File Nos.333-1779
811-8890
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 1 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 6 [X]
(Check appropriate box or boxes.)
LPLA Separate Account One
___________________________
(Exact Name of Registrant)
London Pacific Life & Annuity Company
_____________________________________
(Name of Depositor)
3109 Poplarwood Court, Raleigh, North Carolina 27604
___________________________________________________ _________
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (919) 790-2243
Name and Address of Agent for Service
George Nicholson
London Pacific Life & Annuity Company
3109 Poplarwood Court
Raleigh, North Carolina 27604
Copies to:
Judith A. Hasenauer
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203) 226-7866
Approximate Date of Proposed Public Offering
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
__X__ on May 1, 1997 pursuant to paragraph (b)of Rule 485
_____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
_____ on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
_____ this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
Registrant has declared that it has registered an indefinite number or amount
of securities in accordance with Rule 24f-2 under the Investment Company Act
of 1940. Registrant filed its Rule 24f-2 Notice for the most recent fiscal
year on or about February 28, 1997.
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CROSS REFERENCE SHEET
(required by Rule 495)
Item No. Location
- -------- -------------------------
<S> <C> <C>
PART A
Item 1. Cover Page Cover Page
Item 2. Definitions Definitions
Item 3. Synopsis Highlights
Item 4. Condensed Financial Information Condensed Financial
Information
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies The Company; The Separate
Account; LPT Variable
Insurance Series Trust
Item 6. Deductions and Expenses Charges and Deductions
Item 7. General Description of Variable
Annuity Contracts The Contracts
Item 8. Annuity Period Annuity Provisions
Item 9. Death Benefit Proceeds Payable on
Death
Item 10. Purchases and Contract Value Contributions and
Contract Value
Item 11. Redemptions Withdrawals
Item 12. Taxes Tax Status
Item 13. Legal Proceedings Legal Proceedings
Item 14. Table of Contents of the Statement
of Additional Information Table of Contents of the
Statement of Additional
Information
PART B
Item 15. Cover Page Cover Page
Item 16. Table of Contents Table of Contents
Item 17. General Information and History The Company
Item 18. Services Not Applicable
Item 19. Purchase of Securities Being
Offered. Not Applicable
Item 20. Underwriters Distributor
Item 21. Calculation of Performance Data Performance Information
Item 22. Annuity Payments Annuity Provisions
Item 23. Financial Statements Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item so numbered in Part C to this Registration Statement.
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: Harris Associates Value Portfolio;
MFS Total Return Portfolio; Salomon U.S. Quality Bond Portfolio; Strong
International Stock Portfolio; Salomon Money Market Portfolio; Robertson
Stephens Diversified Growth Portfolio; Lexington Corporate Leaders Portfolio;
and Strong Growth Portfolio. Prior to May 1, 1997, the Harris Associates Value
Portfolio was known as the MAS Value Portfolio and the Robertson Stephens
Diversified Growth Portfolio was known as the Berkeley Smaller Companies
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 on the back page of this Prospectus.
INQUIRIES:
Any inquiries can be made by telephone or in writing to the Annuity Service
Center listed above on the back page of this Prospectus.
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,
1997.
This Prospectus should be kept for future reference.
TABLE OF CONTENTS
PAGE
DEFINITIONS
HIGHLIGHTS
FEE TABLE
CONDENSED FINANCIAL INFORMATION
THE COMPANY
THE SEPARATE ACCOUNT
LPT VARIABLE INSURANCE SERIES TRUST
Harris Associates Value Portfolio
MFS Total Return Portfolio
Salomon U.S. Quality Bond Portfolio
Strong International Stock Portfolio
Salomon Money Market Portfolio
Robertson Stephens Diversified Growth Portfolio
Lexington Corporate Leaders Portfolio
Strong Growth Portfolio
Voting Rights
Substitution of Securities
CHARGES AND DEDUCTIONS
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
Rebalancing Program
Contract Value
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
Multiple Contracts
Contracts Owned by Other than Natural Persons
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 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, or for a longer period in states where required, (thirty (30)
calendar 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 (or the agent through whom it was
purchased in the State of Washington). 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 (in Idaho, the
Company will refund Contributions, less withdrawals), 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 the Right to Examine Contract period plus five (5)
days. Upon the expiration of the Right to Examine Contract period plus five
(5) days, 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.
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 ($30 in North Dakota) from the Contract Value by subtracting
values from the Fixed Account and/or by canceling Accumulation Units from each
applicable Sub-Account. However, during the Accumulation Period, if the
Contract Value is at least $50,000 on the Contract Anniversary, 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 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
Sales Charge NONE
Transfer Fee (see Note 2 below) 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 3 below)
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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'S ANNUAL EXPENSES
(as a percentage of the average daily net assets of a Portfolio)
<TABLE>
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<S> <C> <C> <C>
Other
Expenses
Management (after expense Total Annual
Fees* reimbursement)** Expenses**
----------- ---------------- -------------
Harris Associates Value Portfolio (1) 1.00% .29% 1.29%
MFS Total Return Portfolio .75% .54% 1.29%
Salomon U.S. Quality Bond Portfolio .55% .44% .99%
Strong International Stock Portfolio .75% .74% 1.49%
Salomon Money Market Portfolio .45% .44% .89%
Robertson Stephens Diversified
Growth Portfolio (2) .95% .44% 1.39%
Lexington Corporate Leaders Portfolio .65% .64% 1.29%
Strong Growth Portfolio .75% .54% 1.29%
<FN>
1) Prior to May 1, 1997, the Management Fee was .875% of the average daily net
assets of the Portfolio.
2) Prior to May 1, 1997, the Management Fee was 1.00% of the average daily net
assets of the Portfolio.
* LPIMC Insurance Marketing Services, the investment adviser of LPT Variable
Insurance Series Trust waived its entire management fee from January 31,
1996 to July 31, 1996 with respect to the Salomon U.S. Quality Bond Portfolio,
Salomon Money Market Portfolio, MFS Total Return Portfolio and Robertson Stephens
Diversified Growth Portfolio (formerly the Berkeley Smaller Companies Portfolio);
waived its entire management fee from January 31, 1996 to April 30, 1996
and waived .25% of its management fee from May 1, 1996 to July 31, 1996 with respect
to the Harris Value Portfolio (formerly the MAS Value Portfolio); and waived .25% of
its management fee from January 31, 1996 to July 31, 1996 with respect to the Strong
Growth Portfolio and the Lexington Corporate Leaders Portfolio.
** The Company has voluntarily agreed through December 31, 1997 to reimburse each
Portfolio for certain expenses (excluding brokerage commissions) in excess of
approximately the amounts set forth above under "Total Annual Expenses" for each
Portfolio. Absent this expense reimbursement arrangement, for the year ended
December 31, 1996, the "Total Annual Expenses" (on an annualized basis) were: were
7.55% for the Harris Associates Value Portfolio; 7.84% for the MFS Total Return
Portfolio; 5.79% for the Salomon U.S. Quality Bond Portfolio; 6.67% for the Salomon
Money Market Portfolio; 7.74% for the Strong International Stock Portfolio; 7.09%
for the Strong Growth Portfolio; 7.02% for the Robertson Stephens Diversified Growth
Portfolio; and 6.86% for the Lexington Corporate Leaders 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 regardless of whether the Contract is surrendered
at the end of each time period or if the Contract is annuitized.
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Time Periods
1 year 3 years 5 years 10 years
------- -------- -------- ---------
Harris Associates Value Portfolio $ 30.04 $ 94.47 $ 165.22 $ 374.10
MFS Total Return Portfolio $ 30.04 $ 94.47 $ 165.22 $ 374.10
Salomon U.S. Quality Bond Portfolio $ 26.96 $ 84.78 $ 148.23 $ 335.42
Strong International Stock Portfolio $ 32.09 $ 100.94 $ 176.55 $ 399.88
Salomon Money Market Portfolio $ 25.94 $ 81.55 $ 142.56 $ 322.53
Robertson Stephens Diversified
Growth Portfolio $ 31.06 $ 97.70 $ 170.88 $ 386.99
Lexington Corporate Leaders Portfolio $ 30.04 $ 94.47 $ 165.22 $ 374.10
Strong Growth Portfolio $ 30.04 94.47 $ 165.22 $ 374.10
</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 Prospectuses for the Portfolios of LPT Variable Insurance Series
Trust.
2. 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.
3. 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. In the
State of North Dakota, the Contract Maintenance Charge is $30.
4. Premium Taxes are not reflected. Premium Taxes may apply. (See
"Charges and Deductions - Deduction for Premium and Other Taxes.")
5. 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.
6. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
CONDENSED FINANCIAL INFORMATION
The financial statements of the Company and the Separate Account may be
found in the Statement of Additional Information. The table below gives per
unit information about the financial history of each Sub-Account from the
inception of each (January 31, 1996) to December 31, 1996. This information
should be read in conjunction with the financial statements and related notes
of the Separate Account included in the Statement of Additional Information.
<TABLE>
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Period from commencement of
Sub-Account operations to 12-31-96
- ----------------------------------------- ----------------------------
<S> <C>
Harris Associates Value*
Unit value at beginning of period $ 10.00
Unit value at end of period $ 12.12
No. of units outstanding at end of period 50,583
MFS Total Return
Unit value at beginning of period $ 10.00
Unit value at end of period $ 11.03
No. of units outstanding at end of period 82,279
Salomon U.S. Quality Bond
Unit value at beginning of period $ 10.00
Unit value at end of period $ 10.15
No. of units outstanding at end of period 78,700
Salomon Money Market
Unit value at beginning of period $ 10.00
Unit value at end of period $ 10.36
No. of units outstanding at end of period 27,763
Strong International Stock
Unit value at beginning of period $ 10.00
Unit value at end of period $ 10.58
No. of units outstanding at end of period 40,840
Strong Growth
Unit value at beginning of period $ 10.00
Unit value at end of period $ 12.62
No. of units outstanding at end of period 44,555
Robertson Stephens Diversified Growth**
Unit value at beginning of period $ 10.00
Unit value at end of period $ 10.35
No. of units outstanding at end of period 52,516
Lexington Corporate Leaders
Unit value at beginning of period $ 10.00
Unit value at end of period $ 11.51
No. of units outstanding at end of period 29,933
<FN>
* Prior to May 1, 1997, the Harris Associates Value Sub-Account was known
as the MAS Value Sub-Account.
** Prior to May 1, 1997, the Robertson Stephens Diversified Growth
Sub-Account was known as the Berkeley Smaller Companies Sub-Account.
</TABLE>
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.
HARRIS ASSOCIATES VALUE PORTFOLIO (formerly MAS Value Portfolio): The Harris
Associates Value Portfolio seeks long-term capital appreciation by investing
primarily in equity securities. Although income is considered in the selection
of securities, the Portfolio is not designed for investors whose primary
investment objective is income. The Portfolio invests principally in
securities of U.S. issuers. However, it may invest up to 25% of its total
assets in securities of non-U.S. issuers. The Sub-Adviser for this Portfolio
is Harris Associates L.P. Prior to May 1, 1997, the Portfolio had different
investment objectives, policies and restrictions and a different Sub-Adviser.
MFS TOTAL RETURN PORTFOLIO : The MFS Total Return 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 Strong
International Stock Portfolio 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.
