File Nos. 333-56513
811-8890
================================================================================
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. 2 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 17 [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 C. 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
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
__X__ on May 1, 1999 pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
_____ on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
_____ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Registered:
Individual Immediate Variable Annuity Contracts
<TABLE>
<CAPTION>
CROSS REFERENCE SHEET
(required by Rule 495)
<S> <C> <C>
Item No. Location
- -------- --------
PART A
Item 1. Cover Page Cover Page
Item 2. Definitions Definitions of Terms used in
this Prospectus
Item 3. Synopsis Summary
Item 4. Condensed Financial Information Not Applicable
Item 5. General Description of Registrant, Other Information-London
Depositor, and Portfolio Companies Pacific, The Separate Account;
Investment Options
Item 6. Deductions and Expenses Expenses
Item 7. General Description of Variable The London Pacific Immediate
Annuity Contracts Variable Annuity Contracts
Item 8. Annuity Period Annuity Payments (The Annuity
Period)
Item 9. Death Benefit Death Benefit
Item 10. Purchases and Contract Value How to Purchase the Contracts
Item 11. Redemptions Surrenders
Item 12. Taxes Taxes
Item 13. Legal Proceedings Not Applicable
Item 14. Table of Contents of the Statement Table of Contents of the
of Additional Information 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 London Pacific
Item 18. Services Not Applicable
Item 19. Purchase of Securities Being Not Applicable
Offered
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.
Part A
LONDON PACIFIC LIFE & ANNUITY COMPANY
INDIVIDUAL SINGLE CONTRIBUTION IMMEDIATE VARIABLE ANNUITY CONTRACTS
issued by
LPLA SEPARATE ACCOUNT ONE
and
LONDON PACIFIC LIFE & ANNUITY INSURANCE COMPANY
MAY 1, 1999
This prospectus describes two Individual Single Contribution Immediate Variable
Annuity Contracts issued by London Pacific Life & Annuity Company (London
Pacific) - one is the Guaranteed Minimum Variable Annuity Payment Contract and
the other is the Non-Guaranteed Minimum Variable Annuity Payment Contract. When
discussed together, they are referred to as the Contracts in this
prospectus.
If you buy the Guaranteed Minimum Variable Annuity Payment Contract, your
Contribution will initially be allocated to London Pacific's Fixed Account.
Thirty days after we issue your Contract, your Contribution, with interest, will
be allocated to the one available Investment Option: the BT Equity 500 Index
Fund of BT Insurance Funds Trust.
If you buy the Non-Guaranteed Minimum Variable Annuity Payment Contract, you can
invest in the following twelve (12) Investment Options:
LPT VARIABLE INSURANCE SERIES TRUST:
Harris Associates Value Portfolio
MFS Total Return Portfolio
Robertson Stephens Diversified Growth Portfolio
Lexington Corporate Leaders Portfolio(R)
Strong Growth Portfolio
SAI Global Leaders Portfolio
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.:
Morgan Stanley Dean Witter U.F. High Yield Portfolio
Morgan Stanley Dean Witter U.F. International Magnum Portfolio
Morgan Stanley Dean Witter U.F. Emerging Markets Equity Portfolio
BT INSURANCE FUNDS TRUST:
BT Equity 500 Index Fund
FEDERATED INSURANCE SERIES
Federated Prime Money Fund II
Federated Fund for U.S. Government Securities II
Please read this prospectus carefully before investing and keep it on file for
future reference. It contains important information about the London Pacific
Immediate Variable Annuity Contracts.
To learn more about the London Pacific Immediate Variable Annuity Contracts, you
can request a copy of the Statement of Additional Information (SAI) dated
May 1, 1999. The SAI has been filed with the Securities and Exchange
Commission (SEC) and is legally a part of this prospectus. The SEC maintains a
Web site (http://www.sec.gov) that contains the SAI, material incorporated by
reference and other information regarding companies that file electronically
with the SEC. The Table of Contents of the SAI can be found on page __ of this
prospectus. For a free copy of the SAI, call us at: (800) 852-3152 or write to
us at our Annuity Service Center: P.O. Box 29564, Raleigh, North Carolina
27626.
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The Contracts:
* are not bank deposits
* are not federally insured
* are not endorsed by any bank or government agency
* are not guaranteed and may be subject to loss of principal
INQUIRIES: If you have any questions about your Contract or need more
information, please contact us at:
Annuity Service Center
P.O. Box 29564
Raleigh, North Carolina 27626
(800) 852-3152
TABLE OF CONTENTS
DEFINITIONS OF TERMS USED IN THIS PROSPECTUS....................................
SUMMARY .......................................................................
FEE TABLE.......................................................................
THE LONDON PACIFIC IMMEDIATE VARIABLE ANNUITY CONTRACT..........................
ANNUITY PAYMENTS (THE ANNUITY PERIOD)...........................................
HOW TO PURCHASE THE CONTRACTS...................................................
Contribution...........................................................
Allocation of Contribution.............................................
Accumulation Units - Non-Guaranteed Minimum Variable Annuity
Payment Contract Only...............................................
INVESTMENT OPTIONS..............................................................
LPT Variable Insurance Series Trust....................................
Morgan Stanley Universal Funds, Inc....................................
BT Insurance Funds Trust...............................................
Federated Insurance Series.............................................
Dollar Cost Averaging Program - Non-Guaranteed Minimum Variable
Annuity Payment Contract Only.......................................
Rebalancing Program - Non-Guaranteed Minimum Variable Annuity
Payment Contract Only...............................................
Substitution...........................................................
Exchange Program.......................................................
PERFORMANCE.....................................................................
EXPENSES .......................................................................
Separate Account Charge................................................
Guaranteed Minimum Annuity Payment Charge (Guaranteed Minimum
Variable Annuity Payment Contract Only).............................
Commutation Fee (Non-Guaranteed Minimum Variable Annuity Payment
Contract Only)......................................................
Transfer Fee (Non-Guaranteed Minimum Variable Annuity Payment
Contract Only).....................................................
Premium Taxes..........................................................
Income Taxes...........................................................
Investment Option Expenses.............................................
TAXES .......................................................................
SURRENDERS......................................................................
DEATH BENEFIT...................................................................
OTHER INFORMATION...............................................................
London Pacific.........................................................
Year 2000.......................................................
The Separate Account...................................................
Distribution...........................................................
TABLE OF CONTENTS OF THE SAI....................................................
APPENDIX - ILLUSTRATIONS OF ANNUITY PAYMENTS....................................
DEFINITIONS OF TERMS USED IN THIS PROSPECTUS
Accumulation Unit - The unit of measurement used to determine the value of your
interest in a Non-Guaranteed Minimum Variable Annuity Payment Contract prior to
the Annuity Date.
Annuitant - The natural person on whose life Annuity Payments are based. On or
after the Annuity Date, the Annuitant also includes any Joint Annuitant.
Annuity Date - The date on which Annuity Payments begin.
Annuity Calculation Date - The date on which the first Annuity Payment will be
calculated. It will not be more than 5 days before the Annuity Date.
Annuity Payments - The series of payments made to the Payee after the Annuity
Date.
Annuity Period - The period of time beginning with the Annuity Date during which
Annuity Payments are made.
Annuity Service Center - The office indicated under Inquiries on the first page
of this prospectus to which notices, requests and the Contribution must be sent.
Annuity Unit - The unit of measurement used in the calculation of Annuity
Payments.
Assumed Investment Return (AIR) - The investment return upon which Annuity
Payments are based.
Beneficiary - The person entitled to receive benefits under the Contract in the
case of the death of the Owner, Joint Owner, Annuitant or Joint Annuitant, as
applicable.
Business Day - Any day the New York Stock Exchange (NYSE) and we are open for
business.
Contract Value - The value of your Non-Guaranteed Minimum Variable Annuity
Payment Contract prior to the Annuity Date.
Contribution - The money you invest in the Contract.
Due Proof of Death - A certified copy of the death certificate, an order of a
court of competent jurisdiction, a statement from a physician who attended the
deceased or any other proof acceptable to London Pacific.
Fixed Account - A segment of our general account which contains all of our
assets with the exception of segregated separate account assets.
Guaranteed Minimum Annuity Payment (Guaranteed Minimum Variable Annuity Payment
Contract Only) - The amount which is guaranteed as the minimum annuity payment
amount. This amount is shown in your Contract. This amount is payable regardless
of the performance of the Investment Option.
Investment Option(s) - Those investments available under the Contracts.
Issue Date - The date on which your Contract became effective. Contract years
are measured from the Issue Date.
Joint Annuitant - The person, other than the Annuitant, on whose continuation of
life Annuity Payments may be made. The Joint Annuitant may not be changed.
Non-Qualified Contract - If you purchase the Contract as an individual and not
under any pension plan, specially sponsored program or an individual retirement
annuity, it is referred to as a Non-Qualified Contract.
Owner/Joint Owner - The person(s) or entity(ies) entitled to ownership rights
under the Contract.
Payee - The person you designate to receive Annuity Payments.
Qualified Contract - If you purchase the Contract under a pension plan,
specially sponsored program, or an individual retirement annuity, it is referred
to as a Qualified Contract.
Separate Account - A segregated asset account maintained by us to support the
London Pacific Immediate Variable Annuity contracts and certain other contracts.
The Separate Account is LPLA Separate Account One.
Written Request - A request in writing, in a form satisfactory to us, which is
received by the Annuity Service Center.
SUMMARY
The sections in this Summary are explained in more detail later in this
prospectus.
The London Pacific Immediate Variable Annuity Contracts
This prospectus describes two Individual Single Contribution Immediate Variable
Annuity Contracts - one is the Guaranteed Minimum Variable Annuity Payment
Contract and the other is the Non-Guaranteed Minimum Variable Annuity Payment
Contract (collectively, the Contracts). The Contracts are offered by London
Pacific Life & Annuity Company (London Pacific). The Contracts provide for
income to the Payee under a payment plan you select.
For Guaranteed Minimum Variable Annuity Payment Contracts, your Contribution
will initially be allocated to London Pacific's Fixed Account. Thirty days after
we issue your Contract, your Contribution, with interest, will be allocated to
the BT Equity 500 Index Fund of BT Insurance Funds Trust. The BT Equity 500
Index Fund is the only available Investment Option for the Guaranteed Minimum
Variable Annuity Payment Contract.
The Non-Guaranteed Minimum Variable Annuity Payment Contract has twelve (12)
Investment Options which are listed below under Investment Options.
Under the Contract, you are the Owner. You can name a Joint Owner. You must name
a Payee and an Annuitant. You can also name a Joint Annuitant. The Annuity Date
will be 30th day after the Issue Date of your Contract.
Annuity Payments
You can receive Annuity Payments from your Contract by selecting one of the
available Annuity Options. The dollar amount of your Annuity Payments may go up
or down depending on the investment performance of the Investment Option(s).
You can protect your investment by purchasing a Guaranteed Minimum Variable
Annuity Payment Contract. If you buy the Guaranteed Minimum Variable Annuity
Payment Contract, the amount of your Annuity Payments are guaranteed to be at
least equal to 100% of the Guaranteed Minimum Annuity Payment shown in your
Contract.
How to Purchase the Contract
The Contract requires a single Contribution of at least $20,000. You cannot add
to your Contract. Your registered representative can help you fill out the
proper forms.
Investment Options
You can invest in the following Investment Options if you own a Non-Guaranteed
Minimum Variable Annuity Payment Contract:
LPT Variable Insurance Series Trust:
Harris Associates Value Portfolio
MFS Total Return Portfolio
Robertson Stephens Diversified Growth Portfolio
Lexington Corporate Leaders Portfolio(R)
Strong Growth Portfolio
SAI Global Leaders Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.:
Morgan Stanley Dean Witter U.F. High Yield Portfolio
Morgan Stanley Dean Witter U.F. International Magnum Portfolio
Morgan Stanley Dean Witter U.F. Emerging Markets Equity Portfolio
BT Insurance Funds Trust:
BT Equity 500 Index Fund
Federated Insurance Series
Federated Prime Money Fund II
Federated Fund for U.S. Government Securities II
If you own a Guaranteed Minimum Variable Annuity Payment Contract, you can only
invest in the BT Equity 500 Index Fund of BT Insurance Funds Trust during the
Annuity Period.
Depending on market conditions and the performance of the Investment Option(s)
you select, you can make or lose money in any of these Investment Options.
Expenses
The Contracts have insurance features and investment features and there are
costs related to each.
London Pacific deducts for its insurance charges which total 1.25% annually of
the value of your Contract allocated to Investment Options (Separate Account
Charge).
If you own a Non-Guaranteed Minimum Variable Annuity Payment Contract, you can
make 12 free transfers each year. After that, we charge a $20 transfer fee for
each transfer.
For the Guaranteed Minimum Variable Annuity Payment Contract, London Pacific
deducts a Guaranteed Minimum Annuity Payment Charge which may range from 1.75%
to 2.15% annually of your Contract allocated to the Investment Option. The
Guaranteed Minimum Annuity Payment Charge is set forth in your Contract. The
charge will lock in at the time you purchase the Contract and will not change
for the life of your Contract.
If you make a surrender, it will be subject to a commutation fee. The
commutation fee is equal to the difference between the remaining guaranteed
Annuity Payments discounted at the AIR and the remaining guaranteed Annuity
Payments discounted at a rate equal to the sum of the AIR plus 1.00%.
There are also investment charges which range from .30% to 1.75% of the average
daily value of the Investment Option, depending upon the Investment Option.
Taxes
Annuity Payments will be treated for federal income tax purposes as partly a
return of your original investment. That part of each payment is not taxable as
income. If you own a Qualified Contract, the entire payment may be taxable.
Surrenders
You cannot make any surrenders from a Guaranteed Minimum Variable Annuity
Payment Contract.
For Non-Guaranteed Minimum Variable Annuity Payment Contracts, you may make a
total surrender after the Annuity Date if you have chosen Annuity Option 3
(Payment for a Period Certain). No partial surrenders are permitted.
Death Benefit
If you, the Joint Owner (if any), the Annuitant or the Joint Annuitant (if any)
dies, a death benefit may be paid to the Beneficiary.
Exchange Program
London Pacific offers an exchange program (the Exchange Program) which is
available only to purchasers who exchange a contract issued by another insurance
company not affiliated with London Pacific or other financial investment for a
Contract offered by this Prospectus. The Exchange Program is not available to
purchasers who own another immediate variable annuity contract and want to
exchange it for the Contracts described in this prospectus. Under the Exchange
Program, London Pacific adds certain amounts to the Contract as exchange credits
(Exchange Credits). Subject to specific limits, the Exchange Credits equal the
surrender charge paid, if any, to the other insurance company or the charges and
penalties paid to a financial institution.
Free-Look
Guaranteed Minimum Variable Annuity Payment Contract: If you cancel the Contract
within 10 days after receiving it (or the period required in your state), we
will refund your Contribution.
Non-Guaranteed Minimum Variable Annuity Payment Contract: If you cancel the
Contract within 10 days after receiving it (or the period required in your
state), we will send your money back. You will receive whatever your Contract is
worth on the day we receive your request. This may be more or less than your
Contribution. If we are required by law to return your Contribution, we reserve
the right to put your money in the Federated Prime Money Fund II during the
free-look period.
FEE TABLE
See Notes to Fee Table and Examples on page __.
OWNER TRANSACTION EXPENSES - NON-GUARANTEED MINIMUM VARIABLE ANNUITY PAYMENT
CONTRACT ONLY
Commutation Fee *
An amount equal to the difference between the remaining guaranteed
Annuity Payments discounted at the AIR and the remaining guaranteed
Annuity Payments discounted at a rate equal to the sum of the AIR plus
1.00%.
Transfer Fee
No charge for first 12 transfers in a Contract year, thereafter the fee
is $20 for each subsequent transfer.
* Only applies to a surrender under Annuity Option 3 or lump sum payments to
Beneficiaries under Annuity Options 2 and 3 under a Non-Guaranteed Minimum
Variable Annuity Payment Contract. The proceeds received will be reduced by the
commutation fee.
SEPARATE ACCOUNT ANNUAL EXPENSES FOR GUARANTEED MINIMUM VARIABLE ANNUITY PAYMENT
CONTRACT
(as a percentage of average account value)
Mortality and Expense Risk Fees and Account Fees and Expenses ** 1.25%
Guaranteed Minimum Annuity Payment Charge (maximum charge)*** 2.15%
-----
Total Separate Account Annual Expenses 3.40%
SEPARATE ACCOUNT ANNUAL EXPENSES FOR NON-GUARANTEED MINIMUM VARIABLE ANNUITY
PAYMENT CONTRACT
(as a percentage of average account value)
Mortality and Expense Risk Fees and Account Fees and Expenses ** 1.25%
-----
Total Separate Account Annual Expenses 1.25%
** This charge is referred to as a Separate Account Charge in your Contract and
throughout this prospectus.
*** The Guaranteed Minimum Annuity Payment Charge ranges from 1.75% to 2.15%
depending upon when you buy the Contract. The charge may be changed quarterly.
However, once you buy the Contract, the charge is locked in and will not change
for the life of your Contract. The amount of the charge is shown in your
Contract.
