AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON February 25, 1999
REGISTRATION NO. 33-75714
811-8374
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. 6 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 7 [X]
ALEXANDER HAMILTON VARIABLE ANNUITY
SEPARATE ACCOUNT
(EXACT NAME OF REGISTRANT)
ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA
(NAME OF DEPOSITOR)
100 N. Greene St., Greensboro, NC 27401
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE
(336) 691-3000
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<S> <C>
NAME AND ADDRESS OF
AGENT FOR SERVICE: COPY TO:
Shari J. Lease, Esquire Joan E. Boros, Esquire
Alexander Hamilton Life Insurance Jorden Burt Boros Cicchetti Berenson & Johnson LLP
Company of America 1025 Thomas Jefferson Street, N.W.
One Granite Place Suite 400 East
Concord, NH 03301 Washington, D.C. 20007
</TABLE>
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on May 1, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[X] on May 1, 1999 pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on _______ pursuant to paragraph (a)(ii) 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.
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after effectiveness of the Registration Statement
TITLE OF SECURITIES BEING REGISTERED:
Variable Portion of Contracts issued by the Separate Account
No filing fee is due because an indefinite number of shares is deemed to have
been registered in reliance on Section 24(f) of the Investment Company Act of
1940.
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 495
Showing Location in Part A (Prospectus)
Part B (Statement of Additional Information) and Part C
of Registration Statement Information Required by Form N-4
PART A
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<CAPTION>
Item of Form N-4 Prospectus Caption
<S> <C> <C>
1. Cover Page............................. Cover Page
2. Definitions............................ Definitions
3. Synopsis............................... Summary; Historical
Performance Data
4. Condensed Financial Information ....... Condensed Financial
Information
5. General
(a) Depositor........................ Alexander Hamilton Life
Insurance Company of America;
Additional Information about
the Company
(b) Registrant ...................... The Separate Account
(c) Portfolio Company................ Separate Account Investments
(d) Fund Prospectus.................. Separate Account Investments
(e) Voting Rights.................... Voting Rights
6. Deductions and Expenses
(a) General.......................... Charges and Deductions
(b) Sales Load %..................... Surrender Charge
(c) Special Purchase Plan........... Not Applicable
(d) Commissions...................... Distributor of the Contracts
(e) Fund Expenses.................... Other Expenses Including
Investment Advisory Fees
(f) Expenses - Registrant............ Not Applicable
7. Contracts
(a) Persons with Rights.............. Alexander Hamilton Life
Insurance Company of America;
Distributions Under The
Contract; Voting Rights
<PAGE>
(b) (i) Allocation of Premium
Payments...................... Premium Payments
(ii) Transfers..................... Transfers
(iii) Exchanges..................... Not Applicable
(c) Changes.......................... Addition, Deletion or
Substitution of Investments
(d) Inquiries........................ Questions and Answers About Your Contract;
Annuity Payments;
Annuity Payment Options;
General Provisions
8. Annuity Period......................... Annuity Payment Options
9. Death Benefit.......................... Death Benefit
10. Purchase and Contract Balances
(a) Purchases........................ Contract Application and
Issuance of Contracts
(b) Valuation........................ Contract Value
(c) Daily Calculation................ Separate Account Accumulation Unit Value
(d) Underwriter...................... Distributor of the Contracts
11. Redemptions
(a) By Contract Owners............... Surrenders
By Annuitant..................... Not Applicable
(b) Texas ORP........................ Restrictions Under the Texas
ORP Retirement Program
(c) Check Delay...................... Surrenders
(d) Lapse............................ Lapse
(e) Free Look........................ Questions and Answers About your Contract;
................................. Free Look Period
12. Taxes ................................. Certain Federal Income Tax
Consequences
13. Legal Proceedings...................... Legal Proceedings
14. Table of Contents for the
Statement of Additional Information . . Statement of Additional
Information Table of Contents
PART B
Statement of
Additional
Item of Form N-4 Information Caption
15. Cover Page............................. Cover Page
16. Table of Contents...................... Table of Contents
17. General Information
and History....................... (Prospectus) Alexander
Hamilton Life Insurance
Company of America; Additional
Information About the Company
<PAGE>
18. Services
(a) Fees and Expenses
of Registrant.................. Not Applicable
(b) Management Contracts............. Not Applicable
(c) Custodian........................ Records, Reports and Services
Independent
Auditors......................... Financial Statements
(d) Assets of Registrant............. Not Applicable
(e) Affiliated Person................ Not Applicable
(f) Principal Underwriter............ Not Applicable
19. Purchase of Securities
Being Offered.......................... (Prospectus) The Alexander
Hamilton Life Insurance
Company of America Variable
Annuity Contract
Offering Sales Load.................... (Prospectus) Surrender Charge
20. Underwriters........................... (Prospectus) Distributor of
the Contracts
21 . Calculation of Performance
Data ................................. (Prospectus) Performance Data;
Performance Data and
Calculations
22. Annuity Payments....................... (Prospectus) Annuity Income
Payments; Annuity Payment
Options
23. Financial Statements................... Financial Statements
PART C - - OTHER INFORMATION
Item of Form N-4 Part C Caption
24. Financial Statements
and Exhibits........................... Financial Statements and
Exhibits
(a) Financial Statements............. Financial Statements
(b) Exhibits......................... Exhibits
25. Directors and Officers of.............. The Company's Directors
the Depositor.......................... and Officers
26. Persons Controlled By or
Under Common Control................... Persons Controlled By or Under
Common Control with the
Depositor or Registrant
<PAGE>
27. Number of Contract Owners.............. Number of Contract Owners
28. Indemnification........................ Indemnification
29. Principal Distributor of the
Underwriters........................... Contracts
30. Location of Accounts
and Records............................ Location of Accounts and
Records
31. Management Services.................... Management Services
32. Undertakings........................... Undertakings
Signature Page......................... Signatures
</TABLE>
<PAGE>
Prospectus: May 1, 1999
The Allegiance Variable Annuity
Issued by
ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA
In connection with
ALEXANDER HAMILTON VARIABLE ANNUITY SEPARATE ACCOUNT
SERVICE CENTER ADDRESS: One Granite Place, Concord, NH 03301
Telephone No.: 1-800-289-1776
- --------------------------------------------------------------------------------
This Prospectus describes the Allegiance Variable Annuity (the "Contract"), an
individual flexible premium deferred variable annuity offered by Alexander
Hamilton Life Insurance Company of America ("we", "our" or the "Company"). The
Contract is designed to help you plan for retirement or other long-term
purposes. You may purchase it on either a tax qualified or non-tax qualified
basis.
Because this is a flexible premium annuity contract, you may pay multiple
premiums. We allocate your premium among the 18 Variable Sub-accounts of the
Alexander Hamilton Variable Annuity Separate Account and the 2 Interest Rate
Guarantee Periods of the Capital Developer Account in the proportions that you
choose. Each Variable Sub-account invests exclusively in shares of one of the
following Portfolios:
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<S> <C>
JPVF International Equity Portfolio JPVF Money Market Portfolio
JPVF World Growth Stock Portfolio Fidelity VIP Growth Portfolio
JPVF Emerging Growth Portfolio Fidelity VIP Equity-Income Portfolio
JPVF Capital Growth Portfolio Fidelity VIP II Contrafund Portfolio
JPVF Growth Portfolio Fidelity VIP II Index 500 Portfolio
JPVF Small Company Portfolio MFS Research Series
JPVF Growth and Income Portfolio MFS Utilities Series
JPVF Balanced Portfolio Oppenheimer Strategic Bond Fund
JPVF High Yield Bond Portfolio Oppenheimer Bond Fund
</TABLE>
We may make available other investment options in the future. Not all
Sub-accounts or Interest Rate Guarantee Periods may be available in all states.
You may not purchase a Non-Qualified Contract if you or the Annuitant are over
90 years old. You may not purchase certain types of Qualified Contracts if you
are over 80 years old.
Your Contract Value will vary up or down depending on the investment
performance of the Sub-accounts to which you have allocated your Premium
Payments. We do not guarantee any minimum Contract Value for amounts allocated
to the Sub-accounts. Amounts which you allocate to the Capital Developer
Account will earn a specified Guaranteed Interest Rate. The Market Value
Adjustment could increase or decrease the value of amounts withdrawn,
transferred, or annuitized from the Capital Developer Account.
- --------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
Prospectus is truthful or complete. Any Representation to the contrary is a
criminal offense.
This Prospectus sets forth the information you should know about the Contract.
You should read it before investing and keep it for future reference. We have
filed a Statement of Additional Information with the Securities and Exchange
Commission ("SEC"). The current Statement of Additional Information is dated
May 1, 1999. The information in the Statement of Additional Information is
incorporated by reference in this Prospectus. You can obtain a free copy by
writing us or calling us at the address or telephone number given above. The
Table of Contents of the Statement of Additional Information appears at page 40
of this Prospectus.
THIS PROSPECTUS IS VALID ONLY IF ACCOMPANIED OR PRECEDED BY CURRENT
PROSPECTUSES FOR THE FUNDS LISTED ABOVE. PLEASE READ THIS PROSPECTUS AND THE
PROSPECTUSES FOR THE FUNDS CAREFULLY AND RETAIN THEM FOR YOUR FUTURE REFERENCE.
Contracts and shares of the Funds are not deposits or obligations of or
guaranteed by any bank. They are not federally insured by the FDIC or any other
government agency. Investing in the contracts involves certain investment
risks, including possible loss of principal invested.
This Prospectus and other information about the Alexander Hamilton Variable
Annuity Separate Account required to be filed with the Securities and Exchange
Commission can be found in the SEC's Web Site at http://www.sec.gov.
<PAGE>
Table of contents
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
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DEFINITIONS ....................................................... 4
QUESTIONS AND ANSWERS ABOUT YOUR CONTRACT ......................... 6
FEE TABLES ........................................................ 10
Contract Owner Transaction Expenses .............................. 10
Separate Account Annual Expenses ................................. 10
Fund Annual Expenses ............................................. 10
Examples ......................................................... 11
CONDENSED FINANCIAL INFORMATION ................................... 12
INVESTMENT OPTIONS ................................................ 14
Separate Account Investments ..................................... 14
Mixed and Shared Funding; Conflicts of Interest .................. 16
The Capital Developer Account .................................... 16
Market Value Adjustment .......................................... 17
THE ALLEGIANCE VARIABLE ANNUITY CONTRACT .......................... 18
Contract Application and Issuance of Contracts ................... 18
Free Look Period ................................................ 18
Premium Payments ................................................. 19
Initial Premium Payment ......................................... 19
Additional Premium Payments ..................................... 19
Allocation of Premium Payments .................................. 19
Payment Not Honored by Bank ..................................... 19
Contract Value ................................................... 19
Separate Account Accumulation Unit Value ........................ 20
Minimum Contract Value .......................................... 20
Transfers ........................................................ 20
Telephone Transfers and Reallocations ........................... 21
Dollar Cost Averaging ............................................ 21
Automatic Rebalancing ............................................ 21
DISTRIBUTIONS UNDER THE CONTRACT .................................. 22
Surrenders and Partial Withdrawals ............................... 22
Systematic Withdrawal Plan ....................................... 23
Annuity Payments ................................................. 23
Maturity Date ................................................... 23
Election of Annuity Payment Option .............................. 23
Taxes ........................................................... 23
Annuity Payment Options .......................................... 24
Death Benefit .................................................... 25
Death of Contract Owner Prior to Maturity Date .................. 26
IRS Required Distribution ....................................... 26
Death of Annuitant Prior to Maturity Date ....................... 26
Death of Annuitant on or After Maturity Date .................... 26
Death of Contract Owner on or After Maturity Date ............... 26
Contract Owner's Spouse as Beneficiary .......................... 26
Payment of Death Benefit to Beneficiary ......................... 26
Beneficiary ...................................................... 26
Change of Contract Owner ......................................... 27
Restrictions Under the Texas Optional Retirement Program ......... 27
Restrictions Under Qualified Contracts ........................... 27
Restrictions Under Section 403(b) Plans .......................... 27
CHARGES AND DEDUCTIONS ............................................ 27
Surrender Charge ................................................. 27
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Mortality and Expense Risk Charge ................................... 28
Administrative Expense Charge ....................................... 28
Annual Administrative Fee ........................................... 28
Transfer Charge ..................................................... 29
Premium Taxes ....................................................... 29
Federal, State and Local Taxes ...................................... 29
Other Expenses Including Investment Advisory Fees ................... 29
Reduction in Charges for Certain Groups ............................. 29
CERTAIN FEDERAL INCOME TAX CONSEQUENCES .............................. 29
Taxation of Annuities ............................................... 30
In General ......................................................... 30
Possible Changes in Taxation ....................................... 30
Surrenders and Partial Withdrawals from Qualified Contracts ........ 30
Surrenders and Partial Withdrawals from Non-Qualified Contracts .... 31
Annuity Payments ................................................... 31
Penalty Tax ........................................................ 31
Death Benefit Proceeds ............................................. 31
Gifts, Transfers, Assignments, or Exchanges of the Contract ........ 32
Generation-Skipping Transfers ...................................... 32
Multiple Contracts ................................................. 32
Withholding ........................................................ 32
Other Tax Consequences ............................................. 32
Qualified Plans .................................................... 32
Qualified Pension and Profit Sharing Plans ......................... 33
Individual Retirement Annuities and Individual Retirement Accounts . 33
Tax-Sheltered Annuities ............................................ 33
Section 457 Deferred Compensation ("Section 457") Plans ............ 33
ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA ................. 34
The Separate Account ................................................ 34
Year 2000 Matter .................................................... 34
DISTRIBUTOR OF THE CONTRACTS ......................................... 35
VOTING RIGHTS ........................................................ 36
ADDITIONAL INFORMATION ABOUT THE SEPARATE ACCOUNT .................... 36
Addition, Deletion, or Substitution of Investments .................. 36
Performance Data .................................................... 37
Company Ratings ..................................................... 38
GENERAL CONTRACT PROVISIONS .......................................... 39
LEGAL PROCEEDINGS .................................................... 39
AVAILABLE INFORMATION ................................................ 40
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS ................ 41
APPENDIX I -- SURRENDER CHARGE CALCULATION ........................... I-1
APPENDIX II -- MARKET VALUE ADJUSTMENT CALCULATION AND EXAMPLES ...... II-1
FUND PROSPECTUSES
Jefferson Pilot Variable Fund, Inc. ................................. JPVF-l
Fidelity's Variable Insurance Products Funds (VIP and VIP II) ....... VIP-I
MFS Variable Insurance Trust ........................................ MFSRS-1
Oppenheimer Variable Account Funds (OVAF) ........................... OVAF-1
</TABLE>
- --------------------------------------------------------------------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESPERSON OR OTHER
PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON.
- --------------------------------------------------------------------------------
3
<PAGE>
[arrow] DEFINITIONS
Accumulation Period--The period, beginning on the Contract Date, during which
Contract Value builds up under your Contract, and ending on the date preceding
the Maturity Date.
Unit--A unit of measure which we use to calculate Separate Account Value during
the Accumulation Period.
Annuitant(s)--The natural person(s) upon whose life the Annuity Payments are
based. You will be the Annuitant unless you name someone else to be the
Annuitant in the Contract application. The Annuitant named in the application
cannot be changed.
Annuity Payments--The payments we make to the Payee beginning on the Maturity
Date. The amount of the Annuity Payments will be based on the Contract Value
and the age of the Annuitant on the Maturity Date, and the Annuity Payment
Option and payment frequency that you select.
Annuity Payment Options--Options available for methods of receiving Annuity
Payments.
Annuity Period--The period which begins on the Maturity Date and ends with the
last Annuity Payment.
Annuity Unit--A unit of measure used to determine the amount of each Variable
Annuity payment.
Beneficiary--The persons or entities designated by you to receive the Death
Benefit under the Contract.
Capital Developer Account--An allocation option available under the Contract
that provides a Guaranteed Interest Rate for a specified Interest Rate
Guarantee Period. This rate will never be less than 3% per year. The Capital
Developer Account is guaranteed by us and is not part of the Separate Account.
Capital Developer Account Value--The portion of the Contract Value held in the
Capital Developer Account.
Code--The Internal Revenue Code of 1986, as amended.
Company (our, we, us)--Alexander Hamilton Life Insurance Company of America.
Contract--The Allegiance Variable Annuity, an individual flexible premium
multi-funded variable annuity contract that is described in this Prospectus.
Contract Date--The effective date of coverage under the Contract and the date
from which the Company measures Contract Years, quarters, months and
anniversaries.
Contract Owner (you, your)--The person or entity entitled to the ownership
rights of the Contract. The Contract Owner is the person in whose name the
Contract is issued. It is the person or entity named in the application, unless
otherwise changed. Joint Contract Owners are permitted only if they are
spouses.
Contract Value--The value of all of the Accumulation Units held under the
Contract in the Separate Account plus the value of all amounts held under the
Contract in the Capital Developer Account.
Contract Year--The first Contract Year is the annual period which begins on the
Contract Date. Subsequent Contract Years begin on each anniversary of the
Contract Date.
Death Benefit--The amount payable upon the death of any Contract Owner.
Due Proof of Death--Information required by the Company to process a claim for
a Death Benefit, including a death certificate and a death claim form
acceptable to the Company.
Fixed Annuity Options--Annuity Payment Options under the Contract that provide
for scheduled and fixed payments.
Funds--The Jefferson Pilot Funds, VIP Portfolios, MFS Funds and Oppenheimer
Funds.
Guaranteed Interest Rate--The applicable effective annual interest rate which
the Company will credit and compound annually on the Capital Developer Account
Value during each Interest Rate Guarantee Period. The rate is guaranteed to be
at least three percent per year.
Interest Rate Guarantee Period--A specified period which begins on the date
that a Premium Payment is allocated to (or a portion of Contract Value is
transferred to) the Capital Developer Account to accumulate at a Guaranteed
Interest Rate. Currently the Company offers one and seven-year Interest Rate
Guarantee Periods.
Investment Option--Each Interest Rate Guarantee Period of the Capital Developer
Account and each Variable Sub-account of the Separate Account.
4
<PAGE>
Issue Age--The age of the Contract Owner on the Contract Date.
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.
Jefferson Pilot Funds--The portfolios of JPVF which are available under the
Contracts--Small Company Portfolio, World Growth Stock Portfolio, International
Equity Portfolio, Growth Portfolio, Growth and Income Portfolio, Emerging
Growth Portfolio, Capital Growth Portfolio, High Yield Bond Portfolio, Money
Market Portfolio and Balanced Portfolio.
Market Value Adjustment--A positive or negative adjustment applied to the
Capital Developer Account Value in the event of a premature full Surrender,
Partial Withdrawal, Transfer or annuitization that is requested prior to the
end of an Interest Rate Guarantee Period. The Market Value Adjustment does not
apply during the last 30 days of the Interest Rate Guarantee Period.
Maturity Date--The date on which the Company makes the first Annuity Payment
under the Contract. The latest Maturity Date that may be elected is the later
of the Annuitant's 85th birthday or 10 years from the Contract Date.
MFS Funds--Mutual fund series of the MFS Variable Insurance Trust which are
available under the Contract--MFS Research Series and MFS Utilities Series.
MFS Variable Insurance Trust--An open-end management investment company
registered under the 1940 Act.
Net Premium Payment--A Premium Payment less any applicable Premium Tax.
Oppenheimer Funds--The Portfolios of the Oppenheimer Variable Account Funds
which are available under the Contract--Oppenheimer Strategic Bond Fund and
Oppenheimer Bond Fund.
Oppenheimer Variable Account Funds ("OVAF")--An open-end management investment
company registered under the 1940 Act.
Payee--The person or entity who will receive Annuity Payments under the
Contract.
Premium Payment--A payment to the Company under the Contract.
Premium Tax--A tax imposed by certain states when a Premium Payment is made,
when Annuity Payments begin, when a partial withdrawal is made, or when the
Contract is surrendered.
Request--A request in a form satisfactory to the Company, which is received by
the Company's Variable Annuity Service Center.
Separate Account--The Alexander Hamilton Variable Annuity Separate Account, a
separate account of Alexander Hamilton Life Insurance Company of America, which
consists of assets set aside by the Company, the investment performance of
which is kept separate from that of the general assets and all other separate
account assets of the Company. The Separate Account is registered as a unit
investment trust under the 1940 Act.
Separate Account Value--The portion of Contract Value held in the Separate
Account. There is no guaranteed or minimum Separate Account Value.
Surrender Value--Proceeds payable upon a surrender of the Contract, equal to
(a) the Contract Value (b) plus or minus any applicable Market Value
Adjustment, (c) minus any applicable Surrender Charge, (d) minus the Annual
Administrative Fee, and (e) minus any applicable Premium Tax.
The VIP Funds--The Variable Insurance Products Fund ("VIP") and the Variable
Insurance Products Fund II ("VIP II"), which are open-end diversified
management investment companies registered under the 1940 Act.
Treasury Rate--The applicable effective annual U.S. Treasury Rate used by the
Company for determining the Market Value Adjustment applicable to a surrender,
withdrawal, transfer, or annuitization from the Capital Developer Account at
any given time.
Valuation Day--Any day on which the New York Stock Exchange is open for trading
except for normal federal holiday closing or when the Securities and Exchange
Commission has determined that a state of emergency exists. In addition, the
Company will be closed on the following local or regional business holidays
which shall not constitute a Valua-
5
<PAGE>
tion Day: Good Friday, the Friday following Thanksgiving and the day before or
following Christmas Day.
Valuation Period--The period of time beginning at the close of business on the
New York Stock Exchange on any Valuation Day and ending at the close of
business on the next Valuation Day. A Valuation Period may be more than one
day.
Variable Annuity Options--Annuity Payment Options under the Contract that
provide for payments which vary as to dollar amount in relation to the
investment performance of specified Variable Sub-accounts.
Variable Annuity Service Center--P.O. Box 515, Concord, NH 03302-0515. Notices,
Requests and Premium Payments under the Contract must be sent to the Company's
Variable Annuity Service Center.
