[GRAPHIC OMITTED]
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT
with a Fixed Account
issued by
LPLA SEPARATE ACCOUNT ONE
and
LONDON PACIFIC LIFE & ANNUITY INSURANCE COMPANY
May 1, 1999
This prospectus describes the individual deferred variable annuity contract with
a Fixed Account issued by London Pacific Life & Annuity Company (London
Pacific). The annuity contract has a Fixed Account which offers an interest rate
which is guaranteed by London Pacific and the following 12 Investment Options:
LPT VARIABLE INSURANCE SERIES TRUST:
Harris Associates Value Portfolio
MFS Total Return Portfolio
Berkeley U.S. Quality Bond Portfolio (not available for new purchases or
additional Contributions)
Berkeley Money Market Portfolio (not available for new purchases or additional
Contributions)
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
Deferred Variable Annuity Contract.
To learn more about the London Pacific Deferred Variable Annuity Contract with a
Fixed Account, you can obtain 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 is on Page 24 of this prospectus.
For a free copy of the SAI, call us at our Annuity Service Center at the address
below.
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
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.
INQUIRIES: If you have any questions about your Contract or need more
information, please contact us at:
Annuity Service Center
P.O. Box 2956
Raleigh, North Carolina 27626
(800) 852-3152
TABLE OF CONTENTS
PAGE
DEFINITIONS OF TERMS USED IN THIS PROSPECTUS ........... 1
SUMMARY ................................................ 2
FEE TABLE .............................................. 5
THE LONDON PACIFIC DEFERRED VARIABLE ANNUITY CONTRACT... 8
Ownership...................................... 9
Assignment..................................... 9
Modification of the Contract.................. 10
ANNUITY PAYMENTS (THE ANNUITY PERIOD).................... 10
Annuity Date ................................... 10
Annuity Payments ............................... 10
Annuity Options ................................ 10
HOW TO PURCHASE THE CONTRACTS ........................... 11
Contributions .................................. 11
Allocation of Contributions .................... 11
Free-Look ...................................... 12
Accumulation Units ............................. 12
Transfers ...................................... 13
INVESTMENT OPTIONS....................................... 13
LPT Variable Insurance Series Trust............. 13
Morgan Stanley Dean Witter Universal Funds, Inc. 14
BT Insurance Funds Trust........................ 14
Federated Insurance Series...................... 14
Dollar Cost Averaging Program .................. 15
Rebalancing Program ............................ 15
Voting Rights .................................. 15
Substitution.................................... 15
Exchange Program................................ 15
PERFORMANCE.............................................. 17
EXPENSES ................................................ 17
Mortality and Expense Risk Charge............... 17
Administrative Charge .......................... 18
Distribution Charge ............................ 18
Contract Maintenance Charge .................... 18
Contingent Deferred Sales Charge................ 18
Transfer Fee ................................... 19
Premium Taxes................................... 19
Income Taxes.................................... 19
Investment Option Expenses...................... 19
TAXES ................................................... 20
Annuity Contracts in General................... 20
Qualified and Non-Qualified Contracts ......... 20
Withdrawals - Non-Qualified Contracts .......... 20
Withdrawals - Qualified Contracts .............. 21
Diversification ................................ 21
WITHDRAWALS............................................... 21
Systematic Withdrawal Option .................... 22
Suspension of Payments or Transfers ............. 22
DEATH BENEFIT............................................. 22
Upon Your Death ................................... 22
Death of Annuitant ................................ 23
OTHER INFORMATION......................................... 23
London Pacific................................... 23
Year 2000........................................ 24
The Separate Account............................. 24
Distribution..................................... 24
TABLE OF CONTENTS OF THE SAI.............................. 24
APPENDIX A................................................ 25
APPENDIX B ............................................... 27
DEFINITIONS OF TERMS USED IN THIS PROSPECTUS
Accumulation Period - The period of time before the Annuity Date during which
you can make Contributions.
Annuity Date - The date on which Annuity Payments begin.
Annuity Payments - The series of payments made to you or someone you choose
after the Annuity Date.
Annuity Period - The period of time beginning with the Annuity Date during which
we make Annuity Payments.
Annuity Service Center - The office indicated under Inquiries on the first page
of this prospectus to which notices, requests and Contributions must be sent.
Business Day - Any day the New York Stock Exchange (NYSE) and we are open for
business.
Contributions - The money you invest in the Contract.
Fixed Account - A segment of our general account which contains all of our
assets with the exception of segregated separate account assets.
Investment Option(s) - Those variable investments available under the Contract.
Non-Qualified Contract - If you purchase the Contract as an individual and not
under 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.
Qualified Contract - If you purchase the Contract under 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 Deferred Variable Annuity Contract and certain other contracts.
The Separate Account is LPLA Separate Account One. The Separate Account is
divided into sub-accounts.
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 Deferred Variable Annuity Contract
This prospectus describes the individual deferred variable annuity contract with
a Fixed Account (Contract). The Contract is offered by London Pacific Life &
Annuity Company (London Pacific). The Contract provides for a death benefit and
guaranteed payment plans. The Contract is designed for retirement savings or
other long-term investment purposes.
The Contract allows you the choice to invest in our Fixed Account or the 12
Investment Options. The Investment Options are intended to offer a better return
than the Fixed Account. However, this is NOT guaranteed. You can also lose your
money.
Under the Contract, you are the Owner. You can name a Joint Owner. The Joint
Owner must be your spouse.
Annuity Payments
You can receive Annuity Payments from your Contract by selecting one of the
available Annuity Options. You can choose to have Annuity Payments come from the
Fixed Account or the Investment Options or both. If you choose to have any
portion of the payments come from the Investment Options, the dollar amount of
your Annuity Payments may go up or down depending on the investment performance
of the Investment Option(s) you select.
How to Purchase the Contract
The Contract requires an initial Contribution of at least $5,000. If you buy the
Contract as an Individual Retirement Annuity (IRA), the initial Contribution
must be at least $1,000. You can make additional Contributions of at least
$1,000 at any time during the Accumulation Period. Your registered
representative can help you fill out the proper forms.
Investment Options
You can invest in the following Investment Options:
LPT Variable Insurance Series Trust:
Harris Associates Value Portfolio
MFS Total Return Portfolio
Berkeley U.S. Quality Bond Portfolio (not available for new purchases or
additional Contributions)
Berkeley Money Market Portfolio (not available for new purchases or additional
Contributions)
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
Depending on market conditions and the performance of the Investment Options you
select, you can make or lose money in any of these Investment Options.
