value on the day the charge is deducted. The Charge percentage is
equal to 0.10% if the youngest Annuitant's age is 65 or younger on the Contract
Date and 0.30% if the youngest Annuitant's age is 66 through 75 on the Contract
Date. We deduct this Charge from your Contract Value allocated to your
Investment Options on a pro-rata basis. However, any portion of the Charge we
deduct from the Fixed Option, the DCA Plus Fixed Option, and the GIOs will not
be greater than the interest credited to each of these Options, respectively,
in excess of the annual rate of 3%. If you make a full withdrawal of your Net
Contract Value during a Contract Year, we will deduct the entire Charge for
that Contract Year from the final payment made to you.
The EGMDBR may only be purchased on the Contract Date and will remain in effect
until the earlier of (a) the full withdrawal of the amount available for
withdrawal under the Contract, (b) a death benefit becomes payable under the
Contract, (c) any termination of the Contract in accordance with the provisions
of the Contract, or (d) the Annuity Date. The EGMDBR may not otherwise be
cancelled. The EGMDBR may only be purchased if the age of each Annuitant is 75
or younger on the Contract Date.
Purchasing the Earnings Enhancement Guarantee (EEG) Rider (Optional)
You may purchase the EEG Rider 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 Guaranteed Earnings Enhancement (GEE) Rider in your Contract's
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.
Purchasing the Guaranteed Income Advantage (GIA) Rider (Optional)
Subject to state availability, you may purchase the GIA Rider on the Contract
Date or on any Contract Anniversary. You may purchase the GIA Rider only if the
age of each Annuitant is 80 years or younger on the date the GIA Rider is
purchased. The GIA Rider will remain in effect until the earlier of:
.a full withdrawal of the amount available for withdrawal under the
Contract;
.a death benefit becomes payable under the Contract;
.any termination of the Contract in accordance with the terms of the
Contract;
.the Annuity Date; or
.termination of the GIA Rider.
You may terminate the GIA Rider on the fifth Contract Anniversary or on any
later Contract Anniversary.
If you buy the GIA Rider within 30 days after the Contract Date or Contract
Anniversary, we will make the effective date of the GIA Rider to coincide with
that Contract Date or Contract Anniversary.
19
Making Your Investments ("Purchase Payments")
Making Your Initial Investment
Your initial Investment must be at least $5,000 if you are buying a Non-
Qualified Contract, and at least $2,000 if you are buying a Qualified Contract.
You may pay this entire amount when you submit your application, or you may
choose our pre-authorized checking plan (PAC), which allows you to pay in equal
monthly installments over one year (at least $400 per month for Non-Qualified
Contracts, and at least $150 per month for Qualified Contracts). 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. We
also call each Investment you make a Purchase Payment.
You must obtain our consent before making an initial or additional Investment
that will bring your aggregate Investments over $1,000,000.
Making Additional Investments
You may choose to invest additional amounts in your Contract at any time. Each
additional investment must be at least $250 for Non-Qualified Contracts and $50
for Qualified Contracts. See APPENDIX A: STATE LAW VARIATIONS section in this
Prospectus.
Forms of Investment
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. If you make
Investments by check other than a cashier's check, your payment of any
withdrawal proceeds and any refund during your Free Look period may be delayed
until your check has cleared.
HOW YOUR INVESTMENTS ARE ALLOCATED
Choosing Your Investment Options
You may allocate your Investments among 31 of the Subaccounts, the GIOs, the
Fixed Option and, if available in your state of issue, if you elect DCA Plus,
the DCA Plus Fixed Option. Allocations of your initial Investment to the
Investment Options you selected will be effective on your Contract Date. Each
additional Investment will be allocated to the Investment Options according to
your allocation instructions in your application, or most recent instructions,
if any, subject to the terms described in the WITHDRAWALS--Right to Cancel
("Free Look") section in this Prospectus. 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 delivered. If your
initial Investment is received from multiple sources, we will consider them all
your initial Investment.
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 $600 to the Inflation Managed Subaccount. At the end
of the Business Day on which your allocation is effective, the value of one
Unit in the Government Securities Subaccount is $15. As a result, 40
Subaccount Units are credited to your Contract for your $600.
Your Variable Account Value Will Change
After we credit your Contract with Subaccount Units, the value of those Units
will usually fluctuate. This means that, from time to time, your investment
allocated to the Variable Investment Options may be worth more or less than the
original 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.
20
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 on each Business Day. The SAI
contains a detailed discussion of these calculations.
When Your Investment is Effective
The day your allocation is effective determines the Unit Value at which
Subaccount Units are attributed to your Contract. In the case of transfers or
withdrawals, the effective day determines the Unit Value at which affected
Subaccount Units are debited and/or credited under your Contract. 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 Investment is ordinarily effective on the day we issue your
Contract. Any additional allocation is effective on the day we receive your
Investment in proper form. See ADDITIONAL INFORMATION--Inquiries and Submitting
Forms and Requests section in this Prospectus.
Transfers
Once your Investments are allocated to the Investment Options you selected, you
may transfer your Contract Value less Loan Account Value from any Investment
Option to any other Investment Option, except the DCA Plus Fixed Option.
However, as of May 1, 2001 and continuing through December 31, 2001, you may
not make more than 15 transfers; and beginning January 1, 2002, and each
calendar year thereafter, transfers are limited to 25 for each calendar year.
For the purpose of applying the limitations, any transfers that occur on the
same day are considered one transfer and transfers that occur as a result of
the dollar cost averaging program, the portfolio rebalancing program, the
earnings sweep program or an approved asset allocation program are excluded
from the limitation. No transfer fee is currently imposed for transfers among
the Investment Options, but we reserve the right to impose a transaction fee
for transfers in the future; a fee of up to $15 per transfer may apply to
transfers in excess of 15 in any Contract Year.
Certain restrictions apply to the Fixed Option, the DCA Fixed Option and GIOs.
See THE GENERAL ACCOUNT--Withdrawals and Transfers section in this Prospectus.
Transfer requests are generally effective on the Business Day we receive them
in proper form.
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 $500 immediately after such transfer, we
may transfer that Account Value to your other Investment Options on a pro rata
basis, relative to your most recent allocation instructions. We reserve the
right (unless otherwise required by law) to limit the size of transfers, to
restrict transfers, to require that you submit any transfer requests in
writing, and to suspend transfers. We also reserve the right to reject any
transfer request.
Market-timing Restrictions
The Contract is not designed to serve as a vehicle for frequent trading in
response to short-term fluctuations in the market. Such frequent trading can
disrupt management of the Fund and raise expenses. This in turn can have an
adverse effect on Portfolio performance and therefore your Contract's
performance. Accordingly, organizations or individuals that use market-timing
investment strategies and make frequent transfers should not purchase the
Contract.
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We reserve the right to restrict, in our sole discretion and without prior
notice, transfers initiated by a market timing organization or individual or
other party authorized to give transfer instructions on behalf of multiple
Contract Owners. Such restrictions could include: (1) not accepting transfer
instructions from an agent acting on behalf of more than one Contract Owner;
and (2) not accepting preauthorized transfer forms from market timers or other
entities acting on behalf of more than one Contract Owner at a time.
We further reserve the right to impose, without prior notice, restrictions on
transfers that we determine, in our sole discretion, will disadvantage or
potentially hurt the rights or interests of other Contract Owners.
Exchanges of Annuity Units
Exchanges of Annuity Units in any Subaccount(s) to any other Subaccount(s)
after the Annuity Date are limited to four in any twelve-month period. See THE
GENERAL ACCOUNT--Withdrawals and Transfers section in this Prospectus and THE
CONTRACTS AND THE SEPARATE ACCOUNT section in the SAI.
Automatic Transfer Options
We offer four automatic transfer options: DCA Plus, dollar cost averaging,
portfolio rebalancing and earnings sweep. There is no charge for these options,
and transfers under these automatic transfer options are not counted towards
your total transfers in a Contract Year.
DCA Plus
DCA Plus provides a way for you to transfer amounts monthly from the DCA Plus
Fixed Option to one or more Variable Investment Option(s) over a period of up
to one year. This allows you to average the Unit Values of the Variable
Investment Option(s) over time, and may permit a "smoothing" of abrupt peaks
and drops in Unit Values.
Prior to the Annuity Date, you may allocate all or a portion of your
Investment(s) to the DCA Plus Fixed Option. The initial minimum amount that you
may allocate to the DCA Plus Fixed Option is $5,000. You may not transfer any
amounts to the DCA Plus Fixed Option from any other Investment Option. All
Investments allocated to the DCA Plus Fixed Option will earn interest at the
then current Guaranteed Interest Rate declared by us.
The day that the first Investment allocation is made to the DCA Plus Fixed
Option will begin a Guaranteed Term of 6 months and a period of 6 monthly
transfers. On the same day of each month thereafter, we will transfer to the
Variable Investment Options you selected an amount equal to your DCA Plus Fixed
Option Value on that day divided by the remaining number of monthly transfers
in the Guaranteed Term.
Example: On May 1, you submit a $10,000 Investment entirely to the DCA Plus
Fixed Option at a then current Guaranteed Interest Rate of 5.00%. On June 1,
the value of the DCA Plus Fixed Option is $10,041.52. On June 1, a transfer
equal to $1,673.59 ($10,041.52/6) will be made according to your DCA Plus
transfer instructions. Your remaining DCA Plus Fixed Option Value after the
transfer is therefore $8,367.93.
On July 1, your DCA Plus Fixed Option Value has now increased to $8,401.56.
We will transfer $1,680.31 ($8,401.56/5) to the Variable Investment Options,
leaving a remaining value of $6,721.25 in the DCA Plus Fixed Option.
During the Guarantee Term, you may allocate all or a part of additional
Investments to the DCA Plus Fixed Option, provided such allocations are at
least $250. Each such allocation will be transferred to the Variable Investment
Options you selected over the remaining Guarantee Term. Transfers will be made
proportionately from the DCA Plus Fixed Option Value attributed to each
Purchase Payment allocation.
Example: (Using the previous example): On July 15, you allocate an
additional $5,000 to the DCA Plus Option at a Guaranteed Interest Rate of
4.00%. On August 1, your DCA Plus Fixed Option Value has increased to
$11,758.30. An amount equal to $2,939.58 ($11,758.30/4) is transferred from
the DCA Plus Fixed Option to the Variable Investment Options. The remaining
DCA Plus Fixed Option Value is $8,818.73.
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The minimum amount for the DCA Plus monthly transfer is $250. If a monthly DCA
Plus transfer amount is less than $250, we may transfer your entire DCA Plus
Fixed Option Value to the Variable Investment Options according to your most
recent DCA Plus transfer instructions and automatically terminate your DCA
Plus. DCA Plus transfers must be made on a monthly basis to the Variable
Investment Options; you may not choose to transfer other than monthly nor may
you transfer to either the Fixed Option or any of the GIOs under DCA Plus.
Unless otherwise instructed, any additional Investment we receive during a
Guarantee Term will be allocated to the Investment Options, including the DCA
Plus Fixed Option if so indicated, according to your most recent Investment
allocation instructions. If we receive any additional Investments after your
DCA Plus ends and you have not changed your Investment allocation instructions,
the portion of additional Investments that you had instructed us to allocate to
the DCA Plus Fixed Option under DCA Plus will be allocated to the Variable
Investment Options in the same proportion you had elected under DCA Plus.
When your DCA Plus program ends you may request, in a form satisfactory to us,
to establish a new DCA Plus program subject to our minimum allocation
requirements.
Your DCA Plus program automatically ends at the end of your DCA Plus Guarantee
Term. If we do not receive completed DCA Plus transfer instructions in proper
order by the time your first DCA Plus transfer is due, your DCA Plus will be
automatically terminated at the time and your DCA Plus Fixed Account Value will
be transferred to the Fixed Option at the Fixed Option's then current
Guaranteed Interest Rate, unless you provide us with other transfer
instructions. You may request, in a form satisfactory to us, termination of
your DCA Plus program at any time. Upon our receipt of such request, or when
death benefit proceeds become payable, any remaining balance in your DCA Plus
Fixed Option will be transferred to the Fixed Option at the Fixed Option's then
current Guaranteed Interest Rate, unless you instruct us to transfer such
amounts to other Investment Options. On your Annuity Date any net amount
converted to an annuity from your DCA Plus Fixed Option will be applied to a
fixed annuity and will be held in our General Account, unless you instruct us
otherwise.
You may have only one DCA Plus program in effect at any given time. DCA Plus
may not be used concurrently with our dollar cost averaging program. Further,
the DCA Plus Fixed Option is not available for use with any of our other
systematic transfer programs; i.e., dollar cost averaging, portfolio
rebalancing or earnings sweep.
We reserve the right to change the terms and conditions of DCA Plus, but not a
DCA Plus program you already have in effect.
Dollar Cost Averaging
Dollar cost averaging is a method in which you buy securities in a series of
regular Investments instead of in a single Investment. This allows you to
average the securities' prices over time, and may permit a "smoothing" of
abrupt peaks and drops in price. Prior to your Annuity Date, you may use dollar
cost averaging to transfer amounts, over time, from any Variable Investment
Option with an Account Value of at least $5,000 to one or more other Variable
Investment Options. Each transfer must be for at least $250. The DCA Plus Fixed
Option and GIOs are not available for dollar cost averaging. Detailed
information appears in the SAI.
Portfolio Rebalancing
You may instruct us to maintain a specific balance of Variable Investment
Options under your Contract (e.g., 30% in the Equity Index Subaccount, 40% in
the Managed Bond Subaccount, and 30% in the Growth LT Subaccount) prior to your
Annuity Date. Periodically, we will "rebalance" your values in the elected
Subaccounts to the percentages you have specified. Rebalancing may result in
transferring amounts from a Subaccount earning a relatively higher return to
one earning a relatively lower return. The Fixed Option, DCA Plus Fixed Option
and GIOs are 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.
23
CHARGES, FEES AND DEDUCTIONS
Withdrawal Charge
No sales charge is imposed on any Purchase Payment. Your Purchase Payments may,
however, be subject to a withdrawal charge; this charge may apply to amounts
you withdraw under your Contract, depending on the length of time each Purchase
Payment has been invested and on the amount you withdraw. No withdrawal charge
is imposed on (i) amounts annuitized after the first Contract Year, (ii)
payments of death benefits, (iii) subject to state variations, withdrawals by
Contract Owners to meet the minimum distribution rules for Qualified Contracts
as they apply to amounts held under the Contract, or, (iv) subject to medical
evidence satisfactory to us, after the first Contract Anniversary, full or
partial withdrawals if the Annuitant has been diagnosed with a medically
determinable condition that results in a life expectancy of twelve (12) months
or less. See the APPENDIX A: STATE LAW VARIATIONS section in this Prospectus.
Free Withdrawals
We will not impose a withdrawal charge on withdrawals of your Earnings, or on
withdrawals of amounts held under your Contract for at least six Contract
Years. In addition, during each Contract Year we will not impose a withdrawal
charge on your withdrawal of up to 10% of your remaining Purchase Payments at
the beginning of the Contract Year that would otherwise be subject to the
withdrawal charge plus up to 10% of any additional Purchase Payments received
during the Contract Year. Our calculations of the withdrawal charge deduct this
"free 10%" from your "oldest" Purchase Payment that is still otherwise subject
to the charge.
Example: You make an initial Purchase Payment of $10,000 in Contract Year 1,
and make additional Purchase Payments of $1,000 and $6,000 in Contract Year
2. With Earnings, your Contract Value in Contract Year 3 is $19,000. In
Contract Year 3, you may withdraw $3,700 free of the withdrawal charges
(your total Purchase Payments were $17,000, so 10% of that total equals
$1,700, plus you had $2,000 of Earnings). After this withdrawal, your
Contract Value is $15,300 (all attributable to Purchase Payments). In
Contract Year 4, your Contract Value falls to $12,500; you may withdraw
$1,530 (10% of $15,300) free of any withdrawal charges.
How the Charge is Determined
The amount of the charge depends on how long each Purchase Payment was held
under your Contract. Each Purchase Payment you make is considered to have a
certain "age," depending on the length of time since that payment was
effective. A Purchase Payment is "one year old" or has an "age of one" from the
day it is effective until the beginning of the day preceding your next Contract
Anniversary; beginning on the day preceding that Contract Anniversary, your
Purchase Payment will have an "age of two", and increases in age on the day
preceding each Contract Anniversary. When you withdraw an amount subject to the
withdrawal charge, the "age" of the Purchase Payment you withdraw determines
the level of withdrawal charge as follows:
[Download Table]
"Age" of Payment Withdrawal
in Years Charge
---------------- ----------
1............................................ 7%
2............................................ 7%
3............................................ 6%
4............................................ 5%
5............................................ 3%
6............................................ 1%
7 or more.................................... 0%
We calculate your withdrawal charge by assuming that your Earnings are
withdrawn first, followed by amounts attributed to Purchase Payments with the
"oldest" Purchase Payment withdrawn first. The withdrawal charge will be
deducted proportionally among all Investment Options from which the withdrawal
occurs. Any applicable Annual Fee will be deducted after the withdrawal charge
is calculated. In addition, amounts you withdraw from your GIO(s) will be
subject to the MVA. See THE GENERAL ACCOUNT--Withdrawals and Transfers.
24
We pay sales commissions and other expenses associated with promotion and sales
of the Contracts to broker-dealers. The withdrawal charge is designed to
reimburse us for these costs, although we expect that our actual expenses will
be greater than the amount of the withdrawal charge. Broker-dealers may receive
aggregate commissions of up to 8.00% of your aggregate Purchase Payments.
Under certain circumstances and in exchange for lower initial commissions,
certain sellers of Contracts may be paid a persistency trail commission which
will take into account, among other things, the length of time Purchase
Payments have been held under a Contract, and Account Values. A trail
commission is not anticipated to exceed 1.00%, on an annual basis, of the
Account Values considered in connection with the trail commission. We may also
pay override payments, expense allowances, bonuses, wholesaler fees and
training allowances. Registered representatives earn commissions from the
broker-dealers with which they are affiliated and such arrangements may vary.
In addition, registered representatives who meet specified production levels
may qualify, under sales incentive programs adopted by us, to receive non-cash
compensation such as expense-paid trips, expense-paid educational seminars, and
merchandise.
Transfers
Transfers of all or part of your Account Value from one Investment Option to
another are not considered a withdrawal of an amount from your Contract, so no
withdrawal charge is imposed at the time of transfer. See HOW YOUR INVESTMENTS
ARE ALLOCATED--Transfers section in this Prospectus. However, amounts
transferred from a GIO before its Guarantee Term has expired are subject to the
MVA. See THE GENERAL ACCOUNT--Withdrawals and Transfers and GIOs sections in
this Prospectus.
Premium Taxes
Depending on your state of residence (among other factors), a tax may be
imposed on your Investments at the time your Investment is made, at the time of
a partial or full 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 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 Investments ("premium taxes"), we will
impose a similar charge against your Contract Value. Premium tax is subject to
state requirements. We normally will charge you when you annuitize some or all
of your Contract Value. We reserve the right to impose this charge for
applicable premium taxes when you make a full or partial withdrawal, at the
time any death benefit proceeds are paid, or when those taxes are incurred.
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 Investments 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 Investments.
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 Net Contract Value is less than $50,000 on that date. The fee is not
imposed on amounts you annuitize or on payment of death benefit proceeds. The
fee reimburses certain of our costs in administering the Contracts and the
Separate Account; we do not intend to realize a profit from this fee or the
Administrative Fee. This fee is guaranteed not to increase for the life of your
Contract.
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Your Annual Fee will be charged proportionately against your Investment
Options. Assessments against your Variable Investment Options are made by
debiting some of the Subaccount Units previously credited to your Contract;
that is, assessment of the Annual Fee does not change the Unit Value for those
Subaccounts.
Waivers and Reduced Charges
We may agree to reduce or waive the withdrawal charge or the Annual Fee, or
credit additional amounts under our Contracts, in situations where selling
and/or maintenance costs associated with the Contracts are reduced, such as the
sale of several Contracts to the same 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 some or all of such charges 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 Select 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. These credits will be added to an Eligible Person's
Contract when we apply the Investments. We may also agree to waive minimum
Investment requirements for Eligible Persons.
We will only reduce or waive withdrawal or other charges, reduce or waive
minimums, or credit additional amounts on any Contract where expenses
associated with the sale or distribution of the Contract and/or costs
associated with administering and maintaining the Contract are reduced. We
reserve the right to terminate waiver, reduced charge and crediting programs at
any time, including for issued Contracts.
If you are an Eligible Person, you will not keep any amounts credited if you
return your Contract during the Free Look period as described under the
WITHDRAWALS--Right to Cancel ("Free Look") section in this Prospectus.
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 1.25% of each
Subaccount's assets; this charge may not be increased for the duration of your
Contract.
The Risk Charge will stop at annuitization if you select a fixed annuity. The
Risk Charge 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.
We will realize a gain if the Risk Charge exceeds our actual cost of expenses
and benefits, and will suffer a loss if such actual costs exceed the Risk
Charge. Any gain will become part of our General Account; we may use it for any
reason, including covering sales expenses on the Contracts.
26
Administrative Fee
We charge an Administrative Fee as compensation for costs we incur in operating
the Separate Account and issuing and administering the Contracts, including
processing applications and payments, and issuing reports to you and to
regulatory authorities.
The Administrative Fee is assessed daily at an annual rate of 0.15% 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. The
Administrative Fee will continue after annuitization if you choose any variable
annuity.
Annual Enhanced Guaranteed Minimum Death Benefit Rider (EGMDBR) Charge
(Optional Rider)
If you purchase the Enhanced Guaranteed Minimum Death Benefit Rider, we charge
an annual Enhanced Death Benefit Charge which is described under PURCHASING
YOUR CONTRACT--Purchasing the Enhanced Guaranteed Minimum Death Benefit Rider
(Optional) section in this Prospectus.
Annual Earnings Enhancement Guarantee (EEG) Charge (Optional Rider)
If you purchase the EEG Rider, we deduct annually an Earnings Enhancement
Guarantee Charge ("EEG Charge") for expenses related to the EEG Rider. The EEG
Charge is also called the GEE Charge in the Contract's Rider. The EEG Charge is
equal to 0.25% multiplied by your Contract Value on the date the Charge is
deducted. The Earning Enhancement Guarantee Charge is also called the
Guaranteed Earnings Enhancement (GEE) Charge in your Contract's Rider.
We will deduct the EEG Charge from your Investment Options on a proportionate
basis on each Contract Anniversary following the date you purchase the Rider,
if the EEG Rider is in effect.
Any portion of the EEG Charge we deduct from a Fixed Option will not be greater
than the annual interest credited in excess of 3%. If you make a full
withdrawal of the amount available for withdrawal during a Contract Year, we
will deduct the entire EEG Charge for that Contract Year from the final payment
made to you.
Annual Guaranteed Income Advantage (GIA) Charge (Optional Rider)
If you purchase the GIA Rider, we deduct annually a Guaranteed Income Advantage
Charge ("GIA Charge") for expenses related to the GIA Rider. The GIA Charge is
equal to 0.30% multiplied by your Contract Value on the date the Charge is
deducted.
We will deduct the GIA Charge from your Investment Options on a proportionate
basis:
. on each Contract Anniversary the GIA Rider remains in effect;
. on the Annuity Date, if the GIA Rider is still in effect;
. when the GIA Rider is terminated.
Any portion of the GIA Charge we deduct from the Fixed Option, the DCA Plus
Fixed Option and the Guaranteed Interest Options ("GIOs") will not be greater
than the annual interest credited in excess of 3%. If you terminate the GIA
Rider, we will charge your Contract for the annual GIA Charge on the effective
date of termination. If you make a full withdrawal of the amount available for
withdrawal during a Contract Year, we will deduct the entire GIA Charge for the
Contract Year in which you make the full withdrawal from the final payment made
to you.
Expenses of the Fund
Your Variable Account Value reflects advisory fees and other expenses incurred
by the various Portfolios of the Fund, net of any applicable 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.
27
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. We will send the annuity payments to the
payee that you designate. If you are buying a Qualified Contract, you must be
the sole Annuitant; if you are buying a Non-Qualified Contract you may choose
yourself and/or another person. Whether you choose to have a sole or two Joint
Annuitants, you may choose a Contingent Annuitant; more information on these
options is provided in the SAI. You will not be able to add or change a sole or
Joint Annuitant after your Contract is issued; however, if you are buying a
Qualified Contract, you may add a Joint Annuitant at the time of annuitization.
You will be able to add or change a Contingent Annuitant until your Annuity
Date or the death of your sole Annuitant or both Joint Annuitants, whichever
occurs first; however, once your Contingent Annuitant has become the Annuitant
under your Contract, no additional Contingent Annuitant may be named. No
Annuitant (primary, joint or contingent) may be named upon or after reaching
his or her 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 applicable MVAs, and any applicable charge
for premium taxes and/or other taxes, (the "Conversion Amount"), as long as
such Conversion Amount annuitized is at least $10,000, subject to any state
exceptions. If you annuitize only a portion of this available Contract Value,
you may have the remainder distributed, less any applicable charge for premium
taxes and/or other taxes, any applicable withdrawal charge, any applicable MVA,
any Annual Fee, any Enhanced Death Benefit Charge, and any GIA Charge. This
option may or may not be available, or may be available only for certain types
of contracts. Any such distribution will be made to you in a single sum if the
remaining Conversion Amount is less than $10,000 on your Annuity Date.
Distributions under your Contract may have tax consequences. You should consult
a qualified tax adviser for information on annuitization.
Choosing Your Annuity Date ("Annuity Start Date")
You should choose your Annuity Date when you submit your application or we will
apply a default Annuity Date to your Contract.
You may change your Annuity Date by notifying us, in proper form, at least ten
Business Days prior to the earlier of your 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 95th birthday however, to meet IRS
minimum distribution rules your required minimum distribution date may be
earlier than your Annuity Date; if you have Joint Annuitants and a Non-
Qualified Contract, your Annuity Date cannot be later than your younger Joint
Annuitant's 95th birthday; if you have Joint Annuitants and a Qualified
Contract, your Annuity Date cannot be later than your own 95th birthday.
Different requirements may apply in some states. If your Contract is a
Qualified Contract, you may also be subject to additional restrictions. Adverse
federal tax consequences may result if you choose an Annuity Date that is prior
to an Annuitant's attained age 59 1/2. See FEDERAL TAX STATUS section in this
Prospectus.
You should carefully review the Annuity Options with your financial tax
adviser, and, for Contracts used in connection with a Qualified Plan, reference
should be made to the terms of the particular plan and the requirements of the
Code for pertinent limitations respecting annuity payments, required minimum
distributions, and other matters. For instance, under requirements for
retirement plans that qualify under Section 401 or 408 of the Code, required
minimum distributions, or 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.
28
For retirement plans that qualify under section 401 or 408 of the Code,
distributions must begin no later than the Required Minimum Date of the April 1
of the calendar year following the year in which the Owner/Annuitant reaches
age 70 1/2. These distributions are subject to the "minimum distribution and
incidental death benefit", "MDIB", rules of Code Section 401(a)(9) and the
Regulations thereunder, and shall comply with such rules. Accordingly:
(a) The entire interest under the Contract shall be distributed to the
Owner/Annuitant:
(i) Not later than the April 1st next following the close of the calendar
year in which the Owner/Annuitant attains age 70 1/2, or
(ii) Commencing not later than the Required Beginning Date, over the
Owner/Annuitant's life or the lives of the Owner/Annuitant and his or
her Beneficiary.
(b) For purposes of calculating life expectancy for retirement plans under Code
Section 401 or 408, life expectancy is computed by use of the expected
return multiples V and VI of Regulation Section 1.72-9. Unless otherwise
elected by the Owner by the Required Beginning Date, life expectancy for
the Owner shall be recalculated annually, but shall not be recalculated
annually for any spouse Beneficiary. Any election by the Owner/Annuitant to
recalculate (or not) the life expectancy of the Owner/Annuitant or of the
spouse Beneficiary shall be irrevocable and shall apply to all subsequent
years. The life expectancy of a non-spouse Beneficiary may not be
recalculated. Instead, where the life expectancy of a Beneficiary (or
Owner/Annuitant) is not recalculated annually, such a life expectancy shall
be calculated using the attained age of such Beneficiary (or
Owner/Annuitant) during the calendar year in which the Owner attains 70
1/2, and payments for subsequent years shall be calculated based on such
life expectancy reduced by one year for each calendar year which has
elapsed since the calendar year life expectancy was first calculated.
(c) The method of distribution selected also shall comply with the MDIB rule of
Code Section 401(a)(9), and proposed Regulation Section 1.401(a)(9)-2.
On January 11, 2001 the Internal Revenue Service (IRS) issued Revised Proposed
Regulations that simplify the existing Required Minimum Distribution rules.
Under the Revised Proposed Regulations, effective January 1, 2002, the IRS is
mandating that all IRA holders (with one exception) use a Uniform Distribution
Table to calculate their Required Minimum Distributions. Clients will no longer
need to make elections at age 70 1/2.
The Uniform Distribution Table is based on a joint life expectancy and uses the
IRA owner's actual age and assumes that the beneficiary is 10 years younger
than the IRA owner. Note that under these proposed regulations, the IRA owner
does not need to actually have a named beneficiary when they turn 70 1/2.
The exception is for an IRA owner who has a spouse, who is more than 10 years
younger, as the sole beneficiary on the IRA. In that situation, the spouse's
actual age (and life expectancy) will be used in the joint life calculation.
For calendar year 2001, taxpayers may rely on either the Revised Proposed
Regulations or the existing (1987 proposed) regulations. If any future guidance
from the IRS is more restrictive than the guidance in these Revised Proposed
Regulations, the future guidance will be issued without retroactive effect.
However, if a plan qualified under Section 401(a) of the Code or a 403(b)
contract so provides, no distributions are required for individuals who are
employed after age 70 1/2 (other than 5% owners) until they retire. If a plan
is qualified under Section 408A of the Code, no minimum distributions are
required at any time.
For retirement plans that qualify under Section 401 or 408 of the Code, the
period elected for receipt of required minimum distributions or annuity
payments under Annuity Options 2 and 4 (a) generally may be no longer than the
joint life expectancy of the Annuitant and Beneficiary in the year that the
Annuitant reaches age 70 1/2, and (b) must be shorter than such joint life
expectancy if the Beneficiary is not the Annuitant's spouse and is more than 10
years younger than the Annuitant. Under Option 3, if the Beneficiary is not the
Annuitant's spouse and is more than 10 years younger than the Annuitant, the 66
2/3% and 100% elections specified below may not be available. The restrictions
on options for retirement plans that qualify under Sections 401 and 408 also
apply to a retirement plan that qualifies under Section 403(b) with respect to
amounts that accrued after December 31, 1986.
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Subject to legislation, if you annuitize only a portion of your Net Contract
Value on your Annuity Date, you may, at that time, have the option to elect not
to have the remainder of your Contract Value distributed, but instead to
continue your Contract with that remaining Contract Value (a "continuing
Contract"). If this option is available, you would then choose a second Annuity
Date for your continuing Contract, and all references in this Prospectus to
your "Annuity Date" would, in connection with your continuing Contract, be
deemed to refer to that second Annuity Date. This option may not be available,
or may be available only for certain types of Contracts. You should be aware
that some or all of the payments received before the second Annuity Date may be
fully taxable. We recommend that you call your tax adviser for more information
if you are interested in this option.