ROBERTSON STEPHENS DIVERSIFIED GROWTH PORTFOLIO (formerly Berkeley Smaller
Companies Portfolio): The Robertson Stephens Diversified Growth Portfolio's
investment objective is to seek long-term capital growth. In selecting
investments for the Portfolio, the Sub-Adviser focuses on small and mid-cap
companies, to create a portfolio of investments broadly diversified over
industry sectors and companies. The Portfolio will invest primarily in common
and preferred stocks and warrants. Although the Portfolio intends to focus on
companies with market capitalizations of up to $3 billion, the Portfolio will
remain flexible and may invest in securities of larger companies. The
Sub-Adviser for this Portfolio is Robertson, Stephens & Company Investment
Management, L.P. Prior to May 1, 1997, the Portfolio had different investment
objectives, policies and restrictions and a different Sub-Adviser.
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 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. 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.
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 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 canceling 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 ($30 in the State of North Dakota) 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 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 pro-rata from the Fixed Account
and the Sub-Accounts. (In South Carolina, Texas and Washington, during the
Accumulation Period and in the event of a total withdrawal, the Company
deducts the Contract Maintenance Charge only by canceling Accumulation Units
from each applicable Sub-Account.) 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. 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. 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 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. See
"Tax Status - Income Tax Withholding."
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.
REBALANCING PROGRAM
Certain Owners may utilize an asset allocation model known as the Asset
Equalizer to help them establish their initial investment allocations in the
Contracts. These Owners may rebalance their investments monthly to maintain
the allocations in the Asset Equalizer model. Rebalancing provides for
periodic pre-authorized automatic transfers among the Sub-Accounts. Any
amounts in the Fixed Account will not be transferred pursuant to this program.
If the Owner is participating in the Rebalancing 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.
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.
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
canceled. 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 the
valuation 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 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 is 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 once each Contract Year make a transfer from one or more
Sub-Accounts 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. (In the State of
Washington, the Owner may make a withdrawal on the Annuity Date.)
Unless the Owner instructs the Company otherwise, a partial withdrawal will be
made from the Separate Account. A partial withdrawal will result in the
cancelation 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 canceled if
other than the above method is desired.
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 $2,000. The
minimum Contract Value which must remain in a Sub-Account or the Fixed Account
after a partial withdrawal is $500.
INCOME TAXES AND TAX PENALTIES MAY APPLY TO ANY WITHDRAWAL FROM THE CONTRACT.
See "Tax Status - Tax Treatment of Withdrawals - Qualified Contracts" and "Tax
Treatment of Withdrawals - Non-Qualified Contracts."
SYSTEMATIC WITHDRAWAL OPTION
The Company offers 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.
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 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 80, 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 80, 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.
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. 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 a Fixed and Variable Annuity is 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 a Fixed
and Variable Annuity 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 an ongoing quarterly commission currently equal to
.275% of the Contract Value (pro-rated for the first Contract quarter based
upon the length of time the Contract has been in force) 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 all recurring charges and
deductions against the Sub-Account's income, including the deduction of the
Mortality and Expense Risk Charge, the Administrative Charge, the Distribution
Charge and a pro-rata portion of the Contract Maintenance Charge. The Company
does not impose a sales load upon redemptions in connection with the
Contracts.
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. The Company may also advertise
performance information computed on a different basis which may not include
certain charges. If such charges were deducted, the performance would be
lower.
Any advertisement will also include total return figures calculated as
described in the Statement of Additional Information. The total return
figures will reflect the fees and expenses of the Portfolio and all recurring
charges and deductions against the Sub-Account's income, including the
deduction of the Mortality and Expense Risk Charge, the Administrative Charge,
the Distribution Charge and a pro-rata portion of the Contract Maintenance
Charge for the applicable periods shown.
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 all recurring charges and deductions against the Sub-Account's
income, including the deduction of the Mortality and Expense Risk Charge, the
Administrative Charge, the Distribution Charge and a pro-rata portion of the
Contract Maintenance Charge. The Company does not impose a sales load upon
redemptions in connection with the Contracts.
The Company may also show historical Accumulation Unit values in certain
advertisements containing illustrations. These illustrations will be based on
actual Accumulation Unit values.
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.
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.
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.
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.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS
Under Section 72(u) of the Code, the investment earnings on Contributions for
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 a Contract held by a trust or other
entity as an agent for a natural person nor Contracts held by Qualified Plans.
Purchasers should consult their own tax counsel or other tax adviser before
purchasing a Contract to be owned by a non-natural person.
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 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; 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
contributions 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) 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 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 (e)
distributions from an Individual Retirement Annuity for the purchase of
medical insurance (as described in Section 213(d)(1)(D) of the Code) for the
Owner or Annuitant (as applicable) and his or her spouse and dependents if the
Owner or Annuitant (as applicable) has received unemployment compensation for
at least 12 weeks. This exception no longer applies after the Owner or
Annuitant (as applicable) has been re-employed for at least 60 days.
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.
FINANCIAL STATEMENTS
Financial statements of the Company and the Separate Account have been
included in the Statement of Additional Information.
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
Experts
Legal Opinions
Distributor
Yield Calculation for the Salomon Money Market Sub-Account
Performance Information
Annuity Provisions
Financial Statements
APPENDIX
The purpose of the Examples below is to demonstrate how the death benefit is
calculated.
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 10
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 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 80, the death benefit will be limited
to the Contract Value.
(b) The death benefit is $12,000.
[Back Cover of Prospectus]
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
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACTS
WITH FLEXIBLE CONTRIBUTIONS
ISSUED BY
LPLA SEPARATE ACCOUNT ONE
AND
LONDON PACIFIC LIFE & ANNUITY COMPANY
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS DATED MAY 1, 1997, FOR THE INDIVIDUAL
FIXED AND VARIABLE DEFERRED ANNUITY CONTRACTS WITH FLEXIBLE CONTRIBUTIONS
WHICH ARE REFERRED TO HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION FOR A PROSPECTIVE INVESTOR.
FOR A COPY OF THE PROSPECTUS CALL OR WRITE THE COMPANY AT: P.O. BOX 29564,
RALEIGH, NORTH CAROLINA 27626; (800) 852-3152.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED MAY 1, 1997.
TABLE OF CONTENTS
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
COMPANY
Information regarding London Pacific Life & Annuity Company (the "Company")
and its ownership is contained in the Prospectus.
The Company contributed the initial capital to the Separate Account. As of
April 1, 1997, the initial capital contributed by the Company represented
approximately 17.0% of the total assets of the Separate Account. The Company
currently intends to remove these assets from the Separate Account on a
pro-rata basis in proportion to money invested in the Separate Account by
Owners.
EXPERTS
The financial statements of the Company as of December 31, 1996 and 1995 and
for each of the three years in the period ended December 31, 1996, and the
financial statements of the Separate Account for the period from January 31,
1996 (commencement of operations) to December 31, 1996, included in this
Statement of Additional Information have been so included in reliance on the
reports of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
LEGAL OPINIONS
Legal matters in connection with the Contracts described herein are being
passed upon by the law firm of Blazzard, Grodd & Hasenauer, P.C., Westport,
Connecticut.
DISTRIBUTOR
London Pacific Financial and Insurance Services acts as the distributor.
London Pacific Financial and Insurance Services is an affiliate of the
Company. The offering is on a continuous basis.
YIELD CALCULATION FOR THE SALOMON MONEY MARKET SUB-ACCOUNT
The Salomon Money Market Sub-Account of the Separate Account will calculate
its current yield based upon the seven days ended on the date of calculation.
The Company does not currently advertise any yield information for the Salomon
Money Market Sub-Account.
The current yield of the Salomon Money Market Sub-Account is computed daily by
determining the net change (exclusive of capital changes) in the value of a
hypothetical pre-existing Owner account having a balance of one Accumulation
Unit of the Sub-Account at the beginning of the period, subtracting the
Mortality and Expense Risk Charge, the Administrative Charge, the Distribution
Charge and the Contract Maintenance Charge, dividing the difference by the
value of the Owner account at the beginning of the same period to obtain the
base period return and multiplying the result by (365/7).
The Salomon Money Market Sub-Account computes its effective compound yield by
determining the net changes (exclusive of capital change) in the value of a
hypothetical pre-existing Owner account having a balance of one Accumulation
Unit of the Sub-Account at the beginning of the period, subtracting the
Mortality and Expense Risk Charge, the Administrative Charge, the Distribution
Charge and the Contract Maintenance Charge and dividing the difference by the
value of the Owner account at the beginning of the base period to obtain the
base period return, and then compounding the base period return by adding 1,
raising the sum to a power equal to 365 divided by 7, and subtracting 1 from
the result, according to the following formula: Effective Yield = ((Base
Period Return +1) 365/7)-1. The current and the effective yields reflect the
reinvestment of net income earned daily on the Salomon Money Market
Sub-Account's assets.
Net investment income for yield quotation purposes will not include either
realized capital gains and losses or unrealized appreciation and depreciation,
whether reinvested or not.
The yields quoted should not be considered a representation of the yield of
the Salomon Money Market Sub-Account in the future since the yield is not
fixed. Actual yields will depend not only on the type, quality and maturities
of the investments held by the Salomon Money Market Sub-Account and changes in
the interest rates on such investments, but also on changes in the Salomon
Money Market Sub-Account's expenses during the period.
Yield information may be useful in reviewing the performance of the Salomon
Money Market Sub-Account and for providing a basis for comparison with other
investment alternatives. However, the Salomon Money Market Sub-Account's yield
fluctuates, unlike bank deposits or other investments which typically pay a
fixed yield for a stated period of time.
PERFORMANCE INFORMATION
From time to time, the Company may advertise performance data as described in
the Prospectus. Any such advertisement will include total return figures for
the time periods indicated in the advertisement. Such total return figures
will reflect the deduction of a 1.25% Mortality and Expense Risk Charge, a
.15% Administrative Charge, a .10% Distribution Charge, the investment
advisory fee and expenses for the underlying Portfolio being advertised and
any applicable Contract Maintenance Charge.
The hypothetical value of a Contract purchased for the time periods described
in the advertisement will be determined by using the actual Accumulation Unit
values for an initial $1,000 purchase payment, and deducting any applicable
Contract Maintenance Charge to arrive at the ending hypothetical value. The
average annual total return is then determined by computing the fixed interest
rate that a $1,000 purchase payment would have to earn annually, compounded
annually, to grow to the hypothetical value at the end of the time periods
described. The formula used in these calculations is:
n
P (1+T) = ERV
<TABLE>
<CAPTION>
<S> <C>
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the time periods used (or
fractional portion thereof) of a hypothetical $1,000 payment
made at the beginning of the time periods used.
</TABLE>
In addition to total return data, the Company may include yield information in
its advertisements. For each Sub-Account (other than the Salomon Money Market
Sub-Account) for which the Company will advertise yield, it will show a yield
quotation based on a 30 day (or one month) period ended on the date of the
most recent balance sheet of the Separate Account included in the registration
statement, computed by dividing the net investment income per Accumulation
Unit earned during the period by the maximum offering price per Unit on the
last day of the period, according to the following formula:
6
Yield = 2 [( a-b + 1) - 1]
----
cd
<TABLE>
<CAPTION>
<S> <C> <C>
Where:
a = Net investment income earned during the period by the Portfolio
attributable to shares owned by the Sub-Account.
b = Expenses accrued for the period (net of reimbursements).
c = The average daily number of Accumulation Units outstanding
during the period.
d = The maximum offering price per Accumulation Unit on the
last day of the period.
</TABLE>
The Company may also advertise performance data which may be computed on a
different basis which may not include certain charges. If such charges were
deducted, the performance would be lower.
Owners should note that the investment results of each Sub-Account will
fluctuate over time, and any presentation of the Sub-Account's total return or
yield for any period should not be considered as a representation of what an
investment may earn or what an Owner's total return or yield may be in any
future period.