Expenses
The Contract has insurance features and investment features and there are costs
related to each. The fees and charges are as follows:
Mortality and Expense Risk Charge: 1.25% annually of the average daily net asset
value of each Investment Option.
Administrative Charge: .15% annually of the average daily net asset value of
each Investment Option.
Distribution Charge: .10% annually of the average daily net asset value of each
Investment Option.
Transfer Fee: If you make more than 12 transfers in a Contract year, we
deduct a transfer fee which is equal to $20 per transfer, or 2% of the amount
transferred (whichever is less).
Contingent Deferred Sales Charge: If you make a withdrawal from your
Contract, we will deduct a contingent deferred sales charge which declines from
7% to 0% depending upon the number of years we have had your Contribution. After
London Pacific has had your Contribution for 7 years, there is no charge for
withdrawals.
Contract Maintenance Charge: Each year, London Pacific deducts a $36
contract maintenance charge from your Contract. The charge is waived if the
value of your Contract is at least $50,000.
Premium Taxes: When you make a withdrawal, begin receiving Annuity Payments
or when we pay a death benefit, London Pacific may assess a premium tax charge
which ranges from 0% to 4%, depending on the state.
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 you
select.
Taxes
Your earnings are not taxed until you take them out. If you take money out
during the Accumulation Period, earnings come out first and are taxed as income.
If you are younger than 59 1/2 when you take money out, you may be charged a 10%
federal tax penalty on the earnings. Payments during the Annuity Period are
considered partly a return of your original investment. That part of each
payment is not taxable.
Death Benefit
If you die, a death benefit will 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 only available to
purchasers who own a fixed annuity contract issued by another insurance company
not affiliated with London Pacific or other financial investments. 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
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 will put your money in the Federated Prime Money Fund II during
the free-look period.
LPLA SEPARATE ACCOUNT ONE FEE TABLE
See Notes to Fee Table and Examples on Page 8.
Contract Owner Transaction Expenses
Charge as a Percentage
Contingent Deferred Sales Charge Contract Year of Unliquidated Contribution
- -------------------------------- ------------- ----------------------------
1 year 7%
2 years 7%
3 years 6%
4 years 5%
5 years 4%
6 years 3%
7 years 2%
8 years or more 0%
Transfer Fee No charge for first 12 transfers in a Contract
(See Note 2 on Page 8) year. After that, the fee is the lesser of $20
or 2% of the amount transferred.
Contract Maintenance Charge $36 per Contract per Contract year.
(see Note 3 on Page 8 )
Separate Account Annual Expenses
(as a percentage of average account value)
Mortality and Expense Risk Charge..................... 1.25%
Administrative Charge................................. .15%
Distribution Charge................................... .10%
------
Total Separate Account Annual Expenses.................1.50%
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
Fees reimbursement)* Portfolio Expenses*
---- -----------------------------------
Harris Associates Value 1.00% .29% 1.29%
MFS Total Return .75% .54% 1.29%
Berkeley U.S. Quality Bond** .55% .44% .99%
Berkeley Money Market** .45% .44% .89%
Robertson Stephens Diversified
Growth .95% .44% 1.39%
Lexington Corporate Leaders .65% .64% 1.29%
Strong Growth .75% .54% 1.29%
SAI Global Leaders*** .75% .54% 1.29%
* 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 Portfolio Expenses" for each Portfolio. Absent this expense
reimbursement arrangement, for the year ending December 31, 1998, the
"Total Annual Portfolio Expenses" (on an annualized basis) were: 1.85% for
the Harris Associates Value Portfolio; 1.87% for the MFS Total Return
Portfolio; 3.60% for the Berkeley U.S. Quality Bond Portfolio; 3.14% for
the Berkeley Money Market 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.
** Prior to May 1, 1999, London Pacific reimbursed the Berkeley U.S. Quality
Bond Portfolio and the Berkeley Money Market Portfolio for certain
expenses. Effective May 1, 1999, this arrangement has been terminated. For
the year ending December 31, 1999, the "Other Expenses" are estimated to be
2.75% for the Berkeley U.S. Quality Bond Portfolio and 2.25% for the
Berkeley Money Market Portfolio.
*** Estimated. The Portfolio commenced investment operations on May 1, 1999.
Morgan Stanley Dean Witter Universal Funds, Inc.'s Annual Expenses
(as a percentage of the average daily net assets of a Portfolio)
Other Expenses
Management (after expense Total Annual
Fees reimbursement)* Portfolio Expenses*
---- --------------- -------------------
Morgan Stanley Dean Witter
U.F. High Yield .15% .65% .80%
Morgan Stanley Dean Witter
U.F. International Magnum .15% 1.00% 1.15%
Morgan Stanley Dean Witter
U.F. Emerging Markets Equity 0.0% 1.75% 1.75%
* 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 Expenses," and "Total Annual Portfolio 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.
BT Insurance Funds Trust's Annual Expenses
(as a percentage of the average daily net assets of a Portfolio)
Total Annual
Other Expenses Portfolio Expenses
Management Administ- (after expense (after expense
Fees rative Fee reimbursement)* reimbursement)*
---- ---------- --------------- ---------------
BT Equity 500 Index .20% .02% .08% .30%
* Without expense waivers and reimbursements for the year ended December 31,
1998, the "Total Annual Portfolio Expenses" for the BT Equity 500 Index
Fund would have been 1.19%.
Federated Insurance Series' Annual Expenses
(as a percentage of the average daily net assets of a Portfolio)
Total Annual
Other Expense Expenses (after
Management after waiver and waivers and
Fees reimbursements)* reimbursements)*
---- ---------------- ----------------
Federated Prime Money Fund II .50% .30% .80%
Federated Fund for U.S.
Government Securities II .60% .25% .85%
* 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 .93% for the Federated Fund for U.S.
Government Securities II.
Examples:
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on your assets:
(a) if you surrender your Contract at the end of each time period;
(b) if you do not surrender your Contract.