Variable Sub-account--Separate Account assets are divided into Variable
Sub-accounts. Assets of the Variable Sub-accounts will be invested in shares of
the corresponding Funds.
VIP Portfolios--The portfolios of the VIP Funds which are available under the
Contracts--VIP Equity-Income Portfolio, VIP II Index 500 Portfolio, VIP Growth
Portfolio and VIP II Contrafund Portfolio.
[arrow] QUESTIONS AND ANSWERS ABOUT YOUR CONTRACT
The following are answers to some of the questions you may have about some of
the more important features of the Contract. The Contract is more fully
described in the rest of the Prospectus. Please read the Prospectus carefully.
1. What is the Contract?
The Contract is a flexible premium deferred variable annuity contract. It is
designed for tax-deferred retirement investing. It can be purchased on a non-
qualified basis ("Non-qualified Contract") or in connection with certain plans
qualifying for favorable federal income tax treatment ("Qualified Contract").
The Contract, like all deferred annuity contracts, has two phases: the
Accumulation Period and the Annuity Period. During the Accumulation Period,
earnings accumulate on a tax-deferred basis and are taxed as income when you
make a withdrawal. The Annuity Period begins when you begin receiving payments
under one of the Annuity Payment Options described in the answer to Question
No. 2. The amount of money accumulated under your Contract during the
Accumulation Period will be used to determine the amount of your Annuity
Payments during the Annuity Period.
You may allocate your Premium Payments to any combination of the 20 Investment
Options under the Contract. However, over the life of your Contract, you are
currently limited to allocating your Premium Payments to no more than 16 of the
current or future Variable Sub-accounts. The Company may change this limitation
in the future. The Investment Options currently available are the 18 Variable
Sub-accounts of the Separate Account and the two Interest Rate Guarantee
Periods of the Capital Developer Account. These Investment Options may not be
available in all states.
Each Sub-account will invest in a single investment portfolio (a "Portfolio")
of a mutual fund. Because the Separate Account Value will increase or decrease
depending on the investment experience of the Variable Sub-accounts to which
you allocate your premiums, you bear the entire investment risk with respect to
amounts allocated to the Sub-accounts. The investment policies and risks of
each Portfolio are described in prospectuses for the Portfolios which accompany
this Prospectus.
The Contract may be issued as a group contract in certain states. If you are
covered under a group contract, you will be issued a certificate as evidence of
your participation under the group contract. The description of the Contract in
this Prospectus applies equally to a certificate under a group contract unless
otherwise described.
2. What annuity options does the Contract offer?
The Contract offers four Annuity Payment Options. You may choose a fixed
annuity, a variable annuity, or a combination of both. The Annuity Payment
Options include:
[diamond] Fixed payments for a specified period between five and thirty years
(available as a fixed annuity only).
[diamond] Payments for life with optional guaranteed periods.
[diamond] Joint and last survivor life income payments.
[diamond] Payments based on terms agreed upon in writing by you and the Company.
6
<PAGE>
You may change your Annuity Payment Option at any time before annuitization.
You may select the Maturity Date of your Contract. The latest Maturity Date you
may select for a Non-qualified Contract, however, is the later of the
Annuitant's 85th birthday or 10 years from the Contract Date. If your Contract
was issued in connection with a qualified plan, a different maximum Maturity
Date may apply.
If you select Annuity Payments on a variable basis, the amount of our payments
to you will be affected by the investment performance of the Sub-accounts you
have selected. A fixed annuity Payment Option provides for payments that will
be set on the Maturity Date and will not change. If you select an Annuity
Payment Option that is a combination of variable and fixed payments, you must
specify the allocation of the Contract Value between the Fixed Payment Option
and the Variable Payment Option. You may not change the Annuity Payment Option
or the frequency of Annuity Payments after we begin making Annuity Payments to
you.
3. How do I buy a Contract?
You can obtain a Contract application from your Company agent. We must receive
a completed application and an initial Premium Payment of at least $2,000
before we will issue a Contract. A lower initial Premium Payment may apply to
certain Qualified Contracts. You may pay for the initial Premium Payment in a
single payment or by twelve equal systematic payments over the first 12
Contract months. Your subsequent Premium Payments must be at least $50. We will
not issue a Contract to you if either you or the Annuitant is more than 90
years old. For certain types of Qualified Contracts you must be age 80 or
younger before we will issue a Contract to you.
4. What are my investment choices under the Contract?
You can allocate and reallocate your investment among the Sub-accounts. Each
Sub-account invests in a single Portfolio. Under the Contract, the Separate
Account currently invests in the following Portfolios:
- --------------------------------------------------------------------------------
Jefferson Pilot Variable Fund, Inc.:
International Equity Portfolio
World Growth Stock Portfolio
Emerging Growth Portfolio
Growth Portfolio
Capital Growth Portfolio
Small Company Portfolio
Growth and Income Portfolio
Balanced Portfolio
High Yield Bond Portfolio
Money Market Portfolio
- --------------------------------------------------------------------------------
Fidelity Variable Insurance Trust:
Growth Portfolio
Equity-Income Portfolio
- --------------------------------------------------------------------------------
Fidelity Variable Insurance Trust II:
Contrafund Portfolio
Index 500 Portfolio
- --------------------------------------------------------------------------------
MFS Variable Insurance Trust:
Research Series
Utilities Series
- --------------------------------------------------------------------------------
Oppenheimer Variable Account Funds:
Strategic Bond Fund
Bond Fund
- --------------------------------------------------------------------------------
Each Portfolio holds its assets separately from the assets of the other
Portfolios. Each Portfolio has distinct investment objectives and policies
which are described in the accompanying prospectuses for the Portfolios.
5. What is the Capital Developer Account?
We currently offer two different Interest Rate Guarantee Periods in the Capital
Developer Account, lasting for one and seven years. Not all periods are
available in all states. We will credit specified interest rates to the amounts
you allocate to the Capital Developer Account. The amounts which you allocate
to the Capital Developer Account may be subject to a Market Value Adjustment if
you request a Surrender, Partial Withdrawal, transfer or annuitization 31 days
or more prior to the end of the Interest Rate Guarantee Period. Because of this
adjustment and for other reasons, the amount we pay you upon a Surrender or
Partial Withdrawal or apply to a transfer or annuitization may be more or less
than the Capital Developer Account Value at the time of the transaction.
However, the Market Value Adjustment will never reduce the earnings on amounts
allocated to the Capital Developer Account to less than three percent per year
before any applicable Surrender Charges.
6. What are my expenses under the Contract?
Mortality and Expense Risk Charge. We deduct a daily charge equal to a
percentage of the net assets in the Separate Account for the mortality and
expense risks that we assume. The effective annual rate of this charge is 1.25%
of the Separate Account
7
<PAGE>
Value. This charge does not apply to the Capital Developer Account.
Administrative Expense Charge. We deduct a daily charge equal to a percentage
of the net assets in each Variable Sub-account for administering the Separate
Account. The effective annual rate of this charge is 0.15% of the daily value
of net assets in each Variable Sub-account. We guarantee that we will not
increase this charge. This charge does not apply to the Capital Developer
Account.
Annual Administrative Fee. We impose a fee each year for Contract maintenance
and related administrative expenses. This fee is the lesser of $30 per Contract
Year or 2% of Contract Value. We guarantee that we will not increase this fee.
The fee will be deducted from the Contract Value on the last day of each
Contract Year and upon Full Surrender of the Contract before a Contract
Anniversary. We will not deduct the fee if 100% of the Contract Value is held
in the Capital Developer Account. We will also not deduct the fee for a
Contract Year if, on the last day of that Contract Year, the Contract Value is
$30,000 or greater.
Transfer Charge. Although we currently are not charging a transfer fee, the
Contract permits us to charge you a $10 fee for each transfer in excess of 15
during any Contract Year.
Surrender Charge. We will deduct a Surrender Charge from the amount of any
Partial Withdrawal or Full Surrender during the first seven Contract Years to
help defray sales expenses. The Surrender Charge in the first three Contract
Years is 6% of the Contract Value withdrawn or surrendered and declines by one
percentage point for each of the next four Contract Years. The Surrender Charge
percentages are as follows:
<TABLE>
<CAPTION>
Percentage
Year Charge
---- ------
<S> <C>
1 6%
2 6%
3 6%
4 5%
5 4%
6 3%
7 2%
8 0%
</TABLE>
We will also impose the Surrender Charge on the Maturity Date if it occurs
during the first seven Contract Years and you choose an annuity option of less
than five years. The Surrender Charge will not apply to certain distributions.
(See "Surrender Charge")
Each year you are entitled to a Free Withdrawal Amount, equal to 10% of the
Contract Value at the time of the Surrender or Partial Withdrawal, on which we
will not deduct a Surrender Charge. We guarantee that the aggregate Surrender
Charge will never exceed 8.5% of the total premium payments.
Premium Taxes. We may incur Premium Taxes relating to the Contract in certain
states. Depending upon applicable state law, we will deduct any Premium Taxes
related to a particular Contract from Premium Payments, from the Contract Value
upon Partial Withdrawal or Surrender, or on the Maturity Date. We may elect to
defer the deduction of Premium Taxes from Premium Payments until a later time.
Fund Expenses. In addition to our charges under the Contract, each Portfolio
deducts amounts from its assets to pay its investment advisory fees and other
expenses.
7. How will my investment in the Contract be taxed?
You should consult a qualified tax adviser for personalized answers. If you are
a natural person, generally, earnings under your Contract are not taxed until
amounts are withdrawn or distributions are made (e.g., a Partial Withdrawal,
Surrender or Annuity Payment). You may be deemed to have received a
distribution and taxes may be due if you pledge or assign your Contract.
Generally, a portion of any distribution or deemed distribution will be taxable
as ordinary income. The taxable portion of certain distributions may be subject
to withholding. In addition, a penalty tax may apply to certain distributions
or deemed distributions under the Contract.
Special rules apply if the Contract is owned by a company or other legal
entity. Generally, such an owner must include in income any increase in the
excess of the Contract Value over the "investment in the contract" during the
taxable year.
8. Do I have access to my money?
At any time during the Accumulation Period, you may elect to receive all or a
portion of your Contract's Surrender Value. The minimum Partial Withdrawal
amount you may receive is $250 from a Variable Sub-account and $1,000 from the
Capital Developer Account. After a Partial Withdrawal, the remaining Contract
Value must be at least $2,000.
Although you have access to your money during the Accumulation Period, certain
charges, such as the
8
<PAGE>
Surrender Charge, Annual Administrative Fee and state Premium Taxes, may be
deducted on a Surrender or a Partial Withdrawal. You may also incur federal
income tax liability or tax penalties. In addition, if you have allocated some
of the value of your Contract to the Capital Developer Account, the amount of
your surrender proceeds or withdrawal may be increased or decreased by a Market
Value Adjustment.
The Separate Account value remaining in any Variable Sub-account immediately
following a Partial Withdrawal must be at least $250. Immediately after a
Partial Withdrawal from the Capital Developer Account, the remaining Capital
Developer Account Value in an Interest Rate Guarantee Period must be at least
$1,000. If the processing of your Partial Withdrawal request would result in a
remaining Variable Sub-account value of less than $250 or a remaining Interest
Rate Guarantee Period value of less than $1,000, we will treat your request as
a request for the withdrawal of the entire Contract amount in that Variable
Sub-account or Interest Rate Guarantee Period.
You may elect to receive the Contract Value as of the Maturity Date, less any
applicable Surrender Charge, in a lump sum payment.
9. What is the death benefit?
We will pay a death benefit while the Contract is in force and before the
Maturity Date, if the Contract Owner dies, or if the Annuitant dies and the
Contract owner is not a natural person.. To receive the death benefit payment,
the Beneficiary must return the Contract, provide us with Due Proof of Death,
and elect a Death Benefit Option. The Death Benefit will be at least equal to
the Contract Value at the time of payment. No Surrender Charge, Market Value
Adjustment or Annual Administrative Fee is imposed upon amounts paid as a Death
Benefit.
10. May I transfer Contract Value among the Investment Options and the Interest
Rate Guarantee Periods?
During the Accumulation Period, you may transfer Contract Value among the
Investment Options subject to certain limitations. The minimum amount you may
transfer from any Variable Sub-account is $250. The minimum amount you may
transfer from the Capital Developer Account is $1,000. Transfers from the
Capital Developer Account may be subject to a Market Value Adjustment.
During the Annuity Period, if you have chosen a Variable Annuity Payment
Option, you may transfer Separate Account Value between the various Variable
Sub-accounts. However, if you have chosen a Fixed Annuity Payment Option,
transfers are not permitted.
11. Do I have any right to cancel my Contract?
You have a limited time period in which to return your Contract for
cancellation and receive a refund as described in your Contract. This time
period depends on the state in which your Contract is issued. In most states,
it is 10 days after you receive it. If your Contract replaces another contract,
you have 20 days in which to cancel your Contract. The amount of your refund
will depend on the state in which your Contract was issued. In most states, we
will pay you an amount equal to the Contract Value on the date we receive the
Contract from you and we will not deduct any Surrender Charges or
administrative charges that would otherwise apply. The Contract Value may be
more or less than your Premium Payments. In some states, we are required to
refund your Premium Payments less any Partial Withdrawals you may have already
made from your Contract. Since state laws differ as to the time period you have
to return your Contract and the amount of the refund you would be entitled to,
you should refer to your Contract for specific information about your
circumstances.
12. Who can I contact for more information?
If you have a question about procedures or your Contract, or if you have a
request that is required to be made to us, you can write to us at the Variable
Annuity Service Center, P.O. Box 515, Concord, New Hampshire 03302-0515. You
may also send us a fax at 603-226-5123 or call us at 1-800-289-1776. When
contacting us you should include the Contract number, your name and the
Annuitant's name. Please make sure you also sign the inquiry or request.
The foregoing summary is qualified in its entirety by the information in the
remainder of this Prospectus, in the Statement of Additional Information, in
the prospectus for each of the underlying Funds and in the Contract. You should
refer to these documents for more detailed information. This Prospectus
generally describes only the Contract and the Separate Account. Separate
prospectuses attached hereto describe each Fund.
9
<PAGE>
[arrow] FEE TABLES
<TABLE>
<S> <C>
Contract Owner Transaction Expenses
Sales Load on Premium Payments .................... none
Maximum Surrender Charge
(as a % of Contract Value Surrendered)(1) ......... 6%
Annual Administrative Fee ......................... The lesser of $30 per
Contract or 2% of
Contract Value
Transfer Fee ...................................... No Fee for First 15 each
year; $10 for each
additional transfer
(currently not assessed)
Separate Account Annual Expenses
(as a percentage of account value)
Mortality and Expense Risk Charge ................. 1.25%
Administrative Expense Charge ..................... 0.15%
-----
Total Separate Account Annual Expenses ............ 1.40%
</TABLE>
(1) The Surrender Charge is not applicable after the seventh Contract Year or
to the first 10% of Contract Value withdrawn or surrendered during each
Contract Year. (See "Free Surrender Amount.")
Fund Annual Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Total Fund
Management Other Annual
Fees Expenses Expenses
(After Expense (After Expense (After Expense
Reimbursements) Reimbursements) Reimbursements)
----------------- ----------------- ----------------
<S> <C> <C> <C>
JPVF Growth Portfolio ....................... 0.75% 0.65% 1.40%
JPVF High Yield Bond Portfolio .............. 0.75% 0.65% 1.40%
JPVF International Equity Portfolio ......... 1.00% 0.60% 1.60%
JPVF Balanced Portfolio ..................... 0.75% 0.22% 0.97%
JPVF Capital Growth Portfolio ............... 1.00% 0.09% 1.09%
JPVF Small Company Portfolio ................ 0.75% 0.08% 0.83%
JPVF Emerging Growth Portfolio .............. 0.80% 0.20% 1.00%
JPVF Growth and Income Portfolio ............ 0.75% 0.10% 0.85%
JPVF Money Market Portfolio ................. 0.50% 0.10% 0.60%
JPVF World Growth Stock Portfolio ........... 0.75% 0.16% 0.91%
MFS Research Series ......................... 0.75% 0.13% 0.88%(1)
MFS Utilities Series ........................ 0.75% 0.25% 1.00%(1)
Oppenheimer Bond Fund ....................... 0.73% 0.05% 0.78%
Oppenheimer Strategic Bond Fund ............. 0.75% 0.08% 0.83%
VIP Equity-Income Portfolio ................. 0.50% 0.08% 0.58%(2)
VIP Growth Portfolio ........................ 0.60% 0.09% 0.69%(2)
VIP II Contrafund Portfolio ................. 0.60% 0.11% 0.71%(2)
VIP II Index 500 Portfolio .................. 0.24% 0.04% 0.28%(3)
</TABLE>
(1) The Series has an expense offset arrangement which reduces the Series'
custodian fees based upon the amount of cash maintained by the Series with
its custodian and dividend disbursing agent, and may enter into other such
arrangements and directed brokerage arrangements (which 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% during the current fiscal
year. Otherwise, "Other Expenses" for the Utilities Series would be 0.45%
and "Total Fund Annual Expenses" would be 1.20%.
(2) 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 the VIP
Growth Portfolio, and .68% for VIP II Contrafund Portfolio.
(3) FMR agreed to reimburse a portion of VIP II Index 500 Portfolio's expenses
during the period. Without this reimbursement, the funds' management fee,
other expenses and total expenses would have been .27%, .13%, and .40%
respectively.
10
<PAGE>
Examples
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets (and assuming the entire Contract Value is allocated to
the applicable Variable Sub-account):
1. If you surrender the Allegiance Contract, you would pay the following
expenses on a $1,000 investment assuming a 5% annual return on assets.*
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
Sub-accounts: -------- --------- --------- ---------
<S> <C> <C> <C> <C>
JPVF Growth Portfolio ........................ $90 $157
JPVF High Yield Bond Portfolio ............... $90 $157
JPVF International Equity Portfolio .......... $92 $163
JPVF Balanced Portfolio ...................... $86 $145 $189 $345
JPVF Capital Growth Portfolio ................ $87 $148 $195 $360
JPVF Small Company Portfolio ................. $85 $140 $181 $328
JPVF Emerging Growth Portfolio ............... $87 $145 $190 $349
JPVF Growth and Income Portfolio ............. $85 $141 $182 $330
JPVF Money Market Portfolio .................. $83 $134 $169 $298
JPVF World Growth Stock Portfolio ............ $86 $143 $185 $338
MFS Research Series .......................... $85 $142 $184 $334
MFS Utilities Series ......................... $87 $145 $190 $349
Oppenheimer Bond Fund ........................ $84 $139 $179 $321
Oppenheimer Strategic Bond Fund .............. $85 $140 $181 $328
VIP Equity-Income Portfolio .................. $83 $133 $168 $296
VIP II Contrafund Portfolio .................. $84 $137 $175 $312
VIP II Index 500 Portfolio ................... $80 $124 $152 $256
VIP Growth Portfolio ......................... $84 $136 $174 $310
</TABLE>
* These expense figures also apply if the Contract is annuitized for less than
five years.
2. If you annuitize for a period of five years or greater, or do not surrender
the Allegiance Contract, you would pay the following expenses on a $1,000
investment assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
Sub-accounts: -------- --------- --------- ---------
<S> <C> <C> <C> <C>
JPVF Growth Portfolio ........................ $29 $ 93
JPVF High Yield Bond Portfolio ............... $29 $ 93
JPVF International Equity Portfolio .......... $31 $100
JPVF Balanced Portfolio ...................... $25 $ 80 $143 $345
JPVF Capital Growth Portfolio ................ $26 $ 84 $150 $360
JPVF Small Company Portfolio ................. $23 $ 75 $136 $328
JPVF Emerging Growth Portfolio ............... $25 $ 81 $145 $349
JPVF Growth and Income Portfolio ............. $24 $ 76 $137 $330
JPVF Money Market Portfolio .................. $21 $ 68 $123 $298
JPVF World Growth Stock Portfolio ............ $24 $ 78 $140 $338
MFS Research Series .......................... $24 $ 77 $138 $334
MFS Utilities Series ......................... $25 $ 81 $145 $349
Oppenheimer Bond Fund ........................ $23 $ 74 $133 $321
Oppenheimer Strategic Bond Fund .............. $23 $ 75 $136 $328
VIP Equity-Income Portfolio .................. $21 $ 68 $122 $296
VIP II Contrafund Portfolio .................. $22 $ 72 $129 $312
VIP II Index 500 Portfolio ................... $18 $ 58 $105 $256
VIP Growth Portfolio ......................... $22 $ 71 $128 $310
</TABLE>
We have included the above table and examples to assist you in understanding
the costs and expenses that you will bear directly or indirectly, by investing
in the Separate Account. The table reflects expenses of the Separate Account as
well as the Portfolios. For additional information you should read "Charges and
Deductions" in the Prospectus and the section on expenses in the Prospectus for
each underlying Portfolio. In addition to the expenses listed above, Premium
Taxes may be applicable.
11
<PAGE>
These examples reflect the Annual Administrative Fee as an annual charge of
.01% of assets, based on an anticipated average Contract Value of $30,000.
The Examples should not be considered a representation of past or future
expenses, and your actual expenses may be greater or lesser than those shown.
Similarly, the annual rate of return of 5% assumed in the example is not an
estimate or guarantee of future investment performance.
[arrow] 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 following table sets forth certain information regarding the Variable
Subaccounts for a Contract since the commencement of business operations on
February 28, 1996.