ANNUITY PROVISIONS
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. Annuity Payments also depend upon
the Age of the Annuitant and any Joint Annuitant and the assumed interest
factor utilized. The Annuity Table used will depend upon the Annuity Option
chosen. The dollar amount of Variable Annuity Payments for each applicable
Sub-Account after the first Variable Annuity Payment is determined as follows:
1. The dollar amount of the first Variable Annuity Payment is divided by
the value of an Annuity Unit for each applicable Sub-Account as of the Annuity
Date. This sets the number of Annuity Units for each monthly payment for the
applicable Sub-Account. The number of Annuity Units remains fixed during the
Annuity Period.
2. The fixed number of Annuity Units per payment in each Sub-Account is
multiplied by the Annuity Unit Value for that Sub-Account for the last
Valuation Period of the month preceding the month for which the payment is
due. This result is the dollar amount of the payment for each applicable
Sub-Account.
The total dollar amount of each Variable Annuity Payment is the sum of all
Sub-Account Variable Annuity Payments reduced by the applicable portion of the
Contract Maintenance Charge.
ANNUITY UNIT
The value of any Annuity Unit for each Sub-Account of the Separate Account was
arbitrarily set initially at $10.
The Sub-Account Annuity Unit Value at the end of any subsequent Valuation
Period is determined as follows:
1. The Net Investment Factor for the current Valuation Period is
multiplied by the value of the Annuity Unit for the Sub-Account for the
immediately preceding Valuation Period. The Net Investment Factor is equal to
the Accumulation Unit Value for the current Valuation Period divided by the
Accumulation Unit Value for the immediately preceding Valuation Period.
2. The result in (1) is then divided by the Assumed Investment Rate
Factor which equals 1.00 plus the Assumed Investment Rate for the number of
days since the preceding Valuation Date. The Assumed Investment Rate is equal
to an effective annual rate of 4%.
The value of an Annuity Unit may increase or decrease from Valuation Period to
Valuation Period.
(See "Annuity Provisions" in the Prospectus.)
FINANCIAL STATEMENTS
The financial statements of the Company included herein should be considered
only as bearing upon the ability of the Company to meet its obligations under
the Contracts.
LPLA SEPARATE ACCOUNT ONE
FINANCIAL STATEMENTS
CONTENTS
Audited Financial Statements
Statement of Assets and Liabilities......... 1
Statement of Operations....................... 2
Statement of Changes in Net Assets......... 3
Notes to Financial Statements................ 4
Report of Independent Accountants............ 8
LPLA SEPARATE ACCOUNT ONE
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Salomon Strong
MFS Total Salomon U.S. Money International Strong
MAS Value Return Quality Bond Market Stock Growth
ASSETS Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
------------ ------------ ------------- ------------ -------------- ------------
Investments in the LPT
Variable Insurance Trust,
at value (Note 3) $ 766,457 $ 1,046,614 $ 926,451 $ 417,951 $ 565,195 $ 722,959
------------ ------------ ------------- ------------ -------------- ------------
Total Assets $ 766,457 $ 1,046,614 $ 926,451 $ 417,951 $ 565,195 $ 722,959
------------ ------------ ------------- ------------ -------------- ------------
LIABILITIES
Accrued expenses payable to
London Pacific Life & Annuity
Company (Note 4) 22 32 31 16 15 17
Amounts retained by London Pacific
Life & Annuity Co. in LPLA Separate
Account One
(Note 7) 153,196 139,219 127,999 130,261 133,139 160,583
------------ ------------ ------------- ------------ -------------- ------------
TOTAL LIABILITIES 153,218 139,251 128,030 130,277 133,154 160,600
------------ ------------ ------------- ------------ -------------- ------------
Net Assets Attributable to
Contract Owners $ 613,239 $ 907,363 $ 798,421 $ 287,674 $ 432,041 $ 562,359
============ ============ ============= ============ ============== ============
UNIT VALUE $ 12.12 $ 11.03 $ 10.15 $ 10.36 $ 10.58 $ 12.62
============ ============ ============= ============ ============== ============
Units Outstanding 50,583 82,279 78,700 27,763 40,840 44,555
============ ============ ============= ============ ============== ============
<S> <C> <C>
Berkeley Lexington
Smaller Corporate
Companies Leaders
ASSETS Sub-Account Sub-Account
------------ ------------
Investments in the LPT
Variable Insurance Trust,
at value (Note 3) $ 674,793 $ 489,190
------------ ------------
Total Assets $ 674,793 $ 489,190
------------ ------------
LIABILITIES
Accrued expenses payable to
London Pacific Life & Annuity
Company (Note 4) 17 13
Amounts retained by London Pacific
Life & Annuity Co. in LPLA Separate
Account One
(Note 7) 131,253 144,672
------------ ------------
TOTAL LIABILITIES 131,270 144,685
------------ ------------
Net Assets Attributable to
Contract Owners $ 543,523 $ 344,505
============ ============
UNIT VALUE $ 10.35 $ 11.51
============ ============
Units Outstanding 52,516 29,933
============ ============
</TABLE>
See Notes to Financial Statements
LPLA SEPARATE ACCOUNT ONE
STATEMENT OF OPERATIONS
FOR THE PERIOD JANUARY 31, 1996 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Strong
MFS Total Salomon U.S. Salomon Money International Strong
MAS Value Return Quality Bond Market Stock Growth
INCOME AND EXPENSES Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
------------ ------------ ------------- -------------- -------------- -------------
Income:
Dividends from the LPT Variable
Insurance Series Trust $ 19,181 $ 15,103 $ 37,717 $ 15,124 $ 2,659 $ 38,140
Expenses:
Mortality and other expense
charges (Note 4) 1,620 2,240 5,845 1,903 1,726 1,160
------------ ------------ ------------- -------------- -------------- -------------
Net investment income 17,561 12,863 31,872 13,221 933 36,980
------------ ------------ ------------- -------------- -------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS.
Net realized gain on sales of
investments 29 2 102 0 75 551
------------ ------------ ------------- -------------- -------------- -------------
Net unrealized appreciation
(depreciation) on investments
Beginning of period 0 0 0 0 0 0
End of period 40,172 19,948 646 0 2,107 (5,660)
------------ ------------ ------------- -------------- -------------- -------------
Net unrealized appreciation
(depreciation) during period 40,172 19,948 646 0 2,107 (5,660)
------------ ------------ ------------- -------------- -------------- -------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS 40,201 19,950 748 0 2,182 (5,109)
------------ ------------ ------------- -------------- -------------- -------------
Net Increase (Decrease) in Net
Assets Resulting from Operations $ 57,762 $ 32,813 $ 32,620 $ 13,221 $ 3,115 $ 31,871
============ ============ ============= ============== ============== =============
<S> <C> <C>
Berkeley Lexington
Smaller Corporate
Companies Leaders
INCOME AND EXPENSES Sub-Account Sub-Account
------------- ------------
Income:
Dividends from the LPT Variable
Insurance Series Trust $ 112,982 $ 4,264
Expenses:
Mortality and other expense
charges (Note 4) 1,558 672
------------- ------------
Net investment income 111,424 3,592
------------- ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS.
Net realized gain on sales of
investments 85 4
------------- ------------
Net unrealized appreciation
(depreciation) on investments
Beginning of period 0 0
End of period (142,697) 24,589
------------- ------------
Net unrealized appreciation
(depreciation) during period (142,697) 24,589
------------- ------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (142,612) 24,593
------------- ------------
Net Increase (Decrease) in Net
Assets Resulting from Operations ($31,188) $ 28,185
============= ============
</TABLE>
See Notes to Financial Statements
LPLA SEPARATE ACCOUNT ONE
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD JANUARY 31, 1996 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Salomon Strong
MFS Total Salomon U.S. Money International
MAS Value Return Quality Bond Market Stock
INCREASE(DECREASE) IN NET Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
------------- ------------- -------------- ------------- ---------------
ASSETS FROM OPERATIONS
Net investment income $ 17,561 $ 12,863 $ 31,872 $ 13,221 $ 933
Net realized gain on sales 29 2 102 0 75
Net unrealized appreciation
(depreciation) during the period 40,172 19,948 646 0 2,107
------------- ------------- -------------- ------------- ---------------
Net increase (decrease) in net
Assets resulting from operations 57,762 32,813 32,620 13,221 3,115
------------- ------------- -------------- ------------- ---------------
CONTRACT RELATED TRANSACTIONS:
Transfers in from net premiums 286,034 414,918 95,545 2,841,064 155,627
Transfers out from contract related
transactions (357) (3,655) (3,368) 0 (1,948)
Transfers between Separate Account
investment portfolios 297,996 477,506 676,623 (2,561,350) 283,386
------------- ------------- -------------- ------------- ---------------
Net increase in net assets resulting
from contract related transactions 583,673 888,769 768,800 279,714 437,065
------------- ------------- -------------- ------------- ---------------
INITIAL CONTRIBUTION BY LONDON
PACIFIC LIFE & ANNUITY COMPANY 125,000 125,000 125,000 125,000 125,000
Change in amount retained by London
Pacific Life & Annuity Company in
LPLA Separate Account One (Note 7) (153,196) (139,219) (127,999) (130,261) 133,139)
------------- ------------- -------------- ------------- ---------------
INCREASE IN NET ASSETS 613,239 907,363 798,421 287,674 432,041
NET ASSETS, BEGINNING OF PERIOD 0 0 0 0 0
------------- ------------- -------------- ------------- ---------------
NET ASSETS, END OF PERIOD $ 613,239 $ 907,363 $ 798,421 $ 287,674 $ 432,041
============= ============= ============== ============= ===============
<S> <C> <C> <C>
Berkeley Lexington
Strong Smaller Corporate
Growth Companies Leaders
INCREASE(DECREASE) IN NET Sub-Account Sub-Account Sub-Account
------------- ------------- -------------
ASSETS FROM OPERATIONS
Net investment income $ 36,980 $ 111,424 $ 3,592
Net realized gain on sales 551 85 4
Net unrealized appreciation
(depreciation) during the period (5,660) (142,697) 24,589
------------- ------------- -------------
Net increase (decrease) in net
Assets resulting from operations 31,871 (31,188) 28,185
------------- ------------- -------------
CONTRACT RELATED TRANSACTIONS:
Transfers in from net premiums 227,819 246,768 187,429
Transfers out from contract related
transactions (2,879) (1,896) (53)
Transfers between Separate Account
investment portfolios 341,131 336,092 148,616
------------- ------------- -------------
Net increase in net assets resulting
from contract related transactions 566,071 580,964 335,992
------------- ------------- -------------
INITIAL CONTRIBUTION BY LONDON
PACIFIC LIFE & ANNUITY COMPANY 125,000 125,000 125,000
Change in amount retained by London
Pacific Life & Annuity Company in
LPLA Separate Account One (Note 7) (160,583) (131,253) (144,672)
------------- ------------- -------------
INCREASE IN NET ASSETS 562,359 543,523 344,505
NET ASSETS, BEGINNING OF PERIOD 0 0 0
------------- ------------- -------------
NET ASSETS, END OF PERIOD $ 562,359 $ 543,523 $ 344,505
============= ============= =============
</TABLE>
See Notes to Financial Statements
LPLA SEPARATE ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 - ORGANIZATION
LPLA Separate Account One ("Separate Account") is a separate investment
account of London Pacific Life & Annuity Company ("Company"). The Separate
Account was established on November 23, 1994 under the insurance laws of the
State of North Carolina for the purpose of issuing flexible payment variable
annuity contracts. Under North Carolina's insurance laws, the assets of the
Separate Account are clearly identified and distinguished from the other
assets and liabilities of the Company. The Separate Account cannot be charged
with liabilities arising out of any other business of the Company.