Time Periods
------------
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Harris Associates Value a)$100.04 $154.47 $205.22 $374.10
b)$ 30.04 $ 94.47 $165.22 $374.10
MFS Total Return a)$100.04 $154.47 $205.22 $374.10
b)$ 30.04 $ 94.47 $165.22 $374.10
Berkeley U.S. Quality Bond a)$ 96.96 $144.78 $188.23 $335.42
b)$ 26.96 $ 84.78 $148.23 $335.42
Berkeley Money Market a)$ 95.94 $141.55 $182.56 $322.53
b)$ 25.94 $ 81.55 $142.56 $322.53
Robertson Stephens Diversified Growth a)$101.06 $157.70 $210.88 $386.99
b)$ 31.06 $ 97.70 $170.88 $386.99
Lexington Corporate Leaders a)$100.04 $154.47 $205.22 $374.10
b)$ 30.04 $ 94.47 $165.22 $374.10
Strong Growth a)$100.04 $154.47 $205.22 $374.10
b)$ 30.04 $ 94.47 $165.22 $374.10
SAI Global Leaders a)$100.04 $154.47 $205.22 $374.10
b)$ 30.04 $ 94.47 $165.22 $374.10
Morgan Stanley Dean Witter a)$ 95.02 $138.64 $177.47 $310.92
U.F. High Yield b)$ 25.02 $ 78.64 $137.47 $310.92
Morgan Stanley Dean Witter a)$ 98.60 $149.95 $197.29 $356.05
U.F. International Magnum b)$ 26.80 $ 89.95 $157.29 $356.05
Morgan Stanley Dean Witter a)$104.75 $169.34 $231.27 $433.40
U.F. Emerging Markets Equity b)$ 34.75 $109.34 $191.27 $433.40
BT Equity 500 Index a)$ 89.89 $122.48 $149.15 $246.46
b)$ 19.89 $ 62.48 $109.15 $246.46
Federated Prime Money Fund II a)$ 95.02 $138.64 $177.47 $310.92
b)$ 25.02 $ 78.64 $137.47 $310.92
Federated Fund for U.S Government a)$ 95.23 $140.26 $186.30 $317.37
Securities II b)$ 25.53 $ 80.26 $140.20 $317.37
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. Once each Contract year, you can withdraw up to 10% of unliquidated
Contributions (which means not previously withdrawn) on a non-cumulative
basis without the imposition of the contingent deferred sales charge (free
withdrawal). You can make a free withdrawal once each Contract year unless
you have selected the Systematic Withdrawal Option. If you are younger than
59 1/2 when you make a withdrawal, it may be subject to a ten percent (10%)
federal income tax penalty.
3. London Pacific will not charge you the transfer fee even if there are more
than 12 transfers in a year if the transfer is made at the end of the
free-look period and any transfers made pursuant to an approved Dollar Cost
Averaging Program or Rebalancing Program.
4. During the Accumulation Period, London Pacific will not charge the contract
maintenance charge if the value of your Contract is at least $50,000 or
more. However, if you make a complete withdrawal, London Pacific will
charge the contract maintenance charge. During the Annuity Period, the full
charge will be deducted regardless of the size of your Contract. In the
state of North Dakota, the contract maintenance charge is $30.
5. The examples below assume an estimated $25,000 Contract value. Therefore,
the contract maintenance charge is calculated as $1.44 in the examples. The
charge would be higher for smaller Contract values and lower for higher
Contract values.
6. Premium taxes are not reflected. Premium taxes may apply depending on the
state where you live.
7. The examples should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
There is an accumulation unit value history (condensed financial information)
contained in Appendix A to this prospectus.
THE LONDON PACIFIC DEFERRED VARIABLE ANNUITY CONTRACT
This prospectus describes the Individual Deferred Variable Annuity Contract with
a Fixed Account (Contract) issued by London Pacific.
An annuity is a contract between you (the Owner) and us (an insurance company)
where we promise to pay you (or someone you choose) an income, in the form of
Annuity Payments. Until you decide to begin receiving Annuity Payments, your
annuity is in the Accumulation Period. Once you begin receiving Annuity
Payments, your Contract switches to the Annuity Period.
The Contract benefits from tax deferral. This means that you are not taxed on
the earnings or appreciation on the money in your Contract until you take money
out.
You can choose to invest in the 12 Investment Options. Depending on market
conditions and the performance of the Investment Option(s) you select, you can
make or lose money in any of these portfolios. If you select the variable
annuity portion of the Contract, the amount of money you are able to accumulate
in your Contract during the Accumulation Period depends upon the investment
performance of the Investment Option(s) you select. The amount of Annuity
Payments you receive during the Annuity Period from the variable annuity portion
of the Contract also depends, in part, on the investment performance of the
Investment Option(s) you select for the Annuity Period.
The Contract also offers you a Fixed Account. The Fixed Account offers an
interest rate that's guaranteed by London Pacific. If you select the Fixed
Account, your money will be placed with the other general assets of London
Pacific.
Ownership
Owner - Under the Contract you are the Owner. You name an 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 of
Owner. The change will become effective as of the date the Written Request is
signed. A new designation of Owner will not apply to any payment made or action
taken by us prior to the time it was received.
If the Contract is Non-Qualified and is owned by a non-natural person (for
example, a corporation) it is not treated as an annuity contract for tax
purposes. This means that income on the Contract is treated as ordinary income
received by the Owner during the taxable year. You should seek tax advice before
you buy the Contract if it is going to be owned by a trust or other non-natural
person.
The Contract may be owned by Joint Owners. Any Joint Owner must be your spouse.
When either Owner dies, the surviving Joint Owner will be the primary
Beneficiary. We will treat any other designated Beneficiary as a contingent
Beneficiary unless you specify otherwise in a Written Request.
Unless you tell us otherwise, if there are Joint Owners all transactions will
require both signatures except for telephone transfers. If the telephone
transfer option is elected and there are Joint Owners, either Joint Owner can
give telephone instructions.
Annuitant - The Annuitant is the person on whose life we base Annuity Payments.
You designate the Annuitant when the Contract is issued. You can change the
Annuitant at any time before the Annuity Date. The Annuitant may not be changed
in a Contract which is owned by a non-natural person. Any change of Annuitant is
subject to our underwriting rules which are in effect at the time.
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 date. Unless an irrevocable Beneficiary has been
named, you may change the primary Beneficiary(ies) or contingent
Beneficiary(ies). A change must 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 (transfer ownership) 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 Contract
The Contract may be modified in order to comply with applicable state and
federal law. A Contract may be changed or altered only by the President or Vice
President and the Secretary of London Pacific. Any change must be in writing.
