As Filed with the Securities and Exchange Commission on November 18, 1997
Registration No. 333-32701
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
PRE-EFFECTIVE AMENDMENT NO. 1
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUST
REGISTERED ON FORM N-8B-2
LIFE OF VIRGINIA SEPARATE ACCOUNT II
(Exact name of trust)
THE LIFE INSURANCE COMPANY OF VIRGINIA
(Name of depositor)
6610 West Broad Street
Richmond, Virginia 23230
(Complete address of depositor's principal executive offices)
<TABLE>
<CAPTION>
Name and complete address of agent for service: Copy to:
<S> <C>
J. Neil McMurdie, Esq.
The Life Insurance Company of Virginia Stephen E. Roth, Esq.
6610 West Broad Street Sutherland, Asbill & Brennan LLP
Richmond, Virginia 23230 1275 Pennsylvania Avenue, N.W.
Washington, DC 20004-2404
</TABLE>
Approximate date of proposed public offering: As soon as practicable after the
effective date of this Registration Statement
Securities Being Offered: Flexible Premium Variable Life Insurance Policies
The Registrant hereby amends this Registration Statement on such dates as may be
necessary to delay its effective date until the Registrant shall file a further
amendment which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on such
date as the Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
THE LIFE INSURANCE COMPANY OF VIRGINIA
Cross Reference to Items Required by form N-8B-2
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
- ----------- ---------------------
<S> <C>
1 Cover Page
2 Cover Page
3 Not applicable
4 Sale of the Policies
5 Separate Account II
6 Separate Account II
7 Not applicable
8 Separate Account II
9 Litigation
10 Summary and Diagram of the Policy; Premiums; Allocation Options; Death Benefits; Other
Policy Benefits and Provisions; Surrender Benefits; Loan Benefits; Separate Account
II; Voting of Fund Shares
11 Separate Account II; Allocation Options
12 Separate Account II; Allocation Options
13 Charges and Deductions
14 Premiums
15 Premiums; Allocation Options
16 Allocation Options
17 Premiums; Surrender Benefits; Loan Benefits; Requesting Payments and Telephone
Transactions
18 Separate Account II; Allocation Options; Other Policy Benefits and Provisions
19 Reports to Policy Owners
20 Separate Account II
21 Loan Benefits
22 Not applicable
23 Life of Virginia
24 Not applicable
25 Life of Virginia
26 Charges and Deductions
27 Life of Virginia
28 Life of Virginia
29 Life of Virginia
30 Not applicable
31 Not applicable
32 Not applicable
33 Not applicable
34 Not applicable
35 Life of Virginia
36 Not applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
- ----------- ---------------------
<S> <C>
37 Not applicable
38 Sale of the Policies
39 Sale of the Policies
40 Not Applicable
41 Sale of the Policies
42 Not applicable
43 Not applicable
44 How Your Policy Account Values Vary
45 Not applicable
46 How Your Policy Account Values Vary
47 Allocation Options
48 Life of Virginia; Separate Account II; Allocation Options
49 Not applicable
50 Separate Account II; Allocation Options
51 Premiums; Allocation Options; Charges and Deductions; Surrender Benefits
52 Separate Account II; Allocation Options; Other Policy Benefits and Provisions
53 Tax Considerations
54 Not applicable
55 Hypothetical Illustrations
56 Not applicable
57 Not applicable
58 Not applicable
59 Financial Statements
</TABLE>
<PAGE>
PART I
<PAGE>
PROSPECTUS DATED
Flexible Premium Variable Life Insurance Policy
Form 1250 9/97
LIFE OF VIRGINIA SEPARATE ACCOUNT II
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, Virginia 23230
Telephone (804) 281-6000
This prospectus describes a flexible premium variable life insurance
policy offered by The Life Insurance Company of Virginia. The Policy is designed
to provide life insurance protection on the Insured named in the Policy and at
the same time provide flexibility to vary the amount and timing of premiums and
to change the amount of death benefit payable under the Policy. This flexibility
allows you to provide for changing insurance needs under a single insurance
policy.
You may allocate Net Premiums and Account Value to one or more
Investment Subdivisions of the Life of Virginia Separate Account II, within
certain limits. Each Investment Subdivision invests solely in a corresponding
portfolio of the available Funds. Currently, there are nine Funds available
under the Policy: the Janus Aspen Series, the Variable Insurance Products Fund,
the Variable Insurance Products Fund II, the Variable Insurance Products Fund
III, the GE Investments Funds, Inc., the Oppenheimer Variable Account Funds, the
Federated Insurance Series, The Alger American Fund, and the PBHG Insurance
Series Fund, Inc.
You can elect one of two Death Benefit Options under the Policy. Under
Option A, the Life Insurance Proceeds will equal the greater of (1) the
Specified Amount plus the Policy's Account Value, or (2) the Account Value
multiplied by the applicable corridor percentage. Under Option B, the Life
Insurance Proceeds will equal the greater of (1) the Specified Amount, or (2)
the Account Value multiplied by the applicable corridor percentage. Under both
options, the Specified Amount and Account Value are determined on the date of
the Insured's death. We guarantee that the Life Insurance Proceeds will never be
less than the Specified Amount so long as the Policy is in force.
The Policy provides for a Surrender Value. Because this value is based
on the performance of the Funds, to the extent of allocations to Separate
Account II, there is no guaranteed Surrender Value or guaranteed minimum
Surrender Value. On any given day, the Surrender Value could be more or less
than the premiums paid. If the Surrender Value is insufficient to cover the
charges due under the Policy, the Policy will lapse without value. However, the
Policy will not lapse during the Continuation Period, regardless of the
sufficiency of the Surrender Value, so long as the Net Total Premium is at least
equal to the Continuation Amount.
The Policy also provides for Policy loans and permits partial
surrenders within limits. In addition, you can elect dollar-cost averaging or
portfolio rebalancing programs.
<PAGE>
THIS PROSPECTUS SHOULD BE READ CAREFULLY AND RETAINED
FOR FUTURE REFERENCE. PROSPECTUSES FOR THE FUNDS MUST
ACCOMPANY THIS PROSPECTUS AND SHOULD BE READ IN
CONJUNCTION WITH THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
INTERESTS IN THE POLICIES AND FUNDS ARE NOT DEPOSITS WITH,
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY BANK
OR BANK AFFILIATE, AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION (FDIC), THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page Page
---- -----
<S> <C>
SUMMARY AND DIAGRAM OF HYPOTHETICAL ILLUSTRATIONS
THE POLICY REQUESTING PAYMENTS AND
Fund Charges TELEPHONE TRANSACTIONS
DEFINITIONS Requesting Payments
PREMIUMS Telephone Transactions
Applying for a Policy OTHER POLICY BENEFITS AND
Free Look Right to Cancel PROVISIONS
Premiums Exchange Privilege
Periodic Premium Plan Optional Payment Plans
Premium to Prevent Lapse Other Policy Provisions
Minimum Premium Payment Owner
Death Benefit Guarantee Beneficiary
Crediting Premium to the Policy Reinstatement
ALLOCATION OPTIONS Trustee
Net Premium Allocations Other Changes
Investment Subdivisions Reports
Transfers Change of Owner
Dollar-Cost Averaging Supplemental Benefits
Portfolio Rebalancing Using the Policy as Collateral
Powers of Attorney Reinsurance
CHARGES AND DEDUCTIONS LIFE OF VIRGINIA
Premium Charge The Life Insurance Company of Virginia
Mortality and Expense Risk State Regulation
Charge Executive Officers and Directors
Monthly Deduction Separate Account II
Surrender Charge Changes to Separate Account II
Cost of Insurance Voting of Fund Shares
Other Charges TAX CONSIDERATIONS
Reduction of Charges for Group Sales Tax Status of the Policy
HOW YOUR ACCOUNT VALUE VARIES Tax Treatment of Policy Proceeds
Account Value Tax Treatment of Policy Loans
Surrender Value and Other Distributions
Investment Subdivision Values Taxation of Life of Virginia
DEATH BENEFITS Income Tax Withholding
Amount of Death Benefit Payable Other Considerations
Death Benefit Options LEGAL DEVELOPMENTS -
Changing the Death Benefit Option REGARDING EMPLOYMENT
Accelerated Benefit Rider RELATED BENEFIT PLANS
Effect of Partial Surrenders on ADDITIONAL INFORMATION
Life Insurance Proceeds Sale of Policies
Change in Existing Coverage Other Information
Changing the Beneficiary Litigation
LOAN BENEFITS Legal Matters
Interest Experts
Repayment of Policy Debt Change in Auditors
Effect of Policy Loan Financial Statements
SURRENDER BENEFITS
Full Surrender
Partial Surrender
</TABLE>
<PAGE>
This prospectus does not constitute an offering in any jurisdiction in which
such offering may not be lawfully made. No person is authorized to make any
representations in connection with this offering other than those
representations contained in this prospectus and the Fund prospectuses and
Statements of Additional Information.
<PAGE>
SUMMARY AND DIAGRAM OF THE POLICY
The following summary of prospectus information and diagram of the important
features of the Policy should be read in conjunction with the more detailed
information appearing elsewhere in this prospectus. Unless otherwise indicated,
the description of the Policy in this prospectus assumes that the Policy is in
force and there is no Policy Debt. Definitions of certain terms used in this
prospectus may be found by referring to the DEFINITIONS section immediately
following the diagram.
Purpose of the Policy. The Policy is designed to provide insurance
benefits with a long-term investment element. The Policy should be considered in
conjunction with your other insurance. It may not be advantageous to replace
existing insurance with the Policy.
Comparison with Universal Life Insurance. The Policy is similar in many
ways to universal life insurance. As with universal life insurance: the Owner
pays premiums for insurance coverage on the Insured; the Policy provides for the
accumulation of Surrender Value that is payable if the Policy is surrendered
during the Insured's lifetime; and the Surrender Value may be substantially
lower than the premiums paid. However, the Policy differs from universal life
insurance in that the Surrender Value may decrease if the investment performance
of the Investment Subdivisions to which Account Value is allocated is
sufficiently adverse. If the Surrender Value becomes insufficient to cover
charges when due and the Continuation Period is not in effect, the Policy will
lapse without value after a grace period. See "Premium to Prevent Lapse."
Tax Considerations. We intend for the Policy to satisfy the definition
of a life insurance contract under section 7702 of the Internal Revenue Code of
1986, as amended (the "Code"). Under certain circumstances, a Policy could be
treated as a "modified endowment contract." We will monitor Policies and will
attempt to notify you on a timely basis if your Policy is in jeopardy of
becoming a modified endowment contract. For further discussion of the tax status
of a Policy and the tax consequences of being treated as a life insurance
contract or a modified endowment contract, see the "TAX CONSIDERATIONS" section
below.
Free Look Right to Cancel. For a limited time after the Policy is
issued, you have the right to cancel your Policy and receive the sum of all
charges deducted from premiums paid plus Net Premiums adjusted by investment
gains and losses or, if required by state law, a full refund of all premiums
paid. See "Free Look Right to Cancel" and "Net Premium Allocations."
Inquiries. If you have any questions, you may write or call our Home
Office at 6610 West Broad Street, Richmond, Virginia 23230, (804) 281-6000.
<PAGE>
DIAGRAM OF POLICY
- --------------------------------------------------------------------------------
PREMIUMS
o You select a premium payment plan. You are not required to pay premiums
according to the plan, but may vary the frequency and amount, within
limits, and can skip planned premiums. See "Periodic Premium Plan."
o Premium amounts depend on the Insured's Age, sex (where applicable), risk
class, Specified Amount selected, and any supplemental benefit riders. See
"Premiums."
o Unscheduled premium payments may be made, within limits. See "Premiums."
o Under certain circumstances, extra premiums may be required to prevent
lapse. See "Premium to Prevent Lapse."
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DEDUCTION FROM PREMIUMS
o Currently, a 3% premium charge (5% maximum) is deducted from each premium
before allocation to an Investment Subdivision resulting in a Net Premium.
A premium charge will not be assessed against the policy loan portion of a
premium received from the rollover of a life insurance policy. See "Premium
Charge."
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ALLOCATION OF NET PREMIUMS
o You direct the allocation of Net Premiums among up to seven of the
Investment Subdivisions of Separate Account II. For states that require the
refund of premiums during the free look period, we will allocate Net
Premiums to the Money Market Investment Subdivision for 15 days, then to
your designated Investment Subdivisions. See "Net Premium Allocations" for
rules and limits.
o The Investment Subdivisions invest in corresponding portfolios of the
following Funds:
<TABLE>
<CAPTION>
<S> <C>
Janus Aspen Series GE Investments Funds, Inc. (Continued)
Growth Portfolio Total Return Fund
Aggressive Growth Portfolio International Equity Fund
International Growth Portfolio Real Estate Securities Fund
Worldwide Growth Portfolio Global Income Fund
Balanced Portfolio Value Equity Fund
Flexible Income Portfolio Income Fund
Capital Appreciation Portfolio Oppenheimer Variable Account Funds
Variable Insurance Products Fund Oppenheimer Bond Fund
Equity-Income Portfolio Oppenheimer Capital Appreciation Fund
Overseas Portfolio Oppenheimer Growth Fund
Growth Portfolio Oppenheimer High Income Fund
Variable Insurance Products Fund II Oppenheimer Multiple Strategies Fund
Asset Manager Portfolio Federated Insurance Series
Contrafund Portfolio Federated American Leaders Fund II
Variable Insurance Products Fund III Federated Utility Fund II
Growth & Income Portfolio Federated High Income Bond Fund II
Growth Opportunities Portfolio The Alger American Fund
GE Investments Funds, Inc. Alger American Growth Portfolio
S&P 500 Index Fund Alger American Small Capitalization Portfolio
Money Market Fund PBHG Insurance Series Fund, Inc.
PBHG Growth II Portfolio
PBHG Large Cap Growth Portfolio
See "Investment Subdivisions Options."
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
DEDUCTIONS FROM ASSETS
o Management fees and other expenses are deducted from the assets of each Fund.
See "Fund Charges."
o A daily mortality and expense risk charge at a current effective annual rate
of 0.70% (maximum effective annual rate of 0.90%) is deducted from assets in
the Investment Subdivisions. See "Mortality and Expense Risk Charge."
o A monthly deduction is made each month from the Account Value for (1) the
cost of insurance, (2) a current monthly policy charge of $12 in the first
policy year and $6 per month thereafter (it cannot exceed $12 per month), and
(3) supplemental benefit charges. The monthly deduction will also include
the increase charge for the first month following an increase in the
Specified Amount. See "Monthly Deduction."
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACCOUNT VALUE
o Account Value is the total amount under the Policy in each Investment
Subdivision and the General Account. See "Account Value" and "Investment
Subdivision Account Value."
o Account Value serves as the starting point for calculating certain values
under a Policy, such as the Surrender Value and the Life Insurance
Proceeds. Account Value varies from day to day to reflect investment
experience of the Investment Subdivisions, charges deducted and other
Policy transactions (such as Policy loans, transfers and partial
surrenders.) See "HOW YOUR ACCOUNT VALUE VARIES."
o Account Value can be transferred among the Investment Subdivisions. A $10
transfer processing fee applies to each transfer made after the first
transfer in a Policy Month. See "Transfers" for rules and limits. Policy
loans reduce the amount available for allocations and transfers.
o There is no minimum guaranteed Account Value. During the Continuation
Period, the Policy will lapse if the Surrender Value is insufficient to
cover the monthly deduction and the Net Total Premium is less than the
Continuation Amount. After the Continuation Period, the Policy will lapse
if the Surrender Value is insufficient to cover the monthly deduction. See
"Premium to Prevent Lapse."
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------- ----------------------------------------------------
<S> <C>
CASH BENEFITS DEATH BENEFITS
o Policy loans are available for amounts up to o The minimum Specified Amount available is
90% of Account Value less any Surrender $100,000.
Charges, less any Policy Debt. See "LOAN o A death benefit is available under one of two
BENEFITS" for discussion of interest on Policy options: Option A (greater of Specified
loans and additional rules and limits. See Amount plus Account Value, or a specified
also "TAX CONSIDERATIONS." percentage of Account Value); or Option B
o Partial surrenders are available under the (greater of Specified Amount, or a specified
Policy. The minimum partial surrender amount percentage of Account Value). See "DEATH
is $500, and a fee equal to the lesser of $25 BENEFITS."
or 2% of the amount of the partial surrender o A death benefit is payable as a lump sum or
will apply to each Partial Surrender. See under a variety of payment options.
"Partial Surrender" for rules and limits. o The Specified Amount and the Death Benefit
o The Policy can be surrendered at any time for Option may be changed. See "Change in
its Surrender Value (Account Value minus Existing Coverage" and "Changing the Death
Policy Debt and minus any applicable surrender Benefit Option" for rules and limits.
charge). A surrender charge will apply during o During the Continuation Period, the death
the first 15 Policy Years. See "Full benefit guarantee keeps the Policy in force
Surrender" and "Surrender Charge." regardless of the sufficiency of Surrender
o A variety of payment options are available. Value so long as Net Total Premium is at
See "Requesting Payments." least equal to the Continuation Amount. See
"Death Benefit Guarantee."
- ----------------------------------------------------- ----------------------------------------------------
</TABLE>
<PAGE>
Fund Charges. The fees and expenses for each of the Funds (as a
percentage of net assets) for the most recent fiscal year are set forth in the
following table. For more information on these fees and expenses, see the
prospectuses for the Funds which accompany this prospectus.
<TABLE>
<CAPTION>
Management
Fees
(after fee Other Expenses
waiver as (after reimbursement- Total Annual
Fund applicable) as applicable) Expenses
---- ----------- -------------------- ------------
<S> <C>
Janus Aspen Series:
Growth Portfolio 0.65% 0.04% 0.69%
Aggressive Growth Portfolio 0.72% 0.04% 0.76%
International Growth Portfolio 0.05% 1.21% 1.26%
Worldwide Growth Portfolio 0.66% 0.14% 0.80%
Balanced Portfolio 0.79% 0.15% 0.94%
Flexible Income Portfolio 0.65% 0.19% 0.84%
Capital Appreciation Portfolio * 0.75% 0.30% 1.05%
Variable Insurance Products Fund:
Equity-Income Portfolio 0.51% 0.07% 0.58%
Overseas Portfolio 0.76% 0.17% 0.93%
Growth Portfolio 0.61% 0.08% 0.69%
Variable Insurance Products Fund II:
Asset Manager Portfolio 0.64% 0.10% 0.74%
Contrafund Portfolio 0.61% 0.13% 0.74%
Variable Insurance Products Fund III:
Growth and Income Portfolio 0.50% 0.20% 0.70%
Growth Opportunities Portfolio 0.61% 0.16% 0.77%
GE Investments Funds, Inc.:
S&P 500 Index Fund 0.35% 0.13% 0.48%
Money Market Fund 0.10% 0.05% 0.15%
Total Return Fund 0.50% 0.10% 0.60%
International Equity Fund 1.00% 0.50% 1.50%
Real Estate Securities Fund 0.85% 0.22% 1.07%
Global Income Fund * 0.60% 0.30% 0.90%
Value Equity Fund * 0.65% 0.26% 0.91%
Income Fund* 0.50% 0.13% 0.63%
Oppenheimer Variable Account Funds:
Oppenheimer Bond Fund 0.74% 0.04% 0.78%
Oppenheimer Capital Appreciation Fund 0.72% 0.03% 0.75%
Oppenheimer Growth Fund 0.75% 0.04% 0.79%
Oppenheimer High Income Fund 0.75% 0.06% 0.81%
Oppenheimer Multiple Strategies Fund 0.73% 0.04% 0.77%
Federated Insurance Series:
Federated American Leaders Fund II 0.53% 0.32% 0.85%
Federated Utility Fund II 0.24% 0.61% 0.85%
Federated High Income Bond Fund II 0.01% 0.79% 0.80%
The Alger American Fund:
Alger American Growth Portfolio 0.75% 0.04% 0.79%
Alger American Small Capitalization Portfolio 0.85% 0.03% 0.88%
PBHG Insurance Series Fund, Inc.:
Growth II Portfolio * 0.85% 0.30% 1.15%
Large Cap Growth Portfolio * 0.72% 0.38% 1.10%
</TABLE>
* The Global Income Fund, Value Equity Fund and Income Fund of the GE
Investments Funds, Inc., the Capital Appreciation Portfolio of the Janus Aspen
Series, and the Growth II Portfolio and Large Cap Growth Portfolio of the PBHG
Insurance Series Fund, Inc. had not yet commenced operations as of December
31, 1996. Therefore, the fees and expenses for these portfolios are estimates.
Other Policies
We offer other variable life insurance policies which also invest in the same
portfolios of the Funds. These Policies may have different charges that could
affect the value of the Investment Subdivisions and may offer different benefits
more suitable to your needs. To obtain more information about these policies,
contact your agent, or call (800) 352-9910.
<PAGE>
The purpose of these tables is to assist the Owner in understanding the
various costs and expenses that an Owner will bear, directly and indirectly.
Except as noted below, the Tables reflect charges and expenses of Account II as
well as the underlying Funds for the most recent fiscal year. For more
information on the charges described in these Tables see Charges and Deductions
and the Prospectuses for the underlying Funds which accompany this Prospectus.
In addition to the expenses listed above, premium taxes varying from 0 to 3.5%
may be applicable.
The expense information regarding the Funds was provided by those Funds. The
Variable Insurance Products Fund, Variable Insurance Products Fund II, Variable
Insurance Products Fund III, Oppenheimer Variable Account Funds, Janus Aspen
Series, Federated Insurance Series, The Alger American Fund, PBHG Insurance
Series Fund, Inc. and their investment advisers are not affiliated with Life of
Virginia. While Life of Virginia has no reason to doubt the accuracy of these
figures provided by these non-affiliated Funds, Life of Virginia has not
independently verified such information. The annual expenses listed for all the
Funds are net of certain reimbursements by the Funds' investment advisers. Life
of Virginia cannot guarantee that the reimbursements will continue.
Absent certain reimbursements and reductions that are reflected in the table,
the total annual expenses of the portfolios of the Variable Insurance Products
Fund during 1996 would have been 0.56% for VIP Equity-Income Portfolio, 0.67%
for VIP Growth Portfolio and O.92% for VIP Overseas Portfolio.
Absent certain reimbursements and reductions that are reflected in the table,
the total annual expenses of the portfolios of the Variable Insurance Products
Fund II during 1996 would have been 0.73 for VIP Asset Manager Portfolio and
0.71% for VIP Contrafund Portfolio.
Absent certain reimbursements and reductions that are reflected in the table,
the total annual expenses of the portfolios of the Variable Insurance Products
Fund III during 1996 would have been 0.77% for VIP Growth Opportunities
Portfolio.
GE Investment Management Incorporated currently serves as investment adviser
to GE Investments Funds, Inc. (formerly Life of Virginia Series Fund, Inc.).
Prior to May 1, 1997, Aon Advisors, Inc. served as investment adviser to this
Fund and had agreed to reimburse the Fund for certain expenses of each of the
Fund's portfolios. Absent certain fee waivers or reimbursements, the total
annual expenses of the portfolios of GE Investments Funds, Inc. during 1996
would have been 0.55% for Money Market Fund, 0.48% for S&P 500 Index Fund, 0.60%
for Total Return Fund, 1.07% for Real Estate Securities Fund, 1.56% for
International Equity Fund. The Other Expenses for the Global Income Fund, the
Value Equity Fund and the Income Fund are estimates by the Fund since these
portfolios were recently organized and have no operating history, and actual
expenses may be greater or less than those shown.
Absent reimbursements, the total annual expenses of the portfolios of the
Janus Aspen Series during 1996 would have been .83% for Growth Portfolio, .83%
for Aggressive Growth Portfolio, 0.91% for Worldwide Growth Portfolio, 2.21% for
International Growth Portfolio, and 1.07% for Balanced Portfolio. The Other
Expenses listed for the Capital Appreciation Portfolio of Janus Aspen Series are
estimates provided by the Fund because the portfolio had not yet commenced
operations as of December 31, 1996. The total expenses absent fee waivers are
estimated to be 1.30%.
Absent certain fee waivers or reimbursements, the total annual expenses of the
portfolios of the Federated Insurance Series during 1996 would have been 1.36%
for Federated Utility Fund II, 1.39% for Federated High Income Bond Fund II, and
1.07% for Federated American Leaders Fund II.
The Other Expenses listed for the Growth II Portfolio and Large Cap Growth
Portfolio of PBHG Insurance Series Fund, Inc. are estimates provided by the Fund
because the portfolios were recently organized and have a brief operating
history. Actual expenses may be greater or less than those shown.
<PAGE>
DEFINITIONS
Account Value - Account Value is the total amount under the Policy in each
Investment Subdivision and the General Account.
Age - The age on the Insured's birthday nearest the Policy Date or a Policy
Anniversary.
Attained Age - The Insured's Age on the Policy Date plus the number of full
years since the Policy Date.
Beneficiary - The person or entity designated by you to receive the death
benefit payable at the death of the Insured.
Continuation Amount - A cumulative amount set forth on the policy data pages for
each month of the Continuation Period representing the minimum Net Total Premium
required to keep the Policy in force during the Continuation Period.
Continuation Period - The first 10 Policy years during which the Policy will not
lapse if the Net Total Premium is at least equal to the Continuation Amount for
the number of Policy Months that the Policy has been in force.
Eligible Proceeds - Total Proceeds subject to a maximum of $250,000 from of all
our policies or certificates covering the Insured.
Fund - Any open-end management investment company, or unit investment trust, in
which Separate Account II invests.
General Account - Assets of Life of Virginia other than those allocated to
Separate Account II or any of our other separate accounts.
Home Office - Life of Virginia's offices at 6610 West Broad Street, Richmond,
Virginia 23230, 1-804-281-6000.
Insured - The person upon whose life the Policy is issued.
Investment Subdivision - A subdivision of Separate Account II, the assets of
which are invested exclusively in a corresponding Fund.
Life Insurance Proceeds - The amount payable upon the death of the Insured. The
Life Insurance Proceeds will be reduced by outstanding Policy Debt and past due
charges, if any, to determine the death benefit payable under the Policy.
Life of Virginia - The Life Insurance Company of Virginia. "We," "us," or "our"
refers to Life of Virginia.
Monthly Anniversary Day - The same day in each month as the Policy Date.
Net Premium - The portion of each premium paid allocated to one or more
Investment Subdivision, and used in determining the Account Value.
<PAGE>
Net Premium Factor - The factor used in determining the Net Premium which
represents a deduction from each premium paid.
Net Total Premium - On any date, Net Total Premium equals the total of all
premiums paid to that date less (a) divided by (b), where:
(a) is any outstanding Policy Debt, plus the sum of any partial
surrenders to date; and
(b) is the Net Premium Factor.
Optional Payment Plan - A plan under which Life Insurance Proceeds or Surrender
Value proceeds can be used to provide a series of periodic payments to you or a
Beneficiary.
Owner - The Owner of the Policy. "You" or "your" refers to the Owner.
Contingent Owners may also be named.
Planned Periodic Premium - A level premium amount scheduled for payment at fixed
intervals over a specified period of time.
Policy - The Policy with any attached application(s), and any riders and
endorsements.
Policy Date - The date as of which the Policy is issued and as of which it
becomes effective. Policy Years and Anniversaries are measured from the Policy
Date.
Policy Debt - The amount of outstanding loans plus accrued interest.
Policy Month - A one-month period beginning on a Monthly Anniversary Day and
ending on the day immediately preceding the next Monthly Anniversary Day.
Separate Account II - The segregated asset account of Life of Virginia to which
Net Premiums are allocated.
Specified Amount - An amount used in determining the insurance coverage on an
insured life.
Surrender Value - The amount payable to you upon surrender of the Policy.
Total Proceeds - Life Insurance Proceeds plus any additional term insurance on a
terminally ill Insured added to the Policy by rider, not including the
Children's Insurance Rider. Total proceeds will not include any proceeds payable
under the Accidental Death Benefit Rider or any proceeds payable under the
Policy or any additional term insurance rider on the Insured that would expire
within 24 months of the date we receive proof of terminal illness. No adjustment
to the Total Proceeds will be made for any Policy Debt, but adjustments will be
made for any misstatement of age or sex of a terminally ill Insured.
Unit Value - Unit of measure used to calculate the Account Value for each
Investment Subdivision.
Valuation Day - For each Investment Subdivision, each day on which the New York
Stock Exchange is open for business except for days that the Investment
Subdivision's corresponding Fund does not value its shares.
Valuation Period - The period that starts at the close of regular trading on the
New York Stock Exchange on any Valuation Day and ends at the close of regular
trading on the next succeeding Valuation Day.
<PAGE>
PREMIUMS
Applying for a Policy. To purchase a Policy, you must complete an
application and submit it to us at our Home Office at 6610 West Broad Street,
Richmond, VA 23230. You also must pay an initial premium of a sufficient amount.
See "Premiums," below. Your initial premium can be submitted with your
application or at a later date. Coverage becomes effective as of the Policy
Date.
Generally, we will issue a Policy covering an Insured up to Age 85 if
evidence of insurability satisfies our underwriting rules. Required evidence of
insurability may include, among other things, a medical examination of the
Insured. We may, in our sole discretion, issue a Policy covering an Insured over
Age 85. We reserve the right not to accept an application for any lawful reason.
Free Look Right to Cancel. During your "free-look" period, you may
cancel your Policy and receive a refund of all charges deducted from premiums
paid, plus the Net Premiums allocated to Separate Account II adjusted for
investment gains and losses. Some states require the refund of all premiums
paid. Generally, the free look period expires 10 days after you receive your
Policy. Some states may require a longer period. If you decide to cancel the
Policy, you must return it by mail or other delivery to us or to our authorized
agent. Immediately after mailing or delivery, the Policy will be deemed void
from the beginning.
Premiums. The premium amounts sufficient to fund a Policy depend on a
number of factors, such as the Age, sex (where appropriate) and risk class of
the proposed Insured, the desired Specified Amount, any supplemental benefits,
and investment performance of the Investment Subdivisions. After the initial
premium is paid, unscheduled premium payments may be paid in any amount and at
any time. We reserve the right, however, to limit the number and amount of any
unscheduled premium payment. Additionally, total premiums paid may not exceed
guideline premium limitations for life insurance set forth in the Code. We
reserve the right to reject any premium, or portion thereof, that would result
in the Policy being disqualified as life insurance under the Code and will
refund any rejected premium along with any interest accrued thereon. In
addition, we will monitor Policies and will attempt to notify you on a timely
basis if your Policy is in jeopardy of becoming a modified endowment contract
under the Code. See "TAX CONSIDERATIONS."
Periodic Premium Plan. When you apply for a Policy, you select a
periodic premium payment plan. You may choose to send premiums directly to us
either annually, semi-annually, or quarterly. You can also arrange for annual,
semi-annual, quarterly or monthly premium payments to be paid via automatic
deduction from your bank account or a similar account acceptable to us. You are
not required to pay premiums in accordance with this premium plan; rather, you
can pay more or less than planned or skip a planned premium payment entirely.
You can change the amount of planned premiums and payment arrangements, or
switch between frequencies, whenever you want by providing satisfactory written
or telephone instructions to our Home Office, which will be effective upon our
receipt of the instructions. Depending on the Account Value at the time of an
increase in the Specified Amount and the amount of the increase requested, a
change in your periodic premium payments may be advisable. See "Change in
Existing Coverage."
<PAGE>
Premium to Prevent Lapse. Failure to make a planned premium payment
will not automatically cause a Policy to lapse. Generally, a Policy will lapse
if the Surrender Value is not sufficient to cover the monthly deduction when
due. However, a Policy will not lapse during the Continuation Period, regardless
of the sufficiency of the Surrender Value, so long as the Net Total Premium is
at least equal to the Continuation Amount. See "Monthly Deduction." If
additional premium is necessary to prevent a Policy from lapsing, we will mail
to you notice of the amount required to be paid to keep the Policy in force, and
you will have a 61-day grace period from the date we mail the notice to make the
required premium payment.
Your Policy will remain in effect during the grace period. If the
Insured should die during the grace period before the required premium is paid,
the death benefit will still be payable to the Beneficiary, although the amount
of the Life Insurance Proceeds will be reduced by the amount of premium that
would have been required to keep the Policy in force. See "DEATH BENEFITS --
Amount of Death Benefit Payable." If the required premium has not been paid
before the grace period ends, your Policy will lapse. It will have no value and
no benefits will be payable. But see "Death Benefit Guarantee" and
"Reinstatement" for a mention of your reinstatement rights.
A grace period also may begin if Policy Debt on any Monthly Anniversary
Day exceeds the Account Value less any applicable surrender charges. See "Effect
of Policy Loan" for details.
Minimum Premium Payment. Generally, the minimum amount of premium we
will accept in connection with a periodic premium payment plan is $20 ($15 for
payments made via automatic deduction from your bank or similar account).
Notwithstanding payment of this minimum amount, a Policy may lapse. See "Premium
to Prevent Lapse." For purposes of the minimum premium payment requirements, any
payment is deemed a planned periodic premium if it is received within 30 days
(before or after) of the scheduled date for a planned periodic premium payment
and the percentage difference between the planned amount and the actual payment
amount is not more than 10%. All other premium payments will be deemed
unscheduled premium payments.
Death Benefit Guarantee. On any Monthly Anniversary Day during the
Continuation Period (the first 10 Policy Years) so long as the Net Total Premium
is at least equal to the Continuation Amount for your Policy, the Policy will
remain in force, regardless of the sufficiency of Surrender Value to cover the
monthly deduction. At the end of the Continuation Period, you may, however, have
to make an additional premium payment to keep the Policy in force. See "Premium
to Prevent Lapse."
An increase in Specified Amount will increase the Continuation Amounts.
Any termination and subsequent reinstatement of the Policy will reduce the
Continuation Amounts. Notwithstanding termination and reinstatement, the
Continuation Period will be as though the Policy had been in effect continuously
from its original Policy Date. See "Reinstatement."
Crediting Premium to the Policy. Your initial premium payment will be
credited to the Policy on the Policy Date. Any subsequent premium payment (see
"Net Premium Allocations," below) will be credited to the Policy on the
Valuation Day it is received at our Home Office.
<PAGE>
ALLOCATION OPTIONS
Net Premium Allocations. When you apply for a Policy, you specify the
percentage of Net Premium to be allocated to each Investment Subdivision. You
may not allocate your Net Premiums and Account Value to more than seven
Investment Subdivisions at any given time. You can change the allocation
percentages at any time by sending satisfactory written instructions to our Home
Office. The change will apply to all premiums received with or after we receive
your instructions. Net Premium allocations must be in percentages totaling 100%,
and each allocation percentage must be a whole number of at least 1%.
In general, during the free look period Net Premiums will be allocated
to the Investment Subdivisions based on the Net Premium allocation percentages
specified in the application. However, for states requiring the refund of
premiums during the free look period, all Net Premiums will be allocated to the
Investment Subdivision investing in the Money Market Fund of GE Investments
Funds. Fifteen days following this allocation, the Account Value is transferred
to the Investment Subdivisions based on the Net Premium allocation percentages
selected by you. See "How Your Policy Account Values Vary."
Investment Subdivisions. Separate Account II currently invests in nine
series-type mutual funds. Each of the Funds currently available under the Policy
is registered with the Securities and Exchange Commission ("SEC") as a
diversified open-end management investment company under the Investment Company
Act of 1940, as amended (the "1940 Act"). There are currently thirty-four
Investment Subdivisions available under the Policy. Each Investment Subdivision
invests exclusively in a designated investment portfolio of one of the Funds.