Default Annuity Date and Options
If you have a Non-Qualified Contract and you do not choose an Annuity Date when
you submit your application, your Annuity Date will be your Annuitant's 95th
birthday or your younger Joint Annuitant's 95th birthday, whichever applies;
however some states' laws may require a different Annuity Date. Certain
Qualified Plans may require distribution to occur at an earlier age.
If you have not specified an Annuity Option or do not instruct us otherwise, at
your Annuity Date your Net Contract Value, less any applicable MVA, and/or
charges for premium taxes and/or other taxes, will be annuitized (if this net
amount is at least $10,000) as follows: the net amount from your Fixed Option,
DCA Plus Fixed Option Value and GIO Value will be converted into a fixed-dollar
annuity and the net amount from your Variable Account Value will be converted
into a variable-dollar annuity directed to the Subaccounts proportionate to
your Account Value in each. If you have a Non-Qualified Contract, or if you
have a Qualified Contract and are not married, your default Annuity Option will
be Life with 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 may make three basic decisions about your annuity payments. First, you may
choose whether you want those payments to be a fixed-dollar amount and/or a
variable-dollar amount, subject to state availability. Second, you may choose
the form of annuity payments (see Annuity Options below). Third, you may decide
how often you want annuity payments to be made (the "frequency" of the
payments). You may not change these selections after 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,
(but not under the Fixed Option, DCA Plus Fixed Option or GIOs).
If you select a variable annuity, you may choose as many Variable Investment
Options as you wish; the amount of the periodic annuity payments will vary with
the investment results of the Variable Investment Options selected. After the
Annuity Date, Annuity Units may be exchanged among available Variable
Investment Options up to four times in any twelve-month period. How your
Contract converts into a variable annuity is explained in more detail in THE
CONTRACTS AND THE SEPARATE ACCOUNT section in the SAI.
Annuity Options
Four Annuity Options are currently available under the Contracts, although
additional options may become available in the future.
1. Life Only. Periodic payments are made to the designated payee during the
lifetime of the Annuitant (even if the Owner dies). Payments stop when
the Annuitant dies.
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2. Life with Period Certain. Periodic payments are made to the designated
payee during the lifetime of the Annuitant (even if the Owner dies), with
payments guaranteed for a specified period. You may choose to have
payments guaranteed for anywhere from 5 through 30 years (in full years
only). If the Annuitant dies before the guaranteed payments are
completed, the Beneficiary receives the remainder of the guaranteed
payments, if living; otherwise the Owner, if living; otherwise the
Owner's estate.
3. Joint and Survivor Life. Periodic payments are made during the lifetime
of the Primary Annuitant. After the death of the Primary Annuitant,
periodic payments are made to the secondary Annuitant named in the
election if and so long as such secondary Annuitant lives. You may choose
to have the payments to the surviving secondary Annuitant equal 50%, 66
2/3% or 100% of the original amount payable made during the lifetime of
the Primary Annuitant (you must make this election when you choose your
Annuity Option). If you elect a reduced payment based on the life of the
secondary Annuitant, fixed annuity payments will equal to 50% or 66 2/3%
of the original fixed payment payable during the lifetime of the Primary
Annuitant; variable annuity payments will be determined using 50% or 66
2/3%, as applicable, of the number of Annuity Units for each Subaccount
credited to the Contract as of the date of death of the Primary
Annuitant. Payments stop when both Annuitants have died.
4. Period Certain Only. Periodic payments are made to the designated payee
over a specified period. You may choose to have payments continue for
anywhere from 5 through 30 years (in full years only). If the Annuitant
dies before the guaranteed payments are completed, the Beneficiary
receives the remainder of the guaranteed payments, if living; otherwise
the Owner, if living; otherwise the Owner's estate.
If the Owner dies, after the Annuity Date, the Owner's rights are assumed by
the Joint or Contingent Owner, if living; if not to the Beneficiary, if living;
if not to the Contingent Beneficiary, if living; if not to the Owner's estate.
For Contracts issued in connection with a Qualified Plan, please refer to the
section in this Prospectus under Choosing Your Annuity Date ("Annuity Start
Date"). If your Contract was issued in connection with a Qualified Plan subject
to Title I of the Employment 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.
Guaranteed Income Advantage Annuity Option
If you purchase the GIA Rider (subject to state availability), you may choose
any of the Annuity Options described above, or you may choose the Guaranteed
Income Advantage Annuity Option if 10 years have passed since the GIA Rider was
purchased and the GIA Rider is still in effect. You must choose fixed annuity
payments under this Guaranteed Income Advantage Annuity Option.
The guaranteed income purchased per $1,000 of the net amount applied to the
annuity payments will be based on an annual interest rate of 2.5% and the 1983a
Annuity Mortality Table with the age set back 10 years. The net amount applied
to the annuity payments under the Guaranteed Income Advantage Annuity Option
will be based on the higher of the Guaranteed Income Base or the Enhanced
Income Base, which are described below.
1. Guaranteed Income Base--If you purchase the GIA Rider on the Contract Date,
the Guaranteed Income Base is equal to the Purchase Payments less an
adjustment for each withdrawal, increased at a 5% effective annual rate of
interest. We calculate the adjustment for each withdrawal by multiplying the
Guaranteed Income Base prior to a withdrawal by the ratio of the amount of
the withdrawal, including applicable withdrawal charges and MVAs, to the
Contract Value immediately prior to withdrawal.
If you purchase the GIA Rider on a Contract Anniversary after the Contract
Date, the Guaranteed Income Base is equal to the Contract Value on the date
the GIA Rider is purchased, plus all Purchase Payments made after the GIA
Rider is purchased, less an adjustment for each withdrawal occurring after
the GIA was elected, increased at a 5% effective annual rate of interest. We
calculate the adjustment for each withdrawal by multiplying the Guaranteed
Income Base prior to the withdrawal by the ratio of the amount of the
withdrawal, including applicable withdrawal charges and MVAs to the Contract
Value immediately prior to the withdrawal.
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The effective annual rate of interest will take into account the timing of
when each Purchase Payment and withdrawal occurred. We accomplish this by
applying a daily factor of 1.000133681 to each day's Guaranteed Income Base
balance. The 5% effective annual rate of interest will stop accruing as of
the earlier of:
. the Contract Anniversary following the date the youngest Annuitant reaches
his or her 80th birthday;
. a full withdrawal of the amount available for withdrawal under the
Contract;
. a death benefit becomes payable under the Contract;
. any termination of the Contract in accordance with the provisions of the
Contract;
. the Annuity Date; or
. termination of the GIA Rider.
On the Annuity Date, the net amount we apply to the annuity payments will be
the Guaranteed Income Base reduced by any remaining withdrawal charges
associated with additional Purchase Payments added to the Contract, any MVAs,
any applicable state premium tax, and any outstanding Contract Debt.
2. Enhanced Income Base--The Enhanced Income Base is equal to your Net Contract
Value on the Annuity Date plus an additional 15% of the amount equal to:
. the Net Contract Value on the Annuity Date;
. less the sum of all Purchase Payments applied to the Contract in the 12
months prior to the Annuity Date.
On the Annuity Date, the net amount we apply to the annuity payments will be
the Enhanced Income Base reduced by any withdrawal charges, MVAs, and any
applicable state premium tax.
The structure of the annuity payments that may be elected under the Guaranteed
Income Advantage Annuity Option are:
. 15 years or More Period Certain;
. Life;
. Joint and Survivor Life;
. Life with 10 Years or More Period Certain.
If you elect the Guaranteed Income Advantage ("GIA") Annuity Option, the waiver
of withdrawal charges as described in the Contract will not apply. We will
reduce the net amount applied to the annuity payments under the Guaranteed
Income Advantage Annuity Option by any remaining withdrawal charges. The rider
contains annuity tables for each GIA Annuity Option available.
Frequency of Payments
You may choose to have annuity payments made monthly, quarterly, semiannually,
or annually. The amount of a variable payment will be determined in each period
on the date corresponding to your Annuity Date, and payment will be made on the
next succeeding day.
Your initial annuity payment must be at least $250. Depending on the net amount
you annuitize, this requirement may limit your options regarding the period
and/or frequency of annuity payments.
Your Annuity Payments
Amount of the First Payment
Your Contract contains tables that we use to determine the amount of the first
annuity payment under your Contract, taking into consideration the annuitized
portion of your Net Contract Value at the Annuity Date. This amount will vary,
depending on the annuity period and payment frequency you select; this amount
will be
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larger in the case of shorter Period Certain annuities and smaller for longer
Period Certain annuities. Similarly, this amount will be greater for a Life
Only annuity than for a Joint and Survivor Life annuity, because we will expect
to make payments for a shorter period of time on a Life Only annuity. If you do
not choose the Period Certain Only annuity, this amount will also vary
depending on the age of the Annuitant(s) on the Annuity Date and, for some
Contracts in some states, the sex of the Annuitant(s).
For fixed annuity payments, the guaranteed income factors in our tables are
based on an annual interest rate of 3% and the 1983a Annuity Mortality Table
with the ages set back 10 years. If you elect a fixed annuity, fixed annuity
payments will be based on the periodic income factors in effect for your
Contract on the Annuity Date which are at least the guaranteed income factors
under the Contract.
For variable annuity payments, the tables are based on an assumed annual
investment return of 5% and the 1983a Annuity Mortality Table with the ages set
back 10 years. If you elect a variable annuity, your initial variable annuity
payment will be based on the applicable variable annuity income factors in 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 a
constant 5% annually, annuity payments will be level. The assumed investment
return is explained in more detail in the SAI under THE CONTRACTS AND THE
SEPARATE ACCOUNT section.
Death Benefits
Death benefit proceeds may be payable on proof of death before the Annuity Date
of the Annuitant or of any Contract Owner while the Contract is in force. The
amount of the death benefit will be paid according to the Death Benefit
Proceeds section below.
The "Notice Date" is the day on which we receive proof (in proper form) of
death and instructions regarding payment of death benefit proceeds.
Death Benefit Proceeds
The proceeds of any death benefit payable will be payable upon receipt, in
proper form, of proof of death and instructions regarding payment of death
proceeds. Such proceeds will equal the amount of the death benefit reduced by
any charge for premium taxes and/or other taxes and any Contract Debt. The
death benefit proceeds will be payable in a single sum, as an annuity, 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.
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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 Owner was an Annuitant, the designated
recipient is the Joint Owner, if living; if not the Beneficiary, if living; if
not, the Contingent Beneficiary, if living; if not, the Owner's estate.
Spousal Continuation
A sole designated recipient who is the Owner's spouse may elect to become the
Owner (and sole Annuitant if the deceased Owner had been the Annuitant) and
continue the Contract until the earliest of the spouse's death, the death of
the Annuitant, or the Annuity Date. On the Notice Date, if the surviving spouse
is deemed to have continued the Contract, Pacific Life will set the Contract
Value equal to the death benefit proceeds that would have been payable to the
spouse as the deemed Beneficiary/designated recipient of the death benefit
("Add-In Amount"). Add-In Amount will be added to the Contract Value on the
Notice Date. There will not be an adjustment to the Contract Value if the
Contract Value is equal to the death benefit proceeds as of the Notice Date.
The Add-In Amount will be allocated among Investment Options in accordance with
the current allocation instructions for the Contract and may be, under certain
circumstances, considered earnings. A Joint or Contingent Owner who is the
designated recipient but not the Owner's spouse may not continue the Contract.
If you are a non-individual Owner of a Contract other than a Contract issued
under a Qualified Plan as defined in Section 401 or 403 of the Code, the
Primary Annuitant will be treated as the Owner of the Contract for purposes of
these Distribution Rules. If there is a change in the Primary Annuitant prior
to the Annuity Date, such change will be treated as the death of the Owner. The
amount of the death benefit in this situation will be (a) the Contract Value if
the non-individual Owner elects to maintain the Contract and reinvest the
Contract Value into the Contract in the same amount as immediately prior to the
distribution, or (b) the Contract Value less any Annual Fee, any Enhanced Death
Benefit Charge, and any withdrawal transaction fee, any charges for
withdrawals, and/or premium taxes, if the non-individual Owner elects a cash
distribution. The amount of the death benefit will be determined as of the
Business Day we receive, in proper form, the request to change the Primary
Annuitant and instructions regarding maintaining the Contract or cash
distribution.
The Contract incorporates all applicable provisions of Code Section 72(s) and
any successor provision, as deemed necessary by us to qualify the Contract as
an annuity contract for federal income tax purposes, including the requirement
that, if the owner dies before the Annuity Date, any death benefit proceeds
under the Contract shall be distributed within five years of the Owner's death
(or such other period that we offer and that is permitted under the Code or
such shorter period as we may require).
Qualified Plan Death of Annuitant Distribution Rules
Under Internal Revenue Service regulations, if the Contract is owned under a
Qualified Plan as defined in Section 401, 403, 408, 408A, or 457 of the Code
and the Annuitant dies before the commencement of distributions, the payment of
any death benefit must be made to the designated recipient no later than
December 31 of the calendar year in which the fifth anniversary of the
Annuitant's death falls. In order to satisfy this requirement, the designated
recipient must receive a lump sum payment or elect to receive the Annuitant's
interest in the Contract in equal or substantially equal installments over a
period not exceeding the lifetime or life expectancy of the designated
recipient. If the designated recipient elects the installment payment option,
the Internal Revenue Service regulations provide that payments must begin no
later than December 31 of the calendar year which follows the calendar year in
which the Annuitant died. However, (except in the case of a Roth IRA) if the
designated recipient is the spouse of the Annuitant at the time of the
Annuitant's death ("surviving spouse"), then, under the regulations, payments
under the installment payment option must begin no later than December 31 of
the calendar year in which the Annuitant would have reached age 70 1/2.
Under our administrative procedures, payments must commence no later than the
first anniversary of the death of the Annuitant; however, if the designated
recipient is the surviving spouse and if the surviving spouse elects to defer
the commencement of installment payments beyond the first anniversary of the
Annuitant's death, the surviving spouse will be deemed to continue the contract
as the sole Annuitant and will not be entitled to death benefit proceeds as a
result of the death of the Annuitant; instead the Guaranteed Minimum Death
Benefit
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Amount (defined below) and payment of any death benefit proceeds will be
determined upon our receipt of proof of death and instructions regarding
payment of the surviving spouse as sole Annuitant. Further, under our
administrative procedures, if the installment payment (annuity) option election
is not received by us in good order within 60 days of (or shorter period as we
permit) our receipt of proof in proper form of the Annuitant's death or, if
earlier, before the sixtieth day preceding (1) the first anniversary of the
Annuitant's death or (2) the date on which the Annuitant would have attained
age 70 1/2, the lump sum option will be deemed by us to have been elected,
unless otherwise required by law. If the lump sum option is deemed elected, we
will treat that deemed election as receipt of instructions regarding payment of
death benefit proceeds.
If the Annuitant dies after the commencement of distributions but before the
Annuitant's entire interest in the Contract (other than a Roth IRA) has been
distributed, the remaining interest in the Contract must be distributed to the
designated recipient at least as rapidly as under the distribution method in
effect at the time of the Annuitant's death.
Death Benefit Amounts
The Death Benefit Amount as of any day (prior to the Annuity Date) is equal to
the greater of (a) your Contract Value as of that day, or (b) your aggregate
Purchase Payments, reduced by any applicable charges, and/or MVAs and further
reduced by an amount for each withdrawal that is calculated by multiplying the
aggregate Purchase Payments received prior to each withdrawal by the ratio of
the amount of each withdrawal, including applicable withdrawal charges, to the
Contract Value immediately prior to each withdrawal. We calculate the Death
Benefit Amount as of the Notice Date.
The Guaranteed Minimum Death Benefit Amount is calculated only when death
benefit proceeds become payable as a result of the death of the sole Annuitant,
or the first death of an Owner who is also an Annuitant, prior to the Annuity
Date, and is determined as follows: First, we calculate what the Death Benefit
Amount would have been as of your sixth Contract Anniversary and each
Subsequent Contract Anniversary that occurs while the Annuitant is living and
before the Annuitant reaches his or her 76th birthday (each of these Contract
Anniversaries is a "Milestone Date"). Subject to approval of insurance
authorities in your state of issue, if your Contract is issued before the
Annuitant's 75th birthday, we will calculate what the Death Benefit Amount
would have been as of the Contract Anniversary immediately following the
Annuitant's 75th birthday while the Annuitant is living (also a Milestone Date)
even if such Milestone Date occurs before your sixth Contract Anniversary. This
added feature will benefit Contracts where the Annuitant is from age 69 through
74 at the time the Contract is issued.
We then adjust the Death Benefit Amount for each Milestone Date by: (i) adding
the aggregate amount of any Purchase Payments received by us since the
Milestone Date; and (ii) subtracting an amount for each withdrawal that has
occurred since that Milestone Date, which is calculated by multiplying the
Death benefit Amount by the ratio of the amount of each withdrawal that has
occurred since that Milestone Date, including any withdrawal charge, to the
Contract Value immediately prior to the withdrawal.
The highest of these adjusted Death Benefit Amounts for each Milestone Date, 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.
Optional Enhanced Guaranteed Minimum Death Benefit Rider (EGMDBR)
If at the time your application is completed, you purchase the EGMDBR (subject
to state availability), the Death Benefit Amounts stated above are replaced
with the following:
The Death Benefit Amount as of any day (prior to the Annuity Date) is equal to
the greater of (a) your Contract Value as of that day, or (b) your aggregate
Purchase Payments less an adjusted amount for each withdrawal, including
withdrawal charges and MVAs, increased at an effective annual rate of 6% (and
subject to a maximum of two times the difference between the aggregate Purchase
Payments and withdrawals, including withdrawal charges and MVAs). The 6%
effective annual rate of growth will take into account the timing of when each
Purchase Payment and withdrawal occurred by applying a daily factor of
1.000159654 to each day's balance. The 6% effective annual rate of growth will
stop accruing as of the earlier of: (i) the Contract Anniversary following the
date the Annuitant reaches his or her 80th birthday; (ii) the date of death of
the sole Annuitant; or (iii) the Annuity Date.
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To determine the adjusted amount for each withdrawal:
(i) we divide the amount of each withdrawal, including withdrawal charges
and MVAs, by your contract value immediately before that withdrawal; and
(ii) we then multiply the result by your Death Benefit Amount (as described
in Section b) above), immediately before that withdrawal.
The Guaranteed Minimum Death Benefit Amount is calculated only when death
benefit proceeds become payable as a result of the death of the sole Annuitant,
or the first death of an Owner who is also an Annuitant, prior to the Annuity
Date, and is determined as follows:
First, we calculate what the Death Benefit Amount would have been as of the
quarterly anniversary following the Contract Date and as of each subsequent
quarterly anniversary that occurs while the Annuitant is living and up to and
including the Contract Anniversary following the Annuitant's 65th birthday.
Quarterly anniversaries are measured from the Contract Date. After the Contract
Anniversary following the Annuitant's 65th birthday, we calculate what the
Death Benefit Amount would have been as of each Contract Anniversary that
occurs while the Annuitant is living and before the Annuitant reaches his or
her 81st birthday. Each quarterly anniversary and each Contract Anniversary in
which a Death Benefit Amount is calculated is referred to as a "Milestone
Date." We then adjust the Death Benefit Amount for each Milestone Date by: (i)
adding the aggregate amount of any Purchase Payments received by us since that
Milestone Date; and (ii) subtracting an amount for each withdrawal that has
occurred since that Milestone Date, which is calculated by Multiplying the
Death Benefit Amount by the ratio of the amount of each withdrawal that has
occurred since that Milestone Date, including any withdrawal charge and MVA, to
the Contract Value immediately prior to the withdrawal.
The highest of these adjusted Death Benefit Amounts as of the Notice Date is
your Guaranteed Minimum Death Benefit if the EGMDBR is purchased. Calculations
of any Guaranteed Minimum Death Benefit are made only once death benefit
proceeds become payable under your Contract.
Optional Earnings Enhancement Guarantee (EEG) Rider
If you purchase the EEG Rider, (subject to state availability), an Earnings
Enhancement Guarantee amount ("EEG Amount"), is added to the death benefit
proceeds when such proceeds become payable as a result of the Annuitant's Death
or first death of an Owner who is also an Annuitant. The EEG Rider is also
called the Guaranteed Earnings Enhancement (GEE) Rider and the Earnings
Enhancement Guarantee Amount is called the GEE Amount in the Contract's Rider.
The EEG amount is calculated as follows:
If the age of the oldest Annuitant was age 69 or younger on the Effective Date
of the Rider, the EEG Amount is equal to the lesser of (a) or (b) below:
(a) 40% of Earnings; or
(b) 40% of Remaining Purchase Payments, excluding any Purchase Payments made
in the 12 months prior to the date of death, adjusted for withdrawals.
If the age of the oldest Annuitant was age 70 to 75 on the Effective Date of
the Rider, the EEG Amount is equal to the lesser of (a) or (b) below:
(a) 25% of Earnings; or
(b) 25% of Remaining Purchase Payments, excluding any Purchase Payments made
in the 12 months prior to the date of death, adjusted for withdrawals.
For purposes of calculating the EEG Amount, Earnings are equal to the Contract
Value as of the date of death minus Remaining Purchase Payments. Remaining
Purchase Payments is defined as (a) or (b) below:
(a) If the Rider is effective on the Contract Date, Remaining Purchase
Payments are equal to:
(i) the Initial Purchase Payments; plus
(ii) any additional Purchase Payments added; minus
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(iii) the amount that each withdrawal exceeds the amount of Earnings in
the Contract immediately prior to such withdrawal. Withdrawals are
assumed to be taken from Earnings first, then from Purchase
Payments in the order they were received.
(b) If the Rider is effective after the Contract Date, Remaining Purchase
Payments are equal to:
(i) the Contract Value on the Effective Date; plus
(ii) any additional Purchase Payments added since the Effective Date of
the Rider; minus
(iii) the amount that each withdrawal taken after the Effective Date of
the Rider exceeds the amount of Earnings in the Contract
accumulated since that date. Withdrawals are assumed to be taken
first from Earnings accumulated since the Effective Date of the
Rider, then from Purchase Payments in the order that they were
received.
If the Surviving Spouse of the deceased Owner continues the Contract in
accordance with its terms and conditions, then all provisions of the Rider for
the Surviving Spouse will be based on the age of the Surviving Spouse on the
date of death of the deceased Owner. If the Surviving Spouse is over age 75 on
the date of death, the Rider will not be continued for such Surviving Spouse
and the benefits and charges provided by the Rider will no longer be applied.
The Amount of the Death Benefit: Death of Annuitant
Upon the death of the sole Annuitant, or the first death of an Owner who is
also an Annuitant prior to the Annuity Date, the death benefit will be equal to
the greater of (a) or (b) below:
(a) the Death Benefit Amount as of the Notice Date; or if applicable
(b) the "Guaranteed Minimum Death Benefit Amount" as of the Notice Date,
if greater.
The following procedures apply in the event of death of an Annuitant who is not
also a Contract Owner: If your Contract names Joint Annuitants and only one
Joint Annuitant dies, the surviving Joint Annuitant becomes your sole Annuitant
and the death benefit is not yet payable. If your sole Annuitant dies (or if no
Joint Annuitant survives) and your Contract names a surviving Contingent
Annuitant, he or she becomes the sole Annuitant and the death benefit proceeds
are not yet payable. If there is no surviving Joint or Contingent Annuitant,
the death benefit proceeds are payable to the Owner, if living; if not, to the
Beneficiary, if living; if not to the Contingent Beneficiary, if living; if
not, to the Owner's estate.
If the owner is not the Annuitant and they die simultaneously, the death
benefit will be calculated under the Death of Annuitant provisions and 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 Contingent Beneficiary, if living; if not, to the Owner's estate.
The Amount of the Death Benefit: Death of a Contract Owner
If a Contract Owner who is not an Annuitant dies before the Annuity Date, the
amount of the death benefit will be equal to your Contract Value as of the
Notice Date and will be paid in accordance with the Death Benefit Proceeds
section 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 Contingent Beneficiary, if living, if not, to the
Owner's estate. See THE GENERAL ACCOUNT--Withdrawals and Transfers section in
this Prospectus.
If a Contract Owner who is an Annuitant dies before the Annuity Date, the
amount of the death benefit will be equal to the greater of (a) your Death
Benefit Amount as of the Notice Date, or (b) 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 you and the Annuitant(s) are non-individual persons, no death benefit
will be payable, and any distribution will be treated as a withdrawal and
subject to any applicable annual fee, withdrawal fee, withdrawal charge, charge
for premium taxes and MVAs.
37
WITHDRAWALS
Optional Withdrawals
You may, on or prior to your Annuity Date, withdraw all or a portion of the
amount available under your Contract. You may surrender your Contract and make
a full withdrawal at any time. Except as provided below, beginning 30 days
after your Contract Date, you also may make partial withdrawals from your
Investment Options at any time. You may request to withdraw a specific dollar
amount or a specific percentage of an Account Value or your Net Contract Value.
You may choose to make your withdrawal from specified Investment Options; if
you do not specify Investment Options, your withdrawal will be made from all of
your Investment Options proportionately. Each partial withdrawal must be for
$500 or more, except pre-authorized withdrawals, which must be at least $250.
If your partial withdrawal from an Investment Option would leave a remaining
Account Value in that Investment Option of less than 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. Any such DCA Plus Fixed
Option balance or any amount that would otherwise be allocated to the DCA Plus
Fixed Option will be allocated to the Variable Investment Options according to
your most recent DCA Plus transfer instructions. If your partial withdrawal
leaves you with a Net Contract Value of less than $1,000, we have the right, at
our option, to terminate your Contract and send you the withdrawal proceeds
described in the next section. Partial withdrawals from the Fixed Option in any
Contract Year are subject to restrictions. See GENERAL ACCOUNT--Withdrawals and
Transfers, and APPENDIX A: STATE LAW VARIATIONS sections in this Prospectus.
Amount Available for Withdrawal
The amount available for withdrawal is your Net Contract Value at the end of
the Business Day on which your withdrawal request is effective, less any
applicable Annual Fee, any Enhanced Death Benefit Charge, any withdrawal
charge, any withdrawal transaction fee, and any charge for premium taxes and/or
other taxes, and after application of the MVA, if appropriate. The amount we
send to you (your "withdrawal proceeds") will also reflect any required or
requested federal and state income tax withholding. See FEDERAL TAX STATUS and
THE GENERAL ACCOUNT--Withdrawals and Transfers sections in this Prospectus.
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 Investments you have allocated to that Subaccount.
Withdrawal Transaction Fees
There is currently no transaction fee for partial withdrawals. However, we
reserve the right to impose a withdrawal transaction fee in the future of up to
$15 for each partial withdrawal (including pre-authorized partial withdrawals)
in excess of 15 in any Contract Year. Any such fee would be charged against
your Investment Options proportionately based on your Account Value in each
immediately after the withdrawal.
Pre-Authorized Withdrawals
If your Contract Value is at least $5,000, you may select the pre-authorized
withdrawal option, and you may choose monthly, quarterly, semiannual or annual
withdrawals. Each withdrawal must be for at least $250. Each pre-authorized
withdrawal is subject to federal income tax on its taxable portion and may be
subject to a 10% penalty tax if you have not reached age 59 1/2. The GIOs are
not available for pre-authorized withdrawals. See FEDERAL TAX STATUS and THE
GENERAL ACCOUNT--Withdrawals and Transfers sections in this Prospectus.
Additional information and options are set forth in the SAI and in the Pre-
Authorized Withdrawal section of your application.
Special Requirements for Full Withdrawals
If you wish to withdraw the entire amount available under your Contract, you
must either return your Contract to us or sign and submit to us a "lost
Contract affidavit."
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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 section in this
Prospectus. Distributions may also trigger withholding for state income taxes.
The tax and ERISA rules relating to Contract withdrawals are complex. We are
not the administrator of any Qualified Plan. You should consult your tax
adviser and/or your plan administrator before you withdraw any portion of your
Contract Value.
Effective Date of Withdrawal Requests
Withdrawal requests are normally effective on the Business Day we receive them
in proper form. If you make Investments by check and submit a withdrawal
request immediately afterwards, payment of your withdrawal proceeds may be
delayed until your check clears.
Tax Consequences of Withdrawals
Withdrawals, including pre-authorized withdrawals, will generally have federal
income tax consequences, which could include tax penalties. You should consult
with a tax adviser before making any withdrawal or selecting the pre-authorized
withdrawal option. See FEDERAL TAX STATUS section in this Prospectus.
Right to Cancel ("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. If
you return your Contract, it will be canceled and treated as void from your
Contract Date. You will then receive a refund of your Contract 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 charges to
pay for premium taxes and/or other taxes. Thus, an Owner who returns a Contract
within the Free Look period bears only the investment risk on amounts
attributable to Purchase Payments. If we credit additional amounts to your
Contract as described in CHARGES, FEES, AND DEDUCTIONS--Waivers and Reduced
Charges section in this Prospectus, if you return your Contract during the Free
Look period you will not receive any amounts that we add as a credit or any
gains or losses on the amounts credited (but if the credited amounts and gains
on such amounts exceed the withdrawal charge percentage on your Contract, we
will refund the amount of the excess). You will receive any Contract fees and
charges that we deducted from the credited amounts. We have applied to the
Securities and Exchange Commission for an exemptive order to change the amount
you would receive if you return your Contract during the Free Look period. We
can not be sure that the SEC will grant this order, but if it is granted, you
would not receive any amounts that we add as a credit or Contract fees and
charges deducted from those amounts, but you would keep the gains or losses on
the credited amounts.
39
There are some states that require us to return a different amount if you are
replacing another annuity contract or life insurance policy. For any contract
issued as an IRA returned within 7 days after you receive it, we are required
to return all Purchase Payments (less any withdrawals made).
You'll find a complete description of the Free Look Period and amount to be
refunded that applies to your Contract on the Contract's cover page, or on a
notice that accompanies your Contract.
PACIFIC LIFE AND THE SEPARATE ACCOUNT
Pacific Life
Pacific Life Insurance Company is a life insurance company based in California.
Along with our subsidiaries and affiliates, our operations include life
insurance, annuity, pension and institutional products, group employee
benefits, broker-dealer operations, and investment advisory services. At the
end of 2000, we had over $124.7 billion of individual life insurance in force
and total admitted assets of $51.7 billion. We are ranked the 14th largest life
insurance carrier in the U.S. in terms of 2000 admitted assets.
The Pacific Life family of companies has total assets and funds under
management of $335.9 billion. We are authorized to conduct our life and annuity
business in the District of Columbia and in all states except New York. Our
principal office is at 700 Newport Center Drive, Newport Beach, California
92660.
