File Nos. 33-87150
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. 5 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 14 [X]
(Check appropriate box or boxes.)
LPLA Separate Account One
___________________________
(Exact Name of Registrant)
London Pacific Life & Annuity Company
_____________________________________
(Name of Depositor)
3109 Poplarwood Court, Raleigh, North Carolina 27604
___________________________________________________ _________
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (919) 790-2243
Name and Address of Agent for Service
George Nicholson
London Pacific Life & Annuity Company
3109 Poplarwood Court
Raleigh, North Carolina 27604
Copies to:
Judith A. Hasenauer
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203) 226-7866
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
_____ on (date) pursuant to paragraph (b)of Rule 485
_____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
__X__ on May 1, 1999 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 Variable Annuity Contracts
<TABLE>
<CAPTION>
CROSS REFERENCE SHEET
(required by Rule 495)
Item No. Location
- -------- -------------------------------
<S> <C> <C>
PART A
Item 1. Cover Page Cover Page
Item 2. Definitions Definitions of Terms used in this Prospectus
Item 3. Synopsis Summary
Item 4. Condensed Financial Information Appendix A-Condensed Financial Information
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies London Pacific; The Separate
Account; Investment Options
Item 6. Deductions and Expenses Expenses
Item 7. General Description of Variable The London Pacific Deferred
Annuity Contracts Variable Annuity Contract
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 Withdrawals
Item 12. Taxes Taxes
Item 13. Legal Proceedings Not Applicable
Item 14. Table of Contents of the Statement
of Additional Information Table of Contents of the
Statement of Additional
Information
PART B
Item 15. Cover Page Cover Page
Item 16. Table of Contents Table of Contents
Item 17. General Information and History Company
Item 18. Services Not Applicable
Item 19. Purchase of Securities Being
Offered. Not Applicable
Item 20. Underwriters Distributor
Item 21. Calculation of Performance Data Performance Information
Item 22. Annuity Payments Annuity Provisions
Item 23. Financial Statements Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
Item so numbered in Part C to this Registration Statement.
PART A
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 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
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 __ 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 29564
Raleigh, North Carolina 27626
(800) 852-3152
TABLE OF CONTENTS
PAGE
DEFINITIONS OF TERMS USED IN THIS PROSPECTUS ...........
SUMMARY ................................................
FEE TABLE ..............................................
THE LONDON PACIFIC DEFERRED VARIABLE ANNUITY CONTRACT...
ANNUITY PAYMENTS (THE ANNUITY PERIOD)....................
Annuity Date ...................................
Annuity Payments ...............................
Annuity Options ................................
HOW TO PURCHASE THE CONTRACTS ...........................
Contributions ..................................
Allocation of Contributions ....................
Free-Look ......................................
Accumulation Units .............................
Transfers ......................................
INVESTMENT OPTIONS.......................................
LPT Variable Insurance Series Trust.............
Morgan Stanley Dean Witter Universal Funds, Inc.
BT Insurance Funds Trust........................
Federated Insurance Series......................
Dollar Cost Averaging Program ..................
Rebalancing Program ............................
Voting Rights ..................................
Substitution....................................
Exchange Program................................
PERFORMANCE..............................................
EXPENSES ................................................
Mortality and Expense Risk Charge...............
Administrative Charge ..........................
Distribution Charge ............................
Contract Maintenance Charge ....................
Contingent Deferred Sales Charge ...............
Transfer Fee ...................................
Premium Taxes...................................
Income Taxes....................................
Investment Option Expenses......................
TAXES ...................................................
Annuity Contracts in General
Qualified and Non-Qualified Contracts .........
Withdrawals - Non-Qualified Contracts ..........
Withdrawals - Qualified Contracts ..............
Diversification ................................
WITHDRAWALS...............................................
Systematic Withdrawal Option ....................
Suspension of Payments or Transfers .............
DEATH BENEFIT.............................................
Upon Your Death ...................................
Death of Annuitant ................................
OTHER INFORMATION.........................................
London Pacific...................................
Year 2000........................................
The Separate Account.............................
Distribution.....................................
TABLE OF CONTENTS OF THE SAI..............................
APPENDIX A................................................
APPENDIX B ...............................................
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 some 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 11
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 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)
Berkeley Money Market Portfolio (not available for new purchases)
Robertson Stephens Diversified Growth Portfolio
Lexington Corporate Leaders Portfolio(R)
Strong Growth 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, 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 continent 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 as income.
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 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
CONTRACT OWNER TRANSACTION EXPENSES
Contingent Deferred Sales Charge
(See Note 2 on Page )
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%
Transfer Fee
(See Note 3 on Page )
No charge for first 12 transfers in a Contract 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 4 on Page )
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Charge..................... 1.25%
Administrative Charge................................. .15%
Distribution Charge................................... .10%
-----
Total Separate Account Annual Expenses.................1.50%
<TABLE>
<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
Fees reimbursement)* Portfolio Expenses *
---- --------------- --------------------
<S> <C> <C> <C>
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(R) .65% .64% 1.29%
Strong Growth .75% .54% 1.29%
</TABLE>
* London Pacific has voluntarily agreed through December 31, 1999 to
reimburse certain Portfolios 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; 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.
<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 Expenses
Management (after expense Total Annual
Fees reimbursement)* Portfolio Expenses *
---- --------------- --------------------
Morgan Stanley Dean
<S> <C> <C> <C>
Witter U.F. High Yield 0.0% .80% .80%
Morgan Stanley Dean Witter
U.F. International Magnum 0.0% 1.15% 1.15%
Morgan Stanley Dean Witter
U.F. Emerging Markets
Equity 0.0% 1.75% 1.75%
</TABLE>
* 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, 1997,
"Management Fees," "Other Expenses," and "Total Annual Expenses would have
been: 0.50%, 1.18% and 1.68% for the Morgan Stanley Dean Witter U.F. High
Yield Portfolio; 0.80%, 1.98%, and 2.78% for the Morgan Stanley Dean Witter
U.F. International Magnum Portfolio; and 1.25%, 2.87% and 4.12% for the
Morgan Stanley Dean Witter U.F. Emerging Markets Portfolio.
<TABLE>
<CAPTION>
BT INSURANCE FUNDS TRUST'S ANNUAL EXPENSES
(as a percentage of the average daily net assets of a Portfolio)
Other Expenses
Management Administ- (after expense Total
Fees rative Fee reimbursement)* Annual Portfolio
---- ---------- --------------- ----------------
Expenses *
<S> <C> <C> <C> <C>
BT Equity 500 Index (1) .20% .02% .08% .30%
</TABLE>
(1) Without expense waivers and reimbursements for the period from October 1,
1997 (commencement of operations) to December 31, 1997, the total operating
expense for the BT Equity 500 Index Fund would have been 2.78%.
Federated Insurance Series' Annual Expenses (as a percentage of the average
daily net assets of a Portfolio)
<TABLE>
<CAPTION>
Management Other Total Annual
Portfolio Fees Expenses Expenses
- ----------- ---------- -------- ------------
<S> <C> <C> <C> <C>
Federated Prime Money Fund II(1) .50% .30% .80%
Federated Fund for U.S.
Government Securities II (1) .60% .20% .80%
</TABLE>
(1) Without expense waivers and reimbursements, the total annual operating
expenses for the year ending December 31, 1997 would have been 1.00% for
the Federated Prime Money Fund II and 1.25% 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.
<TABLE>
<CAPTION>
TIME PERIODS
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------- --------- --------- ---------
Harris Associates Value
<S> <C> <C> <C> <C>
a)$100.04 a)$154.47 a)$205.22 a)$374.10
b)$ 30.04 b)$ 94.47 b)$165.22 b)$374.10
MFS Total Return
a)$100.04 a)$154.47 a)$205.22 a)$374.10
b)$ 30.04 b)$ 94.47 b)$165.22 b)$374.10
Berkeley U.S. Quality Bond
a)$ 96.96 a)$144.78 a)$188.23 a)$335.42
b)$ 26.96 b)$ 84.78 b)$148.23 b)$335.42
Berkeley Money Market
a)$ 95.94 a)$141.55 a)$182.56 a)$322.53
b)$ 25.94 b)$ 81.55 b)$142.56 b)$322.53
Robertson Stephens Diversified Growth
a)$101.06 a)$157.70 a)$210.88 a)$386.99
b)$ 31.06 b)$ 97.70 b)$170.88 b)$386.99
Lexington Corporate Leaders
a)$100.04 a)$154.47 a)$205.22 a)$374.10
b)$ 30.04 b)$ 94.47 b)$165.22 b)$374.10
Strong Growth
a)$100.04 a)$154.47 a)$205.22 a)$374.10
b)$ 30.04 b)$ 94.47 b)$165.22 b)$374.10
Morgan Stanley Dean Witter U.F. High Yield
a)$ 95.02 a)$138.64 a)$177.47 a)$310.92
b)$ 25.02 b)$ 78.64 b)$137.47 b)$310.92
Morgan Stanley Dean Witter U.F. International Magnum
a)$ 98.60 a)$149.95 a)$197.2 a)$356.05
b)$ 28.60 b)$ 89.95 b)$157.29 b)$356.05
Morgan Stanley Dean Witter U.F. Emerging Markets Equity
a)$104.75 a)$169.34 a)$231.27 a)$433.40
b)$ 34.75 b)$109.34 b)$191.27 b)$433.40
BT Equity 500 Index
a)$ 89.89 a)$122.48 a)$149.15 a)$246.46
b)$ 19.89 b)$ 62.48 b)$109.15 b)$246.46
Federated Prime Money Fund II
a)$ 95.02 a)$138.64 a)$177.47 a)$310.92
b)$ 25.02 b)$ 78.64 b)$137.47 b)$310.92
Federated Fund for U.S. Government Securities II
a)$ 95.02 a)$138.64 a)$177.47 a)$310.92
b)$ 25.02 b)$ 78.64 b)$137.47 b)$310.92
<FN>
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 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
fee-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.
</FN>
</TABLE>
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 Investment Options. Depending on market
conditions, 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 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 late. 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. 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
You will receive the Annuity Payments unless you choose someone else to receive
them. 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 3
things:
(1) the value of your Contract in the Investment Option on the Annuity
Date;
(2) the 4% assumed investment rate used in the Contract; and
(3) the performance of the Investment Option(s).
If the actual performance exceeds the 4% assumed investment rate, your Annuity
Payments will increase. Likewise, if the actual rate is less than 4%, you
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
and Annuity Option purchased at the date of the elected.
HOW TO PURCHASE THE CONTRACT
Contributions
Contributions are the money you give us to buy the Contract. The minimum
Contribution 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 sent 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 (less withdrawals) 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.
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 of you $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 accumulations
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 amount 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 for this Portfolio is Berkeley Capital Management.
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.
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 Investment 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)
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 eight separate investment
portfolios, two of which are available under the Contracts. Federated Advisers
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 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. 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 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 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 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" 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 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. It 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. Any advertisement will also include
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
assess 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 assess the contingent deferred sales charge. We 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, other are due when Annuity Payments begin. It is London Pacific's
current practice to pay premium taxes when they 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
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 - 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 purchase 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 Option, 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 prorata 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, the greater of
$2,000 or 150% 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, less any contract maintenance charge and less any contingent
deferred sales 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 which permits you 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
under the option 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 systematic 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 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 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 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 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 are 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 7%
of Contributions for promotional or distribution expenses.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Company
Experts
Legal Opinions
Distributor
Reduction or Elimination of Contingent Deferred Sales Charge
Calculation of Performance Information
Federal Tax Status
Annuity Provisions
Financial Statements
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 units
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. This information should be read in conjunction with the
financial statements and related notes of the Separate Account included in the
Statement of Additional Information.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD FROM COMMENCEMENT OF
12-31-98 12-31-97 OPERATIONS TO 12-31-96
-------- -------- ----------------------
Sub-Account
<S> <C> <C>
Unit Value at beginning of period $12.12 $10.00
Unit value at end of period $15.08 $12.12
No. of units outstanding at end of period 225,262 50,583
MFS Total Return
Unit value at beginning of period $11.03 $10.00
Unit value at end of period $13.20 $11.03
No. of units outstanding at end of period 443,010 82,279
Berkeley U.S. Quality Bond
Unit value at beginning of period $10.15 $10.00
Unit value at end of period $10.99 $10.15
No. of units outstanding at end of period 87,032 78,700
Berkeley Money Market
Unit value at beginning of period $10.36 $10.00
Unit value at end of period $10.76 $10.36
No. of units outstanding at end of period 127,652 27,763
Strong Growth
Unit value at beginning of period $12.62 $10.00
Unit value at end of period $15.72 $12.62
No. of units outstanding at end of period 169,389 44,555
Robertson Stephens Diversified Growth
Unit value at beginning of period $10.35 $10.00
Unit value at end of period $12.21 $10.35
No. of units outstanding at end of period 236,983 52,516
Lexington Corporate Leaders
Unit value at beginning of period $11.51 $10.00
Unit value at end of period $14.25 $11.51
No. of units outstanding at end of period 233,629 29,933
Morgan Stanley Dean Witter U.F. High Yield
Unit value at beginning of period
Unit value at end of period
No. of units outstanding at end of period
Morgan Stanley Dean Witter U.F. International Magnum
Unit value at beginning of period
Unit value at end of period
No. of units outstanding at end of period
Morgan Stanley Dean Witter U.F. Emerging Markets Equity
Unit value at beginning of period
Unit value at end of period
No. of units outstanding at end of period
BT Equity 500 Index
Unit value at beginning of period
Unit value at end of period
No. of units outstanding at end of period
</TABLE>
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.
