LONDON PACIFIC LIFE & ANNUITY COMPANY
INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACTS
WITH FLEXIBLE CONTRIBUTIONS
ISSUED BY
LPLA SEPARATE ACCOUNT ONE
AND
LONDON PACIFIC LIFE & ANNUITY COMPANY
The Individual Fixed and Variable Deferred Annuity Contracts with Flexible
Contributions (the "Contracts") described in this Prospectus provide for
accumulation of Contract Values on a fixed and variable basis and payment of
annuity payments on a fixed and variable basis. The Contracts are designed
for use by individuals in retirement plans on a Qualified or Non-Qualified
basis. (See "Definitions.")
Contributions for the Contracts will be allocated to a segregated investment
account of London Pacific Life & Annuity Company (the "Company") which account
has been designated LPLA Separate Account One (the "Separate Account") or to
the Company's Fixed Account. Under certain circumstances, however,
Contributions may initially be allocated to the Salomon Money Market
Sub-Account of the Separate Account. (See "Highlights.") The Separate
Account invests in shares of LPT Variable Insurance Series Trust. (See "LPT
Variable Insurance Series Trust.") LPT Variable Insurance Series Trust is a
series fund with eight Portfolios currently available: MAS Value Portfolio;
MFS Total Return Portfolio; Salomon U.S. Quality Bond Portfolio; Strong
International Stock Portfolio; Salomon Money Market Portfolio; Berkeley
Smaller Companies Portfolio; Lexington Corporate Leaders Portfolio; and Strong
Growth Portfolio.
THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY FINANCIAL INSTITUTION, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENT IN THE CONTRACTS IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF
THE OWNER'S INVESTMENT TO FLUCTUATE, AND WHEN THE CONTRACTS ARE SURRENDERED,
THE VALUE MAY BE HIGHER OR LOWER THAN THE CONTRIBUTIONS.
This Prospectus concisely sets forth the information a prospective investor
should know before investing. Additional information about the Contracts is
contained in the Statement of Additional Information which is available at no
charge. The Statement of Additional Information has been filed with the
Securities and Exchange Commission and is incorporated herein by reference.
The Table of Contents of the Statement of Additional Information can be found
on Page __ of this Prospectus. For the Statement of Additional Information,
call (800) 852-3152 or write to the Company's Annuity Service Center at the
address listed above.
INQUIRIES:
Any inquiries can be made by telephone or in writing to the Annuity Service
Center listed on the back page.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Prospectus and the Statement of Additional Information are dated May 1,
1996.
This Prospectus should be kept for future reference.
TABLE OF CONTENTS
PAGE
DEFINITIONS
HIGHLIGHTS
FEE TABLE
THE COMPANY
THE SEPARATE ACCOUNT
LPT VARIABLE INSURANCE SERIES TRUST
MAS Value Portfolio
MFS Total Return Portfolio
Salomon U.S. Quality Bond Portfolio
Strong International Stock Portfolio
Salomon Money Market Portfolio
Berkeley Smaller Companies Portfolio
Lexington Corporate Leaders Portfolio
Strong Growth Portfolio
Voting Rights
Substitution of Securities
CHARGES AND DEDUCTIONS
Deduction for Contingent Deferred Sales Charge (Sales Load)
Convalescent Care Facility/Terminal Illness Benefit
Reduction or Elimination of the Contingent Deferred Sales Charge
Deduction for Mortality and Expense Risk Charge
Deduction for Administrative Charge
Deduction for Distribution Charge
Deduction for Contract Maintenance Charge
Deduction for Transfer Fee
Deduction for Premium and Other Taxes
Deduction for Expenses of the Trust
THE CONTRACTS
Owner
Joint Owners
Annuitant
Assignment
CONTRIBUTIONS AND CONTRACT VALUE
Contributions
Allocation of Contributions
Dollar Cost Averaging Program
Contract Value
Exchange Program
Accumulation Units
Accumulation Unit Value
TRANSFERS
Transfers During the Accumulation Period
Transfers During the Annuity Period
WITHDRAWALS
Systematic Withdrawal Option
Suspension or Deferral of Payments
PROCEEDS PAYABLE ON DEATH
Death of Owner During the Accumulation Period
Death Benefit Amount During the Accumulation Period
Death Benefit Options During the Accumulation Period
Death of Owner During the Annuity Period
Death of Annuitant
Payment of Death Benefit
Beneficiary
Change of Beneficiary
ANNUITY PROVISIONS
General
Annuity Date
Selection or Change of an Annuity Option
Frequency and Amount of Annuity Payments
Annuity
Fixed Annuity
Variable Annuity
Annuity Options
OPTION A. LIFE ANNUITY
OPTION B. LIFE ANNUITY WITH PERIOD CERTAIN OF 120 MONTHS
OPTION C. JOINT AND SURVIVOR ANNUITY
OPTION D. PERIOD CERTAIN
DISTRIBUTOR
PERFORMANCE INFORMATION
Salomon Money Market Sub-Account
Other Sub-Accounts
TAX STATUS
General
Diversification
Contracts Owned by Other than Natural Persons
Multiple Contracts
Tax Treatment of Assignments
Income Tax Withholding
Tax Treatment of Withdrawals - Non-Qualified Contracts
Qualified Plans
Tax Treatment of Withdrawals - Qualified Contracts
FINANCIAL STATEMENTS
LEGAL PROCEEDINGS
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
APPENDIX
DEFINITIONS
ACCUMULATION PERIOD: The period prior to the Annuity Date during which
Contributions may be made.
ACCUMULATION UNIT: A unit of measure used to determine the value of the
Owner's interest in a Sub-Account of the Separate Account during the
Accumulation Period.
ADJUSTED CONTRACT VALUE: The Contract Value less any applicable Premium Tax
and Contract Maintenance Charge, if any. This amount is applied to the
applicable Annuity Tables to determine Annuity Payments.
AGE: The age of any Owner or Annuitant on his/her last birthday.
ANNUITANT: The natural person on whose life Annuity Payments are based. On
or after the Annuity Date, the Annuitant shall also include any Joint
Annuitant.
ANNUITY DATE: The date on which Annuity Payments begin.
ANNUITY OPTIONS: Options available for Annuity Payments.
ANNUITY PAYMENTS: The series of payments made to the Owner or any named payee
after the Annuity Date under the Annuity Option selected.
ANNUITY PERIOD: The period of time beginning with the Annuity Date during
which Annuity Payments are made.
ANNUITY SERVICE CENTER: The office indicated on the back page of this
Prospectus to which notices, requests and Contributions must be sent. All sums
payable to the Company under the Contract are payable only at the Annuity
Service Center.
ANNUITY UNIT: A unit of measure used to calculate Variable Annuity Payments
during the Annuity Period.
BENEFICIARY: The person(s) or entity(ies) who will receive the death benefit
payable under the Contract.
COMPANY: London Pacific Life & Annuity Company.
CONTRACT ANNIVERSARY: An anniversary of the Issue Date.
CONTRACT VALUE: The dollar value as of any Valuation Period of all amounts
accumulated in the Contract.
CONTRACT WITHDRAWAL VALUE: The Contract Value less any applicable Premium
Tax, less any Contingent Deferred Sales Charge, less any applicable Contract
Maintenance Charge.
CONTRACT YEAR: The first Contract Year is the annual period which begins on
the Issue Date. Subsequent Contract Years begin on each anniversary of the
Issue Date.
CONTRIBUTION: A payment made by or on behalf of an Owner with respect to the
Contract.
EFFECTIVE DATE: The date the Company declares a Guaranteed Interest Rate for
a specified Guarantee Period.
ELIGIBLE FUND: An investment entity into which assets of the Separate Account
will be invested.
FIXED ACCOUNT: An investment option within the General Account where the
Company guarantees the rate(s) of interest for a specified Guarantee Period.
FIXED ANNUITY: A series of payments made during the Annuity Period which are
guaranteed as to dollar amount by the Company.
GENERAL ACCOUNT: The Company's general investment account which contains all
the assets of the Company with the exception of the Separate Account and other
segregated asset accounts.
GUARANTEE PERIOD: A one year period, commencing on the Issue Date, for which
the Guaranteed Interest Rate is credited. Upon each Contract Anniversary, a
new one year Guarantee Period commences.
GUARANTEED INTEREST RATE: The interest rate credited to the Contract Value by
the Company for any given Guarantee Period.
ISSUE DATE: The date on which the Contract became effective.
NON-QUALIFIED CONTRACTS: Contracts issued under non-qualified plans which do
not receive favorable tax treatment under Section 408 of the Internal Revenue
Code of 1986, as amended (the "Code").
OWNER: The person or entity entitled to the ownership rights stated in the
Contract.
PORTFOLIO: A segment of an Eligible Fund which constitutes a separate and
distinct class of shares.
PREMIUM TAX: Any premium taxes paid to any governmental entity assessed
against Contributions or Contract Value.
QUALIFIED CONTRACTS: Contracts issued under qualified plans which receive
favorable tax treatment under Section 408 of the Code.
SEPARATE ACCOUNT: The Company's Separate Account designated as LPLA Separate
Account One.
SUB-ACCOUNT: Separate Account assets are divided into Sub-Accounts. Assets of
each Sub-Account will be invested in shares of an Eligible Fund or a Portfolio
of an Eligible Fund.
VALUATION DATE: Each day on which the Company and the New York Stock Exchange
("NYSE") are open for business.
VALUATION PERIOD: The period of time beginning at the close of business of
the NYSE on each Valuation Date and ending at the close of business for the
next succeeding Valuation Date.
VARIABLE ANNUITY: An annuity with payments which vary as to dollar amount in
relation to the investment performance of specified Sub-Accounts of the
Separate Account.
WRITTEN REQUEST: A request in writing, in a form satisfactory to the Company,
which is received by the Annuity Service Center.
HIGHLIGHTS
Contributions for the Contracts will be allocated to a segregated investment
account of London Pacific Life & Annuity Company (the "Company") which account
has been designated LPLA Separate Account One (the "Separate Account") or to
the Company's Fixed Account. Under certain circumstances, however,
Contributions may initially be allocated to the Salomon Money Market
Sub-Account of the Separate Account (see below). The Separate Account invests
in shares of LPT Variable Insurance Series Trust. Owners bear the investment
risk for all amounts allocated to the Separate Account.
The Contract may be returned to the Company for any reason within ten (10)
calendar days (thirty (30) days if purchased by individuals in California who
are 60 years of age or older on the Issue Date, or twenty (20) calendar days
of the date of receipt with respect to the circumstances described in (c)
below) after its receipt by the Owner ("Right to Examine Contract"). It may be
returned to the Company at its Annuity Service Center. When the Contract is
received by the Company at its Annuity Service Center, it will be voided as if
it had never been in force. Upon its return, the Company will refund the
Contract Value next computed after receipt of the Contract by the Company at
its Annuity Service Center except in the following circumstances: (a) where
the Contract is purchased pursuant to an Individual Retirement Annuity; (b) in
those states which require the Company to refund Contributions, less
withdrawals; or (c) in the case of Contracts which are deemed by certain
states to be replacing an existing annuity or insurance contract and which
require the Company to refund Contributions, less withdrawals. With respect
to the circumstances described in (a), (b) and (c) above, the Company will
refund the greater of Contributions, less any withdrawals, or the Contract
Value, and will allocate initial Contributions to the Salomon Money Market
Sub-Account (except for any Contribution to be allocated to the Fixed Account
as elected by the Owner) until the expiration of fifteen (15)days from the
Issue Date (or twenty-five (25) days in the case of Contracts described under
(c) above). Upon the expiration of the fifteen day period (or twenty-five day
period with respect to Contracts described under (c)), the Sub-Account value
of the Salomon Money Market Sub-Account will be allocated to the Separate
Account in accordance with the election made by the Owner at the time the
Contract is issued.
The Company reserves the right to offer an exchange program (the "Exchange
Program") which is available only to purchasers who exchange an existing
contract issued by another insurance company not affiliated with the Company
for the Contract offered by this Prospectus. As of the date of this
Prospectus, the Company is making such a Program available. Under the
Exchange Program, the Company adds certain amounts to the Contract Value as
exchange credits ("Exchange Credits"). Subject to specific limits, the
Exchange Credits equal the surrender charge paid, if any, to the other
insurance company. (See "Contributions and Contract Value - Exchange
Program.")
A Contingent Deferred Sales Charge (sales load) may be deducted in the event
of a withdrawal of all or a portion of the unliquidated Contributions.
