File No. 33- 11084 811-2188
As filed with the Securities and Exchange Commission on May 1, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. 2 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [ X ]
Amendment No. 12
JEFFERSON-PILOT SEPARATE ACCOUNT A
(Exact Name of Registrant as Specified in Charter)
JEFFERSON-PILOT LIFE INSURANCE COMPANY
100 North Greene Street
Greensboro, North Carolina 27401
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code 1-800-458-4498
J. Gregory Poole
Jefferson-Pilot Life Insurance Company
100 North Greene Street
Greensboro, North Carolina 27401
(Name and Address of Agent for Service)
Copy to:
J. Gregory Poole
Jefferson-Pilot Life Insurance Company
100 North Greene Street
Greensboro, NC 27401
Approximate Date of Proposed Public Offering _______________________
It is proposed that this filing will become effective (check appropriate box)
[ x ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on (date) pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a) (1) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 in connection with File No. 33-11084. Its Rule
24f-2 Notice for the fiscal year ended December 31, 1995 was filed on or about
February 29, 1996
<PAGE>
JEFFERSON-PILOT SEPARATE ACCOUNT A
Registration Statement on Form N-4
CROSS REFERENCE SHEET
Pursuant to Rule 481 (a)
N-4
Item No. Caption
1. . . . . . . . . . . . . . . . . . . . . . . . Cover Page
2. . . . . . . . . . . . . . . . . . . . . . . . Definitions
3. . . . . . . . . . . . . . . . . . . . . . . . Summary of Contract
Expenses; Summary
4. . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
5. . . . . . . . . . . . . . . . . . . . . . . . The Insurance Company;
Jefferson- Pilot Separate
Account A; and Sub-Accounts
of the Separate Account and
Available Funds
6. . . . . . . . . . . . . . . . . . . . . . . . Deductions under the Contracts
7. . . . . . . . . . . . . . . . . . . . . . . . Contract Benefits
8. . . . . . . . . . . . . . . . . . . . . . . . The Annuity Period
9. . . . . . . . . . . . . . . . . . . . . . . . Payment on or after Death of
Annuitant
10 . . . . . . . . . . . . . . . . . . . . . . . Certain Minimum Amounts;
The Accumulation Period
11 . . . . . . . . . . . . . . . . . . . . . . . Redemptions
12 . . . . . . . . . . . . . . . . . . . . . . . Federal Tax Status
13 . . . . . . . . . . . . . . . . . . . . . . . Legal Matters
14 . . . . . . . . . . . . . . . . . . . . . . . Table of Contents
Statement of Additional
Information
<PAGE>
N-4
Item No. Caption
15 . . . . . . . . . . . . . . . . . . . . . . . Cover Page
16 . . . . . . . . . . . . . . . . . . . . . . . Table of Contents
17 . . . . . . . . . . . . . . . . . . . . . . . General Information
18 . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
19 . . . . . . . . . . . . . . . . . . . . . . . Distribution of the Contracts
20 . . . . . . . . . . . . . . . . . . . . . . . Distribution of the Contracts
21 . . . . . . . . . . . . . . . . . . . . . . . Standardized Computation of
Performance
22 . . . . . . . . . . . . . . . . . . . . . . . Determination of Annuity
Payments
23 . . . . . . . . . . . . . . . . . . . . . . . Financial Statements
Part C - Information required in Part C is set forth under each appropriate
item, as numbered, in Part C to this Registration Statement.
<PAGE>
JEFFERSON-PILOT SEPARATE ACCOUNT A
Individual Variable Annuity Contracts
TABLE OF CONTENTS
Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . .3
SUMMARY OF CONTRACT EXPENSES . . . . . . . . . . . . . . ..6
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . 11
THE INSURANCE COMPANY. . . . . . . . . . . . . . . . . . . 12
JEFFERSON-PILOT SEPARATE ACCOUNT A . . . . . . . . . . . . 13
SUB-ACCOUNTS OF THE SEPARATE ACCOUNT
AND AVAILABLE FUNDS. . . . . . . . . . . . . . . . . . . 13
INVESTMENT OBJECTIVES OF THE FUNDS . . . . . . . . . . . . 15
Substitution of Other Securities or Funds . . . . . . 18
DEDUCTIONS UNDER THE CONTRACTS . . . . . . . . . . . . . . 18
Contingent Deferred Sales Charge. . . . . . . . . . . 18
Waiver of Surrender Charge Rider. . . . . . . . . . . 19
Premium Tax . . . . . . . . . . . . . . . . . . . . . 19
Contract Administration Charges . . . . . . . . . . . 19
Deduction for Assuming Mortality and Expense Risks. . 19
Expenses of the Funds . . . . . . . . . . . . . . . . 20
TRANSFERS BETWEEN SUB-ACCOUNTS . . . . . . . . . . . . . . 20
REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . . . 20
Reinvestment Privilege. . . . . . . . . . . . . . . . 21
OTHER SERVICES . . . . . . . . . . . . . . . . . . . . . . 21
Dollar Cost Averaging . . . . . . . . . . . . . . . . 21
Systematic Withdrawal Plan. . . . . . . . . . . . . . 22
Reports to the Owner. . . . . . . . . . . . . . . . . 22
FIXED ACCOUNT. . . . . . . . . . . . . . . . . . . . . . . 23
General Description . . . . . . . . . . . . . . . . . 23
Fixed Account Accumulation Value. . . . . . . . . . . 23
Fixed Account Transfers, Total, and
Partial Surrenders. . . . . . . . . . . .. . . . . 23
CONTRACT BENEFITS. . . . . . . . . . . . . . . . . . . . . 24
CERTAIN MINIMUM AMOUNTS. . . . . . . . . . . . . . . . . . 25
THE ACCUMULATION PERIOD. . . . . . . . . . . . . . . . . . 25
The Accumulation Value and Accumulation Units . . . . 25
Accumulation Unit Value . . . . . . . . . . . . . . . 25
Valuation Date and Valuation Period . . . . . . . . . 26
Net Investment Factor . . . . . . . . . . . . . . . . 26
Example of Calculation of Accumulation Unit Value . . 26
THE ANNUITY PERIOD . . . . . . . . . . . . . . . . . . . . 26
Payment Provisions. . . . . . . . . . . . . . . . . . 26
SETTLEMENT OPTIONS . . . . . . . . . . . . . . . . . . . . 27
Annuity Purchase Rates. . . . . . . . . . . . . . . . 28
Annuity Unit Values . . . . . . . . . . . . . . . . . 29
Number of Annuity Units . . . . . . . . . . . . . . . 29
Time of Payment . . . . . . . . . . . . . . . . . . . 29
Amount of Payment . . . . . . . . . . . . . . . . . . 29
PAYMENT ON OR AFTER DEATH OF ANNUITANT . . . . . . . . . . 29
THE DISTRIBUTION OF THE CONTRACTS. . . . . . . . . . . . . 30
VOTING RIGHTS. . . . . . . . . . . . . . . . . . . . . . . 30
FEDERAL TAX STATUS . . . . . . . . . . . . . . . . . . . . 31
Federal Tax Status of the Separate Account. . . . . . 31
Federal Tax Status of Qualified Contracts . . . . . . 31
Federal Tax Status of Non-Qualified Contracts . . . . 32
Federal Tax Penalties and Withholding . . . . . . . . 33
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . 33
SPECIAL CONSIDERATIONS . . . . . . . . . . . . . . . . . . 33
Restrictions Upon Transfer of Ownership and
Assignment . . . . . . . . . . . . . . . . . . . . . .33
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . 33
STATE REGULATION . . . . . . . . . . . . . . . . . . . . . 33
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . 34
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . 35
TABLE OF CONTENTS - STATEMENT OF ADDITIONAL INFORMATION . 36
INVESTMENT FUND PROSPECTUSES
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUNDS (VIPF) . VIPF-1
JP FAMILY OF FUNDS (JPFF) . . . . . . . . . . . . . . PFF-1
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
(AASAP). . . . . . . . . . . . . . . . . . . . . . AASAP-1
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO (AAMGP). . . AAMGP-1
MFS RESEARCH SERIES . . . . . . . . . . . . . . . . . MFS-1
MFS UTILITIES SERIES. . . . . . . . . . . . . . . . ..MFS-1
ALEXANDER HAMILTON VARIABLE INSURANCE TRUST . . AHVIT-1
<PAGE>
Prospectus
May 1, 1996
Jefferson-Pilot Separate Account A
Individual Variable Annuity Contracts
sold by
Jefferson-Pilot Life Insurance Company
P.O. Box 22086
Greensboro, North Carolina 27420
Telephone (910) 691-3448
This Prospectus offers two forms of individual variable annuity contracts,Alpha
and Alphaflex, that are designed (i) to fund benefits under annuity purchase,
pension or profit-sharing plans qualified for special tax treatment under the
Internal Revenue Code and (ii) for sale to individuals for retirement planning
where no special tax treatment isavailable (the "Contract(s)"). The Contracts
are offered on a flexible payment basis.
Under the Contracts, annuity payments may commence on a preselected future date
(presumably at retirement) under one of the annuity options provided in the
Contracts. Prior to the time annuity payments begin, the Contracts are
partially or totally redeemable based on their current value and subject to
applicable contingent deferred sales charges.
Jefferson-Pilot Life Insurance Company ("Company") provides for variable
accumulations and variable benefits under the Contracts by crediting net
purchase payments to one or more Sub-Accounts ("Sub-Accounts") within
Jefferson-Pilot Separate Account A ("Separate Account") as directed by the
owner of the Contract ("Owner"). Net purchase payments to Contracts may be
invested in any combination of the sixteen available Sub-Accounts or in the
Fixed Account. The Sub-Accounts invest in corresponding investment portfolios
of seven separate mutual funds ("Funds"). The Funds are currently JP Capital
Appreciation Fund, Inc. and JP Investment Grade Bond Fund, Inc., which utilize
the investment advisory services of JP Investment Management Company, a
wholly-owned subsidiary of Jefferson-Pilot Corporation, the parent of the
Company; the Variable Insurance Products Fund and the Variable Insurance
Products Fund II, which are managed by Fidelity Management & Research Company
of Boston, Massachusetts; the Alger American Fund, which is managed by Fred
Alger Management, Inc. of New York, New York; the MFS Variable Insurance Trust,
managed by Massachusetts Financial Services Company of Boston, Massachusetts;
and the Alexander Hamilton Variable Insurance Trust, managed by Alexander
Hamilton Capital Management, a wholly-owned subsidiary of Alexander Hamilton
Life Insurance Company, a wholly-owned subsidiary of Jefferson-Pilot
Corporation.
Generally, within ten days after the Contract is received, an Owner may cancel
it by returning it to the Home Office or the representative that sold it. Free
look provisions may vary based on the state of issue. The state of issue is
based on the address of the Payor.
A prospectus for each of the Funds accompanies this Prospectus or may be
obtained from Jefferson-Pilot Investor Services, Inc., Post Office Box 22086,
Greensboro, North Carolina 27420. An investor should read those prospectuses
carefully before buying a Contract described in this Prospectus or investing in
any Sub-Account.
<PAGE>
This Prospectus sets forth concisely the information about the Contracts and
the Separate Account that a prospective investor should know before investing
and should be retained for future reference. Additional information about the
Contracts and the Separate Account is contained in a Statement of Additional
Information dated May 1, 1996 which is incorporated herein by reference. The
Statement of Additional Information is available upon written or oral request
and without charge from Jefferson-Pilot Investor Services, Inc., Post Office
Box 22086, Greensboro, North Carolina 27420, Telephone Number (910) 691-3448.
The table of contents for the Statement of Additional Information is shown on
page 36 of this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT
PROSPECTUS OF EACH OF THE FOLLOWING MUTUAL FUNDS: JP CAPITAL
APPRECIATION FUND, INC.; JP INVESTMENT GRADE BOND FUND, INC.;
VARIABLE INSURANCE PRODUCTS FUND; VARIABLE INSURANCE PRODUCTS FUND II;
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO; ALGER AMERICAN MIDCAP
GROWTH PORTFOLIO; ALGER AMERICAN MIDCAP GROWTH PORTFOLIO; MFS
RESEARCH SERIES; MFS UTILITIES SERIES; AND ALEXANDER HAMILTON
VARIABLE INSURANCE TRUST.
<PAGE>
DEFINITIONS
Some of the technical expressions and names frequently used in this Prospectus
are defined below for ready reference:
1. ACCUMULATION UNIT - the unit of measure of each Sub-Account of the
Separate Account used in determining the value of the respective Sub-Accounts,
and of the Contract, prior to the Annuity Date.
2. ACCUMULATION VALUE - the value in the Sub-Accounts and the Fixed Account
(Fixed Account Accumulation Value) on any valuation date during the
accumulation period.
3. AHVIT FUNDS - the portfolios of the Alexander Hamilton Variable
Insurance Trust which are available under the Contracts -- AHVIT Growth Fund
and AHVIT Emerging Growth Fund.
4. ALEXANDER HAMILTON VARIABLE INSURANCE TRUST (AHVIT) - an open-end
management investment company registered under the 1940 Act.
5. ALGER AMERICAN FUNDS - the portfolios of the Alger American Fund which are
available under the Contracts -- Alger American Small Capitalization Portfolio
and Alger American MidCap Growth Portfolio.
6. ALPHA - the Contract offered on a flexible premium basis with a minimum
initial purchase payment of $5,000 and a minimum additional payment of
$1,000.
7. ALPHAFLEX - the Contract offered on a flexible premium basis with minimum
initial purchase payment of $2,000 for a Qualified Contract and $5,000 for a
Non-Qualified Contract and a minimum additional payment of $100.
8. ANNUITANT - the natural person upon whose life annuity payments depend or
will depend.
9. ANNUITY DATE - the date on which the first variable annuity payment is
payable.
10. ANNUITY UNIT - the unit of measure of each Sub-Account of the Separate
Account used in determining the amount of each variable annuity payment.
11. BENEFICIARY (or Beneficiaries) - the person (or persons) designated to
receive the death benefit in the case of the death of the Annuitant.
12. CODE - the Internal Revenue Code of 1986, as amended.
13. COMMUTED VALUE - the value, in a single sum, of a series of payments
discounted from their respective due dates to the date of determination, such
value being determined using the Company's current commute rate, which rate may
be different from the assumed rate of interest used in calculating the payments.
14. COMPANY - the Jefferson-Pilot Life Insurance Company.
15. CONTRACT VALUE - the Accumulation Value in the Sub-Accounts and the Fixed
Account less any contingent deferred sales charge, annual contract fee, and
premium deducted at the time of surrender or annuitization.
<PAGE>
16. FIXED ANNUITY - an annuity with payments which do not vary in accordance
with the net investment results of the Separate Account.
17. FIXED ACCOUNT - Contract Values allocated to the Company's General
Account under the Contract.
18. FUNDS - the JP Funds, VIP Funds, AHVIT Funds, Alger American Funds,
and MFS Funds available under the Contract.
19. FUND SHARE - a share of the capital stock of any of the JP Funds and a
share of beneficial interest in any of the VIP Funds, AHVIT Funds, Alger
American Funds, and MFS Funds.
20. GENERAL ACCOUNT - the General Account of the Company in which are held
all the assets other than those held in the Separate Account or in any other
separate account established or maintained by the Company.
21. HOME OFFICE - the principal office of the Company at Greensboro,
North Carolina.
22. 1940 ACT - the Investment Company Act of 1940, as amended.
23. JP FUNDS - JP Capital Appreciation Fund, Inc. and JP Investment Grade
Bond Fund, Inc., which are open-end diversified management investment companies
registered under the 1940 Act.
24. MFS FUNDS - mutual fund series of the MFS Variable Insurance Trust
which are available under the Contracts -- MFS Research Series and MFS
Utilities Series.
25. MFS VARIABLE INSURANCE TRUST - an open-end management investment company
registered under the 1940 Act.
26. NET INVESTMENT FACTOR - a factor which reflects the net investment
experience of each Sub-Account less the charges for the mortality and expense
risk and administrative expenses during a valuation period.
27. NON-QUALIFIED CONTRACT - a Contract issued in connection with a
retirement plan which does not receive favorable tax treatment under Section
401, 403, 408, or 457 of the Code.
28. OWNER - The person(s) (or entity) that, while living, controls all rights
and benefits under the Contract.
29. PAYOR - The person(s) (or entity) that makes the initial purchase payment
and any subsequent payments.
<PAGE>
30. QUALIFIED CONTRACT - an annuity contract that has been issued to fund
benefits:
(i) under a pension or profit sharing plan qualifying, or designed to
qualify, for tax deferment under Code Section 401, including a plan
covering self-employed individuals (HR-10 plans);
(ii) under an annuity purchase plan qualifying, or intended to qualify,
for tax deferment under Code Section 403(b), including plans adopted by
public school systems and certain tax-exempt organizations specified in
Code Section 501(c)(3);
(iii) under an Individual Retirement Account or Annuity qualifying, or
intended to qualify, for tax deferment under Code Section 408; or
(iv) to a government unit under an employee benefit plan which does in
fact result in tax deferment under Code Section 457.
29. SEPARATE ACCOUNT - the separate account designated as Jefferson-Pilot
Separate Account A.
30. SUB-ACCOUNT(S) - a sub-account of the Separate Account investing in
shares of one of the Funds.
31. THE ALGER AMERICAN FUND - a diversified, open-end management
investment company registered under the 1940 Act.
32. VALUATION DATE - any date on which the assets of the Separate Account are
valued. Each day on which the New York Stock Exchange is open for trading is a
valuation date, as is any other day (other than a day on which no purchase
payments are made and no redemptions effected) on which there is a sufficient
degree of trading in the portfolio securities of any of the Funds that the
value of an Accumulation Unit or Annuity Unit might be materially affected.
33. VALUATION PERIOD - the period from the time the accumulation unit value
and the annuity unit value are determined as of one valuation date to the time
such values are determined as of the next valuation date.
34. VARIABLE ANNUITY - an annuity with payments varying in accordance with
the net investment results of the Separate Account.
35. VIP FUNDS - the portfolios of the VIP Trusts which are available
under the Contracts -- Money Market Portfolio, High Income Portfolio,
Equity-Income Portfolio, Growth Portfolio, Overseas Portfolio, Asset Manager
Portfolio, Index 500 Portfolio and Contrafund Portfolio.
36. TRUSTS - the Variable Insurance Products Fund ("VIPF") and the
Variable Insurance Products Fund II ("VIPF-II"), which are open-end diversified
management investment companies registered under the 1940 Act.
<PAGE>
SUMMARY OF CONTRACT EXPENSES
Owner Transaction Expenses
Sales Charge Imposed on Purchases. . . . . . . . . . . . . . . . .None
Deferred Sales Charge for the Alpha* . . . . . . . . . . . . . . . .6.00%
(as a percentage of the amount withdrawn at the time of
surrender or partial surrender)
Deferred Sales Charge for the Alphaflex**. . . . . . . . . . . . . .8.00%
(as a percentage of the amount withdrawn at the time of
surrender or partial surrender)
Surrender Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
* The Deferred Sales Charge declines over time and is 0% beginning in the
seventh policy year. For more information on the contingent Deferred Sales
Charge, see page 18 ("Contingent Deferred Sales Charge").
**The Deferred Sales Charge declines over time and is to 0% beginning in the
ninth policy year. For more information on the Deferred Sales Charge, see page
18 ("Contingent Deferred Sales Charge").
Annual Contract Fee. . . . . . . . . . . . . . . . . . . . . . . . . $35*
*$30 in the State of Washington
Separate Account Annual Expenses
(as a percentage of average account value)
Mortality and Expense Risk Charge. . . . . . . . . . . . . . . . . . .1.25%
Administrative Expense Fee . . . . . . . . . . . . . . . . . . . . . . .15%
Account Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . None
Total Separate Account Annual Expenses. . . . . . . . . . . . . 1.40%
<PAGE>
Annual Portfolio Company Expenses
(as a percentage of portfolio company average net assets)
Total Portfolio
Management Other Company Annual
Fees Expenses Expenses*
JP Capital Appreciation Fund, Inc. 0.50% 0.12% 0.62%
JP Investment Grade Bond Fund, Inc. 0.50% 0.20% 0.70%
VIPF Money Market Portfolio 0.24% 0.09% 0.33%
VIPF High Income Portfolio 0.60% 0.11% 0.71%
VIPF Equity-Income Portfolio 0.51% 0.10% 0.61%
VIPF Growth Portfolio 0.61% 0.09% 0.70%
VIPF Overseas Portfolio 0.76% 0.15% 0.91%
VIPF-II Asset Manager Portfolio 0.71% 0.10% 0.81%
VIPF-II Index 500 Portfolio 0.28% 0.00% 0.28%
VIPF-II Contrafund Portfolio 0.61% 0.12% 0.73%
AHVIT Growth Fund 0.75% 0.25% 1.00%
AHVIT Emerging Growth Fund 0.80% 0.25% 1.05%
MFS Research Series 0.75% 0.25% 1.00%
MFS Utilities Series 0.75% 0.25% 1.00%
Alger American Small Capitalization
Portfolio 0.85% 0.07% 0.92%
Alger American MidCap Growth
Portfolio 0.80% 0.10% 0.90%
*The manager of the VIP Funds voluntarily agreed to temporarily limit the
fund's operating expenses (as a percentage of each fund's average net assets)
to 0.28% for VIPF-II Index 500, 1.00% for VIPF High Income and Contrafund,
1.25% for VIPF-II Asset Manager, and 1.50% VIPF Equity-Income, VIPF Growth,
and VIPF Overseas. If these agreements were not in effect, total operating
expenses of VIPF-II Index 500 would have been .47%. The adviser of the AHVIT
funds voluntarily agreed to temporarily limit the fund's operating expenses
(as a percentage of each fund's average daily net assets on an annualized basis
to 1.00% for AHVIT Growth and 1.05% for AHVIT Emerging Growth. The AHVIT Funds
commenced operations on February 8, 1995. The adviser of the MFS Funds agreed
to bear, subject to reimbursement, 1.00% of the average daily net assets of the
funds for fiscal year 1995. Absent this expense arrangement, "Other Expenses"
for the MFS Research and MFS Utilities would have been 3.15% and 2.33%,
respectively, and the "Total Portfolio Company Annual Expenses" would have been
3.90% and 3.08%, respectively, for these Series.
<PAGE>
EXAMPLE 1
If you surrender the Alpha, you would pay the following expenses on a
$1,000 investment assuming a 5% annual return on assets:
1 year 3 years 5 years 10 years
JP Capital Appreciation Fund, Inc. $83 $124 $171 $303
JP Investment Grade Bond Fund, Inc. $84 $126 $175 $313
VIPF Money Market Portfolio $80 $115 $155 $265
VIPF High Income Portfolio $84 $126 $176 $315
VIPF Equity-Income Portfolio $83 $123 $170 $302
VIPF Growth Portfolio $84 $126 $175 $313
VIPF Overseas Portfolion $86 $132 $186 $340
VIPF-II Asset Manager Portfolio $85 $129 $181 $327
VIPF-II Index 500 Portfolio $80 $113 $153 $259
VIPF-II Contrafund Portfolio $84 $127 $177 $317
AHVIT Growth Fund $87 $135 $191 $351
AHVIT Emerging Growth Fund $87 $137 $194 $357
MFS Research Series $87 $135 $191 $351
MFS Utilities Series $87 $135 $191 $351
Alger American Small Capitalization
Portfolio $86 $133 $187 $341
Alger American MidCap Growth Portfolio $86 $132 $186 $339
<PAGE>
EXAMPLE 2
If you surrender the Alphaflex, you would pay the following expenses on a
$1,000 investment assuming a 5% annual return on assets:
1 year 3 years 5 years 10 years
JP Capital Appreciation Fund, Inc. $106 $142 $184 $334
JP Investment Grade Bond Fund, Inc. $107 $144 $188 $344
VIPF Money Market Portfolio $103 $133 $168 $297
VIPF High Income Portfolio $107 $144 $189 $345
VIPF Equity-Income Portfolio $106 $142 $183 $333
VIPF Growth Portfolio $107 $144 $188 $344
VIPF Overseas Portfolio $109 $150 $199 $370
VIPF-II Asset Manager Portfolio $108 $147 $194 $357
VIPF-II Index 500 Portfolio $103 $132 $166 $290
VIPF-II Contrafund Portfolio $107 $145 $190 $348
AHVIT Growth Fund $109 $153 $204 $381
AHVIT Emerging Growth Fund $110 $154 $206 $387
MFS Research Series $109 $153 $204 $381
MFS Utilities Series $109 $153 $204 $381
Alger American Small Capitalization
Portfolio $109 $151 $200 $371
Alger American MidCap Growth
Portfolio $108 $150 $199 $369
EXAMPLE 3
If you annuitize or do not surrender the Alpha, you would pay the following
expenses on a $1,000 investment assuming a 5% annual return on assets:
1 year 3 years 5 years 10 years
JP Capital Appreciation Fund, Inc. $21 $69 $125 $303
JP Investment Grade Bond Fund, Inc. $22 $72 $129 $313
VIPF Money Market Portfolio $19 $60 $109 $265
VIPF High Income Portfolio $22 $72 $130 $315
VIPF Equity-Income Portfolio $21 $69 $124 $302
VIPF Growth Portfolio $22 $72 $129 $313
VIPF Overseas Portfolio $24 $79 $141 $340
VIPF-II Asset Manager Portfolio $23 $75 $135 $327
VIPF-II Index 500 Portfolio $18 $59 $106 $259
VIPF-II Contrafund Portfolio $23 $73 $131 $317
AHVIT Growth Fund $25 $81 $146 $351
AHVIT Emerging Growth Fund $26 $83 $149 $357
MFS Research Series $25 $81 $146 $351
MFS Utilities Series $25 $81 $146 $351
Alger American Small Capitalization
Portfolio $24 $79 $142 $341
Alger American MidCap Growth
Portfolio $24 $78 $140 $339
<PAGE>
EXAMPLE 4
If you annuitize or do not surrender the Alphaflex, you would pay the following
expenses on a $1,000 investment assuming a 5% annual return on assets:
1 year 3 years 5 years 10 years
JP Capital Appreciation Fund, Inc. $24 $77 $138 $334
JP Investment Grade Bond Fund, Inc. $25 $79 $143 $344
VIPF Money Market Portfolio $21 $68 $122 $297
VIPF High Income Portfolio $25 $80 $143 $345
VIPF Equity-Income Portfolio $24 $77 $138 $333
VIPF Growth Portfolio $25 $79 $143 $344
VIPF Overseas Portfolio $27 $86 $154 $370
VIPF-II Asset Manager Portfolio $26 $83 $149 $357
VIPF-II Index 500 Portfolio $20 $66 $119 $290
VIPF-II Contrafund Portfolio $25 $80 $144 $348
AHVIT Growth Fund $28 $89 $159 $381
AHVIT Emerging Growth Fund $28 $90 $162 $387
MFS Research Series $28 $89 $159 $381
MFS Utilities Series $28 $89 $159 $381
Alger American Small Capitalization
Portfolio $27 $86 $155 $371
Alger American MidCap Growth
Portfolio $27 $86 $154 $369
The purpose of the preceding examples is to assist an Owner or prospective
Owner in understanding the various costs and expenses an Owner will bear
directly or indirectly. The above examples reflect expenses of the Separate
Account as well as the Funds. The above examples reflect the $35 Annual
Contract Fee as an annual charge of (i) with respect to the Alpha, 0.117%
of assets based on an average expected Contract Value of $30,000, and (ii)
with respect to the Alphaflex, 0.35% of assets based on an average expected
Contract Value of $10,000.
THE EXAMPLES SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
The deferred sales charge shown in the examples is the maximum sales load:
see "Contingent Deferred Sales Charge" on page 18 of this Prospectus which
describes the range of contingent deferred sales loads over time and limits
on the contingent deferred sales charge as a percentage of total account value.
The examples do not reflect premium taxes which are levied by some states.
(See "Premium Tax" on page 19.) All premium taxes are the responsibility of
the Owner of the policy and are charged to the policy whenever the state
requires that the Company pay such tax.
The examples reflect Owner transaction expenses, administrative fees, and other
Separate Account charges during the accumulation period (which is described
beginning on page 25 of this Prospectus). The annual contract fee is not
applicable during the annuity period; all other charges and expenses, including
those of the Funds, do apply during the annuity period. See the prospectuses
of the Funds for a fuller description of their expenses.
The Examples assume that purchase payments are allocated to each Fund which may
have different expenses.
<PAGE>
SUMMARY
Jefferson-Pilot Investor Services, Inc. ("Investor Services"), the distributor
of the Contracts, does not deduct a sales charge from purchase payments.
However, if any part of the value of the Contracts is surrendered Investor
Services will, with certain exceptions, deduct from the value of the Contract,
a contingent deferred sales charge equal to the maximum of (i) with respect to
the Alpha, 6% of the amount withdrawn; or (ii) with respect to the Alphaflex,
8% of the amount withdrawn, but in no event under either Contract more than
9% of gross purchase payments. This charge when made is imposed to permit
Investor Services or the Company to recover sales expenses which they have
advanced. (See "Contingent Deferred Sales Charge.")
In addition, on each Contract anniversary date or at full surrender, the
Company will deduct from the Contract an annual contract fee of $35 from the
Accumulation Value. The administrative expense fee of .0004110% of daily net
assets per day, which is approximately equal to an annual rate of .15% for a
365 day year, is charged both during the accumulation period and the annuity
period. This charge is collected to further defray administrative costs.
These charges are to reimburse Investor Services or the Company for
administrative expenses related to the issue, maintenance and administration
of the contract. These charges have been set at a level that will recover no
more than the actual costs associated with administering the contracts, and
the Company does not expect to recover from these charges an amount in excess
of accumulated administrative expenses. (See "Contract Administrative
Charges" on page 19.)
The Company deducts a mortality and expense risk charge from the assets of the
Separate Account, as a daily asset charge of .0034247% of daily net assets,
which is approximately equal to an annual rate of 1.25% for a 365 day year,
during the accumulation period and the annuity period.
The minimum initial purchase payment under the Alpha is $5,000. The minimum
initial purchase payment under the Alphaflex is $2,000 for a Qualified
Contract and $5,000 for a Non-Qualified Contract. The minimum additional
purchase payment is $1,000 for the Alpha and $100 for the Alphaflex under both
a Non-Qualified and Qualified Contract. The minimum subsequent payment made
into a particular Sub-Account is $50.00.
If the Contract Value at the Annuity Date is less than $2,000, the Contract
Value may be distributed in one lump sum in lieu of annuity payments. If any
annuity payment from any Sub-Account would be less than $100, the Company
shall have the right to change the frequency of payments to such intervals as
will result in payments of at least $100 from such Sub-Account(s). (See "The
Annuity Period" on page 26.)
Premium taxes payable to any governmental entity ranging between 0% and 5% will
be charged against the Contracts. (See "Premium Tax" on page 19.)
<PAGE>
An individual for whom a Contract is purchased under an individual retirement
account may evoke the Contract at any time within seven days after the later
of the date on which (i) the account is established, or (ii) the individual
receives a disclosure statement notifying him of his right of revocation by
giving written notice of revocation to the Home Office. Upon such revocation,
the full purchase payment made will be refunded if such payment is invested
in the VIPF Money Market Portfolio Sub-Account, and the Accumulation Value
will be refunded (unless otherwise required by applicable law) if such payment
is invested in any Sub-Account other than the VIPF Money Market Portfolio
Sub-Account. Purchase payments received on an individual retirement account
contract are immediately invested in the Separate Account. The Owner of a
Contract generally may, within 10 days after the date on which the Contract is
issued, revoke the Contract, in which event the Owner will be paid the
Contract's Accumulation Value without reduction for the contingent deferred
sales or administrative charges that would otherwise apply. Also, any fees
and charges previously collected would be refunded. However, in those states
where the free look provision requires the full refund of purchase payments
(less prior surrender), all purchase payments must be placed in the VIPF Money
Market Sub-Account until the end of the free look period. Free look provisions
may vary based on the Owner's state of residence.
This Prospectus describes in detail how a Contract may be purchased and
redeemed. (See "The Distribution of Contracts" on page 30 and "Redemptions"
on page 20.)
Premature payments of benefits under a Contract may cause a penalty tax to be
incurred. (See "Federal Tax Status" on page 31.)
THE INSURANCE COMPANY
The Company was known as Pilot Life Insurance Company prior to the close of
business on December 31, 1986, at which time Jefferson Standard Life Insurance
Company was merged into Pilot Life Insurance Company. Simultaneously with the
merger, Pilot Life Insurance Company changed its name to Jefferson-Pilot Life
Insurance Company. The Company is a stock life insurance company organized
under the insurance laws of North Carolina in 1890. The Company commenced
business operations in 1903 and is primarily engaged in the writing of whole
life, term, endowment and annuity policies on an individual ordinary basis,
plus industrial and group insurance. It is authorized to write insurance and
annuities in 49 states, the District of Columbia, the Virgin Islands, and
Puerto Rico. Its Home Office is located at 100 North Greene Street,
Greensboro, North Carolina.
The Company is a wholly-owned subsidiary of Jefferson-Pilot Corporation,
organized in January 1968. Jefferson-Pilot Corporation is public held. INVESCO
PLC has furnished Jefferson-Pilot Corporation with a Schedule 13G under the
Securities Exchange Act of 1934 ("Exchange Act") dated February 2, 1996
indicating that it and a number of its affiliates, including INVESCO Capital
Management, Inc., may be deemed to beneficially own 6.179% of Jefferson-Pilot
Corporation's outstanding stock by virtue of having shared voting power and
shared dispositive power over the shares which are reported to be held on
behalf of other persons who have the power to direct the receipt of dividends
and proceeds from sales.
<PAGE>
JEFFERSON-PILOT SEPARATE ACCOUNT A
Jefferson-Pilot Separate Account A's (the "Separate Account") predecessor was
established pursuant to a resolution of the Board of Directors of the Company
dated May 13, 1969. The Separate Account was established under the laws of
the State of North Carolina and registered on May 3, 1971 as a unit investment
trust under the 1940 Act. Such registration does not involve supervision of
the investments or investment policies of the Separate Account and does not
imply that the Contract has been approved or disapproved by the Securities and
Exchange Commission ("Commission").
Under North Carolina insurance law the income, gains or losses of the Separate
Account are credited to or charged against the assets of the Separate Account
without regard to the other income, gains or losses of the Company. These
assets are held with relation to the Contracts described in this Prospectus
and such other variable annuity contracts as may be issued by the Company and
designated by it as participating in the Separate Account.
Although the assets maintained in the Separate Account will not be charged with
any liabilities arising out of any other business conducted by the Company, all
obligations arising under the Contracts, including the promise to make annuity
payments, are general corporate obligations of the Company. Accordingly, all
of the Company assets are available to meet its obligations and expenses under
the Contracts participating in the Separate Account.
SUB-ACCOUNTS OF THE SEPARATE ACCOUNT AND AVAILABLE FUNDS
Sixteen Sub-Accounts of the Separate Account, each of which reflects the
investment performance of a specific underlying Fund, are available under
the Contracts. Subject to the limitations stated on page 19 and any
restrictions by an applicable retirement plan, the Owner may elect to have net
purchase payments credited to any of the sixteen Sub-Accounts.
Two of the Sub-Accounts invest in shares of the JP Funds, eight of the
Sub-Accounts invest in shares of the VIP Funds, two Sub-Accounts invest in
shares of Alger American Funds, two Sub-Accounts invest in shares of AHVIT
Funds, and two Sub-Accounts invest in shares of MFS Funds.
Each of the JP Funds is an open-end diversified management investment
company. The Funds were formed specifically to serve as an investment medium
for the Separate Account. Only the Separate Account is eligible at this time
to purchase shares of the JP Funds. The JP Funds reserve the right to offer
their shares to other than the Separate Account. JP Investment Management
Company ("JP Management") 100 North Greene Street, Greensboro, North Carolina,
a wholly-owned subsidiary of Jefferson-Pilot Corporation, is the investment
adviser to the JP Funds and also performs certain administrative functions
for each JP Fund. The Company provides certain personnel and facilities
utilized by Jefferson-Pilot Management in performing its investment advisory
and administrative functions. The JP Funds pay a monthly management fee to
JP Management at the annual rate of .50% of the JP Funds' average daily net
assets, based on a 365 day year. If the Funds' expenses, excluding interest
and taxes, exceed 1% of the Funds' average daily net assets, JP Management
will pay the excess.
<PAGE>
The VIP Trusts also are open-end diversified management investment
companies. The VIP Trusts are organized as series type investment companies
with diversified portfolios, the VIP Funds. The VIP Funds are designed to
serve as investment vehicles for variable annuity and variable life insurance
contracts of various insurance companies. Shares of the VIP Funds currently
are available to the separate accounts of a number of insurance companies, both
affiliated and unaffiliated with Fidelity Management and Research Company
("Fidelity Management"), and Jefferson-Pilot.
Fidelity Management, the adviser to each VIP Fund, whose principal address
is 82 Devonshire Street, Boston, Massachusetts, is a wholly-owned subsidiary
of FMR Corp. and is part of Fidelity Investments, one of the largest investment
management organizations in the United States. Fidelity Investments includes a
number of different companies, which provide a variety of financial services
and products to individuals and corporations.
Fidelity Management provides investment research and portfolio management
services to mutual funds and other clients. At December 31, 1995, Fidelity
Management advised funds having more than 23 million shareholder accounts with
a total value of more than $354 billion. For certain of the VIP Funds, Fidelity
Management has entered into sub-advisory agreements with affiliated companies
that are part of the Fidelity Investments organization. Fidelity Management,
not the VIP Funds, pays the sub-advisers for their services. The highest
annual rate at which any of the VIP Funds paid advisory fees in 1995 was
.76% of average daily net assets (see "Summary").
The Boards of Trustees of the VIP Funds are responsible for monitoring the
VIP Funds for the existence of any material irreconcilable conflict between
the interests of the policyowners of all separate accounts investing in the
VIP Funds and determining what action, if any, should be taken if a material
irreconcilable conflict should occur. See the prospectuses of the VIP Funds
for further discussion of the risks associated with the offering of VIP Fund
shares to our Separate Account and the separate accounts of other insurance
companies. Also see the Statement of Additional Information regarding the
terms of the Participation Agreements relating to the Separate Account's
investment in the VIP Funds.
The Alger American Fund was organized on April 6, 1988 as a multi-series
Massachusetts Business Trust. The Alger American Fund is an open-end
diversified management investment company which offers an unlimited number of
shares of six series, representing shares of the fund's portfolios, including
the Alger American Funds. The Alger American Funds are offered as a pooled
vehicle for insurance companies writing all types of variable annuity contracts
and variable life policies that are also offered directly to qualified pension
and retirement plans.
Fred Alger Management, Inc. is The Alger American Fund's investment manager and
is responsible for the overall supervision of the fund, subject to the
supervision of the Board of Trustees. Alger Management has been in the
business of providing investment advisory services since 1964 and, as of
December 31, 1995, had approximately 4.8 billion dollars under management, 3
billion dollars in mutual fund accounts and 1.8 billion dollars in other
advisory accounts. Alger Management is owned by Alger, Inc. which in turn
is owned by Alger Associates, Inc., a financial services holding company.
Fred M. Alger, III and his brother, David D. Alger, are the majority
shareholders of Alger Associates, Inc. and may be deemed to control that
company and its subsidiaries.
<PAGE>
The Alger American Fund is governed by a Board of Trustees which is responsible
for protecting the interests of shareholders under Massachusetts law. See the
Prospectuses of the Alger American Funds for further discussion of the risks
associated with the offering of Alger American Fund shares to our Separate
Account and other accounts of insurance companies. Also see Statement of
Additional Information regarding the terms of the Participation Agreements
relating to the Separate Account's investment in Alger American Funds.
MFS Variable Insurance Trust is an open end management investment company
offering insurance company separate accounts a selection of investment
vehicles for variable annuity and variable life contracts. Currently the
Trust offers shares beneficial interest to twelve separate mutual fund series,
including the MFS Funds.
MFS manages the MFS Funds, and provides the MFS Funds with overall investment
advisory and administrative services, as well as general office facilities.
Subject to such policies as the Trustees of the MFS Funds may determine, MFS
makes investment decisions for each of the MFS Funds. For its services and
facilities, MFS receives a management fee, computed and paid monthly, in an
amount equal to .75% of the average daily net assets of each MFS Fund.
MFS is America's oldest mutual fund organization. MFS and its predecessor
organizations have a history of money management dating from 1924 and the
founding of the first mutual fund in the United States, Massachusetts
Investors Trust. Net assets Net assets under the management of the MFS
organization were approximately 43.9 billion dollars on behalf of approximately
1.9 million investor accounts as of February 29, 1996. As of such date, the
MFS organization managed approximately 20 billion dollars of assets invested in
equity securities and approximately 20 billion dollars of assets invested in
fixed income securities. Approximately 3.8 billion dollars of the assets
managed by MFS were invested in securities of foreign issuers and non-U.S.
dollar-denominated securities of U.S. issuers. MFS is a subsidiary of Sun Life
of Canada (US) which in turn is a wholly-owned subsidiary of Sun Life Assurance
Company of Canada ("Sun Life"). Sun Life, a mutual life insurance company, is
one of the largest international life insurance companies and has been
operating in the United States since 1895, establishing headquarters office in
Boston, Massachusetts in 1973.