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.
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACTS
WITH FLEXIBLE CONTRIBUTIONS
ISSUED BY
LPLA SEPARATE ACCOUNT ONE
AND
LONDON PACIFIC LIFE & ANNUITY COMPANY
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS DATED MAY 1, 1999, FOR THE INDIVIDUAL
FIXED AND VARIABLE DEFERRED ANNUITY CONTRACTS WITH FLEXIBLE CONTRIBUTIONS WHICH
ARE REFERRED TO HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION FOR A PROSPECTIVE INVESTOR. FOR
A COPY OF THE PROSPECTUS CALL OR WRITE THE COMPANY AT: P.O. BOX 29564, RALEIGH,
NORTH CAROLINA 27626; (800) 852-3152.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED MAY 1, 1999.
TABLE OF CONTENTS
PAGE
Company..................................................................
Experts..................................................................
Legal Opinions..........................................................
Distributor..............................................................
Reduction or Elimination of Contingent Deferred Sales Charge...........
Calculation of Performance Information...................................
Federal Tax Status.......................................................
Annuity Provisions......................................................
Financial Statements....................................................
COMPANY
Information regarding London Pacific Life & Annuity Company (the "Company") and
its ownership is contained in the Prospectus.
The Company contributed the initial capital to the Separate Account. As of
__________, 1999, the initial capital contributed by the Company represented
approximately ___% of the total assets of the Separate Account. The Company
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 year
ended December 31, 1998 and 1997 included in this Statement of Additional
Information have been so included in reliance on the reports of
___________________________, 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.
Reduction or Elimination of the Contingent Deferred Sales Charge
The amount of the Contingent Deferred Sales Charge (CDSC) on the Contracts may
be reduced or eliminated when sales of the Contracts are made to individuals or
to a group of individuals in a manner that results in savings of sales expenses.
The entitlement to reduction of the CDSC will be determined by the Company after
examination of all the relevant factors such as:
1. The size and type of group to which sales are to be made will be
considered. Generally, the sales expenses for a larger group are less than for a
smaller group because of the ability to implement large numbers of Contracts
with fewer sales contacts.
2. The total amount of contributions to be received will be considered. Per
Contract sales expenses are likely to be less on larger contributions than on
smaller ones.
3. Any prior or existing relationship with the Company will be considered.
Per Contract sales expenses are likely to be less when there is a prior existing
relationship because of the likelihood of implementing the Contract with fewer
sales contacts.
4. There may be other circumstances, of which the Company is not presently
aware, which could result in reduced sales expenses.
If, after consideration of the foregoing factors, the Company determines that
there will be a reduction in sales expenses, the Company may provide for a
reduction or elimination of the CDSC.
The CDSC may be eliminated when the Contracts are issued to an officer, director
or employee of the Company or any of its affiliates. In no event will any
reduction or elimination of the CDSC be permitted where the reduction or
elimination will be unfairly discriminatory to any person.
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 Mortality and Expense Risk Charge, the Administrative Charge, the
Distribution Charge and the Contract Maintenance Charge, dividing the difference
by the value of the Owner account at the beginning of the same period to obtain
the base period return and multiplying the result by (365/7).
The 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 Mortality and Expense Risk Charge, the Administrative Charge, the
Distribution Charge and the Contract Maintenance Charge and dividing the
difference by the value of the Owner account at the beginning of the base period
to obtain the base period return, and then compounding the base period return by
adding 1, raising the sum to a power equal to 365 divided by 7, and subtracting
1 from the result, according to the following formula: Effective Yield = ((Base
Period Return +1) 365/7)-1. The current and the effective yields reflect the
reinvestment of net income earned daily on the 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 also include standardized average
annual total return figures for the time periods indicated in the advertisement.
Such total return figures will reflect the deduction of a 1.25% Mortality and
Expense Risk Charge, a .15% Administrative Charge, a .10% Distribution Charge,
the investment advisory fee and expenses for the underlying Portfolio being
advertised and any applicable Contract Maintenance Charge and Contingent
Deferred Sales Charges.
The hypothetical value of a Contract purchased for the time periods described in
the advertisement will be determined by using the actual Accumulation Unit
values for an initial $1,000 purchase payment, and deducting any applicable
Contract Maintenance Charge to arrive at the ending hypothetical value. The
average annual total return is then determined by computing the fixed interest
rate that a $1,000 purchase payment would have to earn annually, compounded
annually, to grow to the hypothetical value at the end of the time periods
described. The formula used in these calculations is:
n
P (1+T) = ERV
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.
Chart 1 below shows the performance of the Accumulation Units calculated for a
specified period of time assuming an initial contribution of $1,000 allocated to
each Portfolio and a deduction of all charges and deductions under the Contract
and the expenses of the Portfolio. Chart 2 is identical to Chart 1 except that
it does not reflect the deduction of the Contingent Deferred Sales Charge.
<TABLE>
<CAPTION>
CHART 1
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<S> <C> <C>
Portfolio 1 Year Since Inception
- ------------ --------- ----------------
Harris Associates ______% _____%
MFS Total Return ______% _____%
Robertson Stephens Diversified ______% _____%
Growth
Lexington Corporate Leaders ______% _____%
Strong Growth ______% _____%
Morgan Stanley Dean Witter U.F.
High Yield ______% _____%
Morgan Stanley Dean Witter U.F.
International Magnum ______% _____%
Morgan Stanley Dean Witter U.F.
Emerging Markets Equity ______% _____%
BT Equity 500 Index ______% _____%
</TABLE>
<TABLE>
<CAPTION>
CHART 2
<S> <C> <C>
Portfolio 1 Year Since Inception
- ------------ --------- ----------------
Harris Associates _____% _____%
MFS Total Return _____% _____%
Robertson Stephens Diversified _____% _____%
Growth
Lexington Corporate Leaders _____% _____%
Strong Growth ____% _____%
Morgan Stanley Dean Witter U.F.
High Yield ____ _____%
Morgan Stanley Dean Witter U.F.
International Magnum ____ _____%
Morgan Stanley Dean Witter U.F.
Emerging Markets Equity ____ _____%
BT Equity 500 Index ____ _____%
</TABLE>
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.
The Company may also advertise performance data which may be computed on a
different basis which may not include certain charges. If such charges were
deducted, the performance would be lower.
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 Code governs taxation of annuities in general. An
owner is not taxed on increases in the value of a Contract until distribution
occurs, either in the form of a lump sum payment or as annuity payments under
the Annuity Option selected. For a lump sum payment received as a total
withdrawal (total surrender), the recipient is taxed on the portion of the
payment that exceeds the cost basis of the Contract. For Non-Qualified
Contracts, this cost basis is generally the contributions, while for Qualified
Contracts there may be no cost basis. The taxable portion of the lump sum
payment is taxed at ordinary income tax rates.
For annuity payments, a portion of each payment in excess of an exclusion amount
is includible in taxable income. The exclusion amount for payments based on a
Fixed Annuity Option is determined by multiplying the payment by the ratio that
the cost basis of the Contract (adjusted for any period certain or refund
feature) bears to the expected return under the Contract. The exclusion amount
for payments based on a Variable Annuity Option is determined by dividing the
cost basis of the Contract (adjusted for any period certain or refund feature)
by the number of years over which the annuity is expected to be paid. Payments
received after the investment in the Contract has been recovered (i.e. when the
total of the excludible amounts equal the investment in the Contract) are fully
taxable. The taxable portion is taxed at ordinary income tax rates. For certain
types of Qualified Plans there may be no cost basis in the Contract within the
meaning of Section 72 of the Code. Owners, Annuitants and Beneficiaries under
the Contracts should seek competent financial advice about the tax consequences
of any distributions.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Separate Account is not a separate entity from the
Company and its operations form a part of the Company.
DIVERSIFICATION. Section 817(h) of the Code imposes certain diversification
standards on the underlying assets of variable annuity contracts. The Code
provides that a variable annuity contract will not be treated as an annuity
contract for any period (and any subsequent period) for which the investments
are not, in accordance with regulations prescribed by the United States Treasury
Department ("Treasury Department"), adequately diversified. Disqualification of
the Contract as an annuity contract would result in imposition of federal income
tax to the Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contracts meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five percent (55%) of the total assets consist of cash, cash
items, U.S. Government securities and securities of other regulated investment
companies.
On March 2, 1989, the Treasury Department issued Regulations (Treas. Reg.
1.817-5), which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contracts. The Regulations
amplify the diversification requirements for variable contracts set forth in the
Code and provide an alternative to the safe harbor provision described above.
Under the Regulations, an investment portfolio will be deemed adequately
diversified if: (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
The Company intends that all Portfolios 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.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS. Under Section 72(u) of the Code,
the investment earnings on Contributions for the Contracts will be taxed
currently to the Owner if the Owner is a non-natural person, e.g., a
corporation, or certain other entities. Such Contracts generally will not be
treated as annuities for federal income tax purposes. However, this treatment is
not applied to Contracts held by a trust or other entity as agent for a natural
person nor to Contracts held by Qualified Plans. Purchasers should consult their
own tax adviser before purchasing a Contract to be owned by a non-natural
person.
MULTIPLE CONTRACTS. The Code provides that multiple non-qualified annuity
contracts which are issued within a calendar year to the same contract owner by
one company or its affiliates are treated as one annuity contract for purposes
of determining the tax consequences of any distribution. Such treatment may
result in adverse tax consequences including more rapid taxation of the
distributed amounts from such combination of contracts. For purposes of this
rule, contracts received in a Section 1035 exchange will be considered issued in
the year of the exchange. Owners should consult a tax adviser prior to
purchasing more than one non-qualified annuity contract in any calendar year.
TAX TREATMENT OF ASSIGNMENTS. An assignment or pledge of a Contract may be a
taxable event. Owners should therefore consult competent tax advisers should
they wish to assign or pledge their Contracts.
INCOME TAX WITHHOLDING. All distributions or the portion thereof which is
includible in the gross income of the Owner are subject to federal income tax
withholding. Generally, amounts are withheld from periodic payments at the same
rate as wages and at the rate of 10% from non-periodic payments. However, the
Owner, in most cases, may elect not to have taxes withheld or to have
withholding done at a different rate.
Effective January 1, 1993, certain distributions from retirement plans qualified
under Section 401 or Section 403(b) of the Code, which are not directly rolled
over to another eligible retirement plan or individual retirement account or
individual retirement annuity, are subject to a mandatory 20% withholding for
federal income tax. The 20% withholding requirement generally does not apply to:
a) a series of substantially equal payments made at least annually for the life
or life expectancy of the participant or joint and last survivor expectancy of
the participant and a designated beneficiary, or distributions for a specified
period of 10 years or more; or b) distributions which are required minimum
distributions; or c) the portion of the distributions not includible in gross
income (i.e. returns of after-tax contributions). Participants under such plans
should consult their own tax counsel or other tax adviser regarding withholding
requirements.
TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED CONTRACTS. Section 72 of the Code
governs the treatment of distributions from annuity contracts. It provides that
if the contract value exceeds the aggregate contributions made, any amount
withdrawn will be treated as coming first from the earnings and then, only after
the income portion is exhausted, as coming from the principal. Withdrawn
earnings are includible in gross income. It further provides that a ten percent
(10%) penalty will apply to the income portion of any distribution. However, the
penalty is not imposed on amounts received: (a) after the taxpayer reaches age
59 1/2; (b) after the death of the Owner; (c) if the taxpayer is totally
disabled (for this purpose disability is as defined in Section 72(m)(7) of the
Code); (d) in a series of substantially equal periodic payments made not less
frequently than annually for the life (or life expectancy) of the taxpayer or
for the joint lives (or joint life expectancies) of the taxpayer and his or her
Beneficiary; (e) under an immediate annuity; or (f) which are allocable to
purchase payments made prior to August 14, 1982.
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 Withdrawals - Qualified Contracts," below.)
QUALIFIED PLANS. The Contracts offered by this Prospectus may also be used as
Qualified Contracts. The following discussion of Qualified Contracts is not
exhaustive and is for general informational purposes only. The tax rules
regarding Qualified Contracts are very complex and will have differing
applications depending on individual facts and circumstances. Each purchaser
should obtain competent tax advice prior to purchasing Qualified Contracts.
Qualified Contracts include special provisions restricting Contract provisions
that may otherwise be available as described in this Prospectus. Generally,
Qualified Contracts are not transferable except upon surrender or annuitization.
On July 6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE V.
NORRIS that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. Qualified Contracts will utilize annuity tables
which do not differentiate on the basis of sex. Such annuity tables will also be
available for use in connection with certain non-qualified deferred compensation
plans.
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 gross income. These IRAs are
subject to limitations on eligibility, contributions, transferability and
distributions. (See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
Under certain conditions, distributions from other IRAs and other Qualified
Plans may be rolled over or transferred on a tax-deferred basis into an IRA.