The assets of each portfolio are separate from other portfolios of that Fund and
each portfolio has separate investment objectives and policies. As a result,
each portfolio operates as a separate investment portfolio and the investment
performance of one portfolio has no effect on the investment of any other
portfolio. Some of the Funds may, in the future, activate additional portfolios.
Before choosing the Investment Subdivisions to allocate your Net
Premium and Account Value, carefully read the individual prospectuses for the
Funds, along with this prospectus. The investment objectives of each of the
portfolios are summarized below. There is no assurance that these objectives
will be met.
Janus Aspen Series. The Janus Aspen Series has seven portfolios that
are currently available under the Policy: Growth Portfolio, Aggressive Growth
Portfolio, Worldwide Growth Portfolio, International Growth Portfolio, Balanced
Portfolio, Flexible Income PortfolioJanus Aspen Series. The Janus Aspen Series
has seven portfolios that are currently available under the Policy: Growth
Portfolio, Aggressive Growth Portfolio, Worldwide Growth Portfolio,
International Growth Portfolio, Balanced Portfolio, Flexible Income Portfolio
and Capital Appreciation Portfolio.
Growth Portfolio has the investment objective of long-term capital
growth in a manner consistent with the preservation of capital. The Growth
Portfolio is a diversified portfolio that pursues its objectives by investing in
common stocks of companies of any size. Generally, this Portfolio emphasizes
larger, more established issuers.
Aggressive Growth Portfolio has the investment objective of long-term
growth of capital. The Aggressive Growth Portfolio is a non-diversified
portfolio that will seek to achieve its objective by normally investing at least
50% of its equity assets in securities issued by medium-sized companies.
Worldwide Growth Portfolio has the investment objective of long-term
growth of capital in a manner consistent with the preservation of capital. The
Worldwide Growth Portfolio will seek to achieve its objective by investing in a
diversified portfolio of common stocks of foreign and domestic issuers of all
sizes. The Portfolio normally invests in issuers from at least five different
countries including the United States.
<PAGE>
International Growth Portfolio has the investment objective of
long-term growth of capital. The International Growth Portfolio will seek to
achieve its objective primarily through investments in common stocks of issuers
located outside the United States. The Portfolio normally invests at least 65%
of its total assets in securities of issuers from at least five different
countries, excluding the United States.
Balanced Portfolio has the investment objective of long-term growth of
capital, consistent with the preservation of capital and balanced by current
income. The Portfolio normally invests 40-60% of its assets in securities
selected primarily for their growth potential and 40-60% of its assets in
securities selected primarily for their income potential.
Flexible Income Portfolio has the investment objective of seeking to
obtain maximum total return, consistent with preservation of capital. Total
return is expected to result from a combination of income and capital
appreciation. The Portfolio pursues its objectives primarily by investing in any
type of income-producing securities. This Portfolio may have substantial
holdings of lower-rated debt securities or "junk" bonds. The risks of investing
in junk bonds are described in the prospectus for the Janus Aspen Series, which
should be read carefully before investing.
Capital Appreciation Portfolio is a nondiversified portfolio that has
the investment objective of seeking long-term growth of capital. It pursues its
objective by investing primarily in common stocks of issuers of any size.
Janus Capital Corporation serves as investment adviser to the
portfolios of Janus Aspen Series.
Variable Insurance Products Fund. Variable Insurance Products Fund has
three portfolios that are currently available under the Policy: Variable
Insurance Products Fund. Variable Insurance Products Fund has three portfolios
that are currently available under the Policy: VIP Equity-Income Portfolio, VIP
Growth Portfolio, and VIP Overseas Portfolio.
VIP Equity-Income Portfolio seeks reasonable income by investing
primarily in income-producing equity securities. In choosing these securities,
the portfolio will also consider the potential for capital appreciation. The
portfolio's goal is to achieve a yield which exceeds the composite yield on the
securities comprising the Standard & Poor's Composite Index of 500 Stocks.
VIP Growth Portfolio seeks to achieve capital appreciation. The
portfolio normally purchases common stocks, although its investments are not
restricted to any one type of security. Capital appreciation may also be found
in other types of securities, including bonds and preferred stocks.
VIP Overseas Portfolio seeks long-term growth of capital primarily
through investments in foreign securities. The portfolio provides a means for
investors to diversify their own portfolios by participating in companies and
economies outside of the United States.
Fidelity Management & Research Company serves as investment adviser to
the Variable Insurance Products Fund.
Variable Insurance Products Fund II. Variable Insurance Products Fund
II has two portfolios that are currently available under the PolicVariable
Insurance Products Fund II. Variable Insurance Products Fund II has two
portfolios that are currently available under the Policy: VIP Asset Manager
Portfolio and VIP Contrafund Portfolio.
VIP Asset Manager Portfolio seeks high total return with reduced risk
over the long-term by allocating its assets among domestic and foreign stocks,
bonds and short-term fixed income instruments.
<PAGE>
VIP Contrafund Portfolio seeks capital appreciation by investing mainly
in equity securities of companies believed to be undervalued or out-of favor.
Fidelity Management & Research Company serves as investment adviser to
the Variable Insurance Products Fund II.
Variable Insurance Products Fund III. Variable Insurance Products Fund
III has two portfolios that are currently available under the Policy: VIP Growth
& Income Portfolio and VIP Growth Opportunities Portfolio.
VIP Growth & Income Portfolio seeks high total return through a
combination of current income and capital appreciation by investing mainly in
equity securities.
VIP Growth Opportunities Portfolio seeks capital growth by investing
primarily in common stock and securities convertible to common stock.
Fidelity Management & Research Company serves as investment adviser to
the Variable Insurance Products Fund III.
GE Investments Funds, Inc. GE Investments Funds, Inc. ("GE Investments
Funds") has eight portfolios that are currently available under the Policy:
Money Market Fund, S&P 500 Index Fund, Total Return Fund, International Equity
Fund, Real Estate Securities Fund, Global Income Fund, Value Equity Fund and
Income Fund are available to Owners through Separate Account II.
Money Market Fund has the investment objective of providing the highest
level of current income as is consistent with high liquidity and safety of
principal by investing in high quality money market securities.
S&P 500 Index Fund has the investment objective of providing capital
appreciation and accumulation of income that corresponds to the investment
return of the Standard & Poor's 500 Composite Stock Price Index, through
investment in common stocks traded on the New York Stock Exchange, the American
Stock Exchange and, to a limited extent, in the over-the-counter markets.
Total Return Fund has the investment objective of providing the highest
total return, composed of current income and capital appreciation, as is
consistent with prudent investment risk by investing in common stocks, bonds and
money market instruments, the proportion of each being continuously determined
by the investment adviser.
International Equity Fund has the investment objective of providing
long-term capital appreciation. The portfolio seeks to achieve its objective by
investing primarily in equity and equity-related securities of companies that
are organized outside of the U.S. or whose securities are principally traded
outside of the U.S.
Real Estate Securities Fund has the investment objective of providing
maximum total return through current income and capital appreciation. The
portfolio seeks to achieve its objective by investing primarily in securities of
U.S. issuers that are principally engaged in or related to the real estate
industry including those that own significant real estate assets. The portfolio
will not invest directly in real estate.
- ------------------
(1) "Standard & Poor's," "S&P," and "S&P 500" are trademarks of McGraw-Hill
Companies, Inc. and have been licensed for use by GE Investment Management
Incorporated. The S&P 500 Index Fund is not sponsored, endorsed, sold or
promoted by Standard & Poor's, and Standard & Poor's makes no representation
or warranty, express or implied, regarding the advisability of investing in
this Fund or the Policy.
<PAGE>
Value Equity Fund has the investment objective of providing long-term
capital appreciation. The portfolio seeks to achieve this objective by investing
primarily in common stock and other equity securities that are undervalued by
the market and offer above-average capital appreciation potential.
Income Fund has the investment objective of providing maximum income
consistent with prudent investment management and preservation of capital by
investing primarily in income-bearing debt securities and other income bearing
instruments.
GE Investment Management, Inc. serves as investment adviser to GE Investments
Funds.
Oppenheimer Variable Account Funds. Oppenheimer Variable Account Funds
has five portfolios that are currently available under the Policy: Oppenheimer
High Income Fund, Oppenheimer Bond Fund, Oppenheimer Capital Appreciation Fund,
Oppenheimer Growth Fund, and Oppenheimer Multiple Strategies Fund.
Oppenheimer High Income Fund seeks a high level of current income from
investment in high yield fixed income securities, including unrated securities
or high risk securities in the lower rating categories. These securities may be
considered to be speculative. This fund may have substantial holdings of
lower-rated debt securities or "junk" bonds. The risks of investing in junk
bonds are described in the prospectus for the Oppenheimer Variable Account
Funds, which should be read carefully before investing.
Oppenheimer Bond Fund primarily seeks a high level of current income
from investment in high yield fixed income securities rated "Baa" or better by
Moody's or "BBB" or better by Standard & Poor's. Secondarily, it seeks capital
growth when consistent with its primary objective.
Oppenheimer Capital Appreciation Fund seeks to achieve capital
appreciation by investing in `growth-type' companies.
Oppenheimer Growth Fund seeks to achieve capital appreciation by
investing in securities of well-known established companies.
Oppenheimer Multiple Strategies Fund seeks a total investment return
(which includes current income and capital appreciation in the value of its
shares) from investments in common stocks and other equity securities, bonds and
other debt securities, and "money market" securities.
Oppenheimer Funds, Inc. serves as investment adviser to Oppenheimer
Variable Account Funds.
Federated Insurance Series. The Federated Insurance Series has three
portfolios that are currently available under the Policy: Federated Utility Fund
II, Federated High Income Bond Fund II and Federated American Leaders Fund II.
Federated Utility Fund II has the investment objective of high current
income and moderate capital appreciation. The Federated Utility Fund II will
seek to achieve its objective by investing primarily in equity and debt
securities of utility companies.
Federated High Income Bond Fund II has the investment objective of high
current income. The Federated High Income Bond Fund II will seek to achieve its
investment objective by investing primarily in a diversified portfolio of
<PAGE>
professionally managed fixed-income securities. The fixed-income securities in
which the Fund intends to invest are lower-rated corporate debt obligations,
commonly referred to as "junk" bonds. The risks of these securities are
described in the prospectus for the Federated Insurance Series, which should be
read carefully before investing.
Federated American Leaders Fund II has the primary investment objective
of long-term growth of capital, and a secondary objective of providing income.
The Federated American Leaders Fund II will seek to achieve its objective by
investing, under normal circumstances, at least 65% of its total assets in
common stock of "blue chip" companies.
Federated Advisers serves as investment adviser to the Federated
Insurance Series.
The Alger American Fund. The Alger American Fund has two portfolios
that are currently available under the Policy: Alger American Small
Capitalization Portfolio and Alger American Growth Portfolio.
Alger American Small Capitalization Portfolio seeks long-term capital
appreciation. Except during temporary defensive periods, the portfolio invests
at least 65% of its total assets in equity securities of companies that, at the
time of purchase of the securities, have total market capitalization within the
range of companies included in the Russell 2000 Growth Index or the S&P Small
Cap 600 Index, updated quarterly. Both indexes are broad indexes of small
capitalization stocks. The portfolio may invest up to 35% of its total assets in
equity securities of companies that, at the time of purchase, have total market
capitalization outside this combined range and in excess of that amount (up to
100% of its assets) during temporary defensive periods.
Alger American Growth Portfolio has the investment objective of
long-term capital appreciation. Except during temporary defensive periods, this
portfolio invests at least 65% of its total assets in equity securities of
companies that, at the time of purchase, have a total market capitalization of
$1 billion or greater.
Fred Alger Management, Inc. serves as the investment manager to The
Alger American Fund.
PBHG Insurance Series Fund, Inc. PBHG Insurance Series Fund, Inc.
("PBHG Insurance Series Fund") has two portfolios that are currently available
under the Policy: Growth II Portfolio and Large Cap Growth Portfolio.
Growth II Portfolio seeks long-term capital appreciation by investing
in equity securities of small and medium sized companies (market capitalization
of up to $4 billion) which have an outlook for strong earnings growth and
significant capital appreciation.
Large Cap Growth Portfolio seeks long-term capital appreciation by
investing primarily in equity securities of larger capitalization companies
(market capitalization of greater than $1 billion) which have an outlook for
strong growth in earnings and potential for capital appreciation.
Pilgrim Baxter & Associates serves as investment adviser to the PBHG
Insurance Series Fund.
Transfers. You may transfer Account Value among the Investment
Subdivisions at any time after the end of the free look period. Transfer
requests may be made in writing or in any other form acceptable to us. A
transfer will take effect as of the end of the Valuation Period during which we
receive your request at our Home Office.
<PAGE>
We may defer transfers under the same conditions that we may delay
paying proceeds. See "Requesting Payments." Currently, there is no limit on the
number of transfers among the Investment Subdivisions, but we reserve the right
to limit the number of transfers to twelve each calendar year. However, there is
a $10 transfer charge for each transfer after the first transfer in any calendar
month. The transfer charge is taken from the amount transferred. For purposes of
assessing this fee, each transfer request is considered one transfer, regardless
of the number of Investment Subdivisions affected by the transfer. We reserve
the right to modify, restrict, suspend or eliminate the transfer privileges,
including telephone transfer privileges, at any time, for any reason.
Dollar-Cost Averaging. The dollar-cost averaging program permits you to
systematically transfer on a monthly or quarterly basis a set dollar amount from
the Investment Subdivision investing in the Money Market Fund of GE Investments
Funds to any combination of other Investment Subdivisions. The dollar-cost
averaging method of investment is designed to reduce the risk of making
purchases only when the price of units is high, but you should carefully
consider your financial ability to continue the program over a long enough
period of time to purchase units when their value is low as well as when it is
high. Dollar-cost averaging does not assure a profit or protect against a loss.
You may participate in the dollar-cost averaging program by selecting
the program on the application, completing a dollar-cost averaging agreement, or
calling our Home Office. To use the dollar-cost averaging program, you must
transfer at least $100 from the Money Market Investment Subdivision with each
transfer. Any amount allocated or transferred must also conform to the minimum
percentage requirements for Net Premium allocations. See "Net Premium
Allocations." Once elected, dollar-cost averaging remains in effect from the
date we receive your request until the value of the Investment Subdivision from
which transfers are being made is depleted, or until you cancel the program by
written request or by telephone if we have your telephone authorization on file.
There is no additional charge for dollar-cost averaging. A transfer under this
program will not count toward the free transfer permitted each calendar month
nor any limit on the maximum number of transfers we may impose for a calendar
year. We reserve the right to discontinue offering or to modify the dollar-cost
averaging program at any time and for any reason.
Portfolio Rebalancing. Once your money has been allocated among the
Investment Subdivisions, the performance of each Investment Subdivision may
cause your allocation to shift. You may instruct us to automatically rebalance
(on a quarterly, semi-annual or annual basis) your Account Value to return to
the percentages specified in your allocation instructions. You may elect to
participate in the portfolio rebalancing program at any time by completing the
portfolio rebalancing agreement. Your percentage allocations must be in whole
percentages and be at least 1% per allocation. Subsequent changes to your
percentage allocations may be made at any time by written or telephone
instructions to the Home Office. Once elected, portfolio rebalancing remains in
effect from the date we receive your written request until you instruct us to
discontinue portfolio rebalancing. There is no additional charge for using
portfolio rebalancing, and a portfolio rebalancing transfer is not considered a
transfer for purposes of assessing a transfer charge nor for calculating any
limit on the maximum number of transfers we may impose for a calendar year. We
reserve the right to discontinue offering the portfolio rebalancing program at
any time and for any reason. Portfolio rebalancing does not guarantee a profit
or protect against loss.
Powers of Attorney. As a general rule and as a convenience to you, we
allow the use of powers of attorney whereby you give a third party the right to
effect transfers on your behalf. However, when the same third party possesses
powers of attorney executed by many Owners, the result can be simultaneous
transfers involving large amounts of Account Value. Such transfers can disrupt
the orderly management of the Funds underlying the Policy, can result in higher
costs to Owners, and are generally not compatible with the long-range goals of
<PAGE>
Owners. We believe that such simultaneous transfers effected by such third
parties are not in the best interests of all shareholders of the Funds
underlying the Policies, and this position is shared by the managements of those
Funds.
Therefore, to the extent necessary to reduce the adverse effects of
simultaneous transfers made by third parties holding multiple powers of
attorney, we may not honor such powers of attorney and have instituted or will
institute procedures to assure that the transfer requests that we receive have,
in fact, been made by the Owners in whose names they are submitted. These
procedures will not, however, prevent Owners from making their own transfer
requests.
CHARGES AND DEDUCTIONS
The following charges are deducted. Certain of the charges depend on a
number of variables, and are illustrated in the hypothetical illustrations
below. The charges are for the services and benefits provided, costs and
expenses incurred, and risks assumed by us under or in connection with the
Policies. The services and benefits provided include: the cash and death
benefits provided by the Policy; investment options, including Net Premium
allocations, dollar-cost averaging and portfolio rebalancing programs;
administration of various elective options under the Policy; and the
distribution of various reports to Owners. The costs and expenses incurred
include: those associated with underwriting applications, increases in Specified
Amount, and riders; various overhead and other expenses associated with
providing the services and benefits provided by the Policy; sales and marketing
expenses; and other costs of doing business, such as federal, state and local
premium and other taxes and fees. The risks assumed include the risks that
insureds may live for a shorter period of time than estimated, resulting in the
payment of greater death benefits than expected, and that the costs of providing
the services and benefits under the Policies will exceed the charges deducted.
Premium Charge. We currently deduct a 3% charge (5% maximum) from each
premium before allocating the resulting Net Premium to the Investment
Subdivisions. A premium charge will not be assessed against the policy loan
portion of a premium received from the rollover of a life insurance policy.
Mortality and Expense Risk Charge. We currently deduct a daily charge
from assets in the Investment Subdivisions attributable to the Policies at an
effective annual rate of 0.70% of net assets. This charge is guaranteed not to
exceed an effective annual rate of 0.90% of net assets. This charge is factored
into the net investment factor. See "How Your Account Values Vary."
Monthly Deduction. We make a monthly deduction on the Policy Date and
each Monthly Anniversary Day from Account Value. The monthly deduction for each
Policy consists of (1) the cost of insurance charge discussed below, (2) a
current monthly Policy charge of $12 in the first policy year and $6 per month
thereafter (it cannot exceed $12 per month), and (3) any charges for additional
benefits added by riders to the Policy (see "Supplemental Benefits"). If an
increase in Specified Amount becomes effective, there will be a one-time charge
(per increase) of $1.50 per $1,000 of increase included in the monthly deduction
(it can not exceed $300 per increase). See "Change in Existing Coverage."
Surrender Charge. If the Policy is fully surrendered during the
surrender charge period, we will deduct a surrender charge. The surrender charge
will depend on the Insured's Age at issue, sex (where appropriate), and risk
class. The surrender charge is calculated based on an amount per $1,000 of the
lowest Specified Amount in effect prior to the surrender. The surrender charge
remains level for the first five Policy Years and then decreases each Policy
month to zero over the next 10 Policy Years or at Age 95, whichever is earlier.
The surrender charge will be deducted before the Surrender Value is paid.
<PAGE>
Decreases in the Specified Amount to less than the lowest Specified
Amount that had previously been in effect (other than as a result of partial
surrenders or changes in Death Benefit Options), will also incur a surrender
charge. The amount of surrender charge will be the charge for a full surrender
multiplied by the ratio of (a) to (b), where:
(a) is the lowest Specified Amount that was in effect prior to the
current decrease, minus the Specified Amount after the current
decrease; and
(b) is the lowest Specified Amount that was in effect prior to the
current decrease. (See Partial Surrenders under SURRENDER BENEFITS.)
A surrender charge is not imposed in connection with a partial
surrenders. (See "Partial Surrenders" under "SURRENDER BENEFITS".)
Cost of Insurance. The cost of insurance is a significant charge under
your Policy because it is the primary charge for the death benefit provided by
your Policy. The cost of insurance charge depends on a number of variables that
cause the charge to vary from Policy to Policy and from Monthly Anniversary Day
to Monthly Anniversary Day. It is calculated separately for the Specified Amount
at issue and for any increase in the Specified Amount. The cost of insurance is
calculated on each Monthly Anniversary Day and is based on the net amount at
risk. The net amount at risk is calculated by dividing the Life Insurance
Proceeds by 1.0032737, and then subtracting the Account Value. To determine the
cost of insurance for a particular Policy Month, we divide the net amount at
risk by 1000 and multiply that result by the applicable cost of insurance rate.
If Option B is in effect, and the Specified Amount has increased, the Account
Value is first considered part of the initial Specified Amount. If the Account
Value is more than the initial Specified Amount, it will be considered part of
the increased Specified Amounts resulting from increases in the order of the
increases.
The monthly cost of insurance rate is based on the Insured's sex (where
appropriate), Age at issue, policy duration and risk class. The risk class (and,
therefore, the cost of insurance rates) will be determined separately for the
initial Specified Amount and for any increase in the Specified Amount requiring
evidence of insurability. The maximum cost of insurance rates allowable under
the Policies are based on the Commissioners' 1980 Standard Ordinary Mortality
Table. The rates we currently charge are, at most ages, lower than the maximum
permitted under the Policies and are determined by us according to our
expectation of future experience with respect to mortality, expenses,
persistency, and taxes. The rates may be changed from time to time at our sole
discretion, but will never be more than the rates shown in the Table of
Guaranteed Maximum Insurance Rates contained in the Policies. A change in rates
will apply to all persons of the same Age, sex (where appropriate), and risk
class and whose Policies have been in effect for the same length of time.
The monthly cost of insurance rate generally increases as the Insured's
Age increases. Therefore, the older the Insured, the higher the investment
experience necessary to achieve the same impact on Life Insurance Proceeds and
Account Value. See "Hypothetical Illustrations" for examples showing the effects
of the cost of insurance charge.
Other Charges. If you request a projection of illustrative future life
insurance under the Policy and Policy values, we reserve the right to charge a
maximum fee of $25 for the cost of preparing the projection. See also
"Transfers," for a discussion of the transfer charge, and "Partial Surrenders,"
for a discussion of the partial surrender processing fee.
Reduction of Charges for Group Sales. Charges and/or deductions may be
reduced for sales of the Policies to a trustee, employer or similar entity
representing a group or to members of the group where such sales result in
savings of sales or administrative expenses. The entitlement to such a reduction
<PAGE>
in charges or deductions will be determined by us based on the following
factors:
1. The size of the group. Generally, the sales expenses for each
individual owner for a larger group are less than for a smaller group
because more Policies can be implemented with fewer sales contacts and
less administrative cost.
2. The total amount of premium payments to be received from a group. Per
Policy sales and other expenses are generally proportionately less on
larger premium payments than on smaller ones.
3. The purpose for which the policies are purchased. Certain types of
plans are more likely to be stable than others. Such stability reduces
the number of sales contacts and administrative and other services
required, reduces sales administration and results in fewer Policy
terminations. As a result, our sales and other expenses are reduced.
4. The nature of the group for which the Policies are being purchased.
Certain types of employee and professional groups are more likely to
continue Policy participation for longer periods than are other groups
with more mobile membership. If fewer Policies are terminated in a
given group, our sales and other expenses are reduced.
5. There may be other circumstances of which we are not presently aware,
which could result in reduced sales expenses.
If, after consideration of the foregoing factors, we determine that a
group purchase would result in reduced sales expenses, such a group may be
entitled to a reduction in charges and/or deductions. Reductions in these
charges and/or deductions will not be unfairly discriminatory against any
person, including the affected owners and all other owners of Policies funded by
Separate Account II.
HOW YOUR ACCOUNT VALUE VARIES
Account Value. The Account Value serves as a starting point for
calculating certain values under a Policy. It is the sum of the Account Value in
each Investment Subdivision and the Account Value held in the General Account to
secure Policy Debt. See "Loan Benefits." The Account Value is determined first
on the Policy Date and thereafter on each Valuation Day. The Account Value will
vary to reflect the performance of the Investment Subdivisions to which amounts
have been allocated and Policy Debt, charges, transfers, partial surrenders,
Policy loan interest, and Policy loan repayments. It may be more or less than
premiums paid.
Surrender Value. The Surrender Value on a Valuation Day is the Account
Value reduced by both any surrender charge that would be deducted if the Policy
were surrendered that day and any Policy Debt.
Investment Subdivision Values. On any Valuation Day, the value of an
Investment Subdivision is equal to the number of Investment Subdivision units
credited to the Policy multiplied by the Unit Value for that day. When
allocations are made to an Investment Subdivision, either by Net Premium
allocation, transfer of Account Value, transfer of loan interest from the
General Account, or repayment of a Policy loan, your Policy is credited with
units in that Investment Subdivision. The number of units is determined by
dividing the amount allocated, transferred or repaid to the Investment
Subdivision by the Investment Subdivision's Unit Value for the Valuation Day
<PAGE>
when the allocation, transfer or repayment is effected. The number of units
credited to a Policy will decrease whenever the allocated portion of the monthly
deduction is taken from the Investment Subdivision, a Policy loan is taken from
the Investment Subdivision, an amount is transferred from the Investment
Subdivision, a partial surrender is taken from the Investment Subdivision, or
the Policy is surrendered.
Unit Values. An Investment Subdivision's Unit Value varies to reflect
the investment experience of the underlying Fund, and may increase or decrease
from one Valuation Day to the next. The unit value for each Investment
Subdivision was arbitrarily set at $10 when the Investment Subdivision was
established. For each Valuation Period after the date of establishment, the Unit
Value is determined by multiplying the value of a unit for an Investment
Subdivision for the prior Valuation Period by the net investment factor for the
Investment Subdivision for the current Valuation Period.
Net Investment Factor. The net investment factor is an index used to
measure the investment performance of an Investment Subdivision from one
Valuation Period to the next. The net investment factor reflects the change in
the net asset value of each share of the Fund held in the Investment Subdivision
from one Valuation Period to the next, adjusted for the daily deduction of the
mortality and expense risk charge from assets in the Investment Subdivision. If
any "ex-dividend" date occurs during the Valuation Period, the per share amount
of any dividend or capital gain distribution is taken into account. Also, if any
taxes need to be reserved, a per share charge or credit for any taxes reserved
for, which is determined by us to have resulted from the operations of the
Investment Subdivision, is taken into account.
DEATH BENEFITS
As long as the Policy remains in force, we will pay the death benefit
upon receipt at our Home Office of satisfactory proof of the Insured's death.
See "Requesting Payments." The death benefit will be paid to the Beneficiary.
Amount of Death Benefit Payable. The amount of death benefit payable
equals the Life Insurance Proceeds determined under the Death Benefit Option in
effect on the date of the Insured's death, plus any supplemental death benefits
provided by rider, minus any Policy Debt on that date and, if the date of death
occurred during a grace period, minus the premium that would have been required
to keep the Policy in force. Under certain circumstances, the amount of the
death benefit payable may be further adjusted. See "OTHER POLICY PROVISIONS --
Incontestability" and "Misstatement of Age or Sex."
Death Benefit Options. Under Option A, the Life Insurance Proceeds
equals the greater of (1) the Specified Amount plus the Account Value, or (2)
the applicable corridor percentage of the Account Value as determined using the
table of percentages shown below. Under Option B, the Life Insurance Proceeds
equals the greater of (1) the Specified Amount, or (2) the applicable corridor
percentage of the Account Value as determined using the table of percentages
shown below. Under both options, the Specified Amount and Account Value are
determined on the date of the Insured's death. The percentage is 250% to Age 40
and declines thereafter as the Insured's Attained Age increases. If the table of
percentages currently in effect becomes inconsistent with any federal income tax
laws and/or regulations, we reserve the right to change the table.
- --------------------------------------------------------------------------------
Table of Percentages of Account Value
- --------------------------------------------------------------------------------
Corridor Corridor Corridor
Attained Age Percentage Attained Age Percentage Attained Age Percentage
- ------------ ---------- ------------ ---------- ------------ ----------
0-40 250% 54 157% 68 117%
41 243% 55 150% 69 116%
42 236% 56 146% 70 115%
43 229% 57 142% 71 113%
44 222% 58 138% 72 111%
45 215% 59 134% 73 109%
46 209% 60 130% 74 107%
47 203% 61 128% 75-90 105%
48 197% 62 126% 91 104%
49 191% 63 124% 92 103%
50 185% 64 122% 93 102%
51 178% 65 120% 94+ 101%
52 171% 66 119%
53 164% 67 118%
- --------------------------------------------------------------------------------
Under Option A, the Life Insurance Proceeds will vary directly with the
investment performance of the Account Value. Under Option B, the Life Insurance
Proceeds ordinarily will not change until the applicable percentage amount of
the Account Value exceeds the Specified Amount or you change the Specified
Amount. To see how and when investment performance may begin to affect the Life
Insurance Proceeds, please see the hypothetical illustrations below.
Changing the Death Benefit Option. You select the Death Benefit Option
when you apply for the Policy. You may change the Death Benefit Option on your
Policy subject to the following rules. Each change must be submitted by written
request received by our Home Office. The effective date of the change will be
the Monthly Anniversary Day after we receive the request for the change. We will
send you revised Policy schedule pages reflecting the new Death Benefit Option
and the effective date of the change. If you request a change from Option A to
Option B, the Specified Amount will be increased by the Account Value on the
effective date of the increase. If you request a change from Option B to Option
A, the Specified Amount after the change will be decreased by the Account Value
on the effective date of the change. A change in Death Benefit Option will
affect the cost of insurance charges.
Accelerated Benefit Rider. Provided the Accelerated Benefit Rider to
the Policy is approved in your state, you may elect an accelerated benefit if
the Insured is terminally ill. For purposes of determining if an accelerated
benefit is available, terminal illness is defined as a medical condition
resulting from bodily injury, or disease, or both: (1) which has been diagnosed
by a licensed physician; (2) which diagnosis is supported by clinical,
radiological, laboratory or other evidence which is satisfactory to us; and (3)
which a licensed physician certifies is expected to result in death within 12
months from the date of such certification. Any request for payment of an
accelerated benefit must be in a form satisfactory to us, and any payment of an
accelerated benefit requires satisfactory proof of a terminal illness and is
subject to our administrative procedures as well as the conditions set forth in
the Accelerated Benefit Rider.
The accelerated benefit available under the Accelerated Benefit Rider
equals the Eligible Proceeds: (1) discounted for the life expectancy of the
Insured at the rate of interest charged for Policy loans; (2) less the amount of
the single premium required to keep the Policy in force for the life expectancy
of the Insured; and (3) less any Policy Debt on the date we pay the accelerated
<PAGE>
benefit, multiplied by the ratio of the Eligible Proceeds to the Total Proceeds.
The accelerated benefit will be paid in one lump sum.
If the Eligible Proceeds are equal to the Life Insurance Proceeds
otherwise payable on the death of the Insured, then payment of the accelerated
benefit will result in termination of all insurance coverage on the life of the
Insured and any insurance coverage under the Policy and riders on any other
named insured will be treated as if the Insured had died. If the Eligible
Proceeds are less than the Life Insurance Proceeds otherwise payable on the
death of the Insured, then the Policy will continue with the Specified Amount,
Account Value, Policy Debt and any additional term rider coverage on such
Insured reduced by the ratio of Eligible Proceeds to Total Proceeds. We will
waive any surrender charge for the resulting decrease in Specified Amount as
well as the minimum Specified Amount requirement under the Policy. Other rider
benefits will continue without reduction.
Effect of Partial Surrenders on Life Insurance Proceeds. A partial
surrender will reduce both the Account Value and the Life Insurance Proceeds by
the amount of the partial surrender. We will not permit partial surrenders
during the first Policy Year if Death Benefit Option B is in effect.
Change in Existing Coverage. After a Policy has been in effect for one
year, you may increase or decrease the Specified Amount. To make a change, you
must send a written request and the Policy to our Home Office. Any change in the
Specified Amount may affect the cost of insurance rate and the net amount at
risk, both of which will affect your cost of insurance. See "Monthly Deduction"
and Cost of Insurance." In addition, any change in the Specified Amount affects
the maximum premium limitation. If decreases in the Specified Amount cause the
premiums to exceed new lower limitations required by federal tax law, the excess
will be withdrawn from Account Value and refunded so that the Policy will
continue to meet these requirements. The Account Value so withdrawn and refunded
will be withdrawn from each Investment Subdivision in the same proportion that
the Account Value in that Investment Subdivision bears to the total Account
Value in all Investment Subdivisions under the Policy at the time of the
withdrawal (i.e. on a pro-rata basis).
Any decrease in the Specified Amount will become effective on the
Monthly Anniversary Day after the date the request is received. The decrease
will first apply to coverage provided by the most recent increase, then to the
next most recent increases successively, then to the coverage under the original
application. During the Continuation Period, we will not allow a decrease unless
the Account Value less any Policy Debt is greater than the surrender charge. The
Specified Amount following a decrease can never be less than the minimum
Specified Amount for the Policy when it was issued. A decrease may cause a
surrender charge to be assessed and may require a payment to you of excess
Account Value.
To apply for an increase, you must complete a supplemental application
and submit evidence of insurability satisfactory to us. Any approved increase
will become effective on the date shown in the supplemental policy data page. An
increase will not become effective, however, if the Policy's Surrender Value is
insufficient to cover the monthly deduction for the Policy Month following the
increase.
If there is an increase in Specified Amount, there will be a one-time
charge (per increase) of $1.50 per $1,000 of increase to cover underwriting and
administrative costs associated with the increase. This charge will be included
in the monthly deduction for the month the decrease becomes effective. This
charge will never exceed $300 per increase.
A change in the existing insurance coverage may have federal tax
consequences. See "TAX CONSIDERATIONS."
<PAGE>
Changing the Beneficiary. If the right is reserved, the Beneficiary may
also be changed during the Insured's life. To make a change, send a written
request to our Home Office. The request and the change must be in a form
satisfactory to us and must actually be received by us. The change will take
effect as of the date you signed the request.
LOAN BENEFITS
You may borrow up to 90% of the difference between (1) your Account
Value at the end of the Valuation Period during which the loan request is
received, and (2) any surrender charges on the date of the loan. See "Requesting
Payments." Requests for Policy loans may be made in writing or by telephone. See
"REQUESTING PAYMENTS AND TELEPHONE TRANSACTIONS." Outstanding Policy Debt,
including accrued interest, reduces the amount available for new loans.
When a loan is made, an amount equal to the loan proceeds is
transferred from the Account Value in Separate Account II to our General Account
and is held as "collateral" for the loan. If you do not direct an allocation for
this transfer when requesting the loan we will make it on a pro-rata basis. When
a loan is repaid, an amount equal to the repayment is transferred from our
General Account to Separate Account II and allocated as you direct when
submitting the repayment. If you provide no direction, the amount will be
allocated in accordance with your standing instructions for Net Premium
allocations.
A portion of Policy loans taken or existing on or after the Preferred
Loan Availability Date will be designated as Preferred Policy Debt. Preferred
Policy Debt will be that portion of Policy Debt which equals the Account Value
under the Policy less the sum of all premium payments made. We redetermine the
amount of Preferred Policy Debt each Policy Month. We currently intend to credit
interest at an annual rate of 6% to that portion of Account Value transferred to
the General Account which is equal to Preferred Policy Debt. We reserve the
right to change, at our sole discretion, the rate of interest credited to the
amount of Account Value transferred to the General Account and guarantee that
Preferred Policy Debt will earn at least a minimum annual interest rate of 4%.
