<PAGE>
File No. 33-11084
811 -2188
As filed with the Securities and Exchange Commission on April 17, 1998
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. / /
-----
Post-Effective Amendment No. 4 /X/
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 /X/
Amendment No. 14
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JEFFERSON-PILOT SEPARATE ACCOUNT A
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(Exact Name of Registrant as Specified in Charter)
JEFFERSON-PILOT LIFE INSURANCE COMPANY
100 North Greene Street
Greensboro, North Carolina 27401
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(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code 1-800-458-4498
Shari J. Lease
Jefferson-Pilot Life Insurance Company
One Granite Place
Concord, New Hampshire 03301
- -------------------------------------------------------------------------------
(Name and Address of Agent for Service)
Copy to:
Joan E. Boros, Esquire
Jorden Burt Boros Cicchetti Berenson & Johnson LLP
1025 Thomas Jefferson Street, N.W.
Suite 400 East
Washington, DC 20007
Approximate Date of Proposed Public Offering:
As soon as practicable after effectiveness of the Registration Statement.
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It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/X/ on May 1, 1998 pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a)(1) of Rule 485
/ / on (date) pursuant to paragraph (a) (1) of Rule 485
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered:
Variable Portion of Contracts issued by the Separate Account
<PAGE>
JEFFERSON-PILOT SEPARATE ACCOUNT A
Registration Statement on Form N-4
CROSS REFERENCE SHEET
Pursuant to Rule 481 (a)
<TABLE>
<CAPTION>
N-4
Item No. Caption
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<S> <C>
1. . . . . . . Cover Page
2. . . . . . . "Definitions"
3. . . . . . . "Summary of Contract Expenses"; "Summary"
4. . . . . . . "Condensed Financial Information"
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 . . . . . . "Certain Federal Income Tax Consequences"
13 . . . . . . "Legal Proceedings"
14 . . . . . . "Table of Contents Statement of Additional Information"
<PAGE>
<CAPTION>
N-4
Item No. Caption
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<S> <C>
15 . . . . . . Cover Page
16 . . . . . . "Table of Contents"
17 . . . . . . "The Insurance Company" (Prospectus)
18 . . . . . . Not Applicable
19 . . . . . . "Principal Underwriter"; "The Distribution of the Contracts"
(Prospectus)
20 . . . . . . "Principal Underwriter"
21 . . . . . . "Standardized Computation of Performance"
22 . . . . . . "Determination of Annuity Payments"
23 . . . . . . "Financial Statements"
</TABLE>
Part C - Information required in Part C is set forth under each appropriate
item, as numbered, in Part C to this Registration Statement.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SUMMARY OF CONTRACT EXPENSES . . . . . . . . . . . . . . . . . . . . . 5
CONDENSED FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . 10
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
THE INSURANCE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . 13
Year 2000 Matter. . . . . . . . . . . . . . . . . . . . . . . . . . 13
JEFFERSON-PILOT SEPARATE ACCOUNT A . . . . . . . . . . . . . . . . . . 13
SUB-ACCOUNTS OF THE SEPARATE ACCOUNT AND AVAILABLE FUNDS . . . . . . . 14
INVESTMENT OBJECTIVES OF THE FUNDS . . . . . . . . . . . . . . . . . . 15
Substitution of Other Securities or Funds . . . . . . . . . . . . . 16
DEDUCTIONS UNDER THE CONTRACTS . . . . . . . . . . . . . . . . . . . . 16
Contingent Deferred Sales Charge. . . . . . . . . . . . . . . . . . 16
Waiver of Surrender Charge Rider. . . . . . . . . . . . . . . . . . 17
Premium Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Contract Administration Charges . . . . . . . . . . . . . . . . . . 17
Annual Contract Fee . . . . . . . . . . . . . . . . . . . . . . . . 17
Administrative Expense Fee. . . . . . . . . . . . . . . . . . . . . 17
Deduction for Assuming Mortality and Expense Risks. . . . . . . . . 17
Expenses of the Funds . . . . . . . . . . . . . . . . . . . . . . . 18
TRANSFERS BETWEEN SUB-ACCOUNTS . . . . . . . . . . . . . . . . . . . . 18
REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Reinvestment Privilege. . . . . . . . . . . . . . . . . . . . . . . 19
OTHER SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Dollar Cost Averaging . . . . . . . . . . . . . . . . . . . . . . . 19
Systematic Withdrawal Plan. . . . . . . . . . . . . . . . . . . . . 20
Reports to the Owner. . . . . . . . . . . . . . . . . . . . . . . . 20
FIXED ACCOUNT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
General Description . . . . . . . . . . . . . . . . . . . . . . . . 20
Fixed Account Accumulation Value. . . . . . . . . . . . . . . . . . 21
Fixed Account Transfers, Total, and Partial Surrenders. . . . . . . 21
CONTRACT BENEFITS. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
CERTAIN MINIMUM AMOUNTS. . . . . . . . . . . . . . . . . . . . . . . . 22
THE ACCUMULATION PERIOD. . . . . . . . . . . . . . . . . . . . . . . . 22
The Accumulation Value and Accumulation Units . . . . . . . . . . . 22
Accumulation Unit Values. . . . . . . . . . . . . . . . . . . . . . 23
Valuation Date and Valuation Period . . . . . . . . . . . . . . . . 23
Net Investment Factor . . . . . . . . . . . . . . . . . . . . . . . 23
Example of Calculation of Accumulation Unit Value . . . . . . . . . 23
THE ANNUITY PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Payment Provisions. . . . . . . . . . . . . . . . . . . . . . . . . 23
SETTLEMENT OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Annuity Purchase Rates. . . . . . . . . . . . . . . . . . . . . . . 25
Annuity Unit Values . . . . . . . . . . . . . . . . . . . . . . . . 26
Number of Annuity Units . . . . . . . . . . . . . . . . . . . . . . 26
Time of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Amount of Payment . . . . . . . . . . . . . . . . . . . . . . . . . 26
PAYMENT ON OR AFTER DEATH OF ANNUITANT . . . . . . . . . . . . . . . . 26
THE DISTRIBUTION OF THE CONTRACTS. . . . . . . . . . . . . . . . . . . 27
VOTING RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
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<PAGE>
TABLE OF CONTENTS--(CONTINUED)
<TABLE>
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PAGE
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES. . . . . . . . . . . . . . . . 28
Taxation of Annuities . . . . . . . . . . . . . . . . . . . . . . . 28
In General . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Possible Changes in Taxation . . . . . . . . . . . . . . . . . . 29
Full and Partial Redemptions From Qualified Contracts. . . . . . 29
Full and Partial Redemptions From Non-Qualified Contracts. . . . 29
Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . 29
Penalty Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Death Benefit Proceeds . . . . . . . . . . . . . . . . . . . . . 30
Gifts, Transfers, Assignments or Exchanges of the Contract . . . 30
Generation-Skipping Transfers. . . . . . . . . . . . . . . . . . 30
Multiple Contracts . . . . . . . . . . . . . . . . . . . . . . . 30
Withholding. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Other Tax Consequences . . . . . . . . . . . . . . . . . . . . . 30
Qualified Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Qualified Pension and Profit Sharing Plans . . . . . . . . . . . 31
Individual Retirement Annuities and Individual
Retirement Accounts. . . . . . . . . . . . . . . . . . . . . . 31
Tax-Sheltered Annuities. . . . . . . . . . . . . . . . . . . . . 31
Section 457 Deferred Compensation ("Section 457") Plans. . . . . 32
LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SPECIAL CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 32
Restrictions Upon Transfer of Ownership and Assignment. . . . . . . 32
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 32
TABLE OF CONTENTS--STATEMENT OF ADDITIONAL INFORMATION . . . . . . . . 33
INVESTMENT FUND PROSPECTUSES
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUNDS (VIP and VIP II) . . . VIPF-1
OPPENHEIMER VARIABLE ACCOUNT FUNDS. . . . . . . . . . . . . . . . . OVAF-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
JEFFERSON PILOT VARIABLE FUND, INC. . . . . . . . . . . . . . . . . JPVF-1
</TABLE>
ii
<PAGE>
PROSPECTUS MAY 1, 1998
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 is available (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 six separate
mutual funds ("Funds"). The Funds are currently Oppenheimer Variable Account
Funds, which are managed by OppenheimerFunds, Inc.; 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 Jefferson Pilot Variable
Fund, Inc., managed by Jefferson Pilot Investment Advisory Corporation, 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. An investor
should read those prospectuses carefully before buying a Contract described in
this Prospectus or investing in any Sub-Account.
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, 1998 which is incorporated herein by
reference. The Statement of Additional Information is available upon written or
oral request and without charge from the Variable Annuity Service Center, P.O.
Box 515, Concord, New Hampshire 03302-0515, Telephone Number 1-800-289-1776. The
table of contents for the Statement of Additional Information is shown on page
35 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: OPPENHEIMER VARIABLE ACCOUNT FUNDS; 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
JEFFERSON PILOT VARIABLE FUND, INC.
<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. 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.
4. 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.
5. 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.
6. ANNUITANT--the natural person upon whose life annuity payments depend
or will depend.
7. ANNUITY DATE--the date on which the first variable annuity payment is
payable.
8. ANNUITY UNIT--the unit of measure of each Sub-Account of the Separate
Account used in determining the amount of each variable annuity payment.
9. BENEFICIARY (OR BENEFICIARIES)--the person (or persons) designated to
receive the death benefit in the case of the death of the Annuitant.
10. CODE--the Internal Revenue Code of 1986, as amended.
11. 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.
12. COMPANY--the Jefferson-Pilot Life Insurance Company.
13. CONTRACT VALUE--the Accumulation Value in the Sub-Accounts and the
Fixed Account less any contingent deferred sales charge, annual contract fee,
and premium tax deducted at the time of surrender or annuitization.
14. FIXED ANNUITY--an annuity with payments which do not vary in
accordance with the net investment results of the Separate Account.
15. FIXED ACCOUNT--Contract Values allocated to the Company's General
Account under the Contract.
16. FUNDS--the Oppenheimer Funds, VIP Portfolios, Jefferson Pilot Funds,
Alger American Funds, and MFS Funds available under the Contract.
17. FUND SHARE--a share of beneficial interest in any of the VIP
Portfolios, Jefferson Pilot Funds, Alger American Funds, and MFS Funds.
18. 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.
2
<PAGE>
19. HOME OFFICE--the principal office of the Company at Greensboro, North
Carolina.
20. JEFFERSON PILOT VARIABLE FUND, INC. ("JPVF")--an open-end diversified
management investment company registered under the 1940 Act. JPVF was previously
known as Chubb America Fund, Inc. and changed its name as part of the
acquisition of Chubb Life and its affiliates by Jefferson-Pilot Corporation.
21. JEFFERSON PILOT FUNDS--the portfolios of the Jefferson Pilot Variable
Fund, Inc. which are available under the Contracts - Emerging Growth Portfolio
and Capital Growth Portfolio.
22. MFS FUNDS--mutual fund series of the MFS Variable Insurance Trust
which are available under the Contracts--MFS Research Series and MFS Utilities
Series.
23. MFS VARIABLE INSURANCE TRUST--an open-end management investment
company registered under the 1940 Act.
24. 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.
25. NON-QUALIFIED CONTRACT--a Contract issued in connection with a
retirement plan which does not receive favorable tax treatment under Section
401, 403, 408, 408A, or 457 of the Code.
26. OPPENHEIMER FUNDS--mutual fund series of the Oppenheimer Variable
Account Funds which are available under the Contracts--Oppenheimer Bond Fund and
Oppenheimer Growth Fund.
27. OPPENHEIMER VARIABLE ACCOUNT FUNDS--a diversified open-end investment
company registered under the 1940 Act.
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.
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 Code
Section 408A; or
(iv) to a government unit under an employee benefit plan which does in
fact result in tax deferment under Code Section 457.
31. SEPARATE ACCOUNT--the separate account designated as Jefferson-Pilot
Separate Account A.
32. SUB-ACCOUNT(S)--a sub-account of the Separate Account investing in
shares of one of the Funds.
33. THE ALGER AMERICAN FUND--a diversified, open-end management investment
company registered under the 1940 Act.
34. 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
3
<PAGE>
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. Valuation Date shall not include the following local or regional
business holidays: Good Friday, the Friday following Thansgiving, and the day
before or following Christmas Day.
35. 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.
36. VARIABLE ANNUITY--an annuity with payments varying in accordance with
the net investment results of the Separate Account.
37. VARIABLE ANNUITY SERVICE CENTER--P.O. Box 515, Concord, NH 03302-0515.
38. VIP FUNDS--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.
39. VIP PORTFOLIOS--the portfolios of the VIP Funds which are available
under the Contracts--VIP Money Market Portfolio, VIP High Income Portfolio,
VIP Equity-Income Portfolio, VIP Growth Portfolio, VIP Overseas Portfolio,
VIP II Asset Manager Portfolio, VIP II Index 500 Portfolio and VIP II Contrafund
Portfolio.
40. 1940 ACT--the Investment Company Act of 1940, as amended.
4
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SUMMARY OF CONTRACT EXPENSES
<TABLE>
<CAPTION>
OWNER TRANSACTION EXPENSES
<S> <C>
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
</TABLE>
* 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 "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
"Contingent Deferred Sales Charge."
<TABLE>
<CAPTION>
<S> <C>
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 . . . . . . . . . . . . . . . . . . . . . . 0.15%
Account Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . None
Total Separate Account Annual Expenses. . . . . . . . . . . . . . . 1.40%
</TABLE>
ANNUAL PORTFOLIO COMPANY EXPENSES
(as a percentage of portfolio company average net assets)
<TABLE>
<CAPTION>
TOTAL PORTFOLIO
MANAGEMENT COMPANY ANNUAL
FEES OTHER EXPENSES EXPENSES
---- -------------- --------
<S> <C> <C> <C>
Oppenheimer Growth Fund. . . . . . . . . . . . . . 0.73% 0.02% 0.75%
Oppenheimer Bond Fund. . . . . . . . . . . . . . . 0.73% 0.05% 0.78%
VIP Money Market Portfolio . . . . . . . . . . . . 0.21% 0.10% 0.31%
VIP High Income Portfolio. . . . . . . . . . . . . 0.59% 0.12% 0.71%
VIP Equity-Income Portfolio . . . . . . . . . . . 0.51% 0.07% 0.58%(1)
VIP Growth Portfolio . . . . . . . . . . . . . . . 0.60% 0.09% 0.69%(1)
VIP Overseas Portfolio . . . . . . . . . . . . . . 0.75% 0.17% 0.92%(1)
VIP II Asset Manager Portfolio . . . . . . . . . . 0.55% 0.10% O.65%(1)
VIP II Index 500 Portfolio . . . . . . . . . . . . 0.24% 0.04% 0.28%(2)
VIP II Contrafund Portfolio. . . . . . . . . . . . 0.60% 0.11% 0.71%(1)
JPVF Capital Growth Portfolio. . . . . . . . . . . 1.00% 0.09% 1.09%
JPVF Emerging Growth Portfolio . . . . . . . . . . 0.80% 0.20% 1.00%
MFS Research Series. . . . . . . . . . . . . . . . 0.75% 0.13% 0.88%(3)
MFS Utilities Series . . . . . . . . . . . . . . . 0.75% 0.25% 1.00%(3)
Alger American Small Capitalization Portfolio. . . 0.85% 0.04% 0.89%
Alger American MidCap Growth Portfolio . . . . . . 0.80% 0.04% 0.84%
</TABLE>
5
<PAGE>
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(1) A portion of the brokerage commissions that certain funds pay was used to
reduce funds expenses. In addition, certain funds have entered into
arrangements with their custodian whereby credits realized as a result of
uninvested cash balances were used to reduce custodian expenses. Including
these reductions, the total operating expenses presented in the table would
have been .57% for VIP Equity-Income Portfolio, .67% for VIP Growth
Portfolio, .90% for VIP Overseas Portfolio, .64% for VIP II Asset Manager
Portfolio, and .68% for VIP II Contrafund Portfolio.
(2) The manager of the VIP II Index 500 Portfolio agreed to reimburse a
portion of the VIP II Index 500 Portfolio's expenses during the period.
Without this reimbursement, the fund's management fee, other expenses and
total expenses would have been .27%, .13%, and .40%, respectively.
(3) The Series has an expense offset arrangement which reduces the Series'
custodian fee based upon the amount of cash maintained by the Series with
its custodian and dividend disbursing agent, and may enter into such other
arrangements and directed brokerage arrangements (which would also have the
effect of reducing the Series' expenses). Any such fee reductions are not
reflected under "Other Expenses." The Adviser has agreed to bear expenses
for the Series, subject to reimbursement by the Series, such that the
Series' "Other Expenses" shall not exceed 0.25% of the average daily net
assets of the Series during the current fiscal year. Otherwise, "Other
Expenses" for the Utilities Series would be 0.45%, and "Total Operating
Expenses" would be 1.20%.
6
<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:
<TABLE>
<CAPTION>
1 3 5 10
FUND YEAR YEARS YEARS YEARS
- ---- ---- ----- ----- -----
<S> <C> <C> <C> <C>
Oppenheimer Growth Fund. . . . . . . . . . . . . . $ 84 $128 $178 $320
Oppenheimer Bond Fund. . . . . . . . . . . . . . . $ 85 $129 $179 $324
VIP Money Market Portfolio . . . . . . . . . . . . $ 80 $114 $154 $263
VIP High Income Portfolio. . . . . . . . . . . . . $ 84 $126 $176 $315
VIP Equity-Income Portfolio. . . . . . . . . . . . $ 83 $123 $169 $298
VIP Growth Portfolio . . . . . . . . . . . . . . . $ 84 $126 $175 $312
VIP Overseas Portfolio . . . . . . . . . . . . . . $ 86 $133 $187 $341
VIP II Asset Manager Portfolio . . . . . . . . . . $ 83 $125 $173 $307
VIP II Index 500 Portfolio . . . . . . . . . . . . $ 80 $113 $153 $259
VIP II Contrafund Portfolio. . . . . . . . . . . . $ 84 $126 $176 $315
JPVF Capital Growth Portfolio. . . . . . . . . . . $ 88 $138 $196 $362
JPVF Emerging Growth Portfolio . . . . . . . . . . $ 87 $135 $191 $351
MFS Research Series. . . . . . . . . . . . . . . . $ 86 $132 $185 $336
MFS Utilities Series . . . . . . . . . . . . . . . $ 87 $135 $191 $351
Alger American Small Capitalization Portfolio. . . $ 86 $132 $185 $338
Alger American MidCap Growth Portfolio . . . . . . $ 85 $130 $183 $331
</TABLE>
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:
<TABLE>
<CAPTION>
1 3 5 10
FUND YEAR YEARS YEARS YEARS
- ---- ---- ----- ----- -----
<S> <C> <C> <C> <C>
Oppenheimer Growth Fund. . . . . . . . . . . . . . $107 $146 $191 $350
Oppenheimer Bond Fund. . . . . . . . . . . . . . . $107 $147 $192 $354
VIP Money Market Portfolio . . . . . . . . . . . . $103 $133 $167 $294
VIP High Income Portfolio. . . . . . . . . . . . . $107 $144 $189 $345
VIP Equity-Income Portfolio. . . . . . . . . . . . $106 $141 $182 $329
VIP Growth Portfolio . . . . . . . . . . . . . . . $107 $144 $187 $343
VIP Overseas Portfolio . . . . . . . . . . . . . . $109 $151 $200 $371
VIP II Asset Manager Portfolio . . . . . . . . . . $106 $143 $185 $338
VIP II Index 500 Portfolio . . . . . . . . . . . . $103 $132 $166 $290
VIP II Contrafund Portfolio. . . . . . . . . . . . $107 $144 $189 $345
JPVF Capital Growth Portfolio. . . . . . . . . . . $110 $156 $208 $392
JPVF Emerging Growth Portfolio . . . . . . . . . . $109 $153 $204 $381
MFS Research Series. . . . . . . . . . . . . . . . $108 $149 $198 $366
MES Utilities Series . . . . . . . . . . . . . . . $109 $153 $204 $381
Alger American Small Capitalization Portfolio. . . $108 $150 $198 $367
Alger American MidCap Growth Portfolio . . . . . . $108 $148 $195 $361
</TABLE>
7
<PAGE>
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:
<TABLE>
<CAPTION>
1 3 5 10
FUND YEAR YEARS YEARS YEARS
- ---- ---- ----- ----- -----
<S> <C> <C> <C> <C>
Oppenheimer Growth Fund. . . . . . . . . . . . . . $ 23 $ 73 $132 $320
Oppenheimer Bond Fund. . . . . . . . . . . . . . . $ 23 $ 74 $134 $324
VIP Money Market Portfolio . . . . . . . . . . . . $ 18 $ 59 $107 $263
VIP High Income Portfolio. . . . . . . . . . . . . $ 22 $ 72 $130 $315
VIP Equity-Income Portfolio. . . . . . . . . . . . $ 21 $ 68 $123 $298
VIP Growth Portfolio . . . . . . . . . . . . . . . $ 22 $ 72 $129 $312
VIP Overseas Portfolio . . . . . . . . . . . . . . $ 24 $ 79 $142 $341
VIP II Asset Manager Portfolio . . . . . . . . . . $ 22 $ 70 $127 $307
VIP II Index 500 Portfolio . . . . . . . . . . . . $ 18 $ 59 $106 $259
VIP II Contrafund Portfolio. . . . . . . . . . . . $ 22 $ 72 $130 $315
JPVF Capital Growth Portfolio. . . . . . . . . . . $ 26 $ 84 $151 $362
JPVF Emerging Growth Portfolio . . . . . . . . . . $ 25 $ 81 $146 $351
MFS Research Series. . . . . . . . . . . . . . . . $ 24 $ 78 $139 $336
MFS Utilities Series . . . . . . . . . . . . . . . $ 25 $ 81 $146 $351
Alger American Small Capitalization Portfolio. . . $ 24 $ 78 $140 $338
Alger American MidCap Growth Portfolio . . . . . . $ 24 $ 76 $137 $331
</TABLE>
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:
<TABLE>
<CAPTION>
1 3 5 10
FUND YEAR YEARS YEARS YEARS
- ---- ---- ----- ----- -----
<S> <C> <C> <C> <C>
Oppenheimer Growth Fund. . . . . . . . . . . . . . $ 25 $ 81 $145 $350
Oppenheimer Bond Fund. . . . . . . . . . . . . . . $ 25 $ 82 $147 $354
VIP Money Market Portfolio . . . . . . . . . . . . $ 21 $ 67 $120 $294
VIP High Income Portfolio. . . . . . . . . . . . . $ 25 $ 80 $143 $345
VIP Equity-Income Portfolio. . . . . . . . . . . . $ 23 $ 76 $136 $329
VIP Growth Portfolio . . . . . . . . . . . . . . . $ 25 $ 79 $142 $343
VIP Overseas Portfolio . . . . . . . . . . . . . . $ 27 $ 86 $155 $371
VIP II Asset Manager Portfolio . . . . . . . . . . $ 24 $ 78 $145 $338
VIP II Index 500 Portfolio . . . . . . . . . . . . $ 20 $ 66 $119 $290
VIP II Contrafund Portfolio. . . . . . . . . . . . $ 25 $ 80 $145 $345
JPVF Capital Growth Portfolio. . . . . . . . . . . $ 28 $ 92 $159 $392
JPVF Emerging Growth Portfolio . . . . . . . . . . $ 28 $ 89 $162 $381
MFS Research Series. . . . . . . . . . . . . . . . $ 26 $ 85 $159 $366
MFS Utilities Series . . . . . . . . . . . . . . . $ 28 $ 89 $159 $381
Alger American Small Capitalization Portfolio. . . $ 26 $ 85 $153 $367
Alger American MidCap Growth Portfolio . . . . . . $ 26 $ 84 $150 $361
</TABLE>
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.