Unliquidated means not previously surrendered or withdrawn. The Contingent
Deferred Sales Charge is based upon the Contract Year in which the withdrawal
is made as follows:
<TABLE>
<CAPTION>
<S> <C>
Charge as a percentage of
Contract Year unliquidated Contribution withdrawn
- ------------------------------ ------------------------------------
1 year 7%
2 years 7%
3 years 6%
4 years 5%
5 years 4%
6 years 3%
7 years 2%
8 years or more 0%
</TABLE>
The Owner may make a partial withdrawal once each Contract Year on a
non-cumulative basis without the imposition of the Contingent Deferred Sales
Charge ("Free Withdrawal"). The Free Withdrawal amount may be up to 10% of
unliquidated Contributions. For purposes of calculating the Free Withdrawal
amount and the Contingent Deferred Sales Charge, amounts withdrawn as a Free
Withdrawal are not considered a liquidation of contributions. If the
Systematic Withdrawal Option is selected, the once a Contract Year limitation
is waived if there have been no other Free Withdrawals during the current
Contract Year. (See "Charges and Deductions - Deduction for Contingent
Deferred Sales Charge" and the "Appendix.") Withdrawals of income may be
subject to a ten percent (10%) federal income tax penalty if the Owner is not
59 1/2 years old at the time of the withdrawal.
Each Valuation Period, the Company deducts a Mortality and Expense Risk Charge
from the Separate Account which is equal, on an annual basis, to 1.25% of the
average daily net asset value of each Sub-Account of the Separate Account.
This Charge compensates the Company for assuming the mortality and expense
risks under the Contracts. (See "Charges and Deductions - Deduction for
Mortality and Expense Risk Charge.")
Each Valuation Period, the Company deducts a Distribution Charge from the
Separate Account which is equal, on an annual basis, to .10% of the average
daily net asset value of each Sub-Account of the Separate Account. This
Charge compensates the Company for the costs associated with the distribution
of the Contracts. (See "Charges and Deductions - Deduction for Distribution
Charge.")
Each Valuation Period, the Company deducts an Administrative Charge from the
Separate Account which is equal, on an annual basis, to .15% of the average
daily net asset value of each Sub-Account of the Separate Account. This
Charge compensates the Company for costs associated with the administration of
the Contracts and the Separate Account. (See "Charges and Deductions -
Deduction for Administrative Charge.")
On each Contract Anniversary, the Company deducts a Contract Maintenance
Charge of $36 from the Contract Value by subtracting values from the Fixed
Account and/or by cancelling Accumulation Units from each applicable
Sub-Account. However, during the Accumulation Period, if the Contract Value
in the Separate Account and the Fixed Account on the Contract Anniversary is
at least $50,000, then no Contract Maintenance Charge is deducted. If a total
withdrawal is made on other than a Contract Anniversary and the Contract Value
for the Valuation Period during which the total withdrawal is made is less
than $50,000, the full Contract Maintenance Charge will be deducted at the
time of the total withdrawal. The Charge will be deducted from the Fixed
Account and the Sub-Accounts in the same proportion that the amount of
Contract Value in the Fixed Account and each Sub-Account bears to the total
Contract Value. During the Annuity Period, the Contract Maintenance Charge
will be deducted pro-rata from Annuity Payments regardless of Contract size
and will result in a reduction of each Annuity Payment. (See "Charges and
Deductions - Deduction for Contract Maintenance Charge.")
Under certain circumstances, a Transfer Fee may be assessed when an Owner
transfers Contract Values between Sub-Accounts or to or from the Fixed
Account. (See "Charges and Deductions - Deduction for Transfer Fee.")
The Company will not deduct Premium Taxes from an Owner's Contributions before
allocating the Contributions to the Fixed Account and/or Sub-Accounts of the
Separate Account unless required to pay such taxes under applicable state law.
The Company's current practice is to pay the Premium Tax due and deduct the
tax upon full or partial withdrawals, payment of a death benefit or purchase
of an annuity under the Contract. The Company reserves the right to
discontinue the deferral of this tax. (See "Charges and Deductions -
Deduction for Premium and Other Taxes.")
There is a ten percent (10%) federal income tax penalty that may be applied
to the income portion of any distribution from the Contracts. However, the
penalty is not imposed under certain circumstances. See "Tax Status -
Tax Treatment of Withdrawals - Non-Qualified Contracts" and "Tax Treatment
of Withdrawals - Qualified Contracts." For a further discussion of the
taxation of the Contracts, see "Tax Status."
See "Tax Status - Diversification" for a discussion of owner control of the
underlying investments in a variable annuity contract.
Because of certain exemptive and exclusionary provisions, interests in the
Fixed Account are not registered under the Securities Act of 1933 and the
Fixed Account is not registered as an investment company under the Investment
Company Act of 1940, as amended. Accordingly, neither the Fixed Account nor
any interests therein are subject to the provisions of these Acts, and the
Company has been advised that the staff of the Securities and Exchange
Commission has not reviewed the disclosures in the Prospectus relating to the
Fixed Account. Disclosures regarding the Fixed Account may, however, be
subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of statements made in
prospectuses.
LPLA SEPARATE ACCOUNT ONE
FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
<S> <C> <C>
Contingent Deferred Sales Charge Charge as a percentage
(see Note 2, page ___) of unliquidated
Contract Year Contribution withdrawn
--------------- -----------------------
1 year 7%
2 years 7%
3 years 6%
4 years 5%
5 years 4%
6 years 3%
7 years 2%
8 years or more 0%
</TABLE>
Transfer Fee (see Note 3, page __) No charge for first 12 transfers in a
Contract Year; thereafter the fee is the
lesser of $20 or 2% of the amount
transferred.
Contract Maintenance Charge $36 per Contract per Contract Year.
(see Note 4, page __)
<TABLE>
<CAPTION>
<S> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Charge 1.25%
Administrative Charge .15%
Distribution Charge .10%
-----
Total Separate Account Annual Expenses 1.50%
</TABLE>
LPT VARIABLE INSURANCE SERIES TRUST ANNUAL EXPENSES
(as a percentage of the average daily net assets of a Portfolio)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Management Other Total Annual
Fees Expenses* Expenses*
----------- ---------- -------------
MAS Value Portfolio (1) .875% .42% 1.29%
MFS Total Return Portfolio (2) .75% .54% 1.29%
Salomon U.S. Quality Bond Portfolio (2) .55% .44% .99%
Strong International Stock Portfolio (3) .75% .74% 1.49%
Salomon Money Market Portfolio (2) .45% .44% .89%
Berkeley Smaller Companies Portfolio (2) 1.00% .39% 1.39%
Lexington Corporate Leaders Portfolio (3) .65% .64% 1.29%
Strong Growth Portfolio (3) .75% .54% 1.29%
<FN>
(1) LPIMC Insurance Marketing Services, the investment adviser of LPT
Variable Insurance Series Trust (the "Adviser"), has agreed to waive its
entire advisory fee for the Portfolio for the initial three months of
the Portfolio's investment operations and to waive .25% of its advisory fee
for the next three months.
(2) The Adviser has agreed to waive its advisory fee for the Portfolio for
the initial six months of the Potfolio's investment operations.
(3) The Adviser has agreed to waive .25% of its advisory fee for the
Portfolio for the initial six months of the Portfolio's investment operations.
* The Company has voluntarily agreed through May 1, 1997 to reimburse each
Portfolio for certain expenses (excluding brokerage commissions) in excess of the
amounts set forth above under "Total Annual Expenses" for each Portfolio. If
expenses were not reimbursed, the estimated "Other Expenses" and "Total Annual
Expenses" for the year ending December 31, 1996 are estimated to be
approximately 1.80% and 2.68%, respectively, for the MAS Value Portfolio; 1.65%
and 2.40%, respectively, for the MFS Total Return Portfolio; 2.83% and 3.38%,
respectively, for the Salomon U.S. Quality Bond Portfolio; 2.51% and 3.26%,
respectively, for the Strong International Stock Portfolio; 2.83% and
3.28%, respectively, for the Salomon Money Market Portfolio; 1.81% and 2.81%,
respectively, for the Berkeley Smaller Companies Portfolio; 1.74% and 3.04%,
respectively, for the Lexington Corporate Leaders Portfolio; and 1.91% and
2.66%, for the Strong Growth Portfolio. The examples below are calculated based
upon such expense reimbursement arrangements.
</TABLE>
EXAMPLES (See Note 6 below)
An Owner would pay the following expenses on a $1,000 investment, assuming a
5% annual return on assets: (a) if the Contract is surrendered at the end of
each time period; (b) if the Contract is not surrendered or if the Contract is
annuitized.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Time Periods
1 year 3 years
------- --------
MAS Value Portfolio a) $100.04 $ 154.47
b) $ 30.04 $ 94.47
MFS Total Return Portfolio a) $100.04 $ 154.47
b) $ 30.04 $ 94.47
Salomon U.S. Quality Bond Portfolio a) $ 96.96 $ 144.78
b) $ 26.96 $ 84.78
Strong International Stock Portfolio a) $102.09 $ 160.94
b) $ 32.09 $ 100.94
Salomon Money Market Portfolio a) $ 95.94 $ 141.55
b) $ 25.94 $ 81.55
Berkeley Smaller Companies Portfolio a) $101.06 $ 157.70
b) $ 31.06 $ 97.70
Lexington Corporate Leaders Portfolio a) $100.04 $ 154.47
b) $ 30.04 $ 94.47
Strong Growth Portfolio a) $100.04 $ 154.47
b) $ 30.04 $ 94.47
</TABLE>
NOTES TO FEE TABLE AND EXAMPLES
1. The purpose of the Fee Table is to assist Owners in understanding the
various costs and expenses that an Owner will incur directly or indirectly.
For additional information, see "Charges and Deductions" in this Prospectus
and the Prospectus for LPT Variable Insurance Series Trust.
2. Once each Contract Year, an Owner may withdraw up to 10% of
unliquidated (which means not previously surrendered or withdrawn)
Contributions on a non-cumulative basis without the imposition of the
Contingent Deferred Sales Charge. A Free Withdrawal can be made once each
Contract Year unless the Systematic Withdrawal Option is selected. Withdrawals
of income may be subject to a ten percent (10%) federal income tax penalty if
the Owner is not 59 1/2 at the time of the withdrawal.
3. Transfers made at the end of the Right to Examine Contract period and
any transfers made pursuant to an approved Dollar Cost Averaging Program will
not be counted in determining the application of the Transfer Fee.
4. During the Accumulation Period, if the Contract Value on the Contract
Anniversary is at least $50,000, then no Contract Maintenance Charge is
deducted. If a total withdrawal is made on other than a Contract Anniversary
and the Contract Value for the Valuation Period during which the total
withdrawal is made is less than $50,000, the full Contract Maintenance Charge
will be deducted at the time of the total withdrawal. During the Annuity
Period, the full charge will be deducted regardless of Contract size.
5. Premium Taxes are not reflected. Premium taxes may apply. (See
"Charges and Deductions - Deduction for Premium and Other Taxes.")
6. The Examples assume an estimated $25,000 Contract Value so that the
Contract Maintenance Charge per $1,000 of net asset value in the Separate
Account is $1.44. Such charge would be higher for smaller Contract Values and
lower for higher Contract Values.
7. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE COMPANY
London Pacific Life & Annuity Company (the "Company") was organized in 1927 in
North Carolina as a stock life insurance company. The Company was acquired
from Liberty Life in 1989 and was formerly named Southern Life Insurance
Company.
The Company is authorized to sell life insurance and annuities in forty states
and the District of Columbia. The Company's ultimate parent is London Pacific
Group Limited, an international fund management firm chartered in Jersey,
Channel Islands.
THE SEPARATE ACCOUNT
The Board of Directors of the Company adopted a resolution to establish a
segregated asset account pursuant to North Carolina insurance law on November
21, 1994. This segregated asset account has been designated LPLA Separate
Account One (the "Separate Account"). The Company has caused the Separate
Account to be registered with the Securities and Exchange Commission as a unit
investment trust pursuant to the provisions of the Investment Company Act of
1940.
The assets of the Separate Account are the property of the Company. However,
the assets of the Separate Account, equal to the reserves and other contract
liabilities with respect to the Separate Account, are not chargeable with
liabilities arising out of any other business the Company may conduct.
Income, gains and losses, whether or not realized, are, in accordance with the
Contracts, credited to or charged against the Separate Account without regard
to other income, gains or losses of the Company. The Company's obligations
arising under the Contracts are general obligations.
The Separate Account meets the definition of a "separate account" under
federal securities laws.