Sales of Contracts for use with IRAs are subject to special requirements imposed
by the Code, including the requirement that certain informational disclosure be
given to persons desiring to establish an IRA. Purchasers of Contracts to be
qualified as Individual Retirement Annuities should obtain competent tax advice
as to the tax treatment and suitability of such an investment.
Roth IRA
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. Contributions
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.
TAX TREATMENT OF WITHDRAWALS - QUALIFIED CONTRACTS. In the case of a withdrawal
under a Qualified Contract, a ratable portion of the amount received is taxable,
generally based on the ratio of the individual's cost basis to the individual's
total accrued benefit under the retirement plan. Special tax rules may be
available for certain distributions from a Qualified Contract. Section 72(t) of
the Code imposes a 10% penalty tax on the taxable portion of any distribution
from qualified retirement plans, including Contracts issued and qualified under
Code Section 408(b) (Individual Retirement Annuities). To the extent amounts are
not includible in gross income because they have been rolled over to an IRA or
to another eligible qualified plan, no tax penalty will be imposed. The tax
penalty will not apply to the following distributions: (a) if distribution is
made on or after the date on which the Owner or Annuitant (as applicable)
reaches age 59 1/2; (b) distributions following the death or disability of the
Owner or Annuitant (as applicable) (for this purpose disability is as defined in
Section 72(m)(7) of the Code); (c) distributions that are part of substantially
equal periodic payments made not less frequently than annually for the life (or
life expectancy) of the Owner or Annuitant (as applicable) or the joint lives
(or joint life expectancies) of such Owner or Annuitant (as applicable) and his
or her designated Beneficiary; (d) distributions made to the Owner or Annuitant
(as applicable) to the extent such distributions do not exceed the amount
allowable as a deduction under Code Section 213 to the Owner or Annuitant (as
applicable) for amounts paid during the taxable year for medical care; (e)
distributions from an Individual Retirement Annuity for the purchase of medical
insurance (as described in Section 213 (d) (1) (D) of the Code) for the Owner or
Annuitant (as applicable) and his or her spouse and dependents if the Owner or
Annuitant (as applicable) has received unemployment compensation for at least 12
weeks (this exception will no longer apply after the Owner or Annuitant (as
applicable) has been re-employed for at least 60 days); (f) 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 (g) 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).
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 commence no later than April
1 of the calendar year, following the year in which the employee attains age 70
1/2. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed.
ANNUITY PROVISIONS
Variable Annuity Payments reflect the investment performance of the Separate
Account in accordance with the allocation of the Adjusted Contract Value to the
Sub-Accounts during the Annuity Period. Annuity Payments also depend upon the
Age of the Annuitant and any Joint Annuitant and the assumed interest factor
utilized. The Annuity Table used will depend upon the Annuity Option chosen. The
dollar amount of Variable Annuity Payments for each applicable Sub-Account after
the first Variable Annuity Payment is determined as follows:
1. The dollar amount of the first Variable Annuity Payment is divided by
the value of an Annuity Unit for each applicable Sub-Account as of the Annuity
Date. This sets the number of Annuity Units for each monthly payment for the
applicable Sub-Account. The number of Annuity Units remains fixed during the
Annuity Period.
2. The fixed number of Annuity Units per payment in each Sub-Account is
multiplied by the Annuity Unit Value for that Sub-Account for the last Valuation
Period of the month preceding the month for which the payment is due. This
result is the dollar amount of the payment for each applicable Sub-Account.
The total dollar amount of each Variable Annuity Payment is the sum of all
Sub-Account Variable Annuity Payments reduced by the applicable portion of the
Contract Maintenance Charge.
ANNUITY UNIT
The value of any Annuity Unit for each Sub-Account of the Separate Account was
arbitrarily set initially at $10.
The Sub-Account Annuity Unit Value at the end of any subsequent Valuation Period
is determined as follows:
1. The Net Investment Factor for the current Valuation Period is multiplied
by the value of the Annuity Unit for the Sub-Account for the immediately
preceding Valuation Period. The Net Investment Factor is equal to the
Accumulation Unit Value for the current Valuation Period divided by the
Accumulation Unit Value for the immediately preceding Valuation Period.
2. The result in (1) is then divided by the Assumed Investment Rate Factor
which equals 1.00 plus the Assumed Investment Rate for the number of days since
the preceding Valuation Date. The Assumed Investment Rate is equal to an
effective annual rate of 4%.
The value of an Annuity Unit may increase or decrease from Valuation Period to
Valuation Period.
(See "Annuity 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.
(to be filed by amendment)
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
A. FINANCIAL STATEMENTS
The financial statements of the Separate Account and the Company will be filed
by amendment.
B. EXHIBITS
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Separate Account.*
2. Not Applicable.
3. Form of Principal Underwriter's Agreement.*
4. Individual Fixed and Variable Deferred Annuity Contract.*
5. Application Form.*
6. (i) Copy of Articles of Incorporation of the Company.*
(ii) Copy of the Bylaws of the Company.*
7. Not Applicable.
8. (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 & Annuity Company.
9. Opinion and Consent of Counsel (to be filed by amendment).
10. Consent of Independent Accountants (to be filed by amendment).
11. Not Applicable.
12. Not Applicable.
13. Calculation of Performance Information (to be filed by amendment).
14. Not Applicable.
15. Company Organizational Chart.*
27. Not Applicable.
* Incorporated by reference to Registrant's Post-Effective Amendment No. 1
to Form N-4 (File No. 33-87150) as electronically filed April 18, 1996.
** Incorporated by reference to Registrant's Post-Effective Amendment No. 3
to Form N-4 (File No. 33-87150) as electronically filed on April 27, 1998.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following are the Executive Officers and Directors of the Company:
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
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The Company organizational chart was filed as Exhibit 15 in Registrant's
Post-Effective Amendment No. 1 (File No. 33-87150) and is incorporated herein by
reference.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of January 31, 1999, there was 558 Qualified Contract Owners and 593
Non-Qualified Contract Owners.
ITEM 28. INDEMNIFICATION
The Bylaws (Article V) of the Company provide that:
Subject to the laws of the State of North Carolina, any present or former
director, officer or employee of the Company, or any person who, at the request
of the Company, express or implied, may have served as a director or officer of
another Company in which this Company owns shares or of which this Company is a
creditor, shall be entitled to reimbursement of expenses and other liabilities,
including attorney's fees actually and reasonably incurred by him and any amount
paid by him in discharge of a judgment, fine, penalty of costs against him or
paid by him in a settlement approved by a court of competent jurisdiction, in
any action or proceeding, including any civil, criminal or administrative
action, suit, hearing or proceeding, to which he is a party by reason of being
or having been a director, officer or employee of this or such other Company.
This section is not intended to extend or to limit in any way the rights and
remedies provided with respect to indemnification of directors, officers,
employees and other persons provided by the laws of the State of North Carolina
but is intended to express the desire of the stockholders of this Company that
indemnification be granted to such directors, officers, employees and other
persons to the fullest extent allowable by such laws.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Not Applicable.
(b) London Pacific Financial and Insurance Services is the principal
underwriter for the Contracts. The following persons are the officers and
directors of London Pacific Financial and Insurance Services.
Name and Principal Position and Offices
Business Address with Underwriter
- ------------------------- -----------------------------------------------
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
(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 Contract described in the Prospectus, in
the aggregate, are reasonable in relation to the services rendered, the expenses
to be incurred and the risks assumed by the Company.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, as amended, the Registrant has caused this Registration Statement to be
signed on its behalf, in the City of Raleigh, and State of North Carolina on
this 16th day of February, 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.
Chairman of the Board and Director
- ----------------------- ------
Arthur I. Trueger Date
/s/ IAN K. WHITEHEAD President, Chief Executive Officer 2/16/99
- ----------------------- and Director ------
Ian K. Whitehead Date
/S/ GEORGE C. NICHOLSON Chief Financial Officer, Secretary 2/16/99
- ----------------------- ------
George C. Nicholson and Director Date
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 5
TO
FORM N-4
FOR
LPLA SEPARATE ACCOUNT ONE
OF
LONDON PACIFIC LIFE & ANNUITY COMPANY
INDEX TO EXHIBITS
EXHIBIT PAGE
EX-99.B8(ii) Form of Fund Participation Agreement - Bankers Trust Company
EX-99.B8(iii) Form of Fund Participation Agreement by and between Federated
Insurance Series and London Pacific Life & Annuity Company
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT made as of the 22nd day of April, 1998, by and between BT
Insurance Funds Trust ("TRUST"), a Massachusetts business trust, Bankers Trust
Company ("ADVISER"), a New York banking corporation, and London Pacific Life and
Annuity Insurance Company ("LIFE COMPANY"), a life insurance company organized
under the laws of the State of North Carolina.
WHEREAS, TRUST is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940, as amended (the "'40 Act"), as
an open-end, diversified management investment company; and
WHEREAS, TRUST is comprised of several series funds (each a "Portfolio"),
with those Portfolios currently available being listed on Appendix A hereto; and
WHEREAS, TRUST was organized to act as the funding vehicle for certain
variable life insurance and/or variable annuity contracts ("Variable Contracts")
offered by life insurance companies through separate accounts ("Separate
Accounts") of such life insurance companies ("Participating Insurance
Companies"); and
WHEREAS, TRUST may also offer its shares to certain qualified pension and
retirement plans ("Qualified Plans"); and
WHEREAS, TRUST has received an order from the SEC, granting Participating
Insurance Companies and their separate accounts exemptions from the provisions
of Sections 9(a), 13(a), 15(a) and 15(b) of the '40 Act, and Rules 6e-2(b)(15)
and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Portfolios of the TRUST to be sold to and held by Variable Contract Separate
Accounts of both affiliated and unaffiliated Participating Insurance Companies
and Qualified Plans ("Exemptive Order"); and
WHEREAS, LIFE COMPANY has established or will establish one or more
Separate Accounts to offer Variable Contracts and is desirous of having TRUST as
one of the underlying funding vehicles for such Variable Contracts; and
WHEREAS, ADVISER is a "bank" as defined in the Investment Advisers Act of
1940, as amended (the "Advisers Act") and as such is excluded from the
definition of "Investment Adviser" and is not required to register as an
investment adviser pursuant to the Advisers Act; and
WHEREAS, ADVISER serves as the TRUST's investment adviser; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase shares of TRUST to fund the
aforementioned Variable Contracts and TRUST is authorized to sell such shares to
LIFE COMPANY at such shares' net asset value;
NOW, THEREFORE, in consideration of their mutual promises, LIFE COMPANY,
TRUST, and ADVISER agree as follows:
Article I. SALE OF TRUST SHARES
1.1 TRUST agrees to make available to the Separate Accounts of LIFE COMPANY
shares of the selected Portfolios as listed on Appendix B for investment of
purchase payments of Variable Contracts allocated to the designated Separate
Accounts as provided in TRUST's Registration Statement.
1.2 TRUST agrees to sell to LIFE COMPANY those shares of the selected
Portfolios of TRUST which LIFE COMPANY orders, executing such orders on a daily
basis at the net asset value next computed after receipt by TRUST or its
designee of the order for the shares of TRUST. For purposes of this Section 1.2,
LIFE COMPANY shall be the designee of TRUST for receipt of such orders from the
designated Separate Account and receipt by such designee shall constitute
receipt by TRUST; provided that LIFE COMPANY receives the order by 4:00 p.m. New
York time and TRUST receives notice from LIFE COMPANY by telephone or facsimile
(or by such other means as TRUST and LIFE COMPANY may agree in writing) of such
order by 8:00 a.m. New York time on the next Business Day. "Business Day" shall
mean any day on which the New York Stock Exchange is open for trading and on
which TRUST calculates its net asset value pursuant to the rules of the SEC.
1.3 TRUST agrees to redeem on LIFE COMPANY's request, any full or
fractional shares of TRUST held by LIFE COMPANY, executing such requests on a
daily basis at the net asset value next computed after receipt by TRUST or its
designee of the request for redemption, in accordance with the provisions of
this Agreement and TRUST's Registration Statement. (In the event of a conflict
between the provisions of this Agreement and the Trust's Registration Statement,
the provisions of the Registration Statement shall govern.) For purposes of this
Section 1.3, LIFE COMPANY shall be the designee of TRUST for receipt of requests
for redemption from the designated Separate Account and receipt by such designee
shall constitute receipt by TRUST; provided that LIFE COMPANY receives the
request for redemption by 4:00 p.m. New York time and TRUST receives notice from
LIFE COMPANY by telephone or facsimile (or by such other means as TRUST and LIFE
COMPANY may agree in writing) of such request for redemption by 9:00 a.m. New
York time on the next Business Day.
1.4 TRUST shall furnish, on or before each ex-dividend date, notice to LIFE
COMPANY of any income dividends or capital gain distributions payable on the
shares of any Portfolio of TRUST. LIFE COMPANY hereby elects to receive all such
income dividends and capital gain distributions as are payable on a Portfolio's
shares in additional shares of the Portfolio. TRUST shall notify LIFE COMPANY or
its designee of the number of shares so issued as payment of such dividends and
distributions.