The Accumulation Unit values and the number of Accumulation Units outstanding
for each Variable Subaccount for each of the periods indicated are as follows
<TABLE>
<CAPTION>
1998 1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
JPVF Money Market Sub-account*
Accumulation unit value
o Beginning of period $ 1.062 1.027 1.000
o End of period $ 1.099 1.062 1.027
Number of accumulation units
o End of period 8,842,988 1,052,017 480,732
- ---------------------------------------------------------------------------------
JPVF Balanced Sub-account*
Accumulation unit value
o Beginning of period $ 12.910 10.801 10.000
o End of period $ 14.990 12.910 10.801
Number of accumulation units
o End of period 382,872 104,886 27,907
- ---------------------------------------------------------------------------------
JPVF Growth & Income Sub-account*
Accumulation unit value
o Beginning of period $ 12.477 $ 9.975 10.000
o End of period $ 13.864 $ 12.477 9.975
Number of accumulation units
o End of period 466,744 105,759 40,125
- ---------------------------------------------------------------------------------
JPVF Capital Growth Sub-account*
Accumulation unit value
o Beginning of period $ 14.527 $ 11.844 10.000
o End of period $ 19.844 $ 14.527 11.844
Number of accumulation units
o End of period 684,717 142,456 53,999
- ---------------------------------------------------------------------------------
JPVF Emerging Growth Sub-account*
Accumulation unit value
o Beginning of period $ 12.469 $ 10.344 10.000
o End of period $ 16.345 $ 12.469 10.344
Number of accumulation units
o End of period 391,328 132,225 88,358
- ---------------------------------------------------------------------------------
JPVF World Growth Stock Sub-account*
Accumulation unit value
o Beginning of period $ 11.179 $ 10.985 10.000
o End of period $ 11.335 $ 11.179 10.985
Number of accumulation units
o End of period 263,838 123,760 101,024
- ---------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
JPVF Growth Sub-account** N/A N/A
Accumulation unit value N/A N/A
o Beginning of period $ 14.655 N/A N/A
o End of period $ 18.879 N/A N/A
Number of accumulation units N/A N/A
o End of period 37,158 N/A N/A
- -----------------------------------------------------------------------------------
JPVF High Yield Bond Sub-account** N/A N/A
Accumulation unit value N/A N/A
o Beginning of period $ 11.909 N/A N/A
o End of period $ 11.695 N/A N/A
Number of accumulation units N/A N/A
o End of period 125,160 N/A N/A
- -----------------------------------------------------------------------------------
JPVF International Equity Sub-account** N/A N/A
Accumulation unit value N/A N/A
o Beginning of period $ 11.371 N/A N/A
o End of period $ 12.970 N/A N/A
Number of accumulation units N/A N/A
o End of period 144,191 N/A N/A
- -----------------------------------------------------------------------------------
JPVF Small Company Sub-account** N/A N/A
Accumulation unit value N/A N/A
o Beginning of period $ 10.000 N/A N/A
o End of period $ 8.588 N/A N/A
Number of accumulation units N/A N/A
o End of period 155,050 N/A N/A
- -----------------------------------------------------------------------------------
MFS Research Series Sub-Account** N/A N/A
Accumulation unit value N/A N/A
o Beginning of period $ 10.000 N/A N/A
o End of period $ 11.896 N/A N/A
Number of accumulation units N/A N/A
o End of period 230,004 N/A N/A
- -----------------------------------------------------------------------------------
MFS Utilities Series Sub-Account** N/A N/A
Accumulation unit value N/A N/A
o Beginning of period $ 10.000 N/A N/A
o End of period $ 11.672 N/A N/A
Number of accumulation units N/A N/A
o End of period 324,448 N/A N/A
- -----------------------------------------------------------------------------------
Oppenheimer Bond Sub-account*
Accumulation unit value
o Beginning of period $ 10.915 $ 10.223 10.000
o End of period $ 11.449 $ 10.915 10.223
Number of accumulation units
o End of period 336,679 151,322 10,568
- -----------------------------------------------------------------------------------
Oppenheimer Strategic Bond Sub-Account** N/A N/A
Accumulation unit value N/A N/A
o Beginning of period $ 10.000 N/A N/A
o End of period $ 9.989 N/A N/A
Number of accumulation units N/A N/A
o End of period 134,573 N/A N/A
- -----------------------------------------------------------------------------------
VIP Equity-Income Sub-account** N/A N/A
Accumulation unit value N/A N/A
o Beginning of period $ 10.000 N/A N/A
o End of period $ 11.296 N/A N/A
Number of accumulation units N/A N/A
o End of period 425,663 N/A N/A
- -----------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------------
<S> <C> <C> <C>
VIP II Contrafund Sub-Account** N/A N/A
Accumulation unit value N/A N/A
o Beginning of period $ 10.000 N/A N/A
o End of period $ 12.355 N/A N/A
Number of accumulation units N/A N/A
o End of period 254,379 N/A N/A
- -----------------------------------------------------------------
VIP II Index 500 Sub-Account** N/A N/A
Accumulation unit value N/A N/A
o Beginning of period $ 10.000 N/A N/A
o End of period $ 12.926 N/A N/A
Number of accumulation units N/A N/A
o End of period 736,865 N/A N/A
- -----------------------------------------------------------------
VIP Growth Sub-Account** N/A N/A
Accumulation unit value N/A N/A
o Beginning of period $ 10.000 N/A N/A
o End of period $ 13.095 N/A N/A
Number of accumulation units N/A N/A
o End of period 335,670 N/A N/A
- -----------------------------------------------------------------
</TABLE>
* On December 5, 1997, the Company substituted shares of various Portfolios of
the Jefferson Pilot Variable Fund, Inc. and the Oppenheimer Bond Fund for the
then existing shares of the Alexander Hamilton Variable Insurance Trust
("AHVIT") and the Federated Prime Money Fund II. The above numbers reflect
the performance of the AHVIT and the Federated Prime Money Fund II for the
period prior to the date of the substitution and reflect the performance of
the Jefferson Pilot Variable Fund, Inc. and the Oppenheimer Bond Fund for the
period after the date of the substitution. In the substitution, the
Oppenheimer Bond Fund was substituted for two of the AHVIT Funds and the
pre-substitution performance numbers for the Oppenheimer Bond Sub-Account
reflect the performance of only one of such AHVIT Funds.
** These Sub-accounts were added to the contract as of January 1, 1998.
[arrow] INVESTMENT OPTIONS
You may allocate your Premium Payments to the 18 Variable Sub-accounts of the
Separate Account, to the two Interest Rate Guarantee Periods of the Capital
Developer Account, or to a combination of these Investment Options. These
Investment Options may not be available in all states. However, over the life
of your Contract, you are currently limited to allocating your Premium Payments
to no more than 16 of the Variable Sub-accounts in existence now or in the
future. The Company reserves the right to modify this limitation in the future.
There is no guaranteed or minimum Surrender Value for any Premium Payments or
amounts allocated to any Variable Sub-account.
Separate Account Investments
The Separate Account currently is divided into 18 Variable Sub-accounts. We
reserve the right to add or remove Variable Sub-accounts. Each Variable
Sub-account reflects the investment performance of a specific underlying Fund.
Currently, ten Sub-accounts invest in shares of the Jefferson Pilot Funds, four
Sub-accounts invest in shares of the VIP Portfolios, two Sub-accounts invest in
shares of the MFS Funds and two Sub-accounts invest in shares of the
Oppenheimer Funds. JPVF, the VIP Funds, MFS Variable Insurance Trust and
Oppenheimer Variable Account Funds are open-end management investment companies
and, with the exception of the MFS Utilities Fund and JPVF International Equity
Portfolio, all of the Funds available under the Contracts are diversified. Each
Fund is managed by a registered investment adviser.
The investment adviser for JPVF is Jefferson Pilot Investment Advisory
Corporation (formerly known as "Chubb Investment Advisory Corporation"), One
Granite Place, Concord, New Hampshire, 03301. Jefferson Pilot Investment
Advisory Corporation has contracted with seven unaffiliated companies,
Templeton Global Advisors, Limited, Lord Abbett & Company, Janus Capital
Corporation, Warburg Pincus Asset Management Inc. (formerly known as "Warburg,
Pincus Counsellors, Inc."), Lombard Odier International Portfolio Management,
Limited, Strong Capital Management, Inc. and Massachusetts Financial Services
Company to act as sub-investment
14
<PAGE>
managers to the Jefferson Pilot Funds. These sub-investment managers are shown
in the table below.
The investment adviser for the VIP Funds is Fidelity Management & Research
Company ("FMR"), 82 Devonshire Street, Boston, Massachusetts. For certain of
the VIP Portfolios FMR has entered into sub-advisory agreements with affiliated
companies.
The investment adviser for the MFS Variable Insurance Trust is Massachusetts
Financial Services Company ("MFS").
The investment adviser for the Oppenheimer Variable Account Funds is
OppenheimerFunds, Inc.
The investment objective of each Fund is as follows:
<TABLE>
<CAPTION>
EQUITY PORTFOLIO CHOICES
- ----------------------------------------------------------------------------------------------------------------------------
Fund Name Objective Manager
<S> <C> <C>
JPVF Growth Capital growth by investing primarily in equity securities that the Sub- Strong Capital
Portfolio Investment Manager believes have above-Management, Inc. average growth Management, Inc.
prospects.
- ----------------------------------------------------------------------------------------------------------------------------
JPVF Long-term growth of capital through investments in securities whose Lombard Odier
International primary trading markets are outside the United States. International Portfolio
Equity Portfolio Management Limited
- ----------------------------------------------------------------------------------------------------------------------------
JPVF Capital Seeks capital growth. Realization of income is not a significant investment Janus Capital
Growth consideration and any income realized will be incidental. Corporation
Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
JPVF Small Seeks growth of capital. The Portfolio pursues its objective by investing Lord Abbett & Company
Company primarily in a diversified portfolio of equity securities issued by small
Portfolio companies.
- ----------------------------------------------------------------------------------------------------------------------------
JPVF Emerging Long-term growth of capital. Dividend and interest income from portfolio MFS
Growth Portfolio securities, if any, is incidental to the Portfolio's investment objective of
long-term growth.
- ----------------------------------------------------------------------------------------------------------------------------
JPVF World Long-term capital growth through a policy of investing primarily in stocks of Templeton Global
Growth companies organized in the U.S. or in any foreign nation. A portion of the Advisors, Limited
Stock Portfolio Portfolio may also be invested in debt obligations of companies and
governments of any nation. Any income realized will be incidental.
- ----------------------------------------------------------------------------------------------------------------------------
MFS Research Seeks to provide long-term growth of capital and future income. MFS
- ----------------------------------------------------------------------------------------------------------------------------
MFS Utilities Seeks capital growth and current income (income above that available from MFS
a portfolio invested entirely in equity securities).
- ----------------------------------------------------------------------------------------------------------------------------
VIP Growth Seeks to achieve capital appreciation. FMR
Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
VIP II Contrafund Seeks long-term capital appreciation. FMR
Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
VIP II Index 500 Seeks investment results that correspond to the total return of common FMR
Portfolio stocks publicly traded in the United States, as represented by the S&P 500.
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
EQUITY AND FIXED-INCOME PORTFOLIO CHOICES
- ----------------------------------------------------------------------------------------------------------------------------
Fund Name Objective Manager
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
JPVF Balanced Reasonable current income and long-term capital growth, consistent with Janus Capital
Portfolio conservation of capital, by investing primarily in common stocks and fixed Corporation
income securities.
- ----------------------------------------------------------------------------------------------------------------------------
JPVF Growth and Long-term growth of capital by investing primarily in a wide range of equity Warburg Pincus Asset
Income Portfolio issues that may offer capital appreciation and, secondarily, to seek a Management, Inc.
reasonable level of current income.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
FIXED INCOME PORTFOLIO CHOICES
- ----------------------------------------------------------------------------------------------------------------------------
Fund Name Objective Manager
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
VIP Equity- Seeks reasonable income by investing primarily in income-producing equity FMR
Income Portfolio securities. In choosing these securities the fund will also consider the
potential for capital appreciation. The fund's goal is to achieve a yield which
exceeds the composite yield on the securities comprising the Standard &
Poor's Composite Index of 500 Stocks (S&P 500).
- ----------------------------------------------------------------------------------------------------------------------------
JPVF High High level of current income by investing primarily in corporate obligations MFS
Yield Bond with emphasis on higher yielding, higher risk, lower-rated or unrated
Portfolio securities.
- ----------------------------------------------------------------------------------------------------------------------------
JPVF Money Seeks to achieve as high a level of current income as is consistent with MFS
Market preservation of capital and liquidity.
Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Seeks a high level of current income. As a secondary objective, seeks capital OppenheimerFunds, Inc.
Bond Fund growth when consistent with its primary objective.
- ----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Seeks a high level of current income principally derived from interest on debt OppenheimerFund, Inc.
Strategic Bond securities and to enhance such income by writing covered call options on
Fund debt securities.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
An investment in the JPVF Money Market Portfolio is neither insured nor
guaranteed by the U.S. Government or the FDIC or any other agency.
* * *
We do not promise that the Funds will meet their investment objectives. Amounts
you have allocated to Sub-accounts may grow in value, decline in value, or grow
less than you expect, depending on the investment performance of the Funds in
which those Sub-accounts invest. You bear the investment risk that those Funds
will not meet their investment objectives. You should carefully review their
prospectuses before allocating amounts to the Sub-accounts of the Separate
Account. With regard to the JPVF High Yield Bond Portfolio and other Funds
investing in higher yielding, higher risk, lower-rated or unrated securities,
you should consult the appropriate section of the corresponding prospectus for
a description of the risks associated with such investments.
On December 5, 1997, the Company and the Separate Account, pursuant to an Order
issued by the Securities and Exchange Commission, substituted shares of the
various investment portfolios of the Jefferson Pilot Funds and of the
Oppenheimer Bond Fund of Oppenheimer Variable Account Funds for shares of
various investment funds of the Alexander Hamilton Variable Insurance Trust and
the Federated Prime Money Fund II of Federated Insurance Series.
Mixed and Shared Funding: Conflicts of Interest
Shares of the Funds are available to insurance company separate accounts which
fund variable annuity contracts and variable life insurance policies, including
the Contract described in the Prospectus. Because Fund shares are offered to
separate accounts of both affiliated and unaffiliated insurance companies, it
is conceivable that, in the future, it may not be advantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in these Funds simultaneously, since the interests of such policyowners
or contract owner may differ. Although neither the Company nor the Funds
currently foresees any such disadvantages either to variable life insurance
policyowners or to variable annuity contract owners, each Fund's Board of
Trustees/Directors has agreed to monitor events in order to identify any
material irreconcilable conflicts which may possibly arise and to determine
what action, if any, should be taken in response thereto. If such a conflict
were to occur, one of the separate accounts might withdraw its investment in a
Fund. This might force that Fund to sell portfolio securities at
disadvantageous prices.
The Capital Developer Account
Premium Payments allocated to the Capital Developer Account and transfers to
the Capital Developer Account are not part of the Separate Account. Rather, the
Capital Developer Account is guaranteed by the general account of the Company,
which supports insurance and annuity obligations. Interests in
16
<PAGE>
the Capital Developer Account have not been registered with the SEC in reliance
upon exemptions under the Securities Act of 1933 and the Capital Developer
Account has not been registered as an investment company under the Investment
Company Act of 1940. However, disclosures regarding the Capital Developer
Account may be subject to certain generally applicable provisions of the
Federal securities laws relating to the accuracy and completeness of statements
made in prospectuses. Disclosure in this Prospectus relating to the Capital
Developer Account has not been reviewed by the SEC.
Within the Capital Developer Account, we offer two Interest Rate Guarantee
Periods, lasting for one and seven years. We will credit interest at a
specified Guaranteed Interest Rate on Premium Payments you allocate and amounts
you transfer to the Capital Developer Account. Amounts you allocate to the
Capital Developer Account may be subject to a Market Value Adjustment upon a
Surrender, Partial Withdrawal, Transfer or annuitization requested more than 30
days prior to the end of the Interest Rate Guarantee Period. The Market Value
Adjustment will never reduce the return on amounts allocated to the Capital
Developer Account to less than 3% per year before any applicable Surrender
Charge. Because of this adjustment and for other reasons, the amount you
receive upon Partial Withdrawal or Surrender or the amount applied to a
transfer or annuitization may be more or less than the Capital Developer
Account Value at the time of transaction.
You may elect to have your Premium Payments allocated to the Interest Rate
Guarantee Periods at any time. In addition, you may transfer all or part of the
Separate Account Value to one or more of the Interest Rate Guarantee Periods
prior to the Maturity Date.
Contract Value in the Interest Rate Guarantee Periods will not share in the
investment performance of our general account or any portion thereof. Instead,
we will pay a specified rate of interest, the Guaranteed Interest Rate, for
each Interest Rate Guarantee Period. The interest rate credited to each
Interest Rate Guarantee Period will vary in our sole discretion, but it will
never be less than 3% annually. There is no specific formula for the
determination of the Guaranteed Interest Rate. Some of the factors that we may
consider in determining the Guaranteed Interest Rate are: general economic
trends; rates of return currently available and anticipated on our investments;
expected investment yields; regulatory and tax requirements; and competitive
factors. We reset this rate periodically. We currently reset the rate
bi-weekly, but in the future the rate may be reset more or less frequently. Due
to the Market Value Adjustment and Surrender Charge, you assume the risk that
the Surrender Value of amounts allocated to the Capital Developer Account (or
the proceeds of a transfer or amount annuitized) will be less than the Capital
Developer Account Value.
We will invest the assets that support the Capital Developer Account in those
assets chosen by us and allowed by applicable state laws regarding the nature
and quality of investments that may be made by life insurance companies and the
percentage of their assets that may be committed to any particular type of
investment. In general, these laws permit investments, within specified limits
and subject to certain qualifications, in federal, state and municipal
obligations, corporate bonds, preferred and common stocks, real estate
mortgages, real estate and certain other investments.
Market Value Adjustment
The proceeds of a Partial Withdrawal, Full Surrender, or Transfer made from an
Interest Rate Guarantee Period of the Capital Developer Account 31 days or more
prior to the end of the Interest Rate Guarantee Period will be increased or
decreased by the application of the Market Value Adjustment. Where applicable,
the Market Value Adjustment is applied to the Capital Developer Account Value.
No Market Value Adjustment is applied to any Partial Withdrawal, Surrender or
Transfer from an Interest Rate Guarantee Period made during the last 30 days of
the Interest Rate Guarantee Period. In addition, no Market Value Adjustment
will apply to Transfers from the One Year Interest Rate Guarantee Period of the
Capital Developer Account under the Dollar Cost Averaging program.
The Market Value Adjustment will reflect the relationship between (a) the
Treasury Rate for the period, the term to maturity of which most closely
approximates the duration remaining in the Interest Rate Guarantee Period from
which the Partial Withdrawal, Surrender, or transfer is made, and (b) the
Guaranteed Interest Rate applicable to the Interest Rate Guarantee Period from
which the Partial Withdrawal, Surrender, or Transfer is made at the time of the
transaction.
Generally, if your Guaranteed Interest Rate does not exceed the applicable
Treasury Rate by at least
17
<PAGE>
0.4%, then the application of the Market Value Adjustment will reduce the
proceeds of a Partial Withdrawal, Surrender or transfer. Similarly, if your
Guaranteed Interest Rate exceeds the applicable Treasury Rate by more than
0.4%, the application of the Market Value Adjustment will increase the proceeds
of a Partial Withdrawal, Surrender, or transfer.
For example, assume that a Contract Owner selects an initial Interest Rate
Guarantee Period of seven years and the Guaranteed Interest Rate for that
duration is 8% per annum, and, at the end of four years, the Contract Owner
makes a Partial Withdrawal. If the three year Treasury Rate is then 6%, the
Market Value Adjustment will be positive and will increase the proceeds. On the
other hand, if the Treasury Rate is higher than the Guaranteed Interest Rate,
for example 10%, the application of the Market Value Adjustment will cause a
decrease in the amount payable.
The formula for calculating the Market Value Adjustment is set forth in
Appendix II to this Prospectus, which contains illustrations of the application
of the Market Value Adjustment.
The Market Value Adjustment will never reduce the return on amounts allocated
to the Capital Developer Account below three percent per year.
[arrow] THE ALLEGIANCE VARIABLE ANNUITY CONTRACT
The Allegiance Variable Annuity Contract (the "Contract") is an individual
Flexible Premium Multi-Funded Deferred Variable Annuity Contract. You may
purchase the Contract on a non-qualified basis ("Non-qualified Contract"). You
may also purchase the Contract in connection with retirement plans or
individual retirement accounts that qualify for favorable federal income tax
treatment ("Qualified Contract"). The Contract is designed to aid you in long-
term financial planning.
Contract Application and Issuance of Contracts
Before we will issue a Contract, we must receive a completed Application and an
initial Premium Payment of at least $2,000 (although a lower minimum may apply
to certain Qualified Contracts). You may pay the initial Premium Payment in a
single payment or in twelve equal systematic payments over the first 12
Contract Months. The systematic payments must be made via automatic debits or
automated clearing house transfers from your checking or savings account. We
reserve the right to reject any Application or Premium Payment. For a
Non-qualified Contract, you (or the Annuitant, if you are not the Annuitant)
must be age 90 or younger. You must be age 80 or younger for certain types of
Qualified Contracts. The Contract is not available in all states.
If you properly complete the Application and it can be accepted in the form
received, your initial Net Premium Payment will be credited to the Contract
Value within 2 business days after the later of our receipt of the Application
or our receipt of the initial Premium Payment at our Variable Annuity Service
Center. If we cannot credit the initial Net Premium Payment to the Separate
Account because the Application or other issuing requirements are incomplete,
we will contact you within 5 business days and give an explanation for the
delay. We will return the initial Premium Payment to you at that time unless
you permit us to keep the initial Premium Payment and credit it as soon as the
necessary requirements are fulfilled. In that event, we will credit the initial
Net Premium Payment to the Contract Value within 2 business days of the
Application's completion.
Your Contract will become effective on the date we credit the initial Net
Premium Payment to the Contract Value.
Free Look Period. You have a limited time period in which to return your
Contract for cancellation and receive a refund as described in your Contract.
This time period depends on the state in which your Contract is issued. In most
states, it is 10 days after you receive it. If your Contract replaces another
Contract, you have 20 days in which to cancel your Contract.
In order to cancel the Contract you must deliver or mail a written notice to
our Variable Annuity Service Center, or to your registered representative from
whom you purchased the Contract, and return the Contract. Such cancellation
will be effective upon being postmarked, properly addressed and postage paid.