An annual rate of 4% is and will be credited to that portion of Account Value
transferred to the General Account which exceeds Preferred Policy Debt.
Interest. We will charge interest daily on any outstanding Policy loan
at an effective annual rate of 6%. Interest is due and payable at the end of
each Policy Year while a Policy loan is outstanding. If, on any Policy
Anniversary, interest accrued since the last Policy Anniversary has not been
paid, the amount of the interest is added to the loan and becomes part of the
outstanding Policy Debt. Interest transferred out of Separate Account II will be
transferred from each Investment Subdivision on a pro-rata basis.
Repayment of Policy Debt. You may repay all or part of your Policy Debt
at any time while the Insured is living and the Policy is in force. Any payments
by you other than planned periodic premiums will be treated first as the
repayment of any outstanding Policy Debt. The portion of the payment in excess
of any outstanding Policy Debt will be treated as an unscheduled premium
payment. We will first apply any repayment to reduce the portion of Policy Debt
that is not Preferred Policy Debt. Loan repayments must be sent to our Home
Office and will be credited as of the date received. A Policy loan repayment is
not treated as a premium payment and is not subject to the 3% premium charge.
Effect of Policy Loan. A Policy loan, whether or not repaid, will
affect Policy values over time because the investment results of the Investment
Subdivisions will apply only to the non-loaned portion of the Account Value. The
<PAGE>
longer the loan is outstanding, the greater the effect is likely to be.
Depending on the investment results of the Investment Subdivisions while the
Policy loan is outstanding, the effect could be favorable or unfavorable. Policy
loans, particularly if not repaid, could make it more likely than otherwise for
a Policy to terminate. See "Tax Considerations," below, for a discussion of
adverse tax consequences if a Policy lapses with Policy loans outstanding. If
the death benefit becomes payable while there is an outstanding Policy loan,
Policy Debt will be deducted from the Life Insurance Proceeds. If Policy Debt
exceeds the Account Value less any applicable surrender charge on any Monthly
Anniversary Day and the Continuation Period is not in effect, the Policy will
lapse without payment of a required loan payment. During the Continuation
Period, if Policy Debt on any Monthly Anniversary Day exceeds the Account Value
less any applicable surrender charge, and the Net Total Premium is less than the
Continuation Amount, your Policy will lapse without payment of a required loan
payment. In either event, we will mail to you notice of the amount required to
be paid to keep the Policy in force, and you will have a 61-day grace period
from the date we mail the notice to make the required loan payment.
SURRENDER BENEFITS
Full Surrender. You may surrender your Policy at any time for its
Surrender Value. See "Requesting Payments." A surrender charge may apply. See
"Schedule of Surrender Charge." Your Policy will terminate and cease to be in
force if it is surrendered for a lump sum. It cannot later be reinstated.
Partial Surrender. You may make partial surrenders under your Policy.
See "Requesting Payments." Requests for partial surrenders may be made in
writing or by telephone. See "REQUESTING PAYMENTS AND TELEPHONE TRANSACTIONS."
The minimum partial surrender amount is $500. A partial surrender processing fee
equal to the lesser of $25 or 2% of the amount surrendered will be assessed for
a partial surrender. The amount of a partial surrender will equal the amount
requested for surrender plus the partial surrender processing fee. When you
request a partial surrender, you can direct how the partial surrender will be
deducted from your Account Value. If you provide no directions, the partial
surrender will be deducted from your Account Value in the Investment
Subdivisions on a pro-rata basis.
<PAGE>
HYPOTHETICAL ILLUSTRATIONS
The following illustrations show how certain values under a sample
Policy change with assumed investment performance over an extended period of
time. In particular, they illustrate how Account Values, Surrender Values and
Life Insurance Proceeds payable under a Policy covering an Insured of a given
Age on the Policy Date, would vary over time. The illustrations assume planned
premiums were paid annually and the return on the assets in the Investment
Subdivisions were a uniform gross annual rate of 0%, 6% or 12%, before deduction
of any fees and charges. The values reflect the deduction of all Policy and Fund
fees and charges. The tables also show planned premiums accumulated at 5%
interest. The values under a Policy would be different from those shown if the
returns averaged 0%, 6% or 12% but fluctuated over and under those averages
throughout the years shown. The hypothetical investment rates of return are
illustrative only and should not be deemed a representation of past or future
investment rates of return. Actual rates of return for a particular Policy may
be more or less than the hypothetical investment rates of return used in the
illustrations.
The illustrations assume an average annual expense ratio of .82% of the
average daily net assets of the Funds available under the Policies, based on the
estimated expense ratios of each of the Funds for the first year of operations.
For information on Fund expenses, see the prospectus for the Funds accompanying
this prospectus. The current illustrations also reflect the 0.70% mortality and
expense risk charge to the Separate Account II. The guaranteed illustrations
reflect the maximum 0.90% mortality and expense risk charge to the Separate
Account II. After deduction of estimated Fund expenses and the mortality and
expense risk charge, the illustrated gross annual investment rates of return of
0%, 6% and 12% would correspond to approximate net annual rates of return for
the Investment Divisions of -1.52%, 4.48% and 10.48%, respectively.
The illustrations also reflect the monthly deduction for the
hypothetical Insured. Our current charges and the higher guaranteed charges we
have the contractual right to charge are reflected in separate illustrations on
each of the following pages. All the illustrations reflect the fact that no
charges for Federal or state income taxes are currently made against Separate
Account II and assume no Policy Debt or charges for supplemental benefits.
The illustrations are based on our sex distinct rates for non-tobacco
users. Upon request, we will furnish a comparable illustration based upon the
proposed Insured's individual circumstances. Such illustrations may assume
different hypothetical rates of return than those illustrated.
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male Issue Age 45 Initial Specified Amount $250,000
Preferred Nonsmoker Underwriting Risk Initial Premium and Planned
Death Benefit Option A Premium (Payable Annually) (1) $13,000
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Premiums Gross Annual Investment Gross Annual Investment Gross Annual Investment
End of Accumulated Return with Guaranteed Return with Guaranteed Return with Guaranteed
Policy At 5% Interest Cost of Insurance Rates (2)(3) Cost of Insurance Rates (2)(3) Cost of Insurance Rates (2)(3)
Year Per Year Surrender Account Death Surrender Account Death Surrender Account Death
Value Value Benefit Value Value Benefit Value Value Benefit
<S> <C>
1 13,650 8,922 11,174 261,174 9,631 11,884 261,884 10,341 12,594 262,594
2 27,983 19,837 22,089 272,089 21,954 24,207 274,207 24,158 26,411 276,411
3 43,032 30,492 32,745 282,745 34,731 36,983 286,983 39,320 41,572 291,572
4 58,833 40,888 43,140 293,140 47,975 50,228 300,228 55,958 58,210 308,210
5 75,425 51,018 53,271 303,271 61,697 63,949 313,949 74,214 76,467 326,467
6 92,846 61,110 63,135 313,135 76,139 78,164 328,164 94,478 96,503 346,503
7 111,138 70,921 72,721 322,721 91,075 92,875 342,875 116,683 118,483 368,483
8 130,345 80,440 82,015 332,015 106,509 108,084 358,084 141,013 142,588 392,588
9 150,513 89,659 91,009 341,009 122,449 123,799 373,799 167,671 169,021 419,021
10 171,688 98,559 99,684 349,684 138,893 140,018 390,018 196,873 197,998 447,998
15 294,547 137,860 137,860 387,860 228,790 228,790 478,790 390,466 390,466 640,466
20 451,350 165,527 165,527 415,527 329,852 329,852 579,852 694,821 694,821 944,821
25 651,475 178,159 178,159 428,159 439,877 439,877 689,877 1,174,682 1,174,682 1,424,682
30 906,890 168,328 168,328 418,328 551,120 551,120 801,120 1,930,014 1,930,014 2,180,014
35 1,232,872 122,789 122,789 372,789 646,547 646,547 896,547 3,115,940 3,115,940 3,365,940
</TABLE>
(1) The values illustrated assume a $13,000 premium is paid at the
beginning of each Policy year. Values would be different if premiums
are paid with a different frequency or in different amounts.
(2) The values and benefits are as of the end of the year shown. They
assume that no Policy loans or withdrawals have been made. Excessive
loans or withdrawals may cause this Policy to lapse because of
insufficient account value.
(3) The values and benefits are shown using the maximum cost of insurance
rates allowable under the Policy. Accordingly, if the assumed
hypothetical gross annual investment return were earned, the values
and benefits of an actual Policy with the listed specifications could
never be less than those shown, and in some cases may be greater than
those shown.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF
INFLATION, AND THE ALLOCATIONS MADE BY AN OWNER AMONG THE INVESTMENT OPTIONS.
THE GROSS HYPOTHETICAL INVESTMENT RATES OF RETURN OF 0%, 6% AND 12% SHOWN ABOVE
CORRESPOND TO NET ANNUAL RATES OF RETURN OF -1.72%, 4.28% AND 10.28%. THE DEATH
BENEFIT AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL INVESTMENT RATE OF RETURN AVERAGES 0%, 6% AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS.
NO REPRESENTATIONS CAN BE MADE BY LIFE OF VIRGINIA OR THE FUNDS THAT THESE
HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male Issue Age 45 Initial Specified Amount $250,000
Preferred Nonsmoker Underwriting Risk Initial Premium and Planned
Death Benefit Option A Premium (Payable Annually) (1) $13,000
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Premiums Gross Annual Investment Gross Annual Investment Gross Annual Investment
End of Accumulated Return with Current Return with Current Return with Current
Policy At 5% Interest Cost of Insurance Rates (2)(3) Cost of Insurance Rates (2)(3) Cost of Insurance Rates (2)(3)
Year Per Year Surrender Account Death Surrender Account Death Surrender Account Death
Value Value Benefit Value Value Benefit Value Value Benefit
<S> <C>
1 13,650 9,430 11,683 261,683 10,163 12,415 262,415 10,896 13,148 263,148
2 27,983 20,956 23,209 273,209 23,156 25,408 275,408 25,444 27,697 277,697
3 43,032 32,257 34,509 284,509 36,679 38,931 288,931 41,464 43,716 293,716
4 58,833 43,329 45,582 295,582 50,750 53,003 303,003 59,103 61,355 311,355
5 75,425 54,171 56,424 306,424 65,387 67,640 317,640 78,524 80,776 330,776
6 92,846 65,020 67,045 317,045 80,850 82,875 332,875 100,148 102,173 352,173
7 111,138 75,643 77,443 327,443 96,929 98,729 348,729 123,947 125,747 375,747
8 130,345 86,030 87,605 337,605 113,638 115,213 365,213 150,134 151,709 401,709
9 150,513 96,184 97,534 347,534 131,004 132,354 382,354 178,957 180,307 430,307
10 171,688 106,091 107,216 357,216 149,040 150,165 400,165 210,678 211,803 461,803
15 294,547 153,948 153,948 403,948 252,470 252,470 502,470 426,882 426,882 676,882
20 451,350 195,898 195,898 445,898 378,378 378,378 628,378 779,315 779,315 1,029,315
25 651,475 230,803 230,803 480,803 530,644 530,644 780,644 1,354,361 1,354,361 1,604,361
30 906,890 256,693 256,693 506,693 712,825 712,825 962,825 2,292,563 2,292,563 2,542,563
35 1,232,872 271,042 271,042 521,042 928,680 928,680 1,178,680 3,824,865 3,824,865 4,074,865
</TABLE>
(1) The values illustrated assume a $13,000 premium is paid at the
beginning of each Policy year. Values would be different if premiums
are paid with a different frequency or in different amounts.
(2) The values and benefits are as of the end of the year shown. They
assume that no Policy loans or withdrawals have been made. Excessive
loans or withdrawals may cause this Policy to lapse because of
insufficient account value.
(3) The values and benefits are shown using the cost of insurance charges
currently deducted by Life of Virginia. Although Life of Virginia
anticipates deducting these charges for the forseeable future, THESE
CHARGES ARE NOT GUARANTEED AND COULD BE RAISED AT THE DISCRETION OF
LIFE OF VIRGINIA. Accordingly, even if the assumed hypothetical gross
annual investment return were earned, the values and benefits under an
actual Policy with the listed specifications may be less than those
shown if the cost of insurance charges were increased.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF
INFLATION, AND THE ALLOCATIONS MADE BY AN OWNER AMONG THE INVESTMENT OPTIONS.
THE GROSS HYPOTHETICAL INVESTMENT RATES OF RETURN OF 0%, 6% AND 12% SHOWN ABOVE
CORRESPOND TO NET ANNUAL RATES OF RETURN OF -1.52%, 4.48% AND 10.48%. THE DEATH
BENEFIT AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL INVESTMENT RATE OF RETURN AVERAGES 0%, 6% AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS.
NO REPRESENTATIONS CAN BE MADE BY LIFE OF VIRGINIA OR THE FUNDS THAT THESE
HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male Issue Age 45 Initial Specified Amount $250,000
Preferred Nonsmoker Underwriting Risk Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $ 4,750
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Premiums Gross Annual Investment Gross Annual Investment Gross Annual Investment
End of Accumulated Return with Guaranteed Return with Guaranteed Return with Guaranteed
Policy At 5% Interest Cost of Insurance Rates (2)(3) Cost of Insurance Rates (2)(3) Cost of Insurance Rates (2)(3)
Year Per Year Surrender Account Death Surrender Account Death Surrender Account Death
Value Value Benefit Value Value Benefit Value Value Benefit
<S> <C>
1 4,988 1,232 3,484 250,000 1,472 3,725 250,000 1,713 3,965 250,000
2 10,224 4,603 6,855 250,000 5,302 7,554 250,000 6,031 8,284 250,000
3 15,723 7,859 10,111 250,000 9,239 11,492 250,000 10,738 12,990 250,000
4 21,497 10,999 13,251 250,000 13,287 15,539 250,000 15,873 18,125 250,000
5 27,559 14,017 16,269 250,000 17,443 19,695 250,000 21,475 23,728 250,000
6 33,925 17,139 19,164 250,000 21,938 23,963 250,000 27,823 29,848 250,000
7 40,608 20,123 21,923 250,000 26,535 28,335 250,000 34,730 36,530 250,000
8 47,626 22,961 24,536 250,000 31,229 32,804 250,000 42,252 43,827 250,000
9 54,995 25,643 26,993 250,000 36,018 37,368 250,000 50,450 51,800 250,000
10 62,732 28,154 29,279 250,000 40,892 42,017 250,000 59,390 60,515 250,000
15 107,623 37,769 37,769 250,000 66,414 66,414 250,000 118,542 118,542 250,000
20 164,916 39,673 39,673 250,000 92,174 92,174 250,000 214,408 214,408 261,578
25 238,039 30,329 30,329 250,000 117,846 117,846 250,000 370,937 370,937 430,286
30 331,364 * * * 141,653 141,653 250,000 620,698 620,698 664,147
35 450,473 * * * 160,127 160,127 250,000 1,024,179 1,024,179 1,075,388
</TABLE>
* In the absence of an additional premium, the Policy would lapse.
(1) The values illustrated assume a $ 4,750 premium is paid at the
beginning of each Policy year. Values would be different if premiums
are paid with a different frequency or in different amounts.
(2) The values and benefits are as of the end of the year shown. They
assume that no Policy loans or withdrawals have been made. Excessive
loans or withdrawals may cause this Policy to lapse because of
insufficient account value.
(3) The values and benefits are shown using the maximum cost of insurance
rates allowable under the Policy. Accordingly, if the assumed
hypothetical gross annual investment return were earned, the values and
benefits of an actual Policy with the listed specifications could never
be less than those shown, and in some cases may be greater than those
shown.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF
INFLATION, AND THE ALLOCATIONS MADE BY AN OWNER AMONG THE INVESTMENT OPTIONS.
THE GROSS HYPOTHETICAL INVESTMENT RATES OF RETURN OF 0%, 6% AND 12% SHOWN ABOVE
CORRESPOND TO NET ANNUAL RATES OF RETURN OF -1.72%, 4.28% AND 10.28%. THE DEATH
BENEFIT AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL INVESTMENT RATE OF RETURN AVERAGES 0%, 6% AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS.
NO REPRESENTATIONS CAN BE MADE BY LIFE OF VIRGINIA OR THE FUNDS THAT THESE
HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male Issue Age 45 Initial Specified Amount $250,000
Preferred Nonsmoker Underwriting Risk Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $ 4,750
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Premiums Gross Annual Investment Gross Annual Investment Gross Annual Investment
End of Accumulated Return with Current Return with Current Return with Current
Policy At 5% Interest Cost of Insurance Rates (2)(3) Cost of Insurance Rates (2)(3) Cost of Insurance Rates (2)(3)
Year Per Year Surrender Account Death Surrender Account Death Surrender Account Death
Value Value Benefit Value Value Benefit Value Value Benefit
<S> <C>
1 4,988 1,559 3,812 250,000 1,812 4,065 250,000 2,066 4,318 250,000
2 10,224 5,344 7,597 250,000 6,093 8,345 250,000 6,872 9,125 250,000
3 15,723 9,034 11,286 250,000 10,527 12,780 250,000 12,146 14,398 250,000
4 21,497 12,625 14,877 250,000 15,119 17,372 250,000 17,933 20,185 250,000
5 27,559 16,114 18,366 250,000 19,873 22,125 250,000 24,286 26,538 250,000
6 33,925 19,737 21,762 250,000 25,031 27,056 250,000 31,503 33,528 250,000
7 40,608 23,263 25,063 250,000 30,370 32,170 250,000 39,422 41,222 250,000
8 47,626 26,682 28,257 250,000 35,890 37,465 250,000 48,113 49,688 250,000
9 54,995 29,996 31,346 250,000 41,601 42,951 250,000 57,663 59,013 250,000
10 62,732 33,194 34,319 250,000 47,504 48,629 250,000 68,161 69,286 250,000
15 107,623 49,120 49,120 250,000 81,943 81,943 250,000 140,662 140,662 250,000
20 164,916 62,112 62,112 250,000 123,519 123,519 250,000 260,043 260,043 317,253
25 238,039 71,598 71,598 250,000 174,947 174,947 250,000 455,510 455,510 528,392
30 331,364 76,208 76,208 250,000 240,558 240,558 257,397 775,077 775,077 829,332
35 450,473 73,923 73,923 250,000 323,781 323,781 339,970 1,299,958 1,299,958 1,364,956
</TABLE>
(1) The values illustrated assume a $ 4,750 premium is paid at the
beginning of each Policy year. Values would be different if premiums
are paid with a different frequency or in different amounts.
(2) The values and benefits are as of the end of the year shown. They
assume that no Policy loans or withdrawals have been made. Excessive
loans or withdrawals may cause this Policy to lapse because of
insufficient account value.
(3) The values and benefits are shown using the cost of insurance charges
currently deducted by Life of Virginia. Although Life of Virginia
anticipates deducting these charges for the forseeable future, THESE
CHARGES ARE NOT GUARANTEED AND COULD BE RAISED AT THE DISCRETION OF
LIFE OF VIRGINIA. Accordingly, even if the assumed hypothetical gross
annual investment return were earned, the values and benefits under an
actual Policy with the listed specifications may be less than those
shown if the cost of insurance charges were increased.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF
INFLATION, AND THE ALLOCATIONS MADE BY AN OWNER AMONG THE INVESTMENT OPTIONS.
THE GROSS HYPOTHETICAL INVESTMENT RATES OF RETURN OF 0%, 6% AND 12% SHOWN ABOVE
CORRESPOND TO NET ANNUAL RATES OF RETURN OF -1.52%, 4.48% AND 10.48%. THE DEATH
BENEFIT AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL INVESTMENT RATE OF RETURN AVERAGES 0%, 6% AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THESE HYPOTHETICAL INVESTMENT RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
REQUESTING PAYMENTS AND TELEPHONE TRANSACTIONS
Requesting Payments. Written requests for payment (except for telephone
requests) must be sent to our Home Office or given to our authorized agent for
forwarding to our Home Office. We will ordinarily pay any Life Insurance
Proceeds, loan proceeds or surrender or partial surrender proceeds in a lump sum
within seven days after receipt at our Home Office of all the documents required
for such a payment. Other than the Life Insurance Proceeds, which are determined
as of the date of the Insured's death, the amount will be determined as of the
date our Home Office receives all required documents. Life Insurance Proceeds
may be paid in a lump sum or under an optional payment plan. See "Optional
Payment Plans." Any Life Insurance Proceeds that are paid in one lump sum will
include interest from the date of death to the date of payment. Interest will be
paid at a rate set by us, or by law if greater. The minimum interest rate which
will be paid is 2.5%. Interest will not be paid beyond one year or any longer
time set by law. Life Insurance Proceeds will be reduced by any outstanding
Policy Debt and any due and unpaid charges and increased by any benefits added
by rider.
We may delay making a payment or processing a transfer request if: (1)
the disposal or valuation of Separate Account II's assets is not reasonably
practicable because the New York Stock Exchange is closed for other than a
regular holiday or weekend, trading is restricted by the SEC, or the SEC
declares that an emergency exists; or (2) the SEC by order permits postponement
of payment to protect our Policy Owners. We also may defer making payments
attributable to a check that has not cleared the bank on which it is drawn.
Telephone Transactions. You may make certain requests under the Policy
by telephone provided we have your written authorization on file at the Home
Office. These include requests for transfers, partial surrenders, Policy loans,
changes in premium allocation designations, dollar-cost averaging changes and
changes in the portfolio rebalancing program. Our Home Office will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. Such procedures may include, among others, requiring some form of
personal identification prior to acting upon instructions received by telephone,
providing written confirmation of such transactions, and/or tape recording of
telephone instructions. Your request for telephone transactions authorizes us to
record telephone calls. If reasonable procedures are not employed, we may be
liable for any losses due to unauthorized or fraudulent instructions. However,
if reasonable procedures are employed, we will not be liable for any losses due
to unauthorized or fraudulent instructions.
OTHER POLICY BENEFITS AND PROVISIONS
Exchange Privilege. During the first 24 Policy Months, you may convert
the Policy to a permanent fixed benefit policy. If you object to a material
change in the investment policy of Separate Account II or the Investment
Subdivisions, you may also convert the Policy to a permanent fixed benefit
policy within 60 days after the change. In either case, you may elect either the
same death benefit or the same net amount at risk as the existing Policy at the
time of conversion. Premiums will be based on the same Age at issue and risk
classification of the Insured as the existing Policy. The conversion will be
subject to an equitable adjustment in payments and Account Value to reflect
variances, if any, in the payments and Account Value under the existing Policy
and the new policy. See your Policy for further information.
Optional Payment Plans. The Policy currently offers the following five
optional payment plans as alternatives to the payment of a death benefit or
Surrender Value in a lump sum:
<PAGE>
Plan 1 - Income for a Fixed Period. Periodic payments will be made
for a fixed period not longer than 30 years. Payments can be annual,
semi-annual, quarterly or monthly.
Plan 2 - Life Income. Equal monthly payments will be made for a
guaranteed minimum period. If the payee lives longer than the minimum period,
payments will continue for his or her life. The minimum period can be 10, 15 or
20 years.
Plan 3 - Income of a Definite Amount. Equal periodic payments of a
definite amount will be paid. Payments can be annual, semi-annual, quarterly or
monthly.
Plan 4 - Interest Income. Periodic payments of interest earned from the
proceeds will be paid. Payments can be annual, semi-annual, quarterly or monthly
and will begin at the end of the first period chosen.
Plan 5 - Joint Life and Survivor Income. Equal monthly payments will be
made to two payees for a guaranteed minimum of 10 years. Each payee must be at
least 35 years old when payments begin.
An optional payment plan can be selected in the application or by
notifying us in writing at our Home Office. Any amount left with us for payment
under an optional payment plan will be transferred to our general account.
Payments under an optional payment plan will not vary with the investment
performance of Separate Account II because they are all forms of fixed-benefit
annuities. See "Tax Treatment of Policy Proceeds." Certain conditions and
restrictions apply to payments received under an optional payment plan. For
further information, review your Policy or contact an authorized Life of
Virginia agent.
Other Policy Provisions. The Policy contains provisions addressing the
following matters:
Dividends. The Policy is non-participating. No dividends will be paid
on the Policy.
Incontestability. The Policy limits our right to contest the Policy as
issued or as increased, except for material misstatements contained in the
application or a supplemental application, after it has been in force during the
Insured's lifetime for a minimum period, generally for two years from the Policy
Date or effective date of the increase. This provision does not apply to riders
that provide disability benefits.
Suicide Exclusion. If the Insured commits suicide while sane or insane,
within two years of the Policy Date, Life Insurance Proceeds payable under the
Policy will be limited to all premiums paid, less outstanding Policy Debt and
less amounts paid upon partial surrender of the Policy.
If the Insured commits suicide while sane or insane, more than two
years after the Policy Date but within two years after the effective date of an
increase in the Specified Amount, the proceeds payable with respect to the
increase will be limited to the cost of insurance applied to the increase.
Misstatement of Age or Sex. Life Insurance Proceeds will be adjusted
if the Insured's Age or sex has been misstated in the application.
Written Notice. Any written notice should be sent to us at our Home
Office at 6610 West Broad Street, Richmond, Virginia 23230. The notice should
include the Policy number and the Insured's full name. Any notice sent by us to
you will be sent to the address shown in the application unless an appropriate
address change form has been filed with us.
<PAGE>
Owner. You have rights in the Policy during the Insured's lifetime.
If you die before the Insured and there is no contingent Owner, ownership passes
to your estate.
Beneficiary. You designate the Primary Beneficiaries and Contingent
Beneficiaries when you apply for the Policy. If changed, the Primary Beneficiary
and Contingent Beneficiary is as shown in the latest change filed with us. One
or more Primary Beneficiaries or Contingent Beneficiaries may be named in the
application. In such a case, the proceeds will be paid in equal shares to the
survivors in the appropriate Beneficiary class, unless you request otherwise.
Unless an optional payment plan is chosen, the proceeds payable at the
Insured's death will be paid in a lump sum to the Primary Beneficiary(ies). If
the Primary Beneficiary(ies) dies before the Insured, the proceeds will be paid
to the Contingent Beneficiary(ies). If no Beneficiary(ies) survives the Insured,
the proceeds will be paid to you or your estate.
Reinstatement. If the Policy has not been surrendered, the Policy may
be reinstated within three years after lapse, subject to compliance with certain
conditions, including the payment of a necessary premium and submission of
satisfactory evidence of insurability. See your Policy for further information.
Trustee. If a trustee is named as the Owner or Beneficiary of the
Policy and subsequently exercises ownership rights or claims benefits
thereunder, we will have no obligation to verify that a trust is in effect or
that the trustee is acting within the scope of his/her authority. Payment of
policy benefits to the trustee will release us from all obligations under the
Policy to the extent of the payment. When we make a payment to the trustee, we
will have no obligation to ensure that such payment is applied according to the
terms of the trust agreement.
Other Changes. At any time we may make such changes in the Policy as
are necessary to assure compliance at all times with the definition of life
insurance prescribed by the Code; to make the Policy, our operations, or the
operation of Separate Account II conform with any law or regulation issued by
any government agency to which they are subject; or to reflect a change in the
operation of Separate Account II, if allowed by the Policy. Only the President
or a Vice-President of Life of Virginia has the right to change the Policy. No
agent has the authority to change the Policy or waive any of its terms. All
endorsements, amendments, or riders must be signed by such officer to be valid.
Reports. We maintain records and accounts of all transactions involving
the Policy, Separate Account II and Policy Debt. Within 30 days after each
Policy Anniversary, you will be sent a report showing information about your
Policy for the period covered by the report. The report will show the amount of
Life Insurance Proceeds, the Account Value in each Investment Subdivision, the
Surrender Value and Policy Debt. The report will also show premiums paid and
charges made during the Policy Year. You will also be sent an annual and a
semi-annual report for each Fund underlying an Investment Subdivision to which
you have allocated Account Value, as required by the 1940 Act. In addition, when
you pay premiums (other than by pre-authorized checking account deduction), or
if you take out a Policy loan, make transfers or make partial surrenders, you
will receive a written confirmation of these transactions.
Change of Owner. You may change the Owner of the Policy by sending a
written request on a form satisfactory to us to our Home Office while the
Insured is alive and the Policy is in force. The change will take effect the
date you sign the written request, but the change will not affect any action we
have taken before we receive the written request. A change of Owner does not
change the Beneficiary designation.
<PAGE>
Supplemental Benefits. Supplemental benefits are available and may be
added to your Policy by rider. Monthly charges for these benefits will be
deducted from your Account Value as part of the monthly deduction. See "Monthly
Deduction." Examples of these supplemental benefits include term insurance on a
spouse or children, additional death benefits if the insured dies in an
accident, and waiver of either the monthly deduction or a stipulated amount if
the Insured becomes disabled as defined in the rider. Additional rules and
limits apply to these supplemental benefits. Please ask your authorized Life of
Virginia agent for further information or contact our Home Office.
Using the Policy as Collateral. The Policy can be assigned as
collateral security. We must be notified in writing if you assign the Policy.
Any payments made before the assignment and recorded at our Home Office will not
be affected. We are not responsible for the validity of an assignment. Your
rights and the rights of the Beneficiary may be affected by an assignment.
Reinsurance. We intend to reinsure a portion of the risks assumed
under the Policies.
LIFE OF VIRGINIA
The Life Insurance Company of Virginia. We are a stock life insurance
company operating under a charter granted by the Commonwealth of Virginia on
March 21, 1871. We are principally engaged in the offering of life insurance and
annuity policies and rank among the 25 largest stock life insurance companies in
the United States in terms of business in force. We are admitted to do business
in 49 states and the District of Columbia. Our principal offices are at 6610
West Broad Street, Richmond, Virginia 23230.
Eighty percent of our capital stock is owned by General Electric
Capital Assurance Corporation ("GE Capital Assurance"). The remaining 20% is
owned by GE Life Insurance Group, Inc. GE Capital Assurance and GE Life
Insurance Group, Inc. are indirectly wholly-owned subsidiaries of General
Electric Capital Corporation ("GE Capital"). GE Capital, a New York corporation,
is a diversified financial services company whose subsidiaries consist of
specialty insurance, equipment management, and commercial and consumer financing
businesses. GE Capital's parent, General Electric Company, founded more than one
hundred years ago by Thomas Edison, is the world's largest manufacturer of jet
engines, engineering plastics, medical diagnostic equipment and large electric
power generation equipment.
State Regulation. We are subject to regulation by the State Corporation
Commission of the Commonwealth of Virginia. An annual statement is filed with
the Virginia Commissioner of Insurance on or before March 1 of each year
covering our operations and reporting on our financial condition as of December
31 of the preceding year. Periodically, the Commissioner of Insurance examines
our liabilities and reserves and those of Separate Account II and certifies
their adequacy, and a full examination of our operations is conducted by the
State Corporation Commission, Bureau of Insurance of the Commonwealth of
Virginia at least every five years.
We are also subject to the insurance laws and regulation of other
states within which it is licensed to operate.
Executive Officers and Directors. We are managed by a board of
directors. The following table sets forth the name, address and principal
occupations during the past five years of each of our executive officers and
directors.
<PAGE>
Name and Position(s)
With Life of Virginia* Principal Occupations Last Five Years
Ronald V. Dolan* Director, Chairman of the Board, Life of
Virginia since 1997; President and Chief
Executive Officer of First Colony Life
Insurance Company 1992-1997; President,
First Colony Corporation since 1985.
Paul E. Rutledge III* Director, President and Chief Executive
Officer since 1997; President and Chief
Operating Officer, Life of Virginia, 5/91 to
4/97; Executive Vice President and Chief
Operating Officer, United Investors Life
Insurance Company, Birmingham, Alabama, 9/87
to 4/91.
Selwyn L. Flournoy, Jr.* Director, Life of Virginia since 5/89;
Senior Vice President, Life of Virginia,
since 1980. Chief Financial Officer since
1980.
Linda L. Lanam* Director, Life of Virginia, since 2/93;
Senior Vice President since 1997; Vice
President and Senior Counsel, Life of
Virginia, since 1989; Corporate Secretary
for Life of Virginia and for a number of
Life of Virginia affiliates, since 1992.
Robert D. Chinn* Director, Life of Virginia since 1997;
Senior Vice President - Agency, Life of
Virginia, since 1/92; Vice President, Life
of Virginia, since 1985.
Elliott Rosenthal Senior Vice President - Investment Products
since 1997; Vice President and Senior
Investment Actuary, 1/95 - 4/97; Investment
Actuary, 1/82 - 2/95.
Victor C. Moses Director, Life of Virginia, since April 1,
1996. Director of GNA since April 1994.
Senior Vice President, Business Development,
and Chief Actuary of GNA since Mary 1993.
Senior Vice President and Chief Financial
Officer of GNA, 1991-1993. Vice President
and Chief Actuary of GNA, 1983-1991. Senior
Vice President, Controller and Treasurer GNA
Investors Trust, 1992-1993.
Geoffrey S. Stiff Director, Life of Virginia, since April 1,
1996. Director of GNA since April 1994.
Senior Vice President, Chief Financial
Officer and Treasurer of GNA since May 1993.
Vice President, Chief Financial Officer and
Director of Employers Reinsurance
Corporation 1987-1993. Senior Vice
President, Controller and Treasurer of GNA
Investors Trust since 1993.
- ----------------------------------------------------------------
* Messrs. Dolan, Rutledge, Flournoy, Chinn and Ms. Lanam are members of our
Executive Committee.
The principal business address of each person listed, unless otherwise
indicated, is The Life Insurance Company of Virginia, 6610 W. Broad Street,
Richmond, Virginia 23230.
The principal business address for Mr. Dolan and Mr. Stiff is First Colony
Life Insurance Company, 700 Main Street, Post Office 1280, Lynchburg, VA
24505-1280.
The principal business address for Mr. Moses is GNA Corporation, Two Union
Square, 601 Union Street, Seattle, WA 98101.
The composition of our Board of Directors changed following our sale on April
1, 1996.
<PAGE>
Separate Account II. Separate Account II was established by us as a
separate investment account on August 21, 1986. Separate Account II currently
has thirty-four Investment Subdivisions available under the Policy, but that
number may change in the future. Each Investment Subdivision invests exclusively
in shares representing an interest in a separate corresponding portfolio of one
of the nine Funds described above. Net Premiums are allocated in accordance with
your instructions among up to seven of the thirty-four Investment Subdivisions
available under the Policy.
The assets of Separate Account II belong to us. Nonetheless, the assets
in Separate Account II attributable to the Policies are not chargeable with
liabilities arising out of any other business which we may conduct. The assets
of Separate Account II shall, however, be available to cover the liabilities of
our General Account to the extent that the assets of Separate Account II exceed
its liabilities arising under the Policies supported by it. Income and both
realized and unrealized gains or losses from the assets of Separate Account II
are credited to or charged against Separate Account II without regard to the
income, gains or losses arising out of any other business we may conduct.
Separate Account II is registered with the SEC as a unit investment
trust under the 1940 Act and meets the definition of a separate account under
the federal securities laws. Registration with the SEC does not involve
supervision of the management or investment practices or policies of Separate
Account II by the SEC.
Changes to Separate Account II. Separate Account II may include other
Investment Subdivisions that are not available under the Policy and are not
otherwise discussed in this prospectus. We may substitute another investment
subdivision or insurance company separate account under the Policy if, in our
judgment, investment in a Investment Subdivision should no longer be possible or
becomes inappropriate to the purposes of the Policies, or if investment in
another investment subdivision or insurance company separate account is in the
best interest of Owners. No substitution may take place without notice to Owners
and prior approval of the SEC and insurance regulatory authorities, to the
extent required by the 1940 Act and applicable law.