8
<PAGE>
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" 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.") 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 elsewhere in 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.
9
<PAGE>
CONDENSED FINANCIAL INFORMATION
The following condensed financial information is derived from the financial
statements of the Separate Account. The data should be read in conjunction with
the financial statements, related notes, and other financial information
included in the Statement of Additional Information.
The table below contains certain information regarding the Sub-Accounts for
a Contract for the period from commencement of business operations on December
1,1994 through December 31, 1997, except for these sub-accounts with inception
dates of May 1, 1996: Alger American Small Capitalization, Alger American MidCap
Growth, VIP-II Contrafund, VIP-II Index 500, JPVF Emerging Growth, MFS Research
Series, MFS Utilities Series, and JPVF Capital Growth.
The Variable Accumulation Unit values and the number of Variable
Accumulation Units outstanding for each Sub-Account for the periods shown are as
follows:
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION
BEGINNING OF END OF UNITS AT END OF
INVESTMENT DIVISION PERIOD PERIOD PERIOD
- ------------------- ------ ------ ------
<S> <C> <C> <C>
Oppenheimer Growth
1994 (1) . . . . . . . . . . . . . . . . 10.000000 10.214259 0.000
1995 . . . . . . . . . . . . . . . . . . 10.214259 13.437239 1,051,871.585
1996 (2) . . . . . . . . . . . . . . . . 13.437239 15.687352 1,479,421.465
1997 . . . . . . . . . . . . . . . . . . 15.687352 19.597148 1,785,954.734
Oppenheimer Bond
1994 (1) . . . . . . . . . . . . . . . . 10.000000 10.073995 0.000
1995 . . . . . . . . . . . . . . . . . . 10.073995 11.868974 718,607.599
1996 (2) . . . . . . . . . . . . . . . . 11.868974 12.105651 810,389.562
1997 . . . . . . . . . . . . . . . . . . 12.105651 13.042029 803,804.832
VIP Money Market
1994 (1) . . . . . . . . . . . . . . . . 10.000000 10.032676 0.000
1995 . . . . . . . . . . . . . . . . . . 10.032676 10.475795 604,573.553
1996 . . . . . . . . . . . . . . . . . . 10.475795 10.888553 756,510.915
1997 . . . . . . . . . . . . . . . . . . 10.888553 11.326697 763,879.997
VIP Equity-Income
1994 (1) . . . . . . . . . . . . . . . . 10.000000 10.106754 0.000
1995 . . . . . . . . . . . . . . . . . . 10.106754 13.464371 603,748.536
1996 . . . . . . . . . . . . . . . . . . 13.464371 15.171936 1,304,420.278
1997 . . . . . . . . . . . . . . . . . . 15.171936 19.166449 1,601,788.024
VIP Growth
1994 (1) . . . . . . . . . . . . . . . . 10.000000 10.396331 0.000
1995 . . . . . . . . . . . . . . . . . . 10.396331 13.878009 439,231.793
1996 . . . . . . . . . . . . . . . . . . 13.878009 15.695218 1,061,896.920
1997 . . . . . . . . . . . . . . . . . . 15.695218 19.111315 1,222,931.643
VIP Overseas
1994 (1) . . . . . . . . . . . . . . . . 10.000000 9.976153 0.000
1995 . . . . . . . . . . . . . . . . . . 9.976153 10.789882 44,023.734
1996 . . . . . . . . . . . . . . . . . . 10.789882 12.044844 154,948.844
1997 . . . . . . . . . . . . . . . . . . 12.044844 13.249871 207,469.483
VIP High Income
1994 (1) . . . . . . . . . . . . . . . . 10.000000 10.063711 0.000
1995 . . . . . . . . . . . . . . . . . . 10.063711 11.969023 104,906.955
1996 . . . . . . . . . . . . . . . . . . 11.969023 13.457366 264,864.236
1997 . . . . . . . . . . . . . . . . . . 13.457366 15.614753 352,324.761
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION
BEGINNING OF END OF UNITS AT END OF
INVESTMENT DIVISION PERIOD PERIOD PERIOD
- ------------------- ------ ------ ------
<S> <C> <C> <C>
VIP II Asset Manager
1994 (1) . . . . . . . . . . . . . . . . 10.000000 9.804023 0.000
1995 . . . . . . . . . . . . . . . . . . 9.804023 11.307468 170,765.634
1996 . . . . . . . . . . . . . . . . . . 11.307468 12.777286 490,202.223
1997 . . . . . . . . . . . . . . . . . . 12.777286 15.201721 695,042.527
Alger American Small Capitalization
1996 (3) . . . . . . . . . . . . . . . . 10.000000 9.190108 148,321.277
1997 . . . . . . . . . . . . . . . . . . 9.190108 10.094700 186,397.444
Alger American MidCap Growth
1996 (3) . . . . . . . . . . . . . . . . 10.000000 9.808937 94,916.505
1997 . . . . . . . . . . . . . . . . . . 9.808937 11.124001 175,725.230
VIP II Contrafund
1996 (3) . . . . . . . . . . . . . . . . 10.000000 11.145245 75,800.073
1997 . . . . . . . . . . . . . . . . . . 11.145245 13.643639 297,589.028
VIP II Index 500
1996 (3) . . . . . . . . . . . . . . . . 10.000000 11.367158 82,751.669
1997 . . . . . . . . . . . . . . . . . . 11.367158 14.874449 422,954.310
JPVF Emerging Growth
1996 (3) . . . . . . . . . . . . . . . . 10.000000 9.579577 67,640.913
1997 (4) . . . . . . . . . . . . . . . . 9.579577 11.548720
MFS Research Series
1996 (3) . . . . . . . . . . . . . . . . 10.000000 10.970831 104,920.216
1997 . . . . . . . . . . . . . . . . . . 10.970831 13.010109 313,795.248
MFS Utilities Series
1996 (3) . . . . . . . . . . . . . . . . 10.000000 11.602401 24,368.744
1997 . . . . . . . . . . . . . . . . . . 11.602401 15.067972 138,657.863
JPFV Capital Growth
1996 (3) . . . . . . . . . . . . . . . . 10.000000 10.415742 100,317.887
1997 (4) . . . . . . . . . . . . . . . . 10.415742 12.774321 194,345.426
</TABLE>
- -------------------------
(1) Period from December 1, 1994 through December 31, 1994
(2) On December 19, 1996, shares of the Oppenheimer Growth Fund were
substituted for shares of the Jefferson-Pilot Capital Appreciation Fund,
Inc.; and shares of the Oppenheimer Bond Fund were substituted for shares
of the Jefferson-Pilot Investment Grade Bond Fund, Inc.
(3) Period from May 1, 1996 through December 31, 1996
(4) On December 5, 1997, shares of the JPVF Capital Growth Portfolio were
substituted for shares of the Growth Fund of the Alexander Hamilton
Variable Insurance Trust ("AHVIT"), and shares of the JPVF Emerging Growth
Portfolio were substituted for shares of the AHVIT Emerging Growth Fund.
The above numbers reflect the performance of the AHVIT Growth Fund and
the AHVIT Emerging Growth Fund for the period prior to the date of the
substitution and reflect the performance of the JPVF Capital Growth
Portfolio and the JPVF Emerging Growth Portfolio for the period after the
date of the substitution.
11
<PAGE>
SUMMARY
Jefferson Pilot Variable Corporation (formerly Jefferson-Pilot Investor
Services, Inc.) ("JPVC"), 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 JPVC 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 JPVC 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 JPVC 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 Administration Charges.")
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.")
Premium taxes payable to any governmental entity ranging between 0% and 5%
will be charged against the Contracts. (See "Premium Tax.")
An individual for whom a Contract is purchased under an individual
retirement account may revoke 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 Variable Annuity
Service Center. Upon such revocation, the full purchase payment made will be
refunded if such payment is invested in the VIP 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
VIP 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
VIP 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 the Contracts" and "Redemptions.")
Premature payments of benefits under a Contract may cause a penalty tax to
be incurred. (See "Certain Federal Income Tax Consequences.")
12
<PAGE>
THE 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 publicly held.
YEAR 2000 MATTER. Certain computer programs have been written using two
digits rather than four to define the applicable year. As a result, any of
Jefferson-Pilot Corporation's computer programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000 (the "Year 2000 Matter"). This could result in a system failure which may
disrupt operations, including an inability to accurately process or calculate
new or in-force business.
Jefferson-Pilot Corporation (the Company's parent company) has completed an
assessment and has determined that it will have to modify or replace portions of
the software and hardware utilized by Jefferson-Pilot Corporation affiliates,
including the Company, so that the computer systems will function properly with
respect to dates in the year 2000 and thereafter.
Jefferson-Pilot Corporation will utilize both internal and external
resources to reprogram, replace, convert and test software and hardware for any
necessary Year 2000 modifications. The project is estimated to be completed not
later than the third quarter of 1999. Jefferson-Pilot Corporation believes that
with modifications to its existing software and hardware and conversions to new
software, the Year 2000 Matter will not pose significant operational problems
for its computer systems. However, if such modifications and conversions are not
made, or are not completed on a timely basis, the Year 2000 Matter could have a
material impact on operations of the Company.
Jefferson-Pilot Corporation has initiated formal communications with all of
its significant suppliers to determine the extent to which the Company's
systems, policies, procedures and contracts are vulnerable to those third
parties' failure to remediate their own Year 2000 issues. There is no guarantee
that the systems of other companies on which the Company relies will be in
compliance on a timely basis; nor is there any guarantee that non-compliance
would not have an adverse affect on the Company's systems and business.
The costs of the project and the date on which the Jefferson-Pilot
Corporation believes it will be compliant are based on management's best
estimates, which were derived utilizing various assumptions of future events,
including the continued availability of certain resources and other factors.
However, there can be no guarantee that these estimates will be achieved.
Jefferson-Pilot Corporation has not yet allocated the costs of compliance
among its subsidiaries, including the Company. To the best of Jefferson-Pilot
Corporation and the Company's knowledge, it is currently anticipated that any
future allocation is unlikely to have a material financial impact on the
Company.
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.
13
<PAGE>
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 set forth in this Prospectus 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 Oppenheimer Funds, eight
of the Sub-Accounts invest in shares of the VIP Portfolios, two Sub-Accounts
invest in shares of Alger American Funds, two Sub-Accounts invest in shares
of Jefferson Pilot Funds, and two Sub-Accounts invest in shares of MFS Funds.
The Oppenheimer Variable Account Funds was organized in 1984 as a
Massachusetts business trust. The Oppenheimer Variable Account Funds is an
open-end. diversified management investment company consisting of ten separate
funds, including the Oppenheimer Growth Fund and the Oppenheimer Bond Fund, both
organized in 1984. OppenheimerFunds, Inc., which has operated as an investment
adviser since 1959, manages the funds, is responsible for selecting the funds'
investments, and handles its day-to-day business.
The VIP Funds also are open-end diversified management investment
companies. The VIP Funds are organized as series type investment companies
with diversified portfolios. 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 ("FMR"), and Jefferson-Pilot.
FMR, 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. For certain of the VIP Funds,
FMR has entered into subadvisory agreements with affiliated companies that
are part of the Fidelity Investments organization. FMR, not the VIP Funds,
pays the sub-advisers for their services.
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. ("Alger Management") 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.
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. 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.
JPVF (formerly Chubb America Fund, Inc.) is an open-end management
investment company which was incorporated in Maryland on October 19, 1984. It
currently has eleven Portfolios which are presently offered only to the
sub-accounts of the Company and its affiliated life insurance companies. The
investment manager to JPVF is Jefferson Pilot Investment Advisory Corporation
("JP Investment Advisory") (formerly Chubb Investment Advisory Corporation),
which is an affiliate of the Company. JP Investment Advisory has contracted with
Janus Capital Corporation to act as
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sub-investment manager of the JPVF Capital growth Portfolio and with MFS to act
as sub-investment manager of the JPVF Emerging Growth Portfolio.
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.
OPPENHEIMER GROWTH FUND (OPPENHEIMER GROWTH SUB-ACCOUNT). Oppenheimer
Growth Fund seeks to achieve capital appreciation by investing in securities of
well-known and established companies. Such securities generally have a history
of earnings and dividends and are issued by seasoned companies (having an
operating history of at least five years, including predecessors). Current
income is a secondary consideration in the selection of its portfolio
securities.
OPPENHEIMER BOND FUND (OPPENHEIMER BOND SUB-ACCOUNT). Oppenheimer Bond
Fund's primary objective is to seek a high level of current income. As a
secondary investment objective, Oppenheimer Bond Fund seeks capital growth when
consistent with its primary objective. Oppenheimer Bond Fund invests mainly in
investment grade debt securities.
VIP MONEY MARKET PORTFOLIO (VIP MONEY MARKET PORTFOLIO SUB-ACCOUNT). VIP
Money Market Portfolio seeks as high a level of current income as is consistent
with preservation of capital and liquidity by investing in money market
instruments.
VIP HIGH INCOME PORTFOLIO (VIP HIGH INCOME PORTFOLIO SUB-ACCOUNT). VIP
High Income Portfolio seeks a high level of current income by investing
primarily in high-yielding, fixed-income securities, while also considering
growth of capital.
VIP EQUITY-INCOME PORTFOLIO (VIP EQUITY-INCOME PORTFOLIO SUB-ACCOUNT).
VIP Equity-Income Portfolio seeks reasonable income by investing primarily in
income producing equity securities. In choosing these securities, the fund will
also consider the potential for capital appreciation.
VIP GROWTH PORTFOLIO (VIP GROWTH PORTFOLIO SUB-ACCOUNT). VIP Growth
Portfolio seeks to achieve capital appreciation.
VIP OVERSEAS PORTFOLIO (VIP OVERSEAS PORTFOLIO SUB-ACCOUNT). VIP
Overseas Portfolio seeks long-term growth of capital primarily through
investments in foreign securities.
VIP II ASSET MANAGER PORTFOLIO (VIP II ASSET MANAGER PORTFOLIO
SUB-ACCOUNT). VIP 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 instruments.
VIP II INDEX 500 PORTFOLIO (VIP II INDEX 500 PORTFOLIO SUB-ACCOUNT).
VIP II Index 500 Portfolio seeks investment results that correspond to the
total return of common stocks publicly traded in the United States, as
represented by the S&P 500.
VIP II CONTRAFUND PORTFOLIO (VIP II CONTRAFUND PORTFOLIO SUB-ACCOUNT).
VIP II Contrafund Portfolio seeks long-term capital appreciation.
MFS RESEARCH SERIES (MFS RESEARCH SERIES SUB-ACCOUNT). MFS Research Series
seeks to provide long-term growth of capital and future income.
MFS UTILITIES SERIES (MFS UTILITIES SERIES SUB-ACCOUNT). MFS Utilities
Series seeks capital growth and current income (income above that available from
a portfolio invested entirely in equity securities).
JPVF CAPITAL GROWTH PORTFOLIO (JPVF CAPITAL GROWTH SUB-ACCOUNT). JPVF
Capital Growth Portfolio seeks capital growth. Realization of income is not a
significant investment consideration and any income realized will be incidental.
JPVF EMERGING GROWTH PORTFOLIO (JPVF EMERGING GROWTH SUB-ACCOUNT). JPVF
Emerging Growth Portfolio seeks to provide long-term growth of capital. Dividend
and interest income from portfolio securities, if any, is incidental to the
Portfolio's investment objective of long-term growth.
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ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO (ALGER AMERICAN SMALL
CAPITALIZATION PORTFOLIO SUB-ACCOUNT). Alger American Small Capitalization
Portfolio seeks long-term capital appreciation. 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 of the securities,
have total market capitalization within the range of companies included in the
Russell 2000 Growth Index or the S&P Small Cap 600 Index, updated quarterly.
Both indexes are broad indexes of small capitalization stocks. 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 this combined
range and in excess of that amount (up to 100% of its assets) during temporary
defensive periods.
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. 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.
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
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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 to 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.
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, JPVC performs certain recordkeeping and other
administrative functions for which it is entitled to receive 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 canceling 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
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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.
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.
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 Variable Annuity Service Center 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.
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
canceling a number of Accumulation Units equal in value to the amount requested.
Accumulation Units will be canceled at the accumulation unit value as of the end
of the valuation period in which the request for redemption is received at the
Variable Annuity Service Center.
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 Variable Annuity
Service Center. 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.
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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.
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 "Certain Federal Income Tax
Consequences").
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 Variable Annuity Service Center 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
VIP 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 VIP 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 Variable Annuity Service
Center 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 VIP 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 VIP 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 VIP 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 Variable Annuity Service Center
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.
An Owner may initiate, reinstate or change the dollar cost averaging terms
by properly completing the new enrollment form and returning it to the Variable
Annuity Service Center at least five (5) business days prior to the next
scheduled Transfer Date such transfer is to be made.
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When utilizing dollar cost averaging an Owner must be invested in the VIP
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 Variable Annuity
Service Center. 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 of 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 "Certain Federal Income Tax Consequences.")
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.
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 VARIABLE ANNUITY SERVICE CENTER 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.
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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.
FIXED ACCOUNT TRANSFERS, TOTAL SURRENDERS, 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: (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
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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. 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 "Full
and Partial Redemptions From Qualified Contracts" and "Full and Partial
Redemptions From 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").
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 Variable Annuity Service Center. 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 Variable
Annuity Service Center. 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 VIP Money Market Portfolio Sub-Account will not be
considered received unless the Company has received the payment in cash at its
Variable Annuity Service Center 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
VIP Money Market Portfolio invests
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normally require immediate settlement in Federal funds. The VIP 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.
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 VIP High Income
Sub-Account and the corresponding VIP 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 Variable Annuity Service Center
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. 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
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be applied to provide annuity payments that reflect the investment experience of
such applicable Sub-Accounts. However, no such election will be allowed which
would provide an initial payment from any available Sub-Account of less than
$100.
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.
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.)
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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.
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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").
PAYMENT ON OR AFTER DEATH OF ANNUITANT
Upon receipt at the Variable Annuity Service Center 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.
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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.
THE DISTRIBUTION OF THE CONTRACTS
Jefferson Pilot Variable Corporation (formerly Jefferson-Pilot Investor
Services, Inc.) ("JPVC"), a broker-dealer registered under the Securities
Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc. ("NASD"), is the distributor of the contracts.
JPVC is organized under the laws of North Carolina and is a wholly-owned
subsidiary of Jefferson-Pilot Corporation. Its principal business address is One
Granite Place, Concord, New Hampshire 03301. JPVC will enter into one or more
contracts with various broker-dealers for the distribution of the Contracts.
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.
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, to the extent required by law, will follow voting instructions
received from the person having the right to give such instruction. If, however,
the 1940 Act or any regulation thereunder should be amended, or if the present
interpretation thereof should change, and as a result the Company determines
that it is permitted to vote the Funds' shares in its own right, it may elect to
do so. The Company reserves the right, when permitted by law, to restrict or
eliminate any of the voting rights of Owners or other persons who have voting
rights as to the Separate Account.
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.
The number of shares for which a person has the right to give instructions
will be determined as of a date established by the Funds for determining
shareholders eligible to vote at the meeting. 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.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING DISCUSSION IS A GENERAL DESCRIPTION OF FEDERAL TAX
CONSIDERATIONS RELATING TO THE CONTRACT AND IS NOT INTENDED AS TAX ADVICE. THIS
DISCUSSION IS NOT INTENDED TO ADDRESS THE TAX CONSEQUENCES RESULTING FROM ALL OF
THE SITUATIONS IN WHICH A PERSON MAY BE ENTITLED TO OR MAY RECEIVE A
DISTRIBUTION UNDER THE CONTRACT. ANY PERSON CONCERNED ABOUT THESE TAX
IMPLICATIONS SHOULD CONSULT A COMPETENT TAX ADVISOR BEFORE INITIATING ANY
TRANSACTION. THIS DISCUSSION IS BASED UPON THE COMPANY'S UNDERSTANDING OF THE
PRESENT FEDERAL INCOME TAX LAWS AS THEY ARE CURRENTLY INTERPRETED BY THE
INTERNAL REVENUE SERVICE. NO REPRESENTATION IS MADE AS TO THE LIKELIHOOD OF THE
CONTINUATION OF THE PRESENT FEDERAL INCOME TAX LAWS OR OF THE CURRENT
INTERPRETATION BY THE INTERNAL REVENUE SERVICE. MOREOVER, NO ATTEMPT HAS BEEN
MADE TO CONSIDER ANY APPLICABLE STATE OR OTHER TAX LAWS.