<TABLE>
<CAPTION>
LPT VARIABLE INSURANCE SERIES TRUST'S ANNUAL EXPENSES (as a percentage of the
average daily net assets of a Portfolio)
Other Expenses
Management (after expense Total Annual
Portfolio Fees reimbursement)* Expenses *
- --------- ---- --------------- ----------
<S> <C> <C> <C> <C>
Harris Associates Value 1.00% .29% 1.29%
MFS Total Return .75% .54% 1.29%
Robertson Stephens Diversified
Growth .95% .44% 1.39%
Lexington Corporate Leaders(R) .65% .64% 1.29%
Strong Growth .75% .54% 1.29%
SAI Global Leaders** .75% .54% 1.29%
</TABLE>
* London Pacific has voluntarily agreed through December 31, 1999 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
ending December 31, 1998, the "Total Annual Expenses" (on an annualized basis)
were: 1.85% for the Harris Associates Value Portfolio; 1.87% for the MFS Total
Return Portfolio; 2.39% for the Strong Growth Portfolio; 2.37% for the Robertson
Stephens Diversified Growth Portfolio; and 1.60% for the Lexington Corporate
Leaders Portfolio. The examples following are calculated based upon such expense
reimbursement arrangements.
**Estimated. The Portfolio commenced investment operations on May 1, 1999.
<TABLE>
<CAPTION>
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.'S ANNUAL EXPENSES (as a percentage
of the average daily net assets of a Portfolio)
Other Operating
Management Expenses (after expense Total Annual
Portfolio Fees reimbursement)* Expenses *
- --------- ---- --------------- ----------
<S> <C> <C> <C>
Morgan Stanley Dean Witter U.F. High Yield 0.15% .65% .80%
Morgan Stanley Dean Witter U.F. International
Magnum 0.15% 1.00% 1.15%
Morgan Stanley Dean Witter U.F. Emerging
Markets Equity 0.0% 1.75% 1.75%
<FN>
* The advisers have voluntarily waived receipt of their management fees and
agreed to reimburse the Portfolio, if necessary, if such fees would cause
the total annual operating expenses of the Portfolio to exceed the
percentages set forth above under "Total Annual Portfolio Expenses." Absent
this expense reimbursement, for the year ending December 31, 1998,
"Management Fees," "Other Operating Expenses," and "Total Annual Expenses"
would have been: 0.50%, 0.65% and 1.15% for the Morgan Stanley Dean Witter
U.F. High Yield Portfolio; 0.80%, 1.00%, and 1.80% for the Morgan Stanley
Dean Witter U.F. International Magnum Portfolio; and 1.25%, 2.20% and 3.45%
for the Morgan Stanley Dean Witter U.F. Emerging Markets Portfolio.
</FN>
</TABLE>
<TABLE>
<CAPTION>
BT INSURANCE FUNDS TRUST'S ANNUAL EXPENSES (as a percentage of the average daily
net assets of a Portfolio)
Total Annual
Other Expenses Expenses
Management Administ- (after expense (after expense
Portfolio Fees rative Fee reimbursement)* reimbursement)*
- --------- ---- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
BT Equity 500 Index (1) .20% .02% .08% .30%
<FN>
* Without expense waivers and reimbursements for the year ended December 31,
1998, the total operating expense for the BT Equity 500 Index Fund would have
been 1.19%.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Federated Insurance Series' Annual Expenses
(as a percentage of the average daily net assets of a Portfolio)
Other Total Annual
Expenses Expenses
(after waivers (after waivers
Management and reimburse- and reimburse-
Portfolio Fees ments) ments)
- -------------------- ------------- --------- -------------
Federated Prime Money
<S> <C> <C> <C> <C>
Fund II* .50% .30% .80%
Federated Fund For U.S.
Government Securities II* .60% .25% .85%
<FN>
* Without expense waivers and reimbursements, the total annual operating
expenses for the year ending December 31, 1998 would have been 0.81%
for the Federated Prime Money Fund II and 0.93% for the Federated Fund
for U.S. Government Securities II.
</FN>
</TABLE>
EXAMPLES
The examples assume a $1,000 investment with payments based on an annuity with a
25 year period certain Annuity Option and a 3% AIR. If you choose a period
certain of more than 25 years, your expenses would be higher than those shown.
Likewise, if you choose a period certain of less than 25 years (Non-Guaranteed
Minimum Variable Annuity Payment Contracts only), your expenses would be lower
than those shown below. If you own a Non-Guaranteed Minimum Variable Annuity
Payment Contract and choose a 5% or 7% AIR (instead of the 3% AIR used in the
examples below), your expenses would be less than those shown. The examples
below for the Guaranteed Minimum Variable Annuity Payment Contract assume the
deduction of the maximum Guaranteed Minimum Annuity Payment Charge. Your
expenses will be less than those shown below if the Guaranteed Minimum Annuity
Payment Charge for your Contract is less than the maximum amount.
Guaranteed Minimum Variable Annuity Payment Contract:
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
<TABLE>
<CAPTION>
Time Periods
1 Year 3 Years 5 Years 10 Years
--------------------------------------------
BT INSURANCE FUNDS TRUST:
<S> <C> <C> <C> <C> <C>
BT Equity 500 Index $36.32 $104.14 $165.59 $292.14
Non-Guaranteed Minimum Variable Annuity Payment Contract:
</TABLE>
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets: (a) if you surrender your Contract and have chosen
Annuity Option 3; or (b) if you do not surrender your Contract.
<TABLE>
<CAPTION>
Time Periods
1 Year 3 Years 5 Years 10 Years
------------------------------------------
LPT VARIABLE INSURANCE SERIES TRUST
<S> <C> <C> <C> <C>
Harris Associates Value (a) $121.21 $155.27 $187.38 $254.62
(b) 25.06 72.67 116.83 211.45
MFS Total Return (a) $121.21 $155.27 $187.38 $254.62
(b) 25.06 72.67 116.83 211.45
Robertson Stephens Diversified Growth (a) $121.09 $157.77 $191.34 $261.49
(b) 26.03 75.42 121.14 218.76
Lexington Corporate Leaders(R) (a) $121.21 $155.27 $187.38 $254.62
(b) 25.06 27.67 116.83 211.45
Strong Growth (a) $121.21 $155.27 $187.38 $254.62
(b) 25.06 72.67 116.83 211.45
SAI Global Leaders (a) $121.21 $155.27 $187.38 $254.62
(b) 25.06 72.67 116.83 211.45
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.:
Morgan Stanley Dean Witter
U.F. High Yield (a) $115.89 $142.90 $167.73 $219.95
(b) 20.27 59.07 95.42 174.61
Morgan Stanley Dean Witter
U.F. International Magnum (a) $118.99 $151.75 $181.82 $244.88
(b) 23.70 68.80 110.77 201.10
Morgan Stanley Dean Witter
U.F. Emerging Markets Equity (a) $124.25 $166.72 $205.41 $285.71
(b) 29.53 85.25 136.47 244.49
BT INSURANCE FUNDS TRUST:
BT Equity 500 Index (a) $111.47 $130.10 $147.18 $182.86
(b) 15.37 45.00 73.03 135.18
FEDERATED INSURANCE SERIES TRUST:
Federated Prime Money Fund II (a) $115.89 $142.90 $167.73 $219.95
(b) 20.27 59.07 95.42 174.61
Federated Fund for U.S. Government
Securities II (a) $116.33 $144.17 $169.76 $223.57
(b) 20.76 60.47 97.63 178.45
</TABLE>
Notes to Fee Table and Examples
1. The purpose of the fee table is to show you the various expenses you will
incur directly or indirectly with the Contract. The Fee Table reflects expenses
of the Separate Account as well as the Investment Options.
2. Premium taxes are not reflected. Premium taxes may apply depending on the
state where you live.
3. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE LONDON PACIFIC IMMEDIATE VARIABLE ANNUITY CONTRACT
This prospectus describes two Individual Single Contribution Immediate Variable
Variable Annuity Payment Contracts issued by London Pacific - one is the
Guaranteed Minimum Variable Annuity Payment Contract and the other is the Non-
Guaranteed Minimum Variable Annuity Payment Contract. Together, they are
referred to as the Contracts.
An annuity is a contract between you (the Owner) and us (an insurance company)
where we promise to pay you an income, in the form of Annuity Payments.
Depending on market conditions, your Annuity Payments may go up or down and you
may make or lose money, based on the investment performance of the Investment
Option(s) you choose. For the Non-Guaranteed Minimum Variable Annuity Payment
Contract, no minimum Annuity Payment is guaranteed. For the Guaranteed Minimum
Variable Annuity Payment Contract, there is a Guaranteed Minimum Annuity
Payment.
Ownership
Owner - Under the Contracts you are the Owner. You may name an Annuitant and a
Joint Annuitant. You 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. 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 us prior to the time it was received. Any change in Owner is
subject to our underwriting rules then in effect.
The Contract may be owned by Joint Owners. The Owners must jointly exercise all
rights of the Contract except for transfers (for Non-Guaranteed Minimum Variable
Annuity Payment Contracts), which can be exercised individually.
Annuitant - The Annuitant and Joint Annuitant is the person or persons on whose
life Annuity Payments are based. You designate the Annuitant and Joint
Annuitant, if any, at the Issue Date.
Beneficiary - The Beneficiary is the person(s) or entity you name to receive any
death benefit. The Beneficiary is named at the time the Contract is issued
unless changed at a later late. Unless an irrevocable Beneficiary has been
named, the Owner and the Joint Owner, if any, may change the Primary
Beneficiary(ies) or Contingent Beneficiary(ies). A change may be made by Written
Request. The change will take effect as of the date the Written Request is
signed. London Pacific will not be liable for any payment made or action it
takes before the change is recorded.
Assignment
You can assign the Contract at any time during your lifetime. You must send a
Written Request to our Annuity Service Center specifying the terms of the
assignment. London Pacific will not be liable for any payment or other action we
take in accordance with the Contract until we receive notice of the assignment.
Any assignment made after the death benefit has become payable will only be
valid with our consent. AN ASSIGNMENT MAY BE A TAXABLE EVENT.
If the Contract is issued pursuant to a Qualified plan, there may be limitations
on your ability to assign the Contract.
Modification of the Contracts
The Contracts may be modified in order to comply with applicable state and
federal law.
ANNUITY PAYMENTS (THE ANNUITY PERIOD)
You can receive regular Annuity Payments from your Contract. The Payee will
receive the Annuity Payments. The day on which those payments begin is called
the Annuity Date. The Annuity Date will be 30th day after the Issue Date of your
Contract. You can choose among income plans. We call them Annuity Options. We
ask you to choose an Annuity Option when you buy the Contract.
During the Annuity Period, payments will come from the Investment Options you
have selected (meaning they are variable annuity payments). We do not currently
offer any fixed income options. Annuity Payments can be made monthly or
annually. Once selected, the frequency of the payments cannot be changed. If you
own a Non-Guaranteed Minimum Variable Annuity Payment Contract and if the
Annuity Payment would be or become less than $100, we will reduce the frequency
of the Annuity Payments to an interval which will result in each payment being
at least $100.
The first Annuity Payment will be calculated on the Annuity Calculation Date
which will be no more than 5 days before the Annuity Date. Annuity Payments will
reflect the investment performance of the Investment Options during the Annuity
Period. On the Annuity Calculation Date, a fixed number of Annuity Units will be
purchased.
The dollar amount of your subsequent payments will depend on 3 things:
(1) the value of your Contract in the Investment Option on the Annuity Date;
(2) the Assumed Investment Return (AIR) used in the Contract; and
(3) the performance of the Investment Option(s) you select.
For Guaranteed Minimum Variable Annuity Payment Contracts, the AIR is 3%. For
Non-Guaranteed Minimum Variable Annuity Payment Contracts, you can choose a 3%,
5% or 7% AIR. We ask you to choose an AIR at the time you buy the Contract. Once
selected, you may not change the AIR. Choosing a higher AIR will result in a
higher initial amount of income (Annuity Payment), but income will increase more
slowly during periods of good investment performance of the Investment options
and decrease more rapidly during periods of poor investment performance. The SAI
contains a more detailed description of how Annuity Payments and Annuity Unit
values are calculated.
GUARANTEED MINIMUM ANNUITY PAYMENT - GUARANTEED MINIMUM VARIABLE ANNUITY PAYMENT
CONTRACT ONLY: You can choose to protect your investment by purchasing a
Guaranteed Minimum Variable Annuity Payment Contract. If you purchase a
Guaranteed Minimum Variable Annuity Payment Contract, London Pacific guarantees
that your Annuity Payment will be at least equal to 100% of the Guaranteed
Minimum Annuity Payment shown in your Contract. Each Annuity Payment will vary
upwards or downwards based on the performance of the Investment Option, unless
the Annuity Payment would be less than the Guaranteed Minimum Annuity Payment.
Under the terms of the Contract's guarantee, London Pacific will pay the Payee
the greater of: (a) the Annuity Payment amount determined by multiplying the
number of Annuity Units times the Annuity Unit value; or (b) the Guaranteed
Minimum Annuity Payment.
If you own either the Guaranteed Minimum Variable Annuity Payment Contract or
the Non-Guaranteed Minimum Variable Annuity Payment Contract, you can choose one
of the following Annuity Options. After Annuity Payments begin, you cannot
change the Annuity Option.
OPTION 1. LIFE ANNUITY. Under this option, we will make Annuity Payments at a
frequency that you choose so long as the Annuitant is alive. After the Annuitant
dies, we stop making Annuity Payments.
OPTION 2. LIFE ANNUITY WITH PERIOD CERTAIN. Under this option, we will make
Annuity Payments at a frequency you choose so long as the Annuitant is alive.
For a Non-Guaranteed Minimum Variable Annuity Payment Contract, if, when the
Annuitant dies, we have made Annuity Payments for less than the number of years
selected (period certain), the Beneficiary has the option of receiving the
remaining Annuity Payments for the rest of the period certain or taking the
death benefit in a single lump sum. The lump sum payment will be equal to the
present value of the remaining guaranteed Annuity Payments discounted at a rate
equal to the sum of the AIR plus 1.00% using the Annuity Unit values as of the
date London Pacific receives written notification of Due Proof of Death. For a
Guaranteed Minimum Variable Annuity Payment Contract, if, when the Annuitant
dies, we have made Annuity Payments for less than the period certain, the
remaining guaranteed Annuity Payments will continue to the Beneficiary for the
remainder of the period certain.
OPTION 3. PAYMENT FOR A PERIOD CERTAIN. Under this option, we will make Annuity
Payments at a frequency you choose for a fixed period of years. For a Guaranteed
Contract, the minimum period is 25 years. For the Non-Guaranteed Minimum
Variable Annuity Payment Contract, if, at the death of the Annuitant, Annuity
Payments have been made for less than the fixed period of years, the Beneficiary
will have the option of receiving the remaining guaranteed Annuity Payments for
the rest of the period or taking the death benefit in a single lump sum. The
lump sum payment will be equal to the present value of the remaining guaranteed
Annuity Payments discounted at a rate equal to the sum of the AIR plus 1.00%
using the Annuity Unit values as of the date London Pacific receives written
notification of Due Proof of Death. For the Guaranteed Minimum Variable Annuity
Payment Contract, if, at the death of the Annuitant, payments have been made for
less than the fixed period of years, the remaining payments will continue to the
Beneficiary for the remainder of the period.
OPTION 4. JOINT & SURVIVOR LIFE ANNUITY. Under this option, we will make Annuity
Payments at a frequency you choose so long as the Annuitant and the Joint
Annuitant are alive. After the first Annuitant dies and during the lifetime of
the surviving Annuitant, we will continue making Annuity Payments. After the
surviving Annuitant dies, we will stop making Annuity Payments.
HOW TO PURCHASE THE CONTRACTS
Contribution
The Contribution is the money you give us to buy the Contract. The Contracts
require the payment of a single Contribution of at least $20,000. For the
Guaranteed Minimum Variable Annuity Payment Contract, the maximum Contribution
you can make is equal to the lesser of $1,000,000 or the Contribution amount
that produces a maximum annualized initial annuity benefit of $75,000. You
cannot make additional Contributions to your Contract.
Allocation of Contribution
When you purchase a Non-Guaranteed Minimum Variable Annuity Payment Contract, we
will allocate your Contribution to the Investment Options you have selected. We
have reserved the right, under certain circumstances, to allocate the
Contribution to the Federated Prime Money Fund II until the end of the free-look
period.
When you purchase a Guaranteed Minimum Variable Annuity Payment Contract, we
will allocate your Contribution to the Fixed Account. Your Contribution will
earn interest in the Fixed Account. The Contribution, with interest earned in
the Fixed Account, will be allocated to the BT Equity 500 Index Fund 30 days
after the Issue Date of your Contract.
Once we receive your Contribution and the necessary information and they are
deemed to be in good order, we will issue you a Contract. We will allocate your
Contribution within 2 business days. If the information is not in good order, we
will contact you to get the necessary information. If for some reason we are
unable to complete this process within 5 business days, we will either sent back
your money or get your permission to keep it until we get all of the necessary
information.
Free-Look
Guaranteed Minimum Variable Annuity Payment Contract: If you change your mind
about owning the Contract, you can cancel it within 10 days after receiving it
(or the period required in your state), and we will refund your Contribution.
Non-Guaranteed Minimum Variable Annuity Payment Contract: If you change your
mind about owning the Contract, you can cancel it within 10 days after receiving
it (or the period required in your state), and we will send your money back. You
will receive whatever your Contract is worth on the day we receive your request.
This may be more or less than your Contribution. If you have purchased the
Contract as an individual retirement annuity or in certain states, we are
required to return your Contribution. If that is the case, we reserve the right
to put your money in the Federated Prime Money Fund II for 15 days after we
allocate your Contribution (or whatever period is required in your state).