We may also, where permitted by law: (1) create new separate accounts;
(2) combine separate accounts, including Separate Account II; (3) add new
Investment Subdivisions or remove Investment Subdivisions from Separate Account
II; (4) make the Investment Subdivisions available under other policies we
issue; (5) deregister Separate Account II under the 1940 Act; and (6) operate
Separate Account II under the direction of committee or in another form.
Voting of Fund Shares. We are the legal owner of shares held by the
Investment Subdivisions and as such have the right to vote on all matters
submitted to shareholders of the Funds. However, as required by law, we will
vote shares held in the Investment Subdivisions at regular and special meetings
of shareholders of the Funds in accordance with instructions received from
Owners with Account Value in the Investment Subdivisions. To obtain voting
instructions from Owners, before a meeting of shareholders of the Funds, we will
send Owners voting instruction material, a voting instruction form and any other
related material. Shares held by an Investment Subdivision for which no timely
instructions are received will be voted by us in the same proportion as those
shares for which voting instructions are received. Should the applicable federal
securities laws, regulations or interpretations thereof change so as to permit
us to vote shares of the Funds in our own right, we may elect to do so. We may,
if required by state insurance officials, disregard your voting instructions if
such instructions would require shares to be voted so as to cause a change in
sub-classification or investment objectives of one or more of the Funds, or to
approve or disapprove an investment advisory agreement. In addition, we may
under certain circumstances disregard voting instructions that would require
changes in the investment policy or investment adviser of one or more of the
Funds, provided that we reasonably disapprove of such changes in accordance with
<PAGE>
applicable federal regulations. If we ever disregard voting instructions, Owners
will be advised of that action and of the reasons for such action in the next
report to Owners.
TAX CONSIDERATIONS
The following discussion is general and is not intended as tax advice.
Tax Status of the Policy. The Code, in section 7702, establishes a
statutory definition of life insurance for tax purposes. We believe that the
Policy meets the statutory definition of life insurance, which places
limitations on the amount of premiums that may be paid. If the Specified Amount
of a Policy is increased or decreased, the applicable premium limitation may
change. In the case of a decrease in the Specified Amount, a partial surrender,
a change from Option A to Option B, or any other such change that reduces
benefits under the Policy during the first 15 years after a Policy is issued and
that results in a cash distribution to you in order for the Policy to continue
complying with section 7702 definitional limitations on premiums and cash
values, certain amounts prescribed in section 7702 which are so distributed will
be includable in your ordinary income (to the extent of any gain in the Policy).
Such income inclusion will also occur, in certain circumstances, with respect to
cash distributions made in anticipation of reductions in benefits under the
Policy.
The Code (section 817(h)) and regulations promulgated thereunder by the
Secretary of the Treasury (the "Treasury") prescribe diversification standards
for the investments of Separate Account II which must be met in order for the
Policy to be treated as a life insurance contract for federal tax purposes.
Separate Account II, through the Funds, intends to comply with the
diversification requirements prescribed by the Treasury. Although we do not
control the Funds, we have entered into agreements regarding participation in
the Funds which require the Funds to be operated in compliance with the
requirements prescribed by the Treasury. Thus, we believe that Separate Account
II will be treated as adequately diversified for federal tax purposes.
In certain circumstances, variable contract owners may be considered
the owners, for federal tax purposes, of the assets of the separate account used
to support such contracts. In those circumstances, income and gains from the
separate account assets would be includable in the variable contract owners'
gross income annually as earned. The Internal Revenue Service (the "Service")
has stated in published rulings that a variable contract owner will be
considered the owner of separate account assets if the owner possesses incidents
of ownership in those assets, such as the ability to exercise investment control
over the assets. The Treasury has announced, in connection with the issuance of
regulations concerning diversification requirements, that those regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset [i.e. separate] account may cause the
investor, rather than the insurance company, to be treated as the owner of the
assets of the account." This announcement also stated that guidance would be
issued by the way of regulation or published rulings on the "extent to which
policyholders may direct their investments to particular sub-accounts [of a
separate account] without being treated as owners of the underlying assets."
The ownership rights under the Policy are similar to, but different in
certain respects from, those present in situations addressed by the Service in
rulings in which it was determined that contract owners were not owners of
separate account assets. For example, you have the choice of more Funds to which
to allocate premiums and cash values and may be able to reallocate more
frequently than in such rulings. These differences could result in you being
considered, under the standard of those rulings, the owner of the assets of
Separate Account II. To ascertain the tax treatment of our policyowners, we have
requested, with regard to a policy similar to this Policy, a ruling from the
Service that we, and not our policyowners, are the owner of the assets of the
separate account there involved for federal income tax purposes. The Service
informed us that it will not rule on the request until issuance of the promised
<PAGE>
guidance referred to in the preceding paragraph. Because we do not know what
standards will be set forth in the regulations or revenue rulings which the
Treasury has stated it expects to issue, we have reserved the right to modify
our practices to attempt to prevent you from being considered the owner of the
assets of Separate Account II.
Frequently, if the Service or the Treasury sets forth a new position
which is adverse to taxpayers, the position is applied on a prospective basis
only. Thus, if the Service or the Treasury were to issue regulations or a ruling
which treated you as the owner of the assets of Separate Account II, that
treatment might only apply on a prospective basis. However, if the ruling or
regulations were not considered to set forth a new position, you might be
retroactively determined to be the owner of a portion of the assets of Separate
Account II for tax purposes.
The following discussion assumes that the Policy will qualify as a life
insurance contract for federal tax purposes.
Tax Treatment of Policy Proceeds. The Policies should receive the same
Federal income tax treatment as fixed benefit life insurance. As a result, the
Life Insurance Proceeds payable under either benefit option are excludable from
the gross income of the Beneficiary under section 101 of the Code, and you will
not be deemed to be in constructive receipt of the Surrender Value under a
Policy until actual surrender. If proceeds payable upon death of the Insured are
paid under optional payment Plan 4 (interest income), the interest payments will
be includable in the Beneficiary's income. If proceeds payable on death are
applied under optional payment plan 3 and the Beneficiary is at an advanced age
at such time, such as age 80 or older, it is possible that payments would be
treated in a manner similar to that under Plan 4. If the proceeds payable upon
death of the Insured are paid under one of the other optional payment plans, the
payments will be prorated between amounts attributable to the death benefit
which will be excludable from the Beneficiary's income and amounts attributable
to interest which will be includable in the Beneficiary's income. In the event
of certain cash distributions under the Policy resulting from any change which
reduces future benefits under the Policy, the distribution will be taxed in
whole or in part as ordinary income (to the extent of gain in the Policy). See
discussion above, "Tax Status of the Policy."
For an Insured who survived beyond the end of the Commissioners' 1980
Standard Ordinary Mortality Table, there may be a question about taxation of
death benefit proceeds and constructive receipt. Because we continue to charge
for the insurance risk beyond age 100, we believe that the proceeds will
continue to be protected from taxation. Therefore, we have no current plans to
withhold or report taxes in this situation.
Except as noted below, a loan received under a Policy will be treated
as your indebtedness, so that no part of any loan under a Policy will constitute
income to you so long as the Policy remains in force, and a partial surrender
under a Policy will not constitute income except to the extent it exceeds the
total premiums paid for the Policy (reduced by any amounts previously withdrawn
which were not treated as income). However, with respect to the portion of any
loan that is attributable to cash value in excess of the total premium payments
under the Policy, it is possible that the Service could treat you as being in
receipt of certain amounts of income.
Generally, interest paid on loans under a Policy will not be tax
deductible, except in the case of certain loans under a Policy covering a "key
person." A tax adviser should be consulted before taking any policy loan.
The right to exchange the Policy for a permanent fixed benefit policy
(see "Exchange Privilege"), the right to change Owners (see "Change of Owner"),
the provision for surrenders, the right to change from one death benefit option
to another, and other changes reducing future death benefits may have tax
consequences depending on the circumstances of such exchange, change or
surrender. Upon complete surrender, if the amount received plus the Policy Debt
<PAGE>
exceeds the total premiums paid (less any amounts treated as previously
withdrawn by you), the excess generally will be treated as ordinary income.
Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Owner or Beneficiary.
Tax Treatment of Policy Loans and Other Distributions. The Technical
Miscellaneous Revenue Act of 1988 (TAMRA) includes the following provisions,
which affect the taxation of distributions (other than proceeds paid at the
death of the insured) from life insurance contracts:
1. If premiums are paid more rapidly than the rate defined by a "7-Pay
Test," the Policy will be classified as a "modified endowment
contract." This test applies a cumulative limit on the amount of
payments that can be made into a Policy in order to avoid modified
endowment contract treatment.
2. Any Policy received in exchange for a policy classified as a modified
endowment contract will be treated as a modified endowment contract
regardless of whether it meets the 7-Pay Test.
3. Loans (including unpaid interest thereon) from a Policy classified as a
modified endowment contract will be considered distributions.
4. Distributions (including partial surrenders, loans and loan interest,
assignments and pledges) from a Policy classified as a modified
endowment contract will be taxed first as distributions of income from
the Policy (to the extent that the cash value of the Policy, before
reduction by any surrender charge or loan, exceeds the total premiums
paid less any previous untaxed withdrawals), and then as a non-taxable
recovery of premium.
5. A penalty tax of 10% will be imposed on distributions includable in
income (including complete and partial surrenders, loans and loan
interest, assignments and pledges) from a Policy classified as a
modified endowment contract, unless such distributions are made (1)
after you attain age 59 1/2, (2) because you have become disabled, or
(3) as substantially equal annuity payments over your life or life
expectancy (or over the joint lives or life expectancies of you and
your beneficiary).
In order to avoid classification as a modified endowment contract, a
Policy must not have been issued in exchange for a modified endowment contract,
and premiums paid under the Policy must not be paid more rapidly than the 7-Pay
Test allows. We will provide you guidance as to the amount of premium payments
that may be paid if you wish to avoid treatment of the Policy as a modified
endowment contract.
Additionally, all life insurance contracts which are treated as
modified endowment contracts and which are issued by us or any of our affiliates
with the same person designated as the owner within the same calendar year will
be aggregated and treated as one contract for purposes of determining any tax on
distributions.
<PAGE>
The provisions of TAMRA are complex and are open to considerable
variation in interpretation. You should consult your tax advisor before making
any decisions regarding increases or decreases in or additions to coverage or
distributions from your Policy.
Taxation of Life of Virginia. Because of our current status under the
Code, we do not expect to incur any Federal income tax liability that would be
chargeable to Separate Account II. Based upon this expectation, no charge is
being made currently to Separate Account II for Federal income taxes. If,
however, we determine that such taxes may be incurred, we may assess a charge
for those taxes from Separate Account II.
We may also incur state and local taxes (in addition to premium taxes
for which a deduction from premiums is currently made) in several states. At
present, these taxes are not significant. If there is a material change in state
or local tax laws, charges for such taxes attributable to Separate Account II
may be made.
Income Tax Withholding. Generally, unless you provide us with a written
election to the contrary before a distribution is made, we are required to
withhold income taxes from any portion of the money received by you upon
surrender of the Policy (and if the Policy is a modified endowment contract,
upon a partial surrender or a Policy loan). If you request that no taxes be
withheld, or if we do not withhold a sufficient amount of taxes, you will be
responsible for the payment of any taxes and early distribution penalties that
may be due on the amounts received. You may also be required to pay penalties
under the estimated tax rules, if your withholding and estimated tax payments
are insufficient to satisfy your total tax liability. You may, therefore, want
to consult a tax advisor.
The foregoing discussion is general and is not intended as tax advice.
Other Considerations. Any person concerned about these tax implications
should consult a competent tax advisor. This discussion is based on our
understanding of the present Federal income tax laws as they are currently
interpreted by the Service. No representation is made as to the likelihood of
continuation of these current laws and interpretations. It should be further
understood that the foregoing 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.
LEGAL DEVELOPMENTS REGARDING EMPLOYMENT-RELATED BENEFIT PLANS
In 1983, the Supreme Court held in Arizona Governing Committee v.
Norris, that optional annuity benefits provided under an employee's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women on the basis of sex. The Policy contains guaranteed
cost of insurance rates and guaranteed purchase rates for certain settlement
options that distinguish between men and women. Accordingly, employers and
employee organizations should consider, in consultation with legal counsel, the
impact of Norris, and Title VII generally, on any employment-related insurance
or benefit program for which a Policy may be purchased.
ADDITIONAL INFORMATION
Sale of Policies. The Policies will be sold by our licensed life
insurance agents who are also registered representatives of Forth Financial
Securities Corporation, the principal underwriter of the Policies, or of
broker-dealers who have entered into written sales agreements with the principal
underwriter. Forth Financial Securities Corporation, a Virginia Corporation,
located at 6610 W. Broad Street, Richmond, Virginia 23230, is registered with
the SEC under the Securities Exchange Act of 1934 as a broker-dealer and a
member of the National Association of Securities Dealers, Inc. Forth Financial
Securities Corporation also serves as principal underwriter for other variable
<PAGE>
life insurance and variable annuity policies issued by us. However, no amounts
have been retained by Forth Financial Securities Corporation for acting as
principal underwriter of these other policies.
Our writing agents will receive commissions based on a commission
schedule and rules. First-year commissions depend on the Insured's Age, risk
class, and the size of the policy. In the first Policy Year, the agent will
receive a commission of up to 95% of the maximum commissionable premium plus up
to 4.0% of premiums paid in excess of the maximum commissionable premium. In
renewal years, the agent receives up to 4.0% of the premiums paid. A trail
commission equal to an annual rate of 0.15% of Account Value may be paid on
Policies that after the fifth Policy Year have an Account Value equal to or
greater than $10,000.
Other Information. A registration statement under the Securities Act of
1933 has been filed with the SEC relating to the offering described in this
prospectus. This prospectus does not include all the information set forth in
the registration statement. The omitted information may be obtained at the SEC's
principal office in Washington, D.C. by paying the SEC's prescribed fees.
Litigation. No legal or administrative proceeding is pending that
would have a material effect upon Separate Account II.
Legal Matters. The legal matters in connection with the Policy
described in this prospectus have been passed on by J. Neil McMurdie, Associate
Counsel and Assistant Vice President of Life of Virginia. Sutherland, Asbill &
Brennan LLP of Washington, D.C. has provided advice on matters relating to the
federal securities laws.
Experts.
KPMG Peat Marwick LLP. The consolidated balance sheet of The Life
Insurance Company of Virginia and subsidiary as of December 31, 1996, and the
related consolidated statements of income, shareholders' equity and cash flows
for the nine months ended December 31, 1996 and the preacquisition three months
period ended March 31, 1996, and the Statement of Assets and Liabilities of Life
of Virginia Separate Account II as of December 31, 1996 and the related
statements of operations and changes in net assets for the year or period then
ended have been included herein and in the registration statement in reliance
upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants appearing elsewhere herein, and upon the authority of said firm as
experts in account and auditing.
Ernst & Young LLP. The consolidated financial statements of The Life
Insurance Company of Virginia and subsidiaries at December 31, 1995 and for each
of the two years in the period ended December 31, 1995 and the statements of
operations and statements of changes in net assets of Life of Virginia Separate
Account II for each of the two years or periods ended December 31, 1995,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, to the extent indicated in their
reports thereon also appearing elsewhere herein, and are included in reliance
upon such reports given upon the authority of such firm as experts in account
and auditing.
Actuarial Matters. Actuarial matters included in this prospectus have
been examined by Bruce E. Booker, an actuary of Life of Virginia, whose opinion
is filed as an exhibit to the registration statement.
Change in Auditors. Subsequent to the acquisition of us by GNA
Corporation on April 1, 1996, we selected KPMG Peat Marwick LLP to be our
auditor. Accordingly, our principal auditor has changed for the year ending
December 31, 1996, from Ernst & Young LLP, to KPMG Peat Marwick LLP. The former
auditors were dismissed and KPMG Peat Marwick LLP was retained because KPMG Peat
<PAGE>
Marwick LLP is the auditor for GE Capital, the indirect parent of GNA
Corporation. This change of auditors was approved by the members of our Board of
Directors.
Neither KPMG Peat Marwick LLP's nor Ernst & Young LLP's reports on the
financial statements contains any adverse opinions or a disclaimer of opinion,
or was qualified or modified as a uncertainty or audit scope. Furthermore, there
were no disagreements with either on any matter of accounting principle or
practice, financial statement disclosure or auditing scope or procedure which
would have caused them to make reference to the subject matter of the
disagreement in connection with their reports.
Financial Statements. The consolidated financial statements of Life of
Virginia and subsidiaries included herein should be distinguished from the
financial statements of Separate Account II and should be considered only as
bearing on our ability to meet our obligations under the Policies. Such
consolidated financial statements of Life of Virginia and subsidiaries should
not be considered as bearing on the investment performance of the assets held in
Separate Account II.
<PAGE>
LIFE OF VIRGINIA SEPARATE
ACCOUNT II
Financial Statements
For the nine months ended September 30, 1997
(Unaudited)
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Table of Contents
For the nine months ended September 30, 1997
- ---------------------------------------------------------------
Page
Financial Statements:
Statement of Assets and Liabilities...........1
Statement of Operations.......................7
Statement of Changes in Net Assets...........13
Notes to Financial Statements......................19
- ---------------------------------------------------------------
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Assets and Liabilities
As of September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
------------------------------------------------------------------------------------
Real
S&P 500 Government Money Total International Estate Global Value
Index Securities Market Return Equity Securities Income Equity
Assets Fund Fund Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in GE Investments Funds, Inc., at
fair value (note 2):
S&P 500 Index Fund (151,383
shares; cost - $2,658,044) $2,906,560 - - - - - - -
Government Securities Fund (32,286
shares; cost - $324,204) - 321,890 - - - - - -
Money Market Fund (1,950,236 shares;
cost - $2,177,356) - - 1,950,236 - - - - -
Total Return Portolio (226,047 shares;
cost - $3,497,054) - - - 3,336,461 - - - -
International Equity Fund (5,395 shares;
cost - $61,639) - - - - 69,374 - - -
Real Estate Securities Fund
(9,627 shares; cost - $141,339) - - - - - 163,276 - -
Global Income Fund
(915 shares; cost - $9,318) - - - - - - 9,445 -
Value Equity Fund - - - - - - - -
(109 shares; cost - $1,336) - - - - - - - 1,448
Receivable from affiliate (note 3) 2,608 - - 265,585 - 649 - -
Receivable for units sold - - - - 62 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $2,909,168 321,890 1,950,236 3,602,046 69,436 163,925 9,445 1,448
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 5,561 1,647 147,543 7,251 143 286 19 3
Payable for units withdrawn 1,169 277 20,560 292 - 77 - 21
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 6,730 1,924 168,103 7,543 143 363 19 24
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets $2,902,438 319,966 1,782,133 3,594,503 69,293 163,562 9,426 1,424
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding units 72,057 16,519 110,760 119,458 5,058 8,686 916 107
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit $ 40.28 19.37 16.09 30.09 13.70 18.83 10.29 13.28
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Assets and Liabilities, Continued
As of September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
------------------------------------------------------------------------------------
Capital High Multiple
Money Bond Appreciation Growth Income Strategies
Assets Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Oppenheimer Variable
Account Funds, at fair value (note 2):
Money Fund (517 shares; cost - $517) $ 517 - - - - -
Bond Fund (23,738 shares;
cost - $274,158) - 278,916 - - - -
Capital Appreciation Fund
(72,425 shares; cost - $2,451,203) - - 3,213,507 - - -
Growth Fund (67,956 shares;
cost - $1,693,296) - - - 2,256,142 - -
High Income Fund (117,119 shares;
cost - $1,276,734) - - - - 1,351,555 -
Multiple Strategies Fund
(38,195 shares; cost - $562,414) - - - - - 657,710
Receivable from affiliate (note 3) 41 - 12,062 2,016 3,035 4,241
Receivable for units sold - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 558 278,916 3,225,569 2,258,158 1,354,590 661,951
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 1 1,840 6,336 4,409 2,625 1,360
Payable for units withdrawn - 290 797 520 601 122
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1 2,130 7,133 4,929 3,226 1,482
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets $ 557 276,786 3,218,436 2,253,229 1,351,364 660,469
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding units 35 12,673 72,865 52,134 39,875 22,246
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit $16.09 21.84 44.17 43.22 33.89 29.69
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Assets and Liabilities, Continued
As of September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund
-------------------------------------------------------------------------------------
Money High Equity
Market Income Income Growth Overseas
Assets Portfolio Portfolio Portfolio Portfolio Portfolio
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Variable Insurance Products
Fund, at fair value (note 2):
Money Market Portfolio (303,359 shares;
cost - $303,359) $ 303,359 - - - -
High Income Portfolio (17,018 shares;
cost - $190,775) - 228,894 - - -
Equity-Income Portfolio (211,253 shares;
cost - $4,137,768) - - 5,027,812 - -
Growth Portfolio (128,192 shares;
cost - $3,757,460) - - - 4,794,363 -
Overseas Portfolio (89,799 shares;
cost - $1,545,451) - - - - 1,847,171
Accrued investment income 1,413 - - - -
Receivable from affiliate (note 3) - 1,230 39,810 7,910 4,206
Receivable for units sold - - - - 321
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets $ 304,772 230,124 5,067,622 4,802,273 1,851,698
- ---------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ---------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 9,972 469 9,658 9,545 3,778
Payable for units withdrawn - 61 1,323 1,410 -
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 9,972 530 10,981 10,955 3,778
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets $ 294,800 229,594 5,056,641 4,791,318 1,847,920
- ---------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding units 18,265 7,767 127,984 110,501 71,597
- ---------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit $ 16.14 29.56 39.51 43.36 25.81
- ---------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Assets and Liabilities, Continued
As of September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Variable Insurance
Products Fund II Product Fund III Advisers Management Trust
----------------------- --------------------------- ------------------------------
Asset Growth & Growth
Manager Contrafund Income Opportunities Balanced Bond Growth
Assets Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Variable Insurance Products
Fund II, at fair value (note 2):
Asset Manager Portfolio (233,136 shares;
cost - $3,581,452) $ 4,110,193 - - - - - -
Contrafund Portfolio (90,705 shares;
cost - $1,522,642) - 1,832,250 - - - - -
Investment in Variable Insurance Products
Fund III, at fair value (note 2):
Growth & Income Portfolio (763 shares;
cost - $8,802) - - 9,472 - - - -
Growth Opportunities Portfolio
(3,206 shares; cost - $58,606) - - - 59,240 - - -
Investment in Advisers Management Trust,
at fair value (note 2):
Balanced Portfolio (15,096 shares;
cost - $226,409) - - - - 271,719 - -
Bond Portfolio (4,026 shares;
cost - $56,271) - - - - - 56,165 -
Growth Portfolio (4,793 shares;
cost - $108,070) - - - - - - 149,628
Receivable from affiliate (note 3) 9,076 24,450 - 823 - - 2,624
Receivable for units sold - - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 4,119,269 1,856,700 9,472 60,063 271,719 56,165 152,252
- ----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 8,322 3,644 13 32 1,828 1,619 331
Payable for units withdrawn 1,324 280 34 11 4 - 8
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 9,646 3,924 47 43 1,832 1,619 339
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets $ 4,109,623 1,852,776 9,425 60,020 269,887 54,546 151,913
- ----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding units 164,582 87,976 786 5,065 13,133 4,157 7,392
- ------------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit $ 24.97 21.06 11.99 11.85 20.55 13.12 20.55
- ----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Assets and Liabilities, Continued
As of September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Federated Investors
Insurance Series Alger American Fund PBHG Insurance Series Fund
------------------------------- ----------------------- ---------------------------
American High Small PBHG PBHG
Leaders Income Bond Utility Capitalization Growth Large Cap Growth II
Fund II Fund II Fund II Portfolio Portfolio Portfolio Portfolio
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments in Federated Investors
Insurance Series, at fair value (note 2):
American Leaders Fund II (1,368 shares;
cost - $24,087) $ 26,228 - - - - - -
High Income Bond Fund II (8,557 shares;
cost - $86,930) - 91,818 - - - - -
Utility Fund II (10,775 shares;
cost - $124,101) - - 136,308 - - - -
Investment in Alger American,
at fair value (note 2):
Small Capitalization Portfolio
(27,032 shares; cost - $1,202,288) - - - 1,261,306 - - -
Growth Portfolio (18,862 shares;
cost - $698,198) - - - - 835,230 - -
Investment in PBHG Insurance Series
Fund Inc., at fair value (note 2):
PBHG Large Cap Portfolio
(2,010 shares; cost - $23,669) - - - - - 24,043 -
PBHG Growth II Portfolio
(1,292 shares; cost - $14,070) - - - - - - 14,782
Receivable from affiliate (note 3) 52 757 - 11,258 6,788 387 -
Receivable for units sold - - - - - - -
- ---------------------------------------------------------------------------------------------------------------------------
Total assets $ 26,280 92,575 136,308 1,272,564 842,018 24,430 14,782
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities
- ---------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate
(note 3) 39 342 696 2,382 1,764 17 58
Payable for units withdrawn 20 10 30 605 103 79 4
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 59 352 726 2,987 1,867 96 62
- ---------------------------------------------------------------------------------------------------------------------------
Net assets $ 26,221 92,223 135,582 1,269,577 840,151 24,334 14,720
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Outstanding units 1,837 6,132 8,938 110,590 59,755 2,040 1,290
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value per unit $ 14.27 15.04 15.17 11.48 14.06 11.93 11.41
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Assets and Liabilities, Continued
As of September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Janus Aspen Series
---------------------------------------------------------------------
Aggressive Worldwide Flexible
Growth Growth Growth Balanced Income
Portfolio Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Janus Aspen Series,
at fair value (note 2):
Aggressive Growth Portfolio
(95,121 shares; cost - $1,752,831) $ 1,919,537 - - - -
Growth Portfolio (98,466 shares;
shares; cost - $1,504,240) - 1,844,262 - - -
Worldwide Growth Portfolio
(120,557 shares; cost - $ 2,422,029) - - 2,930,753 - -
Balanced Portfolio (19,901 shares;
cost - $288,892) - - - 342,901 -
Flexible Income Portfolio
(3,032 shares; cost - $34,856) - - - - 35,502
International Growth Portfolio
(14,836 shares; cost - $255,377) - - - - -
Capital Appreciation Portfolio
(659 shares; cost - $7,565) - - - - -
Receivable from affiliate (note 3) 26,495 16,845 15,756 1,461 271
Receivable for units sold - - - - -
- ------------------------------------------------------------------------------------------------------------------
Total assets $ 1,946,032 1,861,107 2,946,509 344,362 35,773
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate
(note 3) 3,473 3,569 5,321 661 96
Payable for units withdrawn 884 353 1,149 48 26
- ------------------------------------------------------------------------------------------------------------------
Total liabilities 4,357 3,922 6,470 709 122
- ------------------------------------------------------------------------------------------------------------------
Net assets $ 1,941,675 1,857,185 2,940,039 343,653 35,651
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Outstanding units 122,503 110,613 157,474 25,011 3,009
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Net asset value per unit $ 15.85 16.79 18.67 13.74 11.85
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------
Janus Aspen Series
------------------------------
International Capital
Growth Appreciation
Portfolio Portfolio
- --------------------------------------------------------------------------
<S> <C>
Investment in Janus Aspen Series,
at fair value (note 2):
Aggressive Growth Portfolio
(95,121 shares; cost - $1,752,831) - -
Growth Portfolio (98,466 shares;
shares; cost - $1,504,240) - -
Worldwide Growth Portfolio
(120,557 shares; cost - $ 2,422,029) - -
Balanced Portfolio (19,901 shares;
cost - $288,892) - -
Flexible Income Portfolio
(3,032 shares; cost - $34,856) - -
International Growth Portfolio
(14,836 shares; cost - $255,377) 287,965 -
Capital Appreciation Portfolio
(659 shares; cost - $7,565) - 8,528
Receivable from affiliate (note 3) 1,539 3
Receivable for units sold - -
- --------------------------------------------------------------------------
Total assets 289,504 8,531
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------
Accrued expenses payable to affiliate
(note 3) 505 17
Payable for units withdrawn 27 -
- --------------------------------------------------------------------------
Total liabilities 532 17
- --------------------------------------------------------------------------
Net assets 288,972 8,514
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Outstanding units 20,910 725
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Net asset value per unit 13.82 11.74
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
See accompanying notes to unaudited financial statements.
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Operations
For the period ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
----------------------------------------------------
S&P 500 Government Money
Index Securities Market
Fund Fund Fund
----------------------------------------------------
Nine Months Nine Months Nine Months
<S> <C> Ended 9/30/97 Ended 9/30/97 Ended 9/30/97
- ---------------------------------------------------------------------------------------------------------------------------
Investment income:
Income - Dividends $ - - 2,034,256
Expenses - Mortality and expense risk charges (note 3) 12,049 1,612 10,380
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) (12,049) (1,612) 2,023,876
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) (5,854) (2,534) (1,425,432)
Unrealized appreciation (depreciation) on investments 545,474 15,749 (528,078)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 539,620 13,215 (1,953,510)
- ---------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations $ 527,571 11,603 70,366
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
----------------------------------------------------
Total International Real Estate
Return Equity Securities
Fund Fund Fund
----------------------------------------------------
Nine Months Nine Months Nine Months
<S> <C> Ended 9/30/97 Ended 9/30/97 Ended 9/30/97
- ------------------------------------------------------------------------------------------------------------------------
Investment income:
Income - Dividends - - -
Expenses - Mortality and expense risk charges (note 3) 17,920 277 505
- ------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) (17,920) (277) (505)
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) (48,671) 612 1,390
Unrealized appreciation (depreciation) on investments 516,988 8,382 19,464
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 468,317 8,994 20,854
- ------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 450,397 8,717 20,349
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
-------------------------------
Global Value
Income Equity
Fund Fund
--------------------------------
Period from Period from
<S> <C> 6/18-9/30/97 6/17-9/30/97
- ----------------------------------------------------------------------------------------------------
Investment income:
Income - Dividends - -
Expenses - Mortality and expense risk charges (note 3) 14 1
- ----------------------------------------------------------------------------------------------------
Net investment income (expense) (14) (1)
- ----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 16 6
Unrealized appreciation (depreciation) on investments 127 112
- ----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 143 118
- ----------------------------------------------------------------------------------------------------
Increase in net assets from operations 129 117
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
See accompanying notes to unaudited financial statements.
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Operations, Continued
For the period ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
----------------------------------------------------------
Capital
Money Bond Appreciation
Fund Fund Fund
----------------------------------------------------------
Nine Months Nine Months Nine Months
Ended 9/30/97 Ended 9/30/97 Ended 9/30/97
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ 23 13,255 119,431
Expenses - Mortality and expense risk charges (note 3) 3 1,374 13,685
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 20 11,881 105,746
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized (loss) gain on investments:
Net realized gain (loss) - (112) 81,550
Unrealized appreciation on investments - 2,648 355,617
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments - 2,536 437,167
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations $ 20 14,417 542,913
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
---------------------------------------------------------
High Multiple
Growth Income Strategies
Fund Fund Fund
--------------------------------------------------------
Nine Months Nine Months Nine Months
Ended 9/30/97 Ended 9/30/97 Ended 9/30/97
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 94,465 77,070 39,498
Expenses - Mortality and expense risk charges (note 3) 9,517 6,228 3,289
- --------------------------------------------------------------------------------------------------------------------------
Net investment income 84,948 70,842 36,209
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized (loss) gain on investments:
Net realized gain (loss) 84,038 7,258 21,927
Unrealized appreciation on investments 308,542 38,535 40,390
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 392,580 45,793 62,317
- --------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 477,528 116,635 98,526
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited financial statements.
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Operations, Continued
For the period ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund
--------------------------------------------------------
Money High Equity
Market Income Income
Portfolio Portfolio Portfolio
--------------------------------------------------------
Nine Months Nine Months Nine Months
Ended 9/30/97 Ended 9/30/97 Ended 9/30/97
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ 29,454 16,812 339,803
Expenses - Mortality and expense risk charges (note 3) 1,538 1,145 21,213
- --------------------------------------------------------------------------------------------------------------------------
Net investment income 27,916 15,667 318,590
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments:
Net realized gain - 2,005 86,019
Unrealized appreciation on investments - 14,799 474,804
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments - 16,804 560,823
- --------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations $ 27,916 32,471 879,413
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Variable Insurance Products Fund
---------------------------------------
Growth Overseas
Portfolio Portfolio
--------------------------------------
Nine Months Nine Months
Ended 9/30/97 Ended 9/30/97
- ----------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 135,480 155,793
Expenses - Mortality and expense risk charges (note 3) 21,788 9,523
- ----------------------------------------------------------------------------------------------------
Net investment income 113,692 146,270
- ----------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments:
Net realized gain 140,745 84,894
Unrealized appreciation on investments 655,782 88,611
- ----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 796,527 173,505
- ----------------------------------------------------------------------------------------------------
Increase in net assets from operations 910,219 319,775
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
See accompanying notes to unaudited financial statements.
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Operations, Continued
For the period ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund II
----------------------------------------
Asset
Manager Contrafund
Portfolio Portfolio
----------------------------------------
Nine Months Nine Months
Ended 9/30/97 Ended 9/30/97
- -------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ 417,972 33,739
Expenses - Mortality and expense risk charges (note 3) 19,676 7,762
- -------------------------------------------------------------------------------------------------------------
Net investment income (expense) 398,296 25,977
- -------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 43,063 181,861
Unrealized appreciation (depreciation) on investments 160,908 177,088
- -------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 203,971 358,949
- -------------------------------------------------------------------------------------------------------------
Increase in net assets from operations $ 602,267 384,926
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Variable Insurance Product Fund III
--------------------------------------
Growth & Growth
Income Opportunities
Portfolio Portfolio
---------------------------------------
Period from Period from
5/30-9/30/97 5/30-9/30/97
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends - -
Expenses - Mortality and expense risk charges (note 3) 14 33
- ----------------------------------------------------------------------------------------------------------
Net investment income (expense) (14) (33)
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 33 442
Unrealized appreciation (depreciation) on investments 671 633
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 704 1,075
- ----------------------------------------------------------------------------------------------------------
Increase in net assets from operations 690 1,042
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Advisers Management Trust
-----------------------------------------------------
Balanced Bond Growth
Portfolio Portfolio Portfolio
-----------------------------------------------------
Nine Months Nine Months Nine Months
Ended 9/30/97 Ended 9/30/97 Ended 9/30/97
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 16,310 4,664 11,458
Expenses - Mortality and expense risk charges (note 3) 1,352 385 774
- ------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 14,958 4,279 10,684
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 2,384 (599) 6,387
Unrealized appreciation (depreciation) on investments 30,412 (155) 22,709
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 32,796 (754) 29,096
- ------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 47,754 3,525 39,780
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited financial statements.