The Board of Trustees of the MFS Funds, as a part of its overall management
responsibility, oversees various organizations responsible for each funds'
day-to-day management. See Prospectuses of the MFS Funds for further
discussion of the risks associated with the offering of MFS Fund shares to our
Separate Account and the separate accounts of other insurance companies.
Also see the Statement of Additional Information regarding the terms of the
Participation Agreements relating to the Separate Account's investment in the
MFS Funds.
The Alexander Hamilton Variable Insurance Trust is an open-end management
investment company established as a Massachusetts business trust. The
Alexander Hamilton Variable Insurance Trust consists of seven separate
investment portfolios or funds, each of which is, in effect, a separate
mutual fund. The AHVIT Funds are designed to serve as investment vehicles
for variable annuity and variable life insurance contracts set up with various
insurance companies.
<PAGE>
Alexander Hamilton Capital Management, the adviser to the AHVIT Funds, is a
wholly-owned subsidiary of Alexander Hamilton Life Insurance Company of America.
Alexander Hamilton Life Insurance Company of America is a wholly-owned
subsidiary of Jefferson-Pilot Corporation, insurance holding company. The
AHVIT Funds pay a monthly management fee to Alexander Hamilton Capital
Management, Inc. at an annual rate of .75% of the AHVIT Growth Fund's average
daily net assets and .80% of the AHVIT Emerging Growth Fund's average daily
net assets.
The Board of Trustees of the AHVIT Funds are responsible for protecting
the interests of shareholders. See the Prospectus of the Alexander Hamilton
Variable Insurance Trust for further discussion of the risks associated with
the offering of AHVIT Fund shares to our Separate Account and the separate
accounts of other insurance companies. Also see the Statement of Additional
Information regarding the terms of the Participation Agreements relating to
the Separate Account's investment in the AHVIT Funds.
INVESTMENT OBJECTIVES OF THE FUNDS
Set forth below is a summary of the investment objectives of the Funds.
There can be no assurance that these objectives will be achieved. The Funds'
prospectuses are attached to this Prospectus; you should read them carefully
before investing.
JP Capital Appreciation Fund, Inc. (JP Capital Appreciation Sub-Account). JP
Capital Appreciation Fund seeks long-term growth of capital with realization of
current income as a secondary objective, and it is intended that its assets
will consist principally of a portfolio of common stocks. Historically, the
value of a diversified portfolio of common stocks held for an extended period
of time has tended to rise during periods of inflation. There has been,
however, no exact correlation; and for some periods the values of such
securities have declined while the cost of living was rising.
JP Investment Grade Bond Fund, Inc. (JP Investment Grade Bond Sub-Account).
JP Investment Grade Bond Fund seeks the maximum level of current income as is
consistent with reasonable risk with growth of income and capital as a
secondary objective. It is intended that its assets will consist principally
of fixed income securities and dividend paying common stocks. The value of a
portfolio of fixed income securities will reflect interest earnings and changes
in the market value of such securities. During periods of declining interest
rates the market value of a portfolio of debt securities has tended to rise,
and during periods of rising interest rates the market value of such securities
has tended to decline.
VIPF Money Market Portfolio (VIPF Money Market Portfolio Sub-Account). VIPF
Money Market Portfolio seeks to obtain as high a level of current income as is
consistent with preserving capital and providing liquidity. It invests only in
high-quality, U.S. dollar denominated money market securities of domestic and
foreign issuers, such as certificates of deposit, obligations of governments
and their agencies, and commercial paper and notes.
VIPF High Income Portfolio (VIPF High Income Portfolio Sub-Account). VIPF
High Income Portfolio seeks to obtain a high level of current income by
investing primarily in high-yielding, lower rated, fixed-income securities,
while also considering growth of capital. It normally invests at least 65%
of its total assets in income-producing debt securities and preferred stocks,
including convertible securities, and up to 20% in common stocks and other
equity securities. In view of the types of securities in which this VIP Fund
invests, you should read the complete risk disclosure in the Prospectus for
this VIP Fund before investing in it.
<PAGE>
VIPF Equity-Income Portfolio (VIPF Equity-Income Portfolio Sub-Account). VIPF
Equity-Income Portfolio seeks reasonable income by investing primarily in
income producing equity securities, with the potential for capital appreciation
as a consideration. It normally invests at least 65% of its assets in
income-producing common or preferred stock and the remainder in debt securities.
VIPF Growth Portfolio (VIPF Growth Portfolio Sub-Account). VIPF Growth
Portfolio seeks to achieve capital appreciation, normally by purchase of
common stocks, although investments are not restricted to any one type of
security. Capital appreciation may also be found in other types or securities,
including bonds and preferred stocks.
VIPF Overseas Portfolio (VIPF Overseas Portfolio Sub-Account). VIPF Overseas
Portfolio seeks long-term growth of capital primarily through investments in
foreign securities. It normally invests at least 65% of its assets in
securities from at least three countries outside North America.
VIPF-II Asset Manager Portfolio (VIPF-II Asset Manager Portfolio Sub-Account).
VIPF-II Asset Manager Portfolio seeks high total return with reduced risk
over the long-term by allocating its assets among stocks, bonds and short-term
fixed-income instruments. The expected "neutral" mix of assets, which will
occur when the investment adviser concludes there is minimal relative
difference in value between the three asset classes, is 40% in intermediate to
long-term bonds and 20% in short-term fixed income instruments.
VIPF-II Index 500 Portfolio (VIPF-II Index 500 Portfolio Sub-Account).
VIPF-II Index 500 Portfolio seeks to match the total return of the S&P 500
while keeping expenses low. FMR normally invests at least 80% (65% if fund
assets are below $ 20 million) of the Fund's assets in equity securities of
companies that compose the S&P 500. The S&P 500 is an index 500 stocks,
most of which trade on New York Stock Exchange. It is generally acknowledged
that S&P 500 broadly represents the performance of publicly traded stocks in
the U.S.
VIPF-II Contrafund Portfolio (VIPF-II Contrafund Portfolio Sub-Account).
VIPF-II Contrafund Portfolio seeks capital appreciation by investing mainly in
equity securities of companies that FMR believes to be undervalued due to an
overly pessimistic appraisal by the public. The fund usually invests primarily
in common stocks and securities convertible into common stocks, but it
has the flexibility to invest in any type of security that may produce capital
appreciation.
The Fund's strategy can lead to investments in small or medium sized companies,
which carry more risks then larger ones. Generally, these companies,
especially small sized ones, rely on limited product lines and markets,
financial resources, or other factors. This may make them more susceptible to
setbacks or downturns.
MFS Research Series (MFS Research Series Sub-Account). MFS Research Series
seeks to provide long-term growth for capital and future income. The Research
Series' policy is to invest a substantial portion of its assets in the common
stocks or securities convertible into common stocks of companies believed to
possess better than average prospects for long-term growth. A small portion
of the assets may be invested in bonds, short-term obligations, preferred
stocks or common stocks whose principle characteristic is income production
rather than growth. Such securities may also offer opportunities for growth
of capital as well as income. In the case of both growth stocks and income
issues, emphasis is placed on the selection of progressive, well managed
companies.
<PAGE>
MFS Utilities Series (MFS Utilities Series Sub-Account) MFS Research Series
seeks capital growth and current income (income above that available from a
portfolio invested entirely in equity securities). The Utilities Series will
seek to achieve its objective by investing, under normal circumstances, at
least 65% (but up to a 100% at the discretion of its adviser) of its assets
in equity and debt securities of both domestic and foreign companies in the
utilities industry. The Series may also invest in debt and equity securities
of issuers in other industries, although under normal circumstances not more
then 35% of the Series assets will be so invested. In addition, the Series
may hold a portion of its assets in cash and money market instruments.
AHVIT Growth Fund (AHVIT Growth Sub-Account). AHVIT Growth Fund seeks
capital growth. It invests primarily in equity securities that have
above-average growth prospects. Under normal market conditions, the Growth
Fund will invest at least 65% of its total assets in equity securities,
including, common stocks, preferred stocks and securities convertible into
common or preferred stocks such as warrants and convertible bonds. All the
emphasis of the Growth Fund is clearly on equity securities. The Growth Fund
may also invest in debt obligations when it perceives that they are more
attractive then stocks on a long-term basis.
AHVIT Emerging Growth Fund (AHVIT Emerging Growth Sub-Account). AHVIT Emerging
Growth Fund seeks capital appreciation through investment in a diversified
portfolio of equity securities selected for their growth potential; it does
not seek current income. The AHVIT Emerging Growth Fund pursues its investment
objective by investing primarily in smaller and medium sized companies which
the Fund's sub-adviser, Massachusetts Financial Services Company, believes
possess above-average potential for appreciation. Under normal market
conditions, at least 80% of the Fund's net assets will be invested in the
securities of such issuers. Securities in which the fund invest may be
speculative and may involve a substantial risk. In view of the types of
securities in which the Emerging Growth Fund invests, you should read the
complete risk disclosure in the Prospectus for this AHVIT Fund before
investing.
Alger American Small Capitalization Portfolio (Alger American Small
Capitalization Portfolio Sub-Account). Alger American Small Capitalization
Portfolio seeks long term capitalization. Except during temporary defensive
periods, the portfolio invests at least 65% of its total assets in equity
securities of companies that, at the time of purchase, have total market
capitalization -- present market value per share multiplied by the total
number of shares outstanding -- within the range of companies included in the
Russell 2000 Growth Index, updated quarterly. The Russell 2000 Growth Index is
designed to track the performance of small capitalization companies. As of
March 31, 1996, the range of market capitalization of these companies was 20
million dollars to 3.04 billion dollars. The Portfolio may invest up to 35%
of its total assets in equity securities that, at the time of purchase, have
total market capitalization outside the range of companies included in the
Russell 2000 Growth Index and in excess of that amount (up to 100% of its
assets) during temporary defensive periods.
<PAGE>
Alger American MidCap Growth Portfolio (Alger American MidCap Growth Portfolio
Sub-Account). Alger American MidCap Growth Portfolio seeks long term
capitalization. Except during temporary defensive periods, the portfolio
invests at least 65% of its total assets in equity securities of companies
that, at the time of purchase, have total market capitalization -- present
market value per share multiplied by the total number of shares outstanding
- -- within the range of companies included in the S&P MidCap 400 Index, updated
quarterly. The S&P MidCap 400 Index is designed to track the performance of
medium capitalization companies. As of March 31, 1996, the range of market
capitalization of these companies was 153 million dollars to 8.88 billion
dollars. The Portfolio may invest up to 35% of its total assets in equity
securities of companies that, at the time of purchase, have total market
capitalization outside the range of companies included in the S&P MidCap 400
Index and in excess of that amount (up to 100% of its assets) during temporary
defensive periods.
The values of the investments held in the Funds fluctuate daily and are subject
to the risk of changing economic conditions as well as the risks inherent in the
ability of management to anticipate changes in such investments necessary to
meet changes in economic conditions. Additional information concerning the
Funds, including information as to the expenses paid by the Funds, is given in
the Funds' prospectuses which accompany and should be read in conjunction with
this Prospectus.
Substitution of Other Securities or Funds. If the shares of any Funds
should no longer be
available for investment by the Separate Account or, if in the judgment of the
Company further investment in such Funds' shares should become inappropriate,
the Company may substitute shares of some other investment company for Fund
shares already purchased or to be purchased in the future by purchase payments
under the Contract. Any substitution will be made pursuant to any prior
approval of the Commission and compliance with all applicable rules and
regulations. In the event of any substitution or change, the Company will
endorse the Contract if necessary to reflect the substitution or change.
DEDUCTIONS UNDER THE CONTRACTS
Contingent Deferred Sales Charge. The Company makes no deduction from purchase
payments for sales expenses, but does impose the contingent deferred sales
charge. The Company incurs sales expenses upon the issuance of the Contracts.
Such expenses include commissions, costs of advertising and sales promotion,
costs of the Prospectuses allocable to new sales, and sales administration and
related costs. Because the Contracts are normally purchased for the long term,
the Company expects to recover these costs over time. If, however, a Contract
is totally or partially surrendered (value withdrawn), or if the Accumulation
Value is applied under an annuity option to provide an annuity certain for a
period of less than 120 months, a contingent deferred sales charge is imposed
at that time as a means for the Company to recover sales expenses.
<PAGE>
The contingent deferred sales charge is assessed on withdrawals based on the
then Accumulation Value during (i) with respect to Alpha, the first six
Contract years, and (ii) with respect to the Alphaflex, the first eight
Contract years. With respect to the Alpha, the charge is 6% of the amount
withdrawn during the first and second Contract years. The percentage will
scale downward by 1/12 of one percent each month during the third Contract
year so that at the end of the third Contract year the charge is 5%. The
charge is 5% during the fourth Contract year. The charge will scale downward
by 1/12 of one percent each month during the fifth Contract year so that at
the end of the fifth Contract year the charge is 4%. The charge will scale
downward by 1/6 of one percent each month during the sixth Contract year so
that at the end of the sixth Contract year the charge is 2%. Beginning in
the seventh Contract year there will be no charge. With respect to the
Alphaflex, the charge is 8% of the amount withdrawn during the first Contract
year. The percentage will scale downward by 1/12 of one percent each month
during the second through eighth Contract years so that at the end of the
eighth Contract year the charge will be 1%. Beginning in the ninth Contract
year there will be no charge. In no event will the aggregate contingent
deferred sales charges exceed 9% of the aggregate purchase payments made
under the Contracts.
Each year after the first year of the Contract, (i) up to 10% of Accumulation
Value may be withdrawn without the imposition of any charge from the Alpha,
and (ii) up to 10% of the Accumulation Value may be withdrawn without the
imposition of any charge from the Alphaflex if the account value is at least
$20,000 under that Contract. The 10% amount that can be withdrawn without
penalty applies only to the first withdrawal in each policy year. Upon a
full surrender, the entire Accumulation Value will be subject the deferred
sales charge, and any charges waived on partial withdrawals during the
previous twelve months will be recovered.
No contingent deferred sales charge will be deducted from any Accumulation
Value which is paid due to the death of an Annuitant.
A contingent deferred sales charge may be deducted from the Accumulation Value
which is paid due to the death of an Owner who is not the Annuitant.
Waiver of Surrender Charge Rider. If the Waiver of Surrender Charge Rider
("Rider") is attached to your Contract, we may waive the contingent deferred
sales charge described above provided that the conditions described in the
Rider are met including (a) the Annuitant is confined to a hospital or
"eligible nursing home" (as defined in the Rider) (b) such confinement
has lasted for a continuous period of 60 days or longer; and (c) certification
of Annuitant's medical condition from a licensed physician stating that in the
physician's opinion the Annuitant's confinement is medically required. We
will waive only the contingent deferred sales charges which are applicable
to purchase payments received prior to the date the first confinement began.
Waiver of withdrawal charges is subject to all of the conditions and provisions
of the Rider (See your Contract.). The Rider is not available in all
states.
<PAGE>
Premium Tax. Deduction for premium taxes will be made only in those instances
and at such time as the laws and regulations of the various states (or other
jurisdictions) assess such a tax. Premium tax assessments are based on the
address of record of the Payor at the time a premium tax may be payable. It is
the Company's practice to make the applicable deduction for premium taxes when
the annuity payment begins in those states (or other jurisdictions) so
permitting. Otherwise, premium taxes will be deducted from purchase payments.
Premium taxes presently range from 0% to 5% of total consideration or of the
total Accumulation Value of amounts annuitized.
Contract Administration Charges. The Company performs or delegates all
administrative functions relative to the Contracts. Except as noted below,
deductions are made under each Contract for the expenses associated with such
functions. Such expenses may include salaries, rent, office equipment,
communications, postage, legal, actuarial, and auditing fees. Pursuant to
an agreement with the Company, Investor Services performs certain recordkeeping
and other administrative functions for which it receives compensation from
the Company.
Annual Contract Fee. The contract fee is $35, which will be allocated
proportionately among all accounts under the Contract. The annual contract
fee is deducted by cancelling the number of Accumulation Units equal in value
to the charge. This is done on the last valuation date of each Contract year
prior to the commencement of annuity payments and, without proration, on the
date the Contract is totally redeemed. The annual contract fee will be
deducted proportionately from all Sub-Accounts and the Fixed Account in the
current policy year. The annual contract fee deducted from the Fixed Account
can not exceed the interest earned in excess of the guaranteed rate in the
Fixed Account in the current policy year. To the extent there is not
sufficient excess interest earned in the Fixed Account, the proportional
amount charged to the Sub-Accounts will be increased. (See "Fixed Account")
The annual contract fee will not be deducted if, on the last valuation date of
that Contract year, the Contract Value is $40,000 or greater.
Administrative Expense Fee. To further defray the cost of the administrative
functions described above, the Company deducts a charge of .0004110% of the net
assets of the Separate Account per day, which is approximately equal to an
annual rate of .15% for a 365 day year.
The Company guarantees that the Contract administration charges will never be
increased.
Deduction for Assuming Mortality and Expense Risks. The Company assumes a
risk by its contractual obligation to pay a death benefit to the Beneficiary
if the Annuitant dies prior to the Annuity Date. The Company also assumes the
risk that annuity payments will continue for a longer period than anticipated
and assumes the risk that the deductions for sales and administration charges
may prove to be insufficient to cover the actual expenses incurred. The Company
assumes these risks for the duration of the Contract. As consideration for
assuming these risks and risks associated with expenses exceeding the Company's
expected expenses, the Company imposes a charge based on assets.
<PAGE>
The charge, together with the administrative expense fee, is applied at the end
of each valuation period through a factor in the determination of the net
investment results of the Separate Account (see "Net Investment Factor"). The
charge is .0017808% per day of net daily assets for assuming mortality risks,
including the step-up death benefit, and .0016439% for assuming expense risks.
These charges, when combined, are approximately equal to 1.25% (which includes
the mortality risk charge of .65% and the expense risk charge of .60%) on an
annual basis for a 365 day year. The Company reserves the right to decrease
or increase this charge annually, but in no event may it exceed the amounts
described above.
Mortality and expense risk and administrative charges are added to the General
Account of the Company and are not specifically earmarked for any other purpose.
The Company utilizes the assets in its General Account to meet administration,
mortality and general expenses, as well as any shortfall in the recovery of
distribution costs related to the Contracts. Charges under other contracts the
Company issues also provide a source of revenue to meet these expenses. Based
upon the Company's actuarial projections, it is possible that the contingent
deferred sales charge described above may, at least initially, be insufficient
to recover all of the distribution costs and related expenses incurred in
connection with the Contracts. In such event, some portion of the mortality
and expense risk charges (to the extent such charges comprise surplus in the
General Account) may be utilized by the Company to meet such excess sales
expenses.
Expenses of the Funds. There are deductions from and expenses paid out of the
assets of the Funds that are described in the prospectuses for those Funds.
These deductions and expenses and the investment performance of the Funds
affect the value of Accumulation Units which are discussed in this Prospectus
under the caption "The Accumulation Period."
TRANSFERS BETWEEN SUB-ACCOUNTS
At any time prior to the commencement of annuity payments, the Owner may elect
by written notice to the Home Office to transfer Accumulation Units between
the Sub-Accounts. The number of Accumulation Units to be credited will be
adjusted to reflect the respective current values of the units in the
respective Sub-Accounts. Each such transfer must involve a minimum of $100,
and a partial transfer will not be permitted if the value of any Sub-Account
after transfer would be less than $500. The Company may waive the $500 minimum
where the Owner indicates he intends to continue making periodic payments to
that Sub-Account.
<PAGE>
During the accumulation period an Owner may make up to twelve transfers each
Contract year at no charge. A charge of $25 per transfer will be charged for
transfers in excess of these limitations. Transfers effected pursuant to a
dollar cost averaging program will not be counted towards these limitations.
After the commencement of annuity payments which do not involve life
contingencies (i.e., Options 1 and 4), the Owner may similarly elect to
transfer Annuity Units between the available Sub-Accounts, subject to the same
minimum amounts and charges. During the annuity period, the Owner may make up
to four transfers each Contract year at no charge. A charge of $25 per
transfer will be charged for transfers in excess of these limitations.
REDEMPTIONS
Subject to any retirement plan requirements, Contracts may be redeemed in full
or in part at any time prior to the commencement of annuity payments, except
that a partial redemption of an amount less than $250 will not be permitted
(although the Contract could be redeemed in full), and a partial redemption
will not be permitted if the value of the Sub-Account being partially redeemed
after such redemption would be less than $500. The Company may waive the $500
minimum where the Owner indicates he intends to continue making periodic
payments to that Sub-Account. The redemption will be affected by cancelling
a number of Accumulation Units equal in value to the amount requested.
Accumulation Units will be cancelled at the accumulation unit value as of the
end of the valuation period in which the request for redemption is received
at the Home Office.
Any applicable contingent deferred sales charge, (see that caption under
"Deductions Under the Contracts") will be deducted from the redemption value
determined as described above and below. The annuitant has no redemption
right under the Contracts subsequent to the commencement of annuity payments
except when payments are being made pursuant to the Option 1 (payments for a
specified period) or Option 4 (payments of a specified dollar amount). Under
Option 1, the value of the Contract for purposes of redemption shall be
commuted at the Company's current commute rate for any remaining certain
payments based on the dollar amount of an annuity payment determined as of the
end of the valuation period in which the request for redemption is received at
the Home Office. Under Option 4, the value of the Contract for purposes of
redemption shall be the remaining balance of proceeds under the option as of
the end of the valuation period in which the request for redemption is
received (see "Option 4"). Any partial redemption under Option 1 or 4 of an
amount less than $250 will not be permitted and a partial redemption will not
be permitted if the value of the Sub-Account being partially redeemed after
such partial redemption would be less than $500. If as a result of a partial
redemption the next monthly payment under Option 1 from the applicable
Sub-Account would be less than $100, the Company may change the frequency of
payments so that such next payment would be at least $100.
Payment of a redemption request will be made within seven days of receipt of
such request in proper and complete form, except that payment may be deferred
as permitted under provisions of the 1940 Act. Deferment is currently
permissible during any period when (a) trading on the New York Stock Exchange
("Exchange") is restricted as determined by the Commission or the Exchange is
closed for other than weekends and holidays; (b) an emergency exists as
determined by the Commission as a result of which disposal by a Fund of
securities held by it is not reasonably practicable, or it is not reasonably
practicable for a Fund fairly to determine the value of its net assets; or (c)
the Commission by order so permits for the protection of security holders.
<PAGE>
A Contract sold to a participant of the Texas Optional Retirement Program is
subject to restrictions on withdrawals except upon the termination of
employment in the Texas public institution of public education or the
retirement, death, or total disability of such participant. Contracts sold
pursuant to Section 403(b) of the Code are subject to certain restrictions
on cash withdrawals prior to termination of employment.
The tax consequences, including the tax withholding requirements, of a
redemption should be carefully considered (see "Federal Tax Status of Qualified
Contracts" and "Federal Tax Status of Non-Qualified Contracts").
Reinvestment Privilege. An annuitant who has redeemed his Contract in part or
in full may within 30 calendar days of the redemption reinvest all or part of
the redemption proceeds, including the contingent deferred sales charge, if any,
at the net asset value next determined following timely receipt by the Company
at its Home Office of the written reinvestment order. The privilege may be
exercised by an annuitant only one time. If the annuitant has realized a gain
on the redemption, the transaction is taxable and reinvestment will not alter
any capital gains tax payable. If there has been a loss on the redemption
and a subsequent reinvestment, some or all of the loss will not be allowed as
a tax deduction depending on the amount reinvested.
OTHER SERVICES
Dollar Cost Averaging. The Company offers a dollar cost averaging program
during the accumulation period whereby an Owner may predesignate a portion
of VIPF Money Market Portfolio Sub-Account's Accumulation Value to be
automatically transferred on a monthly basis to one or more of the other
Sub-Accounts.
The dollar cost averaging program is available for purchase payments and for
Accumulation Value transferred into the VIPF Money Market Portfolio
Sub-Account. An Owner may enroll in this program at the time the Contract is
issued or anytime thereafter by properly completing the Dollar Cost Averaging
enrollment form and returning it to the Company at its Home Office at least
five (5) business days prior to the second Tuesday of a month which is the
date that all dollar cost averaging transfers will be made ("Transfer Date").
This program must be elected for at least a 3 month period, but can not be
elected for more than 36 months.
Under the program, transfers will be made in the amounts designated by the
Owner and must be at least $500 per Sub- Account. The total Accumulation
Value in the VIPF Money Market Portfolio Sub-Account at the time dollar cost
averaging is elected must be at least $10,000. Dollar cost averaging will cease
automatically if the Accumulation Value in the VIPF Money Market Portfolio
Sub-Account does not equal or exceed the amount designated to be transferred
on each Transfer Date and the remaining amount will be transferred.
Dollar cost averaging will terminate when (i) the number of designated monthly
transfers has been completed, (ii) the value of the Accumulation Units
attributable to the VIPF Money Market Portfolio Sub-Account is insufficient
to complete the next transfer, (iii) the Owner requests termination in writing
and such writing is received by the Company at its Home Office at least five
(5) business days prior to the next scheduled Transfer Date in order to cancel
the transfer scheduled to take effect on such date, or (iv) the Contract is
surrendered.
<PAGE>
An Owner may initiate, reinstate or change the dollar cost averaging terms by
properly completing the new enrollment form and returning it to the Home
Office at least five (5) business days prior to the next scheduled Transfer
Date such transfer is to be made.
When utilizing Dollar Cost Averaging an Owner must be invested in the VIPF
Money Market Portfolio Sub-Account and may be invested in any other
Sub-Accounts at any given time. Election of dollar cost averaging is not
available during the annuity period or when an Owner has entered into a
Systematic Withdrawal Plan Agreement as described below.
Systematic Withdrawal Plan. The Company administers a systematic withdrawal
plan ("SWP") which allows certain Owners to pre-authorize periodic withdrawals
during the accumulation period. Owners entering into a SWP agreement instruct
the Company to withdraw selected amounts from any of the Sub-Accounts on a
monthly, quarterly, semi-annual or annual basis. Currently the SWP is
available to Owners who have a minimum Accumulation Value of $25,000 at the
time the SWP is initiated and who elect a period over which withdrawals shall
occur of no less than 6 and no more than 24 months. Owners also must request
a minimum $100 periodic payment. The amounts distributed under the SWP can not
exceed the amount free of the contingent deferred sales charge ( (i) 10% of
Accumulation Value under the Alpha, and (ii) 10% of the Accumulation Value
under the Alphaflex if the Accumulation Value is at least $20,000). Owners
interested in SWP may obtain an application from their representative or the
Home Office. Election of a SWP is not available during the time an Owner is
participating in the dollar cost averaging program described above. The
Company reserves the right to amend the SWP on thirty (30) days' notice. The
SWP may be terminated at any time by the Owner or the Company.
Withdrawals taken under the SWP or changes to an SWP election may cause the 10%
Federal tax penalty on early withdrawals to apply. Withdrawals taken under
an SWP may represent taxable income and may be subject to 20% Federal income
tax withholding. (See "Federal Income Taxes.")
Reports to the Owner. There will be sent to the Owner periodic reports
containing such information as may be required by applicable state law and the
1940 Act and rules thereunder. Such reports shall include the investment
results of the Funds at least semi-annually and, for Contracts still in the
accumulation period, an annual report of the number of Accumulation Units
to the credit of the Contract and the then current accumulation unit value.
<PAGE>
FIXED ACCOUNT
Owners may allocate purchase payments to the Fixed Account. In addition,
Owners may transfer amounts in or out of the Fixed Account. Such fixed amounts
are held in the General Account of the Company. Because of exemptive and
exclusionary provisions, amounts in the Fixed Account have not been registered
under the Securities Act of 1933 and the Fixed Account has not been registered
as an investment company under the 1940 Act. Accordingly, neither the Fixed
Account nor any interests therein are subject to the provisions of these
acts and, as a result, the staff of the Commission has not reviewed the
disclosures in this Prospectus relating to the Fixed Account. Disclosures
regarding the Fixed Account may, however, be subject to certain generally
applicable provisions of the Federal securities laws relating to the accuracy
and completeness of statements made in prospectuses. This Prospectus is
generally intended to serve as a disclosure document only for the aspects
of the Contract involving the Separate Account and contains only selected
information regarding the Fixed Account. More information regarding the Fixed
Account may be obtained from the Home Office or from your sales representative.
General Description. Our obligations with respect to the Fixed Account are
supported by our General Account. Subject to applicable law, we have sole
discretion over the investment of the assets in our General Account.
The Company guarantees that Fixed Account Accumulation Value will accrue
interest at an annual effective rate of 3 1/2%, independent of the actual
investment experience of the General Account. We may, at our sole discretion,
credit higher rates of interest, although we are not obligated to credit
interest in excess of the guaranteed rate. Any interest rate in excess of the
guaranteed rate with respect to any premium payment or interest credit will
not be modified more often than once per year. Any higher rate of interest
will be quoted at an annual effective rate. The rate of any excess interest
initially or subsequently credited to any amount can in many cases vary,
depending on when that amount was originally allocated to the Fixed Account.
Once credited, such interest will be guaranteed and will become part of the
Accumulation Value in the Fixed Account from which deductions for fees and
charges may be made.
Charges under the Contract are the same as when the Separate Account is being
used, except that the 1.40% per annum charged for mortality and expense risk
and administrative expenses is not imposed on amounts of Fixed Account
Accumulation Value.
Fixed Account Accumulation Value. The Fixed Account Accumulation Value on any
Valuation Date is the sum of the Purchase Payments allocated to the Fixed
Account, plus any transfers from the Separate Account, plus interest credited
to the Fixed Account, less any surrenders, contingent deferred sales charges,
or annual administrative charges allocated to the Fixed Account or transfers
to the Separate Account.
<PAGE>
Fixed Account Transfers, Total, and Partial Surrenders. Amounts in the Fixed
Account are generally subject to the same rights and limitations and will be
subject to the same charges as are amounts allocated to the Sub-Accounts with
respect to total and partial surrenders. (See "Transfers Between
Sub-Accounts.") Transfers out of the Fixed Account have special limitations.
Prior to the Annuity Date, and after the first Contract anniversary, Owners may
transfer part or all of the Accumulation Value from the Fixed Account to the
Sub-Accounts, provided that (1) no more than one such transfer is made each
Contract year, (2) no more that 20% of the Fixed Account Accumulation Value is
transferred during any 12 month period (unless the balance in the Fixed Account
after the transfer would be less than $1,000, in which case the entire balance
may be transferred), and (3) at least $500 is transferred at any one time (or,
if less, the entire amount in the Fixed Account). Irrespective of the above,
we may, in our discretion, permit a continuing request for transfer of lesser
amounts automatically on a periodic basis. However, we reserve the right to
discontinue or modify any such arrangements at our discretion.
Without the Company's prior approval, no purchase payments or transfers may be
allocated to the Fixed Account if the amount allocated to the Fixed Account
having the same Owner or Annuitant would thereupon exceed $500,000. The
Company reserves the right to modify this provision at any time.
The Company reserves the right to limit the sum of purchase payments to the
Fixed Account and transfers to the Fixed Account to $25,000 in any 12 month
period. However, we reserve the right to discontinue or modify any such
arrangements at our discretion.
CONTRACT BENEFITS
The objective of the Contracts is to provide Accumulation Values and payments
which will tend to reflect changes in the cost of living subsequent to the
date of issue of the Contract. There is no assurance that this objective will
be met. The Company seeks to accomplish this objective by allocating net
purchase payments, as directed by the Owner, to one or more of the
Sub-Accounts.
Each Contract is issued to the Owner. The Annuitant named in the Contract will
be the Owner unless another Annuitant is specified in the application for, or
amendment to, the Contract.
Subject to the minimum and maximum initial and subsequent purchase payment
limitations, an Owner may continue to make purchase payments prior to the
commencement of annuity payments. The Contracts provide for a variable
monthly life annuity to begin at some future selected date, called the Annuity
Date, with a provision that variable annuity payments will be made for at least
120 months, unless the Owner elects one of the other Settlement Options. The
Owner may elect one of the other Settlement Options provided by the Contracts
(see "Settlement Options").
Each Contract contains a guaranteed death benefit upon the death of the
Annuitant prior to commencement of annuity payments or age 75, whichever occurs
first, equal to the greatest of:
<PAGE>
(i) the purchase payments made (less partial withdrawals and any contingent
deferred sales and partial withdrawal transaction charges taken); (ii) the
Accumulation Value at the end of the valuation period during which due proof
of death is received (the "basic death benefit"); and (iii) the step-up benefit
plus purchase payments made, less partial withdrawals and any contingent
deferred sales and partial withdrawal transaction charges taken since the last
step-up anniversary.
The step-up death benefit at issue is the initial purchase payment. At each
step-up anniversary, the current Accumulation Value is compared to the prior
determination of the step-up death benefit, increased by purchase payments made
and reduced by partial withdrawals and any contingent deferred sales and
partial withdrawal transaction charges taken since that anniversary. The
greater of these becomes the new step-up benefit. The step-up anniversaries
are (i) with respect to the Alpha, the Contract date and every sixth Contract
anniversary thereafter (i.e., sixth, twelfth, eighteenth, etc., Contract
anniversaries), and (ii) with respect to the Alphaflex, the Contract date and
every eighth Contract anniversary thereafter (i.e., eighth, sixteenth,
twenty-fourth, etc. Contract anniversaries) (except in Texas, where the step-up
anniversaries are the Contract date and every sixth year thereafter). The
death benefit for attained age 75 and older will be the Accumulation Value.
In the event of the Annuitant's death prior to the Annuity Date, the
Beneficiary may elect, if the Owner has not specified otherwise, to have the
value of the Contract paid to him in a lump sum or applied to effect a
variable annuity under the Settlement Options (see "Payment on or After Death
of Annuitant"). In the event that the Beneficiary is a surviving spouse, the
Contract can be continued.
Upon the death of an Owner who is not the Annuitant, the Beneficiary will
receive the Owner's interest in the Contract.
With respect to Non-Qualified Contracts, the Owner may select the date variable
annuity payments are to begin, except that payments may not begin later than the
Annuitant's 85th birthday or earlier than the Annuitant's 50th birthday. For
Qualified Contracts, the Owner may select the date variable annuity payments
are to begin, except that, generally, payments may not begin later than April
1 of the year following the year in which the purchaser reaches age 70 1/2.
(see "Federal Tax Status of Qualified Contracts" for limitation of the Annuity
Date under certain Qualified Contracts). Upon election, at least 45 days prior
to the Annuity Date, the Owner may change the Annuity Date (see "Payment
Provisions"), elect a different form of variable annuity (see "Settlement
Options"), or elect that all or a portion of the Accumulation Value be applied
to effect a fixed-dollar annuity (see "Settlement Options"). An Owner may,
subject to certain restrictions (see "Redemption"), elect to redeem all or a
portion of the value of the Contract. However, certain tax consequences may
result from any such election (see "Federal Tax Status of Qualified Contracts"
and "Federal Tax Status of Non-Qualified Contracts").
CERTAIN MINIMUM AMOUNTS
The minimum initial purchase payment under the Alpha is $5,000. The minimum
initial purchase payment for the Alphaflex is $2,000 for a Qualified Contract
and $5,000 for a Non-Qualified Contract. For the Alphaflex, the minimum
initial purchase payment must accompany the application. (There may be
exceptions for Qualified Contracts on an automatic premium mode). The minimum
additional purchase payment is $1,000 for the Alpha and $100 for the Alphaflex
under both a Non-Qualified and Qualified Contract. The minimum amount that may
be applied under a Settlement Option is $2,000; provided, however, if the
total amount applied is less than $15,000, a totally fixed settlement option
must be selected. Also, any election must provide an initial payment of at
least $100 per Sub-Account (see "The Annuity Period").
Subject to retirement plan requirements, Contracts may be redeemed in full or
in part at any time prior to the Annuity Date, except that a partial redemption
of less than $500 from any Sub-Account will not be permitted, and the value of
any Sub-Account after such partial redemption must be at least $500. The
Company may waive the $500 minimum where the Owner indicates he intends to
continue making periodic payments on his Contract and allocating payment
to that Sub-Account (see "Redemptions").
<PAGE>
THE ACCUMULATION PERIOD
The Accumulation Value and Accumulation Units. During the period prior to the
commencement of annuity payments, referred to herein as the accumulation
period, a separate accumulation account is maintained under the Contracts
for each Sub-Account into which purchase payments are directed. Each net
purchase payment is credited to each Sub-Account or the Fixed Account, or
allocated among the Sub-Accounts, as directed by the Owner, in the form
of Accumulation Units. Accumulation Units are credited separately to each
Sub-Account. The number of Accumulation Units of each type credited to the
Contract is determined by dividing the designated portion of the net purchase
payment by the applicable accumulation unit value as of the end of the
valuation period in which the purchase payment is received at the Home Office.
The initial purchase payment will be credited to the Contract not later than
two (2) business days following the date the properly completed application
which accompanies the purchase payment is received by the Company at its Home
Office. If an application is incomplete or incorrect, the applicant will be
informed of the reasons for the delay, and the purchase payment will be
returned to the applicant within five (5) days of receipt unless the
applicant specifically authorizes the Company to retain the purchase payment
until the application is completed or corrected. Any part of a purchase
payment that is to be applied to the VIPF Money Market Portfolio Sub-Account
will not be considered received unless the Company has received the payment in
cash at its Home Office or in Federal funds. If remitted in other than the
foregoing manner, such as by money order or personal check, payment will not
be considered received until the close of business on the second business day
after actual receipt. This is because the money market instruments in which
the VIPF Money Market Portfolio invests normally require immediate settlement
in Federal funds. The VIPF Money Market Portfolio intends at all times to be
fully invested in order to maximize its earnings.
Information on how to procure a Federal Reserve Draft or to transmit Federal
funds by wire is available at your bank. The bank may charge for these
services.
The value of any Sub-Account at any time is equal to the total number of
Accumulation Units credited to that Sub-Account multiplied by the applicable
then current accumulation unit value.
Accumulation Unit Values. On December 1, 1994, the value of an Accumulation
Unit in each Sub-Account was set at $10.00. The value of an Accumulation Unit
is redetermined on each valuation date and is equal to the accumulation unit
value determined on the immediately preceding valuation date multiplied by
the applicable net investment factor (described below) for the current
valuation period. The accumulation unit value for a valuation period is the
value determined at the end of such period.
Valuation Date and Valuation Period. Each date on which the assets of the
Sub-Accounts are valued is a valuation date. The assets of the Sub-Accounts
are valued as of 4:00 p.m. on each valuation date. The period from the time
the accumulation unit value is determined as of one valuation date to the time
such value is determined as of the next valuation date is called a valuation
period.
<PAGE>
Net Investment Factor. The net investment factor is a device for measuring
the change in accumulation unit value over a valuation period. It is
determined for any valuation period by dividing (a) the net asset value of a
Fund share as of the end of such valuation period less capital gains tax per
share, if applicable, plus the per share amount of any distributions made by
the Fund during such valuation period, by (b) the net asset value of a
Fund share determined as of the end of the preceding valuation period, and
then subtracting from this result the charges for mortality and expense risks
and for administrative expenses for the current valuation period.
Example of Calculation of Accumulation Unit Value. Suppose (a) the
accumulation unit value for the preceding valuation period was $10.532614000;
(b) the net asset value of a Fund share as of the end of the current valuation
period is $11.44; (c) the per-share amount of a distribution from the Fund
during such valuation period was $.19; (d) the per-share amount of a tax
liability was $00.00; (e) the net asset value of a Fund share as of the end
of the previous valuation period was $11.61; (f) the number of days in the
current valuation period is one; (g) the daily deduction for assuming mortality
and expense risks is .000034247; and (h) the daily deduction for the
administrative expense fee is .000004110. The net investment factor for the
current valuation period is calculated as follows:
$ 11.44 + .19 - $00.00 - (1 x .000034247) - (1 x .000004110) = 1.001684296
$ 11.61
The accumulation unit value for the preceding valuation period ($10.532614000)
is then multiplied by the net investment factor for the current valuation
period (1.001684296), which produces an accumulation unit value of
$10.550354040 for the current valuation period.
THE ANNUITY PERIOD
Payment Provisions. The variable annuity payments under the Contracts will
vary in amount, either up or down, to reflect the investment performance of the
available Funds, as elected by the Owner, at least 45 days prior to the Annuity
Date. All of the Sub-Accounts, except the VIPF High Income and the corresponding
VIPF High Income Portfolio, are available during the annuity periods. Variable
annuity payments will commence on the Annuity Date selected by the Owner. The
Annuity Date may be changed provided written election to change is received at
the Home Office at least 45 days prior to the old Annuity Date and provided
the new Annuity Date is at least 45 days after such election and, except by
consent of the Company, not later than the Annuitant's 85th birthday or earlier
than the Annuitant's 50th birthday (see "Federal Tax Status of Qualified
Contracts" for limitations of the Annuity Date under certain Qualified
Contracts). Variable annuity payments are made monthly on the same day of the
month as the Annuity Date.