The Separate Account is divided into Sub-Accounts. Each Sub-Account invests
in one Portfolio of LPT Variable Insurance Series Trust. There is no
assurance that the investment objectives of any of the Portfolios will be met.
Owners bear the complete investment risk for Contributions allocated to a
Sub-Account. Contract Values will fluctuate in accordance with the investment
performance of the Sub-Accounts to which Contributions are allocated, and in
accordance with the imposition of the fees and charges assessed under the
Contracts.
LPT VARIABLE INSURANCE SERIES TRUST
LPT Variable Insurance Series Trust (the "Trust") has been established to act
as the funding vehicle for the Contracts offered. LPIMC Insurance Marketing
Services (the "Adviser"), a subsidiary of the Company and a registered
investment adviser under the Investment Advisers Act of 1940, serves as
investment adviser to the Trust. The Adviser manages the investment
strategies and policies of the Portfolios and the Trust, subject to the
control of the Board of Trustees of the Trust. The Adviser has entered into
sub-advisory agreements with professional managers for investment of the
assets of each Portfolio. The Sub-Adviser for each Portfolio is listed under
each Portfolio's investment objectives below. The Portfolios pay monthly
investment management fees to the Adviser, and the Adviser pays the
sub-advisers for their services to the Portfolios. The Adviser retains a
management fee as compensation for providing certain services to the
Portfolios at an annual rate of .25% of each Portfolio's net assets for all
Portfolios. See "Management of the Trust" in the Prospectuses for each
Portfolio, which accompany this Prospectus, for additional information
concerning the Adviser and the sub-advisers, including a description of
advisory and sub-advisory fees.
The Trust is an open-end, series management investment company. While a brief
summary of the investment objectives of the Portfolios is set forth below,
more comprehensive information, including a discussion of potential risks, is
found in the current Prospectuses for the Portfolios which are included with
this Prospectus. Additional Prospectuses and the Statement of Additional
Information can be obtained by calling or writing the Company.
PURCHASERS SHOULD READ THIS PROSPECTUS AND THE PROSPECTUSES FOR THE PORTFOLIOS
CAREFULLY BEFORE INVESTING.
The Trust is intended to meet differing investment objectives with its
currently available separate Portfolios.
MAS VALUE PORTFOLIO : The investment objective of the MAS Value Portfolio is
to achieve above-average total return over a market cycle of three to five
years, consistent with reasonable risk, by investing in common stocks with
equity capitalizations usually greater than $300 million which are deemed by
the Sub-Adviser to be relatively undervalued, based on various measures such
as price/earnings ratios and price/book ratios. While capital return will be
emphasized somewhat more than income return, the Portfolio's total return will
consist of both capital and income returns. The Sub-Adviser for this
Portfolio is Miller Anderson & Sherrerd, LLP.
MFS TOTAL RETURN PORTFOLIO : The Portfolio's investment objective is to seek
total return by investing in securities which will provide above-average
income (compared to a portfolio entirely invested in equity securities) and
opportunities for growth of capital and income consistent with the prudent
employment of capital. Under normal market conditions, at least 25% of the
Portfolio's assets will be invested in fixed income securities and at least
40% and no more than 75% of the Portfolio's assets will be invested in equity
securities. The Sub-Adviser for this Portfolio is Massachusetts Financial
Services Company.
SALOMON U.S. QUALITY BOND PORTFOLIO : The investment objective of the Salomon
U.S. Quality Bond Portfolio is to obtain a high level of current income. It
is a diversified Portfolio that seeks to attain its objective by investing
primarily in debt obligations and mortgage-backed securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities including
collateralized mortgage obligations backed by such securities. The Portfolio
may also invest a portion of its assets in investment grade bonds. The
Sub-Adviser for this Portfolio is Salomon Brothers Asset Management Inc.
STRONG INTERNATIONAL STOCK PORTFOLIO : The investment objective of the Strong
International Stock Portfolio is to seek capital growth. The Portfolio
invests primarily in the equity securities of issuers located outside the
United States. The Portfolio will invest at least 65% of its total assets in
foreign equity securities, including common stocks, preferred stocks, and
securities that are convertible into common or preferred stocks, such as
warrants and convertible bonds, that are issued by companies whose principal
headquarters are located outside the United States. Under normal market
conditions, the Portfolio expects to invest at least 90% of its total assets
in foreign equity securities. The Portfolio will normally invest in
securities of issuers located in at least five foreign countries. Investing
in securities of foreign issuers involves risks not associated with investing
in securities of domestic issuers. Purchasers are cautioned to read the
section entitled "Implementation of Policies and Risks - Foreign Securities
and Currencies" in the Trust Prospectus for a discussion of the risks involved
in foreign investing. The Sub-Adviser for this Portfolio is Strong Capital
Management, Inc.
SALOMON MONEY MARKET PORTFOLIO : The investment objective of the Salomon Money
Market Portfolio is to seek as high a level of current income as is consistent
with liquidity and the stability of principal. The Portfolio invests in
high-quality, short-term U.S. dollar-denominated money market instruments
which are deemed to mature in thirteen months or less, and is managed so that
the average portfolio maturity of all portfolio instruments (on a
dollar-weighted basis) will not exceed 90 days. An investment in this
Portfolio is neither insured nor guaranteed by the U.S. Government and there
can be no assurance that the Portfolio will be able to maintain a stable net
asset value of $1.00 per share. The Sub-Adviser for this Portfolio is Salomon
Brothers Asset Management Inc.
BERKELEY SMALLER COMPANIES PORTFOLIO : The investment objective of the
Berkeley Smaller Companies Portfolio is to seek long-term capital appreciation
by investing primarily in equity securities of those smaller companies that
the Sub-Adviser believes may be the industry leaders of tomorrow. The
Portfolio will select its portfolio investments primarily from among U.S. and
foreign companies with individual market capitalizations which would, at the
time of purchase, place them in the same size range as companies included in
the NASDAQ Composite Index, excluding its top 75 companies. Based on this
policy and recent U.S. share prices, the companies in which the Portfolio
invests typically will have individual market capitalizations of less than
$1.0 billion ("smaller companies"). Under normal market conditions, the
Portfolio will invest at least 65% of its total assets in smaller companies.
The Sub-Adviser for this Portfolio is Berkeley Capital Management.
LEXINGTON CORPORATE LEADERS PORTFOLIO : The investment objective of the
Lexington Corporate Leaders Portfolio is to seek long-term capital growth and
income through investment in the common stocks of large, well-established
companies. The Portfolio will seek to maintain an equal number of shares in
each of the companies in which it invests. The companies in which the
Portfolio will invest have a large market capitalization (in excess of $1.0
billion), an established history of earnings and dividend payments, a large
number of publicly held shares and high trading volume and a high degree of
liquidity. The Portfolio's common stock investments will be selected from a
list of 100 "corporate leaders" of commerce and industry, as determined by the
sub-adviser. The Sub-Adviser for this Portfolio is Lexington Management
Corporation.
STRONG GROWTH PORTFOLIO : The investment objective of the Strong Growth
Portfolio is to seek capital growth. The Portfolio invests primarily in
equity securities that the Sub-Adviser believes have above-average growth
prospects. Under normal market conditions, the Portfolio will invest at least
65% of its total assets in equity securities, including common stocks,
preferred stocks, and securities that are convertible into common or preferred
stocks, such as warrants and convertible bonds. The Sub-Adviser for this
Portfolio is Strong Capital Management, Inc.
VOTING RIGHTS
In accordance with its view of present applicable law, the Company will vote
the shares of the Trust held in the Separate Account at special meetings of
the shareholders in accordance with instructions received from persons having
the voting interest in the Separate Account. The Company will vote shares for
which it has not received instructions, as well as shares attributable to it,
in the same proportion as it votes shares for which it has received
instructions. The Trust does not hold regular meetings of shareholders.
The number of shares which a person has a right to vote will be determined as
of a date to be chosen by the Company not more than sixty (60) days prior to a
shareholder meeting of the Trust. Voting instructions will be solicited by
written communication at least ten (10) days prior to the meeting.
SUBSTITUTION OF SECURITIES
If the shares of an Eligible Fund (or any Portfolio within an Eligible Fund or
any other Eligible Fund or Portfolio), are no longer available for investment
by the Separate Account or, if in the judgment of the Company's Board of
Directors, further investment in the shares should become inappropriate in
view of the purpose of the Contracts, the Company may limit further purchase
of such shares or may substitute shares of another Eligible Fund or Portfolio
for shares already purchased under the Contracts. No substitution of
securities may take place without prior approval of the Securities and
Exchange Commission and under the requirements it may impose.
CHARGES AND DEDUCTIONS
Various charges and deductions are made from the Contract Value, the Separate
Account and the Fixed Account. These charges and deductions are:
DEDUCTION FOR CONTINGENT DEFERRED SALES CHARGE (SALES LOAD)
The Contracts do not provide for a front-end sales charge. However, if all or
a portion of the unliquidated Contributions are withdrawn within the first
seven Contract Years, a Contingent Deferred Sales Charge (sales load) will be
assessed. This charge reimburses the Company for expenses incurred in
connection with the promotion, sale and distribution of the Contracts. The
Contingent Deferred Sales Charge is based upon the Contract Year in which the
withdrawal is made and is applied only to a withdrawal of Contribution. The
Contingent Deferred Sales Charge is as follows:
<TABLE>
<CAPTION>
Charge as a percentage
of unliquidated
Contract Year Contribution withdrawn
- --------------- -----------------------
<S> <C>
1 year 7%
2 years 7%
3 years 6%
4 years 5%
5 years 4%
6 years 3%
7 years 2%
8 years or more 0%
</TABLE>
The Owner may make a partial withdrawal once each Contract Year on a
non-cumulative basis without the imposition of the Contingent Deferred Sales
Charge ("Free Withdrawal"). The Free Withdrawal amount may be up to 10% of
unliquidated Contributions. Unliquidated means not previously surrendered or
withdrawn. For purposes of calculating the Free Withdrawal amount and the
Contingent Deferred Sales Charge, amounts withdrawn as a Free Withdrawal are
not considered a liquidation of contributions. If the Systematic Withdrawal
Option is selected, the once a Contract Year limitation is waived if there
have been no other Free Withdrawals during the current Contract Year.
Systematic Withdrawals can be made monthly, quarterly, semi-annually or
annually. See the "Appendix" for examples of how the Free Withdrawal amount
and the Contingent Deferred Sales Charge are calculated. The value of the
Exchange Credits from the Exchange Program is not available as a Free
Withdrawal (see "Contributions and Contract Value - Exchange Program").
Withdrawals of income may be subject to a ten percent federal income tax
penalty if the Owner is not 59 1/2 at the time of the withdrawal.
CONVALESCENT CARE FACILITY/TERMINAL ILLNESS BENEFIT
In addition, in certain states, if an Owner has been confined in a
Convalescent Care Facility for any continuous ninety day period or if the
Owner is first diagnosed as having a terminal illness and it is at least 90
days after the Issue Date, an Owner may make a one time withdrawal of a
certain amount free of the Contingent Deferred Sales Charge.
REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE
The amount of the Contingent Deferred Sales Charge may be reduced or
eliminated when sales of the Contracts are made to individuals or to a group
of individuals in a manner that results in savings of sales expenses. The
entitlement to a reduction of the Contingent Deferred Sales Charge will be
determined by the Company after examination of all the relevant factors such
as:
1. The size and type of group to which sales are to be made will be
considered. Generally, the sales expenses for a larger group are less than
for a smaller group because of the ability to implement large numbers of
Contracts with fewer sales contacts.
2. The total amount of Contributions to be received will be considered.
Per Contract sales expenses are likely to be less on larger Contributions than
on smaller ones.
3. Any prior or existing relationship with the Company will be
considered. Per Contract sales expenses are likely to be less when there is a
prior existing relationship because of the likelihood of implementing the
Contract with fewer sales contacts.
4. There may be other circumstances, of which the Company is not
presently aware, which could result in reduced sales expenses.
If, after consideration of the foregoing factors, the Company determines that
there will be a reduction in sales expenses, the Company may provide for
a reduction or elimination of the Contingent Deferred Sales Charge.
The Contingent Deferred Sales Charge may be eliminated when the Contracts are
issued to an officer, director or employee of the Company or any of its
affiliates. In no event will reductions or elimination of the Contingent
Deferred Sales Charge be permitted where reductions or elimination will be
unfairly discriminatory to any person.