Accumulation Units - Non-Guaranteed Minimum Variable Annuity Payment Contract
Only
The value of a Contract will go up or down depending upon the investment
performance of the Investment Option(s) you choose. In order to keep track of
the value of your Contract, we use a unit of measure we call an Accumulation
Unit. During the Annuity Period, we call it an Annuity Unit.
Every Business Day we determine the value of an Accumulation Unit for each
Investment Option. We do this by:
1. determining the total amount of money invested in the particular
Investment Option;
2. subtracting from that amount the Separate Account Charge; and
3. dividing this amount by the number of outstanding Accumulation Units.
The value of an Accumulation Unit may go up or down from day to day.
When you make your Contribution to a Non-Guaranteed Minimum Variable Annuity
Payment Contract, London Pacific will credit your Contract with Accumulation
Units. The number of Accumulation Units credited is determined by dividing the
amount of the Contribution allocated to an Investment Option by the value of the
Accumulation Unit for that Investment Option.
London Pacific calculates that value of an Accumulation Unit for each Investment
Option after the New York Stock Exchange (NYSE) closes each day and then credits
your Contract. There may be days when the NYSE is open for business and we are
closed. The day after Thanksgiving is the only such date. On such date, you will
not have access to your account and therefore no transactions will be processed
for the Separate Account.
When you make your Contribution to a Guaranteed Minimum Variable Annuity Payment
Contract, we will credit your Contract with interest in our Fixed Account up to
the Annuity Date.
Transfers - Non-Guaranteed Minimum Variable Annuity Payment Contract Only:
If you own a Non-Guaranteed Minimum Variable Annuity Payment Contract, you can
make transfers, by Written Request, between Investment Options before the
Annuity Calculation Date and after the Annuity Date. During the Annuity Period,
after a transfer, your next Annuity Payment will reflect changes in the value of
the new Annuity Units.
The minimum amount which you can transfer is $500 from one or more Investment
Options or your entire interest in the Investment Option, if less. The minimum
amount which must remain in an Investment Option after a transfer is $500 for
each Investment Option or $0 if the entire interest in the Investment Option is
transferred.
If you make more than 12 transfers each year, a $20 transfer fee will be
assessed for each transfer after the first free 12.
Telephone transfers can be made pursuant to Written Request. London Pacific will
use reasonable procedures to confirm that instructions given us by telephone are
genuine. If we fail to use such procedures, we may be liable for losses due to
fraudulent or unauthorized instructions. London Pacific tape records all
telephone instructions.
London Pacific reserves the right, at any time and without prior notice to any
party, to terminate, suspend or modify the transfer privilege described above.
The Contracts are not designed for professional market timing organizations.
Repeated patterns of frequent transfers are disruptive to the operations of the
Investment Options. When London Pacific becomes aware of such disruptive
transactions, we may modify the transfer provisions of the Contract.
IF YOU OWN A GUARANTEED MINIMUM VARIABLE ANNUITY PAYMENT CONTRACT, YOU MAY NOT
MAKE TRANSFERS.
INVESTMENT OPTIONS
For Non-Guaranteed Minimum Variable Annuity Payment Contracts, the following
twelve (12) Investment Options are available. Additional Investment Options may
be available in the future.
YOU SHOULD READ THE PROSPECTUSES FOR THESE FUNDS CAREFULLY BEFORE INVESTING.
COPIES OF THESE PROSPECTUSES ARE ATTACHED TO THIS PROSPECTUS.
Shares of the Funds may be offered in connection with certain variable annuity
contracts and variable life insurance policies of various life insurance
companies which may or may not be affiliated with London Pacific. Certain
portfolios may also be sold directly to qualified plans. The funds do not
believe that offering their shares in this manner will be disadvantageous to
you.
London Pacific may enter into certain arrangements under which it is reimbursed
by the Investment Options' advisers, distributors and/or affiliates for the
administrative services which is provides to the Portfolios.
LPT VARIABLE INSURANCE SERIES TRUST
LPT Variable Insurance Series Trust (Trust) is a mutual fund with multiple
portfolios. LPIMC Insurance Marketing Services Adviser, a subsidiary of London
Pacific and a registered investment adviser under the Investment Advisers Act of
1940, serves as investment adviser to the Trust. The Adviser has entered into
sub-advisory agreements with professional money managers for investment of the
assets of each portfolio of the Trust. The Sub-Adviser for each portfolio is
listed under each portfolio below.
The following Investment Options are available under the Contract:
Harris Associates Value Portfolio
The Sub-Adviser for this Portfolio is Harris Associates L.P.
MFS Total Return Portfolio
The Sub-Adviser for this Portfolio is Massachusetts Financial Services
Company.
Robertson Stephens Diversified Growth Portfolio
The Sub-Adviser for this Portfolio is Robertson, Stephens & Company Investment
Management, L.P.
Lexington Corporate Leaders Portfolio(R)(long-term capital growth and
income through investment in common stocks of large, well-established
companies)
The Sub-Adviser for this Portfolio is Lexington Management Corporation.
Strong Growth Portfolio
The Sub-Adviser for this Portfolio is Strong Capital Management, Inc.
SAI Global Leaders Portfolios (long-term capital growth through
investment in common stocks of large foreign and domestic companies)
The Sub-Adviser for this Portfolio is Select Advisors, Inc.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
Morgan Stanley Dean Witter Universal Funds, Inc. is a mutual fund with eighteen
portfolios, three of which are available under the Contracts. Prior to January
6, 1999, the name of the fund was Morgan Stanley Universal Funds, Inc. Miller
Anderson & Sherrerd, LLP is the investment adviser to the High Yield Portfolio.
Morgan Stanley Dean Witter Asset Management Inc. (formerly Morgan Stanley Asset
Management Inc.) is the investment adviser for the International Magnum and
Emerging Markets Equity Portfolios. The following Investment Options are
available under the Contract:
High Yield Portfolio
International Magnum Portfolio (long-term capital appreciation by investing
primarily in equity securities of non-U.S. issuers domiciled in EAFE
countries)
Emerging Markets Equity Portfolio
BT INSURANCE FUNDS TRUST
BT Insurance Funds Trust (Fund) is a series fund with six series, one of which
is available under the Contracts. Bankers Trust Company is the investment
manager of the Fund. The following Investment Option is available under the
Contract:
BT Equity 500 Index Fund
Under a Guaranteed Minimum Variable Annuity Payment Contract, the BT Equity 500
Index Fund of BT Insurance Funds Trust is the only available Investment Option.
FEDERATED INSURANCE SERIES
Federated Insurance Series is a mutual fund with multiple separate investment
portfolios, two of which are available under the Contracts. Federated Investment
Management Company is the investment adviser of the Federated Prime Money Fund
II and the Federated Fund for U.S. Government Securities II. The following
Investment Options are available under the Contract:
Federated Prime Money Fund II
Federated Fund for U.S. Government Securities II
Dollar Cost Averaging Program - Non-Guaranteed Minimum Variable Annuity
Payment Contract Only
The Dollar Cost Averaging Program is a program, which if elected, permits you to
systematically transfer amounts monthly, quarterly, semi-annually or annually
from the Federated Prime Money Fund II or the Federated Fund for U.S. Government
Securities II to one or more of the other Investment Options. To participate in
the program, the value of your Contract must be at least $20,000. By allocating
amounts on a regular schedule as opposed to allocating the total amount at one
particular time, you may be less susceptible to the impact of market
fluctuations.
You must participate in Dollar Cost Averaging for at least 12 months. There is
no current charge for Dollar Cost Averaging. However, we reserve the right to
charge for it in the future. Transfers under this program will take place on the
date you request to participate in the program and anniversaries of that date.
Transfers made pursuant to the Dollar Cost Averaging Program are not taken into
account in determining the transfer fee.
We reserve the right at any time and without prior notice to any party, to
terminate, suspend or modify the Dollar Cost Averaging Program.
Rebalancing Program - Non-Guaranteed Minimum Variable Annuity Payment Contract
Only
You may use an asset allocation model know as the Asset Equalizer to help you
establish your initial investment allocations. If you do, you may rebalance your
investments monthly to maintain the allocation in the Asset Equalizer model.
Rebalancing provides for periodic automatic transfers among the Investment
Options.
Transfers made pursuant to the Rebalancing Program are not taken into account in
determining the transfer fee.
Voting Rights
London Pacific is the legal owner of the Investment Option shares. However,
London Pacific believes that when an Investment Option solicits proxies in
conjunction with a vote of shareholders, it is required to obtain from you and
other owners instructions as to how to vote those shares. When we receive those
instructions, we will vote all of the shares we own in proportion to those
instructions. This will also include any shares that London Pacific owns on its
own behalf. Should London Pacific determine that it is no longer required to
comply with the above, we will vote the shares in our own right.
Substitution
London Pacific may be required to substitute one of the Investment Options you
have selected with another portfolio. We would not do this without the prior
approval of the Securities and Exchange Commission. We will give you notice of
our intention to do this.
Exchange Program
London Pacific currently offers an exchange program (Exchange Program) which is
available only to purchasers who exchange a contract issued by another insurance
company not affiliated with London Pacific or other financial institution
(Exchange Investment) for a Contract offered by this prospectus. The Exchange
Program is not available to purchasers who own another immediate variable
annuity contract and want to exchange it for the Contracts described in this
prospectus. We reserve the right to modify, suspend, or terminate the Exchange
Program at any time or from time to time without notice. If the Exchange Program
is in effect, it will apply to all exchanges which qualify for the program for a
Contract offered by this prospectus. The Exchange Program is available only
where permitted by law.
A currently owned variable deferred annuity contract or life insurance policy
may be exchanged for a Contract pursuant to Section 1035 of the Internal Revenue
Code (Code), or where applicable, may qualify for a "rollover" or transfer to a
Contract pursuant to other sections of the Code.
You should carefully evaluate whether the Exchange Program offers benefits which
are more favorable than if you continued to hold your Exchange Investment.
Factors to consider include, but are not limited to: (a) the amount, if any, of
surrender charges or other charges and penalties incurred in surrendering a
contract which can be obtained from the insurance company or financial
institution which issued the contract or instrument; (b) the time remaining
under your Exchange Investment during which surrender charges or other charges
and penalties apply; (c) the on-going charges, if any, under the Exchange
Investment versus the on-going charges under the Contracts described in this
prospectus; (d) the amount and timing of any benefits under the Exchange
Program; and (e) the potentially greater cost to you if the charges under a
Contract or the surrender charge or charges and penalties on the Exchange
Investment exceeds the benefits under the Exchange Program. While we know of no
adverse federal income tax consequences, you should consult with your own tax
adviser regarding the tax consequences of an exchange.
Under the currently available Exchange Program, London Pacific adds certain
amounts to the Contract as exchange credits (Exchange Credits). The Exchange
Credits are credited by London Pacific on behalf of Owners of an Exchange
Investment from our general account. Subject to a specified limit (Exchange
Credit Limit) discussed below, Exchange Credits equal the surrender charge paid,
if any, to the other insurance company or the charges and penalties paid to the
other financial institution. The Exchange Program is subject to the following
rules:
1. London Pacific does not add Exchange Credits unless we receive in
writing, not later than 30 days after the issue of the Contract,
evidence satisfactory to us:
a. of the surrender charge or other charges and penalties, if any,
paid by you to surrender the Exchange Investment and the amount
of any such charge; and
b. you acknowledge that you are aware that the commutation fee under
the Contract will be assessed in full against a subsequent
surrender to the extent applicable.
2. London Pacific allocates the Exchange Credits to the Contract 25 days
after a Contract is issued (and for Non-Guaranteed Contracts, 35 days
after a Contract is issued in California if the purchaser is 60 years
of age or older). In no event will Exchange Credits be added after the
Annuity Date. The Exchange Credits will be allocated prorata among the
Investment Options based on the ratio of the values in the Investment
Option.
3. The value of the Exchange Credits as of the date of the allocation to
the Investment Option equals the lesser of the Exchange Credit Limit
or the surrender charge paid or other charges and penalties to
surrender the Exchange Investment. The Exchange Credit Limit currently
is 5% of the net amount payable upon surrender of the Exchange
Investment. We reserve the right at any time and from time to time to
increase or decrease the Exchange Credit Limit. However, the Exchange
Credit Limit in effect at any time will apply to all purchases
qualifying for the Exchange Program.
4. London Pacific does not consider additional amounts credited to your
Contract under the Exchange Program to be an increase in your
investment in the Contract.
PERFORMANCE
London Pacific may advertise performance of the various Investment Options.
Performance information of an Investment Option is based on the Separate
Account's past performance only and is no indication of future performance.
London Pacific will calculate performance by determining the percentage change
in an Investment Option by dividing the increase (decrease) for the Option by
the value of the Investment Option at the beginning of the period. The
performance number will reflect the expenses of the Investment Option and the
deduction of the Separate Account Charge, and with respect to the Guaranteed
Minimum Variable Annuity Payment Contract, the Guaranteed Minimum Annuity
Payment Charge.
EXPENSES
There are charges and other expenses associated with the Contracts that reduce
the return on your investment in the Contracts. These charges and expenses are:
SEPARATE ACCOUNT CHARGE
This charge is equal, on an annual basis, to 1.25% of the daily value of the
Contracts invested in an Investment Option, after fund expenses have been
deducted. This charge compensates London Pacific for assuming the mortality and
expense risks under the Contracts and the costs associated with the
administration of the Contracts and the Separate Account.
GUARANTEED MINIMUM ANNUITY PAYMENT CHARGE (GUARANTEED MINIMUM VARIABLE ANNUITY
PAYMENT CONTRACT ONLY)
This charge ranges from 1.75% to 2.15% of the daily value of the Guaranteed
Minimum Variable Annuity Payment Contract invested in the Investment Option,
after fund expenses have been deducted. The charge will be set quarterly and
will lock in at the time you purchase the Contract for the life of the Contract.
The amount of the Guaranteed Minimum Annuity Payment charge is set forth in your
Contract. The charge varies due to stock market volatility which affects the
cost London Pacific incurs for reinsuring the Guaranteed Minimum Annuity
Payment. This charge compensates London Pacific for the costs associated with
providing the Guaranteed Minimum Annuity Payment.
COMMUTATION FEE (NON-GUARANTEED MINIMUM VARIABLE ANNUITY PAYMENT CONTRACT ONLY)
If you surrender your Contract under Annuity Option 3 or if the Beneficiary
elects to receive a lump sum payment under Annuity Options 2 or 3 after the
Annuitant dies, the amount received will be reduced by a minus b, where:
a = the remaining guaranteed Annuity Payments discounted at the AIR; and
b = the remaining guaranteed Annuity Payments discounted at a rate equal to
the sum of the AIR plus 1.00%.
TRANSFER FEE (NON-GUARANTEED MINIMUM VARIABLE ANNUITY PAYMENT CONTRACT ONLY)
You can make 12 free transfers every year. We measure a year from the day we
issue your Contract. If you make more than 12 transfers a year, we will deduct a
transfer fee of $20 for each transfer thereafter.
The transfer fee will be deducted from the Investment Option from which the
transfer is made. If your entire interest in the Investment Option is being
transferred, the transfer fee will be deducted from the amount which is
transferred. If the transfer is made from more than one Investment Option, the
transfer fee will be deducted pro-rata from each Investment Option from which a
transfer is made.
Any transfers made pursuant to the Dollar Cost Averaging or Rebalancing Programs
will not count in determining the transfer fee.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. London Pacific is responsible for the payment of
these taxes and will make a deduction from the value of the Contracts for them.
Some of these taxes are due when the Contract is issued, other are due when
Annuity Payments begin. It is London Pacific's current practice to deduct for
any premium taxes from the Contribution when it is made. Premium taxes generally
range from 0% to 4%, depending on the state.
INCOME TAXES
London Pacific will deduct from the Contracts for any income taxes which it
incurs because of the Contracts. At the present time, we are not making any such
deductions.
INVESTMENT OPTION EXPENSES
There are deductions from and expenses paid out of the assets of the various
Investment Options, which are described in the attached fund prospectuses.
TAXES
Note: London Pacific has prepared the following information on taxes as a
general discussion of the subject. It is not intended as tax advice to any
individual. You should consult your own tax adviser about your own
circumstances. London Pacific has included an additional discussion regarding
taxes in the Statement of Additional Information.
ANNUITY CONTRACTS IN GENERAL
Annuity contracts are a means of setting aside money for future needs and for
providing a series of periodic payments for life or a fixed number of years.
Congress recognized how important saving for retirement was and provided special
rules in the Internal Revenue Code (Code) for annuities.
Simply stated these rules provide that you will not be taxed on the earnings on
the money held in your annuity contract until you take the money out. This is
referred to as tax-deferral. There are different rules as to how you will be
taxed depending on how you take the money out and the type of
Contract--Qualified or Non-Qualified (see following sections).
You, as the Owner, will not be taxed on increases in the value of your Contract
until a distribution occurs--either as a surrender or as Annuity Payments. When
you make a surrender you are taxed on the amount of the surrender that is
earnings. For Annuity Payments, different rules apply. A portion of each Annuity
Payment is treated as a partial return of your Contribution and will not be
taxed. The remaining portion of the Annuity Payment will be treated as ordinary
income. How the Annuity Payment is divided between taxable and non-taxable
portions depends upon the period over which the Annuity Payments are expected to
be made. Annuity Payments received after you have received all of your
Contribution are fully includible in income.