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Operations, Continued
For the period ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Federated Investors Insurance Series
--------------------------------------------------------
American High
Leaders Income Bond Utility
Fund II Fund II Fund II
--------------------------------------------------------
Nine Months Nine Months Nine Months
Ended 9/30/97 Ended 9/30/97 Ended 9/30/97
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ 148 3,619 4,929
Expenses - Mortality and expense risk charges (note 3) 53 489 599
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 95 3,130 4,330
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments:
Net realized gain 294 396 959
Unrealized appreciation on investments 2,112 3,815 7,526
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 2,406 4,211 8,485
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations $ 2,501 7,341 12,815
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Alger American Fund
-------------------------------------
Small
Capitalization Growth
Portfolio Portfolio
--------------------------------------
Nine Months Nine Months
Ended 9/30/97 Ended 9/30/97
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 23,157 10,015
Expenses - Mortality and expense risk charges (note 3) 3,890 5,841
- -------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 19,267 4,174
- -------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments:
Net realized gain 105,592 96,174
Unrealized appreciation on investments 64,200 138,840
- -------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 169,792 235,014
- -------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 189,059 239,188
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
PBHG Insurance Series Fund
--------------------------------------
PBHG PBHG
Large Cap Growth II
Portfolio Portfolio
---------------------------------------
Period from Period from
5/21-9/30/97 5/21-9/30/97
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends - -
Expenses - Mortality and expense risk charges (note 3) 19 15
- --------------------------------------------------------------------------------------------------------------------
Net investment income (expense) (19) (15)
- --------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments:
Net realized gain 584 43
Unrealized appreciation on investments 375 712
- --------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 959 755
- --------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 940 740
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Operations, Continued
For the period ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series
-------------------------------------------------------
Aggressive Worldwide
Growth Growth Growth
Portfolio Portfolio Portfolio
-------------------------------------------------------
Nine Months Nine Months Nine Months
Ended 9/30/97 Ended 9/30/97 Ended 9/30/97
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ - 42,092 29,312
Expenses - Mortality and expense risk charges (note 3) 6,857 7,903 10,858
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) (6,857) 34,189 18,454
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments:
Net realized gain 70,631 34,171 67,477
Unrealized appreciation on investments 94,312 240,510 387,676
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 164,943 274,681 455,153
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations $ 158,086 308,870 473,607
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Janus Aspen Series
-------------------------------------------
Flexible
Balanced Income
Portfolio Portfolio
-------------------------------------------
Nine Months Nine Months
Ended 9/30/97 Ended 9/30/97
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 6,733 1,695
Expenses - Mortality and expense risk charges (note 3) 1,417 157
- --------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 5,316 1,538
- --------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments:
Net realized gain 4,457 181
Unrealized appreciation on investments 36,966 564
- --------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 41,423 745
- --------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 46,739 2,283
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Janus Aspen Series
-----------------------------------
International Capital
Growth Appreciation
Portfolio Portfolio
-----------------------------------
Period from Period from
5/21-9/30/97 5/21-9/30/97
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 1,376 -
Expenses - Mortality and expense risk charges (note 3) 916 19
- ------------------------------------------------------------------------------------------------------------
Net investment income (expense) 460 (19)
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments:
Net realized gain 3,031 53
Unrealized appreciation on investments 31,548 962
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 34,579 1,015
- ------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 35,039 996
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets
For the period ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
---------------------------------------------------
S&P 500 Government Money
Index Securities Market
Fund Fund Fund
---------------------------------------------------
Nine Months Nine Months Nine Months
Ended 9/30/97 Ended 9/30/97 Ended 9/30/97
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (Decrease) in net assets
From operations:
Net investment income (expense) $ (12,049) (1,612) 2,023,876
Net realized gain (loss) (5,854) (2,534) (1,425,432)
Unrealized appreciation (depreciation) on investments 545,474 15,749 (528,078)
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 527,571 11,603 70,366
- -----------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 362,915 26,643 2,837,218
Loan interest (348) 260 (215)
Transfers (to) from the general account of Life of Virginia:
Death benefits - - -
Surrenders (19,149) (15,233) (10,526)
Loans (12,472) (4,140) (5,184)
Cost of insurance and administrative expense (note 3) (163,269) (18,237) (207,268)
Transfer gain (loss) and transfer fees (note 3) (294) 2,670 (230,609)
Interfund transfers 417,595 4,756 (3,077,254)
- -----------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets from capital transactions 584,978 (3,281) (693,838)
- -----------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets 1,112,549 8,322 (623,472)
Net assets at beginning of year 1,789,889 311,644 2,405,605
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 2,902,438 319,966 1,782,133
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
-----------------------------------------------
Total International Real Estate
Return Equity Securities
Fund Fund Fund
-----------------------------------------------
Nine Months Nine Months Nine Months
Ended 9/30/97 Ended 9/30/97 Ended 9/30/97
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (Decrease) in net assets
From operations:
Net investment income (expense) (17,920) (277) (505)
Net realized gain (loss) (48,671) 612 1,390
Unrealized appreciation (depreciation) on investments 516,988 8,382 19,464
- ----------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 450,397 8,717 20,349
- ----------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 125,897 12,535 48,416
Loan interest 2 3,969 1
Transfers (to) from the general account of Life of Virginia:
Death benefits - - -
Surrenders (554) 554 (620)
Loans (289) - (874)
Cost of insurance and administrative expense (note 3) (3,768) 90 (9,569)
Transfer gain (loss) and transfer fees (note 3) (251,151) (11,068) 430
Interfund transfers (5,332) 19,273 75,217
- ----------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets from capital transactions (135,195) 25,353 113,001
- ----------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets 315,202 34,070 133,350
Net assets at beginning of year 3,279,301 35,223 30,212
- ----------------------------------------------------------------------------------------------------------------------
Net assets at end of year 3,594,503 69,293 163,562
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
----------------------------
Global Value
Income Equity
Fund Fund
----------------------------
Period from Period from
6/17-9/30/97 6/17-9/30/97
- ------------------------------------------------------------------------------------------------
<S> <C>
Increase (Decrease) in net assets
From operations:
Net investment income (expense) (14) (1)
Net realized gain (loss) 16 6
Unrealized appreciation (depreciation) on investments 127 112
- ------------------------------------------------------------------------------------------------
Increase in net assets from operations 129 117
- ------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 1,067 821
Loan interest - -
Transfers (to) from the general account of Life of Virginia:
Death benefits - -
Surrenders - -
Loans - -
Cost of insurance and administrative expense (note 3) (123) (80)
Transfer gain (loss) and transfer fees (note 3) (6) (1)
Interfund transfers 8,359 567
- ------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets from capital transactions 9,297 1,307
- ------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets 9,426 1,424
Net assets at beginning of year - -
- ------------------------------------------------------------------------------------------------
Net assets at end of year 9,426 1,424
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets, Continued
For the period ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
---------------------------------------------------
Capital
Money Bond Appreciation
Fund Fund Fund
---------------------------------------------------
Nine Months Nine Months Nine Months
Ended 9/30/97 Ended 9/30/97 Ended 9/30/97
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (Decrease) in net assets
From operations:
Net investment income $ 20 11,881 105,746
Net realized gain (loss) - (112) 81,550
Unrealized appreciation on investments - 2,648 355,617
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 20 14,417 542,913
- -----------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 111 41,850 617,498
Loan interest - 22 163
Transfers (to) from the general account of Life of Virginia:
Death benefits - - (313)
Surrenders - (17,569) (37,730)
Loans - (1,617) (30,675)
Cost of insurance and administrative expense (note 3) (175) (17,527) (225,388)
Transfer gain (loss) and transfer fees (note 3) 13 (1,219) 25,584
Interfund transfers (119) (11,411) (15,680)
- -----------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets from capital transactions (170) (7,471) 333,459
- -----------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets (150) 6,946 876,372
Net assets at beginning of period 707 269,840 2,342,064
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 557 276,786 3,218,436
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
---------------------------------------------
High Multiple
Growth Income Strategies
Fund Fund Fund
---------------------------------------------
Nine Months Nine Months Nine Months
Ended 9/30/97 Ended 9/30/97 Ended 9/30/97
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (Decrease) in net assets
From operations:
Net investment income 84,948 70,842 36,209
Net realized gain (loss) 84,038 7,258 21,927
Unrealized appreciation on investments 308,542 38,535 40,390
- ---------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 477,528 116,635 98,526
- ---------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 345,740 277,907 97,300
Loan interest 291 50 (12)
Transfers (to) from the general account of Life of Virginia:
Death benefits - - -
Surrenders (65,864) (13,512) (51,281)
Loans (11,458) (18,179) (4,928)
Cost of insurance and administrative expense (note 3) (124,718) (120,266) (48,767)
Transfer gain (loss) and transfer fees (note 3) (5,455) 1,656 (366)
Interfund transfers 157,292 114,326 (4,664)
- ---------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets from capital transactions 295,828 241,982 (12,718)
- ---------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets 773,356 358,617 85,808
Net assets at beginning of period 1,479,873 992,747 574,661
- ---------------------------------------------------------------------------------------------------------------------
Net assets at end of period 2,253,229 1,351,364 660,469
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets, Continued
For the period ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund
--------------------------------------------------
Money High Equity
Market Income Income
Portfolio Portfolio Portfolio
--------------------------------------------------
Nine Months Nine Months Nine Months
Ended 9/30/97 Ended 9/30/97 Ended 9/30/97
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (Decrease) in net assets
From operations:
Net investment income $ 27,916 15,667 318,590
Net realized gain - 2,005 86,019
Unrealized appreciation on investments - 14,799 474,804
- ----------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets from operations 27,916 32,471 879,413
- ----------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums - 208 795,516
Loan interest - (6) 638
Transfers (to) from the general account of Life of Virginia:
Death benefits - - (276)
Surrenders (2) (2,299) (60,186)
Loans (1,093) (1,460) (37,796)
Cost of insurance and administrative expense (note 3) (15,583) (14,144) (341,901)
Transfer gain (loss) and transfer fees (note 3) (16,581) 1,332 15,966
Interfund transfers (15,510) 280 584,449
- ----------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets from capital transactions (48,769) (16,089) 956,410
- ----------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets (20,853) 16,382 1,835,823
Net assets at beginning of year 315,653 213,212 3,220,818
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 294,800 229,594 5,056,641
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Variable Insurance Products Fund
-----------------------------
Growth Overseas
Portfolio Portfolio
----------------------------
Nine Months Nine Months
Ended 9/30/97 Ended 9/30/97
- ----------------------------------------------------------------------------------------------
<S> <C>
Increase (Decrease) in net assets
From operations:
Net investment income 113,692 146,270
Net realized gain 140,745 84,894
Unrealized appreciation on investments 655,782 88,611
- ----------------------------------------------------------------------------------------------
Increase (Decrease) in net assets from operations 910,219 319,775
- ----------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 578,559 277,780
Loan interest (29) 702
Transfers (to) from the general account of Life of Virginia:
Death benefits (7,486) (264)
Surrenders (107,005) (76,194)
Loans (86,592) (25,446)
Cost of insurance and administrative expense (note 3) (346,300) (140,958)
Transfer gain (loss) and transfer fees (note 3) 248,333 2,370
Interfund transfers (9,027) (270,475)
- ----------------------------------------------------------------------------------------------
Increase (Decrease) in net assets from capital transactions 270,453 (232,485)
- ----------------------------------------------------------------------------------------------
Increase (Decrease) in net assets 1,180,672 87,290
Net assets at beginning of year 3,610,646 1,760,630
- ----------------------------------------------------------------------------------------------
Net assets at end of year 4,791,318 1,847,920
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets, Continued
For the period ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund II
-----------------------------------
Asset
Manager Contrafund
Portfolio Portfolio
--------------------------------
Nine Months Nine Months
Ended 9/30/97 Ended 9/30/97
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Increase (Decrease) in net assets
From operations:
Net investment income (expense) $ 398,296 25,977
Net realized gain (loss) 43,063 181,861
Unrealized appreciation (depreciation) on investments 160,908 177,088
- ----------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets from operations 602,267 384,926
- ----------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 472,591 447,908
Loan interest 280 (81)
Transfers (to) from the general account of Life of Virginia:
Death benefits - (5,439)
Surrenders (96,646) (84,305)
Loans (20,641) (10,457)
Cost of insurance and administrative expense (note 3) (249,534) (145,599)
Transfer gain (loss) and transfer fees (note 3) 30,514 16,844
Interfund transfers 490,040 203,512
- ----------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets from capital transactions 626,604 422,383
- ----------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets 1,228,871 807,309
Net assets at beginning of year 2,880,752 1,045,467
- ----------------------------------------------------------------------------------------------------------
Net assets at end of year $ 4,109,623 1,852,776
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Variable Insurance Product Fund III
-------------------------------
Growth & Growth
Income Opportunities
Portfolio Portfolio
--------------------------------
Period from Period from
5/30-9/30/97 5/30-9/30/97
- -------------------------------------------------------------------------------------------------------
<S> <C>
Increase (Decrease) in net assets
From operations:
Net investment income (expense) (14) (33)
Net realized gain (loss) 33 442
Unrealized appreciation (depreciation) on investments 671 633
- -------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets from operations 690 1,042
- -------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 481 510
Loan interest - -
Transfers (to) from the general account of Life of Virginia:
Death benefits - -
Surrenders - -
Loans - -
Cost of insurance and administrative expense (note 3) (446) (309)
Transfer gain (loss) and transfer fees (note 3) - 824
Interfund transfers 8,700 57,953
- -------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets from capital transactions 8,735 58,978
- -------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets 9,425 60,020
Net assets at beginning of year - -
- -------------------------------------------------------------------------------------------------------
Net assets at end of year 9,425 60,020
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Advisers Management Trust
---------------------------------------------
Balanced Bond Growth
Portfolio Portfolio Portfolio
---------------------------------------------
Nine Months Nine Months Nine Months
Ended 9/30/97 Ended 9/30/97 Ended 9/30/97
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (Decrease) in net assets
From operations:
Net investment income (expense) 14,958 4,279 10,684
Net realized gain (loss) 2,384 (599) 6,387
Unrealized appreciation (depreciation) on investments 30,412 (155) 22,709
- --------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets from operations 47,754 3,525 39,780
- --------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 321 - -
Loan interest (18) - (45)
Transfers (to) from the general account of Life of Virginia:
Death benefits - - -
Surrenders (10,646) (61) (3,450)
Loans (1,513) - (1,168)
Cost of insurance and administrative expense (note 3) (9,745) (1,046) (5,328)
Transfer gain (loss) and transfer fees (note 3) (250) (1,418) 1,972
Interfund transfers (30) (25,998) (14,397)
- --------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets from capital transactions (21,881) (28,523) (22,416)
- --------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets 25,873 (24,998) 17,364
Net assets at beginning of year 244,014 79,544 134,549
- --------------------------------------------------------------------------------------------------------------------
Net assets at end of year 269,887 54,546 151,913
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets, Continued
For the period ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Federated Investors Insurance Series
--------------------------------------------------
American High
Leaders Income Bond Utility
Fund II Fund II Fund II
--------------------------------------------------
Nine Months Nine Months Nine Months
Ended 9/30/97 Ended 9/30/97 Ended 9/1-9/30/97
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (Decrease) in net assets
From operations:
Net investment income (expense) $ 95 3,130 4,330
Net realized gain 294 396 959
Unrealized appreciation on investments 2,112 3,815 7,526
- ----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 2,501 7,341 12,815
- ----------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 10,018 34,607 30,563
Loan interest - - -
Transfers (to) from the general account of Life of Virginia:
Death benefits - - -
Surrenders - - -
Loans - - -
Cost of insurance and administrative expense (note 3) (1,421) (6,277) (7,310)
Transfer gain (loss) and transfer fees (note 3) 75 318 (124)
Interfund transfers 12,778 20,636 12,298
- ----------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets from capital transactions 21,450 49,284 35,427
- ----------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets 23,951 56,625 48,242
Net assets at beginning of year 2,270 35,598 87,340
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 26,221 92,223 135,582
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Alger American Fund PBHG Insurance Series Fund
------------------------------ -----------------------
Small PBHG
Capitalization Growth Large Cap
Portfolio Portfolio Portfolio
---------------------------------------------------
Nine Months Nine Months Period from
Ended 9/30/97 Ended 9/30/97 5/21-9/30/97
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (Decrease) in net assets
From operations:
Net investment income (expense) 19,267 4,174 (19)
Net realized gain 105,592 96,174 584
Unrealized appreciation on investments 64,200 138,840 375
- ---------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 189,059 239,188 940
- ---------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 204,663 257,911 2,111
Loan interest 1,486 533 -
Transfers (to) from the general account of Life of Virginia:
Death benefits - - -
Surrenders (2,017) (17,047) (181)
Loans (3,833) (3,610) -
Cost of insurance and administrative expense (note 3) (62,505) (82,888) (512)
Transfer gain (loss) and transfer fees (note 3) (218) (92,754) 387
Interfund transfers 521,167 (867,766) 21,589
- ---------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets from capital transactions 658,743 (805,621) 23,394
- ---------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in net assets 847,802 (566,433) 24,334
Net assets at beginning of year 421,775 1,406,584 -
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end of year 1,269,577 840,151 24,334
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
PBHG Insurance Series Fund
--------------
PBHG
Growth II
Portfolio
--------------
Period from
5/21-9/30/97
- -------------------------------------------------------------------------------------
<S> <C>
Increase (Decrease) in net assets
From operations:
Net investment income (expense) (15)
Net realized gain 43
Unrealized appreciation on investments 712
- -------------------------------------------------------------------------------------
Increase in net assets from operations 740
- -------------------------------------------------------------------------------------
From capital transactions:
Net premiums 5,338
Loan interest -
Transfers (to) from the general account of Life of Virginia:
Death benefits -
Surrenders -
Loans -
Cost of insurance and administrative expense (note 3) (616)
Transfer gain (loss) and transfer fees (note 3) (44)
Interfund transfers 9,301
- -------------------------------------------------------------------------------------
Increase (Decrease) in net assets from capital transactions 13,980
- -------------------------------------------------------------------------------------
Increase (Decrease) in net assets 14,720
Net assets at beginning of year -
- -------------------------------------------------------------------------------------
Net assets at end of year 14,720
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets, Continued
For the period ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series
---------------------------------------------------
Aggressive Worldwide
Growth Growth Growth
Portfolio Portfolio Portfolio
---------------------------------------------------
Nine Months Nine Months Nine Months
Ended 9/30/97 Ended 9/30/97 Ended 9/30/97
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase in net assets
From operations:
Net investment income (expense) $ (6,857) 34,189 18,454
Net realized gain 70,631 34,171 67,477
Unrealized appreciation on investments 94,312 240,510 387,676
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 158,086 308,870 473,607
- -----------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 399,651 367,861 610,532
Loan interest 120 580 881
Transfers (to) from the general account of Life of Virginia:
Death benefits - - -
Surrenders (32,241) (18,399) (17,985)
Loans (6,013) (4,776) (10,229)
Cost of insurance and administrative expense (note 3) (132,132) (123,398) (191,317)
Transfer gain (loss) and transfer fees (note 3) 6,401 8,474 2,197
Interfund transfers 464,744 204,363 651,066
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 700,530 434,705 1,045,145
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets 858,616 743,575 1,518,752
Net assets at beginning of period 1,083,059 1,113,610 1,421,287
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 1,941,675 1,857,185 2,940,039
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series
------------------------------------------------------------
Flexible International Capital
Balanced Income Growth Appreciation
Portfolio Portfolio Portfolio Portfolio
------------------------------------------------------------
Nine Months Nine Months Period from Period from
Ended 9/30/97 Ended 9/30/97 5/21-9/30/97 5/21-9/30/97
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase in net assets
From operations:
Net investment income (expense) 5,316 1,538 460 (19)
Net realized gain 4,457 181 3,031 53
Unrealized appreciation on investments 36,966 564 31,548 962
- ---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 46,739 2,283 35,039 996
- ---------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 51,245 14,455 88,013 751
Loan interest - - 2 -
Transfers (to) from the general account of Life of Virginia:
Death benefits - - - -
Surrenders (5,949) - (998) -
Loans (373) - (462) -
Cost of insurance and administrative expense (note 3) (21,273) (6,285) (18,011) (613)
Transfer gain (loss) and transfer fees (note 3) 412 266 1,556 2
Interfund transfers 104,076 16,049 129,895 7,378
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 128,138 24,485 199,995 7,518
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 174,877 26,768 235,034 8,514
Net assets at beginning of period 168,776 8,883 53,938 -
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 343,653 35,651 288,972 8,514
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Notes to Unaudited Financial Statements
September 30, 1997
- --------------------------------------------------------------------------------
(1) Description of Entity
Life of Virginia Separate Account II (the Account) is a separate
investment account established in 1986 by The Life Insurance Company of
Virginia (Life of Virginia) under the laws of the Commonwealth of
Virginia. The Account operates as a unit investment trust under the
Investment Company Act of 1940. The Account is used to fund certain
benefits for flexible premium variable life insurance policies issued
by Life of Virginia. The Life Insurance Company of Virginia is a stock
life insurance company operating under a charter granted by the
Commonwealth of Virginia on March 21, 1871. Eighty percent of the
capital stock of Life of Virginia is owned by General Electric Capital
Assurance Corporation. The remaining 20% is owned by GE Life Insurance
Group, Inc. General Electric Capital Assurance Corporation and GE Life
Insurance Group, Inc. are indirectly, wholly-owned subsidiaries of
General Electric Capital Corporation ("GE Capital"). GE Capital, a New
York corporation, is a diversified financial services company.
In May 1997, seven new investment subdivisions were added to the
Account. The Growth & Income Portfolio and Growth Opportunities
Portfolio each invests solely in a designated portfolio of the Variable
Insurance Products Fund III. The Global Income Fund and the Value
Equity Fund each invests solely in a designated portfolio of the GE
Investments Funds, Inc. The Capital Appreciation Portfolio invests
solely in a designated portfolio of the Janus Aspen Series. The Growth
II Portfolio and the Large Cap Growth Portfolio each invests solely in
a designated portfolio of the PBHG Insurance Series Fund. All
designated portfolios described above are series type mutual funds.
(2) Summary of Significant Accounting Policies
Investments
Investments are stated at fair value which is based on the underlying
net asset value per share of the respective portfolios or funds.
Purchases and sales of investments are recorded on the trade date.
Realized gains and losses on investments are determined on the average
cost basis. The units and unit values are disclosed as of the last
business day in the applicable year or period. Dividends received from
net investment income and net realized capital gains are reinvested in
additional shares of the portfolio. Dividend income and capital gain
distributions are recorded as income on the ex-dividend date.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Notes to Unaudited Financial Statements
September 30, 1997
- --------------------------------------------------------------------------------
(2) Continued
The aggregate cost of the investments acquired and the aggregate
proceeds of investments sold, for the nine months ended September 30,
1997 was:
Cost of Proceeds
Shares from
Fund/Portfolio Acquired Shares Sold
- --------------------------------------------------------------------------------
GE Investment Funds, Inc.:
S&P 500 Index $ 1,603,786 $ 271,564
Government Securities 77,148 49,589
Money Market 10,572,735 8,536,557
Total Return 998,004 333,392
International Equity 40,461 10,174
Real Estate Securities 143,591 26,216
Global Income 11,230 1,928
Value Equity 1,444 114
Oppenheimer Variable Account Funds:
Money 1,765 1,928
Bond 102,149 95,689
Capital Appreciation 1,048,383 626,998
Growth 797,323 405,238
High Income 499,803 184,906
Multiple Strategies 214,531 189,497
Variable Insurance Products Fund:
Money Market 74,058 77,771
High Income 20,312 21,655
Equity-Income 2,148,033 844,981
Growth 1,382,997 989,059
Overseas 635,598 722,433
Variable Insurance Products Fund II:
Asset Manager 1,567,047 552,861
Contrafund 1,967,663 1,535,197
Variable Insurance Products Fund III:
Growth & Income 9,218 450
Growth Opportunties 74,057 15,893
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Notes to Unaudited Financial Statements
September 30, 1997
- --------------------------------------------------------------------------------
(2) Continued
Cost of Proceeds
Shares from
Fund/Portfolio Acquired Shares Sold
- --------------------------------------------------------------------------------
Advisers Management Trust:
Bond $ 10,462 $ 33,173
Growth 16,363 29,804
Balanced 17,104 23,299
Janus Aspen Series:
Balanced 173,666 39,996
Aggressive Growth 2,432,748 1,741,445
Growth 821,651 325,098
Worldwide 1,540,721 472,292
Flexible Income 102,768 76,894
International Growth 237,328 37,717
Capital Appreciation 8,129 616
Federated Insurance Series:
American Leaders Fund II 26,419 4,867
Utility Fund II 58,719 18,286
High Income Bond Fund II 64,172 11,667
The Alger American Fund
Small Capitalization 3,146,358 2,466,608
Growth 3,222,993 3,988,154
PBHG Insurance Series Fund, Inc.
PBHG Large Cap Growth 40,815 17,731
PBHG Growth II 14,720 693
Federal Income Taxes
The Account is not taxed separately because the operations of the
Account are part of the total operations of Life of Virginia. Life of
Virginia is taxed as a life insurance company under the Internal
Revenue Code (the Code). Life of Virginia is included in the
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Notes to Unaudited Financial Statements
September 30, 1997
- --------------------------------------------------------------------------------
(2) Continued
General Electric Capital Assurance Company consolidated federal income
tax return. The Account will not be taxed as a regulated investment
company under subchapter M of the Code. Under existing federal income
tax law, no taxes are payable on the investment income or on the
capital gains of the Account.
Use of Estimates
Financial statements prepared in conformity with generally accepted
accounting principles require management to make estimates and
assumptions that affect amounts reported therein. Actual results could
differ from those estimates.
(3) Related Party Transactions
Net premiums transferred from Life of Virginia to the Account represent
gross premiums recorded by Life of Virginia on its flexible premium
variable life insurance policies, less deductions of 7.5% retained as
compensation for certain distribution expenses and premium taxes. In
addition, there is a deferred sales charge of up to 45% of the first
year's premiums. This charge will be deducted from the policy's cash
value in equal installments at the beginning of each of the policy
years two through ten with any remaining installments deducted at
policy lapse or surrender.
If a policy surrenders or lapses during the first nine years, a charge
is made by Life of Virginia to cover the expenses of underwriting and
issuing the policy.
The charge is a stated percentage of the insurance amount and varies by
the age of the policyholder when issued, sex (where appropriate), risk
class and period of time that the policy has been in force. A charge
equal to the lesser of $25 or 2% of the amount paid on a partial
surrender will be made to compensate Life of Virginia for the costs
incurred in connection with the partial surrender.
A charge based on the policy specified amount of insurance, death
benefit option, cash values, duration, the insured's sex, issue age and
risk class is deducted from the policy cash values each month to
compensate Life of Virginia for the cost of insurance and any benefits
added by rider. In addition, Life of Virginia charges the Account for
the mortality and expense risk that Life of Virginia assumes. This
charge is deducted daily at an effective annual rate of .70% of the net
assets of the Account. For policies issued on or after May 1, 1993,
Life of Virginia will deduct a monthly administrative charge of $6 from
the policy cash value and for policies issued prior to May 1, 1993,
Life of Virginia will deduct a monthly administrative charge of $5 from
the policy cash value.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Notes to Unaudited Financial Statements
September 30, 1997
- --------------------------------------------------------------------------------
(3) Continued
Gains or losses resulting from the processing time between the
crediting of an initial net premium and the investment of that premium
are credited or charged to Life of Virginia. In addition, any such gain
or loss resulting from the processing time between a request for policy
surrender and the sale of the underlying shares is also credited or
charged to Life of Virginia.
GE Investment Funds, Inc. (the Fund) is an open-end diversified
management investment company whose shares are sold to Life of
Virginia's Separate Accounts.
Forth Financial Securities Corporation (FFSC), an affiliate of Life of
Virginia, acts as principal underwriter (as defined in The Investment
Company Act of 1940) of the Account's policies pursuant to an agreement
with Life of Virginia.
GE Investment Management Incorporated currently serves as investment
adviser to GE Investment Funds, Inc. (formerly Life of Virginia Series
Fund, Inc.). Prior to May 1, 1997, Aon Advisors, Inc. served as
investment advisor to the Fund and had agreed to reimburse the Fund for
certain expenses of each of the Fund's portfolios. As compensation for
its services, the Investment Advisor is paid an investment advisory fee
by the Fund based on the average daily net assets at an effective
annual rate of .35% for the S&P 500 Index Fund, .1% for the Money
Market Fund, .5% for the Government Securities & Total Return Funds,
1.00% for the International Equity Fund and .85% for the Real Estate
Securities Fund.
Certain officers and directors of Life of Virginia are also officers
and directors of FFSC and the Fund.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Table of Contents
Year ended December 31, 1996
=============================================================================
PAGE
Independent Auditors' Report............................................. 1
Financial Statements:
Statements of Assets and Liabilities..............................3
Statements of Operations..........................................9
Statements of Changes in Net Assets..............................19
Notes to Financial Statements............................................29
=============================================================================
<PAGE>
[KPMG PEAT MARWICK LLP LETTERHEAD]
REPORT OF INDEPENDENT AUDITORS
Policyholders
Life of Virginia Separate Account II
and Board of Directors
The Life Insurance Company of Virginia
We have audited the accompanying statements of assets and liabilities of Life of
Virginia Separate Account II (the Account) (comprising, the Life of Virginia
Series Fund, Inc.--Common Stock Index, Government Securities, Money Market,
Total Return, International Equity and Real Estate Securities Portfolios; the
Oppenheimer Variable Account Fund--Money, Bond, Capital Appreciation, Growth,
High Income and Multiple Strategies Funds; the Variable Insurance Products
Fund--Money Market, High Income, Equity-Income, Growth and Overseas Portfolios;
the Variable Insurance Products Fund II--Asset Manager and Contrafund
Portfolios; the Advisers Management Trust--Balanced, Bond and Growth Portfolios;
the Federated Investors Insurance Series--American Leaders, High Income Bond and
Utility Funds II; the Alger American--Small Cap and Growth Portfolios; and the
Janus Aspen Series--Aggressive Growth, Growth, Worldwide Growth, Balanced,
Flexible Income and International Growth Portfolios) as of December 31, 1996 and
the related statements of operations and changes in net assets for the year or
periods then ended. These financial statements are the responsibility of the
Account's management. Our responsibility is to express an opinion on these
financial statements based on our audit. The accompanying statements of
operations and changes in net assets of Life of Virginia Separate Account II for
the years or periods ended December 31, 1995 and 1994, were audited by other
auditor, whose report thereon dated February 8, 1996 expressed an unqualified
opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1996, by correspondence with
the underlying mutual funds. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
<PAGE>
In our opinion, the 1996 financial statements referred to above present fairly,
in all material respects, the financial position of each of the respective
portfolios constituting Life of Virginia Separate Account II as of December 31,
1996 and the results of their operations and changes in their net assets for the
year or period then ended in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
February 11, 1997
<PAGE>
[LETTERHEAD OF ERNST & YOUNG LLP]
Report of Independent Auditors
Policyholders
Life of Virginia Separate Account II
and Board of Directors
The Life Insurance Company of Virginia
We have audited the accompanying statements of operations and changes in net
assets for each of the two years in the period ended December 31, 1995 for the
Life of Virginia Series Fund, Inc. Common Stock Index, Government Securities,
Money Market and Total Return portfolios, the Oppenheimer Variable Account Funds
portfolios, the Variable Insurance Products Fund portfolios, the Variable
Insurance Products Fund II Asset Manager portfolio, the Advisers Management
Trust portfolios, and for the period from August 25, 1995 (date of inception) to
December 31, 1995 for the Life of Virginia Series Fund, Inc. International
Equity portfolio, for the period from October 5, 1995 (date of inception) to
December 31, 1995 for the Life of Virginia Series Fund, Inc. Real Estate
Securities portfolio, for the period from February 7, 1995 (date of inception)
to December 31, 1995 for the Variable Insurance Products Fund II Contrafund
portfolio, for the period from October 31, 1995 (date of inception) to December
31, 1995 for the Insurance Management Series Corporate Bond portfolio, for the
period from March 22, 1995 (date of inception) to December 31, 1995 for the
Insurance Management Series Utility portfolio, for the year ended December 31,
1995 and for the period from March 8, 1994 (date of inception) to December 31,
1994 for the Janus Aspen Aggressive Growth, Growth, and Worldwide Growth
portfolios, for the period from November 14, 1995 (date of inception) to
December 31, 1995 for the Janus Aspen Balanced portfolio, for the period from
December 20, 1995 (date of inception) to December 31, 1995 for the Janus Aspen
Flexible Income portfolio, for the period from October 11, 1995 (date of
inception) to December 31, 1995 for the Alger American Small Cap portfolio, and
for the period from October 23, 1995 (date of inception) to December 31, 1995
for the Alger American Growth portfolio. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
<PAGE>
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and changes in their assets for
the periods described in the first paragraph of each of the respective
portfolios constituting Life of Virginia Separate Account II, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Richmond, Virginia
February 8, 1996
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Assets and Liabilities
December 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Life of Virginia Series Fund, Inc.