The Contract may be purchased and used in connection with retirement plans
qualifying for favorable tax treatment ("Qualified Contract"), or the Contract
may be purchased on a non-qualified basis ("Non-Qualified Contract"). Qualified
Contracts are designed for use by individuals whose purchase payments are
comprised solely of proceeds from and/or contributions under retirement plans
which are intended to qualify as plans entitled to special income tax treatment
under Sections 401, 403(b), 408 (Traditional IRA), 408A (Roth IRA), or 457 of
the Internal Revenue Code of 1986, as amended (the "Code"). Information
regarding the tax treatment of a Traditional IRA or a Roth IRA is contained in a
separate IRA Disclosure Statement available from the Company. The ultimate
effect of Federal income taxes on the amounts held under a contract, on annuity
payments, and on the economic benefit to you, the Annuitant, or the Beneficiary
depends on the type of retirement plan, on the tax and employment status of the
individual concerned and, in some cases, on the employer's tax status. In
addition, certain requirements must be satisfied in purchasing a Qualified
Contract with proceeds from a tax qualified plan and receiving distributions
from a Qualified Contract in order to continue receiving favorable tax
treatment. Therefore, purchasers of Qualified Contracts should seek competent
legal and tax advice regarding the suitability of the Contract for their
situation, the applicable requirements, and the tax treatment of the rights and
benefits of the Contract. The following discussion assumes that a Qualified
Contract is purchased with proceeds from and/or contributions under retirement
plans that qualify for the intended special Federal income tax treatment.
If this Contract is purchased as a Non-Qualified Contract, it is intended
that the Contract will be owned and administered to satisfy the requirements of
Section 72 of the Code. If this Contract is purchased as a Qualified Contract,
it is intended that the Contract will be owned and administered to satisfy the
requirements of the provisions of the Code that apply to that type of Qualified
Contract. The following discussion is based on the assumption that the Contract
satisfies whichever Federal income tax rules apply to the Contract.
At the time the initial purchase payment is paid, a prospective purchaser
must specify whether a Non-Qualified Contract or a Qualified Contract is being
purchased. If the initial purchase payment is derived from an exchange or
surrender of another annuity contract, the Company may require that the
prospective purchaser provide information with regard to the Federal income tax
status of the previous annuity contract. The Company will require that persons
purchase separate Contracts if they desire to invest monies qualifying for
different annuity tax treatment under the Code. Each such separate Contract
would require the minimum initial purchase payment stated above. Additional
purchase payments under a Contract must qualify for the same Federal income tax
treatment as the initial purchase payments under the Contract; the Company will
not accept an additional purchase payment under a Contract if the Federal income
tax treatment of such purchase payment would be different from that of the
initial purchase payment.
TAXATION OF ANNUITIES
IN GENERAL. Section 72 of the Code governs taxation of annuities in
general. The Company believes that if you are an individual (a "natural" person
under the tax rules), you will not be taxed on increases in the value of a
Contract until a distribution occurs (E.G., partial redemptions, full
redemptions or annuity payments under the Settlement Option elected). Any change
in ownership, assignment, pledge, or agreement to assign or pledge any portion
of the Contract Value (and in the case of a Qualified Contract, any portion of
an interest in the qualified plan) generally will be treated as a distribution.
The taxable portion of a distribution (in the form of a single lump sum payment
or an annuity) is taxable as ordinary income.
28
<PAGE>
If the owner of any Non-Qualified Contract is not an individual or other
"natural" person (e.g., a corporation or a certain type of trust), the owner
generally must include in income any increase in the excess of the contract's
value over the "investment in the contract" (discussed below) during the taxable
year. There are some exceptions to this rule, and a prospective Contract Owner
that is not a natural person may wish to discuss these with a competent tax
advisor.
POSSIBLE CHANGES IN TAXATION. In past years, legislation has been proposed
that would have adversely modified the Federal taxation of certain annuities.
For example, one such proposal would have changed the tax treatment of
nonqualified variable annuities by taxing the owner on the gain in any
sub-account if the owner transferred funds between various investment options.
Although as of the date of this prospectus Congress has not passed any
legislation regarding the taxation of annuities, there is always the possibility
that the tax treatment of annuities could change by legislation or other means
(such as IRS regulations, revenue rulings, judicial decisions, etc.). Moreover,
it is also possible that any change could apply to your Contract even though it
was purchased prior to the change in the tax laws or rules.
FULL AND PARTIAL REDEMPTIONS FROM QUALIFIED CONTRACTS. In the case of a
Surrender or Partial Withdrawal under a QUALIFIED CONTRACT, under Section 72(e)
of the Code a ratable portion of the amount received is taxable, generally based
on the ratio of the "investment in the contract" to the individual's total
account balance under the retirement plan. The "investment in the contract"
generally equals the amount of any premium payments paid by or on behalf of any
individual with after tax contributions. For a Contract issued in connection
with qualified plans, the "investment in the contract" can be zero. As explained
in the separate Disclosure Statement for Roth IRAs, special tax rules apply to
distributions from Roth IRAs and Roth Conversion IRAs.
FULL AND PARTIAL REDEMPTIONS FROM NON-QUALIFIED CONTRACTS. With respect to
NON-QUALIFIED CONTRACTS, partial redemptions (including systematic withdrawals)
are generally treated as taxable income to the extent that the Contract Value
immediately before the partial redemption exceeds the "investment in the
contract" at that time. The Contract Value immediately before a partial
redemption is before any surrender charge. Full redemptions are treated as
taxable income to the extent that the amount received exceeds the "investment in
the contract".
ANNUITY PAYMENTS. If you elect to receive payments over a period of years,
over your life expectancy, or over the life expectancies of yourself and another
individual, part of each payment you receive will be a return of your
"investment in the contract" and part of each payment will be taxable income. In
general, the amount of each payment that is a return of your "investment in the
contract" is calculated by dividing your total "investment in the contract" by
the total number of expected payments. For example, if your "investment in the
contract" is $6,000, and you elect to receive 60 monthly annuity payments, $100
of each payment will be a return of your "investment in the contract" and will
not be subject to Federal income taxes ($6,000 / 60 = $100). If payments are
being made over your life expectancy, or the joint life expectancy of you and
your spouse, there are IRS tables which are used to determine how many annuity
payments are expected to be made. After you have received the expected number of
payments, you will have received, tax-free your entire "investment in the
contract". Any additional payments will be fully taxable. If you die before you
have received your entire "investment in the contract" and there are no
additional payments after you die, there is a special tax rule that allows you a
deduction for the recovered "investment in the contract" on your last income tax
return. If some payments continue to your beneficiary after your death, your
beneficiary can Recover any remaining "investment in the contract" over the
additional payments being made.
PENALTY TAX. For Non-Qualified Contracts and for most Qualified Contracts
(there are special rules for the Roth IRA's) there may be a 10% Federal penalty
tax on any premature distributions. The 10% penalty applies only to the portion
of the distribution that is treated as taxable income. In general, however,
there is no penalty tax on distributions from a Non-Qualified Contract: (1) made
on or after the date on which you attain age 59 1/2; (2) made as a result of
your death or disability; (3) received in substantially equal periodic payments
as a life annuity or a joint and survivor annuity for the lives or life
expectancies of you and a "designated beneficiary"; (4) resulting from the
direct rollover of the Contract into another qualified contract or individual
retirement annuity; (5) allocable to investment in the Contract before August
14, 1982; (6) under a qualified funding asset (as defined in Code Section
130(d)); (7) under an immediate annuity (as defined in Code Section 72(u)(4));
or (8) which are purchased by an employer on termination of certain types of
qualified plans and which are held by the employer until the employee separates
from service. For distributions from Qualified Contracts, in addition to all of
the above exceptions to the 10% penalty tax, the following additional exceptions
to the penalty may apply: (1) made to an employee after separation from service
after age 55 from a retirement plan other than an IRA; (2) made to pay certain
uninsured medical expenses; (3) made to certain unemployed individuals to pay
29
<PAGE>
health insurance premiums; (4) made to pay for certain higher education
expenses; and (5) made to a first-time home buyer ($10,000 lifetime limit).
DEATH BENEFIT PROCEEDS. The Code requires that both Qualified and
Non-Qualified Contracts make certain distributions if the owner of the Contract
dies. If the owner dies before periodic annuity payments have started, the
entire value of the annuity must either (i) be paid out, in full, within five
years of the death of the owner, or (ii) annuity payments must start within one
year of the death of the owner. If the surviving spouse becomes the owner of the
Contract, the spouse has the option of continuing the Contract as if he or she
had been the original purchaser. If the owner dies after periodic annuity
payments have started, payments must continue to be made under a method that
will distribute the balance in the Contract at least as rapidly as the method
being used prior to death. A non-spousal beneficiary may not elect, or continue
to use, a settlement option unless that settlement option will result in
distributions that comply with the Code.
Amounts may be distributed because of the death of a Contract Owner.
Generally, such amounts are includable in the income of the recipient as
follows:
(1) if distributed in a lump sum, such amounts are taxed in the same
manner as a full redemption as described above, or
(2) if distributed under a Settlement Option, such amounts are taxed in
the same manner as annuity payments described above.
For these purposes, the investment in the Contract is not affected by the
owner's death. That is, the investment in the Contract remains the amount of any
purchase payments paid which were not excluded from gross income.
GIFTS, TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF THE CONTRACT. A
transfer of ownership of a Contract, the designation of an Annuitant or
Beneficiary other than yourself, or the exchange of a Contract may result in
certain tax consequences to you, including the immediate taxation of the entire
gain in the Contract. If you are thinking about any gift, transfer, assignment,
or exchange of a Contract, you should contact a competent tax adviser to discuss
the potential tax effects of such transaction.
GENERATION-SKIPPING TRANSFERS. The Company may be required to determine
whether the death benefit or any other payment constitutes a "direct skip" that
may be subject to the Generation-Skipping Transfer Tax, as defined in Section
2612 of the Code. A direct skip occurs, for example, if you make a gift to your
grandchild instead of your living child. If the Generation-Skipping Transfer Tax
applies to a distribution, the Company is required to calculate and withhold
from any payment the amount of such tax and pay it to the IRS.
MULTIPLE CONTRACTS. All non-qualified deferred annuity contracts that are
issued by the Company (or its affiliates) to you during any calendar year are
treated as one annuity contract for purposes of determining the amount
includable in gross income under Section 72(e) of the Code. In addition, the
Treasury Department has specific authority to issue regulations that prevent the
avoidance of Section 72(e) through the serial purchase of annuity contracts or
otherwise. Congress has also indicated that the Treasury Department may have
authority to treat the combination purchase of an immediate annuity contract and
separate deferred annuity contract as a single annuity contract under its
general authority to prescribe rules as may be necessary to enforce the income
tax laws. A prospective purchaser of more than one annuity contract in a
calendar year should consult with a competent tax advisor before making such a
purchase.
WITHHOLDING. Pension and annuity distributions generally are subject to
withholding for the recipient's Federal income tax liability at rates that vary
according to the type of distribution and the recipient's tax status. If you
have provided the Company with your taxpayer identification number (i.e., your
Social Security number), you may elect not to have tax withheld from
distributions (withholding is mandatory for certain distributions from certain
types of Qualified Contracts).
OTHER TAX CONSEQUENCES. As noted above, the foregoing discussion of the
Federal income tax consequences under the Contract is not exhaustive and special
rules are provided with respect to other tax situations not discussed in this
Prospectus. Further, the Federal income tax consequences discussed herein
reflect the Company's understanding of current law, and the law may change.
Federal estate and state and local estate, inheritance, and other tax
consequences of ownership or receipt of distributions under the Contract depend
on your individual circumstances or those of the recipient of the distribution.
A competent tax advisor should be consulted for further information.
30
<PAGE>
QUALIFIED PLANS
The Contract is designed for use with several types of qualified plans. The
tax rules applicable to Contract Owners in qualified plans, including
restrictions on contributions and benefits, taxation of distributions, and any
tax penalties, vary according to the type of plan and the terms and conditions
of the plan itself. Various tax penalties may apply to contributions in excess
of specified limits, distributions that do not satisfy specified requirements,
and certain other transactions with respect to qualified plans. Therefore, no
attempt is made to provide more than general information about the use of the
Contract with the various types of qualified plans. Contract Owners, Annuitants
and Beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the Contracts comply with
applicable law. Following are brief descriptions of the various types of
qualified plans in connection with which the Company will issue the Contract.
Contracts for all types of qualified plans may not be available in all states.
When issued in connection with a qualified plan, the Contract will be amended as
necessary to conform to the requirements of the Code.
QUALIFIED PENSION AND PROFIT SHARING PLANS. Sections 401(a) of the Code
permits corporate employers to establish various types of retirement plans for
employees. The Self-Employed Individuals' Tax Retirement Act of 1962, as
amended, commonly referred to as "HR 10," permits self-employed individuals to
establish qualified plans for themselves and their employees. These retirement
plans may permit the purchase of the Contracts to accumulate retirement savings
under the plans. Adverse tax or other legal consequences to the plan, to the
participant or to both may result if the Contract is assigned or transferred to
any individual as a means to provide benefit payments, unless the plan complies
with all legal requirements applicable to such benefits prior to transfer of the
Contract. Purchasers of a Contract for use with such plans should seek competent
advice regarding the suitability of the proposed plan documents and the Contract
to their specific needs.
INDIVIDUAL RETIREMENT ANNUITIES AND INDIVIDUAL RETIREMENT ACCOUNTS. Section
408 of the Code permits eligible individuals to contribute to an individual
retirement program known as an Individual Retirement Annuity or Individual
Retirement Account (each hereinafter referred to as a "Traditional IRA").
Traditional IRA's are subject to limitations on the amount which may be
contributed and deducted and the time when distributions may commence. Also,
distributions from certain other types of qualified plans may be "rolled over"
on a tax-deferred basis into a Traditional IRA. The sale of a Contract for use
with a Traditional IRA may be subject to special disclosure requirements of the
Internal Revenue Service. Purchasers of a Contract for use with Traditional
IRA's will be provided with supplemental information required by the Internal
Revenue Service or other appropriate agency. Such purchasers will have the right
to revoke their purchase within 7 days of the earlier of the establishment of
the Traditional IRA or their purchase. Purchasers should seek competent advice
as to the suitability of the Contract for use with Traditional IRA's. The
Internal Revenue Service has not addressed in a ruling of general applicability
whether a death benefit provision such as the provision in the Contract comports
with Traditional IRA qualification requirements.
Section 408A of the Code permits eligible individuals to contribute to a
Roth IRA. Purchasers should seek competent advice as to the suitability of the
Contract for use with the Roth IRA. Purchasers of a Contract for use with Roth
IRA's will be provided with supplemental information required by the Internal
Revenue Service or other appropriate agency. Such purchasers will have the right
to revoke their purchase within 7 days of the earlier of the establishment of
the Roth IRA or their purchase. Purchasers should seek competent advice as to
the suitability of the Contract for use with Roth IRA's. The Internal Revenue
Service has not addressed in a ruling of general applicability whether a death
benefit provision such as the provision in the Contract comports with Roth IRA
qualification requirements.
TAX-SHELTERED ANNUITIES. Section 403(b) of the Code permits public school
employees and employees of certain types of religious, charitable, educational,
and scientific organizations specified in Section 501(c)(3) of the Code to
purchase annuity contracts and, subject to certain limitations, exclude the
amount of premiums from gross income for tax purposes. However, these payments
may be subject to FICA (Social Security) taxes. These annuity contracts are
commonly referred to as "Tax-Sheltered Annuities." Subject to certain
exceptions, withdrawals under Tax-Sheltered Annuities which are attributable to
contributions made pursuant to salary reduction agreements are prohibited unless
made after you attain age 59 1/2, upon your separation from service, upon your
death or disability, or for an amount not greater than the total of such
contributions in the case of hardship.
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SECTION 457 DEFERRED COMPENSATION ("SECTION 457") PLANS. Under Section 457
of the Code, employees of (and independent contractors who perform services for)
certain state and local governmental units or certain tax-exempt employers may
participate in a Section 457 plan of their employer allowing them to defer part
of their salary or other compensation. The amount deferred and any income on
such amount will not be taxable until paid or otherwise made available to the
employee. The maximum amount that can be deferred under a Section 457 plan in
any tax year is ordinarily one-third of the employee's includable compensation,
up to $7,500. Includable compensation means earnings for services rendered to
the employer which is includable in the employee's gross income, but excluding
any contributions under the Section 457 plan or a Tax-Sheltered Annuity. During
the last three years before an individual attains normal retirement age,
additional "catch-up" deferrals are permitted.
The deferred amounts will be used by the employer to purchase the Contract.
The Contract will be issued to the employer, and all Contract Values will be
subject to the claims of the employer's creditors. The employee has no rights or
vested interest in the Contract and is only entitled to payment in accordance
with the Section 457 plan provisions. The plans may permit participants to
specify the form of investment for their deferred compensation account.
Depending on the terms of the particular plan, the employer may be entitled to
draw on deferred amounts for purposes unrelated to its Section 457 plan
obligations. Present Federal income tax law does not allow tax-free transfers or
rollovers for amounts accumulated in a Section 457 plan, except for transfers to
other Section 457 plans in certain limited cases.
LEGAL PROCEEDINGS
The Company is not involved in any litigation that is of material
importance in relation to its general account assets. In addition, there are no
legal proceedings to which the Separate Account is a party.
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.
32
<PAGE>
TABLE OF CONTENTS
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PRINCIPAL UNDERWRITER. . . . . . . . . . . . . . . . . . . . . . . . . B-2
DETERMINATION OF ANNUITY PAYMENTS. . . . . . . . . . . . . . . . . . . B-2
Amount of Annuity Payments. . . . . . . . . . . . . . . . . . . . . B-2
Annuity Unit Value. . . . . . . . . . . . . . . . . . . . . . . . . B 2
Illustrations of Variable Annuity Payments. . . . . . . . . . . . . B-2
STANDARDIZED COMPUTATION OF PERFORMANCE. . . . . . . . . . . . . . . . B-3
Performance Comparisons . . . . . . . . . . . . . . . . . . . . . . B-3
Yields. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-4
Total Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . B-4
TAX COMPARISON . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-7
VALUATION OF ASSETS OF THE ACCOUNT . . . . . . . . . . . . . . . . . . B-7
TRANSFERABILITY RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . B-7
CONTINGENT DEFERRED SALES CHARGE . . . . . . . . . . . . . . . . . . . B-7
FEDERAL TAX MATERS . . . . . . . . . . . . . . . . . . . . . . . . . . B-7
Taxation of the Company . . . . . . . . . . . . . . . . . . . . . . B-8
Tax Status of the Contracts . . . . . . . . . . . . . . . . . . . . B-8
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-9
OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . B-9
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-9
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . B-10
</TABLE>
33
<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 the Variable Annuity Service Center, P.O.
Box 515, Concord, New Hampshire 03302-0515, telephone number 1-800-289-1776.
- --------------------------------------------------------------------------------
The Date of the Prospectus to which this Statement of Additional Information
Relates is May 1, 1998.
The Date of this Statement of Additional Information is May 1,1998.
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
Principal Underwriter. . . . . . . . . . . . . . . . . . . . . . . . . . . .B-2
Determination of Annuity Payments. . . . . . . . . . . . . . . . . . . . . .B-2
Standardized Computation of Performance. . . . . . . . . . . . . . . . . . .B-3
Tax Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-7
Valuation of Assets of the Account . . . . . . . . . . . . . . . . . . . . .B-7
Transferability Restrictions . . . . . . . . . . . . . . . . . . . . . . . .B-7
Contingent Deferred Sales Charge . . . . . . . . . . . . . . . . . . . . . .B-7
Federal Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-7
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-9
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-9
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-9
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-10
</TABLE>
B-1
<PAGE>
PRINCIPAL UNDERWRITER
Jefferson Pilot Variable Corporation ("JPVC") (formerly Jefferson-Pilot Investor
Services, Inc.) may be considered the underwriter of the Contracts for purposes
of the federal securities laws. JPVC received a concession allowance of
$2,594,823 in 1996, of which it retained $203,024, and a concession allowance of
$2,712,381 in 1997 of which it retained $528,208.
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.
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
B-2
<PAGE>
certain period of 120 months with an assumed investment rate of 3 1/2%. (Option
2b, as described in the prospectus).
<TABLE>
<S> <C> <C>
(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
</TABLE>
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.
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.
B-3
<PAGE>
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.
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.
Current yield is calculated for the VIP 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. Standardized 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. These quotations are referred to as Non-Standardized total
returns. Non-standardized total returns also do not include the annual contract
fee of $35.00.
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
B-4
<PAGE>
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(l+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.
The following table shows the Standardized Average Annual Total Return for the
Alpha Variable Annuity sub-accounts for the period ended December 31, 1997.
<TABLE>
<CAPTION>
Since Inception
Sub-Accounts One Year (12/1/94) Cumulative
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Oppenheimer Growth* 14.14% 19.62% 73.80%
Oppenheimer Bond* -2.02% 4.13% 13.31%
VIP Money Market -5.51% -0.92% -2.81%
VIP High Income 5.78% 10.66% 36.69%
VIP Equity-Income 15.46% 18.71% 69.72%
VIP Growth 11.17% 18.73% 69.85%
VIP Overseas 0.11% 4.54% 14.68%
VIP II Asset Manager 8.55% 9.58% 32.60%
<CAPTION>
Since Inception
Sub-Accounts One Year (5/1/96) Cumulative
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
VIP II Index 500 19.71% 20.14% 35.82%
VIP II Contrafund 11.78% 13.89% 24.23%
JPVF Capital Growth** 12.00% 9.32% 16.03%
JPVF Emerging Growth** 10.03% 2.65% 4.46%
MFS Research Series 8.18% 10.69% 18.47%
MFS Utilities Series 18.79% 21.00% 37.45%
Alger American SmallCap -0.04% -5.66% -9.26%
Alger American Midcap Growth 3.31% 0.38% 0.63%
</TABLE>
The Following table shows the Standardized Average Annual Total Return for the
AlphaFLEX Variable Annuity subaccounts for the period ended December 31, 1997.