DEDUCTION FOR MORTALITY AND EXPENSE RISK CHARGE
Each Valuation Period, the Company deducts a Mortality and Expense Risk Charge
from the Separate Account which is equal, on an annual basis, to 1.25%
(consisting of approximately .25% for mortality risks and approximately 1.00%
for expense risks) of the average daily net asset value of each Sub-Account of
the Separate Account. The mortality risks assumed by the Company arise from
its contractual obligation to make Annuity Payments after the Annuity Date
(determined in accordance with the Annuity Option chosen by the Owner)
regardless of how long all Annuitants live. This assures that neither an
Annuitant's own longevity, nor an improvement in life expectancy greater than
that anticipated in the mortality tables, will have any adverse effect on the
Annuity Payments the Annuitant will receive under the Contract. Further, the
Company bears a mortality risk in that it guarantees the annuity purchase
rates for the Annuity Options under the Contract whether for a Fixed Annuity
or a Variable Annuity. Also, the Company bears a mortality risk with respect
to the death benefit and with respect to the waiver of the Contingent Deferred
Sales Charge if Contributions have been held in the Contract less than eight
(8) years. The expense risk assumed by the Company is that all actual
expenses involved in administering the Contracts, including Contract
maintenance costs, administrative costs, mailing costs, data processing costs,
legal fees, accounting fees, filing fees and the costs of other services may
exceed the amount recovered from the Contract Maintenance Charge and the
Administrative Charge.
If the Mortality and Expense Risk Charge is insufficient to cover the actual
costs, the loss will be borne by the Company. Conversely, if the amount
deducted proves more than sufficient, the excess will be a profit to the
Company. The Company expects a profit from this charge.
The Mortality and Expense Risk Charge is guaranteed by the Company and cannot
be increased.
To the extent that the Contingent Deferred Sales Charge is insufficient to
cover the actual costs of distribution, the Company may use any of its
corporate assets, including potential profit which may arise from the
Mortality and Expense Risk Charge, to provide for any difference.
DEDUCTION FOR ADMINISTRATIVE CHARGE
Each Valuation Period, the Company deducts an Administrative Charge from the
Separate Account which is equal, on an annual basis, to .15% of the average
daily net asset value of each Sub-Account of the Separate Account. This
charge, together with the Contract Maintenance Charge (see below), is to
reimburse the Company for the expenses it incurs in the establishment and
maintenance of the Contracts and the Separate Account. These expenses
include, but are not limited to: preparation of the Contracts, confirmations,
annual reports and statements, maintenance of Owner records, maintenance of
Separate Account records, administrative personnel costs, mailing costs, data
processing costs, legal fees, accounting fees, filing fees, the costs of other
services necessary for Owner servicing and all accounting, valuation,
regulatory and reporting requirements. Since this charge is an asset-based
charge, the amount of the charge attributable to a particular Contract may
have no relationship to the administrative costs actually incurred by that
Contract. The Company does not intend to profit from this charge. This
charge will be reduced to the extent that the amount of this charge is in
excess of that necessary to reimburse the Company for its administrative
expenses. Should this charge prove to be insufficient, the Company will not
increase this charge and will incur the loss.
DEDUCTION FOR DISTRIBUTION CHARGE
Each Valuation Period, the Company deducts a Distribution Charge from the
Separate Account which is equal, on an annual basis, to .10% of the average
daily net asset value of each Sub-Account of the Separate Account. This
charge compensates the Company for the costs associated with the distribution
of the Contracts. The Company does not intend to profit from this charge.
This charge will be reduced to the extent that the amount of this charge
is in excess of that necessary to reimburse the Company for its
costs of distribution. Should this charge prove to be insufficient, the
Company will not increase this charge and will incur the loss. The staff of
the Securities and Exchange Commission deems the Distribution Charge to
constitute a deferred sales charge.
DEDUCTION FOR CONTRACT MAINTENANCE CHARGE
On each Contract Anniversary, the Company deducts a Contract Maintenance
Charge from the Contract Value by subtracting values from the Fixed Account
and/or by cancelling Accumulation Units from each applicable Sub-Account to
reimburse it for expenses relating to maintenance of the Contracts. The
Contract Maintenance Charge is $36.00 each Contract Year. However, during the
Accumulation Period, if the Contract Value in the Separate Account and the
Fixed Account on the Contract Anniversary is at least $50,000, then no
Contract Maintenance Charge is deducted. If a total withdrawal is made on
other than a Contract Anniversary and the Contract Value for the Valuation
Period during which the total withdrawal is made is less than $50,000, the
full Contract Maintenance Charge will be deducted at the time of the total
withdrawal. During the Annuity Period, the Contract Maintenance Charge will
be deducted from Annuity Payments regardless of Contract size and will result
in a reduction of each Annuity Payment. The Contract Maintenance Charge will
be deducted from the Fixed Account and the Sub-Accounts in the Separate
Account in the same proportion that the amount of Contract Value in the Fixed
Account and each Sub-Account bears to the total Contract Value. The Company
has set this charge at a level so that, when considered in conjunction with
the Administrative Charge (see above), it will not make a profit from the
charges assessed for administration.
DEDUCTION FOR TRANSFER FEE
An Owner may transfer all or part of the Owner's interest in a Sub-Account or
the Fixed Account (subject to Fixed Account provisions) without the imposition
of any fee or charge if there have been no more than 12 transfers made in a
Contract Year. A transfer made at the end of the Right to Examine Contract
period from the Salomon Money Market Sub-Account will not count in determining
the application of the Transfer Fee. If more than twelve transfers have been
made in a Contract Year, the Company will deduct a Transfer Fee which is equal
to the lesser of $20 or 2% of the amount transferred. If the Owner is
participating in an approved Dollar Cost Averaging Program, such transfers
currently are not counted toward the number of transfers for the year and are
not taken into account in determining any Transfer Fee.
DEDUCTION FOR PREMIUM AND OTHER TAXES
Any taxes, including any Premium Taxes, paid to any governmental entity
relating to the Contract may be deducted from the Contributions or Contract
Value when incurred. The Company will, in its sole discretion, determine when
taxes have resulted from: the investment experience of the Separate Account;
receipt by the Company of the Contributions; or commencement of Annuity
Payments. The Company may, at its sole discretion, pay taxes when due and
deduct that amount from the Contract Value at a later date. Payment at an
earlier date does not waive any right the Company may have to deduct amounts
at a later date. The Company's current practice is to pay any Premium Taxes
when incurred and deduct the tax upon full or partial withdrawals, payment of
a death benefit or purchase of an annuity under the Contract. The Company
reserves the right to discontinue the deferral of Premium Taxes. Premium
taxes generally range from 0% to 4%.
While the Company is not currently maintaining a provision for federal income
taxes with respect to the Separate Account, the Company has reserved the right
to establish a provision for income taxes if it determines, in its sole
discretion, that it will incur a tax as a result of the operation of the
Separate Account. The Company will deduct for any income taxes incurred by it
as a result of the operation of the Separate Account whether or not there was
a provision for taxes and whether or not it was sufficient.
The Company will deduct any withholding taxes required by applicable law.
DEDUCTION FOR EXPENSES OF THE TRUST
There are other deductions from and expenses (including management fees paid
to the Adviser and other expenses) paid out of the assets of the Trust which
are described in the Prospectuses for the Portfolios of the Trust.
THE CONTRACTS
OWNER
The Owner has all interest and rights to amounts held in his or her Contract.
The Owner is the person designated as such on the Issue Date, unless changed.
The Owner may change owners of the Contract at any time prior to the Annuity
Date by Written Request. A change of Owner will automatically revoke any
prior designation of Owner. The change will become effective as of the date
the Written Request is signed. A new designation of Owner will not apply to
any payment made or action taken by the Company prior to the time it was
received.
For Non-Qualified Contracts, in accordance with Code Section 72(u), a deferred
annuity contract held by a corporation or other entity that is not a natural
person is not treated as an annuity contract for tax purposes. Income on the
contract is treated as ordinary income received by the owner during the
taxable year. However, for purposes of Code Section 72(u), an annuity
contract held by a trust or other entity as agent for a natural person is
considered held by a natural person and treated as an annuity contract for tax
purposes. Tax advice should be sought prior to purchasing a Contract which is
to be owned by a trust or other non-natural person.
JOINT OWNERS
The Contract can be owned by Joint Owners. If Joint Owners are named, any
Joint Owner must be the spouse of the other Owner. Upon the death of either
Owner, the surviving Joint Owner will be the Primary Beneficiary. Any other
Beneficiary designation will be treated as a Contingent Beneficiary unless
otherwise indicated in a Written Request. Unless otherwise specified in the
application for the Contract, if there are Joint Owners both signatures will
be required for all Owner transactions except telephone transfers. If the
telephone transfer option is elected and there are Joint Owners, either Joint
Owner can give telephone instructions.
ANNUITANT
The Annuitant is the person on whose life Annuity Payments are based. The
Annuitant is the person designated by the Owner at the Issue Date, unless
changed prior to the Annuity Date. The Annuitant may not be changed in a
Contract which is owned by a non-natural person. Any change of Annuitant is
subject to the Company's underwriting rules then in effect.
ASSIGNMENT
A Written Request specifying the terms of an assignment of the Contract must
be provided to the Annuity Service Center. Until the Written Request is
received, the Company will not be required to take notice of or be responsible
for any transfer of interest in the Contract by assignment, agreement, or
otherwise.
The Company will not be responsible for the validity or tax consequences of
any assignment. Any assignment made after the death benefit has become payable
will be valid only with the Company's consent.
If the Contract is assigned, the Owner's rights may only be exercised with the
consent of the assignee of record.
If the Contract is issued pursuant to a retirement plan which receives
favorable tax treatment under the provisions of Section 408 of the Code, it
may not be assigned, pledged or otherwise transferred except as may be
allowed under applicable law.
CONTRIBUTIONS AND CONTRACT VALUE
CONTRIBUTIONS
The initial Contribution is due on the Issue Date. The minimum initial
Contribution is $10,000 (except for Individual Retirement Annuities, the
minimum initial Contribution is $1,000). The minimum subsequent Contribution
is $1,000, or if the periodic investment plan option is elected $100. The
maximum total Contributions the Company will accept without Company approval
are $1,000,000, except for issue Ages greater than 75 years old for which the
maximum total Contributions are $500,000. The Company reserves the right to
reject any Contribution or Contract.
ALLOCATION OF CONTRIBUTIONS
Contributions are allocated to the Fixed Account and/or to one or more
Sub-Accounts of the Separate Account in accordance with the selections made by
the Owner. The allocation of the initial Contribution is made in accordance
with the selection made by the Owner at the Issue Date. Unless otherwise
changed by the Owner, subsequent Contributions are allocated in the same
manner as the initial Contribution. Allocation of the Contribution is subject
to the terms and conditions imposed by the Company. There are currently no
limitations on the number of Sub-Accounts that can be selected by an Owner.
Allocations must be in whole percentages with a minimum allocation of 10% of
each Contribution or transfer, unless the Contribution is being made pursuant
to an approved Dollar Cost Averaging Program. Under certain circumstances,
the Company will allocate initial Contributions to the Salomon Money Market
Sub-Account until the expiration of the Right to Examine Contract period (see
"Highlights").
For initial Contributions, if the forms required to issue a Contract are in
good order, the Company will apply the Contribution to the Separate Account
and credit the Contract with Accumulation Units and/or to the Fixed Account
and credit the Contract with dollars within two business days of receipt.
In addition to the underwriting requirements of the Company, good order means
that the Company has received federal funds (monies credited to a bank's
account with its regional Federal Reserve Bank). If the forms required to
issue a Contract are not in good order, the Company will attempt to get them
in good order or the Company will return the forms and the Contribution within
five business days. The Company will not retain the Contribution for more
than five business days while processing incomplete forms unless it has been
so authorized by the purchaser. For subsequent Contributions, the Company will
apply Contributions to the Separate Account and credit the Contract with
Accumulation Units and/or to the Fixed Account and credit the Contract with
dollars as of the end of the Valuation Period during which the Contribution
was received in good order.
DOLLAR COST AVERAGING PROGRAM
Dollar Cost Averaging is a program which, if elected, permits an Owner to
systematically transfer amounts on a monthly, quarterly, semi-annual or annual
basis from the Salomon Money Market Sub-Account, the Salomon U.S. Quality Bond
Portfolio or the Fixed Account to one or more Sub-Accounts. Dollar Cost
Averaging may be elected if the Owner's Contract Value is at least $20,000 as
of the Valuation Date Dollar Cost Averaging is elected. By allocating amounts
on a regularly scheduled basis as opposed to allocating the total amount at
one particular time, an Owner may be less susceptible to the impact of market
fluctuations. The minimum amount which may be transferred is $500 per
transfer. The amount must be a fixed dollar amount. Transfers to the Fixed
Account are not permitted. The Company reserves the right, at any time and
without prior notice to any party, to terminate, suspend or modify its Dollar
Cost Averaging Program.