ANNUITY PAYMENTS (THE ANNUITY PERIOD)
Annuity Date
You can receive regular Annuity Payments from your Contract. You will receive
the payments unless you choose someone else to receive them. The day on which
those payments begin is called the Annuity Date. The Annuity Date must be the
first day of a calendar month and must be at least one month after we issue your
Contract. The Annuity Date may not be later than when the Annuitant reaches age
85 or 10 years after we issue your Contract if you are age 75 or older on the
day your Contract is issued. You can change the Annuity Date by Written Request.
Any change must be requested at least 7 days prior to the Annuity Date.
Annuity Payments
During the Annuity Period, you have the same investment choices you had just
before the start of the Annuity Period. During the Annuity Period, payments can
come from the Investment Options you have selected (meaning they are variable
Annuity Payments) or from the Fixed Account (meaning they are fixed Annuity
Payments). You must select if you want variable Annuity Payments or fixed
Annuity Payments or a combination of both no later than 15 days before the
Annuity Date. If you do not instruct us, your payments will be variable Annuity
Payments.
Annuity Payments are made monthly. If the Annuity Payment would be or become
less than $200 ($100 if a combination fixed and variable annuity is selected),
we will reduce the frequency of the Annuity Payments to an interval which will
result in each payment being at least $200 ($100 if a combination fixed and
variable annuity is selected).
If you choose to have any portion of your Annuity Payments come from the
Investment Options, the dollar amount of your payments will depend on the
following:
(1) the value of your Contract in the Investment Option on the Annuity
Date;
(2) the 4% assumed investment rate used in the Contract;
(3) the performance of the Investment Option(s) you select;
(4) the Annuity Option you select; and
(5) the age of the Annuitant and any joint Annuitant with respect to
certain Annuity Options.
If the actual performance exceeds the 4% assumed investment rate, your Annuity
Payments will increase. Likewise, if the actual investment rate is less than 4%,
your Annuity Payments will decrease.
The SAI contains a description of how Annuity Payments and Annuity Unit values
are calculated.
Annuity Options
You can choose among income plans. We call them Annuity Options. We ask you to
choose an Annuity Option when you buy the Contract. Prior to the Annuity Date
you may change the Annuity Option by Written Request. Any change must be
requested at least 7 days prior to the Annuity Date.
You can choose one of the following Annuity Options or any other Annuity Option
acceptable to London Pacific.
OPTION A. LIFE ANNUITY. Under this option, we will make monthly Annuity Payments
during the life of the Annuitant. After the Annuitant dies, we stop making
Annuity Payments.
OPTION B. LIFE ANNUITY WITH PERIOD CERTAIN OF 120 MONTHS. Under this option, we
will make monthly Annuity Payments during the life of the Annuitant. If the
Beneficiary does not want payments to continue for the rest of the period
certain, he or she may elect to have the present value of the guaranteed Annuity
Payments remaining commuted and paid in a lump sum.
OPTION C. JOINT & SURVIVOR ANNUITY. Under this option, we will make monthly
Annuity Payments 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 at 66 2/3%. After the
surviving Annuitant dies, we will stop making Annuity Payments.
OPTION D. PAYMENT FOR A PERIOD CERTAIN. Under this option, we will make monthly
Annuity Payments for a fixed period of years. The period must be at least 10
years and cannot be more than 30 years. If you do not want to continue to
receive payments for the rest of the selected period, you may elect to have the
present value of the remaining payments commuted and paid in a lump sum or as an
Annuity Option purchased at the date of such election.
HOW TO PURCHASE THE CONTRACT
Contributions
Contributions are the money you give us to buy the Contract. The minimum we will
accept is $5,000 when the Contract is bought as a Non-Qualified Contract. If you
are buying the Contract as part of an IRA (individual retirement annuity), the
minimum we will accept is $1,000. You can make additional Contributions of
$1,000 ($100 if the periodic investment plan option is elected). The maximum
Contributions we will accept without our prior approval are $1,000,000 except if
you are 75 years old when you buy the Contract in which case the maximum is
$500,000. We reserve the right to reject any Contribution or Contract.
Allocation of Contributions
When you purchase the Contract, we will allocate your Contribution to the
Investment Option(s) you have selected. Unless you instruct us otherwise,
subsequent Contributions will be allocated in the same manner as the initial
Contribution. Your allocations must be in whole numbers with a minimum
allocation of 10% of each Contribution or transfer (unless the Contribution is
being made pursuant to an approved Dollar Cost Averaging Program). Under certain
circumstances we will allocate your initial Contribution to the Federated Prime
Money Fund II until the end of the free-look period.
Once we receive your Contribution and the necessary information and they are
deemed to be in good order, we will issue you a Contract and 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 send back
your money or get your permission to keep it until we get all of the necessary
information. If you add more money to your Contract by making additional
Contributions, we will credit these amounts to your Contract within one business
day. Our business day closes when the New York Stock Exchange closes, usually
4:00 p.m. Eastern time.
Free-Look
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
will 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) and
refund the greater of your Contribution or the value of your Contract.
Accumulation Units
The value of your Contract allocated to the Investment Options will go up or
down depending upon the investment performance of the Investment Option(s) you
select. 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. The difference between accumulation unit values and annuity unit
values is the assumed investment rate factor raised to the power equal to the
number of years since the initial accumulation unit values were set.
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 mortality and expense risk charge, the
administrative charge and the distribution 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 the 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.
Example:
On Wednesday we receive an additional Contribution from you of $4,000. You have
instructed us to allocate it to the Harris Associates Value Portfolio. When the
New York Stock Exchange closes on that Wednesday, we determine that the value of
an accumulation unit for the Harris Associates Value Portfolio is $12.50. We
then divide $4,000 by $12.50 and credit your Contract with 320 accumulation
units for the Harris Associates Value Portfolio on that Wednesday night.
Transfers
You can make transfers among the Investment Options and the Fixed Account before
the Annuity Date.
The minimum amount which you can transfer is $500 from one or more Investment
Options or the Fixed Account or your entire interest in the Investment Option or
Fixed Account, if less. The minimum which must remain in an Investment Option or
the Fixed Account after a transfer is $500 for each Investment Option or the
Fixed Account, or $0 if the entire interest in the Investment Option or Fixed
Account is transferred.