We were originally organized on January 2, 1868, under the name "Pacific Mutual
Life Insurance Company of California" and reincorporated as "Pacific Mutual
Life Insurance Company" on July 22, 1936. On September 1, 1997, we converted
from a mutual life insurance company to a stock life insurance company
ultimately controlled by a mutual holding company and were authorized by
California regulatory authorities to change our name to Pacific Life Insurance
Company. Pacific Life is a subsidiary of Pacific LifeCorp, a holding company,
which, in turn, is a subsidiary of Pacific Mutual Holding Company, a mutual
holding company. Under their respective charters, Pacific Mutual Holding
Company must always hold at least 51% of the outstanding voting stock of
Pacific LifeCorp, and Pacific LifeCorp must always own 100% of the voting stock
of Pacific Life. Owners of Pacific Life's annuity contracts and life insurance
policies have certain membership interests in Pacific Mutual Holding Company,
consisting principally of the right to vote on the election of the Board of
Directors of the mutual holding company and on other matters, and certain
rights upon liquidation or dissolutions of the mutual holding company.
Our subsidiary, Pacific Select Distributors, Inc. (PSD) serves as the principal
underwriter (distributor) for the Contracts. PSD is located at 700 Newport
Center Drive, Newport Beach, California 92660. We and PSD enter into selling
agreements with broker-dealers, under which such broker-dealers act as agents
of ours and PSD in the sale of the Contracts.
We may provide you with reports of our ratings both as an insurance company and
as to our claims-paying ability with respect to our General Account assets. The
SAI presents more details about these ratings.
Separate Account A
Separate Account A was established on September 7, 1994 as a separate account
of ours, and is registered with the SEC under the 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 our general corporate obligations.
We are also the legal owner of the assets in the Separate Account. Assets of
the Separate Account attributed to the reserves and other liabilities under the
Contract and other contracts issued by us that are supported by the Separate
Account may not be charged with liabilities arising from any of our other
business; any income, gain or loss (whether or not realized) from the assets of
the Separate Account are credited to or charged against the Separate Account
without regard to our other income, gain or loss.
We may invest money in the Separate Account in order to commence its operations
and for other purposes, but not to support contracts other than variable
annuity contracts. A portion of the Separate Account's assets may include
accumulations of charges we make against the Separate Account and investment
results of assets so
40
accumulated. These additional assets are ours and we may transfer them to our
General Account at any time; however, before making any such transfer, we will
consider any possible adverse impact the transfer might have on the Separate
Account. Subject to applicable law, we reserve the right to transfer our assets
in the Separate Account to our General Account.
The Separate Account is not the sole investor in the Fund. Investment in the
Fund by other separate accounts in connection with variable annuity and
variable life insurance contracts may create conflicts. See the accompanying
Prospectus and the SAI for the Fund for more information.
FINANCIAL HIGHLIGHTS
The table below is designed to help you understand how the Variable Investment
Options have performed. It shows the value of a Subaccount Unit at the
beginning and end of each period, as well as the number of Subaccount Units at
the end of each period. A Subaccount Unit is also called an Accumulation Unit.
The information in the table for the period ended December 31, 2000 is included
in the financial statements of Separate Account A which have been audited by
Deloitte & Touche LLP, independent auditors. You should read the table in
conjunction with the financial statements for Separate Account A, which are
included in its annual report dated as of December 31, 2000.
[Enlarge/Download Table]
2000 1999 1998 1997 1996
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Aggressive Equity
Subaccount Unit Value at beginning of period $15.31 $12.19 $10.92 $10.67 $10.00
Subaccount Unit Value as of December 31 $11.92 $15.31 $12.19 $10.92 $10.67
Number of Subaccount Units outstanding at end of period 12,691,264 11,134,505 5,808,703 1,711,363 387,987
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Emerging Markets
Subaccount Unit Value at beginning of period $10.14 $6.70 $9.28 $9.57 $10.00
Subaccount Unit Value as of December 31 $6.43 $10.14 $6.70 $9.28 $9.57
Number of Subaccount Units outstanding at end of period 8,225,853 6,758,343 3,975,851 1,342,086 240,607
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Diversified Research/1/
Subaccount Unit Value at beginning of period $10.00 N/A N/A N/A N/A
Subaccount Unit Value as of December 31 $10.87 N/A N/A N/A N/A
Number of Subaccount Units outstanding at end of period 4,671,588 N/A N/A N/A N/A
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Small-Cap Equity/2/
Subaccount Unit Value at beginning of period $23.01 $17.98 N/A N/A N/A
Subaccount Unit Value as of December 31 $17.60 $23.01 N/A N/A N/A
Number of Subaccount Units outstanding at end of period 5,207,769 837,054 N/A N/A N/A
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International Large-Cap/1/
Subaccount Unit Value at beginning of period $10.00 N/A N/A N/A N/A
Subaccount Unit Value as of December 31 $7.74 N/A N/A N/A N/A
Number of Subaccount Units outstanding at end of period 16,119,405 N/A N/A N/A N/A
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Equity
Subaccount Unit Value at beginning of period $25.76 $18.85 $14.68 $12.59 $10.00
Subaccount Unit Value as of December 31 $19.01 $25.76 $18.85 $14.68 $12.59
Number of Subaccount Units outstanding at end of period 17,310,865 13,292,054 6,695,038 1,983,738 453,223
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I-Net Tollkeeper/3/
Subaccount Unit Value at beginning of period $10.00 N/A N/A N/A N/A
Subaccount Unit Value as of December 31 $6.72 N/A N/A N/A N/A
Number of Subaccount Units outstanding at end of period 5,473,395 N/A N/A N/A N/A
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Multi-Strategy
Subaccount Unit Value at beginning of period $16.01 $15.17 $13.01 $11.03 $10.00
Subaccount Unit Value as of December 31 $15.91 $16.01 $15.17 $13.01 $11.03
Number of Subaccount Units outstanding at end of period 12,843,499 12,744,327 8,073,603 1,830,504 294,936
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Equity Income
Subaccount Unit Value at beginning of period $20.22 $18.10 $14.78 $11.66 $10.00
Subaccount Unit Value as of December 31 $18.60 $20.22 $18.10 $14.78 $11.66
Number of Subaccount Units outstanding at end of period 32,058,370 26,156,874 14,764,834 4,189,318 743,123
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Strategic Value/4/
Subaccount Unit Value at beginning of period $10.00 N/A N/A N/A N/A
Subaccount Unit Value as of December 31 $9.75 N/A N/A N/A N/A
Number of Subaccount Units outstanding at end of period 1,347,212 N/A N/A N/A N/A
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[Enlarge/Download Table]
2000 1999 1998 1997 1996
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Growth LT
Subaccount Unit Value at beginning of period $38.74 $19.84 $12.71 $11.61 $10.00
Subaccount Unit Value as of December 31 $29.92 $38.74 $19.84 $12.71 $11.61
Number of Subaccount Units outstanding at end of period 32,677,987 24,739,519 10,966,264 3,826,332 950,317
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Focused 30/4/
Subaccount Unit Value at beginning of period $10.00 N/A N/A N/A N/A
Subaccount Unit Value as of December 31 $8.23 N/A N/A N/A N/A
Number of Subaccount Units outstanding at end of period 1,969,500 N/A N/A N/A N/A
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Mid-Cap Value/5/
Subaccount Unit Value at beginning of period $10.38 $10.00 N/A N/A N/A
Subaccount Unit Value as of December 31 $12.78 $10.38 N/A N/A N/A
Number of Subaccount Units outstanding at end of period 11,314,553 3,539,541 N/A N/A N/A
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International Value
Subaccount Unit Value at beginning of period $16.10 $13.29 $12.76 $11.84 $10.00
Subaccount Unit Value as of December 31 $14.06 $16.10 $13.29 $12.76 $11.84
Number of Subaccount Units outstanding at end of period 34,358,474 30,366,865 15,066,242 5,292,436 1,312,817
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Equity Index
Subaccount Unit Value at beginning of period $23.64 $19.88 $15.69 $11.97 $10.00
Subaccount Unit Value as of December 31 $21.14 $23.64 $19.88 $15.69 $11.97
Number of Subaccount Units outstanding at end of period 34,504,075 28,123,841 15,518,412 4,460,482 757,175
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Small-Cap Index/5/
Subaccount Unit Value at beginning of period $11.77 $10.00 N/A N/A N/A
Subaccount Unit Value as of December 31 $11.19 $11.77 N/A N/A N/A
Number of Subaccount Units outstanding at end of period 5,321,131 3,538,845 N/A N/A N/A
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REIT/5/
Subaccount Unit Value at beginning of period $9.86 $10.00 N/A N/A N/A
Subaccount Unit Value as of December 31 $12.91 $9.86 N/A N/A N/A
Number of Subaccount Units outstanding at end of period 4,442,265 1,859,366 N/A N/A N/A
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Inflation Managed (formerly called Government Securities)
Subaccount Unit Value at beginning of period $11.41 $11.80 $10.95 $10.14 $10.00
Subaccount Unit Value as of December 31 $12.58 $11.41 $11.80 $10.95 $10.14
Number of Subaccount Units outstanding at end of period 17,179,920 13,720,231 4,543,208 1,506,839 673,682
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Managed Bond
Subaccount Unit Value at beginning of period $11.60 $11.99 $11.14 $10.27 $10.00
Subaccount Unit Value as of December 31 $12.76 $11.60 $11.99 $11.14 $10.27
Number of Subaccount Units outstanding at end of period 42,510,009 31,653,501 16,897,325 4,434,069 742,041
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Money Market
Subaccount Unit Value at beginning of period $11.55 $11.16 $10.75 $10.36 $10.00
Subaccount Unit Value as of December 31 $12.10 $11.55 $11.16 $10.75 $10.36
Number of Subaccount Units outstanding at end of period 33,992,524 27,967,969 14,823,792 3,041,495 1,478,808
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High Yield Bond
Subaccount Unit Value at beginning of period $12.13 $11.95 $11.83 $10.96 $10.00
Subaccount Unit Value as of December 31 $11.52 $12.13 $11.95 $11.83 $10.96
Number of Subaccount Units outstanding at end of period 11,695,713 11,078,968 7,396,859 2,702,260 630,637
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Large-Cap Value/5/
Subaccount Unit Value at beginning of period $10.99 $10.00 N/A N/A N/A
Subaccount Unit Value as of December 31 $12.49 $10.99 N/A N/A N/A
Number of Subaccount Units outstanding at end of period 9,783,552 5,648,927 N/A N/A N/A
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The Blue Chip, Aggressive Growth, Financial Services, Health Sciences,
Technology, Telecommunications, Capital Opportunities, Mid-Cap Growth, and
Global Growth Subaccounts began operations on January 2, 2001 and are not
included in the Financial Highlights.
/1/This Subaccount began operations on January 3, 2000
/2/This Subaccount began operations on October 1, 1999
/3/This Subaccount began operations on May 1, 2000
/4/This Subaccount began operations on October 2, 2000
/5/This Subaccount began operations on January 4, 1999
42
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 as agent for a natural person, the contract
generally will not be treated as an "annuity" for tax purposes, meaning that
the contract owner will be taxed currently on annual increases in Contract
Value at ordinary income rates unless some other exception applies.
Section 72 of the Code governs the taxation of annuities in general, and we
designed the Contracts to meet the requirements of Section 72 of the Code. We
believe that, under current law, the Contract will be treated as an annuity for
federal income tax purposes if the Contract Owner is a natural person or 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 in the Fund's SAI. We believe the
underlying Variable Investment Options for the Contract meet these
requirements. In connection with the issuance of temporary regulations relating
to diversification requirements under Section 817(h), the Treasury Department
announced that such regulations do not provide guidance concerning the extent
to which you may direct your investments to particular divisions of a separate
account. Such guidance may be included in regulations or revenue rulings under
Section 817(d) relating to the definition of a variable contract. Because of
this uncertainty, we reserve the right to make such changes as we deem
necessary or appropriate to ensure that your Contract continues to qualify as
an annuity for tax purposes. Any such changes will apply uniformly to affected
Contract Owners and will be made with such notice to affected Contract Owners
as is feasible under the circumstances.
Taxes Payable by Contract Owners: General Rules
These general rules apply to Non-Qualified Contracts. As discussed below,
however, tax rules may differ for Qualified Contracts and you should consult a
qualified tax adviser if you are purchasing a Qualified Contract.
Distributions of net investment income or capital gains that each Subaccount
receives from its corresponding Portfolio are automatically reinvested in such
Portfolio unless we, on behalf of the Separate Account, elect otherwise. As
noted above, you will be subject to federal income taxes on the investment
income from your Contract only when it is distributed to you.
Multiple Contracts
All Non-Qualified Contracts that are issued by us, or our affiliates, to the
same Owner during any calendar year are treated as one Contract for purposes of
determining the amount includible in gross income under Code Section 72(e).
Further, the Treasury Department has specific authority to issue regulations
that prevent the avoidance of Section 72(e) through the serial purchase of
Contracts or otherwise.
Taxes Payable on Withdrawals
Amounts you withdraw before annuitization, including amounts withdrawn from
your Contract Value in connection with partial withdrawals for payment of any
charges and fees, will be treated first as taxable income to the extent that
your Contract Value exceeds the aggregate of your Investments (reduced by non-
taxable amounts previously received), and then as non-taxable recovery of your
Investments.
43
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 Optional Riders
Is it our understanding that the charges relating to the optional Earnings
Enhancement Guarantee (EEG) Rider are not subject to current taxation and we
will not report them as such. However, the IRS may determine in the future 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 as such.
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 Investments (as used here, "Investments"
means the aggregate Investments 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 Investments 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
Investments have been fully recovered, an Annuitant (or in certain cases the
Beneficiary) is allowed a deduction on the final tax return for the unrecovered
Investments; however, if any remaining annuity payments are made to a
Beneficiary, the Beneficiary will recover the balance of the Investments 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. If the Contract Owner or Annuitant dies and
within sixty days after the date on which a lump sum death benefit first
becomes payable the designated recipient elects to receive annuity payments in
lieu of the lump sum death benefit, then the designated recipient will not be
treated for tax purposes as having received the lump sum death benefit in the
tax year it first becomes payable. Rather, in that case, the designated
recipient will be taxed on the annuity payments as they are received.
Any amount payable upon the Contract Owner's death, whether before or after the
Annuity Date, will be included in the estate of the Contract Owner for federal
estate tax purposes. In addition, designation of a Beneficiary who either is 37
1/2 or more years younger than a Contract Owner or is a grandchild of a
Contract Owner may have Generation Skipping Transfer Tax consequences under
section 2601 of the Code.
Generally, gifts of non-tax qualified contracts prior to the annuity start date
will trigger tax on the gain on the contract, with the donee getting a stepped-
up basis for the amount included in the donor's income. The 10% penalty tax and
gift tax also may be applicable. This provision does not apply to transfers
between spouses or incident to a divorce.
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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. The plan administrator and/or custodian, whichever is
applicable, (but not us) is responsible for all Plan administrative duties
including, but not limited to, notification of distribution options,
disbursement of Plan benefits, handling any processing and administration of
Qualified Plan loans, compliance regulatory requirements and federal and state
tax reporting of income/distributions from the Plan to Plan participants and,
if applicable, Beneficiaries of Plan participants and IRA contributions from
Plan participants. Our administrative duties are limited to administration of
the Contract and any disbursements of any Contract benefits to the Owner,
Annuitant, or Beneficiary of the Contract, as applicable. Our tax reporting
responsibility is limited to federal and state tax reporting of
income/distributions to the applicable payee and IRA contributions from the
Owner of a Contract, as recorded on our books and records. The Qualified Plan
(the plan administrator or the custodian) is required to provide us with
information regarding individuals with signatory authority on the Contract(s)
owned. If you are purchasing a Qualified Contract, you should consult with your
plan administrator and/or a qualified tax adviser. You should also consult with
your tax adviser and/or plan administrator before you withdraw any portion of
your contract value.
Individual Retirement Annuities ("IRAs")
Recent federal tax legislation has expanded the type of IRAs available to
individuals for tax deferred retirement savings: In addition to "traditional"
IRAs established under Code Section 408, there are Roth IRAs governed by Code
Section 408A and SIMPLE IRAs established under Code Section 408(p).
Contributions to each of these types of IRAs are subject to differing
limitations. In addition, distributions from each type of IRA are subject to
differing restrictions. The following is a very general description of each
type of IRA:
Traditional IRAs
Traditional IRAs are subject to limitations on the amount that may be
contributed, the persons who may be eligible, and on the time when
distributions must commence. Depending upon the circumstances of the
individual, contributions to a traditional IRA may be made on a deductible or
non-deductible basis. Failure to make mandatory distributions may result in
imposition of a 50% penalty tax on any difference between the required
distribution amount and the amount actually distributed. A 10% penalty tax is
imposed on the amount includable in gross income from distributions that occur
before you attain age 59 1/2 and that are not made on account of death or
disability, with certain exceptions. These exceptions include distributions
that are part of a series of substantially equal periodic payments made over
your life (or life expectancy) or the joint lives (or joint life expectancies)
of you and your 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, 401(k) plans, and pension
and profit-sharing plans.
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SIMPLE IRAs
The Small Business Job Protection Act of 1996 created a new retirement plan,
the Savings Incentive Match Plan for Employees of Small Employers ("SIMPLE
Plans"). Depending upon the 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 transferred 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 became 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. 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; Investments 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.
Loans
Certain Qualified Contract Owners may borrow against their Contracts; otherwise
loans from us are not permitted. If yours is a Qualified Contract not subject
to Title 1 of ERISA, issued under Section 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 these loans are processed by your Plan Administrator.
We urge you to consult with a qualified tax adviser prior to effecting any loan
transaction under your Contract.
Generally, interest paid on your loan under a 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.
We may change these loan provisions to reflect changes in the Code or
interpretations thereof.
46
Loan Procedures
Your loan request must be submitted on our Loan Agreement Form. You may submit
a loan request at any time after your first Contract Anniversary and before
your Annuity Date; however, before requesting a new loan, you must wait thirty
days after the last payment of a previous loan. If approved, your loan will
usually be effective as of the end of the Business Day on which we receive all
necessary documentation in proper form. We will normally forward proceeds of
your loan to you within seven calendar days after the effective date of your
loan. There is a loan administration fee of $500, unless state law requires
otherwise. As of the date of this prospectus, we currently waive this fee.
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, in accordance with the Loan
Agreement. Your GIO Value is not available to secure your loan.
As your loan is repaid, a portion, corresponding to the amount of the repayment
of any amount then held as security for your loan, will be transferred from the
Loan Account back into your Investment Options relative to your current
allocation instructions.
Loan Terms
You may have only one loan outstanding at any time. The minimum loan amount is
$1,000, subject to certain state limitations. Your Contract Debt at the
effective date of your loan may not exceed the lesser of:
. 50% of your Contract Value;
. 100% of your Contract Value excluding your GIO 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. We
are not responsible for making any determination (including loan amounts
permitted) or any interpretations with respect to your Qualification Plan.
Qualified Plan (Not Subject to Title I of ERISA)
If your Qualified Plan is not subject to Title I of ERISA regulations, you will
be charged interest on your Contract Debt at a fixed annual rate equal to 5%.
The amount held in the Loan Account to secure your loan will earn a return
equal to an annual rate of 3%.
Interest charges accrue on your Contract Debt daily, beginning on the effective
date of your loan. Interest earned on the Loan Account Value accrue daily
beginning on the day following the effective date of the loan, and those
earnings will be transferred once a year to your Investment Options in
accordance with your current allocation instructions.
Repayment Terms
Your loan, including principal and accrued interest, generally must be repaid
in quarterly installments. An installment will be due in each quarter on the
date corresponding to the effective date of your loan, beginning with the first
such date following the effective date of your loan.
Example: On May 1, we receive your loan request, and your loan is effective.
Your first quarterly payment will be due on August 1.
Adverse tax consequences may result if you fail to meet the repayment
requirements for your loan. You must repay principal and interest of any loan
in substantially equal payments over the term of the loan. Normally, the term
of the loan will be five years from the effective date of the loan; however, if
you have certified to us that your loan proceeds are to be used to acquire a
principal residence for yourself, you may request a loan term of 30 years. In
either case, however, you must repay your loan prior to your Annuity Date. If
you elect to annuitize (or withdraw) your Net Contract Value while you have an
outstanding loan, we will deduct any Contract Debt from your Contract Value at
the time of the annuitization (or withdrawal) to repay the Contract Debt.
47
You may prepay your entire loan at any time; if you do so, we will bill you for
any unpaid interest that has accrued through the date of payoff. Your loan will
be considered repaid only when the interest due has been paid. Subject to any
necessary approval of state insurance authorities, while you have Contract Debt
outstanding, we will treat all payments you send us as Investments unless you
specifically indicate that your payment is a loan repayment or include your
loan stub with your payment. To the extent allowed by law, any loan repayments
in excess of the amount then due will be applied to the principal balance of
your loan. Such repayments will not change the due dates or the periodic
repayment amount due for future periods. If a loan repayment is in excess of
the principal balance of your loan, any excess repayment will be refunded to
you. Repayments we receive that are less than the amount due will be returned
to you, unless otherwise required by law.
If we have not received your full payment by its due date, we will declare the
entire remaining loan balance in default. At that time, we will send written
notification of the amount needed to bring the loan back to a current status.
You will have sixty (60) days from the date on which the loan was declared in
default (the "grace period") to make the required payment.
If the required payment is not received by the end of the grace period, the
defaulted loan balance plus accrued interest and any withdrawal charge will be
withdrawn from your Contract Value, if amounts under your Contract are eligible
for distribution. In order for an amount to be eligible for distribution from a
Qualified Plan you must meet one of six triggering events. They are: attainment
of age 59 1/2; separation from service; death; disability; plan termination;
and financial hardship. If those amounts are not eligible for distribution, the
defaulted loan balance plus accrued interest and any withdrawal charge will be
considered a Deemed Distribution and will be withdrawn when such Contract
Values become eligible. In either case, the Distribution or the Deemed
Distribution will be considered a currently taxable event, and may be subject
to federal tax withholding, the withdrawal charge and the federal early
withdrawal penalty tax.
If there is a Deemed Distribution under your Contract and to the extent allowed
by law, any future withdrawals will first be applied as repayment of the
defaulted Contract Debt, including accrued interest and charges for applicable
taxes. Any amounts withdrawn and applied as repayment of Contract Debt will
first be withdrawn from your Loan Account, and then from your Investment
Options on a proportionate basis relative to the Account Value in each
Investment Option. If you have an outstanding loan that is in default, the
defaulted Contract Debt will be considered a withdrawal for the purpose of
calculating any Death Benefit Amount and/or Guaranteed Minimum Death Benefit.
The terms of any such loan are intended to qualify for the exception in Code
Section 72(p)(2) so that the distribution of the loan proceeds will not
constitute a distribution that is taxable to you. To that end, these loan
provisions will be interpreted to ensure and maintain such tax qualification,
despite any other provisions to the contrary. We reserve the right to amend
your Contract to reflect any clarifications that may be needed or are
appropriate to maintain such tax qualification requirements. We will send you a
copy of any such amendment. If you refuse such an amendment, it may result in
adverse tax consequences to you.
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.
48
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 your Contract Value over a relatively
long period of time without making significant withdrawals, there should be tax
advantages, regardless of your tax bracket, in purchasing a Contract rather
than, for example, a mutual fund with a similar investment policy and
approximately the same level of expected investment results. This is because
little or no income taxes are incurred by you or by us while you are
participating in the Subaccounts, and it is generally advantageous to defer the
payment of income taxes, so that the investment return is compounded without
any deduction for income taxes. The advantage will be greater if you decide to
liquidate your Contract Value in the form of monthly annuity payments after
your retirement, or if your tax rate is lower at that time than during the
period that you held the Contract, or both.
Taxes on Pacific Life
Although the Separate Account is registered as an investment company, it is not
a separate taxpayer for purposes of the Code. The earnings of the Separate
Account are taxed as part of our operations. No charge is made against the
Separate Account for our federal income taxes (excluding the charge for premium
taxes), but we will review, periodically, the question of charges to the
Separate Account or your Contract for such taxes. Such a charge may be made in
future years for any federal income taxes that would be attributable to the
Separate Account or to our operations with respect to your Contract, or
attributable, directly or indirectly, to Investments 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 Portfolios held by the Subaccounts.
We may vote on any matter voted on at Fund shareholders' meetings. However, our
current interpretations of applicable law requires us to vote the number of
shares attributable to your Variable Account Value (your "voting interest") in
accordance with your directions.
We will pass proxy materials on to you so that you have an opportunity to give
us voting instructions for your voting interest. You may provide your
instructions by proxy or in person at the shareholders' meeting. If there are
shares of a Portfolio held by a Subaccount for which we do not receive timely
voting instructions, we will vote those shares in the same proportion as all
other shares of that Portfolio held by that Subaccount for which we have
received timely voting instructions. If we do not receive any voting
instructions for the shares in a
49
Separate Account, we will vote the shares in that Separate Account in the same
proportion as the total votes for all of our Separate Accounts for which we've
received timely instructions. If we hold shares of a Portfolio in our General
Account, we will vote such shares in the same proportion as the total votes
cast for all of our separate accounts, including Separate Account A. We will
vote shares of any Portfolio held by our non-insurance affiliates in the same
proportion as the total votes for all separate accounts of ours and our
insurance affiliates.
We may elect, in the future, to vote shares of the Portfolios held in Separate
Account A in our own right if we are permitted to do so through a change in
applicable federal securities laws or regulations, or in their interpretation.
The number of Portfolio shares that form the basis for your voting interest is
determined as of the record date set by the Board of Trustees of the Fund. It
is equal to (a) your Contract Value allocated to the Subaccount corresponding
to that Portfolio, divided by (b) the net asset value per share of that
Portfolio. Fractional votes will be counted. We reserve the right, if required
or permitted by a change in federal regulations or their interpretation, to
amend how we calculate your voting interest.
After your Annuity Date, if you have selected a variable annuity, the voting
rights under your Contract will continue during the payout period of your
annuity, but the number of shares that form the basis for your voting interest,
as described above, will decrease throughout the payout period.
Changes to Your Contract
Contract Owner(s) and Contingent Owner
You may change your Non-Qualified Contract at any time prior to your Annuity
Date to name a different Contract Owner or to add a Joint Owner, or to add or
change a Contingent Owner; if yours is a Qualified Contract, you must be the
only Contract Owner, but you may still add or change a Contingent Owner. Your
Contract cannot name more than two Contract Owners (either as Joint or
Contingent Owners) at any time. Any newly-named Contract Owners, including
Joint and/or Contingent Owners, must be under the age of 86 at the time of
change or addition. Joint ownership is in the form of a joint tenancy. The
Contract Owner(s) may make all decisions regarding the Contract, including
making allocation decisions and exercising voting rights. Transactions under
jointly owned Contracts require authorization from both Contract Owners.
Transfer of Contract ownership may involve federal income tax and/or
consequences; you should consult a qualified tax adviser before effecting such
a transfer. A change to joint Contract ownership is considered a transfer of
ownership.
Annuitant and Contingent or Joint Annuitant
Your sole Annuitant cannot be changed, and Joint Annuitants cannot be added or
changed, once your Contract is issued. Certain changes may be permitted in
connection with Contingent Annuitants. See RETIREMENT BENEFITS AND OTHER
PAYOUTS--Selecting Your Annuitant section in this Prospectus. 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 or remove your Beneficiary or add Beneficiaries at any
time prior to the death of the Annuitant or Owner, as applicable. Spousal
consent may be required to change the Beneficiary of an IRA. If you have named
your Beneficiary irrevocably, you will need to obtain that Beneficiary's
consent before making any changes. Qualified Contracts may have additional
restrictions on naming and changing Beneficiaries; for example, if your
Contract was issued in connection with a Qualified Plan subject to Title I of
ERISA, your spouse must either be your Beneficiary or consent to your naming of
a different Beneficiary. If you leave no surviving Beneficiary, your estate may
receive any death benefit proceeds under your Contract.
50
Changes to All Contracts
If, in the judgment of our management, continued investment by Separate Account
A in one or more of the Portfolios becomes unsuitable or unavailable, we may
seek to alter the Variable Investment Options available under the Contracts. We
do not expect that a Portfolio will become unsuitable, but unsuitability issues
could arise due to changes in investment policies, market conditions, or tax
laws, or due to marketing or other reasons.
Alterations of Variable Investment Options may take differing forms. We reserve
the right to 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 an investment company, or another investment vehicle. We
may also purchase, through a Subaccount, other securities for other series or
other classes of contracts, and may permit conversions or exchanges between
series or classes of contracts on the basis of Contract Owner requests.
Required approvals of the SEC and state insurance regulators will be obtained
before any such substitutions are effected, and you will be notified of any
planned substitution.
We may add new Subaccounts to Separate Account A, and any new Subaccounts may
invest in Portfolios 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 you, and will comply with the filing or other
procedures established by applicable state insurance regulators, to the extent
required by applicable law. We also reserve the right, after receiving any
required regulatory approvals, to do any of the following:
. cease offering any Subaccount;
. add or change designated investment companies or their portfolios, or
other investment vehicles;
. add, delete or make substitutions for the securities and other assets that
are held or purchased by the Separate Account or any Variable Account;
. permit conversion or exchanges between portfolios and/or classes of
contracts on the basis of Owners' requests;
. add, remove or combine Variable Accounts;
. combine the assets of any Variable Account with any other of our separate
accounts or of any of our affiliates;
. register or deregister Separate Account A or any Variable Account under
the 1940 Act;
. operate any Variable Account as a managed investment company under the
1940 Act, or any other form permitted by law;
. run any Variable Account as under the direction of a committee, board, or
other group;
. restrict or eliminate any voting rights of Owners with respect to any
Variable Account or other persons who have voting rights as to any
Variable Account;
. make any changes required by the 1940 Act or other federal securities
laws;
. make any changes necessary to maintain the status of the Contracts as
annuities under the Code;
. make other changes required under federal or state law relating to
annuities;
. suspend or discontinue sale of the Contracts; and
. comply with applicable law.
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.
51
Please send your forms and written requests or questions to:
Pacific Life Insurance Company
P.O. Box 7187
Pasadena, California 91109-7187
If you are submitting an Investment or other payment by mail, please send it,
along with your application if you are submitting one, to:
Pacific Life Insurance Company
P.O. Box 100060
Pasadena, California 91189-0060
If you are using an overnight delivery service to send payments, please send
them to:
Pacific Life Insurance Company
c/o FCNPC
1111 South Arroyo Parkway, First Floor
Pasadena, California 91105
The effective date of certain notices or of instructions is determined by the
date and time on which we "receive" the notice or instructions. We "receive"
this information only when it arrives, in proper form, at the correct mailing
address set out above. Please call us at 1-800-722-2333 if you have any
questions regarding which address you should use.
Investments after your initial Investment, loan requests, transfer requests,
loan repayments 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" means in a form satisfactory to us and may require,
among other things, a signature guarantee or other verification of
authenticity. We do not generally require a signature guarantee unless it
appears that your signature may have changed over time or the signature does
not appear to be yours; an executed application or confirmation of application,
as applicable, in proper form is not received by us; or, to protect you or us.
Requests regarding death benefits must be accompanied by both proof of death
and instructions regarding payment satisfactory to us. You should call your
registered representative or us if you have questions regarding the required
form of a request.