1.5 TRUST shall make the net asset value per share for the selected
Portfolio(s) available to LIFE COMPANY on a daily basis as soon as reasonably
practicable after the net asset value per share is calculated but shall use its
best efforts to make such net asset value available by 6:30 p.m. New York time.
If TRUST provides LIFE COMPANY with materially incorrect share net asset value
information through no fault of LIFE COMPANY, LIFE COMPANY on behalf of the
Separate Accounts, shall be entitled t an adjustment to the number of shares
purchased or redeemed to reflect the correct share net asset value. Any material
error in the calculation of net asset value per share, dividend or capital gain
information shall be reported promptly upon discovery to LIFE COMPANY.
1.6 At the end of each Business Day, LIFE COMPANY shall use the information
described in Section 1.5 to calculate Separate Account unit values for the day.
Using these unit values, LIFE COMPANY shall process each such Business Day's
Separate Account transactions based on requests and premiums received by it by
the close of trading on the floor of the New York Stock Exchange (currently 4:00
p.m. New York time) to determine the net dollar amount of TRUST shares which
shall be purchased or redeem at that day's closing net asset value per share.
The net purchase or redemption orders so determined shall be transmitted to
TRUST by LIFE COMPANY by 8:00 a.m. New York Time on the Business Day next
following LIFE COMPANY's receipt of such requests and premiums in accordance
with the terms of Sections 1.2 and 1.3 hereof.
1.7 If LIFE COMPANY's order requests the purchase of TRUST shares, LIFE
COMPANY shall pay for such purchase by wiring federal funds to TRUST or its
designated custodial account on the day the order is transmitted by LIFE
COMPANY. If LIFE COMPANY's order requests a net redemption resulting in a
payment of redemption proceeds to LIFE COMPANY, TRUST shall use its best efforts
to wire the redemption proceeds to LIFE COMPANY by the next Business Day, unless
doing so would require TRUST to dispose of Portfolio securities or otherwise
incur additional costs. In any event, proceeds shall be wired to LIFE COMPANY
within the time period permitted by the '40 Act or the rules, orders or
regulations thereunder, and TRUST shall notify the person designated in writing
by LIFE COMPANY as the recipient for such notice of such delay by 3:00 p.m. New
York Time on the same Business Day that LIFE COMPANY transmits the redemption
order to TRUST. If LIFE COMPANY's order requests the application of redemption
proceeds from the redemption of shares to the purchase of shares of another Fund
advised by ADVISER, TRUST shall so apply such proceeds on the same Business Day
that LIFE COMPANY transmits such order to TRUST.
1.8 TRUST agrees that all shares of the Portfolios of TRUST will be sold
only to Participating Insurance Companies which have agreed to participate in
TRUST to fund their Separate Accounts and/or to Qualified Plans, all in
accordance with the requirements of Section 817(h)(4) of the Internal Revenue
Code of 1986, as amended ("Code") and Treasury Regulation 1.817-5. Shares of the
TRUST's Portfolios will not be sold directly to the general public.
1.9 TRUST may refuse to sell shares of any Portfolio to any person, or
suspend or terminate the offering of the shares of or liquidate any Portfolio of
TRUST if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board of Trustees of the TRUST
(the "Board"), acting in good faith and in light of its duties under federal and
any applicable state laws, deemed necessary, desirable or appropriate and in the
best interests of the shareholders of such Portfolios.
1.10 Issuance and transfer of Portfolio shares will be by book entry only.
Stock certificates will not be issued to LIFE COMPANY or the Separate Accounts.
Shares ordered from Portfolio will be recorded in appropriate book entry titles
for the Separate Accounts.
Article II. REPRESENTATIONS AND WARRANTIES
2.1 LIFE COMPANY represents and warrants that it is an insurance company
duly organized and in good standing under the laws of North Carolina and that it
has legally and validly established each Separate Account as a segregated asset
account under such laws, and that London Pacific Financial & Insurance Services,
the principal underwriter for the Variable Contracts, is registered as a
broker-dealer under the Securities Exchange Act of 1934 (the "'34 Act").
2.2 LIFE COMPANY represents and warrants that it has registered or, prior
to any issuance or sale of the Variable Contracts, will register each Separate
Account as a unit investment trust ("UIT") in accordance with the provisions of
the '40 Act and cause each Separate Account to remain so registered to serve as
a segregated asset account for the Variable Contracts, unless an exemption from
registration is available.
2.3 LIFE COMPANY represents and warrants that the Variable Contracts will
be registered under the Securities Act of 1933 (the "'33 Act") unless an
exemption from registration is available prior to any issuance or sale of the
Variable Contracts, and that the Variable Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
(including all applicable blue sky laws) and further that the sale of the
Variable Contracts shall comply in all material respects with applicable state
insurance law suitability requirements.
2.4 LIFE COMPANY represents and warrants that the Variable Contracts are
currently and at the time of issuance will be treated as life insurance,
endowment or annuity contracts under applicable provisions of the Code, that it
will maintain such treatment and that it will notify TRUST immediately upon
having a reasonable basis for believing that the Variable Contracts have ceased
to be so treated or that they might not be so treated in the future.
2.5 TRUST represents and warrants that the Fund shares offered and sold
pursuant to this Agreement will be registered under the '33 Act and sold in
accordance with all applicable federal laws, and TRUST shall be registered under
the '40 Act prior to and at the time of any issuance or sale of such shares.
TRUST, subject to Section 1.9 above, shall amend its registration statement
under the '33 Act and the '40 Act from time to time as required in order to
effect the continuous offering of its shares. TRUST shall register and qualify
its shares for sale in accordance with the laws of the various states only if
and to the extent deemed advisable by TRUST.
2.6 TRUST represents and warrants that each Portfolio will comply with the
diversification requirements set forth in Section 817(h) of the Code, and the
rules and regulations thereunder, including without limitation Treasury
Regulation 1.817-5, and will notify LIFE COMPANY immediately upon having a
reasonable basis for believing any Portfolio has ceased to comply and will
immediately take all reasonable steps to adequately diversify the Portfolio to
achieve compliance.
TRUST represents and warrants that each Portfolio invested in by the
Separate Account will be treated as a "regulated investment company" under
Subchapter M of the Code, and will notify LIFE COMPANY immediately upon having a
reasonable basis for believing it has ceased to so qualify or might not so
qualify in the future.
ADVISER represents and warrants that it shall perform its obligations
hereunder in compliance in all material respects with any applicable state and
federal laws.
Article III. PROSPECTUS AND PROXY STATEMENTS
3.1 TRUST shall prepare and be responsible for filing with the SEC and any
state regulators requiring such filing all shareholder reports, notices, proxy
materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of TRUST.
TRUST shall bear the costs of registration and qualification of shares of the
Portfolios, preparation and filing of the documents listed in this Section 3.1
and all taxes and filing fees to which a issuer is subject on the issuance and
transfer of its shares.
3.2 TRUST or its designee shall provide LIFE COMPANY, free of charge, with
as many copies of the current prospectus (or prospectuses), statements of
additional information, annual and semi-annual reports and proxy statements for
the shares of the Portfolios as LIFE COMPANY may reasonably request for
distribution to existing Variable Contract owners whose Variable Contracts are
funded by such shares. TRUST or its designee shall provide LIFE COMPANY, at LIFE
COMPANY's expense, with as many copies of the current prospectus (or
prospectuses) for the shares as LIFE COMPANY may reasonably request for
distribution to prospective purchasers of Variable Contracts. If requested by
LIFE COMPANY, TRUST or its designee shall provide such documentation (including
a "camera ready" copy of the current prospectus (or prospectuses) as set in type
or, at the request of LIFE COMPANY, as a diskette in the form sent to the
financial printer) and other assistance as is reasonably necessary in order for
the parties hereto once a year (or more frequently if the prospectus (or
prospectuses) for the shares is supplemented or amended) to have the prospectus
for the Variable Contracts and the prospectus (or prospectuses) for the TRUST
shares printed together in one document. The expenses of such printing will be
apportioned between LIFE COMPANY and TRUST in proportion to the number of pages
of the Variable Contract and TRUST prospectus, taking account of other relevant
factors affecting the expense of printing, such as covers, columns, graphs and
charts; TRUST shall bear the cost of printing the TRUST prospectus portion of
such document for distribution only to owners of existing Variable Contracts
funded by the TRUST shares and LIFE COMPANY shall bear the expense of printing
the portion of such documents relating to the Separate Account; provided,
however, LIFE COMPANY shall bear all printing expenses of such combined
documents where used for distribution to prospective purchasers or to owners of
existing Variable Contracts not funded by the shares. In the event that LIFE
COMPANY requests that TRUST or its designee provide TRUST's prospectus in a
"camera ready" or diskette format, TRUST shall be responsible for providing the
prospectus (or prospectuses) in the format in which it is accustomed to
formatting prospectuses and shall bear the expense of providing the prospectus
(or prospectuses) in such format (e.g. typesetting expenses), and LIFE COMPANY
shall bear the expense of adjusting or changing the format to conform with any
of its prospectuses.
3.3 TRUST will provide LIFE COMPANY with at least one complete copy of all
prospectuses, statements of additional information, annual and semi-annual
reports, proxy statements, exemptive applications and all amendments or
supplements to any of the above that relate to the Portfolios promptly after the
filing of each such document with the SEC or other regulatory authority. LIFE
COMPANY will provide TRUST with at least one complete copy of all prospectuses,
statements of additional information, annual and semi-annual reports, proxy
statements, exemptive applications and all amendments or supplements to any of
the above that relate to a Separate Account promptly after the filing of each
such document with the SEC or other regulatory authority. n Article IV. SALES
MATERIALS n
4.1 LIFE COMPANY will furnish, or will cause to be furnished, to TRUST and
ADVISER, each piece of sales literature or other promotional material in which
TRUST or ADVISER is named, at least fifteen (15) Business Days prior to its
intended use. No such material will be used if TRUST or ADVISER objects to its
use in writing within ten (10) Business Days after receipt of such material.
4.2 TRUST and ADVISER will furnish, or will cause to be furnished, to LIFE
COMPANY, each piece of sales literature or other promotional material in which
LIFE COMPANY or its Separate Accounts are named, at least fifteen (15) Business
Days prior to its intended use. No such material will be used if LIFE COMPANY
objects to its use in writing within ten (10) Business Days after receipt of
such material.
4.3 TRUST and its affiliates and agents shall not give any information or
make any representations on behalf of LIFE COMPANY or concerning LIFE COMPANY,
the Separate Accounts, or the Variable Contracts issued by LIFE COMPANY, other
than the information or representations contained in a registration statement or
prospectus for such Variable Contracts, as such registration statement and
prospectus may be amended or supplemented from time to time, or in reports of
the Separate Accounts or reports prepared for distribution to owners of such
Variable Contracts, or in sales literature or other promotional material
approved by LIFE COMPANY or its designee, except with the written permission of
LIFE COMPANY.
4.4 LIFE COMPANY and its affiliates and agents shall not give any
information or make any representations on behalf of TRUST or concerning TRUST
other than the information or representations contained in a registration
statement or prospectus for TRUST, as such registration statement and prospectus
may be amended or supplemented from time to time, or in sales literature or
other promotional material approved by TRUST or its designee, except with the
written permission of TRUST.
4.5 For purposes of this Agreement, the phrase "sales literature or other
promotional material" or words of similar import include, without limitation,
advertisements (such as material published, or designed for use, in a newspaper,
magazine or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures or other public media),
sales literature (such as any written communication distributed or made
generally available to customers or th public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, or reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports and
proxy materials, and any other material constituting sales literature or
advertising under National Association of Securities Dealers, Inc. ("NASD")
rules, the '40 Act, the '33 Act or rules thereunder.
Article V. POTENTIAL CONFLICTS
5.1 The parties acknowledge that TRUST has received an order from the SEC
granting relief from various provisions of the '40 Act and the rules thereunder
to the extent necessary to permit TRUST shares to be sold to and held by
Variable Contract separate accounts of both affiliated and unaffiliated
Participating Insurance Companies and Qualified Plans. The Exemptive Order
requires TRUST and each Participating Insurance Company to comply with
conditions and undertakings substantially as provided in this Section 5. The
TRUST will not enter into a participation agreement with any other Participating
Insurance Company unless it imposes the same conditions and undertakings as are
imposed on LIFE COMPANY hereby.
5.2 The Board will monitor TRUST for the existence of any material
irreconcilable conflict between the interests of Variable Contract owners of all
separate accounts and with participants of Qualified Plans investing in TRUST.
An irreconcilable material conflict may arise for a variety of reasons, which
may include: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling or any similar action by
insurance, tax or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of TRUST are being managed; (e) a difference in voting instructions
given by Variable Contract owners; (f) a decision by a Participating Insurance
Company to disregard the voting instructions of Variable Contract owners and (g)
if applicable, a decision by a Qualified Plan to disregard the voting
instructions of plan participants.
5.3 LIFE COMPANY will report any potential or existing conflicts of which
it becomes aware to the Board. LIFE COMPANY will be responsible for assisting
the Board in carrying out its duties in this regard by providing the Board with
all information reasonably necessary for the Board to consider any issues
raised. The responsibility includes, but is not limited to, an obligation by the
LIFE COMPANY to inform the Board whenever it has determined to disregard
Variable Contract owner voting instructions. These responsibilities of LIFE
COMPANY will be carried out with a view only to the interests of the Variable
Contract owners.