At the time of election, the Owner should consider the question of allocation
of Contract value between the available Sub-Accounts or the Fixed Account for
the purchase of a fixed-dollar annuity. Allocation between the Fixed Account
and the Sub-Accounts may be altered by the Owner at any time within 45 days
prior to the Annuity Date. If the Owner does not elect otherwise, Sub-Account
Accumulation Units, after reduction for any applicable premium tax, will be
applied to provide annuity payments that reflect the investment experience of
such applicable Sub-Accounts. No such election will be allowed which would
provide an initial payment from any available Sub-Account of less than $100.
<PAGE>
The Owner may elect any one of the Settlement Options described below by
filing a written notice 45 days prior to the Annuity Date (see "Settlement
Options" below for limitations under Qualified Contracts). If the Annuitant
dies before the Annuity Date, the Beneficiary may elect, if the Owner has not
already done so, to apply any part of the Accumulation Value under the
Settlement Options.
The person electing a Settlement Option may elect, in lieu of monthly payments,
to receive payments on a quarterly, semi-annual, or annual basis. In such
case, an actuarially equivalent number of Annuity Units will be determined.
Upon annuitization, the Contract Value may be allocated between the available
Sub-Accounts for the purchase of variable settlement options on Contracts that
have a value of at least $15,000. To annuitize contracts with values less
than $15,000, a totally fixed settlement option must be elected. If the amount
to be applied under a Settlement Option is less than $2,000, the Company
reserves the right to pay such amount in one sum instead. Also, no election
will be allowed which would provide an initial payment from any Sub-Account of
less than $100.
The Company continues to deduct the mortality and expense risk charge (1.25%)
and the administrative expense fee (0.15%), which are assessed during the
accumulation period. The annual contract fee will not be deducted during the
annuity period.
<PAGE>
SETTLEMENT OPTIONS
OPTION 1 - Payments for a Specified Period - This is an annuity payable monthly
for a selected number of years, which may be 1 to 30 years.
OPTION 2 - Life Income - This is an annuity payable in monthly installments,
with such installments being paid as elected under a, b, c, or d, below.
a. Life Annuity - This is an annuity which provides monthly payments
during the lifetime of the Annuitant with no monthly payments or other
benefits payable after the date of his death. This Option offers a slightly
higher level of monthly payments than Options 2b, 2c, or 2d because no
further payments are payable after the death of the Annuitant. It would
be possible under this Option for only one annuity payment to be made if
the Annuitant died before the due date of the second annuity payment, two
if he died before the third annuity payment, etc.
b. Life Annuity with 60, 120, 180, or 240 Monthly Payments Certain - This
is an annuity which provides monthly payments during the lifetime of the
Annuitant and further provides that if, at the death of the Annuitant,
payments have been made for less than the elected period certain, which
may be 60, 120, 180, or 240 months, the annuity payments will be continued
during the remainder of such period to the named Beneficiary.
c. Installment Refund Life Annuity - This is an annuity payable monthly
during the lifetime of the Annuitant with payments made for a period
certain not less than the number of months found by dividing the amount
applied under the Option by the first monthly payment.
d. Joint and Survivor Life Annuity - This is an annuity that provides
monthly payments during the joint lifetime of the Annuitant and one other
person, called the Joint Annuitant, and thereafter during the lifetime of
the survivor with no monthly payments or other benefits payable after the
death of the survivor. It would be possible under this Option for only
one annuity payment to be made if the Annuitant and Joint Annuitant died
before the due date of the second annuity payment, two if they died before
the third annuity payment, etc.
OPTION 3 - Interest - This Option is only available under a fixed dollar
annuity. (See the third succeeding paragraph below.)
OPTION 4 - Payments of a Specified Dollar Amount - This is an annuity payable
in equal annual, semi-annual, quarterly, or monthly installments of a
designated dollar amount until the remaining balance is less than the amount of
one installment. The designated amount may not be less than $100 per year from
any Sub-Account per $1,000 of the amount applied under the Option. To
determine the remaining balance payable at the end of any valuation period,
such balance at the end of the previous valuation period is decreased
by the amount of any installment paid during the valuation period and the
result multiplied by the net investment factor for the valuation period. If
the remaining balance is less than the amount of one installment, such balance
will be paid and will be the final payment under the Option.
Variable annuity payments payable to a Beneficiary under Options 1, 2b, 2c, or
4 may, upon proper election, be commuted and paid in one sum (see "Payment on
or after Death of Annuitant").
In lieu of variable payments, an election may be made to apply a portion, or
all, of the proceeds of the Contract to purchase a fixed dollar annuity.
Fixed dollar annuities are not described in this Prospectus. Information
concerning a fixed dollar annuity can be obtained from the Company or any of
its sales representatives. Once a fixed dollar annuity is elected, it can not
be converted to a variable annuity.
In lieu of the above options, an election may be made to have the proceeds of
the Contract placed on deposit with the Company in its General Account, and a
sum will be paid annually, semi-annually, quarterly, or monthly, as selected,
which shall be equal to the fixed interest rate for the period multiplied by
the amount remaining on deposit. Proceeds on deposit may be withdrawn or
applied at any time under one of the Settlement Options as a Fixed Annuity
only.
At any time while Option 1 or Option 4 is in effect the person having made such
election may elect to change payments under that option to payments under Option
2 or to redeem all or part of the value of the Contract. The number of Annuity
Units added or subtracted because of any such change or redemption will be
determined in accordance with the annuity unit value for the date on which the
change or redemption is effected. (See "Annuity Unit Values" and
"Redemptions").
Under Qualified Contracts Options 1 and 4, Option 2b with 240 monthly payments
certain, and any other option that would impair the Qualified tax status of
the Contract may not be available.
If the Alpha contract is annuitized and then surrendered within 6 years, the
contingent deferred sales charge would still apply, and if the Alphaflex is
annuitized and then surrendered within 8 years, the contingent deferred sales
charge would still apply.
Annuity Purchase Rates. The Contracts contain a schedule of annuity rates
based upon an assumed investment return of 3 1/2% for each of Option 1 and
Option 2. The annuity rates show how much the first monthly variable annuity
payment will be for each $1,000 applied to effect the annuity. Except as
noted below, the rates vary with the form of annuity, the date of birth and
sex of the Annuitant and the Joint Annuitant, if any, and the date on
which the annuity is effected.
Subject to consent of the Company and applicable state law, annuity rates based
upon an assumed investment return of 5% may also be available.
The annuity rates for the Contracts are based on, among other things, an annual
interest rate, referred to as the assumed investment return. The assumed
investment return selected affects both the amount of the first annuity payment
and the pattern of subsequent payments. If the actual investment return should
exceed the assumed investment return, the variable annuity payments would
increase and, conversely, if the actual investment return should be less than
the assumed investment return the payments would decrease. The selection of a
higher assumed investment return would produce a higher initial payment but
more slowly rising subsequent payments (or more rapidly falling subsequent
payments) than the selection of a lower assumed investment return.
The United States Supreme Court has ruled that under certain employer-sponsored
employee benefit plans, annuity options may not be based on sex-distinct
actuarial tables. All Qualified Contracts described in this Prospectus other
than those issued to fund Individual Retirement Accounts or Annuities, which
are not employer-sponsored annuity benefits, will be based on the unisex
annuity rates set forth in the amendments to the Contracts after approval
of the Company's unisex annuity rates by the insurance department of the state
in which the Contract is sold.
Annuity Unit Values. The value of an Annuity Unit was set at $10.00 on
December 1, 1994 for each Sub-Account. On each valuation date thereafter the
annuity unit value is redetermined by multiplying (i) the annuity unit value
determined at the end of the immediately preceding valuation period, times
(ii) the net investment factor for the applicable Sub-Account for the current
valuation period, times (iii) a factor to adjust for the assumed investment
return described under "Annuity Purchase Rates" above.
Number of Annuity Units. To determine the number of Annuity Units for each
Sub-Account, the number of Accumulation Units credited to the Sub-Account on
the annuitization date is multiplied by the applicable accumulation unit
value for a valuation period preceding the Annuity Date by not more than 10
days. The amount so determined, reduced by any applicable contingent deferred
sales charge and premium tax, is multiplied by the appropriate Settlement
Option factor, as shown in the Contract, and the result divided by 1,000.
The resulting amount is divided by the applicable annuity unit value for a
valuation period preceding the Annuity Date by not more than 10 days to
determine the number of annuity units for each Sub-Account to be credited to
the Contract (except under Option 4; see "Option 4"). The number of Annuity
Units so computed will remain fixed and is used to compute each annuity
payment.
Time of Payment. The first annuity payment is made on the Annuity Date.
Amount of Payment. The amount of each annuity payment is the sum of payments
of each Sub-Account determined by multiplying the number of Annuity Units
credited to the Contract, as computed above, by the annuity unit value for a
valuation period preceding the due date of the payment by not more than 10
days (except under Option 4, where the Contract Value is applied to provide
annuity payments as specified under that option; see "Option 4").
<PAGE>
PAYMENT ON OR AFTER DEATH OF ANNUITANT
Upon receipt at the Home Office of due proof that the death of the Annuitant
has occurred before the Annuity Date and while the Contract was in force and
before the Annuitant's seventy-fifth birthday, the Company will pay to a
designated Beneficiary the greatest of: (i) the purchase payments made
(less partial withdrawals and any surrender and partial withdrawal transaction
charges taken); (ii) the Accumulation Value at the end of the valuation
period during which due proof of death is received; and (iii) the step-up
benefit plus purchase payments made, less partial withdrawals and any
contingent deferred sales charge and partial withdrawal transaction charges
taken since the last step-up anniversary. The step-up death benefit at issue
is the initial purchase payment. At each step-up anniversary, the current
Accumulation Value is compared to the prior determination of the step-up death
benefit, increased by purchase payments made and reduced by partial withdrawals
and any contingent deferred sales charge and partial withdrawal transaction
charges taken since that anniversary. The greater of these becomes the new
step-up death benefit. The step-up anniversaries are (i) with respect to the
Alpha, the Contract date and every sixth Contract anniversary thereafter
(i.e., sixth, twelfth, eighteenth, etc., Contract anniversaries), and
(ii) with respect to the Alphaflex, the Contract date and every eighth
Contract anniversary thereafter (i.e., eighth, sixteenth, twenty-fourth,
etc., Contract anniversaries) (except in Texas, where the step-up anniversaries
are the Contract date and every sixth year thereafter). The death benefit for
attained age 75 will be the Accumulation Value.
Before the Annuity Date, the Beneficiary may elect, if the Owner shall not
have done so, either to receive such value in one sum or to apply it under any
of the Settlement Options contained in the Contracts. If the value is applied
under the Settlement Options, any reference in the description of the options
to "Annuitant" will be construed to mean "Beneficiary." If the Beneficiary of
a Contract is the Owner's spouse, then upon the Owner's death the Contract may
be continued without any of the following restrictions on distribution.
After the Annuity Date, no payments on death are made except as may be provided
by the form of annuity in effect. In such cases the Owner may, prior to the
Annuitant's death, elect that any variable annuity payments to which the
Beneficiary may become entitled will be commuted and paid in one sum; or in
absence of such election and unless the Owner is then living, a Beneficiary
who becomes entitled to variable annuity payments may elect that the remainder
of such payments be commuted and paid in one sum. Any such commutation will be
equal to the value, in a single sum, of the remaining variable annuity
payments, discounted from their respective due dates to the date of
determination of the single sum commuted at the Company's current commute
rate, assuming that the annuity unit value applicable to the payments
on the date of termination will remain unchanged thereafter.
With respect to the Contracts (other than Individual Retirement Annuities and
those issued in connection with Individual Retirement Accounts and corporate
pension plans), if the Owner dies on or after the Annuity Date and before the
entire value of the Contract has been distributed, the remaining value must be
distributed at least as rapidly as the method of distribution in effect.
<PAGE>
THE DISTRIBUTION OF THE CONTRACTS
The Contracts are sold primarily by individuals who are associated persons of
Jefferson-Pilot Investor Services, Inc. ("Investor Services"), a broker-dealer
registered under the Securities Exchange Act of 1934 and a member of the
National Association of Securities Dealers, Inc. ("NASD").
Investor Services is organized under the laws of North Carolina and is a
wholly-owned subsidiary of Jefferson-Pilot Corporation. Contracts may be sold
through other broker-dealers registered under the Exchange Act and who are
members of NASD and whose representatives are authorized by applicable law to
sell variable annuities. Such other broker-dealers will be allowed a maximum
commission of (i) with respect to the Alpha, 7% of purchase payments on such
Contract, and (ii) with respect to the Alphaflex, 5% of purchase payments on
such Contract.
<PAGE>
VOTING RIGHTS
The Company, as the sponsor of the Separate Account, shall vote Fund shares
held in the Separate Account at regular and special meetings of shareholders
of the Funds, but will follow voting instructions received from the person
having the right to give such instruction.
The number of Fund shares for which a person has the right to give instructions
will be determined as of a date to be chosen by the Company not more than
90 days prior to any meeting, and voting instructions will be solicited by
written communication at least ten days prior to such meeting.
Except as specified below, the Owner has the right to instruct the voting of
Fund shares prior to the Annuity Date. Under Contracts issued in connection
with plans qualified under Section 403(b) or 408 of the Code or in connection
with HR-10 Plans, the Annuitant has the right to instruct the voting of shares
prior to the Annuity Date. Under Contracts issued in connection with plans
qualified under either Section 401 or 403(a) of the Code, other than HR 10
Plans, the Owner has the right to instruct the voting of shares prior to the
Annuity Date, except that the Annuitant is entitled to instruct with respect
to votes attributable to his purchase payments (if any) and, to the extent
authorized by the terms of the plan, with respect to any additional votes
under the Contract.
The number of shares attributable to a Contract prior to the Annuity Date is
determined by dividing the value of the Accumulation Value for such Contract
by the net asset value of one share of the respective Funds. The number of
shares attributable to a Contract on and after the Annuity Date is determined
by dividing the reserve (which generally will decrease) held by the Company in
the Separate Account for such Contract by the net asset value of one share.
All Fund proxy material, together with an appropriate form to be used to give
voting instructions, will be mailed to each person having such voting
instruction rights. Neither the Funds nor the Company is under a duty to
inquire as to the instructions received or the authority of Owners or others
to instruct the voting of shares. Shares for which no instructions are
received, including shares owned by the Company, will be voted in the same
proportion as the shares for which instructions are received from persons
entitled to give such instructions by reason of all contracts participating
in the Separate Account.
FEDERAL TAX STATUS
It should be recognized that the rules governing the tax treatment of annuity
contracts are very complex, and cannot be easily summarized. The following
discussion is not intended to be exhaustive, and it does not cover numerous
special rules for annuities issued or contributions paid in past years if such
annuities are exchanged for the Contract. A qualified tax adviser should be
consulted for complete information.
Federal Tax Status of the Separate Account. The Company is taxed as a life
insurance company under the Code. The operations of the Separate Account are
part of the total operations of the Company and are not taxed separately,
although the operations of the Separate Account are treated separately for
accounting and financial statement purposes and must be considered separately
in computing the Company's tax liability. Currently, no taxes are payable by
the Separate Account on the investment income and capital gains of the
Separate Account. The Company reserves the right to deduct a charge from
Separate Account assets if such tax treatment should change.
<PAGE>
Federal Tax Status of Qualified Contracts. The comments in this section apply
only to Contracts described in this Prospectus which are Qualified Contracts,
as defined herein.
Although plans under Section 457 of the Code are not treated as "qualified"
plans for certain purposes, they do receive favorable treatment for purposes
most relevant to this Prospectus, in that Contracts issued to Section 457 Plans
need not comply with the investment diversification rules of Code Section
817(h), and the Contracts issued to such plans are treated as Qualified
Contracts.
If this Contract is purchased as a "tax-sheltered annuity" under Section
403(b) of the Code, it is subject to certain restrictions on redemption imposed
by Section 403(b)(11) of the Code. Briefly, these restrictions are as follows:
Unless the purchaser reaches age 59 1/2, separates from service, dies, or
becomes disabled, the purchaser may not surrender amounts attributable to
salary reduction contributions made or income earned, except in the case
of hardship. Hardship withdrawals will not include income earned, and are
subject to tax penalties and contingent deferred sales charges.
Benefits received from a Qualified Contract will often be paid from
contributions that have never been included in the gross income of the
participant. Benefits received from such a plan will be taxable as ordinary
income whether received upon surrender, withdrawal, or death or disability of
the Annuitant. If the participant made contributions to the Qualified Contract
with funds that have previously been included in gross income, special rules
provide for the return of the contributions over the period that payments are
received. Under certain circumstances, a ten percent (10%) penalty tax may
be imposed on distributions. The rules governing the imposition of this
penalty are discussed in a later part of this section.
The rules governing the eligibility to participate, limitations on permissible
contributions, and the treatment of distributions from Qualified Contracts are
extremely complex. The Code requires that Federal income taxes be withheld,
at a twenty percent (20%) rate, from any "eligible rollover distribution"
which is not transferred directly to another qualified plan. All qualified
plans are required to notify participants of the IRS rules before an "eligible
rollover distribution" is made. The Separate Account has adopted procedures
that will enable it to make or receive trustee to trustee transfers, which
will exempt eligible distributions from the withholding requirements.
Purchasers should also be aware that the Code generally requires that certain
minimum distributions from Qualified Contracts be made following the date
when the purchaser reaches age 70 1/2, or following the death of the purchaser
(a special rule applies for surviving spouses). The minimum distribution rules
generally require that the purchaser of a Qualified Contract receive
distributions over his or life expectancy, or the joint life expectancy of the
purchaser and his or her spouse. Purchasers of Qualified Contracts should seek
competent tax advice on the tax rules governing their eligibility to
participate, the limitations on contributions, and the treatment of
distributions.
Federal Tax Status of Non-Qualified Contracts. The comments in this section
apply only to Non-Qualified Contracts described in this Prospectus which are
not Qualified Contracts. The Federal income tax treatment of the Owner,
Annuitant, or Beneficiary of a variable annuity contract is determined under
the rules of Section 72 of the Code. Under the existing provisions of the Code,
an increase in the Accumulation Value is not taxable to an individual Owner
until received by him, either as a cash redemption or as annuity payments.
Under the rules explained below, any taxable gain on payments or redemption
from the Contract are taxable as ordinary income. No payments by the Company
under the Contracts are eligible for capital gains treatment.
<PAGE>
The Contracts will be taxed as an annuity as long as the diversification
requirements of Section 817(h) of the Code and the Treasury Regulations
thereunder are complied with. The Company intends to comply with such
requirements.
In applying the rules explained below, an individual's investment in the
Contract is equal to the sum of the purchase payments made by the individual on
the Contract, reduced by that portion of any previous partial redemption(s)
that were not treated as taxable income.
The Federal income taxation of distributions or payments from annuity contracts
may vary depending upon the type of distribution received. If the distributions
are received as a series of substantially equal payments, the gain on the
Contract is spread out over the payment period. Under the "exclusion ratio" of
Section 72 of the Code, a portion of each payment is excluded from income as a
return of the investment in the Contract. The portion of each payment to be
excluded is determined by dividing the investment in the Contract by the
expected return in the case of fixed payments, and by the payment period in the
case of variable payments. The total excludable amount is limited to the
individual's investment in the Contract. Once the individual's investment in
the Contract is returned under the exclusion ratio, all subsequent payments
will be included in income. If payments end by reason of the death of
the Annuitant before the investment in the Contract has been returned under
the exclusion ratio, the amount of the unrecovered investment in the Contract
is a deduction on the Annuitant's tax return for the last taxable year. In
the event of a complete redemption prior to the Annuity Date, any gain on the
termination of the Contract will be taxed as ordinary income, and the Owner
may be subject to the ten percent (10%) penalty tax provisions of the Code.
The rules governing the imposition of this penalty are explained in a later
paragraph of this section.
If amounts are received from partial redemption of the Contract prior to the
annuity starting date, any partial redemption will be taxable to the Owner to
the extent that the Contract's value at the time of the redemption exceeds the
Owner's investment in the Contract, and the Owner may be subject to the ten
percent (10%) penalty provisions of the Code. The rules governing the
imposition of this penalty are explained in a later section. If the Owner dies
on or after the Annuity Date, the remaining portion of the Contract's value
must be distributed at least as rapidly as under the method of distribution in
effect at the Owner's death. If the Owner dies prior to the Annuity Date, the
entire Contract Value must (a) be distributed within five years of the Owner's
death, or (b) be distributed as annuity payments that do not extend beyond the
life or life expectancy of the Owner's beneficiary and that begin within
one year of the Owner's death. If the Owner's spouse is the Beneficiary, the
Contract may be continued in the name of the spouse as the Owner.
The Code contains a special rule for non-qualified annuity contracts not owned
by individuals, such as Contracts purchased by corporate employers in
connection with deferred compensation plans.
In determining the amount of taxable income in a distribution from an annuity
contract, all annuity contracts issued by the Company to an individual during
any calendar year are treated as a single contract.
Federal Tax Penalties and Withholding. A ten percent (10%) penalty tax may be
imposed on certain partial or complete redemptions of a Contract. The ten
percent (10%) penalty tax will not be imposed in certain instances, including
those in which the redemption amount is received after the Annuitant reaches
age 59 1/2, if the redemption amount is one of a series of substantially
equal periodic payments made over the Annuitant's life, is received following
the death of the Owner, or is attributable to the Owner's becoming disabled.
For distributions from Qualified Contracts, the penalty does not apply for the
reasons stated above or if the employee has separated from service after
attaining age 55.
Under a Qualified or Non-Qualified Contract the Company is required to withhold
Federal income taxes from any income payments to the Owner unless the Owner
elects, for any reason, to have no withholding made from the payments. This
withholding requirement also applies to Qualified Contracts, discussed above.
The Owner can change his election at any time by written notice to the Home
Office.
<PAGE>
LEGAL MATTERS
Legal matters with respect to the organization of the Company, its authority
to issue annuity contracts and the validity of the Contract, have been passed
upon by its General Counsel, John D. Hopkins.
SPECIAL CONSIDERATIONS
The Company reserves the right to amend the Contract to meet the requirements
of any applicable Federal or state laws or regulations. The Company will
notify the Owner in writing of any such amendments.
Restrictions Upon Transfer of Ownership and Assignment. An Owner's rights
under a Contract may be assigned as provided by applicable law. An
assignment will not be binding upon the Company until it receives a written
copy of the assignment. The Owner is solely responsible for the validity or
effect of any assignment. The Owner, therefore, should consult a qualified
tax adviser regarding the tax consequences, as an assignment may be a
taxable event.
Ownership of a Contract issued to qualify under Section 403(b) or 408 of the
Code or the Self-Employed Individuals' Tax Retirement Act of 1962 ("HR-10
Plan") may not be transferred, assigned or pledged except, with respect to a
Contract qualifying under 403(b) or an HR-10 Plan, the Contract may be
assigned to the Company.
AVAILABLE INFORMATION
The Company has filed a registration statement (the "Registration Statement")
with the Commission under the Securities Act of 1933 relating to the Contracts
offered by this Prospectus. This Prospectus has been filed as a part of the
Registration Statement and does not contain all of the information set forth
in the Registration Statement, and reference is hereby made to such
Registration Statement for further information relating to the Company and the
Contracts. The Registration Statement may be inspected and copied, and copies
can be obtained at prescribed rates from the Commission.
STATE REGULATION
The Company is subject to the laws of the State of North Carolina governing
insurance companies and to regulation by the North Carolina Commissioner of
Insurance. An annual statement in a prescribed form must be filed with that
Commissioner on or before March 1 in each year covering the operations of the
Company for the preceding year and its financial condition on December 31 of
such year. Its books and assets are subject to review or examination by the
Commissioner or his agents at all times, and a full examination of its
operations is conducted by the National Association of Insurance Commissioners
at least once in every five years. North Carolina law also prescribes
permissible investments, but does not involve supervision of the investment
management or policy of the Company. The last such examination was conducted
for the five year period ended December 31, 1992.
EXPERTS
The consolidated financial statement of the Company as of December 31, 1994
and 1995, and for each of the years in the three-year period ended December
31, 1995 have been included herein in reliance upon the report of McGladrey &
Pullen, LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.
<PAGE>
FINANCIAL STATEMENTS
Financial statements for the Company and the Separate Account may be found in
the Statement of Additional Information. Owners should direct their questions
concerning their Contracts to Jefferson-Pilot Investor Services, Inc., Post
Office Box 22086, Greensboro, North Carolina 27420.
<PAGE>
TABLE OF CONTENTS
STATEMENT OF ADDITIONAL INFORMATION
Page
DISTRIBUTION OF THE CONTRACTS B-2
DETERMINATION OF ANNUITY PAYMENTS B-2
Amount of Annuity Payments B-2
Annuity Unit Value B-3
Illustrations of Variable Annuity Payments B-3
STANDARDIZED COMPUTATION OF PERFORMANCE B-4
Performance Information: Yields B-5
Performance Information: Total Returns B-6
TAX COMPARISON B-6
VALUATION OF ASSETS OF THE ACCOUNT B-7
TRANSFERABILITY RESTRICTIONS B-7
CONTINGENT DEFERRED SALES CHARGE B-7
PARTICIPATION AGREEMENTS B-7
GENERAL INFORMATION B-8
TAX SUMMARY B-8
Transfers Between Non-Qualified Annuities B-8
Tax Sheltered Annuity Arrangements (TSAs) B-9
Tax Qualified Retirement Plans
(Qualified Plans): Contributions B-9
Individual Retirement Annuities (IRAs) B-9
Simplified Employee Pension Program
(SEP-IRA) B-11
Public and Non-Profit Organization
Employee Deferred Compensation Plans
(EDC Plans) B-11
Penalties for Excess Contributions
and Excess Deferrals B-11
Distributions From Qualified Annuities B-11
Income Tax Withholding B-12
Financial Statements B-13
<PAGE>
Statement of Additional Information
Alpha and Alphaflex
Individual Variable Annuity Contracts
(for Tax-Qualified and Non-Qualified Plans)
Jefferson-Pilot Separate Account A
(the "Separate Account"), a separate account of
Jefferson-Pilot Life Insurance Company
_______________________________________________________________________
This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the prospectus
for the Contracts. A copy of the prospectus may be obtained from
Jefferson-Pilot Investor Services, Inc., Post Office Box 22086,
Greensboro, North Carolina 27420, telephone number 1-800-458-4498.
________________________________________________________________________
The Date of the Prospectus to which this Statement of Additional
Information Relates is May 1, 1996.
The Date of this Statement of Additional Information is May 1, 1996.
Table of Contents Page
Distribution of the Contracts . . . . . . . . . . . . . . . . . . . . B-2
Determination of Annuity Payments . . . . . . . . . . . . . . . . . . B-2
Standardized Computation of Performance . . . . . . . . . . . . . . . B-4
Tax Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . B-6
Valuation of Assets of the Account. . . . . . . . . . . . . . . . . . B-7
Transferability Restrictions. . . . . . . . . . . . . . . . . . . . . B-7
Contingent Deferred Sales Charge. . . . . . . . . . . . . . . . . . . B-7
Participation Agreements. . . . . . . . . . . . . . . . . . . . . . . B-7
General Information . . . . . . . . . . . . . . . . . . . . . . . . . B-8
Tax Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-8
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . B-13
<PAGE>
Distribution of the Contracts
The Contracts are offered on a continuous basis primarily through
individuals who are registered representatives of Jefferson-Pilot Investor
Services, Inc. ("Investor Services"), a wholly-owned subsidiary of
Jefferson-Pilot Corporation, a publicly-owned insurance holding company.
Jefferson-Pilot Life Insurance Company is a wholly-owned subsidiary of
Jefferson-Pilot Corporation. Effective after the close of business on
December 31, 1986 and simultaneously with the merger of Jefferson Standard
Life Insurance Company into Pilot Life Insurance Company, the Company's name
changed to Jefferson-Pilot Life Insurance Company, and Jefferson Standard
Separate Account A merged into Pilot Separate Account A, which simultaneously
changed its name to Jefferson-Pilot Separate Account A.
Investor Services may be considered the underwriter of the Contracts for
purposes of the federal securities laws. The Contracts were first offered
January 13, 1995. Investor Services administers the Contracts. For fiscal
year 1995, Investor Services received a concession allowance of $1,242,604 for
expenses relative to the sales and administration of the Contracts.
Determination of Annuity Payments
The following discussion of the method for determining the amount of monthly
annuity payments under a variable payment plan is intended to be read in
conjunction with these sections of the prospectus for the Contracts:
"Deductions under the Contracts,"; Sub-Accounts of the Separate Account and
Available Funds,"; "The Accumulation Period,"; and "The Annuity Period".
This discussion assumes there is no contingent deferred sales charge or
premium tax payable.
Amount of Annuity Payments. The amount of the first annuity payment under a
Contract will be determined on the basis of the particular payment plan
selected, the annuity purchase rate and, where permitted for plans involving
life contingencies, the Annuitant's adjusted age and sex. The amount of the
first payment is the sum of the payments from each Sub-Account determined by
applying the appropriate annuity purchase rate to the product of the number of
Accumulation Units in the Sub-account on the annuity date and the accumulation
unit value for the Sub-Account for a valuation period preceding the annuity
date by not more than 10 days. Annuity rates currently in use are based on the
1983 'a' table with age adjustment. Variable annuity payments after the first
will vary from month to month and will depend upon the number and value of
Annuity Units credited to the Annuitant. A Contract will not share in the
divisible surplus of the Company.
The number of Annuity Units in each Sub-Account is determined by dividing
the amount of the first annuity payment from the Sub-Account by the value
of an Annuity Unit at the last valuation period preceding the annuity date
by not more than 10 days. The number of Annuity Units thus credited to the
Annuitant in each Sub-Account remains constant throughout the annuity period.
However, the value of Annuity Units in each division will fluctuate with the
investment experience of the Sub-Account. The amount of each variable annuity
payment after the first is the sum of payments from each Sub-Account determined
by multiplying this fixed number of Annuity Units each payment date by the
value of an Annuity Unit for a valuation period preceding the due date of the
payment by not more than ten days.
<PAGE>
Annuity Unit Value. The value of an Annuity Unit for each Sub-Account was
established at $10 as of the date sales of the Contracts commenced for that
Sub-Account. The value of an Annuity Unit on any later date varies to
reflect the investment experience of the Sub-Account, the assumed investment
rate on which the annuity rate tables are based, and the deduction for
mortality and expense risks assumed by the Company and the administrative
expense fee.
The annuity unit value for each Sub-Account on any valuation date is determined
by multiplying the annuity unit value on the immediately preceding valuation
date by two factors: (a) the net investment factor for the current period for
the Sub-Account; and (b) an adjustment factor to neutralize the assumed
investment rate used in calculating the annuity rate tables.
Illustrations of Variable Annuity Payments. To illustrate the manner in which
variable annuity payments are determined consider this example. Item (4)
in the example shows the applicable monthly payment rate for a male, adjusted
age 63, who has elected a life annuity payment plan with a certain period of
120 months with an assumed investment rate of 3 1/2%. (Option 2b, as described
in the prospectus).
(1) Assumed number of Accumulation Units in a Sub-Account on
maturity date . . . . . . . . . . . . . . . . . . . . .25,000
(2) Assumed Value on an Accumulation Unit in a Sub-Account
at maturity . . . . . . . . . . . . . . . . . . . . $10.00
(3) Cash value of Contract at maturity, (1) x (2) . . . . . . . . . $250,000
(4) Assumed applicable monthly payment rate per $1,000
from annuity-rate table . . . . . . . . . . . . . . . $5.80
(5) Amount of first payment from a Sub-Account, (3) x (4) divided
by $1,000 . . . . . . . . . . . . . . . . . . . . . . $1,450
(6) Assumed value of Annuity Unit in a Sub-Account at
maturity. . . . . . . . . . . . . . . . . . . . . . . .$10.00
(7) Number of Annuity Units credited in a Sub-Account, (5)
divided by (6). . . . . . . . . . . . . . . . . . . . .145
The $10.00 value at maturity provides a first payment from the Sub-Account of
$1450, and payments thereafter of the varying dollar value of 145 Annuity
Units. The amount of subsequent payments from the Sub-Account is determined
by multiplying 145 units by the value of an Annuity Unit in the Sub-Account on
the applicable valuation date. For example, if that unit value is $11.00, the
monthly payment from the Sub-Account will be 145 multiplied by $11.00, or
$1595.00.
However, the value of the Annuity Unit depends entirely on the investment
experience of the Sub-Account. Thus in the example above, if the net
investment rate for the following month was less than the assumed investment
rate of 3 1/2%, the Annuity Unit would decline in value. If
the annuity unit value declined to $9.00, the succeeding monthly payment would
then be 145 x $9.00, or $1305.
<PAGE>
For the sake of simplicity, the foregoing example assumes that all of the
Annuity Units are in one Sub-Account. If there are Annuity Units in two or
more Sub-Accounts, the annuity payment from each Sub-Account is calculated
separately, in the manner illustrated, and the total monthly payment is the
sum of the payments from the Sub-Accounts.
Standardized Computation of Performance
Performance Comparisons. Performance information for a Sub-Account may be
compared, in reports and advertising, to: (i) Standard & Poor's Stock Index
(S&P 500), Dow Jones Industrial Average (DJIA), Donahue Money Market
Institutional Averages, or other unmanaged indices generally regarded as
representative of the securities markets; (ii) other variable annuity separate
accounts or other investment products traced by Lipper Analytical Services,
Inc. or the Variable Annuity Research and Data Service, which are widely used
independent research firms that rank mutual funds and other investment
companies by overall performance, investment objectives, and assets; and (iii)
the Consumer Price Index (measure of inflation) to assess the real rate of
return from an investment in a certificate. Unmanaged indices may assume the
reinvestment of dividends, but generally do not reflect deductions for annuity
charges, investment management costs, brokerage costs, and other transaction
costs that are normally paid when directly investing in securities.
Total returns, yields, and other performance information may be quoted
numerically or in a table, graph, or similar illustration. Reports and
advertising also may contain other information, including the ranking of any
Sub-Account derived from rankings of variable annuity separate accounts or
other investment products traced by Lipper Analytical Services, Inc. or by
rating services, companies, publications, or other persons which rank separate
accounts or other investment products on overall performance or other criteria.
Performance Information. Yields. Some Sub-Accounts may advertise yields.
Yields quoted in advertising reflect the change in value of a hypothetical
investment in the Sub-Account over a stated period of time, not taking into
account capital gains or losses or the imposition of any contingent deferred
sales charge. Yields are annualized and stated as a percentage.
<PAGE>
Current yield is calculated for the VIPF Money Market Portfolio Sub-Account.
Current Yield is based on the change in the value of a hypothetical investment
(exclusive of capital changes) over a particular 7-day period, less a
hypothetical charge reflecting deductions from values during the period (the
base period), and stated as a percentage of the investment at the start of the
base period (the base period return). The base period return is then
annualized by multiplying by 365/7, with the resulting yield figure carried
to at least the nearest hundredth of one percent. Effective yield for
Sub-Accounts assumes that all dividends received during an annual period have
been reinvested. This compounding effect causes effective yield to be higher
than current yield. Calculation of effective yield begins with the same base
period return used in the calculation of current yield, which is then
annualized to reflect weekly compounding pursuant to the following formula:
Effective Yield = [(Base Period Return) + 1)365/7] - 1
Yield for Sub-Accounts is based on all investment income (including dividends
and interest) per Accumulation Unit earned during a particular 30-day period,
less expenses accrued during the period (net investment income). Yield is
computed by dividing net investment income by the value of an Accumulation Unit
on the last day of the period, according to the following formula:
Yield = 2[(a-b/cd + 1)6 - 1]
where a = net investment income earned during the period by the corresponding
Fund portfolio, b = expenses accrued for the period (net of reimbursements),
c = the average daily number of Accumulation Units outstanding during the
period, and d = the value (maximum offering price) per Accumulation Unit on
the last day of the period.
Total Returns. Total returns reflect all aspects of a Sub-Account's return,
including the automatic reinvestment by the Sub-Account of all distributions
and the deduction of all applicable charges to the Sub-Account on an annual
basis, including mortality and expense risk charges, the annual contract
charge, the administrative expense fee, and any other charges against
certificate values. Quotations also will assume a termination (surrender) at
the end of the particular period and reflect the deduction of the contingent
deferred sales charge, if applicable. Additional quotations may be given that
do not assume a termination (surrender) and do not take into account deduction
of the contingent deferred sales charge since the Contracts are intended as
long-term products.
Average annual total returns are calculated by determining the growth or
decline in value of a hypothetical historical investment in the Sub-Account
over certain periods, including 1, 5, and 10 years (up to the life of the
Sub-Account), and then calculating the annually compounded percentage rate
that would have produced the same result if the rate of growth or decline in
value had been constant over the period. Investors should realize that the
Sub-Account's experience is not constant over time, but changes from year to
year, and that the average annual returns represent averaged figures as
opposed to the year-to-year performance of a Sub-Account. Average annual
returns are calculated pursuant to the following formula:
P(1+T)n = ERV, where P is a hypothetical initial payment of $1,000, T is the
average annual total return, n is the number of years, and ERV is the
withdrawal value at the end of the period.
Cumulative total returns are unaveraged and reflect the simple change in value
of a hypothetical investment in the Sub-Account over a stated period of time.
<PAGE>
Tax Comparison
Reports and advertising also may show the effect of tax deferred compounding
on a Sub-Account's investment returns, or returns in general, illustrated by
graphs, charts, or otherwise, which may include a comparison, at various points
in time, of the return from an investment in a Contract (giving effect to all
fees and charges), or returns in general, on a tax-deferred basis (assuming one
or more tax rates) with the return on a taxable basis, and which will disclose
the tax characteristics of the investments shown, including the impact of
withdrawals and surrenders.
Valuation of Assets of the Account
The value of Fund shares held in each Sub-Account at the time of each valuation
is the redemption value of such shares at such time.
Transferability Restrictions
Ownership of a Contract purchased as a tax-deferred annuity pursuant to Section
403(b) of the Internal Revenue Code of 1986, as amended (the "Code"), cannot be
changed and the Contract cannot be sold, assigned or pledged as collateral for
a loan, or for any other purpose, to any person other than the Company.
Similar restrictions are applicable to Contracts purchased in exchange
transactions by persons who have received fixed dollar policies as
distributions of termination benefits from tax-qualified corporate or HR-10
plans or trusts. Ownership of a Contract purchased as an individual retirement
annuity pursuant to Section 408(b) of the Code cannot be transferred except in
limited circumstances involving divorce.
Contingent Deferred Sales Charge
The charge is made as a percentage of the amount withdrawn. For example, if an
Owner subject to a 6% contingent deferred sales charge wishes to net $100 on
the partial redemption of a Contract, he must make a total withdrawal of
$106.38, of which $6.38 will be deducted as a contingent deferred sales charge.
An Owner need only indicate the net amount he wishes to net on a partial
redemption, and the Company will determine the total or gross amount necessary
to withdraw to net the desired amount.
To the extent that the contingent deferred sales charge is insufficient to
cover all the distribution costs and related expenses, some portion of the
proceeds from the mortality and expense risk charge may be utilized by the
Company to meet such excess distribution expenses. The Company has represented
in documents filed with the Securities and Exchange Commission that the
mortality and expense risk charge is consistent with the risks assumed by the
Company and is within the range of industry practice, based on its review of
its requirements and industry practice. Moreover, the Company represented
that use of any proceeds from such charge to defray distribution expenses has
a reasonable likelihood of benefiting the Separate Account and Owners.
Participation Agreements
<PAGE>
Shares of the Funds are made available to the Separate Account under four
substantially similar Participation Agreements ("Participation Agreements").
The Participation Agreements regarding the VIP Funds and the Alger American
Funds are among the Alger American Fund or the Variable Insurance Products
Funds and Variable Insurance Products Fund II, as applicable, the distributor
of those funds (the "Distributor") and the Company. The Participation
Agreements regarding the MFS Funds and the AHVIT Funds are among the MFS
Variable Insurance Trust or the Alexander Hamilton Variable Insurance Trust,
as applicable, the adviser to the Trusts (the "Adviser") and the Company.
If state or federal law precludes the sale of Fund shares to the Separate
Account, or in certain other circumstances, sales of shares to the Separate
Account may be suspended and/or the Participation Agreement may be as to the
Funds. Also, the Participation Agreement with the Variable Insurance Products
Fund and Variable Insurance Products Fund II may be terminated by any party
thereto on one year's written notice, while the Participation Agreements
regarding the MFS Funds, the Alger American Funds and the AHVIT Funds may be
terminated by any party thereto on six month's, sixty day's, and six month's
notice, respectively. Notwithstanding termination of the Participation
Agreement, the Fund and the Distributor or Adviser, as applicable, are
obligated to continue to make the Funds' shares available for Contracts
outstanding on the date the Participation Agreement terminates, unless the
Participation Agreement was terminated due to an irreconcilable conflict
among contract owners of different separate accounts. If for any reason the
shares of any Fund are no longer available for purchase by the Separate Account
for outstanding Contracts, the parties to each Participation Agreement have
agreed to cooperate to comply with the 1940 Act in arranging for the
substitution of another funding medium as soon as reasonably practicable and
without disruption of sales of shares to the Separate Account or any
Sub-Account.
General Information
The financial statements of the Separate Account and of Jefferson-Pilot Life
Insurance Company included in this Statement of Additional Information have
been so included in reliance on the reports of McGladrey & Pullen, LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting. McGladrey & Pullen LLP, provides audit services
for the Account. The address of McGladrey & Pullen, LLP is P.O. Box 24701,
Greensboro, North Carolina 27402.