During the Annuity Period you may make a transfer from one or more of the
Investment Options to the Fixed Account once a Contract year. You may not make a
transfer from the Fixed Account to the Investment Options during the Annuity
Period.
If you make more than 12 transfers in a year, a transfer fee may be assessed.
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.
INVESTMENT OPTIONS
The following 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 it 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.
Berkeley U.S. Quality Bond Portfolio (not available for new purchases or
additional Contributions)
The Sub-Adviser for this Portfolio is Berkeley Capital Management.
Berkeley Money Market Portfolio (not available for new purchases or
additional Contributions)
The Sub-Adviser is Berkeley Capital Management
Robertson Stephens Diversified Growth Portfolio
The Sub-Adviser for this Portfolio is RS Investment Management Company, 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 Portfolio (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 Contract. 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 (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
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
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, the Federated Fund for U.S. Government
Securities II, the Morgan Stanley Dean Witter U.F. High Yield Portfolio or the
Fixed Account to one or more of the other Investment Options. Transfers to the
Fixed Account are not permitted. 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
You may use an asset allocation model known 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. Any amounts in the Fixed Account will not be transferred as part of
this program.
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 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 an existing contract issued by another
insurance company not affiliated with London Pacific or other financial
investment (Exchange Investment) for a Contract offered by this prospectus. The
Exchange Program is not available to purchasers who own a variable annuity
contract and want to exchange it for the Contract 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. 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.
A currently owned 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" 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 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 or financial investment 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 contingent deferred sales charge;
(e) the amount and timing of any benefits under the Exchange Program; and
(f) 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.
Under the currently available Exchange Program, London Pacific adds certain
amounts to the value of your 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, if any, 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 contingent deferred sales
charge under the Contract will be assessed in full against a
subsequent withdrawal; to the extent applicable.
2. London Pacific allocates the Exchange Credits to the Contract 30 days after
a Contract is issued (40 days after a Contract is issued in California if
the purchaser is 60 years of age or older).The Exchange Credits will be
allocated prorata among the Investment Options based on the ratio of the
values in the Investment Option at the time we add the Exchange Credits.
Exchange Credits are added to the Fixed Account based on the allocation to
the Fixed Account on the date the Contract is issued.
3. The value of the Exchange Credits as of the date of the allocation to the
Investment Options is equal to the lesser of the Exchange Credit Limit or
the surrender charge paid or other charges and penalties paid to surrender
the Exchange Investment. The Exchange Credit Limit currently is 5% of the
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. The value of the Exchange Credits we add to your Contract is not available
as a free withdrawal.
5. 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 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 mortality and expense
risk charge, the administrative charge, the distribution charge and any
applicable contract maintenance charge. This non-standard performance will not
reflect the deduction of the contingent deferred sales charge. The deduction of
any applicable contingent deferred sales charge would reduce the percentage
increase or make greater any percentage decrease. London Pacific may also
advertise performance information which is computed on a different basis. In
that case, any advertisement will also include average annual total return
figures which reflect the deduction of all fees and charges.
Future performance will vary and the results which may be shown are not
necessarily representative of future results.
EXPENSES
There are charges and other expenses associated with the Contract that reduce
the return on your investment in the Contract. These charges and expenses are:
Mortality and Expense Risk Charge. This charge is equal, on an annual basis, to
1.25% of the daily value of the Contract invested in an Investment Option, after
fund expenses have been deducted. This charge is for all the insurance benefits
e.g., guarantee of annuity rates, the death benefit, for certain expenses of the
Contract, and for assuming the risk (expense risk) that the current charges will
be insufficient in the future to cover the cost of administering the Contract.
London Pacific may use any profits it makes from this charge to pay for the
costs of distributing the Contract.
Administrative Charge. This charge is equal, on an annual basis, to .15% of the
daily value of the Contract invested in an Investment Option, after fund
expenses have been deducted. This charge, together with the contract maintenance
charge (see below), is for the expenses associated with the administration of
the Contract. Some of these expenses are: preparation of the Contract,
confirmations, annual reports and statements, maintenance of Contract records,
personnel costs, legal and accounting fees, filing fees, and computer and
systems costs.
Distribution Charge. This charge is equal, on an annual basis, to .10% of the
daily value of the Contract invested in an Investment Option, after fund
expenses have been deducted. This charge compensates London Pacific for the
costs associated with the distribution of the Contract.
Contract Maintenance Charge. On each anniversary of the date when your Contract
was issued, London Pacific deducts $36 ($30 in the state of North Dakota) from
your Contract as a contract maintenance charge. This charge is for
administrative expenses. This charge cannot be increased.
London Pacific will not deduct this charge during the Accumulation Period if,
when the deduction is to be made, the value of your Contract is $50,000 or more.
If you make a complete withdrawal from your Contract, the contract maintenance
charge will also be deducted. The contract maintenance charge is deducted
prorata from the Investment Options and the Fixed Account (except in South
Carolina, Texas and Washington, the charge is only deducted from the Investment
Options)
After the Annuity Date, the charge will be collected monthly out of each Annuity
Payment regardless of the size of the Contract.
Contingent Deferred Sales Charge. During the Accumulation Period, you can make
withdrawals from your Contract. However, if all or a portion of the unliquidated
Contribution is withdrawn within the first 7 Contract years, London Pacific will
access a contingent deferred sales charge (unliquidated Contributions means
Contributions that you have not previously surrendered or withdrawn). The Charge
is based on the Contract year in which you make a withdrawal and is applied only
to a withdrawal of Contribution. The charge is as follows:
Charge as a
Percentage of
Unliquidated
Contract Year Contribution
-------------- ---------------
1 year 7%
2 years 7%
3 years 6%
4 years 5%
5 years 4%
6 years 3%
7 years 2%
8 years or more 0%
Free Withdrawals. Once a year on a non-cumulative basis, you can withdraw up to
10% of your unliquidated Contributions without the contingent deferred sales
charge (free withdrawal amount). For purposes of the free withdrawal amount and
the contingent deferred sales charge, amounts you withdraw as a free withdrawal
are not considered a liquidation of Contributions. If you choose to make
withdrawals under our Systematic Withdrawal Option, the once a year limitation
on withdrawals for the free withdrawal amount is waived if you have not made any
other free withdrawals during that Contract year.