QUALIFIED AND NON-QUALIFIED CONTRACTS
If you purchase the Contract as an individual and not under any pension plan,
specially sponsored program or an individual retirement annuity, your Contract
is referred to as a Non-Qualified Contract.
If you purchase the Contract under a pension plan, specially sponsored program,
or an individual retirement annuity, your Contract is referred to as a qualified
contract. Examples of qualified plans are: Individual Retirement Annuities
(IRAs) and pension and profit-sharing plans, which include 401(k) plans.
SURRENDERS--NON-QUALIFIED CONTRACTS
If you surrender your Contract, the earnings portion of the Contract are
includible in income. The Code also provides that any amount received under an
annuity contract which is included in income may be subject to a penalty. The
amount of the penalty is equal to 10% of the amount that is includible in
income. Some distributions will be exempt from the penalty. They include any
amounts:
(1) paid on or after you reach age 59 1/2;
(2) paid after you die;
(3) paid if you become totally disabled (as that term is defined in the
Code);
(4) paid in a series of substantially equal payments made
annually (or more frequently) for life or a period not exceeding life
expectancy;
(5) paid as annuity payments under an immediate annuity; or
(6) which come from purchase payments made prior to August 14, 1982.
SURRENDERS--QUALIFIED CONTRACTS
The above information describing the taxation of non-qualified contracts does
not apply to Qualified Contracts. There are special rules that govern with
respect to Qualified Contracts. We have provided a more complete discussion in
the Statement of Additional Information.
DIVERSIFICATION
The Code provides that the underlying investments for a variable annuity must
satisfy certain diversification requirements in order to be treated as an
annuity contract. London Pacific believes that the Investment Options are being
managed so as to comply with the requirements. Neither the Code nor the Internal
Revenue Service Regulations issued to date provide guidance as to the
circumstances under which you, because of the degree of control you exercise
over the underlying investments, and not London Pacific would be considered the
owner of the shares of the Investment Options. If you are considered the owner
of the shares, it will result in the loss of the favorable tax treatment for the
Contract. It is unknown to what extent Owners are permitted to select Investment
Options, to make transfers among the Investment Options or the number and type
of Investment Options Owners may select from without being considered the owner
of the shares. If any guidance is provided which is considered a new position,
then the guidance would generally be applied prospectively. However, if such
guidance is considered not to be a new position, it may be applied
retroactively. This would mean that you, as the Owner of the Contract, could be
treated as the owner of the Investment Options.
Due to the uncertainty in this area, London Pacific reserves the right to modify
the Contracts in an attempt to maintain favorable tax treatment.
SURRENDERS
YOU CANNOT MAKE ANY SURRENDERS FROM A GUARANTEED MINIMUM VARIABLE ANNUITY
PAYMENT CONTRACT AFTER THE FREE-LOOK PERIOD.
If you own a Non-Guaranteed Minimum Variable Annuity Payment Contract and have
chosen Annuity Option 3, you may make a total surrender of your Contract after
the Annuity Date by submitting a Written Request to the Annuity Service Center.
Partial surrenders are not permitted.
When you make a complete surrender London Pacific will calculate the amount you
will receive by using the Annuity Unit values as of the date it receives your
surrender request. We will mail the proceeds to you within seven (7) business
days unless the suspension of payments or transfers provision is in effect (see
below). The proceeds will be reduced by the commutation fee.
INCOME TAXES AND TAX PENALTIES MAY APPLY TO ANY SURRENDER YOU MAKE.
Suspension of Payments or Transfers
London Pacific may be required to suspend or postpone payments for surrenders or
transfers 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 shares of the
Investment Options is not reasonably practicable or London Pacific cannot
reasonably value the shares of the Investment Options; or
4. during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of owners.
DEATH BENEFIT
If you, the Joint Owner, the Annuitant or the Joint Annuitant die before the
Annuity Date, London Pacific will pay your Beneficiary a death benefit. The
death benefit is calculated as of the day we receive written notification of Due
Proof of Death. For a Guaranteed Minimum Variable Annuity Payment Contract, the
death benefit is equal to the Contribution plus interest. For a Non-Guaranteed
Minimum Variable Annuity Payment Contract, the death benefit is equal to the
Contract value.
The death benefit will be paid after the death of the Owner, the Joint Owner, if
any, the Annuitant or the Joint Annuitant, if any, whichever death occurs first.
The entire death benefit must be paid within 5 years of the date of death unless
the Beneficiary elects to have the death benefit payable under an Annuity
Option. The death benefit payable under an Annuity Option must be paid over the
Beneficiary's lifetime or for a period not extending beyond the Beneficiary's
life expectancy. Payment must begin within one year of the date of death. In the
event of the death of the Owner who is not an Annuitant, if the Beneficiary is
the spouse of the Owner, he or she may elect to continue the Contract in his/her
own name.
Payment to the Beneficiary, other than a single lump sum, can only be elected
during the 60 day period beginning with the date of receipt of Due Proof of
Death.
If you or a Joint Owner die on or after the Annuity Date, any remaining Annuity
Payments will continue at least as rapidly as under the method of distribution
in effect at the Owner's death. Upon the death of the Owner on or after the
Annuity Date, the Beneficiary becomes the Owner.
Under a Guaranteed Minimum Variable Annuity Payment Contract, upon the death of
the Annuitant on or after the Annuity Date, any remaining payments will continue
at least as rapidly as under the method of distribution in effect at the
Annuitant's death.
Under a Non-Guaranteed Minimum Variable Annuity Payment Contract, upon the death
of the Annuitant on or after the Annuity Date, the Beneficiary will have the
option under Annuity Options 2 and 3 of having payments continue to the
Beneficiary for the remainder of the period or taking the death benefit in a
single lump sum. The lump sum will be equal to the present value of the
guaranteed Annuity Payments, discounted at a rate equal to the sum of the AIR
plus 1.00% using the Annuity Unit values as of the date we receive written
notification of Due Proof of Death. Death benefits will be paid at least as
rapidly as under the method of distribution in effect at the Annuitant's
death.
If the Contract is owned by a non-individual (e.g., a corporation), then the
death of the Annuitant will be treated as the death of the Owner for purposes of
the distribution of the death benefit.
OTHER INFORMATION
LONDON PACIFIC
London Pacific Life & Annuity Company (London Pacific) was organized in 1927 in
North Carolina as a stock life insurance company. London Pacific was acquired
from Liberty Life in 1989. London Pacific is authorized to sell life insurance
and annuities in 40 states and the District of Columbia. London Pacific's
ultimate parent is London Pacific Group Limited, an international fund
management firm chartered in Jersey, Channel Islands.
London Pacific's financial statements appear in the SAI and should be considered
only as bearing upon London Pacific's ability to meet its obligations under the
Contracts.
YEAR 2000
London Pacific's computer systems related to variable annuity products is Year
2000 compliant. Like other variable annuity companies, London Pacific would be
adversely affected if the computer systems used by the adviser, the sub-advisers
and other service providers to the Investment Options do not properly process
and calculate data-related information and data as of and after January 1, 2000.
London Pacific believes the adviser, sub-advisers and service providers are
taking steps that they believe are reasonably designed to address the Year 2000
issue. At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact.
THE SEPARATE ACCOUNT
London Pacific established a separate account known as LPLA Separate Account One
(Separate Account) to hold the assets that underlie the Contracts. The Board of
Directors of London Pacific adopted a resolution to establish the Separate
Account under North Carolina insurance law on November 21, 1994. We have
registered the Separate Account with the SEC as a unit investment trust under
the Investment Company Act of 1940. The Separate Account is divided into
sub-accounts.
The assets of the Separate Account are held in London Pacific's name on behalf
of the Separate Account and legally belong to London Pacific. However, those
assets that underlie the Contracts, are not chargeable with liabilities arising
out of any other business London Pacific may conduct. All the income, gains and
losses (realized or unrealized) resulting from these assets are credited to or
charged against the Contracts and not gains any other contracts we may issue.
DISTRIBUTION
London Pacific Financial and Insurance Services, 1755 Creekside Oaks Drive,
Sacramento, California 96833 acts as the principal underwriter of the Contracts.
London Pacific Financial and Insurance Services is registered as a broker-dealer
with the SEC and is a member of the National Association of Securities Dealers,
Inc. London Pacific Financial and Insurance Services is an affiliate of London
Pacific. Commissions will paid to broker-dealers who sell the Contracts.
Broker-dealers will be paid a commission, up to an amount currently equal to 9%
of the Contribution for promotional or distribution expenses.
TABLE OF CONTENTS OF THE SAI
London Pacific
Experts
Legal Opinions
Distributor
Calculation of Performance Information
Federal Tax Status
Annuity Provisions
Financial Statements
APPENDIX - ILLUSTRATIONS OF ANNUITY PAYMENTS
GUARANTEED MINIMUM VARIABLE ANNUITY PAYMENT CONTRACTS
The following tables have been prepared to show you how investment performance
affects Annuity Payments over time. The Annuity Payments reflect three different
assumptions for a constant investment return before all expenses: 0%, 6% and
12%. These are hypothetical rates of return. London Pacific does not guarantee
that the Contract will earn these returns for any one year or any sustained
period of time. The tables are for illustrative purposes only. They do not
represent past or future investment returns.
The Annuity Payments will never be less than the Guaranteed Minimum Annuity
Payment amount shown in your Contract regardless of the actual returns of the BT
Equity 500 Index Fund. Since it is very likely that investment returns will
fluctuate over time, Annuity Payments will also fluctuate. However, the payment
will never fall below the Guaranteed Minimum Annuity Payment amount. The total
amount of Annuity Payments you will ultimately receive will depend on the
cumulative investment returns and how long the Annuitant lives and the Annuity
Option you chose.
The illustration that follows is based on a 3% Assumed Investment Return (AIR).
Currently, this is the only AIR available for Guaranteed Minimum Variable
Annuity Payment Contracts.
The Annuity Payments shown reflect the deduction of all fees and expenses.
Actual Investment Option fees and expenses will vary from year to year and may
be higher or lower than the assumed rate. The illustration assumes that the BT
Equity 500 Index Fund will incur expense at an annual rate of 0.30% of the
average daily net assets of the Fund. This is the annualized average as of
December 31, 1998. The Separate Account Charge of 1.25% and the Guaranteed
Minimum Annuity Payment Charge of 2.15% are used in the calculations. After
taking these expenses and charges into consideration, the illustrated gross
investment returns of 0%, 6% and 12% are approximately equal to net rates of
3.00%, 3.00% and 7.87%, respectively.
<TABLE>
<CAPTION>
REGENCY VARIABLE IMMEDIATE ILLUSTRATION
<S> <C>
Annuitant: John Doe Contribution: $100,000
Date of Birth: 7/1/28 Issue Date: 10/2/98
Annuity Option: Single Life Annuity Annuity Date: 11/1/98
Premium Tax: 0% Annuity Payment Frequency: Monthly
Guaranteed Minimum Annuity Assumed Investment Return: 3%
Payment $642
</TABLE>
The amount of monthly Annuity Payments shown in the table below and the graph
that follows assumes a constant annual investment return. The amount of Annuity
Payments that you will actually receive will depend on the investment
performance of the BT Equity 500 Index Portfolio. Annuity Payments can go up or
down. However the payment for a Guaranteed Minimum Variable Annuity Payment
Contract will never be less than the Guaranteed Minimum Annuity Payment amount.
The amounts shown are based on a 3% assumed investment return. Annuity Payments
will remain constant at $642 per month when the annualized net rate of return
after expenses is 3%.
<TABLE>
<CAPTION>
MONTHLY ANNUITY PAYMENTS
<S> <C> <C> <C>
Annual rate of return before expenses: 0% 6% 12%
Annuity Payment Date Age Annual rate of return after expenses: 3.00% 3.00% 7.87%
- -------------------- --- ------------------------------------- ----- ----- -----
November 1, 1998 70 $642 $642 $ 642
November 1, 1999 71 642 642 673
November 1, 2000 72 642 642 704
November 1, 2001 73 642 642 738
November 1, 2002 74 642 642 772
November 1, 2007 79 642 642 973
November 1, 2012 84 642 642 1,226
November 1, 2017 89 642 642 1,544
November 1, 2022 94 642 642 1,945
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY. THEY
SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS. HOWEVER, IN NO EVENT WILL THE PAYMENT BE LESS THAN THE GUARANTEED
MINIMUM ANNUITY PAYMENT.
<TABLE>
<CAPTION>
Annuity Payments
3% AIR
-----------------------------------------------------------------
<S> <C>
$3,000 | |
| |
$2,500 | |
| |
$2,000 | |
Monthly Payment Amount | Z |
$1,500 | Z |
| Z |
$1,000 | Z Z Z Z Z |
| Y Y Y Y Y Y Y Y Y |
$500 | |
| |
$0 | |
-----------------------------------------------------------------
1988 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Year
X - 3.00% Y - 3.00% Z - 7.87%
</TABLE>
NON-GUARANTEED MINIMUM VARIABLE ANNUITY PAYMENT CONTRACTS
The following tables have been prepared to show you how investment performance
affects Annuity Payments over time. The Annuity Payments reflect three different
assumptions for a constant investment return before all expenses: 0%, 6% and
12%. These are hypothetical rates of return. London Pacific does not guarantee
that the Contract will earn these returns for any one year or any sustained
period of time. The tables are for illustrative purposes only. They do not
represent past or future investment returns.
The Annuity Payments may be more or less than the Annuity Payments shown if the
actual returns of the Investment Options are different than those illustrated.
Since it is very likely that investment returns will fluctuate over time,
Annuity Payments will also fluctuate. The total amount of Annuity Payments you
will ultimately receive will depend on the cumulative investment returns and how
long the Annuitant lives and the Annuity Option you chose.
Another factor which determines the amount of Annuity Payments is the Assumed
Investment Return. Payments will increase from one Annuity Payment date to the
next if the annualized net rate of return during that time is greater than the
Assumed Investment Return. It will decrease if the annualized net rate of return
is less than the Assumed Investment Return.
Three illustrations follow. The first is based on a 3% Assumed Investment
Return, the second is based on a 5% Assumed Investment Return, and the third is
based on a 7% Assumed Investment Return.
The Annuity Payments shown reflect the deduction of all fees and expenses.
Actual Investment Option fees and expenses will vary from year to year and from
Investment Option to Investment Option and may be higher or lower than the
assumed rate. The illustrations assume that each Investment Option will incur
expense at an annual rate of 1.23% of the average daily net assets of the
Investment Option. This is the annualized average as of December 31, 1998,
weighted by each Investment Option's net assets as of December 31, 1998. The
Separate Account Charge is calculated at an annual rate of 1.25% of the
average daily account values of the Separate Account. After taking these
expenses and charges into consideration, the illustrated gross investment
returns of 0%, 6% and 12% are approximately equal to net rates of -2.46%, 3.39%
and 9.42, respectively.
<TABLE>
<CAPTION>
REGENCY VARIABLE IMMEDIATE ILLUSTRATION
<S> <C>
Annuitant: John Doe Contribution: $100,000
Date of Birth: 7/1/28 Issue Date: 10/2/98
Annuity Option: Single Life Annuity Annuity Date: 11/1/98
Premium Tax: 0% Annuity Payment Frequency: Monthly
Assumed Investment Return: 3%
</TABLE>
The amount of monthly Annuity Payments shown in the table below and the graph
that follows assumes a constant annual investment return. The amount of Annuity
Payments that you will actually receive will depend on the investment
performance of the Investment Option(s) you select. Annuity Payments can go up
or down and no minimum dollar amount of Annuity Payments is guaranteed. The
amounts shown are based on a 3% Assumed Investment Return. Annuity Payments will
remain constant at $642 per month when the annualized net rate of return after
expenses is 3%.
<TABLE>
<CAPTION>
MONTHLY ANNUITY PAYMENTS
Annual rate of return before expenses: 0% 6% 12%
Annuity Payment Date Age Annual rate of return after expenses: (2.46)% 3.39% 9.42%
- -------------------- --- ------------------------------------- ------ ----- -----
<S> <C> <C> <C> <C> <C>
November 1, 1998 70 639 642 645
November 1, 1999 71 605 645 684
November 1, 2000 72 573 647 726
November 1, 2001 73 543 650 770
November 1, 2002 74 514 652 817
November 1, 2007 79 392 665 1096
November 1, 2012 84 298 678 1472
November 1, 2017 89 227 691 1975
November 1, 2022 94 173 704 2652
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY. THEY
SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS.
<TABLE>
<CAPTION>
Annuity Payments
3% AIR
-----------------------------------------------------------------
<S> <C>
$3,000 | |
| |
$2,500 | Z|
| |
$2,000 | Z |
Monthly Payment Amount | |
$1,500 | Z |
| Z |
$1,000 | Z Z Z Z Z |
| X X Y Y Y Y Y Y Y|
$500 | Y Y X |
| X X X X X X|
$0 | |
-----------------------------------------------------------------
1988 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Year
X - (2.46)% Y - 3.39% Z - 9.42%
</TABLE>
<TABLE>
<CAPTION>
REGENCY VARIABLE IMMEDIATE ILLUSTRATION
<S> <C>
Annuitant: John Doe Contribution: $100,000
Date of Birth: 7/1/28 Issue Date: 10/2/98
Annuity Option: Single Life Annuity Annuity Date: 11/1/98
Premium Tax: 0% Frequency of Annuity Income: Monthly
Assumed Investment Return: 5%
</TABLE>
The amount of monthly Annuity Payments shown in the table below and the graph
that follows assumes a constant annual investment return. The amount of Annuity
Payments that you will actually receive will depend on the investment
performance of the Investment Option(s) you select. Annuity Payments can go up
or down and no minimum dollar amount of Annuity Payments is guaranteed. The
amounts shown are based on a 5% Assumed Investment Return. Income will remain
constant at $764 per month when the annualized net rate of return after expenses
is 5%.