The Contract will then be void as if it had never been issued.
The amount of your refund will depend on the state in which your Contract was
issued. In most states we will pay you an amount equal to the Contract Value on
the date we receive the Contract from you. We will not deduct any Surrender
Charges or administrative charges that would otherwise apply. The Contract
Value at that time may be more or less than your Premium Payments. In some
states we are required to refund your Premium Payments less any
18
<PAGE>
Partial Withdrawals you may have already made from your Contract. If your
Contract is issued in one of the states where we are required to refund your
Premium Payments, we will allocate any Premium Payments made prior to the
expiration of the free look period (plus 5 days to allow for mailing time) to
the JPVF Money Market Sub-account. Five days after the expiration of the free
look period, we will allocate your Premium Payments to the Variable
Sub-accounts in accordance with the instructions set forth in your application.
Premium Payments
You should make all Premium Payments, checks, or electronic fund transfers
payable to Alexander Hamilton Life Insurance Company of America and they should
be sent to our Variable Annuity Service Center. We will provide you a receipt
upon request. We will provide you with a confirmation of each transaction. Your
Premium Payments may be made directly on a flexible basis, through the
systematic investment program, on a monthly or quarterly basis, or through a
group billing or payroll deduction arrangement on a periodic basis.
Initial Premium Payment. The minimum initial Premium Payment is currently
$2,000 (although a lower minimum may apply to certain Qualified Contracts).
However, the minimum initial premium can be made in 12 equal monthly payments
when you have elected the systematic investment program for additional premiums
to be automatically withdrawn monthly from your bank account or when you are
part of a periodic group billing or payroll deduction arrangement. We reserve
the right to increase or decrease this amount for Contracts issued after some
future date. The initial Premium Payment is the only Premium Payment required
to be paid under a Contract. The maximum initial Premium Payment that we
currently accept without our prior approval is $1,000,000.
Additional Premium Payments. Prior to the Maturity Date and before a Death
Benefit has become payable, you may make additional Premium Payments at any
interval. The minimum additional Premium Payment under the Contract is $50. We
reserve the right to limit the dollar amount of any additional Premium
Payments. Total Premium Payments under the Contract may not exceed $1,000,000
without our prior approval. Additional Premium Payments will be credited to
Contract Value as of the Valuation Period during which they are received at our
Annuity Service Center.
Allocation of Premium Payments. Premium Payments will be allocated among the 18
Variable Sub-accounts as specified by you in the Application. If you fail to
specify how Premium Payments are to be allocated, the Application cannot be
accepted. You must allocate Premium Payments to one or more Variable
Sub-accounts of the Separate Account or to one or more Interest Rate Guarantee
Periods, or some combination thereof in whole percentages (totaling 100%). Any
allocation to a Variable Sub-account must be at least $50 and in increments of
5% of a Premium Payment. Any allocation to an Interest Rate Guarantee Period of
the Capital Developer Account must be at least $1,000. Premium Payments
allocated to an Interest Rate Guarantee Period will be credited with interest
from the day after they are received.
The allocation specified in the Application will continue to be used for
additional Premium Payments unless you request a change of allocation. You may
change the allocation instructions for Net Premium Payments any time before the
Maturity Date by sending a Request to our Variable Annuity Service Center. You
must specify your new allocation choices. The allocation change will apply to
Premium Payments received with or after the Request.
Payment Not Honored by Bank. Any payment due under the Contract which is
derived, all or in part, from any amount paid to us by check or draft may be
postponed until such time as we determine that such instrument has been
honored.
Contract Value
On the Contract Date, your Contract Value equals your initial Net Premium
Payment. Thereafter, on any day on or before your Maturity Date, your Contract
Value equals the sum of the Separate Account Value and the Capital Developer
Account Value. Your Contract Value will increase by (1) any additional Premium
Payments we receive; (2) any increases in the Contract Value due to investment
results of the Variable Sub-accounts you have selected; (3) interest credited
to the Capital Developer Account; and (4) any positive Market Value
Adjustments. Your Contract Value will decrease by (1) any Partial Withdrawals
or Full Surrenders, including applicable charges; (2) any decreases in your
Contract Value due to investment results of the Variable Sub-accounts you have
selected; (3) the Mortality and Expense Risk Charge, the Administrative Expense
Charge, any applicable Transfer
19
<PAGE>
Charge, and, on the last day of any Contract Year, the Annual Administrative
Fee; (4) any negative Market Value Adjustment; and (5) taxes, when applicable.
We will inform you of your Contract Value upon request.
Your Contract Value is expected to change from Valuation Period to Valuation
Period. A Valuation Period is the period between successive Valuation Days. A
Valuation Day is any day that the New York Stock Exchange is open for trading.
Holidays are generally not Valuation Days.
Separate Account Accumulation Unit Value. When you allocate a Net Premium
Payment or transfer an amount to a Variable Sub-account, it is credited to the
Separate Account Value in the form of Accumulation Units. Each Variable
Sub-account has a distinct Accumulation Unit value. The number of units
credited is determined by dividing the portion of the Net Premium Payment or
amount transferred by the dollar value of one Accumulation Unit of the Variable
Sub-account as of the end of the Valuation Period during which the allocation
or transfer is made. When amounts are transferred out of, or withdrawn or
surrendered from, a Variable Sub-account, Accumulation Units are cancelled or
redeemed in a similar manner.
We will determine the Separate Account Value on every Valuation Day. For each
Variable Sub-account, the Accumulation Unit value for a given Valuation Period
is based on the net asset value of a share of the corresponding Fund.
Therefore, the Accumulation Units will fluctuate in value from day to day based
on the investment experience of the corresponding Fund and the Separate Account
Value will increase or decrease to reflect the investment performance of the
corresponding Fund. The Separate Account Value also reflects expenses borne by
the Fund(s) and the deduction of certain charges. The determination of Variable
Sub-account Accumulation Unit values is described in detail in the Statement of
Additional Information.
Minimum Contract Value. A minimum Contract Value of $2,000 for Non-qualified
Contracts must be maintained during the Accumulation Period. If you fail to
maintain the minimum Contract Value and no Premium Payments have been made in
the past two years, then we may cancel the Contract and return the Contract
Value less any applicable fees to you in one lump sum. We will send a 90 day
notice to the most current address you have given us before we cancel your
contract. If you make sufficient Premium Payments to restore the Contract Value
to at least the minimum Contract Value within 90 days of the date of notice,
the Contract will not be cancelled.
Transfers
You can transfer Contract Value to or from Interest Rate Guarantee Periods of
the Capital Developer Account and/or any Variable Sub-account of the Separate
Account, within certain limits, as described below. We reserve the right to
restrict the transfer privilege in any way. We must receive your transfer
request at our Variable Annuity Service Center before a transfer will be
effected.
As a general rule, we only make transfers on days when we and the New York
Stock Exchange are open for business. If we receive your request on one of
those days, we will make the transfer on the first subsequent day on which we
and the New York Stock Exchange are open.
Transfers during the Accumulation Period are subject to the following
provisions:
[diamond] There is no limit to the number of transfers that can be made. No fee
is imposed on the first 15 transfers in each Contract Year during the
Accumulation Period, but a fee equal to $10 may be imposed for each
transfer in excess of 15 during any Contract Year. Although we reserve
the right to impose the $10 fee, we currently have no plans to do so.
[diamond] Transfers from an Interest Rate Guarantee Period that are made within
30 days of the end of the Interest Rate Guarantee Period are not
subject to a Market Value Adjustment. All other transfers from
Interest Rate Guarantee Periods are subject to a Market Value
Adjustment.
[diamond] If, after a transfer, the remaining Separate Account Value in the
Variable Sub-account from which the transfer was made would be less
than $250, we may include that remaining Separate Account Value as
part of the transfer.
[diamond] The minimum amount you may transfer among the Variable Sub-accounts is
$250 or the entire Separate Account Value remaining in the Investment
Option. The minimum amount that may be transferred to or from an
Interest Rate Guarantee Period of the Capital Developer Account is
$1,000.
During the Annuity Period, under any Variable Annuity Option, you (whether you
are the Annu-
20
<PAGE>
itant or not) may transfer Separate Account Value among Variable Sub-accounts,
subject to the following provisions:
[diamond] There is no limit to the number of transfers that can be made. No fee
is imposed on the first 15 transfers in each Contract Year during the
Annuity Period, but there may be a charge of $10 for each transfer in
excess of 15 during any Contract Year. We reserve the right to charge
the fee, however, we currently have no plans to do so. We will provide
at least 30 days notice of our intention to impose such fee.
[diamond] If, after a transfer, the remaining Separate Account Value in the
Variable Sub-account from which the transfer was made is less than
$250, we may include that remaining Separate Account Value as part of
the transfer.
[diamond] The minimum amount you may transfer from a Variable Sub-account is
$250 or the entire Separate Account Value remaining in the Variable
Sub-account.
Transfers between Variable Sub-accounts during the Annuity Period will be
processed based on the formula outlined in the Statement of Additional
Information (see "Annuity Period Transfer Formulas").
No transfers of amounts applied to a Fixed Annuity Option are permitted.
Telephone Transfers and Reallocations. You or your authorized representative
may request transfers by telephone of Contract Value or reallocation of Premium
Payments (including allocation changes pursuant to existing Dollar Cost
Averaging and Automatic Rebalancing programs), provided we have received the
appropriate authorization form. You will be asked to provide us with personal
identification information, such as social security number and date of birth,
at the time of such request for verification purposes. Although we have
procedures that are reasonably designed to reduce the risk of unauthorized
telephone transfers or allocation changes, there still exists some risk.
Neither the Company, Jefferson Pilot Variable Corporation, nor any of their
affiliates are liable for any loss resulting from unauthorized telephone
transfers or allocation changes if the procedures have been followed, and you
bear the risk of loss in such situation.
Dollar Cost Averaging
Under the Dollar Cost Averaging program, you can instruct us to automatically
transfer a specified dollar amount from any Variable Sub-account or the One
Year Interest Rate Guarantee Period of the Capital Developer Account to the
Variable Sub-accounts or the One Year Interest Rate Guarantee Period. The
program is not available in connection with the Seven Year Interest Rate
Guarantee Period of the Capital Developer Account. The automatic transfers can
occur monthly or quarterly, and the amount transferred each time must be at
least $50. At the time the program begins, your Contract must have a minimum
value of $5,000. Automatic transfers from the One Year Interest Rate Guarantee
Period of the Capital Developer Account taken under the Dollar Cost Averaging
program will not be subject to a Market Value Adjustment.
Dollar Cost Averaging, a long-term investment method which provides for
regular, level investments over time, results in the purchase of more
Accumulation Units when the Accumulation Unit Value is low, and fewer
Accumulation Units when the Accumulation Unit Value is high. However, there is
no guarantee that the Dollar Cost Averaging program will result in a higher
Contract Value, protect against loss, or otherwise be successful.
You can elect the Dollar Cost Averaging program when purchasing the Contract or
at a later date. The election can specify that only a certain number of
transfers will be made, in which case the program will terminate when that
number of transfers has been made. Otherwise, the program will terminate when
the amount in the Variable Sub-account or the One Year Interest Rate Guarantee
Period of the Capital Developer Account, as applicable, equals $250 or less.
There is no charge for this program. Transfers made as part of the Dollar Cost
Averaging program do not count toward the 15 free transfers that you are
permitted annually under the Contract.
Automatic Rebalancing
An automatic rebalancing program is also available to you. This program
provides a method for re-establishing fixed proportions between selected
Variable Sub-accounts on a systematic basis. Under this program, the allocation
between Variable Sub-accounts will be automatically readjusted to the desired
allocation, subject to a minimum of 5% per Variable Sub-account, on a quarterly
or annual basis. Transfers made as a result of this program do not count toward
the 15 free transfers that you are permitted annually under the Contract. There
is currently no fee charged for participation in this program. This program
does not guarantee profits nor protect against losses.
21
<PAGE>
You may not elect to have Dollar Cost Averaging and Automatic Rebalancing at
the same time. The applicable authorization form must be on file with us before
either program may begin. We reserve the right to modify the terms and
conditions of these programs upon 30 days advance notice to you.
[arrow] DISTRIBUTIONS UNDER THE CONTRACT
Surrenders and Partial Withdrawals
Prior to the Maturity Date, you may surrender all (a "Surrender" or "Full
Surrender") or withdraw a portion (a "Partial Withdrawal") of the Surrender
Value in exchange for a cash payment from us by sending a Request, signed by
you, to our Variable Annuity Service Center. The Surrender Value is the
Contract Value plus or minus any Market Value Adjustment minus any applicable
Surrender Charge, Annual Administrative Fee, and any applicable Premium Taxes.
The proceeds payable upon a Partial Withdrawal will be the Partial Withdrawal
amount requested, increased or decreased by applicable Market Value Adjustment
and then decreased by any applicable Surrender Charge. For Partial Withdrawals,
you must specify the Investment Option from which the withdrawal should be
taken. If we do not receive allocation instructions from you, we will allocate
the Partial Withdrawal proportionately among the Sub-accounts and the Capital
Developer Account in the same proportions as you have instructed us to allocate
your Premium Payments.
No Market Value Adjustment is imposed on Surrenders or Partial Withdrawals made
from an Interest Rate Guarantee Period during the last 30 days of the Interest
Rate Guarantee Period.
The minimum amount that you can withdraw is $250 ($1,000 if the withdrawal is
from any Guaranteed Interest Period of the Capital Developer Account) unless we
agree otherwise or unless a smaller amount is required to comply with the Code.
Qualified Contracts may be subject to required minimum distribution
requirements. (See "Certain Federal Income Tax Consequences.") In addition,
following any Partial Withdrawal, your remaining Contract Value must be at
least $2,000. If the processing of your Partial Withdrawal request would result
in a remaining Contract Value of less than $2,000, we may treat your Partial
Withdrawal request as a request for a Full Surrender of your Contract, and you
will receive the Surrender Value. Following payment of the Surrender Value,
your Contract will be cancelled. If the amount requested to be withdrawn or
surrendered from an Investment Option is greater than the Contract Value of
that Investment Option, we will pay you the entire Contract Value of that
Investment Option, plus or minus any Market Value Adjustment, minus any
Surrender Charge and minus any Annual Administrative Fee and any charge for
applicable Premium Taxes that may apply.
The Separate Account Value remaining in any Variable Sub-account immediately
following a Partial Withdrawal must be at least $250. The Capital Developer
Account Value remaining in an Interest Rate Guarantee Period immediately
following a Partial Withdrawal must be at least $1,000. If the processing of
your withdrawal request would result in Separate Account Value remaining in a
Variable Sub-account of less than $250 or Capital Developer Account Value
remaining in an Interest Rate Guarantee Period of less than $1,000, we may
treat your withdrawal request as a request for withdrawal of the entire
Separate Account Value remaining in the relevant Variable Sub-account or the
entire Capital Developer Account Value remaining in the relevant Interest Rate
Guarantee Period.
You may Surrender the Contract at any time prior to the Maturity Date by
sending a Request to our Variable Annuity Service Center. All of your rights
and those of the Annuitant will terminate following a Full Surrender or at any
time Partial Withdrawals reduce your Contract Value to zero. After the Maturity
Date, no Surrenders or Partial Withdrawals are permitted. (See "Annuity Payment
Options.")
Withdrawals and Surrenders will be processed using the Separate Account Value
for the Valuation Period during which your Request for Withdrawal or Surrender
is received at our Variable Annuity Service Center. We will pay all Partial
Withdrawals and Full Surrender requests to you or to any other Payee that you
designate within 5 business days (unless you choose a later date) following
receipt of your request and all requirements necessary to process the Request
at our Variable Annuity Service Center, except as follows:
[diamond] Capital Developer Account--We reserve the right, when permitted by
law, to defer payment of any Partial Withdrawal or Full Surrender from
the Interest Rate Guarantee Periods for up to 6 months. We will pay
Interest on any amount deferred for 30 days or more at a rate of at
least 3.0% per year.
22
<PAGE>
[diamond] Separate Account--We reserve the right to defer the payment of any
Partial Withdrawal or Full Surrender from the Separate Account as
permitted by the Investment Company Act of 1940. Such delay may occur
because (i) the New York Stock Exchange is closed for trading (other
than usual weekend or holiday closing); (ii) the SEC determines that a
state of emergency exists; or (iii) an order or pronouncement of the
SEC permits a delay for your protection.
In addition, a Premium Payment amount is not available to satisfy a Partial
Withdrawal or Full Surrender until the check or other instrument by which such
Premium Payment was made has been honored.
Partial Withdrawals (including systematic withdrawals described below) and
Surrenders may be taxable and a penalty tax may apply prior to age 59-1/2.
(See "Certain Federal Income Tax Consequences.")
Systematic Withdrawal Plan
Under the Systematic Withdrawal Plan, you can instruct us to make automatic
withdrawal payments to you monthly, quarterly, semi-annually or annually from a
specified Variable Sub-account. The minimum monthly payment is $250, the
minimum quarterly payment is $750, the minimum semi-annual payment is $1,500,
and the minimum annual payment is $3,000, or the amounts can be the minimum
required amounts to comply with qualified plan requirements. The request for
systematic withdrawal must specify a date for the first payment, which must be
at least 30 but not more than 90 days after the form is submitted. The
Surrender Charge will not apply to the first 10% of Contract Value (determined
at the time of the Withdrawal) that is withdrawn during a Contract Year.
Amounts withdrawn in excess of 10% will be subject to any applicable Surrender
Charge. After the seventh Contract Year, amounts withdrawn will no longer be
subject to a Surrender Charge. Systematic Withdrawals may not be taken from the
Interest Rate Guarantee Periods. Systematic Withdrawals may result in certain
tax consequences. (See "Certain Federal Income Tax Consequences.")
Annuity Payments
We will make Annuity Payments beginning on the Maturity Date, provided that the
Contract is in force on that date. The Annuity Payment Option and frequency of
Annuity Payments may not be changed after Annuity Payments begin. Unless you
specify otherwise, the Payee of the Annuity Payments is the Annuitant. The
dollar amount of the payments will depend on numerous factors including the
Contract Value on the Maturity Date, the type of Annuity and Annuity Payment
Option you elected, the frequency of payments you elected, and possibly the age
of the Annuitant on the Maturity Date.
Maturity Date. Initially, you select the Maturity Date at the time the
Application is completed. You may change the Maturity Date from time-to-time,
by submitting a Request to us, provided that notice of each change is received
by our Variable Annuity Service Center at least 30 days prior to the
then-current Maturity Date along with the written consent of any irrevocable
Beneficiaries. The latest Maturity Date which may be elected for a
Non-qualified Contract, unless otherwise consented to by the Company, is the
Annuitant's 85th birthday or the tenth Contract anniversary (whichever is
later) and for a Qualified Contract, the date the Annuitant attains age 701/2,
unless you demonstrate that the minimum required distribution under the Code is
being made. If you do not select a Maturity Date, the Maturity Date will be the
Annuitant's 85th birthday (for a Non-qualified Contract) or the date the
Annuitant attains age 701/2 (for a Qualified Contract).
Election of Annuity Payment Option. During your lifetime and that of the
Annuitant and prior to the Maturity Date, you may choose an Annuity Payment
Option. You may change the option, but a Request specifying a change of option
and the written consent of any irrevocable Beneficiary must be received by our
Variable Annuity Service Center at least 30 days prior to the Maturity Date. If
no election is made at least 30 days prior to the Maturity Date, Annuity
Payments will be made as an annuity for the Annuitant's life with Annuity
Payments guaranteed for 10 years. (See "Annuity Payment Options," below.) You
may not change the Annuity Payment Option after the Maturity Date.
If the Maturity Date is in the first seven Contract Years and if an Annuity
Payment Option of less than five years is elected, then the surrender charge
will be deducted.
Taxes. All or part of each Annuity Payment will be taxable. (See "Certain
Federal Income Tax Consequences.") We may be required by state law to pay a
Premium Tax on the amount applied to an Annuity Payment Option and we will
deduct a charge for the amount of any such Premium Taxes.
23
<PAGE>
Annuity Payment Options
The Contract provides four Annuity Payment Options which are described below.
Three of these are offered as either a fixed annuity or a variable annuity
(Option I is only available as a fixed annuity). You may elect a fixed annuity,
a variable annuity, or a combination of both. If you elect a combination, you
must specify what part of the Contract Value is to be applied to the Fixed and
Variable Payment Options. Unless you specify otherwise, the Capital Developer
Account Value will be used to provide a fixed annuity and the Separate Account
Value will be used to provide a variable annuity. Variable Annuity Payments
will be based on the Variable Sub-account(s) that you select, or on the
allocation of the Separate Account Value among the Variable Sub-accounts.
If the amount of the Annuity Payments will depend on the age of the Annuitant,
we reserve the right to ask for satisfactory proof of the Annuitant's age. If
Annuity Payments are contingent upon the survival of the Annuitant, we may
require evidence satisfactory to us that such Annuitant is living. We may delay
making Annuity Payments until satisfactory proof is received.
On the Maturity Date, the sum of (i) the Capital Developer Account Value and
(ii) the Separate Account Value, plus or minus (iii) any Market Value
Adjustment, minus (iv) any applicable Surrender Charge, minus (v) any Premium
Tax, will be applied to provide for Annuity Payments under the selected Annuity
Payment Option.
A fixed annuity provides for Annuity Payments which will remain constant
pursuant to the terms of the Annuity Payment Option elected. The effect of
choosing a fixed annuity is that the amount of each payment will be set on the
Maturity Date and will not change. If a fixed annuity is selected, the Separate
Account Value used to provide the fixed annuity will be transferred to the
general assets of the Company, and may become subject to the claims of the
Company's third party creditors. The Annuity Payments will be fixed in amount
by the fixed annuity provisions selected and, for some options, the age of the
Annuitant. The fixed annuity payment amounts are determined by applying the
annuity purchase rate specified in the Contract to the portion of the Contract
Value allocated to the Fixed Annuity Option that you select. However, if the
Company's annuity purchase rates in effect on the Maturity Date would result in
higher Annuity Payments, then those more favorable rates will be used.