In addition, in certain states, if you have been confined to a convalescent care
facility for any continuous ninety day period or if you are first diagnosed as
having a terminal illness and it is at least 90 days after the day your contract
was issued, you can make a one time withdrawal of a certain amount and London
Pacific will not access the contingent deferred sales charge. We will call this
the Convalescent Care Facility/Terminal Illness Benefit. This benefit may not be
available in all states.
INCOME TAXES AND TAX PENALTIES MAY APPLY TO ANY WITHDRAWAL YOU MAKE.
NOTE: For tax purposes, withdrawals are considered to have come from the last
money into the Contract. Thus, for tax purposes, earnings are considered to come
out first.
See Appendix B for examples of how the contingent deferred sales charge is
calculated.
Reduction or Elimination of the Contingent Deferred Sales Charge. London Pacific
will reduce or eliminate the amount of the contingent deferred sales charge when
the Contract is sold under circumstances which reduce its sales expense. Some
examples are: if there is a large group of individuals that will be purchasing
the Contract or a prospective purchaser already had a relationship with London
Pacific. London Pacific will not deduct a contingent deferred sales charge under
a Contract issued to an officer, director or employee of London Pacific or any
of its affiliates.
Transfer Fee. 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 or 2% of the
amount transferred (whichever is less). The transfer fee will be deducted from
the Investment Option or the Fixed Account from which the transfer is made. If
your entire interest in the Investment Option or Fixed Account 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 or the
Fixed Account, the transfer fee will be deducted pro-rata from each Investment
Option or the Fixed Account 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. A transfer at the end of the
free-look period will also 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 Contract for them. Some of these taxes are due when the Contract is
issued, others are due when Annuity Payments begin. It is London Pacific's
current practice to pay premium taxes when they are incurred and deduct for them
from your Contract when you make a partial or full withdrawal, when we pay a
death benefit or when you start receiving Annuity Payments. Premium taxes
generally range from 0% to 4%, depending on the state.
Income Taxes. London Pacific will deduct from the Contract for any income taxes
which it incurs because of the Contract. 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 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 - usually
retirement. 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 withdrawal or as Annuity Payments.
When you make a withdrawal you are taxed on the amount of the withdrawal 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
Contributions are fully includible in income.
When a non-qualified contract is owned by a non-natural person (e.g.,
corporation or certain other entities other than a trust holding the Contract as
an agent for a natural person), the Contract will generally not be treated as an
annuity for tax purposes.
Qualified And Non-Qualified Contracts
If you purchase the Contract as an individual and not under an individual
retirement annuity, your Contract is referred to as a Non-Qualified Contract.
If you purchase the Contract as an individual retirement annuity, your Contract
is referred to as a Qualified Contract.
Withdrawals-Non-Qualified Contracts
If you make a withdrawal from your Contract, the Code treats such a withdrawal
as first coming from earnings and then from your Contribution. Such withdrawn
earnings 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 withdrawals will
be exempt from the penalty. They include any amounts:
(1) paid on or after the taxpayer reaches age 59 1/2;
(2) paid after you die;
(3) paid if the taxpayer becomes 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 under an immediate annuity: or
(6) which come from purchases payments made prior to August 14, 1982.
Withdrawals - 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 Contract in an attempt to maintain favorable tax treatment.
WITHDRAWALS
At any time during the Accumulation Period, you may make a partial or total
withdrawal from your Contract by Written Request (in the state of Washington,
you can also make a withdrawal on the Annuity Date). Unless you tell us
otherwise, withdrawals will be made from the Investment Options. The withdrawal
will be made pro-rata from the Investment Options (unless you tell us
otherwise). A partial withdrawal is taken from the value for which the free
withdrawal amount applies and then from the value which is subject to a
contingent deferred sales charge.
Each partial withdrawal must be for at least $500 (this requirement may be
waived to meet the minimum distribution requirements for Qualified Contracts).
London Pacific requires that after you make a partial withdrawal, $2,000 or 15%
of the applicable contingent deferred sales charge must remain in your Contract
(this requirement may be waived to meet the minimum distribution requirements
for Qualified Contracts). We also require that after a partial withdrawal, at
least $500 must remain in an Investment Option or the Fixed Account.
When you make a withdrawal, you will receive the value of your Contract, less
any premium tax and less any contract maintenance charge. London Pacific will
pay the amount of any withdrawal within 7 days of your request unless the
suspension of payments or transfer provision is in effect (see below).
INCOME TAXES AND TAX PENALTIES MAY APPLY TO ANY WITHDRAWAL YOU MAKE.
Systematic Withdrawal Option
You may use the Systematic Withdrawal Option to pre-authorize automatic
withdrawals. You may participate in this option if the value of your Contract is
at least $20,000 on the day you request this option. Withdrawals can be made
monthly, quarterly or semi-annually. The minimum amount you can withdraw is $100
each payment. The standard date of the month for withdrawals is the date you
request to enroll in this option. You can specify a different date. You can stop
withdrawals with 30 days' written notice to us.
Under the systematic withdrawal option, you can withdraw up to 10% of the
unliquidated Contributions as of the immediately preceding Contract anniversary
or, if during the first Contract year, as of the date your Contract is issued.
If you use the Systematic Withdrawal Option, it replaces the free withdrawal in
the same Contract year. Any amount you withdraw in excess of the free withdrawal
amount may be subject to the contingent deferred sales charge.
We do not currently charge for systematic withdrawals. We reserve the right to
charge for this option in the future.
INCOME TAXES AND TAX PENALTIES MAY APPLY TO ANY WITHDRAWAL 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.
London Pacific reserves the right to postpone payment for a withdrawal or
transfer from the Fixed Account for a period of up to 6 months.
DEATH BENEFIT
Upon Your Death
If you or any Joint Owner die before the Annuity Date, London Pacific will pay
your Beneficiary a death benefit. Upon the death of the Joint Owner, the
surviving Joint Owner, if any, will be treated as the primary Beneficiary. Any
other Beneficiary designation on record at the time of death will be treated as
a contingent Beneficiary. The amount of the death benefit depends on how old the
Owner or Joint Owner is.