The Separate Account is a unit investment trust registered with the Securities
and Exchange Commission under the Investment Company Act of 1940. Contract
owners may allocate their account values to one or more of the Separate
Account's investment Sub-Accounts. Funds of the investment Sub-Accounts of
the Separate Account are invested exclusively in a corresponding investment
portfolio of the LPT Variable Insurance Series Trust ("Trust") managed by
LPIMC Insurance Marketing Services ("LPIMC"), a registered investment advisor
and a wholly-owned subsidiary of the Company.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles consistently followed
by the Separate Account in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reported period. Actual results could differ from those estimates.
INVESTMENTS - Security transactions are recorded on the trade date.
Investments held by the Sub-Accounts are stated at the net asset value per
share of the respective investment portfolio of the Trust. Realized gains and
losses on sales of shares of the Trust are determined based on the first-in,
first-out method. Dividends and capital gain distributions are recorded on
the ex-dividend date and are reinvested in additional shares of the respective
investment portfolio of the Trust.
FEDERAL INCOME TAXES - Operations of the Separate Account are included in the
income tax return of the Company, which is taxed as a life insurance company
under the Internal Revenue Code. The Separate Account will not be taxed as a
registered investment company under Sub-Chapter M of the Internal Revenue
Code. Under existing federal income tax law, no taxes are payable on the
investment income or on the capital gains of the Separate Account.
LPLA SEPARATE ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 3 - INVESTMENTS
The number of shares owned, aggregate cost, and net asset value per share of
each Sub-Account's investment in the Trust at December 31, 1996 were as
follows:
<TABLE>
<CAPTION>
_______________________________________________________________________________
Portfolio Information
Number of Aggregate Net Asset
Investment Sub-Account Shares Cost Value Per Share
________________________________________________________________________________
<S> <C> <C> <C>
MAS Value 64,647 $ 726,285 $ 11.86
MFS Total Return 96,012 1,026,666 10.90
Salomon U.S. Quality Bond 94,436 925,805 9.81
Salomon Money Market 417,951 417,951 1.00
Strong International Stock 53,401 563,088 10.58
Strong Growth 60,664 728,619 11.92
Berkeley Smaller Companies 78,575 817,490 8.58
Lexington Corporate Leaders 42,749 464,601 11.44
</TABLE>
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company assesses a charge of 1.25% per annum based on the average daily
net assets of each Sub-Account at each valuation date for mortality and
expense risks. The Company also charges each Sub-Account .15% and .10% per
annum based on the average daily net assets of each Sub-Account for
administrative and distribution expenses, respectively. These charges are
deducted from the daily unit value of each Sub-Account but are paid to the
Company on a monthly basis.
A contract maintenance charge of $36 is currently deducted on the policy
anniversary date and upon full surrender of the policy when the accumulated
value is $50,000 or less.
London Pacific Financial and Insurance Services ("LPFIS"), a registered
broker/dealer and wholly-owned subsidiary of the Company, is principal
underwriter and general distributor of the Separate Account. LPFIS does not
receive any compensation for sales of the variable annuity contracts.
LPLA SEPARATE ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 5 - CHANGES IN UNITS OUTSTANDING
Changes in units outstanding for the period January 31, 1996 (commencement of
operations) to December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Investment Sub-Account Units Purchased Units Transferred Units Redeemed Net Increase
___________________________ ________________ __________________ _________________ ______________
<S> <C> <C> <C> <C>
MAS Value 23,988 26,628 (33) 50,583
MFS Total Return 37,908 44,705 (334) 82,279
Salomon U.S. Quality Bond 9,805 69,231 (336) 78,700
Salomon Money Market 277,258 (249,495) 0 27,763
Strong International Stock 14,759 26,267 (186) 40,840
Strong Growth 17,977 26,809 (231) 44,555
Berkeley Smaller Companies 22,713 29,987 (184) 52,516
Lexington Corporate Leaders 16,470 13,468 (5) 29,933
</TABLE>
NOTE 6 - DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Internal Revenue Code a variable
annuity contract, other than a contract issued in connection with certain
types of employee benefit plans, will not be treated as an annuity contract
for federal income tax purposes for any period for which the investments of
the segregated asset account on which the contract is based are not adequately
diversified. The Code provides that the "adequately diversified" requirement
may be met if the underlying investments satisfy either a statutory safe
harbor test or diversification requirements set forth in regulations issued by
the Secretary of Treasury.
The Internal Revenue Service has issued regulations under Section 817(h) of
the Code. The Company believes that it satisfies the current requirements of
the regulations, and it intends that the Separate Account will continue to
meet such requirements.
NOTE 7 - AMOUNT RETAINED BY THE COMPANY
The amount retained by the Company is attributable to the Company's initial
contribution to the Separate Account and the underlying investment results.
The change in this amount arises from that portion, determined ratably, of the
Separate Account's investment results applicable to the net assets owned by
the Company. The funds contributed by the Company, as well as any investment
appreciation or depreciation, are not subject to charges for mortality and
expense risks, administration expenses and distribution expenses.
Amounts retained by the Company in the Separate Account may be transferred by
the Company to its General Account at any time.
LPLA SEPARATE ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 8 - PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of the Trust shares by the Separate
Account during the year ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Investment Sub-Account Purchases Sales
___________________________ ___________ ___________
<S> <C> <C>
MAS Value $ 726,613 $ 357
MFS Total Return 1,026,717 53
Salomon U.S. Quality Bond 980,727 55,024
Salomon Money Market 2,853,937 2,435,986
Strong International Stock 564,621 1,608
Strong Growth 730,723 2,655
Berkeley Smaller Companies 819,174 1,769
Lexington Corporate Leaders 464,650 53
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of London Pacific Life & Annuity
Company and Contract Owners of LPLA Separate Account One
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets present fairly,
in all material respects, the financial position of each of the Sub-Accounts
(MAS Value, MFS Total Return, Salomon U.S. Quality Bond, Salomon Money Market,
Strong International Stock, Strong Growth, Berkeley Smaller Companies and
Lexington Corporate Leaders) constituting LPLA Separate Account One at
December 31, 1996, the results of each of their operations and the changes in
each of their net assets for the period indicated, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of London Pacific Life & Annuity Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of investments owned at December 31, 1996 by correspondence with
the Trust, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 18, 1997
LONDON PACIFIC LIFE
& ANNUITY COMPANY
(A wholly-owned subsidiary
of London Pacific Group
Limited)
STATUTORY BASIS FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
London Pacific Life & Annuity Company
(A wholly-owned subsidiary of London Pacific Group Limited)
Statutory Basis Financial Statements
Years ended December 31, 1996, 1995 and 1994
CONTENTS
Report of Independent Accountants........................................... 1
AUDITED FINANCIAL STATEMENTS
Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus... 3
Statutory Statements of Operations.......................................... 4
Statutory Statements of Changes in Capital and Surplus..................... 5
Statutory Statements of Cash Flows......................................... 6-7
Notes to Statutory Financial Statements.................................... 8-19
Report of Independent Accountants
February 3, 1997
To the Board of Directors and Shareholder of
London Pacific Life & Annuity Company
(A wholly-owned subsidiary of London Pacific Group Limited)
We have audited the accompanying statutory statements of admitted assets,
liabilities, capital and surplus of London Pacific Life & Annuity Company (a
wholly-owned subsidiary of London Pacific Group Limited) as of December 31, 1996
and 1995, and the related statutory statements of operations, of changes in
capital and surplus, and of cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
As described in Note 1, these financial statements were prepared in conformity
with accounting practices prescribed or permitted by the North Carolina
Department of Insurance, which practices differ from generally accepted
accounting principles. Accordingly, the financial statements are not intended
to represent a presentation in accordance with generally accepted accounting
principles. The effects on the financial statements of the variances
between the statutory basis of accounting and generally accepted accounting
principles, although not reasonably determinable, are presumed to be material.
To the Board of Directors and Shareholder of
London Pacific Life & Annuity Company
Page 2
February 3, 1997
In our opinion, the financial statements referred to above (1) do not present
fairly in conformity with generally accepted accounting principles, the
financial position of London Pacific Life & Annuity Company at December 31,
1996 and 1995, or the results of its operations or its cash flows for each of
the three years in the period ended December 31, 1996 because of the effects of
the variances between the statutory basis of accounting and generally accepted
accounting principles referred to in the third paragraph of this report and (2)
do present fairly, in all material respects, its financial position and the
results of its operations and its cash flows, on the basis of accounting
described in Note 1.