Telephone and Electronic Transactions
You are automatically entitled to make certain transactions by telephone or, to
the extent available, electronically. You may also authorize other people to
make certain transaction requests by telephone or to the extent available
electronically by so indicating on the application or by sending us
instructions in writing in a form acceptable to us. We cannot guarantee that
you or any other person you authorize will always be able to reach us to
complete a telephone or electronic transaction; for example, all telephone
lines or our web-site may be busy during certain periods, such as periods of
substantial market fluctuations or other drastic economic or market change, or
telephones or the internet may be out of service during severe weather
conditions or other emergencies. Under these circumstances, you should submit
your request in writing (or other form acceptable to us). Transaction
instructions we receive by telephone or electronically before 4:00 p.m. Eastern
time on any Business Day will usually be effective on that day, and we will
provide you confirmation of each telephone or electronic transaction.
We have established procedures reasonably designed to confirm that instructions
communicated by telephone or electronically are genuine. These procedures may
require any person requesting a telephone or electronic transaction to provide
certain personal identification upon our request. We may also record all or
part of any telephone conversation with respect to transaction instructions. We
reserve the right to deny any transaction
52
request made by telephone or electronically. You are authorizing us to accept
and to act upon instructions received by telephone or electronically with
respect to your Contract, and you agree that, so long as we comply with our
procedures, neither we, any of our affiliates, nor the Fund, or any of their
directors, trustees, officers, employees or agents will be liable for any loss,
liability, cost or expense (including attorneys' fees) in connection with
requests that we believe to be genuine. This policy means that so long as we
comply with our procedures, you will bear the risk of loss arising out of the
telephone and electronic transaction privileges of your Contract. If a Contract
has Joint Owners, each Owner may individually make telephone and/or electronic
transaction requests.
Electronic Delivery Authorization
You may authorize us to provide prospectuses, statements and other information
("documents") electronically by so indicating on the application, or by sending
us instructions in writing in a form acceptable to us to receive such documents
electronically. You must have internet access to use this service. While we
impose no additional charge for this service, there may be potential costs
associated with electronic delivery, such as on-line charges. Documents will be
available on our Internet Web site. You may access and print all documents
provided through this service. As documents become available, we will notify
you of this by sending you an e-mail message that will include instructions on
how to retrieve the document. If our e-mail notification is returned to us as
"undeliverable," we will contact you to obtain your updated e-mail address. If
we are unable to obtain a valid e-mail address for you, we will send a paper
copy by regular U.S. mail to your address of record. You may revoke your
consent for electronic delivery at any time and we will resume providing you
with a paper copy of all required documents; however, in order for us to be
properly notified, your revocation must be given to us a reasonable time before
electronic delivery has commenced. We will provide you with paper copies at any
time upon request. Such request will not constitute revocation of your consent
to receive required documents electronically.
Timing of Payments and Transactions
For withdrawals from the Variable Investment Options or for death benefit
payments attributable to your Variable Account Value, we will normally send the
proceeds within seven calendar days after your withdrawal request is effective
or after the Notice Date, as the case may be. Similarly, for transfers from the
Variable Investment Options, we will normally send the proceeds within seven
calendar days after your transfer (or exchange) request is effective. We will
normally effect periodic annuity payments on the day that corresponds to the
Annuity Date and will make payment on the following day. Payments or transfers
may be suspended for a longer period under certain 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 (i) withdrawals from the Fixed Option, DCA Plus Fixed
Option or GIOs, (ii) death benefit payments attributable to Fixed Option Value,
DCA Plus Fixed Option Value or GIO Value, or (iii) fixed periodic annuity
payments, payment of proceeds may be delayed for up to six months (thirty days
in West Virginia) after the request is effective. Similar delays may apply to
loans and transfers from the Fixed Option, the DCA Plus Fixed Option and the
GIOs. See THE GENERAL ACCOUNT section of this Prospectus for more details.
Confirmations, Statements and Other Reports to Contract Owners
Confirmations will be sent out for unscheduled Investments and transfers,
loans, loan repayments, unscheduled partial withdrawals, a full withdrawal, GIO
renewals, and on payment of any death benefit proceeds. Each quarter prior to
your Annuity Date, we will send you a statement that provides certain
information pertinent to your Contract. These statements disclose Contract
Value, Subaccount values, values under each Fixed Option, DCA Plus Fixed Option
or GIO, fees and charges applied to your Contract Value, transactions made and
specific Contract data that apply to your Contract. Confirmations of your
transactions under the pre-authorized checking plan, dollar cost averaging,
earnings sweep, portfolio rebalancing, and 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
53
which the transaction you believe to be erroneous appeared. When you write,
tell us your name, contract number and a description of the suspected error.
You will also be sent an annual report for the Separate Account and the Fund
and a list of the securities held in each Portfolio of the Fund, as required by
the 1940 Act; or more frequently if required by law.
Replacement of Life Insurance or Annuities
The term "replacement" has a special meaning in the life insurance industry and
is described more fully below. Before you make your purchase decision, we want
you to understand how a replacement may impact your existing plan of insurance.
A policy "replacement" occurs when a new policy or contract is purchased and,
in connection with the sale, an existing policy or contract is surrendered,
lapsed, forfeited, assigned to the replacing insurer, otherwise terminated, or
used in a financed purchase. A "financed purchase" occurs when the purchase of
a new life insurance policy or annuity contract involves the use of funds
obtained from the values of an existing life insurance policy or annuity
contract through withdrawal, surrender or loan.
There are circumstances in which replacing your existing life insurance policy
or annuity contract can benefit you. As a general rule, however, replacement is
not in your best interest. Accordingly, you should make a careful comparison of
the costs and benefits of your existing policy or contract and the proposed
policy or contract to determine whether replacement is in your best interest.
Financial Statements
The statement of net assets of Separate Account A as of December 31, 2000 and
the related statement of operations for the year then ended and statements of
changes in net assets for each of the two years in the period then ended are
incorporated by reference in the Statement of Additional Information from the
Annual Report of Separate Account A dated December 31, 2000. Pacific Life's
consolidated financial statements as of December 31, 2000 and 1999 and for each
of the three years in the period ended December 31, 2000 are contained in the
Statement of Additional Information.
THE GENERAL ACCOUNT
General Information
All amounts allocated to the Fixed Option, DCA Plus Fixed Option and GIOs
become part of our General Account. Subject to applicable law, we exercise sole
discretion over the investment of General Account assets, and bear the
associated investment risk; you will not share in the investment experience of
General Account assets.
Because of exemptive and exclusionary provisions, interests in the General
Account under the Contract are not registered under the Securities Act of 1933
and the General Account has not been registered as an investment company under
the 1940 Act. Any interest you have in the Fixed Option, DCA Plus Fixed Option
or GIOs 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 or GIOs. This disclosure may, however, be subject to certain provisions
of federal securities laws relating to the accuracy and completeness of
statements made in prospectuses.
You may choose among the following General Account options: the Fixed Option
and Guaranteed Interest Options with three available Guarantee Terms: three-
year, six-year and ten-year. Each is described below.
Guarantee Terms
When you allocate any portion of your Investments or Contract Value to the
Fixed Option, the DCA Plus Fixed Option or one or more GIOs in the General
Account, we guarantee you an interest rate (a "Guaranteed Interest Rate") for a
specified period of time (a "Guarantee Term") of up to ten years. The Fixed
Option, DCA Plus
54
Fixed Option and each GIO offers a separate Guaranteed Interest Rate and
Guarantee Term. Guarantee Terms will be offered at our discretion. Presently,
we offer Guarantee Terms of up to one year for the Fixed Option, one year for
the DCA Plus Fixed Option and three-, six- and ten-years for the GIOs. You
should specify the Fixed Option, DCA Plus Fixed Option and/or GIO(s) into which
you want us to allocate your Purchase Payments or Contract Value, if any. Each
allocation to a GIO must be at least $500.
Guaranteed Interest Rates for each Fixed Option, DCA Plus Fixed Option and GIO
may be changed periodically for new allocations; your allocation will receive
the Guaranteed Interest Rate in effect for that Fixed Option, DCA Plus Fixed
Option or GIO on the effective date of your allocation. All Guaranteed Interest
Rates will be expressed as annual effective rates; however, interest will
accrue daily. The Guaranteed Interest Rate on your Fixed Option, DCA Plus Fixed
Option and/or GIO will remain in effect for the Guarantee Term and will never
be less than an annual rate of 3%.
DCA Plus Fixed Option
Availability of the DCA Plus Fixed Option (and therefore also DCA Plus) is
subject to approval of state insurance authorities. Ask your registered
representative about its status in your state of issue.
When you establish a DCA Plus and you make your initial Investment allocation
to the DCA Plus Fixed Option, we establish a Guarantee Term that ends 6 months
from the day your allocation is effective. We credit each allocation made to
the DCA Plus Fixed Option during that Guarantee Term at the Guaranteed Interest
Rate in effect on the day each allocation is effective through the earliest of:
(i) the end of the Guarantee Term;
(ii) the day on which the DCA Plus Fixed Option Value is zero;
(iii) the Annuity Date; or
(iv) the day on which death benefit proceeds become payable.
We stop crediting interest on any amount transferred or withdrawn from the DCA
Plus Fixed Option as of the day the transfer or withdrawal is effective.
Fixed Option
Each allocation (or rollover) you make to the Fixed Option receives a Guarantee
Term that begins on the day that allocation or rollover is effective and ends
at the end of that Contract Year or, if earlier, on your Annuity Date. At the
end of that Contract Year, we will roll over your Fixed Option Value on that
day into a new Guarantee Term of one year (or, if shorter, the time remaining
until your Annuity Date) at the then current Guaranteed Interest Rate, unless
you instruct us otherwise.
Example: Your Contract Anniversary is February 1. On February 1 of year 1,
you allocate $1,000 to the Fixed Option and receive a Guarantee Term of one
year and a Guaranteed Interest Rate of 5%. On August 1, you allocate another
$500 to the Fixed Option and receive a Guaranteed Interest Rate of 6%.
Through January 31, year 1, your first allocation of $1,000 earns 5%
interest and your second allocation of $500 earns 6% interest. On February
1, year 2, a new interest rate may go into effect for your entire Fixed
Option Value.
Guaranteed Interest Options
Subject to state availability, each allocation (or rollover) you make to a GIO
receives a Guarantee Term that begins on the day that allocation or rollover is
effective and ends at the end of the Guarantee Term. For each GIO, at the end
of its Guarantee Term, we will roll over that portion of your Account Value on
that day into a new GIO with a Guarantee Term of the same length and at the
then current Guaranteed Interest Rate corresponding to that Guarantee Term,
unless, within thirty days after the end of the Guarantee Term you instruct us
otherwise (see End of GIO Guarantee Term below). However, if the last day of
this new Guarantee Term would occur after the Annuity Date, we will roll over
that portion of your Account Value into the longest
55
Guarantee Term, if any, that ends prior to the Annuity Date, with the
corresponding new Guaranteed Interest Rate then in effect. If there is no
Guarantee Term that ends before the Annuity Date, we will allocate that portion
of your Account Value to the Fixed Option at the corresponding Guaranteed
Interest Rate then in effect for new allocations.
Example: On January 1 of year 1, you allocate $1,000 to a GIO with a
Guarantee Term of three years and a Guaranteed Interest Rate of 7%. On
August 1, you allocate another $500 to another GIO with a Guarantee Term of
three years and a Guaranteed Interest Rate of 7.5%. On November 1, you
allocate $2,000 to a third GIO with a ten-year Guarantee Term at a
Guaranteed Interest Rate of 9%. Through December 31, year 3, your first
allocation of $1,000 earns 7% interest, and on January 1, year 4, a new
interest rate will go into effect for this portion of your GIO Value.
Through July 31, year 4, your second allocation of $500 earns 7.5% interest,
and on August 1, year 4, a new interest rate will go into effect for this
portion of your GIO Value. Finally, through October 31, year 11, your third
allocation of $2,000 earns 9% interest, and on November 1, year 11, a new
interest rate will go into effect on this portion of your GIO Value.
End of GIO Guarantee Term
You have thirty days after the last day of the Guarantee Term of a GIO to
inform us whether you want to (i) renew that particular Account Value in a
different Guarantee Term at its corresponding Guaranteed Interest Rate in
effect for new allocations, (ii) transfer all or part of that Account Value to
another Investment Option, and/or (iii) withdraw all or part of that Account
Value. Any subsequent change to such instructions will be subject to the
provisions of the CHARGES, FEES AND DEDUCTIONS section of this Prospectus.
If you instruct us to allocate that portion of your Account Value that was
rolled over in the new GIO to a GIO with a different Guarantee Term, we will
consider that allocation to be made as of the end of the previous Guarantee
Term and will credit interest accordingly. If you instruct us to transfer to a
Variable Investment Option or the Fixed Option or to withdraw that portion of
your Account Value in the new GIO, we will effect such transfer or withdrawal
as of the day we receive your request; interest will be credited at the
Guaranteed Interest Rate for the time the Account Value was allocated to that
GIO. Any amounts that you transfer or withdraw before the last day of the
Guarantee Term or after this thirty-day period will be subject to the MVA. All
withdrawals made before, during or after this thirty-day period will be subject
to any applicable withdrawal charge, withdrawal fee and any charges for premium
taxes and/or other taxes.
Withdrawals and Transfers
Prior to the Annuity Date, you may withdraw amounts from your Fixed Option, DCA
Plus Fixed Option and/or one or more GIOs, or transfer amounts from your Fixed
Option, DCA Plus Fixed Option and/or GIOs to one or more of the other
Investment Options, except that you may not transfer amounts to the DCA Plus
Fixed Option. The withdrawal or transfer will access each GIO Term Value
proportionately (or you may specify a particular GIO Term Value). Amounts from
the oldest GIO within a GIO Term Value will be withdrawn or transferred first.
Transfer requests to a GIO will be applied as an allocation to a new GIO. In
addition, no partial withdrawal or transfer (other than a monthly transfer
under DCA Plus) may be made from your Fixed Option, DCA Plus Fixed Option or
GIOs within 30 days of the Contract Date. If your withdrawal leaves you with a
Net Contract Value of less than $1,000, we have the right, at our option, to
terminate your Contract and send you the withdrawal proceeds.
Payments or transfers from the Fixed Option, DCA Plus Fixed Option or a GIO may
be delayed, as described under ADDITIONAL INFORMATION--Timing of Payments and
Transactions section of this Prospectus; any amount delayed will, as long as it
is held under the Fixed Option, DCA Plus Fixed Option or that GIO, continue to
earn interest at the Guaranteed Interest Rate then in effect until that
Guarantee Term has ended, and the minimum guaranteed interest rate of 3%
thereafter, unless state law requires a greater rate be paid.
Fixed Option
After the first Contract Anniversary, you may make one transfer or partial
withdrawal from your Fixed Option during any Contract Year, except as provided
under the dollar cost averaging, earnings sweep and pre-
56
authorized withdrawal programs. You may make one transfer or one partial
withdrawal within the 30 days after the end of each Contract Anniversary.
Normally, you may transfer or withdraw up to one-third (33 1/3%) of your Fixed
Option Value in any given Contract Year. However, in consecutive Contract Years
you may transfer or withdraw up to one-third (33 1/3%) of your Fixed Option
Value in one year; you may transfer or withdraw up to one-half (50%) of your
remaining Fixed Option Value in the next year; and you may transfer or withdraw
up to the entire amount (100%) of any remaining Fixed Option Value in the third
year. In addition, if, as a result of a partial withdrawal or transfer, the
Fixed Option Value is less than $500, we have the right, at our option, to
transfer the entire remaining amount to your other Investment Options on a
proportionate basis relative to your most recent allocation instructions. Any
amount that would otherwise be allocated to the DCA Plus Fixed Option will be
allocated to the Variable Investment Options according to your most recent DCA
Plus transfer instructions.
DCA Plus Fixed Option
No transfer to the DCA Plus Fixed Option may be made at any time.
GIOs
You may make unlimited transfers or withdrawals from your GIOs during any
Contract Year, however as of May 1, 2001 and continuing through December 31,
2001, you may not make more than 15 transfers; and beginning January 1, 2002,
and each calendar year thereafter, transfers are limited to 25 for each
calendar year, as described under HOW YOUR INVESTMENTS ARE ALLOCATED--Transfers
section of this Prospectus.
You may not request an allocation or transfer into or renewal of a GIO that has
a Guarantee Term that ends after the Annuity Date. If you do not specify a
particular GIO Term Value(s), the amount of any transfer or withdrawal will be
deducted proportionately from your GIO Term Values, beginning with the oldest
GIO within each GIO Term Value. In addition, if as the result of a partial
withdrawal or transfer, your Account Value in that GIO is less than $500, we
have the right, at our option, to transfer the remaining amount to your other
Investment Options on a proportionate basis relative to your most recent
allocation instructions. A GIO cannot participate in any systematic transfer
program. In addition, your GIO Value cannot be transferred to the Loan Account
to secure any loan made under the Contract.
An MVA is applied to the Account Value of a GIO in order to determine the net
amount of the transfer or withdrawal prior to the deduction of any applicable
charges or fees. Unless you request a net amount, the amount actually
transferred or sent to you equals the amount requested, less any MVA, less any
applicable withdrawal charge (based upon the amount requested before the
application of the MVA), and less any charges for Annual Fees, transactions,
premium taxes and/or other taxes, including any taxes required for withholding.
The MVA is not applied to (i) amounts used to pay charges for the Annual Fee,
transfer fees, and/or premium taxes and/or other taxes, (ii) the amount of
death benefit proceeds, and (iii) subject to medical evidence satisfactory to
us, full or partial withdrawals, after the first Contract Anniversary if the
Annuitant has been diagnosed with a medically determinable condition that
results in a life expectancy of twelve (12) months or less.
The formula for calculating the MVA is set forth in Appendix B to this
Prospectus, which also contains illustrations of the application of the MVA.
57
TERMS USED IN THIS PROSPECTUS
Some of the terms we've used in this Prospectus may be new to you. We've
identified them in the Prospectus by capitalizing the first letter of each
word. You'll find an explanation of what they mean below.
If you have any questions, please ask your registered representative or call us
at 1-800-722-2333.
Account Value - The amount of your Contract Value allocated to a specified
Variable Investment Option, the Fixed Option or to a GIO.
Annual Fee - A $40 fee charged each year on your Contract Anniversary and at
the time of a full withdrawal, if your Net Contract Value is less than $50,000
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 ("Annuity Start Date") - The date specified in your Contract, or
the date you later elect, if any, for the start of annuity payments if the
Annuitant (or Joint Annuitants) is (or are) still living and your Contract is
in force; or if earlier, the date that annuity payments actually begin.
Annuity Option - Any one of the income options available for a series of
payments after your Annuity Date.
Beneficiary - A person who may have a right to receive the death benefit
payable upon the death of the Annuitant or a Contract Owner prior to the
Annuity Date, may have a right to receive remaining guaranteed annuity
payments, if any, if the Annuitant dies after the Annuity Date.
Business Day - Any day on which the value of an amount invested in a Variable
Investment Option is required to be determined, which currently includes each
day that the New York Stock Exchange is open for trading and our administrative
offices are open. The New York Stock Exchange and our administrative offices
are closed on weekends and on the following holidays: New Year's Day, Martin
Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, July Fourth,
Labor Day, Thanksgiving Day and Christmas Day, and the Friday before New Year's
Day, July Fourth or Christmas Day if that holiday falls on a Saturday, the
Monday following New Year's Day, July Fourth or Christmas Day if that holiday
falls on a Sunday, unless unusual business conditions exist, such as the ending
of a monthly or yearly accounting period. In this Prospectus, "day" or "date"
means Business Day unless otherwise specified. If any transaction or event
called for under a Contract is scheduled to occur on a day that is not a
Business Day, such transaction or event will be deemed to occur on the next
following Business Day unless otherwise specified. Special circumstances such
as leap years and months with fewer than 31 days are discussed in the SAI.
Code - The Internal Revenue Code of 1986, as amended.
Contingent Annuitant - A person, named in your Contract, who will become your
sole surviving Annuitant if your existing sole Annuitant (or both Joint
Annuitants) should die.
Contingent Owner - A person, named in your Contract, who will succeed to the
rights as a Contract Owner of your Contract if all named Contract Owners die
before your Annuity Date.
Contract Anniversary - The same date, in each subsequent year, as your Contract
Date.
Contract Date - The date we issue your Contract.
Contract Debt - As of the end of any given Business Day, the principal amount
you have outstanding on any loan under your Contract, plus any accrued and
unpaid interest. Loans are only available on certain Qualified Contracts.
Contract Owner, Owner, Policyholder, you, or your - Generally, a person who
purchases a contract and makes the Investments. A Contract Owner has all rights
in the Contract, including the right to make withdrawals, designate and change
beneficiaries, transfer amounts among Investment Options, and designate an
Annuity Option. If your Contract names Joint Owners, both Joint Owners are
Contract Owners and share such rights.
Contract Value - As of the end of any Business Day, the sum of your Variable
Account Value, Fixed Option Value, DCA Plus Fixed Option Value, GIO Value and
the Loan Account Value.
Contract Year - A year that starts on the Contract Date or on a Contract
Anniversary.
DCA Plus Fixed Option - If you allocate all or part of your investments to the
DCA Plus Fixed Option, such amounts are held in our General Account and receive
interest at rates declared periodically (the "Guaranteed Interest Rate"), but
not less than an annual rate of 3%.
DCA Plus Fixed Option Value - The aggregate of your Contract Value allocated to
the DCA Plus Fixed Option.
Earnings - As of the end of any Business Day, your Earnings equal your Contract
Value less your aggregate Investments, which are reduced by withdrawals of
prior Investments.
Fixed Option - If you allocate all or part of your Investments or Contract
Value to the Fixed Option, such amounts are held in our General Account and
receive the Guaranteed Interest Rate declared periodically, but not less than
an annual rate of 3%.
Fixed Option Value - The aggregate amount of your Contract Value allocated to
the Fixed Option.
Fund - Pacific Select Fund.
General Account - Our General Account consists of all of our assets other than
those assets allocated to Separate Account A or to any of our other separate
accounts.
GIO Term Value - The aggregate amount under your Contract allocated to all GIOs
that have the same length Guarantee Term. The GIO Term Value is based on the
original Guarantee Term, not the time remaining in the Guarantee Term. The GIO
Term Value is used in determining which GIOs will be accessed when you make a
withdrawal or transfer.
GIO Value - The aggregate amount of your Contract Value allocated to all GIOs.
Guarantee Term - The period during which an amount you allocate to the Fixed
Option or to a GIO earns a Guaranteed Interest Rate. These terms are up to one-
year for the Fixed Option, one-year for the DCA Plus Fixed Option and three-,
six- and ten-years for the GIOs.
58
Guaranteed Interest Option ("GIO") - If you allocate all or part of your
Investment or Contract Value to one or more GIOs, such amounts are subject to a
particular Guaranteed Interest Rate for the Guarantee Term selected. GIO
amounts are held in our General Account and are subject to a Market Value
Adjustment if annuitized, withdrawn or transferred prior to the end of the
Guarantee Term. Each new allocation will receive the Guaranteed Interest Rate
then applicable to new allocations for the selected Guarantee Term.
Guaranteed Interest Rate - The interest rate guaranteed at the time of
allocation (or rollover) for the Guarantee Term on amounts allocated to the
Fixed Option, DCA Plus Fixed Option, or Guaranteed Interest Option. All
Guaranteed Interest Rates are expressed as annual rates and interest is accrued
daily. The rate will not be less than an annual rate of 3%.
Investment - An amount paid to us by or on behalf of a Contract Owner as
consideration for the benefits provided under the Contract.
Investment Option - A Subaccount, the Fixed Option, the DCA Plus Fixed Option
or a GIO offered under the Contract.
Joint Annuitant - If your Contract is a Non-Qualified Contract, you may name
two Annuitants, called "Joint Annuitants," in your application for your
Contract. Special restrictions apply for Qualified Contracts.
Loan Account - The account in which the amount equal to the principal amount of
a loan and any interest accrued is held to secure any Contract Debt.
Loan Account Value - The amount, including any interest accrued, held in the
Loan Account to secure Contract Debt.
Market Value Adjustment ("MVA") - The adjustment made to any amount annuitized,
transferred or withdrawn from a GIO prior to the end of its Guarantee Term.
This adjustment reflects the impact of changes in applicable interest rates
between the time the Purchase Payment(s) and/or Contract Value is allocated to
a specific GIO and the time of the annuitization, withdrawal or transfer.
Net Contract Value - Your Contract Value less Contract Debt.
Non-Qualified Contract - A Contract other than a Qualified Contract.
Policyholder - The Contract Owner.
Portfolio - A separate portfolio of the Fund in which a Subaccount invests its
assets.
Primary Annuitant - The individual that is named in your Contract, the events
in the life of whom are of primary importance in affecting the timing or amount
of the payout under the Contract.
Purchase Payment ("Premium Payment") ("Investment") - An amount paid to us by
or on behalf of a Contract Owner as consideration for the benefits provided
under the Contract.
Qualified Contract - A Contract that qualifies under the Code as an individual
retirement annuity or account ("IRA"), or form thereof, or a Contract purchased
by a Qualified Plan, qualifying for special tax treatment under the Code.
Qualified Plan - A retirement plan that receives favorable tax treatment under
Section 401, 403, 408, 408A or 457 of the Code.
SEC - Securities and Exchange Commission.
Separate Account A (the "Separate Account") - A separate account of ours
registered as a unit investment trust under the Investment Company Act of 1940,
as amended (the "1940 Act").
Subaccount - An investment division of the Separate Account. Each Subaccount
invests its assets in shares of a corresponding Portfolio.
Subaccount Annuity Unit - Subaccount Annuity Units (or "Annuity Units") are
used to measure variation in variable annuity payments. To the extent you elect
to convert all or some of your Contract Value into variable annuity payments,
the amount of each annuity payment (after the first payment) will vary with the
value and number of Annuity Units in each Subaccount attributed to any variable
annuity payments. At annuitization (after any applicable premium taxes and/or
other taxes are paid), the amount annuitized to a variable annuity determines
the amount of your first variable annuity payment and the number of Annuity
Units credited to your annuity in each Subaccount. The value of Subaccount
Annuity Units, like the value of Subaccount Units, is expected to fluctuate
daily, as described in the definition of Unit Value.
Subaccount Unit - Before your Annuity Date, each time you allocate an amount to
a Subaccount, your Contract is credited with a number of Subaccount Units in
that Subaccount. These Units are used for accounting purposes to measure your
Account Value in that Subaccount. The value of Subaccount Units is expected to
fluctuate daily, as described in the definition of Unit Value.
Unit Value - The value of a Subaccount Unit ("Subaccount Unit Value") or
Subaccount Annuity Unit ("Subaccount Annuity Unit Value"). Unit Value of any
Subaccount is subject to change on any Business Day in much the same way that
the value of a mutual fund share changes each day. The fluctuations in value
reflect the investment results, expenses of and charges against the Portfolio
in which the Subaccount invests its assets. Fluctuations also reflect charges
against the Separate Account. Changes in Subaccount Annuity Unit Values also
reflect an additional factor that adjusts Subaccount Annuity Unit Values to
offset our Annuity Option Table's implicit assumption of an annual investment
return of 5%. The effect of this assumed investment return is explained in
detail in the SAI. Unit Value of a Subaccount Unit or Subaccount Annuity Unit
on any Business Day is measured at or about 4:00 p.m., Eastern time, on that
Business Day.
Variable Account Value - The aggregate amount of your Contract Value allocated
to all Subaccounts.
Variable Investment Option - A Subaccount (also called a Variable Account).
59
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
[Download Table]
Page
----
PERFORMANCE................................................................ 1
Total Returns............................................................ 1
Yields................................................................... 2
Performance Comparisons and Benchmarks................................... 3
Separate Account Performance............................................. 3
DISTRIBUTION OF THE CONTRACTS.............................................. 7
Pacific Select Distributors, Inc. (PSD).................................. 7
THE CONTRACTS AND THE SEPARATE ACCOUNT..................................... 8
Calculating Subaccount Unit Values....................................... 8
Variable Annuity Payment Amounts......................................... 8
Corresponding Dates...................................................... 10
Age and Sex of Annuitant................................................. 10
Systematic Transfer Programs............................................. 11
Pre-Authorized Withdrawals............................................... 13
Death Benefit............................................................ 13
Joint Annuitants on Qualified Contracts.................................. 14
1035 Exchanges........................................................... 14
Safekeeping of Assets.................................................... 14
Dividends................................................................ 14
FINANCIAL STATEMENTS....................................................... 14
INDEPENDENT AUDITORS....................................................... 14
60
APPENDIX A:
STATE LAW VARIATIONS
Right to Cancel ("Free Look")
Variations to the length of the Free Look period. In most states, the Free Look
period is a 10-day period beginning on the day you receive your Contract. If
your Contract was issued in one of the following states, the Free Look period
is as specified below:
Idaho (20 days)
North Dakota (20 days)
In addition, if you reside in California and are age 60 or older on your
Contract Date, the Free Look period is 30 days.
There may be extended Free Look periods in some states for replacement
business. Please consult with your registered representative if you have any
questions regarding your state's Free Look period.
For Contracts delivered to residents of Maryland:
If your partial withdrawal leaves you with a Net Contract Value of less than
$500, we have the right, at our option, to terminate your Contract and send you
the withdrawal proceeds.
For Contracts delivered to residents of Massachusetts:
You may not make additional Purchase Payments after your first Purchase
Payment.
If your partial withdrawal leaves you with a Net Contract Value of less than
$500, we have the right, at our option, to terminate your Contract and send you
the withdrawal proceeds.
For Contracts delivered to residents of Oregon:
The Guaranteed Interest Options ("GIOs") are not available.
You may make additional Purchase Payments only during your first Contract Year.
For Contracts delivered to residents of Pennsylvania:
The Guaranteed Interest Options ("GIOs") are not available.
If your partial withdrawal leaves you with a Net Contract Value of less than
$500, we have the right, at our option, to terminate your Contract and send you
the withdrawal proceeds.
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APPENDIX B:
MARKET VALUE ADJUSTMENT
The MVA for amounts annuitized, transferred or withdrawn from a GIO prior to
the end of its Guarantee Term are based on the following formula:
MVA = W x [(J - I) x (N/12)] where:
(W) is the amount to be annuitized, withdrawn or transferred from the GIO.
(J) is the Guaranteed Interest Rate that would apply, as of the date of
transfer, annuitization or withdrawal, to a newly-issued GIO with a
Guarantee Term equal to the number of "years remaining" in the Guarantee
Term of the GIO from which the annuitization, withdrawal or transfer is
to be made, plus 0.25%. (For this purpose, the "years remaining" will be
rounded up to the next higher number of whole years. If a Guaranteed
Interest Rate is required for a Guarantee Term not currently offered, the
Guaranteed Interest Rate will be based on linear interpolation, between
the Guaranteed Interest Rates for currently offered Guarantee Terms, if
possible. Otherwise, we will determine a substitute Guaranteed Interest
Rate that will be no less favorable to you than the then most recent U.S.
Treasury Yield for a maturity closest to the "years remaining", plus
1.0%);
(I) is the Guaranteed Interest Rate applicable to the GIO; and
(N) is the number of complete months remaining in the Guarantee Term.
The MVA will never exceed, in the positive or negative direction, the excess
interest earned on the GIO from which the annuitization, withdrawal or transfer
is to be made. For this purpose, excess interest is defined as the dollar
amount of interest earned during the current Guarantee Term in excess of 3%,
per annum.