Prior to the Owner or oldest Joint Owner reaching age 75, the death benefit will
be the greater of:
1. the adjusted Contributions (which means your initial Contribution, plus any
subsequent contributions less any subsequent partial withdrawals in the
same proportion that the Contract value was reduced on the date of the
withdrawal); or
2. the value of your Contract as of the day London Pacific receives at its
Annuity Service Center both proof of death and a payment method election;
or
3. the value of your Contract on the most recent seventh year Contract
anniversary or the adjusted Contributions as of the most recent seventh
year Contract anniversary, whichever is greater. This amount is increased
for subsequent Contributions and is reduced for subsequent partial
withdrawals in the same proportion that the Contract value was reduced on
the date of the withdrawal.
After the Owner or the oldest Joint Owner reaches age 75 but before reaching age
85, the death benefit will be determined in accordance with the above and will
be subject to any applicable contingent deferred sales charge determined at the
time the death benefit is paid.
After the Owner or the oldest Joint Owner reaches age 85, the death benefit will
be the value of the Contract as of the day we receive both proof of death and an
election of the payment method, less any applicable contingent deferred sales
charge determined at the time the death benefit is paid.
In certain states, the death benefit will be the value of your Contract as of
the day London Pacific receives proof of death and an election of the payment
method, less any applicable contingent deferred sales charge determined at the
time the death benefit is paid.
See Appendix B for examples of how the death benefit is calculated.
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 at the then current Contract value. 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 proof of death.
If you or a Joint Owner (who is not the Annuitant) die during the Annuity
Period, 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 during the Annuity Period, the beneficiary becomes the Owner.
Death of Annuitant
Upon the death of the Annuitant, who is not the Owner, during the Accumulation
Period, you may designate a new Annuitant subject to our underwriting rules then
in effect. If you do not designate a new Annuitant within 30 days of the death
of the Annuitant, you will become the Annuitant. If the Owner is a non-natural
person, the death or change of the Annuitant will be treated as the death of the
Owner and a new Annuitant may not be designated.
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 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 without regard to income, gains or losses from 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 7%
of Contributions for promotional or distribution expenses.
Table Of Contents Of The Statement Of Additional Information
Company............................................................3
Experts........................................................... 3
Legal Opinions.................................................... 3
Distribution...................................................... 3
Reduction or Elimination of Contingent Deferred Sales Charge..... 3
Yield Calculation for the Federated Prime Money Fund II
Sub-Account................................................... 4
Calculation of Performance Information........................... 4
Federal Tax Status............................................... 7
Annuity Provisions............................................... 12
Financial Statements.............................................. 13
APPENDIX A
CONDENSED FINANCIAL INFORMATION
The financial statements of London Pacific and the Separate Account may be found
in the Statement of Additional Information. The table below gives per
accumulation unit information about the financial history of each sub-account of
the Separate Account for the periods indicated. There are no accumulation unit
values for the Federated Prime Money Fund II and the Federated Fund for U.S.
Government Securities II because they were first offered under the Contract on
January 25, 1999. There are no accumulation unit values for the SAI Global
Leaders Sub-Account because it was offered under the Contract on May 1, 1999.
This information should be read in conjunction with the financial statements and
related notes of the Separate Account included in the Statement of Additional
Information.
Period From
Commencement
Year Ended Of Operations
Sub-Account 12-31-98 12-31-97 To 12-31-96
- ----------- -------- -------- -----------
Harris Associates Value
Unit Value at beginning of period $15.08 $12.12 $10.00
Unit value at end of period $15.50 $15.08 $12.12
No. of units outstanding at end of period 458,166 225,262 50,583
MFS Total Return
Unit value at beginning of period $13.20 $11.03 $10.00
Unit value at end of period $14.56 $13.20 $11.03
No. of units outstanding at end of period 798,518 443,010 82,279
Berkeley U.S. Quality Bond
Unit value at beginning of period $10.99 $10.15 $10.00
Unit value at end of period $11.68 $10.99 $10.15
No. of units outstanding at end of period 158,002 87,032 78,700
Berkeley Money Market
Unit value at beginning of period $10.76 $10.36 $10.00
Unit value at end of period $11.08 $10.76 $10.36
No. of units outstanding at end of period 117,712 7,652 27,763
Strong Growth
Unit value at beginning of period $15.72 $12.62 $10.00
Unit value at end of period $20.16 $15.72 $12.62
No. of units outstanding at end of period 324,168 169,389 44,555
Robertson Stephens Diversified Growth
Unit value at beginning of period $12.21 $10.35 $10.00
Unit value at end of period $14.13 $12.21 $10.35
No. of units outstanding at end of period 431,784 236,983 52,516
Lexington Corporate Leaders
Unit value at beginning of period $14.25 $11.51 $10.00
Unit value at end of period $15.72 $14.25 $11.51
No. of units outstanding at end of period 508,938 233,629 29,933
Period From
Commencement
Year Ended Of Operations
Sub-Account 12-31-98 12-31-97 To 12-31-96
- ----------- -------- -------- -----------
Morgan Stanley Dean Witter U.F. High Yield
Unit value at beginning of period (5/4/98) $10.00 N/A N/A
Unit value at end of period $9.95 N/A N/A
No. of units outstanding at end of period 39,568 N/A N/A
Morgan Stanley Dean Witter U.F.
International Magnum
Unit value at beginning of period (5/4/98) $10.60 N/A N/A
Unit value at end of period $9.10 N/A N/A
No. of units outstanding at end of period 233,470 N/A N/A
Morgan Stanley Dean Witter U.F. Emerging
Markets Equity
Unit value at beginning of period (5/4/98) $10.00 N/A N/A
Unit value at end of period $6.99 N/A N/A
No. of units outstanding at end of period 7,980 N/A N/A
BT Equity 500 Index
Unit value at beginning of period (5/4/98) $10.00 N/A N/A
Unit value at end of period $10.94 N/A N/A
No. of units outstanding at end of period 155,738 N/A N/A
APPENDIX B
The purpose of the examples below is to help you understand how the contingent
deferred sales charge is calculated and to show you how the death benefit is
calculated. These are just examples and may not represent your particular facts
and circumstances. The death benefit amounts in the examples below are purely
hypothetical.
I. Withdrawals and Contingent Deferred Sales Charges
EXAMPLE A - TOTAL WITHDRAWAL IN CONTRACT YEAR TWO
Example A assumes the following:
(1) Your initial Contribution was $10,000 and you selected one Investment
Option.