A variable annuity provides for payments that fluctuate or vary in dollar
amount, based on the investment performance of your selected allocations to one
or more Variable Sub-accounts. The variable annuity purchase rate tables in the
Contract reflect an assumed interest rate of 3.0%, so if the actual net
investment performance of the Variable Sub-account is less than this rate, then
the dollar amount of the actual Variable Annuity Payments will decrease. If the
actual net investment performance of the Variable Sub-account is higher than
this rate, then the dollar amount of the actual Variable Annuity Payments will
increase. If the net investment performance exactly equals the 3.0% rate, then
the dollar amount of the actual Variable Annuity Payments will remain constant.
You should consult the Statement of Additional Information for more detailed
infor-mation as to how we determine Variable Annuity Payments.
You may choose to receive Annuity Payments under any one of the Annuity Payment
Options described below. In addition, we may consent to other plans of payment
before the Maturity Date. Additionally, you may also elect to receive the
Contract Value less any applicable Surrender Charge as of the Maturity Date in
a lump sum payment.
Note Carefully: Under Annuity Payment Options II and III it would be possible
for only one Annuity Payment to be made if the Annuitant(s) were to die before
the due date of the second Annuity Payment; only two Annuity Payments if the
Annuitant(s) were to die before the due date of the third Annuity Payment; and
so forth.
The following Annuity Options are available:
Annuity Payment Option I--Income for Specified Period (Available as a Fixed
Annuity Payment Option only)--We make Periodic Payments for the period you have
chosen. The specified period must be at least 5 years and cannot be more than
30 years.
Annuity Payment Option II--Life Income--We make payments for as long as the
Annuitant lives with optional guaranteed periods (Life Income with Period
Certain). If the Annuitant dies before all of the guaranteed payments have been
made, we will pay the remaining guaranteed payments to the Beneficiary.
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<PAGE>
Annuity Payment Option III--(1) Joint and Last Survivor Life Income
Payments--We make payments during the joint lifetime of two Annuitants,
continuing in the same amount during the lifetime of the surviving Annuitant;
or (2) Joint and 50% or 75% Survivor Annuity--Payments will be made during the
joint lifetime of two Annuitants, continuing during the lifetime of the
surviving Annuitant and will be computed on the basis of one-half or three-
fourths of the Annuity Payment (or units) in effect during the joint lifetime.
Annuity Payment Option IV--Special Income Settlement Agreement--The Company
will pay the proceeds in accordance with terms agreed upon in writing by you
and the Company.
During the Annuity Period, you may (whether or not you are the Annuitant), upon
Request, transfer a portion of any Variable Sub-account to another Variable
Sub-account within the Separate Account. (See "Transfers.") However, during the
Annuity Period, no Partial Withdrawals or Surrenders are permitted.
A portion or the entire amount of the Annuity Payments may be taxable as
ordinary income. If, at the time the Annuity Payments begin, we have not
received a proper written election not to have federal income taxes withheld,
we must by law withhold such taxes from the taxable portion of such annuity
payments and remit that amount to the federal government. (See "Certain Federal
Income Tax Consequences.")
Except as otherwise agreed to by you and the Company, Annuity Payments will be
payable monthly. If your Contract Value is less than $2,000 (or an amount that
would provide monthly Annuity Payments of less than $20 under any Annuity
Payment Option) on the Maturity Date, we will pay you a lump sum. We may
require proof from the Payee of the Annuitant's survival as a condition of
future payments.
In some states, the Contracts offered by this Prospectus contain annuity tables
that provide for different benefit payments to men and women of the same age.
We will use these sex-distinct tables, where permitted, for non-qualified
Contracts and IRAs. We will use unisex tables for Qualified Contracts (other
than IRAs). You may request a copy of these tables from us.
Death Benefit
Death of Contract Owner Prior to Maturity Date. If you die before the Maturity
Date, a Death Benefit will be paid to the Beneficiary, if living. The Death
Benefit is payable upon our receipt of Due Proof of Death, as well as proof
that the death occurred during the Accumulation Period. Upon our receipt of
this proof and an election of a Death Benefit Option and return of the
Contract, the Death Benefit generally will be payable after we have sufficient
information to make the Death Benefit payment(s). If an election by the
Beneficiary to receive Annuity Payments as described below under "Payment of
Death Benefit to Beneficiary" is not received by us within 90 days following
the date we receive Due Proof of Death, the Beneficiary will be deemed to have
elected to receive the Death Benefit in the form of a single cash payment on
such 90th day.
The determination of the Death Benefit depends upon your Issue Age (age when
the Contract was issued). If you die and your Issue Age is less than or equal
to age 75, the amount of the Death Benefit is equal to the greatest of:
(A) the sum of all Premium Payments less any "Adjusted Partial Withdrawals,"
with interest compounded at 4% per year (However, we will no longer credit
this interest beginning on the earlier of (1) the date of your death or (2)
the date you reach age 75);
(B) the Contract Value as of the most recent fifth Contract Anniversary
occurring while the you were living and before your age 75, plus any Premium
Payments and minus any "Adjusted Partial Withdrawals" made since that
Contract Anniversary; and
(C) the Contract Value as of the date we have sufficient information to make the
Death Benefit payment.
For purposes of (A), above, the Death Benefit will be calculated as of the date
of the Contract Owner's death but will never be greater than 200% of all
Premium Payments, less any Partial Withdrawals.)
The "Adjusted Partial Withdrawal" for each Partial Withdrawal is the product of
(a) times (b) where:
(a) is the ratio of the amount of the Partial Withdrawal to the Contract Value
on the date of (but immediately prior to) the Partial Withdrawal; and
(b) is the Death Benefit on the date of (but immediately prior to) the Partial
Withdrawal.
If you die and your Issue Age is greater than age 75, the amount of the Death
Benefit is equal to the
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<PAGE>
Contract Value on the date we receive Due Proof of Death, election of a payment
option, and return of the Contract.
If you are deemed a non-natural person (i.e., a trust or corporation) under
Section 72 of the Code, the Death Benefit is payable upon the death of the
primary Annuitant. The "primary Annuitant" is that individual whose life
affects the timing or amount of Annuity Payments under the Contract. The Death
Benefit in such situation is equal to the Contract Value on the date we have
received Due Proof of Death of the primary Annuitant, election of a payment
option, and return of the Contract.
Payment of the Death Benefit will be in full settlement of our liability under
the Contract, and the Contract will be cancelled on the date the Death Benefit
is determined and paid.
Death Benefit payments will be made in a lump sum or in accordance with your or
the Beneficiary's election, as described below. The Contract Value will be
calculated as of the date the we receive Due Proof of Death and all
requirements necessary to make the payment at our Variable Annuity Service
Center. The Contract will end on such date.
IRS Required Distribution. Federal tax law requires that if you die before the
Maturity Date, then the entire value of the Contract must generally be
distributed within five years of the date of your death. Special rules may
apply to your spouse. See "Federal Tax Matters," in the Statement of Additional
Information, for a detailed description of these rules. Other rules apply to
Qualified Contracts. (See "Certain Federal Income Tax Consequences.")
Death of Annuitant Prior to Maturity Date. If you are not the Annuitant and the
Annuitant dies prior to the Maturity Date, you may name a new Annuitant. If no
new Annuitant is named, you become the new Annuitant.
If you are a non-natural person (i.e., a trust or corporation) for purposes of
Code Section 72, then the primary Annuitant's death will be treated as the
death of the Contract Owner and will result in payment of the Contract Value.
(No enhanced Death Benefit will apply.)
Death of Annuitant on or After Maturity Date. If the Annuitant dies while there
are remaining guaranteed Annuity Payments to be made, we will continue to make
the remaining guaranteed Annuity Payments to only one of the following, in this
order: (1) the named Payee, if any and if living, (2) the Contract Owner, if
living, (3) the Beneficiary, if any and if living, and (4) the Contract Owner's
estate. Annuity Payments will be paid at least as rapidly as under the Annuity
Payment Option in effect at the time of death. However, the recipient of the
remaining Annuity Payments can elect to accelerate payment of the remaining
Annuity Payments. No amount will be payable to a Beneficiary under any Annuity
Payment Option if the Annuitant dies after all guaranteed Annuity Payments have
been made.
Death of Contract Owner on or After Maturity Date. If you die after the
Maturity Date and before the Annuitant, we will pay any remaining guaranteed
Annuity Payments to only one of the following, in this order: (1) any named
Payee, if living, (2) any joint Contract Owner, if living, (3) any Beneficiary,
if living, (4) the deceased Contract Owner's estate. Annuity Payments will be
paid at least as rapidly as under the Annuity Payment Option in effect at the
time of death.
Contract Owner's Spouse as Beneficiary. If you die and the Beneficiary is your
surviving spouse, your spouse may choose not to receive the Death Benefit and
may continue the Contract and become the Contract Owner. In this situation, if
you were also the Annuitant, your spouse will be the new Annuitant. If your
spouse chooses to continue the Contract, no Death Benefit will be paid because
of your death.
Payment of Death Benefit to Beneficiary. Instead of accepting the Death
Benefit, the Beneficiary (after your death) can choose by Request to receive
Annuity Payments based on his or her life expectancy. Payment under any payment
option must be for the life of the Beneficiary or for a number of years that is
not more than the life expectancy of the Beneficiary, at the time of your death
(as determined for federal tax purposes), and must begin within one year of
your death.
Beneficiary
You may name more than one Beneficiary in the Application. You may change a
Beneficiary by sending a Request, signed by you, to our Variable Annuity
Service Center. When the Variable Annuity Service Center records the change, it
will take effect as of the date we received your Request at our Variable
Annuity Service Center. You may designate the amount or percentage of the Death
Benefit that
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<PAGE>
each Beneficiary receives, either in the Application or by a Request, signed by
you. If you do not make such a designation, the Death Benefit will be paid in
equal shares to each Beneficiary. We will comply with all state and federal
laws requiring notification of the change in Beneficiary.
Change of Contract Owner
You may change the Contract Owner while the Annuitant is alive by sending a
Request to our Variable Annuity Service Center. The change will be effective on
the date we record the Request, but will be subject to any payment made or
action taken by us before recording the change. When the change takes effect,
all rights of ownership in the Contract will pass to the new Contract Owner.
Changing the Contract Owner does not change the Annuitant, or the Beneficiary.
Changing the Contract Owner may have tax implications (See "Certain Federal
Income Tax Consequences"). We will comply with all state and federal laws
requiring notification of the change in Contract Owner. The Annuitant named in
the Application cannot be changed unless that Annuitant dies prior to the
Maturity Date.
Restrictions Under the Texas Optional Retirement Program
Section 36.105 of the Texas Educational Code permits participants in the Texas
Optional Retirement Program ("ORP") to withdraw their interest in a variable
annuity contract issued under the ORP only upon: (1) termination of employment
in the Texas public institutions of higher education; (2) retirement; or (3)
death. Accordingly, if you are a participant in the ORP, you (or your estate if
you have died) will be required to obtain a certificate of termination from the
employer or a certificate of death before the Contract can be surrendered.
Restrictions Under Qualified Contracts
Other restrictions with respect to the election, commencement, or distribution
of benefits may apply under Qualified Contracts or under the terms of the plan
in respect of which Qualified Contracts are issued.
Restrictions Under Section 4O3(b) Plans
Section 403(b) of the Internal Revenue Code provides for tax-deferred
retirement savings plans for employees of certain non-profit and educational
organizations. In accordance with the requirements of Section 403(b), any
Contract used for a 403(b) plan will prohibit distributions of elective
contributions and earnings on elective contributions except upon death of the
employee, attainment of age 59-1/2, separation from service, disability, or
financial hardship. In addition, income attributable to elective contributions
may not be distributed in the case of hardship.
[arrow] CHARGES AND DEDUCTIONS
We will make certain charges and deductions under the Contract in order to
compensate us for incurring expenses in distributing the Contract, bearing
mortality and expense risks under the Contract, and administering the Separate
Account and the Contracts. The Company may also deduct charges for transfers,
Premium Taxes, and other federal, state or local taxes. In addition, certain
deductions are made from the assets of the Funds for management fees and
expenses.
Surrender Charge
We incur expenses relating to the sale of Contracts, including commissions to
registered representatives and other promotional expenses. The Surrender
Charge, which is a contingent deferred sales charge, is intended to allow as to
recoup these distribution expenses. In connection with a Partial Withdrawal,
Full Surrender, or an Annuity Payment Option of less than five years during the
first seven Contract Years, we will impose the Surrender Charge on the amount
withdrawn or surrendered, net of any Market Value Adjustment and before any
deductions for the Annual Administrative Fee or Premium Taxes. The Surrender
Charge is calculated as a percentage of the Contract Value withdrawn,
surrendered, or annuitized. The Surrender Charge schedule is as follows:
<TABLE>
<CAPTION>
Contract Year 1 2 3 4 5 6 7 8+
- ------------- - - - - - - - --
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Surrender Charge..... 6% 6% 6% 5% 4% 3% 2% 0%
</TABLE>
The Surrender Charge may not be applied under the following circumstances:
1. If you cancel the Contract during the free look period.
2. If you choose to annuitize the Contract after the first Contract Year and
you choose an Annuity Payment Option of longer than five years.
3. Payment of the Death Benefit.
4. On any Free Surrender Amount. (See below.)
5. To comply with the minimum distribution requirements of the Internal Revenue
Code.
6. If, after the Contract Date, you become confined to a hospital or a
state-licensed inpatient nursing
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care facility ("nursing care facility") and meet all of the following
conditions:
(a) You were not confined to a nursing care facility at any time on or
before the Contract Date;
(b) You have been confined to a nursing care facility for at least 30
consecutive days;
(c) It is medically necessary for you to be confined to the nursing care
facility; and
(d) You send us a Request for a Surrender or Partial Withdrawal along with
the Request for waiver of Surrender Charges while you are confined or
within 90 days after your discharge from such facility.
7. If You are diagnosed as suffering from an illness that reduces your life
expectancy to 12 months or less from the date of diagnosis, we reserve the
right to require, at our expense, a second opinion from a physician
acceptable to both of us.
We will tell you the amount of Surrender Charge that would be assessed upon a
Withdrawal or Surrender upon request. More information about how the Surrender
Charge is calculated for Partial Withdrawals and Full Surrenders is in Appendix
I. We may waive or reduce the Surrender Charge for Contracts sold to certain
groups (See "Reduction in Charges for Certain Groups.")
We anticipate that the Surrender Charge will not generate sufficient funds to
pay the cost of distributing the Contracts.
We guarantee that the aggregate surrender charge will never exceed 8.5% of the
total premium payments you make under the Contract.
Free Surrender Amount. We impose a Surrender Charge on partial withdrawals and
full surrenders (and certain annuitizations) in the first seven Contract Years.
However, you are entitled to withdraw up to 10% of the Contract Value each year
without a Surrender Charge. This free surrender amount is equal to 10% of the
Contract Value as of the date of the withdrawal, less the sum of free surrender
amounts previously taken during the Contract Year, and will not be less than
zero. Because the Contract Value may change from day to day, the free surrender
amount or any remaining portion thereof may increase or decrease on any day.
Any cumulative amount surrendered or withdrawn in excess of the annual free
surrender amount during one of the first seven Contract Years is subject to the
Surrender Charge, as applicable. Unused free surrender amounts cannot be
accumulated and carried from one Contract Year to the next. The free surrender
amount does not apply to amounts applied to an Annuity Payment Option.
Mortality and Expense Risk Charge
We impose a daily charge as compensation for bearing certain mortality and
expense risks in connection with the Contracts. This charge is 1.25% annually
of the daily value of net assets in each Variable Sub-Account. The Mortality
and Expense Risk Charge is reflected in the Accumulation Unit value or Annuity
Unit value for each Variable Sub-account. The Mortality and Expense Risk Charge
will not be deducted with respect to amounts held in the Capital Developer
Account.
Contract Values and Annuity Payments are not affected by changes in actual
mortality experience nor by actual expenses incurred by the Company. The
mortality risks we assume arise from our contractual obligations to make
Annuity Payments. Thus, you are assured that neither the Annuitant's own
longevity nor an unanticipated improvement in general life expectancy will
adversely affect the Annuity Payments that you will receive under the Contract.
We also bear substantial risk in connection with the Death Benefit. During the
Accumulation Period, if your Age is less than 75, we will pay a Death Benefit
that could be greater than the Contract Value. Otherwise, the Death Benefit is
based on the Contract Value. The Death Benefit is paid without imposition of a
Surrender Charge or application of the Market Value Adjustment.
The expense risk we assume is the risk that our actual expenses in
administering the Contract and the Separate Account will exceed the amount we
receive through the Annual Administrative Fee and the Administrative Expense
Charge.
Administrative Expense Charge
We deduct a daily charge equal to a percentage of the net assets in each
Variable Sub-account for administering the Separate Account. The effective
annual rate of this charge is 0.15% of the daily value of net asset in each
Variable Sub-account. We guarantee that the amount of this charge will not
increase. The Administrative Expense Charge does not apply to any amounts held
in the Capital Developer Account.
Annual Administrative Fee
In order to cover the cost of administering your Contract, we deduct an Annual
Administrative Fee
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<PAGE>
from the Contract Value of your Contract on the last day of each Contract Year
and upon Full Surrender of the Contract. This Annual Administrative Fee is the
lesser of $30 or 2% of Contract Value on the last day of the applicable
Contract Year. We guarantee that this fee will not increase. We do not
anticipate realizing any profit from this charge. The Annual Administrative Fee
will be deducted pro rata from your Investment Options in the same proportion
that the amount of your Contract Value in each Investment Option bears to your
total Contract Value. We will waive the Annual Administrative Fee if, on the
last day of that Contract Year, your Contract Value is $30,000 or greater or if
100% of your Contract Value is allocated to the Capital Developer Account. No
Annual Administrative Fee is deducted after the Maturity Date.
We may waive or reduce the Annual Administrative Fee for Contracts sold to
certain groups. (See "Reduction in Charges for Certain Groups.")
Transfer Charge
We may impose a fee equal to $10 for each Transfer in excess of 15 during any
Contract Year. Although we reserve the right to impose a $10 fee, we currently
have no plans to do so.
Premium Taxes
We may be required to pay Premium Taxes in certain states. Depending upon
applicable state law, we will deduct the Premium Taxes if we are required to
pay them. This may occur, for example, at the time you pay a premium, Surrender
the Contract or make a Partial Withdrawal or when the Contract reaches the
Maturity Date or a Death Benefit is paid. Premium Taxes may range from 0% to
3.5% of Premium Payments or Contract Value.
Federal, State and Local Taxes
No charges are currently made for federal, state, or local taxes other than
state Premium Taxes. However, we reserve the right to deduct charges in the
future for such taxes or other economic burden resulting from the application
of any tax laws that we determine to be attributable to the Contracts.
Other Expenses Including Investment Advisory Fees
You indirectly bear the charges and expenses of the Funds whose shares are held
by the Sub-accounts to which you allocate your Contract Value. The net assets
of each Fund will reflect deductions in connection with the investment advisory
fees and other expenses.
For more information concerning the investment advisory fees and other charges
against the Funds, see the prospectuses for the Funds, current copies of which
accompany this Prospectus.
Reduction in Charges for Certain Groups
The Company may reduce or eliminate the Annual Administrative Fee or Surrender
Charge on Contracts that have been sold to (1) employees and sales
representatives of the Company or its affiliates; (2) customers of the Company
or distributors of the Contracts who are transferring existing contract values
to a Contract; (3) individuals or groups of individuals when sales of the
Contract result in savings of sales or administrative expenses; or (4)
individuals or groups of individuals where Premium Payments are to be made
through an approved group payment method and where the size and type of the
group results in savings of administrative expenses.
In no event will reduction or elimination of the Annual Administrative Fee or
Surrender Charge be permitted where such reduction or elimination will be
unfairly discriminatory to any person.
[arrow] 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.
You may purchase the Contract on a non-qualified basis ("Non-qualified
Contract") or for use in connection with plans qualifying for favorable tax
treatment ("Qualified Contract"). Qualified Contracts are designed for use by
individuals whose Premium Payments are comprised solely of proceeds from and/or
contributions under retirement plans which are intended to qualify as plans
entitled to special
29
<PAGE>
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 you purchase this Contract 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 you purchase this Contract 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 you pay the initial Premium Payment, you must specify whether a
Non-Qualified Contract or a Qualified Contract is being purchased. If your
initial Premium Payment is derived from an exchange or surrender of another
annuity contract, we may require that you provide us with information as to the
Federal income tax status of the previous annuity contract. We will require you
to purchase separate Contracts if you desire to invest monies qualifying for
different annuity tax treatment under the Code. We would require the minimum
initial Premium Payment on each contract. Additional Premium Payments under
your Contract must qualify for the same Federal income tax treatment as your
initial Premium Payment under the Contract. We will not accept an additional
Premium Payment under your Contract if the Federal income tax treatment of such
Premium Payment would be different from that of your initial Premium Payment.
Taxation of Annuities
In General. Section 72 of the Code governs taxation of annuities in general. We
believe 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 Withdrawals, Full Surrenders or Annuity
Payments under the Annuity Payment Option elected). Any change in ownership,
assignment, pledge, or agreement to assign or pledge any portion of your
Contract Value (and in the case of a Qualified Contract, any portion of your
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.
If the owner of any Non-qualified annuity 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 if you are not a
natural person you 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.
Surrenders and Partial Withdrawals from Qualified Contracts. In the case of a
Surrender or Partial With-
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drawal 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.
Surrenders and Partial Withdrawals from Non-Qualified Contracts. With respect
to Non-Qualified Contracts, Partial Withdrawals (including systematic
withdrawals) are generally treated as taxable income to the extent that the
Contract Value immediately before the Partial Withdrawal exceeds the
"investment in the contract" at that time. The Contract Value immediately
before a Partial Withdrawal is before any surrender charge, and includes any
positive Market Value Adjustment which results from such a Partial Withdrawal.