Generally, if the Guaranteed Interest Rate currently in effect for the
Guarantee Term (I) is lower than (J) as defined above, the MVA will result in a
lower amount payable to you. Similarly, if (I) is higher than (J), the MVA will
result in a higher amount payable to you. In no event will the MVA reduce
interest earned to less than 3% per annum.
MVA EXAMPLES
These assumptions are made in the following examples:
1. An allocation of $10,000 was made to a Guaranteed Interest Option (GIO)
with a 6-year Guarantee Term, and with a Guaranteed Interest Rate of
5.5%.
2. A full withdrawal is requested 2 1/2 years (30 months) from the
expiration of the Guarantee Term (i.e., N = 30).
3. The Account Value for the GIO at the time of the request is $12,061.01.
It is assumed that no Contract charges or fees have been applied to this
GIO.
4. If the GIO Account Value had been credited with 3% interest instead of
the 5.5%, the Account Value would have been $11,089.97. The excess
interest for this GIO is then $971.04, (i.e. $12,061.01- $11,089.97).
5. No transfers or withdrawals have been previously made from this GIO.
Examples of MVAs that Reduce the Withdrawal Amount:
Example A (MVA not limited to excess interest)
Assume that on the date of withdrawal the Guaranteed Interest Rate for a new
Guarantee Term of 3 years (2 1/2 years rounded up to the next higher whole
year) is 7.5%. "J" is then 7.75% (i.e. 7.50% + 0.25%). Then:
MVA= ($12,061.01) x [( 7.75% - 5.5%) x (30/12)]
= $678.43 (representing a positive amount to be subtracted from the GIO
Account Value)
62
Since the amount of the MVA is less than the excess interest earned on the GIO,
the withdrawal amount will include the GIO Account Value less $678.43. That
amount, $11,382.58, would be further reduced by the withdrawal charge and any
other Contract charges or fees that apply. The withdrawal charge is calculated
based on the GIO Account Value before the MVA.
Example B (MVA is limited to excess interest)
This time, assume that on the date of withdrawal the Guaranteed Interest Rate
for a new Guarantee Term of 3 years (2 1/2 years rounded up to the next higher
whole year) is 9.0%. "J" is then 9.25% (i.e. 9.00% + 0.25%). Then:
MVA= ($12,061.01) x [(9.25% - 5.5%) x (30/12)]
= $1,130.72 (representing a positive amount to be subtracted from the GIO
Account Value)
Since the amount of the MVA exceeds the excess interest earned on the GIO, the
MVA must be reduced to equal the excess interest and the withdrawal amount will
include the GIO Account Value less $971.04. That amount, $11,089.97, would be
further reduced by the withdrawal charge and any other Contract charges or fees
that apply. The withdrawal charge is calculated based on the GIO Account Value
before the MVA.
Examples of MVAs that Increase the Withdrawal Amount:
Example C (MVA not limited to excess interest)
Assume that on the date of withdrawal the Guaranteed Interest Rate for a new
Guarantee Term of 3 years (2 1/2 years rounded up to the next higher whole
year) is 3.25%. "J" is then 3.50% (i.e. 3.25% + 0.25%). Then:
MVA= ($12,061.01) x [(3.50% - 5.5%) x (30/12)]
= - $603.05 (representing a negative amount to be subtracted from the GIO
Account Value)
Since the absolute amount of the MVA is less than the excess interest earned on
the GIO, the withdrawal amount will include the GIO Account Value plus $603.05.
That amount, $12,664.06, would then be reduced by the withdrawal charge and any
other Contract charges or fees that apply. The withdrawal charge is calculated
based on the GIO Account Value before the MVA.
Example D (MVA is limited to excess interest)
To more readily show this example, and to demonstrate a Guaranteed Interest
Rate ("J") based on interpolation, the assumptions for this example have been
modified and are as follows:
1. An allocation of $10,000 was made to a Guaranteed Interest Option (GIO)
with a 6-year Guarantee Term, and with a Guaranteed Interest Rate of
5.5%.
2. A full withdrawal is requested 3 1/2 years (42 months) from the
expiration of the Guarantee Term (i.e., N = 42).
3. The Account Value for the GIO at the time of the request is $11,432.24.
It is assumed that no Contract charges or fees have been applied to this
GIO.
4. If the GIO Account Value had been credited with 3% interest instead of
the 5.5%, the Account Value would have been $10,766.96. The excess
interest for this GIO is then $665.28.
5. No transfers or withdrawals have been previously made from this GIO.
This time, assume that on the date of withdrawal the Guaranteed Interest Rate
for a new Guarantee Term of 3 years is 3.25%, and also assume that the
Guaranteed Interest Rate for a new Guarantee Term of 6 years is 4.0%.
63
Then the Guaranteed Interest Rate for a Guarantee Term of 4 years (3 1/2
rounded to the next higher whole year) is 3.5%. (That result is determined by
interpolation as follows: 3.25% plus (4.0% - 3.25%) x (4 years - 3 years)/(6
years - 3 years))
Then "J" is 3.75% (i.e. 3.50% + 0.25%), and:
MVA= ($11,432.24) x [(3.75% - 5.5%) x (42/12)]
= - $700.22 (representing a negative amount to be subtracted from the GIO
Account Value)
Since the absolute amount of the MVA exceeds the excess interest earned on the
GIO, the MVA must be reduced to equal the excess interest and the withdrawal
amount will include the GIO Account Value plus $665.28. That amount,
$12,097.52, would be reduced by the withdrawal charge and any other Contract
charges or fees that apply. The withdrawal charge is calculated based on the
GIO Account Value before the MVA.
64
-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
[SCISSORS SYMBOL]
To receive a current copy of the Pacific Portfolios SAI without charge, call
(800) 722-2333 or complete the following and send it to:
Pacific Life Insurance Company
Annuities Division
Post Office Box 7187
Pasadena, CA 91109-7187
Name _____________________________________________________
Address __________________________________________________
City _________________________ State ________ Zip ________
PH02/53003.29
PACIFIC PORTFOLIOS WHERE TO GO FOR MORE INFORMATION
The Pacific You'll find more information about the Pacific
Portfolios Portfolios variable annuity contract and Separate
variable annuity Account A in the Statement of Additional Information
Contract is (SAI) dated May 1, 2001.
offered by Pacific
Life Insurance
Company, The SAI has been filed with the SEC and is considered
700 Newport Center to be part of this Prospectus because it's incorporated
Drive, by reference. You'll find the table of contents for the
P.O. Box 9000, SAI on page 60 of this Prospectus.
Newport Beach,
California 92660. You can get a copy of the SAI at no charge by calling
or writing to us, or by contacting the SEC. The SEC may
If you have any charge you a fee for this information.
questions about
the Contract,
please ask your
registered
representative or
contact us.
---------------------------------------------------------
How to contact us Call or write to us at:
Pacific Life Insurance Company
Annuities Division
P.O. Box 7187
Pasadena, California 91109-7187
1-800-722-2333
6 a.m. through 5 p.m. Pacific time
Send Investments, other payments and application forms:
By mail
Pacific Life Insurance Company
P.O. Box 100060
Pasadena, California 91189-0060
By overnight delivery service
Pacific Life Insurance Company
c/o FCNPC
1111 South Arroyo Parkway, Suite 150
Pasadena, California 91105
---------------------------------------------------------
How to contact the Public Reference Section of the SEC
SEC Washington, D.C. 20549-6009
1-800-SEC-0330
Internet: www.sec.gov
[LOGO OF PACIFIC PORTFOLIOS]
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2001
PACIFIC PORTFOLIOS
SEPARATE ACCOUNT A
----------------
Pacific Portfolios (the "Contract") is a variable annuity contract offered 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,
2001, and any supplement thereto, 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
Annuities Division
Mailing Address: P.O. Box 7187
Pasadena, California 91109-7187
1-800-722-2333
TABLE OF CONTENTS
[Download Table]
Page No.
--------
PERFORMANCE............................................................ 1
Total Returns........................................................ 1
Yields............................................................... 2
Performance Comparisons and Benchmarks............................... 3
Separate Account Performance......................................... 3
DISTRIBUTION OF THE CONTRACTS.......................................... 7
Pacific Select Distributors, Inc. (PSD).............................. 7
THE CONTRACTS AND THE SEPARATE ACCOUNT................................. 8
Calculating Subaccount Unit Values................................... 8
Variable Annuity Payment Amounts..................................... 8
Corresponding Dates.................................................. 10
Age and Sex of Annuitant............................................. 10
Systematic Transfer Programs......................................... 11
Pre-Authorized Withdrawals........................................... 13
Death Benefit........................................................ 13
Joint Annuitants on Qualified Contracts.............................. 14
1035 Exchanges....................................................... 14
Safekeeping of Assets................................................ 14
Dividends............................................................ 14
FINANCIAL STATEMENTS................................................... 14
INDEPENDENT AUDITORS................................................... 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 guarantee of future investment performance, and do
not represent the actual experience of amounts invested by any particular
Contract Owner.
Total Returns
A Subaccount may advertise its "average annual total return" over various
periods of time. "Total return" represents the average percentage change in
value of an investment in the Subaccount from the beginning of a measuring
period to the end of that measuring period. "Annualized" total return assumes
that the total return achieved for the measuring period is achieved for each
such period for a full year. "Average annual" total return is computed in
accordance with a standard method prescribed by the SEC.
Average Annual Total Return
To calculate a Subaccount's average annual total return for a specific
measuring period, we first take a hypothetical $1,000 investment in that
Subaccount, at its then-applicable Subaccount Unit Value (the "initial
payment") and we compute the ending redeemable value of that initial payment
at the end of the measuring period based on the investment experience of that
Subaccount ("full withdrawal value"). The full withdrawal value reflects the
effect of all recurring fees and charges applicable to a Contract Owner under
the Contract, including the Risk Charge, the asset-based Administrative Fee
and the deduction of the applicable withdrawal charge, but does not reflect
any charges for applicable premium taxes, the Enhanced Guaranteed Minimum
Death Benefit Charge for the optional EGMDBR, the GIA Charge for the optional
GIA Rider, the EEG Charge for the optional EEG Rider, or any non-recurring
fees or charges. The Annual Fee is also taken into account, assuming an
average Contract Value of $45,000. The redeemable value is then divided by the
initial payment and this quotient is raised to the 365/N power (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-, three-,
five- and ten-year periods (if applicable), and may be given for other periods
as well (such as from commencement of the Subaccount's operations, or on a
year-by-year basis).
When considering "average" total return figures for periods longer than one
year, it is important to note that the relevant Subaccount's annual total
return for any one year in the period might have been greater or less than the
average for the entire period.
Aggregate Total Return
A Subaccount may use "aggregate" total return figures along with its "average
annual" total return figures for various periods; these figures represent the
cumulative change in value of an investment in the Subaccount for a specific
period. Aggregate total returns may be shown by means of schedules, charts or
graphs and may indicate subtotals of the various components of total return.
The SEC has not prescribed standard formulas for calculating aggregate total
return.
1
Total returns may also be shown for the same periods that do not take into
account the withdrawal charge, the Annual Fee, the Enhanced Guaranteed Minimum
Death Benefit Charge for the optional EGMDBR, or any GIA or EEG Charges for
the optional GIA or EEG Riders.
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, any Enhanced Guaranteed
Minimum Death Benefit Charge for the optional EGMDBR, or any GIA or EEG
Charges for the optional GIA, EEG Riders, or any non-recurring fees or
charges, but do reflect a deduction for the Annual Fee, the Risk Charge and
the asset-based Administrative Fee and assume an average Contract Value of
$45,000.
At December 31, 2000, the Money Market Subaccount's current yield was 5.91%
and the effective yield was 6.09%.
Other Subaccounts
"Yield" of the other Subaccounts is computed in accordance with a different
standard method prescribed by the SEC. The net investment income (investment
income less expenses) per Subaccount Unit earned during a specified one-month
or 30-day period is divided by the Subaccount Unit Value on the last day of
the specified period. This result is then annualized (that is, the yield is
assumed to be generated each month or each 30-day period for a year),
according to the following formula, which assumes semiannual compounding:
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 Risk Charge, the asset-based
Administrative Fee and the Annual Fee (assuming an average Contract Value of
$45,000), but does not reflect any withdrawal charge, any charge for
applicable premium taxes, any Enhanced Guaranteed Minimum Death Benefit Charge
for the optional EGMDBR, any GIA or EEG Charges for the optional GIA and EEG
Riders, or any non-recurring fees or charges.
The Subaccounts' yields will vary from time to time depending upon market
conditions, the composition of each Portfolio and operating expenses of the
Fund allocated to each Portfolio. Consequently, any given performance
quotation should not be considered representative of the Subaccount's
performance in the future. Yield should
2
also be considered relative to changes in Subaccount Unit Values and to the
relative risks associated with the investment policies and objectives of the
various Portfolios. In addition, because performance will fluctuate, it may
not provide a basis for comparing the yield of a Subaccount with certain bank
deposits or other investments that pay a fixed yield or return for a stated
period of time.
Performance Comparisons and Benchmarks
In advertisements and sales literature, we may compare the performance of some
or all of the Subaccounts to the performance of other variable annuity issuers
in general and to the performance of particular types of variable annuities
investing in mutual funds, or series of mutual funds, with investment
objectives similar to each of the Subaccounts. This performance may be
presented as averages or rankings compiled by Lipper Analytical Services, Inc.
("Lipper"), the Variable Annuity Research and Data Service ("VARDS(R)") or
Morningstar, Inc. ("Morningstar"), which are independent services that monitor
and rank the performance of variable annuity issuers and mutual funds in each
of the major categories of investment objectives on an industry-wide basis.
Lipper's rankings include variable life issuers as well as variable annuity
issuers. VARDS(R) rankings compare only variable annuity issuers. The
performance analyses prepared by Lipper and VARDS(R) rank such issuers on the
basis of total return, assuming reinvestment of dividends and distributions,
but do not take sales charges, redemption fees or certain expense deductions
at the separate account level into consideration. In addition, VARDS(R)
prepares risk adjusted rankings, which consider the effects of market risk on
total return performance. We may also compare the performance of the
Subaccounts with performance information included in other publications and
services that monitor the performance of insurance company separate accounts
or other investment vehicles. These other services or publications may be
general interest business publications such as The Wall Street Journal,
Barron's, Business Week, Forbes, Fortune, and Money.
In addition, our reports and communications to Contract Owners,
advertisements, or sales literature may compare a Subaccount's performance to
various benchmarks that measure the performance of a pertinent group of
securities widely regarded by investors as being representative of the
securities markets in general or as being representative of a particular type
of security. We may also compare the performance of the Subaccounts with that
of other appropriate indices of investment securities and averages for peer
universes of funds or data developed by us derived from such indices or
averages. Unmanaged indices generally assume the reinvestment of dividends or
interest but do not generally reflect deductions for investment management or
administrative costs and expenses.
Separate Account Performance
The Contract was not available prior to 1997. However, in order to help you
understand how investment performance can affect your Variable Account Value,
we are including performance information based on the historical performance
of the Subaccounts.
The following table presents the annualized total return for each Variable
Account for the period from each such Variable Account's commencement of
operations through December 31, 2000. The table is based on a Contract for
which the average initial premium is approximately $45,000. The accumulated
value (AV) reflects the deductions for all contractual expenses except any
charge for any premium taxes, the contingent deferred sales charge, the
Enhanced Guaranteed Minimum Death Benefit Charge for the optional EGMDBR, the
GIA Charge for the optional GIA Rider, or the EEG Charge for the optional EEG
Charge, and any other non-recurring fees or charges. The full withdrawal value
(FWV) reflects the deduction for all contractual expenses, except any charge
for any premium taxes, the Enhanced Guaranteed Minimum Death Benefit Charge,
the GIA or EEG Charge, or any non-recurring fees and charges.
3
The results shown in this section are not an estimate or guarantee of future
investment performance.
Historical Separate Account Performance
Annualized Rates of Return for Periods ending December 29, 2000
All numbers are expressed as a percentage
[Download Table]
Since
1 Year 3 Years Inception
-------------- -------------- --------------
Variable Accounts AV FWV AV FWV AV FWV
----------------- ------ ------ ------ ------ ------ ------
Aggressive Equity 4/17/96*..... (22.24) (28.54) 2.93 1.21 3.99 3.49
Emerging Markets 4/17/96*...... (36.67) (42.97) (11.61) (13.97) (9.23) (10.09)
Diversified Research 1/3/00*... 8.68 2.29
Small-Cap Equity 10/1/99*...... (23.57) (29.87) (1.67) (6.85)
International Large-Cap
1/3/00*....................... (22.60) (28.99)
Equity 1/2/96*................. (26.30) (32.60) 9.00 7.47 13.72 13.40
I-Net Tollkeeper 5/1/00*....... (32.81) (39.19)
Multi-Strategy 1/2/96*......... (0.73) (7.03) 6.92 5.32 9.72 9.34
Equity Income 1/2/96*.......... (8.09) (14.39) 7.96 6.39 13.23 12.90
Strategic Value 10/2/00*....... (2.53) (8.92)
Growth LT 1/2/96*.............. (22.88) (29.18) 33.03 32.00 24.53 24.31
Focused 30 10/2/00*............ (17.69) (24.07)
Mid-Cap Value 1/4/99*.......... 23.19 16.89 13.10 10.26
International Value 1/2/96*.... (12.72) (19.02) 3.23 1.51 7.06 6.65
Equity Index 1/2/96*........... (10.64) (16.94) 10.45 8.96 16.17 15.88
Small-Cap Index 1/4/99*........ (5.04) (11.34) 5.82 2.77
REIT 1/4/99*................... 30.94 24.64 13.68 10.85
Inflation Managed 1/2/96*...... 10.22 3.92 4.67 3.01 4.67 4.22
Managed Bond 1/2/96*........... 9.90 3.60 4.58 2.90 4.98 4.53
Money Market 1/2/96*........... 4.62 (1.68) 3.95 2.25 3.85 3.38
High Yield Bond 1/2/96*........ (5.14) (11.44) (0.98) (2.85) 2.85 2.36
Large-Cap Value 1/4/99*........ 13.67 7.37 11.82 8.94
--------
* Date Variable Account commenced operations.
Effective June 1, 1997 Morgan Stanley Asset Management became the Portfolio
Manager of the International Value Portfolio. Effective May 1, 1998, Alliance
Capital Management L.P. ("Alliance Capital") became the Portfolio Manager of
the Aggressive Equity Portfolio and Goldman Sachs Asset Management became the
Portfolio Manager of the Equity Portfolio; prior to May 1, 1998 some of the
investment policies of the Aggressive Equity and Equity Portfolios differed.
Effective January 1, 2000, Alliance Capital became the Portfolio Manager of
the Emerging Markets Portfolio and Mercury Advisors (formerly Mercury Asset
Management US) became the Portfolio Manager of the Equity Index and Small-Cap
Index Portfolios. Effective January 2, 2001, Lazard Asset Management became
the Portfolio Manager of the International Value Portfolio. Prior to May 1,
2001, the Inflation Managed Portfolio was called the Government Securities
Portfolio and some of the investment policies differed.
The Blue Chip, Aggressive Growth, Financial Services, Health Sciences,
Technology, Telecommunications, Capital Opportunities, Mid-Cap Growth, and
Global Growth Subaccounts started operations after December 31, 2000 and there
is no historical value available for these Subaccounts.
In order to help you understand how investment performance can affect your
Variable Account Value, we are including performance information based on the
historical performance of the Portfolios.
The Separate Account commenced operations as of January 2, 1996. Therefore, no
historical performance data exists for the Subaccounts prior to that date. The
following table represents what the performance of the Subaccounts would have
been if the Subaccounts had been both in existence and invested in the
corresponding Portfolio since the date of the Portfolio's (or predecessor
series') inception or for the indicated time period. Eight of the Portfolios
of the Fund available under the Contract have been in operation since January
4, 1988. The Equity Index Portfolio has been in operation since January 30,
1991; the Growth LT Portfolio since January 4, 1994; the Aggressive Equity and
Emerging Markets Portfolios since April 1, 1996; the Mid-Cap Value, Small-Cap
Index, REIT, and Large-Cap Value Portfolios since January 4, 1999; the
Diversified Research and International Large-Cap Portfolios since January 3,
2000; the I-Net Tollkeeper Portfolio since May 1, 2000; the Strategic Value
and Focused 30 Portfolios since October 2, 2000; and the Blue Chip, Aggressive
Growth, Financial Services, Health Sciences, Technology, Telecommunications,
Capital Opportunities, Mid-Cap Growth, and Global Growth Portfolios since
January 2, 2001. Historical performance information for the Equity Portfolio
is based in part on the performance of the Portfolio's predecessor series
which was a series of the Pacific Corinthian Variable Fund that began its
first full year of operations in 1984, the assets of which were acquired by
the Fund on December 31, 1994. Because the Subaccounts had not commenced
operations until January 2, 1996 or later, as indicated in the chart above,
and because the Contracts were not available until 1997, these are not actual
performance numbers for the Subaccounts or for the Contract.
4
These are hypothetical total return numbers based on accumulated value ("AV")
and full withdrawal value ("FWV") that represent the actual performance of the
Portfolios, adjusted for the fees and charges applicable to the Contract; the
FWV also includes applicable withdrawal charges. Any charge for premium taxes,
the Enhanced Guaranteed Minimum Death Benefit Charge for the optional EGMDBR,
the GIA Charge for the optional GIA Rider, or the EEG charge for the EEG Rider
are not reflected in these data, and reflection of the Annual Fee assumes an
average Contract size of $45,000. The information presented also includes data
representing unmanaged market indices.
The results shown in this section are not an estimate or guarantee of future
investment performance.
Historical and Hypothetical Separate Account Performance
Annualized Rates of Return for Periods ending December 29, 2000
All numbers are expressed as a percentage.
[Enlarge/Download Table]
Since
1 Year 3 Years 5 Years 10 Years Inception
-------------- -------------- ----------- ----------- --------------
Variable Accounts AV FWV AV FWV AV FWV AV FWV AV FWV
----------------- ------ ------ ------ ------ ----- ----- ----- ----- ------ ------
Aggressive Equity....... (22.24) (28.54) 2.93 1.21 3.75 3.25
Emerging Markets........ (36.67) (42.97) (11.61) (13.97) (8.95) (9.80)
Diversified Research.... 8.68 2.29
Small-Cap Equity........ (23.57) (29.87) 4.04 2.35 12.03 11.69 14.48 14.48 12.72 12.72
International Large-Cap. (22.60) (28.99)
Equity.................. (26.30) (32.60) 9.00 7.47 13.76 13.44 13.09 13.09 12.63 12.63
I-Net Tollkeeper........ (32.81) (39.19)
Multi-Strategy.......... (0.73) (7.03) 6.92 5.32 9.84 9.47 10.17 10.17 9.57 9.57
Equity Income........... (8.09) (14.39) 7.96 6.39 13.45 13.12 13.18 13.18 11.83 11.83
Strategic Value......... (2.53) (8.92)
Growth LT............... (22.88) (29.18) 33.03 32.00 24.52 24.29 24.04 24.04
Focused 30.............. (17.69) (24.07)
Mid-Cap Value........... 23.19 16.89 13.10 10.26
International Value..... (12.72) (19.02) 3.23 1.51 7.37 6.96 7.01 7.01 6.71 6.71
Equity Index............ (10.64) (16.94) 10.45 8.96 16.34 16.04 15.06 15.06
Small-Cap Index......... (5.04) (11.34) 5.82 2.77
REIT.................... 30.94 24.64 13.68 10.85
Inflation Managed....... 10.22 3.92 4.67 3.01 4.68 4.22 6.28 6.28 6.70 6.70
Managed Bond............ 9.90 3.60 4.58 2.90 4.99 4.54 6.77 6.77 7.17 7.17
Money Market............ 4.62 (1.68) 3.95 2.25 3.85 3.38 3.26 3.26 3.91 3.91
High Yield Bond......... (5.14) (11.44) (0.98) (2.85) 2.87 2.39 8.40 8.40 7.05 7.05
Large-Cap Value......... 13.67 7.37 11.82 8.94
[Download Table]
Major Indices 1 year 3 years 5 years 10 years
------------- ------ ------- ------- --------
Credit Suisse First Boston Global High Yield
Bond......................................... (5.21) (0.51) 4.51 11.20
Lehman Brothers Aggregate Bond................ 11.63 6.36 6.46 7.96
Lehman Brothers Government Bond............... 13.23 6.73 6.49 7.92
Lehman Brothers Government/Credit............. 11.84 6.20 6.23 8.00
Morgan Stanley Capital International Europe,
Australasia & Far East....................... (13.96) 9.64 7.43 8.56
Morgan Stanley Capital International Emerging
Markets Free................................. (30.61) (4.83) (4.17) 8.26
North American Real Estate Investment Trust
Equity....................................... 26.36 (0.19) 10.10 13.60
Russell MidCap................................ 19.18 7.75 15.12 17.88
Russell 1000 Growth........................... (22.42) 12.74 18.15 17.33
Russell 2000.................................. (3.02) 4.65 10.31 15.53
Russell 2500.................................. 4.27 9.12 13.98 17.41
Russell 2500 Growth........................... (16.10) 10.38 12.17 15.72
Standard & Poor's 500 Composite Stock Price... (9.11) 12.26 18.35 17.46
--------
The performance of the Aggressive Equity, Emerging Markets, Equity, Multi-
Strategy, Equity Income, and International Value Variable Accounts for all or
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 Multi-Strategy and Equity Income Portfolios; prior to
January 1, 1994, some of the investment policies of the Multi-Strategy
Portfolio and the investment objective of the Equity Income Portfolio
differed. Effective June 1, 1997 Morgan Stanley Asset Management became the
Portfolio Manager of the International Value 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 Portfolio; prior to May 1, 1998 some of the
investment policies of the Aggressive Equity and Equity Portfolios differed.
Performance of the Equity Portfolio is based in part on the performance of the
predecessor portfolio of Pacific Corinthian Variable Fund, which began its
first full year of operations in 1984, the assets of which were acquired by
the Fund on December 31, 1994. Effective January 1, 2000, Alliance Capital
became the Portfolio Manager of the Emerging Markets Portfolio and Mercury
Advisors (formerly Mercury Asset Management US) became the Portfolio Manager
of the Equity Index and Small-Cap Index Portfolios. Effective January 2, 2001,
Lazard Asset Management became the Portfolio Manager of the International
Value Portfolio. Prior to May 1, 2001, the Inflation Managed Portfolio was
called the Government Securities Portfolio and some of the investment policies
differed.
5
Tax Deferred Accumulation
In reports or other communications to you or in advertising or sales
materials, we may also describe the effects of tax-deferred compounding on the
Separate Account's investment returns or upon returns in general. These
effects may be illustrated in charts or graphs and may include comparisons at
various points in time of returns under the Contract or in general on a tax-
deferred basis with the returns on a taxable basis. Different tax rates may be
assumed.
In general, individuals who own annuity contracts are not taxed on increases
in the value under the annuity contract until some form of distribution is
made from the contract. Thus, the annuity contract will benefit from tax
deferral during the accumulation period, which generally will have the effect
of permitting an investment in an annuity contract to grow more rapidly than a
comparable investment under which increases in value are taxed on a current
basis. The following chart illustrates this benefit by comparing accumulation
under a variable annuity contract with accumulations from an investment on
which gains are taxed on a current ordinary income basis. The chart shows
accumulations on an initial Purchase Payment of $10,000, assuming hypothetical
annual returns of 0%, 4% and 8%, compounded annually, and a tax rate of 36%.
The values shown for the taxable investment do not include any deduction for
management fees or other expenses but assume that taxes are deducted annually
from investment returns. The values shown for the variable annuity do not
reflect the deduction of contractual expenses such as the Risk Charge (equal
to an annual rate of 1.25% of average daily account value), the Administrative
Fee (equal to an annual rate of 0.15% of average daily account value) and the
Annual Fee (equal to $40 per year if your Net Contract Value is less than
$50,000), the Enhanced Death Benefit Rider Charge (equal to a maximum annual
rate of .30% of average daily account value), the GIA Charge for the optional
GIA Rider (equal to an annual rate of .30% of average daily account value),
any EEG Charge for the optional EEG Rider, any charge for premium taxes, or
the expenses of an underlying investment vehicle, such as the Fund. The values
shown also do not reflect the withdrawal charge. Generally, the withdrawal
charge is equal to 7% of the amount withdrawn attributable to Purchase
Payments that are one year old, 7% of the amount withdrawn attributable to
Purchase Payments that are two years old, 6% of the amount withdrawn
attributable to Purchase Payments that are three years old, 5% of the amount
withdrawn attributable to Purchase Payments that are four years old, 3% of the
amount withdrawn attributable to Purchase Payments that are five years old,
and 1% of the amount withdrawn attributable to Purchase Payments that are six
years old. The age of Purchase Payments is considered 1 year old in the
Contract Year we receive it and increases by one year on the beginning of the
day preceding each Contract Anniversary. There is no withdrawal charge on
withdrawals of your Earnings, on amounts attributed to Purchase Payments at
least 7 years old, or to the extent that total withdrawals that are free of
charge during the Contract Year do not exceed 10% of the sum of your remaining
Purchase Payments at the beginning of the Contract Year that have been held
under your Contract for less than seven years plus additional Purchase
Payments applied to your Contract during that Contract Year. If these expenses
and fees were taken into account, they would reduce the investment return
shown for both the taxable investment and the hypothetical variable annuity
contract. In addition, these values assume that you do not surrender the
Contract or make any withdrawals until the end of the period shown. The chart
assumes a full withdrawal, at the end of the period shown, of all Contract
Value and the payment of taxes at the 36% rate on the amount in excess of the
Purchase Payment.
The rates of return illustrated are hypothetical and are not an estimate or
guarantee of performance. Actual tax rates may vary for different assets and
taxpayers from that illustrated and withdrawals by and distributions to
Contract Owners who have not reached age 59 1/2 may be subject to a tax
penalty of 10%.
6
Power of Tax Deferral
$10,000 investment at annual rates of return of 0%, 4% and 8%, taxed @ 36%
[TAX DEFERRAL GRAPH APPEARS HERE]
Taxable Tax-Deferred
Investment Investment
---------- ------------
10 Years
0% $10,000.00 $10,000.00
4% $12,875.97 $13,073.56
8% $16,476.07 $17,417.12
20 Years
0% $10,000.00 $10,000.00
4% $16,579.07 $17,623.19
8% $27,146.07 $33,430.13
30 Years
0% $10,000.00 $10,000.00
4% $21,347.17 $24,357.74
8% $44,726.05 $68,001.00
DISTRIBUTION OF THE CONTRACTS
Pacific Select Distributors, Inc.
Pacific Select Distributors, Inc. (PSD), a subsidiary of ours, acts as the
principal underwriter ("distributor") of the Contracts and offers the
Contracts on a continuous basis. PSD is registered as a broker-dealer with the
SEC and is a member of the National Association of Securities Dealers (NASD).
We pay PSD for acting as principal underwriter under a Distribution Agreement.