5.4 If a majority of the Board or majority of its disinterested Trustees,
determines that a material irreconcilable conflict exists affecting LIFE
COMPANY, LIFE COMPANY, at its expense and to the extent reasonably practicable
(as determined by a majority of the Board's disinterested Trustees), will take
any steps necessary to remedy or eliminate the irreconcilable material conflict,
including; (a) withdrawing the assets allocable to some or all of the Separate
Accounts from TRUST or any Portfolio thereof and reinvesting those assets in a
different investment medium, which may include another Portfolio of TRUST, or
another investment company; (b) submitting the question as to whether such
segregation should be implemented to a vote of all affected Variable Contract
owners and as appropriate, segregating the assets of any appropriate group (i.e
variable annuity or variable life insurance Contract owners of one or more
Participating Insurance Companies) that votes in favor of such segregation, or
offering to the affected Variable Contract owners the option of making such a
change; and (c) establishing a new registered management investment company (or
series thereof) or managed separate account. If a material irreconcilable
conflict arises because of LIFE COMPANY's decision to disregard Variable
Contract owner voting instructions, and that decision represents a minority
position or would preclude a majority vote, LIFE COMPANY may be required, at the
election of TRUST, to withdraw the Separate Account's investment in TRUST, and
no charge or penalty will be imposed as a result of such withdrawal. The
responsibility to take such remedial action shall be carried out with a view
only to the interests of the Variable Contract owners.
For the purposes of this Section 5.4, a majority of the disinterested
members of the Board shall determine whether or not any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
TRUST or ADVISER (or any other investment adviser of TRUST) be required to
establish a new funding medium for any Variable Contract. Further, LIFE COMPANY
shall not be required by this Section 5.4 to establish a new funding medium for
any Variable Contracts if any offer to do so has been declined by a vote of a
majority of Variable Contract owners materially and adversely affected by the
irreconcilable material conflict.
5.5 The Board's determination of the existence of an irreconcilable
material conflict and its implications shall be made known promptly and in
writing to LIFE COMPANY.
5.6 No less than annually, LIFE COMPANY shall submit to the Board such
reports, materials or data as the Board may reasonably request so that the Board
may fully carry out its obligations. Such reports, materials, and data shall be
submitted more frequently if deemed appropriate by the Board.
Article VI. VOTING
6.1 LIFE COMPANY will provide pass-through voting privileges to all
Variable Contract owners so long as the SEC continues to interpret the '40 Act
as requiring pass-through voting privileges for Variable Contract owners.
Accordingly, LIFE COMPANY, where applicable, will vote shares of the Portfolio
held in its Separate Accounts in a manner consistent with voting instructions
timely received from its Variable Contract owners. LIFE COMPANY will be
responsible for assuring that each of its Separate Accounts that participates in
TRUST calculates voting privileges in a manner consistent with other
Participating Insurance Companies. LIFE COMPANY will vote shares for which it
has not received timely voting instructions, as well as shares it owns, in the
same proportion as its votes those shares for which it has received voting
instructions.
6.2 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or if Rule
6e-3 is adopted, to provide exemptive relief from any provision of the '40 Act
or the rules thereunder with respect to mixed and shared funding on terms and
conditions materially different from any exemptions granted in the Exemptive
Order, then TRUST, and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rule 6e-2 and Rule
6e-3(T), as amended, and Rule 6e 3, as adopted, to the extent such Rules are
applicable.
Article VII. INDEMNIFICATION
7.1 Indemnification by LIFE COMPANY. LIFE COMPANY agrees to indemnify and
hold harmless TRUST, ADVISER and each of their Trustees, directors, principals,
officers, employees and agents and each person, if any, who controls TRUST or
ADVISER within the meaning of Section 15 of the '33 Act (collectively, the
"Indemnified Parties") against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of LIFE COMPANY,
which consent shall not be unreasonably withheld) or litigation or threatened
litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of TRUST's shares or the Variable Contracts and:
(a) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the Registration
Statement or prospectus for the Variable Contracts or contained in the
Variable Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not apply
as to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished in writing to LIFE COMPANY by or
on behalf of TRUST for use in the registration statement or prospectus
for the Variable Contracts or in the Variable Contracts or sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Variable Contract or TRUST shares; or
(b) arise out of or result from (i) statements or representations (other
than statements or representations contained in the registration
statement, prospectus or sales literature of TRUST not supplied by
LIFE COMPANY, or persons under its control) or (ii) wrongful conduct
of LIFE COMPANY or persons under its control, with respect to the sale
or distribution of the Variable Contracts or TRUST shares; or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or
sales literature of TRUST or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission or
such alleged statement or omission was made in reliance upon and in
conformity with information furnished in writing to TRUST by or on
behalf of LIFE COMPANY; or
(d) arise as a result of any failure by LIFE COMPANY to provide
substantially the services and furnish the materials under the terms
of this Agreement; or
(e) arise out of or result from any material breach of any representation
and/or warranty made by LIFE COMPANY in this Agreement or arise out of
or result from any other material breach of this Agreement by LIFE
COMPANY.
7.2 LIFE COMPANY shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party to the extent that such losses, claims,
damages, liabilities or litigation are attributable to such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations or duties under this Agreement.
7.3 LIFE COMPANY shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified LIFE COMPANY in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify LIFE COMPANY of any
such claim shall not relieve LIFE COMPANY from any liability which it may have
to the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against an Indemnified Party, LIFE COMPANY shall be entitled to participate at
its own expense in the defense of such action. LIFE COMPANY also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action.
After notice from LIFE COMPANY to such party of LIFE COMPANY's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and LIFE COMPANY will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
7.4 Indemnification by TRUST. TRUST agrees to indemnify and hold harmless
LIFE COMPANY and each of its directors, officers, employees, and agents and each
person, if any, who controls LIFE COMPANY within the meaning of Section 15 of
the '33 Act (collectively, the "Indemnified Parties") against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of TRUST which consent shall not be unreasonably withheld)
or litigation or threatened litigation (including legal and other expenses) to
which the Indemnified Parties may become subject under any statute, or
regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of TRUST's shares or the Variable Contracts
and:
(a) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement
or prospectus or sales literature of TRUST (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished in writing to
ADVISER or TRUST by or on behalf of LIFE COMPANY for use in the
registration statement or prospectus for TRUST or in sales literature
(or any amendment or supplement) or otherwise for use in connection
with the sale of the Variable Contracts or TRUST shares; or
(b) arise out of or result from (i) statements or representations (other
than statements or representations contained in the registration
statement, prospectus or sales literature for the Variable Contracts
not supplied by ADVISER or TRUST or persons under its control) or (ii)
gross negligence or wrongful conduct or willful misfeasance of TRUST
or persons under its control, with respect to the sale or distribution
of the Variable Contracts or TRUST shares; or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or
sales literature covering the Variable Contracts, or any amendment
thereof or supplement thereto or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if such
statement or omission or such alleged statement or omission was made
in reliance upon and i conformity with information furnished in
writing to LIFE COMPANY for inclusion therein by or on behalf of
TRUST; or
(d) arise as a result of (i) a failure by TRUST to provide substantially
the services and furnish the materials under the terms of this
Agreement; or (ii) a failure by a Portfolio(s) invested in by the
Separate Account to comply with the diversification requirements of
Section 817(h) of the Code; or (iii) a failure by a Portfolio(s)
invested in by the Separate Account to qualify as a "regulated
investment company" under Subchapter M of the Code; or
(e) arise out of or result from any material breach of any representation
and/or warranty made by TRUST in this Agreement or arise out of or
result from any other material breach of this Agreement by TRUST.
TRUST shall not be liable under this indemnification provision with respect
to any losses, claims, damages, liabilities or litigation incurred or assessed
against an Indemnified Party to the extent that such losses, claims, damages,
liabilities or litigation are attributable to such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations and duties under this Agreement.
TRUST shall not be liable under this indemnification provision with respect
to any claim made against an Indemnified Party unless such Indemnified Party
shall have notified TRUST in writing within a reasonable time after the summons
or other first legal process giving information of the nature of the claim shall
have been served upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated agent), but failure
to notify TRUST of any such claim shall not relieve TRUST from any liability
which it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, TRUST shall be entitled to
participate at its own expense in the defense thereof. TRUST also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from TRUST to such party of TRUST's election
to assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and TRUST will not be liable
to such party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
Article VIII. TERM; TERMINATION
8.1 This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the provisions herein.
8.2 This Agreement shall terminate in accordance with the following
provisions:
(a) At the option of LIFE COMPANY or TRUST at any time from the date
hereof upon 180 days' notice, unless a shorter time is agreed to by
the parties;
(b) At the option of LIFE COMPANY, if TRUST shares are not reasonably
available to meet the requirements of the Variable Contracts as
determined by LIFE COMPANY. Prompt notice of election to terminate
shall be furnished by LIFE COMPANY, said termination to be effective
ten days after receipt of notice unless TRUST makes available a
sufficient number of shares to reasonably meet the requirements of the
Variable Contracts within said ten-day period;
(c) At the option of LIFE COMPANY, upon the institution of formal
proceedings against TRUST by the SEC, the NASD, or any other
regulatory body, the expected or anticipated ruling, judgment or
outcome of which would, in LIFE COMPANY's reasonable judgment,
materially impair TRUST's ability to meet and perform TRUST's
obligations and duties hereunder. Prompt notice of election to
terminate shall be furnished by LIFE COMPANY with said termination to
be effective upon receipt of notice;
(d) At the option of TRUST, upon the institution of formal proceedings
against LIFE COMPANY and/or its broker-dealer affiliates by the SEC,
the NASD, or any other regulatory body, the expected or anticipated
ruling, judgment or outcome of which would, in TRUST's reasonable
judgment, materially impair LIFE COMPANY's ability to meet and perform
its obligations and duties hereunder. Prompt notice of election to
terminate shall be furnished by TRUST with said termination to be
effective upon receipt of notice;
(e) In the event TRUST's shares are not registered, issued or sold in
accordance with applicable state or federal law, or such law precludes
the use of such shares as the underlying investment medium of Variable
Contracts issued or to be issued by LIFE COMPANY. Termination shall be
effective upon such occurrence without notice;
(f) At the option of TRUST if the Variable Contracts cease to qualify as
annuity contracts or life insurance contracts, as applicable, under
the Code, or if TRUST reasonably believes that the Variable Contracts
may fail to so qualify. Termination shall be effective upon receipt of
notice by LIFE COMPANY;
(g) At the option of LIFE COMPANY, upon TRUST's breach of any material
provision of this Agreement, which breach has not been cured to the
satisfaction of LIFE COMPANY within ten days after written notice of
such breach is delivered to TRUST;
(h) At the option of TRUST, upon LIFE COMPANY's breach of any material
provision of this Agreement, which breach has not been cured to the
satisfaction of TRUST within ten days after written notice of such
breach is delivered to LIFE COMPANY;
(i) At the option of TRUST, if the Variable Contracts are not registered,
issued or sold in accordance with applicable federal and/or state law.
Termination shall be effective immediately upon such occurrence
without notice;
(j) In the event this Agreement is assigned without the prior written
consent of LIFE COMPANY, TRUST, and ADVISER, termination shall be
effective immediately upon such occurrence without notice.
8.3 Notwithstanding any termination of this Agreement pursuant to Section
8.2 hereof, TRUST at its option may elect to continue to make available
additional TRUST shares, as provided below, for so long as TRUST desires
pursuant to the terms and conditions of this Agreement, for all Variable
Contracts in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"). Specifically, without
limitation, if TRUST so elects to make additional TRUST shares available, the
owners of the Existing Contracts or LIFE COMPANY, whichever shall have legal
authority to do so, shall be permitted to reallocate investments in TRUST,
redeem investments in TRUST and/or invest in TRUST upon the payment of
additional premiums under the Existing Contracts. In the event of a termination
of this Agreement pursuant to Section 8.2 hereof, TRUST and ADVISER, as promptly
as is practicable under the circumstances, shall notify LIFE COMPANY whether
TRUST elects to continue t make TRUST shares available after such termination.
If TRUST shares continue to be made available after such termination, the
provisions of this Agreement shall remain in effect and thereafter either TRUST
or LIFE COMPANY may terminate the Agreement, as so continued pursuant to this
Section 8.3, upon sixty (60) days prior written notice to the other party.
8.4 Except as necessary to implement Variable Contract owner initiated
transactions, or as required by state insurance laws or regulations, LIFE
COMPANY shall not redeem the shares attributable to the Variable Contracts (as
opposed to the shares attributable to LIFE COMPANY's assets held in the Separate
Accounts), and LIFE COMPANY shall not prevent Variable Contract owners from
allocating payments to a Portfolio that was otherwise available under the
Variable Contracts until thirty (30) days after the LIFE COMPANY shall have
notified TRUST of its intention to do so.
Article IX. NOTICES
Any notice hereunder shall be given by registered or certified mail return
receipt requested to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify in
writing to the other party.