Jefferson-Pilot Corporation, directly or through its ownership of the
Company, owns beneficially 8.80% of the outstanding shares of JP Investment
Grade Bond Fund and less than 1% of the outstanding shares of JP Capital
Appreciation Fund.
Tax Summary
Transfers Between Non-Qualified Annuities. Under Section 1035 of the Code an
Owner may exchange one annuity contract for another annuity contract in a
tax-free exchange. To avoid recognizing income on the surrender of the annuity
contract, the Owner must absolutely assign the old contract to us. We will
surrender the contract and apply the proceeds to our certificate.
<PAGE>
Tax Sheltered Annuity Arrangements (TSAs). An employer may make contributions
to a TSA, or alternatively, an employer may agree with its employee that, in
return for employer contributions to a TSA, the employee will accept a
reduction in salary or forego a salary increase. That agreement may not be
changed with respect to any salary of the employee earned while the agreement
is in effect. The employee can only make one agreement with his or her employer
during any tax year.
The contributions that can be excluded from income in a tax year may not exceed
the smaller of (i) the employee's exclusion allowance, or (ii) the overall
limit the Code imposes on contributions to TSAs. The exclusion allowance is a
calculation that takes into consideration the employee's includable
compensation, number of years of service, and prior years of contributions.
Tax-Qualified Retirement Plans (Qualified Plans). Contributions. The limit
for contributions on behalf of each participant to a defined contribution plan
is the lesser of (i) 25% of earned income or compensation, or (ii) $30,000.
(The $30,000 limit will eventually be indexed, on a 1 to 4 basis, to the
defined benefit plan limit once that limit exceeds $120,000. That limit is
$120,000 in 1996, to be adjusted in subsequent years for inflation.) In the
case of a profit sharing plan, the employer's deduction for contributions may
not exceed 15% of all participants' compensation. Salary reduction
contributions to a 401(k) program in 1996 are limited to $9,500, to be
adjusted in subsequent years for cost-of-living increases. The employer
may not consider compensation or earned income in excess of $150,000 in 1996,
to be adjusted in subsequent years for cost of living increases, in calculating
contributions to a qualified plan. Special rules apply when an employer
maintains two or more different types of qualified plans.
Earned income for self-employed individuals is defined so as to exclude
deductible contributions made to qualified plans. Thus, the 25% deductible
limit is in effect a limit of 20% and the 15% deductible limit is a limit of
13% of earned income including plan contributions for such persons.
Individual Retirement Annuities (IRAs). The Code permits deductible and
non-deductible contributions to be made under a Contract that qualifies as an
IRA. The Contract (accompanied by the appropriate IRA rider) is designed to
qualify as an IRA. The Code also allows a tax-free transfer (rollover) of
certain distributions from qualified plans and TSAs which are used to purchase
an IRA.
If the Owner and the Owner's spouse are not currently covered by a retirement
plan (including a Qualified Plan, TSA, or SEP-IRA), then each working spouse
may make a deductible contribution of 100% of compensation up to $2,000
regardless of their adjusted gross income (AGI). If either the Owner or, if
married, the Owner's spouse is covered by another retirement plan, the IRA
deduction phases out between $25,000 and $35,000 of AGI for a single person
and $40,000 and $50,000 of AGI for married persons filing jointly. If the
Owner is married, filing separately and covered by a retirement plan, the IRA
deduction phases out between $0 to $10,000 of AGI. In the case of spousal
IRAs, an IRA certificate is issued for each spouse and the working spouse may
contribute a total of $2,250 to both certificates (but no more than $2,000 to
one certificate). For these purposes, a working spouse can make an election
to be treated as having no compensation, thereby allowing the other working
spouse to make a contribution to a spousal IRA.
<PAGE>
If the Owner is not eligible to deduct part or all of the IRA contribution, he
may still make nondeductible contributions. However, the deductible and
nondeductible contributions combined cannot exceed the $2,000 limit (or the
$2,250 spousal limit).
Deductible and non-deductible IRA contributions in excess of the lesser of (i)
100% of compensation or earned income, or (ii) $2,000 are subject to a
6% excise tax for the year in which made and for each year thereafter until
withdrawn.
No contributions are allowed for the tax year in which an individual becomes
age 70 1/2 or any tax year after that year. A working spouse age 70 1/2 or
over, however, can contribute 100% or compensation up to $2,000 to a spousal
IRA until the year the non-working spouse reaches age 70 1/2.
An individual may elect for each IRA certificate or account to make a tax-free
rollover once a year among individual retirement arrangements (including
rollovers from individual retirement bonds purchased before 1983). An
individual may also make a rollover contribution into an IRA with the proceeds
from a TSA or qualified plan.
Distributions from an IRA must commence by April 1 of the calendar year
following the calendar year in which the Owner reaches age 70 1/2.
Distributions must be made over the life or life expectancy of the Owner
(or the joint lives or life expectancies of the Owner and a beneficiary).
The amount required to be distributed each year under this rule is referred to
as the minimum distribution amount.
An Owner who does not receive the minimum distribution amount will be subject
to a 50% excise tax on the difference between the minimum distribution amount
and the amount actually distributed.
An Owner can revoke a Contract issued as an IRA by following the directions in
the cover of the prospectus. Because revocation may have adverse tax
consequences, the Owner should consult with a tax expert. If the Contract is
revoked, an Owner may contribute to a new IRA, provided that the eligibility
requirements for IRA contributions are met at that time.
Simplified Employee Pension Program (SEP-IRA). An employer can establish a
SEP-IRA for its employees. Under an employer's SEP-IRA, contributions for
each eligible employee can be made under a Contract issued as an IRA.
Public and Non-Profit Organization Employee Deferred Compensation Plans (EDC
Plans). Employees and independent contractors who perform services for a state
(including any subdivision or agency of the state, and any tax-exempt rural
electric cooperative) or a tax-exempt employer may exclude from federal gross
income contributions made to a Contract by the employer under an EDC Plan.
Generally, the maximum amount of contributions that can be excluded from gross
income under an EDC Plan in any tax year is 33 1/3% of the employee's
includible compensation, up to $7,500. Includible compensation means earnings
for services rendered to the employer which are includible in the employee's
federal gross income, but excluding contributions of the employee under the EDC
Plan, any TSA or 401(k) program for the taxable year. Any amount excluded from
gross income of the employee under a TSA or 401(k) program reduces the
contributions under the EDC Plan which can be excluded from the employee's
gross income in a tax year. Distributions under an EDC Plan must commence no
later than April 1 of the calendar year in which the Owner attains age 70 1/2,
except that the Owners in government plans may further defer distribution until
60 days after the later of the close of the plan year in which the Owner
attains or would have attained normal retirement age or separates from service.
<PAGE>
Penalties for Excess Contributions and Excess Deferrals. In general, employer
contributions to a qualified plan, TSA, SEP-IRA, or EDC Plan, which are greater
than the amount currently deductible are subject to a 10% penalty tax, which is
paid by the employer.
A penalty tax of 6% applies to any salary deferral amount which exceeds the
maximum permitted by the Code, and the excess amount (including earnings) is
also taxable as ordinary income in the year of deferral.
Distributions from Qualified Annuities. Distributions to a Owner in excess of
$155,000 per year from all qualified plans (except EDC Plans) will generally
be subject to a 15% excise tax in addition to the income tax due. In the case
of distributions from a qualified annuity (other than an EDC Plan) prior to the
annuity starting date, the Owner must recover his investment in the certificate
based on a ratio of his investment to the total value of the Contract as of the
date of the withdrawal.
Income Tax Withholding. An Owner receiving periodic payments which total
$14,025 or more per year will generally be subject to wage-bracket type
withholding (as if such payments were payments of wages by an employer to an
employee) unless the Owner elects no withholding. When a Owner makes no
withholding election whatsoever, withholding will be made as if the Owner is
married and claiming three withholding exemptions.
An Owner receiving a non-periodic distribution (whether a total or partial
distribution) will generally be subject to withholding at a flat 10% rate.
In certain cases, if the distribution is a qualified total distribution (as
defined in the Code), a special withholding table will apply. In both cases,
the Owner will be permitted to elect not to have tax withheld. All Owners
receiving periodic and non-periodic payments will be further notified of the
withholding requirements and of their right to make withholding elections
affecting such payments. Special withholding rules apply to United States
citizens residing outside the United States.
Recently enacted mandatory withholding provisions apply to distributions made
from qualified plans after December 31, 1992. Mandatory withholding of 20%
will apply to any distribution eligible for a tax-free rollover if the
distribution is not transferred directly to an IRA.
<PAGE>
Jefferson-Pilot Separate Account A
Statements of Condition
<TABLE>
<CAPTION>
December 31 December 31
1995 1994
<S> <C> <C>
Assets:
Securities of investment companies:
JP Capital Appreciation Fund, Inc. at net asset
value (3,681,799.240 shares at $18.96 per share - 1995;
3,462,756.564 shares at $16.77 per share - 1994)
(Cost - $51,156,952; $48,266,495 - 1994).......................... $ 69,806,913 $ 58,070,428
JP Investment Grade Bond Fund, Inc. at net asset
value (2,068,966.582 shares at $11.26 per share - 1995;
2,269,646.751 shares at $10.08 per share - 1994)
(Cost - $21,942,565; $24,257,727 - 1994).......................... 23,296,564 22,878,039
VIPF Money Market Portfolio at net
asset value (8,265,821.110 shares at $1.00 per share -
1995; 5,868,771.530 shares at $1.00 per share - 1994)
(Cost - $8,265,821; $5,868,772 - 1994)............................ 8,265,821 5,868,772
VIPF Growth Portfolio at net asset value
(208,755.567 shares at $29.20 per share)
(Cost - $5,799,589)............................................... 6,095,663 0
VIPF Equity-Income Portfolio at net
asset value (421,852.324 shares at $19.27 per share)
(Cost - $7,473,714)............................................... 8,129,094 0
VIPF High Income Portfolio at net
asset value (104,201.965 shares at $12.05 per share)
(Cost - $1,183,864)............................................... 1,255,634 0
VIPF Overseas Portfolio at net
asset value (27,859.881 shares at $17.05 per share)
(Cost - $451,980)................................................. 475,011 0
VIPF-II Asset Manager Portfolio at net
asset value (122,287.952 shares at $15.79 per share)
(Cost - $1,789,192)............................................... 1,930,927 0
$119,255,627 $ 86,817,239
</TABLE>
<PAGE>
Jefferson-Pilot Separate Account A
Statements of Condition
<TABLE>
<CAPTION>
December 31 December 31
1995 1994
<S> <C> <C>
Net Assets:
Variable annuity contracts (Note 5):
JP Capital Appreciation Fund, Inc. ............................... $ 68,154,550 $ 56,038,324
JP Investment Grade Bond Fund, Inc. .............................. 22,695,644 21,738,919
VIPF Money Market Portfolio ...................................... 7,839,152 5,319,899
VIPF Growth Portfolio ............................................ 6,086,637 0
VIPF Equity-Income Portfolio ..................................... 8,121,281 0
VIPF High Income Portfolio ....................................... 1,253,789 0
VIPF Overseas Portfolio........................................... 474,253 0
VIPF-II Asset Manager Portfolio .................................. 1,928,765 0
Jefferson-Pilot Life Insurance Company -
Sponsor:
JP Capital Appreciation Fund, Inc. (7,894.011
accumulation units at $89.076761 per unit, 10,999.299
accumulation units at $85.716878 per unit, and 473.677
accumulation units at $13.437239 per unit; 13,378.617
accumulation units at $67.236358 per unit and 17,454.079
accumulation units at $64.888770 per unit - 1994) ................ 1,652,363 2,032,104
JP Investment Grade Bond Fund, Inc. (5,924.856
accumulation units at $40.329278 per unit, 9,270.357
accumulation units at $38.823373 per unit and 174.234
accumulation units at $11.868974 per unit; 18,963.397
accumulation units at $33.990010 per unit and 15,070.443
accumulation units at $32.816163 per unit - 1994)................. 600,920 1,139,120
VIPF Money Market Portfolio (3,412.823 accumulation
units at $20.018413 per unit, 17,807.392 accumulation units
at $19.875722 per unit and 421.421 accumulation units at
$10.475795 per unit; 3,285.392 accumulation units at
$19.635816 per unit and 25,551.204 accumulation units at
$18.956484 per unit - 1994)....................................... 426,669 548,873
VIPF Growth Portfolio (650.348 accumulation units at
$13.878009 per unit) ............................................. 9,026 0
VIPF Equity-Income Portfolio (580.272 accumulation units at
$13.464371 per unit) ............................................. 7,813 0
VIPF High Income Portfolio (154.159 accumulation units at
$11.969023 per unit) ............................................. 1,845 0
VIPF Overseas Portfolio (70.239 accumulation units at
$10.789882 per unit) ............................................. 758 0
VIPF-II Asset Manager Portfolio (191.163 accumulation units
at $11.307468 per unit) .......................................... 2,162 0
$119,255,627 $ 86,817,239
</TABLE>
See Notes to Financial Statements
<PAGE>
Jefferson-Pilot Separate Account A
Statements of Operations
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
Investment Income:
Dividend income.............................. $ 3,305,277 $ 2,417,020 $ 2,380,407
Capital gain distribution from investment
companies..................................... 7,805,833 1,635,499 3,312,891
11,111,110 4,052,519 5,693,298
Realized and Unrealized Gain(Loss)
on Investments:
Net realized gain (loss) on investments....... 312,695 (115,139) 7,755
Unrealized appreciation (depreciation)
of investments................................ 12,767,704 (7,904,741) 1,274,689
Net gain (loss) on investments................ 13,080,399 (8,019,880) 1,282,444
Net increase (decrease) in net assets
from operations.............................. $ 24,191,509 $ (3,967,361) $ 6,975,742
</TABLE>
See Notes to Financial Statements
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
Net assets at beginning of period............. $ 86,817,239 $ 88,396,269 $ 71,069,051
Net increase (decrease) in net assets
from operations............................. 24,191,509 (3,967,361) 6,975,742
Net contract purchase payments................ 32,162,039 9,671,357 14,258,623
Mortality and expense fees (Note 2)........... (1,863,270) (794,119) (706,247)
Administrative charges........................ (50,191) (57,680) (54,898)
Set aside for sponsor......................... 1,863,270 794,119 706,247
Benefits paid................................. (20,516,600) (7,764,628) (5,566,773)
Net transfer of reserves from (to) sponsor.... (466,558) 1,339,282 2,514,524
Transfer to sponsor........................... (2,881,811) (800,000) (800,000)
Net assets at end of period................... $ 119,255,627 $ 86,817,239 $ 88,396,269
</TABLE>
See Notes to Financial Statements
Notes to Financial Statements:
1. Significant Accounting Policies
History.
Jefferson-Pilot Separate Account A (Account) was established by resolution of
the Board of Directors of Jefferson-Pilot Life Insurance Company (Sponsor) on
May 5, 1969. The Account has been registered as a unit investment trust under
the Investment Company Act of 1940 to receive and invest payments made by
purchasers of variable annuity contracts. The Account operates primarily in
the United States.
During 1995 five new sub-accounts, each of which reflects the investment
performance of a specific underlying mutual fund, were established in
connection with the sale of new variable annuity products. Subject to certain
limitations and restrictions, a variable annuity contractholder may now elect
to have net purchase payments credited to any of eight sub-accounts. Prior to
the commencement of annuity payments, a contractholder may elect to transfer
accumulation units among sub-accounts, subject to certain minimum transfer
amounts. After the commencement of annuity payments which do not involve life
contingencies, contractholders may elect to transfer accumulation units among
sub-accounts. Contractholders may also allocate purchase payments or transfer
amounts into or out of the "Fixed Account", which is maintained in the general
account of the sponsor. The sponsor guarantees that the fixed account
accumulation value will accrue interest at an annual effective rate of 3.5%,
although the sponsor may, in its sole discretion, credit interest in excess
of the guaranteed rate.
<PAGE>
Jefferson-Pilot Separate Account A
1. Significant Accounting Policies (continued)
Investments
In accordance with terms of the contracts, the payments are invested in shares
of JP Capital Appreciation Fund Inc., JP Investment Grade Bond Fund, Inc.,
VIPF Money Market Portfolio, VIPF Growth Portfolio, VIPF Equity-Income
Portfolio, VIPF High Income Portfolio, VIPF Overseas Portfolio, and VIPF-II
Asset Manager Portfolio at the net asset value of such shares on the date
payments are received. The accumulation of net asset values at the date shares
are acquired represents cost. The investments in JP Capital Appreciation Fund,
JP Investment Grade Bond Fund, VIPF Money Market Portfolio, VIPF Growth
Portfolio, VIPF Equity-Income Portfolio, VIPF High Income Portfolio, VIPF
Overseas Portfolio, and VIPF-II Asset Manager Portfolio shares are carried in
the Statements of Condition at net asset value, which is market value at
December 31, 1995 and 1994, respectively. Realized gains and losses on
investment transactions are recorded on a last-in, first-out basis.
Use of Estimates
The preparation of financial statements requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes.
Dividend Income
Dividends are recorded as income on the ex-dividend date.
Reclassifications
The Account's policy is to reclassify certain amounts reported in prior years'
financial statements when necessary for conformity with classifications adopted
in the current year.
2. Fees
In accordance with the provisions of the variable annuity contracts, specified
amounts on contracts issued before 1983 are set aside for the Sponsor and
Jefferson-Pilot Investor Services, Inc. to cover the assumption of mortality
and expense risks, sales and administrative expenses, and state premium taxes.
The charge for assuming the mortality and expense risks on these contracts is
.6935% annually. On contracts issued between 1982 and 1994, amounts are set
aside to cover only the assumption of mortality and expense risks at the rate
of .9855% annually. Contracts issued after 1994 include a mortality and
expense fee of 1.25% and an administrative fee of .15%. Fixed account
accumulation values are not charged a mortality and expense fee or an
administrative fee.
3. Federal Income Taxes
Operations of the Account are taxed with those of the Sponsor. Under existing
federal income tax law no taxes are payable on the transactions of the Account.
4. Accumulation Units
Changes in the number of accumulation units are as follows:
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
Capital Appreciation Division
Units outstanding at beginning of
period...................................... 789,103.105 725,347.885 629,329.526
Units purchased.............................. 549,966.137 188,521.920 181,159.301
Redemptions and charges...................... (287,197.657) (124,766.700) (85,140.942)
Units outstanding at end of period........... 1,051,871.585 789,103.105 725,347.885
Investment Grade Bond Division
Units outstanding at beginning of
period...................................... 695,826.656 769,555.253 646,845.980
Units purchased.............................. 259,333.287 118,020.500 224,626.218
Redemptions and charges...................... (236,552.344) (191,749.097) (101,916.945)
Units outstanding at end of period........... 718,607.599 695,826.656 769,555.253
</TABLE>
<PAGE>
Jefferson-Pilot Separate Account A
4. Accumulation Units (continued)
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
Money Market Division
Units outstanding at beginning of
period....................................... 308,432.391 256,956.900 265,004.470
Units purchased.............................. 1,058,289.647 317,950.738 143,501.366
Redemptions and charges...................... (762,148.485) (266,475.247) (151,548.936)
Units outstanding at end of period........... 604,573.553 308,432.391 256,956.900
Growth Division
Units outstanding at beginning of
period....................................... 0.000 0.000 0.000
Units purchased.............................. 507,035.009 0.000 0.000
Redemptions and charges...................... (67,803.216) 0.000 0.000
Units outstanding at end of period........... 439,231.793 0.000 0.000
Equity-Income Division
Units outstanding at beginning of
period....................................... 0.000 0.000 0.000
Units purchased.............................. 748,847.746 0.000 0.000
Redemptions and charges...................... (145,099.210) 0.000 0.000
Units outstanding at end of period........... 603,748.536 0.000 0.000
High Income Division
Units outstanding at beginning of
period....................................... 0.000 0.000 0.000
Units purchased.............................. 146,293.540 0.000 0.000
Redemptions and charges...................... (41,386.585) 0.000 0.000
Units outstanding at end of period........... 104,906.955 0.000 0.000
Overseas Division
Units outstanding at beginning of
period....................................... 0.000 0.000 0.000
Units purchased.............................. 53,006.800 0.000 0.000
Redemptions and charges...................... (8,983.066) 0.000 0.000
Units outstanding at end of period........... 44,023.734 0.000 0.000
Asset Manager Division
Units outstanding at beginning of
period....................................... 0.000 0.000 0.000
Units purchased.............................. 195,362.723 0.000 0.000
Redemptions and charges...................... (24,597.089) 0.000 0.000
Units outstanding at end of period........... 170,765.634 0.000 0.000
</TABLE>
<PAGE>
Jefferson-Pilot Separate Account A
5. Variable Annuity Contracts
Net asset values for variable annuity contracts are based on the following
accumulation units, unit values and annuity funds:
<TABLE>
<CAPTION>
Accumulation Unit Total
Units Value Value
<S> <C> <C> <C>
JP Capital Appreciation Fund, Inc
December 31, 1995
Qualified units (a).................. 317,320.795 $ 13.437239 $ 4,263,915
Non-qualified units (a).................. 74,434.083 $ 13.437239 1,000,188
Qualified units (b).................. 427,257.294 $ 98.128982 41,926,323
Non-qualified units (b).................. 115,004.557 $ 85.716878 9,857,832
Qualified units (c).................. 71,875.556 $ 101.941873 7,327,129
Non-qualified units (c).................. 26,612.313 $ 89.076761 2,370,539
Annuity fund ............. 1,408,624
$ 68,154,550
JP Capital Appreciation Fund, Inc
December 31, 1994
Qualified units (b).................. 506,969.885 $ 74.284890 $ 37,660,203
Non-qualified units (b).................. 143,849.903 $ 64.888770 9,334,243
Qualified units (c).................. 79,131.487 $ 76.947120 6,088,940
Non-qualified units (c).................. 28,319.131 $ 67.236358 1,904,075
Annuity fund ............. 1,050,863
$ 56,038,324
JP Investment Grade Bond Fund, Inc.
December 31, 1995
Qualified units (a).................. 110,870.601 $ 11.868974 $ 1,315,920
Non-qualified units (a).................. 62,561.226 $ 11.868974 742,538
Qualified units (b).................. 348,002.314 $ 37.900717 13,189,537
Non-qualified units (b).................. 114,458.341 $ 38.823373 4,443,659
Qualified units (c).................. 49,056.142 $ 39.373178 1,931,496
Non-qualified units (c).................. 18,289.528 $ 40.329278 737,603
Annuity fund ............. 334,891
$ 22,695,644
JP Investment Grade Bond Fund, Inc.
December 31, 1994
Qualified units (b).................. 444,546.741 $ 32.036271 $ 14,241,620
Non-qualified units (b).................. 140,638.462 $ 32.816163 4,615,215
Qualified units (c).................. 55,364.078 $ 33.184197 1,837,212
Non-qualified units (c).................. 21,243.534 $ 33.990010 722,068
Annuity fund ............. 322,804
$ 21,738,919
</TABLE>
<PAGE>
Jefferson-Pilot Separate Account A
5. Variable Annuity Contracts (continued)
<TABLE>
<CAPTION>
Accumulation Unit Total
Units Value Value
<S> <C> <C> <C>
VIPF Money Market Portfolio
December 31, 1995
Qualified units (a).................. 399,412.037 $ 10.475795 $ 4,184,159
Qualified units (b).................. 166,434.687 $ 19.875722 3,308,010
Non-qualified units (b).................. 17,085.193 $ 19.875722 339,580
Annuity fund ............. 7,403
$ 7,839,152
VIPF Money Market Portfolio
December 31, 1994
Qualified units (b).................. 211,766.468 $ 18.956484 $ 4,014,348
Non-qualified units (b).................. 67,829.327 $ 18.956484 1,285,805
Annuity fund ............. 19,746
$ 5,319,899
VIPF Growth Portfolio
December 31, 1995
Qualified units (a).................. 277,718.899 $ 13.878009 $ 3,854,185
Non-qualified units (a).................. 160,862.546 $ 13.878009 2,232,452
$ 6,086,637
VIPF Equity-Income Portfolio
December 31, 1995
Qualified units (a).................. 334,408.519 $ 13.464371 $ 4,502,600
Non-qualified units (a).................. 268,759.745 $ 13.464371 3,618,681
$ 8,121,281
VIPF High Income Portfolio
December 31, 1995
Qualified units (a).................. 79,150.583 $ 11.969023 $ 947,355
Non-qualified units (a).................. 25,602.213 $ 11.969023 306,434
$ 1,253,789
</TABLE>
<PAGE>
Jefferson-Pilot Separate Account A
5. Variable Annuity Contracts (continued)
<TABLE>
<CAPTION>
Accumulation Unit Total
Units Value Value
<S> <C> <C> <C>
VIPF Overseas Portfolio
December 31, 1995
Qualified units (a).......... 33,625.064 $ 10.789882 $ 362,810
Non-qualified units (a).......... 10,328.431 $ 10.789882 111,443
$ 474,253
VIPF-II Asset Manager Portfolio
December 31, 1995
Qualified units (a).......... 132,355.509 $ 11.307468 $ 1,496,605
Non-qualified units (a).......... 38,218.962 $ 11.307468 432,160
$ 1,928,765
</TABLE>
(a) - contracts issued after 1994.
(b) - contracts issued 1983 - 1994.
(c) - contracts issued before 1983.
<PAGE>
Jefferson-Pilot Life Insurance Company
Financial Report
December 31, 1995
Contents
INDEPENDENT AUDITOR'S REPORT
FINANCIAL STATEMENTS
Balance sheets
Statements of income
Statements of stockholder's equity
Statements of cash flows
Notes to financial statements
<PAGE>
Independent Auditor's Report
To the Board of Directors
Jefferson-Pilot Life Insurance Company
Greensboro, North Carolina
We have audited the accompanying balance sheets of Jefferson-Pilot
Life Insurance Company as of December 31, 1995 and 1994, and the
related statements of income, stockholder's equity and cash flows
for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Jefferson-Pilot Life Insurance Company as of December 31,
1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December
31, 1995, in conformity with generally accepted accounting
principles.
As disclosed in the notes to financial statements, the Company
changed its method of accounting for certain investments in debt
and equity securities in 1994 and changed its method of
accounting for postretirement benefits other than pensions in
1993.
/s/McGladrey & Pullen, LLP
Greensboro, North Carolina
February 6, 1996
<PAGE>
Jefferson-Pilot Life Insurance Company
Balance Sheets
(Dollar Amounts in Thousands Except Share and Per Share Information)
December 31,
ASSETS 1995 1994
Cash and investments (Note 3):
Cash and cash equivalents $ 16,819 $ 10,093
Debt securities available for sale,
at fair value (amortized
cost 1995 $2,561,083; 1994 $1,476,404) 2,731,024 1,407,662
Debt securities held to maturity,
at amortized cost (fair value 1995
$1,846,212; 1994 $1,798,135) 1,761,165 1,940,046
Equity securities available for sale,
at market value (amortized cost
1995 $157,848; 1994 $247,223) 430,895 613,017
Equity securities trading portfolio,
at market value (cost 1995 $45,868) 46,406 -
Mortgage loans on real estate 894,005 680,625
Policy loans 237,553 206,361
Real estate, at cost, less accumulated
depreciation 1995 $20,833; 1994 $21,160 28,893 30,888
Other investments 8,264 8,850
Total cash and investments 6,155,024 4,897,542
Investment in affiliated companies, at equity 37,859 33,768
Due from affiliates 26,736 31,781
Accrued investment income 75,294 62,567
Accounts receivable and agents' balances 18,698 14,094
Due from reinsurers 33,231 20,132
Property and equipment, less accumulated
depreciation 1995 $35,012; 1994 $31,725 51,951 53,285
Deferred policy acquisition costs and value of
insurance in force, net of amortization(Note 4) 531,341 323,015
Assets held in separate accounts 345,530 210,225
Other assets 30,860 26,706
$ 7,306,524 $ 5,673,115
See Notes to Financial Statements.
<PAGE>
December 31,
LIABILITIES AND STOCKHOLDER'S EQUITY 1995 1994
Liabilities:
Policy liabilities:
Future policy benefits (Note 5) $ 1,440,116 $ 1,278,905
Policyholder contract deposits (Note 5) 2,984,919 1,846,043
Dividend accumulations and other policyholder
funds on deposit 181,078 176,519
Policy and contract claims 168,654 172,216
Dividends for policyholders 19,149 18,350
Deferred revenue and premiums collected in advance 32,486 23,321
Other 53,488 47,637
Total policy liabilities 4,879,890 3,562,991
Advances from parent company - 21,005
Securities sold under repurchase agreements(Note 6) 196,040 266,839
Currently payable income taxes 11,476 -
Deferred income tax liabilities (Note 8) 141,353 102,839
Liabilities related to separate accounts 345,530 210,225
Accounts payable, accruals and other liabilities 202,664 79,674
Total liabilities 5,776,953 4,243,573
Commitments and contingent liabilities
(Notes 9, 10 and 12)
Stockholder's equity (Note 7):
Common stock, par value $100 per share;
authorized and issued 50,000 shares 5,000 5,000
Capital in excess of par value 30,567 30,567
Retained earnings 1,223,601 1,191,496
Net unrealized gains on securities available
for sale, less deferred income taxes
1995 $144,046; 1994 $104,864 (Note 3) 270,403 202,479
1,529,571 1,429,542
$ 7,306,524 $ 5,673,115
<PAGE>
Jefferson-Pilot Life Insurance Company
Statements of Income
(Dollar Amounts in Thousands)
Year Ended December 31,
1995 1994 1993
Revenue:
Life premiums & other considerations $ 364,001 $ 256,078 $ 240,855
Accident and health premiums 411,117 399,065 386,608
Total premiums and other
considerations 775,118 655,143 627,463
Net investment income (Note 3) 420,917 365,301 353,699
Realized investment gains (Note 3) 35,036 41,083 40,332
1,231,071 1,061,527 1,021,494
Benefits and expenses:
Life benefits and other credits to
policyholders 417,722 318,907 295,813
Accident and health benefits 330,324 308,949 305,648
Total benefits 748,046 627,856 601,461
Insurance commissions 92,300 69,162 52,318
General and administrative 101,872 92,109 90,244
Insurance taxes, licenses and fees 25,855 22,784 22,794
Net deferral of policy acquisition costs
(Note 4) (54,536) (40,410) (17,527)
Net amortization of value of insurance
in force (Note 4) 18,622 - -
932,159 771,501 749,290
Income before income taxes and
cumulative effect of change in
accounting principle 298,912 290,026 272,204
Income taxes (Note 8) 97,443 95,524 88,215
Income before cumulative effect
of change in accounting principle 201,469 194,502 183,989
Cumulative effect of change in accounting
principle on years prior to 1993,
net of income tax benefit (Note 9) - - (19,790)
Net income $ 201,469 $ 194,502 $ 164,199
See Notes to Financial Statements.
<PAGE>
Jefferson-Pilot Life Insurance Company
Statements of Stockholder's Equity
(Dollar Amounts in Thousands)
Capital in
Common Excess of
Stock Par Value
Balance, December 31, 1992 $ 5,000 $ 30,567
Net income - -
Dividends paid to parent company - -
Decrease during year, net of deferred
income tax effect - -
Balance, December 31, 1993 5,000 30,567
Change in accounting principle
effective January 1, 1994 (Note 3) - -
Net income - -
Dividends paid to parent company - -
Decrease during year, net of deferred
income tax effect - -
Balance, December 31, 1994 5,000 30,567
Net income - -
Dividends paid to parent company - -
Increase during year, net of deferred
income tax effect - -
Balance, December 31, 1995 $ 5,000 $ 30,567
See Notes to Financial Statements.
<PAGE>
Net Net Unrealized
Unrealized Gains on
Gains Securities Total
Retained on Equity Available Stockholder's
Earnings Securities for Sale Equity
$ 1,018,552 $ 314,699 $ - $ 1,368,818
164,199 - - 164,199
(91,257) - - (91,257)
- (6,662) - (6,662)
1,091,494 308,037 - 1,435,098
- (308,037) 363,652 55,615
194,502 - - 194,502
(94,500) - - (94,500)
- - (161,173) (161,173)
1,191,496 - 202,479 1,429,542
201,469 - - 201,469
(169,364) - - (169,364)
- - 67,924 67,924
$ 1,223,601 $ - $ 270,403 $ 1,529,571
<PAGE>
Jefferson-Pilot Life Insurance Company
Statements of Cash Flows
(Dollar Amounts in Thousands)
Year Ended December 31,
1995 1994 1993
Cash Flows From Operating Activities
Net income $ 201,469 $ 194,502 $ 164,199
Adjustments to reconcile net income
to net cash provided by operating
activities:
Change in policy liabilities other than
deposits 18,405 (24,062) 33,686
Credits to policyholder accounts, net 17,173 26,537 28,143
Deferral of policy acquisition costs,net (54,536) (40,410) (17,527)
Amortization of value of insurance
in force, net 18,622 - -
Depreciation, including amounts related to
real estate investments 5,766 5,800 5,919
Change in trading securities (46,406) - -
Change in receivables and asset accruals (3,082) (5,163) (29,207)
Change in payables and expense accruals 42,215 (4,000) 1,252
Realized investment gains (6,003) (41,083) (40,332)
Other operating activities, net (10,959) 2,384 11,460
Net cash provided by
operating activities 182,664 114,505 157,593
Cash Flows From Investing Activities
Securities available for sale:
Sales 438,857 756,114 -
Maturities, calls and redemptions 152,792 93,756 -
Purchases (799,230) (807,293) -
Securities held to maturity:
Sales - 7,431 -
Maturities, calls and redemptions 24,412 122,589 -
Purchases (58,366) (577,121) -
Debt securities:
Sales, maturities, calls and redemptions - - 844,905
Purchases - - (1,138,113)
Equity securities:
Sales - - 102,130
Purchases - - (65,246)
(Continued)
<PAGE>
Jefferson-Pilot Life Insurance Company
Statements of Cash Flows (Continued)
(Dollar Amounts in Thousands)
Year Ended December 31,
1995 1994 1993
Repayments of mortgage loans $ 53,183 $ 71,374 $ 63,014
Mortgage loans originated (291,000) (173,139) (85,588)
Reduction of policy loans, net 5,385 8,242 6,063
Cash received in assumption
reinsurance transaction 164,488 - -
Real estate and property and
equipment sold 8,625 9,464 4,014
Purchases of real estate and property
and equipment (7,740) (10,778) (8,308)
Other investing activities, net 586 (13,570) (14,421)
Net cash used in
investing activities (308,008) (512,931) (291,550)
Cash Flows From Financing Activities
Policyholder contract deposits 484,540 361,991 264,602
Withdrawals of policyholder contract
deposits (188,666) (117,939) (90,108)
Advances from parent company, net (21,005) (15,497) 36,502
Proceeds from securities sold under
repurchase agreements - 584,225 -
Payments for securities sold under
repurchase agreements (70,799) (317,386) -
Cash dividends (97,000) (94,500) (91,257)
Other financing activities 25,000 - -
Net cash provided by
financing activities 132,070 400,894 119,739
Net increase (decrease) in
cash and cash equivalents 6,726 2,468 (14,218)
Cash and cash equivalents:
Beginning 10,093 7,625 21,843
Ending $ 16,819 $ 10,093 $ 7,625
See Notes to Financial Statements.
<PAGE>
JEFFERSON-PILOT LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
Note 1. Nature of Operations and Significant Accounting Policies
Nature of operations: The Company is a wholly-owned subsidiary
of Jefferson-Pilot Corporation and operates exclusively in the
life insurance industry. Life insurance, accident and health
insurance and annuities are currently marketed to individuals
and businesses primarily in the United States. In May 1995, the
Company assumed certain life insurance and annuity business of
Kentucky Central Life Insurance Company ("KCL") in an assumption
reinsurance transaction as disclosed in Note 2.
Basis of presentation: The accompanying financial statements
have been prepared in accordance with generally accepted
accounting principles ("GAAP"). The Company also submits
financial statements to insurance industry regulatory
authorities. Those financial statements are prepared on the
basis of statutory accounting practices ("SAP") and are
significantly different from financial statements prepared in
accordance with generally accepted accounting principles.
A comparison of statutory basis net income and capital and
surplus to the amounts included in the financial statements is
presented in Note 7, along with a description for the principal
differences between SAP and GAAP.
Use of estimates: The preparation of financial statements in
accordance with GAAP requires management to make estimates and
assumptions affecting the reported amounts of assets and
liabilities, disclosures of contingent assets and liabilities as
of the date of the financial statements and the reported amounts
of revenue and expenses for the reporting period. Actual
results and outcomes can differ from those estimates.
Management considers available facts and knowledge of existing
circumstances when establishing estimated amounts included in
the financial statements. While it does not generally expect
significant near-term changes in estimated amounts reflected in
the accompanying financial statements, operating in the life
insurance industry requires management to utilize historical
experience and assumptions about future events and circumstances
in order to develop estimates of material reported amounts and
disclosures. Included among the material (or potentially
material) reported amounts and disclosures that require
extensive use of estimates are (1) fair values of assets
received and liabilities assumed in assumption transactions, (2)
fair values of investments in securities and other financial
instruments, (3) asset valuation allowances, (4) policy
liabilities, (5) deferred policy acquisition costs and value of
insurance in force, (6) liabilities for pension and other
postretirement benefits, (7) liabilities for potential
assessments of additional income taxes relating to prior years
and (8) the potential effects of resolving litigated matters.
Estimates regarding all of the preceding are inherently subject
to change and are reassessed periodically.
Cash and cash equivalents: The Company includes with cash and
cash equivalents its holdings of highly liquid investments which
either mature within three months of the date of acquisition or
contain an investor put option that can be exercised at par
within 90-day intervals. The Company routinely maintains cash
deposits with financial institutions in amounts that exceed
federally-insured limits, but has not experienced any loss of
principal related to such deposits.
<PAGE>
Note 1. Nature of Operations and Significant Accounting Policies (Continued)
Investments in debt and equity securities: The Company's
investments in debt securities include notes, bonds, collateralized
mortgage obligations, convertible and other debt instruments, and
redeemable preferred stocks. Investments in equity securities
include common and nonredeemable preferred stocks.
The Company adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") 115 "Accounting for Certain
Investments in Debt and Equity Securities" effective January 1,
1994. SFAS 115 applies to equity securities having readily
determinable fair values and to debt securities. Securities
under its scope must be classified for financial reporting
purposes as either 1) securities held to maturity, stated at
amortized cost; 2) trading securities, stated at fair value with
unrealized gains and losses reflected in income; or 3)
securities available for sale, stated at fair value with net
unrealized gains and losses included in a separate component of
stockholder's equity, net of deferred income tax effect.
SFAS 115 establishes criteria for classifying debt securities as
held to maturity or trading and requires debt securities not
otherwise classified to be accounted for as available for sale.
Equity securities with readily determinable fair values are
required to be classified as either trading or available for
sale. Except for those included in a trading portfolio,
individual securities that experience other-than-temporary
declines in value to amounts less than amortized cost must be
adjusted to a new cost basis, with a corresponding charge to
earnings.
In connection with the adoption of SFAS 115, the Company
classified debt securities that it has both the positive intent
and ability to hold until maturity as held to maturity. Other
debt securities and all marketable equity securities were
classified as available for sale. Prior to adopting SFAS 115,
all debt securities were stated at amortized cost less
allowances for other-than-temporary declines in value. Debt
securities classified as available for sale were adjusted to
aggregate fair value as of January 1, 1994 as required by SFAS
115. Equity securities held by the Company were already stated
at market prior to adoption of SFAS 115 and therefore were not
adjusted.
Amortization of premiums and accrual of discounts on investments
in debt securities are reflected in earnings over the
contractual terms of the investments in a manner that produces a
constant effective yield. Realized gains and losses on
dispositions of securities are determined by the
specific-identification method.
Fair values of debt and equity securities have been determined
using values obtained from independent pricing services and
discounted cash flow techniques, as considered appropriate based
on consideration of relevant investment characteristics.
Mortgage and policy loans: Mortgage loans on real estate are
stated at unpaid balances, net of allowances for unrecoverable
amounts. Policy loans are stated at their unpaid balances.
<PAGE>
Note 1. Nature of Operations and Significant Accounting Policies (Continued)
During 1995, the Company adopted SFAS 114 "Accounting by
Creditors for Impairment of a Loan". SFAS 114, as amended by
SFAS 118, requires that certain impaired loans be reported at
the net present value of expected future cash flows, the loan's
observable market price or, for collateral dependent loans, the
fair value of the underlying collateral. Adoption of SFAS 114
did not have a significant effect on the financial statements
for 1995.
Real estate and other investments: Real estate not acquired by
foreclosure is stated at cost less accumulated depreciation.
Real estate acquired by foreclosure is stated at the lower of
depreciated cost or fair value minus estimated costs to sell.
Real estate is depreciated principally by the straight-line
method over estimated useful lives generally ranging from 30 to
40 years for buildings. Other investments are stated at equity,
or the lower of cost or market, as appropriate.
Property and equipment: Property and equipment are stated at
cost and depreciated principally by the straight-line method
over their estimated useful lives, generally 30 to 50 years for
buildings and approximately 10 years for other property and
equipment.