/s/ PRICE WATERHOUSE LLP
_________________________
<TABLE>
<CAPTION>
LONDON PACIFIC LIFE & ANNUITY COMPANY
(A wholly-owned subsidiary of London Pacific Group Limited)
STATUTORY STATEMENTS OF ADMITTED ASSETS, LIABILITIES, CAPITAL AND SURPLUS
__________________________________________________________________________________________
DECEMBER 31,
_____________
<S> <C> <C>
1996 1995
-------------- ---------------
ASSETS
Investments:
Bonds $1,142,464,351 $1,057,481,158
Preferred stock 1,687,616 9,912,720
Common stock 20,479,485 1,430,013
Short-term investments 88,249,049 69,747,096
Policy loans 6,294,811 4,455,976
-------------- ---------------
Total investments 1,259,175,312 1,143,026,963
-------------- ---------------
Cash 26,008,933 2,664,850
-------------- ---------------
Total cash and investments 1,285,184,245 1,145,691,813
Investment income due and accrued 12,363,810 17,492,346
Electronic data processing equipment, net 358,143 609,886
Amount due from broker-dealers 53,223,692 12,527,500
Receivable from affiliates 138,877 4,608,663
Other assets 1,037,418 1,741,100
Separate account assets 5,609,610 -
-------------- ---------------
Total assets $1,357,915,795 $1,182,671,308
============== ===============
LIABILITIES, CAPITAL AND SURPLUS
Aggregate reserves for life policies and contracts $1,097,795,798 $1,066,977,854
Policy and contract claims 382,429 417,570
Accrued dividends to policyholders 422,330 527,418
Interest maintenance reserve 11,668,491 10,376,170
Federal income taxes payable 3,998,217 2,007,817
Remittances and items not allocated 631,586 219,649
Asset valuation reserve 29,133,762 30,546,857
Payable to affiliates 36,512 3,325
Amounts due to broker-dealers 131,945,347 20,930,752
Accounts payable, accrued expenses and other liabilities 1,574,699 1,053,398
Separate account liabilities 4,489,291 -
-------------- ---------------
Total liabilities 1,282,078,462 1,133,060,810
-------------- ---------------
Capital and surplus:
Capital stock - $10 par value, 1,000,000 shares
authorized; 200,000 shares issued and outstanding 2,000,000 2,000,000
Paid-in and contributed surplus 70,394,120 48,394,120
Unassigned surplus (deficit) 3,443,213 (783,622)
-------------- ---------------
Total capital and surplus 75,837,333 49,610,498
-------------- ---------------
Commitments and contingent liabilities
Total liabilities, capital and surplus $1,357,915,795 $1,182,671,308
============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
LONDON PACIFIC LIFE & ANNUITY COMPANY
(A wholly-owned subsidiary of London Pacific Group Limited)
STATUTORY STATEMENTS OF OPERATIONS
____________________________________________________________________________________________________
YEAR ENDED DECEMBER 31,
________________________
<S> <C> <C> <C>
1996 1995 1994
------------ ------------- -------------
REVENUES
Insurance premiums and annuity
Considerations $137,499,919 $203,233,606 $210,373,366
Net investment income 91,013,416 88,960,512 79,812,665
Amortization of interest maintenance reserve 683,806 (185,844) 945,197
Net gain from operations from separate account 120,319 - -
Other income 287,470 1,255 -
------------ ------------- -------------
Total revenues 229,604,930 292,009,529 291,131,228
------------ ------------- -------------
BENEFITS AND EXPENSES
Policyholder benefits and changes in reserve 196,153,897 256,854,252 256,731,020
Commissions 8,531,145 14,237,877 22,125,145
Net transfer to separate account 4,175,745 - -
Other operating expenses 12,844,370 10,358,955 10,020,230
------------ ------------- -------------
Total benefits and expenses 221,705,157 281,451,084 288,876,395
------------ ------------- -------------
Gain from operations before dividends to
policyholders, federal income taxes and
net realized capital gains (losses) 7,899,773 10,558,445 2,254,833
Dividends to policyholders 915,864 1,007,373 540,513
------------ ------------- -------------
Gains from operations, before federal income taxes
and net realized capital gains (losses) 6,983,909 9,551,072 1,714,320
Federal income tax expense (benefit) (excluding
tax on capital gains) 991,257 2,597,127 (961,168)
------------ ------------- -------------
Gain from operations before net realized capital
gains (losses) 5,992,652 6,953,945 2,675,488
Net realized capital gains (losses), less capital gains
tax of $4,617,743, $1,931,162 and ($2,174,852)
and excluding $1,976,127, $303,286 and
$2,316,416 transferred to the IMR in 1996, 1995
and 1994, respectively. 988,636 3,445,440 (6,538,149)
------------ ------------- -------------
Net income (loss) $ 6,981,288 $ 10,399,385 ($3,862,661)
============ ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
LONDON PACIFIC LIFE & ANNUITY COMPANY
(A wholly-owned subsidiary of London Pacific Group Limited)
STATUTORY STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
_______________________________________________________________________________________________
<S> <C> <C> <C> <C>
PAID-IN AND
CAPITAL CONTRIBUTED UNASSIGNED
STOCK SURPLUS SURPLUS TOTAL
----------- ------------ -------------- -------------
Balance as of December 31, 1993 2,000,000 33,350,173 10,344,182 45,694,355
Net loss (3,862,661) (3,862,661)
Increase in unrealized capital gains 1,726,451 1,726,451
Increase in non-admitted assets (695,915) (695,915)
Increase in asset valuation reserve (19,129,023) (19,129,023)
Capital contributions 13,588,397 13,588,397
---------- ------------ ------------ -------------
Balance as of December 31, 1994 2,000,000 46,938,570 (11,616,966) 37,321,604
Net income 10,399,385 10,399,385
Increase in unrealized capital gains 9,403 9,403
Decrease in non-admitted assets 1,575,841 1,575,841
Increase in asset valuation reserve (1,151,285) (1,151,285)
Capital contributions 1,455,550 1,455,550
---------- ------------ ----------- -------------
Balance as of December 31, 1995 $ 2,000,000 $ 48,394,120 ($783,622) $ 49,610,498
Net income 6,981,288 6,981,288
Increase in unrealized capital losses (4,163,544) (4,163,544)
Increase in non-admitted assets (4,004) (4,004)
Decrease in asset valuation reserve 1,413,095 1,413,095
Capital contributions 22,000,000 22,000,000
----------- ------------ -------------- -------------
Balance as of December 31, 1996 $ 2,000,000 $ 70,394,120 $ 3,443,213 $ 75,837,333
=========== ============ ============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
LONDON PACIFIC LIFE & ANNUITY COMPANY
(A wholly-owned subsidiary of London Pacific Group Limited)
STATUTORY STATEMENTS OF CASH FLOWS
________________________________________________________________________________________
YEAR ENDED DECEMBER 31,
<S> <C> <C> <C>
1996 1995 1994
------------- ------------- ------------
CASH PROVIDED BY:
Premiums and annuity considerations
collected $137,499,919 $203,233,606 $210,357,865
Investment income received (excluding
Realized gains/losses and net of investment
expenses) 95,583,016 86,134,922 78,892,896
Other income received 287,305 1,255 226,807
------------- ------------- ------------
Total cash provided by operations 233,370,240 289,369,783 289,477,568
------------- ------------- ------------
CASH USED FOR:
Life and accident and health claims paid 832,760 1,213,526 210,886
Surrender benefits and other fund
withdrawals paid 110,213,086 81,936,665 66,245,808
Other benefits to policyholders paid 54,325,262 51,869,119 42,541,134
------------- ------------- ------------
165,371,108 135,019,310 108,997,828
------------- ------------- ------------
Commissions and other expenses paid 20,570,531 24,913,719 34,449,032
------------- ------------- ------------
Net transfers to separate account 5,441,049 - -
Dividends to policyholders paid 1,020,952 1,048,627 858,087
Federal income taxes (recoverable) paid
(excluding tax on capital gains) (999,143) (2,654,355) 7,673,225
------------- ------------- ------------
Total cash used for operations 191,404,497 158,327,301 151,978,172
------------- ------------- ------------
Net cash provided by operations 41,965,743 131,042,482 137,499,396
------------- ------------- ------------
PROCEEDS FROM INVESTMENTS SOLD, MATURED OR
REPAID:
Bonds 651,187,776 193,271,490 346,800,750
Stocks 105,201,117 11,228,210 120,257,956
Net gain on short-term investments - - 17,915
Other proceeds 15,922 96,780 -
------------- ------------- ------------
756,404,815 204,596,480 467,076,621
Tax on capital gains (4,617,743) (1,931,162) 2,174,832
------------- ------------- ------------
Total investment proceeds 751,787,072 202,665,318 469,251,453
------------- ------------- ------------
</TABLE>
(continued on next page)
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
LONDON PACIFIC LIFE & ANNUITY COMPANY
(A wholly-owned subsidiary of London Pacific Group Limited)
STATUTORY STATEMENTS OF CASH FLOWS (CONTINUED)
___________________________________________________________________________
YEAR ENDED DECEMBER 31,
<S> <C> <C> <C>
1996 1995 1994
------------- ------------- --------------
COST OF INVESTMENTS ACQUIRED:
Bonds 735,812,956 268,824,294 602,767,827
Stocks 112,429,288 6,872,362 125,375,796
Miscellaneous other 52,218 575,445 1,562,819
------------- ------------- --------------
Total investments acquired 848,294,462 276,272,101 729,706,442
Net increase in policy loans 1,838,835 1,456,664 961,502
------------- ------------- --------------
Net cash from investments (98,346,225) (75,063,447) (261,416,491)
------------- ------------- --------------
COST FROM FINANCING AND MISCELLANEOUS SOURCES:
Capital and surplus paid in 22,000,000 1,455,550 13,588,397
Other cash provided 116,248,250 20,941,157 10,238,471
Other cash applied (40,021,732) (17,753,828) (190,351)
------------- ------------- --------------
Net cash from financing and
miscellaneous sources 98,226,518 4,642,879 23,636,517
------------- ------------- --------------
Net change in cash and short-term investments 41,846,036 60,621,914 (100,280,578)
------------- ------------- --------------
CASH AND SHORT-TERM INVESTMENTS:
Beginning of year 72,411,946 11,790,032 112,070,610
------------- ------------- --------------
End of year 114,257,982 $ 72,411,946 $ 11,790,032
============= ============= ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Income taxes $ 3,664,978 $ 2,524,651 $ 5,516,862
</TABLE>
The accompanying notes are an integral part of these financial statements.
LONDON PACIFIC LIFE & ANNUITY COMPANY
(A wholly-owned subsidiary of London Pacific Group Limited)
NOTES TO STATUTORY FINANCIAL STATEMENTS
_____________________________________________________________
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
London Pacific Life & Annuity Company (the Company) is domiciled in North
Carolina and is a wholly-owned subsidiary of The London Pacific Assurance
Group Limited (the Parent), a holding company domiciled in the state of
California, which is ultimately a wholly-owned subsidiary of London Pacific
Group Limited (formerly Govett & Company Limited). The Company has two
wholly-owned subsidiaries, LPIMC Insurance Marketing Services (the Marketing
Company), a registered investment advisor and London Pacific Financial &
Insurance Services (the Broker Dealer), a registered broker-dealer. The
Company is engaged primarily in the development and marketing of annuity
products and universal life insurance. Although the Company is licensed and
sells its universal life and annuity products in 40 states, its primary
markets are California, Florida, Michigan, Ohio, Texas and Washington.
The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in
the financial statements and accompanying notes. Such estimates and
assumptions could change in the future as more information becomes known,
which could impact amounts reported and disclosed herein.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity
with accounting practices prescribed or permitted by the North Carolina
Department of Insurance which is a comprehensive basis of accounting other
than generally accepted accounting principles. Significant differences
between statutory accounting principles and generally accepted accounting
principles (GAAP) are described in Note 2.
INVESTMENTS
Investments are recorded in accordance with the requirements of the
National Association of Insurance Commissioners (NAIC). Bonds not backed by
loans are reported at cost or amortized cost; the discount or premium on bonds
is amortized using the interest method. For loan-backed bonds, anticipated
prepayments are considered when determining the amortization of discount or
premium. Prepayment assumptions are obtained from dealer surveys and are
based on the current interest rate and economic development. The
retrospective adjustment method is used to value all such securities except
for interest-only securities, which are valued using the prospective method.
Preferred stocks are carried at NAIC Securities Valuation Office (SVO) values.
Common stocks are reported at market value as determined by the SVO and the
related unrealized capital gain/(loss) is reported in unassigned surplus
without any adjustment for federal income taxes. The Company's subsidiaries
are reported at equity in the underlying statutory basis of their net assets.
As of December 31, 1996, the carrying value of the Company's investment in
subsidiaries was $1,025,980. Short-term investments are carried at cost which
approximates market value.
INTEREST RATE SWAP CONTRACTS
The Company enters into interest rate swap programs for the purpose of
minimizing exposure to fluctuations in interest rates. The notional amount of
the single matched swap in place at December 31, 1996 and 1995 was $9,000,000.
The unexpired term at December 31,1996 was five months. During the term of
the swap, the net swap settlement amount is accrued over time as an adjustment
to other expense or other income.
Gains or losses on termination are deferred and amortized as an interest
adjustment over the remaining life of the underlying financial instrument.
There are no outstanding matched swaps at a loss position at December 31, 1996
and 1995. The Company does not act as an intermediary or broker in interest
rate swaps.
LONDON PACIFIC LIFE & ANNUITY COMPANY
(A wholly-owned subsidiary of London Pacific Group Limited)
NOTES TO STATUTORY FINANCIAL STATEMENTS
_____________________________________________________________
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN EXCHANGE FORWARD CONTRACTS
The Company enters into foreign exchange forward contracts to hedge
exposure to currency risk on foreign denominated bonds. The cost of the
contracts is included as part of the carrying value of the underlying
securities. As of December 31, 1996, the notional amount of the contracts was
$60,752,853 and expire in December 1997. The Company uses the deferral method
to account for foreign exchange forward contracts. Under the deferral method,
realized and unrealized gains and losses from these forward contracts are
deferred on the Statutory Statement of Admitted Assets, Liabilities, Capital
and Surplus. Upon disposal of the hedged security, deferred gains and losses
are recognized in net realized capital gains in the Statutory Statement of
Operations. The Company only enters into foreign exchange forward contracts
with brokers deemed to be credit worthy by management.