We and PSD enter into selling agreements with broker-dealers whose registered
representatives are authorized by state insurance departments to sell the
Contracts. The aggregate amount of underwriting commissions paid to PSD for
2000, 1999, and 1998, respectively, with regard to this Contract was
$72,633,292, $90,274,920, and $58,491,244, respectively, of which $0 was
retained.
7
THE CONTRACTS AND THE SEPARATE ACCOUNT
Calculating Subaccount Unit Values
The Unit Value of the Subaccount Units in each Variable Investment Option is
computed at or about 4:00 p.m. Eastern time on each Business Day. The initial
Unit Value of each Subaccount was $10 on the Business Day the Subaccount began
operations. At the end of each Business Day, the Unit Value for a Subaccount
is equal to:
YXZ
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 or other amounts set aside during
that valuation period as a reserve for any income and/or any other
taxes which we determine to have resulted from the operations of
the Subaccount or Contract, and/or any taxes attributable,
directly or indirectly, to Investments;
(B) = the net asset value per share of the corresponding Portfolio shares
held by the Subaccount as of the end of the preceding valuation
period; and
(C) = a factor that assesses against the Subaccount net assets for each
calendar day in the valuation period, the charge for mortality and
expense risks at a rate equal to 1.25% annually and the
Administrative Charge at a rate equal to 0.15% annually (see CHARGES,
FEES AND DEDUCTIONS in the Prospectus).
As explained in the Prospectus, the Annual Fee, if applicable, and any
Enhanced Guaranteed Minimum Death Benefit Charge are 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, in the Fixed Option, the
DCA Plus Fixed Option and in each GIO 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 Fees, Enhanced Guaranteed Minimum
Death Benefit Charge, GIA Charge, EEG Charge, withdrawal charge, and any
charges for premium taxes and/or other taxes without converting this amount
into annuity payments.
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 $1,000 of his Contract Value (reduced by
applicable charges) that he will be using to provide variable payments.
Therefore, if his Contract Value after deducting applicable fees and
charges is $100,000 on his Annuity Date and he applies this entire amount
toward his variable annuity, his first monthly payment will be $579.00.
You may choose any other Annuity Option Table that assumes a different rate of
return which we offer at the time your Annuity Option is effective.
Third: Subaccount Annuity Units
For each Subaccount, we use the amount of the first variable annuity payment
under your Contract attributable to each Subaccount to determine the number of
Subaccount Annuity Units that will form the basis of subsequent payment
amounts. First, we use the Annuity Option Table to determine the amount of
that first variable payment for each Subaccount. Then, for each Subaccount, we
divide that amount of the first variable annuity payment by the value of one
Subaccount Annuity Unit (the "Subaccount Annuity Unit Value") as of the end of
the Annuity Date to obtain the number of Subaccount Annuity Units for that
particular Subaccount. The number of Subaccount Annuity Units used to
calculate subsequent payments under your Contract will not change unless
exchanges of Annuity Units are made (or if the Joint and Survivor Annuity
Option is elected and the Primary Annuitant dies first), but the value of
those Annuity Units will change daily, as described below.
Fourth: The Subsequent Variable Payments
The amount of each subsequent variable annuity payment will be the sum of the
amounts payable based on each Subaccount. The amount payable based on each
Subaccount is equal to the number of Subaccount Annuity Units for that
Subaccount multiplied by their Subaccount Annuity Unit Value at the end of the
Business Day in each payment period you elected that corresponds to the
Annuity Date.
Each Subaccount's Subaccount Annuity Unit Value, like its Subaccount Unit
Value, changes each day to reflect the net investment results of the
underlying investment vehicle, as well as the assessment of the Risk Charge at
an annual rate of 1.25% and the Administrative Fee at an annual rate of 0.15%.
In addition, the calculation of Subaccount Annuity Unit Value incorporates an
additional factor; as discussed in more detail below, this additional factor
adjusts Subaccount Annuity Values to correct for the Option Table's implicit
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, you may
exchange Subaccount Annuity Units in any Subaccount for Subaccount Annuity
Units in any other Subaccount(s) up to four times in any twelve month period
after your Annuity Date. The number of Subaccount Annuity Units in any
Subaccount may change due to such exchanges. Exchanges following your Annuity
Date will be made by exchanging Subaccount Annuity Units of equivalent
aggregate value, based on their relative Subaccount Annuity Unit Values.
Understanding the "Assumed Investment Return" Factor
The Annuity Option Table incorporates a number of implicit assumptions in
determining the amount of your first variable annuity payment. As noted above,
the numbers in the Annuity Option Table reflect certain actuarial assumptions
based on the Annuitant's age, and, in some cases, the Annuitant's sex. In
addition, these numbers
9
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; thus 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 Risk
Charge, the Administrative Fee, and the assumed investment return. The
Subaccount Annuity Unit Value for any Subaccount will generally be less than
the Subaccount Unit Value for that same Subaccount, and the difference will be
the amount of the assumed investment return factor.
Example: Assume the net investment performance of a Subaccount is at a rate
of 5.00% per year (after deduction of the 1.25% 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, 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's assets is at a rate less
than 5.00% per year, the Subaccount Annuity Unit Value will decrease, even if
the Subaccount Unit Value is increasing.
Example: Assume the net investment performance of a Subaccount is at a rate
of 2.60% per year (after deduction of the 1.25% 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 = 0.9771; 0.9771 - 1 = - 0.0229; - 0.0229 * 100% = - 2.29%.
-----
1.05
The assumed investment return will always cause increases in Subaccount
Annuity Unit Values to be somewhat less than if the assumption had not been
made, will cause decreases in Subaccount Annuity Unit Values to be somewhat
greater than if the assumption had not been made, and will (as shown in the
example above) sometimes cause a decrease in Subaccount Annuity Unit Values to
take place when an increase would have occurred if the assumption had not been
made. If we had assumed a higher investment return in our Annuity Option
tables, it would produce annuities with larger first payments, but the
increases in subaccount annuity payments would be smaller and the decreases in
subsequent annuity payments would be greater; a lower assumed investment
return would produce annuities with smaller first payments, and the increases
in subsequent annuity payments would be greater and the decreases in
subsequent annuity payments would be smaller.
Corresponding Dates
If any transaction or event under your Contract is scheduled to occur on a
"corresponding date" that does not exist in a given calendar period, the
transaction or event will be deemed to occur on the following Business Day. In
addition, as stated in the Prospectus, any event scheduled to occur on a day
that is not a Business Day will occur on the next succeeding Business Day.
Example: If your Contract is issued on February 29 in year 1 (a leap year),
your Contract Anniversary in years 2, 3 and 4 will be on March 1.
Example: If your Annuity Date is July 31 and you select monthly annuity
payments, the payments received will be based on valuations made on July
31, August 31, October 1 (for September), October 31, December 1 (for
November), December 31, January 31, March 1 (for February), March 31, May 1
(for April), May 31 and July 1 (for June).
Age and Sex of Annuitant
As mentioned in the Prospectus, the Contracts generally provide for sex-
distinct annuity income factors in the case of life annuities. Statistically,
females tend to have longer life expectancies than males; consequently, if the
10
amount of annuity payments is based on life expectancy, they will ordinarily
be higher if an annuitant is male than if an annuitant is female. Certain
states' regulations prohibit sex-distinct annuity income factors, and
Contracts issued in those states will use unisex factors. In addition,
Contracts issued in connection with Qualified Plans are required to use unisex
factors.
We may require proof of your Annuitant's age and sex before or after
commencing annuity payments. If the age or sex (or both) of your Annuitant are
incorrectly stated in your Contract, we will correct the amount payable 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 we
make the correction after annuity payments have started, 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 age and/or sex.
Systematic Transfer Programs
The GIOs and the DCA Plus Fixed Option are not available for any systematic
transfer programs, except that if you elect DCA Plus, such transfers must be
made from the DCA Plus Fixed Option. For a description of DCA Plus, including
its limitations and restrictions, see HOW YOUR INVESTMENTS ARE ALLOCATED--
Transfers in the Prospectus. The Fixed Account is not available in connection
with rebalancing and DCA Plus and may not be used as a source account for
dollar cost averaging programs newly established by you. You may not use
dollar cost averaging, DCA Plus and/or the earnings sweep at the same time.
Dollar Cost Averaging
When you request dollar cost averaging, you are authorizing us to make
periodic reallocations of your Contract Value without waiting for any further
instruction from you. You may request to begin or stop dollar cost averaging
at any time prior to your Annuity Date; the effective date of your request
will be the day we receive written notice from you in proper form. Your
request may specify the date on which you want your first transfer to be made.
If you do not specify a date for your first transfer, we will treat your
request as if you had specified the effective date of your request. Your first
transfer may not be made until 30 days after your Contract Date, and if you
specify an earlier date, your first transfer will be delayed until one
calendar month after the date you specify. If you request dollar cost
averaging on your application for your Contract and you fail to specify a date
for your first transfer, your first transfer will be made one period after
your Contract Date (that is, if you specify monthly transfers, the first
transfer will occur 30 days after your Contract Date; quarterly transfers, 90
days after your Contract Date; semiannual transfers, 180 days after your
Contract Date; and if you specify annual transfers, the first transfer will
occur on your Contract Anniversary). If you stop dollar cost averaging, you
must wait 30 days before you may begin this option again.
Your request to begin dollar cost averaging must specify the Investment Option
you wish to transfer money from (your "source account"). You may choose any
Investment Option (excluding the DCA Plus Fixed Option and the GIOs) as your
source account. The Account Value of your source account must be at least
$5,000 for you to begin dollar cost averaging.
Your request to begin dollar cost averaging must also specify the amount and
frequency of your transfers. You may choose monthly, quarterly, semiannual or
annual transfers. The amount of your transfers may be specified as a dollar
amount or a percentage of your source Account Value; however, each transfer
must be at least $250. Dollar cost averaging transfers are not subject to the
same requirements and limitations as other transfers.
Finally, your request must specify the Fixed or Variable Investment Option(s)
you wish to transfer amounts to (your "target account(s)"). If you select more
than one target account, your dollar cost averaging request must specify how
transferred amounts should be allocated among the target accounts. Your source
account may not also be a target account.
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. We may change,
terminate or suspend the dollar cost averaging option at any time.
Portfolio Rebalancing
Portfolio rebalancing allows you to maintain the percentage of your Contract
Value allocated to each Variable Investment Option at a pre-set level prior to
annuitization. For example, you could specify that 30% of your Contract Value
should be in the Equity Index Subaccount, 40% in the Managed Bond Subaccount,
and 30% in the Growth LT Subaccount. Over time, the variations in each
Subaccount's investment results will shift this balance of these Subaccount
Value allocations. If you elect the portfolio rebalancing feature, we will
automatically transfer your Subaccount Value back to the percentages you
specify.
You may choose to have rebalances made quarterly, semiannually or annually
until your Annuity Date; portfolio rebalancing is not available after you
annuitize.
Procedures for selecting portfolio rebalancing are generally the same as those
discussed in detail above for selecting dollar cost averaging: You may make
your request at any time prior to your Annuity Date and it will be effective
when we receive it in proper form. If you stop portfolio rebalancing, you must
wait 30 days to begin again. You may specify a date for your first rebalance,
or we will treat your request as if you selected the request's effective date.
If you specify a date fewer than 30 days after your Contract Date, your first
rebalance will be delayed one month, and if you request rebalancing on your
application but do not specify a date for the first rebalance, it will occur
one period after your Contract Date, as described above under Dollar Cost
Averaging. We may change, terminate or suspend the portfolio rebalancing
feature at any time.
Earnings Sweep
An earnings sweep automatically transfers the earnings attributable to a
specified Investment Option (the "sweep option") to one or more other
Investment Options (your "target option(s)"). If you elect to use the earnings
sweep, you may select either the Fixed Option or the Money Market Subaccount
as your sweep option. The Account Value of your sweep option will be required
to be at least $5,000 when you elect the earnings sweep. You may select one or
more Variable Investment Options (but not the Money Market Subaccount) as your
target option(s).
You may choose to have earnings sweeps occur monthly, quarterly, semiannually
or annually until you annuitize. At each earnings sweep, we will automatically
transfer your accumulated earnings attributable to your sweep option for the
previous period proportionately to your target option(s). That is, if you
select a monthly earnings sweep, we will transfer the sweep option earnings
from the preceding month; if you select a semiannual earnings sweep, we will
transfer the sweep option earnings accumulated over the preceding six months.
Earnings sweep transfers are not subject to the same requirements and
limitations as other transfers.
To determine the earnings, we take the change in the sweep option's Account
Value during the sweep period, add any withdrawals or transfers out of the
sweep option Account that occurred during the sweep period, and subtract any
allocations to the sweep option Account during the sweep period. The result of
this calculation represents the "total earnings" for the sweep period.
If, during the sweep period, you withdraw or transfer amounts from the sweep
option Account, we assume that earnings are withdrawn or transferred before
any other Account Value. Therefore, your "total earnings" for the sweep period
will be reduced by any amounts withdrawn or transferred during the sweep
option period. The remaining earnings are eligible for the sweep transfer.
Procedures for selecting the earnings sweep are generally the same as those
discussed in detail above for selecting dollar cost averaging and portfolio
rebalancing: You may make your request at any time and it will be effective
12
when we receive it in proper form. If you stop the earnings sweep, you must
wait 30 days to begin again. You may specify a date for your first sweep, or
we will treat your request as if you selected the request's effective date. If
you specify a date fewer than 30 days after your Contract Date, your first
earnings sweep will be delayed one month, and if you request the earnings
sweep on your application but do not specify a 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 selected the Fixed Option as your sweep option. You may not use
the earnings sweep, DCA Plus 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
Fixed, DCA Plus Fixed or Variable Investment Options; if you do not give us
these specific directions, amounts will be deducted proportionately from your
Account Value in each Fixed, DCA Plus Fixed or Variable Investment Option.
Procedures for selecting pre-authorized withdrawals are generally the same as
those discussed in detail above for selecting dollar cost averaging, portfolio
rebalancing, and earnings sweeps: You may make your request at any time and it
will be effective when we receive it in proper form. If you stop the pre-
authorized withdrawals, you must wait 30 days to begin again. You may specify
a date for the first withdrawal, or we will treat your request as if you
selected the request's effective date. If you specify a date fewer than 30
days after your Contract Date, your first pre-authorized withdrawal will be
delayed one month, and if you request the pre-authorized withdrawals on your
application but do not specify a date for the first withdrawal, it will occur
one period after your Contract Date.
If your pre-authorized withdrawals cause your Account Value in any Investment
Option to fall below any minimum Account Value we 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. Any such DCA Plus Fixed Option balance or any amount
that would otherwise be allocated to the DCA Plus Fixed Option will be
allocated to the Variable Investment Options according to your most recent DCA
Plus transfer instructions. If your pre-authorized withdrawals cause your
Contract Value to fall below $1,000, we may, at our option, terminate your
Contract and send you the remaining withdrawal proceeds.
Pre-authorized withdrawals are subject to the same withdrawal charges as are
other withdrawals, and each withdrawal is subject to any applicable charge for
premium taxes and/or other taxes, to federal income tax on its taxable
portion, and, if you have not reached age 59 1/2, a 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 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.
13
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.
1035 Exchanges
You may make your initial Investment through an exchange of an existing
annuity contract. To exchange, you must complete a 1035 Exchange form, which
is available by calling your representative, or by calling us at 1-800-722-
2333, and mail the form along with the annuity contract you are exchanging
(plus your completed application if you are making an initial Investment) to
us.
In general terms, Section 1035 of the Code provides that you recognize no gain
or loss when you exchange one annuity contract solely for another annuity
contract. However, transactions under Section 1035 may be subject to special
rules and may require special procedures and record-keeping, particularly if
the exchanged annuity contract was issued prior to August 14, 1982. You should
consult your tax adviser prior to effecting a 1035 Exchange.
Safekeeping of Assets
We are responsible for the safekeeping of the assets of the Separate Account.
These assets are held separate and apart from the assets of our General
Account and our other separate accounts.
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 otherwise. You should consult with your tax
adviser before making an election.
FINANCIAL STATEMENTS
The statement of net assets of Separate Account A as of December 31, 2000 and
the related statement of operations for the year then ended and statements of
changes in net assets for each of the two years in the period then ended are
incorporated by reference in this Statement of Additional Information from the
Annual Report of Separate Account A dated December 31, 2000. Pacific Life's
consolidated financial statements as of December 31, 2000 and 1999 and for
each of the three years in the period ended December 31, 2000 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.
INDEPENDENT AUDITORS
The consolidated financial statements of Pacific Life as of December 31, 2000
and 1999 and for each of the three years in the period ended December 31, 2000
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 and Subsidiaries (the
Company) as of December 31, 2000 and 1999, 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, 2000. 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 auditing standards generally
accepted in the United States of America. 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, 2000 and 1999, and the
results of their operations and their cash flows for each of the three
years in the period ended December 31, 2000 in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Costa Mesa, CA
February 26, 2001
15
Pacific Life Insurance Company and Subsidiaries
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
[Download Table]
December 31,
2000 1999
----------------------------------------------------------------------------
(In Millions)
ASSETS
Investments:
Securities available for sale at estimated fair value:
Fixed maturity securities $15,136 $14,814
Equity securities 179 295
Trading securities at fair value 71 100
Mortgage loans 3,026 2,920
Real estate 243 236
Policy loans 4,680 4,258
Other investments 2,654 883
---------------------------------------------------------------------------
TOTAL INVESTMENTS 25,989 23,506
Cash and cash equivalents 211 439
Deferred policy acquisition costs 1,785 1,446
Accrued investment income 335 287
Other assets 535 832
Separate account assets 25,918 23,613
---------------------------------------------------------------------------
TOTAL ASSETS $54,773 $50,123
===========================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Universal life and investment-type products $19,410 $19,046
Future policy benefits 4,531 4,386
Short-term and long-term debt 359 224
Other liabilities 1,323 939
Separate account liabilities 25,918 23,613
---------------------------------------------------------------------------
TOTAL LIABILITIES 51,541 48,208
---------------------------------------------------------------------------
Commitments and contingencies
Stockholder's Equity:
Common stock - $50 par value; 600,000 shares authorized,
issued and outstanding 30 30
Paid-in capital 147 140
Unearned ESOP shares (6) (12)
Retained earnings 3,030 2,035
Accumulated other comprehensive income (loss) 31 (278)
---------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY 3,232 1,915
---------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $54,773 $50,123
===========================================================================
See Notes to Consolidated Financial Statements
16
Pacific Life Insurance Company and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
[Download Table]
Years Ended December 31,
2000 1999 1998
-------------------------------------------------------------------------------
(In Millions)
REVENUES
Universal life and investment-type product policy
fees $ 769 $ 654 $ 525
Insurance premiums 552 484 537
Net investment income 1,615 1,473 1,414
Net realized investment gains 1,002 102 40
Commission revenue 270 234 220
Other income 209 145 112
-------------------------------------------------------------------------------
TOTAL REVENUES 4,417 3,092 2,848
-------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Interest credited to universal life and investment-
type products 934 904 881
Policy benefits paid or provided 879 735 757
Commission expenses 576 485 387
Operating expenses 575 453 468
-------------------------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES 2,964 2,577 2,493
-------------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR INCOME TAXES 1,453 515 355
Provision for income taxes 458 144 113
-------------------------------------------------------------------------------
NET INCOME $ 995 $ 371 $ 242
===============================================================================
See Notes to Consolidated Financial Statements
17
Pacific Life Insurance Company and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
[Enlarge/Download Table]
Accumulated Other
Comprehensive Income (Loss)
---------------------------------------
Unrealized Unrealized
Gain/(Loss) Foreign Gain on
Unearned On Securities Currency Interest in
Common Paid-in ESOP Retained Available for Translation PIMCO
Stock Capital Shares Earnings Sale, Net Adjustment Advisors L.P. Total
-------------------------------------------------------------------------------------------------------------------
(In Millions)
BALANCES, JANUARY 1, 1998 $30 $120 $1,422 $578 $(3) $2,147
Comprehensive income:
Net income 242 242
Other comprehensive income (loss) (71) 4 (67)
------
Total comprehensive income 175
Issuance of partnership units by
PIMCO Advisors L.P. 6 6
-------------------------------------------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 1998 30 126 1,664 507 1 2,328
Comprehensive loss:
Net income 371 371
Other comprehensive loss (785) (1) (786)
------
Total comprehensive loss (415)
Issuance of partnership units by
PIMCO Advisors L.P. 11 11
Capital contribution 3 3
Purchase of ESOP note $(13) (13)
Allocation of unearned ESOP Shares 1 1
-------------------------------------------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 1999 30 140 (12) 2,035 (278) - 1,915
Comprehensive income:
Net income 995 995
Other comprehensive income (loss) 236 (4) $77 309
------
Total comprehensive income 1,304
Issuance of partnership units by
PIMCO Advisors L.P. 5 5
Allocation of unearned ESOP Shares 2 6 8
-------------------------------------------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 2000 $30 $147 $ (6) $3,030 $(42) $(4) $77 $3,232
===================================================================================================================
See Notes to Consolidated Financial Statements
18
Pacific Life Insurance Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
[Download Table]
Years Ended December 31,
2000 1999 1998
--------------------------------------------------------------------------------
(In Millions)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 995 $ 371 $ 242
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization on fixed maturity securities (72) (78) (39)
Depreciation and other amortization 36 21 26
Earnings of equity method investees (23) (93) (99)
Deferred income taxes 424 (8) (21)
Net realized investment gains (1,002) (102) (40)
Net change in deferred policy acquisition costs (339) (545) (172)
Interest credited to universal life and
investment-type products 934 904 881
Change in trading securities 29 (3) (14)
Change in accrued investment income (48) (28) 3
Change in future policy benefits 145 58 (10)
Change in other assets and liabilities 86 206 102
--------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,165 703 859
--------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale:
Purchases (2,903) (4,173) (4,331)
Sales 1,595 2,334 2,209
Maturities and repayments 1,601 1,400 2,222
Repayments of mortgage loans 700 681 335
Proceeds from sales of mortgage loans and real
estate 1 24 43
Purchases of mortgage loans and real estate (806) (886) (1,246)
Distributions from partnerships 62 138 120
Change in policy loans (422) (255) (130)
Cash received from acquisition of insurance block
of business 165
Other investing activity, net (720) 255 (466)
--------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (892) (317) (1,244)
--------------------------------------------------------------------------------
(Continued)
See Notes to Consolidated Financial Statements
19
Pacific Life Insurance Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
[Download Table]
Years Ended December 31,
(Continued) 2000 1999 1998
--------------------------------------------------------------------------
(In Millions)
CASH FLOWS FROM FINANCING ACTIVITIES
Policyholder account balances:
Deposits $ 4,090 $ 4,453 $ 4,007
Withdrawals (4,734) (4,322) (3,771)
Net change in short-term and long-term debt 135 (220) 192
Purchase of ESOP note (13)
Allocation of unearned ESOP shares 8 1
--------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES (501) (101) 428
--------------------------------------------------------------------------
Net change in cash and cash equivalents (228) 285 43
Cash and cash equivalents, beginning of year 439 154 111
--------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 211 $ 439 $ 154
==========================================================================
SUPPLEMENTAL SCHEDULE OF INVESTING AND FINANCING ACTIVITIES
In connection with the acquisition of an annuity block of business in
1999, as discussed in Note 4, the following assets and liabilities
were assumed:
Fixed maturity securities $ 1,593
Cash and cash equivalents 165
Other assets 100
--------
Total assets assumed $ 1,858
========
Annuity reserves $ 1,847
Other liabilities 11
--------
Total liabilities assumed $ 1,858
========
==========================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid $ 74 $ 83 $ 128
Interest paid $ 28 $ 23 $ 24
==========================================================================
See Notes to Consolidated Financial Statements
20
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND DESCRIPTION OF BUSINESS
Pacific Life Insurance Company (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 is an indirect subsidiary of Pacific
Mutual Holding Company (PMHC), a mutual holding company, and a wholly
owned subsidiary of Pacific LifeCorp, an intermediate stock holding
company. PMHC and Pacific LifeCorp were organized pursuant to consent
received from the Insurance Department of the State of California and the
implementation of a plan of conversion to form a mutual holding company
structure in 1997 (the Conversion).
Pacific Life and its subsidiaries and affiliates have primary business
operations which consist of life insurance, annuities, pension and
institutional products, group employee benefits, broker-dealer operations,
and investment management and advisory services. Pacific Life's primary
business operations provide a broad range of life insurance, asset
accumulation and investment products for individuals and businesses and
offer a range of investment products to institutions and pension plans.
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 accounting principles generally accepted in the United
States of America (GAAP) and include the accounts of Pacific Life and its
majority owned and controlled subsidiaries. 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 filed with regulatory
authorities (Note 2).
NEW ACCOUNTING PRONOUNCEMENTS
On January 1, 2000, the Company adopted the American Institute of
Certified Public Accountants Statement of Position (SOP) 98-7, Deposit
Accounting: Accounting for Insurance and Reinsurance Contracts That Do Not
Transfer Insurance Risk. SOP 98-7 provides guidance on how to account for
insurance and reinsurance contracts that do not transfer insurance risk
under a method referred to as deposit accounting. Adoption of this SOP did
not have a material impact on the Company's consolidated financial
statements.
In September 2000, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities - a replacement of FASB Statement No. 125. SFAS No. 140
revises the standards of accounting for securitizations and other
transfers of financial assets and collateral and requires certain
disclosures, but it carries over most of SFAS No. 125's provisions without
reconsideration. It is effective for transfers of financial assets and
extinguishments of liabilities occurring after March 31, 2001 and is
effective for recognition and reclassification of collateral for
disclosures relating to securitization transactions and collateral for
fiscal years ending after December 15, 2000. Implementation of SFAS No.
140 is not expected to have a material impact on the Company's
consolidated financial statements.
Effective January 1, 2001, the Company will adopt the requirements of SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities, as
amended by SFAS No. 137, Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133, and
SFAS No. 138, Accounting for Certain Derivative Instruments and Certain
Hedging Activities - an amendment of FASB Statement No. 133, and
supplemented by implementation guidance issued by the FASB's Derivatives
Implementation Group. SFAS No. 133 requires, among other things, that all
derivatives be recognized as either assets or liabilities and measured at
estimated fair value. The corresponding derivative gains and losses should
be
21
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
reported based upon the hedge relationship, if such a relationship exists.
Changes in the estimated fair value of derivatives that are not designated
as hedges or that do not meet the hedge accounting criteria in SFAS No.
133 are required to be reported in income. SFAS No. 138 amended SFAS No.
133 so that for interest rate hedges, a company may designate as the
hedged risk, the risk of changes only in a benchmark interest rate. Also,
credit risk is newly defined as the company-specific spread over the
benchmark interest rate and may be hedged separately from, or in
combination with, the benchmark interest rate. Implementation of SFAS No.
133, as amended, is not expected to have a material impact on the
Company's consolidated financial statements. However, the FASB's
Derivative Implementation Group continues to deliberate on multiple
issues, the resolution of which could have a significant impact on the
Company's expectations.
INVESTMENTS
Available for sale fixed maturity securities and equity securities are
reported at estimated fair value, with unrealized gains and losses, net of
deferred income taxes and adjustments related to deferred policy
acquisition costs, recorded as a component of other comprehensive income
(loss). The cost of fixed maturity and equity securities is adjusted for
impairments in value deemed to be other than temporary. Trading securities
are reported at fair value with unrealized gains and losses included in
net realized investment gains.
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.
Realized gains and losses on investment transactions are determined on a
specific identification basis and are included in net realized investment
gains.
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 recorded as a component of other
comprehensive income (loss), 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 liabilities. Unrealized gains and losses of other derivatives
are included in net realized investment gains.
Mortgage loans, net of valuation allowances, and policy loans are stated
at unpaid principal balances.
Real estate is carried at depreciated cost, net of writedowns, 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.
Partnership and joint venture interests in which the Company does not have
a controlling interest or a majority ownership are generally recorded
using the equity method of accounting and are included in other
investments.
Investments in Low Income Housing Tax Credits (LIHTC) are included in
other investments. These investments are recorded under either the
effective interest method or the equity method. For investments in LIHTC
recorded under the effective interest method, the amortization of the
original investment and the tax credits are recorded in the provision for
income taxes. For investments in LIHTC recorded under the equity method,
the amortization of the initial investment is included in net investment
income and the related tax credits are recorded in the provision for
income taxes. The amortization recorded in net investment income was $33
million, $22 million and $11 million for the years ended December 31,
2000, 1999 and 1998, respectively.
22
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
The Company, through its wholly owned subsidiary Pacific Asset Management
LLC and subsidiaries (PAM), had an approximate 33% beneficial ownership
interest in PIMCO Advisors L.P. (PIMCO Advisors) as of December 31, 1999
and May 4, 2000, through the direct and indirect ownership of PIMCO
Advisors' Class A limited partnership units (Class A units). This interest
was accounted for using the equity method through May 4, 2000.
On May 5, 2000, a transaction was closed whereby Allianz of America, Inc.
(Allianz), a subsidiary of Allianz AG, acquired substantially all
interests in PIMCO Advisors other than those beneficially owned by PAM.
PAM exchanged its Class A units for a new security, PIMCO Advisors Class E
limited partnership units (Class E units). This exchange resulted in a
realized, pretax nonmonetary exchange gain of $1,082 million, based on the
fair value of the Class A units exchanged, or $38.75 per unit, the per
unit value that Allianz paid to acquire its interest in PIMCO Advisors.
This gain is included in net realized investment gains for the year ended
December 31, 2000. A net deferred tax liability in the amount of $365
million was also established.
As a result of this transaction, the Company has virtually no influence
over PIMCO Advisors' operating and financial policies. Effective May 5,
2000, the interest in PIMCO Advisors is being accounted for using the cost
method. The interest in PIMCO Advisors, which is included in other
investments, is being reported at estimated fair value, as determined by
the put and call option price described below. An unrealized gain of $124
million, net of deferred income taxes of $47 million, is reported as a
component of other comprehensive income (loss).
In connection with this transaction, PAM entered into a Continuing
Investment Agreement with Allianz with respect to its interest in PIMCO
Advisors. The interest in PIMCO Advisors held by PAM is subject to put and
call options held by PAM and Allianz, respectively. The put option gives
PAM the right to require Allianz, on the last business day of each
calendar quarter, to purchase all of the interest in PIMCO Advisors held
by PAM. The put option price is based on the per unit amount, as defined
in the Continuing Investment Agreement, for the most recently completed
four calendar quarters multiplied by a factor of 14. The call option gives
Allianz the right to require PAM, on any January 31, April 30, July 31, or
October 31, beginning on January 31, 2003, to sell its interest in PIMCO
Advisors to Allianz. The call option price is based on the per unit
amount, as defined in the Continuing Investment Agreement, for the most
recently completed four calendar quarters multiplied by a factor of 14 and
can be exercised only if the call per unit value reaches a minimum value.
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 and investment-type
products, such costs are generally amortized over the expected life of the
contract in proportion to the present value of expected gross profits
using the assumed crediting rate. Adjustments are reflected in income 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 traditional life insurance products,
such costs are being amortized over the premium-paying period of the
related policies in proportion to premium revenues recognized, using
assumptions consistent with those used in computing policy reserves.