Deferred policy acquisition costs and value of insurance in
force: The costs of acquiring new business, including
commissions, certain costs of underwriting and issuing policies
and certain agency office expenses, all of which vary with and
are primarily related to the production of new business, have
been deferred.
For traditional life insurance policies, the deferred costs are
amortized over the premium paying periods of the related
contracts using the same assumptions about anticipated premium
revenue that are used to compute liabilities for future policy
benefits. For universal life and annuity products, these costs
are amortized at a constant rate based on the present value of
the estimated future gross profits to be realized over the terms
of the contracts, not to exceed 25 years.
Value of insurance in force represents the actuarially
determined present value of anticipated profits to be realized
from life insurance and annuity business acquired, using the
same assumptions used to value the related liabilities where
appropriate. Value of insurance in force relating to the KCL
transaction was determined using a risk-adjusted discount rate.
Value of insurance in force is amortized over the related
contract periods, using current crediting rates to accrete
interest and a constant rate based on the present value of
expected future profits to amortize.
The carrying amounts of deferred policy acquisition costs and
value of insurance in force are adjusted for amounts that would
have been recognized if realized gains and losses and net
unrealized holding gains or losses on debt securities classified
as available for sale had actually been realized. Both deferred
policy acquisition costs and value of insurance in force are
reviewed periodically to determine that the unamortized portion
does not exceed expected recoverable amounts. No impairment
adjustments have been reflected in earnings of any year
presented.
<PAGE>
Note 1. Nature of Operations and Significant Accounting Policies (Continued)
Separate accounts: Separate accounts are assets and liabilities
associated with certain contracts for which investment income
and investment gains and losses accrue directly to the contract
holders. The assets of the separate accounts are stated at
value and are not subject to any claims which may arise out of
any other business of the Company.
Recognition of revenue: Premiums on traditional life insurance
products are reported as revenue when received unless received
in advance of the due date. Benefits and expenses are provided
against earned premium revenue in a manner which recognizes
profits over the estimated lives of the insurance contracts.
Premiums on accident and health insurance are reported as
earned, over the contract period. A reserve is provided for the
portion of premiums written which relate to unexpired coverage
terms.
Revenue from universal life-type and annuity products includes
charges for the cost of insurance, for initiation and
administration of the policy, and for surrender of the policy.
Revenue from these products is recognized in the year assessed
to the policyholder, except that any portion of an assessment
which relates to services to be provided in future years is
deferred and recognized over the period during which services
are provided.
Future policy benefits: Liabilities for future policy benefits
on traditional life and accident and health insurance are
computed by the net level premium valuation method based on
assumptions about future investment yield, mortality, morbidity
and termination. Estimates about future circumstances are based
principally on the Company's own historical experience and
provide for possible unfavorable deviations.
Policyholder contract deposits: Policyholder contract deposits
consist of policy values that accrue to holders of universal
life-type contracts and annuities. The liability is determined
using the retrospective deposit method and does not include a
provision for possible future assessments against policyholders.
Recognition of benefits and expenses: Benefits and expenses,
other than deferred policy acquisition costs, related to
traditional life and accident and health insurance products are
recognized when incurred in a manner designed to match them with
related premiums and spread income recognition over expected
policy lives. For universal life-type and annuity products,
benefits include interest credited to policyholders' accounts,
which is recognized as it accrues.
Policy and contract claims: The liability for policy and
contract claims consists of the estimated amount payable for
claims reported but not yet settled, claims incurred during the
year but reported subsequent to the balance sheet date, and an
estimate of claims incurred but not reported, which is based on
the Company's historical experience adjusted for trends and
circumstances. Management believes that the recorded liability
is sufficient to provide for the associated claims adjustment
expenses.
<PAGE>
Note 1. Nature of Operations and Significant Accounting Policies (Continued)
Reinsurance balances and transactions: Reinsurance receivables
include amounts related to paid benefits and estimated amounts
related to unpaid policy and contract claims, future policy
benefits and policyholder contract deposits. The cost of
reinsurance is accounted for over the terms of the underlying
reinsured policies using assumptions consistent with those used
to account for the policies.
Participating policies: Participating life policies approximate
the following percentages of ordinary life insurance in force
and ordinary life insurance premium revenue as of December 31,
1995, 1994 and 1993 and for the years then ended:
1995 1994 1993
Ordinary life insurance in force 6% 12% 13%
Ordinary life premium revenue 21 22 23
The amount of dividends to be paid on participating policies is
determined annually by the Board of Directors. Anticipated
dividends are accounted for as a planned contractual benefit in
computing the value of future policy benefits. Estimated
amounts of policy dividends for the succeeding twelve months are
based on the current scale, while estimated dividends applicable
to later years are based on the dividend scale which was in
effect when the policies were issued.
Advertising costs: Advertising costs are expensed as incurred.
Advertising expense approximated $1.2 million in 1995, $1.0 million
in 1994 and $1.0 million in 1993.
Income taxes: The Company is included in the consolidated
life/nonlife federal income tax return filed by its parent
company. Income taxes reflected in the accompanying financial
statements have been determined on a separate-company basis.
Deferred income taxes are recorded on the differences between
the tax bases of assets and liabilities and the amounts at which
they are reported in the financial statements. Recorded amounts
are adjusted to reflect changes in income tax rates and other
tax law provisions as they become enacted.
Reclassifications: The Company's policy is to reclassify
certain amounts reported in prior years' financial statements
when necessary to conform with the presentations adopted in the
current year. These reclassifications have no effect on net
income or stockholder's equity of the prior years.
<PAGE>
Note 1. Nature of Operations and Significant Accounting Policies (Continued)
New accounting pronouncements: In March 1995, the Financial
Accounting Standards Board ("FASB") issued SFAS 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" which will be effective in 1996. SFAS
121 establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and
goodwill relating both to such assets that are to be held and
used and to long-lived assets and certain identifiable
intangibles that are to be disposed of. The Company has not yet
completed its analysis of the effects, if any, that initial
application of SFAS 121 might have on its financial statements.
Note 2. Assumption Reinsurance Transaction
On May 31, 1995, the Company assumed certain life insurance and
annuity business of KCL in a transaction which was accomplished
through an assumption reinsurance agreement. KCL has operated
under the control of the Kentucky Insurance Commissioner since
February 1993. The assumption reinsurance agreement was part of
a plan of rehabilitation for KCL that was approved by the court
of jurisdiction in August 1994 and subsequently appealed. Upon
execution of the agreement, assets consisting primarily of cash,
debt securities, policy loans and receivables with aggregate
fair value of $874 million were transferred to the Company and
the Company assumed liabilities with aggregate fair value of
$1.096 billion. The difference between the fair values of
assets received and liabilities assumed was recorded as value of
insurance in force, representing the actuarially determined
present value of anticipated profits to be realized from the
business, using a risk-adjusted discount rate.
Further participation options remaining available to
approximately 4,000 KCL policyholders may result in future
adjustment to the asset and liability balances related to the
KCL transaction, and to the Company's policy value enhancement
under the assumption reinsurance agreement. If 100% of such
policyholders elected further participation, approximately $116
million of additional policy liabilities would result. To the
extent such policyholders opt against further participation, the
Company will refund related policy amounts with interest. The
Company has recorded approximately $78 million, which is
included with other liabilities, pending resolution of the
policyholder option process. Policyholder subsidies provided by
participating guaranty associations, which are intended in part
to mitigate the unfavorable impact of surrenders, do not become
effective before February 1, 1996. After that date, the
policyholder withdrawal rate may increase. Management does not
expect either of these unresolved circumstances to have a
material effect on the Company's financial position or results
of operations.
<PAGE>
Note 3. Investment Information
Changes during 1995 and 1994 in amounts affecting net unrealized gains
included in the separate component of stockholder's equity, reduced by
deferred income taxes, are as follows (in thousands):
Net Unrealized Gains (Losses)
Debt Equity
Securities Securities Total
Effect of adopting SFAS 115 as of January 1, 1994:
Increase in stated amount of securities $ 100,797 $ - $ 100,797
Reduction of deferred policy acquisition
costs (15,235) - (15,235)
Increase in deferred income tax liabilities (29,947) - (29,947)
Increase in net unrealized gains included
in stockholder's equity 55,615 - 55,615
Changes during year ended December 31, 1994:
Decrease in stated amount of securities (169,540) (105,435) (274,975)
Increase in deferred policy acquisition costs 25,526 - 25,526
Decrease in deferred income tax liabilities 50,405 37,871 88,276
Decrease in net unrealized gains included in
stockholder's equity (37,994) (67,564) (105,558)
Net unrealized gains on equity securities
held by the Company as of December 31, 1993 - 308,037 308,037
Net unrealized gains (losses) on securities
available for sale as of December 31, 1994 (37,994) 240,473 202,479
Changes during year ended December 31, 1995:
Increase (decrease) in stated amount of
securities 241,034 (92,748) 148,286
Reduction of value of insurance in force
and deferred policy acquisition costs (41,180) - (41,180)
(Increase) decrease in deferred income
tax liabilities (64,896) 25,714 (39,182)
Increase (decrease) in net unrealized gains
included in stockholder's equity 134,958 (67,034) 67,924
Net unrealized gains on securities available
for sale as of December 31, 1995 $ 96,964 $ 173,439 $ 270,403
<PAGE>
Note 3. Investment Information (Continued)
Aggregate amortized cost, aggregate fair value (stated amount) and gross
unrealized gains and losses pertaining to securities classified as
available for sale as of December 31, 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
Available for Sale
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
<S> <C> <C> <C> <C>
U. S. Treasury obligations and direct
obligations of U. S. Government
agencies $ 302,678 $ 29,807 $ - $ 332,485
Federal agency issued
collateralized
mortgage obligations 1,107,289 60,701 (189) 1,167,801
Obligations of states and political
subdivisions, including special
revenue obligations 18,664 991 (46) 19,609
Corporate obligations 926,561 64,363 (2,182) 988,742
Corporate private-labeled
collateralized
mortgage obligations 194,091 16,047 (3) 210,135
Redeemable preferred stocks 11,800 586 (134) 12,252
Subtotal, debt securities 2,561,083 172,495 (2,554) 2,731,024
Equity securities 157,848 273,870 (823) 430,895
Securities available for sale $ 2,718,931 $ 446,365 $ (3,377) $ 3,161,919
</TABLE>
<PAGE>
Note 3. Investment Information (Continued)
Aggregate amortized cost (stated amount), aggregate fair value and gross
unrealized gains and losses pertaining to debt securities classified as
held to maturity as of December 31, 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
Held to Maturity
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
<S> <C> <C> <C> <C>
Obligations of states and political
subdivisions, including special
revenue obligations $ 23,537 $ 107 $ (184) $ 23,460
Corporate obligations 1,737,628 97,163 (12,039) 1,822,752
Debt securities held to maturity $ 1,761,165 $ 97,270 $ (12,223) $ 1,846,212
</TABLE>
Aggregate amortized cost, aggregate fair value (stated amount) and gross
unrealized gains and losses pertaining to securities classified as available
for sale as of December 31, 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
Available for Sale
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
<S> <C> <C> <C> <C>
U. S. Treasury obligations and
direct obligations of U. S.
Government agencies $ 421,392 $ 8,230 $ (13,831) $ 415,791
Federal agency issued collater-
alized mortgage obligations 389,486 229 (28,011) 361,704
Obligations of states and political
subdivisions, including special
revenue obligations 11,143 18 (1,394) 9,767
Corporate obligations 549,324 2,219 (33,675) 517,868
Corporate private-labeled collater-
alized mortgage obligations 87,592 2,385 (3,000) 86,977
Redeemable preferred stocks 17,467 95 (2,007) 15,555
Subtotal, debt securities 1,476,404 13,176 (81,918) 1,407,662
Equity securities 247,223 376,499 (10,705) 613,017
Securities available for sale $ 1,723,627 $ 389,675 $ (92,623) $ 2,020,679
</TABLE>
<PAGE>
Note 3. Investment Information (Continued)
Aggregate amortized cost (stated amount), aggregate fair value and gross
unrealized gains and losses pertaining to debt securities classified as
held to maturity as of December 31, 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
Held to Maturity
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
<S> <C> <C> <C> <C>
Federal agency issued collateralized
mortgage obligations $ 509,741 $ - $ (58,027) $ 451,714
Obligations of states and political
subdivisions, including special
revenue obligations 31,705 684 (1,275) 31,114
Corporate obligations 1,398,600 13,524 (96,817) 1,315,307
Debt securities held to maturity $ 1,940,046 $ 14,208 $ (156,119) $ 1,798,135
</TABLE>
Aggregate amortized cost and aggregate fair value of debt securities as of
December 31, 1995, according to contractual maturity date, are as indicated
below (in thousands). Actual future maturities will differ from the
contractual maturities shown because the issuers of certain debt securities
have the right to call or prepay the amounts due the Company, with or without
penalty.
<TABLE>
<CAPTION>
Available for Sale Held to Maturity
Amortized Fair Amortized Fair
Cost Value Cost Value
<S> <C> <C> <C> <C>
Due in one year or less $ 11,264 $ 11,349 $ 111 $ 116
Due after one year through five years 226,633 243,308 43,289 38,663
Due after five years through ten years 625,540 670,343 348,804 359,467
Due after ten years through twenty years 192,842 211,753 292,150 304,354
Due after twenty years 140,521 148,184 7,623 8,092
Amounts not due at single maturity date 1,352,483 1,433,835 1,069,188 1,135,520
2,549,283 2,718,772 1,761,165 1,846,212
Redeemable preferred stocks 11,800 12,252 - -
$2,561,083 $2,731,024 $1,761,165 $1,846,212
</TABLE>
<PAGE>
Note 3. Investment Information (Continued)
The Company's investment policy requires it to maintain a
diversified, high average quality debt securities portfolio and
imposes limits on holdings of lower quality securities,
including those with heightened risk-reward exposure. Credit
exposure is regularly monitored on an overall basis and from
industry, geographic and individual issuer perspectives.
Exposure limits are reduced as credit quality declines. When
credit quality declines to the extent that limits are violated,
the affected holdings must be promptly conformed to limits or
Finance Committee approval must be sought. Current investment
policy limits the Company's investments in equity securities and
real estate to a prescribed percentage of statutory surplus plus
asset valuation reserve. Duration/cash flow characteristics of
fixed income investments are compared with those of insurance
liabilities to ascertain that durations are prudently managed.
Only fixed-income investments back the Company's life insurance
liabilities and cash flow tests are regularly performed.
While the Company's investment policy permits the use of
derivative financial instruments such as futures contracts and
interest rate swaps in conjunction with specific direct
investments, the Company has not historically employed such
instruments to alter investment or liability positions. During
1995, the Company established a portfolio of trading securities
for the primary purpose of writing covered call options in
expectation of enhanced total returns from option premiums,
market appreciation and dividends received. The proceeds
received from covered call options was not material and the net
unrealized holding gain included in 1995 income approximated
$500 thousand.
The Company's investment policy relating to collateralized
mortgage obligations ("CMOs") focuses on actively traded, less
volatile issues that produce relatively stable cash flows. CMO
holdings as of December 31, 1995 consist predominately of the
least volatile PAC and sequential tranches of federal agency
issues. Due to the high quality and liquid nature of the CMO
portfolio, the Company believes the impairment risks associated
with these securities are no greater than those applicable to
direct agency or corporate issues.
The Company's investments in debt and equity securities consist
primarily of a diversified portfolio. Debt securities
considered less than investment grade approximated 2.8% of the
debt securities portfolio as of December 31, 1995. Debt
securities with fair value approximating $6 million are on
deposit with or for states in which the Company conducts life
insurance operations.
At December 31, 1995, the recorded investment in loans that are
considered to be impaired under SFAS 114 was $78 million, for
which the related allowance for credit losses is $12 million.
The average recorded investment in impaired loans during the
year ended December 31, 1995 was approximately $79 million. For
the year ended December 31, 1995, the Company recognized
interest income on impaired loans of $7.9 million using the cash
basis method. Recorded investments in impaired loans and
related interest income in 1994 and 1993 were less than the
amounts as of and for the year ended December 31, 1995.
<PAGE>
Note 3. Investment Information (Continued)
The Company's mortgage loan portfolio is comprised primarily of
conventional real estate mortgages collateralized by retail
(54%), apartment (9%), hotel (12%) and office (13%) properties.
Mortgage loan underwriting standards emphasize the credit status
of a prospective borrower, quality of the underlying collateral
and conservative loan-to-value relationships. Speculative
lending arrangements presenting heightened risk-reward exposure
comprise an insignificant percentage of the portfolio. About
66% of stated mortgage loan balances as of December 31, 1995 are
due from borrowers in South Atlantic and East South Central
states, with another 16% due from borrowers in West South Central
states. No other geographic region represents as much as 10% of
December 31, 1995 mortgage loans. Delinquent loans outstanding as
of December 31, 1995 approximate $4 million and the Company has
provided a valuation allowance of $27 million against the entire
mortgage portfolio. Real estate acquired by foreclosure is carried
at $3.5 million, net of allowances of $.9 million.
The details of investment income, net of investment expenses,
for the three years ended December 31, 1995 follow (in thousands):
Year Ended December 31,
1995 1994 1993
Interest on bonds and other debt
instruments $ 311,676 $ 259,681 $ 242,975
Dividends on preferred stocks 4,411 5,050 7,409
Dividends on common stocks 22,945 28,025 26,890
Interest on mortgage loans 74,009 62,599 57,139
Interest on policy loans 13,761 12,498 12,978
Real estate income 8,735 9,099 9,642
Other investment income 10,751 8,635 7,420
Investment income 446,288 385,587 364,453
Investment expenses (25,371) (20,286) (10,754)
Net investment income $ 420,917 $ 365,301 $ 353,699
Investment expenses include salaries, taxes, interest, expenses of maintaining
and operating investment real estate, real estate depreciation and other
allocated costs of investment management and administration.
<PAGE>
Note 3. Investment Information (Continued)
The details of realized gains (losses) for the three years ended
December 31, 1995 follow (in thousands):
Year Ended December 31,
1995 1994 1993
Bonds and other debt instruments $ (5,826) $ (9,311) $ 15,343
Preferred stocks (479) 844 2,980
Common stocks 59,549 45,146 22,879
Other (18,208) 4,404 (870)
Realized investment gains $ 35,036 $ 41,083 $ 40,332
Information about proceeds and gross realized gains and losses
on securities transactions during 1995 and 1994 follows (in thousands):
1995 1994
Available Held Available Held
for Sale to Maturity for Sale to Maturity
Proceeds:
From sales $ 438,857 $ - $ 756,114 $ 7,431
From maturities,
calls and redemptions 152,792 24,412 93,756 122,589
$ 591,649 $ 24,412 $ 849,870 $ 130,020
Gross realized:
Gains $ 39,814 $ 1,490 40,345 1,709
Losses (14,336) (36) (23,353) (329)
Net realized gains $ 25,478 $ 1,454 $ 16,992 $ 1,380
A held-to-maturity security with amortized cost of $5 million was
transferred to the available-for-sale category during 1995 and securities
with amortized cost of $7.76 million were sold during 1994, both due to
significant declines in the creditworthiness of the issuers. Related
recognized losses were not significant.
<PAGE>
Note 3. Investment Information (Continued)
On November 30, 1995, the Company transferred certain debt
securities between the held-to-maturity and available-for-sale
classifications concurrent with the adoption of additional SFAS
115 implementation guidance, which permitted a one-time
reassessment of the appropriateness of classification of
securities held. This reassessment resulted in
available-for-sale debt securities with fair value of $392.8
million and amortized cost of $380.0 million being transferred
to the held-to-maturity classification. The excess of
transfer-date fair value of individual securities over their
amortized cost, and the related unrealized net holding gain,
will be amortized over the period to maturity. In addition,
held-to-maturity debt securities with an amortized cost of
$620.0 million and a fair value of $633.0 million were
transferred to the available-for-sale classification, increasing
unrealized net holding gains by $13.0 million.
Realized gains on held-to-maturity securities represent call
premiums. During 1995 and 1994, the Company transferred
securities classified as available for sale to the defined
benefit pension plans of the Company and its affiliates.
Equity securities with cost of $7.1 million and value of $33.4
million were transferred during 1995, and gains of $26.3 million
were recognized. The transfer in 1994 included debt securities
with amortized cost of $48.9 million and equity securities with
a cost of $7.8 million. The securities transferred in 1994 had
an aggregate value of $75 million on the date of transfer and a
gain of $18.3 million was recognized.
During 1993, the Company sold selected debt securities when
calls or prepayments were considered likely. Proceeds from such
sales represented $109 million. Most of the realized gains on
debt securities in 1993 represent call premiums. Realized gains
on debt securities for 1993 are stated net of losses approximating
$8 million related to declines in value considered other than temporary.
Note 4. Deferred Policy Acquisition Costs and Value of Insurance in Force
Information about deferred policy acquisition costs for the
three years ended December 31, 1995 follows (in thousands):
Year Ended December 31,
1995 1994 1993
Balance, beginning $ 323,015 $ 272,314 $ 254,787
Deferral:
Commissions 61,810 43,369 27,737
Other 20,293 19,306 14,873
82,103 62,675 42,610
Amortization (27,567) (22,265) (25,083)
Net deferral reflected in expenses 54,536 40,410 17,527
Adjustment related to unrealized
(gains) losses on certain
securities (Note 3) (36,071) 10,291 -
Balance, ending $ 341,480 $ 323,015 $ 272,314
<PAGE>
Note 4. Deferred Policy Acquisition Costs and Value of Insurance in Force
(Continued)
Information about the value of insurance in force related to the
KCL transaction for the year ended December 31, 1995 follows (in
thousands):
Balance initially recorded $ 223,883
Interest accretion 7,800
Amortization (26,422)
Net amortization reflected in expenses (18,622)
Adjustment related to unrealized gains on
certain securities (Note 3) (15,400)
Balance, ending $ 189,861
Expected approximate amortization percentages relating to the
value of insurance in force related to the KCL transaction for
the next five years are as follows:
Year Percent
1996 12.0%
1997 10.4
1998 10.0
1999 9.8
2000 9.8
Note 5. Policy Liabilities Information
The liability for future policy benefits associated with
ordinary life insurance policies issued by the Company ("J-P
Life") has been determined using interest rate assumptions which
vary by year of issue and range from 3% to 9.9% for
participating policies, remaining level for all durations. For
nonparticipating policies, assumed interest rates grade
uniformly over 20 to 30 years with initial rates ranging from 3%
to 9.75% and ultimate rates ranging from 3% to 6%. Interest
rate assumptions for weekly premium, monthly debit and term life
insurance products generally fall within the same ranges as
those pertaining to individual life insurance policies.
Interest rate assumptions used to value the business assumed in
the KCL transaction fall within the ranges of rates applied in
the valuation of comparable J-P Life products.
<PAGE>
Note 5. Policy Liabilities Information (Continued)
Credited interest rates for universal life-type products
approximated 6.35% in 1995 and 6.5% in 1994 and 1993. Credited
rates for comparable products assumed in the KCL transaction
approximated J-P Life's 1995 rates. For annuity products
issued by J-P Life, credited rates generally ranged from 5.2% to
6.35% during 1995, 5% to 6.5% during 1994 and 5.0% to 6.25%
during 1993. Credited rates for annuity products assumed from
KCL fall within the 1995 range applicable to J-P Life products.
The Company's assumed mortality rates are generally based on
experience multiples applied to select and ultimate tables
commonly used in the industry. Withdrawal assumptions for
individual life insurance policies issued by the Company from
1948 to 1972 are based on the Company's historical experience
and generally range between Linton's A and B tables. For
policies issued by the Company in 1972 and later years,
withdrawal rate assumptions are based on historical company
experience and vary by issue age, type of coverage and policy
duration. Mortality and withdrawal assumptions pertaining to
the KCL business are similar to those applied to J-P Life policies.
Activity in the liabilities for accident and health and disability
insurance benefits, including reserves for future policy benefits
and unpaid claims and claim adjustment expenses is summarized below.
Substantially all of the claims and claim adjustment expenses incurred
related to each respective current year.
Year Ended December 31,
1995 1994 1993
(In thousands)
Balance as of January 1 $ 266,046 $ 262,164 $ 247,202
Less reinsurance recoverables 12,524 11,312 8,358
Net balance as of January 1 253,522 250,852 238,844
Amount incurred 330,324 308,949 305,648
Amount paid, related to:
Current year 242,483 228,233 220,682
Prior years 81,966 78,046 72,958
324,449 306,279 293,640
Net balance as of December 31 259,397 253,522 250,852
Plus reinsurance recoverables 14,262 12,524 11,312
Balance as of December 31 $ 273,659 $ 266,046 $ 262,164
Balance as of December 31 included with:
Future policy benefits $ 130,435 $ 116,558 $ 106,640
Policy and contract claims 143,224 149,488 155,524
$ 273,659 $ 266,046 $ 262,164
<PAGE>
Note 6. Securities Sold Under Repurchase Agreements
During 1995 and 1994, the Company sold U. S. Treasury
obligations under repurchase agreements involving broker and
dealer counterparties. The repurchase agreements are accounted
for as financing transactions and the related obligations,
together with accrued interest, have been included with
liabilities in the balance sheets.
As of December 31, 1995, securities carried at fair value of
$196 million with amortized cost of $188 million were subject to
open repurchase agreements having initial maturities of 30 to 60
days and weighted average remaining maturities of 19 days. As
of December 31, 1994, securities carried at fair value of $266
million with amortized cost of $273 million were subject to open
repurchase agreements having initial maturities of 120 days and
weighted average remaining maturities of 68 days. The maximum
repurchase liability at any month-end was $264.7 million during
1995 and $267 million during 1994. The weighted average
interest rate of repurchase liabilities outstanding as of
December 31, 1995 and 1994 was 5.8%. The weighted average
interest rate on month-end repurchase liabilities was 6.07%
during 1995 and 4.34% during 1994. Interest expense totaled
$15.72 million on average month-end repurchase liabilities of
$258.9 million during 1995 and $9.6 million on average month-end
liabilities of $221 million during 1994.
Note 7. Statutory Financial Information
A comparison of net income and statutory capital and surplus
determined on the basis of statutory accounting practices
prescribed or permitted by regulatory authorities ("SAP") to net
income and stockholder's equity on the basis of generally
accepted accounting principles ("GAAP") follows (in thousands):
Statutory Accounting Practices
1995 1994 1993
Net income for the year ended December 31:
Before gain recognized upon transfer of
subsidiary to parent company $ 179,210 $ 158,298 $ 138,893
Gain recognized upon transfer of
subsidiary to parent company in
an extraordinary dividend 275,652 - -
Reported net income $ 454,862 $ 158,298 $ 138,893
Statutory capital and surplus as of
December 31 $ 830,236 $ 971,553 $ 945,157
Generally Accepted Accounting Principles
1995 1994 1993
Net income for the year ended December 31:
Before cumulative effect of change in
accounting principle $ 201,469 $ 194,502 $ 183,989
Cumulative effect of change in
accounting principle,
net of tax benefit of $10,194 - - (19,790)
Reported net income $ 201,469 $ 194,502 $ 164,199
Stockholder's equity as of December 31 $1,529,571 $1,429,542 $1,435,098
<PAGE>
Note 7. Statutory Financial Information (Continued)
The Company prepares financial statements on the basis of SAP
prescribed or permitted by the insurance department of the State
of North Carolina. Prescribed SAP include a variety of
publications of the National Association of Insurance Commissioners
("NAIC") as well as state laws, regulations and administrative rules.
Permitted SAP encompass all accounting practices not so prescribed.
The impact of any permitted accounting practices on statutory capital
and surplus is not material.
The principal differences between SAP and GAAP as they relate to
the financial statements are (1) policy acquisition costs are
expensed as incurred under SAP, whereas they are deferred and
amortized under GAAP, (2) the value of acquired insurance in
force is not capitalized under SAP but is under GAAP, (3)
amounts collected from holders of universal life-type and
annuity products are recognized as premiums when collected under
SAP, but are initially recorded as contract deposits under GAAP,
with cost of insurance recognized as revenue when assessed and
other contract charges recognized over the periods for which
services are provided, (4) the classification and carrying
amounts of investments in certain securities are different under
SAP than under GAAP, (5) the criteria for providing asset
valuation allowances, and the methodologies used to determine
the amounts thereof, are different under SAP than under GAAP,
(6) the timing of establishing certain reserves, and the
methodologies used to determine the amounts thereof, are
different under SAP than under GAAP, (7) no provision is made
for deferred income taxes under SAP, and (8) certain assets are
not admitted for purposes of determining surplus under SAP.
The General Statutes of North Carolina limit the amount of
dividends that the Company may pay annually without first
obtaining regulatory approval. Generally, the limitations are
based on statutory net income for the preceding year and
statutory capital and surplus at the end of the preceding year.
During 1995, the Company paid the parent company the maximum
amount of dividends permitted without approval. Also during
1995, the Company transferred its interest in a wholly-owned
subsidiary, the principal asset of which is NationsBank
Corporation common stock, to the parent company in an
extraordinary dividend approved by the North Carolina Department
of Insurance. For SAP reporting purposes, the Company carried
the subsidiary at statutory equity value of approximately $327
million on the transfer date with an unrealized gain of $276
million included in surplus. Upon transfer, the Company
recognized a gain in its statutory statement of operations and a
dividend equal to carrying amount. The dividend was recorded at
cost in the Company's GAAP financial statements and no gain was
recognized. Because of the 1995 extraordinary dividend, the
Company must obtain regulatory approval for 1996 dividends.
Risk-Based Capital ("RBC") requirements promulgated by the NAIC
became effective for life insurance companies in 1993. Under
RBC requirements, life insurers must maintain minimum
capitalization levels that are determined based on formulas
incorporating credit risk pertaining to its investments,
insurance risk, interest rate risk and general business risk.
As of December 31, 1995, the Company's adjusted capital and
surplus exceeded its Authorized Control Level RBC.
<PAGE>
Note 8. Income Taxes
Income taxes as reported in the statements of income are as
follows (in thousands):
Year Ended December 31,
1995 1994 1993
Current expense $ 98,112 $ 88,905 $ 94,263
Deferred expense (benefit) (669) 6,619 (6,048)
Income taxes before cumulative
effect of change
in accounting principle 97,443 95,524 88,215
Deferred income tax benefit reported
with cumulative effect of change
in accounting principle - - (10,194)
Aggregate reported income taxes $ 97,443 $ 95,524 $ 78,021
A reconciliation of the federal income tax rate to the Company's
effective income tax rate, computed based on income before
cumulative effect of change in accounting principle, follows:
Year Ended December 31,
1995 1994 1993
Federal income tax rate 35.0 % 35.0 % 35.0 %
Reconciling items:
Tax exempt interest and dividends
received deduction (1.8) (2.3) (2.4)
Other, net (0.6) 0.2 (0.2)
Effective income tax rate 32.6 % 32.9 % 32.4 %
<PAGE>
Note 8. Income Taxes (Continued)
The tax effects of temporary differences that result in significant
deferred tax assets and deferred tax liabilities are as follows (in thousands):
December 31,
1995 1994
Deferred tax assets:
Difference in policy liabilities $ 170,891 $ 91,139
Capitalization of acquisition costs
for income tax purposes,
net of amortization 42,987 20,353
Obligation for postretirement benefits
other than pensions 8,793 9,501
Other deferred tax assets 11,448 10,491
Gross deferred tax assets 234,119 131,484
Deferred tax liabilities:
Net unrealized gains on securities
available for sale 144,046 104,864
Deferral of policy acquisition costs
and value of insurance in force
for financial reporting purposes,
net of amortization 200,382 109,453
Deferred gain recognition for income
tax purposes 15,474 6,375
Other deferred tax liabilities 15,570 13,631
Gross deferred tax liabilities 375,472 234,323
Net deferred tax liabilities included
in balance sheets $ (141,353) $ (102,839)
Federal income tax returns for all years through 1990 have been
examined by the Internal Revenue Service and are closed.
Settlements and other resolutions during 1993 resulted in the
recovery of taxes and interest previously paid for years through
1987 and reductions of amounts provided for potential
assessments involving subsequent years. In the opinion of
management, recorded income tax liabilities adequately provide
for all remaining open years.
Under prior federal income tax law, one-half of the excess of a
life insurance company's income from operations over its taxable
investment income was not taxed, but was set aside in a special
tax account designated as "Policyholders' Surplus". The Company
has approximately $91 million of untaxed "Policyholders'
Surplus" on which no payment of federal income taxes will be
required unless it is distributed as a dividend, or under other
specified conditions. The Company does not believe that any
significant portion of the account will be taxed in the
foreseeable future and no related deferred tax liability has
been recognized. If the entire balance of the account became
taxable under the current federal rate the tax would approximate
$32 million.
<PAGE>
Note 9. Retirement Benefit Plans
The Company has defined benefit pension plans covering
substantially all employees and full time life insurance agents.
The plans are noncontributory and are funded through group
annuity contracts issued by the Company. The plans provide
benefits based on annual compensation and years of service. The
funding policy is to contribute annually no more than the
maximum amount deductible for federal income tax purposes. The
assets of the plans are those of the related contracts,
approximately $30.9 million of which are on deposit in the
general account of the Company as of December 31, 1995. Plan
assets approximating $189.6 million are held in separate
accounts established by the Company in 1994.
The components of pension expense were as follows (in thousands):
Year Ended December 31,
1995 1994 1993
Service cost, benefits earned during
the year $ 3,961 $ 4,490 $ 5,064
Interest cost on projected benefit
obligation 9,542 10,084 9,127
Actual return on plan assets (30,531) (11,016) (9,380)
Net amortization and deferral 16,403 (2,825) (4,291)
Pension (income) expense $ (625) $ 733 $ 520
The following table sets forth the funded status of the plans
and amounts recognized in the balance sheets (in thousands):
December 31,
1995 1994
Actuarial present value of benefit obligation:
Vested benefit obligation $ 172,757 $ 153,899
Accumulated benefit obligation $ 174,469 $ 155,439
Projected benefit obligation $ 177,836 $ 171,710
Plan assets at fair value 220,465 195,456
Plan assets in excess of projected
benefit obligation 42,629 23,746
Unrecognized net gain (30,106) (11,101)
Unrecognized net asset (16,747) (18,280)
Unrecognized prior service cost 7,777 8,121
Prepaid pension cost $ 3,553 $ 2,486
<PAGE>
Note 9. Retirement Benefit Plans (Continued)
Certain assumptions used in determining the funded status of the
plans were as follows:
1995 1994 1993
Discount rate 7.00 % 7.75 % 6.50 %
Expected long-term rate of return
on plan assets 8.00 8.00 8.00
Rate of increase in compensation levels 5.00 5.75 4.25
The increase in projected benefit obligation attributable to the
reduction in discount rate in 1995 was offset primarily by the
combined effects of reducing the assumed rate of compensation
increase and increasing the assumed turnover rate.
Benefits provided to retirees by annuity contracts issued by the
Company approximated $9.9 million in 1995, $8.9 million in 1994
and $8.2 million in 1993.
The Company sponsors contributory health care and life insurance
benefit plans for eligible retired employees, qualifying retired
agents and certain surviving spouses. Substantially all of the
Company's employees and qualifying agents may become eligible
for these benefits if they reach retirement age or become
disabled while employed by the Company and meet certain
years-of-service requirements. Most of the postretirement
health care and life insurance benefits are provided through the
Company and, until December 1993, were funded as payments were
made to retirees or their beneficiaries. In December 1993, the
Company began contributing to a welfare benefit trust from which
future benefits will be paid.
Prior to 1993, the cost of providing postretirement health care
and life insurance benefits was recognized in the year paid. In
1993, the Company adopted SFAS No. 106 "Employers' Accounting for
Postretirement Benefits Other Than Pensions". SFAS 106 requires
accrual of the cost of providing postretirement benefits during
the employees' active service periods and covers all
postretirement benefits other than pensions that an employer
expects to provide to current and former employees. The Company
elected to immediately recognize the accumulated obligation for
postretirement benefits under SFAS 106, which represents the
actuarial present value of future benefits attributable to the
service of eligible employees to January 1, 1993. Accordingly,
the statement of income for 1993 includes a charge of
$19,790,000, representing initial recognition of the accumulated
benefit obligation of $29,984,000, net of deferred tax benefit of $10,194,000.
<PAGE>
Note 9. Retirement Benefit Plans (Continued)
The components of nonpension postretirement benefits expense for
1995 and 1994 were as follows (in thousands):
Health Care Benefits Life Insurance Benefits
1995 1994 1995 1994
Service cost, benefits earned
during the year $ 321 $ 349 $ 205 $ 227
Interest cost on accumulated
benefit obligation 783 760 660 662
Actual return on plan assets (117) ( 47) (151) ( 59)
Net amortization and deferral (849) (786) (234) (182)
Nonpension postretirement
benefits expense $ 138 $ 276 $ 480 $ 648
The following table sets forth the funded status of the Company's
postretirement health care and life insurance plans as of December 31, 1995
and 1994 (in thousands):
Life
Health Care Benefits Insurance Benefits
1995 1994 1995 1994
Plan assets at fair value $ 1,756 $ 1,299 $ 2,509 $ 1,684
Accumulated postretirement
benefit obligation:
Retirees and surviving spouses 7,650 7,427 7,578 6,478
Fully eligible active 618 579 900 845
Other active participants 3,004 2,244 1,726 1,248
11,272 10,250 10,204 8,571
Accumulated postretirement
benefit obligation in
excess of plan assets (9,516) (8,951) (7,695) (6,887)
Unrecognized (benefit) prior
service cost (6,667) (7,453) (1,960) (2,194)
Unrecognized net (gain) loss (612) (1,798) 1,327 137
Accrued postretirement
benefit cost $ (16,795) $ (18,202) $ (8,328) $ (8,944)
<PAGE>
Note 9. Retirement Benefit Plans (Continued)
Certain assumptions used in determining the funded status of the
plans were as follows:
1995 1994 1993
Discount rate 7% 8% 7%
Expected long-term rate of
return on plan assets 9 9 7
Effective April 1, 1993, the Company changed the eligibility
criteria of its postretirement health care and life insurance
plans to require employees and qualifying agents to complete 15
years of service after the age of 45 to be eligible for these
benefits. Employees and agents hired before January 1, 1994,
who were age 50 or older when hired, will be permitted to
qualify for these benefits at age 65 with 10 years of service.
Effective January 1, 1994 the Company changed its postretirement
health care plan to limit annual benefit increases to a maximum
rate of 4%. Since future health care cost trend rates in excess
of 4% have been assumed in determining the accumulated
postretirement benefit obligation as of December 31, 1995,
future health care cost increases exceeding 4% per year will
have no effect on the Company's obligation. The preceding
changes resulted in the establishment of negative prior service
cost during 1993, which is being amortized on a straight-line
basis over the average remaining period of service to full
eligibility of active employees who are not fully eligible.
Effective January 1, 1995, the Company adopted a defined
contribution retirement plan covering all employees and
full-time agents who have completed one year of service and
attained age 21. The plan is intended to qualify under Section
401(k) of the Internal Revenue Code and includes a profit
sharing component. The Company matches a portion of participant
contributions by contributing to a fund which acquires and holds
shares of Jefferson-Pilot Corporation's common stock for the
account of participants. Profit sharing contributions ranging
up to 4% of participant earnings are made to the Jefferson-Pilot
Corporation common stock fund annually based on established
performance and/or profitability goals. Plan assets are
invested under a group variable annuity contract issued by the
Company. The Company expensed approximately $1.0 million
related to the plan during 1995.
Note 10. Reinsurance
The Company attempts to reduce its exposure to significant
individual claims by reinsuring portions of certain individual
life insurance policies and annuity contracts written. During
1995, the Company continued to follow a practice of reinsuring
the portion of an individual life insurance risk that exceeds $1
million, with an additional $250,000 retention for accidental
death benefits. Individual life insurance risks assumed in the
KCL transaction that exceed $350,000 are also reinsured.
The Company also attempts to reduce exposure to losses that may
result from unfavorable events or circumstances by reinsuring
certain levels and types of term life and accident and health
insurance risks underwritten. The Company assumes portions of
the life and accident and health risks underwritten by certain
other insurers on a limited basis, but amounts related to
assumed reinsurance are not material to the financial statements.
<PAGE>
Note 10. Reinsurance (Continued)
Reinsurance contracts do not relieve the Company from its
primary obligation to policyholders. Therefore, the failure of
a reinsurer to discharge its reinsurance obligations could
result in a loss to the Company. The Company regularly
evaluates the financial condition of its reinsurers and monitors
concentrations of credit risk related to reinsurance activities.
No significant credit losses resulted from the Company's
reinsurance activities during the three years presented.