ELECTRONIC DATA PROCESSING EQUIPMENT
Electronic data processing equipment is recorded at cost, net of
accumulated depreciation of $1,783,263 and $1,511,059 at December 31, 1996 and
1995. Depreciation is provided using the straight-line method over the
estimated useful life of five years. Depreciation expense amounted to
$272,204, $346,495 and $361,961 for the years ended December 31, 1996, 1995
and 1994.
REMITTANCES AND ITEMS NOT ALLOCATED
Remittances and items not allocated consist primarily of cash received
with policy applications for policies that have not been issued.
POLICY AND CONTRACT CLAIMS
Policy and contract claims of $294,629 and $244,046 related to death
benefits payable on life and annuity contracts have been accrued at December
31, 1996 and 1995. The remaining policy and contract claims of $87,800 and
$173,524 at December 31, 1996 and 1995 relate to estimated incurred but
unreported claims on life contracts.
SEPARATE ACCOUNT
Separate account assets and liabilities reported in the accompanying
Statutory Statement of Admitted Assets, Liabilities, Capital and Surplus
represent funds that are separately administered for variable annuity
contracts, and for which the contractholder, rather than the Company, bears
the investment risk. Separate account assets are reported at market value.
The operations of the separate account are not included in the accompanying
financial statements.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior years' financial
statements to conform to the current year presentation.
2. DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND
STATUTORY ACCOUNTING PRINCIPLES
Statutory accounting principles vary in some respects from generally
accepted accounting principles. The more significant of these differences are
as follows:
LONDON PACIFIC LIFE & ANNUITY COMPANY
(A wholly-owned subsidiary of London Pacific Group Limited)
NOTES TO STATUTORY FINANCIAL STATEMENTS
_____________________________________________________________
2. DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND
STATUTORY ACCOUNTING PRINCIPLES (CONTINUED)
INVESTMENTS
Market values of certain investments in bonds and stocks are based on
values specified by the NAIC, rather than on values provided by outside broker
confirmations or internally calculated estimates. For GAAP, investments in
bonds would be designated at purchase as held-to-maturity, trading, or
available-for-sale. Held-to-maturity fixed investments would be reported at
amortized cost, and the remaining fixed maturity investments would be reported
at fair value with unrealized holding gains and losses reported in operations
for those designated as trading and as a separate component of shareholders'
equity for those designated as available-for-sale. Realized gains and losses
are reported in income net of income tax rather than on a pretax basis. The
Asset Valuation Reserve is determined by an NAIC prescribed formula and is
reported as a liability rather than as a valuation allowance or an
appropriation of surplus.
SUBSIDIARIES
The accounts and operations of the Company's subsidiaries are not
consolidated with the accounts and operations of the Company.
POLICY ACQUISITION COSTS
The costs of acquiring and renewing business are expensed when incurred
rather than capitalized and amortized over the terms of the related policies.
NON-ADMITTED ASSETS
Certain assets designated as "non-admitted," principally furniture and
equipment, are excluded from the accompanying Statutory Statements of Admitted
Assets, Liabilities, Capital and Surplus and are charged directly to
unassigned surplus.
PREMIUMS
Single premium whole life, annuity and flexible premium variable life
insurance considerations are recognized as earned upon issuance of the
contract, whereas under GAAP, premium income consists of mortality charges,
surrender charges earned, policy fees earned and amounts deducted from
policyholder accounts.
BENEFIT RESERVES
Certain policy reserves are calculated based on statutorily required
interest and mortality assumptions rather than estimated expected experience
or actual account balances.
INCOME TAXES
Deferred income taxes are generally not provided for differences
between the financial statement amounts and the tax bases of assets and
liabilities.
LONDON PACIFIC LIFE & ANNUITY COMPANY
(A wholly-owned subsidiary of London Pacific Group Limited)
NOTES TO STATUTORY FINANCIAL STATEMENTS
_____________________________________________________________
3. ANALYSIS OF ASSETS
An analysis of the Company's ledger assets as compared with its net
admitted assets is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
___________________
<S> <C> <C> <C> <C>
LEDGER NONLEDGER ASSETS NOT NET
ASSETS ASSETS ADMITTED ADMITTED ASSETS
-------------- ------------ ------------ ----------------
Bonds $1,147,330,467 $ 4,866,116 $ 1,142,464,351
Preferred stock 1,687,616 1,687,616
Common stock 20,194,334 $ 341,598 56,447 20,479,485
Policy loans 6,294,811 6,294,811
Cash 26,008,933 26,008,933
Short-term investment 88,249,049 88,249,049
Investment income due and accrued 12,363,810 12,363,810
Electronic data processing
Equipment, net 358,143 358,143
Furniture and equipment 350,583 350,583
Deposits, prepaid expenses and
Other assets 54,442,692 62,282 104,987 54,399,987
Separate account assets 5,609,610 5,609,610
-------------- ------------ ------------ ----------------
$1,350,526,238 $ 12,767,690 $ 5,378,133 $ 1,357,915,795
============== ============ ============ =================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
___________________
<S> <C> <C> <C> <C>
LEDGER NONLEDGER ASSETS NOT NET
ASSETS ASSETS ADMITTED ADMITTED ASSETS
-------------- ------------ ----------- ----------------
Bonds $1,057,607,158 $ 126,000 $ 1,057,481,158
Preferred stock 9,972,720 ($60,000) 9,912,720
Common stock 1,641,663 (114,209) 97,441 1,430,013
Policy loans 4,455,976 4,455,976
Cash 2,664,850 2,664,850
Short-term investments 69,747,096 69,747,096
Investment income due and
Accrued 17,492,346 17,492,346
Electronic data processing
Equipment, net 609,886 609,886
Receivable from affiliates 4,608,663 4,608,663
Furniture and equipment 245,531 245,531
Deposits, prepaid expenses and
Other assets 14,390,754 83,881 206,035 14,268,600
-------------- ------------ ----------- ----------------
$1,165,944,297 $17,402,018 $ 675,007 $ 1,182,671,308
============== ============ =========== =================
</TABLE>
4. RELATED PARTIES
The Company had material transactions with its parent and affiliated
companies as follows:
CAPITAL CONTRIBUTIONS
The Company received capital contributions from its parent during the
years ended December 31, 1996, 1995 and 1994 totaling $22,000,000, $1,455,550
and $13,588,397, respectively, principally in the form of
investments and accrued interest. During 1996, the Company made a
$500,000 capital contribution to the Marketing Company.
4. RELATED PARTIES (CONTINUED)
EXPENSES
The Company receives investment advisory services under the terms of an
investment management agreement with Berkeley Institutional Investment, Inc.
(BIII), an affiliate of London Pacific Group Limited. Fees charged to the
Company under the agreement amounted to $5,578,673, $5,272,984 and $4,401,840
during the years ended December 31, 1996, 1995, and 1994, respectively.
Commissions on insurance business produced for the Company by its agents
are paid by the Marketing Company, the master general agent for the Company.
Effective January 1, 1995, the Company directly paid all agents' commissions
via the Marketing Company. For the years ended December 31, 1996, 1995, and
1994, the Company paid commissions of $8,261,301, $14,237,877 and $22,125,145,
respectively, to the Marketing Company (and the Marketing Company paid
commissions to agents of approximately $8,261,301, $14,237,877 and
$14,719,474, respectively). The 1994 commission payments to the Marketing
Company include an amount paid to extinguish the Company's contingent
commission liability related to a marketing agreement that was terminated on
December 31, 1994.
The Company has payables to affiliates of $36,512 and $3,325 at December
31, 1996 and 1995, respectively, relating to these transactions.
On May 10, 1996, the Company sold corporate bonds issued by
Bon-Art/Bauchet International ($3,908,904) and Nazareth/Century Mills, Inc.
($5,825,782) to BG Services Limited ("BGSL"), an affiliate. On June 28, 1996,
the Company acquired corporate bonds issued by General Textiles ($5,302,519),
Unisa Holdings, Inc. ($8,000,000) L. Kee & Co., Inc. ($1,000,000), Royal
Rubber & Manufacturing Company ($1,000,000) and Ocean Acquisition Corporation
($5,000,000) from BGSL and sold corporate bonds issued by Gruen Marketing
Corporation ($10,860,146), Hym Acquisition Company ($5,660,382), Milnot
Company ($967,741), Gibson's Discount Center ($2,814,248) and Hornblower
Yachts ($1,500,000) to BGSL. On August 15, 1996, the Company sold a corporate
bond issued by Bon-Art/Bauchet International ($663,209) to BGSL. On September
30 and November 15, 1996, the Company acquired $500,000 and $250,000,
respectively, of corporate bonds issued by Select Advisors, Inc., an
affiliate. On December 31, 1996, the Company acquired corporate bonds issued
by Childers Products Company ($6,000,000) and common stocks of Imagyn Medical,
Inc. ($1,083,494), Cardiac Pathways Corp. ($1,661,146) and Thermo Electron
Corp. ($4,255,360) from BGSL and sold corporate bonds issued by Two Court,
Inc. ($6,000,000) and Catalina Furniture Company ($7,000,000) to BGSL.
As of December 31, 1996, the Company had investments in affiliates as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
STATEMENT
ISSUER COUPON MATURITY VALUE
- ----------------------------- ------- -------- -----------
Bon-Art/Bauchet International 13.00% 10/02 $ 5,811,260
Nazareth/Century Mills, Inc. 13.43% 12/03 11,983,472
Ocean Acquisition Corporation 12.00% 12/00 4,000,000
Select Advisors, Inc. 5.75% 11/97 750,000
</TABLE>
5. FEDERAL INCOME TAXES
The provision for federal income taxes has been computed in accordance
with provisions of the Internal Revenue Code, as amended. The Company files a
separate federal income tax return and is not included in a consolidated
return with affiliated entities.
The Company's total tax expense differs from an amount computed by
applying the federal income tax of 35 percent to statutory income. The four
primary items required to reconcile taxable income and statutory income are:
(1) capitalization of policy acquisition costs, (2) differences in computing
reserves for statutory and tax purposes, (3) differences in statutory and tax
bases of assets sold, and (4) differences in timing for the deduction of
accrued expenses.
LONDON PACIFIC LIFE & ANNUITY COMPANY
(A wholly-owned subsidiary of London Pacific Group Limited)
NOTES TO STATUTORY FINANCIAL STATEMENTS
_____________________________________________________________
6. AGGREGATE RESERVES FOR LIFE POLICIES AND CONTRACTS
Aggregate reserves for life policies and contracts have generally been
computed using the Commissioners' Reserve Valuation Method (CRVM) or the
Commissioners' Annuity Reserve Valuation Method (CARVM) prescribed by the
North Carolina Department of Insurance. The aggregate reserves for life
policies and contracts were computed on a policy-by-policy basis.
Statutory reserves for policy benefits due under universal life and
accumulation annuity insurance contracts are computed using the CRVM and the
CARVM, respectively. The CRVM and CARVM reserves established for specific
contracts are the greater of a formula reserve or the cash surrender value of
the contract.
The formula reserves for the universal life policies are computed using
the 1980 Commissioners Standard Ordinary (CSO) mortality table and a 4.0%
discount rate. These assumptions are in compliance with the minimum statutory
requirements.
The accumulation annuity insurance contracts include a single premium
deferred annuity product and a flexible premium deferred annuity product. The
formula reserves for the single premium deferred annuity are higher than the
cash surrender value due to the one year interest rate guarantee provision of
these contracts. The Company computed reserves with an interest rate of 5.50%
for 1996 issues, 6.00% for 1995 issues and 6.50%-5.50% for 1994 issues. These
rates are the maximum statutory interest rates for such contracts. For
flexible premium deferred annuities, the cash surrender value is never greater
than the formula reserves, but may be equal to the CARVM reserve due to the
calendar quarter interest guarantee provision of these contracts. The Company
uses the same interest rates to compute reserves as are used for single
premium deferred annuities.