------------------------------------------------------------------------
Common Government Money Total International Real Estate
Stock Index Securities Market Return Equity Securities
Assets Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Life of Virginia Series
Fund, Inc., at fair value (note 2):
Common Stock Index Portfolio (68,343
shares; cost - $1,331,677) $ 1,034,719 -- -- -- -- --
Government Securities Portfolio (29,405
shares; cost - $299,180) -- 281,116 -- -- -- --
Money Market Portfolio (179,920 shares;
cost - $1,566,610) -- -- 1,867,568 -- -- --
Total Return Portfolio (173,098 shares;
cost - $2,881,113) -- -- -- 2,203,532 -- --
International Equity Portfolio
(2,779 shares; cost - $30,739) -- -- -- -- 30,093 --
Real Estate Securities Portfolio
(1,775 shares; cost - $22,575) -- -- -- -- -- 25,047
Dividend receivable 751,436 31,170 97,157 846,101 1,884 1,678
Receivable from affiliate (note 3) 2,016 -- -- 230,368 82 194
Receivable for units sold 1,915 103 573,514 -- 3,168 3,296
- --------------------------------------------------------------------------------------------------------------------------------
Total assets 1,790,086 312,389 2,538,239 3,280,001 35,227 30,215
================================================================================================================================
Liabilities
- --------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 197 745 132,634 389 4 3
Payable for units withdrawn -- -- -- 311 -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities 197 745 132,634 700 4 3
- --------------------------------------------------------------------------------------------------------------------------------
Net assets $ 1,789,889 311,644 2,405,605 3,279,301 35,223 30,212
================================================================================================================================
Outstanding units 56,039 16,683 154,701 125,692 3,036 1,918
================================================================================================================================
Net asset value per unit $ 31.94 18.68 15.55 26.09 11.60 15.75
================================================================================================================================
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Assets and Liabilities, Continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Fund
----------------------------------------------------------------------
Capital High Multiple
Money Bond Appreciation Growth Income Strategies
Assets Fund Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Oppenheimer Variable
Account Funds, at fair value (note 2):
Money Fund (679 shares;
cost - $679) $ 679 -- -- -- -- --
Bond Fund (23,209 shares;
cost - $267,811) -- 269,921 -- -- -- --
Capital Appreciation Fund
(60,836 shares; cost - $1,948,268) -- -- 2,354,955 -- -- --
Growth Fund (54,019 shares;
cost - $1,217,173) -- -- -- 1,471,477 -- --
High Income Fund (89,027
shares; cost - $954,579) -- -- -- -- 990,865 --
Multiple Strategies Fund
(36,491 shares; cost - $515,454) -- -- -- -- -- 570,359
Receivable from affiliate (note 3) 28 -- -- 6,688 995 4,486
Receivable for units sold -- 49 1,988 1,907 1,021 --
- ----------------------------------------------------------------------------------------------------------------------
Total assets 707 269,970 2,356,943 1,480,072 992,881 574,845
======================================================================================================================
Liabilities
- ----------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) -- 130 14,879 199 134 77
Payable for units withdrawn -- -- -- -- -- 107
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities -- 130 14,879 199 134 184
- ----------------------------------------------------------------------------------------------------------------------
Net assets $ 707 269,840 2,342,064 1,479,873 992,747 574,661
======================================================================================================================
Outstanding units 45 13,055 63,799 44,162 32,190 22,651
======================================================================================================================
Net asset value per unit $ 15.56 20.67 36.71 33.51 30.84 25.37
======================================================================================================================
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Assets and Liabilities, Continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund
-----------------------------------------------------------
Money High Equity--
Market Income Income Growth Overseas
Assets Portfolio Portfolio Portfolio Portfolio Portfolio
- -------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Variable Insurance Products
Fund, at fair value (note 2):
Money Market Portfolio (307,072 shares;
cost - $307,072) $ 307,072 -- -- -- --
High Income Portfolio (17,047 shares;
cost - $190,113) -- 213,433 -- -- --
Equity--Income Portfolio (150,449 shares;
cost - $2,748,697) -- -- 3,163,937 -- --
Growth Portfolio (115,732 shares;
cost - $3,222,777) -- -- -- 3,603,899 --
Overseas Portfolio (93,445 shares;
cost - $1,547,392) -- -- -- -- 1,760,500
Accrued investment income 1,430 -- -- -- --
Receivable from affiliate (note 3) 7,194 -- 22,564 7,570 1,069
Receivable for units sold -- -- 34,746 -- --
- -------------------------------------------------------------------------------------------------------------
Total assets 315,696 213,433 3,221,247 3,611,469 1,761,569
=============================================================================================================
Liabilities
- -------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 43 178 429 486 237
Payable for units withdrawn -- 43 -- 337 702
- -------------------------------------------------------------------------------------------------------------
Total liabilities 43 221 429 823 939
- -------------------------------------------------------------------------------------------------------------
Net assets $ 315,653 213,212 3,220,818 3,610,646 1,760,630
=============================================================================================================
Outstanding units 20,234 8,361 101,828 103,102 81,098
=============================================================================================================
Net asset value per unit $ 15.60 25.50 31.63 35.02 21.71
=============================================================================================================
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Assets and Liabilities, Continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Variable Insurance
Products Fund II Advisers Management Trust
---------------------- ---------------------------------------
Asset
Manager Contrafund Balanced Bond Growth
Assets Portfolio Portfolio Portfolio Portfolio Portfolio
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Variable Insurance Products
Fund II, at fair value (note 2):
Asset Manager Portfolio (170,823 shares;
cost - $2,524,202) $2,892,037 -- -- -- --
Contrafund Portfolio (62,852 shares;
cost - $908,315) -- 1,040,837 -- -- --
Investment in Advisers Management Trust,
at fair value (note 2):
Balanced Portfolio (15,397 shares;
cost - $230,220) -- -- 245,118 -- --
Bond Portfolio (5,668 shares;
cost - $79,581) -- -- -- 79,630 --
Growth Portfolio (5,197 shares;
cost - $115,124) -- -- -- -- 133,972
Receivable from affiliate (note 3) -- 4,567 -- -- 569
Receivable for units sold -- 203 16 -- 26
- -------------------------------------------------------------------------------------------------------------------
Total assets 2,892,037 1,045,607 245,134 79,630 134,567
===================================================================================================================
Liabilities
- -------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 9,568 140 1,120 86 18
Payable for units withdrawn 1,717 -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
Total liabilities 11,285 140 1,120 86 18
- -------------------------------------------------------------------------------------------------------------------
Net assets $2,880,752 1,045,467 244,014 79,544 134,549
===================================================================================================================
Outstanding units 135,501 62,082 14,270 6,358 8,592
===================================================================================================================
Net asset value per unit $ 21.26 16.84 17.10 12.51 15.66
===================================================================================================================
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Assets and Liabilities, Continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Federated Investors
Insurance Series Alger American
------------------------------------- ------------------------
American High Small
Leaders Income Bond Utility Cap Growth
Assets Fund II Fund II Fund II Portfolio Portfolio
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments in Federated Investors Insurance Series,
at fair value (note 2):
American Leaders Fund II
(149 shares; cost - $2,241) $ 2,270 -- -- -- --
High Income Bond Fund II
(3,428 shares; cost - $34,029) -- 35,102 -- -- --
Utility Fund II (7,400 shares -
cost - $82,709) -- -- 87,390 -- --
Investment in Alger American,
at fair value (note 2):
Small Cap Portfolio (10,065 shares;
cost - $416,945) -- -- -- 411,764 --
Growth Portfolio (39,772 shares;
cost - $1,367,186) -- -- -- -- 1,365,377
Receivable from affiliate (note 3) -- 422 -- 9,418 6,449
Receivable for units sold -- 78 292 649 34,943
- --------------------------------------------------------------------------------------------------------------------
Total assets 2,270 35,602 87,682 421,831 1,406,769
====================================================================================================================
Liabilities
- --------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) -- 4 331 56 185
Payable for units withdrawn -- -- 11 -- --
- --------------------------------------------------------------------------------------------------------------------
Total liabilities -- 4 342 56 185
====================================================================================================================
Net assets $ 2,270 35,598 87,340 421,775 1,406,584
====================================================================================================================
Oustanding units 205 2,627 6,422 43,392 129,520
====================================================================================================================
Net asset value per unit $ 11.10 13.55 13.60 9.72 10.86
====================================================================================================================
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Assets and Liabilities, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series
----------------------------------------------------------------------------
Aggressive Worldwide Flexible International
Growth Growth Growth Balanced Income Growth
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Janus Aspen Series,
at fair value (note 2):
Aggressive Growth Portfolio
(58,294 shares;
cost - $990,897) $1,063,290 -- -- -- -- --
Growth Portfolio (69,183
shares; cost - $973,515) -- 1,073,027 -- -- -- --
Worldwide Growth Portfolio
(72,385 shares; cost -
$1,286,124) -- -- 1,407,171 -- -- --
Balanced Portfolio (11,361
shares; cost - $150,765) -- -- -- 167,808 -- --
Flexible Income Portfolio
(790 shares; cost -
$8,800) -- -- -- -- 8,883 --
International Growth Portfolio
(3,421 shares; cost -
$52,735) -- -- -- -- -- 53,775
Receivable from affiliate (note 3) 18,322 7,645 11,808 969 1 --
Receivable for units sold 1,593 33,083 2,498 21 -- 213
- -----------------------------------------------------------------------------------------------------------------------------
Total assets 1,083,205 1,113,755 1,421,477 168,798 8,884 53,988
=============================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 146 145 190 22 1 50
Payable for units withdrawn -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities 146 145 190 22 1 50
=============================================================================================================================
Net assets $1,083,059 1,113,610 1,421,287 168,776 8,883 53,938
=============================================================================================================================
Outstanding units 69,875 74,890 90,240 13,755 780 4,602
=============================================================================================================================
Net asset value per unit $ 15.50 14.87 15.75 12.27 11.39 11.72
=============================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Operations
<TABLE>
<CAPTION>
Life of Virginia Series Fund, Inc.
------------------------------------------------------
Common Government
Stock Index Securities
Portfolio Portfolio
--------------------------- -----------------------
Year ended December 31 Year ended December 31,
1996 1995 1994 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income--Dividends $ 751,436 20,611 10,993 31,170 18,835 10,652
Expenses--Mortality and expense risk charges (note 3) 9,854 5,975 4,467 2,175 1,930 762
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income 741,582 14,636 6,526 28,995 16,905 9,890
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 65,600 33,666 1,682 289 2,130 (2,789)
Unrealized appreciation (depreciation) on investments (498,697) 203,288 (11,121) (28,379) 23,073 (11,441)
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (433,097) 236,954 (9,439) (28,090) 25,203 (14,230)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations $ 308,485 251,590 (2,913) 905 42,108 (4,340)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Life of Virginia Series Fund, Inc.
----------------------------------
Money Market
Portfolio
-------------------------------
Year ended December 31,
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income--Dividends 97,157 64,373 28,145
Expenses--Mortality and expense risk charges (note 3) 15,476 12,610 9,044
- ------------------------------------------------------------------------------------------------------------
Net investment income 81,681 51,763 19,101
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) (325,593) 68,408 110,539
Unrealized appreciation (depreciation) on investments 345,223 (25,977) (2,317)
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 19,630 42,431 108,222
- ------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 101,311 94,194 127,323
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Life of Virginia Series Fund, Inc.
----------------------------------
Total Return
Portfolio
----------------------------
Year ended December 31,
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income--Dividends 846,101 210,985 17,248
Expenses--Mortality and expense risk charges (note 3) 20,200 9,371 2,872
- ---------------------------------------------------------------------------------------------------------
Net investment income 825,901 201,614 14,376
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 68,427 17,126 5,404
Unrealized appreciation (depreciation) on investments (708,053) 18,487 (11,896)
- ---------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (639,626) 35,613 (6,492)
- ---------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 186,275 237,227 7,884
- ---------------------------------------------------------------------------------------------------------
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
Life of Virginia Series Fund, Inc. (continued)
------------------------------------------------------
International Real Estate
Equity Portfolio Securities Portfolio
------------------------ --------------------------
Period from Period from
August 25, October 5,
Year ended 1995 to Year ended 1995 to
December 31, December 31, December 31, December 31,
1996 1995 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ 1,884 176 1,678 22
Expenses - Mortality and expense risk charges (note 3) 152 11 57 --
- --------------------------------------------------------------------------------------------------------------------
Net investment income 1,732 165 1,621 22
- --------------------------------------------------------------------------------------------------------------------
Net realized and unrealized (loss) gain on investments:
Net realized gain 510 4 381 --
Unrealized appreciation (depreciation) on investments (839) 193 2,468 4
- --------------------------------------------------------------------------------------------------------------------
Net realized and unrealized (loss) gain on investments (329) 197 2,849 4
- --------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations $ 1,403 362 4,470 26
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Fund
---------------------------------------------------
Money Bond
Fund Fund
---------------------- --------------------------
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income--Dividends $ 224 662 310 16,705 8,365 4,168
Expenses--Mortality and expense risk charges (note 3) 31 82 51 1,790 844 430
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 193 580 259 14,915 7,521 3,738
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) -- -- -- 128 407 (60)
Unrealized appreciation (depreciation) on investments -- -- -- (3,916) 9,889 (4,975)
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments -- -- -- (3,788) 10,296 (5,035)
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations $ 193 580 259 11,127 17,817 (1,297)
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Variable Account Fund
---------------------------------------------
Capital
Appreciation
Fund
-------------------------------
Year ended December 31,
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income--Dividends 99,449 5,317 42,513
Expenses--Mortality and expense risk charges (note 3) 13,659 10,098 4,255
- ------------------------------------------------------------------------------------------------------------
Net investment income (expense) 85,790 (4,781) 38,258
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 128,677 57,411 (5,894)
Unrealized appreciation (depreciation) on investments 103,509 281,347 (41,031)
- -------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 232,186 338,758 (46,925)
- -------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 317,976 333,977 (8,667)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Fund
--------------------------------------------------------
Growth
Fund
----------------------------
Year ended December 31,
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income--Dividends 72,782 10,459 1,840
Expenses--Mortality and expense risk charges (note 3) 7,950 3,854 1,807
- ---------------------------------------------------------------------------------------------------------
Net investment income (expense) 64,832 6,605 33
- ---------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 59,611 22,586 6,108
Unrealized appreciation (depreciation) on investments 113,315 125,878 (2,215)
- ---------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 172,926 148,464 3,893
- ---------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 237,758 155,069 3,926
- ---------------------------------------------------------------------------------------------------------
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Fund
----------------------------------------------------
High Multiple
Income Strategies
Fund Fund
----------------------------------------------------
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income--Dividends $ 78,385 47,571 19,850 33,554 35,104 13,754
Expenses--Mortality and expense risk charges (note 3) 5,650 3,622 1,474 3,353 3,322 1,636
- -----------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 72,735 43,949 18,376 30,201 31,782 12,118
- -----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 8,045 1,112 (2,786) 22,006 5,112 1,058
Unrealized appreciation (depreciation) on investments 28,139 30,017 (25,264) 14,047 48,453 (16,980)
- -----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 36,184 31,129 (28,050) 36,053 53,565 (15,922)
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations $108,919 75,078 (9,674) 66,254 85,347 (3,804)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund
-----------------------------------------------------
High
Money Market Income
Portfolio Portfolio
---------------------------- -----------------------
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Income--Dividends $17,813 34,581 5,417 24,435 12,908 9,861
Expenses--Mortality and expense risk
charges (note 3) 2,449 4,231 711 1,779 1,682 976
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 15,364 30,350 4,706 22,656 11,226 8,885
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) -- -- -- 7,114 4,603 (69)
Unrealized appreciation (depreciation) on investments -- -- -- 1,632 25,411 (12,284)
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments -- -- -- 8,746 30,014 (12,353)
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations $15,364 30,350 4,706 31,402 41,240 (3,468)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Variable Insurance Products Fund
-----------------------------------------------------
Equity-
Income
Portfolio
-----------------------------
Year ended December 31,
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Income--Dividends 85,939 72,375 31,170
Expenses--Mortality and expense risk
charges (note 3) 17,180 8,801 3,777
- ----------------------------------------------------------------------------------------------------------
Net investment income (expense) 68,759 63,574 27,393
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 98,124 44,633 (8,219)
Unrealized appreciation (depreciation) on investments 149,934 255,114 (15,896)
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 248,058 299,747 (24,115)
- ----------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 316,817 363,321 3,278
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund
----------------------------------------------------
Growth
Portfolio
--------------------------------
Year ended December 31,
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Income--Dividends 213,091 9,023 41,630
Expenses--Mortality and expense risk
charges (note 3) 25,014 16,541 7,849
- ----------------------------------------------------------------------------------------------------------
Net investment income (expense) 188,077 (7,518) 33,781
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 342,839 237,960 (6,352)
Unrealized appreciation (depreciation) on investments (104,224) 415,406 (16,629)
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 238,615 653,366 (22,981)
- ----------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 426,692 645,848 10,800
- ----------------------------------------------------------------------------------------------------------
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
Variable Insurance Variable Insurance
Products Fund Products Fund II
-----------------------------------------------------
Asset
Overseas Manager
Portfolio Portfolio
------------------------ ---------------------------
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income--Dividends $ 36,638 6,739 1,317 183,395 38,074 24,335
Expenses--Mortality and expense risk charges (note 3) 11,528 8,185 4,137 19,647 16,293 8,441
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 25,110 (1,446) (2,820) 163,748 21,781 15,894
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 39,291 6,569 (16,479) 105,006 25,753 (2,448)
Unrealized appreciation (depreciation) on investments 126,664 107,430 (45,747) 98,064 313,566 (80,899)
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 165,955 113,999 (62,226) 203,070 339,319 (83,347)
- -------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations $191,065 112,553 (65,046) 366,818 361,100 (67,453)
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund II
--------------------------------------------
Contrafund
Portfolio
-----------------------------
Period from
February 7,
Year ended 1995 to
December 31, December 31,
1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income--Dividends 2,964 3,470
Expenses--Mortality and expense risk charges (note 3) 4,608 700
- ----------------------------------------------------------------------------------------------------------
Net investment income (expense) (1,644) 2,770
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 14,028 2,651
Unrealized appreciation (depreciation) on investments 119,895 12,626
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 133,923 15,277
- ----------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 132,279 18,047
- ----------------------------------------------------------------------------------------------------------
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Advisers Management Trust
--------------------------------------------------------
Balanced Bond
Portfolio Portfolio
------------------------ ----------------------------
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income--Dividends $ 41,530 5,568 3,758 7,068 2,839 209
Expenses--Mortality and expense risk charges (note 3) 1,799 1,863 1,177 581 491 259
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 39,731 3,705 2,581 6,487 2,348 (50)
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 4,564 5,430 1,226 38 450 (50)
Unrealized appreciation (depreciation) on investments (28,989) 43,147 (8,138) (3,678) 3,567 461
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (24,425) 48,577 (6,912) (3,640) 4,017 411
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations $ 15,306 52,282 (4,331) 2,847 6,365 361
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Advisers Management Trust
-----------------------------------------------
Growth
Portfolio
-----------------------------------------------
Year ended December 31,
1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income--Dividends 13,580 4,462 3,932
Expenses--Mortality and expense risk charges (note 3) 1,005 1,076 512
- -------------------------------------------------------------------------------------------------------
Net investment income (expense) 12,575 3,386 3,420
- -------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 4,264 6,665 (362)
Unrealized appreciation (depreciation) on investments (6,024) 29,994 (6,943)
- -------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (1,760) 36,659 (7,305)
- -------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 10,815 40,045 (3,885)
- -------------------------------------------------------------------------------------------------------
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Federated Investors
Insurance Series
-----------------------------------------------------------------
High
American Income
Leaders Bond Utility
Fund II Fund II Fund II
-------------- ----------------------- ------------------------
Period from Period from Period from
August 14, October 31, Year ended March 22,
1996 to Year ended 1995 to 1995 to 1995 to
December 31, December 31, December 31, December 31, December 31,
1996 1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income--Dividends $ 9 1,592 7 2,283 862
Expenses--Mortality and expense risk charges (note 3) 2 127 1 364 132
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 7 1,465 6 1,919 730
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 4 51 -- 2,332 167
Unrealized appreciation (depreciation) on investments 29 1,038 35 700 3,982
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 33 1,089 35 3,032 4,149
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations $ 40 2,554 41 4,951 4,879
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Alger American
-----------------------------------------------------------
Small
Cap Growth
Portfolio Portfolio
-------------------------------- ------------------------
Period from Period from
October 11, October 23,
Year ended 1995 to Year ended 1995 to
December 31, December 31, December 31, December 31,
1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income--Dividends 502 -- 3,815 --
Expenses--Mortality and expense risk charges (note 3) 1,659 24 2,350 12
- -------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) (1,157) (24) 1,465 (12)
- -------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 4,156 (52) 1,107 7
Unrealized appreciation (depreciation) on investments (4,745) (436) (1,956) 147
- -------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (589) (488) (849) 154
- -------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations (1,746) (512) 616 142
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series
------------------------------------------------------------------------------------
Aggressive Growth
Growth Portfolio Portfolio
--------------------------------------- ------------------------------------
Period from Period from
March 8, March 8,
Year ended Year ended 1994 to Year ended Year ended 1994 to
December 31, December 31, December 31, December 31, December 31, December 31,
1996 1995 1994 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income--Dividends $ 9,052 7,589 844 21,456 7,206 227
Expenses--Mortality and expense
risk charges (note 3) 6,061 3,092 194 5,068 1,335 143
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 2,991 4,497 650 16,388 5,871 84
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 49,684 24,104 688 21,606 8,766 1,024
Unrealized appreciation
(depreciation) on investments (6,584) 74,041 4,935 67,602 33,088 (1,179)
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 43,100 98,145 5,623 89,208 41,854 (155)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations $ 46,091 102,642 6,273 105,596 47,725 (71)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series
----------------------------------------------------------------------
Worldwide
Growth
Portfolio
----------------------------------------------------------------------
Period from
March 8,
Year ended Year ended 1994 to
December 31, December 31, December 31,
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income--Dividends 17,129 1,537 2
Expenses--Mortality and expense 6,046 2,178 282
risk charges (note 3)
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 11,083 (641) (280)
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments: 102,324 8,523 (232)
Net realized gain (loss) 66,974 56,274 (2,201)
Unrealized appreciation
(depreciation) on investments 169,298 64,797 (2,433)
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 180,381 64,156 (2,713)
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series (continued)
-----------------------------------------------------------------
Flexible International
Balanced Income Growth
Portfolio Portfolio Portfolio
------------------------- ------------------------ ------------
Period from Period from Period from
November 14, December 20, July 9,
Year ended 1995 to Year ended 1995 to 1996 to
December 31, December 31, December 31, December 31, December 31,
1996 1995 1996 1995 1996
- --------------------------------------------------------------------------------------------------------- ------------ -----------
<S> <C>
Investment income:
Income-Dividends $ 3,497 584 541 1 136
Expenses-Mortality and expense risk charges (note 3) 931 66 34 -- 40
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income 2,566 518 507 1 96
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain 2,098 395 13 -- 152
Unrealized appreciation (depreciation) on investments 14,575 2,467 83 (1) 1,040
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 16,673 2,862 96 (1) 1,192
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations $19,239 3,380 603 -- 1,288
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
===================================================================================================================================
Life of Virginia Series Fund, Inc.
--------------------------------------------------------------------------------
Common Government
Stock Index Securities
Portfolio Portfolio
--------------------------------------------------------------------------------
Year ended December 31, Year ended December 31,
--------------------------------------------------------------------------------
1996 1995 1994 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets
From operations:
Net investment income $ 741,582 14,636 6,526 28,995 16,905 9,890
Net realized gain (loss) 65,600 33,666 1,682 289 2,130 (2,789)
Unrealized appreciation
(depreciation) on investments (498,697) 203,288 (11,121) (28,379) 23,073 (11,441)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease)
in net assets from operations 308,485 251,590 (2,913) 905 42,108 (4,340)
- -----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 308,147 205,386 166,616 37,229 37,525 43,467
Loan interest (455) (592) (365) 878 244 --
Transfers (to) from the general account
of Life of Virginia:
Death benefits (1,955) -- -- -- -- --
Surrenders (15,204) (35,272) (34,647) (3,155) -- (8,360)
Loans (16,280) 33 (7,799) (2,302) -- (8,446)
Cost of insurance and
administrative expense (note 3) (158,228) (112,723) (96,243) (23,586) (22,993) (15,063)
Transfer gain (loss)
and transfer fees (note 3) 109 1,890 (560) (75) (368) (292)
Interfund transfers 289,390 91,482 89,283 (18,963) 21,812 168,642
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions 405,524 150,204 116,285 (9,974) 36,220 179,948
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 714,009 401,794 113,372 (9,069) 78,328 175,608
Net assets at beginning of year 1,075,880 674,086 560,714 320,713 242,385 66,777
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 1,789,889 1,075,880 674,086 311,644 320,713 242,385
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
===============================================================================================================================
Life of Virginia Series Fund, Inc.
----------------------------------------------------------------------------
Money Market Total Return
Portfolio Portfolio
---------------------------------------------------------------------------
Year ended December 31, Year ended December 31,
---------------------------------------------------------------------------
1996 1995 1994 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets
From operations:
Net investment income 81,681 51,763 19,101 825,901 201,614 14,376
Net realized gain (loss) (325,593) 68,408 110,539 68,427 17,126 5,404
Unrealized appreciation
(depreciation) on investments 345,223 (25,977) (2,317) (708,053) 18,487 (11,896)
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease)
in net assets from operations 101,311 94,194 127,323 186,275 237,227 7,884
- ------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 5,619,954 5,903,130 4,343,151 143,160 180,914 116,553
Loan interest (1,840) (33) (198) (178) (130) (138)
Transfers (to) from the general account
of Life of Virginia:
Death benefits (1,302) -- -- (25,232) -- --
Surrenders (7,042) (25,025) (2,620) (14,027) (22,038) (15,289)
Loans (59,410) 215 (686) (6,948) (6,501) (6,316)
Cost of insurance and
administrative expense (note 3) (257,113) (201,089) (221,019) (339,757) (173,014) (70,159)
Transfer gain (loss)
and transfer fees (note 3) (28,760) (164,726) (122,409) 125,446 105,770 139
Interfund transfers (4,363,145) (5,222,614) (3,495,580) 124,895 2,309,889 53,434
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions 901,342 289,858 500,639 7,359 2,394,890 78,224
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 1,002,653 384,052 627,962 193,634 2,632,117 86,108
Net assets at beginning of year 1,402,952 1,018,900 390,938 3,085,667 453,550 367,442
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year 2,405,605 1,402,952 1,018,900 3,279,301 3,085,667 453,550
===============================================================================================================================
</TABLE>
19
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
===================================================================================================================================
Life of Virginia Series Fund, Inc. (continued)
-------------------------------------------------------------
International Real Estate
Equity Portfolio Securities Portfolio
-------------------------------------------------------------
Period from Period from
August 25, October 5,
Year ended 1995 to Year ended 1995 to
December 31, December 31, December 31, December 31,
1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase in net assets
From operations:
Net investment income $ 1,732 165 1,621 22
Net realized gain 510 4 381 --
Unrealized appreciation
(depreciation) on investments (839) 193 2,468 4
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 1,403 362 4,470 26
From capital transactions:
Net premiums 18,822 3,961 15,327 143
Loan interest 7 -- -- --
Transfers (to) from the general account
of Life of Virginia:
Death benefits -- -- -- --
Surrenders (1,403) -- (347) --
Loans (229) -- -- --
Cost of insurance and
administrative expense (note 3) (3,119) (316) (1,892) (31)
Transfer gain (loss)
and transfer fees (note 3) 86 (5) 190 2
Interfund transfers 10,273 5,381 12,060 264
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 24,437 9,021 25,338 378
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 25,840 9,383 29,808 404
Net assets at beginning of period 9,383 -- 404 --
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 35,223 9,383 30,212 404
==================================================================================================================================
</TABLE>
20
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
========================================================================================================================
Oppenheimer Variable Account Fund
-------------------------------------------------------------------
Money Bond
Fund Fund
------------------------------------- --------------------------------
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) $ 193 580 259 14,915 7,521 3,738
Net realized gain (loss) -- -- -- 128 407 (60)
Unrealized appreciation
(depreciation) on investments -- -- -- (3,916) 9,889 (4,975)
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in
net assets from operations 193 580 259 11,127 17,817 (1,297)
From capital transactions:
Net premiums -- 7,628 2,919 41,062 36,446 42,700
Loan interest -- -- -- (2) 1 --
Transfers (to) from the general account
of Life of Virginia:
Death benefits -- -- -- -- -- --
Surrenders -- (954) -- (3,478) (1,208) (203)
Loans -- -- -- -- (134) --
Cost of insurance and
administrative expense (note 3) (997) (1,976) (1,381) (21,145) (15,526) (11,652)
Transfer gain (loss)
and transfer fees (note 3) (8) (12) 38 6 (54) (44)
Interfund transfers (10,491) (3,849) 7,234 50,864 63,844 20,767
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions (11,496) 837 8,810 67,307 83,369 51,568
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (11,303) 1,417 9,069 78,434 101,186 50,271
Net assets at beginning of year 12,010 10,593 1,524 191,406 90,220 39,949
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 707 12,010 10,593 269,840 191,406 90,220
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=================================================================================================================================
Oppenheimer Variable Account Fund
--------------------------------------------------------------------------------
Capital
Appreciation Growth
Fund Fund
--------------------------------- -----------------------------------
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) 85,790 (4,781) 38,258 64,832 6,605 33
Net realized gain (loss) 128,677 57,411 (5,894) 59,611 22,586 6,108
Unrealized appreciation
(depreciation) on investments 103,509 281,347 (41,031) 113,315 125,878 (2,215)
- ---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in
net assets from operations 317,976 333,977 (8,667) 237,758 155,069 3,926
From capital transactions:
Net premiums 615,934 394,900 436,547 310,615 175,911 135,634
Loan interest (174) (114) (74) (155) 12 (18)
Transfers (to) from the general account
of Life of Virginia:
Death benefits -- (2,168) (134) (3,934) (2,519) --
Surrenders (128,744) (58,441) (11,508) (18,216) (7,126) (18,961)
Loans (8,425) (9,348) (10,450) (21,680) (5,542) (39)
Cost of insurance and
administrative expense (note 3) (242,592) (174,402) (99,843) (107,526) (61,493) (38,468)
Transfer gain (loss)
and transfer fees (note 3) 6,908 (5,711) (17,544) (1,119) 2,839 1,716
Interfund transfers 270,794 151,112 295,377 266,465 216,857 90,274
- ---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions 513,701 295,828 592,371 424,450 318,939 170,138
- ---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 831,677 629,805 583,704 662,208 474,008 174,064
Net assets at beginning of year 1,510,387 880,582 296,878 817,665 343,657 169,593
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year 2,342,064 1,510,387 880,582 1,479,873 817,665 343,657
==================================================================================================================================
</TABLE>
21
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
===================================================================================================================================
Oppenheimer Variable Account Fund
----------------------------------------------------------
High Multiple
Income Strategies
Fund Fund
------------------------------ --------------------------
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets
From operations:
Net investment income $ 72,735 43,949 18,376 30,201 31,782 12,118
Net realized gain (loss) 8,045 1,112 (2,786) 22,006 5,112 1,058
Unrealized appreciation
(depreciation) on investments 28,139 30,017 (25,264) 14,047 48,453 (16,980)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 108,919 75,078 (9,674) 66,254 85,347 (3,804)
- -----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 311,435 225,228 205,911 122,291 183,632 98,195
Loan interest 16 179 (16) (18) (48) (51)
Transfers (to) from the general account of
Life of Virginia:
Death benefits (18,532) (386) (225) (17,498) -- --
Surrenders (7,723) (26,138) (3,726) (183,972) (11,026) (6,329)
Loans (133,614) (3,839) (8,327) (729) (617) (288)
Cost of insurance and
administrative expense (note 3) 559 (106,764) (70,347) (50,034) (67,361) (48,099)
Transfer gain (loss)
and transfer fees (note 3) 111,802 692 (422) 6,336 (572) (1,398)
Interfund transfers -- 132,318 138,398 87,158 52,156 137,152
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions 263,943 221,290 261,246 (36,466) 156,164 179,182
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 372,862 296,368 251,572 29,788 241,511 175,378
Net assets at beginning of year 619,885 323,517 71,945 544,873 303,362 127,984
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 992,747 619,885 323,517 574,661 544,873 303,362
===================================================================================================================================
</TABLE>
22
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
=======================================================================================================================
Variable Insurance Products Fund
-----------------------------------------------------------------------------
High
Money Market Income
Portfolio Portfolio
----------------------------- -----------------------------
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) $ 15,364 30,350 4,706 22,656 11,226 8,885
Net realized gain (loss) -- -- -- 7,114 4,603 (69)
Unrealized appreciation
(depreciation) on investments -- -- -- 1,632 25,411 (12,284)
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 15,364 30,350 4,706 31,402 41,240 (3,468)
- -----------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 1,850 96,485 459,738 -- 91,883 83,545
Loan interest (14) 102 (32) (22) 245 1
Transfers (to) from the general account
of Life of Virginia:
Death benefits -- -- -- -- (393) (143)
Surrenders (19,871) (2,975) -- (36,177) (6,219) (13,554)
Loans (1,250) -- (3,125) (2,449) -- (8,677)
Cost of insurance and
administrative expense (note 3) (30,816) (65,636) (28,427) (30,421) (49,478) (33,264)
Transfer gain (loss)
and transfer fees (note 3) (5,041) (991) 6,932 (553) 373 (44)
Interfund transfers (89,691) (162,335) 93,040 (34,288) 36,951 60,841
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions (144,833) (135,350) 528,126 (103,910) 73,362 88,705
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (129,469) (105,000) 532,832 (72,508) 114,602 85,237
Net assets at beginning of year 445,122 550,122 17,290 285,720 171,118 85,881
- ------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 315,653 445,122 550,122 213,212 285,720 171,118
========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
========================================================================================================================
Variable Insurance Products Fund
------------------------------------------------------------------------
Equity-
Income Growth
Portfolio Portfolio
------------------------------ ------------------------------------
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) 68,759 63,574 27,393 188,077 (7,518) 33,781
Net realized gain (loss) 98,124 44,633 (8,219) 342,839 237,960 (6,352)
Unrealized appreciation
(depreciation) on investments 149,934 255,114 (15,896) (104,224) 415,406 (16,629)
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 316,817 363,321 3,278 426,692 645,848 10,800
- ------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 923,240 487,170 213,828 928,744 621,255 656,784
Loan interest (54) 34 (29) (476) (2,442) (55)
Transfers (to) from the general account
of Life of Virginia:
Death benefits (22,109) -- -- (24,929) (2,486) (219)
Surrenders (120,408) (19,474) (12,023) (179,684) (78,450) (56,950)
Loans (12,984) (4,694) 550 (72,457) 5,101 (935)
Cost of insurance and
administrative expense (note 3) (336,646) (199,167) (85,059) (419,528) (324,187) (188,583)
Transfer gain (loss)
and transfer fees (note 3) 18,395 3,592 (459) 34,069 (20,621) (14,996)
Interfund transfers 643,935 410,782 311,214 (78,376) 590,049 478,565
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions 1,093,369 678,243 428,022 187,363 788,219 873,611
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 1,410,186 1,041,564 431,300 614,055 1,434,067 884,411
Net assets at beginning of year 1,810,632 769,068 337,768 2,996,591 1,562,524 678,113
- -----------------------------------------------------------------------------------------------------------------------
Net assets at end of year 3,220,818 1,810,632 769,068 3,610,646 2,996,591 1,562,524
========================================================================================================================
</TABLE>
23
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
===================================================================================================================================
Variable Insurance Products Fund Variable Insurance Products Fund II
---------------------------------------- ------------------------------------------
Asset
Overseas Manager
Portfolio Portfolio
---------------------------------------- ------------------------------------------
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) $ 25,110 (1,446) (2,820) 163,748 21,781 15,894
Net realized gain (loss) 39,291 6,569 (16,479) 105,006 25,753 (2,448)
Unrealized appreciation
(depreciation) on investments 126,664 107,430 (45,747) 98,064 313,566 (80,899)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 191,065 112,553 (65,046) 366,818 361,100 (67,453)
- -----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 455,202 445,508 426,790 695,446 756,041 858,361
Loan interest (10) (29) (113) (44) 209 (20)
Transfers (to) from the general account
of Life of Virginia:
Death benefits (3,636) -- -- (22,120) (1,919) --
Surrenders (76,054) (19,836) (6,869) (107,389) (51,751) (11,317)
Loans (29,577) (7,544) (5,299) 70 (20,572) (8,489)
Cost of insurance and
administrative expense (note 3)(199,651) (190,510) (104,233) (341,676) (352,049) (241,348)
Transfer gain (loss) and
transfer fees (note 3) 5,668 (13,025) (2,893) (36) (3,037) (7,230)
Interfund transfers (2,943) 233,172 359,446 (462,667) 294,547 849,854