Amounts due from reinsurers as reported in the balance sheets
are summarized below (in thousands):
December 31,
1995 1994
Resulting from reinsurance activities
pursuant to J-P Life's
historical practices:
Life and annuity $ 6,489 $ 7,317
Accident and health 14,820 12,815
21,309 20,132
Resulting from reinsurance activities
associated with insurance in force
assumed from KCL during 1995 11,922 -
Amounts due from reinsurers as reported
in balance sheets $ 33,231 $ 20,132
The effects of reinsurance on total premiums and other
considerations and total benefits are as follows (in thousands):
Year Ended December 31,
1995 1994 1993
Premiums and other considerations,
before effect of reinsurance ceded $ 807,076 $ 670,150 $ 645,451
Less premiums and other
considerations ceded 31,958 15,007 17,988
Net premiums and other considerations $ 775,118 $ 655,143 $ 627,463
Benefits, before reinsurance
recoveries $ 774,011 $ 641,767 $ 610,662
Less reinsurance recoveries 25,965 13,911 9,201
Net benefits $ 748,046 $ 627,856 $ 601,461
<PAGE>
Note 11. Disclosures About Fair Values of Financial Instruments
The fair values of cash, cash equivalents, balances due on
account from agents, reinsurers and others, and accounts payable
approximate their carrying amounts as reflected in the balance
sheets due to their short-term availability or maturity. Assets
and liabilities related to the Company's separate accounts are
reported at fair value in the accompanying balance sheets.
The fair values of debt and equity securities have been
determined from nationally quoted market prices and by using
values supplied by independent pricing services and discounted
cash flow techniques. These fair values are disclosed together
with carrying amounts in Note 3.
The fair value of the mortgage loan portfolio, carried at $894.0
million and $680.6 million as of December 31, 1995 and 1994, has
been estimated by discounting expected future cash flows using
the interest rate currently offered for similar loans. The
estimated fair value of mortgage loans approximated $977 million
and $698 million as of December 31, 1995 and 1994.
The fair value of policy loans outstanding, carried at $237.6
million and $206.4 million as of December 31, 1995 and 1994, has
been estimated using a current risk-free interest rate applied
to expected future loan repayments projected based on historical
repayment patterns. The estimated fair value of policy loans
approximated $240 million and $190 million as of December 31,
1995 and 1994.
Annuity contracts issued by the Company do not generally have
defined maturities. Fair values of the Company's liabilities
under annuity contracts, the carrying amounts of which are
included with policyholder contract deposits in the accompanying
balance sheets, are estimated to equal the cash surrender values
of the underlying contracts. The stated amount and estimated
fair value of the Company's liability under annuity contracts in
the accumulation phase totaled $1.342 billion and $1.279 billion
as of December 31, 1995 ($1.081 billion and $1.039 billion as of
December 31, 1994).
The fair values of dividend accumulations, experience-rated
refund liabilities and other policyholder funds on deposit
approximate their carrying amount of $293 million and $202
million as of December 31, 1995 and 1994 since they are either
subject to current withdrawal or are of a relatively short-term
nature. The estimated fair value of liabilities under
supplementary contracts not involving life contingencies, which
are combined with dividend accumulations and other policyholder
funds on deposit, are estimated to approximate carrying amounts
of $23 million as of December 31, 1995 and $22 million as of
December 31, 1994.
The fair values of advances from the parent company approximate
their carrying amounts of $21.0 million as of December 31, 1994
due to their short-term nature and interest rates approximating
those currently available. Similarly, the fair value of the
liability for securities sold under repurchase agreements
approximates its carrying amounts of $196.0 million and $266.8
million as of December 31, 1995 and 1994, which amounts include
accrued interest.
The fair value of outstanding commitments to fund mortgage loans
and to acquire debt securities in private placement
transactions, which are not reflected in the balance sheets,
approximated $61 million and $65 million as of December 31, 1995
and 1994, respectively.
<PAGE>
Note 11. Disclosures About Fair Values of Financial Instruments
(Continued)
Except for the portfolio of equity securities classified as
trading in the accompanying 1995 balance sheet, the Company has
not maintained financial instruments for trading purposes.
Note 12. Commitments and Contingent Liabilities
The Company routinely enters into commitments to extend credit
in the form of mortgage loans and to purchase certain debt
instruments for its investment portfolio in private placement
transactions. All such commitments outstanding at December 31,
1995 were in the normal course of the Company's investment
activities and pertained to future investments which are similar
in nature to those it currently holds.
The Company leases electronic data processing equipment and
field office space under noncancelable operating lease
agreements. The lease terms generally range from three to five
years. Annual rent expense approximated $6 million in 1995 and
in 1994, and $8 million in 1993. Future rental commitments are
expected to be slightly higher than current year amounts.
The Company is a defendant in a proposed class action suit
alleging deceptive practices, fraudulent and negligent
misrepresentation and breach of contract in the sale of certain
life insurance policies using policy performance illustrations
which used then current interest or dividend rates and insurance
charges and illustrated that some or all of the future premiums
might be paid from policy values rather than directly by the
insured. The claimant's actual policy values exceeded those
illustrated on a guaranteed basis, but were less than those
illustrated on a then current basis due primarily to the
interest credit rates having declined along with the overall
decline in interest rates in recent years. Unspecified
compensatory and punitive damages, costs and equitable relief
are sought. The case is in the preliminary stages of pleadings
and discovery. While management is unable to make a meaningful
estimate of the amount or range of loss that could result from
an unfavorable outcome, management believes that it has made
appropriate disclosures to policyholders as a matter of
practice, and intends to vigorously defend.
The Company is involved in other legal and administrative
proceedings and claims of various types, some of which include
claims for punitive damages. In recent years the life insurance
industry has experienced increased litigation in which large
jury awards including punitive damages have occurred. Because
of the considerable uncertainties that exist, the Company cannot
predict the outcome of pending or future litigation with
certainty. Based on consultation with the Company's legal
advisers, management believes that resolution of pending legal
proceedings will not have a material adverse effect on the
Company's financial position or liquidity.
<PAGE>
Note 13. Supplemental Cash Flow Information
Under the terms of the assumption reinsurance agreement to
acquire the majority of the life insurance business of Kentucky
Central Life Insurance Company, liabilities were assumed as
follows (in thousands):
Fair value of noncash assets acquired $ 931,891
Cash received from assumption reinsurance 164,488
Liabilities assumed $ 1,096,379
The accompanying 1995 statement of stockholder's equity reflects
a noncash dividend in the amount of $72,364,000 representing the
Company's equity in a wholly-owned subsidiary transferred to the
Company's parent company during 1995 (see Note 7).
Cash payments for interest on financing arrangements totaled
$17,078,000 in 1995, $8,083,000 in 1994 and $309,000 in 1993.
Cash payments for income taxes totaled $74 million (net of
refunds of $5 million), $98 million and $103 million in 1995,
1994 and 1993, respectively.
<PAGE>
PART C
OTHER INFORMATION
Page in
Statement of
Item 24. Financial Statements and Exhibits Additional Information
(a) Financial Statements.
Included in Part B of the Registration Statement:
Jefferson-Pilot Separate Account A
Statements of Condition at December 31, 1995
and 1994 B-13
Statements of Operations for the Years Ended
December 31, 1995, 1994 and 1993 B-15
Statements of Changes in Net Assets for
the Years Ended December 31, 1995, 1994
and 1993 B-15
Notes to Financial Statements B-15
Report of Independent Certified Public B-21
Accountant
Statements of Depositor - Jefferson-Pilot
Life Insurance Company
Balance Sheets at December 31, 1995 and
1994 B-22
Statements of Income for the Years
Ended December 31, 1995, 1994 and
1993 B-24
Statements of Stockholder's Equity for the
Years Ended December 31, 1995, 1994
and 1993 B-25
Statements of Cash Flows for the
Years Ended December 31, 1995, 1994
and 1993 B-27
Notes to Financial Statements B-29
Report of Independent Certified Public Accountants B-57
<PAGE>
(b) Exhibits.
(1) Resolution of the Board of Directors of Depositor authorizing the
establishment of Registrant. (incorporated by reference to the Form N-4
registration statement of Jefferson-Pilot Separate Account A, (the
"Registrant") filed with the Securities and Exchange Commission (the
"Commission") (File No. 33-11084).
(2) None
(3) Distribution Agreement between the Registrant and Jefferson-Pilot
Investor Services, Inc., dated June 29, 1994 (incorporated by reference
to the Registrant's Form N-4 registration statement filed with the
Commission on July 1, 1994.) (File No. 33-11084).
(4) (a) Form of variable annuity contract ("Alphaflex"). (incorporated by
reference to the Registrant's Form N-4 registration statement filed with
the Commission on July 1, 1994.) (File No. 33-11084).
(b) Form of variable annuity contract ("Alpha"). (incorporated by
reference to the Registrant's Form N-4 registration statement filed
with the Commission on July 1, 1994.) (File No. 33-11084).
(5) Form of application used with variable annuity (incorporated by
reference to the Registrant's Form N-4 registration statement filed with
the Commission on July 1, 1994.) (File No. 33-11084).
(6) (i) Articles of Incorporation. (incorporated by reference to the
Form N-4 registration statement of the Registrant filed with the Commission
(File No. 33-11084).
(6) (ii) By-Laws (incorporated by reference to Post Effective Amendment
No. 8 to the Registrant's Form N-4 registration statement filed with the
Commission on May 2, 1994.) (File No. 33-11084).
(6) (iii) Articles of Amendment to Restated Charter. (incorporated by
reference to Post Effective Amendment No. 2 to the Registrant's Form N-4,
filed with the Commission on April 29, 1988.) (File No. 33-11084).
(7) None.
(8) None.
(9) Consent and Opinion of Counsel. (incorporated by reference to the
Registrant's Form N-4 registration statement filed with the Commission on
July 1, 1994.) (File No. 33-11084).
(10) Consent of Certified Public Accountants.
(11) None.
(12) None.
(13) None.
(14) Powers of Attorney (incorporated by reference to the Registrant's Form
N-4 registration statement filed with the Commission on July 1, 1994.)
(File No. 33-11084).
<PAGE>
(15)(a) Participation Agreement Among Variable Insurance Products Fund,
Fidelity Distributors Corporation and Jefferson-Pilot Life Insurance
Company. (incorporated by reference to the Registrant's Form N-4
registration statement filed with the Commission on July 1, 1994.)
(File No. 33-11084).
(b) Form of Participation Agreement Among Variable Insurance Products Fund,
II, Fidelity Distributors Corporation and Jefferson-Pilot Life Insurance
Company. (incorporated by reference to the Registrant's Form N-4
registration statement filed with the Commission on July 1, 1994.)
(File No. 33-11084).
(c) Form of Participation Agreement Among Alexander Hamilton Variable
Insurance Trust, Alexander Hamilton Capital Management, Inc. and Jefferson-
Pilot Life Insurance Company.
(d) Form of Participation Agreement Among MFS Variable Insurance Trust,
Jefferson-Pilot Life Insurance Company and Massachusetts Financial Services
Company.
(e) Form of Participation Agreement Among The Alger American Fund,
Jefferson-Pilot Life Insurance Company and Fred Alger and Company,
Incorporated.
Item 25. Directors and Officers of Jefferson-Pilot Life Insurance Company*
DIRECTORS
Thomas M. Belk E. S. Melvin
Belk Stores Services, Inc. PO Box 26400
2801 West Tyvola Road Greensboro, NC 27420
Charlotte, NC 28217-4500
Kenneth C. Mlekush
William E. Blackwell
William Porter Payne
Edwin. B. Borden Atlanta Committee for the
Borden Manufacturing Company Olympic Games
PO Drawer P 250 Williams Street, Suite 6000
Goldsboro, NC 27533 PO Box 1996
Atlanta, Georgia 30301-1996
Donald S. Russell, Jr.
William H. Cunningham Attorney at Law
The University of Texas System One Tiftgreen Circle
601 Colorado, O Henry Hall Columbia, SC 29223
Austin, TX 78701
Robert H. Spilman
C. Randolph Ferguson Bassett Furniture Industries,
PO Box 626
Dennis R. Glass Bassett, VA 24055
Robert G. Greer David A. Stonecipher
Tanglewood Bank
PO Box 27710 Martha Ann Walls
Houston, TX 77227 Southern Newspapers, Inc.
1050 Wilcrest Drive
George W. Henderson, III Houston, TX 77042
3330 W. Friendly Ave.
Greensboro, NC 27410 E. J. Yelton
Hugh L. McColl, Jr.
NationsBank Corporation
NC 1-007-5801
Charlotte, NC 28255
<PAGE>
OFFICERS*
David A. Stonecipher - President and Chief Executive Officer
C. Randolph Ferguson - Executive Vice President - Group
Dennis R. Glass - Executive Vice President, Chief Financial Officer and
Treasurer
John D. Hopkins - Executive Vice President and General Counsel
Kenneth C. Mlekush - Executive Vice President - Individual
E. Jay Yelton - Executive Vice President - Investments
Reggie D. Adamson - Senior Vice President - Finance
Darryl D. Andrews - Senior Vice President - Information Systems
Byron C. Burkehart - Senior Vice President - Group Marketing
Charles Phillip Elam II - Senior Vice President and Annuity Actuary
John C. Ingram - Senior Vice President - Securities
Curtis R. Lashley, M.D. - Senior Vice President - Client Services
Frank G. Mahoney - Senior Vice President - Annuity and Investment Products
Donna D. Newton - Senior Vice President - Group Managed Care and
Underwriting
Edward W. O'Neil - Senior Vice President and Group Actuary
Hal B. Phillips, Jr. - Senior Vice President and Chief Actuary
Hoyt J. Phillips - Senior Vice President - Human Resources
James T. Ponder - Senior Vice President - Special Marketing
Ronald H. Ridlehuber - Senior Vice President - Independent Marketing
William L. Seawell, II - Senior Vice President - Ordinary Marketing
James R. Abernathy - Vice President - Mortgage Loan
Loretta Abrams - Vice President - New Business/Underwriting
Jay C. Bugg - Vice President - Independent Marketing Sales
Charles R. Carrick - Vice President - Independent Marketing Sales
Dean F. Chatlain - Vice President and Tax Counsel
Arnold A. Culbreth, Jr. - Vice President - Corporate Affairs
Gary Dace - Vice President - Financial Institutions
33045 Hamilton Court, Farminton Hills, MI 48334
Glynn H. Downs - Vice President and Manager - Financial Forecasting
Jerry D. Driver, Jr. - Vice President - Home Service Sales
Clifton W. Eason - Vice President and Associate Actuary
Thomas C. Eusebio - Vice President - Individual Health Operations
Alan R. Fields - Vice President - Human Resources
O. Louis Gentry - Vice President - Group Administration and Systems
Gregg A. Hansen - Vice President and Assistant General Counsel
Daniel L. Hindman - Vice President - Group Marketing
Daniel A. Hewitt, III - Vice President - Ordinary Sales
Clyde Honaker, Jr. - Vice President and Site Manager - Lexington
Kincaid Towers, Lexington, KY 40507
Vernon A. Horne - Vice President - Individual Marketing Services
James C. Howe - Vice President - Independent Marketing Sales
Ward B. Hurlburt - Vice President - Group Medical Director
C. Lindsay Ingram - Vice President - Individual Operations
Richard A. Kapanka - Vice President and Associate General Counsel
Kevin M. Lenihan - Vice President - Group Claims
Valerie W. Loftin - Vice President and Assistant General Counsel
Robert T. Martin - Vice President - Home Service Operations
Marvin Maynard - Vice President - Information Systems
Richard McCarter - Vice President - Agencies
33045 Hamilton Court, Farminton Hills, MI 48334
W. Hardee Mills, Jr. - Vice President - Securities
Wilbur B. McKee, Jr. - Vice President - Administrative Services
Hector C. Newton, III - Vice President - Ordinary Sales
Neal A. Pickett, Jr. - Vice President and Medical Director
Michael Quinlivan - Vice President - Pension
Robert A. Reed - Vice President, Secretary and Associate General Counsel
N. Earl Ridout - Vice President - Provider Relations
Carlos A. Rios - Vice President - Individual Marketing Administration
John L. Roberson - Vice President - Individual Health Administration
Jimmy W. Shoffner - Vice President - Accounting
Richard T. Stange - Vice President and Deputy General Counsel
Stephen A. Stanley - Vice President and Associate Actuary
Francis A. Sutherland - Vice President and Insurance Counsel
Stuart G. Tugman, Jr. - Vice President - Advanced Sales
E. Patton Walden - Vice President - Ordinary Sales
James D. Pendry - Regional Vice President - Group
Lennie I. Whittemore - Regional Vice President - Group
I. Neal Adams - Second Vice President - Group Administration
Thomas L. Bass, Jr. - Second Vice President - Management Development
Douglas H. Bray - Second Vice President - Group Contracts
H. Lusby Brown - Second Vice President - Securities
Joe E. Davis - Second Vice President and Associate Actuary
James Dimidio - Second Vice President - Group Underwriting
John J. Dougherty - Second Vice President - Information Services
Donna Drew - Second Vice President - Annuity Processing
33045 Hamilton Court, Farminton Hills, MI 48334
W. Roderic Edens - Second Vice President and Associate Actuary
Edward Engle - Second Vice President - Associate Actuary
33045 Hamilton Court, Farminton Hills, MI 48334
John R. Evans - Second Vice President - Client Services Career
Gretchen A. Flatto - Second Vice President and Associate Actuary
H. Ted Frye - Second Vice President and Associate Actuary
David A. Gerrish - Second Vice President - Mass Marketing
Wayne D. Harris - Second Vice President - Client Services IMO
S. Edwards Hines, Jr. - Second Vice President - Conferences and Incentives
Charles E. Hoover - Second Vice President - Information Services
Bonita G. Johnson - Second Vice President and Associate Actuary
Philip T. Johnson - Second Vice President - Accounting
Kristine K. Kattman - Second Vice President and Associate Actuary
John A. Kilgore - Second Vice President - Employee Benefits and Human
Resources Administration
Vicky A. Larkin - Second Vice President - Human Resources
Randall S. Macon - Second Vice President - LifeComp
James E. McDonald, Jr. - Second Vice President - Securities
Keith Moore - Second Vice President - Information Systems
Leah S. Ogden - Second Vice President - Securities
Ronald M. Pittman - Second Vice President - Human Resources
Reginald J. Roberson - Second Vice President - Individual Marketing Services
Alan Roman - Second Vice President - Agencies
33045 Hamilton Court, Farminton Hills, MI 48334
Michael O. Russell - Second Vice President - Mortgage Loan
Peter E. Sanders - Second Vice President - Information Services
Robert Scheppegrell - Second Vice President - Group Planning
Lance Schulz - Second Vice President - Associate Actuary
Kincaid Towers, Lexington, KY 40507
John J. Shea - Second Vice President - Information Services
F. Keith Sink - Second Vice President - Agent Services
William M. Stephens - Second Vice President - Mortgage Loan
Dennis J. Swanick - Second Vice President - Accounting
Willie K. Tart - Second Vice President - Information Services
Thomas N. Taylor - Second Vice President and Associate Actuary
Lynne Y. Tuggle - Second Vice President - Information Services
Thomas P. Vann - Second Vice President and Associate Actuary
Gregory D. Walker - Second Vice President - Securities
Paul F. Warnock - Second Vice President and Associate Actuary
Robert E. Whalen - Second Vice President - Securities
Joseph L. Wheeler - Second Vice President - Client Services Home Service
Robert B. Willett - Second Vice President and Associate Actuary
Randall Woock - Second Vice President - Associate Actuary
33045 Hamilton Court, Farminton Hills, MI 48334
L. Wayne Wood - Second Vice President - Information Services
James S. Woodward, III - Second Vice President - Marketing Development
* The Principal Business Address for each Director and Officer of the
Depositor is, unless otherwise indicated, 100 North Greene Street, Greensboro,
North Carolina 27401
<PAGE>
Item 26. Persons Controlled By or Under Common Control With the Depositor
or Registrant
The Depositor established the Registrant by action of its Board
of Directors pursuant to North Carolina law. The Depositor is a
wholly-owned subsidiary of Jefferson-Pilot Corporation, which is
a publicly owned company. Both of these companies are North
Carolina companies.
Separate financial statements are filed for the Registrant. All
of Jefferson-Pilot Corporation's subsidiaries' financial
statements are included in Jefferson-Pilot Corporation's
consolidated financial statements.
The following is a list of corporations controlled by
Jefferson-Pilot Corporation.
Percent of
Voting Securities
State of Owned by Jefferson-
Name Incorporation Pilot Corporation
Jefferson-Pilot Life North Carolina 100%
Insurance Company
JP Investment Management North Carolina 100%
Company
Jefferson-Pilot Investor North Carolina 100%
Services, Inc.
Jefferson - Pilot North Carolina 100%
Communications Company
Alexander Hamilton Life Michigan 100%
Insurance Company of America
Omitted from the list are subsidiaries of Jefferson-Pilot Corporation and
the other companies listed which, considered in the aggregate as a single
subsidiary, would not constitute a significant subsidiary. Because none of
the companies listed is a subsidiary of Registrant, only the financial
statements of Registrant are filed.
Item 27. Number of Contract Holders
As of April 15, 1996, the number of contract owners of these qualified
contracts of Jefferson-Pilot Separate Account A was 1,134. On that same
date, the number of contract holders of these non-qualified contracts of
Jefferson-Pilot Separate Account A was 402.
<PAGE>
Item 28. Indemnification
The Jefferson-Pilot Corporation, pursuant to resolution of its Board of
Directors, agrees to indemnify the officers and directors of Jefferson-Pilot
Investor Services, Inc. and Jefferson-Pilot Life Insurance Company against
any liability to the extent permitted by law. That resolution reads as
follows:
1. The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, including all appeals, by reason of
the fact that he/she is or was a director, officer, or employee of the
Corporation, or is or was serving at the request of the Corporation as
a director, trustee, officer, employee, or agent of another
Corporation, partnership, joint venture, trust, or other enterprise, or
as a committee member, trustee or administrator under an employee
benefit plan (all such persons hereinafter sometimes referred to as
"employee"), against expenses (including attorneys' fees), judgments,
decrees, fines, penalties, and amounts paid in settlement actually and
reasonably incurred by such employee in connection with such action,
suit or proceeding, except that no indemnification shall be made in
respect of any liability or litigation expense which such employee may
incur on account of that employee's activities which were at the time
taken, known or believed by that employee to be clearly in conflict with
the best interests of the Corporation. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create
a presumption that the employee knew or believed the activities were
clearly in conflict with the best interests of the Corporation.
2. Any indemnification under Section 1 (unless ordered by a court)
shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the employee is
proper in the circumstances because the employee did not know or
believe, at the time, that the activities were clearly in conflict
with the best interests of the Corporation. Such determination shall
be made (a) by a majority vote of directors acting at a meeting at
which a quorum is present, or (b) if such quorum is not obtainable
(or even of obtainable), and a majority of directors so direct, by
independent legal counsel (compensated by the Corporation) in a written
opinion, or (c) by the affirmative vote of the holders of a majority of
the shares entitled to vote in the election of directors.
3. Expenses of each employee indemnified hereunder incurred in
defending a civil, criminal, administrative, or investigative action,
suit, or proceeding (including all appeals), or threat thereof, may be
paid by the Corporation in advance of the final disposition of such
action, suit or proceeding as authorized by the Board of Directors,
upon receipt of an undertaking by or on behalf of the employee, to
repay such amount unless it shall ultimately be determined that the
employee is entitled to be indemnified by the Corporation.
4. The indemnification provided by the Resolution shall not be deemed
exclusive of any other rights to which those seeking indemnification
may be entitled as a matter of law, any agreement, vote of
shareholders, any insurance purchased by the Corporation, or otherwise,
both as to action in the employee's official capacity and as to action
in another capacity while holding such office, and shall continue as
to any employee who has ceased to be director, officer, or employee and
shall inure to the benefit of the heirs, executors, and administrators
of such an employee.
5. The Corporation may purchase and maintain insurance on behalf of
any employee who is or was a director, officer, or employee of the
Corporation, or is or was serving at the request of the Corporation as
a director, trustee, officer, or employee of another corporation,
partnership, joint venture, trust, or other enterprise against any
liability asserted against the employee and incurred by the employee
in any such capacity, or arising out of the employee's status as such,
whether or not the Corporation would have the power to indemnify the
employee against such liability under the provisions of this Resolution
or of the North Carolina Business Corporation Act.
The North Carolina law applicable to indemnification of directors and
officers reads as follows:
<PAGE>
Part 5. Indemnification
55-8-50 POLICY STATEMENT AND DEFINITIONS (a) It is the public policy of this
State to enable corporations organized under this Chapter to attract and
maintain responsible, qualified directors, officers, employees and agents,
and, to that end, to permit corporations organized under this Chapter to
allocate the risk of personal liability of directors, officers, employees
and agents through indemnification and insurance as authorized in this Part.
(b) Definitions in this Part:
(1) "Corporation" includes any domestic or foreign predecessor entity of
a corporation in a merger or other transaction in which the predecessor's
existence ceased upon consummation of the transaction.
(2) "Director" means an individual who is or was a director of a
corporation or an individual who, while a director of a corporation, is
or was serving at the corporation's request as a director, officer,
partner, trustee, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan, or
other enterprise. A director is considered to be serving an employee
benefit plan at the corporation's request if his duties to the corporation
also impose duties on, or otherwise involve services by, him to the plan or
to participants in or beneficiaries of the plan. "Director" includes,
unless the context requires otherwise, the estate of personal
representatives of a director.
(3) "Expenses" means expenses of every kind incurred in defending a
proceeding, including counsel fees.
(4) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine including an excise tax assessed with respect to an employee
benefit plan, or reasonable expenses incurred with respect to a proceeding.
(5) "Official capacity" means (i) when used with respect to a director, the
office of director in a corporation: and (ii) when used with respect to an
individual other than a director, as contemplated in G.S. 55-8-56 the
office in a corporation held by the officer or the employment or agency
relationship undertaken by the employee or agent on behalf of the
corporation. "Official capacity" does not include service for any other
foreign or domestic corporation or any partnership, joint venture, trust,
employee benefit plan, or other enterprise.
(6) "Party" includes an individual who was, is, or is threatened to be
made a named defendant or respondent in a proceeding.
(7) "Proceeding" means by threatened, pending, or completed action, suit
or proceeding, whether civil, criminal, administrative, or investigative
and whether formal or informal.
<PAGE>
55-8-51 AUTHORITY TO INDEMNIFY (a) Except as provided in subsection (d),
a corporation may indemnify an individual made a party to a proceeding because
he is or was a director against liability incurred in the proceeding if:
(1) He conducted himself in good faith; and
(2) He reasonably believed (i) in the case of conduct in his official
capacity with the corporation, that his conduct was in its best interests;
and (ii) in all other cases, that his conduct was at least not opposed to
its best interests; and
(3) In the case of any criminal proceeding, he had no reasonable cause to
believe his conduct was unlawful.
(b) A director's conduct with respect to an employee benefit plan for a
purpose he reasonably believed to be in the interests of the participants
in and beneficiaries of the plan is conduct that satisfies the requirement
of subsection (a)(2)(ii).
(c) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of no contest or its equivalent is not, of
itself, determinative that the director did not meet the standard of
conduct described in this section.
(d) A corporation may not indemnify a director under this section:
(1) In connection with a proceeding by or in the right of the corporation
in which the director was adjudged liable to the corporation; or
(2) In connection with any other proceeding charging improper personal
benefit to him, whether or not involving action in his official capacity,
in which he was adjudged liable on the basis that personal benefit was
improperly received by him.
(e) Indemnification permitted under this section in connection with a
proceeding by or in the right of the corporation that is concluded without
a final adjudication on the issue of liability is limited to reasonable
expenses incurred in connection with the proceeding.
(f) The authorization, approval or favorable recommendations by the board
of directors of a corporation of indemnification, as permitted by this
section, shall not be deemed an act or corporate transaction in which a
director has a conflict of interest, and no such indemnification shall be
void or voidable on such ground.
55-8-52 MANDATORY INDEMNIFICATION Unless limited by its articles of
incorporation, a corporation shall indemnify a director who was wholly
successful, on the merits or otherwise, in the defense of any proceeding
to which he was a party because he is or was a director of the corporation
against reasonable expenses incurred by him in connection with the proceeding.
<PAGE>
55-8-53 ADVANCE FOR EXPENSES Expenses incurred by a director in defending
a proceeding may be paid by the corporation in advance of the final disposition
of such proceeding as authorized by the board of directors in the specific case
or as authorized or required under any provision in the articles of
incorporation or bylaws or by any applicable resolution or contract upon
receipt of an undertaking by or on behalf of the director to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the corporation against such expenses.
55-8-54 COURT-ORDERED INDEMNIFICATION Unless a corporation's articles of
incorporation provide otherwise, a director of the corporation who is a party
to a proceeding may apply for indemnification to the court conducting the
proceeding or to another court of competent jurisdiction. On receipt of an
application, the court after giving any notice the court considers necessary
may order indemnification if it determines.
(1) The director is entitled to mandatory indemnification under G.S.
55-8-52 in which case the court shall also order the corporation to pay
the director's reasonable expenses incurred to obtain court-ordered
indemnification, or
(2) The director is fairly and reasonably entitled to indemnification in
view of all the relevant circumstances, whether or not he met the standard
of conduct set forth in G.S. 55-8- 51 or was adjudged liable as described
in G.S. 55-8-51(d), but if he was adjudged so liable his indemnification
is limited to reasonable expenses incurred.
55-8-55 DETERMINATION AND AUTHORIZATION OF INDEMNIFICATION (a) A
corporation may not indemnify a director under G.S. 55-8-51 unless authorized
in the specific case after a determination has been made that indemnification
of the director is permissible in the circumstances because he has met the
standard of conduct set forth in G.S. 55-8-51.
(b) The determination shall be made:
(1) By the board of directors by majority vote of a quorum consisting of
directors not at the time parties to the proceeding;
(2) If a quorum cannot be obtained under subdivision (1), by majority vote
of a committee duly designated by the board of directors (in which
designation directors who are parties may participate), consisting solely
of two or more directors not at the time parties to the proceeding;
(3) By special legal counsel (i) selected by the board of directors or its
committee in the manner prescribed in subdivision (1) or (2): or (ii) if a
quorum of the board of directors cannot be obtained under subdivision (1)
and a committee cannot be designated under subdivision (2), selected by
majority vote of the full board of directors (in which selection directors
who are parties may participate); or
(4) By the shareholders, but shares owned by or voted under the control of
directors who are at the time parties to the proceeding may not be voted
on the determination.
(c) Authorization of indemnification and evaluation as to reasonableness
of expenses shall be made in the same manner as the determination that
indemnification is permissible, except that if the determination is made
by special legal counsel, authorization of indemnification and evaluation
as to reasonableness of expenses shall be made by those entitled under
subsection (b)(3) to select counsel.
<PAGE>
55-8-56 INDEMNIFICATION OF OFFICERS, EMPLOYEES, AND AGENTS
Unless a corporation's articles of incorporation provide otherwise:
(1) An officer of the corporation is entitled to mandatory indemnification
under G.S. 55-8-52, and is entitled to apply for court-ordered
indemnification under G.S. 55-8-54, in each case to the same extent as a
director:
(2) The corporation may indemnify and advance expenses under this Part to
an officer, employee, or agent of the corporation to the same extent as to
a director; and
(3) A corporation may also indemnify and advance expenses to an officer,
employee, or agent who is not a director to the extent, consistent with
public policy, that may be provided by its articles of incorporation,
bylaws, general or specific action of its board of directors, or contract.
55-8-57 ADDITIONAL INDEMNIFICATION AND INSURANCE (a) In addition to
and separate and apart from the indemnification provided for in G.S. 55-8-51,
55-8-52, 55-8-54, 55-8-55 and 55-8-56, a corporation may in its articles of
incorporation or bylaws or by contract or resolution indemnify or agree to
indemnify any one or more of its "directors, officers, employees, or agents
against liability and expenses in any proceeding (including without limitation
a proceeding brought by or on behalf of the corporation itself) arising out of
their status as such or their activities in any of the foregoing capacities;
provided, however, that a corporation may not indemnify or agree to indemnify
a person against liability or expenses he may incur on account of his
activities which were at the time taken known or believed by him to be
clearly in conflict with the best interests of the corporation. A corporation
may likewise and to the same extent indemnify or agree to indemnify any person
who, at the request of the corporation, is or was serving as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise or as a
trustee or administrator under an employee benefit plan. Any provision in any
articles of incorporation, bylaw, contract, or resolution permitted under this
section may include provisions for recovery from the corporation of reasonable
costs, expenses, and attorneys' fees in connection with the enforcement of
rights to indemnification granted therein and may further include provisions
establishing reasonable procedures for determining and enforcing the rights
granted therein.
(b) The authorization, adoption, approval, or favorable recommendation
by the board of directors of a public corporation of any provision in any
articles of incorporation, bylaw, contract or resolution, as permitted in
this section, shall not be deemed an act or corporate transaction in which
a director has a conflict of interest, and no such articles of
incorporation or bylaw provision or contract or resolution shall be void
or voidable on such grounds. The authorization, adoption, approval, or
favorable recommendation by the board of directors of a nonpublic
corporation of any provision in any articles of incorporation, bylaw,
contract or resolution, as permitted in this section, which occurred prior
to July 1, 1990, shall not be deemed an act or corporate transaction in
which a director has a conflict of interest, and no such articles of
incorporation, bylaw provision, contract or resolution shall be void or
voidable on such grounds. Except as permitted in G.S. 55-8-31, no such
bylaw, contract, or resolution not adopted, authorized, approved or
ratified by shareholders shall be effective as to claims made or
liabilities asserted against any director prior to its adoption,
authorization, or approval by the board of directors.
<PAGE>
(c) A corporation may purchase and maintain insurance on behalf of an
individual who is or was a director, officer, employee, or agent of the
corporation, or who, while a director, officer, employee, or agent of the
corporation, is or was serving at the request of the corporation as a
director, officer, partner , trustee, employee, or agent of another
foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise, against liability asserted
against or incurred by him in that capacity or arising from his status as
a director, officer, employee, or agent, whether or not the corporation
would have the power to indemnify him against the same liability under any
provision of this act. (Last amended by Ch. 1024.L.'89. eff. 7-1-90.)
55-8-58 APPLICATION OF PART (a) If articles of incorporation limit
indemnification or advance for expenses, indemnification and advance for
expenses are valid only to the extent consistent with the articles.
(b) This Part does not limit a corporation's power to pay or reimburse
expenses incurred by a director in connection with his appearance as a
witness in a proceeding at a time when he has not been made a named
defendant or respondent to the proceeding.
(c) This Part shall not affect rights or liabilities arising out of
acts or omissions occurring before the effective date of this act.
Item 29. Principal Underwriters
(a) Jefferson-Pilot Investor Services, the principal underwriter for the
Registrant, is also the principal underwriter of shares issued by
Jefferson-Pilot Capital Appreciation Fund, Inc. and Jefferson-Pilot
Investment Grade Bond Fund, Inc.
(b)
Name and Principal Positions and Offices
Business Address* with Underwriter
E. Jay Yelton Director
Kenneth C. Mlekush Director
Dennis J. Swanick Treasurer
J. Gregory Poole Secretary
Jimmy W. Shoffner Assistant Treasurer
*All of the addresses are 100 North Greene Street, Greensboro, North Carolina
27401.
<PAGE>
(c)
(1) (2) (3) (4) (5)
Name of Net Compensation Brokerage Compensation
Principal Underwriting on Redemption Commissions
Underwriter Discounts and
Commissions
1995
Jefferson-Pilot $0 $0 $0 $1,345,584
Investor
Services, Inc.
Jefferson-Pilot Investor Services administrators contracts sold by the
Registrant and receives a concession allowance to cover all the expenses
incurred by it relative to sales and administration of these contracts.
The amount shown in column (5) represents this concession allowance.
Item 30. Location of Accounts and Records
Accounts and records required by the 1940 Act and the rules promulgated
thereunder are maintained at 100 North Greene Street, Greensboro, North
Carolina 27401.
Item 31. Management Services
None
Item 32. Undertakings
None
Registrant hereby represents that a no-action letter issued by the Commission
staff to the American Council of Life Insurance, available November 22, 1988,
is being relied upon and the provisions of paragraphs numbered (1) - (4) of
that letter have been complied with.
<PAGE>
EXHIBIT INDEX
Exhibit Description of
No. Exhibit
(3) Principal Underwriting and Service Agreement*
(4)(a) Form of Flexible Premium Deferred Annuity ( Alphaflex )*
(4)(b) Form of Flexible Premium Deferred Annuity ( Alpha )*
(5) Form of Application of Variable Annuity*
(9) Consent and Opinion of Counsel*
(10) Consent of Independent Certified Public Accountants
(14) Powers of Attorney*
(15)(a) Participation Agreement Among Variable Insurance Products Fund,
Fidelity Distributors Corporation and Jefferson-Pilot Life
Insurance Company*
(15)(b) Participation Agreement Among Variable Insurance Products Fund
II, Fidelity Distributors Corporation and Jefferson-Pilot Life
Insurance Company*
(15)(c) Form of Participation Agreement Among Alger American Fund,
Alger Management, Inc. and Jefferson-Pilot Life Insurance
Company
(15)(d) Form of Participation Agreement Among Alexander Hamilton
Variable Insurance Trust, Alexander Hamilton Capital Management,
Inc. and Jefferson-Pilot Life Insurance Company
(15)(e) Form of Participation Agreement Among MFS Variable Insurance
Trust, Massachusetts Financial Services Company and
Jefferson-Pilot Life Insurance Company
* Incorporated by reference to the Form N-4 registration statement of
Jefferson-Pilot Separate Account A filed with the Securities and Exchange
Commission on July 1, 1994 (File No. 33-11084).
<PAGE>
EXHIBIT 10
Consent of Independent Certified Public Accountants
<PAGE>
EXHIBIT (10)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our Firm under the caption "General Information"
in the Statement of Additional Information and under the caption "Experts" in
the Prospectus of Jefferson-Pilot Separate Account A and to the use of our
reports on Jefferson-Pilot Separate Account A, dated February 23, 1996 and
Jefferson-Pilot Life Insurance Company dated February 6, 1996, respectively,
in Post-Effective Amendment No. 2 under the Securities Act of 1933 and
Post-Effective Amendment No. 12 under the Investment Company Act of 1940 to
the Registration Statement (Form N-4) of Jefferson -Pilot Separate Account A.
/s/ McGladrey & Pullen, LLP
Greensboro, NC
April 29, 1996
<PAGE>
EXHIBIT (15)(c)
Participation Agreement Among Alger American Fund, Alger Management, Inc. and
Jefferson- Pilot Life Insurance Company
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 21st day of December, 1995, by and among The Alger
American Fund (the "Trust"), an open-end management investment company
organized as a Massachusetts business trust, Jefferson-Pilot Life Insurance
Company, a life insurance company organized as a corporation under the laws of
the State of North Carolina, (the "Company"), on its own behalf and on behalf
of each segregated asset account of the Company set forth in Schedule A, as
may be amended from time to time (the "Accounts"), and Fred Alger and Company,
Incorporated, a Delaware corporation, the Trust's distributor (the
"Distributor").
WHEREAS, the Trust is registered with the Securities and Exchange Commission
(the "Commission") as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and has an
effective registration statement relating to the offer and sale of the various
series of its shares under the Securities Act of 1933, as amended (the "1933
Act");
WHEREAS, the Trust and the Distributor desire that Trust shares be used as an
investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts to be offered by life
insurance companies which have entered into fund participation agreements with
the Trust (the "Participating Insurance Companies");
WHEREAS, shares of beneficial interest in the Trust are divided into the
following series which are available for purchase by the Company for the
Accounts: Alger American Small Capitalization Portfolio, Alger American
Growth Portfolio, Alger American Income & Growth Portfolio, Alger American
Balanced Portfolio, Alger American MidCap Growth Portfolio, and Alger American
Leveraged AllCap Portfolio;
WHEREAS, the Trust has received an order from the Commission, dated February
17, 1989 (File No. 812-7076), granting Participating Insurance Companies and
their separate accounts exemptions from the provisions of Sections 9(a), 13(a),
15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Portfolios of the
Trust to be sold to and held by variable annuity and variable life insurance
separate accounts of both affiliated and unaffiliated life insurance companies
(the "Shared Funding Exemptive Order");
WHEREAS, the Company has registered or will register under the 1933 Act certain
variable life insurance policies and variable annuity contracts to be issued by
the Company under which the Portfolios are to be made available as investment
vehicles unless an exemption from registration under the 1933 Act is available
and the Trust has been so advised (the "Contracts");
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act unless an exemption from registration under
the 1940 Act is available and the Trust has been so advised;
WHEREAS, the Company desires to use shares of one or more Portfolios as
investment vehicles for the Accounts;
NOW THEREFORE, in consideration of their mutual promises, the parties agree as
follows:
<PAGE>
ARTICLE I.
Purchase and Redemption of Trust Portfolio Shares
1.1. For purposes of this Article I, the Company shall be the Trust's agent
for the receipt from each account of purchase orders and requests for
redemption pursuant to the Contracts relating to each Portfolio, provided that
the Company notifies the Trust of such purchase orders and requests for
redemption by 9:30 a.m. Eastern time on the next following Business Day, as
defined in Section 1.3.
1.2. The Trust shall make shares of the Portfolios available to the
Accounts at the net asset value next computed after receipt of a purchase
order by the Trust (or its agent), as established in accordance with the
provisions of the then current prospectus of the Trust describing Portfolio
purchase procedures. The Company will transmit orders from time to time to
the Trust for the purchase and redemption of shares of the Portfolios. The
Trustees of the Trust (the "Trustees") may refuse to sell shares of any
Portfolio to any person, or suspend or terminate the offering of shares of any
Portfolio if such action is required by law or by regulatory authorities having
jurisdiction or if, in the sole discretion of the Trustees acting in good faith
and in light of their fiduciary duties under federal and any applicable state
laws, such action is deemed in the best interests of the shareholders of such
Portfolio.