Full Surrenders 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 unrecovered "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 Roth IRAs) 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
health insurance premiums; (4) made to pay for certain higher education
expenses; or (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 you
die before periodic annuity payments have started, the entire value of the
annuity must either (i) be paid out, in full, within five years of your death,
or (ii) annuity payments must start within one year of your death. If your
surviving spouse becomes the owner of the Contract, your spouse has the option
of continuing the Contract as if he or she had been the original purchaser. If
you die after periodic annuity payments have started, payments
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<PAGE>
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 your 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 Surrender as described above, or
(2) if distributed under an Annuity Payment Option, such amounts are taxed in
the same manner as Annuity Payments as 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 such 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. We 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, we are 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. If you are considering the purchase of more than one annuity contract
in a calendar year, you 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 our 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. You
should consult a competent tax advisor for further information.
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
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Beneficiaries are cautioned that the rights of any person to any benefits under
Qualified Contracts may be subject to the terms and conditions of the plans
themselves, regardless of the terms and conditions of the Contract. Some
retirement plans are subject to distribution and other requirements that are
not incorporated into our Contract administration procedures. Contract Owners,
Participants 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 we 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. If you are considering the purchase of a Contract for use with
such a plan, you should seek competent advice regarding the suitability of the
proposed plan documents and the Contract to your 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 "Traditional IRA").
Traditional IRAs 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
IRAs 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. You should seek
competent advice as to the suitability of the Contract for use with Traditional
IRAs. 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 of a Contract for use with Roth IRAs 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. You should seek competent advice as to the suitability of the
Contract for use with Roth IRAs. 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.
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
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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.
[arrow] ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA
The Company, 100 N. Greene St., Greensboro, North Carolina 27401, is a stock
life insurance company. It was incorporated under the laws of Michigan on
October 31, 1963. It is principally engaged in the sale of life insurance and
annuities, and is licensed in Canada, the District of Columbia, and all states
except New York. As of December 31, 1998, the Company had assets of over $9.3
billion on a GAAP basis. The Company is wholly-owned by Jefferson-Pilot
Corporation, a $23.1 billion asset company based in Greensboro, North Carolina.
Jefferson-Pilot Corporation is in the insurance business through
Jefferson-Pilot Life Insurance Company, Jefferson Pilot Financial Insurance
Company, and Jefferson Pilot LifeAmerica Insurance Company, and in the
communications business through television and radio stations. The obligations
under the Contracts are obligations of the Company.
For more information about the Company, see "Additional Information About the
Separate Account."
The Separate Account
The Alexander Hamilton Variable Annuity Separate Account of Alexander Hamilton
Life Insurance Company of America (the "Separate Account") was established as a
separate investment account under the laws of the State of Michigan on January
24, 1994.
The Company owns the assets of the Separate Account. The Separate Account will
not be charged with liabilities arising out of other separate accounts the
Company may have or out of any other business of the Company unless the
liabilities have a specific and determinable relation to or dependence upon the
Separate Account. The Company reserves the right to transfer assets of the
Separate Account in excess of the reserves and other Contract liabilities with
respect to the Separate Account to the Company's general account. The income,
if any, and gains or losses realized or unrealized on each Variable Sub-account
are credited to or charged against that Variable Sub-account without regard to
other income, gains or losses of the Company. Therefore, the investment
performance of any Variable Sub-account should be entirely independent of the
investment performance of the Company's general account assets or any other
separate account maintained by the Company.
Year 2000 Matter
The year 2000 issue relates to the way computer systems and programs define
calendar dates. By using only two digit dates, they could fail or make
miscalculations due to the inability to distinguish between dates in the 1900's
and in the 2000's. The potential problem also exists in some systems and
equipment not typically thought of as "computer-related" (referred to as
"non-IT") which contain hardware or software that must handle dates.
In 1995, Our parent, Jefferson-Pilot Corporation (the "Company"), began work on
a project to ensure the Year 2000 compliance of all systems, non-IT embedded
software equipment, and all Company key vendors and service providers. The
target completion date for the project is September 30, 1999.
The Company has completed the assessment and strategy phases for mainframe
applications, operat-
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ing systems and hardware. The Company's new business and policyholder
administration systems and the general ledger are on the mainframe. Currently,
approximately 62% of all mainframe systems have been tested to confirm that
their performance will not be affected by dates extending after 1999 and are
compliant. With respect to significant policyholder systems, the majority of
these have been completed. Testing is expected to be completed in the first
quarter of 1999. For other mainframe systems the project is on schedule.
For the majority of its non-IT related systems and equipment, the Company has
been advised by vendors that systems and equipment are currently Year 2000
compliant. The Company is obtaining written documentation regarding compliance.
Completion for non-IT systems and equipment is scheduled for September 1999.
The most significant category of key business partners is financial
institutions. Their critical functions include safeguarding and managing
investment portfolios, processing of the Company's operating bank accounts, and
sales/distribution. Other partner categories include insurance agents and
marketing organizations, suppliers of communication services, utilities,
materials and supplies. The Company has conducted surveys of all its software
and hardware vendors and testing is underway. Critical business partners have
been identified and surveys initiated. Results of these surveys will be
analyzed in the first quarter of 1999 and appropriate testing of other due
diligence conducted in the second and third quarters.
Since the project's inception, the Company has incurred external costs of $6.7
million and internal costs of $6.5 million. Current estimates, based on actual
experience to date, project a total expense for the project of $23.2 million,
with remaining external costs of $5.3 million and internal costs of $4.7
million. Total 1998 costs were $8.4 million. There has not been a material
adverse impact on the Company's operations as a result of IT projects being
deferred due to resource constraints caused by the Year 2000 project.
The Company has investments in publicly and privately placed securities and
loans. It may be exposed to credit risk to the extent that related borrowers
are materially adversely impacted by the Year 2000 issue. Portfolio
diversification reduces the overall risk. The Company is in compliance with the
Securities Valuation Office's Due Diligence Guidelines.
The Company expects its critical policyholder systems to be compliant by the
first quarter of 1999.
From Year 2000 problems, the Company could experience an interruption in its
ability to collect and process premiums, process claim payments, safeguard and
manage its invested assets and operating cash accounts, accurately maintain
policyholder information, accurately maintain accounting records, issue new
policies and/or perform adequate customer service. While the Company believes
the occurrence of such a situation is unlikely, a possible worst case scenario
might include one or more of the Company's significant policyholder systems
being non-compliant, resulting in a material disruption to the Company's
operations.
Although the Company plans completion of certification of all internal systems
and non-IT equipment well in advance of 2000, the Company recognizes the need
to plan for unanticipated problems resulting from failure of internal systems
or equipment or from failures of the Company's business partners, providers,
suppliers or other critical third parties. The Company will begin work on
contingency plans for all mission critical functions in the first quarter of
1999.
[arrow] DISTRIBUTOR OF THE CONTRACTS
Jefferson Pilot Variable Corporation (formerly Jefferson-Pilot Investor
Services, Inc.) is the principal underwriter of the Contracts. Jefferson Pilot
Variable Corporation will enter into one or more contracts with various
broker-dealers for the distribution of the Contracts. Commissions paid on
Contract sales may vary and, in certain circumstances, commissions may be paid
in installments over time. Jefferson Pilot Variable Corporation, a wholly owned
subsidiary of Jefferson-Pilot Corporation, is a member of the NASD. Its mailing
address is One Granite Place, Concord, NH 03301. There may be other underwriters
in the future.
In addition to the payment of commissions, we may from time to time pay or allow
additional promotional incentives, in the form of cash or other compensation, to
broker-dealers that sell variable annuity contracts. In some instances, such
other incentives may be offered only to certain broker-dealers that sell or are
expected to sell during specified time periods certain minimum amounts of
variable annuity contracts. Our payment of promotional incentives is subject to
applicable state insurance law and regulation.
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<PAGE>
[arrow] VOTING RIGHTS
There are no voting rights associated with the Capital Developer Account Value.
With respect to the Separate Account Value, we are the "shareholder" of the
Funds and as such, we have certain voting rights. As a general matter, you do
not have a direct right to vote the shares of the Funds held by the Variable
Sub-accounts to which you have allocated your Contract Value. Under current
law, however, and prior to the Maturity Date, you are entitled to give us
instructions on how to vote those shares on certain matters. We will notify
when your instructions are needed. We will also provide proxy materials or
other information to assist you in understanding the matters being voted on. We
will determine the number of shares for which you may give voting instructions
as of the record date set by the relevant Fund holding the shareholder meeting.
The number of votes that you have the right to instruct will be calculated
separately for each Variable Sub-account. The number of votes that you have the
right to instruct for a particular Variable Sub-account will be determined by
dividing your Contract Value in the Variable Sub-account by the net asset value
per share of the corresponding Fund in which the Variable Sub-account invests.
Fractional shares will be counted.
After the Maturity Date, the person receiving Annuity Payments has the voting
interest, and the number of votes decreases as Annuity Payments are made and as
the reserves for the Contract decrease. The person's number of votes will be
determined by dividing the reserve for the Contract allocated to the applicable
Variable Sub-account by the net asset value per share of the corresponding
Fund. Fractional shares will be counted.
If you send us written voting instructions, we will follow your instructions in
voting the Fund shares attributable to your Contract. If you do not send us
written instructions, we will vote the shares attributable to your Contract in
the same proportions as we vote the shares for which we have received
instructions from other Contract Owners. Shares held by the Company or its
affiliates in which you or other persons entitled to vote have no beneficial
interest may be voted by the shareholder thereof (the Company or its
affiliates) in its sole discretion.
We reserve the right to restrict or eliminate any of your voting rights when we
are permitted by law to do so.
The above description reflects our view of currently applicable law. If the law
changes or our interpretation of the law changes, we may decided that we are
permitted to vote Fund shares without obtaining voting instructions from our
Contract Owners and we may elect to do so.
[arrow] ADDITIONAL INFORMATION ABOUT THE SEPARATE ACCOUNT
Addition, Deletion, or Substitution of Investments
We reserve the right to transfer assets of the Separate Account, which we
determine to be associated with the class of policies to which the Contract
belongs, to another separate account. If this type of transfer is made, the
term "Separate Account," as used herein shall then mean the separate account to
which the assets were transferred.
We further reserve the right, subject to applicable law, to make additions to,
deletions from, or substitutions for the shares that are held in the Separate
Account or that the Separate Account may purchase. If the shares of a Fund are
no longer available for investment or if in our judgment further investment in
any Fund should become inappropriate in view of the purposes of the Separate
Account, we may redeem the shares, if any, of that Fund and substitute shares
of another Fund or of another registered open-end management investment
company. We will not substitute any shares attributable to a Contract's
interest in a Variable Sub-account of the Separate Account without notice and
prior approval of the SEC and state insurance authorities, if required by law.
We also reserve the right to establish additional Variable Sub-accounts of the
Separate Account, each of which would invest in shares corresponding to a new
investment portfolio of the existing Funds or in shares of another investment
company. Subject to applicable law and any required SEC approval, we, may, in
our sole discretion, establish new Variable Sub-accounts, eliminate one or more
Variable Sub-accounts, or combine Variable Sub-accounts if marketing needs, tax
considerations or investment conditions warrant. Any new Variable Sub-accounts
may be made available to existing Contract Owners on a basis to be determined
by the Company.
If any of these substitutions or changes are made, we may by appropriate
endorsement change the
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<PAGE>
Contract to reflect the substitution or change. If we deem it to be in the best
interest of Contract Owners and Annuitants, and subject to any approvals that
may be required under applicable law, the Separate Account may be operated as a
management investment company under the 1940 Act; it may be deregistered under
the Act if registration is no longer required; or it may be combined with other
separate accounts of the Company. Further, we reserve the right, when permitted
by law, to manage the Separate Account under the direction of a committee at
any time. We will notify you of our intent to exercise any such reserved rights
with respect to the Separate Account. You will have thirty-one (31) days after
you receive any such notification to accept or reject the change(s) described
therein. If you choose not to accept such change(s), you may request to cancel
your Contract and receive the Surrender Value.
Performance Data
From time-to-time we may use the yield of the JPVF Money Market Variable
Sub-account and total returns of other Variable Sub-accounts in advertisements
and sales literature. These figures will be based on historical performance for
the Funds and are not intended to and do not indicate future performance.
JPVF Money Market Variable Sub-account Yield. The yield of the JPVF Money
Market Variable Sub-account refers to the annualized income generated by an
investment in that Variable Sub-account over a specified seven-day period. The
yield is "annualized" by assuming that the income generated for that seven-day
period is generated each seven-day period over a 52-week period and is shown as
a percentage of that investment. The effective yield is calculated similarly
but, when annualized, the income earned by an investment in that Variable
sub-account is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect of this assumed
reinvestment.
Other Variable Sub-account Yield. We may from time-to-time advertise or
disclose the current annualized yield of one or more of the Variable Sub-
accounts of the Separate Account (except the JPVF Money Market Variable
Sub-account) for 30-day periods. The annualized yield of a Variable Sub-account
refers to income generated by the Variable Sub-account over a specific 30-day
period. Because the yield is annualized, the yield generated by a Variable
Sub-account during the 30-day period is assumed to be generated each 30-day
period over a 12-month period. The yield is computed by: (i) dividing the net
investment income of the Variable Sub-account less Variable Sub-account
expenses for the period, by (ii) the maximum offering price per unit on the
last day of the period times the daily average number of units outstanding for
the period, (iii) compounding that yield for a 6-month period, and (iv)
multiplying that result by 2. Expenses attributable to the Variable Sub-account
include (i) the Annual Administrative Fee, (ii) the Mortality and Expense Risk
Charge and (iii) the Administrative Expense Charge.
Because of the charges and deductions imposed by the Separate Account, the
yield for a Variable Sub-account of the Separate Account will be lower than the
yield for its corresponding Fund. The yield calculations do not reflect the
effect of any Surrender Charge or Premium Taxes that may be applicable to a
particular Contract. The yield on amounts held in the Variable Sub-accounts of
the Separate Account normally will fluctuate over time. Therefore, the
disclosed yield for any given past period is not an indication or
representation of future yields or rates of return. A Variable Sub-account's
actual yield is affected by the types and quality of its investments and its
operating expenses.
Total Return. Total returns for the Sub-accounts may be calculated pursuant to
a standardized formula or in non-standardized manners. The standardized total
return of the Variable Sub-accounts refers to return quotations assuming an
investment has been held in the Variable Sub-account for various periods of
time including, but not limited to. one year, five years, and ten years (if the
Variable Sub-account has been in operation for those periods), and a period
measured from the date the Variable Sub-account commenced operations. The total
return quotations will represent the average annual compounded rates of return
that would equate an initial investment of $1,000 to the redemption value of
that investment as of the last day of each of the periods for which total
return quotations are provided. Accordingly, the total return quotations will
reflect not only income but also changes in principal value (that is, changes
in the Accumulation Unit values), whereas the yield figures will only reflect
income. In addition, the standardized total return quotations will reflect the
Surrender Charge imposed on Partial Withdrawals and Full Surrenders, but the
standardized yield figures will not.
37
<PAGE>
In addition, we may from time-to-time also disclose total return in
non-standard formats and cumulative total return for the Variable Sub-accounts.
The non-standard average annual total return and cumulative total return would
not reflect the Surrender Charge, which if reflected would lower the
performance figures for periods of less than seven years.
We may from time-to-time also disclose standard total returns and non-standard
total returns for the Variable Sub-accounts based on or covering periods of
time other than those indicated above. All non-standard performance data will
only be disclosed if the standard total return is also disclosed. For
additional information regarding the calculation of performance data, please
refer to the Statement of Additional Information.
Performance Comparisons. From time-to-time, in advertisements, sales
literature, or in reports to you, we may compare the performance of the
Variable Sub-accounts to that of other variable accounts or investment vehicles
with similar investment objectives or to relevant indices published by
recognized mutual fund or variable annuity statistical rating services or
publications of general variable annuity statistical rating services or
publications of general interest such as Forbes or Money magazines. For
example, a Variable Sub-account's performance might be compared to that of
other accounts or investments with a similar investment objective as compiled
by Lipper Analytical Services, Inc., VARDs, Morningstar, Inc., or by others. In
addition, a Variable Sub-account's performance might be compared to that of
recognized stock market indicators including, but not limited to, the Standard
& Poor's 500 Stock Index (which is a group of unmanaged securities widely
regarded by investors as representative of the stock market in general) and the
Dow Jones Industrial Average (which is a price-weighted average of 30 large,
well-known industrial stocks that are generally the leaders in their industry).
Performance comparisons should not be considered representative of the future
performance of a Variable Sub-account.
General. Performance data may also be calculated for shorter or longer base
periods. The Separate Account may use various base periods as may be deemed
necessary or appropriate to provide investors with the most informative
performance data information, depending on the then-current market conditions.
Performance will vary from time-to-time, and historical results will not be
representative of future performance. Performance information may not provide a
basis for comparison with other investments or other investment companies using
a different method of calculating performance. Current yield is not fixed and
varies with changes in investment income and Accumulation Unit values. The JPVF
Money Market Variable Sub-account yield will be affected if it experiences a
net inflow of new money which it invests at interest rates different from those
being earned on its then-current investments. An investor's principal in a
Variable Sub-account and a Variable Sub-account's return are not guaranteed and
will fluctuate according to market conditions. Also, as noted above, advertised
performance data figures will be historical figures for a Contract during the
Accumulation Period.
Company Ratings
We may from time-to-time publish (in advertisements, sales literature and
reports to you) the ratings and other information assigned to us by one or more
independent rating organizations such as A.M. Best Company, Standard & Poor's,
Duff & Phelps, and Fitch Investors Services. The purpose of the ratings is to
reflect our financial strength and/or claims-paying ability and not be
considered as bearing on the investment performance of assets held in the
Separate Account. Each year the A.M. Best Company reviews the financial status
of thousands of insurers, culminating in the assignment of Best's Ratings.
These ratings reflect A.M. Best Company's current opinion of the relative
financial strength and operating performance of an insurance company in
comparison to the norms of the life/health insurance industry. In addition, our
claims-paying ability as measured by Standard and Poor's Insurance Ratings
Services, Duff & Phelps, or Fitch Investors Services may be referred to in such
advertisements, sales literature, or reports. These ratings are opinions
regarding our financial capacity to meet the obligations of our insurance and
annuity policies in accordance with their terms. Such ratings do not reflect
the investment performance of the Separate Account or the degree of risk
associated with an investment in the Separate Account.
38
<PAGE>
[arrow] GENERAL CONTRACT PROVISIONS
Entire Contract
The entire contract consists of the Contract, any attached riders and
endorsements, and the attached copy of the Application. Only the Company's
President, or one of its Executive Vice Presidents may change the Contract. The
change must be in writing. No change will be made in the Contract unless you
agree to it in writing. No agent is authorized to change the Contract or to
change or waive any provisions of the Contract.
Reliance on Information Provided in Application
In issuing the Contract, we will rely on the statements made in the
Application. We deem all such statements to be representations and not
warranties. We assume that these statements are true and complete to the best
of the knowledge and belief of those who made them. We will not use any
statement made in connection with the Application to void the Contract unless
that statement is a material misrepresentation and is part of the Application.
Variations in Contract Provisions
Certain provisions of your Contract may vary from the descriptions in this
Prospectus in order to comply with different state laws. Any such variations
will be included in your Contract or in riders or endorsements to your
Contract.
The Company's Ability to Contest the Contract
We will not contest the Contract from the Contract Date.
Measurement of Dates
Contract Years, Quarters, Months, and Anniversaries are measured from the
Contract Date, except where otherwise specified.
Calculation of Age
References in the Contract to a person's age on any date refer to his or her
age on that person's last birthday.
Misstatement of Age
If the age of the Annuitant has been misstated, any amount payable under the
Contract will be what would have been purchased at the correct age. If payments
were made based on incorrect age, we will increase or reduce a later payment or
payments to adjust for the error. Any adjustment will include interest, at 6.0%
per year, from the date of the wrong payment to the date the adjustment is
made.
Assignment of the Contract
While the Annuitant is living, and except for Qualified Contracts, you may
assign the Contract or any interest you have in it. Any irrevocable Beneficiary
must agree to the assignment. If there is a joint Contract Owner, the joint
Contract Owner must agree to any assignment. Your interest, and anyone else's,
will then be subject to that assignment. As Contract Owner, you still have the
rights of ownership that you have not assigned.
An assignee cannot change the Contract Owner, Annuitant or Beneficiary, and may
not elect an alternative payment option. Any amount payable to the assignee
will be made in one lump sum.
To assign the Contract, you must provide us with a copy of the assignment. We
are not responsible for the validity of any assignment. An assignment will be
subject to any payment previously made by us or any other action we may take
before recording the assignment.
State law such as those governing marital property may affect your ability to
encumber the Contract.
Nonparticipating
The Contract is nonparticipating and will not share in any surplus earnings of
the Company. No dividends are payable on the contract.
Non-Business Days
If the due date for any activity required by the Contract falls on a
non-business day for the Company, performance will be rendered on the first
business day following the due date.
Regulatory Requirements
All interest guarantees, surrender benefits, and amounts payable at death will
not be less than the minimum benefits approved under the laws and regulations
of the state in which the Contract is delivered.
We will administer the Contract in accordance with the U.S. tax laws and
regulations in order to retain its status as an annuity contract.
The Contract is deemed to include all state and federal laws that apply.
[arrow] LEGAL PROCEEDINGS
We are 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.
39
<PAGE>
[arrow] AVAILABLE INFORMATION
We have filed a registration statement (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933
relating to the Contracts offered by this Prospectus. This Prospectus has been
filed as part of the Registration Statement and does not contain all of the
information set forth in the Registration Statement. 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 at
the public reference facilities of the SEC at Room 1024, 450 Fifth Street, N.W,
Washington, D.C. 20549. Copies of such materials also can be obtained from the
Public Reference Section of the SEC at 450 Fifth Street, N.W, Washington, D.C.
20549, at prescribed rates.