If selected, Dollar Cost Averaging must be for at least 12 months. There is
no current charge for Dollar Cost Averaging. However, the Company reserves
the right to charge for Dollar Cost Averaging in the future. The standard
date of the month for transfers is the date the Owner's request for enrollment
in the program is received and processed by the Company and subsequent
monthly, quarterly, semi-annual or annual anniversaries of that date. The
Owner may specify a different future date. Transfers made pursuant to the
Dollar Cost Averaging Program are not taken into account in determining any
Transfer Fee.
CONTRACT VALUE
The Contract Value for any Valuation Period is the sum of the Contract Value
in each of the Sub-Accounts of the Separate Account and the Contract Value in
the Fixed Account.
The Contract Value in a Sub-Account of the Separate Account is determined by
multiplying the number of Accumulation Units allocated to the Sub-Account by
the Accumulation Unit value.
EXCHANGE PROGRAM
The Company reserves the right to offer an exchange program (the "Exchange
Program") which is available only to purchasers who exchange an existing
contract issued by another insurance company not affiliated with the Company
(an "Exchange Contract") for a Contract offered by this Prospectus. As of the
date of this Prospectus, the Company is making such a program available.
However, the Company reserves the right to modify, suspend, or terminate the
Exchange Programs at any time or from time to time without notice. If such an
Exchange Program is in effect, it will apply to all such exchanges for a
Contract.
The Exchange Program is available only where permitted by law to owners of
insurance or annuity contracts. A currently owned annuity or life insurance
policy (either fixed or variable) may be exchanged for a Contract pursuant to
Section 1035 of the Code, or where applicable, may qualify for a "rollover" or
transfer to a Contract pursuant to other sections of the Code. Purchasers
should carefully evaluate whether the Exchange Program offers benefits which
are more favorable than if the Owner continued to hold the Exchange Contract.
Factors to consider include, but are not limited to: (a) the amount, if any,
of the surrender charges under the Exchange Contract, which can be ascertained
from the insurance company which issued the contract; (b) the time remaining
under the Exchange Contract during which surrender charges apply; (c) the
on-going charges, if any, under the Exchange Contract versus the on-going
charges under the Contract; (d) the Contingent Deferred Sales Charge under the
Contract; (e) the amount and timing of any benefits under such an Exchange
Program; and (f) the potentially greater cost to the Owner if the Contingent
Deferred Sales Charge on the Contract or the surrender charge on the Exchange
Contract exceeds the benefits under such an Exchange Program. While the
Company knows of no adverse federal income tax consequences, Owners should
consult with their own tax adviser as to the tax consequences of such an
exchange.
Under the currently available Exchange Program, the Company adds certain
amounts to the Contract Value as exchange credits ("Exchange Credits"). Such
Exchange Credits are credited by the Company on behalf of Owners of Exchange
Contracts with funds from the Company's General Account. Subject to a
specified limit (the "Exchange Credit Limit") discussed below, the Exchange
Credits equal the surrender charge paid, if any, to the other insurance
company. The Exchange Program is subject to the following rules:
(1) The Company does not add Exchange Credits unless it receives in
writing, not later than 30 days after the issue of the Contract, evidence
satisfactory to the Company:
(a) of the surrender charge, if any, paid by the Owner to surrender
the Exchange Contract and the amount of any such charge; and
(b) that the Owner acknowledges that he or she is aware that the
Contingent Deferred Sales Charge under the Contract will be assessed in full
against any subsequent surrender or partial withdrawal to the extent then
applicable.
(2) The Company allocates the Exchange Credits to the Contract Value 30
days after a Contract is issued (40 days after a Contract is issued in
California if the purchaser is 60 years of age or older). The ratio of the
Exchange Credits to be added to the Fixed Account is the ratio between such
Fixed Account and the Contribution on the date the Contract is issued. The
Exchange Credits, if any, to be allocated to the Separate Account are
pro-rated among the Sub-Accounts based on the ratio of the Contract Values in
the Sub-Accounts 30 days after the Contract is issued (40 days after a
Contract is issued in California if the purchaser is 60 years of age or
older). The allocations are made as follows:
(a) for Fixed Account allocations: once any applicable Exchange
Credits are allocated, interest is credited as if the Exchange Credits had
been allocated as of the Issue Date.
(b) for allocations to any Sub-Accounts: the Company adds
Accumulation Units at the Accumulation Unit Value for the designated
Sub-Accounts as of the Valuation Period of such addition.
(3) The value of the Exchange Credits as of the date of the allocation
to the Sub-Accounts equals the lesser of the Exchange Credit Limit or the
surrender charge paid to surrender the Exchange Contract. The Exchange Credit
Limit currently is 5% of the net amount payable upon surrender of the Exchange
Contract. It is not based on any other Contribution. The Company reserves
the right at any time and from time to time to increase or decrease the
Exchange Credit Limit. However, the Exchange Credit Limit in effect at any
time will apply to all purchases qualifying for the Exchange Program.
(4) The value of the Exchange Credits is not available as a Free
Withdrawal (see "Charges and Deductions - Deduction for Contingent Deferred
Sales Charge").
(5) The Company does not consider additional amounts credited to the
Contract Value under the Exchange Program to be an increase in the Owner's
investment in the Contract.
ACCUMULATION UNITS
Accumulation Units will be used to account for all amounts allocated to or
withdrawn from the Sub-Accounts of the Separate Account as a result of
Contributions, withdrawals, transfers, or fees and charges. The Company will
determine the number of Accumulation Units of a Sub-Account purchased or
cancelled. This will be done by dividing the amount allocated to (or the
amount withdrawn from) the Sub-Account by the dollar value of one Accumulation
Unit of the Sub-Account as of the end of the Valuation Period during which the
request for the transaction is received at the Annuity Service Center.
ACCUMULATION UNIT VALUE
The Accumulation Unit Value for each Sub-Account was arbitrarily set initially
at $10. The Accumulation Unit Value for each Sub-Account for any later
Valuation Period is determined by subtracting (2) from (1) and dividing the
result by (3) where:
1. is the result of:
a. the assets of the Sub-Account attributable to Accumulation Units;
plus or minus
b. the cumulative charge or credit for taxes reserved which is
determined by the Company to have resulted from the operation
of the Sub-Account.
2. is the cumulative unpaid charge for the Mortality and Expense Risk
Charge, for the Administrative Charge and for the Distribution Charge.
3. is the number of Accumulation Units outstanding at the end of
theValuation Period.
The Accumulation Unit Value may increase or decrease from Valuation Period to
Valuation Period.
TRANSFERS
TRANSFERS DURING THE ACCUMULATION PERIOD
Subject to any limitation imposed by the Company on the number of transfers
(currently, unlimited) that can be made during the Accumulation Period, the
Owner may transfer all or part of the Contract Value in a Sub-Account or the
Fixed Account by Written Request without the imposition of any fee or charge
if there have been no more than the number of free transfers (currently,
twelve). All transfers are subject to the following:
1. If more than the number of free transfers have been made in a
Contract Year, the Company will deduct a Transfer Fee for each subsequent
transfer permitted. The Transfer Fee is the lesser of $20 or 2% of the amount
transferred. The Transfer Fee will be deducted from the Contract Value in the
Fixed Account or the Sub-Account from which the transfer is made. However, if
the Owner's entire Contract Value in the Fixed Account or a Sub-Account is
being transferred, the Transfer Fee will be deducted from the amount which is
transferred. If the Contract Value is being transferred from more than one
Sub-Account or a Sub-Account and the Fixed Account, any Transfer Fee will be
allocated to the Fixed Account and to those Sub-Accounts on a pro-rata basis
in proportion to the amount transferred from each.
2. The minimum amount which can be transferred is $500 (from (i) one or
multiple Sub-Accounts or (ii) the Fixed Account or the Owner's entire
interest in the Sub-Account or the Fixed Account, if less. The minimum
amount which must remain in a Sub-Account after a transfer is $500 per
Sub-Account, or $0 if the entire amount in the Sub-Account is
transferred. Transfers made pursuant to an approved Dollar Cost Averaging
Program will not be subject to this limitation. The minimum amount which
must remain in the Fixed Account after a transfer is $500, or $0 if the entire
amount in any Guarantee Period is transferred. Transfers made from any
Guarantee Period pursuant to an approved Dollar Cost Averaging Program
will not be subject to these limits.
3. The Company reserves the right, at any time and without prior notice
to any party, to terminate, suspend or modify the transfer privilege described
above.
Owners can elect to make transfers by telephone. To do so Owners must complete
a Written Request. The Company will use reasonable procedures to confirm that
instructions communicated by telephone are genuine. If it does not, the
Company may be liable for any losses due to unauthorized or fraudulent
instructions. The Company may tape record all telephone instructions. The
Company will not be liable for any loss, liability, cost or expense incurred
by the Owner for acting in accordance with such telephone instructions
believed to be genuine. The telephone transfer privilege may be discontinued
at any time by the Company.
If there are Joint Owners, unless the Company is informed to the contrary,
telephone instructions will be accepted from either of the Joint Owners.
Neither the Separate Account nor the Trust are designed for professional
market timing organizations or other entities using programmed and frequent
transfers. A pattern of exchanges that coincides with a "market timing"
strategy may be disruptive to a Portfolio. The Company reserves the right to
restrict the transfer privilege or reject any specific Contribution allocation
request for any person whose transactions seem to follow a timing pattern.
TRANSFERS DURING THE ANNUITY PERIOD
During the Annuity Period, the Owner may make transfers, by Written Request,
as follows:
1. The Owner may make transfers of Contract Values between Sub-Accounts,
subject to any limitations imposed by the Company on the number of transfers
that can be made during the Annuity Period (currently, unlimited). If more
than the number of free transfers have been made in a Contract Year, the
Company will deduct a Transfer Fee for each subsequent transfer permitted.
The Transfer Fee will be deducted from the amount which is transferred. The
Transfer Fee is the lesser of $20 or 2% of the amount transferred.
2. The Owner may not make a transfer from the Separate Account to the
Fixed Account. The Owner may not make a transfer from the Fixed Account to
the Separate Account.
3. Transfers between Sub-Accounts will be made by converting the number
of Annuity Units being transferred to the number of Annuity Units of the
Sub-Account to which the transfer is made, so that the next Annuity Payment if
it were made at that time would be the same amount that it would have been
without the transfer. Thereafter, Annuity Payments will reflect changes in
the value of the new Annuity Units.
4. The minimum amount which can be transferred is $500 (from one or
multiple Sub-Accounts) or the Owner's entire interest in the Sub-Account, if
less. The minimum amount which must remain in a Sub-Account after a transfer
is $500 per Sub-Account, or $0 if the entire amount in the Sub-Account is
transferred.
5. The Company reserves the right, at any time and without prior notice
to any party, to terminate, suspend or modify the transfer privilege described
above.
Owners can elect to make transfers by telephone. To do so Owners must complete
a Written Request. The Company will use reasonable procedures to confirm that
instructions communicated by telephone are genuine. If it does not, the
Company may be liable for any losses due to unauthorized or fraudulent
instructions. The Company may tape record all telephone instructions. The
Company will not be liable for any loss, liability, cost or expense incurred
by the Owner for acting in accordance with such telephone instructions
believed to be genuine. The telephone transfer privilege may be discontinued
at any time by the Company.
If there are Joint Owners, unless the Company is informed to the contrary,
telephone instructions will be accepted from either of the Joint Owners.
WITHDRAWALS
During the Accumulation Period, the Owner may, upon a Written Request, make a
total or partial withdrawal of the Contract Withdrawal Value.
Unless the Owner instructs the Company otherwise, a partial withdrawal will
be made from the Separate Account. A partial withdrawal will result in the
cancellation of Accumulation Units from each applicable Sub-Account in the
ratio that the Owner's interest in the Sub-Account bears to the total Contract
Value allocated to the Separate Account. The Owner must specify by Written
Request in advance which Sub-Account Accumulation Units are to be cancelled if
other than the above method is desired.
A partial withdrawal is taken first from the Contract Withdrawal Value for
which the Free Withdrawal provision applies and then from the Contract
Withdrawal Value for which the Contigent Deferred Sales Charge applies. A
partial withdrawal from the Fixed Account is made for a Contract with multiple
Contributions during the Guarantee Period by a withdrawal from the
Contribution with the most recent Effective Date.