23
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Components of deferred policy acquisition costs are as follows:
[Download Table]
Years Ended December 31,
2000 1999 1998
---------------------------
(In Millions)
Balance, January 1 $1,446 $ 901 $717
Additions:
Capitalized during the year 621 538 275
Acquisition of insurance block of
business 75
--------------------------
Total additions 621 613 275
--------------------------
Amortization:
Allocated to commission expenses (174) (112) (68)
Allocated to operating expenses (54) (49) (29)
Allocated to unrealized gains (losses) (54) 93 6
--------------------------
Total amortization (282) (68) (91)
--------------------------
Balance, December 31 $1,785 $ 1,446 $901
==========================
UNIVERSAL LIFE AND INVESTMENT-TYPE PRODUCTS
Universal life and investment-type products, including guaranteed interest
contracts and funding agreements, 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 2000, 1999 and 1998.
FUTURE POLICY BENEFITS
Life insurance reserves are valued using the net level premium method.
Interest rate assumptions ranged from 4.5% to 9.3% for 2000, 1999 and
1998. Mortality, morbidity and withdrawal assumptions are generally based
on the Company's experience, modified to provide for possible unfavorable
deviations. Future dividends for participating business are provided for
in the liability for future policy benefits. Dividends to policyholders
are included in policy benefits paid or provided.
Dividends are accrued based on dividend formulas approved by the Board of
Directors and reviewed for reasonableness and equitable treatment of
policyholders by an independent consulting actuary. As of December 31,
2000 and 1999, participating experience rated policies paying dividends
represent less than 1% of direct written life insurance in force.
REVENUES, BENEFITS AND EXPENSES
Insurance premiums are recognized as revenue when due. Benefits and
expenses, other than deferred policy acquisition costs, are recognized
when incurred.
Generally, receipts for universal life and investment-type products 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
recorded on the trade date.
24
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
DEPRECIATION AND AMORTIZATION
Depreciation of investment real estate is computed on the straight-line
method over the estimated useful lives, which range from 5 to 30 years.
Certain other assets are depreciated or amortized on the straight-line
method over periods ranging from 3 to 40 years. Depreciation of investment
real estate is included in net investment income. Depreciation and
amortization of certain other assets is included in operating expenses.
INCOME TAXES
Pacific Life is taxed as a life insurance company for income tax purposes.
Pacific Life and its includable subsidiaries are included in the
consolidated income tax returns of PMHC and are allocated an expense or
benefit based principally on the effect of including their operations in
the consolidated provisions. 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 estimated fair 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 5, 6
and 7, has been determined using available market information and
appropriate valuation methodologies. However, considerable judgment is
required to interpret market data to develop the estimates of fair value.
Accordingly, the estimates presented may not be indicative of the amounts
the Company could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies could have a
significant effect on the estimated fair value amounts.
RISKS AND UNCERTAINTIES
The Company operates in a business environment which is subject to various
risks and uncertainties. Such risks and uncertainties include, but are not
limited to, interest rate risk, investment market 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 that
attempt to match the duration of assets and liabilities and utilization of
derivative instruments. Additionally, the Company includes contractual
provisions limiting withdrawal rights for certain of its products. A
substantial portion of the Company's liabilities are not subject to
surrender or can be surrendered only after deduction of a surrender charge
or a market value adjustment.
Credit risk is the risk that issuers of investments owned by the Company
may default or that other parties may not be able to pay amounts due to
the Company. The Company manages its investments to limit credit risk by
diversifying its portfolio among various security types and industry
sectors. The credit risk of financial instruments is controlled through
credit approval procedures, limits and ongoing monitoring. Real estate and
mortgage loan investment risks are limited by diversification of
geographic location and property type. Management does not believe that
significant concentrations of credit risk exist.
25
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
The Company is also exposed to credit loss in the event of nonperformance
by the counterparties to interest rate swap contracts and other derivative
securities. The Company manages this risk through credit approvals and
limits on exposure to any specific counterparty. However, the Company does
not anticipate nonperformance by the counterparties.
The Company is subject to various state and Federal regulatory
authorities. The potential exists for changes in regulatory initiatives
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, cases might be decided or future legislation
might be enacted, or if decided or enacted, whether such cases or
legislation would contain provisions with possible negative effects on the
Company's life insurance or annuity products.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the 2000
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 on the accompanying consolidated financial
statements:
[Download Table]
December 31,
2000 1999
--------------
(In Millions)
Statutory capital and surplus $1,678 $1,219
Deferred policy acquisition costs 1,764 1,399
Asset valuation reserve 524 232
Deferred income taxes 181 305
Non admitted assets 115 83
Subsidiary equity 50 25
Accumulated other comprehensive income (loss) 31 (278)
Surplus notes (150) (150)
Insurance and annuity reserves (767) (845)
Other (194) (75)
--------------
Stockholder's equity as reported herein $3,232 $1,915
==============
26
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. STATUTORY RESULTS (Continued)
[Download Table]
Years Ended December 31,
2000 1999 1998
----------------------------
(In Millions)
Statutory net income $ 141 $ 168 $ 188
Earnings of subsidiaries 674 (27) (33)
Deferred policy acquisition costs 393 379 177
Deferred income taxes (87) (3) 18
Insurance and annuity reserves (106) (184) (145)
Other (20) 38 37
----------------------------
Net income as reported herein $ 995 $ 371 $ 242
============================
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 the risk-based capital results, 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, 2000 and 1999, Pacific
Life and Pacific Life & Annuity Company (PL&A), a wholly owned Arizona
domiciled life insurance subsidiary of Pacific Life, exceeded the minimum
risk-based capital requirements.
CODIFICATION
In March 1998, the NAIC adopted the Codification of Statutory Accounting
Principles (Codification). Codification, which is intended to standardize
regulatory accounting and reporting to state insurance departments, is
effective January 1, 2001. However, statutory accounting principles will
continue to be established by individual state laws and permitted
practices. The Insurance Departments of the States of Arizona and
California will require adoption of Codification for the preparation of
statutory financial statements effective January 1, 2001. The impact of
adopting Codification will be reported as an adjustment to statutory
surplus on the effective date. The Company has not yet finalized the
effects of adopting Codification, but anticipates that there will not be
any adverse effect on the statutory surplus of Pacific Life or PL&A.
PERMITTED PRACTICE
Effective May 5, 2000, the Insurance Department of the State of California
approved a permitted practice allowing Pacific Life to apply the
accounting guidance promulgated for limited liability companies in
Statement of Statutory Accounting Principle (SSAP) No. 48, Joint Ventures,
Partnerships and Limited Liability Companies, and SSAP No. 46, Investments
in Subsidiary, Controlled and Affiliated Entities, prior to the effective
date of Codification, for its investment in PAM. Under this permitted
practice, PAM is accounted for using the equity method of accounting. The
permitted practice also required that the equity of PAM be adjusted for
any tax effects not recorded at PAM due to its limited liability company
structure.
Prior to May 5, 2000, net cash distributions received on PAM's interest in
PIMCO Advisors were recorded as income, as permitted by the Insurance
Department of the State of California.
27
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. STATUTORY RESULTS (Continued)
DIVIDEND RESTRICTIONS
Dividend payments by Pacific Life to Pacific LifeCorp in any 12-month
period cannot exceed the greater of 10% of statutory capital and surplus
as of the preceding year-end or the statutory net gain from operations for
the previous calendar year, without prior approval from the Insurance
Department of the State of California. Based on this limitation and 2000
statutory results, Pacific Life could pay $161 million in dividends in
2001 without prior approval. No dividends were paid during 2000, 1999 and
1998.
The maximum amount of ordinary dividends that can be paid by PL&A without
restriction cannot exceed the lesser of 10% of statutory surplus as
regards to policyholders, or the statutory net gain from operations. No
dividends were paid during 2000, 1999 and 1998. Based on this limitation
and 2000 statutory results, PL&A could pay $22 million in dividends in
2001 without prior approval.
3. CLOSED BLOCK
In connection with the Conversion, an arrangement known as a closed block
(the Closed Block) was established, for dividend purposes only, for the
exclusive benefit of certain individual life insurance policies that had
an experience based dividend scale for 1997. The Closed Block was designed
to give reasonable assurance to holders of Closed Block policies that
policy dividends will not change solely as a result of the Conversion.
Assets that support the Closed Block, which are primarily included in
fixed maturity securities, policy loans and accrued investment income,
amounted to $290 million and $294 million as of December 31, 2000 and
1999, respectively. Liabilities allocated to the Closed Block, which are
primarily included in future policy benefits, amounted to $330 million and
$342 million as of December 31, 2000 and 1999, respectively. The
contribution to income from the Closed Block amounted to $6 million, $4
million and $5 million and is primarily included in insurance premiums,
net investment income and policy benefits paid or provided for the years
ended December 31, 2000, 1999 and 1998, respectively.
4. ACQUISITIONS
In 1999, Pacific Life acquired a payout annuity block of business from
Confederation Life Insurance Company (U.S.) in Rehabilitation, which is
currently under rehabilitation (Confederation Life). On the effective
date, this block of business consisted of approximately 16,000 annuitants
having reserves of $1.8 billion. The assets received as part of this
acquisition amounted to $1.6 billion in fixed maturity securities and $0.2
billion in cash. The cost of acquiring this annuity business, representing
the amount equal to the excess of the estimated fair value of the reserves
assumed over the estimated fair value of the assets acquired, is included
in deferred policy acquisition costs.
During 1999, Pacific Life acquired a 95% interest in Grayhawk Golf
Holdings, LLC, which owns 100% of a real estate investment property in
Arizona.
28
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. INVESTMENTS
The amortized cost, gross unrealized gains and losses, and estimated fair
value of fixed maturity and equity securities available for sale 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.
[Download Table]
Gross Unrealized
Amortized ----------------- Estimated
Cost Gains Losses Fair Value
---------------------------------------
(In Millions)
As of December 31, 2000:
------------------------
U.S. Treasury securities and
obligations of U.S. government
authorities and agencies $ 32 $ 2 $ 34
Obligations of states and
political subdivisions 641 55 $ 1 695
Foreign governments 302 20 5 317
Corporate securities 8,780 258 232 8,806
Mortgage-backed and asset-backed
securities 5,230 101 100 5,231
Redeemable preferred stock 52 9 8 53
--------------------------------------
Total fixed maturity securities $15,037 $445 $346 $15,136
======================================
Total equity securities $ 173 $ 18 $ 12 $ 179
======================================
As of December 31, 1999:
------------------------
U.S. Treasury securities and
obligations of U.S. government
authorities and agencies $ 93 $ 9 $ 1 $ 101
Obligations of states and
political subdivisions 642 13 28 627
Foreign governments 285 11 7 289
Corporate securities 8,740 220 387 8,573
Mortgage-backed and asset-backed
securities 5,324 34 251 5,107
Redeemable preferred stock 108 14 5 117
--------------------------------------
Total fixed maturity securities $15,192 $301 $679 $14,814
======================================
Total equity securities $ 269 $ 57 $ 31 $ 295
======================================
29
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. INVESTMENTS (Continued)
The amortized cost and estimated fair value of fixed maturity securities
available for sale as of December 31, 2000, 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.
[Download Table]
Amortized Estimated
Cost Fair Value
--------------------
(In Millions)
Due in one year or less $ 538 $ 545
Due after one year through five years 3,669 3,749
Due after five years through ten years 2,833 2,835
Due after ten years 2,767 2,776
-------------------
9,807 9,905
Mortgage-backed and asset-backed securities 5,230 5,231
-------------------
Total $15,037 $15,136
===================
Major categories of investment income are summarized as follows:
[Download Table]
Years Ended December 31,
2000 1999 1998
------------------------
(In Millions)
Fixed maturity securities $1,109 $1,030 $ 930
Equity securities 13 15 14
Mortgage loans 225 205 175
Real estate 61 46 38
Policy loans 182 159 161
Other 155 132 203
------------------------
Gross investment income 1,745 1,587 1,521
Investment expense 130 114 107
------------------------
Net investment income $1,615 $1,473 $1,414
========================
30
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. INVESTMENTS (Continued)
Net realized investment gain, including changes in valuation allowances,
are as follows:
[Download Table]
Years Ended December 31,
2000 1999 1998
---------------------------
(In Millions)
Fixed maturity securities $ 2 $ 16 $ 8
Equity securites (13) 58 35
Mortgage loans 11 10 (11)
Real estate (3) 18 1
Interest in PIMCO Advisors (Note 1) 1,082
Other investments (77) 7
--------------------------
Total $1,002 $102 $ 40
==========================
The change in gross unrealized gain on investments in available for sale
and trading securities is as follows:
[Download Table]
December 31,
2000 1999 1998
--------------------
(In Millions)
Available for sale securities:
Fixed maturity $477 $ ( 925) $(229)
Equity (20) (157) 63
--------------------
Total $457 $(1,082) $(166)
--------------------
Trading securities $ 6 $ 0 $ 3
====================
Gross gains of $125 million, $188 million and $113 million and gross
losses of $44 million, $62 million and $39 million on sales of available
for sale securities were realized for the years ended December 31, 2000,
1999 and 1998, respectively.
As of December 31, 2000 and 1999, investments in fixed maturity securities
with a carrying value of $13 million were on deposit with state insurance
departments to satisfy regulatory requirements. The Company's interest in
PIMCO Advisors (Note 1) exceeds 10% of total stockholder's equity as of
December 31, 2000.
31
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments are as
follows:
[Download Table]
December 31, 2000 December 31, 1999
------------------- -------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
---------------------------------------
(In Millions)
Assets:
Fixed maturity and equity
securities (Note 5) $15,315 $15,315 $15,109 $15,109
Trading securities 71 71 100 100
Mortgage loans 3,026 3,246 2,920 2,984
Policy loans 4,680 4,680 4,258 4,258
Cash and cash equivalents 211 211 439 439
Interest in PIMCO Advisors (Note
1) 1,548 1,548
Derivative instruments (Note 7) 15 15 44 44
Liabilities:
Guaranteed interest contracts 6,676 6,803 6,365 6,296
Deposit liabilities 470 483 545 534
Annuity liabilities 1,114 1,114 1,305 1,305
Short-term debt 195 195 60 60
Long-term debt 164 166 164 164
Derivative instruments (Note 7) 445 445 230 230
The following methods and assumptions were used to estimate the fair value
of these financial instruments as of December 31, 2000 and 1999:
TRADING SECURITIES
The fair value of trading securities is based on quoted market prices.
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 because interest rates are generally variable and based on
current market rates.
CASH AND CASH EQUIVALENTS
The carrying values approximate fair values due to the short-term
maturities of these instruments.
GUARANTEED INTEREST CONTRACTS AND DEPOSIT LIABILITIES
The estimated fair value of fixed maturity guaranteed interest contracts
is estimated using the rates currently offered for deposits of similar
remaining maturities. The estimated fair value of deposit liabilities with
no defined maturities is the amount payable on demand.
32
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. FINANCIAL INSTRUMENTS (Continued)
ANNUITY LIABILITIES
The estimated fair value of annuity liabilities approximates carrying
value and primarily includes policyholder deposits and accumulated
credited interest.
SHORT-TERM DEBT
The carrying amount of short-term debt is a reasonable estimate of its
fair value because the interest rates are variable and based on current
market rates.
LONG-TERM DEBT
The estimated fair value of surplus notes (Note 10) is based on market
quotes. The carrying amount of other long-term debt is a reasonable
estimate of its fair value because the interest on the debt is
approximately the same as current market rates.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Pacific Life has issued certain contracts to 401(k) plans totaling $1.7
billion as of December 31, 2000, pursuant to the terms of which the 401(k)
plan retains direct ownership and control of the assets related to these
contracts. Pacific Life agrees to provide benefit responsiveness in the
event that plan benefit requests exceed plan cash flows. In return for
this guarantee, Pacific Life receives a fee which varies by contract.
Pacific Life sets the investment guidelines to provide for appropriate
credit quality and cash flow matching.
7. DERIVATIVE 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 as 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 on the accompanying consolidated
financial statements. The notional amounts of these instruments reflect
the extent of involvement in the various types of financial instruments.
The estimated fair values of these instruments are based on dealer
quotations or internal price estimates believed to be comparable to dealer
quotations. These amounts estimate what the Company would have to pay or
receive if the contracts were terminated at that time. The Company
determines, on an individual counterparty basis, the need for collateral
or other security to support financial instruments with off-balance sheet
counterparty risk.
33
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. DERIVATIVE INSTRUMENTS (Continued)
Outstanding derivatives with off-balance sheet risks, shown in notional or
contract amounts along with their carrying value and estimated fair values
as of December 31, 2000 and 1999 are as follows:
[Enlarge/Download Table]
Assets (Liabilities)
-----------------------------------------
Notional or Carrying Estimated Carrying Estimated
Contract Amounts Value Fair Value Value Fair Value
----------------- -------- ---------- -------- ----------
2000 1999 2000 2000 1999 1999
-----------------------------------------------------------
(In Millions)
Interest rate floors,
caps, options
and swaptions $ 715 $1,003 $ 15 $ 15 $ 5 $ 5
Interest rate swap
contracts 2,649 2,867 (89) (89) 39 39
Asset swap contracts 87 58 (3) (3) (4) (4)
Credit default and total
return swaps 3,809 2,062 (129) (129) (43) (43)
Financial futures
contracts 26 677
Foreign currency
derivatives 2,488 1,685 (224) (224) (183) (183)
----------------------------------------------------------
Total derivatives $9,774 $8,352 $(430) $(430) $(186) $(186)
==========================================================
A reconciliation of the notional or contract amounts and discussion of the
various derivative instruments are as follows:
[Download Table]
Balance Terminations Balance
Beginning and End of
of Year Acquisitions Maturities Year
-------------------------------------------
(In Millions)
December 31, 2000:
------------------
Interest rate floors, caps,
options and swaptions $1,003 $ 160 $ 448 $ 715
Interest rate swap contracts 2,867 2,420 2,638 2,649
Asset swap contracts 58 45 16 87
Credit default and total
return swaps 2,062 2,853 1,106 3,809
Financial futures contracts 677 2,731 3,382 26
Foreign currency derivatives 1,685 1,079 276 2,488
------------------------------------------
Total $8,352 $9,288 $7,866 $9,774
==========================================
December 31, 1999:
------------------
Interest rate floors, caps,
options and swaptions $2,653 $ 671 $2,321 $1,003
Interest rate swap contracts 2,608 1,226 967 2,867
Asset swap contracts 63 8 13 58
Credit default and total
return swaps 650 1,617 205 2,062
Financial futures contracts 609 5,587 5,519 677
Foreign currency derivatives 1,131 874 320 1,685
------------------------------------------
Total $7,714 $9,983 $9,345 $8,352
==========================================
34
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. DERIVATIVE INSTRUMENTS (Continued)
The following table presents the notional amounts of derivative financial
instruments by maturity as of December 31, 2000:
[Enlarge/Download Table]
Remaining Life
---------------------------------------------
After One After Five
One Year Year Through Years Through After Ten
or Less Five Years Ten Years Years Total
----------------------------------------------------
(In Millions)
Interest rate floors, caps, options and swaptions $ 15 $ 450 $ 250 $ 715
Interest rate swap contracts 43 1,204 1,109 $ 293 2,649
Asset swap contracts 4 83 87
Credit default and total return swaps 962 2,265 240 342 3,809
Financial futures contracts 26 26
Foreign currency derivatives 44 813 1,205 426 2,488
----------------------------------------------------
Total $1,094 $4,815 $2,804 $1,061 $9,774
====================================================
Interest Rate Floors, Caps, Options and Swaptions
-------------------------------------------------
The Company uses interest rate floors, caps, options and swaptions to
hedge against fluctuations in interest rates and to take positions in its
total return portfolios. Interest rate floor agreements entitle the
Company to receive the difference when the current rate of the underlying
index is below the strike rate. Interest rate cap agreements entitle the
Company to receive the difference when the current rate of the underlying
index is above the strike rate. Options purchased involve the right, but
not the obligation, to purchase the underlying securities at a specified
price during a given time period. Swaptions are options to enter into a
swap transaction at a specified price. The Company uses written covered
call options on a limited basis. Gains and losses on covered calls are
offset by gains and losses on the underlying position. Floors, caps and
options are reported as assets and options written are reported as
liabilities. 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 Swap Contracts
----------------------------
The Company uses interest rate swaps to manage interest rate risk and to
take positions in its total return portfolios. The interest rate swap
agreements generally involve the exchange of fixed and floating rate
interest payments or the exchange of floating to floating interest
payments tied to different indexes. Generally, no premium is paid to enter
into the contract and no principal payments are made by either party. The
amounts to be received or paid pursuant to these agreements are accrued
and recognized through an adjustment to net investment income over the
life of the agreements.
Asset Swap Contracts
--------------------
The Company uses asset swap contracts to manage interest rate and equity
risk to better match portfolio duration to liabilities. Asset swap
contracts involve the exchange of upside equity potential for fixed income
streams. The amounts to be received or paid pursuant to these agreements
are accrued and recognized through an adjustment to net investment income
over the life of the agreements.
35
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. DERIVATIVE INSTRUMENTS (Continued)
Credit Default and Total Return Swaps
-------------------------------------
The Company uses credit default and total return swaps to take advantage
of market opportunities. Credit default swaps involve the receipt of fixed
rate payments in exchange for assuming potential credit exposure of an
underlying security. Total return swaps involve the exchange of floating
rate payments for the total return performance of a specified index or
market. Fee amounts received or paid pursuant to these agreements are
recognized in net investment income over the life of the agreements.
Financial Futures Contracts
---------------------------
The Company uses exchange-traded financial futures contracts to hedge cash
flow timing differences between assets and liabilities and overall
portfolio duration. Assets and liabilities are rarely acquired or sold at
the same time, which creates a need to hedge their change in value during
the unmatched period. In addition, foreign currency futures may be used to
hedge foreign currency risk on non-U.S. dollar denominated securities.
Financial futures contracts obligate the holder to buy or sell the
underlying financial instrument at a specified future date for a set price
and may be settled in cash or by delivery of the financial instrument.
Price changes on futures are settled daily through the required margin
cash flows. The notional amounts of the contracts do not represent future
cash requirements, as the Company intends to close out open positions
prior to expiration.
Foreign Currency Derivatives
----------------------------
The Company enters into foreign exchange forward contracts and swaps to
hedge against fluctuations in foreign currency exposure. Foreign currency
derivatives involve the exchange of foreign currency denominated payments
for U.S. dollar denominated payments. Gains and losses on foreign exchange
forward contracts offset losses and gains, respectively, on the related
foreign currency denominated assets. The amounts to be received or paid
under the foreign currency swaps are accrued and recognized through an
adjustment to net investment income over the life of the agreements.
8. UNIVERSAL LIFE AND INVESTMENT-TYPE PRODUCTS
The detail of universal life and investment-type product liabilities is as
follows:
[Download Table]
December 31,
2000 1999
---------------
(In Millions)
Universal life $11,405 $10,808
Investment-type products 8,005 8,238
---------------
$19,410 $19,046
===============
36
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. UNIVERSAL LIFE AND INVESTMENT-TYPE PRODUCTS (Continued)
The detail of universal life and investment-type products policy fees and
interest credited, net of reinsurance ceded, is as follows:
[Download Table]
Years Ended December 31,
2000 1999 1998
--------------------------
(In Millions)
Policy fees:
Universal life $541 $509 $440
Investment-type products 228 145 85
--------------------------
Total policy fees $769 $654 $525
==========================
Interest credited:
Universal life $467 $444 $441
Investment-type products 467 460 440
--------------------------
Total interest credited $934 $904 $881
==========================
9. LIABILITY FOR GROUP HEALTH UNPAID CLAIMS AND CLAIM ADJUSTMENT EXPENSES
Activity in the liability for group health unpaid claims and claim
adjustment expenses, which is included in future policy benefits, is
summarized as follows:
[Download Table]
Years Ended December 31,
2000 1999
--------------------------
(In Millions)
Balance at January 1 $116 $137
Less reinsurance
recoverables
--------------------------
Net balance at January 1 116 137
--------------------------
Incurred related to:
Current year 412 377
Prior years (33) (34)
--------------------------
Total incurred 379 343
--------------------------
Paid related to:
Current year 300 287
Prior years 65 77
--------------------------
Total paid 365 364
--------------------------
Net balance at December 31 130 116
Plus reinsurance
recoverables
--------------------------
Balance at December 31 $130 $116
==========================
As a result of favorable settlement of prior years' estimated claims, the
provision for claims and claim adjustment expenses decreased by $33
million and $34 million for the years ended December 31, 2000 and 1999,
respectively.
37
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. 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, 2000 and
1999. As of December 31, 2000 and 1999, Pacific Life had a revolving
credit facility of $350 million. There was no debt outstanding under the
revolving credit facility as of December 31, 2000 and 1999.
PAM had bank borrowings outstanding of $195 million and $60 million as of
December 31, 2000 and 1999, respectively. The interest rate was 6.9% and
6.0% as of December 31, 2000 and 1999, respectively. The amount of the
borrowings and the interest rates are reset monthly. The borrowing limit
for PAM as of December 31, 2000 and 1999 was $215 million and $100
million, respectively.
In connection with Pacific Life's acquisition of Grayhawk Golf Holdings,
LLC in 1999, the Company assumed a note payable with a maturity date of
May 22, 2008. The note bears a fixed rate of interest of 7.6%. The
outstanding balance as of December 31, 2000 and 1999 was $15 million.
Pacific Life has $150 million of long-term debt, which consists of surplus
notes outstanding at an interest rate of 7.9% maturing on December 30,
2023. Interest is payable semiannually on June 30 and December 30. The
surplus notes may not be redeemed at the option of Pacific Life or any
holder of the surplus notes. The surplus notes are unsecured and
subordinated to all present and future senior indebtedness and policy
claims of Pacific Life. Each payment of interest on and the payment of
principal of the surplus notes may be made only with the prior approval of
the Insurance Commissioner of the State of California. Interest expense
amounted to $12 million for each of the years ended December 31, 2000,
1999 and 1998 and is included in net investment income.
11. INCOME TAXES
The provision for income taxes is as follows:
[Download Table]
Years Ended December 31,
2000 1999 1998
---------------------------
(In Millions)
Current $ 34 $152 $134
Deferred 424 (8) (21)
---------------------------
$458 $144 $113
===========================
38
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. INCOME TAXES (Continued)
The sources of the Company's provision for deferred taxes are as follows:
[Download Table]
Years Ended December 31,
2000 1999 1998
----------------------------
(In Millions)
Nonmonetary exchange of PIMCO Advisors
units (Note 1) $447
Deferred policy acquisition costs 57 $ 20 $(13)
Policyholder reserves 19 51 (30)
Partnership income 3 (25) 21
Duration hedging 3 (30) 21
Nondeductible reserves 1 4 28
Investment valuation (19) (28) (24)
Other (5) (3)
----------------------------
Deferred taxes from operations 506 (8) -
Release of deferred taxes in connection with
the nonmonetary exchange of PIMCO Advisors
units (Note 1) (82)
Release of subsidiary deferred taxes (21)
----------------------------
Provision for deferred taxes $424 $ (8) $(21)
============================
In connection with the nonmonetary exchange of partnership units at PIMCO
Advisors, certain nonoperating deferred taxes previously established were
released.
The Company's acquisition of a controlling interest in a subsidiary
allowed such subsidiary to be included in PMHC's consolidated income tax
return. That inclusion resulted in the release of certain deferred taxes
in 1998.
A reconciliation of the provision for income taxes based on the prevailing
corporate statutory tax rate to the provision reflected in the
consolidated financial statements is as follows:
[Download Table]
Years Ended December 31,
2000 1999 1998
----------------------------
(In Millions)
Provision for income taxes at the
statutory rate $509 $180 $124
State income taxes 25
Nontaxable investment income (6) (7) (4)
Low income housing tax credits (22) (19) (4)
Book to tax basis difference on
nonmonetary exchange of PIMCO Advisors
units (Note 1) (35)
Other (13) (10) (3)
----------------------------
Provision for income taxes $458 $144 $113
============================
39
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. INCOME TAXES (Continued)
The net deferred tax asset (liability), included in other liabilities and
other assets as of December 31, 2000 and 1999, respectively, is comprised
of the following tax effected temporary differences:
[Download Table]
December 31,
2000 1999
---------------
(In Millions)
Deferred tax assets
Policyholder reserves $ 184 $204
Investment valuation 92 73
Deferred compensation 35 35
Duration hedging 18 21
Postretirement benefits 8 9
Dividends 7 8
Other 11 10
---------------
Total deferred tax assets 355 360
Deferred tax liabilities
Nonmonetary exchange of PIMCO Advisors units (Note
1) 429
Deferred policy acquisition costs 101 44
Partnership income 16
Depreciation 2 3
---------------
Total deferred tax liabilities 548 47
---------------
Net deferred tax asset (liability) from operations (193) 313
Unrealized (gain) loss on securities (23) 151
Issuance of partnership units by PIMCO Advisors (81)
---------------
Net deferred tax asset (liability) $(216) $383
===============
40
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12.COMPREHENSIVE INCOME (LOSS)
The Company displays comprehensive income (loss) and its components on the
accompanying consolidated statements of stockholder's equity and as
follows. Other comprehensive income (loss) is shown net of
reclassification adjustments and net of deferred income taxes. The
disclosure of the gross components of other comprehensive income (loss) is
as follows:
[Download Table]
For the Years Ended December 31,
2000 1999 1998
------------------------------------
(In Millions)
Gross Holding Gain (Loss):
Holding gain (loss) on securities
available for sale $ 388 $(1,175) $(58)
Income tax (expense) benefit (135) 411 20
Reclassification adjustment:
Realized (gain) loss on sale of
securities available for sale 3 (78) (43)
Income tax expense (benefit) (2) 28 15
Allocation of holding (gain) loss
to deferred policy acquisition costs (27) 44 (7)
Income tax (expense) benefit 9 (15) 2
-----------------------------------
Net unrealized gain (loss) on
securities available for sale 236 (785) (71)
Foreign currency translation
adjustment (4) (1) 4
Unrealized gain on interest in PIMCO
Advisors 77
-----------------------------------
Other comprehensive income (loss) $ 309 $(786) $(67)
===================================
13. REINSURANCE
The Company has reinsurance agreements with other insurance companies for
the purpose of diversifying risk and limiting exposure on larger mortality
risks or, in the case of a producer-owned reinsurance company, to
diversify risk and retain top producing agents. Amounts receivable from
reinsurers for reinsurance of future policy benefits, universal life
deposits, and unpaid losses is included in other assets. All assets
associated with business reinsured on a yearly renewable term and modified
coinsurance basis remain with, and under the control of the Company.