<TABLE>
<CAPTION>
Since Inception
Sub-Accounts One Year (12/1/94) Cumulative
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Oppenheimer Growth* 11.71% 19.25% 72.12%
Oppenheimer Bond* -4.10% 3.81% 12.21%
VIP Money Market -7.52% -1.23% -3.75%
VIP High Income 3.53% 10.32% 35.37%
VIP Equity-Income 13.00% 18.33% 68.08%
VIP Growth 8.80% 18.36% 68.21%
VIP Overseass -2.02% 4.21% 13.57%
VIP II Asset Manager 6.24% 9.23% 31.32%
B-5
<PAGE>
<CAPTION>
Since Inception
Sub-Accounts One Year (5/1/96) Cumulative
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
VIP II Index 500 17.17% 19.12% 33.90%
VIP II Contrafund 9.40% 12.92% 22.47%
JPVF Capital Growth** 9.61% 8.39% 14.39%
JPFV Emerging Growth** 7.69% 1.77% 2.98%
MFS Research Series 5.88% 9.75% 16.79%
MFS Utilities Series 16.26% 19.97% 35.50%
Alger American SmallCap -2.16% -6.46% -10.54%
Alger American Midcap Growth 1.11% -0.48% -0.80%
</TABLE>
The following table shows the Non-Standardized Average Annual Total Return
for the Alpha/AlphaFLEX Variable Annuity subaccounts for the period ending
December 31, 1997.
<TABLE>
<CAPTION>
Since Inception
Sub-Accounts One Year (12/1/94) Cumulative
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Oppenheimer Growth* 24.92% 24.37% 95.97%
Oppenheimer Bond* 7.74% 8.99% 30.42%
VIP Money Market 4.02% 4.12% 13.27%
VIP High Income 16.03% 15.54% 56.15%
VIP Equity-Income 26.33% 23.48% 91.66%
VIP Growth 21.77% 23.36% 91.11%
VIP Overseas 10.00% 9.55% 32.50%
VIP II Asset Manager 18.97% 14.54% 52.02%
<CAPTION>
Since Inception
Sub-Accounts One Year (5/1/96) Cumulative
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
VIP II Index 500 30.85% 26.87% 48.74%
VIP II Contrafund 22.42% 20.47% 36.44%
JPVF Capital Growth** 22.64% 15.81% 27.74%
JPFV Emerging Growth** 20.56% 9.01% 15.49%
MFS Research Series 18.59% 17.08% 30.10%
MFS Utilities Series 29.87% 27.85% 50.68%
Alger American SmallCap 9.84% 0.57% 0.95%
Alger American Midcap Growth 13.41% 6.59% 11.24%
</TABLE>
* On December 19, 1996, shares of the Oppenheimer Growth Fund were substituted
for shares of the Jefferson-Pilot Capital Appreciation Fund, Inc. and shares
of the Oppenheimer Bond Fund were substituted for shares of the
Jefferson-Pilot Investment Grade Bond Fund, Inc.
** On December 5, 1997, shares of the JPVF Capital Growth Portfolio were
substituted for shares of the Growth Fund of the Alexander Hamilton Variable
Insurance Trust ("AHVIT") and shares of the JPVF Emerging Growth Portfolio
were substituted for shares of the AHVIT Emerging Growth Fund. The above
numbers reflect the performance of the AHVIT Growth Fund and the AHVIT
Emerging Growth Fund for the period prior to the date of the substitution and
reflect the performance of the JPVF Capital Growth Portfolio and the JPVF
Emerging Growth Portfolio for the period after the date of the substitution.
B-6
<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.
FEDERAL TAX MATTERS
The Contracts are designed for use by individuals as either a non-qualified
annuity contract or as an annuity contract purchased for a qualified annuity
contract or as an annuity contract purchased for a qualified retirement plan
under Section 401, 403(b), 408, 408A or 457 of the Internal Revenue Code of
1986, as amended (the "Code"). The ultimate effect of Federal Income taxes on
the Contract Value will depend on numerous factors that are explained in the
Prospectus (See "Certain Federal Income Tax Consequences"). THE FOLLOWING
DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. Any person concerned
about these tax implications should consult a competent tax advisor. This
discussion is based upon the Company's understanding of the present federal
income tax laws as they are currently interpreted by the Internal Revenue
Service. No representation is made as to the
B-7
<PAGE>
likelihood of continuation of these present federal income tax laws or of the
current interpretations by the Internal Revenue Service. Moreover, no attempt
has been made to consider any applicable state or other tax laws.
TAXATION OF THE COMPANY. The Company is taxed as a life insurance company under
Part I of Subchapter L of the Code. The following discussion assumes that the
Company is taxed as a life insurance company under Part I of Subchapter L.
Since the Separate Account is not an entity separate from the Company, and its
operations are a part of the Company, it will not be taxed separately as a
"regulated investment company" under Subchapter M of the Code. Investment
income and realized capital gains are automatically applied to increase reserves
under the Contract. Under existing federal income tax law, the Company believes
that the Separate Account investment income and realized net capital gains will
not be taxed to the extent that such income and gains are applied to increase
the reserves under the Contract.
Accordingly, the Company does not anticipate that it will incur any federal
income tax liability attributable to the Separate Account, and therefore, the
Company does not intend to make provisions for any such taxes. However, if
changes in the federal tax laws or interpretations thereof result in the Company
being taxed on income or gains attributable to the Separate Account, then the
Company may impose a charge against the Separate Account (with respect to some
or all contracts) in order to set aside provisions to pay such taxes.
TAX STATUS OF THE CONTRACTS. Section 817(h) of the Code requires that with
respect to Non-Qualified Contracts, the investments of the Trust be "adequately
diversified" in accordance with Treasury regulations in order for the Contracts
to qualify as annuity contracts under federal tax law. The Separate Account,
through the Funds, intends to comply with the diversification requirements
prescribed by the Treasury in Reg. Sec. 1.817-5, which affect how a Fund's
assets may be invested.
In certain circumstances, owners of variable annuity contracts may be considered
the owners, for federal income tax purposes, of the assets of the separate
account used to support their contracts. In those circumstances, income and
gains for the separate account assets would be includible in the variable
contract owner's gross income. The IRS has stated in published rulings that a
variable contract owner will be considered the owner of separate account assets
if the contract owner possesses incidents of ownership in those assets, such as
the ability to exercise investment control over the assets. The Treasury
Department also announced, in connection with the issuance of regulations
concerning diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control of the investments of a
segregated asset account may cause the investor (i.e., you), rather than the
insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular sub-accounts without being treated as owners of the
underlying assets."
The ownership rights under the Contract are similar to, but different in certain
respects from, those described by the IRS in rulings in which it was determined
that policy owners were not owners of separate account assets. For example,
you have additional flexibility in allocating premium payments and policy
values. These differences could result in you being treated as the owner of a
pro rata portion of the assets of the Separate Account. In addition, the
Company does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. The Company therefore reserves the right to modify the Contract as
necessary to attempt to prevent you from being considered the owner of a pro
rata share of the assets of the Separate Account or to otherwise qualify the
Contract for favorable tax treatment.
B-8
<PAGE>
Both non-qualified and qualified annuity contracts are required to comply with
certain minimum distribution requirements in order to be treated as annuity
contracts under the Code. Owners of non-qualified annuity contracts are
generally not required to commence distributions under the annuity contract
prior to the maturity date of the contract. However, if the Owner of a
non-qualified annuity dies before the contract matures, the beneficiary is
required to either (i) annuitize the contract within one year of the Owner's
death, or (ii) totally withdraw all funds from the annuity within five years of
the Owner's death. Owners of qualified annuity contracts (other than Roth IRAs)
are, however, generally required to commence distributions from the annuity
contract when they attain age 70 1/2, and to receive distributions over the
Owner's life expectancy (or over the joint life expectancy of the Owner and the
Owner's spouse). There are special rules that allow a surviving spouse to take
over the annuity contract at the Owner's death and treat the contract as if it
had originally been purchased by the surviving spouse. If the Owner dies once
distributions have begun (for both qualified and non-qualified annuities), the
beneficiary must continue to receive distributions at least as rapidly as the
Owner was receiving them. Further details regarding the minimum distribution
rules are contained in the Prospectus.
LEGAL MATTERS
Legal advice relating to certain matters under the federal securities laws
applicable to the issue and sale of the Contract has been provided to the
Company by Jorden Burt Boros Cicchetti Berenson & Johnson of Washington, D.C.
OTHER INFORMATION
A Registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933, as amended, with respect to the
Contracts discussed in this Statement of Additional Information. Not all of the
information set forth in the Registration Statement, amendments and exhibits
thereto has been included in the Prospectus for the Contracts or this Statement
of Additional Information. Statements contained in the Prospectus and this
Statement of Additional Information concerning the content of the Contracts and
other legal instruments are intended to be summaries. For a complete statement
of the terms of these documents, reference should be made to the instruments
filed with the Securities and Exchange Commission.
EXPERTS
The statement of assets and liabilities of Jefferson-Pilot Separate
Account A of Jefferson-Pilot Life Insurance Company at December 31, 1997,
and the related statement of operations for the year then ended, and the
statement of changes in net assets for each of the two years in the period
then ended, appearing in this Statement of Additional Information and this
Registration Statement have been audited by Ernst & Young, LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein,
and are included in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
The financial statements of Jefferson-Pilot Life Insurance Company at
December 31, 1997 and 1996, and for each of the years then ended, appearing
in this Statement of Additional Information and this Registration Statement
have been audited by Ernst & Young, LLP, independent auditors, as set forth
in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The financial statements of Jefferson-Pilot Life Insurance Company for the
year ended December 31, 1995, appearing in this Statement of Additional
Information and this Registration Statement have been audited by McGladrey &
Pullen, LLP, independent certified public accountants, as set forth in their
report appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
B-9
<PAGE>
FINANCIAL STATEMENTS
The financial statement of the Company included in this Statement of Additional
Information should be considered only as bearing on the ability of the Company
to meet its obligations under the Contracts. They should not be considered as
bearing on the investment performance of the assets held in the Separate
Account.
B-10
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Unitholders of Jefferson-Pilot Separate Account A
of Jefferson-Pilot Life Insurance Company
Board of Directors, Jefferson-Pilot Life Insurance Company
We have audited the accompanying statement of assets and liabilities of
Jefferson-Pilot Separate Account A of Jefferson-Pilot Life Insurance Company as
of December 31, 1997, and the related statement of operations for the year then
ended, and the statement of changes in net assets for each of the two years in
the period then ended. 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. Our procedures
included confirmation of securities owned as of December 31, 1997, by
correspondence with the fund managers. 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 Separate
Account A of Jefferson-Pilot Life Insurance Company at December 31, 1997, and
the results of its operations for the year then ended, and the changes in its
net assets for the two years in the period then ended in conformity with
generally accepted accounting principles.
Greensboro, North Carolina
April 6, 1998 /s/ Ernst & Young LLP
<PAGE>
Jefferson-Pilot Separate Account A
Statement of Assets and Liabilities
December 31, 1997
<TABLE>
<S> <C>
ASSETS
Securities of investment companies:
Oppenheimer Growth Fund at net asset value (3,187,103.165
shares at $32.44 per share, cost - $71,582,876.11) $103,389,628
Oppenheimer Bond Fund at net asset value (1,751,743.928 shares
at $11.91 per share, cost - $19,923,617) 20,863,270
VIPF Money Market Portfolio at net asset value (10,032,759.080
shares at $1.00 per share, cost - $10,032,759) 10,032,759
VIPF Growth Portfolio at net asset value (635,394.218 shares at
$37.10 per share, cost - $18,907,281.16) 23,573,125
VIPF Equity-Income Portfolio at net asset value (1,274,910.351
shares at $24.28 per share, cost - $24,943,893) 30,954,823
VIPF High Income Portfolio at net asset value (405,115.170 shares
at $13.58 per share, cost - $4,844,272) 5,501,464
VIPF Overseas Portfolio at net asset value (143,174.160 shares at
$19.20 per share, cost - $2,596,729) 2,748,944
VIPF II Asset Manager Portfolio at net asset value (588,645.058
shares at $18.01 per share, cost - $9,282,815) 10,601,497
Alger American Small Capitalization Portfolio at net asset value
(43,008.600 shares at $43.75 per share, cost - $1,750,887 1,881,626
Alger American MidCap Growth Portfolio at net asset value
(80,842.333 shares at $24.18 per share, cost - $1,750,972) 1,954,768
VIPF II Contrafund Portfolio at net asset value (203,620.719
shares at $19.94 per share, cost - $3,536,967) 4,060,197
VIPF II Index 500 Portfolio at net asset value (55,527.586 shares
at $114.39 per share, cost - $5,539,233) 6,351,801
JPVF Emerging Growth Portfolio at net asset value (102,830.577
shares at $17.47 per share, cost - $1,675,472) 1,796,450
MFS Research Series at net asset value (258,550.370 shares at
$15.79 per share, cost - $3,625,284) 4,082,510
MFS Utilities Series at net asset value (116,136.338 shares at
$17.99 per share, cost - $1,747.666) 2,089,293
JPVF Capital Growth Portfolio at net asset value (116,939.751 shares
at $21.23 per share, cost - $2,217,393) 2,482,631
LIABILITIES
Accrued transfer to sponsor
Oppenheimer Growth Fund 566,928
Oppenheimer Bond Fund 253,072
------------
Total net assets $231,544,786
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
2
<PAGE>
Jefferson-Pilot Separate Account A
Statement of Assets and Liabilities (continued)
Year ended December 31, 1997
<TABLE>
<S> <C>
NET ASSETS
Variable annuity contracts (Note 8):
Oppenheimer Growth Fund $102,345,492
Oppenheimer Bond Fund 20,373,977
VIPF Money Market Portfolio 9,722,817
VIPF Growth Portfolio 23,544,013
VIPF Equity-Income Portfolio 30,917,121
VIPF High Income Portfolio 5,494,512
VIPF Overseas Portfolio 2,745,587
VIPF II Asset Manager Portfolio 10,589,060
Alger American Small Capitalization Portfolio 1,879,264
Alger American MidCap Growth Portfolio 1,952,302
VIPF II Contrafund Portfolio 4,055,521
VIPF II Index 500 Portfolio 6,346,318
JPVF Emerging Growth Portfolio 1,796,450
MFS Research Series 4,077,376
MFS Utilities Series 2,086,702
JPVF Capital Growth Portfolio 2,482,631
Jefferson-Pilot Life Insurance Company - Sponsor:
Oppenheimer Growth Fund (1,516.992 accumulation units at
$131.766651 per unit, 2,926.502 accumulation units at $126.055656
per unit and -4,673.378 accumulation units at $19.597148 per unit) 477,206
Oppenheimer Bond Fund (1,293.169 accumulation units at $44.948381
per unit, 3,973.173 accumulation units at $43.017026 per unit and
550.751 accumulation units at $13.042029 per unit) 236,223
VIPF Money Market Portfolio (13,891.865 accumulation units at
$21.669744 per unit and 786.554 accumulation units at $11.326697
per unit) 309,942
VIPF Growth Portfolio (1,523.277 accumulation units at $19.111315
per unit) 29,111
VIPF Equity-Income Portfolio (1,967.095 accumulation units at
$19.166449 per unit) 37,702
VIPF High Income Portfolio (445.258 accumulation units at
$15.614753 per unit) 6,953
</TABLE>
3
<PAGE>
Jefferson-Pilot Separate Account A
Statement of Assets and Liabilities (continued)
<TABLE>
<S> <C>
Jefferson-Pilot Life Insurance Company - Sponsor (continued):
VIPF Overseas Portfolio (253.385 accumulation units at $13.249871
per unit) 3,357
VIPF II Asset Manager Portfolio (818.187 accumulation units at
$15.201721) 12,438
Alger American Small Capitalization Portfolio (234.005 accumulation
units at $10.094700 per unit) 2,362
Alger American MidCap Growth Portfolio (221.623 accumulation units at
$11.124001 per unit) 2,465
VIPF II Contrafund Portfolio (342.736 accumulation units at
$13.643639 per unit) 4,676
VIPF II Index 500 Portfolio (368.593 accumulation units at $14.874449
per unit) 5,483
MFS Research Series (394.622 accumulation units at $13.010109 per unit) 5,134
MFS Utilities Series (171.902 accumulation units at $15.067972 per unit) 2,590
------------
Total net assets $231,544,786
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE>
Jefferson-Pilot Separate Account A
Statement of Operations
Year ended December 31, 1997
<TABLE>
<S> <C>
Investment income:
Dividend income $ 3,317,603
Capital gain distribution from investment companies 8,021,811
-----------
11,339,414
-----------
Expenses:
Mortality and expense risk charge (2,520,440)
Administrative charges (91,508)
-----------
Net investment income 8,727,466
-----------
Realized and unrealized gain on investments:
Net realized gain on investments 4,015,825
Net unrealized appreciation of investments 25,396,773
-----------
Net gain on investments 29,412,598
-----------
Net increase in net assets resulting from operations $38,140,064
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
Jefferson-Pilot Separate Account A
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996
------ ------
<S> <C> <C>
Increase (decrease) in net assets from operations
Net investment income $ 8,727,466 $ 15,464,182
Net realized gain on investments 4,015,825 75,016
Net unrealized appreciation of investments 25,396,773 1,849,583
--------------------------------
Net increase in net assets resulting from operations $ 38,140,064 $ 17,388,781
Changes from principal transactions
Net contract purchase payments $ 46,466,828 $ 49,960,458
Benefits paid (22,309,458) (13,977,989)
Net transfer of reserves to sponsor (439,186) (618,786)
Transfer to sponsor (1,321,553) (1,000,000)
--------------------------------
Increase in net assets derived from principal transactions 22,396,631 34,363,683
--------------------------------
Total increase (decrease) $ 60,536,695 $ 51,752,464
--------------------------------
Net assets at beginning of year $171,008,091 $119,255,627
--------------------------------
Net assets at end of year $231,544,786 $171,008,091
--------------------------------
--------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
Jefferson-Pilot Separate Account A
Notes to Financial Statements
December 31, 1997
1. 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.
Subject to certain limitations and restrictions, a variable annuity
contractholder may elect to have net purchase payments credited to any of 16
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, at its sole discretion, credit
interest in excess of the guaranteed rate. Fixed account accumulation values
are not charged a mortality and expense fee or an administrative fee.
On December 4, 1997, the Sponsor exchanged the balance in AHVIT Emerging Growth
Fund, consisting of 147,778.984 shares with a net asset value of $12.82 per
share, receiving 100,235.846 shares of the Jefferson-Pilot Variable Fund
("JPVF"), formerly CAF Emerging Markets Fund, with a net asset value of $18.71
per share. The Sponsor also exchanged 179,267.579 shares AHVIT Growth Fund,
having a net asset value of $14.71 per share, receiving 119,228.904 shares of
the JPVF, formerly CAF Capital Growth Fund, with a net asset value of $22.12 per
share. The conversion ratios were based on the net asset values of the funds at
the conversion date.
In accordance with the terms of the contracts, payments are invested in
shares of Oppenheimer Growth Fund, Oppenheimer Bond Fund, VIPF Money Market
Portfolio, VIPF Growth Portfolio, VIPF Equity-Income Portfolio, VIPF High
Income Portfolio, VIPF Overseas Portfolio, VIPF II Asset Manager Portfolio,
Alger American Small Capitalization Portfolio, Alger American MidCap Growth
Portfolio, VIPF II Contrafund Portfolio, VIPF II Index 500 Portfolio, JPVF
Emerging Growth Portfolio, MFS Research Series, MFS Utilities Series and JPVF
Capital Growth 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.
7
<PAGE>
Jefferson-Pilot Separate Account A
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION
The investments in the shares of the sub-accounts are carried in the Statement
of Assets and Liabilities at net asset value, which is market value at December
31, 1997. Investment transactions are accounted for on the date the order to
buy or sell is executed (trade date).
INVESTMENT INCOME
Investment income consists of dividend income (both ordinary and capital gains)
and is recognized on the ex-dividend date. All distributions received are
reinvested in the respective sub-accounts. The aggregate costs of purchases and
proceeds from sales of investments (other than short-term securities) for the
year ended December 31, 1997, were $73,891,543 and $41,947,446, respectively.
Realized investment gains and losses on investments are determined using the
last-in-first-out method.
RECLASSIFICATIONS
Certain 1996 amounts in the financial statements have been reclassified to
conform to the 1997 presentation. The reclassification had no effect on
previously reported net assets.
3. 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 Variable Corporation 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 have a mortality and expense fee of 1.25%
and an administrative fee of .15%.
4. 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.
8
<PAGE>
5. USE OF ESTIMATES
The accompanying financial statements of the Account have been prepared in
accordance with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates that affect amounts
reported in the financial statements and accompanying notes. Such estimates
could change in the future as more information becomes known, which could impact
the amounts reported and disclosed herein.
6. REMUNERATION
The Account pays no remuneration to directors, advisory boards or officers or
such other persons who may from time to time perform services for the Account.