If to TRUST:
BT Insurance Funds Trust
c/o First Data Investor Services Group, Inc.
One Exchange Place
53 State Street, Mail Stop BOS 865
Boston, MA 02109
Attn: Elizabeth Russell, Legal Dep't
and
c/o BT Alex. Brown
One South Street, Mail Stop 1-18-6
Baltimore, MD 21202
Attn: Brian Wixted, Mutual Fund Services
If to ADVISER:
Bankers Trust Company - Global Investment Management
130 Liberty Street
New York, NY 10006
Attn.: Vinay Mendiratta, Mail Stop 2355
If to LIFE COMPANY:
London Pacific Life & Annuity Company
3101 Poplarwood Court, Suite 300
Raleigh, NC 27626
Attn.: George Nicholson, CFO
Notice shall be deemed given on the date of receipt by the addressee as
evidenced by the return receipt.
Article X. MISCELLANEOUS
10.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
10.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
10.3 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
10.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of North
Carolina. It shall also be subject to the provisions of the federal securities
laws and the rules and regulations thereunder and to any orders of the SEC
granting exemptive relief therefrom and the conditions of such orders.
10.5 It is understood and expressly stipulated that neither the
shareholders of shares of any Portfolio nor the Trustees or officers of TRUST or
any Portfolio shall be personally liable hereunder. No Portfolio shall be liable
for the liabilities of any other Portfolio. All persons dealing with TRUST or a
Portfolio must look solely to the property of TRUST or that Portfolio,
respectively, for enforcement of any claims against TRUST or that Portfolio. It
is also understood that each of the Portfolios shall be deemed to be entering
into a separate Agreement with LIFE COMPANY so that it is as if each of the
Portfolios had signed a separate Agreement with LIFE COMPANY and that a single
document is being signed simply to facilitate the execution and administration
of the Agreement.
10.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the NASD and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
10.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
10.8 If the Agreement terminates, the parties agree that Article 7 and
Sections 10.5, 10.6 and 10.7 shall remain in effect after termination.
10.9 No provision of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by TRUST,
ADVISER and the LIFE COMPANY.
No failure or delay by a party in exercising any right or remedy under this
Agreement will operate as a waiver thereof and no single or partial exercise of
rights shall preclude a further or subsequent exercise. The rights and remedies
provided in this Agreement are cumulative and not exclusive of any rights or
remedies provided by law.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Fund Participation Agreement as of the date and year first above
written.
BT INSURANCE FUNDS TRUST
By:\s\ Elizabeth Russell
- ------------------------
Name: Elizabeth Russell
Title: Secretary
BANKERS TRUST COMPANY
By:\s\ Irene Greenberg
- ----------------------
Name:Irene Greenberg
Title:Vice President
LONDON PACIFIC LIFE AND ANNUITY INSURANCE COMPANY
By:\s\ Mark E. Prillaman
- ------------------------
Name:Mark E. Prillaman
Title: Executive Vice President
Appendix A
BT Insurance Funds Trust Equity 500 Index Portfolio
Appendix B
LPLA Separate Account One
FUND PARTICIPATION AGREEMENT
----------------------------
This AGREEMENT is made this 25th day of January, 1999, by and between
LONDON PACIFIC LIFE & ANNUITY COMPANY (the "Insurer"), a life insurance company
domiciled in North Carolina, on its behalf and on behalf of the segregated asset
accounts of the Insurer listed on Exhibit A to this Agreement (the "Separate
Accounts"); Insurance Series (the "Fund"), a Massachusetts business trust; and
Federated Securities Corp. (the "Distributor"), a Pennsylvania corporation.
W I T N E S S E T H
WHEREAS, the Fund is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended ("1940 Act") and the Fund is authorized to issue
separate classes of shares of beneficial interest ("shares"), each representing
an interest in a separate portfolio of assets known as a "portfolio" and each
portfolio has its own investment objective, policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its
portfolios to separate accounts of insurance companies that fund variable
annuity contracts ("Variable Contracts") and to serve as an investment medium
for Variable Contracts offered by insurance companies that have entered into
participation agreements substantially similar to this agreement ("Participating
Insurance Companies"), and the Fund will be made available in the future to
offer shares of one or more of its portfolios to separate accounts of insurance
companies that fund variable life insurance policies (at which time such
policies would also be "Variable Contracts" hereunder), and
WHEREAS, the Fund is currently comprised of eight separate portfolios, and
other portfolios may be established in the future; and
WHEREAS, the Fund has obtained an order from the SEC dated December 29,
1993 (File No. 812-8620), granting Participating Insurance Companies and
variable annuity and variable life insurance separate accounts exemptions from
the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the 1940 Act and
Rules 6e-2(b)(15) and 6e- 3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Fund to be sold to and held by variable annuity and
variable life insurance separate accounts of life insurance companies that may
or may not be affiliated with one another (hereinafter the "Mixed and Shared
Funding Exemptive Order"); and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended ("1934 Act"), and is a
member in good standing of the National Association of Securities Dealers, Inc.
("NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurer wishes to purchase shares of one or more of the Fund's
portfolios on behalf of its Separate Accounts to serve as an investment medium
for Variable Contracts funded by the Separate Accounts, and the Distributor is
authorized to sell shares of the Fund's portfolios;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants hereinafter set forth, the parties hereby agree as follows:
ARTICLE I. Sale of Fund Shares
1.1 The Distributor agrees to sell to the Insurer those shares of the
portfolios offered and made available by the Fund and identified on Exhibit B
("Portfolios") that the Insurer orders on behalf of its Separate Accounts, and
agrees to execute such orders on each day on which the Fund calculates its net
asset value pursuant to rules of the SEC ("business day") at the net asset value
next computed after receipt and acceptance by the Fund or its agent of the order
for the shares of the Fund.
1.2 The Fund agrees to make available on each business day shares of the
Portfolios for purchase at the applicable net asset value per share by the
Insurer on behalf of its Separate Accounts; provided, however, that the Board of
Trustees of the Fund may refuse to sell shares of any Portfolio to any person,
or suspend or terminate the offering of shares of any Portfolio, if such action
is required by law or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Trustees, acting in good faith and in light of the
Trustees' fiduciary duties under applicable law, necessary in the best interests
of the shareholders of any Portfolio.
1.3 The Fund and the Distributor agree that shares of the Portfolios of the
Fund will be sold only to Participating Insurance Companies, their separate
accounts, and other persons consistent with each Portfolio being adequately
diversified pursuant to Section 817(h) of the Internal Revenue Code of 1986, as
amended ("Code"), and the regulations thereunder. No shares of any Portfolio
will be sold directly to the general public to the extent not permitted by
applicable tax law.
1.4 The Fund and the Distributor will not sell shares of the Portfolios to
any insurance company or separate account unless an agreement containing
provisions substantially the same as the provisions in Article IV of this
Agreement is in effect to govern such sales.
1.5 Upon receipt of a request for redemption in proper form from the
Insurer, the Fund agrees to redeem any full or fractional shares of the
Portfolios held by the Insurer, ordinarily executing such requests on each
business day at the net asset value next computed after receipt and acceptance
by the Fund or its agent of the request for redemption, except that the Fund
reserves the right to suspend the right of redemption, consistent with Section
22(e) of the 1940 Act and any rules thereunder. Such redemption shall be paid
consistent with applicable rules of the SEC and procedures and policies of the
Fund as described in the current prospectus.
1.6 For purposes of Sections 1.2 and 1.5, the Insurer shall be the agent of
the Fund for the limited purpose of receiving and accepting purchase and
redemption orders from each Separate Account and receipt of such orders by 4:00
p.m. Eastern time by the Insurer shall be deemed to be receipt by the Fund for
purposes of Rule 22c-1 of the 1940 Act; provided that the Fund receives notice
of such orders on the next following business day prior to 4:00 p.m. Eastern
time on such day, although the Insurer will use its best efforts to provide such
notice by 9:00 a.m. Eastern time.
1.7 The Insurer agrees to purchase and redeem the shares of each Portfolio
in accordance with the provisions of the current prospectus for the Fund.
1.8 The Insurer shall pay for shares of the Portfolio on the next business
day after it places an order to purchase shares of the Portfolio. Payment shall
be in federal funds transmitted by wire.
1.9 Issuance and transfer of shares of the Portfolios will be by book entry
only unless otherwise agreed by the Fund. Stock certificates will not be issued
to the Insurer or the Separate Accounts unless otherwise agreed by the Fund.
Shares ordered from the Fund will be recorded in an appropriate title for the
Separate Accounts or the appropriate subaccounts of the Separate Accounts.
1.10 The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Insurer of any income dividends or capital gain
distributions payable on the shares of the Portfolios. The Insurer hereby elects
to reinvest in the Portfolio all such dividends and distributions as are payable
on a Portfolio's shares and to receive such dividends and distributions in
additional shares of that Portfolio. The Insurer reserves the right to revoke
this election in writing and to receive all such dividends and distributions in
cash. The Fund shall notify the Insurer of the number of shares so issued as
payment of such dividends and distributions.
1.11 The Fund shall instruct its recordkeeping agent to advise the Insurer
on each business day of the net asset value per share for each Portfolio as soon
as reasonably practical after the net asset value per share is calculated and
shall use its best efforts to make such net asset value per share available by
7:00 p.m. Eastern time.
ARTICLE II. Representations and Warranties
2.1 The Insurer represents and warrants that it is an insurance company
duly organized and in good standing under applicable law and that it is taxed as
an insurance company under Subchapter L of the Code.
2.2 The Insurer represents and warrants that it has legally and validly
established each of the Separate Accounts as a segregated asset account under
the North Carolina Insurance Code, and that each of the Separate Accounts is a
validly existing segregated asset account under applicable federal and state
law.
2.3 The Insurer represents and warrants that the Variable Contracts issued
by the Insurer or interests in the Separate Accounts under such Variable
Contracts (1) are or, prior to issuance, will be registered as securities under
the Securities Act of 1933 ("1933 Act") or, alternatively, (2) are not
registered because they are properly exempt from registration under the 1933 Act
or will be offered exclusively in transactions that are properly exempt from
registration under the 1933 Act.
2.4 The Insurer represents and warrants that each of the Separate Accounts
(1) has been registered as a unit investment trust in accordance with the
provisions of the 1940 Act or, alternatively, (2) has not been registered in
proper reliance upon an exclusion from registration under the 1940 Act.
2.5 The Insurer represents that it believes, in good faith, that the
Variable Contracts issued by the Insurer are currently treated as annuity
contracts or life insurance policies (which may include modified endowment
contracts), whichever is appropriate, under applicable provisions of the Code.
2.6 The Fund represents and warrants that it is duly organized as a
business trust under the laws of the Commonwealth of Massachusetts, and is in
good standing under applicable law.
2.7 The Fund represents and warrants that the shares of the Portfolios are
duly authorized for issuance in accordance with applicable law and that the Fund
is registered as an open-end management investment company under the 1940 Act.
2.8 The Fund represents that it believes, in good faith, that the
Portfolios currently comply with the diversification provisions of Section
817(h) of the Code and the regulations issued thereunder relating to the
diversification requirements for variable life insurance policies and variable
annuity contracts.
2.9 The Distributor represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC.
ARTICLE III. General Duties
3.1 The Fund shall take all such actions as are necessary to permit the
sale of the shares of each Portfolio to the Separate Accounts, including
maintaining its registration as an investment company under the 1940 Act, and
registering the shares of the Portfolios sold to the Separate Accounts under the
1933 Act for so long as required by applicable law. The Fund shall amend its
Registration Statement filed with the SEC under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of the
shares of the Portfolios. The Fund shall register and qualify the shares for
sale in accordance with the laws of the various states to the extent deemed
necessary by the Fund or the Distributor.
3.2 The Fund shall make every effort to maintain qualification of each
Portfolio as a Regulated Investment Company under Subchapter M of the Code (or
any successor or similar provision) and shall notify the Insurer immediately
upon having a reasonable basis for believing that a Portfolio has ceased to so
qualify or that it might not so qualify in the future.
3.3 The Fund shall make every effort to enable each Portfolio to comply
with the diversification provisions of Section 817(h) of the Code and the
regulations issued thereunder relating to the diversification requirements for
variable life insurance policies and variable annuity contracts and any
prospective amendments or other modifications to Section 817 or regulations
thereunder, and shall notify the Insurer immediately upon having a reasonable
basis for believing that any Portfolio has ceased to comply.
3.4 The Insurer shall take all such actions as are necessary under
applicable federal and state law to permit the sale of the Variable Contracts
issued by the Insurer, including registering each Separate Account as an
investment company to the extent required under the 1940 Act, and registering
the Variable Contracts or interests in the Separate Accounts under the Variable
Contracts to the extent required under the 1933 Act, and obtaining all necessary
approvals to offer the Variable Contracts from state insurance commissioners.
3.5 The Insurer shall make every effort to maintain the treatment of the
Variable Contracts issued by the Insurer as annuity contracts or life insurance
policies, whichever is appropriate, under applicable provisions of the Code, and
shall notify the Fund and the Distributor immediately upon having a reasonable
basis for believing that such Variable Contracts have ceased to be so treated or
that they might not be so treated in the future.