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions 148,999 447,736 666,829 (238,416) 621,469 1,439,811
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 340,064 560,289 601,783 128,402 982,569 1,372,358
Net assets at beginning of period 1,420,566 860,277 258,494 2,752,350 1,769,781 397,423
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 1,760,630 1,420,566 860,277 2,880,752 2,752,350 1,769,781
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
======================================================================================
Variable Insurance Products Fund II
-----------------------------------------
Contrafund
Portfolio
----------------------------------------
Period from
February 7,
Year ended 1995 to
December 31, December 31,
1996 1995
- --------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) (1,644) 2,770
Net realized gain (loss) 14,028 2,651
Unrealized appreciation
(depreciation) on investments 119,895 12,626
- --------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 132,279 18,047
- --------------------------------------------------------------------------------------
From capital transactions:
Net premiums 331,802 104,232
Loan interest 107 4
Transfers (to) from the general account
of Life of Virginia:
Death benefits -- --
Surrenders (8,625) --
Loans (4,921) (396)
Cost of insurance and
administrative expense (note 3) (91,674) (18,015)
Transfer gain (loss) and
transfer fees (note 3) 1,153 3,247
Interfund transfers 398,084 180,143
- --------------------------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions 625,926 269,215
- --------------------------------------------------------------------------------------
Increase in net assets 758,205 287,262
Net assets at beginning of period 287,262 --
- --------------------------------------------------------------------------------------
Net assets at end of period $ 1,045,467 287,262
======================================================================================
</TABLE>
24
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
===================================================================================================================================
Advisers Management Trust
-------------------------------------------------------------------------
Balanced Bond
Portfolio Portfolio
--------------------------------- -------------------------------------
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) $ 39,731 3,705 2,581 6,487 2,348 (50)
Net realized gain (loss) 4,564 5,430 1,226 38 450 (50)
Unrealized appreciation
(depreciation) on investments (28,989) 43,147 (8,138) (3,678) 3,567 461
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 15,306 52,282 (4,331) 2,847 6,365 361
- -----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums -- 52,871 128,528 -- 37,211 17,926
Loan interest (7) 6 1 -- -- --
Transfers (to) from the general account
of Life of Virginia:
Death benefits (16,809) (1,989) -- -- -- --
Surrenders (3,543) (3,754) (6,026) -- (3,175) --
Loans -- (305) (211) -- -- --
Cost of insurance
and administrative expense (note 3) (16,515) (24,013) (17,394) (3,975) (6,373) (3,036)
Transfer gain (loss) and
transfer fees (note 3) (143) 7 (936) (55) (170) 111
Interfund transfers (26,358) 5,186 16,186 (11,128) 5,181 31,747
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions (63,375) 28,009 120,148 (15,158) 32,674 46,748
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (48,069) 80,291 115,817 (12,311) 39,039 47,109
Net assets at beginning of year 292,083 211,792 95,975 91,855 52,816 5,707
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 244,014 292,083 211,792 79,544 91,855 52,816
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
==================================================================================================
Advisers Management Trust
--------------------------------------------
Growth
Portfolio
Year ended December 31,
1996 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) 12,575 3,386 3,420
Net realized gain (loss) 4,264 6,665 (362)
Unrealized appreciation
(depreciation) on investments (6,024) 29,994 (6,943)
- -------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 10,815 40,045 (3,885)
- -------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 30 43,607 72,306
Loan interest (118) 2 7
Transfers (to) from the general account
of Life of Virginia:
Death benefits -- -- --
Surrenders -- (9,384) (2,502)
Loans (4,361) (1,132) (487)
Cost of insurance
and administrative expense (note 3) (8,829) (13,364) (8,077)
Transfer gain (loss) and
transfer fees (note 3) 273 (357) 650
Interfund transfers (24,783) (2,815) 15,771
- -------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions (37,788) 16,557 77,668
- -------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (26,973) 56,602 73,783
Net assets at beginning of year 161,522 104,920 31,137
- -------------------------------------------------------------------------------------------------
Net assets at end of year 134,549 161,522 104,920
=================================================================================================
</TABLE>
25
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
===================================================================================================================================
Federated Investors
Insurance Series
---------------------------------------------------------------------------
High
American Income
Leaders Bond Utility
Fund II Fund II Fund II
------------- -------------------------------- -------------------------
Period from Period from Period from
August 14, October 31, March 22,
1996 to Year ended 1995 to Year ended 1995 to
December 31, December 31, December 31, December 31, December 31
1996 1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) $ 7 1,465 6 1,919 730
Net realized gain (loss) 4 51 -- 2,332 167
Unrealized appreciation
(depreciation) on investments 29 1,038 35 700 3,982
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 40 2,554 41 4,951 4,879
- -----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 941 18,547 8 27,264 39,132
Loan interest -- -- -- -- --
Transfers (to) from the general account
of Life of Virginia:
Surrenders -- -- -- (60) --
Loans -- -- -- -- --
Cost of insurance (note 3) (101) (3,746) (74) (6,249) (3,417)
Transfer gain (loss) and
transfer fees (note 3) (1) 362 62 (372) 30
Interfund transfers 1,391 9,630 8,214 236 20,946
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 2,230 24,793 8,210 20,819 56,691
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 2,270 27,347 8,251 25,770 61,570
Net assets at beginning of period -- 8,251 -- 61,570 --
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 2,270 35,598 8,251 87,340 61,570
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
==================================================================================================================================
-------------------------------------------------------------------------
Alger American
Small
Cap Growth
Portfolio Portfolio
--------------------------------------------------------------------------
Period from Period from
October 11, October 23,
Year ended 1995 to Year ended 1995 to
December 31, December 31, December 31, December 31,
1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) (1,157) (24) 1,465 (12)
Net realized gain (loss) 4,156 (52) 1,107 7
Unrealized appreciation
(depreciation) on investments (4,745) (436) (1,956) 147
- -------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations (1,746) (512) 616 142
- -------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 151,593 4,392 180,079 2,473
Loan interest (3,345) -- 31 2
Transfers (to) from the general account
of Life of Virginia:
Surrenders (1,160) -- (1,243) --
Loans (13,496) -- (956) --
Cost of insurance (note 3) (37,209) (879) (34,162) (500)
Transfer gain (loss) and
transfer fees (note 3) 9,170 208 6,248 170
Interfund transfers 281,412 33,347 1,232,717 20,967
- ------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 386,965 37,068 1,382,714 23,112
- ------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 385,219 36,556 1,383,330 23,254
Net assets at beginning of period 36,556 -- 23,254 --
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 421,775 36,556 1,406,584 23,254
==============================================================================================================================
</TABLE>
26
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Janus Aspen Series
-----------------------------------------------------------
Aggressive
Growth Portfolio
-------------------------------------------
Period from
March 8,
Year ended Year ended 1994 to
December 31, December 31, December 31,
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) $ 2,991 4,497 650
Net realized gain (loss) 49,684 24,104 688
Unrealized appreciation (depreciation)
on investments (6,584) 74,041 4,935
- ----------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 46,091 102,642 6,273
- ----------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 440,252 272,031 20,533
Loan interest 50 101 4
Transfers (to) from the general account of
Life of Virginia:
Death benefits (155) -- --
Surrenders (55,525) (6,433)
Loans (9,797) (590) (355)
Cost of insurance and administrative
expense (note 3) (128,435) (69,676) (5,600)
Transfer gain (loss) and transfer
fees (note 3) 5,450 10,642 1,698
Interfund transfers 161,707 197,192 94,959
- ----------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 413,547 403,267 111,239
Increase in net assets 459,638 505,909 117,512
- ----------------------------------------------------------------------------------------------------------
Net assets at beginning of period 623,421 117,512 --
- ----------------------------------------------------------------------------------------------------------
Net assets at end of period $ 1,083,059 623,421 117,512
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Janus Aspen Series
-----------------------------------------------------------
Growth Portfolio
-------------------------------------------
Period from
March 8,
Year ended Year ended 1994 to
December 31, December 31, December 31,
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) 16,388 5,871 84
Net realized gain (loss) 21,606 8,766 1,024
Unrealized appreciation (depreciation)
on investments 67,602 33,088 (1,179)
- ----------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 105,596 47,725 (71)
- ----------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 350,437 130,419 20,151
Loan interest 59 -- --
Transfers (to) from the general account of
Life of Virginia:
Death benefits (151) -- --
Surrenders (67,362) (364) --
Loans (5,035) (28) --
Cost of insurance and administrative
expense (note 3) (88,814) (39,647) (5,932)
Transfer gain (loss) and transfer
fees (note 3) 5,548 1,834 42
Interfund transfers 454,994 138,995 65,214
- ----------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 649,676 231,209 79,475
Increase in net assets 755,272 278,934 79,404
- ----------------------------------------------------------------------------------------------------------
Net assets at beginning of period 358,338 79,404 --
- ----------------------------------------------------------------------------------------------------------
Net assets at end of period 1,113,610 358,338 79,404
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Janus Aspen Series
-----------------------------------------------------------
Worldwide
Growth Portfolio
-------------------------------------------
Period from
March 8,
Year ended Year ended 1994 to
December 31, December 31, December 31,
1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) 11,083 (641) (280)
Net realized gain (loss) 102,324 8,523 (232)
Unrealized appreciation (depreciation)
on investments 66,974 56,274 (2,201)
- ----------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 180,381 64,156 (2,713)
- ----------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 381,650 165,843 53,431
Loan interest 270 -- 4
Transfers (to) from the general account of
Life of Virginia:
Death benefits -- -- --
Surrenders (40,322) (6,089) --
Loans (19,483) 5 (10,988)
Cost of insurance and administrative
expense (note 3) (115,529) (55,173) (11,136)
Transfer gain (loss) and transfer
fees (note 3) 8,504 1,721 1,100
Interfund transfers 610,432 97,041 118,182
- ----------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 825,522 203,348 150,593
Increase in net assets 1,005,903 267,504 147,880
- ----------------------------------------------------------------------------------------------------
Net assets at beginning of period 415,384 147,880 --
- ----------------------------------------------------------------------------------------------------
Net assets at end of period 1,421,287 415,384 147,880
- ----------------------------------------------------------------------------------------------------
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series (continued)
-----------------------------------------------------------------
Flexible International
Balanced Income Growth
Portfolio Portfolio Portfolio
------------------------- ------------------------ ------------
Period from Period from Period from
November 14, December 20, July 9,
Year ended 1995 to Year ended 1995 to 1996 to
December 31, December 31, December 31, December 31, December 31,
1996 1995 1996 1995 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets
From operations:
Net investment income $ 2,566 518 507 1 96
Net realized gain 2,098 395 13 -- 152
Unrealized appreciation (depreciation) on investments 14,575 2,467 83 (1) 1,040
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 19,239 3,380 603 -- 1,288
- ----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 19,054 336 3,048 13 19,750
Loan interest -- -- -- -- --
Transfers (to) from the general account of
Life of Virginia:
Death benefits -- -- -- -- --
Surrenders -- -- -- -- --
Loans -- -- -- -- --
Cost of insurance (note 3) (11,055) (792) (840) (4) (1,705)
Transfer gain (loss) and transfer fees
note 3) 1,193 (248) 1 1 (43)
Interfund transfers 63,919 73,750 6,026 35 34,648
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 73,111 73,046 8,235 45 52,650
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 92,350 76,426 8,838 45 53,938
Net assets at beginning of period 76,426 -- 45 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 168,776 76,426 8,883 45 53,938
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Notes to Financial Statements
December 31, 1996
==============================================================================
(1) Description of Entity
Life of Virginia Separate Account II (the Account) is a separate
investment account established in 1986 by The Life Insurance Company of
Virginia (Life of Virginia) under the laws of the Commonwealth of
Virginia. The Account operates as a unit investment trust under the
Investment Company Act of 1940. The Account is used to fund certain
benefits for flexible premium variable life insurance policies issued
by Life of Virginia. As of April 1, 1996, Life of Virginia is a
wholly-owned subsidiary of GNA Corporation, which is a wholly-owned
subsidiary of General Electric Capital Corporation. Prior to April 1,
1996, Life of Virginia was an indirect wholly-owned subsidiary of Aon
Corporation (Aon).
In May 1996, two new investment subdivisions were added to the Account.
One of these subdivisions, the International Growth Portfolio, invests
solely in a designated portfolio of the Janus Aspen Series, a series
type mutual fund. The other new subdivision, the American Leaders Fund
II, invests solely in a designated portfolio of the Federated Investors
Insurance Series, a series type mutual fund.
During 1995, nine new investment subdivisions were added to the
Account. The Utility Fund II and High Income Bond Fund II each invests
solely in a designated portfolio of the Federated Investors Insurance
Series, a series type mutual fund. The Contrafund Portfolio invests
solely in a designated portfolio of the Variable Insurance Products
Fund II Portfolio, a series type mutual fund. The International Equity
Portfolio and the Real Estate Securities Portfolio each invests solely
in a designated portfolio of Life of Virginia Series Fund, Inc., a
series type mutual fund. The Balanced Portfolio and Flexible Income
Portfolio each invests solely in a designated portfolio of the Janus
Aspen Series, a series type mutual fund. The Growth Portfolio and Small
Cap Portfolio each invests solely in a designated portfolio of the
Alger American Fund, a series type mutual fund.
In November 1995, six subdivisions were closed to new money. Three of
these subdivisions, the Balanced Portfolio, Bond Portfolio, and Growth
Portfolio each invests solely in a designated portfolio of the Advisers
Management Trust, a series type mutual fund. The fourth and fifth
closed subdivisions, the Money Market Portfolio and High Income
Portfolio, each invested solely in a designated portfolio of the
Variable Insurance Products Fund, a series type mutual fund. The sixth
closed subdivision, the Money Fund invests solely in a designated
portfolio of the Oppenheimer Variable Account Fund, a series type
mutual fund.
(2) Summary of Significant Accounting Policies
Investments
Investments are stated at fair value which is based on the underlying
net asset value per share of the respective portfolios or funds.
Purchases and sales of investments are recorded on the trade date.
Realized gains and losses on investments are determined on the average
cost basis. The units and unit values are disclosed as of the last
business day in the applicable year or period.
<PAGE>
(2) Continued
The aggregate cost of the investments acquired and the aggregate
proceeds of investments sold, for the year or period ended December 31,
1996, were:
Cost of Proceeds
Shares from
Fund/Portfolio Acquired Shares Sold
----------------------------------------------------------------------
Life of Virginia Series Fund, Inc.:
Common Stock Index $ 725,624 332,391
Government Securities 52,192 64,304
Money Market 25,454,726 25,288,621
Total Return 2,985,814 3,124,233
International Equity 35,558 14,525
Real Estate 28,637 6,842
Oppenheimer Variable Account Funds:
Money 1,755 13,052
Bond 154,561 72,368
Capital Appreciation 1,228,941 638,890
Growth 840,978 355,349
High Income 652,963 317,645
Multiple Strategies 279,145 291,709
Variable Insurance Products Fund:
Money Market 451,799 583,881
High Income 27,321 108,081
Equity-Income 2,013,619 903,906
Growth 3,600,702 3,256,739
Overseas 693,475 524,739
Variable Insurance Products Fund II:
Asset Manager 1,216,913 1,290,073
Contrafund 803,124 180,039
Advisers Management Trust:
Balanced 42,743 66,218
Bond 10,674 19,287
Growth 15,040 40,542
Federated Investors Insurance Series:
American Leaders 2,340 103
High Income Bond 29,690 3,868
Utility 105,641 82,820
Alger American:
Small Cap 811,109 435,043
Growth 1,559,296 216,067
Janus Aspen Series:
Aggressive Growth 790,861 381,510
Growth 841,915 214,540
Worldwide Growth 1,742,273 916,850
Balanced 167,848 93,366
Flexible Income 9,615 873
International Growth 65,883 13,300
----------------------------------------------------------------------
<PAGE>
(2) Continued
Federal Income Taxes
The Account is not taxed separately because the operations of the
Account are part of the total operations of Life of Virginia. Life of
Virginia is taxed as a life insurance company under the Internal
Revenue Code (the Code). Life of Virginia is included in the General
Electric Capital Assurance Company consolidated federal income tax
return. The Account will not be taxed as a regulated investment company
under subchapter M of the Code. Under existing federal income tax law,
no taxes are payable on the investment income or on the capital gains
of the Account.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of increases
and decreases in net assets from operations during the reporting
period. Actual results could differ from those estimates.
(3) Related Party Transactions
Net premiums transferred from Life of Virginia to the Account represent
gross premiums recorded by Life of Virginia on its flexible premium
variable life insurance policies, less deductions of 7.5% retained as
compensation for certain distribution expenses and premium taxes. In
addition, there is a deferred sales charge of up to 45% of the first
year's premiums. This charge will be deducted from the policy's cash
value in equal installments at the beginning of each of the policy
years two through ten with any remaining installments deducted at
policy lapse or surrender. If a policy is surrendered or lapses during
the first nine years, a charge is made by Life of Virginia to cover the
expenses of issuing the policy.
The charge is a stated percentage of the insurance amount and varies by
the age of the policyholder when issued and period of time that the
policy has been in force. A charge equal to the lesser of $25 or 2% of
the amount paid on a partial surrender will be made to compensate Life
of Virginia for the costs incurred in connection with the partial
surrender.
A charge based on the policy specified amount of insurance, death
benefit option, cash values, duration, the insured's sex, issue age and
risk class, is deducted from the policy cash values each month to
compensate Life of Virginia for the cost of insurance and any benefits
added by rider. In addition, Life of Virginia charges the Account for
the mortality and expense risk that Life of Virginia assumes. This
charge is deducted daily at an effective annual rate of .70% of the net
assets of the Account. For policies issued on or after May 1, 1993,
Life of Virginia will deduct a monthly administrative charge of $6 from
the policy cash value and for policies issued prior to May 1, 1993,
Life of Virginia will deduct a monthly administrative charge of $5 from
the policy cash value.
<PAGE>
(3) Continued
Gains or losses resulting from the processing time between the
crediting of an initial net premium and the investment of that premium
are charged to Life of Virginia. In addition, any such gain or loss
resulting from the processing time between a request for policy
surrender and the sale of the underlying shares is also charged to Life
of Virginia.
Life of Virginia Series Fund, Inc. (the Fund) is an open-end
diversified management investment company whose shares are sold to
Life of Virginia's Separate Accounts.
Forth Financial Securities Corporation (FFSC), a wholly-owned
subsidiary of GNA Corporation, acts as principal underwriter (as
defined in The Investment Company Act of 1940) of the Account's
policies pursuant to an agreement with Life of Virginia.
Aon Advisors, Inc. (Investment Advisor), a wholly-owned subsidiary of
Aon, serves as investment advisor to the Fund and provides portfolio
management, investment advice, and related administrative services for
the Fund. As compensation for its services, the Investment Advisor is
paid an investment advisory fee by the Fund based on the average daily
net assets at an effective annual rate of .35% for the Common Stock
Index Portfolio, .50% for the Government Securities, Money Market and
Total Return Portfolios, 1.00% for the International Equity Portfolio
and .85% for the Real Estate Securities Portfolio. Effective July 1,
1994, the investment advisor agreed to waive a portion of the advisory
fee for the Money Market Portfolio such that the effective annual rate
is .10%.
Certain officers and directors of Life of Virginia are also officers
and directors of FFSC and the Fund.
===============================================================================
<PAGE>
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
Consolidated Balance Sheets
Unaudited
(in millions)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
September 30 December 31
Assets 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C>
Investments:
Fixed maturities:
Available for sale - at fair value; (amortized cost:
1997 - $5,471.8; 1996 - $5,102.2) $ 5,602.4 5,142.7
Equity securities - at fair value
Common stocks (cost: 1997 - $41.5; 1996 - $31.6) 53.3 34.7
Preferred stocks (cost: 1997 - $87.8; 1996 - $123.5) 96.5 130.8
Mortgage loans on real estate (net of reserve for losses:
1997 - $17.0; 1996 - $20.8) 505.9 585.4
Real estate (net of accumulated depreciation: 1997 -
$4.6; 1995 - $4.4) 11.8 19.4
Policy loans 184.7 179.5
Short-term investments - 42.4
- --------------------------------------------------------------------------------------------------
Total investments 6,454.6 6,134.9
- --------------------------------------------------------------------------------------------------
Cash 0.9 6.4
Receivables:
Premiums and other 28.2 21.0
Accrued investment income 119.1 116.6
- --------------------------------------------------------------------------------------------------
Total receivables 147.3 137.6
Deferred policy acquisition costs 141.8 70.3
Goodwill (net of accumulated amortization: 1997 - 9.6; 1996 - $5.0) 118.7 125.4
Present value of future profits
(net of accumulated amortization: 1997 - $88.4; 1996 - $45.2) 350.5 419.2
Property and equipment at cost
(net of accumulated depreciation: 1997 - $2.2; 1996 - $1.7) 3.3 1.7
Deferred income tax benefit 54.6 72.9
Other assets 13.4 12.3
Assets held in separate accounts 3,775.0 2,762.7
- --------------------------------------------------------------------------------------------------
Total assets 11,060.1 9,743.4
==================================================================================================
</TABLE>
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
Unaudited
(in millions, except share data)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
September 30 December 31
Liabilities and Stockholders' Equity 1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Policy liabilities:
Future policy benefits $ 519.5 518.3
Policy and contract claims 80.5 69.1
Unearned and advance premiums 0.1 0.1
Other policyholder funds 5,393.3 5,094.4
- --------------------------------------------------------------------------------------------------------
Total policy liabilities 5,993.4 5,681.9
General liabilities:
Payable to affiliate, net 23.6 8.8
Commissions and general expenses 51.9 46.8
Current income taxes 42.2 45.4
Other liabilities 60.1 192.2
Liabilities related to separate accounts 3,775.0 2,762.7
- --------------------------------------------------------------------------------------------------------
Total liabilities 9,946.2 8,737.8
========================================================================================================
Commitments and Contingent Liabilities
- --------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock - $1,000 par value:
Authorized, issued and outstanding: 4,000 shares 4.0 4.0
Paid-in additional capital 926.0 928.1
Net unrealized investment gains 64.1 19.4
Retained earnings 119.8 54.1
- --------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,113.9 1,005.6
- --------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity 11,060.1 9,743.4
========================================================================================================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
Consolidated Statements of Income
Unaudited
(in millions)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Preacquisition
-------------------------------------
Nine months Nine months Three months
ended ended ended Year ended
September 30, December 31, March 31, December 31,
1997 1996 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
Revenue
Premiums and policy fees $ 201.5 154.7 92.4 179.3
Separate account fees 31.8 23.1 5.9 17.7
Net investment income 353.2 334.4 112.0 402.1
Realized investment gains (losses) 9.6 6.0 9.0 (76.5)
Other income 1.2 0.6 1.0 2.8
- ----------------------------------------------------------------------------------------------------------------
Total revenue earned 597.3 518.8 220.3 525.4
- ----------------------------------------------------------------------------------------------------------------
Benefits and Expenses
Benefits to policyholders 375.6 326.4 166.0 372.9
Commissions and general expenses 60.6 53.2 28.8 43.7
Amortization of intangibles 47.9 50.1 0.6 3.2
Amortization of deferred policy acquisition costs 9.7 3.2 6.0 39.3
- ----------------------------------------------------------------------------------------------------------------
Total benefits and expenses 493.8 432.9 201.4 459.1
Income Before Income Tax 103.5 85.9 18.9 66.3
Provision for income tax
Current expense (benefit) 42.0 39.7 (3.8) 37.9
Deferred expense (benefit) (4.2) (7.9) 10.8 (10.8)
- ----------------------------------------------------------------------------------------------------------------
37.8 31.8 7.0 27.1
Net income $ 65.7 54.1 11.9 39.2
=================================================================================================================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Unaudited
(in millions)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Preacquisition
------------------------------------
Nine months Nine months Three months
ended ended ended Year ended
September 30, December 31, March 31, December 31,
1997 1996 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Common stock
$1,000 par value common stock, authorized,
issued and outstanding 4,000 in 1997,
1996 and 1995)
Balance at beginning and end of period $ 4.0 4.0 4.0 4.0
Paid-in Additional Capital
Balance at beginning of period 928.1 818.4 749.1 704.1
Adjustment to reflect purchase method (2.1) 109.7 - -
Capital contribution from parent - - 69.3 45.0
- ----------------------------------------------------------------------------------------------------------------------------
Balance at end of period 926.0 928.1 818.4 749.1
Net Unrealized Investment Gains (Losses)
Balance at beginning of period 19.4 11.9 103.1 (97.5)
Adjustment to reflect purchase method - (11.9) - -
Net unrealized investment gains (losses) 44.7 19.4 (91.2) 200.6
- ----------------------------------------------------------------------------------------------------------------------------
Balance at end of period 64.1 19.4 11.9 103.1
Net Foreign Exchange Gains (Losses)
Balance at beginning of period - - - (3.0)
Net foreign exchange gains (losses) - - - 3.0
- ----------------------------------------------------------------------------------------------------------------------------
Balance at end of period - - - -
Retained Earnings (Deficit)
Balance at beginning of period 54.1 (22.4) (34.3) 159.8
Adjustment to reflect purchase method - 22.4 - -
Net income 65.7 54.1 11.9 39.2
Dividends to stockholder - - - (40.0)
Stock dividend to affiliate - - - (193.3)
- ----------------------------------------------------------------------------------------------------------------------------
Balance at end of period 119.8 54.1 (22.4) (34.3)
- ----------------------------------------------------------------------------------------------------------------------------
Stockholders' equity at end of period $ 1,113.9 1,005.6 811.9 821.9
=============================================================================================================================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Unaudited
(in millions)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Preacquisition
-------------------------------
Nine months Nine months Three months
ended ended ended Year ended
September 30, December 31, March 31, December 31,
1997 1996 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Cash flows from operating activities:
Net income $ 65.7 54.1 11.9 39.2
Adjustments to reconcile net income to cash provided by
(used in) operating activities:
Change in policy liabilities 194.7 53.5 (32.8) 114.2
Change in accrued investment income (2.5) (37.6) 4.1 (2.1)
Deferred policy acquisition costs (87.0) (74.9) (22.2) (76.1)
Amortization of deferred policy acquisition costs 9.7 3.2 6.0 39.3
Amortization of intangibles 47.9 50.1 0.6 3.2
Other amortization and depreciation 6.6 7.3 1.4 (1.2)
Premiums and operating receivables, commissions and general
expenses, income taxes, other assets and other liabilities (132.9) 77.8 22.9 (65.7)
Realized investment (gains) losses (9.6) (6.0) (9.0) 76.5
- -----------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) operating activities 92.6 127.5 (17.1) 127.3
- -----------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Sale (purchase) of short-term investments - net 42.4 49.4 (10.1) (18.8)
Sale or maturity of investments
Fixed maturities - held to maturity:
Maturities - - - 3.9
Calls and prepayments - - - 60.9
Sales - - - -
Fixed maturities - available for sale
Maturities 203.4 201.5 46.1 35.0
Calls and prepayments 237.2 353.5 101.0 58.6
Sales 83.3 452.0 115.8 1,700.3
All other investments 129.7 177.3 44.9 124.6
Purchase of investments:
Fixed maturities - held to maturity - - - -
Fixed maturities - available for sale (895.1) (1,279.5) (144.1) (1,950.7)
All other investments (20.3) (39.5) (65.5) (183.5)
Sale (purchase) of property and equipment (2.3) - (0.2) (0.8)
- -----------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) investing activities (221.7) (85.3) 87.9 (170.5)
Cash flows from financing activities:
Capital contribution - - 2.8 -
Cash dividends to stockholder - - (40.0) (6.0)
Change in cash overdrafts 6.8 (12.7) 28.8 -
Interest sensitive life, annuity and investment
contract deposits 1,523.7 1,275.4 301.9 1,059.5
Interest sensitive life, annuity and investment
contract withdrawals (1,406.9) (1,305.6) (358.8) (1,031.7)
- -----------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) financing activities 123.6 (42.9) (65.3) 21.8
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash (5.5) (0.7) 5.5 (21.4)
Cash at beginning of period 6.4 7.1 1.6 23.0
- -----------------------------------------------------------------------------------------------------------------------------------
Cash at end of period $ 0.9 6.4 7.1 1.6
===================================================================================================================================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA & SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
(1) Summary of Significant Accounting Principles and Practices
The financial results included in this report are stated in conformity with
generally accepted accounting principles and are unaudited but include
normal recurring adjustments considered necessary for a fair presentation
of the results for such periods. These interim figures are not necessarily
indicative of results for a full year.
Refer to the consolidated financial statements and notes in the audited
financial statements for the year ended December 31, 1996 for additional
details of Life of Virginia's financial position, as well as a description
of the accounting policies which have continued without change. The details
included in notes have not changed except as a result of normal
transactions in the interim.
<PAGE>
[KPMG PEAT MARWICK LETTERHEAD]
Suite 1900
1021 East Cary Street
Richmond, VA 23219-4023
INDEPENDENT AUDITORS' REPORT
Board of Directors
The Life Insurance Company of Virginia
We have audited the accompanying consolidated balance sheets of The Life
Insurance Company of Virginia (an indirect wholly-owned subsidiary of General
Electric Capital Corporation) and subsidiaries as of December 31, 1996, and the
related consolidated statements of income, stockholders' equity, and cash flows
for the nine months ended December 31, 1996. We have also audited the
preacquisition statements of income, stockholders' equity and cash flows for the
three months ended March 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. The accompanying
financial statements of the Life Insurance Company of Virginia as of and for the
years ended December 31, 1995 and 1994, were audited by other auditors whose
report, dated February 8, 1996 on those financial statements included an
explanatory paragraph that described the change in the company's method of
accounting for certain investments.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1996 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Life
Insurance Company of Virginia and subsidiaries as of December 31, 1996, and the
results of their operations and their cash flows for the nine month period ended
December 31, 1996 and the preacquisition three month period ended March 31, 1996
in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, effective April
1, 1996, General Electric Capital Corporation acquired all of the outstanding
stock of The Life Insurance Company of Virginia in a business combination
accounted for as a purchase. As a result of the acquisition, the consolidated
financial information for the periods after the acquisition is presented on a
different cost basis than that for the periods before the acquisition and,
therefore, is not comparable.
/s/ KPMG PEAT MARWICK LLP
January 15, 1997
<PAGE>
[LETTERHEAD OF ERNST & YOUNG LLP]
Report of Independent Auditors
Board of Directors
The Life Insurance Company of Virginia
We have audited the accompanying consolidated statement of financial position of
The Life Insurance Company of Virginia and subsidiaries as of December 31, 1995,
and the related consolidated statements of income, stockholder's equity, and
cash flows for each of the two years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The Life Insurance
Company of Virginia and subsidiaries at December 31, 1995, and the consolidated
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Note 2, the Company changed its method of accounting for
certain investments in 1994.
/s/ Ernst & Young LLP
Richmond, Virginia
February 8, 1996
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
(in millions)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Preacquisition
ASSETS 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments:
Fixed maturities:
Available for sale - at fair value; (amortized cost:
December 31, 1996 - $5,102.2; 1995 - $4,267.2) $ 5,142.7 4,411.0
Equity securities - at fair value
Common stocks (cost: December 31, 1996 - $31.6; 1995 - $31.5) 34.7 35.4
Preferred stocks (cost: December 31, 1996 - $123.5; 1995 - $102.2) 130.8 121.5
Mortgage loans on real estate (net of reserve for losses:
December 31, 1996 - $20.8; 1995 - $23.6) 585.4 592.5
Real estate (net of accumulated depreciation: December 31, 1996 -
$4.4; 1995 - $5.6) 19.4 36.6
Policy loans 179.5 151.7
Short-term investments 42.4 81.7
- --------------------------------------------------------------------------------------------------------------------
Total investments 6,134.9 5,430.4
- --------------------------------------------------------------------------------------------------------------------
Cash 6.4 1.6
Receivables:
Premiums and other 21.0 13.5
Accrued investment income 116.6 72.3
Receivable from affiliates, net - 558.4
- --------------------------------------------------------------------------------------------------------------------
Total receivables 137.6 644.2
Deferred policy acquisition costs 70.3 363.9
Goodwill (net of accumulated amortization: December 31, 1996 - $5.0) 125.4 -
Present value of future profits
(net of accumulated amortization: December 31, 1996 - $45.2; 419.2 32.6
1995 - $32.5)
Property and equipment at cost
(net of accumulated depreciation: December 31, 1996 - $1.7; 1.7 3.7
1995 - $18.4)
Deferred income tax benefit 72.9 -
Other assets 12.3 65.9
Assets held in separate accounts 2,762.7 2,019.6
- --------------------------------------------------------------------------------------------------------------------
Total assets 9,743.4 8,561.9
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
December 31, 1996 and 1995
(in millions, except share data)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Preacquisition
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Policy liabilities:
Future policy benefits $ 518.3 472.4
Policy and contract claims 69.1 31.7
Unearned and advance premiums 0.1 0.3
Other policyholder funds 5,094.4 5,013.9
- --------------------------------------------------------------------------------------------------------------------
Total policy liabilities 5,681.9 5,518.3
General liabilities:
Payable to affiliate, net 8.8 -
Commissions and general expenses 46.8 12.8
Current income taxes 45.4 9.5
Deferred income taxes - 75.5
Other liabilities 192.2 104.3
Liabilities related to separate accounts 2,762.7 2,019.6
- --------------------------------------------------------------------------------------------------------------------
Total liabilities 8,737.8 7,740.0
- --------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENT LIABILITIES
- --------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock - $1,000 par value:
Authorized, issued and outstanding: 4,000 shares 4.0 4.0
Paid-in additional capital 928.1 749.1
Net unrealized investment gains 19.4 103.1
Retained earnings (deficit) 54.1 (34.3)
- --------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,005.6 821.9
- --------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity 9,743.4 8,561.9
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
Consolidated Statements of Income
For the periods from April 1, 1996 to December 31, 1996 and from January 1, 1996
to March 31, 1996, and the years ended December 31, 1995 and 1994 (in millions)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Preacquisition
-----------------------------------------------
Nine months Three months
ended ended Year ended Year ended
December 31, March 31, December 31, December 31,
1996 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
REVENUE
Premiums and policy fees $ 154.7 92.4 179.3 218.8
Separate account fees 23.1 5.9 17.7 11.3
Net investment income (note 2) 334.4 112.0 402.1 490.6
Realized investment gains (losses) (note 2) 6.0 9.0 (76.5) (25.8)
Other income 0.6 1.0 2.8 8.5
- -----------------------------------------------------------------------------------------------------------------------------
Total revenue earned 518.8 220.3 525.4 703.4
- -----------------------------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Benefits to policyholders 326.4 166.0 372.9 477.1
Commissions and general expenses 53.2 28.8 43.7 75.7
Amortization of intangibles 50.1 0.6 3.2 5.1
Amortization of deferred policy acquisition costs 3.2 6.0 39.3 57.1
- -----------------------------------------------------------------------------------------------------------------------------
Total benefits and expenses 432.9 201.4 459.1 615.0
INCOME BEFORE INCOME TAX 85.9 18.9 66.3 88.4
Provision for income tax (note 3)
Current expense (benefit) 39.7 (3.8) 37.9 21.0
Deferred expense (benefit) (7.9) 10.8 (10.8) (5.7)
- -----------------------------------------------------------------------------------------------------------------------------
31.8 7.0 27.1 15.3
NET INCOME (LOSS) $ 54.1 11.9 39.2 73.1
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For the periods from April 1, 1996 to December 31, 1996 and from January 1, 1996
to March 31, 1996, and the years ended December 31, 1995 and 1994 (in millions)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Preacquisition
----------------------------------------------
Nine months Three months
ended ended Year ended Year ended
December 31, March 31, December 31, December 31,
1996 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCK
$1,000 par value common stock, authorized,
issued and outstanding 4,000 in 1996,
1995 and 1994)
Balance at beginning and end of period $ 4.0 4.0 4.0 4.0
PAID-IN ADDITIONAL CAPITAL
Balance at beginning of period 818.4 749.1 704.1 704.1
Adjustment to reflect purchase method (note 1) 109.7 - - -
Capital contribution from parent (notes 4, 7) - 69.3 45.0 -
- -------------------------------------------------------------------------------------------------------------------
Balance at end of period 928.1 818.4 749.1 704.1
NET UNREALIZED INVESTMENT GAINS (LOSSES)
Balance at beginning of period 11.9 103.1 (97.5) 23.6
Adjustment to reflect purchase method
(note 1) (11.9) - - -
Effect of change in accounting principles
at January 1 (note 2) - - - 25.1
Net unrealized investment gains (losses) 19.4 (91.2) 200.6 (146.2)
- -------------------------------------------------------------------------------------------------------------------
Balance at end of period 19.4 11.9 103.1 (97.5)
NET FOREIGN EXCHANGE GAINS (LOSSES)
Balance at beginning of period - - (3.0) (2.3)
Net foreign exchange gains (losses) - - 3.0 (0.7)
- -------------------------------------------------------------------------------------------------------------------
Balance at end of period - - - (3.0)
RETAINED EARNINGS (DEFICIT)
Balance at beginning of period (22.4) (34.3) 159.8 126.7
Adjustment to reflect purchase method
(note 1) 22.4 - - -
Net income 54.1 11.9 39.2 73.1
Dividends to stockholder - - (40.0) (40.0)
Stock dividend to affiliate (note 7) - - (193.3) -
- -------------------------------------------------------------------------------------------------------------------
Balance at end of period 54.1 (22.4) (34.3) 159.8
- -------------------------------------------------------------------------------------------------------------------
Stockholders' equity at end of period $ 1,005.6 811.9 821.9 767.4
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the periods from April 1, 1996 to December 31, 1996 and from January 1, 1996
to March 31, 1996, and the years ended December 31, 1995 and 1994 (in millions)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Preacquisition
-------------------------------------------
Nine months Three months
ended ended Year ended Year ended
December 31, March 31, December 31, December 31,
1996 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 54.1 11.9 39.2 73.1
Adjustments to reconcile net income to cash provided by
(used in) operating activities:
Change in policy liabilities 53.5 (32.8) 114.2 331.4
Change in accrued investment income (37.6) 4.1 (2.1) 1.8
Deferred policy acquisition costs (74.9) (22.2) (76.1) (91.8)
Amortization of deferred policy acquisition costs 3.2 6.0 39.3 57.1
Amortization of intangibles 50.1 0.6 3.2 5.1
Other amortization and depreciation 7.3 1.4 (1.2) 2.3
Premiums and operating receivables, commissions and general
expenses, income taxes, other assets and other liabilities 77.8 22.9 (65.7) (139.7)
Realized investment (gains) losses (6.0) (9.0) 76.5 25.8
- -----------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) operating activities 127.5 (17.1) 127.3 265.1
- -----------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Sale (purchase) of short-term investments - net 49.4 (10.1) (18.8) (0.3)
Sale or maturity of investments
Fixed maturities - held to maturity:
Maturities - - 3.9 50.8
Calls and prepayments - - 60.9 727.5
Sales - - - -
Fixed maturities - available for sale
Maturities 201.5 46.1 35.0 50.4
Calls and prepayments 353.5 101.0 58.6 269.1
Sales 452.0 115.8 1,700.3 444.7
All other investments 177.3 44.9 124.6 231.1
Purchase of investments:
Fixed maturities - held to maturity - - - (734.0)
Fixed maturities - available for sale (1,279.5) (144.1) (1,950.7) (1,018.5)
All other investments (39.5) (65.5) (183.5) (357.1)
Sale (purchase) of property and equipment - (0.2) (0.8) (1.8)
- -----------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) investing activities (85.3) 87.9 (170.5) (338.1)
Cash flows from financing activities:
Capital contribution - 2.8 - -
Cash dividends to stockholder - (40.0) (6.0) (20.0)
Change in cash overdrafts (12.7) 28.8 - -
Interest sensitive life, annuity and investment contract deposits 1,275.4 301.9 1,059.5 1,455.5
Interest sensitive life, annuity and investment contract withdrawals (1,305.6) (358.8) (1,031.7) (1,362.6)
- -----------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) financing activities (42.9) (65.3) 21.8 72.9
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash (0.7) 5.5 (21.4) (0.1)
Cash at beginning of period 7.1 1.6 23.0 23.1
- -----------------------------------------------------------------------------------------------------------------------------------
Cash at end of period $ 6.4 7.1 1.6 23.0
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA & SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
===============================================================================
(1) SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND PRACTICES
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been
prepared in conformity with generally accepted accounting principles
(GAAP) and include the accounts of The Life Insurance Company of
Virginia and its subsidiaries ("Life of Virginia" or "Company").