7. ACCUMULATION UNITS
Changes in the number of accumulation units are as follows:
<TABLE>
<CAPTION>
1997 1996
---------------------------------
<S> <C> <C>
OPPENHEIMER GROWTH FUND
Units outstanding at beginning of period 1,479,421.465 1,051,871.585
Units purchased 632,241.115 711,197.685
Redemptions and charges (325,707.846) (283,647.805)
---------------------------------
Units outstanding at end of period 1,785,954.734 1,479,421.465
---------------------------------
---------------------------------
OPPENHEIMER BOND FUND
Units outstanding at beginning of period 810,389.562 718,607.599
Units purchased 268,832.205 323,390.644
Redemptions and charges (275,416.935) (231,608.681)
---------------------------------
Units outstanding at end of period 803,804.832 810,389.562
---------------------------------
---------------------------------
VIPF MONEY MARKET PORTFOLIO
Units outstanding at beginning of period 756,510.915 604,573.553
Units purchased 2,466,568.744 1,686,143.385
Redemptions and charges (2,459,199.662) (1,534,206.023)
---------------------------------
Units outstanding at end of period 763,879.997 756,510.915
---------------------------------
---------------------------------
</TABLE>
9
<PAGE>
7. ACCUMULATION UNITS (CONTINUED)
<TABLE>
<CAPTION>
1997 1996
----------------------------------
<S> <C> <C>
VIPF GROWTH PORTFOLIO
Units outstanding at beginning of period 1,061,896.920 439,231.793
Units purchased 419,835.567 865,935.194
Redemptions and charges (258,800.844) (243,270.067)
----------------------------------
Units outstanding at end of period 1,222,931.643 1,061,896.920
----------------------------------
----------------------------------
VIPF EQUITY-INCOME PORTFOLIO
Units outstanding at beginning of period 1,306,420.278 603,748.536
Units purchased 648,588.430 1,030,677.532
Redemptions and charges (353,220.684) (328,005.790)
----------------------------------
Units outstanding at end of period 1,601,788.024 1,306,420.278
----------------------------------
----------------------------------
VIPF HIGH INCOME PORTFOLIO
Units outstanding at beginning of period 264,864.236 104,906.955
Units purchased 192,441.392 210,340.408
Redemptions and charges (104,980.867) (50,383.127)
----------------------------------
Units outstanding at end of period 352,324.761 264,864.236
----------------------------------
----------------------------------
VIPF OVERSEAS PORTFOLIO
Units outstanding at beginning of period 154,948.844 44,023.734
Units purchased 110,591.923 134,771.167
Redemptions and charges (58,071.284) (23,846.057)
----------------------------------
Units outstanding at end of period 207,469.483 154,948.844
----------------------------------
----------------------------------
VIPF II ASSET MANAGER PORTFOLIO
Units outstanding at beginning of period 490,202.223 170,765.634
Units purchased 356,163.453 390,192.194
Redemptions and charges (151,323.149) (70,755.605)
----------------------------------
Units outstanding at end of period 695,042.527 490,202.223
----------------------------------
----------------------------------
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
Units outstanding at beginning of period 148,321.277 0.000
Units purchased 102,281.650 162,500.493
Redemptions and charges (64,205.483) (14,179.216)
----------------------------------
Units outstanding at end of period 186,397.444 148,321.277
----------------------------------
----------------------------------
</TABLE>
10
<PAGE>
7. ACCUMULATION UNITS (CONTINUED)
<TABLE>
<CAPTION>
1997 1996
--------------------------------
<S> <C> <C>
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
Units outstanding at beginning of period 94,916.505 0.000
Units purchased 106,519.905 113,068.110
Redemptions and charges (25,711.180) (18,151.605)
----------------------------------
Units outstanding at end of period 175,725.230 94,916.505
----------------------------------
----------------------------------
VIPF II CONTRAFUND PORTFOLIO
Units outstanding at beginning of period 75,800.073 0.000
Units purchased 283,820.499 83,633.795
Redemptions and charges (62,031.544) (7,833.722)
----------------------------------
Units outstanding at end of period 297,589.028 75,800.073
----------------------------------
----------------------------------
VIPF II INDEX 500 PORTFOLIO
Units outstanding at beginning of period 83,751.669 0.000
Units purchased 392,419.398 94,257.747
Redemptions and charges (53,216.757) (10,506.078)
----------------------------------
Units outstanding at end of period 422,954.310 83,751.669
----------------------------------
----------------------------------
JPVF EMERGING GROWTH PORTFOLIO
Units outstanding at beginning of period 67,640.913 0.000
Units purchased 144,053.771 89,590.061
Redemptions and charges (56,140.634) (21,949.148)
----------------------------------
Units outstanding at end of period 155,554.050 67,640.913
----------------------------------
----------------------------------
MFS RESEARCH SERIES
Units outstanding at beginning of period 104,920.216 0.000
Units purchased 251,559.034 115,020.019
Redemptions and charges (42,684.002) (10,099.803)
----------------------------------
Units outstanding at end of period 313,795.248 104,920.216
----------------------------------
----------------------------------
</TABLE>
11
<PAGE>
7. ACCUMULATION UNITS (CONTINUED)
<TABLE>
<CAPTION>
1997 1996
-------------------------------
<S> <C> <C>
MFS UTILITIES SERIES
Units outstanding at beginning of period 24,368.744 0.000
Units purchased 138,242.937 27,428.409
Redemptions and charges (23,953.818) (3,059.665)
----------------------------------
Units outstanding at end of period 138,657.863 24,368.744
----------------------------------
----------------------------------
JPVF CAPITAL GROWTH PORTFOLIO
Units outstanding at beginning of period 100,317.887 0.000
Units purchased 144,668.643 119,226.846
Redemptions and charges (50,641.104) (18,908.959)
----------------------------------
Units outstanding at end of period 194,345.426 100,317.887
----------------------------------
----------------------------------
</TABLE>
8. 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>
OPPENHEIMER GROWTH FUND
DECEMBER 31, 1997
Qualified units (a) 801,368.745 $ 19.597148 $ 15,704,542
Non-qualified units (a) 442,474.379 $ 19.597148 8,671,236
Qualified units (b) 355,927.496 $144.308956 51,363,525
Non-qualified units (b) 97,838.385 $126.055656 12,333,082
Qualified units (c) 58,967.643 $150.797347 8,892,164
Non-qualified units (c) 22,146.719 $131.766651 2,918,199
Annuity fund 2,462,744
------------
$102,345,492
------------
------------
</TABLE>
12
<PAGE>
8. VARIABLE ANNUITY CONTRACTS (CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION UNIT TOTAL
UNITS VALUE VALUE
---------------------------------------------------
<S> <C> <C> <C>
OPPENHEIMER GROWTH FUND
DECEMBER 31, 1996
Qualified units (a) 604,991.684 $ 15.687352 $ 9,490,718
Non-qualified units (a) 273,088.264 $ 15.687352 4,284,032
Qualified units (b) 394,329.192 $115.040657 45,363,890
Non-qualified units (b) 102,192.917 $100.489435 10,269,308
Qualified units (c) 66,387.518 $119.862895 7,957,400
Non-qualified units (c) 24,697.054 $104.736142 2,586,674
Annuity fund 1,750,312
-----------
$81,702,334
-----------
-----------
OPPENHEIMER BOND FUND
DECEMBER 31, 1997
Qualified units (a) 253,726.858 $13.042029 $ 3,309,113
Non-qualified units (a) 205,917.088 $13.042029 2,685,577
Qualified units (b) 224,892.512 $41.994705 9,444,295
Non-qualified units (b) 68,600.878 $43.017026 2,951,006
Qualified units (c) 25,218.722 $43.882775 1,106,668
Non-qualified units (c) 13,823.619 $44.948381 621,349
Annuity fund 255,969
-----------
$20,373,977
-----------
-----------
OPPENHEIMER BOND FUND
DECEMBER 31, 1996
Qualified units (a) 206,344.377 $12.105651 $ 2,497,933
Non-qualified units (a) 175,807.726 $12.105651 2,128,267
Qualified units (b) 279,442.690 $38.818395 10,847,517
Non-qualified units (b) 88,950.963 $39.763392 3,536,992
Qualified units (c) 31,174.177 $40.445409 1,260,852
Non-qualified units (c) 17,553.565 $41.427546 727,201
Annuity fund 291,180
-----------
$21,289,942
-----------
-----------
</TABLE>
13
<PAGE>
8. VARIABLE ANNUITY CONTRACTS (CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION UNIT TOTAL
UNITS VALUE VALUE
---------------------------------------------------
<S> <C> <C> <C>
VIPF MONEY MARKET PORTFOLIO
DECEMBER 31, 1997
Qualified units (a) 630,153.712 $11.326697 $ 7,137,560
Qualified units (b) 101,962.673 $21.669744 2,209,505
Non-qualified units (b) 17,085.193 $21.669744 370,232
Annuity fund 5,520
-----------
$ 9,722,817
-----------
-----------
VIPF MONEY MARKET PORTFOLIO
DECEMBER 31, 1996
Qualified units (a) 537,961.454 $10.888553 $ 5,857,622
Qualified units (b) 187,052.578 $20.745350 3,880,471
Non-qualified units (b) 17,085.193 $20.745350 354,438
Annuity fund 6,400
-----------
$10,098,931
-----------
-----------
VIPF GROWTH PORTFOLIO
DECEMBER 31, 1997
Qualified units (a) 774,156.975 $19.111315 $14,795,158
Non-qualified units (a) 444,086.154 $19.111315 8,487,070
Annuity fund 261,785
-----------
$23,544,013
-----------
-----------
VIPF GROWTH PORTFOLIO
DECEMBER 31, 1996
Qualified units (a) 651,517.188 $15.695218 $10,225,704
Non-qualified units (a) 409,196.903 $15.695218 6,422,435
Annuity fund 186,406
-----------
$16,834,545
-----------
-----------
VIPF EQUITY-INCOME PORTFOLIO
DECEMBER 31, 1997
Qualified units (a) 908,708.158 $19.166449 $17,416,709
Non-qualified units (a) 687,859.294 $19.166449 13,183,820
Annuity fund 316,592
-----------
$30,917,121
-----------
-----------
</TABLE>
14
<PAGE>
8. VARIABLE ANNUITY CONTRACTS (CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION UNIT TOTAL
UNITS VALUE VALUE
---------------------------------------------------
<S> <C> <C> <C>
VIPF EQUITY-INCOME PORTFOLIO
DECEMBER 31, 1996
Qualified units (a) 742,097.035 $15.171936 $11,259,049
Non-qualified units (a) 562,778.828 $15.171936 8,538,444
Annuity fund 217,784
-----------
$20,015,277
-----------
-----------
VIPF HIGH INCOME PORTFOLIO
DECEMBER 31, 1997
Qualified units (a) 179,967.613 $15.614753 $ 2,810,150
Non-qualified units (a) 171,911.888 $15.614753 2,684,362
-----------
$ 5,494,512
-----------
-----------
VIPF HIGH INCOME PORTFOLIO
DECEMBER 31, 1996
Qualified units (a) 143,311.536 $13.457366 $ 1,928,596
Non-qualified units (a) 121,230.627 $13.457366 1,631,445
-----------
$ 3,560,041
-----------
-----------
VIPF OVERSEAS PORTFOLIO
DECEMBER 31, 1997
Qualified units (a) 140,578.942 $13.249871 $ 1,862,653
Non-qualified units (a) 66,637.156 $13.249871 882,934
-----------
$ 2,745,587
-----------
-----------
VIPF OVERSEAS PORTFOLIO
DECEMBER 31, 1996
Qualified units (a) 103,229.823 $12.044844 $ 1,243,387
Non-qualified units (a) 51,528.504 $12.044844 620,653
-----------
$ 1,864,040
-----------
-----------
VIPF II ASSET MANAGER PORTFOLIO
DECEMBER 31, 1997
Qualified units (a) 471,851.713 $15.201721 $ 7,172,958
Non-qualified units (a) 222,372.627 $15.201721 3,380,447
Annuity fund 35,655
-----------
$10,589,060
-----------
-----------
</TABLE>
15
<PAGE>
8. VARIABLE ANNUITY CONTRACTS (CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION UNIT TOTAL
UNITS VALUE VALUE
---------------------------------------------------
<S> <C> <C> <C>
VIPF II ASSET MANAGER PORTFOLIO
DECEMBER 31, 1996
Qualified units (a) 340,261.913 $12.777286 $ 4,347,624
Non-qualified units (a) 149,348.015 $12.777286 1,908,262
-----------
$ 6,255,886
-----------
-----------
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
DECEMBER 31, 1997
Qualified units (a) 116,078.161 $10.094700 $ 1,171,774
Non-qualified units (a) 70,085.278 $10.094700 707,490
-----------
$ 1,879,264
-----------
-----------
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
DECEMBER 31, 1996
Qualified units (a) 88,628.875 $ 9.190108 $ 814,509
Non-qualified units (a) 59,516.980 $ 9.190108 546,967
-----------
$ 1,361,476
-----------
-----------
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
DECEMBER 31, 1997
Qualified units (a) 106,609.606 $11.124001 $ 1,185,925
Non-qualified units (a) 68,894.003 $11.124001 766,377
-----------
$ 1,952,302
-----------
-----------
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
DECEMBER 31, 1996
Qualified units (a) 59,194.780 $ 9.808937 $ 580,638
Non-qualified units (a) 35,594.861 $ 9.808937 349,148
-----------
$ 929,786
-----------
-----------
VIPF II CONTRAFUND PORTFOLIO
DECEMBER 31, 1997
Qualified units (a) 155,982.980 $13.643639 $2,128,175
Non-qualified units (a) 141,263.312 $13.643639 1,927,346
-----------
$4,055,521
-----------
-----------
</TABLE>
16
<PAGE>
8. VARIABLE ANNUITY CONTRACTS (CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION UNIT TOTAL
UNITS VALUE VALUE
---------------------------------------------------
<S> <C> <C> <C>
VIPF II CONTRAFUND PORTFOLIO
DECEMBER 31, 1996
Qualified units (a) 40,992.762 $11.145245 $ 456,874
Non-qualified units (a) 34,720.276 $11.145245 386,966
-----------
$ 843,840
-----------
-----------
VIPF II INDEX 500 PORTFOLIO
DECEMBER 31, 1997
Qualified units (a) 231,725.470 $14.874449 $ 3,446,789
Non-qualified units (a) 190,860.291 $14.874449 2,838,942
Annuity fund 60,587
-----------
$ 6,346,318
-----------
-----------
VIPF II INDEX 500 PORTFOLIO
DECEMBER 31, 1996
Qualified units (a) 43,614.925 $11.367158 $ 495,778
Non-qualified units (a) 40,079.527 $11.367158 455,590
Annuity fund 49,883
-----------
$ 1,001,251
-----------
-----------
JPVF EMERGING GROWTH PORTFOLIO
Qualified units (a) 89,623.330 $11.548720 $ 1,035,035
Non-qualified units (a) 65,930.721 $11.548720 761,415
-----------
$ 1,796,450
-----------
-----------
AHVIT EMERGING GROWTH FUND
DECEMBER 31, 1996
Qualified units (a) 41,615.435 $ 9.579577 $ 398,658
Non-qualified units (a) 25,937.810 $ 9.579577 248,473
-----------
$ 647,131
-----------
-----------
</TABLE>
17
<PAGE>
8. VARIABLE ANNUITY CONTRACTS (CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION UNIT TOTAL
UNITS VALUE VALUE
---------------------------------------------------
<S> <C> <C> <C>
MFS RESEARCH SERIES
DECEMBER 31, 1997
Qualified units (a) 191,868.728 $13.010109 $ 2,496,233
Non-qualified units (a) 121,531.897 $13.010109 1,581,143
-----------
$ 4,077,376
-----------
-----------
MFS RESEARCH SERIES
DECEMBER 31, 1996
Qualified units (a) 74,784.207 $10.970831 $ 820,445
Non-qualified units (a) 30,017.296 $10.970831 329,315
-----------
$ 1,149,760
-----------
-----------
MFS UTILITIES SERIES
DECEMBER 31, 1997
Qualified units (a) 64,802.179 $15.067972 $ 976,437
Non-qualified units (a) 73,683.782 $15.067972 1,110,265
-----------
$ 2,086,702
-----------
-----------
MFS UTILITIES SERIES
DECEMBER 31, 1996
Qualified units (a) 13,428.328 $11.602401 $ 155,801
Non-qualified units (a) 10,878.887 $11.602401 126,221
-----------
$ 282,022
-----------
-----------
JPVF CAPITAL GROWTH PORTFOLIO
DECEMBER 31, 1997
Qualified units (a) 103,554.956 $12.774321 $ 1,322,844
Non-qualified units (a) 90,790.469 $12.774321 1,159,787
-----------
$ 2,482,631
-----------
-----------
AHVIT GROWTH FUND
DECEMBER 31, 1996
Qualified units (a) 58,550.128 $10.415742 $ 609,843
Non-qualified units (a) 41,671.213 $10.415742 434,037
-----------
$ 1,043,880
-----------
-----------
</TABLE>
(a) - contracts issued after 1994.
(b) - contracts issued 1983 - 1994.
(c) - contracts issued before 1983.
18
<PAGE>
Report of Independent Auditors
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 (a wholly-owned subsidiary of Jefferson-Pilot Corporation),
as of December 31, 1997 and 1996, and the related statements of income,
stockholder's equity and cash flows for the years then ended. 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. The financial statements of Jefferson-Pilot Life Insurance
Company for the year ended December 31, 1995 were audited by predecessor
auditors, whose report dated February 6, 1996 expressed an unqualified
opinion on those statements.
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 1997 and 1996 financial statements referred to above present
fairly, in all material respects, the financial position of Jefferson-Pilot Life
Insurance Company, as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
Greensboro, North Carolina
February 9, 1998
/s/ Ernst & Young LLP
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Jefferson-Pilot Life Insurance Company
Greensboro, North Carolina
We have audited the statements of income, stockholder's equity and cash flows
of Jefferson-Pilot Life Insurance Company for the year 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 audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of
Jefferson-Pilot Life Insurance Company for the year ended December 31, 1995,
in conformity with generally accepted accounting principles.
McGLADREY & PULLEN, LLP
Greensboro, North Carolina
February 6, 1996
<PAGE>
Jefferson-Pilot Life Insurance Company
Balance Sheets
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
----------------------------
<S> <C> <C>
ASSETS
Investments:
Debt securities available for sale, at fair value (amortized
cost 1997--$2,904,494; 1996--$2,664,100) $3,078,255 $2,709,763
Debt securities held to maturity, at amortized cost (fair
value 1997--$1,886,461; 1996--$1,873,675) 1,823,580 1,849,192
Equity securities available for sale, at fair value
(amortized cost 1997--$50,004; 1996--$141,158) 320,762 420,937
Equity securities trading portfolio, at fair value
(cost 1997--$630; 1996--$23,238) 312 22,580
Mortgage loans on real estate 1,113,132 1,013,689
Policy loans 239,395 235,443
Real estate 40,436 33,304
Other investments 4,978 9,003
----------------------------
Total investments 6,620,850 6,293,911
Cash and cash equivalents 695 10,220
Investments at equity 18,080 42,164
Due from affiliates 43,505 42,306
Accrued investment income 78,386 78,428
Accounts receivable and agents' balances 24,029 17,090
Due from reinsurers 55,796 47,700
Property and equipment 54,283 54,041
Deferred policy acquisition costs 609,534 612,435
Assets held in separate accounts 672,986 487,704
Other assets 44,161 38,599
----------------------------
$8,222,305 $7,724,598
----------------------------
----------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
----------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Policy liabilities:
Future policy benefits $1,516,386 $1,478,105
Policyholder contract deposits 3,688,762 3,307,589
Dividend accumulations and other policyholder
funds on deposit 199,213 200,159
Policy and contract claims 158,081 163,668
Deferred revenue and premiums collected in advance 38,343 33,505
Other 67,677 55,739
----------------------------
Total policy liabilities 5,668,462 5,238,765
Securities sold under repurchase agreements 95,361 198,608
Currently payable income taxes 10,274 14,074
Deferred income tax liabilities 141,500 110,695
Liabilities related to separate accounts 672,986 487,704
Accounts payable, accruals and other liabilities 155,912 116,853
----------------------------
Total liabilities 6,744,495 6,166,699
Commitments and contingent liabilities
Stockholder's equity:
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 1,173,828 1,303,241
Net unrealized gains on securities, less deferred
income taxes 1997--$139,491; 1996--$110,500 268,415 219,091
----------------------------
1,477,810 1,557,899
----------------------------
$8,222,305 $7,724,598
----------------------------
----------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
Jefferson-Pilot Life Insurance Company
Statements of Income
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
--------------------------------------------
<S> <C> <C> <C>
REVENUE
Premiums and other considerations $ 780,934 $ 861,505 $ 775,118
Net investment income 478,394 469,099 420,917
Realized investment gains 79,011 30,411 35,036
--------------------------------------------
1,338,339 1,361,015 1,231,071
BENEFITS AND EXPENSES
Insurance and annuity benefits 803,535 832,495 748,046
Insurance commissions 112,300 100,538 92,300
General and administrative 113,764 106,180 101,872
Insurance taxes, licenses and fees 27,938 28,109 25,855
Net deferral of policy acquisition costs (33,488) (7,257) (35,914)
--------------------------------------------
1,024,049 1,060,065 932,159
Income before income taxes 314,290 300,950 298,912
Income taxes 107,083 101,310 97,443
--------------------------------------------
Net income $ 207,207 $ 199,640 $ 201,469
--------------------------------------------
--------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE>
Jefferson-Pilot Life Insurance Company
Statements of Stockholder's Equity
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NET
CAPITAL IN UNREALIZED TOTAL
COMMON EXCESS OF RETAINED GAINS ON STOCKHOLDER'S
STOCK PAR VALUE EARNINGS SECURITIES EQUITY
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995 $5,000 $30,567 $1,191,496 $202,479 $1,429,542
Net income - - 201,469 - 201,469
Dividends paid to parent company - - (169,364) - (169,364)
Increase during year - - - 67,924 67,924
------------------------------------------------------------------------
Balance at December 31, 1995 5,000 30,567 1,223,601 270,403 1,529,571
Net income - - 199,640 - 199,640
Dividends paid to parent company - - (120,000) - (120,000)
Decrease during year - - - (51,312) (51,312)
------------------------------------------------------------------------
Balance at December 31, 1996 5,000 30,567 1,303,241 219,091 1,557,899
Net income - - 207,207 - 207,207
Dividends paid to parent company - - (336,620) - (336,620)
Increase during year - - - 49,324 49,324
------------------------------------------------------------------------
Balance at December 31, 1997 $5,000 $30,567 $1,173,828 $268,415 $1,477,810
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
6
<PAGE>
Jefferson-Pilot Life Insurance Company
Statements of Cash Flow
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $207,207 $199,640 $201,469
Adjustments to reconcile net income to net cash
provided by operating activities:
Change in policy liabilities other than deposits 48,523 63,633 18,405
Credits to policyholder accounts, net 30,708 15,320 17,173
Deferral of policy acquisition costs, net (36,263) (7,257) (35,914)
Depreciation, including amounts related to
real estate investments 3,244 4,523 5,766
Change in trading securities 22,268 23,826 (46,406)
Change in receivables and asset accruals (14,587) (17,339) (3,082)
Change in payables and expense accruals 29,484 (2,379) 42,215
Realized investment gains (79,011) (29,991) (6,003)
Other operating activities, net (1,039) (8,287) (10,959)
------------------------------------------
Net cash provided by operating activities 210,534 241,689 182,664
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale:
Sales 551,265 211,586 438,857
Maturities, calls and redemptions 216,739 145,496 152,792
Purchases (857,129) (458,674) (799,230)
Securities held to maturity:
Sales 9,607 - -
Maturities, calls and redemptions 168,500 115,872 24,412
Purchases (140,007) (205,127) (58,366)
Repayments of mortgage loans 82,542 85,950 53,183
Mortgage loans originated (182,321) (205,830) (291,000)
(Increase) decrease in policy loans, net (3,952) 2,110 5,385
Cash received in assumption reinsurance
transaction - - 164,488
Real estate and property and equipment sold - 6,834 8,625
Purchases of real estate and property and
equipment - (15,468) (7,740)
Other investing activities, net (4,886) (927) 586
------------------------------------------
Net cash used in investing activities (159,642) (318,178) (308,008)
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Policyholder contract deposits $ 798,082 $ 573,999 $ 484,540
Withdrawals of policyholder contract deposits (445,996) (386,677) (188,666)
Advances from parent company, net - - (21,005)
Proceeds from securities sold under repurchase agreements (103,247) 2,568 (70,799)
Cash dividends paid (309,256) (120,000) (97,000)
Other financing activities - - 25,000
------------------------------------------
Net cash (used in) provided by financing activities (60,417) 69,890 132,070
------------------------------------------
Net (decrease) increase in cash and cash equivalents (9,525) (6,599) 6,726
Cash and cash equivalents:
Beginning 10,220 16,819 10,093
------------------------------------------
Ending $ 695 $ 10,220 $ 16,819
------------------------------------------
------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
8
<PAGE>
Jefferson-Pilot Life Insurance Company
Notes to Financial Statements
December 31, 1997
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Jefferson-Pilot Life Insurance Company (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 GAAP. See Note 7.