3.6 The Insurer shall offer and sell the Variable Contracts issued by the
Insurer in accordance with applicable provisions of the 1933 Act, the 1934 Act,
the 1940 Act, the NASD Rules of Fair Practice, and state law respecting the
offering of variable annuity contracts.
3.7 The Distributor shall sell and distribute the shares of the Portfolios
of the Fund in accordance with the applicable provisions of the 1933 Act, the
1934 Act, the 1940 Act, the NASD Rules of Fair Practice, and state law.
3.8 During such time as the Fund engages in Mixed Funding or Shared
Funding, a majority of the Board of Trustees of the Fund shall consist of
persons who are not "interested persons" of the Fund ("disinterested Trustees"),
as defined by Section 2(a)(19) of the 1940 Act and the rules thereunder, and as
modified by any applicable orders of the SEC, except that if this provision of
this Section 3.8 is not met by reason of the death, disqualification, or bona
fide resignation of any Trustee or Trustees, then the operation of this
provision shall be suspended (a) for a period of 45 days if the vacancy or
vacancies may be filled by the Fund's Board; (b) for a period of 60 days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
3.9 The Insurer and its agents will not in any way recommend any proposal
or oppose or interfere with any proposal submitted by the Fund at a meeting of
owners of Variable Contracts or shareholders of the Fund, and will in no way
recommend, oppose, or interfere with the solicitation of proxies for Fund shares
held by Contract Owners, without the prior written consent of the Fund, which
consent may be withheld in the Fund's sole discretion.
3.10 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities having jurisdiction (including, without
limitation, the SEC, the NASD, and state insurance regulators) and shall permit
such authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
ARTICLE IV. Potential Conflicts
4.1 During such time as the Fund engages in Mixed Funding or Shared
Funding, the parties hereto shall comply with the conditions in this Article IV.
4.2 The Fund's Board of Trustees shall monitor the Fund for the existence
of any material irreconcilable conflict (1) between the interests of owners of
variable annuity contracts and variable life insurance policies, and (2) between
the interests of owners of Variable Contracts ("Variable Contract Owners")
issued by different Participating Life Insurance Companies that invest in the
Fund. A material irreconcilable conflict may arise for a variety of reasons,
including: (a) an action by an state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretive letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio of
the Fund are being managed; (e) a difference in voting instructions given by
variable annuity and variable life insurance contract owners; or (f) a decision
by a Participating Insurance Company to disregard the voting instructions of
Variable Contract Owners.
4.3 The Insurer agrees that it shall report any potential or existing
conflicts of which it is aware to the Fund's Board of Trustees. The Insurer will
be responsible for assisting the Board of Trustees of the Fund in carrying out
its responsibilities under the Mixed and Shared Funding Exemptive Order, or, if
the Fund is engaged in Mixed Funding or Shared Funding in reliance on Rule 6e-2,
6e-3(T), or any other regulation under the 1940 Act, the Insurer will be
responsible for assisting the Board of Trustees of the Fund in carrying out its
responsibilities under such regulation, by providing the Board with all
information reasonably necessary for the Board to consider any issues raised.
This includes, but is not limited to, an obligation by the Insurer to inform the
Board whenever Variable Contract Owner voting instructions are disregarded. The
Insurer shall carry out its responsibility under this Section 4.3 with a view
only to the interests of the Variable Contract Owners.
4.4 The Insurer agrees that in the event that it is determined by a
majority of the Board of Trustees of the Fund or a majority of the Fund's
disinterested Trustees that a material irreconcilable conflict exists, the
Insurer shall, at its expense and to the extent reasonably practicable (as
determined by a majority of the disinterested Trustees of the Board of the
Fund), take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including: (1) withdrawing the
assets allocable to some or all of the Separate Accounts from the Fund or any
Portfolio and reinvesting such assets in a different investment medium,
including another portfolio of the Fund, or submitting the question as to
whether such segregation should be implemented to a vote of all affected
Variable Contract Owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners or life insurance contract
owners of contracts issued by one or more Participating Insurance Companies),
that votes in favor of such segregation, or offering to the affected Variable
Contract Owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account. If a
material irreconcilable conflict arises because of the Insurer's decision to
disregard Variable Contract Owners' voting instructions and that decision
represents a minority position or would preclude a majority vote, the Insurer
shall be required, at the Fund's election, to withdraw the Separate Accounts'
investment in the Fund, provided, however, that such withdrawal and termination
shall be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees, and no
charge or penalty will be imposed as a result of such withdrawal. These
responsibilities shall be carried out with a view only to the interests of the
Variable Contract Owners. A majority of the disinterested Trustees of the Fund
shall determine whether or not any proposed action adequately remedies any
material irreconcilable conflict, but in no event will the Fund or its
investment adviser or the Distributor be required to establish a new funding
medium for any Variable Contract. The Insurer shall not be required by this
Section 4.4 to establish a new funding medium for any Variable Contract if any
offer to do so has been declined by vote of a majority of Variable Contract
Owners materially adversely affected by the material irreconcilable conflict.
4.5 The Insurer, at least annually, shall submit to the Fund's Board of
Trustees such reports, materials, or data as the Board reasonably may request so
that the Trustees of the Fund may fully carry out the obligations imposed upon
the Board by the conditions contained in the application for the Mixed and
Shared Funding Exemptive Order and said reports, materials, and data shall be
submitted more frequently if deemed appropriate by the Board.
4.6 All reports of potential or existing conflicts received by the Fund's
Board of Trustees, and all Board action with regard to determining the existence
of a conflict, notifying Participating Insurance Companies of a conflict, and
determining whether any proposed action adequately remedies a conflict, shall be
properly recorded in the minutes of the Board of Trustees of the Fund or other
appropriate records, and such minutes or other records shall be made available
to the SEC upon request.
4.7 The Board of Trustees of the Fund shall promptly notify the Insurer in
writing of its determination of the existence of an irreconcilable material
conflict and its implications.
ARTICLE V. Prospectuses and Proxy Statements; Voting
5.1 The Insurer shall distribute such prospectuses, proxy statements and
periodic reports of the Fund to the owners of Variable Contracts issued by the
Insurer as required to be distributed to such Variable Contract Owners under
applicable federal or state law.
5.2 The Distributor shall provide the Insurer with as many copies of the
current prospectus of the Fund as the Insurer may reasonably request. If
requested by the Insurer in lieu thereof, the Fund shall provide such
documentation (including a final copy of the Fund's prospectus as set in type or
in camera-ready copy) and other assistance as is reasonably necessary in order
for the Insurer to either print a stand-alone document or print together in one
document the current prospectus for the Variable Contracts issued by the Insurer
and the current prospectus for the Fund, or a document combining the Fund
prospectus with prospectuses of other funds in which the Variable Contracts may
be invested. The Fund shall bear the expense of printing copies of its current
prospectus that will be distributed to existing Variable Contract Owners, and
the Insurer shall bear the expense of printing copies of the Fund's prospectus
that are used in connection with offering the Variable Contracts issued by the
Insurer.
5.3 The Fund and the Distributor shall provide, at the Fund's expense, such
copies of the Fund's current Statement of Additional Information ("SAI") as may
reasonably be requested, to the Insurer and to any owner of a Variable Contract
issued by the Insurer who requests such SAI.
5.4 The Fund, at its expense, shall provide the Insurer with copies of its
proxy materials, periodic reports to shareholders, and other communications to
shareholders in such quantity as the Insurer shall reasonably require for
purposes of distributing to owners of Variable Contracts issued by the Insurer.
The Fund, at the Insurer's expense, shall provide the Insurer with copies of its
periodic reports to shareholders and other communications to shareholders in
such quantity as the Insurer shall reasonably request for use in connection with
offering the Variable Contracts issued by the Insurer. If requested by the
Insurer in lieu thereof, the Fund shall provide such documentation (including a
final copy of the Fund's proxy materials, periodic reports to shareholders, and
other communications to shareholders, as set in type or in camera-ready copy)
and other assistance as reasonably necessary in order for the Insurer to print
such shareholder communications for distribution to owners of Variable Contracts
issued by the Insurer.
5.5 For so long as the SEC interprets the 1940 Act to require pass-through
voting by Participating Insurance Companies whose Separate Accounts are
registered as investment companies under the 1940 Act, the Insurer shall vote
shares of each Portfolio of the Fund held in a Separate Account or a subaccount
thereof, whether or not registered under the 1940 Act, at regular and special
meetings of the Fund in accordance with instructions timely received by the
Insurer (or its designated agent) fro owners of Variable Contracts funded by
such Separate Account or subaccount thereof having a voting interest in the
Portfolio. The Insurer shall vote shares of a Portfolio of the Fund held in a
Separate Account or a subaccount thereof that are attributable to the Variable
Contracts as to which no timely instructions are received, as well as shares
held in such Separate Account or subaccount thereof that are not attributable to
the Variable Contracts and owned beneficially by the Insurer (resulting from
charges against the Variable Contracts or otherwise), in the same proportion as
the votes cast by owners of the Variable Contracts funded by that Separate
Account or subaccount thereof having a voting interest in the Portfolio from
whom instructions have been timely received. The Insurer shall vote shares of
each Portfolio of the Fund held in its general account, if any, in the same
proportion as the votes cast with respect to shares of the Portfolio held in all
Separate Accounts of the Insurer or subaccounts thereof, in the aggregate.
5.6 During such time as the Fund engages in Mixed Funding or Shared
Funding, the Fund shall disclose in its prospectus that (1) the Fund is intended
to be a funding vehicle for variable annuity and variable life insurance
contracts offered by various insurance companies, (2) material irreconcilable
conflicts possibly may arise, and (3) the Board of Trustees of the Fund will
monitor events in order to identify the existence of any material irreconcilable
conflicts and to determine what action if any, should be taken in response to
any such conflict. The Fund hereby notifies the Insurer that prospectus
disclosure may be appropriate regarding potential risks of offering shares of
the Fund to separate accounts funding both variable annuity contracts and
variable life insurance policies and to separate accounts funding Variable
Contracts of unaffiliated life insurance companies.
ARTICLE VI. Sales Material and Information
6.1 The Insurer shall furnish, or shall cause to be furnished, to the Fund
or its designee, each piece of sales literature or other promotional material in
which the Fund (or any Portfolio thereof) or its investment adviser or the
Distributor is named at least 15 days prior to the anticipated use of such
material, and no such sales literature or other promotional material shall be
used unless the Fund and the Distributor or the designee of either approve the
material or do not respond with comments on the material within 10 days from
receipt of the material.
6.2 The Insurer agrees that neither it nor any of its affiliates or agents
shall give any information or make any representations or statements on behalf
of the Fund or concerning the Fund other than the information or representations
contained in the Registration Statement or prospectus for the Fund shares, as
such registration statement and prospectus may be amended or supplemented from
time to time, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material approved by the Fund or its designee
and by the Distributor or its designee, except with the permission of the Fund
or its designee and the Distributor or its designee.
6.3 The Fund or the Distributor or the designee of either shall furnish to
the Insurer or its designee, each piece of sales literature or other promotional
material in which the Insurer or its Separate Accounts are named at least 15
days prior to the anticipated use of such material, and no such material shall
be used unless the Insurer or its designee approves the material or does not
respond with comments on the material within 10 days from receipt of the
material.
6.4 The Fund and the Distributor agree that each and the affiliates and
agents of each shall not give any information or make any representations on
behalf of the Insurer or concerning the Insurer, the Separate Accounts, or the
Variable Contracts issued by the Insurer, other than the information or
representations contained in a registration statement or prospectus for such
Variable Contracts, as such registration statement and prospectus may be amended
or supplemented from time to time, or in reports for the Separate Accounts or
prepared for distribution to owners of such Variable Contracts, or in sales
literature or other promotional material approved by the Insurer or its
designee, except with the permission of the Insurer.
6.5 The Fund will provide to the Insurer at least one complete copy of the
Mixed and Shared Funding Exemptive Application and any amendments thereto, all
prospectuses, Statements of Additional Information, reports, proxy statements
and other voting solicitation materials, and all amendments and supplements to
any of the above, that relate to the Fund or its shares, promptly after the
filing of such document with the SEC or other regulatory authorities.
6.6 The Insurer will provide to the Fund all prospectuses (which shall
include an offering memorandum if the Variable Contracts issued by the Insurer
or interests therein are not registered under the 1933 Act), Statements of
Additional Information, reports, solicitations for voting instructions relating
to the Fund, and all amendments or supplements to any of the above that relate
to the Variable Contracts issued by the Insurer or the Separate Accounts which
utilize the Fund as an underlying investment medium, promptly after the filing
of such document with the SEC or other regulatory authority.
6.7 For purposes of this Article VI, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use, in a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, computerized media, or other public
media), sales literature (i.e., any written communication distributed or made
generally available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees.