40
<PAGE>
Statement of additional information
- --------------------------------------------------------------------------------
A Statement of Additional Information is available (at no cost) which contains
more details concerning the subjects discussed in this Prospectus. The
following is the Table of Contents for that Statement:
TABLE OF CONTENTS
<TABLE>
Page
----
<S> <C>
More information About the Contract .................................... B-3
Determination of Variable Sub-account Accumulation Unit Values ......... B-3
Calculation of Annuity Unit Value ...................................... B-3
Annuity Period Transfer Formulas ....................................... B-4
Administration ......................................................... B-5
Records and Reports .................................................... B-5
Custody of Assets ...................................................... B-5
Principal Underwriter .................................................. B-5
Performance Data and Calculations ...................................... B-6
Money Market Variable Sub-account Yields ............................... B-6
Other Variable Sub-account Yield ....................................... B-6
Variable Sub-account Total Return Calculations: Standardized ........... B-7
Other Performance Data: Non-Standardized ............................... B-8
Other Information ...................................................... B-11
Federal Tax Matters .................................................... B-11
Taxation of the Company ................................................ B-12
Tax Status of the Contracts ............................................ B-12
Legal Matters .......................................................... B-13
Other Information ...................................................... B-13
Experts ................................................................ B-13
Financial Statements ................................................... B-14
</TABLE>
41
<PAGE>
APPENDIX I
SURRENDER CHARGE CALCULATION
A Surrender Charge, which will not exceed 8.5% of total Premiums paid, is
deducted from the Contract Value upon Partial Withdrawal or Full Surrender of
the Contract, unless certain conditions apply. (See "Surrender Charge.")
The Surrender Charge is calculated as follows:
(S - FREE) x X% = SC, but not less than zero.
Where:
(S) is the gross Surrender or Partial Withdrawal Amount.
(FREE) is the 10% Free Surrender Amount (net of any other
applicable withdrawals that may have been taken and
applied toward the current Contract Year).
(SC) is the Surrender Charge Amount.
(X) is the following Surrender Charge percentage:
Contract Year Percentage
1 6
2 6
3 6
4 5
5 4
6 3
7 2
8 0
Example.
Assume a Contract Value of $50,000 at the end of the third Contract Year.
Also assume that no Market Value adjustment has been taken and no previous
partial surrenders were made.
1) If there is a Full Surrender at the end of the third Contract Year:
Surrender Charge = ($50,000 - $5,000) x .06 = $2,700.00
Thus, the Surrender proceeds would be $50,000 - $2,700.00 = $47,300.00.
Premium Taxes may also be applicable. NOTE: The Annual Administrative Fee
($30) applies to Full Surrenders only when Contract Value is less than
$30,000.
2) If there is a Partial Surrender of $10,000 at the end of the third Contract
Year: Surrender Charge = ($10,000 - $5000) x .06 = $300.00
Thus, the Contract Value would be reduced by $10,000 and you would receive
$9,700. Premium Taxes may also be applicable.
I-52
<PAGE>
APPENDIX II
MARKET VALUE ADJUSTMENT
The formula which will be used to determine the Market Value Adjustment is:
_ _
| _ _ (N/12) |
|| 1 + I | |
|| ------------ | -1 | X A
|| 1 + J + .004 | |
||_ _| |
|_ _|
NOTE: The Market Value Adjustment will be limited so that it does not
reduce the return on the Capital Developer Account below 3.0% per
year.
I = The Guaranteed Interest Rate in effect for the current Interest Rate
Guarantee Period (expressed as a decimal, (e.g., 1% = .01).)
J = The Current U.S. Treasury Bill, Note or Bond rate (as quoted by the Wall
Street Journal and expressed as a decimal (e.g., 1% = .01)) in effect for
the period most closely approximating the duration remaining in the current
Interest Rate Guarantee Period (Fractional years will be rounded to the
nearest month and the interest rate will be calculated using interpolation).
If the period is less than 1 year then the Company will use the 1 year
Treasury Bill rate.
N = The number of complete months from the Surrender or Partial Withdrawal to
the end of the current Interest Rate Guarantee Period.
A = The amount surrendered, withdrawn or transferred.
The ".004" in the formula is a factor designed to cover anticipated costs of
liquidating investments. Thus, the Guaranteed Interest Rate ("I") must be at
least 0.04% higher than the Treasury Rate ("J") for there to be a positive
market value adjustment. If I is lower than J or higher but less than 0.04%
higher, the Market Value Adjustment is negative.
Examples of Market Value Adjustment
Assume a Capital Developer Account Value of $50,000, a seven year guarantee
period with a Guaranteed Interest Rate of 6%, and an original payment of $43,000
at the beginning of the current guarantee period.
1) If there is a Full Surrender at the beginning of the fourth Contract Year
with four years remaining in the interest rate guarantee period:
(a) if the current rate for a four year Treasury Note is 5%:
_ _
| 1.06 (48/12) |
Market Value Adjustment $50,000 x | (-----) -1 | = $1,148.28
|_ 1.054 _|
Free Surrender Amount = ($51,148.28 x .10) = $5,114.83
Surrender Charge = ($51,148.28-$5,114.83) x .05 = $2,301.67
Thus, the surrender proceeds = $51,148.28 - $2,301.67
= $48,846.61 - any applicable Premium Taxes;
(b) if the current rate for the three year Treasury Note is 7%:
_ _
| 1.06 (48/12) |
Market Value Adjustment $50,000 x | (-----) -1 | = -$2,556.54
|_ 1.074 _|
Minimum Market Value Adjustment with 3% guaranteed return =
43,000 x (1.03)3 - 50,000 = -3,012.74
Since - 2,556.54 is greater than - 3,012.74, the actual Market Value
Adjustment is - 2,556.54
II-53
<PAGE>
Free Surrender Amount = ($47,443.46 x .10) = $4,744.35
Surrender Charge = ($47,443.46 - $4,744.35) x .05 = $2,134.96
Thus, the Surrender proceeds = $47,443.46 - $2,134.96
= $45,308.50 - any applicable Premium Taxes
2) If there is a Full Surrender at the beginning of the tenth Policy Year (thus,
no Surrender Charge applies) with three years remaining in the interest rate
guarantee period:
(a) if the current rate for a three year Treasury Note is 5%:
_ _
| 1.06 (36/12) |
Market Value Adjustment $50,000 x | (-----) -1 | = $858.76
|_ 1.054 _|
Free Surrender Amount = $50,858.76
Surrender Charge = 0
Thus, the surrender proceeds = $50,858.76 - any applicable Premium Taxes;
(b) if the current rate for a three year Treasury Note is 7%:
_ _
| 1.06 (36/12) |
Market Value Adjustment $50,000 x | (-----) -1 | = -$1,929.93
|_ 1.074 _|
Minimum Market Value Adjustment with 3% guaranteed return =
43,000 x (1.03)4 - 50,000 = -1,603.12
Since -1,929.93 is less than -1,603.12, the actual Market Value
Adjustment is -1,603.12
Free Surrender Amount = $48,396.88
Surrender Charge = 0
Thus, the surrender proceeds = $48,396.88 - any applicable Premium Taxes
3) If there is a partial surrender of $10,000 at the beginning of the fourth
Contract Year with four years remaining in the interest rate guarantee
period:
(a) if the current rate for a four year Treasury Note is 5%:
_ _
| 1.06 (48/12) |
Market Value Adjustment $10,000 x | (-----) -1 | = $229.66
|_ 1.054 _|
Free Surrender Amount = ($50,229.66 x .10) = $5,022.97
Surrender Charge = ($10,000 - $5,022.97) x .05 = $248.85
Thus, the Surrender proceeds = $10,000 + $229.66 - $248.85
= $9,980.81 - any Applicable Premium Taxes;
(b) if the current rate for a three year Treasury Note is 7%:
_ _
| 1.06 (48/12) |
Market Value Adjustment $10,000 x | (-----) -1 |= -$511.31
|_ 1.074 _|
Minimum Market Value Adjustment with 3% guaranteed return =
43,000 x (1.03)3 - 50,000 = -3,012.74
Since -511.31 is less than -3,012.74, the actual Market Value
Adjustment is -511.31
Free Surrender Amount = ($49,488.69 x .10) = $4,948.87
II-54
<PAGE>
Surrender Charge = ($10,000 - $4,948.87) x .05 = $252.56
Thus, the surrender proceeds = $10,000 - $511.31 - $252.56
= $9,236.13 - any applicable Premium Taxes.
4) If there is a partial surrender of $10,000 at the beginning of the tenth
Contract Year (thus no Surrender Charge applies) with three years remaining
in the interest rate guarantee period:
(a) if the current rate for a two year Treasury Note is 5%:
_ _
| 1.06 (36/12) |
Market Value Adjustment $10,000 x | (-----) -1 | = $171.75
|_ 1.054 _|
Free Surrender Amount = $10,171.75
Surrender Charge = 0
Thus, the Surrender proceeds = $10,171.75 - any Applicable Premium Taxes;
(b) if the current rate for a two year Treasury Note is 7%:
_ _
| 1.06 (36/12) |
Market Value Adjustment $10,000 x | (-----) -1 | = -$385.99
|_ 1.074 _|
Minimum Market Value Adjustment with 3% guaranteed return =
43,000 x (1.03)4 - 50,000 = -1,603.12
Since -385.99 is greater than -1,603.12, the actual Market Value
Adjustment is -385.99
Free Surrender Amount = $9,614.01
Surrender Charge = 0
Thus, the surrender proceeds = $10,000 - $385.99
= $9,614.01 - any applicable Premium Taxes.
II-55
<PAGE>
ALEXANDER HAMILTON ALLEGIANCE VARIABLE ANNUITY
Offered by
ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA
100 N. Greene St.
Greensboro, North Carolina 27401
------------
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information expands upon certain subjects discussed
in the current Prospectus for the Alexander Hamilton Life Insurance Company of
America Variable Annuity Contract (the "Contract") offered by Alexander Hamilton
Life Insurance Company of America. You may obtain a copy of the Prospectus dated
May 1, 1999 by calling 1-800-289-1776, or by writing to the Company at its
Variable Annuity Service Center, One Granite Place, P.O. Box 515, Concord, New
Hampshire 03302-0515. Terms used in the current Prospectus for the Contract are
incorporated in this Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUSES FOR THE CONTRACT, THE JEFFERSON PILOT
VARIABLE FUND, INC.; THE VARIABLE INSURANCE PRODUCTS FUND; THE VARIABLE
INSURANCE PRODUCTS FUND II; THE MFS VARIABLE INSURANCE TRUST; AND THE
OPPENHEIMER VARIABLE ACCOUNT FUNDS.
Dated: May 1, 1999
Page 1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
More Information About the Contract...................................... 3
Determination of Variable Sub-account Accumulation Unit Values........... 3
Calculation of Annuity Unit Value ....................................... 4
Annuity Period Transfer Formulas......................................... 5
Administration........................................................... 6
Records and Reports...................................................... 6
Custody of Assets........................................................ 6
Principal Underwriter.................................................... 6
Performance Data and Calculations........................................ 7
Money Market Variable Sub-account Yield.............................. 7
Other Variable Sub-account Yields.................................... 7
Variable Sub-account Total Return Calculations: Standardized ........ 9
Other Performance Data: Non-Standardized ........................... 10
Other Information................................................... 12
Federal Tax Matters......................................................13
Taxation of the Company...............................................13
Tax Status of the Contracts...........................................13
Legal Matters............................................................15
Other Information........................................................15
Experts..................................................................15
Financial Statements.....................................................15
</TABLE>
In order to supplement the description in the Prospectus, the following provides
additional information about the Company and the Contract which may be of
interest to you.
Page 2
<PAGE>
MORE INFORMATION ABOUT THE CONTRACT
DETERMINATION OF VARIABLE SUB-ACCOUNT ACCUMULATION UNIT VALUES
ACCUMULATION UNITS. Accumulation Units are used to account for all
amounts allocated to or withdrawn from the Separate Account. The Company will
determine the number of Accumulation Units of a Variable Sub-account by dividing
the Net Premium Payment allocated to (or the amount withdrawn from) the Variable
Sub-account by the dollar value of one Accumulation Unit on the date of the
transaction. The Separate Account Value will consist of the sum of the value of
all Accumulation Units in all Variable Sub-accounts credited to the Contract on
the applicable Valuation Day.
ACCUMULATION UNIT VALUE. The value of an Accumulation Unit in a
Variable Sub-account on any Valuation Day is the product of (a) the value on the
preceding Valuation Day and (b) the Net Investment Factor for the Variable
Sub-account for the Valuation Period just ended. The value of an Accumulation
Unit in each of the initial seven Variable Sub-accounts was arbitrarily
established at the inception of the Separate Account's operation. The value was
established at $10 for each of the eighteen Variable Sub-accounts except the
Money Market Variable Sub-account, for which the value was established at $1,
the JPVF Growth Sub-account, for which the value was established at $14.655, the
JPVF High Yield Bond Sub-account, for which the value was established at
$11.909, and the JPVF International Equity Sub-account, for which the value was
established at $11.371.
A VALUATION DAY is every day on which the Company and the New York
Stock Exchange ("NYSE") are open for business, but shall not include any day on
which trading on the NYSE is restricted, or on which an emergency exists, as
determined by the Securities and Exchange Commission and/or respective governing
bodies of the NYSE so that valuation or disposal of securities is not
practicable.
A VALUATION PERIOD is the period of time beginning at the close of
trading of the New York Stock Exchange on any Valuation Day and ending at the
close of business on the next Valuation Day. A Valuation Period may be one day
or more than one day.
NET INVESTMENT FACTOR. The Company calculates the Net Investment Factor
for a Valuation Period for each Variable Sub-account by dividing (a) by (b) and
subtracting (c) from the result, where:
(a) is the sum of:
(1) the net asset value of a Fund share held in the Separate Account
for that Variable Sub-account determined at the end of the
current Valuation Period, plus
(2) the per share amount of any dividend or capital gain
distributions made for shares held in the Separate Account for
that Variable Sub-account if the ex-dividend date occurs during
the Valuation Period.
Page 3
<PAGE>
(b) is the net asset value of a Fund share held in the Separate Account
for that Variable Sub-account determined as of the end of the
preceding Valuation Period.
(c) is a factor representing the Mortality and Expense Risk Charge and the
Administrative Expense Charge. This factor is equal, on an annual
basis, to 1.40% (1.25% + 0.15%) of the daily net asset value of Fund
shares held in the Separate Account for that Variable Sub-account.
The Net Investment Factor may be greater or less than one; therefore, the
Accumulation Unit value may increase or decrease.
CALCULATION OF ANNUITY UNITY VALUE
[bullet] Annuity Units and Payments. The dollar amount of each Variable Annuity
Payment depends on the number of Annuity Units credited to that Annuity
Payment Option and the value of those units. The number of Annuity
Units is determined as follows:
1. The dollar amount of the first payment with respect to each
Variable Sub-account is determined by multiplying the portion of
the Contract Value to be applied to the Variable Sub-account by
the variable annuity purchase rate specified in the Settlement
Option table in the Contract.
2. The number of Annuity Units credited in each Variable Sub-account
is then determined by dividing the dollar amount of the first
payment by the value of one Annuity Unit in that Variable
Sub-account on the Maturity Date.
3. The amount of each subsequent Annuity Payment equals the product
of the Annuitant's number of Annuity Units and the Annuity Unit
values on the payment date. The amount of each payment may vary.
[bullet] Annuity Unit Value. The value of the Annuity Units will increase or
decrease on a daily basis to reflect the investment performance of the
applicable Fund. The value of an Annuity Unit in a Variable Sub-account
on any Valuation Day is determined as follows:
1. The value of the Annuity Unit for the Variable Sub-account on the
preceding Valuation Day is multiplied by the Net Investment
Factor for the Valuation Period.
2. The result in (1) is then multiplied by a factor (slightly less
than one) to compensate for the interest assumption built into
the variable annuity purchase rates.
The Net Investment Factor reflects the investment experience of the
applicable Fund and certain charges (See above for a detailed description of the
Net Investment Factor).
Page 4
<PAGE>
ANNUITY PERIOD TRANSFER FORMULAS
During the Annuity Period, you may transfer Separate Account Value from
one Variable Sub-account to another, subject to certain limitations. Interest
Rate Guarantee Periods are not available during the Annuity Period, thus none
will be available for transfers. (See "Transfers,". 16 of the Prospectus.)
Transfers during the Annuity Period are implemented according to the
following formula:
1. Determine the number of units to be transferred from the Variable
Sub-account as follows:
= D/AUV1
2. Determine the numb er of Annuity Units remaining in such Variable
Sub-account (after the transfer):
= UNIT1 - D/AUV1
3. Determine the number of Annuity Units in the transferee Variable
Sub-account (after the transfer):
= UNIT2 + D/AUV2
4.Subsequent Annuity Payments will reflect the changes in Annuity Units
in each Variable Sub-account as of the next Annuity Payment's due
date.
Where:
(AUV1) is the Annuity Unit value of the Variable Sub-account that the
transfer is being made from.
(AUV2) is the Annuity Unit value of the Variable Sub-account that the
transfer is being made to.
(UNIT1) is the number of units in the Variable Sub-account that the
transfer is being made from, before the transfer.
(UNIT2) is the number of units in the Variable Sub-account that the
transfer is being made to, before the transfer.
(D) is the dollar amount being transferred.
Page 5
<PAGE>
ADMINISTRATION
The Company or its affiliates will be providing administrative
services. The services provided by the Company or its affiliates include
issuance and redemption of the Contract, maintenance of records concerning the
Contract and certain Contract Owner services.
If the Company or its affiliates do not continue to provide these
services, the Company will attempt to secure similar services from such sources
as may then be available. Services will be purchased on a basis which, in the
Company's sole discretion, affords the best service at the lowest cost. The
Company, however, reserves the right to select a provider of services which the
Company, in its sole discretion, considers best able to perform such services in
a satisfactory manner even though the costs for the service may be higher than
would prevail elsewhere.
RECORDS AND REPORTS
All records and accounts relating to the Separate Account will be
maintained by the Company. As presently required by the Investment Company Act
of 1940 and regulations promulgated thereunder, the Company will mail to you at
your last known address of record, at least annually, reports containing such
information as may be required under that Act or by any other applicable law or
regulation. You will also receive confirmation of each financial transaction and
any other reports required by law or regulation.
CUSTODY OF ASSETS
The assets of each of the Variable Sub-accounts of the Separate Account
are held in the custody of Citibank,N.A. The assets of each of the Variable
Sub-accounts of the Separate Account are segregated and held separate and apart
from the assets of the other Variable Sub-accounts and from the Company's
general account assets. The Administrator maintains records of all purchases and
redemptions of Fund shares by each of the Variable Sub-accounts.
PRINCIPAL UNDERWRITER
During the year ended December 31, 1996 Jefferson Pilot Variable
Corporation ("JPVC") (formerly Jefferson-Pilot Investor Services, Inc.) was paid
$25,128.35 in brokerage commissions, and FMG Distributors, the principal
underwriter until being replaced by JPVC, was paid $25,367.11 in brokerage
commissions. FMG Distributors were also paid $41,666.67 for underwriting
activities for 1996. During the year ended December 31, 1997, JPVC received
$341,003 in brokerage commissions, of which it retained $66,407. During the year
ended December 31, 1998 JPVC received $4,442,409 in brokerage commissions, and
did not retain any of these commissions.
The Company, on its own behalf and on behalf of the Separate Account,
entered into a Principal Underwriter Agreement with JPVC dated November 1, 1996.
JPVC is a wholly-owned subsidiary of Jefferson-Pilot Corporation and is an
affiliate of the Company.
Page 6
<PAGE>
PERFORMANCE DATA AND CALCULATIONS
Money Market Variable Sub-account Yield
The Yield of the Money Market Variable Sub-account for a seven-day
period is calculated by a standardized method prescribed by rules of the
Securities and Exchange Commission. Under this method, the yield quotation is
computed by determining the net change, exclusive of capital changes, in the
value of a hypothetical pre-existing account having a balance of one
Accumulation Unit of the Money Market Variable Sub-account at the beginning of
such seven-day period, subtracting a hypothetical charge reflecting deductions
from contract owner accounts, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period return,
and multiplying the base period return by (365/7) with the resulting yield
figure carried to at least the nearest hundredth of one percent. The Separate
Account may also compute the Money Market Variable Sub-account's yield on an
annualized basis. This current annualized yield is computed by determining the
net change (exclusive of realized gains and losses on the sale of securities and
unrealized appreciation and depreciation) in the value of a hypothetical account
having a balance of one Accumulation Unit of the Money Market Variable
Sub-account at the beginning of such seven-day period, dividing such net change
in account value by the value of the account at the period to determine the base
period return, and annualizing this quotient on a 365-day basis.
The SEC also permits the Separate Account to disclose the effective
yield of the Money Market Variable Sub-account for the same seven-day period,
determined on a compounded basis. The effective yield is calculated by
compounding the unannualized base period return by adding one to the base period
return, raising the sum to a power equal to 365 divided by 7, and subtracting
one from the result.
The yield on amounts held in the Money Market Variable Sub-account
normally will fluctuate on a daily basis. Therefore, the disclosed yield for any
given past period is not an indication or representation of future yields or
rates of return. The Money Market Variable Sub-account's actual yield is
affected by changes in interest rates on money market securities, average
portfolio maturity of the JPVF Money Market Portfolio, the types and quality of
portfolio securities held by the JPVF Money Market Portfolio, and its operating
expenses. The yield figures do not reflect Surrender Charges or Premium Taxes.
Other Variable Sub-account Yields
The yield of Variable Sub-accounts other than the Money Market Variable
Sub-account based on a thirty-day period is calculated by a standardized method
prescribed by rules of the Securities and Exchange Commission. The yield is
computed by dividing the net investment income per Accumulation Unit earned
during the period by the maximum offering price per unit on the last day of the
period, according to the following formula:
Page 7
<PAGE>
6
(a-b+1)
YIELD = 2[ ----- -1]
cd
Where:
a = net investment income earned during the period by the portfolio company
attributable to shares owned by the Sub-account.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of Accumulation Units outstanding during the
period.
d = the maximum offering price per Accumulation Unit on the last day of the
period.