USE OF ESTIMATES
The preparation of financial statements requires management to make estimates
and assumptions affecting the reported amounts of assets and liabilities, the
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. Those estimates are inherently subject to change and actual results
could differ from those estimates. Included among the material (or potentially
material) reported amounts and disclosures that require extensive use of
estimates are asset valuation allowances, policy liabilities, deferred policy
acquisition costs and the potential effects of resolving litigated matters.
CASH AND CASH EQUIVALENTS
The Company includes with cash and cash equivalents its holdings of highly
liquid investments which mature within three months of the date of acquisition.
9
<PAGE>
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEBT AND EQUITY SECURITIES
Debt and equity securities are classified 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 taxes and
adjustments to deferred policy acquisition costs.
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.
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.
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,
primarily buildings, is depreciated principally by the straight-line method over
estimated useful lives generally ranging from 30 to 40 years. Accumulated
depreciation was approximately $20.1 million and $20.7 million at December 31,
1997 and 1996, respectively. Other investments are stated at equity, or the
lower of cost or market, as appropriate.
DUE FROM AFFILIATES
Due from affiliates consists primarily of several bonds issued by
Jefferson-Pilot Communications Company (JPCC) which totaled $43.5 million and
$42.3 million at December 31, 1997 and 1996, respectively. JPCC is also a
wholly-owned subsidiary of Jefferson-Pilot Corporation. The bonds mature
between 2003 and 2010 and bear interest at rates ranging from 6.5% to 8.0%.
Total investment income from JPCC bonds, which is included in net investment
income, was $3.2 million, $1.8 million and $1.5 million in 1997, 1996 and 1995,
respectively.
10
<PAGE>
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
Accumulated depreciation was $40.5 million and $40.3 million at December 31,
1997 and 1996, respectively.
DEFERRED POLICY ACQUISITION COSTS
Costs related to obtaining 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.
Deferred policy acquisition costs for traditional life insurance polices are
amortized over the premium paying periods of the related contracts using the
same assumptions for 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.
The carrying amounts of deferred policy acquisition costs are adjusted for the
effect of realized gains and losses and the effects of unrealized gains or
losses on debt securities classified as available for sale. Deferred policy
acquisition costs are reviewed periodically to determine that the unamortized
portion does not exceed expected recoverable amounts. No impairment adjustments
have been reflected in earnings for any year presented.
SEPARATE ACCOUNTS
Separate account assets and liabilities represent funds segregated by the
Company for the benefit of certain policyholders who bear the investment risk.
The separate account assets and liabilities, which are equal, are recorded at
fair value. Policyholder account deposits and withdrawals, investment income
and realized investment gains and losses are excluded from the amounts reported
in the Statements of Income. Fees charged on policyholders' deposits are
included in other revenue.
11
<PAGE>
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECOGNITION OF REVENUE
Premiums on traditional life insurance products are reported as revenue when
received unless received in advance of the due date.
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 include 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.
RECOGNITION OF BENEFITS AND EXPENSES
Benefits and expenses, other than deferred policy acquisition costs, related to
traditional life, accident and health, and disability 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.
FUTURE POLICY BENEFITS
Liabilities for future policy benefits on traditional life and disability
insurance are computed by the net level premium valuation method based on
assumptions about future investment yield, mortality, morbidity and persistency.
Estimates about future circumstances are based principally on historical
experience and provide for possible adverse 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 consists of policy values that accrue
to the benefit of the policyholder, before deduction of surrender charges.
12
<PAGE>
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
POLICY AND CONTRACT CLAIMS
The liability for policy and contract claims consists of the estimated amount
payable for claims reported but not yet settled and an estimate of claims
incurred but not reported, which is based on historical experience, adjusted for
trends and circumstances. Management believes that the recorded liability is
sufficient to provide for the associated claims adjustment expenses.
REINSURANCE BALANCES AND TRANSACTIONS
Reinsurance receivables include amounts recoverable from reinsurers 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.
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.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income", which
is effective for fiscal years beginning after December 15, 1997. SFAS 130 sets
standards for the reporting and display of comprehensive income and its
components in financial statements. Application of the new rules will not
impact the Company's financial position or net income. The Company expects to
adopt this pronouncement in the first quarter of 1998, which will include the
presentation of comprehensive income for prior periods presented for comparative
purposes, as required by SFAS 130. The primary element of comprehensive income
applicable to the Company is changes in unrealized gains and losses on
securities classified as available for sale.
13
<PAGE>
2. ASSUMPTION REINSURANCE TRANSACTION
On May 31, 1995, the Company assumed certain life insurance and annuity business
of Kentucky Central Life Insurance Company (KCL) in a transaction which was
accomplished through an assumption reinsurance agreement. Upon execution of the
agreement, assets consisting primarily of cash, debt securities, policy loans
and receivables with aggregate fair value of $872 million, including $164
million of cash, 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
deferred policy acquisition costs.
At December 31, 1995, further participation options in the assumption
reinsurance agreement remained available to approximately 4,000 KCL
policyholders. The Company had recorded a $78 million liability at December 31,
1995, pending resolution of the policyholder option process. Total assets
received on May 31, 1995 included $78 million of assets associated with these
additional policies.
On November 30, 1996, the Company completed the KCL transaction by assuming the
additional 4,000 policies. The Company established additional reserves of $112
million on these policies, released the $78 million liability established in
1995, and recorded an additional $40 million of deferred policy acquisition
costs.
14
<PAGE>
3. INVESTMENTS
Aggregate amortized cost, aggregate fair value, and gross unrealized gains and
losses are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
---------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE CARRIED AT FAIR VALUE
U.S. Treasury obligations and direct obligations
of U.S. Government agencies $ 191,738 $ 14,616 $ - $ 206,354
Federal agency issued collateralized mortgage
obligations 1,038,033 60,408 (98) 1,098,343
Obligations of states and political subdivisions 14,129 749 (104) 14,774
Corporate obligations 1,230,239 79,530 (2,880) 1,306,889
Corporate private-labeled collateralized
mortgage obligations 429,150 21,610 (58) 450,702
Redeemable preferred stocks 1,205 29 (41) 1,193
---------------------------------------------------------
Subtotal, debt securities 2,904,494 176,942 (3,181) 3,078,255
Equity securities 50,004 270,783 (25) 320,762
---------------------------------------------------------
Securities available for sale $2,954,498 $447,725 $(3,206) $3,399,017
---------------------------------------------------------
---------------------------------------------------------
HELD TO MATURITY CARRIED AT AMORTIZED COST
Obligations of state and political subdivisions $ 10,269 $ 355 $ (32) $ 10,592
Corporate obligations 1,813,311 66,278 (3,720) 1,875,869
---------------------------------------------------------
Debt securities held to maturity $1,823,580 $ 66,633 $(3,752) $1,886,461
---------------------------------------------------------
---------------------------------------------------------
</TABLE>
15
<PAGE>
3. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
---------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE CARRIED AT FAIR VALUE
U.S. Treasury obligations and direct obligations
of U.S. Government agencies $ 297,669 $ 16,094 $ - $ 313,763
Federal agency issued collateralized mortgage
obligations 1,106,140 20,336 (8,571) 1,117,905
Obligations of states and political subdivisions 4,690 21 (99) 4,612
Corporate obligations 960,562 13,072 (6,025) 967,609
Corporate private-labeled collateralized mortgage
obligations 284,311 15,604 (5,139) 294,776
Redeemable preferred stocks 10,728 518 (148) 11,098
---------------------------------------------------------
Subtotal, debt securities 2,664,100 65,645 (19,982) 2,709,763
Equity securities 141,158 282,398 (2,619) 420,937
---------------------------------------------------------
Securities available for sale $2,805,258 $348,043 $(22,601) $3,130,700
---------------------------------------------------------
---------------------------------------------------------
HELD TO MATURITY CARRIED AT AMORTIZED COST
Obligations of state and political subdivisions $15,396 $960 $(50) $16,306
Corporate obligations 1,833,796 55,515 (31,942) 1,857,369
---------------------------------------------------------
Debt securities held to maturity $1,849,192 $ 56,475 $(31,992) $1,873,675
---------------------------------------------------------
---------------------------------------------------------
</TABLE>
CONTRACTUAL MATURITIES
Aggregate amortized cost and aggregate fair value of debt securities as of
December 31, 1997, 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 $ 17,979 $ 18,183 $ - $ -
Due after one year through five years 340,626 357,055 97,232 99,797
Due after five years through ten years 491,468 515,189 360,026 372,444
Due after ten years through twenty years 208,751 232,582 269,163 276,501
Due after twenty years 194,615 206,169 30,867 32,902
Amounts not due at a single maturity date 1,649,850 1,747,884 1,066,292 1,104,817
---------------------------------------------------------
2,903,289 3,077,062 1,823,580 1,886,461
Redeemable preferred stocks 1,205 1,193 - -
---------------------------------------------------------
$2,904,494 $3,078,255 $1,823,580 $1,886,461
---------------------------------------------------------
---------------------------------------------------------
</TABLE>
16
<PAGE>
3. INVESTMENTS (CONTINUED)
INVESTMENT CONCENTRATION, RISK AND IMPAIRMENT
Debt securities considered less than investment grade approximated 4.7% and 2.1%
of the total debt securities portfolio as of December 31, 1997 and 1996,
respectively.
The Company's mortgage loan portfolio is comprised primarily of conventional
real estate mortgages collateralized by retail (52%), apartment (13%), hotel
(11%), office (9%), and industrial (8%) properties. Mortgage loan underwriting
standards emphasize the credit status of a prospective borrower, quality of the
underlying collateral and conservative loan-to-value relationships.
Approximately 50%, 17% and 11% of the stated mortgage loan balances as of
December 31, 1997 are due from borrowers in South Atlantic states, West South
Central states and East South Central states, respectively. No other geographic
region represents as much as 10% of December 31, 1997 mortgage loans.
At December 31, 1997 and 1996, the recorded investment in mortgage loans that
are considered to be impaired was $73 million and $81 million, respectively.
Delinquent loans outstanding as of December 31, 1997 and 1996 totaled $4 million
and $9 million, respectively. The related allowance for credit losses was $27
million at December 31, 1997 and 1996. The average recorded investment in
impaired loans was $77 million, $79 million and $79 million during the years
ended December 31, 1997, 1996 and 1995, respectively. For the years ended
December 31, 1997, 1996 and 1995, the Company recognized interest income on
impaired loans of $7 million, $8 million and $8 million, respectively, using the
cash basis method.
CHANGES IN NET UNREALIZED GAINS AND LOSSES ON SECURITIES
Changes during the three year period ended December 31, 1997 in amounts
affecting net unrealized gains and losses included in the separate component of
stockholder's equity, reduced by deferred income taxes, are as follows (in
thousands):
17
<PAGE>
3. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
NET UNREALIZED GAINS (LOSSES)
-----------------------------------------
DEBT EQUITY
SECURITIES SECURITIES TOTAL
-----------------------------------------
<S> <C> <C> <C>
Net unrealized (losses) gains on securities
available for sale as of January 1, 1995 $ (37,994) $240,473 $202,479
Change during year ended December 31, 1995:
Increase (decrease) in stated amount of securities 241,034 (92,748) 148,286
Decrease in 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
Change during year ended December 31, 1996:
(Decrease) increase in stated amount of securities (125,873) 6,732 (119,141)
Increase in deferred policy acquisition costs 34,283 - 34,283
Decrease (increase) in deferred income tax
liabilities 35,960 (2,414) 33,546
-----------------------------------------
(Decrease) increase in net unrealized gains
included in stockholder's equity (55,630) 4,318 (51,312)
-----------------------------------------
Net unrealized gains on securities available
for sale as of December 31, 1996 41,334 177,757 219,091
Change during year ended December 31, 1997:
Increase (decrease) in stated amount of securities 126,500 (9,021) 117,479
Decrease in deferred policy acquisition costs (39,164) - (39,164)
(Increase) decrease in deferred income tax
liabilities (31,154) 2,163 (28,991)
-----------------------------------------
Increase (decrease) in net unrealized gains
included in stockholder's equity 56,182 (6,858) 49,324
-----------------------------------------
Net unrealized gains on securities available
for sale as of December 31, 1997 $ 97,516 $170,899 $268,415
-----------------------------------------
-----------------------------------------
</TABLE>
18
<PAGE>
3. INVESTMENTS (CONTINUED)
NET INVESTMENT INCOME
The details of investment income, net of investment expenses, follow (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
------------------------------------------
<S> <C> <C> <C>
Interest on debt securities $357,457 $343,849 $311,676
Dividends on preferred stocks 1,052 3,051 4,411
Dividends on common stocks 12,138 17,725 22,945
Interest on mortgage loans 95,954 90,466 74,009
Interest on policy loans 14,876 15,434 13,761
Real estate income 8,618 9,272 8,735
Other investment income 6,459 10,722 10,751
------------------------------------------
Investment income 496,554 490,519 446,288
Investment expenses (18,160) (21,420) (25,371)
------------------------------------------
Net investment income $478,394 $469,099 $420,917
------------------------------------------
------------------------------------------
</TABLE>
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.
REALIZED GAINS AND LOSSES
The details of realized investment gains (losses) follow (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
------------------------------------------
<S> <C> <C> <C>
Debt securities $(3,856) $ (58) $ (5,826)
Preferred stocks 2,682 1,947 (479)
Common stocks 71,620 25,901 59,549
Other 8,565 2,621 (18,208)
------------------------------------------
Realized investment gains $79,011 $30,411 $ 35,036
------------------------------------------
------------------------------------------
</TABLE>
19
<PAGE>
3. INVESTMENTS (CONTINUED)
Information about gross realized gains and losses on available for sale
securities transactions follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
------------------------------------------
<S> <C> <C> <C>
Gross realized:
Gains $ 81,512 $29,184 $ 39,814
Losses (10,758) (3,201) (14,336)
------------------------------------------
Net realized gains on available-for-sale
securities $ 70,754 $25,983 $ 25,478
------------------------------------------
------------------------------------------
</TABLE>
TRADING SECURITIES
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 change in
net unrealized holding gains and losses on trading securities included in 1997
and 1996 income was not significant.
OTHER INFORMATION
During 1997, the Company sold certain securities that had been classified as
held to maturity, due to significant declines in credit worthiness of the
issuers. Total proceeds were approximately $10 million. A held to maturity
security with amortized cost of $5 million was transferred to the available
for sale category during 1995 due to a significant decline in the credit
worthiness of the issuer.
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 Statement No. 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 $393 million and amortized cost of $380 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, is amortized over the period to
maturity. In addition, held to maturity debt securities with an amortized cost
of $620 million and a fair value of $633 million were transferred to the
available for sale classification, increasing unrealized net holding gains by
$13 million.
20
<PAGE>
3. INVESTMENTS (CONTINUED)
During 1996 and 1995, 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 $5 million and fair value of $27 million were
transferred during 1996, and gains of $22 million were recognized. Equity
securities with cost of $7 million and fair value of $33 million were
transferred during 1995, and gains of $26 million were recognized.
4. DERIVATIVES
USE OF DERIVATIVES
The Company's investment policy permits the use of derivative financial
instruments such as interest rate swaps in certain circumstances. The following
summarizes open interest rate swaps at December 31, 1997 and 1996 (notional
amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
--------------------------
<S> <C> <C>
Receive-fixed swaps held as hedges of
direct investments:
Notional amount $ 6,000 $ -
Average rate received 7.83% -
Average rate paid 6.21% -
Receive-fixed swaps held to modify
annuity crediting rates:
Notional amount $12,500 $12,500
Average rate received 6.78% 6.78%
Average rate paid 5.67% 5.56%
</TABLE>
HEDGING DIRECT INVESTMENTS
Interest rate swaps are used to reduce the impact of interest rate
fluctuations on specific floating-rate direct investments. Interest is
exchanged periodically on the notional value, with the Company receiving
the fixed rate and paying various short-term LIBOR rates on a net exchange
basis. The net amount received or paid under these swaps is reflected as an
adjustment to investment income. For hedges of investments classified as
available for sale, net unrealized gains on securities, net of the effects of
income taxes and impact on deferred policy acquisition costs and the value of
business acquired, are not significant and are included in net unrealized
gains on securities available for sale in stockholder's equity as of December
31, 1997 and 1996.
21
<PAGE>
4. DERIVATIVES (CONTINUED)
MODIFYING ANNUITY CREDITING RATES
Interest rate swaps are used to modify the interest characteristics of a certain
block of annuity contract deposits. Interest is exchanged periodically on the
notional value, with the Company receiving a fixed rate and paying various
short-term LIBOR rates on a net exchange basis. The net amount received or paid
under these swaps is reflected as an adjustment to insurance and annuity
benefits.
CREDIT AND MARKET RISK
The Company is exposed to credit risk in the event of non-performance by
counterparties to swap agreements. The Company limits this exposure by entering
into swap agreements with counterparties having high credit ratings and by
regularly monitoring the ratings.
The Company's credit exposure on swaps is limited to the fair value of swap
agreements that are favorable to the Company. The Company does not expect any
counterparty to fail to meet its obligation; however, non-performance would not
have a material adverse effect on the Company's financial position or results of
operations.
The Company's exposure to market risk is mitigated by the offsetting effects of
changes in the value of swap agreements and the related direct investments and
credited interest on annuities. The Company routinely monitors correlation
between hedged items and hedging instruments. In the event a hedge
relationship were to be terminated, any related hedging instrument that remained
would be marked to market.
22
<PAGE>
5. DEFERRED POLICY ACQUISITION COSTS
Information about deferred policy acquisition costs for the years ended
December 31 follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
------------------------------------------
<S> <C> <C> <C>
Balance, beginning $612,435 $531,341 $323,015
Deferral:
Commissions 82,073 67,135 61,810
Other 31,000 26,921 20,293
------------------------------------------
113,073 94,056 82,103
Amortization (79,585) (86,799) (46,189)
------------------------------------------
Net deferral reflected in expenses 33,488 7,257 35,914
Addition for KCL assumption 2,775 39,554 223,883
Adjustment related to unrealized
(gains) losses on certain securities (39,164) 34,283 (51,471)
------------------------------------------
Balance, ending $609,534 $612,435 $531,341
------------------------------------------
------------------------------------------
</TABLE>
6. POLICY LIABILITIES INFORMATION
INTEREST RATE ASSUMPTIONS
The liability for future policy benefits associated with ordinary life
insurance policies issued by the Company has been determined using interest
rate assumptions which vary by year of issue and range from 3% to 9.9% and,
when applicable, uniform grading over 20 to 30 years to 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.
23
<PAGE>
6. POLICY LIABILITIES INFORMATION (CONTINUED)
Credited interest rates for universal life-type products approximated 6.19% in
1997, 6.26% in 1996 and 6.35% in 1995. For annuity products, credited rates
generally ranged from 4.00% to 8.30% during 1997, 4.75% to 8.25% during 1996 and
5.20% to 6.35% during 1995.
MORTALITY AND WITHDRAWAL ASSUMPTIONS
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 are based on
historical Company experience and vary by issue age, type of coverage and policy
duration.
For immediate annuities issued prior to 1987, mortality assumptions are based on
blends of the 1971 Individual Annuity Mortality Table and the 1969-71 U.S. Life
Tables. For similar products issued after 1986, mortality assumptions are based
on blends of the 1983a and 1979-81 U.S. Life tables.