Reserves for policy benefits due under immediate annuity insurance
contracts are based on a present value actuarial computation using a statutory
discount rate and a statutory mortality basis. The reserves are based on the
83a table and with a discount rate of 6.75% for 1996, 7.25% for 1995 and 6.50%
for 1994.
The withdrawal characteristics of annuity actuarial reserves and deposit
liabilities at December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
______________________ _______________________
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal at book
value less surrender charge of 5% or more $ 445,721,115 42.24% $ 530,130,854 51.79%
Subject to discretionary withdrawal at book
value less surrender charge greater than
0% but less than 5% 440,023,827 41.70% 327,712,985 32.01%
Subject to discretionary withdrawal at book
value with no surrender charge 13,795,748 1.31% 6,736,768 0.66%
Not subject to discretionary withdrawal 155,624,990 14.75% 159,069,009 15.54%
-------------- ------ -------------- ------
$1,055,165,680 100% $1,023,649,616 100%
============== ====== ============== =======
</TABLE>
LONDON PACIFIC LIFE & ANNUITY COMPANY
(A wholly-owned subsidiary of London Pacific Group Limited)
NOTES TO STATUTORY FINANCIAL STATEMENTS
_____________________________________________________________
7. INVESTMENTS
The Company records its investments in debt securities at cost or
amortized cost. The securities are designated investment grade (NAIC SVO
categories "1" and "2") or non-investment grade (categories "3", "4", "5", and
"6"). The NAIC 's highest ratings classification includes issues normally
rated investment grade by independent rating agencies.
The NAIC SVO classified the Company's debt securities as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
_________________ ___________________
<S> <C> <C> <C> <C>
STATEMENT PERCENT STATEMENT PERCENT
NAIC CATEGORY VALUE OF TOTAL VALUE OF TOTAL
- ------------------------- -------------- --------- -------------- ---------
1 - Highest quality $ 642,553,936 57% $ 465,956,793 44%
2 - High quality 309,858,268 27 382,099,503 36
3 - Medium quality 70,923,479 6 90,540,167 9
4 - Low quality 94,156,455 8 85,136,505 8
5 - Lower quality 15,018,522 1 33,748,190 3
6 - Debt securities in or
near default 9,953,691 1 - -
-------------- --------- -------------- ---------
$1,142,464,351 100% $1,057,481,158 100%
============== ========= ============== =========
</TABLE>
The cost or amortized cost and the fair, or comparable value of
investments in debt securities are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
COST OR GROSS UNREALIZED
DECEMBER 31, 1996 AMORTIZED COST GAINS LOSSES FAIR VALUE
- ----------------------------- ------------------------ ---------- ------------ --------------
U.S. Government
Obligations $ 8,221,012 $ 91,040 ($138,952) $ 8,173,100
Obligations of states
And political subdivisions 5,276,177 115,665 (35,812) 5,356,030
Corporate securities 635,225,514 1,274,089 (5,347,151) 631,152,452
Other debt securities 110,687,081 173,235 (21,547) 110,838,769
Mortgage-backed securities 383,054,567 - - 383,054,567
------------------------ ---------- ------------ --------------
$ 1,142,464,351 $1,654,029 ($5,543,462) $1,138,574,918
======================== ========== ============ ==============
</TABLE>
LONDON PACIFIC LIFE & ANNUITY COMPANY
(A wholly-owned subsidiary of London Pacific Group Limited)
NOTES TO STATUTORY FINANCIAL STATEMENTS
_____________________________________________________________
7. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
COST OR UNREALIZED
DECEMBER 31, 1995 AMORTIZED COST GROSS GAINS LOSSES FAIR VALUE
- ----------------------------- --------------- ------------ ----------- --------------
U.S. Government
Obligations $ 7,293,486 $ 163,613 ($3,498) $ 7,453,601
Obligations of states
And political subdivisions 2,364,678 55,072 - 2,419,750
Corporate securities 678,240,972 17,874,218 (649,005) 695,466,185
Other debt securities 58,473,851 637,910 (24,207) 59,087,554
Mortgage-backed securities 311,108,171 - - 311,108,171
--------------- ------------ ----------- --------------
$ 1,057,481,158 $ 18,730,813 ($676,710) $1,075,535,261
=============== ============ =========== ==============
</TABLE>
Fair values are based on published quotations of the SVO of the NAIC.
Fair values generally represent quoted market value prices for securities
traded in the public marketplace, or analytically determined values using bid
or closing prices for securities not traded in the public marketplace.
However, for certain investments for which the NAIC does not provide a value,
the Company uses the amortized cost amount as a substitute for fair value in
accordance with prescribed guidance. As of December 31, 1996 and 1995, the
fair value of investments in debt securities includes $863,848,633 and
$646,886,351, respectively, of debt securities that were valued at amortized
cost.
The cost or amortized cost and the fair value of debt securities at
December 31, 1996, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or repay obligations with or without call or prepayment
penalties.
A summary of the cost or amortized cost and fair value of the Company's
investment in debt securities at December 31, 1996, by contractual maturity,
is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
COST OR
AMORTIZED COST FAIR VALUE
--------------- --------------
Maturity:
In 1997 $ 2,446,638 $ 2,452,454
In 1998-2001 124,559,207 124,701,518
In 2002-2006 409,942,705 407,821,158
After 2006 222,461,234 220,545,221
Mortgage-backed securities 383,054,567 383,054,567
--------------- --------------
Total $ 1,142,464,351 $1,138,574,918
=============== ===============
</TABLE>
LONDON PACIFIC LIFE & ANNUITY COMPANY
(A wholly-owned subsidiary of London Pacific Group Limited)
NOTES TO STATUTORY FINANCIAL STATEMENTS
_____________________________________________________________
7. INVESTMENTS (CONTINUED)
Proceeds from sales of investments in fixed maturities and related gross
gains and losses on those sales are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1995 December 31, 1994
------------------ ------------------ ------------------
Proceeds from sales $ 651,187,776 $ 193,271,491 $ 236,920,286
Gross realized gains 13,725,509 $ 2,078,023 $ 4,413,014
Gross realized losses 9,195,257 $ 1,618,499 $ 1,704,392
</TABLE>
At December 31, 1996, debt securities with an admitted asset value of
$10,156,572 were on deposit with state insurance departments to satisfy
regulatory requirements.
Unrealized gains and losses on investments in non-redeemable preferred
and common stocks are reported directly in unassigned surplus and do not
affect operations. The gross unrealized gains and losses on, and the cost and
fair value of, those investments are summarized as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
GROSS GROSS
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ---------- ------------ -----------
AT DECEMBER 31, 1996
Preferred stocks $ - $ - $ - $ -
Common stocks 20,832,834 629,246 (982,595) 20,479,485
------------ ------------ ------------ -----------
Total $ 20,832,834 $ 629,246 ($982,595) $20,479,485
============ ============ ============ ===========
AT DECEMBER 31, 1995
Preferred stocks $ 2,807,430 $ - ($60,000) $ 2,747,430
Common stocks 2,280,162 $ - (850,149) 1,430,013
------------ ---------- ------------ -----------
Total $ 5,087,592 $ - ($910,149) $ 4,177,443
============ =========== ============ ===========
</TABLE>
8. INVESTMENT INCOME
An analysis of the Company's net investment income is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
<S> <C> <C> <C>
1996 1995 1995
------------ ------------ ------------
Interest on debt securities $94,149,963 $91,585,614 $76,595,702
Interest on short-term investments 787,618 554,252 397,098
Interest on cash on hand and on deposit 375,723 274,696 344,915
Equity in undistributed earnings of subsidiaries (39,151) (285,874) 5,484,000
Other investment income 1,532,466 2,493,535 2,460,670
------------ ------------ ------------
Gross investment income 96,806,619 94,622,223 85,282,385
Less investment expenses (5,793,203) (5,661,711) (5,469,720)
------------ ------------ ------------
Net investment income $91,013,416 $88,960,512 $79,812,665
=========== ============ ============
</TABLE>
LONDON PACIFIC LIFE & ANNUITY COMPANY
(A wholly-owned subsidiary of London Pacific Group Limited)
NOTES TO STATUTORY FINANCIAL STATEMENTS
_____________________________________________________________
9. REINSURANCE
The maximum amount of direct universal life insurance retained on any
life is $250,000. Amounts in excess of $250,000 are ceded on a Yearly
Renewable Term basis of reinsurance. Life insurance ceded to other companies
for the years ended December 31, 1996 and 1995 totaled $47,349,000 and
$53,210,000 or 11.7% and 12.4% of life insurance in force, respectively. A
contingent liability exists with respect to insurance ceded which would become
a liability should the reinsurer be unable to meet the obligations assumed
under reinsurance agreements.
10. SURPLUS
Under the Insurance Code of the State of North Carolina, in a given
year the Company may make dividend distributions without prior approval of the
Insurance Commissioner up to the lesser of its net gain from operations for
the preceding year or 10% of surplus as of December 31 of the preceding year.
The maximum dividend that could be paid during 1997 without the Insurance
Commissioner's approval is $5,992,652.
The NAIC has adopted Risk-Based Capital (RBC) requirements which
became effective December 31, 1993, that attempt to evaluate the adequacy of a
life insurance company's adjusted statutory capital and surplus in relation to
investment, insurance and other business risks. The RBC formula is used by
the states as an early warning tool to identify possible weakly capitalized
companies for the purpose of initiating regulatory action and is not designed
to be a basis for ranking the financial strength of insurance companies. In
states which have adopted the NAIC regulations, the new RBC requirements
provide for four different levels of regulatory attention depending on the
ratio of the company's adjusted capital and surplus to its RBC. As of
December 31, 1996, the adjusted capital and surplus of the Company is
substantially in excess of the minimum level of RBC that would require
regulatory response.
11. COMMITMENT AND CONTINGENT LIABILITIES
Rental expense for all leases was $550,944, $722,359 and $847,389
for 1996, 1995 and 1994, respectively. Future minimum rental commitments
under noncancelable operating leases for office space and equipment aggregate
$1,137,364 through 2000. The amounts due by year are $500,225 in 1997,
$281,139 in 1998, $267,000 in 1999 and $89,000 in 2000.
The Company has contingent liabilities resulting from anticipated state
guaranty association assessments for life insurers deemed insolvent during the
year. Although the total amount of this exposure is not known, a substantial
portion of the amount assessed will be recovered against future premium taxes
under current laws and regulations. As of December 31, 1996, the Company
estimates its net contingent liability for future state guaranty association
assessments is within range of $500,000 to $2,000,000. The Company has not
committed any surplus funds to reserve for the contingent liability. The
Company recognizes its obligation for guaranty fund assessments when it
receives notice that an amount is payable to a guaranty fund. Expenses
incurred for guaranty fund assessments were $1,674,481, $1,075,244 and
$431,456 in 1996, 1995 and 1994, respectively.
The Company has been named as a cross-defendant in a complaint filed by
The American Endeavor Fund Limited where the plaintiff seeks damages in excess
of $2 million. The Company believes that the alleged claims are without merit.
While these claims are being contested, the outcome is not predictable with
assurance. The Company believes that any liability resulting from these
claims should not have a material adverse affect on the Company's statutory
surplus.