The Company will pay the amount of any withdrawal from the Separate Account
within seven (7) days of receipt of a request in good order unless the
Suspension or Deferral of Payments provision is in effect.
Each partial withdrawal must be for at least $500. The minimum Contract Value
which must remain in the Contract after a partial withdrawal is the greater of
(i) $2,000; or (ii) 150% of the applicable Contingent Deferred Sales Charge.
The minimum Contract Value which must remain in a Sub-Account or the Fixed
Account after a partial withdrawal is $500.
SYSTEMATIC WITHDRAWAL OPTION
The Company permits a Systematic Withdrawal Option which enables an Owner to
pre-authorize a periodic exercise of the contractual withdrawal rights
described above. The Systematic Withdrawal Option is available if the Owner's
Contract Value is at least $20,000 as of the Valuation Date this option is
requested. The Owner or the Company may terminate systematic withdrawals upon
30 days' prior written notice. There is currently no charge for systematic
withdrawals. However, the Company reserves the right to charge for systematic
withdrawals in the future. The total permitted systematic withdrawal in a
Contract Year is limited to not more than 10% of the unliquidated
Contributions as of the immediately preceding Contract Anniversary or, if
during the first Contract Year, as of the Issue Date. The Systematic
Withdrawal Option can be exercised at any time, including during the first
Contract Year. The exercise of the Systematic Withdrawal Option in any
Contract Year replaces the Free Withdrawal amount which is allowable once
per Contract Year without incurring a Contingent Deferred Sales Charge.
Systematic withdrawals are available for Qualified and Non-Qualified
Contracts. Certain tax penalties and restrictions may apply to
systematic withdrawals from the Contracts. (See "Tax Status - Tax
Treatment of Withdrawals - Qualified Contracts" and "Tax Status - Tax
Treatment of Withdrawals - Non-Qualified Contracts.") Owners entering
into such a program instruct the Company to withdraw an amount specified
as a percentage of the Contribution, or a percentage of Contract Value,
or in dollars on a monthly, quarterly or semi-annual basis. The minimum
withdrawal amount is $100 per payment. The standard date of the month for
withdrawals is the date the Owner's request for enrollment in the program
is received and processed by the Company, and subsequent monthly (or
the payment schedule selected) anniversaries of that date. The Owner may
specify a different future date.
SUSPENSION OR DEFERRAL OF PAYMENTS
The Company reserves the right to suspend or postpone payments from the
Separate Account for a withdrawal or transfer for any period when:
1. The New York Stock Exchange is closed (other than customary weekend
and holiday closings);
2. Trading on the New York Stock Exchange is restricted;
3. An emergency exists as a result of which disposal of securities held
in the Separate Account is not reasonably practicable or it is not reasonably
practicable to determine the value of the Separate Account's net assets; or
4. During any other period when the Securities and Exchange Commission,
by order, so permits for the protection of Owners; provided that applicable
rules and regulations of the Securities and Exchange Commission will govern as
to whether the conditions described in (2) and (3) exist.
The Company further reserves the right to postpone payment for a withdrawal or
transfer from the Fixed Account for a period of up to six months.
PROCEEDS PAYABLE ON DEATH
DEATH OF OWNER DURING THE ACCUMULATION PERIOD
Upon the death of the Owner or any Joint Owner prior to the Annuity Date, the
death benefit will be paid to the Beneficiary(ies) designated by the Owner.
Upon the death of a Joint Owner, the surviving Joint Owner, if any, will be
treated as the primary Beneficiary. Any other Beneficiary designation on
record at the time of death will be treated as a contingent Beneficiary.
A Beneficiary may request that the death benefit be paid under one of the
Death Benefit Options described below. If the Beneficiary is the spouse of
the Owner he or she may elect to continue the Contract at the then current
Contract Value in his or her own name and exercise all the Owner's rights
under the Contract.
DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PERIOD
Prior to the Owner, or the oldest Joint Owner, attaining Age 75, the death
benefit during the Accumulation Period will be the greater of:
1. The Adjusted Contributions; or
2. The Contract Value determined as of the end of the Valuation Period
during which the Company receives at its Annuity Service Center both due proof
of death and an election of the payment method; or
3. The Contract Value on the most recent seventh year Contract
Anniversary or the Adjusted Contributions as of the most recent seventh
year Contract Anniversary, whichever is greater. This amount is increased
for subsequent Contributions and reduced for subsequent partial
withdrawals in the same proportion that the Contract Value was reduced on the
date of the withdrawal.
After the Owner, or the oldest Joint Owner, attains Age 75 but before
attaining Age 85, the death benefit during the Accumulation Period will be
determined in accordance with the above and will be subject to any applicable
Contingent Deferred Sales Charge determined at the time the death benefit is
paid.
After the Owner, or the oldest Joint Owner, attains Age 85, the death benefit
during the Accumulation Period will be the Contract Value determined as of the
end of the Valuation Period during which the Company receives both due proof
of death an election for the payment method, less any applicable Contingent
Deferred Sales Charge determined at the time the death benefit is paid.
Adjusted Contributions are equal to the initial Contribution increased for
subsequent Contributions and reduced for subsequent partial withdrawals in the
same proportion that the Contract Value was reduced on the date of the
withdrawal.
In certain states, the death benefit during the Accumulation Period
will be the Contract Value determined as of the end of the Valuation Period
during which the Company receives both due proof of death and an
election for the payment method less any applicable Contingent Deferred Sales
Charge determined at the time the death benefit is paid.
Owners should refer to their Contract for the applicable death benefit
provision.
See the "Appendix" for examples of how the death benefit is calculated.
DEATH BENEFIT OPTIONS DURING THE ACCUMULATION PERIOD
A non-spousal Beneficiary must elect the death benefit to be paid under one of
the following options in the event of the death of the Owner during the
Accumulation Period:
OPTION 1 - lump sum payment of the death benefit; or
OPTION 2 - payment of the entire death benefit within 5 years of
the date of the death of the Owner; or
OPTION 3 - payment of the death benefit under an Annuity Option over
the lifetime of the Beneficiary or over a period not extending beyond the life
expectancy of the Beneficiary with distribution beginning within one year of
the date of death of the Owner or any Joint Owner.
Any portion of the death benefit not applied under Option 3 within one year of
the date of the Owner's death, must be distributed within five years of the
date of death.
A spousal Beneficiary may elect to continue the Contract in his or her own
name at the then current Contract Value, elect a lump sum payment of the death
benefit or apply the death benefit to an Annuity Option.
If a lump sum payment is requested, the amount will be paid within seven (7)
days of receipt of proof of death and the election, unless the Suspension or
Deferral of Payments provision is in effect.
Payment to the Beneficiary, other than in a lump sum, may only be elected
during the sixty-day period beginning with the date of receipt of proof of
death.
DEATH OF OWNER DURING THE ANNUITY PERIOD
If the Owner or a Joint Owner, who is not the Annuitant, dies during the
Annuity Period, any remaining payments under the Annuity Option elected will
continue at least as rapidly as under the method of distribution in effect at
such Owner's death. Upon the death of the Owner during the Annuity Period, the
Beneficiary becomes the Owner.
DEATH OF ANNUITANT
Upon the death of the Annuitant, who is not the Owner, during the Accumulation
Period, the Owner may designate a new Annuitant, subject to the Company's
underwriting rules then in effect. If no designation is made within 30 days
of the death of the Annuitant, the Owner will become the Annuitant. If the
Owner is a non-natural person, the death of the Annuitant will be treated as
the death of the Owner and a new Annuitant may not be designated.
Upon the death of the Annuitant during the Annuity Period, the death benefit,
if any, will be as specified in the Annuity Option elected. Death benefits
will be paid at least as rapidly as under the method of distribution in effect
at the Annuitant's death.
PAYMENT OF DEATH BENEFIT
The Company will require due proof of death before any death benefit is paid.
Due proof of death will be:
1. a certified death certificate;
2. a certified decree of a court of competent jurisdiction as to the
finding of death; or
3. any other proof satisfactory to the Company.
All death benefits will be paid in accordance with applicable law or
regulations governing death benefit payments.
BENEFICIARY
The Beneficiary designation in effect on the Issue Date will remain in effect
until changed. The Beneficiary is entitled to receive the benefits to be paid
at the death of the Owner. Unless the Owner provides otherwise, the death
benefit will be paid in equal shares to the survivor(s) as follows:
1. to the Primary Beneficiary(ies) who survive the Owner's and/or the
Annuitant's death, as applicable; or if there are none
2. to the Contingent Beneficiary(ies) who survive the Owner's and/or the
Annuitant's death, as applicable; or if there are none
3. to the estate of the Owner.
CHANGE OF BENEFICIARY
Subject to the rights of any irrevocable Beneficiary(ies), the Owner may
change the Primary Beneficiary(ies) or Contingent Beneficiary(ies). Any change
must be made by Written Request. The change will take effect as of the date
the Written Request is signed. The Company will not be liable for any payment
made or action taken before it records the change.
ANNUITY PROVISIONS
GENERAL
On the Annuity Date, the Adjusted Contract Value will be applied under the
Annuity Option selected by the Owner. Annuity Payments may be made on a fixed
or variable basis or both.
ANNUITY DATE
The Annuity Date is selected by the Owner on the Issue Date. The Annuity Date
must be the first day of a calendar month and must be at least one month after
the Issue Date. The Annuity Date may not be later than when the Annuitant
reaches Age 85 or 10 years after the Issue Date for issue ages after Age 75.
Prior to the Annuity Date, the Owner, subject to the above, may change the
Annuity Date by Written Request. Any change must be requested at least seven
(7) days prior to the new Annuity Date.
SELECTION OR CHANGE OF AN ANNUITY OPTION
An Annuity Option is selected by the Owner at the time the Contract is issued.
Prior to the Annuity Date, the Owner can change the Annuity Option selected
by Written Request. Any change must be requested at least seven (7) days
prior to the Annuity Date.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Annuity Payments are paid in monthly installments. The Adjusted Contract
Value is applied to the Annuity Table for the Annuity Option selected. If the
Adjusted Contract Value to be applied under an Annuity Option is less than
$2,000, the Company reserves the right to make a lump sum payment in lieu of
Annuity Payments. If the Annuity Payment would be or become less than $200
where only a Fixed Annuity or a Variable Annuity is selected, or if
the Annuity Payment would be or become less than $100 on each basis when a
combination of Fixed and Variable Annuities are selected, the Company will
reduce the frequency of payments to an interval which will result in each
payment being at least $200, or $100 on each basis if a combination of Fixed
and Variable Annuities is selected.
ANNUITY
If the Owner selects a Fixed Annuity, the Adjusted Contract Value is allocated
to the Fixed Account and the Annuity is paid as a Fixed Annuity. If the Owner
selects a Variable Annuity, the Adjusted Contract Value will be allocated to
the Sub-Account(s) of the Separate Account in accordance with the selection
made by the Owner, and the Annuity will be paid as a Variable Annuity. The
Owner can also select a combination of a Fixed and Variable Annuity and the
Adjusted Contract Value will be allocated accordingly. Unless the Owner
specifies otherwise, the payee of the Annuity Payments shall be the Owner.
The Adjusted Contract Value will be applied to the applicable Annuity Table
contained in the Contract based upon the Annuity Option selected by the Owner.
FIXED ANNUITY
The Owner may elect to have the Adjusted Contract Value applied to provide a
Fixed Annuity. The dollar amount of each Fixed Annuity Payment will be
determined in accordance with Annuity Tables contained in the Contract which
are based on the minimum guaranteed interest rate of 3% per year. The dollar
amount of each Fixed Annuity Payment will be reduced by the applicable portion
of the Contract Maintenance Charge. After the initial Fixed Annuity Payment,
the payments will not change regardless of investment, mortality or expense
experience.
VARIABLE ANNUITY
Variable Annuity Payments reflect the investment performance of the Separate
Account in accordance with the allocation of the Adjusted Contract Value to
the Sub-Accounts during the Annuity Period. Variable Annuity payments are not
guaranteed as to dollar amount.
ANNUITY OPTIONS
The following Annuity Options or any other Annuity Option acceptable to the
Company may be selected:
OPTION A. LIFE ANNUITY : Monthly Annuity Payments during the life of the
Annuitant.