24
<PAGE>
6. POLICY LIABILITIES INFORMATION (CONTINUED)
ACCIDENT AND HEALTH, AND DISABILITY INSURANCE LIABILITIES ACTIVITY
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 (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
------------------------------------------
<S> <C> <C> <C>
Balance as of January 1 $287,680 $273,659 $266,046
Less reinsurance recoverables 27,238 14,262 12,524
------------------------------------------
Net balances as of January 1 260,442 259,397 253,522
Amount incurred, related to:
Current year 372,759 401,433 403,469
Prior years (49,653) (62,979) (73,145)
------------------------------------------
323,106 338,454 330,324
Amount paid, related to:
Current year 226,883 245,978 242,483
Prior years 96,415 91,431 81,966
------------------------------------------
323,298 337,409 324,449
Net balance as of December 31 260,250 260,442 259,397
Plus reinsurance recoverables 31,174 27,238 14,262
------------------------------------------
Balance as of December 31 $291,424 $287,680 $273,659
------------------------------------------
------------------------------------------
Balance as of December 31 included with:
Future policy benefits $168,083 $156,016 $130,435
Policy and contract claims 123,341 131,664 143,224
------------------------------------------
$291,424 $287,680 $273,659
------------------------------------------
------------------------------------------
</TABLE>
The Company uses conservative estimates for determining its liability for
accident and health, and disability benefits, which are based on historical
claim payment patterns and attempt to provide for potential adverse changes in
claim patterns and severity. Lower than anticipated claims resulted in
adjustments to the liability for accident and health, and disability benefits in
each of the years presented.
25
<PAGE>
7. STATUTORY FINANCIAL INFORMATION
The Company prepares financial statements on the basis of statutory accounting
practices (SAP) prescribed or permitted by the North Carolina Department of
Insurance. 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 permitted accounting practices on statutory
capital and surplus is not significant for the Company.
The principal differences between SAP and generally accepted accounting
principles (GAAP) as they relate to the financial statements of the Company are
(1) policy acquisition costs are expensed as incurred under SAP, whereas they
are deferred and amortized under GAAP, (2) 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, (3) the
classification and carrying amounts of investments in certain securities are
different under SAP than under GAAP, (4) the criteria for providing asset
valuation allowances, and the methodologies used to determine the amounts
thereof, are different under SAP than under GAAP, (5) the timing of establishing
certain reserves, and the methodologies used to determine the amounts thereof,
are different under SAP than under GAAP, (6) no provision is made for deferred
income taxes under SAP, and (7) certain assets are not admitted for purposes of
determining surplus under SAP.
Net income and capital and surplus of the Company on the basis of SAP is as
follows (in thousands):
<TABLE>
<CAPTION>
STATUTORY ACCOUNTING PRACTICES
1997 1996 1995
------------------------------------------
<S> <C> <C> <C>
Statutory Accounting Practices:
Before gain recognized upon transfer
of subsidiary to parent company $229,079 $204,874 $179,210
Gain recognized upon transfer of
subsidiary to parent company in an
extraordinary dividend - - 275,652
------------------------------------------
Reported net income for the year
ended December 31 $229,079 $204,874 $454,862
------------------------------------------
------------------------------------------
Reported statutory capital and surplus
as of December 31 $824,892 $894,559 $830,236
------------------------------------------
------------------------------------------
</TABLE>
26
<PAGE>
7. STATUTORY FINANCIAL INFORMATION (CONTINUED)
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 a combination of statutory net gain from
operations for the preceding year, 10% of statutory surplus at the end of the
preceding year, and dividends and distributions made within the preceding twelve
months. 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 the carrying
amount. The dividend was recorded at cost in the Company's GAAP financial
statements and no gain was recognized. All dividends paid in 1997 and 1996
required regulatory approval. Any dividends paid through April 1998 will
require regulatory approval. The Company obtained regulatory approval for a
dividend of $30 million which was paid on March 5, 1998. An additional $90
million of dividends are planned for 1998, a portion of which will require
regulatory approval.
Risk-Based Capital ("RBC") requirements promulgated by the NAIC require life
insurers to 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, 1997,
the Company's adjusted capital and surplus exceeded its authorized control level
RBC.
8. INCOME TAXES
Income taxes as reported in the statements of income are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
------------------------------------------
<S> <C> <C> <C>
Current expense $105,269 $ 98,422 $ 98,112
Deferred expense (benefit) 1,814 2,888 (669)
------------------------------------------
Aggregate reported income taxes $107,083 $101,310 $ 97,443
------------------------------------------
------------------------------------------
</TABLE>
27
<PAGE>
8. INCOME TAXES (CONTINUED)
A reconciliation of the federal income tax rate to the Company's effective
income tax rate follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
----------------------------------------
<S> <C> <C> <C>
Federal income tax rate 35.0% 35.0% 35.0%
Reconciling items:
Tax exempt interest and dividends
received deduction (0.5) (2.7) (1.8)
Other, net (0.4) 1.4 (0.6)
----------------------------------------
Effective income tax rate 34.1% 33.7% 32.6%
----------------------------------------
----------------------------------------
</TABLE>
The tax effects of temporary differences that result in significant deferred
income tax assets and deferred income tax liabilities are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
----------------------------
<S> <C> <C>
Deferred income tax assets:
Difference in policy liabilities $ 165,111 $ 122,859
Obligation for postretirement benefits other
than pensions 8,136 8,136
Other deferred income tax assets 22,293 20,730
----------------------------
Gross deferred income tax assets 195,540 151,725
Deferred income tax liabilities:
Net unrealized gains on securities available for sale 139,491 110,500
Deferral of policy acquisition costs 160,981 116,050
Deferred gain recognition for income tax purposes 16,604 16,357
Other deferred income tax liabilities 19,964 19,513
----------------------------
Gross deferred income tax liabilities 337,040 262,420
----------------------------
Net deferred income tax liabilities included in
balance sheets $(141,500) $(110,695)
----------------------------
----------------------------
</TABLE>
Federal income tax returns for all years through 1993 are closed. In the
opinion of management, recorded income tax liabilities adequately provide for
all remaining open years.
28
<PAGE>
8. INCOME TAXES (CONTINUED)
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.
9. RETIREMENT BENEFIT PLANS
PENSION PLANS
The Company participates in the defined benefit pension plans of Jefferson-Pilot
Corporation. These plans cover substantially all employees and full time life
insurance agents. The plans provide benefits based on annual compensation and
years of service. The plans are noncontributory and are funded through group
annuity contracts issued by the Company. The assets of the plans are those of
the related contracts, and are primarily held in separate accounts of the
Company. The funding policy is to contribute annually no more than the maximum
amount deductible for federal income tax purposes. Pension expense totaled $0.9
million in 1997. Pension income totaled $0.1 million in 1996 and $0.6 million
in 1995. Prepaid pension cost was $9.4 million and $4.3 million at December 31,
1997 and 1996, respectively.
OTHER POSTRETIREMENT BENEFIT PLANS
The Company participates in contributory health care and life insurance benefit
plans sponsored by Jefferson-Pilot Corporation. 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. The
Company contributes to a welfare benefit trust from which future benefits will
be paid. The Company accrues the cost of providing postretirement benefits
other than pensions during the employees' active service periods. Nonpension
postretirement benefits expense totaled $0.6 million in 1997, $0.7 million in
1996 and $0.6 million in 1995. Accrued benefit cost was $22.5 million and $23.0
million at December 31, 1997 and 1996, respectively.
29
<PAGE>
9. RETIREMENT BENEFIT PLANS (CONTINUED)
DEFINED CONTRIBUTION PLANS
The Company participates in defined contribution retirement plans sponsored by
Jefferson-Pilot Corporation covering most employees and full-time agents. The
Company matches a portion of participant contributions and makes profit sharing
contributions to a fund which acquires and holds shares of Jefferson-Pilot
Corporation's common stock. Plan assets are invested under a group variable
annuity contract issued by the Company. The Company expensed $1.5 million,
$2.3 million and $1.0 million related to the plan during 1997, 1996 and 1995,
respectively.
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. The Company reinsures 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 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.
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 ended December 31, 1997.
30
<PAGE>
10. REINSURANCE (CONTINUED)
The effects of reinsurance on total premiums and other considerations and total
benefits are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
----------------------------------------
<S> <C> <C> <C>
Premiums and other considerations, before
effect of reinsurance ceded $837,530 $919,560 $807,076
Less premiums and other considerations ceded 56,596 58,055 31,958
----------------------------------------
Net premiums and other considerations $780,934 $861,505 $775,118
----------------------------------------
----------------------------------------
Benefits, before reinsurance recoveries $846,487 $884,806 $774,011
Less reinsurance recoveries 42,952 52,311 25,965
----------------------------------------
Net insurance and annuity benefits $803,535 $832,495 $748,046
----------------------------------------
----------------------------------------
</TABLE>
11. DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying values and fair values of financial instruments as of December 31
are summarized as follows (in millions):
<TABLE>
<CAPTION>
1997 1996
------------------------ ------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
------------------------ ------------------------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Debt securities available for sale $3,078 $3,078 $2,710 $2,710
Debt securities held to maturity 1,824 1,886 1,849 1,874
Equity securities available for sale 321 321 421 421
Equity securities trading portfolio - - 23 23
Mortgage loans 1,113 1,178 1,014 1,056
Policy loans 239 246 235 228
Due from affiliates 44 45 42 41
FINANCIAL LIABILITIES
Annuity contract liabilities in
accumulation phase 1,562 1,486 1,379 1,319
Securities sold under repurchase
agreements 95 95 199 199
</TABLE>
31
<PAGE>
11. DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
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 maturity or
availability. 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. Fair values for affiliate
bonds discussed in Note 1 are determined using similar sources.
The fair value of the mortgage loan portfolio has been estimated by discounting
expected future cash flows using the interest rate currently offered for similar
loans.
The fair value of policy loans outstanding for traditional life products has
been estimated using a current risk-free interest rate applied to expected
future loan repayments projected based on historical repayment patterns. The
fair values of policy loans on universal life-type and annuity products
approximate carrying values due to the variable interest rates charged on those
loans.
Annuity contracts issued by the Company do not generally have defined
maturities. Therefore, 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 fair value of the liability for securities sold under repurchase agreements
approximates its carrying amounts, which amounts include accrued interest.
The fair value of interest rate swaps that hedge annuity contract deposits have
not been recorded on the balance sheet and are not significant.
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. 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,
approximates $50 million as of December 31, 1997.
32
<PAGE>
12. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
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
crediting 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. 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 its
position.
In the normal course of business, the Company is involved in various lawsuits.
Because of the considerable uncertainties that exist, the Company cannot
predict the outcome of pending or future litigations. However, management
believes that the resolution of pending legal proceedings will not have a
material adverse effect on the Company's financial position or liquidity, but
could have a material adverse effect on the results of operations for a specific
period.
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 $5 million in 1997,
$5 million in 1996, and $6 million in 1995. Future rental commitments are not
significant.
13. SUPPLEMENTAL CASH FLOW INFORMATION
The accompanying 1997 statement of stockholder's equity reflects noncash
dividends in the amount of $27 million representing the Company's equity in
assets transferred to the Company's parent company during 1997.
The accompanying 1995 statement of stockholder's equity reflects a noncash
dividend in the amount of $72 million 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 $10 million in
1997, $11 million in 1996, and $17 million in 1995. Interest expense totaled
$8.9 million, $10.9 million, and $15.7 million in 1997, 1996 and 1995,
respectively. Cash payments for income taxes totaled $109 million, $99 million
and $74 million (net of refunds of $5 million) in 1997, 1996 and 1995,
respectively.
33
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements.
Included in Part B of the Registration Statement:
Jefferson-Pilot Separate Account A
Statements of Assets and Liabilities at December 31, 1997
Statements of Operations for the Year Ended December 31, 1997
Statements of Changes in Net Assets for the Years Ended
December 31, 1997 and 1996
Notes to Financial Statements
Report of Independent Auditors
Statements of Depositor - Jefferson-Pilot Life Insurance Company
Balance Sheets at December 31, 1997 and 1996
Statements of Income for the Years Ended December 31, 1997, 1996
and 1995
Statements of Stockholder's Equity for the Years Ended
December 31, 1997, 1996 and 1995
Statements of Cash Flows for the Years Ended December 31, 1997,
1996 and 1995
Notes to Financial Statements
Report of Independent Auditors
(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. 33-11064).
C-1
<PAGE>
(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) (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 MFS Variable Insurance
Trust, Jefferson-Pilot Life Insurance Company and Massachusetts
Financial Services Company. (incorporated by reference to the
Registrant's Form N-4 registration statement filed with the
Commission on May 3,1996.) (File No. 33-11084).
(d) Form of Participation Agreement Among The Alger American Fund,
Jefferson-Pilot Life Insurance Company and Fred Alger and
Company, Incorporated. (incorporated by reference to the
Registrant's Form N-4 registration statement filed with the
Commission on May 3,1996.) (File No. 33-11084).
(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) (a) Consent of Ernst & Young LLP.
(b) Consent of McGladrey & Pullen LLP.
(c) Powers of Attorney.
C-2
<PAGE>
(11) None.
(12) None.
(13) Schedule of Computation of Performance (incorporated by reference to
the Registrant's Form N-4 registration statement filed with the
Commission on May 2, 1997) (File No. 33-11084).
(14) Financial Data Schedule.
ITEM 25. DIRECTORS AND OFFICERS OF JEFFERSON-PILOT LIFE INSURANCE COMPANY*
DIRECTORS
Edwin B. Borden
Borden Manufacturing Company
P0 Drawer P
Goldsboro, NC 27533
William H. Cunningham
The University of Texas System
601 Colorado, O'Henry Hall
Austin, TX 78701
Dennis R. Glass
Robert G. Greer
Bank of Tanglewood
500 Chimney Rock
Houston, TX 77056
George W. Henderson, III
Burlington Industries, Inc.
3330 W. Friendly Ave.
Greensboro, NC 27410
Hugh L. McColl, Jr.
NationsBank Corporation
NC 1-007-5801
100 North Tryon Street
Charlotte, NC 28255
E. S. Melvin
The Joseph M. Bryan Foundation of
Greater Greensboro, Inc.
324 West Wendover Avenue, Suite 207
Greensboro, NC 27408
Kenneth C. Mlekush
C-3
<PAGE>
William Porter Payne
NationsBank Corporation
600 Peachtree Street, NE
55th Floor
Atlanta, GA 30308-2214
Donald S. Russell, Jr.
Attorney at Law
One Tiftgreen Circle
Columbia, SC 29223
Robert H. Spilman
Spillman Properties
PO Box 880
3559 Fairystone Park Highway
Bassett, VA 24055
David A. Stonecipher
Martha Ann Walls
Southern Newspapers, Inc.
1050 Wilcrest Drive
Houston, TX 77042
E. Jay Yelton
OFFICERS*
David A. Stonecipher - Chairman and Chief Executive Officer
Kenneth C. Mlekush - President
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
E. Jay Yelton - Executive Vice President - Investments
Reggie D. Adamson - Senior Vice President - Finance
Darryl D. Andrews - Senior Vice President Information Systems
Charles Phillip Elam II - Senior Vice President and Annuity Actuary
John C. Ingram - Senior Vice President - Securities
David B. Jarvis - Senior Vice President - Bank Assurance
Frank G. Mahoney - Senior Vice President - Annuity and Investment Products
Hal B. Phillips, Jr. - Senior Vice President and Chief Actuary
James T. Ponder -Senior Vice President - Special Markets
Ronald H. Ridlehuber - Senior Vice President - Independent Marketing
William L. Seawell, II - Senior Vice President - Ordinary Marketing
Dale E. Cooper - Vice President - Variable Annuities
Valerie W. Loftin - Vice President - Annuity Operations
Robert A. Reed - Vice President, Secretary and Associate General Counsel
Donna L. Drew - Second Vice President
32991 Hamilton Court, Farmington Hills, MI 48334
Paul F. Warnock - Second Vice President and Associate Actuary
David Mattinson - Second Vice President Annuity Accounting
C-4
<PAGE>
* The Principal Business Address for each Director and Officer of the
Depositor is, unless otherwise indicated, 100 North Greene Street,
Greensboro, North Carolina 27401
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.
<TABLE>
<CAPTION>
Percent of
Voting Securities
State of Owned by Jefferson-
Name Incorporation Pilot Corporation
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Jefferson-Pilot Life North Carolina 100%
Insurance Company
Jefferson-Pilot Variable North Carolina 100%
Corporation
Jefferson - Pilot North Carolina 100%
Communications Company
Alexander Hamilton Life Michigan 100%
Insurance Company of America
AH (Michigan) Life Insurance Michigan 100%
Company
First Alexander Hamilton New York 100%
Life Insurance Company
Jefferson Pilot Financial New Hampshire 100%
Insurance Company
Jefferson Pilot LifeAmerica New Jersey 100%
Insurance Company
Sovereign Life Insurance New Hampshire 100%
Company
Jefferson Pilot Securities Corporation New Hampshire 100%
</TABLE>
C-5
<PAGE>
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 March 27, 1998, the number of contract owners of these qualified contracts
of Jefferson-Pilot Separate Account A was 3,020 and on that same date the number
of contract holders of these non-qualified contracts of Jefferson-Pilot Separate
Account A was 1,205.
ITEM 28. INDEMNIFICATION
The Jefferson-Pilot Corporation, pursuant to resolution of its Board of
Directors, has agreed to indemnify the officers and directors of Jefferson Pilot
Variable Corporation and Jefferson-Pilot Life Insurance Company against any
liability to the extent permitted by law. The resolution provides
that 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.
Any indemnification (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.
The North Carolina law applicable to indemnification of directors and officers
provides that it is the public policy of North Carolina to enable corporations
organized under North Carolina law to attract and maintain responsible,
qualified directors, officers, employees and agents, and, to that end, to permit
such corporations to allocate the risk of personal liability of directors,
officers, employees and agents through indemnification and insurance.
A North Carolina 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.
C-6
<PAGE>
A North Carolina corporation may not indemnify a director under North Carolina
law in connection with a proceeding by or in the right of the corporation in
which the director was adjudged liable to the corporation; or 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.
Unless limited by its articles of incorporation, North Carolina law provides
that a North Carolina 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.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "1933 Act") may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person in
connection with the securities being registered), the Company will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisidiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Jefferson-Pilot Variable Corporation also acts as principal underwriter for
the following:
- Alexander Hamilton Variable Annuity Separate Account of Alexander
Hamilton Life Insurance Company of America
- JPF Separate Account A of Jefferson Pilot Financial Insurance Company
- JPF Separate Account C of Jefferson Pilot Financial Insurance Company
- JPF Separate Account B of Jefferson Pilot LifeAmerica Insurance
Company
- JPF Separate Account D of Jefferson Pilot LifeAmerica Insurance
Company
- Jefferson Pilot Variable Fund, Inc.
(b)
Name and Principal Positions and Offices
Business Address* with Underwriter
- ------------------ -----------------------------------
Ronald R. Angarella Director and President
David K. Booth Vice President, Marketing
W. Thomas Boulter Chief Compliance Officer
Charles C. Cornelio Director
Kevin Haddad Compliance Officer
100 North Greene Street
Greensboro, NC 27401
Carol R. Hardiman Director
Shari J. Lease Secretary
John A. Weston Chief Financial Officer
Stafford Moser Assistant Vice President, Marketing
100 North Greene Street
Greensboro, NC 27401
*All of the addresses are One Granite Place, Concord, NH 03301 (except as
otherwise noted).
C-7
<PAGE>
<TABLE>
<CAPTION>
(c)
(1) (2) (3) (4) (5)
Name of Net Compensation Brokerage Compensation
Principal Underwriting on Redemption Commissions
Underwriter Discounts and
Commissions
<S> <C> <C> <C> <C> <C>
1997 Jefferson Pilot $ 0 $ 0 $528,208 $ 0
Variable
Corporation
</TABLE>
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 and One Granite Place, Concord, New Hampshire 03301.
ITEM 31. MANAGEMENT SERVICES
None
ITEM 32. UNDERTAKINGS
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.
(a) Not Applicable.
(b) Not Applicable.
(c) Not Applicable.
(d) Jefferson-Pilot Life Insurance Company hereby represents that the fees and
charges deducted under the contract, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred,
and the risks assumed by Jefferson-Pilot Life Insurance Company.
C-8
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this Registration Statement and has duly caused
this Registration Statement to be signed on its behalf, in the City of
Greensboro and State of North Carolina on the 13th day of April, 1998.
JEFFERSON-PILOT SEPARATE ACCOUNT A
(Registrant)
JEFFERSON-PILOT LIFE INSURANCE COMPANY
(Depositor)
By: /s/ David A. Stonecipher
----------------------------------------
David A. Stonecipher, Chairman and CEO
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ David A. Stonecipher Chairman and Chief April 13, 1998
- ------------------------ Executive Officer
David A. Stonecipher (Principal Executive Officer)
/s/ Dennis R. Glass Executive Vice President April 13, 1998
- ------------------- and Chief Financial Officer
Dennis R. Glass (Principal Financial and
Accounting Officer)
</TABLE>
SIGNATURES
Edwin B. Borden, Director*
William H. Cunningham, Director*
Dennis R. Glass, Director*
Robert G. Greer, Director*
George W. Henderson, III, Director*
Hugh L. McColl, Jr., Director
E. S. Melvin, Director*
Kenneth C. Mlekush, President and Director*
William Porter Payne, Director*
Donald S. Russell, Jr., Director
Robert H. Spilman, Director*
David A. Stonecipher, Director*
Martha Ann Walls, Director*
E. Jay Yelton, Executive Vice President and Director*
*By: /s/ Shari J. Lease
--------------------------------------------------
Shari J. Lease, Attorney-in-Fact
executed on the 15th day of April, 1998,
pursuant to Powers of Attorney filed as an
Exhibit hereto
<PAGE>
EXHIBIT INDEX
Exhibit Description of
No. Exhibit
- --- -------
(1O)(a) Consent of Independent Certified Public Accountants
(10)(b) Consent of Independent Certified Public Accountants
(10)(c) Powers of Attorney
(14) Financial Data Schedule
<PAGE>
EXHIBIT 10(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports on the Jefferson-Pilot Separate Account A dated April
6, 1998, and the Jefferson-Pilot Life Insurance Company dated February 9,
1998, in Post-Effective Amendment No. 4 (Form N-4, No. 33-11084) under the
Securities Act of 1933 and Amendment No. 14 (Form N-4, No. 811-2188) under
the Investment Company Act of 1940 and related Statement of Additional
Information of the Alpha/Alphaflex Variable Annuity issued by Jefferson-Pilot
Life Insurance Company.