ARTICLE VII. Indemnification
7.1 Indemnification by the Insurer
7.1(a) The Insurer agrees to indemnify and hold harmless the Fund, each of
its Trustees and officers, any affiliated person of the Fund within the meaning
of Section 2(a)(3) of the 1940 Act, and the Distributor (collectively, the
"Indemnified Parties" for purposes of this Section 7.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Insurer) or litigation expenses (including legal and
other expenses), to which the Indemnified Parties may become subject under any
statute or regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or litigation expenses are related to the sale or
acquisition of the Fund's shares or the Variable Contracts issued by the Insurer
and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or prospectus (which shall include an offering memorandum) for
the Variable Contracts issued by the Insurer or sales literature for such
Variable Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished to the Insurer
by or on behalf of the Fund for use in the registration statement or
prospectus for the Variable Contracts issued by the Insurer or sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of such Variable Contracts or Fund shares; or
(ii) arise out of or as a result of any statement or representation
(other than statements or representations contained in the registration
statement, prospectus or sales literature of the Fund not supplied by the
Insurer or persons under its control) or wrongful conduct of the Insurer or
any of its affiliates, employees or agents with respect to the sale or
distribution of the Variable Contracts issued by the Insurer or the Fund
shares; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement, prospectus, or sales
literature of the Fund or any amendment thereof or supplement thereto or
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance upon
information furnished to the Fund by or on behalf of the Insurer; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Insurer in this Agreement or
arise out of or result from any other material breach of this Agreement by
the Insurer; except to the extent provided in Sections 7.1(b) and 7.1(c)
hereof.
7.1(b) The Insurer shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation expenses
to which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of the
Indemnified Party's duties or by reason of the Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the Fund.
7.1(c) The Insurer shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such Party
shall have notified the Insurer in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after such Party
shall have received notice of such service on any designated agent), but failure
to notify the Insurer o any such claim shall not relieve the Insurer from any
liability which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Insurer shall be
entitled to participate, at its own expense, in the defense of such action. The
Insurer also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Insurer to
such party of the Insurer's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Insurer will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
7.1(d) The Indemnified Parties shall promptly notify the Insurer of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Variable Contracts issued by the
Insurer or the operation of the Fund.
7.2 Indemnification By the Distributor
7.2(a) The Distributor agrees to indemnify and hold harmless the Insurer,
its affiliated principal underwriter of the Variable Contracts, and each of
their directors and officers and any affiliated person of the Insurer within the
meaning of Section 2(a)(3) of the 1940 Act (collectively, the "Indemnified
Parties" for purposes of this Section 7.2) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Distributor) o litigation expenses (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute
or regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or litigation expenses are related to the sale or
acquisition of the Fund's shares or the Variable Contracts issued by the Insurer
and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or prospectus or sales literature of the Fund (or any amendment
or supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, provided that this agreement to indemnify shall not apply
as to any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Distributor or the Fund or the designee of
either by or on behalf of the Insurer for use in the registration statement
or prospectus for the Fund or in sales literature (or any amendment or
supplement) or otherwise for use in the registration statement or
prospectus for the Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Variable Contracts issued by the Insurer or Fund shares; or
(ii) arise out of or as a result of any statement or representations
(other than statements or representations contained in the registration
statement, prospectus or sales literature for the Variable Contracts not
supplied by the Distributor or any employees or agents thereof) or wrongful
conduct of the Fund or Distributor, or the affiliates, employees, or agents
of the Fund or the Distributor with respect to the sale or distribution of
the Variable Contracts issued by the Insurer or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement, prospectus, or sales
literature covering the Variable Contracts issued by the Insurer, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon information furnished
to the Insurer by or on behalf of the Fund; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor in this Agreement or
arise out of or result from any other material breach of this Agreement by
the Distributor; except to the extent provided in Sections 7.2(b) and
7.2(c) hereof.
7.2(b) The Distributor shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of the
Indemnified Party's duties or by reason of the Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the Insurer or the
Separate Accounts.
7.2(c) The Distributor shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Party shall have notified the Distributor in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Party shall have received notice of such service on any designated agent),
but failure to notify the Distributor of any such claim shall not relieve the
Distributor from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Distributor will be entitled to participate, at is own
expense, in the defense thereof. The Distributor also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Distributor to such party of the Distributor's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Distributor
will not be liable to such party under this Agreement for any legal or other
expense subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
7.2(d) The Insurer shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Variable Contracts
issued by the Insurer or the operation of the Separate Accounts.
7.3 Indemnification by the Fund
7.3(a) The Fund agrees to indemnify and hold harmless the Insurer, its
affiliated principal underwriter of the Variable Contracts, and each of their
directors and officers and any affiliated person of the Insurer within the
meaning of Section 2(a)(3) of the 1940 Act (collectively, the "Indemnified
Parties" for purposes of this Section 7.3) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Fund) or litigation expenses (including legal and other expenses)
to which the Indemnified Parties may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or litigation expenses are related to the sale or acquisition of the
Fund's shares or the Variable Contracts issued by the Insurer and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or prospectus or sales literature of the Fund (or any amendment
or supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, provided that this agreement to indemnify shall not apply
as to any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Distributor or the Fund or the designee of
either by or on behalf of the Insurer for use in the registration statement
or prospectus for the Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Variable Contracts issued by the Insurer or Fund shares; or
(ii) arise out of or as a result of any statement or representation
(other than statements or representations contained in the registration
statement, prospectus or sales literature for the Variable Contracts not
supplied by the Distributor or any employees or agents thereof) or wrongful
conduct of the Fund, or the affiliates, employees, or agents of the Fund,
with respect to the sale or distribution of the Variable Contracts issued
by the Insurer or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement, prospectus or sales
literature covering the Variable Contracts issued by the Insurer, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon information furnished
to the Insurer by or on behalf of the Fund; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or arise
out of or result from any other material breach of this Agreement by the
Fund; except to the extent provided in Sections 7.3(b) and 7.3(c) hereof.
7.3(b) The Fund shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation expenses
to which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of the
Indemnified Party's duties or by reason of the Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the Insurer or the
Separate Accounts.
7.3(c) The Fund shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such party
shall have notified the Fund in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after such Party
shall have received notice of such service on any designated agent), but failure
to notify the Fund of any such claim shall not relieve the Fund from any
liability which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Fund will be
entitled to participate, at its own expense, in the defense thereof. The Fund
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action. After notice from the Fund to such party of
the Fund's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Fund will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
7.3(d) The Insurer shall promptly notify the Fund of the commencement of
any litigation or proceedings against it or any of its officers or directors in
connection with the issuance or sale of the Variable Contracts issued by the
Insurer or the sale of the Fund's shares.
ARTICLE VIII. Applicable Law
8.1 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Pennsylvania.
8.2 This Agreement shall be subject to the provisions of the 1933, 1934,
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, the Mixed and Shared Funding Exemptive Order),
and the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE IX. Termination
9.1 This Agreement shall terminate:
(a) at the option of any party upon 180 days advance written notice to
the other parties; or
(b) at the option of the Insurer if shares of the Portfolios are not
reasonably available to meet the requirements of the Variable Contracts
issued by the Insurer, as determined by the Insurer, and upon prompt notice
by the Insurer to the other parties; or
(c) at the option of the Fund or the Distributor upon institution of
formal proceedings against the Insurer or its agent by the NASD, the SEC,
or any state securities or insurance department or any other regulatory
body regarding the Insurer's duties under this Agreement or related to the
sale of the Variable Contracts issued by the Insurer, the operation of the
Separate Accounts, or the purchase of the Fund shares; or
(d) at the option of the Insurer upon institution of formal
proceedings against the Fund or the Distributor by the NASD, the SEC, or
any state securities or insurance department or any other regulatory body;
or
(e) upon requisite vote of the Variable Contract Owners having an
interest in the Separate Accounts (or any subaccounts thereof) to
substitute the shares of another investment company for the corresponding
shares of the Fund or a Portfolio in accordance with the terms of the
Variable Contracts for which those shares had been selected or serve as the
underlying investment media; or
(f) in the event any of the shares of a Portfolio are not registered,
issued or sold in accordance with applicable state and/or federal law, or
such law precludes the use of such shares as the underlying investment
media of the Variable Contracts issued or to be issued by the Insurer; or
(g) by any party to the Agreement upon a determination by a majority
of the Trustees of the Fund, or a majority of its disinterested Trustees,
that an irreconcilable conflict, as described in Article IV hereof, exists;
or
(h) at the option of the Insurer if the Fund or a Portfolio fails to
meet the requirements under Subchapter M of the Code for qualification as a
Regulated Investment Company specified in Section 3.2 hereof or the
diversification requirements specified in Section 3.3 hereof.
9.2 Each party to this Agreement shall promptly notify the other parties to
the Agreement of the institution against such party of any such formal
proceedings as described in Sections 9.1(c) and (d) hereof. The Insurer shall
give 60 days prior written notice to the Fund of the date of any proposed vote
of Variable Contract Owners to replace the Fund's shares as described in Section
9.1(e) hereof.
9.3 Except as necessary to implement Variable Contract Owner initiated
transactions, or as required by state insurance laws or regulations, the Insurer
shall not redeem Fund shares attributable to the Variable Contracts issued by
the Insurer (as opposed to Fund shares attributable to the Insurer's assets held
in the Separate Accounts), and the Insurer shall not prevent Variable Contract
Owners from allocating payments to a Portfolio, until 60 days after the Insurer
shall have notified the Fund or Distributor of its intention to do so.
9.4 Notwithstanding any termination of this Agreement, the Fund and the
Distributor shall at the option of the Insurer continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement, for all Variable Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, based upon instructions from the owners of the
Existing Contracts, the Separate Accounts shall be permitted to reallocate
investments in the Portfolios of the Fund and redeem investments in the
Portfolios, and shall be permitted to invest in the Portfolios in the event that
owners of the Existing Contracts make additional purchase payments under the
Existing Contracts. If this Agreement terminates, the parties agree that
Sections 3.10, 7.1, 7.2, 7.3, 8.1, and 8.2, and, to the extent that all or a
portion of the assets of the Separate Accounts continue to be invested in the
Fund or any Portfolio of the Fund, Articles I, II, and IV and Sections 5.5 and
5.6 will remain in effect after termination.
ARTICLE X. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
Insurance Series
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attn.: John W. McGonigle
If to the Distributor:
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attn.: John W. McGonigle
If to the Insurer:
London Pacific Life & Annuity Company
3109 Poplarwood Court
Raleigh, North Carolina 27604
Attention: George C. Nicholson
ARTICLE XI: Miscellaneous
11.1 The Fund and the Insurer agree that if and to the extent Rule 6e-2 or
Rule 6e-3(T) under the 1940 Act is amended or if Rule 6e-3 is adopted in final
form, to the extent applicable, the Fund and the Insurer shall each take such
steps as may be necessary to comply with the Rule as amended or adopted in final
form.
11.2 A copy of the Fund's Agreement and Declaration of Trust is on file
with the Secretary of the Commonwealth of Massachusetts and notice is hereby
given that any agreements that are executed on behalf of the Fund by any Trustee
or officer of the Fund are executed in his or her capacity as Trustee or officer
and not individually. The obligations of this Agreement shall only be binding
upon the assets and property of the Fund and shall not be binding upon any
Trustee, officer or shareholder of the Fund individually.
11.3 Nothing in this Agreement shall impede the Fund's Trustees or
shareholders of the shares of the Fund's Portfolios from exercising any of the
rights provided to such Trustees or shareholders in the Fund's Agreement and
Declaration of Trust, as amended, a copy of which will be provided to the
Insurer upon request.
11.4 Administrative services to Variable Contract Owners shall be the
responsibility of Insurer. Insurer, on behalf of its separate accounts will be
the sole shareholder of record of Fund shares. Fund and Distributor recognize
that they will derive a substantial savings in administrative expense by virtue
of having a sole shareholder rather than multiple shareholders. In consideration
of the administrative savings resulting from having a sole shareholder rather
than multiple shareholders, Distributor agrees to pay to Insurer an amount
computed at an annual rate of the average daily net asset value of
shares held in subaccounts for which Insurer provides administrative services.
Distributor's payments to Insurer are for administrative services only and do
not constitute payment in any manner for investment advisory services.
11.5 It is understood that the name "Federated" or any derivative thereof
or logo associated with that name is the valuable property of the Distributor
and its affiliates, and that the Insurer has the right to use such name (or
derivative or logo) only so long as this Agreement is in effect. Upon
termination of this Agreement the Insurer shall forthwith cease to use such name
(or derivative or logo).
11.6 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
11.7 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.8 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
11.9 This Agreement may not be assigned by any party to the Agree-ment
except with the written consent of the other parties to the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
INSURANCE SERIES
ATTEST:\s\ A.J. Reed BY: \s\John W. McGonigle
Name: Amanda J. Reed Name: John W. McGonigle
Title: Staff Attorney Title: Secretary
FEDERATED SECURITIES CORP.
ATTEST: :\s\ A.J. Reed BY: \s\ John B. Fisher
Name: Amanda J. Reed Name: John B. Fisher
Title: Staff Attorney Title: President
LONDON PACIFIC LIFE & ANNUITY COMPANY
ATTEST: \s\ Susan Y. Gressel BY:\s\ George Nicholson
Name: Susan Y. Gressel Name: George Nicholson
Title: V.P. & Treasurer Title: CFO & Secretary
EXHIBIT A
LPLA Separate Account One
EXHIBIT B
Prime Money Fund II
U.S. Government Securities Fund II