(2) You make a total withdrawal during the second Contract year.
(3) The value of your Contract at the time of the total withdrawal is
$10,950.
(4) You did not make any other Contributions or previous withdrawals.
The following applies to this Example:
(a) Earnings in the Contract are not subject to the contingent deferred
sales charge (CDSC). Therefore, $950 ($10,950 - $10,000 = $950) is not
subject to the CDSC.
(b) The balance of the total withdrawal of $10,000 is subject to the CDSC
applied during the second year, since the free withdrawal amount does
not apply to total withdrawals.
(c) The amount of the applicable CDSC is .07 x 10,000 = $700.
(d) The amount of the total withdrawal is $10,950 - $700 = $10,250.*
* If you make a total withdrawal on other than a Contract anniversary and the
Contract value when you make the total withdrawal is less than $50,000,
then London Pacific will deduct the full contract maintenance charge of $36
at the time of the total withdrawal.
EXAMPLE B - PARTIAL WITHDRAWAL IN THE AMOUNT OF $3,000 IN CONTRACT YEAR TWO
We have used the same assumptions in this Example as we used in Example A except
that in this Example we assume that you made a partial withdrawal for $3,000 in
Contract year two.
(a) In a partial withdrawal, 10% of the unliquidated Contributions may be
withdrawn as a free withdrawal without the imposition of the CDSC.
(10,000 x .10= $1,000). Therefore $1,000 of the $3,000 partial
withdrawal is not subject to the CDSC.
(b) For purposes of determining the amount of the CDSC, unliquidated
Contributions are deemed to be withdrawn before earnings in the
Contract.
(c) The amount of the CDSC is $140 ($2,000 x .07 = $140).
(d) In this Example, from the partial withdrawal of $3,000 you will
receive $2,860.
EXAMPLE C - PARTIAL WITHDRAWAL IMMEDIATELY FOLLOWED BY A TOTAL WITHDRAWAL
Example C assumes the following:
(1) Your initial Contribution was $10,000 and you selected one Investment
Option.
(2) You make withdrawals during the second Contract year.
(3) The value of your Contract at the time of the withdrawals is $10,950.
(4) You make a partial withdrawal of $1,000.
The following applies to the Example:
(a) As noted in Example B, the partial withdrawal of $1,000 is not subject
to the CDSC because of the 10% free withdrawal amount of $1,000. The
remaining Contract value is $9,950.
(b) For purposes of the total withdrawal you make immediately following
the partial withdrawal, your original Contribution of $10,000 is used
for calculating the CDSC because free withdrawal amounts do not reduce
the Contributions for purposes of calculating the CDSC.
(c) The amount of the CDSC is $700 (.07 x $10,000).
(d) The amount of the total withdrawal is 9,250 ($9,950 - $700).
Note: Withdrawals of income may be subject to a ten percent federal income tax
penalty if you are younger than 59 1/2 at the time you make the withdrawal.
II. Death Benefit Calculations
EXAMPLE A - OWNER AGE 65 AT DEATH; DIES DURING CONTRACT YEAR TWO
Example A assumes the following:
(1) You make a Contribution of $10,000.
(2) You die at age 65 during the second Contract year.
(3) The value of your Contract at the time of your death was $12,000.
(4) You have not made any withdrawals.
The following applies to this Example:
(a) Adjusted Contributions equal $10,000, because you have not make any
withdrawals.
(b) No seventh year stepped-up death benefit is available because death
occurred prior to the seventh year Contract anniversary.
(c) The Contract value is $12,000 and therefore greater than Adjusted
Contributions
(d) The death benefit is $12,000.
EXAMPLE B - OWNER AGE 65 AT DEATH; DIES DURING CONTRACT YEAR TWO
This Example is based on the same assumptions as Example A except that in this
Example the Contract value at death is $9,500.
The following applies to this Example:
(a) The Adjusted Contributions are greater than the Contract Value.
(b) The death benefit is $10,000.
EXAMPLE C - OWNER AGE 65 AT DEATH; DIES DURING CONTRACT YEAR TEN
Example C assumes the following:
(1) You made a single Contribution of $10,000.
(2) You die at age 65 during the tenth Contract year.
(3) The value of your Contract on the seventh Contract anniversary was
$18,000.
(4) The value of your Contract at death was $17,000.
(5) You made a withdrawal of $1,500 in the sixth Contract year at which
time the value of your Contract was $15,000 before you made the
withdrawal.
The following applies to this Example:
(a) Adjusted Contributions are equal to $9,000. (At the time you made the
withdrawal the value of your Contract was reduced by 10%
($1,500/$15,000 = .10). Therefore, Adjusted Contributions are reduced
by 10% ($10,000 -($10,000 x .10)= $9,000).
(b) The value of your Contract on the seventh Contract anniversary
($18,000) was greater than that at the time of your death ($17,000)
and greater than Adjusted Contributions ($9,000).
(c) The death benefit is $18,000.
EXAMPLE D - OWNER AGE 77 AT DEATH; DIES DURING CONTRACT YEAR TWO
This Example is based on the same assumptions as Example A except that in this
Example you die at age 77.
The following applies to this Example:
(a) The death benefit is $12,000 less any CDSC which applies at the time
the death benefit or any portion is withdrawn.
(b) Any applicable CDSC will be calculated as set forth under Examples of
Withdrawals and Contingent Deferred Sales Charges above.
EXAMPLE E - OWNER AGE 87 AT DEATH; DIES DURING CONTRACT YEAR TWO
This Example is based on the same assumptions as Example A except in this
Example you are 87 at the time you die.
The following applies to this Example:
(a) Since you were beyond age 85, the death benefit will be limited to the
value of your Contract, less any CDSC applicable at the time the death
benefit or any portion is withdrawn.
(b) Any applicable CDSC will be calculated as set forth under Examples of
Withdrawals and Contingent Deferred Sales Charges above.
[BACK COVER]
Distributed by:
London Pacific Financial & Insurance Services
1755 Creekside Oaks Drive
Sacramento, California 95833
Issued by:
London Pacific Life & Annuity Company
Home Office:
3109 Poplarwood Court
Raleigh, North Carolina 27604
(919) 790-2243
Annuity Service Center:
P.O. Box 29564
Raleigh, North Carolina 27626
(800) 852-3152