LONDON PACIFIC LIFE & ANNUITY COMPANY
(A wholly-owned subsidiary of London Pacific Group Limited)
NOTES TO STATUTORY FINANCIAL STATEMENTS
_____________________________________________________________
12. ASSET VALUATION AND INTEREST MAINTENANCE RESERVES
The purpose of the AVR is to decrease the volatility of the incidence of
asset losses and to recognize the long term return expectations for equity
investments. The increase or decrease to this reserve is charged or credited
directly to surplus.
The purpose of the IMR is to minimize the effect of gains and losses
arising from gradual interest rate movements. All realized gains and losses
(net of tax) classified as interest related are accumulated and amortized into
net income over the remaining period to maturity of the security sold. The
effect of recording the IMR at December 31, 1996, 1995 and 1994 was to defer
total net capital gains of $12,352,297, $10,190,326 and $10,832,237,
respectively, and to recognize $683,806, ($185,844) and $945,197,
respectively, of IMR amortization into income.
13. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair values of financial
instruments is made in accordance with the requirements of Statement of
Financial Accounting Standards ("SFAS") No. 107, "Disclosure about Fair Value
of Financial Instruments." The estimated fair value amounts have been
determined using available market information and appropriate valuation
methodologies. However, considerable judgment is required to interpret market
data to develop these estimates. Accordingly, these estimates are not
necessarily indicative of the amounts which could be realized in a current
market exchange. The use of different market assumptions or estimation
methodologies may have a material effect on the estimated fair value amounts.
For financial instruments not separately disclosed below, the carrying value
is a reasonable estimate of fair value.
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
__________________________________________________________________________________________________
<S> <C> <C> <C> <C>
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
-------------- -------------- -------------- --------------
Assets:
Debt securities $1,142,464,351 $1,145,112,378 $1,057,481,158 $1,090,099,356
Redeemable preferred stock 1,687,616 1,616,150 7,165,290 7,936,298
Liabilities:
Insurance and annuity
reserves-investment-type
contracts $1,097,795,798 $1,116,979,648 $1,066,977,854 $1,094,695,606
</TABLE>
POLICY RESERVES
In accordance with SFAS No. 107, estimated fair values have been
calculated on policy reserves only for those products determined to be
investment-type. The estimated fair value of deferred annuity and universal
life contracts equals account value after deduction of surrender charges. The
estimated fair value of immediate annuity contracts is based on the present
value of expected benefits using a discount rate equal to the 5-year Treasury
rate.
14. CONCENTRATIONS OF CREDIT RISK
At December 31, 1996, the Company held unrated or less-than-investment
grade corporate bonds of $190,052,147. Those holdings amounted to 16.6% of
the Company's investments in bonds and less than 14.1% of the Company's total
admitted assets. The holdings of less-than-investment grade bonds are widely
diversified and management believes are of satisfactory quality based on the
Company's investment policies and credit standards.
LONDON PACIFIC LIFE & ANNUITY COMPANY
(A wholly-owned subsidiary of London Pacific Group Limited)
NOTES TO STATUTORY FINANCIAL STATEMENTS
_____________________________________________________________
15. RECONCILIATION OF NET TRANSFERS TO OR (FROM) SEPARATE ACCOUNT
Transfers are reported in the Summary of Operations of the Separate
Account Statement:
<TABLE>
<CAPTION>
<S> <C>
Transfers to separate account $4,455,205
Transfers from separate account 296,184
----------
Net transfers to or (from) separate account 4,159,021
Reconciling Adjustments: M & E Fees 16,724
----------
Transfers as reported in the Statutory Summary of Operations
of the Company $4,175,745
==========
</TABLE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
A. FINANCIAL STATEMENTS
The following financial statements of the Company are included in Part B
hereof:
1. Report of Independent Accountants.
2. Statutory Statements of Admitted Assets, Liabilities, Capital
and Surplus - December 31, 1996 and 1995.
3. Statutory Statements of Operations for the Year Ended
December 31, 1996, 1995 and 1994.
4. Statutory Statements of Changes in Capital and Surplus for the
Years Ended December 31, 1996, 1995 and 1994.
5. Statutory Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994.
6. Notes to Statutory Financial Statements.
The following financial statements of the Separate Account are included in
Part B hereof:
1. Statement of Assets and Liabilities as of December 31, 1996.
2. Statement of Operations for the period January 31, 1996
(commencement of operations) to December 31, 1996.
3. Statement of Changes in Net Assets for the period January 31, 1996
(commencement of operations) to December 31, 1996.
4. Notes to Financial Statements - December 31, 1996.
5. Report of Independent Accountants.
B. EXHIBITS
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Separate Account.*
2. Not Applicable.
3. Form of Principal Underwriter's Agreement.*
4. Individual Fixed and Variable Deferred Annuity Contract.*
(i) Enhanced Death Benefit Endorsement.*
5. Application Form.*
6. (i) Copy of Articles of Incorporation of the Company.**
(ii) Copy of the Bylaws of the Company.*
7. Not Applicable.
8. Not Applicable.
9. Opinion and Consent of Counsel.**
10. Consent of Independent Accountants.
11. Not Applicable.
12. Not Applicable.
13. Not Applicable.
14. Not Applicable.
15. Company Organizational Chart.*
27. Not Applicable.
* Incorporated by reference to Registrant's Form N-4 (File No. 333-1779)
as electronically filed on March 18, 1996.
** Incorporated by reference to Registrant's Pre-Effective Amendment No. 1
to Form N-4 (File No. 333-1779) as electronically filed on May 23, 1996.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following are the Executive Officers and Directors of the Company:
<TABLE>
<CAPTION>
<S> <C>
Name and Principal Position and Offices
Business Address with Depositor
- ------------------------- ---------------------------------------
Ian K. Whitehead President, Chief Executive Officer
1755 Creekside Oaks Drive and Director
Sacramento, CA 95833
Arthur I. Trueger Chairman of the Board and Director
650 California Street
San Francisco, CA 94108
George C. Nicholson Chief Financial Officer, Secretary and
3109 Poplarwood Court Director
Raleigh, NC 27604
Mark E. Prillaman Chief Marketing Officer and Director
1755 Creekside Oaks Drive
Sacramento, CA 95833
Susan Y. Gressel Vice President and Treasurer
3109 Poplarwood Court
Raleigh, NC 27604
Charles M. King Vice President and Controller
3109 Poplarwood Court
Raleigh, NC 27604
William J. McCarthy Vice President and Chief Actuary
3109 Poplarwood Court
Raleigh, NC 27604
Charlotte M. Stott Vice President, National Sales Manager
1755 Creekside Oaks Drive
Sacramento, CA 95833
Jerry T. Tamura Vice President, Administrative Services
1755 Creekside Oaks Drive
Sacramento, CA 95833
Randolph N. Vance Vice President, Financial Actuary
3109 Poplarwood Court
Raleigh, NC 27604
Jerry S. Waters Vice President, Technology Services
1755 Creekside Oaks Drive
Sacramento, CA 95833
</TABLE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The Company organizational chart was included as Exhibit 15 in Registrant's
Form N-4 (File No. 333-1779) filed on March 18, 1996 and is incorporated
herein by reference.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of April 1, 1997, there were 65 Qualified Contract Owners and 70
Non-Qualified Contract Owners.
ITEM 28. INDEMNIFICATION
The Bylaws (Article V) of the Company provide that:
Subject to the laws of the State of North Carolina, any present or former
director, officer or employee of the Company, or any person who, at the
request of the Company, express or implied, may have served as a director or
officer of another Company in which this Company owns shares or of which this
Company is a creditor, shall be entitled to reimbursement of expenses and
other liabilities, including attorney's fees actually and reasonably incurred
by him and any amount paid by him in discharge of a judgment, fine, penalty of
costs against him or paid by him in a settlement approved by a court of
competent jurisdiction, in any action or proceeding, including any civil,
criminal or administrative action, suit, hearing or proceeding, to which he is
a party by reason of being or having been a director, officer or employee of
this or such other Company. This section is not intended to extend or to
limit in any way the rights and remedies provided with respect to
indemnification of directors, officers, employees and other persons provided
by the laws of the State of North Carolina but is intended to express the
desire of the stockholders of this Company that indemnification be granted to
such directors, officers, employees and other persons to the fullest extent
allowable by such laws.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Not Applicable.
(b) London Pacific Financial and Insurance Services is the principal
underwriter for the Contracts. The following persons are the officers and
directors of London Pacific Financial and Insurance Services.
<TABLE>
<CAPTION>
Name and Principal Position and Offices
Business Address with Underwriter
- ------------------------- -----------------------------------------------
<S> <C>
Ian K. Whitehead Director
1755 Creekside Oaks Drive
Sacramento, CA 95833
Jerry T. Tamura Chairman, President and Chief Executive Officer
1755 Creekside Oaks Drive
Sacramento, CA 95833
George C. Nicholson Treasurer and Director
3109 Poplarwood Court
Raleigh, NC 27604
Bonnie J. Bridge Secretary
1755 Creekside Oaks Drive
Sacramento, CA 95833
</TABLE>
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Bruce Adams, whose address is 3109 Poplarwood Court, Raleigh, NC 27604,
maintains physical possession of the accounts, books or documents of the
Separate Account required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and the rules promulgated thereunder.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
a. Registrant hereby undertakes to file a post-effective amendment to
this registration statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are never more than
sixteen (16) months old for so long as payment under the variable annuity
contracts may be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statement required to be made available under
this Form promptly upon written or oral request.
d. London Pacific Life & Annuity Company ("Company") hereby represents
that the fees and charges deducted under the Contract described in the
Prospectus, in the aggregate, are reasonable in relation to the services
rendered, the expenses to be incurred and the risks assumed by the Company.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities
Act Rule 485(b) for effectiveness of this Registration Statement has caused
this Registration Statement to be signed on its behalf, in the City of
Raleigh, and State of North Carolina on this 7th day of April, 1997.
LPLA SEPARATE ACCOUNT ONE
--------------------------------------------
Registrant
By: LONDON PACIFIC LIFE & ANNUITY COMPANY
--------------------------------------------
By: /S/ GEORGE NICHOLSON
--------------------------------------------
By: LONDON PACIFIC LIFE & ANNUITY COMPANY
--------------------------------------------
Depositor
By: /S/ GEORGE NICHOLSON
---------------------------------------------
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/S/ ARTHUR I. TRUEGER Chairman of the Board and Director 4/7/97
- ----------------------- ------
Arthur I. Trueger Date
/S/ IAN K. WHITEHEAD President, Chief Executive Officer 4/7/97
- ----------------------- ------
Ian K. Whitehead and Director Date
/S/ GEORGE C. NICHOLSON Chief Financial Officer, Secretary 4/7/97
- ----------------------- ------
George C. Nicholson and Director Date
/S/ MARK E. PRILLAMAN Chief Marketing Officer 4/7/97
- ----------------------- ------
Mark E. Prillaman and Director Date
</TABLE>
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM N-4
FOR
LPLA SEPARATE ACCOUNT ONE
OF
LONDON PACIFIC LIFE & ANNUITY COMPANY
INDEX TO EXHIBITS
EXHIBIT PAGE
EX-99.B10 Consent of Independent Accountants
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 1 to the Registration
Statement on Form N-4 of our report dated February 3, 1997, relating to the
statutory basis financial statements of London Pacific Life & Annuity Company
and our report dated February 18, 1997, relating to the financial statements
of LPLA Separate Account One, both of which appear in such Statement of
Additional Information. We also consent to the reference to us under the
headings "Experts" in such Statement of Additional Information.
/s/ Price Waterhouse LLP
_______________________________
Price Waterhouse LLP
Boston, Massachusetts
April 15, 1997