<TABLE>
<CAPTION>
MONTHLY ANNUITY PAYMENTS
Annual rate of return before expenses: 0% 6% 12%
Annuity Payment Date Age Annual rate of return after expenses: (2.46)% 3.39% 9.42%
- -------------------- --- ------------------------------------- ------ ----- -----
<S> <C> <C> <C> <C> <C>
November 1, 1998 70 760 764 767
November 1, 1999 71 706 752 798
November 1, 2000 72 656 740 830
November 1, 2001 73 609 729 864
November 1, 2002 74 566 718 899
November 1, 2007 79 392 665 1096
November 1, 2012 84 271 615 1336
November 1, 2017 89 187 570 1629
November 1, 2022 94 130 528 1987
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY. THEY
SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS.
<TABLE>
<CAPTION>
Annuity Payments
5% AIR
-----------------------------------------------------------------
<S> <C>
$3,000 | |
| |
$2,500 | |
| |
$2,000 | |
Monthly Payment Amount | Z|
$1,500 | Z |
| Z Z |
$1,000 | Z Z Z Z Z |
| X X Y Y Y Y Y Y Y|
$500 | Y Y X X |
| X X X X X|
$0 | |
-----------------------------------------------------------------
1988 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Year
X - (2.46)% Y - 3.39% Z - 9.42%
</TABLE>
<TABLE>
<CAPTION>
REGENCY VARIABLE IMMEDIATE ILLUSTRATION
<S> <C>
Annuitant: John Doe Contribution: $100,000
Date of Birth: 7/1/28 Issue Date: 10/2/98
Annuity Option: Single Life Annuity Annuity Date: 11/1/98
Premium Tax: 0% Annuity Payment Frequency: Monthly
Assumed Investment Return: 7%
</TABLE>
The amount of monthly Annuity Payments shown in the table below and the graph
that follows assumes a constant annual investment return. The amount of Annuity
Payments that you will actually receive will depend on the investment
performance of the Investment Option(s) you select. Annuity Payments can go up
or down and no minimum dollar amount of Annuity Payments is guaranteed. The
amounts shown are based on a 7% Assumed Investment Return. Income will remain
constant at $889 per month when the annualized net rate of return after expenses
is 7%.
<TABLE>
<CAPTION>
MONTHLY ANNUITY PAYMENTS
Annual rate of return before expenses: 0% 6% 12%
Annuity Payment Date Age Annual rate of return after expenses: (2.46)% 3.39% 9.42%
- -------------------- --- ------------------------------------- ------ ----- -----
<S> <C> <C> <C> <C> <C>
November 1, 1998 70 885 889 893
November 1, 2000 72 807 859 912
November 1, 2001 73 735 830 931
November 1, 2002 74 670 802 951
November 1, 2007 79 611 775 971
November 1, 2012 84 385 653 1077
November 1, 2017 89 242 550 1195
November 1, 2022 94 153 464 1326
96 391 1471
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY. THEY
SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS.
<TABLE>
<CAPTION>
Annuity Payments
7% AIR
-----------------------------------------------------------------
<S> <C>
$3,000 | |
| |
$2,500 | |
| |
$2,000 | |
Monthly Payment Amount | |
$1,500 | Z |
|Z Z Z Z Z Z Z Z |
$1,000 |Y Y Y Y Y |
|X X X X X Y |
$500 | X Y Y Y |
| X X X |
$0 | |
-----------------------------------------------------------------
1988 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Year
X - (2.46)% Y- 3.39% Z- 9.42%
</TABLE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL VARIABLE SINGLE CONTRIBUTION IMMEDIATE
ANNUITY CONTRACTS
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, 1999 FOR THE INDIVIDUAL
VARIABLE SINGLE CONTRIBUTION IMMEDIATE ANNUITY CONTRACTS 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, 1999.
TABLE OF CONTENTS
PAGE
London Pacific...........................................................
Experts..................................................................
Legal Opinions...................... ...................................
Distributor........................... ..................................
Calculation of Performance Information...................................
Federal Tax Status.......................................................
Annuity Provisions......................................................
Financial Statements....................................................
LONDON PACIFIC
Information regarding London Pacific Life & Annuity Company ("London Pacific" or
the "Company") and its ownership is contained in the Prospectus.
London Pacific contributed the initial capital to the Separate Account. As of
March 31, 1999, the initial capital contributed by London Pacific represented
approximately 2.33% of the total assets of the Separate Account. London Pacific
currently intends to retain these funds in the Separate Account.
EXPERTS
The financial statements of the Company as of December 31, 1998 and 1997 and for
each of the three years in the period ended December 31, 1998, and the financial
statements of the Separate Account as of December 31, 1998 and for the years
ended December 31, 1998 and 1997 included in this Statement of Additional
Informa- tion have been so included in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
LEGAL OPINIONS
Blazzard, Grodd & Hasenauer, P.C., Westport, Connecticut has provided advice on
certain matters relating to the federal securities and income tax laws in
connection with the Contracts.
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.
CALCULATION OF PERFORMANCE INFORMATION
YIELD CALCULATION FOR THE FEDERATED PRIME MONEY FUND II SUB-ACCOUNT
The Federated Prime Money Fund II 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 Federated Prime Money Fund II Sub-Account.
The current yield of the Federated Prime Money Fund II 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 Separate Account Charge, and with respect to the Guaranteed Minimum Variable
Annuity Payment Contract, the Guaranteed Minimum Annuity Payment 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 Federated Prime Money Fund II 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 Separate Account Charge, and with respect to the Guaranteed Minimum Variable
Annuity Payment Contract, the Guaranteed Minimum Annuity Payment 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 Federated Prime Money
Fund II 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
Federated Prime Money Fund II 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 Federated Prime Money Fund II Sub-Account and
changes in the interest rates on such investments, but also on changes in the
Federated Prime Money Fund II Sub-Account's expenses during the period.
Yield information may be useful in reviewing the performance of the Federated
Prime Money Fund II Sub-Account and for providing a basis for comparison with
other investment alternatives. However, the Federated Prime Money Fund II 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 standardized average annual
total return figures for the time periods indicated in the advertisement. Such
total return figures will reflect the deduction of the Separate Account Charge
and, with respect to the Guaranteed Minimum Variable Annuity Payment Contract,
the Guaranteed Minimum Annuity Payment 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 Contribution. The average annual total return is
then determined by computing the fixed interest rate that a $1,000 Contribution
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
Where:
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.
The Contracts are new and therefore have no performance history. However, the
Separate Account has invested in certain Investment Options for some time and
has an investment performance history. In order to show how the historical
performance of the funds underlying the Separate Account affect the Contract's
values, London Pacific may develop performance information. The information will
be based upon the historical experience of the Separate Account and the
underlying funds for the periods shown.
In addition to total return data, the Company may include yield information in
its advertisements. For each Sub-Account (other than the Federated Prime Money
Fund II 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
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.
London Pacific 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.
You 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 your total return or yield may be in any future period.
FEDERAL TAX STATUS
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.
GENERAL
Section 72 of the Internal Revenue Code of 1986, as amended (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 elected.
For annuity payments, the portion of a payment includible in income equals the
excess of the payment over the exclusion amount. The exclusion amount for
payments based on a variable annuity option is determined by dividing the
investment in the Contract (adjusted for any period certain or refund guarantee)
by the number of years over which the annuity is expected to be paid (determined
by Treasury Regulations). Payments received after the investment in the Contract
has been recovered (i.e. the total of the excludable amounts equal the
investment in the Contract) are fully taxable. The taxable portion of an annuity
payment is taxed at ordinary income 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, resulting in the whole payment being fully taxable. Contract 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 adequately
diversified in accordance with regulations prescribed by the United States
Treasury Department ("Treasury Department"). Disqualification of the Contract as
an annuity contract would result in the imposition of federal income tax on 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 funds underlying the Contracts
will be managed 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
Section 72(e)(11) of the Code provides that multiple non-qualified annuity
contracts which are issued within a calendar year period 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. For purposes of this
rule, contracts received in a Section 1035 exchange will be considered issued in
the year of the exchange. The legislative history of Section 72(e)(11) indicates
that it was not intended to apply to immediate annuities. However, the
legislative history also states that no inference is intended as to whether the
Treasury Department, under its authority to prescribe rules to enforce the tax
laws, may treat the combination purchase of a deferred annuity contract with an
immediate annuity contract as a single contract for purposes of determining the
tax consequences of any distribution.
TAX TREATMENT OF DISTRIBUTIONS--NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includable 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 and his Beneficiary; (e) as an annuity payment under
an immediate annuity; or (f) which are allocable to purchase payments made prior
to August 14, 1982.
With respect to (d) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
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 Distributions - Qualified Contracts.")
QUALIFIED PLANS
The Contracts offered herein are designed to be suitable for use under various
types of Qualified Plans. Taxation of participants in each Qualified Plan varies
with the type of plan and terms and conditions of each specific plan. Owners,
Annuitants and Beneficiaries are cautioned that benefits under a Qualified Plan
may be subject to the terms and conditions of the plan regardless of the terms
and conditions of the Contracts issued pursuant to the plan. Some retirement
plans are subject to distribution and other requirements that are not
incorporated into the Company's administrative procedures. Owners, participants
and Beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the Contracts comply with
applicable law. Following are general descriptions of the types of Qualified
Plans with which the Contracts may be used. Such descriptions are not exhaustive
and are for general informational purposes only. The tax rules regarding
Qualified Plans are very complex and will have differing applications depending
on individual facts and circumstances. Each purchaser should obtain competent
tax advice prior to purchasing a Contract issued under a Qualified Plan.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available as described
herein. Generally, Contracts issued pursuant to Qualified Plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Distributions - Qualified Contracts" below.)
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. The Contracts sold by the Company in connection with
employer sponsored Qualified Plans 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.
a. Individual Retirement Annuities
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 taxable income. These IRAs
are subject to limitations on eligibility, contributions, transferability and
distributions. (See "Tax Treatment of Distributions - 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.
Roth IRAs
Section 408A of the Code provides that beginning in 1998, individuals may
purchase a new type of non-deductible IRA, known as a Roth IRA. Purchase
payments for a Roth IRA are limited to a maximum of $2,000 per year and are not
deductible from taxable income. Lower maximum limitations apply to individuals
with adjusted gross incomes between $95,000 and $110,000 in the case of single
taxpayers, between $150,000 and $160,000 in the case of married taxpayers filing
joint returns, and between $0 and $10,000 in the case of married taxpayers
filing separately. An overall $2,000 annual limitation continues to apply to all
of a taxpayer's IRA contributions, including Roth IRA and non-Roth IRAs.
Qualified distributions from Roth IRAs are free from federal income tax. A
qualified distribution requires that an individual has held the Roth IRA for at
least five years and, in addition, that the distribution is made either after
the individual reaches age 59 1/2, on the individual's death or disability, or
as a qualified first-time home purchase, subject to a $10,000 lifetime maximum,
for the individual, a spouse, child, grandchild, or ancestor. Any distribution
which is not a qualified distribution is taxable to the extent of earnings in
the distribution. Distributions are treated as made from contributions first and
therefore no distributions are taxable until distributions exceed the amount of
contributions to the Roth IRA. The 10% penalty tax and the regular IRA
exceptions to the 10% penalty tax apply to taxable distributions from a Roth
IRA.
Amounts may be rolled over from one Roth IRA to another Roth IRA. Furthermore,
an individual may make a rollover contribution from a non-Roth IRA to a Roth
IRA, unless the individual has adjusted gross income over $100,000 or the
individual is a married taxpayer filing a separate return. The individual must
pay tax on any portion of the IRA being rolled over that represents income or a
previously deductible IRA contribution. However, for rollovers in 1998, the
individual may pay that tax ratably over the four taxable year period beginning
with tax year 1998.
Purchasers of Contracts to be qualified as a Roth IRA should obtain competent
tax advice as to the tax treatment and suitability of such an investment.
b. Pension and Profit-Sharing Plans
Sections 401(a) and 401(k) of the Code permit employers, including self-employed
individuals, to establish various types of retirement plans for employees. These
retirement plans may permit the purchase of the Contracts to provide benefits
under the Plan. Contributions to the Plan for the benefit of employees will not
be includible in the gross income of the employees until distributed from the
Plan. The tax consequences to participants may vary depending upon the
particular plan design. However, the Code places limitations and restrictions on
all Plans including on such items as: amount of allowable contributions; form,
manner and timing of distributions; transferability of benefits; vesting and
nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals and
surrenders. (See "Tax Treatment of Distributions - Qualified Contracts" below.)
Purchasers of Contracts for use with Pension or Profit Sharing Plans should
obtain competent tax advice as to the tax treatment and suitability of such an
investment.
TAX TREATMENT OF DISTRIBUTIONS - QUALIFIED CONTRACTS
In the case of a surrender under a Qualified Contract, the earnings portion of
the amount surrendered will be includible in taxable income. 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 Sections 401 (Pension and Profit-Sharing Plans including
401(k) plans) and 408 and 408A (Individual Retirement Annuities including Roth
IRAs). To the extent amounts are not includible in gross income because they
have been rolled over to an IRA or to another eligible Qualified Plan, no tax
penalty will be imposed. The tax penalty will not apply to the following
distributions: (a) if distribution is made on or after the date on which the
Owner or Annuitant (as applicable) reaches age 59 1/2; (b) distributions
following the death or disability of the Owner or Annuitant (as applicable) (for
this purpose disability is as defined in Section 72(m) (7) of the Code); (c)
after separation from service, distributions that are part of substantially
equal periodic payments made not less frequently than annually for the life (or
life expectancy) of the Owner or Annuitant (as applicable) or the joint lives
(or joint life expectancies) of such Owner or Annuitant (as applicable) and his
or her designated Beneficiary; (d) distributions to an Owner or Annuitant (as
applicable) who has separated from service after he has attained age 55; (e)
distributions made to the Owner or Annuitant (as applicable) to the extent such
distributions do not exceed the amount allowable as a deduction under Code
Section 213 to the Owner or Annuitant (as applicable) for amounts paid during
the taxable year for medical care; (f) distributions made to an alternate payee
pursuant to a qualified domestic relations order; (g) 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 will no longer apply after the Owner or Annuitant (as applicable) has
been re-employed for at least 60 days); (h) distributions from an Individual
Retirement Annuity made to the Owner or Annuitant(as applicable) to the extent
such distributions do not exceed the qualified higher education expenses (as
defined in Section 72(t)(7) of the Code) of the Owner or Annuitant (as
applicable) for the taxable year; and (i) distributions from an Individual
Retirement Annuity made to the Owner or Annuitant (as applicable) which are
qualified first-time home buyer distributions (as defined in Section 72(t)(8) of
the Code.) The exceptions stated in (d) and (f) above do not apply in the case
of an Individual Retirement Annuity. The exception stated in (c) above applies
to an Individual Retirement Annuity without the requirement that there be a
separation from service.
With respect to (c) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
Generally, distributions from a qualified plan must begin no later than April
1st of the calendar year following the later of (a) the year in which the
employee attains age 70 1/2 or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an Individual Retirement
Annuity. There are no required distributions from a Roth IRA prior to death of
the Owner. 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.
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 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 for a specified period of 10
years or more; or b) distributions which are required minimum distributions; or
c) the portion of the distributions not includible in gross income (i.e. returns
of after-tax contributions); or d) hardship withdrawals. Participants should
consult their own tax counsel or other tax adviser regarding withholding
requirements.
ANNUITY PROVISIONS
DETERMINATION OF ANNUITY PAYMENTS
The first annuity payment will be calculated on the annuity calculation date.
Annuity payments will reflect the investment performance of the Sub-Accounts of
the Separate Account during the annuity period. On the annuity calculation date,
a fixed number of annuity units will be purchased, determined as follows:
The first annuity payment is equal to the Contribution, with interest with
respect to the Guaranteed Minimum Variable Annuity Payment Contract and the
Contract value with respect to the Non-Guaranteed Minimum Variable Annuity
Payment Contract, divided by $1,000 and then multiplied by the payment factor
shown in your Contract. In each Sub-Account, the fixed number of annuity units
is determined by dividing the amount of the initial annuity payment determined
for the Sub-Account by the annuity unit value on the annuity calculation date.
Thereafter, the number of annuity units in the Sub-Account remains unchanged (or
unless you choose to make a transfer if you own a Non-Guaranteed Minimum
Variable Annuity Payment Contract). All calculations will appropriately reflect
the payment frequency you selected.
The dollar amount of annuity payments for each Sub-Account after the first
annuity payment is determined as follows:
1. The dollar amount of the first annuity payment is divided by the value of an
annuity unit for each applicable Sub-Account as of the annuity calculation date.
This sets the number of annuity units for each monthly payment for the
applicable Sub-Account. The number of annuity units for each applicable
Sub-Account remains fixed after the annuity calculation date.
2. The fixed number of annuity units in each Sub-Account is multiplied by the
annuity unit value for that Sub-Account for the last valuation period. This
results in the dollar amount of the payment for each applicable Sub-Account.