OPTION B. LIFE ANNUITY WITH PERIOD CERTAIN OF 120 MONTHS: Monthly
Annuity Payments during the lifetime of the Annuitant and in any event for one
hundred twenty (120) months. If the Beneficiary does not desire payments to
continue for the remainder of the period certain, he or she may elect to have
the present value of the guaranteed annuity payments remaining commuted and
paid in a lump sum.
OPTION C. JOINT AND SURVIVOR ANNUITY : Monthly Annuity Payments payable
during the joint lifetime of the Annuitant and a Joint Annuitant and then
during the lifetime of the survivor at 66 2/3%.
OPTION D. PERIOD CERTAIN : Monthly payments will be made for a specified
period. The specified period must be at least ten (10) years and cannot be
more than thirty (30) years. If the Owner does not desire payments to
continue for the remainder of the selected period, he or she may elect to have
the present value of the remaining payments to be made from the Separate
Account commuted and paid in a lump sum or as an Annuity Option purchased at
the date of such election.
Annuity Options A, B, C and D are available on a Fixed Annuity basis, a
Variable Annuity basis or a combination of both. Election of a Fixed Annuity
or a Variable Annuity must be made no later than fifteen (15) days prior to
the Annuity Date. If no election is made as between a Fixed Annuity and a
Variable Annuity, the Variable Annuity will be the default option.
DISTRIBUTOR
London Pacific Financial and Insurance Services is the distributor of the
Contracts. London Pacific Financial and Insurance Services is registered as a
broker-dealer with the Securities and Exchange Commission and is a member of
the National Association of Securities Dealers, Inc. London Pacific Financial
and Insurance Services is an affiliate of the Company.
Commissions will be paid to broker-dealers who sell the Contracts.
Broker-dealers will be paid commissions, up to an amount currently equal to
6.25% of Contributions, for promotional or distribution expenses associated
with the marketing of the Contracts.
PERFORMANCE INFORMATION
SALOMON MONEY MARKET SUB-ACCOUNT
From time to time, the Salomon Money Market Sub-Account of the Separate
Account may advertise its "current yield" and "effective yield." Both yield
figures are based on historical earnings and are not intended to indicate
future performance. The "current yield" of the Salomon Money Market
Sub-Account refers to the income generated by Contract Values in the Salomon
Money Market Sub-Account over a seven-day period ending on the date of
calculation (which period will be stated in the advertisement). This income
is "annualized." That is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period
and is shown as a percentage of the Contract Value in the Salomon Money Market
Sub-Account. The "effective yield" is calculated similarly. However, when
annualized, the income earned by Contract Value is assumed to be reinvested.
This results in the "effective yield" being slightly higher than the "current
yield" because of the compounding effect of the assumed reinvestment. The
yield figure will reflect the deduction of any asset-based charges and any
applicable Contract Maintenance Charge.
OTHER SUB-ACCOUNTS
From time to time, the Company may advertise performance data for the various
other Sub-Accounts under the Contract. Such data will show the percentage
change in the value of an Accumulation Unit based on the performance of a
Portfolio over a period of time, usually a calendar year, determined by
dividing the increase (decrease) in value for that Unit by the Accumulation
Unit value at the beginning of the period. This percentage figure will
reflect the deduction of any asset-based charges and any applicable Contract
Maintenance Charges under the Contracts.
Any advertisement will also include total return figures calculated as
described in the Statement of Additional Information. The total return
figures will reflect all recurring charges and deductions against the Sub-
Account's income, including the deduction of the Mortality and Expense Risk
Charge, the Administrative Charge and the Distribution Charge for the
applicable periods shown. The Company may also advertise performance
information computed on a different basis.
The Company may make available yield information with respect to some of the
Sub-Accounts. Such yield information will be calculated as described in
the Statement of Additional Information. The yield information will reflect
the deduction of any applicable Contract Maintenance Charge as well as any
asset-based charges.
The Company may also show historical Accumulation Unit values in certain
advertisements containing illustrations. These illustrations will be based on
actual Accumulation Unit values.
In addition, the Company may distribute sales literature which compares the
percentage change in Accumulation Unit values for any of the Sub-Accounts
against established market indices such as the Standard & Poor's 500 Composite
Stock Price Index, the Dow Jones Industrial Average or other management
investment companies which have investment objectives similar to the
underlying Portfolio being compared. The Standard & Poor's 500 Composite
Stock Price Index is an unmanaged, unweighted average of 500 stocks, the
majority of which are listed on the New York Stock Exchange. The Dow Jones
Industrial Average is an unmanaged, weighted average of thirty blue chip
industrial corporations listed on the New York Stock Exchange. Both the
Standard & Poor's 500 Composite Stock Price Index and the Dow Jones Industrial
Average assume quarterly reinvestment of dividends.
In addition, the Company may, as appropriate, compare each Sub-Account's
performance to that of other types of investments such as certificates of
deposit, savings accounts and U.S. Treasuries, or to certain interest rate and
inflation indices, such as the Consumer Price Index, which is published by the
U.S. Department of Labor and measures the average change in prices over time
of a fixed "market basket" of certain specified goods and services. Similar
comparisons of Sub-Account performance may also be made with appropriate
indices measuring the performance of a defined group of securities widely
recognized by investors as representing a particular segment of the securities
markets. For example, Sub-Account performance may be compared with Donoghue
Money Market Institutional Averages (money market rates), Lehman Brothers
Corporate Bond Index (corporate bond interest rates) or Lehman Brothers
Government Bond Index (long-term U.S. Government obligation interest rates).
The Company may also distribute sales literature which compares the
performance of the Accumulation Unit values of the Contracts issued through
the Separate Account with the unit values of variable annuities issued through
the separate accounts of other insurance companies. Such information will be
derived from the Lipper Variable Insurance Products Performance Analysis
Service, the VARDS Report or from Morningstar.
The Lipper Variable Insurance Products Performance Analysis Service is
published by Lipper Analytical Services, Inc., a publisher of statistical
data which currently tracks the performance of almost 4,000 investment
companies. The rankings compiled by Lipper may or may not reflect the
deduction of asset-based insurance charges. The Company's sales literature
utilizing these rankings will indicate whether or not such charges have been
deducted. Where the charges have not been deducted, the sales literature will
indicate that if the charges had been deducted, the ranking might have been
lower.
The VARDS Report is a monthly variable annuity industry analysis compiled by
Variable Annuity Research & Data Service of Georgia and published by Financial
Planning Resources, Inc. The VARDS rankings may or may not reflect the
deduction of asset-based insurance charges. Where the charges have not been
deducted, the sales literature will indicate that if the charges had been
deducted, the rankings might have been lower.
Morningstar rates a variable annuity Sub-Account against its peers with
similar investment objectives. Morningstar does not rate any Sub-Account that
has less than three years of performance data. The Morningstar rankings may
or may not reflect the deduction of charges. Where charges have not been
deducted, the sales literature will indicate that if the charges had been
deducted, the rankings might have been lower.
Owners should note that the investment results of each Sub-Account will
fluctuate over time, and any presentation of a Sub-Account's current yield
or total return for any prior period should not be considered a representation
of what an investment may earn or what an Owner's yield or total return may be
in any future period.
TAX STATUS
GENERAL
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING OF
CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE
COMPANY CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE
MADE. PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING THE
POSSIBILITY OF SUCH CHANGES. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF
THE CONTRACTS. PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT
BE TREATED AS "ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. IT SHOULD BE
FURTHER UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND THAT
SPECIAL RULES NOT DESCRIBED IN THIS PROSPECTUS MAY BE APPLICABLE IN CERTAIN
SITUATIONS. MOREOVER, NO ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE
STATE OR OTHER TAX LAWS.
Section 72 of the Code governs taxation of annuities in general. An owner is
not taxed on increases in the value of a Contract until distribution occurs,
either in the form of a lump sum payment or as annuity payments under the
Annuity Option selected. For a lump sum payment received as a total
withdrawal (total surrender), the recipient is taxed on the portion of the
payment that exceeds the cost basis of the Contract. For Non-Qualified
Contracts, this cost basis is generally the purchase payments, while for
Qualified Contracts there may be no cost basis. The taxable portion of the
lump sum payment is taxed at ordinary income tax rates.
For annuity payments, a portion of each payment in excess of an exclusion
amount is includible in taxable income. The exclusion amount for payments
based on a Fixed Annuity Option is determined by multiplying the payment by
the ratio that the cost basis of the Contract (adjusted for any period certain
or refund feature) bears to the expected return under the Contract. The
exclusion amount for payments based on a Variable Annuity Option is determined
by dividing the cost basis of the Contract (adjusted for any period certain or
refund feature) by the number of years over which the annuity is expected to
be paid. Payments received after the investment in the Contract has been
recovered (i.e. when the total of the excludible amounts equal the investment
in the Contract) are fully taxable. The taxable portion is taxed at ordinary
income tax rates. For certain types of Qualified Plans there may be no cost
basis in the Contract within the meaning of Section 72 of the Code. Owners,
Annuitants and Beneficiaries under the Contracts should seek competent
financial advice about the tax consequences of any distributions.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Separate Account is not a separate entity from the
Company and its operations form a part of the Company.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury
Department ("Treasury Department"), adequately diversified. Disqualification
of the Contract as an annuity contract would result in imposition of federal
income tax to the Owner with respect to earnings allocable to the
Contract prior to the receipt of payments under the Contract. The Code
contains a safe harbor provision which provides that annuity contracts such as
the Contracts meet the diversification requirements if, as of the end of each
quarter, the underlying assets meet the diversification standards for a
regulated investment company and no more than fifty-five percent (55%) of the
total assets consist of cash, cash items, U.S. Government securities and
securities of other regulated investment companies.
On March 2, 1989, the Treasury Department issued Regulations (Treas. Reg.
1.817-5), which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contracts. The
Regulations amplify the diversification requirements for variable contracts
set forth in the Code and provide an alternative to the safe harbor provision
described above. Under the Regulations, an investment portfolio will be
deemed adequately diversified if: (1) no more than 55% of the value of the
total assets of the portfolio is represented by any one investment; (2) no
more than 70% of the value of the total assets of the portfolio is represented
by any two investments; (3) no more than 80% of the value of the total assets
of the portfolio is represented by any three investments; and (4) no more than
90% of the value of the total assets of the portfolio is represented by any
four investments.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable
contracts by Section 817(h) of the Code have been met, "each United States
government agency or instrumentality shall be treated as a separate issuer."
The Company intends that all Portfolios of the Trust will be managed by the
Adviser and Sub-Advisers for the Trust in such a manner as to comply with
these diversification requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Owner control of the
investments of the Separate Account will cause the Owner to be treated as the
owner of the assets of the Separate Account, thereby resulting in the loss of
favorable tax treatment for the Contract. At this time it cannot be
determined whether additional guidance will be provided and what standards may
be contained in such guidance.
The amount of Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available,
would cause the Owner to be considered as the owner of the assets of the
Separate Account resulting in the imposition of federal income tax to the
Owner with respect to earnings allocable to the Contract prior to receipt of
payments under the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a
new position, such guidance or ruling will generally be applied only
prospectively. However, if such ruling or guidance was not considered to set
forth a new position, it may be applied retroactively resulting in the Owner
being retroactively determined to be the owner of the assets of the Separate
Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS
Under Section 72(u) of the Code, the investment earnings on Contributions for
the Contracts will be taxed currently to the Owner if the Owner is a
non-natural person, e.g., a corporation, or certain other entities. Such
Contracts generally will not be treated as annuities for federal income tax
purposes. However, this treatment is not applied to Contracts held by a trust
or other entity as agent for a natural person nor to Contracts held by
Qualified Plans. Purchasers should consult their own tax adviser before
purchasing a Contract to be owned by a non-natural person.
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity contracts which are
issued within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse
tax consequences including more rapid taxation of the distributed amounts from
such combination of contracts. Owners should consult a tax adviser prior to
purchasing more than one non-qualified annuity contract in any calendar year.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. Owners should
therefore consult competent tax advisers should they wish to assign or pledge
their Contracts.
INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includible in the gross
income of the Owner are subject to federal income tax withholding. Generally,
amounts are withheld from periodic payments at the same rate as wages and at
the rate of 10% from non-periodic payments. However, the Owner, in most
cases, may elect not to have taxes withheld or to have withholding done at a
different rate.