The Company may from time to time advertise or disclose the current
annualized yield of one or more of the Variable Sub-accounts of the Separate
Account (except the Money Market Variable Sub-account) for 30-day periods. The
annualized yield of a Variable Sub-account refers to income generated by the
Variable Sub-account over a specific 30-day period. Because the yield is
annualized, the yield generated by a Variable Sub-account during the 30-day
period is assumed to be generated each 30-day period over a 12-month period. The
30-day yield is calculated according to the following formula:
6
(a-b)
YIELD = 2 ----- +1 -1
cd
Where:
a = Net investment income of the Variable Sub-account for the 30-day period
attributable to the Variable Sub-account's unit.
b = Expenses of the Variable Sub-account for the 30-day period.
c = The average number of units outstanding.
d = The unit value at the close (highest) of the last day in the 30-day
period.
Because of the charges and deductions imposed by the Separate Account,
the yield for a Variable Sub-account of the Separate Account will be lower than
the yield for its corresponding Fund. The yield calculations do not reflect the
effect of any Premium Taxes or Surrender Charge that may be applicable to a
particular Contract. Surrender Charges range from 6% to 2% of the amount
withdrawn based on the Contract Year of Surrender. The yield on amounts held in
the Variable Sub-accounts of the Separate Account normally will fluctuate over
time. Therefore, the disclosed yield for any given past period is not an
indication or representation of future yields or rates of return. A Variable
Sub-account's actual yield is affected by the types and quality of the Funds'
investments and its operating expenses.
Page 8
<PAGE>
Variable Sub-account Total Return Calculations: Standardized
The Company may from time to time also disclose average annual total
returns for one or more of the Variable Sub-accounts for various periods of
time. Average annual total return quotations are computed by finding the average
annual compounded rates of return over one, five and ten year periods and for
the life of the Variable Sub-account that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
n
P (1 + T) = ERV
Where:
P = hypothetical initial Premium Payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the one,
five or ten-year period (or fractional portion
thereof) of a hypothetical $1,000 payment made at
the beginning of the one, five, or ten-year
period.
The Surrender Charge on Contracts and all recurring fees that are
charged to all shareholder accounts (the Annual Administrative Fee) are
recognized in the ending redeemable value for standard total return figures.
These figures will not reflect any Premium Taxes.
The following table shows the Standardized Average Annual Total Return
for the Allegiance Variable Annuity sub-accounts for the period ended December
31, 1998.
<TABLE>
<CAPTION>
Since
1998 Inception
<S> <C> <C>
JPVF Money Market Sub-account* -5.61% -1.95%
JPVF Balanced Sub-account* 6.32% 10.01%
JPVF Growth and Income account* 1.63% 6.90%
JPVF Capital Growth Sub-account* 25.58% 21.94%
JPVF Small Company Sub-account** -21.94% -21.94%
JPVF Emerging Growth Sub-account* 20.39% 13.47%
JPVF World Growth Stock Sub-account* -7.51% -0.69%
JPVF Growth Sub-account** 18.27% 18.27%
JPVF High Yield Bond Sub-account** -10.51% -10.51%
JPVF International Equity Sub-account** 4.40% 4.40%
MFS Research Series Sub-account** 9.00% 9.00%
MFS Utilities Series Sub-account** 6.89% 6.89%
Oppenheimer Bond Sub-account* -3.79% -0.30%
Oppenheimer Strategic Bond Sub-account** -8.92% -8.92%
VIP Equity-Income Sub-account** 3.36% 3.36%
VIP Growth Sub-account** 20.27% 20.27%
VIP II Contrafund Sub-account** 13.32% 13.32%
VIP II Index 500 Sub-account** 18.68% 18.68%
</TABLE>
Page 9
<PAGE>
* Performance information reflects the substitution of the funds in which
these Variable Sub-accounts invest which occurred on December 5, 1997. The
above numbers reflect the performance of the Alexander Hamilton Variable
Insurance Trust ("AHVIT") and the Federated Prime Money Fund II for the
period prior to the date of the substitution and reflect the performance of
the Jefferson Pilot Variable Fund, Inc. and the Oppenheimer Bond Fund for
the period after the date of the substitution. In the substitution, the
Oppenheimer Bond Fund was substituted for two of the AHVIT Funds and the
pre-substitution performance numbers for the Oppenheimer Bond Sub-account
reflect the performance of only one of such AHVIT Funds. The inception date
for these Variable Sub-accounts was February 27, 1996.
** These Sub-accounts were added to the Contract as of January 1, 1998.
Other Performance Data: Non-Standardized
The Company may from time to time also disclose average annual total
returns in non-standardized formats in conjunction with the standard format
described above. The non-standard format calculation varies from the standard
format calculation described above in that it will NOT take any Surrender
Charges or the Annual Administrative Fee into account and will be based on an
average contract size of $30,000.
The standardized performance calculation described above is based on
the inception date of each Variable Sub-account. However, for the
non-standardized performance calculation, if a Fund was in existence prior to
the inception date of the corresponding Variable Sub-account, the performance
for the Variable Sub-account will be calculated on a hypothetical basis by
applying the Mortality and Expense Risk Charge and the Administrative Expense
Charge to the historical performance of the corresponding Fund as if the
Contract has been in existence back to the inception date of the Fund.
Page 10
<PAGE>
The following table shows the non-standardized average annual total return for
the Allegiance Variable Annuity Sub-accounts for the periods ended December 31,
1998.
<TABLE>
<CAPTION>
Since
Sub-Accounts 1 Year 3 Years 5 Years 10 Years Inception*
- ------------ ------ ------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
JPVF Money Market 3.41% 3.33% 3.09% 3.31% 3.53% (8/1/85)
JPVF Balanced 16.11% 13.23% 11.25% N/A 10.73% (5/1/92)
JPVF Growth and Income 11.11% 19.60% 16.31% N/A 15.31% (5/1/92)
JPVF Capital Growth 36.60% 27.00% 22.26% N/A 24.17% (5/1/92)
JPVF Small Company -12.97% 6.79% 10.58% 11.33% 10.84% (4/18/86)
JPVF Emerging Growth 31.08% 21.99% N/A N/A 26.81% (5/1/95)
JPVF World Growth Stock 1.40% 10.67% 8.25% 10.74% 10.27% (8/1/85)
JPVF Growth N/A N/A N/A N/A 29.34% (1/1/98)
JPVF High Yield Bond N/A N/A N/A N/A -0.49% (1/1/98)
JPVF International Equity N/A N/A N/A N/A 20.00% (1/1/98)
MFS Research Series 21.69% 20.27% N/A N/A 20.79% (7/26/95)
MFS Utilities Series 16.52% 20.89% N/A N/A 23.64% (1/3/95)
Oppenheimer Bond 5.35% 5.43% 5.51% 7.75% 8.12% (4/3/85)
Oppenheimer Strategic Bond 1.48% 6.31% 5.33% N/A 5.29% (5/3/93)
VIP Equity-Income 10.10% 16.11% 17.09% 14.00% 12.82% (10/9/86)
VIP Growth 37.46% 23.63% 19.97% 17.72% 15.70% (10/9/86)
VIP II Contrafund 28.12% 23.30% N/A N/A 26.83% (1/3/95)
VIP II Index 500 26.58% 26.09% 21.99% N/A 19.52% (8/27/92)
</TABLE>
* The date listed next to each performance figure in this column is the
inception date of the Fund underlying each corresponding Variable
Sub-account.
The Company may from time to time also disclose cumulative total
returns in conjunction with the standard format described above. Cumulative
total return figures represent the cumulative change in value of an investment
in a Sub-account over the indicated periods. The cumulative returns will be
calculated using the following formula, assuming no Surrender Charge or Annual
Administrative Fee.
ERV - P
CTR = -------
P
Where:
CTR = the cumulative total return net of a Variable Sub-account's recurring
charges for the period;
ERV = ending redeemable value at the end of the one, five or ten-year (or
other) period (or fractional portion thereof) of a hypothetical $30,000
Premium Payment made at the beginning of the one, five, or ten-year (or
other) period.
P = a hypothetical initial Premium Payment of $30,000.
Page 11
<PAGE>
The following table shows the Non-Standardized Cumulative Total Return
for the Allegiance Variable Annuity Sub-accounts for the period ended December
31, 1998.
<TABLE>
<CAPTION>
Since
Sub-Accounts 1 Year Inception*
<S> <C> <C> <C>
JPVF Money Market 3.41% 59.36% (8/1/85)
JPVF Balanced 16.11% 97.37% (5/1/92)
JPVF Growth and Income 11.11% 158.65% (5/1/92)
JPVF Capital Growth 36.60% 323.73% (5/1/92)
JPVF Small Company -12.97% 270.07% (4/18/86)
JPVF Emerging Growth 31.08% 139.19% (5/1/95)
JPVF World Growth Stock 1.40% 271.41% (8/1/85)
JPVF Growth N/A 29.34% (1/1/98)
JPVF High Yield Bond N/A -0.49% (1/1/98)
JPVF International Equity N/A 20.00% (1/1/98)
MFS Research Series 21.69% 91.33% (7/26/95)
MFS Utilities Series 16.52% 133.41% (1/3/95)
Oppenheimer Bond 5.35% 192.50% (4/3/85)
Oppenheimer Strategic Bond 1.48% 33.94% (5/3/93)
VIP Equity-Income 10.10% 337.31% (10/9/86)
VIP Growth 37.46% 495.72% (10/9/86)
VIP II Contrafund 28.12% 158.42% (1/3/95)
VIP II Index 500 26.58% 210.22% (8/27/92)
</TABLE>
* The date listed next to each performance figure in this column is the
inception date of the Fund underlying each corresponding Variable
Sub-account.
All non-standard performance data will only be advertised if the standard total
return performance data is also included in the advertisement.
Other Information
The following is a partial list of those publications which may be
cited in advertising or sales literature describing investment results or other
data relative to one or more of the Variable Sub-accounts. Other publications
may also be cited.
<TABLE>
<S> <C>
Broker World Financial World
Across the Board Advertising Age
American Banker Barron's
Best's Review Business Insurance
Business Month Business Week
Changing Times Consumer Reports
Economist Financial Planning
Forbes Fortune
Inc. Institutional Investor
Insurance Forum Insurance Sales
Insurance Week Journal of Accountancy
Journal of the American Society of CLU & ChFC Journal of Commerce
Life Insurance Selling Life Association News
MarketFacts Manager's Magazine
Page 12
<PAGE>
National Underwriter Money
Morningstar, Inc. Nation's Business
New Choices (formerly 50 Plus) New York Times
Pension World Pensions & Investments
Rough Notes Round the Table
U.S. Banker VARDs
Wall Street Journal Working Woman
</TABLE>
FEDERAL TAX MATTERS
The Allegiance Variable Annuity Contract is designed for use by
individuals as either a non-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
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
form 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
Page 13
<PAGE>
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 from 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 your 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.
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 (See "Death Benefits").
Page 14
<PAGE>
LEGAL MATTERS
Legal advice relating to certain matters under the federal securities
laws applicable to the issue and sale of the Contracts 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 financial statements of The Alexander Hamilton Variable Annuity
Separate Account of Alexander Hamilton Life Insurance Company of America as of
December 31, 1998, and for the year then ended, appearing in this Statement of
Additional Information and this Registration Statement have been audited by
______________ , 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 statutory basis financial statements of Alexander Hamilton Life
Insurance Company of America as of December 31, 1998, and for each of the years
in the three-year period ended December 31, 1998, appearing in this Statement of
Additional Information and this Registration Statement have been audited
by________________ , independent auditors, as set forth in their report thereon
(which contains an adverse opinion with respect to conformity with generally
accepted accounting principles) appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
FINANCIAL STATEMENTS
The financial statements 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, nor do they necessarily bear on the Guaranteed Interest Rates
declared from time to time for the Capital Developer Account Interest Rate
Guarantee Periods.
Page 15
<PAGE>
PART C OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
All required financial statements are included in Part A and
Part B of this Registration Statement.
(b) Exhibits:
(1) Resolution of the Board of Directors of Alexander Hamilton
Life Insurance Company of America authorizing establishment of
the Separate Account.1/
(2) Not Applicable.
(3) Principal Underwriting Agreement by and between Alexander Hamilton
Life Insurance Company of America, on its own behalf and on the
behalf of the Separate Account, and Jefferson-Pilot Investor
Services, Inc. 3/
(4) (a) Form of Contract for the Alexander Hamilton Life Insurance
Company of America Variable Annuity.2/
(b) Form of IRA Endorsement.2/
(c) Form of IRA Disclosure and Financial Disclosure Endorsement.2/
(d) Form of TSA Endorsement.2/
(e) Form of 401(a) Endorsement.2/
(5) (a) Form of Application for the Alexander Hamilton Life Insurance
Company of America Variable Annuity Contract.4/
(b) Form of Application Supplement for 1035 Exchange.2/
(6) (a) Charter of Alexander Hamilton Life Insurance Company of
America.1/
(b) By-Laws of Alexander Hamilton Life Insurance Company of
America 1/
(7) Not Applicable.
(8) (a) Participation Agreement by and between Alexander Hamilton Life
Insurance Company of America, Fidelity Distributors
Corporation and Variable Insurance Products Fund.4/
C-1
<PAGE>
(b) Participation Agreement by and between the Alexander Hamilton
Life Insurance Company of America, Fidelity Distributors
Corporation and Variable Insurance Products Fund II.4/
(c) Participation Agreement by and between Alexander Hamilton Life
Insurance Company of America, Massachusetts Financial Services
Company and MFS Variable Insurance Trust.4/
(d) Participation Agreement by and between Alexander Hamilton Life
Insurance Company of America, OppenheimerFunds, Inc. and
Oppenheimer Variable Account Funds.5/
(9) Opinion and Consent of Counsel.2/
(10) Not applicable.
(11) Not Applicable.
(12) Not Applicable.
(13) Schedule of Computation of Performance.4/
(14) Not Applicable.
1/ Incorporated by reference to the initial Registration Statement on Form
N-4 for the Alexander Hamilton Variable Annuity Separate Account filed on
February 24, 1994 (Registration No. 33-75714).
2/ Incorporated by reference to the Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-4 for the Alexander Hamilton Variable
Annuity Separate Account filed on September 8, 1995 (Registration No.
33-75714).
3/ Incorporated by reference to the Post-Effective Amendment No. 2 to the
Registration Statement on Form N-4 for the Alexander Hamilton Variable
Annuity Separate Account filed on May 2, 1997 (Registration No. 33-75714).
4/ Incorporated by reference to the Post-Effective Amendment No. 4 to the
Registration Statement on Form N-4 for the Alexander Hamilton Variable
Annuity Separate Account filed on February 26, 1998 (Registration No.
33-75714).
5/ Incorporated by reference to the Post-Effective Amendment No. 5 to the
Registration Statement on Form N-4 for the Alexander Hamilton Variable
Annuity Separate Account filed on April 20, 1998 (Registration No.
33-75714).
C-2
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
Name and Principal Position and Offices
Business Address with Depositor
- ---------------- --------------
<S> <C>
David A. Stonecipher Director; Chairman of the
Board and President
Dennis R. Glass Director; Executive Vice
President and Treasurer
John D. Hopkins Director; Executive Vice
President and General Counsel
Kenneth C. Mlekush Director; Executive Vice
President
James T. Ponder Director; Executive
Vice President
E. Jay Yelton Director; Executive Vice
President
Reggie D. Adamson Senior Vice President-
Finance
Charles P. Elam Senior Vice President and
Annuity Actuary
John C. Ingram Senior Vice President-
Securities
Hal B. Phillips Senior Vice President and
Life Actuary
Dale E. Cooper Vice President-Variable
Products
Russell C. Simpson Vice President
Robert A. Reed Vice President and
Secretary
Donna L. Drew Director; Assistant Vice President
1000 Town Ctr.
Suite 1070A
Southfield, MI 48075
</TABLE>
*/ Except as otherwise noted, the Principal business address for each officer
and director is 100 N. Greene St., Greensboro, North Carolina, 27401.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
C-3
<PAGE>
The Company owns the assets comprising each Variable Subaccount of the
Registrant. The Company is an wholly-owned subsidiary of Jefferson-Pilot
Corporation.
Separate financial statements are filed for the Registrant.
The following is a list of corporations controlled by Jefferson-Pilot
Corporation:
<TABLE>
<CAPTION>
Organized % Voting
Under Stock
Names of Subsidiaries Laws of: Owned by
Parent
<S> <C> <C>
Jefferson-Pilot Life Insurance Company North Carolina 100%
Jefferson Pilot Variable Corporation North Carolina 100%
Jefferson-Pilot Communications Company North Carolina 100%
Alexander Hamilton Life Insurance Company
of America Michigan 100%
AH (Michigan) Life Insurance Company Michigan 100%
First Alexander Hamilton Life Insurance Company New York 100%
Jefferson Pilot Financial Insurance Company New Hampshire 100%
Jefferson Pilot LifeAmerica Insurance Company New Jersey 100%
Jefferson Pilot Securities Corporation New Hampshire 100%
</TABLE>
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. Since none of the
companies listed is a subsidiary of the registrant, only the financial
statements of the registrant are filed.
C-4
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of February 12, 1999, there were 2,018 Owners of the Contracts, 992 of
which owned non-qualified Contracts and 1,026 of which owned qualified
Contracts.
ITEM 28. INDEMNIFICATION
The following provisions regarding the Indemnification of Directors and Officers
of the Depositor are applicable:
Section 450.1562 of Michigan Compiled Laws allows a corporation to indemnify a
person who was or is party or is threatened to be made a party to a threatened,
pending, or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he or she is or was a
director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, partner, trustee,
employee, or agent of another foreign or domestic corporation, partnership,
joint venture, trust, or other enterprise, whether for profit or not, against
expenses, including attorneys' fees, and amounts paid in settlement actually and
reasonably incurred by the person in connection with the action or suit, if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation or its shareholders,
Indemnification shall not be made for a claim, issue, or matter in which the
person has been found liable to the corporation. 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
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<PAGE>
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 jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITER
(a) Jefferson Pilot Variable Corporation also acts as principal underwriter for
the following:
- 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) The Directors and Officers of Jefferson Pilot Variable Corporation, the
principal underwriter for the Registrant, are as follows:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND
BUSINESS ADDRESS OFFICES WITH UNDERWRITER
- ---------------- ------------------------
<S> <C>
Ronald R. Angarella Director and President
David K. Booth Vice President, Marketing
Richard M. Nummi Assistant Vice President, Compliance
Charles C. Cornelio Director
Kevin Haddad Compliance Officer
100 N. 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 N. Greene Street
Greensboro, NC 27401
</TABLE>
Address (except as otherwise noted):
One Granite Place
Concord, NH 03301
(c)
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
NAME OF NET UNDERWRITING
PRINCIPAL DISCOUNTS AND COMPENSATION BROKERAGE
UNDERWRITER COMMISSIONS ON REDEMPTION COMMISSIONS COMPENSATION
<S> <C> <C> <C> <C> <C>
1998 Jefferson Pilot $ 0 $ 0 $ 0 $ 0
Variable
Corporation
</TABLE>
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<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The records required to be maintained by Section 31(a) of the Investment Company
Act of 1940 and Rules 31a-1 to 31a-3 promulgated thereunder, are maintained by
the Company, at 100 North Green St., Greensboro, North Carolina 27401 and One
Granite Place, Concord, New Hampshire 03301.
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS
(a) Registrant undertakes that it will file a post-effective amendment to
this registration statement as frequently as necessary to ensure that the
audited financial statements in the registration statement are never more than
16 months old for so long as Premium Payments under the Contract may be accepted
(except in accordance with SEC staff no-action correspondence)
(b) Registrant undertakes that it will include either (i) a postcard or
similar written communication affixed to or included
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<PAGE>
in the Prospectus that the applicant can remove to send for a Statement of
Additional Information or (ii) a space in the Contract Application that an
applicant can check to request a Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request to the Company at the address or
phone number listed in the Prospectus.
(d) Alexander Hamilton Life Insurance Company of America 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 Alexander Hamilton Life Insurance Company of
America.
SECTION 403(b) REPRESENTATIONS
The Company represents that it is relying on a no-action letter dated November
28, 1988, to the American Council of Life Insurance (Ref. No. IP-6-88),
regarding Sections 22(e), 27(c)(1), and 27(d) of the Investment Company Act of
1940, in connection with redeemability restrictions on Section 403(b) Contracts,
and that paragraphs numbered (1) through (4) of that letter will be complied
with.
STATEMENT PURSUANT TO RULE 6c-7: TEXAS OPTIONAL RETIREMENT PROGRAM
The Company and the Separate Account rely on 17 C.F.R. Section 270.6c-7, and
represent that the provisions of that Rule have been or will be complied with.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment No. 6 to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Greensboro, State of
North Carolina on this 5th day of February , 1999.
ALEXANDER HAMILTON VARIABLE ANNUITY
SEPARATE ACCOUNT
ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF
AMERICA
Depositor
/s/ David A. Stonecipher
----------------------------------------
David A. Stonecipher
Chairman of the Board, President
Pursuant to the requirements of 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>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ David A. Stonecipher
David A. Stonecipher Director; Chairman of the Board, President February 5, 1999
/s/ Dennis R. Glass
Dennis R. Glass Director; Executive Vice President February 5, 1999
and Treasurer
/s/ John D. Hopkins
John D. Hopkins Director; Executive Vice President February 5, 1999
and General Counsel
/s/ Kenneth C. Mlekush
Kenneth C. Mlekush Director; Executive Vice President February 5, 1999
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ James T. Ponder
James T. Ponder Director; Executive Vice President February 22, 1999
/s/ E. Jay Yelton
E. Jay Yelton Director; Executive Vice President February 5, 1999
/s/ Donna L. Drew
Donna L. Drew Director; Assistant Vice President February 12, 1999
</TABLE>
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