ANNUITY UNIT VALUES
The value of an annuity unit for each Sub-Account of the Separate Account will
vary to reflect the investment experience of the eligible funds. The value of
any Annuity Unit for each Sub-Account was arbitrarily set initially. Annuity
Unit values for any subsequent valuation period will be determined by
multiplying the value of the annuity unit for that Sub-Account on the preceding
day by the product of: (a) the net investment factor (see below) for that
Sub-Account for the day for which the annuity unit value is being calculated,
and (b) the annuity unit factor which neutralizes the assumed investment return
(AIR). Both the annuity unit factor and the AIR are set forth in your
Contract.
Net Investment Factor: The net investment factor for each Sub-Account is equal
to:
(a) the value of a share of the corresponding eligible fund at the end of
the valuation period (plus the per share amount of any unpaid dividends or
capital gains by that eligible fund); divided by
(b) the value of the share of the corresponding eligible fund at the
beginning of the valuation period; and
(c) subtracting from that amount the daily Separate Account Charge, and
with respect to the Guaranteed Minimum Variable Annuity Payment Contract, the
Guaranteed Minimum Annuity Payment Charge.
Valuation period means the period of time beginning at the close of business of
the New York Stock Exchange on each business day and ending at the close of
business for the next succeeding business day.
(See "Annuity Payments (The Annuity Period)" 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............................... 1-2
Statement of Operations........................................... 3-4
Statement of Changes in Net Assets................................ 5-7
Notes to Financial Statements..................................... 8-11
Report of Independent Accountants................................. 12
<TABLE>
<CAPTION>
LPLA SEPARATE ACCOUNT ONE
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
Harris MFS Berkeley
Associates Total U.S. Berkeley Money International Strong
Value Return Quality Bond Market Stock Growth
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account (1) Sub-Account
----------- ----------- ----------- ----------- --------------- -----------
Assets
Investments in the LPT Variable
<S> <C> <C> <C> <C> <C> <C>
Insurance Series Trust $7,222,833 $11,765,590 $1,978,446 $1,304,175 0 $6,846,120
Investments in the BT Insurance
Funds Trust 0 0 0 0 0 0
Investments in Morgan Stanley
Dean Witter U.F., Inc. 0 0 0 0 0 0
--------- ---------- -------- --------- - ---------
Total Assets 7,222,833 11,765,590 1,978,446 1,304,175 0 6,846,120
--------- ---------- --------- --------- - ---------
Liabilities
Amounts retained by London
Pacific Life & Annuity in LPLA
Separate Account One 128,470 137,884 132,804 0 0 320,669
------- ------- ------- - - -------
Total Liabilities 128,470 137,884 132,804 0 0 320,669
------- ------- ------- - - -------
Net Assets Attributable to
Contract Owners $7,094,363 $11,627,706 $1,845,642 $1,304,175 0 $6,525,451
========= ========== ========= ========= = =========
Unit Value $15.50 $14.56 $11.68 $11.08 0 $20.16
===== ===== ===== ===== = =====
Units Outstanding 457,647 798,518 158,002 117,712 0 323,694
======= ======= ======= ======= = =======
<FN>
(1) Formerly Strong International Stock Sub-Account
</FN>
</TABLE>
(Continued on next page)
See Notes to Financial Statements
<TABLE>
<CAPTION>
LPLA SEPARATE ACCOUNT ONE
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
December 31, 1998
Morgan Stanley
Lexington Morgan Stanley Dean Witter U.F. Morgan Stanley
Robertson Stephens Corporate BT Equity Dean Witter U.F. Emerging Dean Witter U.F.
Diversified Growth Leaders 500 Index International Magnum Markets Equity High Yield
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
----------- ----------- ----------- ----------- ----------- -----------
Assets
Investments in the LPT Variable
<S> <C> <C> <C> <C> <C> <C>
Insurance Series Trust $6,257,633 $8,168,740 0 0 0 0
Investments in the BT Insurance
Funds Trust 0 0 $1,731,196 0 0 0
Investments in Morgan Stanley
Dean Witter U.F., Inc. 0 0 0 $2,146,644 $73,234 $418,714
--------- --------- --------- --------- ------ -------
Total Assets 6,257,633 8,168,740 1,731,196 2,146,644 73,234 418,714
--------- --------- --------- --------- ------ -------
Liabilities
Amounts retained by London
Pacific Life & Annuity in LPLA
Separate Account One 165,333 161,599 27,351 22,743 17,470 24,883
------- ------- ------ ------ ------ ------
Total Liabilites 165,333 161,599 27,351 22,743 17,470 24,883
------- ------- ------ ------ ------ ------
Net Assets Attributable to
Contract Owners $6,092,300 $8,007,141 $1,703,845 $2,123,901 $55,764 $393,831
========= ========= ========= ========= ====== =======
Unit Value $14.13 $15.72 $10.94 $9.10 $6.99 $9.95
===== ===== ===== ==== ==== ====
Units Outstanding 431,127 509,410 155,738 233,470 7,980 39,568
======= ======= ======= ======= ===== ======
</TABLE>
See Notes to Financial Statements
<TABLE>
<CAPTION>
LPLA SEPARATE ACCOUNT ONE
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
Harris MFS Berkeley
Associates Total U.S. Berkeley Money International Strong
Value Return Quality Bond Market Stock Growth
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account (1) Sub-Account
----------- ----------- ----------- ----------- --------------- -----------
Income and Expenses
Income:
Dividends from the LPT Variable
<S> <C> <C> <C> <C> <C> <C>
Insurance Series Trust 0 $38,091 0 $80,328 $2,702 $194,821
Dividends from BT Insurance
Funds Trust 0 0 0 0 0 0
Dividends from Morgan Stanley
Dean Witter U.F., Inc. 0 0 0 0 0 0
Expenses:
Mortality and other expenses $85,441 137,660 $23,432 26,846 13,189 69,327
------ ------- ------ ------ ------ ------
Net investment income (85,441) (99,569) (23,432) 53,482 (10,487) 125,494
------- ------- ------- ------ ------- -------
Realized and Unrealized Gain
(Loss ) on Investments
Net realized gain (loss) on sales
of investments 111,115 100,795 24,347 0 (17,373) 44,914
------- ------- ------ - ------- ------
Net unrealized appreciation
(depreciation ) on investments
Beginning of period (26,304) 257,270 3,760 0 (203,633) (22,600)
End of period 14,999 1,083,136 96,589 0 0 1,148,680
------ --------- ------ - - ---------
Net unrealized appreciation
(depreciation) during period 41,303 825,866 92,829 0 203,633 1,171,280
------ ------- ------ - ------- ---------
Net Realized and Unrealized Gain
(Loss) on Investments 152,418 926,661 117,176 0 186,260 1,216,194
------- ------- ------- - ------- ---------
Net Increase (Decrease) in Net
Assets Resulting from Operations $66,977 $827,092 $93,744 $53,482 $175,773 $1,341,688
====== ======= ====== ====== ======= =========
<FN>
(1) Formerly Strong International Stock
Sub-Account
</FN>
</TABLE>
(Continued on next page)
See Notes to Financial Statements
<TABLE>
<CAPTION>
LPLA SEPARATE ACCOUNT ONE
STATEMENT OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
Morgan Stanley
Lexington Morgan Stanley Dean Witter U.F. Morgan Stanley
Robertson Stephens Corporate BT Equity Dean Witter U.F. Emerging Dean Witter U.F.
Diversified Growth Leaders 500 Index International Magnum Markets Equity High Yield
Sub-Account Sub-Account Sub-Account(2) Sub-Account(2) Sub-Account(2) Sub-Account(2)
----------- ----------- ----------- ----------- ----------- -----------
Income and Expenses
Income:
Dividends from the LPT Variable
<S> <C> <C> <C> <C> <C> <C>
Insurance Series Trust 0 $14,110 0 0 0 0
Dividends from BT Insurance
Funds Trust 0 0 $43,968 0 0 0
Dividends from Morgan Stanley
Dean Witter U.F., Inc. 0 0 0 $11,335 $456 $27,873
Expenses:
Mortality and other expenses $71,773 90,079 5,895 13,883 619 3,448
------ ------ ----- ------ --- -----
Net investment income (71,773) (75,969) 38,073 (2,548) (163) 24,425
------- ------- ------ ------ ---- ------
Realized and Unrealized Gain
(Loss) on Investments
Net realized gain (loss) on sales
of investments 55,700 59,981 15,691 (10,481) (5,470) 29,538
------ ------ ------ ------- ------ ------
Net unrealized appreciation
(depreciation) on investments
Beginning of period 344,221 (46,190) 0 0 0 0
End of period 1,196,899 512,465 166,882 (110,842) (8,716) (7,607)
--------- ------- ------- -------- ------ ------
Net unrealized appreciation
(depreciation) during period 852,678 558,655 166,882 (110,842) (8,716) (7,607)
------- ------- ------- -------- ------ ------
Net Realized and Unrealized
Gain (Loss) on Investments 908,378 618,636 182,573 (121,323) (14,186) 21,931
------- ------- ------- -------- ------- ------
Net Increase (Decrease)in Net
Assets Resulting from Operations $836,605 $542,667 $220,646 $(123,871) $(14,349) $46,356
======= ======= ======= ======== ======= ======
<FN>
(2) For the period May 4, 1998 (inception date) to December 31, 1998
</FN>
</TABLE>
See Notes to Financial Statements
<TABLE>
<CAPTION>
LPLA SEPARATE ACCOUNT ONE
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
Harris MFS Berkeley
Associates Total U.S. Berkeley Money International Strong
Value Return Quality Bond Market Stock Growth
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account (1) Sub-Account
----------- ----------- ----------- ----------- --------------- -----------
Increase (Decrease) in Net Assets
from Operations
<S> <C> <C> <C> <C> <C> <C>
Net investments income $(85,441) $(99,569) $(23,432) $53,482 $(10,487) $125,494
Net realized gain (loss) on sales
of investments 111,115 100,795 24,347 0 (17,373) 44,914
Net unrealized appreciation
(depreciation) during the year 41,303 825,866 92,829 0 203,633 1,171,280
------ ------- ------ - ------- ---------
Net increase (decrease) in net assets
resulting from operations 66,977 827,092 93,744 53,482 175,773 1,341,688
------ ------- ------ ------ ------- ---------
Contract Related Transactions
Net premiums 1,311,201 1,879,093 624,534 14,104,609 70,916 942,178
Benefits and contract charges (384,443) (614,365) (52,116) (72,987) (61,285) (286,584)
Transfers between Sub-Accounts
(including fixed account),
net 2,706,447 3,700,606 230,386 (14,154,086) (1,435,482) 1,936,612
--------- --------- ------- ----------- ---------- ---------
Net increase in net assets
resulting from contract
related transactions 3,633,205 4,965,334 802,804 (122,464) (1,425,851) 2,592,206
--------- --------- ------- -------- ---------- ---------
Change in amount retained by
London Pacific Life & Annuity
LPLA Separate Account One, net (3,470) (12,884) (7,803) 0 113,617 (70,669)
------ ------- ------ - ------- -------
Increase (Decrease)in Net Assets 3,696,712 5,779,542 888,745 (68,982) (1,136,461) 3,863,225
Net Assets, Beginning of Period 3,397,651 5,848,164 956,897 1,373,157 1,136,461 2,662,226
--------- --------- ------- --------- --------- ---------
Net Assets, End of Period $7,094,363 $11,627,706 $1,845,642 $1,304,175 $0 $6,525,451
========= ========== ========= ========= = =========
<FN>
(1)Formerly Strong International Stock Sub-Account
</FN>
</TABLE>
(Continued on next page)
See Notes to Financial Statements
<TABLE>
<CAPTION>
LPLA SEPARATE ACCOUNT ONE
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
Morgan Stanley
Lexington Morgan Stanley Dean Witter U.F. Morgan Stanley
Robertson Stephens Corporate BT Equity Dean Witter U.F. Emerging Dean Witter U.F.
Diversified Growth Leaders 500 Index International Magnum Markets Equity High Yield
Sub-Account Sub-Account Sub-Account(2) Sub-Account(2) Sub-Account(2) Sub-Account(2)
----------- ----------- ----------- ----------- ----------- -----------
Increase (Decrease) in Net Assets
from Operations
<S> <C> <C> <C> <C> <C> <C>
Net investment income $(71,773) $(75,969) $38,073 $(2,548) $(163) $24,425
Net realized gain (loss) on
sales of investments 55,700 59,981 15,691 (10,481) (5,470) 29,538
Net unrealized appreciation
(depreciation)during the year 852,678 558,655 166,882 (110,842) (8,716) (7,607)
------- ------- ------- -------- ------ ------
Net increase(decrease) in net assets
resulting from operations 836,605 542,667 220,646 (123,871) (14,349) 46,356
------- ------- ------- -------- ------- ------
Contract Related Transaction:
Net premiums 1,068,730 1,521,553 243,108 230,477 17,687 311,229
Benefits and contract charges(329,799) (328,127) (135,660) (62,419) (805) (99,190)
Transfers between Sub-Accounts
(including fixed account),
net 1,639,033 2,979,341 1,403,101 2,102,457 70,702 160,319
--------- --------- --------- --------- ------ -------
Net increase in net assets
resulting from contact
related transactions 2,377,964 4,172,767 1,510,549 2,270,515 87,584 372,358
--------- --------- --------- --------- ------ -------
Change in amount retained by
London Pacific Life & Annuity
LPLA Separate Account One,
net (16,335) (36,598) (27,350) (22,743) (17,471) (24,883)
------- ------- ------- ------- ------- -------
Increase (Decrease) in
Net Assets 3,198,234 4,678,836 1,703,845 2,123,901 55,764 393,831
Net Assets, Beginning
of Period 2,894,066 3,328,305 0 0 0 0
--------- --------- - - - -
Net Assets, End of Period $6,092,300 $8,007,141 $1,703,845 $2,123,901 $55,764 $393,831
========= ========= ========= ========= ====== =======
<FN>
(2) For the period May 4, 1998 (inception date) to December 31, 1998
</FN>
</TABLE>
See Notes to Financial Statements
<TABLE>
<CAPTION>
LPLA SEPARATE ACCOUNT ONE
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
Berkeley Strong
Harris MFS Total U.S. Berkeley International
Associates Value Return Quality Bond Money Market Stock
Sub-Account (1) Sub-Account Sub-Account(2) Sub-Account(3) Sub-Account
--------------- ----------- -------------- -------------- -----------
Increase (Decrease) in Net Assets
from Operations
<S> <C> <C> <C> <C> <C>
Net investment income $312,852 $139,587 $70,220 $41,393 $48,381
Net realized gain (loss) on sales
of investments 61,876 52,774 7,612 0 8,762
Net unrealized appreciation
(depreciation) during the year (66,476) 237,322 3,114 0 (205,740)
------- ------- ----- - --------
Net increase (decrease) in net assets
resulting from operations 308,252 429,683 80,946 41,393 (148,597)
------- ------- ------ ------ --------
Contract Related Transactions:
Net premiums 448,289 679,593 187,734 14,102,512 239,002
Benefits and contract charges (32,555) (135,077) (37,173) (14,603) (67,415)
Transfers between Sub-Accounts
(including fixed account), net 2,093,609 3,991,383 (65,908) (13,038,636) 661,907
--------- --------- ------- ----------- -------
Net increase in net assets resulting
from contract related transactions 2,509,343 4,535,899 84,653 1,049,273 833,494
--------- --------- ------ --------- -------
Change in amount retained by
London Pacific Life & Annuity
LPLA Separate Account One, net (33,183) (24,781) (7,123) (5,183) 19,523
------- ------- ------ ------ ------
Increase in Net Assets 2,784,412 4,940,801 158,476 1,085,483 704,420
Net Assets, Beginning of Period 613,239 907,363 798,421 287,674 432,041
------- ------- ------- ------- -------
Net Assets, End of Period $3,397,651 $5,848,164 $956,897 $1,373,157 $1,136,461
========== ========== ======== ========== ==========
<FN>
(1) Formerly MAS Value Sub-Account
(2) Formerly Salomon U.S. Quality Bond Sub-Account
(3) Formerly Salomon Money Market Sub-Account
</FN>
</TABLE>
See Notes to Financial Statements
<TABLE>
<CAPTION>
LPLA SEPARATE ACCOUNT ONE
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
Strong Robertson Stephens Lexington
Growth Diversified Growth Corporate Leaders
Sub-Account Sub-Account (4) Sub-Account
----------- --------------- -----------
Increase (Decrease) in Net Assets
from Operations
<S> <C> <C> <C>
Net investment income $250,058 ($19,749) $198,248
Net realized gain (loss) on sales
of investments 89,791 (130,610) 69,824
Net unrealized appreciation
(depreciation) during the year (16,940) 486,918 (70,779)
------- ------- -----
Net increase (decrease) in net assets
resulting from operations 322,909 336,559 197,293
------- ------- -------
Contract Related Transactions:
Net premiums 474,217 381,037 460,740
Benefits and contract charges (61,170) (95,133) (95,125)
Transfers between Sub-Accounts
(including fixed account), net 1,398,404 1,745,826 2,450,950
--------- --------- ---------
Net increase in net assets resulting
from contract related transactions 1,811,451 2,031,730 2,816,565
--------- --------- ---------
Change in amount retained by
London Pacific Life & Annuity
LPLA Separate Account One, net (34,493) (17,746) (30,058)
------- ------- -------
Increase in Net Assets 2,099,867 2,350,543 2,983,800
Net Assets, Beginning of Period 562,359 543,523 344,505
------- ------- -------
Net Assets, End of Period $2,662,226 $2,894,066 $3,328,305
========== ========== ==========
<FN>
(4) Formerly Berkeley Smaller Companies Sub-Account
</FN>
</TABLE>
See Notes to Financial Statements
LPLA SEPARATE ACCOUNT ONE
Notes to Financial Statements
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 in a corresponding investment portfolio of: (1)
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; (2) the BT Insurance Funds Trust; or (3) Morgan
Stanley Dean Witter Universal Funds, Inc. (collectively, the "Trusts").