1.3. The Company shall pay for the purchase of shares of a Portfolio on
behalf of an Account with federal funds to be transmitted by wire to the
Trust, with the reasonable expectation of receipt by the Trust by 2:00 p.m.
Eastern time on the next Business Day after the Trust (or its agent) receives
the purchase order. Upon receipt by the Trust of the federal funds so wired,
such funds shall cease to be the responsibility of the Company and shall become
the responsibility of the Trust for this purpose. "Business Day" shall mean
any day on which the New York Stock Exchange is open for trading and on which
the Trust calculates its net asset value pursuant to the rules of the
Commission.
1.4. The Trust will redeem for cash any full or fractional shares of any
Portfolio, when requested by the Company on behalf of an Account, at the net
asset value next computed after receipt by the Trust (or its agent) of the
request for redemption, as established in accordance with the provisions of the
then current prospectus of the Trust describing Portfolio redemption procedures.
The Trust shall make payment for such shares in the manner established from
time to time by the Trust. Proceeds of redemption with respect to a Portfolio
will normally be paid to the Company for an Account in federal funds
transmitted by wire to the Company by order of the Trust with the reasonable
expectation of receipt by the Company by 2:00 p.m. Eastern time on the next
Business Day after the receipt by the Trust (or its agent) of the request for
redemption. Such payment may be delayed if, for example, the Portfolio's cash
position so requires or if extraordinary market conditions exist, but in no
event shall payment be delayed for a greater period than is permitted by the
1940 Act. The Trust reserves the right to suspend the right of redemption,
consistent with Section 22(e) of the 1940 Act and any rules thereunder.
<PAGE>
1.5. Payments for the purchase of shares of the Trust's Portfolios by the
Company under Section 1.3 and payments for the redemption of shares of the
Trust's Portfolios under Section 1.4 on any Business Day may be netted against
one another for the purpose of determining the amount of any wire transfer.
1.6. Issuance and transfer of the Trust's Portfolio shares will be by book
entry only. Stock certificates will not be issued to the Company or the
Accounts. Portfolio Shares purchased from the Trust will be recorded in the
appropriate title for each Account or the appropriate subaccount of each
Account.
1.7. The Trust shall furnish, on or before the ex-dividend date, notice to
the Company of any income dividends or capital gain distributions payable on
the shares of any Portfolio of the Trust. The Company hereby elects to receive
all such income dividends and capital gain distributions as are payable on a
Portfolio's shares in additional shares of that Portfolio. The Trust shall
notify the Company of the number of shares so issued as payment of such
dividends and distributions.
1.8. The Trust shall calculate the net asset value of each Portfolio on
each Business Day, as defined in Section 1.3. The Trust shall make the net
asset value per share for each Portfolio available to the Company or its
designated agent on a daily basis as soon as reasonably practical after the
net asset value per share is calculated and shall use its best efforts to
make such net asset value per share available to the Company by 6:30 p.m.
Eastern time each Business Day.
1.9. The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their segregated asset accounts, to the
Fund Sponsor or its affiliates and to such other entities as may be permitted
by Section 817(h) of the Code, the regulations hereunder, or judicial or
administrative interpretations thereof. No shares of any Portfolio will be
sold directly to the general public. The Company agrees that it will use Trust
shares only for the purposes of funding the Contracts through the Accounts
listed in Schedule A, as amended from time to time.
1.10. The Trust agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding materially to those contained in Section
2.11 and Article IV of this Agreement.
<PAGE>
ARTICLE II.
Obligations of the Parties
2.1. The Trust shall prepare and be responsible for filing with the
Commission and any state regulators requiring such filing all shareholder
reports, notices, proxy materials (or similar materials such as voting
instruction solicitation materials), prospectuses and statements of additional
information of the Trust. The Trust shall bear the costs of registration and
qualification of shares of the Portfolios, preparation and filing of the
documents listed in this Section 2.1 and all taxes to which an issuer is
subject on the issuance and transfer of its shares.
2.2. The Company shall distribute such prospectuses, proxy statements and
periodic reports of the Trust to the Contract owners as required to be
distributed to such Contract owners under applicable federal or state law.
2.3. The Trust shall provide such documentation (including a final copy of
the Trust's prospectus as set in type or in camera-ready copy) and other
assistance as is reasonably necessary in order for the Company to print
together in one document the current prospectus for the Contracts issued by the
Company and the current prospectus for the Trust. The Trust shall bear the
expense of printing copies of its current prospectus that will be distributed
to existing Contract owners, and the Company shall bear the expense of printing
copies of the Trust's prospectus that are used in connection with offering the
Contracts issued by the Company.
2.4. The Trust and the Distributor shall provide (1) at the Trust's expense,
one copy of the Trust's current Statement of Additional Information ("SAI") to
the Company and to any Contract owner who requests such SAI, (2) at the
Company's expense, such additional copies of the Trust's current SAI as the
Company shall reasonably request and that the Company shall require in
accordance with applicable law in connection with offering the Contracts issued
by the Company.
2.5. The Trust, at its expense, shall provide the Company with copies of
its proxy material, periodic reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably require for
purposes of distributing to Contract owners. The Trust, at the Company's
expense, shall provide the Company with copies of its periodic reports to
shareholders and other communications to shareholders in such quantity as the
Company shall reasonably request for use in connection with offering the
Contracts issued by the Company. If requested by the Company in lieu thereof,
the Trust shall provide such documentation (including a final copy of the
Trust's
proxy materials, periodic reports to shareholders and other communications to
shareholders, as set in type or in camera-ready copy) and other assistance as
reasonably necessary in order for the Company to print such shareholder
communications for distribution to Contract owners.
<PAGE>
2.6. The Company agrees and acknowledges that the Distributor is the sole
owner of the name and mark "Alger" and that all use of any designation
comprised in whole or part of such name or mark under this Agreement shall
inure to the benefit of the Distributor. Except as provided in Section 2.5,
the Company shall not use any such name or mark on its own behalf or on behalf
of the Accounts or Contracts in any registration statement, advertisement,
sales literature or other materials relating to the Accounts or Contracts
without the prior written consent of the Distributor, which consent shall not
be unreasonably withheld, delayed or conditioned. Upon termination of this
Agreement for any reason, the Company shall cease all use of any such name or
mark as soon as reasonably practicable.
2.7. The Company shall furnish, or cause to be furnished, to the Trust or
its designee a copy of each of the following which is applicable: each
Contract prospectus and/or statement of additional information describing the
Contracts, each report to Contract owners, proxy statement, application for
exemption or request for no-action letter in which the Trust or the Distributor
is named contemporaneously with the filing of such document with the Commission.
The Company shall furnish, or shall cause to be furnished, to the Trust or its
designee each piece of sales literature or other promotional material in which
the Trust or the Distributor is named, at least five Business Days prior to its
use. No such material shall be used if the Trust or its designee reasonably
objects to such use within three Business Days after receipt of such material.
2.8. The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust or the Distributor
in connection with the sale of the Contracts other than information or
representations contained in and accurately derived from the registration
statement or prospectus for the Trust shares (as such registration statement
and prospectus may be amended or supplemented from time to time), annual and
semi-annual reports of the Trust, Trust-sponsored proxy statements, or in sales
literature or other promotional material approved by the Trust or its designee,
except as required by legal process or regulatory authorities or with the prior
written permission of the Trust, the Distributor or their respective designees,
which permission will not be unreasonably withheld, delayed or conditioned.
The Company shall adopt and implement procedures reasonably designed to ensure
that "broker only" materials including information therein about the Trust or
the Distributor are not distributed to existing or prospective Contract owners.
2.9. The Trust shall use its best efforts to provide the Company, on a
timely basis, with such information about the Trust, the Portfolios and the
Distributor, in such form as the Company may reasonably require, as the Company
shall reasonably request in connection with the preparation of registration
statements, prospectuses and annual and semi-annual reports pertaining to the
Contracts.
2.10. The Trust and the Distributor shall not give, and agree that no
affiliate of either of them shall give, any information or make any
representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or
representations contained in and accurately derived from the registration
statement or prospectus for the Contracts (as such registration statement and
prospectus may be amended or supplemented from time to time), or in materials
approved by the Company for distribution including sales literature or other
promotional materials, except as required by legal process or regulatory
authorities or with the prior written permission of the Company. The Company
agrees to respond to any request for approval on a prompt and timely basis.
<PAGE>
2.11. So long as, and to the extent that, the Commission interprets the 1940
Act to require pass-through voting privileges for Contract owners, the Company
will provide pass-through voting privileges to Contract owners whose cash
values are invested, through the registered Accounts, in shares of one or more
Portfolios of the Trust. The Trust shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and the Company
shall be responsible for assuring that the Accounts calculate voting privileges
in the manner established by the Trust. With respect to each registered
Account, the Company will vote shares of each Portfolio of the Trust held by a
registered Account and for which no timely voting instructions from Contract
owners are received in the same proportion as those shares for which voting
instructions are received. The Company and its agents will in no way recommend
or oppose or interfere with the solicitation of proxies for Portfolio shares
held to fund the Contacts without the prior written consent of the Trust, which
consent may be withheld in the Trust's sole discretion. The Company reserves
the right, to the extent permitted by law, to vote shares held in any Account
in its sole discretion.
2.12. The Company and the Trust will each provide to the other information
about the results of any regulatory examination relating to the Contracts or
the Trust, including relevant portions of any "deficiency letter" and any
response thereto.
2.13. No compensation shall be paid by the Trust to the Company, or by the
Company to the Trust, under this Agreement (except for specified expense
reimbursements). However, nothing herein shall prevent the parties hereto from
otherwise agreeing to perform, and arranging for appropriate compensation for,
other services relating to the Trust, the Accounts or both.
ARTICLE III.
Representations and Warranties
3.1. The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of North
Carolina and that it has legally and validly established each Account as a
segregated asset account under such law as of the date set forth in Schedule A,
and that Jefferson-Pilot Investor Services, Inc., the principal underwriter for
the Contracts, is registered as a broker-dealer under the Securities Exchange
Act of 1934 and is a member in good standing of the National Association of
Securities Dealers, Inc.
3.2. The Company represents and warrants that it has registered or, prior
to any issuance or sale of the Contracts, will register each Account as a unit
investment trust in accordance with the provisions of the 1940 Act and cause
each Account to remain so registered to serve as a segregated asset account for
the Contracts, unless an exemption from registration is available.
3.3. The Company represents and warrants that the Contracts will be
registered under the 1933 Act unless an exemption from registration is
available prior to any issuance or sale of the Contracts; the Contracts will be
issued and sold in compliance in all materials respects with all applicable
federal and state laws; and the sale of the Contracts shall comply in all
material respects with state insurance law suitability requirements.
3.4. The Trust represents and warrants that it is duly organized and
validly existing under the laws of the Commonwealth of Massachusetts and that
it does and will comply in all material respects with the 1940 Act and the
rules and regulations thereunder.
<PAGE>
3.5. The Trust and the Distributor represent and warrant that the Portfolio
shares offered and sold pursuant to this Agreement will be registered under the
1933 Act and sold in accordance with all applicable federal and state laws, and
the Trust shall be registered under the 1940 Act prior to and at the time of
any issuance or sale of such shares. The Trust shall amend its registration
statement under the 1933 Act and the 1940 Act from time to time as required in
order to effect the continuous offering of its shares. The Trust shall
register and qualify its shares for sale in accordance with the laws of the
various states only if and to the extent deemed advisable by the Trust.
3.6. The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements for variable
annuity, endowment or life insurance contracts set forth in Section 817(h) of
the Internal Revenue Code of 1986, as amended (the "Code"), and the rules and
regulations thereunder, including without limitation Treasury Regulation
1.817-5, and will notify the Company immediately upon having a reasonable basis
for believing any Portfolio has ceased to comply or might not so comply and
will immediately take all reasonable steps to adequately diversify the
Portfolio to achieve compliance within the grace period afforded by Regulation
1.817-5.
3.7. The Trust represents and warrants that it is currently qualified as a
"regulated investment company" under Subchapter M of the Code, that it will
make every effort to maintain such qualification and will notify the Company
immediately upon having a reasonable basis for believing it has ceased to so
qualify or might not so qualify in the future.
3.8. The Trust represents and warrants that it, its directors, officers,
employees and others dealing with the money or securities, or both, of a
Portfolio shall at all times be covered by a blanket fidelity bond or similar
coverage for the benefit of the Trust in an amount not less than the minimum
coverage required by Rule 17g-1 or other applicable regulations under the 1940
Act. Such bond shall include coverage for larceny and embezzlement and be
issued by a reputable bonding company.
3.9. The Distributor represents that it is duly organized and validly existing
under the laws of the State of Delaware and that it is registered, and will
remain registered, during the term of this Agreement, as a broker-dealer
under the Securities Exchange Act of 1934 and is a member in good standing of
the National Association of Securities Dealers, Inc.
ARTICLE IV.
Potential Conflicts
4.1. The parties acknowledge that a Portfolio's shares may be made available
for investment to other Participating Insurance Companies. In such event, the
Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies. A material irreconcilable conflict may
arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Trust shall promptly inform the Company
of any determination by the Trustees that a material irreconcilable conflict
exists and of the implications thereof.
<PAGE>
4.2. The Company agrees to report promptly any potential or existing conflicts
of which it is aware to the Trustees. The Company will assist the Trustees in
carrying out their responsibilities under the Shared Funding Exemptive Order
by providing the Trustees with all information reasonably necessary for and
requested by the Trustees to consider any issues raised including, but not
limited to, information as to a decision by the Company to disregard Contract
owner voting instructions. All communications from the Company to the Trustees
may be made in care of the Trust.
4.3. If it is determined by a majority of the Trustees, or a majority of the
disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of contract owners, the Company shall, in cooperation
with other Participating Insurance Companies whose contract owners are also
affected, at its own expense and to the extent reasonably practicable (as
determined by the Trustees) take whatever steps are necessary to remedy or
eliminate the material irreconcilable conflict, which steps could include:
(a) withdrawing the assets allocable to some or all of the Accounts from the
Trust or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Trust, or
submitting the question of whether or not such segregation should be
implemented to a vote of all affected Contract owners and, as appropriate,
segregating the assets of any appropriate group (i.e., annuity contract owners,
life insurance contract owners, or variable contract owners of one or more
Participating Insurance Companies) that votes in favor of such segregation, or
offering to the affected Contract owners the option of making such a change;
and (b) establishing a new registerd management investment company or managed
separate account.
4.4. If a material irreconcilable conflict arises because of a decision by the
Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees. Any such
withdrawal and termination must take place within six (6) months after the
Trust gives written notice that this provision is being implemented. Until the
end of such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for the purchase and redemption of shares of
the Trust.
4.5. If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state regulators, then the Company will withdraw the affected
Account's investment in the Trust and terminate this Agreement with respect to
such Account within six (6) months after the Trustees inform the Company in
writing that the Trust has determined that such decision has created a material
irreconcilable conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees. Until the end of such six (6) month period, the Trust shall continue
to accept and implement orders by the Company for the purchase and redemption
of shares of the Trust.
<PAGE>
4.6. For purposes of Section 4.3 through 4.5 of this Agreement, a majority of
the disinterested Trustees shall determine whether any proposed action
adequately remedies any material irreconcilable conflict, but in no event will
the Trust be required to establish a new funding medium for any Contract. The
Company shall not be required to establish a new funding medium for the
Contracts if an offer to do so has been declined by vote of a majority of
Contract owners materially adversely affected by the material irreconcilable
conflict. In the event that the Trustees determine that any proposed action
does not adequately remedy any material irreconcilable conflict, then the
Company will withdraw the Account's investment in the Trust and terminate this
Agreement within six (6) months after the Trustees inform the Company in
writing of the foregoing determination; provided, however, that such withdrawal
and termination shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the disinterested
Trustees.
4.7. The Company shall at least annually submit to the Trustees such reports,
materials or data as the Trustees may reasonably request so that the Trustees
may fully carry out the duties imposed upon them by the Shared Funding
Exemptive Order, and said reports, materials and data shall be submitted more
frequently if reasonably deemed appropriate by the Trustees.
4.8. If and to the extent that Rule 6e-3(T) is amended, or Rule 6e-3 is
adopted, to provide exemptive relief from any provision of the 1940 Act or the
rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive
Order, then the Trust and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with Rule
6e-3(T), as amended, or Rule 6e-3, as adopted, to the extent such rules are
applicable.
ARTICLE V.
Indemnification
5.1. Indemnification By the Company. The Company agrees to indemnify and hold
harmless the Distributor, the Trust and each of its Trustees, officers,
employees and agents and each person, if any, who controls the Trust within the
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties"
for purposes of this Section 5.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company, which consent shall not be unreasonably withheld) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses are related to the sale or acquisition of the
Contracts or Trust shares and:
(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in a registration statement
or prospectus for the Contracts or in the Contracts themselves or in sales
literature generated or approved by the Company on behalf of the Contracts or
Accounts (or any amendment or supplement to any of the foregoing)
(collectively, "Company Documents" for the purposes of this Article V), or
arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this indemnity shall not apply
<PAGE>
as to any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and was accurately derived from
written information furnished to the Company by or on behalf of the Trust for
use in Company Documents or otherwise for use in connection with the sale of
the Contracts or Trust shares; or
(b) arise out of or result from statements or representations (other
than statements or representations contained in and accurately derived from
Trust Documents as defined in Section 5.2(a)) or wrongful conduct of the
Company or persons under its control, with respect to the sale or acquisition
of the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in Trust Documents as defined in Section
5.2(a) or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading if such statement or omission was made in reliance upon and
accurately derived from written information furnished to the Trust by or on
behalf of the Company; or
(d) arise out of or result from any failure by the Company to provide
the services or furnish the materials required under the terms of this
Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or arise
out of or result from any other material breach of this Agreement by the
Company; or
(f) arise out or result from the provision by the Company to the Trust
of insufficient or incorrect information regarding the purchase or sale of
shares of any Portfolio, or the failure of the Company to provide such
information on a timely basis.
5.2. Indemnification by the Distributor. The Distributor agrees to indemnify
and hold harmless the Company and each of its directors, officers, employees,
and agents and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for the
purposes of this Section 5.2) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Distributor, which consent shall not be unreasonably withheld) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses are related to the sale or acquisition of the
Contracts or Trust shares and:
(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration statement
or prospectus for the Trust (or any amendment or supplement thereto)
(collectively, "Trust Documents" for the purposes of this Article V), or arise
out of or are based upon the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this indemnity shall not apply
as to any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and was accurately derived from
written information furnished to the Distributor or the Trust by or on behalf
of the Company for use in Trust Documents or otherwise for use in connection
with the sale of the Contracts or Trust shares and; or
<PAGE>
(b) arise out of or result from statements or representations (other
than statements or representations contained in and accurately derived form
Company Documents) or wrongful conduct of the Distributor or persons under its
control, with respect to the sale or acquisition of the Contracts or Portfolio
shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in Company Documents or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading if such statement or
omission was made in reliance upon and accurately derived from written
information furnished to the Company by or on behalf of the Trust; or
(d) arise out of or result from any failure by the Distributor or the
Trust to provide the services or furnish the materials required under the terms
of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor or the Trust in this
Agreement or arise out of or result from any other material breach of this
Agreement by the Distributor or the Trust.
5.3. None of the Company, the Trust or the Distributor shall be liable under
the indemnification provisions of Sections 5.1 or 5.2, as applicable, with
respect to any Losses incurred or assessed against an Indemnified Party that
arise from such Indemnified Party's willful misfeasance, bad faith or gross
negligence in the performance of such Indemnified Party's duties or by reason
of such Indemnified Party's reckless disregard of obligations or duties under
this Agreement.
5.4. None of the Company, the Trust or the Distributor shall be liable under
the indemnification provisions of Sections 5.1 or 5.2, as applicable, with
respect to any claim made against an Indemnified Party unless such Indemnified
Party shall have notified the other party in writing within a reasonable time
after the summons, or other first written notification, giving information of
the nature of the claim shall have been served upon or otherwise received by
such Indemnified Party (or after such Indemnified Party shall have received
notice of service upon or other notification to any designated agent), but
failure to notify the party against whom indemnification is sought of any such
claim shall not relieve that party from any liability which it may have to the
Indemnified Party in the absence of Sections 5.1 and 5.2.
5.5. In case any such action is brought against an Indemnified Party, the
indemnifying party shall be entitled to participate, at its own expense, in the
defense of such action. The indemnifying party also shall be entitled to
assume the defense thereof, with counsel reasonably satisfactory to the party
named in the action. After notice from the indemnifying party to the
Indemnified Party of an election to assume such defense, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the indemnifying party will not be liable to the Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.
<PAGE>
ARTICLE VI.
Termination
6.1. This Agreement shall terminate:
(a) at the option of any party upon 60 days advance written notice to
the other parties, unless a shorter time is agreed to by the parties;
(b) at the option of the Trust or the Distributor if the Contracts
issued by the Company cease to qualify as annuity contracts or life insurance
contracts, as applicable, under the Code or if the Contracts are not
registered, issued or sold in accordance with applicable state and/or federal
law; or
(c) at the option of any party upon a determination by a majority of the
Trustees of the Trust, or a majority of its disinterested Trustees, that a
material irreconcilable conflict exists; or
(d) at the option of the Company upon institution of formal proceedings
against the Trust or the Distributor by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body regarding the
Trust's or the Distributor's duties under this Agreement or related to the sale
of Trust shares or the operation of the Trust; or
(e) at the option of the Company if the Trust or a Portfolio fails to
meet the diversification requirements specified in Section 3.6 hereof; or
(f) at the option of the Company if shares of the Series are not
reasonably available to meet the requirements of the Variable Contracts issued
by the Company, as determined by the Company, and upon prompt notice by the
Company to the other parties; or
(g) at the option of the Company in the event any of the shares of the
Portfolio are not registered, issued or sold in accordance with applicable
state and/or federal law, or such law precludes the use of such shares as the
underlying investment media of the Variable Contracts issued or to be issued by
the Company; or
(h) at the option of the Company, if the Portfolio fails to qualify as a
Regulated Investment Company under Subchapter M of the Code; or
(i) at the option of the Distributor if it shall determine in its sole
judgment exercised in good faith, that the Company and/or its affiliated
companies has suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement or is the
subject of material adverse publicity.
6.2. Notwithstanding any termination of this Agreement, the Trust shall, at
the option of the Company, continue to make available additional shares of any
Portfolio and redeem shares of any Portfolio pursuant to the terms and
conditions of this Agreement for all Contracts in effect on the effective date
of termination of this Agreement.
6.3. The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.11 shall survive the
termination of this Agreement as long as shares of the Trust are held on behalf
of Contract owners in accordance with Section 1.9.
<PAGE>
ARTICLE VII.
Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Trust or its Distributor:
Fred Alger Management, Inc.
30 Montgomery Street
Jersey City, NJ 07302
Attn: Gregory S. Duch
If to the Company:
Jefferson-Pilot Life Insurance Company
100 North Greene Street
Greensboro, NC 27401
Attn: J. Gregory Poole - 4320
ARTICLE VIII.
Miscellaneous
8.1. The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2. This Agreement may be executed in two or more counterparts, each of which
taken together shall constitute one and the same instrument.
8.3. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
8.4. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of New York. It shall also
be subject to the provisions of the federal securities laws and the rules and
regulations thereunder and to any orders of the Commission granting exemptive
relief therefrom and the conditions of such orders. Copies of any such orders
shall be promptly forwarded by the Trust to the Company.
8.5. All liabilities of the Trust arising, directly or indirectly, under this
Agreement, of any and every nature whatsoever, shall be satisfied solely out of
the assets of the Trust and no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
8.6. Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Commission, the
National Association of Securities Dealers, Inc. and state insurance
regulators) and shall permit such authorities reasonable access to its books
and records in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
<PAGE>
8.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
8.8. This Agreement shall not be exclusive in any respect.
8.9. Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the other party.
8.10. No provisions of this Agreement may be amended or modified in any manner
except by a written agreement properly authorized and executed by both parties.
8.11. Each party hereto shall, except as required by law or otherwise permitted
by this Agreement, treat as confidential the names and addresses of the owners
of the Contracts and all information reasonably identified as confidential in
writing by any other party hereto, and shall not disclose such confidential
information without the written consent of the affected party unless such
information has become publicly available.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers to
execute this Participation Agreement as of the date and year first above
written.
Fred Alger and Company, Incorporated
By:________________________________
Name: Gregory S. Duch
Title: Executive Vice President
Alger American Fund
By:_________________________________
Name: Gregory S. Duch
Title: Treasurer
Jefferson-Pilot Life Insurance Company
By:___________________________________
Name:
Tiitle:
<PAGE>
EXHIBIT (15)(d)
Participation Agreement Among Alexander Hamilton Variable Insurance Trust,
Alexander Hamilton Capital Management, and Jefferson-Pilot Life Insurance
Company
<PAGE>
PARTICIPATION AGREEMENT
Among
ALEXANDER HAMILTON VARIABLE INSURANCE TRUST,
ALEXANDER HAMILTON CAPITAL MANAGEMENT, INC.
and
ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA
THIS AGREEMENT, made and entered into as of this 9th day of October, 1995 by
and among ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA (hereinafter
"Insurance Company"), a Michigan life insurance company, on its own behalf and
on behalf of Alexander Hamilton Variable Separate Account (the "Account"), and
the Alexander Hamilton Variable Insurance Trust (hereinafter the "Fund"), a
Business Trust organized under the laws of the Commonwealth of Massachusetts
and Alexander Hamilton Capital Management, Inc. (hereinafter the "Adviser"), a
Michigan corporation.
WHEREAS, the Fund engages in business as an open-end managment investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively, the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements similar to this
Agreement (hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several series of
shares, each designated a "Portfolio" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Fund is registered as an open-end management investment company
under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under the
federal Investment Advisers Act of 1940, as amended, and is the Fund's
investment adviser; and
WHEREAS, Insurance Company has registered or will register certain variable
annuity contracts supported wholly or partially by the Account (the
"Contracts") under the 1933 Act and said Contracts are listed in Schedule A
hereto, as it may be amended from time to time by mutual written agreement; and
WHEREAS, the Account is a duly organized, validly existing segregated asset
account, established by resolution of the Board of Directors of Insurance
Company on January 24, 1994, to set aside and invest assets attributable to the
aforesaid variable annuity contracts; and
WHEREAS, Insurance Company has registered or will register the Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
Insurance Company intends to purchase shares in the Portfolios listed in
Schedule B hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios") on behalf of the Account to
fund the aforesaid Contracts;
NOW, THEREFORE, in consideration of their mutual promises, Insurance Company,
the Fund and the Adviser agree as follows:
<PAGE>
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to Insurance Company those shares of the
Designated Portfolios which the Account orders, executing such orders on a
daily basis at the net asset value next computed after receipt by the Fund or
its designee of the order for the shares of the Portfolios. For purposes of
this Section 1.1, Insurance Company shall be the designee of the Fund for
receipt of such orders and receipt by such designee shall constitute receipt by
the Fund; provided that the Fund receives notice of such order by 10:00 a.m.
eastern standard time on the next following Business Day. "Business Day" shall
mean any day on which the New York Stock Exchange is open for trading and on
which the Fund calculates its net asset value pursuant to the rules of the
Securities and Exchange Commission.
1.2. The Fund agrees to make shares of the Designated Portfolios available
indefinitely for purchase at the applicable net asset value per share by
Insurance Company and the Account on those days on which the Fund calculates
its net asset value pursuant to rules of the Securities and Exchange
Commission, and the Fund shall calculate such net asset value on each day which
the New York Stock Exchange is open for trading. Notwithstanding the
foregoing, the Board of Trustees or Directors of the Fund (hereinafter the
"Board") may refuse to sell shares of any Portfolio to any person, or suspend
or terminate the offering of shares of any Portfolio if such action is
required by law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the Board acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, necessary in the
best interests of the shareholders of such Portfolio.
1.3. The Fund will not sell shares of the Designated Portfolios to the general
public or to any other insurance company or separate account unless agreed to
by Insurance Company.
1.4. The Fund agrees to redeem for cash, on Insurance Company's request, any
full or fractional shares of the Fund held by Insurance Company, executing
such requests on a daily basis at the net asset value next computed after
receipt by the Fund or its designee of the request for redemption. For
purposes of this Section 1.4, Insurance Company shall be the designee of the
Fund for receipt of requests for redemption and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption by 10:00 a.m. on the next following Business Day.
1.5. The Parties hereto acknowledge that the arrangement contemplated by this
Agreement is not exclusive; the Fund's shares may be sold to other insurance
companies (subject to Section 1.3 and Article VI hereof) and the cash value of
the Contracts may be invested in other investment companies.
1.6. Insurance Company shall pay for Fund shares on the next Business Day after
an order to purchase Fund shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire
and/or by a credit for any shares redeemed the same day as the purchase. For
purposes of Section 2.7 hereof, upon receipt by the Fund of the federal funds
so wired, such funds shall cease to be the responsibility of Insurance Company
and shall become the responsibility of the Fund.
1.7. The Fund shall pay and transmit the proceeds of redemptions of Fund shares
on the next Business Day after a redemption order is received in accordance
with Section 1.4 hereof. Payment shall be in federal funds transmitted by wire
and/or a credit for any shares purchased the same day as the redemption.
<PAGE>
1.8. Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to Insurance Company or the Account.
Shares ordered from the Fund will be recorded in an appropriate title for the
Account or the appropriate subaccount of the Account.
1.9. The Fund shall furnish same day notice (by wire or telephone, followed by
written confirmation) to Insurance Company of any income, dividends or capital
gain distributions payable on the Designated Portfolios' shares. Insurance
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Portfolio shares in additional shares of
that Portfolio. Insurance Company reserves the right to revoke this election
and to receive all such income dividends and capital gain distributions in
cash. The Fund shall notify Insurance Company of the number of shares so
issued as payment of such dividends and distributions.
1.10. The Fund shall make the net asset value per share for each Designated
Portfolio available to Insurance Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 6 p.m. eastern
standard time. If the Fund provides incorrect share net asset value
information, Insurance Company shall be entitled to an adjustment to the number
of shares purchased or redeemed to reflect the correct net asset value per
share. Any error in the calculation or reporting of net asset value per share,
dividend or capital gains information greater than or equal to $.01 per share
shall be reported immediately upon discovery to Insurance Company. Any error
of a lesser amount shall be corrected in the next Business Day's net asset
value per share.
ARTICLE II.
Representations and Warranties
2.1. Insurance Company represents and warrants that the Contracts are or will
be registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. Insurance Company further represents
and warrants that it is an insurance company duly organized and in good
standing under applicable law and that it has legally and validly established
the Account prior to any issuance or sale thereof as a segregated asset account
under the insurance laws of the State of Michigan and has registered or, prior
to any issuance or sale of the Contracts, will register the Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as
a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Portfolio shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Michigan and all
applicable federal and state securities laws including without limitation the
1933 Act, the Securities Exchange Act of 1934 as amended (hereinafter the "1934
Act"), and the 1940 Act and that the Fund is and shall remain registered under
the 1940 Act. The Fund shall amend the Registration Statement for its shares
under the 1933 Act and the 1940 Act from time to time as required in order to
effect the continuous offering of its shares. The Fund shall register and
qualify the shares for sale in accordance with the laws of the various states
if and to the extent required by applicable law.
2.3. The Fund undertakes to have a Board, a majority of whom are not
interested persons of the Fund, formulate and approve any plan pursuant to Rule
12b-1 under the 1940 Act to finance distribution expenses.
<PAGE>
2.4. The Fund represents and warrants that the investment policies, fees and
expenses of the Designated Portfolios are and shall at all times remain in
compliance with the insurance and other applicable laws of the State of
Michigan and any other applicable state to the extent required to perform this
Agreement.
2.5. The Fund represents and warrants that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.6. The Adviser represents and warrants that it is and shall remain duly
registered under all applicable federal and state securities laws and that it
shall perform its obligations for the Fund in compliance in all material
respects with the laws of the State of Michigan and any applicable state and
federal securities laws.
2.7. The Fund represents and warrants that all of its directors, officers,
employees, and other individuals dealing with the money and/or securities of
the Fund are and shall continue to be at all times covered by a blanket
fidelity bond or similar coverage for the benefit of the Fund in an amount not
less than the minimal coverage as required currently by Section 17g-(1) of the
1940 Act or related provisions as may be promulgated from time to time. The
aforesaid bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
2.8. The Fund will provide Insurance Company with as much notice as is
reasonably practicable of any material change affecting the Fund (including,
but not limited to, any proxy solicitation and any material change in its
registration statement or prospectus) and consult with Insurance Company in
order to implement any such change in an orderly manner, recognizing the
expenses of changes and attempting to minimize such expenses by implementing
them in conjunction with regular annual updates of the prospectuses for the
Contracts. The Fund agrees to share equitably in expenses incurred by
Insurance Company as a result of actions taken by the Fund.
ARTICLE III.
Prospectuses and SAIs; Voting
3.1. For use in connection with marketing of the Contracts, the Adviser (at
its expense) at least annually, shall provide Insurance Company with as many
copies of the Fund's then current prospectus and Statement of Additional
Information ("SAI") for the Designated Portfolios as Insurance Company may
reasonably request. If requested by Insurance Company in lieu thereof, the
Adviser or Fund shall provide such documentation (including "camera-ready"
copy or a final copy of the Fund's prospectus for the Designated Portfolios set
in type at the Fund's expense) and such other assistance as is reasonably
necessary in order for Insurance Company once each year (or more frequently if
the Fund's prospectus is amended more frequently) to have the prospectuses for
the Contracts and the Designated Portfolios printed together in one document
(the cost of such printing to be born by the Adviser and Insurance company in
proportion to the size of the prospectuses for the Contracts and Designated
Portfolios).
<PAGE>
3.2. For use by Insurance Company in complying with regulatory requirements
regarding communications to existing Contract owners, the Fund (at its
expense), shall provide Insurance Company with copies of its Prospectus, SAI,
proxy materials, reports to stockholders and other communications to
stockholders for the Designated Portfolios in such quantities as Insurance
Company shall reasonably require for distributing to Contract owners (including
annual delivery of the prospectus for the Designated Portfolios to existing
contract owners). If the Contract and Fund prospectuses are printed together
in one document, the cost of such printing shall be borne by the Insurance
Company and fund in proportion to the size of the prospectuses for the Contract
and the Designated Portfolios.
3.3. It is understood and agreed that Insurance Company is not responsible for
the content of the prospectus or SAI for the Designated Portfolios. It is also
understood and agreed that, except with respect to information regarding the
Fund, Adviser or the Designated Portfolios, neither the Fund nor Advisor are
responsible for the content of the prospectus or SAI for the Contracts.
3.4. If and to the extent required by law Insurance Company shall:
(i) solicit voting instructions from Contract
owners;
(ii) vote the Fund shares in accordance with
instructions received from Contract owners:
and
(iii) vote Fund shares for which no instruction
have been received in the same proportion as
Fund shares of such portfolio for which
instructions have been received, so long as
and to the extent that the Securities and
Exchange Commission continues to interpret
the 1940 Act to require pass-through voting
privileges for variable contract owners.
Insurance Company reserves the right to vote
Fund shares held in any segregated asset
account in its own right, to the extent
permitted by law.
ARTICLE IV.
Sales Material and Information
4.1. Insurance Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material that Insurance Company develops or uses and in which the Fund (or a
Portfolio thereof) or Adviser is named, at least fifteen (15) Business Days
prior to its use. No such material shall be used if the Fund or its designee
object to such use within seven (7) Business Days after receipt of such
material.
4.2. Insurance Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus or SAI
for the Fund shares, as such registration statement and prospectus or SAI may
be amended or supplemented from time to time, or in reports or proxy statements
for the Fund, or in sales literature or other promotional material approved by
the Fund or its designee or by the Adviser, except with the permission of the
Fund or the Adviser or the designee of either.
<PAGE>
4.3. The Fund or Adviser shall furnish, or shall cause to be furnished, to
Insurance Company, each piece of sales literature or other promotional
material in which Insurance Company and/or its separate account(s), is named
at least fifteen (15) Business Days prior to its use. No such material shall
be used if Insurance Company objects to such use within seven (7) Business Days
after receipt of such material.
4.4. The Fund and the Adviser shall not give any information or make any
representations on behalf of Insurance Company or concerning Insurance Company,
the Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in reports for the Account, or in sales literature or other
promotional material approved by Insurance Company or its designee, except with
the permission of Insurance Company.
4.5. The Fund will provide to Insurance Company at least one complete copy of
all registration statements, prospectuses, SAI, reports, proxy statements,
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to the Designated Portfolios, contemporaneously with the filing of such
document(s) with the Securities and Exchange Commission or other regulatory
authorities.
4.6. Insurance Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, SAI reports, solicitations for
voting instructions, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Contracts or the Account,
contemporaneously with the filing of such document(s) with the Securities and
Exchange Commission.
4.7. For purposes of this Article IV, the phrase "sales literature and other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V.
Fees and Expenses
5.1. The Fund and the Adviser shall pay no fee or other com pensation to
Insurance Company under this Agreement, and Insurance Company shall pay no fee
or other compensation to the Fund or Adviser under this Agreement, although the
parties hereto will bear certain expenses in accordance with Articles III, V,
and other provisions of this Agreement.
<PAGE>
5.2. All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal
law and, if and to the extent deemed advisable by the Fund, in accordance with
applicable state laws prior to their sale. The Fund shall bear the expenses
for the cost of registration and qualification of the Fund's shares,
preparation and filing of the Fund's prospectus and registration statement,
proxy materials and reports, setting the prospectus in type, printing
prospectuses for distribution to Contract owners, setting in type and printing
the proxy materials and reports to shareholders (including the costs of
printing a prospectus that constitutes an annual report), the preparation of
all statements and notices required by any federal or state law, and all taxes
on the issuance or transfer of the Fund's shares.
5.3. Insurance Company shall bear the expenses of routine annual distribution
of the Fund's prospectus to owners of Contracts issued by Insurance Company
and of distributing the Fund's proxy materials and reports to such Contract
owners.
ARTICLE VI.
Diversification and Qualification
6.1. The Fund and Adviser represent and warrant that the Fund will at all times
sell its shares and invest its assets in such a manner as to ensure that the
Contracts will be treated as annuity contracts under the Internal Revenue Code
of 1986, as amended (the "Code") and the regulations issued thereunder (and any
successor provisions). Without limiting the scope of the foregoing, the Fund
and Adviser represent and warrant that the Fund and each Designated Portfolio
thereof will at all times comply with Section 817(h) of the Code and Treasury
Regulation Section 1.817-5, as amended from time to time, and any Treasury
interpretations thereof, relating to the diversification requirements for
variable annuity, endowment, or life insurance contracts and any amendments or
other modifications or successor provisions to such Section or Regulations.
The Fund and the Adviser agree that shares of the Designated Portfolios will be
sold only to Participating Insurance Companies and their separate accounts.
No shares of any Designated Portfolio will be sold to the general public.
6.2. The Fund and Adviser represent and warrant that the Fund and each
Designated Portfolio is currently qualified as a Regulated Investment Company
under Subchapter M of the Code, and that it will maintain such qualification
(under Subchapter M or any successor or similar provisions) as long as this
Agreement is in effect.
6.3. The Fund or Adviser will notify Insurance Company immediately upon having
a reasonable basis for believing that the Fund or any Portfolio has ceased to
comply with the aforesaid Section 817(h) diversification or Subchapter M
qualification requirements or might not so comply in the future.
<PAGE>
6.4. The Fund and Adviser acknowledge that full compliance with the
requirements referred to in Sections 6.1 and 6.2 hereof is absolutely essential
because any failure to meet those requirements would result in the Contracts
not being treated as annuity contracts for federal income tax purposes, which
would have adverse tax consequences for Contract owners and could also
adversely affect Insurance Company's corporate tax liability. The Fund and
Adviser also acknowledge that it is solely within their power and control to
meet those requirements. Accordingly, without in any way limiting the effect
of Section 7.2 hereof and without in any way limiting or restricting any other
remedies available to Insurance Company, the Adviser will pay all costs
associated with or arising out of any failure, or any anticipated or reasonably
foreseeable failure, of the Fund or any Designated Portfolio to comply with
Sections 6.1 or 6.2 hereof, including all costs associated with correcting or
responding to any such failure; such costs may include, but are not limited to,
the costs involved in creating, organizing, and registering a new investment
company as a funding medium for the Contracts and/or the costs of obtaining
whatever regulatory authorizations are required to substitute shares of another
investment company for those of the failed Portfolio (including but not limited
to an order pursuant to Section 26(b) of the 1940 Act); such costs are to
include, but are not limited to, fees and expenses of legal counsel and other
advisors to Insurance Company and any federal income taxes or tax penalties (or
"toll charges" or enactments or amounts paid in settlement) incurred by
Insurance Company in connection with any such failure or anticipated or
reasonably foreseeable failure.
ARTICLE VII.