ERNST & YOUNG LLP
/s/ Ernst & Young LLP
----------------------------
Greensboro, North Carolina
April 13, 1998
<PAGE>
EXHIBIT 10(b)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Statement of Additional Information of Jefferson-Pilot Separate Account A and
to the use of our report on Jefferson-Pilot Life Insurance Company dated
February 6, 1996 in Post-Effective Amendment No. 4 under the Securities Act
of 1933 and Post-Effective Amendment No. 14 under the Investment Company Act
of 1940 to the Registration Statement (Form N-4) of Jefferson-Pilot Separate
Account A.
MCGLADREY & PULLEN LLP
/s/ McGladrey & Pullen LLP
---------------------------------
Greensboro, North Carolina
April 13, 1998
<PAGE>
EXHIBIT 10(c)
POWER OF ATTORNEY
The undersigned directors and/or officers of Jefferson-Pilot Life Insurance
Company, a North Carolina corporation (the "Company"), hereby constitute and
appoint Shari J. Lease and Charlene Grant, and each of them (with full power to
each of them to act alone), his true and lawful attorney-in-fact and agent, with
full power of substitution to each, for him and on his behalf and in his name,
place and stead, to execute and file any of the documents referred to below
relating to registrations under the Securities Act of 1933 or the Investment
Company Act of 1940 (the "Acts"): registration statements on any form or forms
under the Acts, and any and all amendments and supplements thereto (including
post-effective amendments), with all exhibits and all agreements, consents,
exemptive applications and other documents and instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
being empowered to act with or without the others or other, and to have full
power and authority to do or cause to be done in the name and on behalf of the
undersigned each and every act and thing requisite and necessary or appropriate
with respect thereto to be done in and about the premises in order to effectuate
the same, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, may do or cause to be done by virtue thereof.
/s/ Edwin B. Borden 4/3/98
- ----------------------------------- --------------------------------------
Edwin B. Borden, Director Date
<PAGE>
POWER OF ATTORNEY
The undersigned directors and/or officers of Jefferson-Pilot Life Insurance
Company, a North Carolina corporation (the "Company"), hereby constitute and
appoint Shari J. Lease and Charlene Grant, and each of them (with full power to
each of them to act alone), his true and lawful attorney-in-fact and agent, with
full power of substitution to each, for him and on his behalf and in his name,
place and stead, to execute and file any of the documents referred to below
relating to registrations under the Securities Act of 1933 or the Investment
Company Act of 1940 (the "Acts"): registration statements on any form or forms
under the Acts, and any and all amendments and supplements thereto (including
post-effective amendments), with all exhibits and all agreements, consents,
exemptive applications and other documents and instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
being empowered to act with or without the others or other, and to have full
power and authority to do or cause to be done in the name and on behalf of the
undersigned each and every act and thing requisite and necessary or appropriate
with respect thereto to be done in and about the premises in order to effectuate
the same, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, may do or cause to be done by virtue thereof.
/s/ William H. Cunningham 4/3/98
- ----------------------------------- --------------------------------------
William H. Cunningham, Director Date
<PAGE>
POWER OF ATTORNEY
The undersigned directors and/or officers of Jefferson-Pilot Life Insurance
Company, a North Carolina corporation (the "Company"), hereby constitute and
appoint Shari J. Lease and Charlene Grant, and each of them (with full power to
each of them to act alone), his true and lawful attorney-in-fact and agent, with
full power of substitution to each, for him and on his behalf and in his name,
place and stead, to execute and file any of the documents referred to below
relating to registrations under the Securities Act of 1933 or the Investment
Company Act of 1940 (the "Acts"): registration statements on any form or forms
under the Acts, and any and all amendments and supplements thereto (including
post-effective amendments), with all exhibits and all agreements, consents,
exemptive applications and other documents and instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
being empowered to act with or without the others or other, and to have full
power and authority to do or cause to be done in the name and on behalf of the
undersigned each and every act and thing requisite and necessary or appropriate
with respect thereto to be done in and about the premises in order to effectuate
the same, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, may do or cause to be done by virtue thereof.
/s/ Dennis R. Glass 4/3/98
- ----------------------------------- --------------------------------------
Dennis R. Glass, Director Date
Executive Vice President
CFO & Treasurer
<PAGE>
POWER OF ATTORNEY
The undersigned directors and/or officers of Jefferson-Pilot Life Insurance
Company, a North Carolina corporation (the "Company"), hereby constitute and
appoint Shari J. Lease and Charlene Grant, and each of them (with full power to
each of them to act alone), his true and lawful attorney-in-fact and agent, with
full power of substitution to each, for him and on his behalf and in his name,
place and stead, to execute and file any of the documents referred to below
relating to registrations under the Securities Act of 1933 or the Investment
Company Act of 1940 (the "Acts"): registration statements on any form or forms
under the Acts, and any and all amendments and supplements thereto (including
post-effective amendments), with all exhibits and all agreements, consents,
exemptive applications and other documents and instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
being empowered to act with or without the others or other, and to have full
power and authority to do or cause to be done in the name and on behalf of the
undersigned each and every act and thing requisite and necessary or appropriate
with respect thereto to be done in and about the premises in order to effectuate
the same, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, may do or cause to be done by virtue thereof.
/s/ Robert G. Greer 4/3/98
- ----------------------------------- --------------------------------------
Robert G. Greer, Director Date
<PAGE>
POWER OF ATTORNEY
The undersigned directors and/or officers of Jefferson-Pilot Life Insurance
Company, a North Carolina corporation (the "Company"), hereby constitute and
appoint Shari J. Lease and Charlene Grant, and each of them (with full power to
each of them to act alone), his true and lawful attorney-in-fact and agent, with
full power of substitution to each, for him and on his behalf and in his name,
place and stead, to execute and file any of the documents referred to below
relating to registrations under the Securities Act of 1933 or the Investment
Company Act of 1940 (the "Acts"): registration statements on any form or forms
under the Acts, and any and all amendments and supplements thereto (including
post-effective amendments), with all exhibits and all agreements, consents,
exemptive applications and other documents and instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
being empowered to act with or without the others or other, and to have full
power and authority to do or cause to be done in the name and on behalf of the
undersigned each and every act and thing requisite and necessary or appropriate
with respect thereto to be done in and about the premises in order to effectuate
the same, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, may do or cause to be done by virtue thereof.
/s/ George W. Henderson, III 4/3/98
- ----------------------------------- --------------------------------------
George W. Henderson, III, Director Date
<PAGE>
POWER OF ATTORNEY
The undersigned directors and/or officers of Jefferson-Pilot Life Insurance
Company, a North Carolina corporation (the "Company"), hereby constitute and
appoint Shari J. Lease and Charlene Grant, and each of them (with full power to
each of them to act alone), his true and lawful attorney-in-fact and agent, with
full power of substitution to each, for him and on his behalf and in his name,
place and stead, to execute and file any of the documents referred to below
relating to registrations under the Securities Act of 1933 or the Investment
Company Act of 1940 (the "Acts"): registration statements on any form or forms
under the Acts, and any and all amendments and supplements thereto (including
post-effective amendments), with all exhibits and all agreements, consents,
exemptive applications and other documents and instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
being empowered to act with or without the others or other, and to have full
power and authority to do or cause to be done in the name and on behalf of the
undersigned each and every act and thing requisite and necessary or appropriate
with respect thereto to be done in and about the premises in order to effectuate
the same, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, may do or cause to be done by virtue thereof.
/s/ E. S. Melvin 4/3/98
- ----------------------------------- --------------------------------------
E. S. Melvin, Director Date
<PAGE>
POWER OF ATTORNEY
The undersigned directors and/or officers of Jefferson-Pilot Life Insurance
Company, a North Carolina corporation (the "Company"), hereby constitute and
appoint Shari J. Lease and Charlene Grant, and each of them (with full power to
each of them to act alone), his true and lawful attorney-in-fact and agent, with
full power of substitution to each, for him and on his behalf and in his name,
place and stead, to execute and file any of the documents referred to below
relating to registrations under the Securities Act of 1933 or the Investment
Company Act of 1940 (the "Acts"): registration statements on any form or forms
under the Acts, and any and all amendments and supplements thereto (including
post-effective amendments), with all exhibits and all agreements, consents,
exemptive applications and other documents and instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
being empowered to act with or without the others or other, and to have full
power and authority to do or cause to be done in the name and on behalf of the
undersigned each and every act and thing requisite and necessary or appropriate
with respect thereto to be done in and about the premises in order to effectuate
the same, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, may do or cause to be done by virtue thereof.
/s/ Kenneth C. Mlekush 4/3/98
- ----------------------------------- --------------------------------------
Kenneth C. Mlekush, Director Date
President
<PAGE>
POWER OF ATTORNEY
The undersigned directors and/or officers of Jefferson-Pilot Life Insurance
Company, a North Carolina corporation (the "Company"), hereby constitute and
appoint Shari J. Lease and Charlene Grant, and each of them (with full power to
each of them to act alone), his true and lawful attorney-in-fact and agent, with
full power of substitution to each, for him and on his behalf and in his name,
place and stead, to execute and file any of the documents referred to below
relating to registrations under the Securities Act of 1933 or the Investment
Company Act of 1940 (the "Acts"): registration statements on any form or forms
under the Acts, and any and all amendments and supplements thereto (including
post-effective amendments), with all exhibits and all agreements, consents,
exemptive applications and other documents and instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
being empowered to act with or without the others or other, and to have full
power and authority to do or cause to be done in the name and on behalf of the
undersigned each and every act and thing requisite and necessary or appropriate
with respect thereto to be done in and about the premises in order to effectuate
the same, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, may do or cause to be done by virtue thereof.
/s/ William Porter Payne 4/3/98
- ----------------------------------- --------------------------------------
William Porter Payne, Director Date
<PAGE>
POWER OF ATTORNEY
The undersigned directors and/or officers of Jefferson-Pilot Life Insurance
Company, a North Carolina corporation (the "Company"), hereby constitute and
appoint Shari J. Lease and Charlene Grant, and each of them (with full power to
each of them to act alone), his true and lawful attorney-in-fact and agent, with
full power of substitution to each, for him and on his behalf and in his name,
place and stead, to execute and file any of the documents referred to below
relating to registrations under the Securities Act of 1933 or the Investment
Company Act of 1940 (the "Acts"): registration statements on any form or forms
under the Acts, and any and all amendments and supplements thereto (including
post-effective amendments), with all exhibits and all agreements, consents,
exemptive applications and other documents and instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
being empowered to act with or without the others or other, and to have full
power and authority to do or cause to be done in the name and on behalf of the
undersigned each and every act and thing requisite and necessary or appropriate
with respect thereto to be done in and about the premises in order to effectuate
the same, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, may do or cause to be done by virtue thereof.
/s/ Robert H. Spilman 4/3/98
- ----------------------------------- --------------------------------------
Robert H. Spilman, Director Date
<PAGE>
POWER OF ATTORNEY
The undersigned directors and/or officers of Jefferson-Pilot Life Insurance
Company, a North Carolina corporation (the "Company"), hereby constitute and
appoint Shari J. Lease and Charlene Grant, and each of them (with full power to
each of them to act alone), his true and lawful attorney-in-fact and agent, with
full power of substitution to each, for him and on his behalf and in his name,
place and stead, to execute and file any of the documents referred to below
relating to registrations under the Securities Act of 1933 or the Investment
Company Act of 1940 (the "Acts"): registration statements on any form or forms
under the Acts, and any and all amendments and supplements thereto (including
post-effective amendments), with all exhibits and all agreements, consents,
exemptive applications and other documents and instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
being empowered to act with or without the others or other, and to have full
power and authority to do or cause to be done in the name and on behalf of the
undersigned each and every act and thing requisite and necessary or appropriate
with respect thereto to be done in and about the premises in order to effectuate
the same, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, may do or cause to be done by virtue thereof.
/s/ David A. Stonecipher 4/3/98
- ----------------------------------- --------------------------------------
David A. Stonecipher, Director Date
Chairman & CEO
<PAGE>
POWER OF ATTORNEY
The undersigned directors and/or officers of Jefferson-Pilot Life Insurance
Company, a North Carolina corporation (the "Company"), hereby constitute and
appoint Shari J. Lease and Charlene Grant, and each of them (with full power to
each of them to act alone), his true and lawful attorney-in-fact and agent, with
full power of substitution to each, for him and on his behalf and in his name,
place and stead, to execute and file any of the documents referred to below
relating to registrations under the Securities Act of 1933 or the Investment
Company Act of 1940 (the "Acts"): registration statements on any form or forms
under the Acts, and any and all amendments and supplements thereto (including
post-effective amendments), with all exhibits and all agreements, consents,
exemptive applications and other documents and instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
being empowered to act with or without the others or other, and to have full
power and authority to do or cause to be done in the name and on behalf of the
undersigned each and every act and thing requisite and necessary or appropriate
with respect thereto to be done in and about the premises in order to effectuate
the same, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, may do or cause to be done by virtue thereof.
/s/ Martha Ann Walls 4/3/98
- ----------------------------------- --------------------------------------
Martha Ann Walls, Director Date
<PAGE>
POWER OF ATTORNEY
The undersigned directors and/or officers of Jefferson-Pilot Life Insurance
Company, a North Carolina corporation (the "Company"), hereby constitute and
appoint Shari J. Lease and Charlene Grant, and each of them (with full power to
each of them to act alone), his true and lawful attorney-in-fact and agent, with
full power of substitution to each, for him and on his behalf and in his name,
place and stead, to execute and file any of the documents referred to below
relating to registrations under the Securities Act of 1933 or the Investment
Company Act of 1940 (the "Acts"): registration statements on any form or forms
under the Acts, and any and all amendments and supplements thereto (including
post-effective amendments), with all exhibits and all agreements, consents,
exemptive applications and other documents and instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
being empowered to act with or without the others or other, and to have full
power and authority to do or cause to be done in the name and on behalf of the
undersigned each and every act and thing requisite and necessary or appropriate
with respect thereto to be done in and about the premises in order to effectuate
the same, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, may do or cause to be done by virtue thereof.
/s/ E. Jay Yelton 4/3/98
- ----------------------------------- --------------------------------------
E. Jay Yelton, Director Date
Executive Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000078599
<NAME> JEFFERSON-PILOT SEPARATE ACCOUNT A
<SERIES>
<NUMBER> 1
<NAME> VIPF GROWTH
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 18,907,281
<INVESTMENTS-AT-VALUE> 23,573,125
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 23,573,125
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 18,907,281
<SHARES-COMMON-STOCK> 635,394
<SHARES-COMMON-PRIOR> 541,205
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,665,844
<NET-ASSETS> 23,573,125
<DIVIDEND-INCOME> 633,389
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 305,691
<NET-INVESTMENT-INCOME> 327,698
<REALIZED-GAINS-CURRENT> 285,830
<APPREC-INCREASE-CURRENT> 3,341,005
<NET-CHANGE-FROM-OPS> 3,954,533
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 419,836
<NUMBER-OF-SHARES-REDEEMED> 258,801
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6,720,015
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 20,213,118
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000078599
<NAME> JEFFERSON-PILOT SEPARATE ACCOUNT A
<SERIES>
<NUMBER> 2
<NAME> VIPF MONEY MARKET
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 10,032,759
<INVESTMENTS-AT-VALUE> 10,032,759
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,032,759
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,032,759
<SHARES-COMMON-STOCK> 10,032,759
<SHARES-COMMON-PRIOR> 10,407,244
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 10,032,759
<DIVIDEND-INCOME> 595,108
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 159,193
<NET-INVESTMENT-INCOME> 435,915
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 435,915
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,466,569
<NUMBER-OF-SHARES-REDEEMED> 2,459,199
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (374,485)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 10,220,001
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000078599
<NAME> JEFFERSON-PILOT SEPARATE ACCOUNT A
<SERIES>
<NUMBER> 3
<NAME> VIPF EQUITY-INCOME
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 24,943,893
<INVESTMENTS-AT-VALUE> 30,954,823
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 30,954,823
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 24,943,893
<SHARES-COMMON-STOCK> 1,274,910
<SHARES-COMMON-PRIOR> 952,863
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,010,931
<NET-ASSETS> 30,954,823
<DIVIDEND-INCOME> 2,120,920
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 373,660
<NET-INVESTMENT-INCOME> 1,747,260
<REALIZED-GAINS-CURRENT> 393,121
<APPREC-INCREASE-CURRENT> 3,757,044
<NET-CHANGE-FROM-OPS> 5,897,424
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 648,588
<NUMBER-OF-SHARES-REDEEMED> 353,221
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 10,916,114
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 25,496,766
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000078599
<NAME> JEFFERSON-PILOT SEPARATE ACCOUNT A
<SERIES>
<NUMBER> 4
<NAME> VIPF HIGH INCOME
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 4,844,272
<INVESTMENTS-AT-VALUE> 5,501,464
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,501,464
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,844,272
<SHARES-COMMON-STOCK> 405,115
<SHARES-COMMON-PRIOR> 284,694
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 657,192
<NET-ASSETS> 5,501,464
<DIVIDEND-INCOME> 297,814
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 66,630
<NET-INVESTMENT-INCOME> 231,184
<REALIZED-GAINS-CURRENT> 62,010
<APPREC-INCREASE-CURRENT> 403,573
<NET-CHANGE-FROM-OPS> 696,767
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 192,441
<NUMBER-OF-SHARES-REDEEMED> 104,981
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,937,089
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 4,532,919
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000078599
<NAME> JEFFERSON-PILOT SEPARATE ACCOUNT A
<SERIES>
<NUMBER> 5
<NAME> VIPF OVERSEAS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 2,596,729
<INVESTMENTS-AT-VALUE> 2,748,944
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,748,944
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,596,729
<SHARES-COMMON-STOCK> 143,174
<SHARES-COMMON-PRIOR> 99,062
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 152,215
<NET-ASSETS> 2,748,944
<DIVIDEND-INCOME> 167,245
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 35,964
<NET-INVESTMENT-INCOME> 131,282
<REALIZED-GAINS-CURRENT> 39,380
<APPREC-INCREASE-CURRENT> 972
<NET-CHANGE-FROM-OPS> 171,633
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 110,592
<NUMBER-OF-SHARES-REDEEMED> 58,071
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 882,609
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 2,307,639
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000078599
<NAME> JEFFERSON-PILOT SEPARATE ACCOUNT A
<SERIES>
<NUMBER> 6
<NAME> VIPF ASSET MANAGER
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 9,282,815
<INVESTMENTS-AT-VALUE> 10,601,497
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,601,497
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,282,815
<SHARES-COMMON-STOCK> 588,645
<SHARES-COMMON-PRIOR> 369,962
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,318,683
<NET-ASSETS> 10,601,497
<DIVIDEND-INCOME> 816,097
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 122,167
<NET-INVESTMENT-INCOME> 693,930
<REALIZED-GAINS-CURRENT> 36,781
<APPREC-INCREASE-CURRENT> 722,434
<NET-CHANGE-FROM-OPS> 1,453,144
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 356,163
<NUMBER-OF-SHARES-REDEEMED> 151,323
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,338,043
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 8,432,476
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000078599
<NAME> JEFFERSON-PILOT SEPARATE ACCOUNT A
<SERIES>
<NUMBER> 7
<NAME> ALGER AMERICAN SMALL CAPITALIZATION FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,750,887
<INVESTMENTS-AT-VALUE> 1,881,626
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,881,626
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,750,887
<SHARES-COMMON-STOCK> 43,009
<SHARES-COMMON-PRIOR> 33,319
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 130,739
<NET-ASSETS> 1,881,626
<DIVIDEND-INCOME> 61,776
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 19,933
<NET-INVESTMENT-INCOME> 41,842
<REALIZED-GAINS-CURRENT> (314)
<APPREC-INCREASE-CURRENT> 118,406
<NET-CHANGE-FROM-OPS> 160,074
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 102,282
<NUMBER-OF-SHARES-REDEEMED> 64,205
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 518,537
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 1,622,357
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000078599
<NAME> JEFFERSON-PILOT SEPARATE ACCOUNT A
<SERIES>
<NUMBER> 8
<NAME> ALGER AMERICAN MIDCAP GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,750,972
<INVESTMENTS-AT-VALUE> 1,954,768
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,954,768
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,750,972
<SHARES-COMMON-STOCK> 80,842
<SHARES-COMMON-PRIOR> 43,608
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 203,796
<NET-ASSETS> 1,954,768
<DIVIDEND-INCOME> 21,802
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 19,814
<NET-INVESTMENT-INCOME> 1,987
<REALIZED-GAINS-CURRENT> 16,125
<APPREC-INCREASE-CURRENT> 157,552
<NET-CHANGE-FROM-OPS> 175,664
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 106,520
<NUMBER-OF-SHARES-REDEEMED> 25,711
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,023,738
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 1,442,899
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000078599
<NAME> JEFFERSON-PILOT SEPARATE ACCOUNT A
<SERIES>
<NUMBER> 9
<NAME> VIPF CONTRAFUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 3,536,967
<INVESTMENTS-AT-VALUE> 4,060,197
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,060,197
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
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<NAME> JEFFERSON-PILOT SEPARATE ACCOUNT A
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<NAME> JEFFERSON-PILOT SEPARATE ACCOUNT A
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<NAME> JEFFERSON-PILOT SEPARATE ACCOUNT A
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<NAME> JEFFERSON-PILOT SEPARATE ACCOUNT A
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<NAME> JEFFERSON-PILOT SEPARATE ACCOUNT A
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<NAME> JEFFERSON-PILOT SEPARATE ACCOUNT A
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<NAME> JEFFERSON-PILOT SEPARATE ACCOUNT A
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