Prior to May 1, 1997, the Harris Associates Sub-Account was known as the MAS
Value Sub-Account and the Robertson Stephens Diversified Growth Sub-Account was
known as the Berkeley Smaller Companies Sub-Account. Prior to November 3, 1997,
the Berkeley Money Market Sub-Account was known as the Salomon Money Market
Sub-Account and the Berkeley U.S. Quality Bond Sub-Account was known as the
Salomon U.S. Quality Bond Sub-Account. Prior to June 1, 1998, the International
Stock Sub-Account was known as the Strong International Stock Sub-Account. The
International Sub-Account was liquidated on October 31, 1998.
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 Trusts. Realized gains and losses on
sales of shares of the Trusts 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 Trusts.
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.
NOTE 3 - Investments
The number of shares owned, aggregate cost, and net asset value per share of
each Sub-Account's investment in the Trusts at December 31,1998 were as follows:
<TABLE>
<CAPTION>
Net Asset Value
Investment Sub-Account Shares Cost Per Share
- ---------------------- ------ ---- ---------
<S> <C> <C> <C>
Harris Associates Value 514,791 $7,207,834 $14.03
MFS Total Return 823,663 10,682,454 14.28
Berkeley U.S. Quality Bond 185,153 1,881,857 10.69
Berkeley Money Market 1,304,175 1,304,175 1.00
Strong Growth 402,026 5,697,440 17.03
Robertson Stephens Diversified Growth 521,422 5,060,734 12.00
Lexington Corporate Leaders 545,704 7,656,275 14.97
BT Equity 500 Index 135,993 1,564,314 12.73
Morgan Stanley Dean Witter U.F. International Magnum 191,153 2,257,486 11.23
Morgan Stanley Dean Witter U.F. Emerging Markets Equity 10,300 81,950 7.11
Morgan Stanley Dean Witter U.F. High Yield 40,455 426,321 10.35
</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
NOTE 5 - Changes in Units Outstanding
Changes in units outstanding for the year ended December 31, 1998 were as
follows:
<TABLE>
<CAPTION>
Units Units Units Net
Investment Sub-Account Purchased Transferred Redeemed Change
- ---------------------- --------- ----------- -------- ------
<S> <C> <C> <C> <C>
Harris Associates Value 87,725 170,013 (25,353) 232,385
MFS Total Return 134,884 265,201 (44,577) 355,508
Berkeley U.S. Quality Bond 54,496 21,017 (4,543) 70,970
Berkeley Money Market 1,295,765 (1,298,833) (6,872) (9,940)
International Stock 7,248 (123,674) (6,065) (122,491)
Strong Growth 56,265 115,358 (17,317) 154,306
Robertson Stephens Diversified Growth 89,990 131,337 (27,183) 194,144
Lexington Corporate Leaders 103,457 194,009 (21,685) 275,781
BT Equity 500 Index 24,415 144,321 (12,998) 155,738
Morgan Stanley Dean Witter U.F. International Magnum 24,991 215,645 (7,166) 233,470
Morgan Stanley Dean Witter U.F. Emerging Markets Equity 2,670 5,418 (108) 7,980
Morgan Stanley Dean Witter U.F. High Yield 32,182 17,334 (9,948) 39,568
</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
contributions to the Separate Account, the underlying investment results and
amounts withdrawn by the Company. 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
NOTE 8 - Purchases and Sales of Securities
Cost of purchases and proceeds from sales of the Trusts shares by the Separate
Account during the year ended December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Investment Sub-Account Purchases Sales
- ---------------------- --------- -----
<S> <C> <C>
Harris Associates Value $4,362,618 $814,854
MFS Total Return 5,385,507 519,742
Berkeley U.S. Quality Bond 1,116,585 337,213
Berkeley Money Market 10,069,719 10,138,701
International Stock 367,299 1,803,637
Strong Growth 3,068,321 350,621
Robertson Stephens Diversified Growth 2,675,347 369,156
Lexington Corporate Leaders 4,387,183 290,385
BT Equity 500 Index 1,862,527 313,905
Morgan Stanley Dean Witter U.F. International Magnum 2,362,145 94,178
Morgan Stanley Dean Witter U.F. Emerging Markets Equity 100,272 12,851
Morgan Stanley Dean Witter U.F. High Yield 1,088,977 692,194
</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
(Harris Associates Value, MFS Total Return, Berkeley U.S. Quality Bond, Berkeley
Money Market, International Stock, Strong Growth, Robertson Stephens Diversified
Growth , Lexington Corporate Leaders, BT Equity 500 Index, Morgan Stanley Dean
Witter U.F. International Magnum, Morgan Stanley Dean Witter U.F. Emerging
Markets Equity and Morgan Stanley Dean Witter U.F. High Yield) constituting LPLA
Separate Account One at December 31, 1998, the results of each of their
operations and the changes in each of their net assets for the periods
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 at December 31, 1998 by correspondence with the
Trusts, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 6, 1999
London Pacific Life & Annuity Company
(A wholly-owned subsidiary of London Pacific Group Limited)
Statutory Basis Financial Statements
Years ended December 31, 1998, 1997 and 1996
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
Supplementary Information
Report of Independent Accountants on Supplemental Schedule of
Assets and Liabilities................................................... 21
Schedule 1 - Supplemental Schedule of Assets and Liabilities.............. 22-24
Report of Independent Accountants
To the Board of Directors and Shareholder of
London Pacific Life & Annuity Company
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, 1998
and 1997, 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, 1998. 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.
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, 1998
and 1997, or the results of its operations or its cash flows for each of the
three years in the period ended December 31, 1998 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.
PricewaterhouseCoopers LLP
Raleigh, North Carolina
January 29, 1999
<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,
------------
1998 1997
---- ----
Assets
Investments:
<S> <C> <C>
Bonds $ 1,079,610,476 $ 1,157,095,942
Preferred stock 115,693,328 51,262,033
Common stock 46,252,918 8,477,904
Short-term investments 19,251,573 11,694,690
Policy loans 9.829,719 8,487,559
Other invested assets 20,683,278 -
Receivable for securities 66,995 21,836,311
------ ----------
Total investments 1,291,388,287 1,258,854,439
------------- -------------
Cash 2,704,561 3,347,694
--------- ---------
Total cash and invested assets 1,294,092,848 1,262,202,133
Investment income due and accrued 18,769,336 16,790,319
Electronic data processing equipment, net 69,265 185,870
Receivable from affiliates 6,089 11,503
Other assets 24,123,109 696,682
Separate account assets 47,913,325 22,609,542
---------- ----------
Total assets $1,384,973,972 $1,302,496,049
============== ==============
Liabiliites, Capital and Surplus
Aggregate reserves for life policies and contracts $1,200,939,291 $1,132,728,673
Policy and contract claims 456,424 354,014
Accrued dividends to policyholders 436,814 433,099
Interest maintenance reserve 18,326,723 17,684,781
Federal income taxes (refundable) payable (1,733,125) 3,283,673
Remittances and items not allocated 1.373,171 419,689
Asset valuation reserve 39,037,080 24,184,363
Payable to affiliates 381,529 720,136
Amounts due to broker-dealers - 20,558,221
Accounts payable, accrued expenses and other liabilities 1,445,232 1,184,201
Transfers to separate account, net (2,778,943) (1,330,627)
Separate account liabilities 46,774,118 21,596,927
---------- ----------
Total liabilities $1,304,658,314 $1,221,817,150
============== ==============
Commitments and contingent liabilities
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 70,394,120
Unassigned surplus 7,921,538 8,284,779
--------- ---------
Total capital and surplus 80,315,658 80,678,899
---------- ----------
Total liabilities, capital and surplus $1,384,973,972 $1,302,496,049
============== ==============
</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,
-----------------------
1998 1997 1996
---- ---- ----
Revenues
Insurance premiums and annuity
<S> <C> <C> <C>
considerations $218,217,846 $176,547,838 $137,499,919
Net investment income 89,420,046 88,797,926 91,013,416
Amortization of interest maintenance reserve 2,054,884 2,306,437 683,806
Net gain from operations from separate account 126,592 133,043 120,319
Other income 821,309 552,225 287,470
------- ------- -------
Total revenues 310,640,677 268,337,469 229,604,930
----------- ----------- -----------
Benefits and expenses
Policyholder benefits and changes in reserve 263,063,811 226,126,436 196,153,897
Commissions 14,474,451 11,156,421 8,531,145
Net transfer to separate account 19,809,661 14,607,074 4,175,745
Other operating expenses 11,529,486 11,819,652 12,844,370
---------- ---------- ----------
Total benefits and expenses 308,877,409 263,709,583 221,705,157
----------- ----------- -----------
Gain from operations before dividends to
policyholders, federal income taxes and
net realized capital gains (losses) 1,763,268 4,627,886 7,899,773
Dividends to policyholders 866,445 930,165 915,864
------- ------- -------
Gains from operations, before federal income taxes
and net realized capital gains (losses) 896,823 3,697,721 6,983,909
Federal income tax expense (benefit) (excluding
tax on capital gains (losses)) (2,300,416) (2,212,021) 991,257
---------- ---------- -------
Gain from operations before net realized capital
gains (losses) 3,197,239 5,909,742 5,992,652
Net realized capital gains (losses), less capital gains
tax of $2,757,516, $4,852,562 and $4,617,743
and excluding $2,696,826, $8,322,727, and
$1,976,127 transferred to the IMR in 1998, 1997
and 1996, respectively. (3,063,974) 1,044,541 988,636
---------- --------- -------
Net income $ 133,265 $ 6,954,283 $ 6,981,288
========== ============ ============
</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
Paid-in and
Capital contributed Unassigned
stock surplus surplus Total
----- ------- ------- -----
<S> <C> <C> <C> <C>
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
Net income 6,954,283 6,954,283
Increase in unrealized capital losses (886,116) (886,116)
Increase in non-admitted assets (184,000) (184,000)
Decrease in asset valuation reserve 4,949,399 4,949,399
Dividends to stockholder (5,992,000) (5,992,000)
--------- ---------- ---------- ----------
Balance as of December 31, 1997 2,000,000 70,394,120 8,284,779 80,678,899
Net income 133,265 133,265
Increase in unrealized capital gains 20,246,568 20,246,568
Decrease in non-admitted assets 9,643 9,643
Increase in asset valuation reserve (14,852,717) (14,852,717)
Dividends to stockholder (5,900,000) (5,900,000)
---------- ------------ ---------- ----------
Balance as of December 31, 1998 $2,000,000 $ 70,394,120 $ 7,921,538 $ 80,315,658
========== ============ =========== ============
</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,
-----------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash provided by:
Premiums and annuity considerations
collected $ 218,217,846 $ 176,547,838 $137,499,919
Investment income received (excluding
realized gains/losses and net of investment
expenses) 80,811,293 84,805,153 95,583,016
Other income received 821,309 552,390 287,305
------- ------- -------
Total cash provided by operations 299,850,448 261,905,381 233,370,240
----------- ----------- -----------
Cash used for:
Life and accident and health claims paid 894,411 1,266,207 832,760
Surrender benefits and other fund
withdrawals paid 140,910,187 136,308,194 110,213,086
Other benefits to policyholders paid 52,946,186 53,647,576 54,325,262
---------- ---------- ----------
194,750,784 191,221,977 165,371,108
----------- ----------- -----------
Commissions and other expenses paid 25,731,833 23,639,673 20,570,531
---------- ---------- ----------
Net transfers to separate account 21,257,977 15,431,650 5,441,049
Dividends to policyholders paid 862,730 919,396 1,020,952
Federal income taxes (recoverable) paid
(excluding tax on capital gains) 2,716,382 (1,497,477) (999,143)
--------- ---------- --------
Total cash used for operations 245,319,706 229,715,219 191,404,497
----------- ----------- -----------
Net cash provided by operations 54,530,742 32,190,162 41,965,743
---------- ---------- ----------
Proceeds from investments sold, matured or
repaid:
Bonds 645,481,099 758,322,204 651,187,776
Stocks 29,082,052 23,444,566 105,201,117
Other proceeds - 1,403,827 15,922
---------- --------- ------
674,563,151 783,170,597 756,404,815
Tax on capital gains (2,757,516) (4,825,562) (4,617,743)
---------- ---------- ----------
Total investment proceeds 671,805,635 778,345,035 751,787,072
----------- ----------- -----------
</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,
-----------------------
1998 1997 1996
---- ---- ----
Cost of investments acquired:
<S> <C> <C> <C>
Bonds 588,146,927 762,123,622 735,812,956
Stocks 81,870,393 59,641,808 112,429,288
Other invested assets 20,683,278 - -
Miscellaneous other - 709,824 52,218
---------- ------- ------
Total investments acquired 690,700,598 822,475,254 848,294,462
Net increase in policy loans 1,342,160 2,192,748 1,838,835
--------- --------- ---------
Net cash from investments (20,237,123) (46,322,967) (98,346,225)
----------- ----------- -----------
Cash from financing and miscellaneous
sources:
Capital and surplus paid in - - 22,000,000
Other cash provided 1,130,513 32,627,192 116,248,250
Dividends to stockholder paid (5,900,000) (5,992,000) -
Other cash applied (22,610,382) (111,717,985) (40,021,732)
----------- ------------ -----------
Net cash from financing and
miscellaneous sources (27,379,869) (85,082,793) 98,226,518
----------- ----------- ----------
Net change in cash and short-term investments 6,913,750 (99,215,598) 41,846,036
--------- ----------- ----------
Cash and short-term investments:
Beginning of year 15,042,384 114,257,982 72,411,946
---------- ----------- ----------
End of year $ 21,956,134 $ 15,042,384 $ 114,257,982
============ ============ =============
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Income taxes $ 5,551,869 $ 3,381,115 $ 3,664,978
</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, Oklahoma 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, 1998, the
carrying value of the Company's investment in subsidiaries was $13,092,025.
Short-term investments are carried at cost which approximates market value.
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, 1998, there were no open contracts. 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 $2,198,459 and $2,000,381 at December 31, 1998 and 1997.
Depreciation is provided using the straight-line method over the estimated
useful life of five years. Depreciation expense amounted to $198,078, $217,118
and $272,204 for the years ended December 31, 1998, 1997 and 1996.
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 $324,472 and $243,843 related to death benefits
payable on life and annuity contracts have been accrued at December 31, 1998 and
1997. The remaining policy and contract claims of $131,952 and $110,171 at
December 31, 1998 and 1997 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 contract holder, 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.
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:
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 statutory required interest and
mortality assumptions rather than estimated expected experience or actual
account balances.
Income Taxes
Deferred income taxes are not provided for differences between the financial
statement amounts and the tax bases of assets and liabilities.
3. Non-Admitted Assets
Certain assets, designated as non-admitted assets, have been excluded from
admitted assets and charged against capital and surplus as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Invested assets $151,723 $5,557,783
Electronic data processing equipment 393,216 244,471
Furniture and equipment 206,690 274,564
Other 30,021 120,535
------ -------
Total Non-Admitted Assets $781,650 $6,197,353
======== ==========
</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, 1998, 1997 and 1996 totaling $0, $0 and $22,000,000,
respectively, principally in the form of investments and related accrued
interest. During 1998, the Company made a $6,529,494 capital contribution to the
Marketing Company in the form of a debt security.
Expenses
The Company receives investment advisory services under the terms of an
investment management agreement with Berkeley Institutional Investment, Inc.
(BIII), an affiliate. Fees charged to the Company under the agreement amounted
to $5,824,767, $5,742,889 and $5,578,673 during the years ended December 31,
1998, 1997, and 1996, respectively.
Under the terms of a cost-sharing agreement, the Company has agreed to reimburse
Berkeley International Capital Corporation, ("BICC"), an affiliate, for certain
expenses incurred on behalf of the Company. For the year ended December 31,
1998, 1997, and 1996, the Company paid $535,581, $745,344 and $87,060,
respectively, to BICC.
Commissions on insurance business produced for the Company by its agents are
paid by the Marketing Company, the exclusive master general agent for the
Company. All of the Company's universal life and fixed annuity business is
written through the Marketing Company. For the years ended December 31, 1998,
1997, and 1996, the Company paid commissions of $12,740,349, $9,905,064 and
$8,261,301, respectively, to the Marketing Company (and the Marketing Company
paid commissions to agents of approximately $12,740,349, $9,905,064 and
$8,261,301, respectively).
The Company has payables to affiliates of $381,529 and $720,136 at December 31,
1998 and 1997, respectively, relating to these transactions.
The Company leases certain office space and equipment to Select Advisors, Inc.,
("Select"), an affiliate. During 1998 and 1997, the Company received rental
income of $290,871 and $188,994, respectively, from Select.