Amounts recoverable (payable) from (to) reinsurers include the following
amounts:
[Download Table]
December 31,
2000 1999
--------------
(In Millions)
Universal life deposits $(66) $(55)
Future policy benefits 156 142
Unpaid claims 26 9
Paid claims 13 6
Other 33 9
--------------
Net reinsurance recoverable $162 $111
==============
41
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. REINSURANCE (Continued)
As of December 31, 2000, 70% 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. The
components of insurance premiums are as follows:
[Download Table]
Years Ended December 31,
2000 1999 1998
---------------------------
(In Millions)
Direct premiums $ 646 $563 $603
Ceded reinsurance (108) (93) (83)
Assumed reinsurance 14 14 17
--------------------------
Insurance premiums $ 552 $484 $537
--------------------------
Revenues and benefits are shown net of the following reinsurance
transactions:
[Download Table]
Years Ended December 31,
2000 1999 1998
--------------------------
(In Millions)
Ceded reinsurance netted against policy fees $ 74 $ 52 $ 65
Ceded reinsurance netted against net
investment income 244 212 203
Ceded reinsurance netted against interest
credited 161 111 163
Ceded reinsurance netted against policy
benefits 110 88 121
Assumed reinsurance included in policy
benefits 12 8 18
14. SEGMENT INFORMATION
The Company has five operating segments: Life Insurance, Institutional
Products, Annuities, Group Insurance and Broker-Dealers. These segments
are managed separately and have been identified based on differences in
products and services offered. All other activity is included in Corporate
and Other.
Prior to May 4, 2000, the Company had another operating segment,
Investment Management. In connection with the PIMCO Advisors transaction
(Note 1), Investment Management was no longer considered an operating
segment by management and, effective May 5, 2000, it's activities will be
included in Corporate and Other. PIMCO Advisors offers a diversified range
of investment products through separately managed accounts, and
institutional, retail and offshore funds.
The Life Insurance segment offers universal life, variable universal
life and other life insurance products to individuals, small
businesses and corporations through a network of distribution channels
that include branch offices, marketing organizations, national
accounts and a national producer group that has produced over 10% of
the segment's in force business.
The Institutional Products segment offers investment and annuity
products to pension fund sponsors and other institutional investors
primarily through its home office marketing team.
The Annuities segment offers variable and fixed annuities to
individuals, small businesses and qualified plans through financial
institutions, National Association of Securities Dealers (NASD) firms,
and regional and national wirehouses.
42
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. SEGMENT INFORMATION (Continued)
The Group Insurance segment offers group life, health and dental
insurance, and stop loss insurance products to corporate, government
and labor-management-negotiated plans. The group life, health and
dental insurance is distributed through a network of sales offices and
the stop loss insurance is distributed through a network of third
party administrators.
The Broker-Dealers segment includes five NASD registered firms that
provide securities and insurance brokerage services and investment
advisory services through approximately 3,100 registered
representatives.
Corporate and Other primarily includes investment income, expenses and
assets not attributable to the operating segments, and the operations
of the Company's reinsurance subsidiary located in the United Kingdom.
Corporate and Other also includes the elimination of intersegment
revenues, expenses and assets.
The Company uses the same accounting policies and procedures to measure
segment income and assets as it uses to measure its consolidated net
income and assets. Net investment income and investment gains are
allocated based on invested assets purchased and held as is required for
transacting the business of that segment. Overhead expenses are allocated
based on services provided. Interest expense is allocated based on the
short-term borrowing needs of the segment and is included in net
investment income. The provision for income taxes is allocated based on
each segment's actual tax provision.
Commission income and expense includes commissions paid by the Life
Insurance segment and the Annuities segment for variable product sales to
the Broker-Dealers segment. Elimination of this income and expense is
included in the Corporate and Other segment. Investment Management segment
assets have been reduced by an intersegment note payable of $101 million
as of December 31, 1999. The related intersegment note receivable is
included in Corporate and Other segment assets.
The Company generates substantially all of its revenues and income from
customers located in the United States. Additionally, substantially all of
the Company's assets are located in the United States.
Depreciation expense and capital expenditures are not material and have
not been reported herein. The Company's significant noncash item disclosed
herein is interest credited to universal life and investment-type
products.
43
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. SEGMENT INFORMATION (Continued)
The following is segment information as of and for the year ended December
31, 2000, except for the Investment Management segment, which is for the
period ended May 4, 2000:
[Enlarge/Download Table]
Life Institutional Group Investment Broker- Corporate
Insurance Products Annuities Insurance Management Dealers and Other Total
---------------------------------------------------------------------------------------------------------
(In Millions)
REVENUES
Policy fees $ 541 $ 3 $ 225 $ 769
Insurance premiums (49) 64 2 $511 $ 24 552
Net investment income 606 773 58 29 $49 $ 1 99 1,615
Net realized investment
gains (19) (38) (4) (7) 10 1,060 1,002
Commission revenue 687 (417) 270
Other income 32 8 97 4 6 23 39 209
--------------------------------------------------------------------------------
Total revenues 1,111 810 378 537 65 711 805 4,417
--------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Interest credited 474 395 53 12 934
Policy benefits 190 298 6 385 879
Commission expenses 161 2 135 36 650 (408) 576
Operating expenses 159 20 126 93 27 47 103 575
--------------------------------------------------------------------------------
Total benefits and
expenses 984 715 320 514 27 697 (293) 2,964
--------------------------------------------------------------------------------
Income before provision
for income taxes 127 95 58 23 38 14 1,098 1,453
Provision for income
taxes 29 18 21 6 8 6 370 458
--------------------------------------------------------------------------------
Net income $ 98 $ 77 $ 37 $ 17 $30 $ 8 $ 728 $ 995
================================================================================
Total assets $17,221 $17,908 $16,661 $374 $ 72 $2,537 $54,773
Deferred policy
acquisition costs $ 814 $ 75 $ 886 $ 10 $ 1,785
Separate account assets $ 3,543 $ 7,104 $15,271 $25,918
Policyholder and
contract liabilities $12,428 $10,218 $ 1,019 $189 $ 87 $23,941
Separate account
liabilities $ 3,543 $ 7,104 $15,271 $25,918
44
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. SEGMENT INFORMATION (Continued)
The following is segment information as of and for the year ended December
31, 1999:
[Enlarge/Download Table]
Life Institutional Group Investment Broker- Corporate
Insurance Products Annuities Insurance Management Dealers and Other Total
---------------------------------------------------------------------------------------------------------
(In Millions)
REVENUES
Policy fees $ 509 $ 3 $ 142 $ 654
Insurance premiums (32) 25 6 $476 $ 9 484
Net investment income 580 644 78 23 $116 $ 1 31 1,473
Net realized investment
gains 13 27 (1) 10 53 102
Commission revenue 583 (349) 234
Other income 25 11 57 3 15 19 15 145
--------------------------------------------------------------------------------
Total revenues 1,095 710 283 501 141 603 (241) 3,092
--------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Interest credited 451 384 65 4 904
Policy benefits 174 197 10 354 735
Commission expenses 163 87 33 549 (347) 485
Operating expenses 128 17 48 84 78 42 56 453
--------------------------------------------------------------------------------
Total benefits and
expenses 916 598 210 471 78 591 (287) 2,577
--------------------------------------------------------------------------------
Income before provision
for income taxes 179 112 73 30 63 12 46 515
Provision for income
taxes 54 31 24 10 12 5 8 144
--------------------------------------------------------------------------------
Net income $ 125 $ 81 $ 49 $ 20 $ 51 $ 7 $ 38 $ 371
================================================================================
Total assets $16,276 $17,649 $14,565 $342 $265 $61 $965 $50,123
Deferred policy
acquisition costs $ 750 $ 77 $ 617 $ 2 $ 1,446
Separate account assets $ 3,312 $ 7,176 $13,125 $23,613
Policyholder and
contract liabilities $11,832 $10,166 $ 1,191 $183 $ 60 $23,432
Separate account
liabilities $ 3,312 $ 7,176 $13,125 $23,613
45
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. SEGMENT INFORMATION (Continued)
The following is segment information for the year ended December 31, 1998:
[Enlarge/Download Table]
Life Institutional Group Investment Broker- Corporate
Insurance Products Annuities Insurance Management Dealers and Other Total
--------------------------------------------------------------------------------------------------------
(In Millions)
REVENUES
Policy fees $ 440 $ 3 $ 82 $ 525
Insurance premiums (24) 29 9 $508 $ 15 537
Net investment income 587 566 88 23 $111 $ 1 38 1,414
Net realized investment
gains 4 (14) 5 2 4 39 40
Commission revenue 405 (185) 220
Other income 15 11 33 13 17 16 7 112
-------------------------------------------------------------------------------
Total revenues 1,022 595 217 546 132 422 (86) 2,848
-------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Interest credited 450 354 71 6 881
Policy benefits 179 147 17 405 9 757
Commission expenses 113 38 43 376 (183) 387
Operating expenses 129 19 58 88 72 36 66 468
-------------------------------------------------------------------------------
Total benefits and
expenses 871 520 184 536 72 412 (102) 2,493
-------------------------------------------------------------------------------
Income before provision
for income taxes 151 75 33 10 60 10 16 355
Provision for income
taxes 53 21 11 3 2 4 19 113
-------------------------------------------------------------------------------
Net income $ 98 $ 54 $ 22 $ 7 $ 58 $ 6 $ (3) $ 242
===============================================================================
15. EMPLOYEE BENEFIT PLANS
PENSION PLANS
Pacific Life provides a defined benefit pension plan covering all eligible
employees of the Company. On July 1, 2000, Pacific Life converted this
final average pay formula defined benefit plan to a cash balance approach.
Active employees' existing benefits in this plan were converted to opening
balances and will increase over time from credits, based on years of
service and compensation levels, and quarterly interest accruals. The
full-benefit vesting period for all participants is five years. Pacific
Life's funding policy is to contribute amounts to the plan sufficient to
meet the minimum funding requirements set forth in the Employee Retirement
Income Security Act of 1974, plus such additional amounts as may be
determined appropriate. Contributions are intended to provide not only for
benefits attributed to employment to date but also for those expected to
be earned in the future. All such contributions are made to a tax-exempt
trust. Plan assets consist primarily of group annuity contracts issued by
Pacific Life, as well as mutual funds managed by an affiliate of Pacific
Life.
46
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. EMPLOYEE BENEFIT PLANS (Continued)
Components of the net periodic pension benefit are as follows:
[Download Table]
Years Ended December 31,
2000 1999 1998
----------------------------
(In Millions)
Service cost - benefits earned during
the year $ 6 $ 5 $ 4
Interest cost on projected benefit
obligation 12 11 11
Expected return on plan assets (17) (16) (15)
Amortization of net obligations and
prior service cost (4) (2) (2)
----------------------------
Net periodic pension benefit $ (3) $ (2) $ (2)
============================
The following tables set forth the changes in benefit obligation and plan
assets and funded status reconciliation:
[Download Table]
December 31,
2000 1999
--------------
(In Millions)
Change in Benefit Obligation:
-----------------------------
Benefit obligation, beginning of year $156 $178
Service cost 6 5
Interest cost 12 11
Plan expense (1)
Actuarial (gain) loss 5 (31)
Benefits paid (8) (7)
--------------
Benefit obligation, end of year $170 $156
==============
Change in Plan Assets:
----------------------
Fair value of plan assets, beginning of year $212 $195
Actual return on plan assets (6) 24
Plan expense (1)
Benefits paid (8) (7)
--------------
Fair value of plan assets, end of year $197 $212
==============
Funded Status Reconciliation:
-----------------------------
Funded status $ 27 $ 56
Unrecognized transition asset (1) (48)
Unrecognized prior service cost (2)
Unrecognized actuarial gain (18) (1)
--------------
Prepaid pension cost $ 8 $ 5
==============
In determining the actuarial present value of the projected benefit
obligation as of December 31, 2000 and 1999, the weighted average discount
rate used was 7.5% and 8.0%, respectively, and the rate of increase in
future compensation levels was 6.0% and 5.5%, respectively. The expected
long-term rate of return on plan assets was 8.5% in 2000 and 1999.
47
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15.EMPLOYEE BENEFIT PLANS (Continued)
POSTRETIREMENT BENEFITS
Pacific Life provides 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 net periodic postretirement benefit cost for the years ended December
31, 2000, 1999 and 1998 is $1 million. As of December 31, 2000 and 1999,
the accumulated benefit obligation is $20 million. The fair value of the
plan assets as of December 31, 2000 and 1999 is zero. The amount of
accrued benefit cost included in other liabilities is $24 million as of
December 31, 2000 and 1999.
The Plans include both indemnity and HMO coverage. The assumed health care
cost trend rate used in measuring the accumulated benefit obligation for
indemnity coverage was 10.0% and 8.0% for 2000 and 1999, respectively, and
is assumed to decrease gradually to 5.0% in 2005 and remain at that level
thereafter. The assumed health care cost trend rate used in measuring the
accumulated benefit obligation for HMO coverage was 9.0% and 7.0% for 2000
and 1999, respectively, and is assumed to decrease gradually to 4.5% in
2005 and remain at that level thereafter.
The amount reported is materially affected by the health care cost trend
rate assumptions. If the health care cost trend rate assumptions were
increased by 1%, the accumulated postretirement benefit obligation as of
December 31, 2000 would be increased by 7.8%, and the aggregate of the
service and interest cost components of the net periodic benefit cost
would increase by 7.6%. If the health care cost trend rate assumptions
were decreased by 1%, the accumulated postretirement benefit obligation as
of December 31, 2000 would be decreased by 6.8%, and the aggregate of the
service and interest cost components of the net periodic benefit cost
would decrease by 6.7%.
The discount rate used in determining the accumulated postretirement
benefit obligation is 7.5% and 8.0% for 2000 and 1999, 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. Pacific Life's RISP matches 75% of each
employee contributions, up to a maximum of 6.0% of eligible employee
compensation, to an Employee Stock Ownership Plan (ESOP). ESOP
contributions made by the Company amounted to $8 million, $6 million and
$5 million for the years ended December 31, 2000, 1999 and 1998,
respectively, and are included in operating expenses.
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 LifeCorp issued 1.7 million shares of common stock
to the ESOP in 1997, in exchange for a promissory note of $21 million
(ESOP Note) bearing an interest rate of 6.5%. Interest and principal
payments are due semiannually in equal installments through September 2,
2012. Interest and principal payments made by the ESOP to Pacific LifeCorp
were funded by contributions from Pacific Life. In 1999, Pacific Life
loaned cash to the ESOP to pay off the ESOP Note due Pacific LifeCorp.
Interest and
48
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. EMPLOYEE BENEFIT PLANS (Continued)
principal payments made by the ESOP to Pacific Life continue to be funded
by contributions from Pacific Life. The interest rate was reduced to 6.0%
effective September 2, 1999.
The ESOP Note is included in unearned ESOP shares. The unearned ESOP
shares account is reduced as ESOP shares are released for allocation to
participants through ESOP contributions by Pacific Life. In addition, when
the fair value of ESOP shares being released for allocation to
participants exceeds the original issue price of those shares, paid-in
capital is increased by this difference.
The Company has deferred compensation plans that permit eligible employees
to defer portions of their compensation and earn interest on the deferred
amounts. The interest rate is determined annually. The compensation that
has been deferred has been accrued and the primary expense related to this
plan, other than compensation, is interest on the deferred amounts.
The Company also has performance-based incentive compensation plans for
its employees.
16. 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 $115 million, $70 million and $42 million for the years ended
December 31, 2000, 1999 and 1998, respectively. In addition, Pacific Life
provides certain support services to the Pacific Select Fund for an
administration fee that is based on an allocation of actual costs. Such
administration fees amounted to $440,000, $265,000 and $232,000 for the
years ended December 31, 2000, 1999 and 1998, respectively.
17. TERMINATION AND NONCOMPETITION AGREEMENTS
The Company had termination and noncompetition agreements with certain
former key employees of PAM's subsidiaries. In connection with the closing
of the PIMCO Advisors transaction (Note 1), these agreements were assumed
by Allianz. These agreements provided terms and conditions for the
allocation of future proceeds received from distributions and sales of
certain PIMCO Advisors units and other noncompete payments.
For the years ended December 31, 2000, 1999 and 1998, $14 million, $54
million and $49 million, respectively, is included in operating expenses
related to these agreements.
18. COMMITMENTS AND CONTINGENCIES
The Company has outstanding commitments to make investments primarily in
fixed maturity securities, mortgage loans, limited partnerships and other
investments as follows (In Millions):
[Download Table]
Years Ending December 31:
-------------------------
2001 $200
2002 through 2005 294
2006 and thereafter 171
----
Total $665
====
The Company leases office facilities under various noncancelable operating
leases. Rent expense, which is included in operating expenses, in
connection with these leases was $14 million, $9 million and $7 million
for the years ended December 31, 2000, 1999 and 1998, respectively.
Aggregate minimum future commitments as of December 31, 2000 through the
term of the leases are approximately $68 million.
49
Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. COMMITMENTS AND CONTINGENCIES (Continued)
Pacific Life was named in civil litigation proceedings similar to other
litigation brought against many life insurers alleging misconduct in the
sale of products, sometimes referred to as market conduct litigation. The
class of plaintiffs included, with some exceptions, all persons who owned,
as of December 31, 1997 (or as of the date of policy termination, if
earlier), individual whole life, universal life or variable life insurance
policies sold by Pacific Life on or after January 1, 1982. Pacific Life
has settled this litigation pursuant to a final settlement agreement
approved by the Court in November 1998. The settlement agreement was
implemented during 1999.
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.
---------------------------------------------------------------------------
50
PART II
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, 2000 which are incorporated by
reference from the 2000 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, 2000 and 1999, and for the
three year period ended December 31, 2000,
included in Part B include the following for
Pacific Life:
Independent Auditors' Report
Consolidated Statements of Financial Condition
Consolidated Statements of Operations
Consolidated Statements of Stockholder's 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./1/
(c) Resolution of the Board of Directors of Pacific
Life Insurance Company authorizing conformity to
the terms of the current Bylaws./3/
II-1
2. Not applicable
3. (a) Distribution Agreement between Pacific Mutual Life
and Pacific Select Distributors, Inc. ("PSD") /1/
(b) Form of Selling Agreement between Pacific Mutual
Life, PSD and Various Broker-Dealers /1/
4. (a) Form of Individual Flexible Premium Variable
Accumulation Annuity Contract /2/
(b) Qualified Plan Loan Endorsement /1/
(c) Qualified Pension Plan Rider /1/
(d) 403(b) Tax-Sheltered Annuity Rider /2/
(e) Section 457 Plan Rider /1/
(f) Endorsement for 403(b) Texas Optional Retirement
Program (ORP) /1/
(g) Individual Retirement Annuity Rider (Form
20-13900) /8/
(h) Roth Individual Retirement Annuity Rider
(Form R-RIRA 198) /3/
(i) Simple Individual Retirement Annuity Rider
(Form 20-13400) /8/
(j) DCA Plus Fixed Option Endorsement
(Form E-DCA 697)/3/
(k) Guaranteed Minimum Death Benefit Endorsement
(Form E-GMDB 398) /3/
(l) Enhanced Guaranteed Minimum Death Benefit Rider
(Form R-EGMDB 398) /3/
(m) Guaranteed Income Advantage Rider (Form 23-113499)
/5/
(n) Guaranteed Earnings Enhancement (GEE) Rider (Form
No. 20-14900) /9/
5. (a) Variable Annuity Application. (Form No. 25-12410)
/8/
(b) Variable Annuity PAC APP /1/
(c) Application/Confirmation Form/6/
(d) Form of Guaranteed Earnings Enhancement (GEE)
Rider Request Application /9/
6. (a) Pacific Life's Articles of Incorporation /3/
(b) By-laws of Pacific Life /3/
7. Not applicable
8. Fund Participation Agreement
(a) Fund Participation Agreement
(b) Addendum to Fund Participation Agreement (adding
the Strategic Value and Focused 30 Portfolios)
(c) Addendum to Fund Participation Agreement (adding
nine new Portfolios)
9. Opinion and Consent of legal officer of Pacific Mutual
Life as to the legality of Contracts being registered.
/1/
II-2
10. Independent Auditors' Consent
11. Not applicable
12. Not applicable
13. Performance Calculations
14. Not applicable
15. Powers of Attorney/6/
16. Not applicable
/1/ Included in Registrant's Form N-4, File No. 33-88460, Accession No.
0000898430-96-001377 filed on April 19, 1996 and incorporated by reference
herein.
/2/ Included in Registrant's Form N-4, File No. 33-88460, Accession No.
0001017062-97-000794 filed on April 30, 1997 and incorporated by reference
herein.
/3/ Included in Registrant's Form N-4, File No. 33-88460, Accession No.
0001017062-98-000945 filed on April 29, 1998 and incorporated by reference
herein.
/4/ Included in Registrant's Form N-4, File No. 33-88460, Accession No.
0001017062-99-000659 filed on April 15, 1999 and incorporated by reference.
/5/ Included in Registrant's Form 497, File No. 33-88460, Accession No.
0001017062-99-001607 filed on September 14, 1999 and incorporated by reference
herein.
/6/ Included in Registrant's Form N-4/B, File No. 33-88460, Accession No.
0001017062-00-000577 filed on February 29, 2000 and incorporated by reference
herein.
/7/ Included in Registrant's Form N-4/B, File No. 33-88460, Accession No.
0001017062-00-000955 filed on April 21, 2000 and incorporated by reference
herein.
/8/ Included in Registrant's Form N-4/B, File No. 33-88460, Accession No.
0001017062-00-000955 filed on December 7, 2000 and incorporated by reference
herein.
/9/ Included in Registrant's Form N-4/A, File No. 33-88460, Accession No.
0001017062-01-000459 filed on March 2, 2001, 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, Executive 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
Edward R. Byrd Vice President and Controller
Brian D. Klemens Vice President and Treasurer
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
II-3
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 Life Insurance Company wholly-owned
by Pacific LifeCorp (a Delaware Stock Holding Company) which is, in
turn, 99% owned by Pacific Mutual Holding Company (a California Mutual
Holding Company). Pacific Life is the parent company of Pacific Asset
Management LLC (a Delaware Limited Liability Company), Pacific Life &
Annuity Company (an Arizona Stock Life Insurance Company), Pacific
Select Distributors, Inc., and World-Wide Holdings Limited (a United
Kingdom Corporation). Pacific Life also has a 50% ownership of Pacific
Mezzanine Associates, L.L.C. (a Delaware Limited Liability Company). A
subsidiary of Pacific Mezzanine Associates, L.L.C. is Pacific
Mezzanine Investors, L.L.C., (a Delaware Limited Liability Company)
who is the sole general partner of the PMI Mezzanine Fund, L.P. (a
Delaware Limited Partnership). Subsidiaries of Pacific Asset
Management LLC owns PMRealty Advisors Inc. and Pacific Financial
Products Inc. (a Delaware Corporation) and has a non-managing
membership interest in Allianz-PacLife Partners LLC ( a Delaware
Limited Liability Company), Pacific Financial Products, Inc. and
Allianz-PacLife Partners LLC own the Class E units of PIMCO Advisors
L.P. (a Delaware Limited Partnership). Subsidiaries of Pacific Select
Distributors, Inc. include: Associated Financial Group, Inc. along
with its subsidiary Associated Securities Corporation; Mutual Service
Corporation (a Michigan Corporation), along with its subsidiaries
Advisors' Mutual Service Center, Inc. (a Michigan Corporation) and
Titan Value Equities Group, Inc.; and United Planners' Group, Inc. (an
Arizona Corporation), along with its subsidiary United Planners'
Financial Services of America (an Arizona Limited Partnership).
Subsidiaries of World-Wide Holdings Limited include: World-Wide
Reassurance Company Limited (a United Kingdom Corporation) and World-
Wide Reassurance Company (BVI) Limited (a British Virgin Islands
Corporation). All corporations are 100% owned unless otherwise
indicated. All entities are California corporations unless otherwise
indicated.
II-4
Item 27. Number of Contractholders
Approximately 30,742 Qualified
33,876 Non Qualified
Item 28. Indemnification
(a) The Distribution Agreement between Pacific Life and Pacific Select
Distributors, Inc. (PSD) provides substantially as follows:
Pacific Life hereby agrees to indemnify and hold harmless PSD and its
officers and directors, and employees for any expenses (including legal
expenses), losses, claims, damages, or liabilities incurred by reason
of any untrue or alleged untrue statement or representation of a
material fact or any omission or alleged omission to state a material
fact required to be stated to make other statements not misleading, if
made in reliance on any prospectus, registration statement, post-
effective amendment thereof, or sales materials supplied or approved by
Pacific Life or the Separate Account. Pacific Life shall reimburse each
such person for any legal or other expenses reasonably incurred in
connection with investigating or defending any such loss, liability,
damage, or claim. However, in no case shall Pacific Life 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 PSD.
PSD hereby agrees to indemnify and hold harmless Pacific Life, its
officers, directors, and employees, and the Separate Account for any
expenses, losses, claims, damages, or liabilities arising out of or
based upon any of the following in connection with the offer or sale of
the contracts: (1) except for such statements made in reliance on any
prospectus, registration statement or sales material supplied or
approved by Pacific Life or the Separate Account, any untrue or alleged
untrue statement or representation is 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 PSD or Broker; (4) any
willful misfeasance, bad faith, negligence, misconduct or wrongful act.
PSD 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.
(b) The Form of Selling Agreement between Pacific Life, Pacific Select
Distributors, Inc. (PSD) and Various Broker-Dealers provides
substantially as follows:
Pacific Life and PSD 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
II-5
out of or are based upon any untrue statement or alleged untrue
statement of a material fact or any omission or alleged omission to
state a material fact required to be stated or necessary to make the
statements made not misleading in the registration statement for the
Contracts or for the shares of Pacific Select Fund (the "Fund") filed
pursuant to the 1933 Act, or any prospectus included as a part thereof,
as from time to time amended and supplemented, or in any advertisement
or sales literature approved in writing by Pacific Life and PSD
pursuant to Section IV.E. Of this Agreement.
Selling Broker-Dealer and General Agent agree to indemnify and hold
harmless Pacific Life, the Fund and PSD, their officers, directors,
agents and employees, against any and all losses, claims, damages or
liabilities to which they may become subject under the 1933 Act, the
1934 Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon: (a) any oral or written misrepresentation by Selling Broker-
Dealer or General Agent or their officers, directors, employees or
agents unless such misrepresentation is contained in the registration
statement for the Contracts or Fund shares, any prospectus included as
a part thereof, as from time to time amended and supplemented, or any
advertisement or sales literature approved in writing by Pacific Life
and PSD 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 Life or PSD or any director, officer, agent or employee of
either entity for any legal or other expenses reasonably incurred by
Pacific Life, PSD, 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) PSD also acts as principal underwriter for Pacific Select
Separate Account, Pacific Select Exec Separate Account, Pacific
Select Variable Annuity Separate Account, Pacific Corinthian
Variable Separate Account, Separate Account B, Pacific Life and
Annuity, Pacific Select Exec Separate Account, Pacific Life and
Annuity Separate Account A, COLI Separate Account, COLI II
Separate Account, COLI III Separate Account and Pacific Select
Fund.
(b) For information regarding PSD, reference is made to Form B-D, SEC
File No. 8-15264, which is herein incorporated by reference.
(c) PSD 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.
II-7
Additional Representations
(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. 12 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 25th day of April, 2001.
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. 12 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated:
Signature Title Date
_____________________ Director, Chairman of the Board April 25, 2001
Thomas C. Sutton* and Chief Executive Officer
_____________________ Director and President April 25, 2001
Glenn S. Schafer*
_____________________ Director, Executive Vice President April 25, 2001
Khanh T. Tran* and Chief Financial Officer
_____________________ Director, Senior Vice President April 25, 2001
David R. Carmichael* and General Counsel
_____________________ Director, Vice President and April 25, 2001
Audrey L. Milfs* Corporate Secretary
_____________________ Vice President and Controller April 25, 2001
Edward R. Byrd*
_____________________ Vice President and Treasurer April 25, 2001
Brian D. Klemens*
_____________________ Executive Vice President April 25, 2001
Gerald W. Robinson*
*By: /s/ SHARON A. CHEEVER April 25, 2001
_____________________________
Sharon A. Cheever
as attorney-in-fact
(Powers of Attorney are contained in Post-Effective Amendment No. 6, to the
Registration Statement filed on February 29, 2000 on Form N-4 for Separate
Account A, File No. 33-88460, Accession No. 0001017062-00-000577, as Exhibit
15.)
Dates Referenced Herein and Documents Incorporated by Reference
| Referenced-On Page |
|---|
| This ‘485BPOS’ Filing | | Date | | First | | Last | | | Other Filings |
|---|
| |  |
| | 12/30/23 | | 108 |
| | 9/2/12 | | 118 |
| | 5/22/08 | | 108 |
| | 1/31/03 | | 93 |
| | 12/31/02 | | 7 | | 21 | | | 24F-2NT, N-30D, NSAR-U |
| | 1/1/02 | | 6 | | 59 |
| | 12/31/01 | | 6 | | 59 | | | 24F-2NT, 485BPOS, N-30D, NSAR-U |
| | 5/1/01 | | 1 | | 75 | | | 485BPOS |
| Filed on / Effective on: | | 4/25/01 | | 1 | | 129 | | | 485BPOS |
| | 3/31/01 | | 91 |
| | 3/2/01 | | 123 | | | | | 485APOS |
| | 2/26/01 | | 85 | | | | | NSAR-U |
| | 1/11/01 | | 31 |
| | 1/2/01 | | 44 | | 75 |
| | 1/1/01 | | 91 | | 97 |
| | 12/31/00 | | 9 | | 121 | | | 24F-2NT, NSAR-U |
| | 12/29/00 | | 74 | | 75 | | | N-4 |
| | 12/15/00 | | 91 |
| | 12/7/00 | | 123 | | | | | 485BPOS, 497 |
| | 10/2/00 | | 9 | | 74 | | | 497 |
| | 7/1/00 | | 9 | | 116 |
| | 5/5/00 | | 93 | | 112 | | | 497 |
| | 5/4/00 | | 93 | | 114 |
| | 5/1/00 | | 44 | | 74 |
| | 4/21/00 | | 123 | | | | | 485BPOS |
| | 2/29/00 | | 123 | | 129 | | | 485BPOS |
| | 1/3/00 | | 44 | | 74 |
| | 1/1/00 | | 74 | | 91 |
| | 12/31/99 | | 56 | | 121 | | | 24F-2NT, NSAR-U |
| | 10/1/99 | | 44 |
| | 9/14/99 | | 123 | | | | | 497 |
| | 9/2/99 | | 119 |
| | 4/15/99 | | 123 | | | | | 485BPOS |
| | 1/4/99 | | 44 | | 74 |
| | 12/31/98 | | 92 | | 119 | | | 24F-2NT, N-30D, NSAR-U |
| | 5/1/98 | | 74 | | 75 | | | 485BPOS |
| | 4/29/98 | | 123 | | | | | 485BPOS |
| | 1/1/98 | | 88 |
| | 12/31/97 | | 120 | | | | | 24F-2NT, N-30D, NSAR-U |
| | 9/1/97 | | 42 |
| | 6/1/97 | | 74 | | 75 |
| | 4/30/97 | | 123 | | | | | 485BPOS |
| | 4/19/96 | | 123 | | | | | N-4/A |
| | 4/1/96 | | 74 | | | | | 485BPOS |
| | 1/2/96 | | 20 | | 74 |
| | 12/31/94 | | 74 | | 75 |
| | 9/7/94 | | 42 |
| | 4/1/94 | | 118 |
| | 1/4/94 | | 74 |
| | 1/1/94 | | 75 |
| List all Filings |
124 Subsequent Filings that Reference this Filing
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