Effective January 1, 1993, certain distributions from retirement plans
qualified under Section 401 or Section 403(b) of the Code, which are not
directly rolled over to another eligible retirement plan or individual
retirement generally account or individual retirement annuity, are subject to
a mandatory 20% withholding for federal income tax. The 20% withholding
requirement generally does not apply to: a) a series of substantially equal
payments made at least annually for the life or life expectancy of the
participant or joint and last survivor expectancy of the participant and a
designated beneficiary, or distributions for a specified period of 10 years or
more; or b) distributions which are required minimum distributions; or c) the
portion of the distributions not includible in gross income (i.e. returns of
after-tax contributions). Participants under such plans should consult their
own tax counsel or other tax adviser regarding withholding requirements.
TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED CONTRACTS
Section 72 of the Code governs the treatment of distributions from
annuity contracts. It provides that if the contract value exceeds the
aggregate purchase payments made, any amount withdrawn will be treated as
coming first from the earnings and then, only after the income portion is
exhausted, as coming from the principal. Withdrawn earnings are includible
in gross income. It further provides that a ten percent (10%) penalty will
apply to the income portion of any distribution. However, the penalty is
not imposed on amounts received: (a) after the taxpayer reaches age 59 1/2;
(b) after the death of the Owner; (c) if the taxpayer is totally
disabled (for this purpose disability is as defined in Section 72(m)(7) of
the Code); (d) in a series of substantially equal periodic payments made not
less frequently than annually for the life (or life expectancy) of the
taxpayer or for the joint lives (or joint life expectancies) of the taxpayer
and his or her Beneficiary; (e) under an immediate annuity; or (f) which
are allocable to purchase payments made prior to August 14, 1982.
The above information does not apply to Qualified Contracts. However,
separate tax withdrawal penalties and restrictions may apply to such Qualified
Contracts. (See "Tax Treatment of Withdrawals - Qualified Contracts," below.)
QUALIFIED PLANS
The Contracts offered by this Prospectus may also be used as Qualified
Contracts. The following discussion of Qualified Contracts is not
exhaustive and is for general informational purposes only. The tax rules
regarding Qualified Contracts are very complex and will have differing
applications depending on individual facts and circumstances. Each purchaser
should obtain competent tax advice prior to purchasing Qualified Contracts.
Qualified Contracts include special provisions restricting Contract provisions
that may otherwise be available as described in this Prospectus. Generally,
Qualified Contracts are not transferable except upon surrender or
annuitization.
On July 6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE V.
NORRIS that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. Qualified Contracts will utilize annuity tables
which do not differentiate on the basis of sex. Such annuity tables will also
be available for use in connection with certain non-qualified deferred
compensation plans.
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to
an IRA which will be deductible from the individual's gross income. These
IRAs are subject to limitations on eligibility, contributions, transferability
and distributions. (See "Tax Treatment of Withdrawals - Qualified Contracts"
below.) Under certain conditions, distributions from other IRAs and other
Qualified Plans may be rolled over or transferred on a tax-deferred basis into
an IRA. Sales of Contracts for use with IRAs are subject to special
requirements imposed by the Code, including the requirement that certain
informational disclosure be given to persons desiring to establish an IRA.
Purchasers of Contracts to be qualified as Individual Retirement Annuities
should obtain competent tax advice as to the tax treatment and suitability of
such an investment.
TAX TREATMENT OF WITHDRAWALS - QUALIFIED CONTRACTS
In the case of a withdrawal under a Qualified Contract, a ratable portion of
the amount received is taxable, generally based on the ratio of the
individual's cost basis to the individual's total accrued benefit under the
retirement plan. Special tax rules may be available for certain distributions
from a Qualified Contract. Section 72(t) of the Code imposes a 10% penalty tax
on the taxable portion of any distribution from qualified retirement plans,
including Contracts issued and qualified under Code Section 408(b) (Individual
Retirement Annuities). To the extent amounts are not includible in gross
income because they have been rolled over to an IRA or to another eligible
qualified plan, no tax penalty will be imposed. The tax penalty will not
apply to the following distributions: (a) if distribution is made on or after
the date on which the Owner or Annuitant (as applicable) reaches age 59 1/2;
(b) distributions following the death or disability of the Owner or Annuitant
(as applicable) (for this purpose disability is as defined in Section 72(m)(7)
of the Code); (c) after separation from service, distributions that are part
of substantially equal periodic payments made not less frequently than
annually for the life (or life expectancy) of the Owner or Annuitant (as
applicable) or the joint lives (or joint life expectancies) of such Owner or
Annuitant (as applicable) and his or her designated Beneficiary; (d)
distributions to an Owner or Annuitant (as applicable) who has separated from
service after he has attained age 55; (e) distributions made to the Owner or
Annuitant (as applicable) to the extent such distributions do not exceed the
amount allowable as a deduction under Code Section 213 to the Owner or
Annuitant (as applicable) for amounts paid during the taxable year for medical
care; and (f) distributions made to an alternate payee pursuant to a qualified
domestic relations order. The exceptions stated in (d), (e) and (f) above do
not apply in the case of an Individual Retirement Annuity. The exception
stated in (c) above applies to an Individual Retirement Annuity without the
requirement that there be a separation from service.
Generally, distributions from a qualified plan must commence no later than
April 1 of the calendar year, following the year in which the employee attains
age 70 1/2. Required distributions must be over a period not exceeding the
life expectancy of the individual or the joint lives or life expectancies of
the individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed. In addition, distributions in excess of $150,000 per year may be
subject to an additional 15% excise tax unless an exemption applies.
FINANCIAL STATEMENTS
Financial statements of the Company have been included in the Statement of
Additional Information. No Condensed Financial Information or finanical
statements for the Separate Account have been included herein because, as of
December 31, 1995, the Separate Account had no assets.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Separate Account,
the Distributor or the Company is a party.
TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
ITEM PAGE
Company.............................................................. 3
Experts.............................................................. 3
Legal Opinions....................................................... 3
Distributor.......................................................... 3
Yield Calculation for the Salomon Money Market Sub-Account........... 3
Performance Information.............................................. 4
Annuity Provisions................................................... 6
Financial Statements................................................. 6
APPENDIX
The purpose of the Examples below is (i) to demonstrate how the Contingent
Deferred Sales Charge is calculated and (ii) to demonstrate how the death
benefit is calculated.
WITHDRAWALS AND CONTINGENT DEFERRED SALES CHARGES
EXAMPLE A - TOTAL WITHDRAWAL IN CONTRACT YEAR TWO
Example A assumes the following:
(1) The initial Contribution was $10,000, allocated solely to one
Sub-Account.
(2) The date of total withdrawal occurs during the second Contract Year.
(3) The Owner's Contract Value at the time of the total withdrawal is
$10,950.
(4) No other Contributions or previous withdrawals have been made.
The following applies to this Example:
(a) Earnings in the Contract are not subject to the Contingent Deferred
Sales Charge (CDSC). Therefore, $950 ($10,950 - $10,000 = $950) is not
subject to the CDSC.
(b) The balance of the total withdrawal of $10,000 is subject to the
CDSC applied during the second year, since the Free Withdrawal amount does not
apply to total withdrawals.
(c) The amount of the applicable CDSC is .07 x 10,000 = $700.
(d) The amount of the total withdrawal is $10,950 - $700 = $10,250.*
________________________
* If a total withdrawal is made on other than a Contract Anniversary and
the Contract Value for the Valuation Period during which the total withdrawal
is made is less than $50,000, the full Contract Maintenance Charge of $36 will
be deducted at the time of the total withdrawal.
EXAMPLE B - PARTIAL WITHDRAWAL IN THE AMOUNT OF $3,000 IN CONTRACT YEAR TWO
This Example is based on the same assumptions as Example A except that in this
Example there is a partial withdrawal for $3,000 in Contract Year Two.
(a) In a partial withdrawal, 10% of the unliquidated Contributions may
be withdrawn as a Free Withdrawal without the imposition of the CDSC. (10,000
x .10 = $1,000). Therefore $1,000 of the $3,000 partial withdrawal is not
subject to the CDSC.
(b) For purposes of determining the amount of the CDSC, unliquidated
Contributions are deemed to be withdrawn before earnings in the Contract.
(c) The amount of the CDSC is $140 ($2,000 x .07 = $140).
(d) In this Example, from the partial withdrawal of $3,000 the Owner
will receive $2,860.
EXAMPLE C - PARTIAL WITHDRAWAL IMMEDIATELY FOLLOWED BY A TOTAL WITHDRAWAL
Example C assumes the following:
(1) The initial Contribution was $10,000, allocated solely to one
Sub-Account.
(2) The withdrawals occur during the second Contract Year.
(3) The Contract Value at the time of the withdrawals is $10,950.
(4) The partial withdrawal is for $1,000.
The following applies to the Example:
(a) As noted in Example B, the partial withdrawal of $1,000 is not
subject to the CDSC because of the 10% Free Withdrawal amount of $1,000. The
remaining Contract Value is $9,950.
(b) For purposes of the immediately following total withdrawal, the
original Contribution of $10,000 is used for calculating the CDSC because Free
Withdrawal amounts do not reduce the Contributions for purposes of calculating
the CDSC.
(c) The amount of the CDSC is $700 (.07 x $10,000).
(d) The amount of the total withdrawal is 9,250 ($9,950 - $700).
NOTE: Withdrawals of income may be subject to a ten percent federal income tax
penalty if the Owner is not 59 1/2 at the time of the withdrawal.
DEATH BENEFIT
EXAMPLE A - OWNER AGE 65 AT DEATH: DIES DURING CONTRACT YEAR TWO
Example A assumes the following:
(1) A Contribution of $10,000 was made for the Contract.
(2) Owner dies at Age 65 during the second Contract Year.
(3) The Contract Value at death was $12,000.
(4) No withdrawals have been made.
The following applies to this Example:
(a) Adjusted Contributions equal $10,000, since there were no
withdrawals.
(b) No seventh year stepped-up death benefit is available because death
occurred prior to the seventh year Contract Anniversary.
(c) Contract Value is $12,000 and therefore greater than Adjusted
Contributions.
(d) The death benefit is $12,000.
EXAMPLE B - OWNER AGE 65 AT DEATH; DIES DURING CONTRACT YEAR TWO
This Example is based on the same assumptions as Example A except that in this
Example the Contract Value at death is $9,500.
The following applies to this Example:
(a) The Adjusted Contributions are greater than the Contract Value.
(b) The death benefit is $10,000.
EXAMPLE C - OWNER AGE 65 AT DEATH; DIES DURING CONTRACT YEAR TEN
Example C assumes the following:
(1) A single Contribution of $10,000 was made to the Contract.
(2) Owner dies at Age 65 during the tenth Contract Year.
(3) The Contract Value on the seventh Contract Anniversary was $18,000.
(4) The Contract Value at death was $17,000.
(5) A gross withdrawal of $1,500 was made in the sixth Contract Year at
which time the Contract Value was $15,000 before the withdrawal was made.
The following applies to this Example:
(a) Adjusted Contributions are equal to $9,000. (At the time of the
withdrawal the Contract Value was reduced by 10% ($1,500/$15,000 = .10)
therefore, Adjusted Contributions are reduced by 10% ($10,000 - ($10,000 x
.10) = $9,000).
(b) Contract Value on the seventh Contract Anniversary ($18,000) was
greater than that on the death of Owner ($17,000) and greater than Adjusted
Contributions ($9,000).
(c) The death benefit is $18,000.
EXAMPLE D - OWNER AGE 77 AT DEATH; DIES DURING CONTRACT YEAR TWO
This Example is based on the same assumptions as Example A except that in this
Example the Owner is Age 77 at death.
The following applies to this Example:
(a) The death benefit is $12,000 less any CDSC applicable at the time
the death benefit or any portion is withdrawn.
(b) Any applicable CDSC will be calculated as set forth under Examples
of Withdrawals and Contingent Deferred Sales Charges above.
EXAMPLE E - OWNER AGE 87 AT DEATH; DIES DURING CONTRACT YEAR TWO
This Example is based on the same assumptions as Example A except in this
Example the Owner is Age 87 at death.
The following applies to this Example:
(a) Since the Owner was beyond Age 85, the death benefit will be limited
to the Contract Value less any CDSC applicable at the time the death benefit
or any portion is withdrawn.
(b) Any applicable CDSC will be calculated as set forth under Examples
of Withdrawals and Contingent Deferred Sales Charges above.
[Back Cover]
Distributed by:
London Pacific Financial & Insurance Services
1755 Creekside Oaks Drive
Sacramento, CA 95833
Issued by:
LONDON PACIFIC
LIFE & ANNUITY
COMPANY
Home Office:
3109 Poplarwood Court
Raleigh, North Carolina 27604
(919) 790-2243
Annuity Service Center:
P.O. Box 29564
Raleigh, North Carolina 27626
(800) 852-3152