The Company acquired and disposed of securities with affiliates BG Securities
Limited ("BGSL") and Berkeley (USA) Holding Limited ("BHL"), during the year as
follows:
<TABLE>
<CAPTION>
Acquisitions
Bonds Transfer Date Consideration From
----- ------------- ------------- ----
<S> <C> <C> <C> <C> <C> <C>
Hybrid Networks, Inc: 12%, due 4/2002 4-30-98 $5,500,000 BGSL
Continuus Software Co.; 12%, due 9/2002 8-10-98 6,000,000 BGSL
$11,500,000
Equities
--------
Adeza Biomedical Corp., Series 1 4-30-98 $500,000 BGSL
Dispositions
Bonds Transfer Date Consideration To
----- ------------- ------------- --
Continuus Software Co.; 12%, due 9/2002 4-30-98 $6,000,000 BGSL
PGI,Inc.; 12%, due 5/2002 12-31-98 12,000,000 BGSL
$18,000,000
Equities
--------
Vina Technologies,Inc.; Series B & C 12-31-98 $11,380,692 BGSL
</TABLE>
As of December 31, 1998, the Company had investments in bonds issued by
affiliates as follows:
<TABLE>
<CAPTION>
Statement
Issuer Coupon Maturity Value
------ ------ -------- -----
<S> <C> <C> <C>
Catalina Furniture Company 13.00% 06/02 $ 4,000,000
Select Advisors, Inc. 7.00% 11/99 $ 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 five 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, (4) exclusion of IMR amortization, and (5) differences in
timing for the deduction of accrued expenses.
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 discount rates of
5.5% - 4.0%. 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 5.25% for 1998 issues and 5.50% for 1997 and 1996 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 annuity and mortality table and with a discount rate of
6.25% for 1998 and 6.75% for 1997 and 1996.
The withdrawal characteristics of annuity actuarial reserves and deposit
liabilities at December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
Subject to discretionary withdrawal with
<S> <C> <C> <C> <C>
Market value adjustment $4,778,568 0.40% $ - 0.00%
Subject to discretionary withdrawal at book
value less surrender charge of 5% or more 579,276,921 48.48% 465,856,317 42.21%
Subject to discretionary withdrawal at book
value less surrender charge greater than
0% but less than 5% 448,254,936 37.53% 467,548,853 42.36%
Subject to discretionary withdrawal at book
value with no surrender charge 19,839,689 1.66% 18,944,526 1.72%
Not subject to discretionary withdrawal 142,571,259 11.93% 151,396,771 13.71%
----------- ----- ----------- -----
$1,194,721,373 100% $1,103,746,467 100%
============== === ============== ===
</TABLE>
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, 1998 December 31, 1997
----------------- -----------------
Statement Percent Statement Percent
NAIC Category Value of Total Value of Total
------------- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C>
1 - Highest quality $ 428,372,871 39.68% $ 635,602,909 54.93%
2 - High quality 470,345,693 43.57 362,777,042 31.35
3 - Medium quality 94,990,427 8.80 76,456,905 6.61
4 - Low quality 49,381,718 4.57 58,310,711 5.04
5 - Lower quality 36,519,767 3.38 13,267,848 1.15
6 - Debt securities in or
near default 10,680,527 0.92
-------------- ---- ---------- ----
$1,079,610,476 100% $1,157,095,942 100%
============== === ============== ===
</TABLE>
The cost or amortized cost and the fair, or comparable value of investments
in debt securities are as follows:
<TABLE>
<CAPTION>
Cost or Gross Unrealized
December 31, 1998 Amortized Cost Gains Losses Fair Value
----------------- -------------- ----- ------ ----------
U.S. Government
<S> <C> <C> <C> <C>
obligations $ 3,219,914 $ 229,186 $ - $ 3,449,100
Obligations of states
and political subdivisions 5,265,374 143,104 - 5,408,478
Corporate securities 781,196,584 6,525,279 ( 14,240,334) 773,481,529
Other debt securities 47,810,342 36,745 ( 292) 47,846,795
Mortgage-backed securities 242,118,262 - - 242,118,262
----------- ----------- ------------ -----------
$1,079,610,476 $ 6,934,314 ($14,240,626) $1,072,304,164
============== =========== ============ ==============
</TABLE>
<TABLE>
<CAPTION>
Cost or Gross Unrealized
December 31, 1997 Amortized Cost Gains Losses Fair Value
----------------- -------------- ----- ------ ----------
U.S. Government
<S> <C> <C> <C> <C>
obligations $ 8,220,444 $ 128,216 ($ 3,560) $ 8,345,100
Obligations of states
and political subdivisions 5,068,119 28,221 - 5,096,340
Corporate securities 704,295,379 4,004,751 ( 1,753,246) 706,546,884
Other debt securities 51,306,693 4,868 ( 3,710) 51,307,851
Mortgage-backed securities 388,205,307 - - 388,205,307
----------- ---------- ----------- -----------
$1,157,095,942 $4,166,056 ($1,760,516) $1,159,501,482
============== ========== =========== ==============
</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, 1998 and
1997, the fair value of investments in debt securities includes
$511,199,170 and $823,054,516, 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, 1998, 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, 1998, by contractual
maturity, is as follows:
<TABLE>
<CAPTION>
Cost or
Maturity: Amortized Cost Fair Value
--------- -------------- ----------
<S> <C> <C> <C>
In 1999 $ 10,233,282 $ 10,287,954
In 2000-2003 187,647,331 188,168,207
In 2004-2008 328,666,904 324,251,852
After 2008 310,944,697 307,477,889
Mortgage-backed securities 242,118,262 242,118,262
----------- -----------
Total $1,079,610,476 $1,072,304,164
============== ==============
</TABLE>
Proceeds from sales of investments in fixed maturities and related gross
gains and losses on those sales are as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1998 December 31, 1997 December 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Proceeds from sales $645,481,099 $758,322,204 $651,187,776
Gross realized gains $ 7,688,430 $13,454,190 $13,725,509
Gross realized losses $ 9,091,536 $ 1,537,996 $ 9,195,257
</TABLE>
At December 31, 1998, debt securities with an admitted asset value of
$10,159,944 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>
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
At December 31, 1998
<S> <C> <C> <C> <C>
Preferred stocks $73,836,981 $ - $ - $ 73,836,981
Common stocks 26,789,515 21,836,620 (2,373,217) 46,252,918
---------- ---------- ---------- ----------
Total $100,626,496 $ 21,836,620 ($2,373,217) $120,089,899
============ ============ =========== ============
At December 31, 1997
Preferred stocks $41,355,002 $ - $ - $ 41,355,002
Common stocks 9,363,323 1,455,866 (2,341,285) 8,477,904
--------- --------- ---------- ---------
Total $50,718,325 $ 1,455,866 ($2,341,285) $ 49,832,906
=========== =========== =========== ============
</TABLE>
8. Investment Income
An analysis of the Company's net investment income is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Interest on debt securities $84,560,205 $91,803,407 $94,149,963
Interest on short-term investments 576,053 1,840,299 787,618
Interest on cash on hand and on deposit 231,075 268,480 375,723
Equity in undistributed earnings of subsidiaries 5,590,498 37,168 (39,151)
Other investment income 5,036,371 1,696,372 1,532,466
--------- --------- ---------
Gross investment income 95,994,202 95,645,726 96,806,619
Less investment expenses (6,574,157) (6,847,800) (5,793,203)
---------- ---------- ----------
Net investment income $89,420,045 $88,797,926 $91,013,416
=========== =========== ===========
</TABLE>
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, 1998 and 1997 totaled $41,489,000 and $42,496,000
or 11.4% and 11.2% 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 1999 without the
Insurance Commissioner's approval is $3,197,239.
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, 1998, the adjusted capital and
surplus of the Company is substantially in excess of the minimum level of
RBC that would require regulatory response.
11. 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 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, 1998, 1997 and 1996 was to
defer total net capital gains of $20,381,606, $19,991,216 and $12,352,297,
respectively, and to recognize $2,054,884, $2,306,437 and $683,806,
respectively, of IMR amortization into income.
12. 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, 1998 December 31, 1997
--------------------- -------------------- -------------------- ---------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
--------------------- -------------------- -------------------- ---------------------
Assets:
<S> <C> <C> <C> <C>
Debt securities $ 1,079,610,476 $1,076,633,837 $ 1,157,095,942 $1,171,666,397
Redeemable preferred
stock $ 41,856,347 $ 40,283,550 $ 9,907,031 $ 10,607,958
Liabilities:
Insurance and annuity
reserves $ 1,195,553,184 $1,216,367,799 $1,130,22 1,744 $1,149,093,067
</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.
13. Concentrations of Credit Risk
At December 31, 1998, the Company held unrated or less-than-investment
grade corporate bonds of $181,851,912. Those holdings amounted to 16.8% of
the Company's investments in bonds and less than 13.6% 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.
14. Reconciliation of Net Transfers To or (From) Separate Account
Transfers are reported in the Summary of Operations of the Separate Account
Statement:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1998 1997
---- ----
<S> <C> <C>
Transfers to separate account $23,664,751 $16,973,122
Transfers from separate account 4,417,686 2,527,210
Net transfers to or (from) separate account 19,247,065 14,445,912
---------- ----------
Reconciling Adjustments: Mortality & Expense Fees 562,596 161,162
------- -------
Transfers as reported in the Statutory Summary of Operations
of the Company $19,809,661 $14,607,074
=========== ===========
</TABLE>
15. Deferred Compensation Arrangements
Certain agents producing business for the Company participate in a stock
appreciation rights plan sponsored by the Parent. The rights vest over a five
year period based on the persistency of certain levels of policyholder account
values assigned to the agent and the agent remaining active with the Company.
The Parent will reimburse the Company for any plan benefits as they are
withdrawn by the participating agents. There were no plan benefits accrued or
paid in 1998 or 1997 and 7% of the plan benefits were vested as of December 31,
1998.
Certain members of Company management are eligible to participate in a
contributory deferred compensation plan sponsored by BHL. Compensation
deferred pursuant to the terms of the plan was $336,514 and $125,408 as of
December 31, 1998 and 1997, respectively.
Certain members of Company management participate in an incentive share
option plan sponsored by the Parent whereby the employee can purchase
shares of the Parent's common stock. Stock options are granted to employees
at a price equal to the fair market value of the stock on the date of
grant. The stock options were granted during the years 1990 through 1998.
As of December 31, 1998 2,746,500 shares of the Parent's common stock were
subject to options granted under the plan with option prices ranging from
$2.15 to $3.86. As of December 31, 1998 options on 377,125 shares of common
stock became exercisable under the plan with option prices ranging from
$3.26 to $3.86. No options were exercised or forfeited during 1998. The
Parent will reimburse the Company for any plan benefits as they are paid.
16. Commitment and Contingent Liabilities
Rental expense for all leases was $568,588, $609,627 and $550,944 for 1998,
1997 and 1996, respectively. Future minimum rental commitments under
noncancelable operating leases for office space and equipment aggregate
$1,417,834 through 2003. The amounts due by year are $779,801 in 1999,
$362,149 in 2000, $122,615 in 2001, $122,615 in 2002, and $30,654
thereafter.
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, 1998,
the Company estimates its net contingent liability for future state
guaranty association assessments is within range of $500,000 to $1,000,000.
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 $889,561, $1,007,354
and $1,674,481 in 1998, 1997 and 1996, respectively.
The Company is, from time to time, involved in various legal actions
concerning policy benefits and certain other matters. Those actions are
considered by the Company in estimating policy reserves and other
liabilities. The Company believes that the resolution of those actions
should not have a material adverse effect on the Company's statutory
surplus.
16. Pending Accounting Pronouncement-Codification of Statutory
Accounting Principles
In March 1998, the National Association of Insurance Commissioners (NAIC)
finalized the Codification of Statutory Accounting Principles which will replace
the current Accounting Practices and Procedures manual as the NAIC's primary
guidance on statutory accounting. The codification, which is effective as of
January 1, 2001, provides guidance for areas where statutory accounting has been
silent and changes current statutory accounting in some areas.
The company does not know if or when the North Carolina Department of Insurance
will adopt the Codification. The Company believes the effect of such adoption
will not have a material adverse effect on the Company's statutory surplus.
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, 1998 and 1997.
3. Statutory Statements of Operations for the Years Ended December 31,
1998, 1997 and 1996.
4. Statutory Statements of Changes in Capital and Surplus for the
Years Ended December 31, 1998, 1997 and 1996.
5. Statutory Statements of Cash Flows for the Years Ended December 31,
1998, 1997 and 1996.
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, 1998.
2. Statement of Operations for the years ended December 31, 1998 and
1997.
3. Statement of Changes in Net Assets for the years ended December 31,
1998 and 1997.
4. Notes to Financial Statements - December 31, 1998.
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(i). Form of Principal Underwriter's Agreement.++
3(ii). Form of Selling Agreement.++
4(i). Form of Individual Variable Single Contribution Immediate Annuity
Contract - Guaranteed Minimum Variable Annuity Payment Version.+
4(ii). Form of Individual Variable Single Contribution Immediate Annuity
Contract - Non-Guaranteed Minimum Variable Annuity Payment Version.++
5(i). Form of Application Form - Guaranteed Minimum Variable Annuity Payment
Contract version.++
5(ii). Form of Application Form - Non-Guaranteed Minimum Variable Annuity
Payment Contract version.++
6.(i) Copy of Articles of Incorporation of the Company.**
(ii) Copy of the Bylaws of the Company.*
7. Not Applicable.
8.(i) Form of Fund Participation Agreement by and among London
Pacific Life & Annuity Company, Morgan Stanley Universal Funds,
Inc., Morgan Stanley Asset Management Inc. and Miller Anderson &
Sherrerd, LLP. ***
(ii) Form of Fund Participation Agreement by and between BT Insurance
Funds Trust, Bankers Trust Company and London Pacific Life &
Annuity Company.+++
(iii) Form of Fund Participation Agreement by and between Federated
Insurance Series and London Pacific Life and Annuity Company.+++
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 Nos. 333-1779
and 811-8890) as electronically filed on March 18, 1996.
** Incorporated by reference to Pre-Effective Amendment No. 1 to Form N-4
(File Nos. 333-1779 and 811-8890) as electronically filed on May 23, 1996.
*** Incorporated by reference to Registrant's Amendment No. 8 to Form N-4
(File Nos. 333-1779 and 811-8890) as electronically filed on April 27, 1998.
+ Incorporated by reference to Registrant's Form N-4 (File Nos. 333- 56513
and 811-8890) as electronically filed on June 10, 1998.
++ Incorporated by reference to Registrant's Pre-Effective Amendment No. 1
to Form N-4 (File Nos. 333-56513 and 811-8890) as electronically filed on
October 8, 1998.
+++ Incorporated by reference to Registrant's Post-Effective Amendment No.
5 to Form-N-4 (File No. 33-87150) as electronically filed on February 17, 1999.
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
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 March 1, 1999, there were no 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
Charles King, 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 Contracts 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 and has caused this
Registration Statement to be signed on its behalf, in the City of Raleigh, and
State of North Carolina on this 26th day of April, 1999.
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>
Chairman of the Board and Director
- ----------------------- ------
Arthur I. Trueger Date
/S/ IAN K. WHITEHEAD President, Chief Executive Officer 4/26/99
- ----------------------- ------
Ian K. Whitehead and Director Date
/S/ GEORGE NICHOLSON Chief Financial Officer, Secretary 4/26/99
- ----------------------- ------
George C. Nicholson and Director Date
</TABLE>
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 2
TO
FORM N-4
FOR
LPLA SEPARATE ACCOUNT ONE
OF
LONDON PACIFIC LIFE & ANNUITY COMPANY
INDEX TO EXHIBITS
EXHIBIT
EX-99.B9 Opinion and Consent of Counsel
EX-99.B10 Consent of Independent Accountants
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06880
(203) 226-7866
April 27, 1999
Board of Directors
London Pacific Life & Annuity Company
3109 Poplarwood Court
Raleigh, NC 27604
Re: Opinion and Consent of Counsel - LPLA Separate Account One
Dear Sir or Madam:
You have requested our Opinion of Counsel in connection with the filing with the
Securities and Exchange Commission of a Post-Effective Amendment to the
Registration Statement on Form N-4 for the Individual Single Contribution
Immediate Variable Annuity Contracts (the "Contracts") to be issued by London
Pacific Life & Annuity Company and its separate account, LPLA Separate Account
One.
We are of the following opinions:
1. LPLA Separate Account One is a unit investment trust as that term is
defined in Section 4(2) of the Investment Company Act of 1940 (the "Act"),
and is currently registered with the Securities and Exchange Commission,
pursuant to Section 8(a) of the Act.
2. Upon the acceptance of a Contribution made by an Owner pursuant to a
Contract issued in accordance with the Prospectus contained in the
Registration Statement and upon compliance with applicable law, such an
Owner will have a legally-issued, fully-paid, non-assessable contractual
interest in such Contract.
You may use this opinion letter, or copy hereof, as an exhibit to the
Registration Statement.
We consent to the reference to our Firm under the caption "Legal Opinions"
contained in the Statement of Additional Information which forms a part of the
Registration Statement.
Sincerely,
BLAZZARD, GRODD & HASENAUER, P.C.
By:/s/LYNN KORMAN STONE
---------------------------
Lynn Korman Stone
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 2 to the Registration
Statement on Form N-4 of our report dated January 29, 1999, relating to the
statutory basis financial statements of London Pacific Life & Annuity Company
and our report dated April 6, 1999, 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 heading "Experts"
in such Statement of Additional Information.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 26, 1999