Indemnification
7.1. Indemnification By Insurance Company
7.1(a). Insurance Company agrees to indemnify and hold harmless the Fund and
its officers and each member of its Board (collectively, the "Indemnified
Parties" for purposes of this Section 7.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of Insurance Company) or litigation expenses (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute or regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue
statements or alleged untrue statements of any material
fact contained in the Registration Statement or
prospectus for the Contracts or contained in the
Contracts (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon
the omission or the alleged omission to state
therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading, provided that this Agreement to
indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to Insurance
Company by or on behalf of the Fund for use in the
Registration Statement or prospectus for the Contracts
or in the Contracts or sales literature (or any
amendment or supplement) or otherwise for use in
connection with the sale of the Contracts; or
<PAGE>
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature of the
Fund not sup plied by Insurance Company or persons under its
control) or wrongful conduct of Insurance Company
or persons under its control, with respect to the
sale or distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement,
prospectus, or sales literature of the Fund or any amendment
thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading if such a statement or omission was made in
reliance upon information furnished to the Fund by or on
behalf of Insurance Company; or
(iv) arise as a result of any material failure by Insurance
Company to provide the services and furnish the materials
under the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by Insurance Company
in this Agreement or arise out of or result from any
other material breach of this Agreement by Insurance Company,
as limited by and in accordance with the provisions of Sections 7.1(b) and
7.1(c) hereof.
7.1(b). Insurance Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation expenses to which an Indemnified Party would otherwise be subject by
reason of such Indemnified Party's willful misfeasance, bad faith, or
negligence in the performance of such Indemnified Party's duties or by reason
of such Indemnified Party's reckless disregard of its obligations or duties.
7.1.(c). Insurance Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified Insurance Company in writing within
a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify Insurance
Company of any such claim shall not relieve Insurance Company from any
liability which it may have to the Indemnified Party against whom such action
is brought otherwise than on account of this indemnification provision. In
case any such action is brought against the Indemnified Parties, Insurance
Company shall be entitled to participate, at its own expense, in the defense of
such action. Insurance Company also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action. After
notice from Insurance Company to such party of Insurance Company's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and Insurance Company will
not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
<PAGE>
7.1(d). The Indemnified Parties will promptly notify Insurance Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the operation
of the Fund.
7.2. Indemnification By the Fund
7.2(a). The Fund agrees to indemnify and hold harmless Insurance Company and
each of its directors and officers and each person, if any, who controls
Insurance Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 7.2)
against any and all losses, claims, expenses, damages, liabilities (including
amounts paid in settlement with the written consent of the Fund) or litigation
expenses (including legal and other expenses) to which the Indemnified Parties
may be required to pay or may become subject under any statute or regulation,
at common law or otherwise, insofar as such losses, claims, expenses, damages,
liabilities or expenses (or actions in respect thereof) or settlements, are
related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the
terms of this Agreement; or
(ii) arise out of or result from any material breach of
any representation and/or warranty made by the Fund
in this Agreement or arise out of or result from any
other material breach of this Agreement by the Fund.
as limited by and in accordance with the provisions of Sections
7.2(b) and 7.2(c) hereof.
7.2(b). The Fund shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation expenses to
which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
Insurance Company, the Fund, the Adviser or the Account, whichever is
applicable.
7.2(c). The Fund shall not be liable under this indemnification provision with
respect to any claim made against an Indemnified Party unless such Indemnified
Party shall have notified the Fund in writing within a reasonable time after
the summons or other first legal process giving information of the nature of
the claim shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify the Fund of any such claim shall not relieve the
Fund from any liability which it may have to the Indemnified Party against whom
such action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified Parties,
the Fund will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
7.2(d). Insurance Company agrees promptly to notify the Fund of the
commencement of any litigation or proceeding against it or any of its
respective officers or directors in connection with the Agreement, the issuance
or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.
<PAGE>
ARTICLE VIII.
Applicable Law
8.1. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Michigan.
8.2. This Agreement shall be subject to the provisions of the 1933, 1934 and
1940 Acts, and the rules and regulations and rulings thereunder, including such
exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may grant and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE IX.
Termination
9.1. This Agreement shall continue in full force and effect until the first to
occur of:
(a) termination by any party, with or without cause,
with respect to some or all Portfolios, by six (6)
months' advance written notice delivered to the other
parties; or
(b) termination by Insurance Company by written notice
to the other parties with respect to any Portfolio
based upon Insurance Company's determination that
shares of such Portfolio are not reasonably available
to meet the requirements of the Contracts; or
(c) termination by Insurance Company by written notice
to the other parties with respect to any Portfolio in
the event any of the Portfolio's shares are not
registered, issued or sold in accordance with
applicable state and/ or federal law or such law
precludes the use of such shares as the underlying
investment media of the Contracts issued or to be
issued by Insurance Company; or
(d) termination by the Fund in the event that formal
administrative proceedings are instituted against
Insurance Company by the National Association of
Securities Dealers, Inc. ("NASD"), the Securities and
Exchange Commission, the Insurance Commissioner or like
official of any state or any other regulatory body
regarding Insurance Company's duties under this
Agreement or related to the sale of the Contracts, the
operation of any Account, or the purchase of the Fund
shares, provided, however, that the Fund determines in
its sole judgment exercised in good faith, that any
such administrative proceedings will have a material
adverse effect upon the ability of Insurance Company to
perform its obligations under this Agreement; or
(e) termination by Insurance Company in the event that
formal administrative proceedings are instituted
against the Fund or Adviser by the NASD, the Securities
and Exchange Commission, or any state securities or
insurance department or any other regulatory body,
provided, however, that Insurance Company determines in
its sole judgment exercised in good faith, that any
such administrative proceedings will have a material
adverse effect upon the ability of the Fund or Adviser
<PAGE>
to perform its obligations under this Agreement; or
(f) termination by Insurance Company by written notice
to the Fund and the Adviser with respect to any
Portfolio in the event that such Portfolio fails to
meet the Section 817(h) diversification requirements or
Subchapter M qualifications specified in Article VI
hereof or if Insurance Company reasonably believes that
the Portfolio may fail to meet either of those requirements; or
(g) termination by either the Fund or the Adviser by
written notice to Insurance Company, if either one or
both of the Fund or the Adviser respectively, shall
determine, in their sole judgment exercised in good
faith, that Insurance Company has suffered a material
adverse change in its business operations, financial
condition or prospects since the date of this Agreement
or is the subject of material adverse publicity; or
(h) termination by Insurance Company by written notice
to the Fund and the Adviser, if Insurance Company shall
determine, in its sole judgment exercised in good
faith, that the Fund or the Adviser has suffered a
material adverse change in its business, operations,
financial condition or prospects since the date of this
Agreement or is the subject of material adverse
publicity.
9.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Adviser shall, at the option of Insurance Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts.
9.3. Surviving Provisions. Notwithstanding any termination of this Agreement,
each party's obligation under Article VIII to indemnify other parties shall
survive and not be affected by any termination of this Agreement. In addition,
with respect to Existing Contracts, the provisions of Article I, Article II,
Sections 3.2, 3.3, 3.4, 5.4, 5.5, 5.6, Article VI and Sections 11.1 and 11.5
shall also survive and not be affected by any termination of this Agreement.
<PAGE>
ARTICLE X.
Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
Alexander Hamilton Variable Insurance Trust
33045 Hamilton Court
Farmington Hills, MI 48334-3358
Attention: George A. Cooke
If to Insurance Company:
Alexander Hamilton Life Insurance Company of America
33045 Hamilton Court
Farmington Hills, MI 48334-3358
Attention: James T. Ponder
If to the Adviser:
Alexander Hamilton Capital Management, Inc.
33045 Hamilton Court
Farmington Hills, MI 48334-3358
Attention: William Lang
ARTICLE XI.
Miscellaneous
11.1. Subject to the requirements of legal process and regulatory authority,
each party hereto shall treat as confidential the names and addresses of the
owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written
consent of the affected party until such time as such information may come
into the public domain. Without limiting the foregoing, no party hereto shall
disclose any information that another party reasonably considers to be
proprietary.
11.2. The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect.
11.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.4. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
<PAGE>
11.5. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state insurance regulators)
and shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby. Notwithstanding the generality of the
foregoing, each party hereto further agrees to furnish the Michigan Insurance
Commissioner with any information or reports in connection with services
provided under this Agreement which such Commissioner may request in order to
ascertain whether the variable annuity operations of Insurance Company are
being conducted in a manner consistent with the Michigan Variable Annuity
Regulations and any other applicable law or regulations.
11.6. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
11.7. This Agreement or any of the rights and obligations hereunder may not be
assigned by any party without the prior written consent of all parties hereto.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
Insurance Company:
ALEXANDER HAMILTON LIFE INSURANCE COMPANY
OF AMERICA
SEAL By: _____________________________
Title:
Date:
Fund:
ALEXANDER HAMILTON VARIABLE INSURANCE TRUST
SEAL By: _____________________________
Title:
Date:
Adviser:
ALEXANDER HAMILTON CAPITAL MANAGEMENT, INC.
SEAL By: ______________________________
Title: ____________________________
Date: ____________________________
SCHEDULE A
Contracts Form Numbers
Allegiance Variable Annuity 22161
<PAGE>
SCHEDULE B
Designated Portfolios
Investment Grade Bond
High Yield Bond
Global Bond
Balanced
Growth & Income
Growth
Emerging Growth
International Equity
<PAGE>
EXHIBIT (15)(e)
Participation Agreement among MFS Varialbe Insurance Trust, MFS Financial
Services Corporation, and Jefferson-Pilot Life Insurance Company.
<PAGE>
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
JEFFERSON-PILOT LIFE INSURANCE COMPANY
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this ____ day of ________ 1996 , by and
among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), JEFFERSON-PILOT LIFE INSURANCE COMPANY, a North Carolina corporation
(the "Company") on its own behalf and on behalf of each of the segregated asset
accounts of the Company set forth in Schedule A hereto, as may be amended from
time to time (the "Accounts"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a
Delaware corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), and its
shares are registered or will be registered under the Securities Act of 1933,
as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into several
series of shares, each representing the interests in a particular managed pool
of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the Company
and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the Investment
Advisers Act of 1940, as amended, and any applicable state securities law, and
is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or variable life
insurance contracts (individually, the "Policy" or, collectively, the
"Policies") which, if required by applicable law, will be registered under the
1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated asset
accounts, established by resolution of the Board of Directors of the Company,
to set aside and invest assets attributable to the aforesaid variable annuity
and/or variable life insurance contracts that are allocated to the Accounts
(the Policies and the Accounts covered by this Agreement, and each
corresponding Portfolio covered by this Agreement in which the Accounts invest,
is specified in Schedule A attached hereto as may be modified from time to
time);
WHEREAS, the Company has registered or will register the Accounts as unit
investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered as a
broker-dealer with the Securities and Exchange Commission (the "SEC") under
the Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"),
and is a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD");
WHEREAS, Jefferson-Pilot Investor Services, Inc., the underwriter for the
individual variable annuity and the variable life policies, is registered as a
broker-dealer with the SEC under the 1934 Act and is a member in good standing
of the NASD; and
<PAGE>
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company intends to purchase shares in one or more of the Portfolios
specified in Schedule A attached hereto (the "Shares") on behalf of the
Accounts to fund the Policies, and the Trust intends to sell such Shares to the
Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust, MFS, and
the Company agree as follows:
ARTICLE I. SALE OF TRUST SHARES
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that Business
Day, as defined below) and which are available for purchase by such
Accounts, executing such orders on a daily basis at the net asset value
next computed after receipt by the Trust or its designee of the order for
the Shares. For purposes of this Section 1.1, the Company shall be the
designee of the Trust for receipt of such orders from Policy owners and
receipt by such designee shall constitute receipt by the Trust; provided
that the Trust receives notice of such orders by 9:30 a.m. New York time
on the next following Business Day. "Business Day" shall mean any day on
which the New York Stock Exchange, Inc. (the "NYSE") is open for trading
and on which the Trust calculates its net asset value pursuant to the
rules of the SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and
the Accounts on those days on which the Trust calculates its net asset
value pursuant to rules of the SEC and the Trust shall calculate such net
asset value on each day which the NYSE is open for trading.
Notwithstanding the foregoing, the Board of Trustees of the Trust (the
"Board") may refuse to sell any Shares to the Company and the Accounts, or
suspend or terminate the offering of the Shares if such action is required
by law or by regulatory authorities having jurisdiction or is, in the sole
discretion of the Board acting in good faith and in light of its fiduciary
duties under federal and any applicable state laws, necessary in the best
interest of the Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to
insurance companies which have entered into participation agreements with
the Trust and MFS (the "Participating Insurance Companies") and their
separate accounts, qualified pension and retirement plans and MFS or its
affiliates. The Trust and MFS will not sell Trust shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Articles III and VII of this Agreement is in
effect to govern such sales. The Company will not resell the Shares except
to the Trust or its agents.
1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed by
Policy holders on that Business Day), executing such requests on a daily
basis at the net asset value next computed after receipt by the Trust or
its designee of the request for redemption. For purposes of this Section
1.4, the Company shall be the designee of the Trust for receipt of
requests for redemption from Policy owners and receipt by such designee
shall constitute receipt by the Trust; provided that the Trust receives
notice of such request for redemption by 9:30 a.m. New York time on the
next following Business Day.
<PAGE>
1.5. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted
with respect to any Portfolio. However, with respect to payment of the
purchase price by the Company and of redemption proceeds by the Trust,
the Company and the Trust shall net purchase and redemption orders with
respect to each Portfolio and shall transmit one net payment for all of
the Portfolios in accordance with Section 1.6 hereof.
1.6. In the event of net purchases, the Company shall pay for the Shares
by 2:00 p.m. New York time on the next Business Day after an order to
purchase the Shares is made in accordance with the provisions of Section
1.1. hereof. In the event of net redemptions, the Trust shall pay the
redemption proceeds by 2:00 p.m. New York time on the next Business Day
after an order to redeem the shares is made in accordance with the
provisions of Section 1.4. hereof. All such payments shall be in federal
funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only.
Stock certificates will not be issued to the Company or the Accounts.
The Shares ordered from the Trust will be recorded in an appropriate title
for the Accounts or the appropriate subaccounts of the Accounts.
1.8. The Trust shall furnish same day notice (by wire or telephone
followed by written confirmation) to the Company of any dividends or
capital gain distributions payable on the Shares. The Company hereby
elects to receive all such dividends and distributions as are payable on
a Portfolio's Shares in additional Shares of that Portfolio. The Trust
shall notify the Company of the number of Shares so issued as payment of
such dividends and distributions.
1.9. The Trust or its custodian shall make the net asset value per share
for each Portfolio available to the Company on each Business Day as soon
as reasonably practical after the net asset value per share is calculated
and shall use its best efforts to make such net asset value per share
available by 6:30 p.m. New York time. In the event that the Trust is
unable to meet the 6:30 p.m. time stated herein, it shall provide
additional time for the Company to place orders for the purchase and
redemption of Shares. Such additional time shall be equal to the
additional time which the Trust takes to make the net asset value
available to the Company. If the Trust provides materially incorrect
share net asset value information, the Trust shall make an adjustment to
the number of shares purchased or redeemed for the Accounts to reflect the
correct net asset value per share. Any material error in the calculation
or reporting of net asset value per share, dividend or capital gains
information shall be reported promptly upon discovery to the Company.
<PAGE>
ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. The Company represents and warrants that the Policies are or will be
registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold, and
distributed in compliance in all material respects with all applicable
state and federal laws, including without limitation the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the 1940
Act. The Company further represents and warrants that it is an insurance
company duly organized and in good standing under applicable law and that
it has legally and validly established the Account as a segregated asset
account under applicable law and has registered or, prior to any issuance
or sale of the Policies, will register the Accounts as unit investment
trusts in accordance with the provisions of the 1940 Act (unless exempt
therefrom) to serve as segregated investment accounts for the Policies,
and that it will maintain such registration for so long as any Policies
are outstanding. The Company shall amend the registration statements
under the 1933 Act for the Policies and the registration statements under
the 1940 Act for the Accounts from time to time as required in order to
effect the continuous offering of the Policies or as may otherwise be
required by applicable law. The Company shall register and qualify the
Policies for sales accordance with the securities laws of the various
states only if and to the extent deemed necessary by the Company.
2.2. The Company represents and warrants that the Policies are currently
and at the time of issuance will be treated as life insurance, endowment
or annuity contract under applicable provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), that it will maintain such treatment
and that it will notify the Trust or MFS immediately upon having a
reasonable basis for believing that the Policies have ceased to be so
treated or that they might not be so treated in the future.
2.3. The Company represents and warrants that Jefferson-Pilot Investor
Services, Inc., the underwriter for the individual variable annuity and
the variable life policies, is a member in good standing of the NASD and
is a registered broker-dealer with the SEC. The Company represents and
warrants that the Company and Jefferson-Pilot Investor Services, Inc. will
sell and distribute such policies in accordance in all material respects
with all applicable state and federal securities laws, including without
limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.4. The Trust and MFS represent and warrant that the Shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized
for issuance and sold in compliance with the laws of The Commonwealth of
Massachusetts and all applicable federal and state securities laws and
that the Trust is and shall remain registered under the 1940 Act. The
Trust shall amend the registration statement for its Shares under the 1933
Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its Shares. The Trust shall register and qualify
the Shares for sale in accordance with the laws of the various states only
if and to the extent deemed necessary by the Trust.
2.5. MFS represents and warrants that the Underwriter is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC.
The Trust and MFS represent that the Trust and the Underwriter will sell
and distribute the Shares in accordance in all material respects with all
applicable state and federal securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 1940 Act.
2.6. The Trust represents that it is lawfully organized and validly
existing under the laws of The Commonwealth of Massachusetts and that it
does and will comply in all material respects with the 1940 Act and any
applicable regulations thereunder.
<PAGE>
2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it shall
perform its obligations for the Trust in compliance in all material
respects with any applicable federal securities laws and with the
securities laws of The Commonwealth of Massachusetts. MFS represents and
warrants that it is not subject to state securities laws other than the
securities laws of The Commonwealth of Massachusetts and that it is exempt
from registration as an investment adviser under the securities laws of
The Commonwealth of Massachusetts.
2.8. No less frequently than annually, the Company shall submit to the
Board such reports, material or data as the Board may reasonably request
so that it may carry out fully the obligations imposed upon it by the
conditions contained in the exemptive application pursuant to which the
SEC has granted exemptive relief to permit mixed and shared funding (the
"Mixed and Shared Funding Exemptive Order").
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule A hereto) for the
Shares as the Company may reasonably request for distribution to existing
Policy owners whose Policies are funded by such Shares. The Trust or its
designee shall provide the Company, at the Company's expense, with as many
copies of the current prospectus for the Shares as the Company may
reasonably request for distribution to prospective purchasers of
Policies. If requested by the Company in lieu thereof, the Trust or its
designee shall provide such documentation (including a "camera ready" copy
of the new prospectus as set in type or, at the request of the Company, as
a diskette in the form sent to the financial printer) and other assistance
as is reasonably necessary in order for the parties hereto once each year
(or more frequently if the prospectus for the Shares is supplemented or
amended) to have the prospectus for the Policies and the prospectus for
the Shares printed together in one document; the expenses of such printing
to be apportioned between (a) the Company and (b) the Trust or its
designee in proportion to the number of pages of the Policy and Shares'
prospectuses, taking account of other relevant factors affecting the
expense of printing, such as covers, columns, graphs and charts; the Trust
or its designee to bear the cost of printing the Shares' prospectus
portion of such document for distribution to owners of existing Policies
funded by the Shares and the Company to bear the expenses of printing the
portion of such document relating to the Accounts; provided, however, that
the Company shall bear all printing expenses of such combined documents
where used for distribution to prospective purchasers or to owners of
existing Policies not funded by the Shares. In the event that the
Company requests that the Trust or its designee provides the Trust's
prospectus in a "camera ready" or diskette format, the Trust shall be
responsible for providing the prospectus in the format in which it or MFS
is accustomed to formatting prospectuses and shall bear the expense of
providing the prospectus in such format (e.g., typesetting expenses), and
the Company shall bear the expense of adjusting or changing the format to
conform with any of its prospectuses.
<PAGE>
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or its
designee. The Trust or its designee, at its expense, shall print and
provide such statement of additional information to the Company (or a
master of such statement suitable for duplication by the Company) for
distribution to any owner of a Policy funded by the Shares. The Trust or
its designee, at the Company's expense, shall print and provide such
statement to the Company (or a master of such statement suitable for
duplication by the Company) for distribution to a prospective purchaser
who requests such statement or to an owner of a Policy not funded by the
Shares.
3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's
proxy materials, reports to Shareholders and other communications to
Shareholders in such quantity as the Company shall reasonably require
for distribution to Policy owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3 above,
or of Article V below, the Company shall pay the expense of printing or
providing documents to the extent such cost is considered a distribution
expense. Distribution expenses would include by way of illustration, but
are not limited to, the printing of the Shares' prospectus or prospectuses
for distribution to prospective purchasers or to owners of existing
Policies not funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate to
include in the prospectus pursuant to which a Policy is offered disclosure
regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions received from
Policy owners; and
(c) vote the Shares for which no instructions have been received
in the same proportion as the Shares of such Portfolio for which
instructions have been received from Policy owners;
so long as and to the extent that the SEC continues to interpret the 1940
Act to require pass through voting privileges for variable contract
owners. The Company will in no way recommend action in connection with
or oppose or interfere with the solicitation of proxies for the Shares
held for such Policy owners. The Company reserves the right to vote
shares held in any segregated asset account in its own right, to the
extent permitted by law. Participating Insurance Companies shall be
responsible for assuring that each of their separate accounts holding
Shares calculates voting privileges in the manner required by the Mixed
and Shared Funding Exemptive Order. The Trust and MFS will notify the
Company of any changes of interpretations or amendments to the Mixed and
Shared Funding Exemptive Order.
<PAGE>
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material in which the Trust, MFS, any other investment adviser to the
Trust, or any affiliate of MFS are named, at least three (3) Business Days
prior to its use. No such material shall be used if the Trust, MFS, or
their respective designees reasonably objects to such use within three (3)
Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statement on behalf of the Trust, MFS, any other
investment adviser to the Trust, or any affiliate of MFS or concerning the
Trust or any other such entity in connection with the sale of the Policies
other than the information or representations contained in the
registration statement, prospectus or statement of additional information
for the Shares, as such registration statement, prospectus and statement
of additional information may be amended or supplemented from time to
time, or in reports or proxy statements for the Trust, or in sales
literature or other promotional material approved by the Trust, MFS or
their respective designees, except with the permission of the Trust, MFS
or their respective designees. The Trust, MFS or their respective
designees each agrees to respond to any request for approval on a prompt
and timely basis. The Company shall adopt and implement procedures
reasonably designed to ensure that information concerning the Trust, MFS
or any of their affiliates which is intended for use only by brokers or
agents selling the Policies (i.e., information that is not intended for
distribution to Policy holders or prospective Policy holders) is so used,
and neither the Trust, MFS nor any of their affiliates shall be liable for
any losses, damages or expenses relating to the improper use of such broker
only materials.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company and/or the Accounts is
named, at least three (3) Business Days prior to its use. No such
material shall be used if the Company or its designee reasonably objects
to such use within three (3) Business Days after receipt of such material.
4.4. The Trust and MFS shall not give, and agree that the Underwriter
shall not give, any information or make any representations on behalf of
the Company or concerning the Company, the Accounts, or the Policies
in connection with the sale of the Policies other than the information or
representations contained in a registration statement, prospectus, or
statement of additional information for the Policies, as such registration
statement, prospectus and statement of additional information may be
amended or supplemented from time to time, or in reports for the Accounts,
or in sales literature or other promotional material approved by the
Company or its designee, except with the permission of the Company. The
Company or its designee agrees to respond to any request for approval on
a prompt and timely basis. The parties hereto agree that this Section
4.4. is neither intended to designate nor otherwise imply that MFS is an
underwriter or distributor of the Policies.
<PAGE>
4.5. The Company and the Trust (or its designee in lieu of the Company or
the Trust, as appropriate) will each provide to the other at least one
complete copy of all registration statements, prospectuses, statements of
additional information, reports, proxy statements, sales literature and
other promotional materials, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate to
the Policies, or to the Trust or its Shares, prior to or contemporaneously
with the filing of such document with the SEC or other regulatory
authorities. The Company and the Trust shall also each promptly inform
the other or the results of any examination by the SEC (or other
regulatory authorities) that relates to the Policies, the Trust
or its Shares, and the party that was the subject of the examination
shall provide the other party with a copy of relevant portions of any
"deficiency letter" or other correspondence or written report regarding
any such examination.
4.6. The Trust and MFS will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Portfolio, and of
any material change in the Trust's registration statement, particularly
any change resulting in change to the registration statement or prospectus
or statement of additional information for any Account. The Trust and MFS
will cooperate with the Company so as to enable the Company to solicit
proxies from Policy owners or to make changes to its prospectus, statement
of additional information or registration statement, in an orderly manner.
The Trust and MFS will make reasonable efforts to attempt to have changes
affecting Policy prospectuses become effective simultaneously with the
annual updates for such prospectuses.
4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited to
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or
tape recording, videotape display, signs or billboards, motion pictures,
or other public media), and sales literature (such as brochures, circulars,
reprints or excerpts or any other advertisement, sales literature, or
published articles), distributed or made generally available to customers
or the public, educational or training materials or communications
distributed or made generally available to some or all agents or employees.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust shall pay no fee or other compensation to the Company under
this Agreement, and the Company shall pay no fee or other compensation to
the Trust, except that if the Trust or any Portfolio adopts and implements
a plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution
and Shareholder servicing expenses, then, subject to obtaining any
required exemptive orders or regulatory approvals, the Trust may make
payments to the Company or to the underwriter for the Policies if and in
amounts agreed to by the Trust in writing. Each party, however, shall,
in accordance with the allocation of expenses specified in Articles III
and V hereof, reimburse other parties for expense initially paid by one
party but allocated to another party. In addition, nothing herein shall
prevent the parties hereto from otherwise agreeing to perform, and
arranging for appropriate compensation for, other services relating to the
Trust and/or to the Accounts.
<PAGE>
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable federal
and state laws, including preparation and filing of the Trust's
registration statement, and payment of filing fees and registration fees;
preparation and filing of the Trust's proxy materials and reports to
Shareholders; setting in type and printing its prospectus and statement of
additional information (to the extent provided by and as determined in
accordance with Article III above); setting in type and printing the proxy
materials and reports to Shareholders (to the extent provided by and as
determined in accordance with Article III above); the preparation of all
statements and notices required of the Trust by any federal or state law
with respect to its Shares; all taxes on the issuance or transfer of the
Shares; and the costs of distributing the Trust's prospectuses and proxy
materials to owners of Policies funded by the Shares and any expenses
permitted to be paid or assumed by the Trust pursuant to a plan, if any,
under Rule 12b-1 under the 1940 Act. The Trust shall not bear any
expenses of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies
and of distributing the Trust's Shareholder reports and proxy materials to
Policy owners. The Company shall bear all expenses associated with the
registration, qualification, and filing of the Policies under applicable
federal securities and state insurance laws; the cost of preparing,
printing and distributing the Policy prospectus and statement of
additional information; and the cost of preparing, printing and
distributing annual individual account statements for Policy owners as
required by state insurance laws.
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
6.1. The Trust and MFS represent and warrant that they will use their best
efforts to ensure that each Portfolio of the Trust will meet the
diversification requirements of Section 817(h)(1) of the Code and Treas.
Reg. 1.817-5, relating to the diversification requirements for variable
annuity, endowment, or life insurance contracts, as they may be amended
from time to time (and any revenue rulings, revenue procedures, notices,
and other published announcements of the Internal Revenue Service
interpreting these sections).
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for the
existence of any material irreconcilable conflict between the interests of
the variable annuity contract owners and the variable life insurance
policy owners of the Company and/or affiliated companies ("contract
owners") investing in the Trust. The Board shall have the sole authority
to determine if a material irreconcilable conflict exists, and such
determination shall be binding on the Company only if approved in the form
of a resolution by a majority of the Board, or a majority of the
disinterested trustees of the Board. The Board will give prompt notice of
any such determination to the Company.
<PAGE>
7.2. The Company agrees that it will be responsible for assisting the
Board in carrying out its responsibilities under the conditions set forth
in the Trust's exemptive application pursuant to which the SEC has granted
the Mixed and Shared Funding Exemptive Order by providing the Board, as it
may reasonably request, with all information necessary for the Board to
consider any issues raised and agrees that it will be responsible for
promptly reporting any potential or existing conflicts of which it is
aware to the Board including, but not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions
are disregard. The Company also agrees that, if a material irreconcilable
conflict arises, it will at its own cost remedy such conflict up to and
including (a) withdrawing the assets allocable to some or all of the
Accounts from the Trust or any Portfolio and reinvesting such assets in a
different investment medium, including (but not limited to) another
Portfolio of the Trust, or submitting to a vote of all affected contract
owners whether to withdraw assets from the Trust or any Portfolio and
reinvesting such assets in a different investment medium and, as
appropriate, segregating the assets attributable to any appropriate group
of contract owners that votes in favor of such segregation, or offering to
any of the affected contract owners the option of segregating the assets
attributable to their contracts or policies, and (b) establishing a new
registered management investment company and segregating the assets
underlying the Policies, unless a majority of Policy owners materially
adversely affected by the conflict have voted to decline the offer to
establish a new registered management investment company.
7.3. A majority of the disinterested trustees of the Board shall determine
whether any proposed action by the Company adequately remedies any
material irreconcilable conflict. In the event that the Board determines
that any proposed action does not adequately remedy any material
irreconcilable conflict, the Company will withdraw from investment in the
Trust each of the Accounts designated by the disinterested trustees and
terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination; provided, however, that
such withdrawal and termination shall be limited to the extent required to
remedy any such material irreconcilable conflict as determined by a
majority of the disinterested trustees of the Board.
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of
the 1940 Act or the rules promulgated thereunder with respect to mixed
or shares funding (as defined in the Mixed and Shared Funding Exemptive
Order) on terms and conditions materially different from those contained
in the Mixed Shared Funding Exemptive Order, then (a) the Trust and/or the
Participating Insurance Companies, as appropriate, shall take such steps as
may be necessary to comply with Rule 6e-2 and 6e-3(T), as amended, and
Rule 6e-3, as adopted, to the extent such rules are applicable; and (b)
Sections 3.5, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in such Rule(s) as
so amended or adopted.
<PAGE>
ARTICLE VIII. INDEMNIFICATION
8.1. Indemnification by the Company
The Company agrees to indemnify and hold harmless the Trust, MFS, any
affiliates of MFS, and each of their respective directors/trustees,
officers and each person, if any, who controls the Trust or MFS within
the meaning of Section 15 of the 1933 Act, and any agents or employees
of the foregoing (each an "Indemnified Party," or collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Company) or expenses (including
reasonable counsel fees) to which an Indemnified Party may become subject
under any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the
Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement, prospectus or statement of additional information for the
Policies or contained in the Policies or sales literature or other
promotional material for the Policies (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the
commission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reasonable
reliance upon and in conformity with information furnished to the
Company or its designee by or on behalf of the Trust or MFS for use
in the registration statement, prospectus or statement of additional
information for the Policies or in the Policies or sales literature
or other promotional material (or any amendment or supplement) or
otherwise for use in connection with the sale of the Policies or
Shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material of the
Trust not supplied by the Company or this designee, or persons under
its control and on which the Company has reasonably relied) or
wrongful conduct of the Company or persons under its control, with
respect to the sale or distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue statement
of a material fact contained in the registration statement,
prospectus, statement of additional information, or sales literature
or other promotional literature of the Trust, or any amendment thereof
or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
to the Trust by or on behalf of the Company; or
<PAGE>
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company; or
(e) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement;
as limited by and in accordance with the provisions of this Article
VIII.
8.2. Indemnification by the Trust
The Trust agrees to indemnify and hold harmless the Company and each of
its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act, and any agents
or employees of the foregoing (each an "Indemnified Party," or
collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Trust) or
expenses (including reasonable counsel fees) to which any Indemnified
Party may become subject under any statute, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement, prospectus, statement of additional information or sales
literature or other promotional material of the Trust (or any
amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to make
the statement therein not misleading, provided that this agreement
to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made
in reasonable reliance upon and in conformity with information
furnished to the Trust, MFS, the Underwriter or their respective
designees by or on behalf of the Company for use in the registration
statement, prospectus or statement of additional information for the
Trust or in sales literature or other promotional material for the
Trust (or any amendment or supplement) or otherwise for use in
connection with the sale of the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statement or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material for the
Policies not supplied by the Trust, MFS, the Underwriter or any of
their respective designees or persons under their respective control
and on which any such entity has reasonably relied) or wrongful
conduct of the Trust or persons under its control, with respect to
the sale or distribution of the Policies or Shares; or
(c) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement
(including a failure, whether unintentional or in good faith or
otherwise, to comply with the diversification requirements specified
in Article VI of this Agreement) or arise out of or result from any
other material breach of this Agreement by the Trust; or
<PAGE>
(d) arise out of or result from the materially incorrect or untimely
calculation or reporting of the daily net asset value per share or
dividend or capital gain distribution rate; or
(e) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of the Agreement;
as limited by and in accordance with the provisions of this Article
VIII.
8.3. In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any Participating Insurance
Company or any Policy holder, with respect to any losses, claims, damages,
liabilities or expenses that arise out of or result from (i) a breach of
any representation, warranty, and/or covenant made by the Company
hereunder or by any Participating Insurance Company under an agreement
containing substantially similar representations, warranties and
covenants; (ii) the failure by the Company or any Participating Insurance
Company to maintain its segregated asset account (which invests in any
Portfolio) as a legally and validly established segregated asset account
under applicable state law and as a duly registered unit investment trust
under the provisions of the 1940 Act (unless exempt therefrom); or (iii)
the failure by the Company or any Participating Insurance Company to
maintain its variable annuity and/or variable life insurance contracts
(with respect to which any Portfolio serves as an underlying funding
vehicle) as life insurance, endowment or annuity contracts under
applicable provisions of the Code.
8.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect to any
losses, claims, damages, liabilities or expenses to which an Indemnified
Party would otherwise be subject by reason of such Indemnified Party's
willful misfeasance, willful misconduct, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under
this Agreement.
8.5. Promptly after receipt by an Indemnified Party under this Section
8.5. of commencement of action, such Indemnified Party will, if a claim in
respect thereof is to be made against the indemnifying party under this
section, notify the indemnifying party of the commencement thereof; but
the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any Indemnified Party otherwise than
under this section. In case any such action is brought against any
Indemnified Party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, assume the
defense thereof, with counsel satisfactory to such Indemnified Party.
After notice from the indemnifying party of its intention to assume the
defense of an action, the Indemnified Party shall bear the expenses of
any additional counsel obtained by it, and the indemnifying party shall
not be liable to such Indemnified Party under this section for any legal
or other expenses subsequently incurred by such Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation.
<PAGE>
8.6. Each of the parties agrees promptly to notify the other parties of
the commencement of any litigation or proceeding against it or any of its
respective officers, directors, trustees, employees or 1933 Act control
persons in connection with the Agreement, the issuance or sale of the
Policies, the operation of the Accounts, or the sale or acquisition of
Shares.
8.7. A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article VIII.
The indemnification provisions contained in this Article VIII shall survive
any termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as
the SEC may grant and the terms hereof shall be interpreted and construed
in accordance therewith.
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
The Trust, MFS, and the Company agree that each such party shall promptly
notify the other parties to this Agreement, in writing, of the institution
of any formal proceedings brought against such party or its designees by the
NASD, the SEC, or any insurance department or any other regulatory body
regarding such party's duties under this Agreement or related to the sale of
the Policies, the operation of the Accounts, or the purchase of the Shares.
ARTICLE XI. TERMINATION
11.1. This Agreement shall terminate with respect to the Accounts, or
one, some, or all Portfolios:
(a) at the option of any party upon six (6) months' advance written
notice to the other parties;
or
(b) at the option of the Company to the extent that the Shares of
Portfolios are not reasonably available to meet the requirements of
the Policies or are not "appropriate funding vehicles" for the
Policies, as reasonably determined by the Company. Without limiting
the generality of the foregoing, the Shares of a Portfolio would not
be "appropriate funding vehicles" if, for example, such Shares did
not meet the diversification or other requirements referred to in
Article VI hereof; or if the Company would be permitted to disregard
Policy owner voting instructions pursuant to Rule 6e-2 or 6e-3(T)
under the 1940 Act. Prompt notice of the election to terminate for
such cause and an explanation of such cause shall be furnished to the
Trust by the Company; or
<PAGE>
(c) at the option of the Trust or MFS upon institution of formal
proceedings against the Company by the NASD, the SEC, or any
insurance department or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of
the Policies, the operation of the Accounts, or the purchase of the
Shares; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body
regarding the Trust's or MFS' duties under this Agreement or related
to the sale of the Shares; or
(e) at the option of the Company, the Trust or MFS upon receipt of
any necessary regulatory approvals and/or the vote of the Policy
owners having an interest in the Accounts (or any subaccounts) to
substitute the shares of another investment company for the
corresponding Portfolio Shares in accordance with the terms of the
Policies for which those Portfolio Shares had been selected to serve
as the underlying investment media. The Company will give thirty
(30) days prior written notice to the Trust of the Date of any
proposed vote or other action taken to replace the Shares; or
(f) termination by either the Trust or MFS by written notice to the
Company, if either one or both of the Trust or MFS respectively,
shall determine, in their sole judgment exercised in good faith, that
the Company has suffered a material adverse change in its business,
operations, financial condition, or prospects since the date of this
Agreement or is the subject of material adverse publicity; or
(g) termination by the Company by written notice to the Trust and
MFS, if the Company shall determine, in its sole judgment exercised
in good faith, that the Trust or MFS has suffered a material adverse
change in this business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity; or
(h) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement; or
(i) upon assignment of this Agreement, unless made with the
written consent of the parties hereto.
The notice shall specify the Portfolio or Portfolios, Policies and, if
applicable, the Accounts as to which the Agreement is to be terminated.
11.3. It is understood and agreed that the right of any party hereto
to terminate this Agreement pursuant to Section 11.1(a) may be exercised
for cause or for no cause.
11.4. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance laws or regulations, the
Company shall not redeem the Shares attributable to the Policies (as
opposed to the Shares attributable to the Company's assets held in the
Accounts), and the Company shall not prevent Policy owners from allocating
payments to a Portfolio that was otherwise available under the Policies,
until thirty (30) days after the Company shall have notified the Trust of
its intention to do so.
<PAGE>
11.5. Notwithstanding any termination of this Agreement, the Trust
and MFS shall, at the option of the Company, continue to make available
additional shares of the Portfolios pursuant to the terms and conditions
of this Agreement, for all Policies in effect on the effective date of
termination of this Agreement (the "Existing Policies"), except as
otherwise provided under Article VII of this Agreement. Specifically,
without limitation, the owners of the Existing Policies shall be permitted
to transfer or reallocate investment under the Policies, redeem investments
in any Portfolio and/or invest in the Trust upon the making of additional
purchase payments under the Existing Policies.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at
such other address as such party may from time to time specify in writing to
the other party.
If to the Trust:
MFS Variable Insurance Trust
500 Boylston Street
Boston, Massachusetts 02116
Attn: Stephen E. Cavan, Secretary
If to the Company:
Jefferson-Pilot Life Insurance Company
100 North Greene St.
Greensboro, North Carolina 27401
Attn: Ronald DeCicco
If to MFS:
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
Attn: Stephen E. Cavan, General Counsel
ARTICLE XIII. MISCELLANEOUS
13.1. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Policies and all information reasonably
identified as confidential in writing by any other party hereto and, except
as permitted by this Agreement or as otherwise required by applicable law
or regulation, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written
consent of the affected party until such time as it may come into the
public domain.
<PAGE>
13.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
13.4. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of
the Agreement shall not be affected thereby.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities
(including without limitation the SEC, the NASD, and state insurance
regulators) relating to this Agreement or the transactions contemplated
hereby.
13.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled
to under state and federal laws.
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Company
acknowledges that the obligations of or arising out of this instrument
are not binding upon any of the Trust's trustees, officers, employees,
agents or shareholders individually, but are binding solely upon the
assets and property of the Trust in accordance with its proportionate
interest hereunder. The Company further acknowledges that the assets and
liabilities of each Portfolio are separate and distinct and that the
obligations of or arising out of this instrument are binding solely upon
the assets or property of the Portfolio on whose behalf the Trust has
executed this instrument. The Company also agrees that the obligations
of each Portfolio hereunder shall be several and not joint, in accordance
with its proportionate interest hereunder, and the Company agrees not to
proceed against any Portfolio for the obligations of another Portfolio.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the
date specified above.
JEFFERSON-PILOT LIFE INSURANCE COMPANY
By its authorized officer,
By: _______________________________
Title: ____________________________
MFS VARIABLE INSURANCE TRUST, on behalf of the Portfolios
By its authorized officer and not individually,
By: _______________________________
Title: ____________________________
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: _______________________________
Title: ____________________________
As of ____________________
<PAGE>
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
Name of Separate
Account and Date
Established by Board of Directors
Policies Funded
by Separate Account
Portfolios
Applicable to Policies
<PAGE>