Subsidiaries include Globe Life Insurance Company and Assigned
Settlements Inc. at December 31, 1994 and only Assigned Settlements
Inc. at December 31, 1996 and 1995. All material intercompany
accounts and transactions have been eliminated.
Prior to April 1, 1996 Combined Insurance Company of America
("CICA") owned 100% or 4,000 shares of Life of Virginia. CICA is a
wholly-owned subsidiary of AON Corporation (AON). On April 1, 1996,
CICA sold 100% of the issued and outstanding shares of Life of
Virginia to General Electric Capital Corporation ("GE Capital").
Immediately thereafter, 80% was contributed to General Electric
Capital Assurance Company (the "Parent"). On December 31, 1996, the
remaining 20% was contributed to General Electric Life Insurance
Group, Inc. ("GELIC").
Life of Virginia primarily sells variable annuities and universal
life insurance to customers throughout most of the United States.
Life of Virginia distributes variable annuities primarily through
stockbrokers and universal life insurance primarily through career
agents and independent brokers. Life of Virginia is also engaged in
the sale of traditional individual and group life products and
guaranteed investment contracts. Approximately 34%, 43% and 46% of
premium and annuity consideration collected, in 1996, 1995, and
1994, respectively, came from customers residing in the South
Atlantic region of the United States.
Although the Company markets its products through numerous
distributors, approximately 21.2% and 13.8% of the Company's sales
in 1996 and 1995, respectively, have been through two specific
national stockbrokers. Loss of all or a substantial portion of the
business provided by these stockbrokers could have a material
adverse effect on the business and operations of the Company. The
Company does not believe, however, that the loss of such business
would have a long-term adverse effect because of the Company's
competitive position in the marketplace and the availability of
business from other distributors.
Certain 1995 and 1994 amounts have been reclassified to conform to
1996 presentation.
PURCHASE ACCOUNTING METHOD
Upon acquisition of Life of Virginia by GE Capital, Life of Virginia
restated its financial statements in accordance with the purchase
method of accounting which allocates the net purchase price for Life
of Virginia and its subsidiaries of $932.1 million according to the
fair values of the acquired assets and liabilities, including the
estimated present value of future profits. These allocated values
were dependent upon policies in force and market conditions at the
time of closing.
(Continued)
7
<PAGE>
<TABLE>
<CAPTION>
============================================================================
(1) CONTINUED
These allocations are summarized below:
(In millions) April 1, 1996
- ----------------------------------------------------------------------------
<S> <C>
Assets acquired:
Cash and investments (including mortgages) $ 6,006.2
Goodwill 130.3
Present value of future profits 484.1
Assets held in separate accounts 2,096.6
Other assets 194.2
- ---------------------------------------------------------------------------------------------------------------
Total $ 8,911.4
- ---------------------------------------------------------------------------------------------------------------
Liabilities assumed:
Policyholder liabilities $ 5,658.7
Other liabilities 224.0
Liabilities related to separate accounts 2,096.6
- ---------------------------------------------------------------------------------------------------------------
Total 7,979.3
- ---------------------------------------------------------------------------------------------------------------
Adjusted purchase price $ 932.1
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
In addition to revaluing all material tangible assets and liabilities to
their respective estimated market values as of the closing date of the
sale, Life of Virginia also recorded in its financial statements the
excess of cost over fair value of net assets acquired (goodwill) as well
as the present value of future profits to be derived from the purchased
business. These amounts were determined in accordance with the purchase
method of accounting. This new basis of accounting resulted in an
increase in stockholders' equity of $120.2 million in 1996 reflecting the
application of the purchase method of accounting. The Company's
consolidated financial statements subsequent to April 1, 1996 reflect
this new basis of accounting.
All amounts for periods ended before April 1, 1996 are labeled
"Preacquisition" and are based on the preacquisition historical costs in
accordance with generally accepted accounting principles. The periods
ending after such date are based on fair values at April 1, 1996 and
subsequent costs in accordance with the purchase method of accounting.
PRESENT VALUE OF FUTURE PROFITS
As of April 1, 1996 Life of Virginia established an intangible asset
which represents the "present value of future profits" (PVFP). PVFP
reflects the estimated fair value of the Company's life insurance
business in-force and represents the portion of the cost to acquire the
Company that is allocated to the value of the right to receive future
cash flows from insurance contracts existing at the date of acquisition.
Such value is the present value of the actuarially determined projected
cash flows for the acquired policies discounted at a rate of 15%, the
rate of return required by the Parent to invest in the business being
acquired.
(Continued)
8
<PAGE>
(1) CONTINUED
PVFP is amortized over the estimated contract life of the business
acquired in relation to the present value of estimated gross profits. The
estimated gross profit streams are periodically reevaluated and the
unamortized balance of PVFP adjusted to the amount that would have
existed had the actual experience and revised estimates been known and
applied since inception. The amortization period is the remaining life of
the policies, which ranges from 10 to 30 years from the date of original
policy issue. Based on current assumptions, net amortization of the PVFP
asset, expressed as a percentage, is projected to be 13.3%, 12.1%, 10.9%,
9.7% and 8.3% for the years ended December 31, 1997 through 2001,
respectively. Actual amortization incurred during these years may vary as
assumptions are modified to incorporate actual results.
Prior to April 1, 1996, Life of Virginia's PVFP was calculated in a
similar manner as the PVFP discussed above and related to policies
in-force on April 30, 1986, the date the Company was acquired by Aon.
Under purchase accounting this PVFP was removed.
The projected ending balance of PVFP will be further adjusted to
reflect the impact of unrealized gains or losses on fixed maturities
held as available for sale in the investment portfolios. Such
adjustments are not recorded in the Company's net income but rather as
a credit or charge to stockholders' equity, net of income tax. The
components of PVFP are as follows:
<TABLE>
<CAPTION>
Preacquisition
-------------------------------------------------
Nine months Three months
ended ended Year ended, Year ended
December 31, March 31, December 31, December 31,
(millions) 1996 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S><C>
PVFP - beginning of period $ - 32.6 48.6 53.7
Adjustment related to the purchase
method of accounting 484.0 - - -
Interest added 22.4 0.5 2.1 3.2
Gross amortization, excluding interest (67.5) (1.1) (5.3) (8.3)
Dividend of Globe Life Insurance
Company (note 7) - - (12.8) -
PVFP attributable to unrealized gains (19.7) - - -
- -----------------------------------------------------------------------------------------------------------------
PVFP - end of period $ 419.2 32.0 32.6 48.6
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
GOODWILL
Under the purchase method of accounting, the excess of purchase price
over the fair value of assets and liabilities acquired and PVFP is
established as an asset and referred to as "goodwill." The Company has
elected to amortize goodwill on the straight line basis over a 20 year
period.
(Continued)
9
<PAGE>
(1) CONTINUED
The Company reviews goodwill to determine if events or changes in
circumstances may have affected the recoverability of the outstanding
goodwill as of each reporting period. In the event that the Company
determined that goodwill was not recoverable it would amortize such
amounts as additional goodwill expense in the accompanying financial
statements. As of December 31, 1996, the Company believes that no such
adjustment is necessary.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that could affect the reported amounts of assets and
liabilities as well as the disclosure of contingent assets or liabilities
at the date of the financial statements. As a result, actual results
reported as revenue and expenses could differ from the estimates reported
in the accompanying financial statements. As further discussed in the
accompanying notes to the consolidated financial statements, significant
estimates and assumptions affect deferred acquisition costs, PVFP, future
life policy benefits, provisions for real estate-related losses and
related reserves, other-than-temporary declines in values for fixed
maturities, the valuation allowance for deferred income taxes and the
calculation of fair value disclosures for certain financial instruments.
DEFERRED TAX ASSETS AND LIABILITIES
Pursuant to the acquisition on April 1, 1996, GE Capital, the Company's
ultimate parent, and Aon Corporation, the Company's previous ultimate
parent, agreed to file an election to treat the acquisition of Life of
Virginia as an asset acquisition under the provisions of Internal Revenue
Code Section 338(h)(10). As a result of that election, the tax basis of
the Company's assets as of the date of acquisition were revalued based
upon fair market values. The principal effect of the election was to
establish a tax basis of intangibles of approximately $348 million for
the value of the business acquired that is amortizable for tax purposes
over 10-15 years.
Deferred income taxes have been provided for the effects of temporary
differences between financial reporting and tax bases of assets and
liabilities and have been measured using the enacted marginal tax rates
and laws that are currently in effect.
RECOGNITION OF PREMIUM REVENUE AND RELATED EXPENSES
For universal life-type and investment products, generally there is no
requirement for payment of premium other than to maintain account values
at a level sufficient to pay mortality and expense charges. Consequently,
premiums for universal life-type policies and investment products are not
reported as revenue, but as deposits. Policy fee revenue for universal
life-type policies and investment products consists of charges for the
cost of insurance, policy administration, and surrenders assessed during
the period. Expenses include interest credited to policy account balances
and benefit claims incurred in excess of policy account balances.
(Continued)
10
<PAGE>
(1) CONTINUED
In general, for accident and health products, premiums collected are
reported as earned proportionately over the period covered by the
policies. For all other life products, premiums are recognized as revenue
when due. Benefits and related expenses associated with the premium
revenues are charged to expense proportionately over the lives of the
policies through a provision for future policy benefit liabilities and
through deferral and amortization of deferred policy acquisition costs.
REINSURANCE
Reinsurance premiums, commissions, and expense reimbursements on
reinsured business are accounted for on a basis consistent with those
used in accounting for the original policies issued and the terms of the
reinsurance contracts. Premiums and benefits ceded to other companies
have been reported as a reduction of premium revenue and benefits.
Expense reimbursements received in connection with reinsurance ceded have
been accounted for as a reduction of the related policy acquisition costs
or, to the extent such reimbursements exceed the related acquisition
costs, as other revenue. All reinsurance receivables and prepaid
reinsurance premium amounts are reported as assets.
INVESTMENTS
Fixed maturities are carried at fair value. The amortized cost of fixed
maturities is adjusted for amortization of premiums and accretion of
discounts to maturity that are included in net investment income.
Included in fixed maturities are investments in collateralized mortgage
obligations ("CMOs"). Premiums and discounts arising from the purchase of
CMOs are treated as yield adjustments and included in net investment
income. Prepayment assumptions are obtained from dealer surveys. The
retrospective adjustment method is used to adjust for prepayment
activity.
Short-term investments are carried at amortized cost which approximates
market value. Equity securities are valued at fair value. Mortgage loans
are carried at their unpaid balance, net of unamortized discounts and
reserves. Real estate is carried generally at cost less accumulated
depreciation. Policy loans are carried at unpaid principal balance. Other
long-term investments are carried generally at cost.
Realized investment gains or losses are computed using specific costs of
securities sold. Unrealized gains and temporary unrealized losses on
fixed maturities available for sale and equity securities are excluded
from income and are recorded directly to stockholders' equity, net of
related deferred income taxes and adjustments to amortization of deferred
policy acquisition costs and present value of future profits.
(Continued)
11
<PAGE>
(1) CONTINUED
Investments that have declines in fair value below cost, that are judged
to be other than temporary, are written down to estimated fair values and
reported as realized investment losses. Additionally, reserves for
mortgage loans and certain other long-term investments are established
based on an evaluation of the respective investment portfolio, past
credit loss experience, and current economic conditions. Writedowns and
the change in reserves are included in realized investment gains and
losses in the statements of income. In general, the Company ceases to
accrue investment income when interest or dividend payments are in
arrears.
Life of Virginia measures "impaired" loans at the present value of the
loans discounted cash flow using the effective interest rate of the
original loan as the discount rate. Impaired loans are loans for which it
is probable that the Company will be unable to collect all amounts due
according to terms of the original contractual terms of the loan
agreement. This definition includes, among other things, leases, or
larger groups of small-homogenous loans, and therefore applies
principally to the Company's commercial loans.
Accounting policies relating to interest rate swaps are discussed in
Note 9.
DEFERRED POLICY ACQUISITION COSTS
Costs of acquiring new business, principally commissions, underwriting
and sales expenses that vary with and are primarily related to the
production of new business, are deferred. For non-universal life-type
products, amortization of deferred acquisition costs are related to and
based on the present value of expected premium revenues on the policies.
Periodically amortization is adjusted to reflect current withdrawal
experience. Expected premium revenues are estimated by using the same
assumptions used in estimating future policy benefits.
Deferred policy acquisition costs related to universal life-type policies
and investment products are amortized in relation to the present value of
expected gross profits on the policies. Such amortization is adjusted
periodically to reflect differences in actual and assumed gross profits.
To the extent that unrealized gains or losses on available for sale
securities would result in an adjustment to deferred policy acquisition
costs amortization, had those gains or losses actually been realized, the
related deferred policy acquisition cost adjustments are recorded along
with the unrealized gains or losses included in stockholders' equity with
no effect on net income.
(Continued)
12
<PAGE>
(1) CONTINUED
The components of deferred acquisition costs are as follows:
<TABLE>
<CAPTION>
Preacquisition
---------------------------------------------------
Nine months Three months
ended ended Year ended Year ended
December 31, March 31, December 31, December 31,
(millions) 1996 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
<S><C>
Deferred acquisition costs - $ - 363.9 388.1 413.2
beginning of period
Commissions and expenses deferred 74.9 22.2 76.1 108.8
Amortization (3.2) (6.0) (39.3) (57.1)
Credit Life and Health cession (note 4) - - - (107.0)
Dividend of Globe Life Insurance
Company (note 7) - - (22.8) -
Deferred acquisition costs attributable
to unrealized gains (losses) (1.4) 17.9 (38.2) 30.2
- --------------------------------------------------------------------------------------------------------------------
Deferred acquisition costs - end of period $ 70.3 398.0 363.9 388.1
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment are generally depreciated using the straight- line
method over their estimated useful lives. As a result of purchase
accounting fully depreciated property and equipment were removed.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate fair values
for financial instruments. The carrying amounts in the consolidated
statements of financial position for cash and short-term investments
approximate their fair values. Fair values for fixed maturity securities
and equity securities are based on quoted market prices or, if they are
not actively traded, on estimated values obtained from independent
pricing services or in the case of private placements, are estimated by
discounted expected future cash flows using a current market rate
applicable to the yield credit quality, call features and maturity of the
investments, as applicable. The fair values for mortgage loans and policy
loans are estimated using discounted cash flow analyses, using interest
rates currently being offered for similar loans to borrowers with similar
credit ratings. Fair values of derivatives are based on quoted prices for
exchange-traded instruments or the cost to terminate or offset with other
contracts.
Fair values for liabilities for investment-type contracts are estimated
using discounted cash flow calculations based on interest rates currently
being offered for similar contracts with maturities consistent with those
remaining for the contracts being valued.
(Continued)
13
<PAGE>
(1) CONTINUED
SEPARATE ACCOUNT BUSINESS
The assets and liabilities of the separate accounts represent designated
funds of group pension, variable life and annuity policyholders and are
not guaranteed or supported by other general investments of the Company.
The Company earns mortality and expense risk fees from the separate
accounts and assesses withdrawal charges in the event of early
withdrawals. The assets are carried at fair value and are offset by
liabilities that represent such policyholders' equity in those assets.
The net investment income generated from these assets is not included in
the consolidated statements of income.
The Company has periodically transferred capital to the separate accounts
to provide for the initial purchase of investments in the new portfolios.
As of December 31, 1996, approximately $29.3 million of the Company's
common stock investment related to its capital investments in the
separate accounts.
FUTURE POLICY BENEFIT LIABILITIES AND UNEARNED PREMIUMS AND POLICY AND
CONTRACT CLAIMS
Future policy benefit liabilities on non-universal life-type and accident
and health products have been provided on the net level premium method.
The liabilities are calculated based on assumptions as to investment
yield, mortality, morbidity and withdrawal rates that were determined at
the date of issue or acquisition of Life of Virginia by the Parent, and
provide for possible adverse deviations. Interest assumptions are graded
and range from 7.4% to 6.5%.
Withdrawal assumptions are based principally on experience and vary by
plan, year of issue, and duration.
Policyholder liabilities on universal life-type and investment products
are generally based on policy account values. Interest crediting rates
for these products range from 8.6% to 4.5%.
Unearned premiums generally are calculated using the pro rata method
based on gross premiums. However, in the case of credit life and credit
accident and health, the unearned premiums are calculated such that the
premiums are earned over the period of risk in a reasonable relationship
to anticipated claims.
Policy and contract claim liabilities represent estimates for reported
claims, as well as provisions for losses incurred, but not yet reported.
These claim liabilities are based on historical experience and are
estimates of the ultimate amount to be paid when the claims are settled.
Changes in the estimated liability are reflected in income as the
estimates are revised.
(Continued)
14
<PAGE>
(1) CONTINUED
FOREIGN CURRENCY TRANSLATION
Foreign revenues and expenses are translated at average exchange rates.
Foreign assets and liabilities are translated at year-end exchange rates.
Unrealized foreign exchange gains or losses on translation are generally
reported in stockholders' equity. No tax effect was taken into
consideration for unrealized losses.
(2) INVESTED ASSETS AND RELATED INCOME
Under purchase accounting, the market value of Life of Virginia's fixed
maturity investments as of April 1, 1996, became Life of Virginia's new
cost basis in such investments. The difference between the new cost basis
and original par is then amortized against investment income over the
remaining effective lives of the fixed maturity investments. As a result
of the interest rate environment as of April 1, 1996, the market value of
Life of Virginia's fixed maturity investments was approximately $37.4
million lower than original amortized cost.
The Company's investments in debt and equity securities are considered
available for sale and are carried at estimated fair value, with the
aggregate unrealized appreciation or depreciation being recorded as a
separate component of stockholders' equity. The carrying value and
amortized cost of investments at December 31, 1996 and 1995 were as
follows:
<TABLE>
<CAPTION>
December 31, 1996
----------------- --------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(millions) Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------------------------
<S><C>
Available for sale:
U.S. government and agencies $ 65.5 2.1 - 67.6
States and political subdivisions 2.1 - - 2.1
Foreign governments 178.2 5.6 - 183.8
Corporate securities 3,092.1 29.0 (19.6) 3,101.5
Mortgage-backed securities 1,764.3 29.7 (6.3) 1,787.7
- ---------------------------------------------------------------------------------------------------------------------
Total fixed maturities 5,102.2 66.4 (25.9) 5,142.7
Total equity securities 155.1 11.2 (0.8) 165.5
- ---------------------------------------------------------------------------------------------------------------------
Total available for sale $ 5,257.3 77.6 (26.7) 5,308.2
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
15
<PAGE>
(2) CONTINUED
<TABLE>
<CAPTION>
Preacquisition
----------------- --------------------------------------------------
December 31, 1995
--------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(millions) Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------------------------
<S><C>
Available for sale:
U.S. government and agencies $ 60.7 1.5 - 62.2
States and political subdivisions 2.2 0.2 - 2.4
Foreign governments 18.6 0.6 - 19.2
Corporate securities 2,478.6 140.2 (9.9) 2,608.9
Mortgage-backed securities 1,596.3 19.6 (16.9) 1,599.0
Other fixed maturities 110.8 8.5 - 119.3
- ---------------------------------------------------------------------------------------------------------------------
Total fixed maturities 4,267.2 170.6 (26.8) 4,411.0
Total equity securities 133.7 26.2 (3.0) 156.9
- ---------------------------------------------------------------------------------------------------------------------
Total available for sale $ 4,400.9 196.8 (29.8) 4,567.9
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The amortized cost and fair value of fixed maturities, by contractual
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
December 31, 1996
---------------------------------------------
Amortized Fair
(millions) Cost Value
- ----------------------------------------------------------------------------------------------------------------------
<S><C>
Due in one year or less $ 82.1 82.5
Due after one year through five years 961.8 902.8
Due after five years through ten years 1,626.5 1,671.5
Due after ten years 667.5 698.2
Mortgage-backed securities 1,764.3 1,787.7
- ----------------------------------------------------------------------------------------------------------------------
$ 5,102.2 5,142.7
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The cumulative effect on January 1, 1994 of adopting Statement No. 115
increased stockholders equity by $25.1 million (net of adjustments to
deferred policy acquisition costs of $14.0 million and deferred income
taxes of $20.2 million) to reflect the net unrealized fixed maturities
holding gains on securities previously carried at amortized cost; there
was no effect on net income as a result of the adoption.
(Continued)
16
<PAGE>
(2) CONTINUED
On November 30, 1995, Life of Virginia reclassified all held to maturity
securities to available for sale. The amortized cost and related
unrealized gains for the securities reclassified was $2,698.3 million and
$50.9 million, respectively.
Securities on deposit for regulatory authorities as required by law
amounted to $4.5 million at December 31, 1996 and 1995.
Life of Virginia had $12.6 million and $34.2 million of non-income
producing investments on December 31, 1996 and December 31, 1995,
respectively.
Life of Virginia's "impaired" loans consist of loans requiring allowances
for loan losses of .2 and 12.2 as of December 31, 1996 and 1995,
respectively. Interest income earned on these loans while they were
considered impaired was 1.2 and 5.5 as of December 31, 1996 and 1995,
respectively.
Life of Virginia's mortgage and real estate portfolio is distributed by
geographic location and type. However, Life of Virginia has concentration
exposures in certain regions and in certain types as shown in the
following two tables.
Geographic distribution as of December 31, 1996:
<TABLE>
<CAPTION>
Mortgage Real estate
- -------------------------------------------------------------------------- ----------------------------------------
<S><C>
South Atlantic 48.3% 75.2%
East North Central 14.6% 1.4%
Mountain 12.7% -
West South Central 11.2% -
Pacific 7.3% 8.1%
Middle Atlantic 4.5% 15.3%
East South Central 1.4% -
- -------------------------------------------------------------------------------------------------------------------
Total 100.0% 100.0%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
17
<PAGE>
(2) CONTINUED
Type distribution as of December 31, 1996:
<TABLE>
<CAPTION>
Mortgage Real estate
- -------------------------------------------------------------------------- ----------------------------------------
<S><C>
Office building 23.7% 66.4%
Retail 22.8% 18.4%
Industrial 21.9% -
Apartments 19.2% -
Other commercial 8.2% 15.2%
Hotel/motel 4.2% -
- -------------------------------------------------------------------------------------------------------------------
Total 100.0% 100.0%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The components of net unrealized investment gains (losses) are as
follows:
<TABLE>
<CAPTION>
Preacquisition
---------------------------------------------------
Nine months Three months
ended ended Year ended Year ended
December 31, March 31, December 31, December 31,
(millions) 1996 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S><C>
Gross unrealized investment gains (losses)
Fixed maturities available for sale $ 40.5 2.8 143.8 (154.9)
Equity securities 10.4 5.8 23.2 (2.9)
PVFP (19.7) - - -
Deferred policy acquisition costs (1.4) 9.9 (8.0) 30.2
- -----------------------------------------------------------------------------------------------------------------------
Net unrealized before deferred tax $ 29.8 18.5 159.0 (127.6)
Unrealized income tax benefit (expense) (10.4) (6.6) (55.9) 30.1
- -----------------------------------------------------------------------------------------------------------------------
Net unrealized $ 19.4 11.9 103.1 (97.5)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
18
<PAGE>
(2) CONTINUED
The components of net investment income are as follows:
<TABLE>
<CAPTION>
Preacquisition
----------------------------------------------------
Nine months Three months
ended ended Year ended Year ended
December 31, March 31, December 31, December 31,
(millions) 1996 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S><C>
Fixed maturities $ 276.8 93.1 332.8 404.1
Equity securities 8.7 4.2 10.8 25.2
Mortgage loans on real estate 41.3 13.5 49.8 49.9
Short-term investments 3.1 0.5 3.5 3.8
Other investments 9.9 3.0 13.2 18.0
- -----------------------------------------------------------------------------------------------------------------------
Gross investment income 339.8 114.3 410.1 501.0
Investment expenses (5.4) (2.3) (8.0) (10.4)
- -----------------------------------------------------------------------------------------------------------------------
Net investment income $ 334.4 112.0 402.1 490.6
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Realized gains (losses) on investments are as follows:
<TABLE>
<CAPTION>
Preacquisition
---------------------------------------------------
Nine months Three months
ended ended Year ended Year ended
December 31, March 31, December 31, December 31,
(millions) 1996 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S><C>
Fixed maturities:
Gross gains $ 0.6 0.5 12.9 8.6
Gross losses (0.7) (1.4) (90.2) (39.2)
Fixed maturities held to maturity:
Gross gains - - 1.1 11.3
Gross losses - - (13.8) (9.8)
Equity securities 6.0 10.3 5.6 (1.9)
Mortgage loans on real estate - (0.4) 2.3 9.6
Other 0.1 - 5.6 (4.4)
- -----------------------------------------------------------------------------------------------------------------------
Total before tax 6.0 9.0 (76.5) (25.8)
Less applicable tax (2.3) (1.9) 26.8 9.0
- -----------------------------------------------------------------------------------------------------------------------
Total $ 3.7 7.1 (49.7) (16.8)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
19
<PAGE>
(2) CONTINUED
The changes in net unrealized gains (losses) on fixed maturities and
equity security investments are as follows:
<TABLE>
<CAPTION>
Preacquisition
---------------------------------------------------
Nine months Three months
ended ended Year ended Year ended
December 31, March 31, December 31, December 31,
(millions) 1996 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S><C>
Fixed maturities:
Available for sale $ 40.5 (141.0) 298.7 (214.2)
Held to maturity - - 233.7 (351.0)
Equity securities 10.4 (17.4) 26.1 (38.8)
- -----------------------------------------------------------------------------------------------------------------------
Net unrealized investment gains (losses) $ 50.9 (158.4) 558.5 (604.0)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(3) INCOME TAX
Beginning April 1, 1996, Life of Virginia and its subsidiary will be
included in the life insurance company consolidated Federal income tax
return of GECA. Prior to the April 1, 1996, Life of Virginia was included
in the consolidated federal income tax return of Aon and its principal
domestic subsidiaries and in accordance with intercompany policy,
provided taxes on income based on a separate company basis. Amounts
payable or recoverable related to periods before April 1, 1996, are
subject to an indemnification agreement with Aon. As such the Company is
not at risk for any income taxes nor entitled to recoveries related to
those periods.
Income taxes are recorded in the statements of income and directly in
stockholders' equity accounts. Income tax expense (benefit) for the years
ending December 31 was allocated as follows:
<TABLE>
<CAPTION>
Preacquisition
---------------------------------------------------
Nine months Three months
ended ended Year ended Year ended
December 31, March 31, December 31, December 31,
(millions) 1996 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S><C>
Statement of income:
Operating income (excluding
realized investment gains
and losses) $ 29.5 5.1 53.9 24.3
Realized investment gains/losses 2.3 1.9 (26.8) (9.0)
Income tax expense/(benefit)
included in the statement of
income 31.8 7.0 27.1 15.3
Stockholders' equity:
Unrealized gains/(losses) on
securities available for sale 10.4 (49.3) 86.0 (42.4)
- ---------------------------------------------------------------------------------------------------------------------
Total income tax expense/(benefit) $ 42.2 (42.3) 113.1 (27.1)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
20
<PAGE>
(3) CONTINUED
The actual Federal income tax expense differed from the expected tax
expense computed by applying the U.S. Federal statutory rate to income
before income tax expense. A reconciliation of the income tax provisions
based on the statutory corporate tax rate to the provisions reflected in
the consolidated financial statements is as follows:
<TABLE>
<CAPTION>
Preacquisition
-------- -------------------------------------------------------------
Nine months Three months
ended ended Year ended Year ended
December 31, March 31, December 31, December 31,
1996 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S><C>
Statutory tax rate $ 30.1 35.0% $ 6.6 35.0% $ 23.2 35.0% $ 31.0 35.0%
Tax-exempt
investment
income
deductions (1.0) (1.2) - (0.1) (0.1) (0.1) (0.8) (0.9)
Adjustment of prior
year taxes - - - - 3.5 5.3 (11.8) (13.3)
Other - net 2.7 3.2 0.4 2.1 0.5 0.7 (3.1) (3.5)
- -------------------------------------------------------------------------------------------------------------------------
Effective tax rate $ 31.8 37.0% $ 7.0 37.0% $ 27.1 40.9% $ 15.3 17.3%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
21
<PAGE>
(3) CONTINUED
Significant components of Life of Virginia's deferred tax liabilities and
assets are as follows (in millions):
<TABLE>
<CAPTION>
Preacquisition
------------------
December 31, December 31,
1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S><C>
Deferred tax liabilities:
Present value of future profits $ 89.8 -
Policy acquisition costs - 96.9
Employee benefits - 11.0
Unrealized investment gains 10.4 58.7
Other 6.5 35.2
- ----------------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities 106.7 201.8
- ----------------------------------------------------------------------------------------------------------------------
Deferred tax assets:
Insurance reserve amounts 120.4 78.2
Policy acquisition costs 34.3 -
Guaranty fund amounts 10.8 -
Other 14.1 48.1
- ----------------------------------------------------------------------------------------------------------------------
Total deferred tax assets 179.6 126.3
- ----------------------------------------------------------------------------------------------------------------------
Net deferred tax liabilities (assets) $ (72.9) 75.5
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
A valuation allowance is provided when it is more likely than not that
some portion of the deferred tax assets will not be realized. Management
believes the deferred tax assets will be fully realized in the future
based on the expectation of the reversal of existing temporary
differences, anticipated future earnings, and consideration of all other
available evidence. Accordingly, no valuation allowance is established.
The amount of income taxes paid (refund) for nine months ended December
31, 1996, three months ended March 31, 1996, the years ended December 31,
1995 and 1994 was $38.6 million, $(2.4) million, $44.9 million, and $56.7
million, respectively.
(Continued)
22
<PAGE>
(4) REINSURANCE AND CLAIM RESERVES
Life of Virginia is involved in both the cession and assumption of
reinsurance with other companies. In 1996 and 1995, Life of Virginia's
reinsurance consists primarily of long-duration contracts that are
entered into with financial institutions and related party reinsurance.
In 1994, Life of Virginia's reinsurance consisted primarily of
short-duration contracts that were entered into with numerous automobile
dealerships, financial institutions, and related party reinsurance.
Although these reinsurance agreements contractually obligate the
reinsurers to reimburse the Company, they do not discharge the Company
from its primary liabilities and the Company remains liable to the extent
that the reinsuring companies are unable to meet their obligations.
A summary of reinsurance activity is as follows:
<TABLE>
<CAPTION>
Preacquisition
--------------------------------------------------------
Nine months Three months
ended ended Year ended Year ended
December 31, March 31, December 31, December 31,
1996 1996 1995 1994
---------------- ---------------- ---------------- ------------------
Earned Earned Earned Earned
---------------- ---------------- ---------------- ------------------
<S><C>
Direct $ 210.5 77.2 261.5 404.2
Assumed 6.6 35.0 4.3 8.3
Ceded 62.4 19.8 86.5 193.7
- -------------------------------------------------------------------------------------------------------------------
Net premiums 154.7 92.4 179.3 218.8
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Due to the nature of the Company's reinsurance contracts, premiums earned
approximate premiums written.
A significant portion of Life of Virginia's ceded premiums relates to
group life and health premiums. Life of Virginia is the primary carrier
for the State of Virginia employees group life and health plan. By
statute, Life of Virginia must reinsure these risks with other Virginia
domiciled companies who wish to participate.
Incurred losses and loss adjustment expenses are net of reinsurance of
$60.5 million, $17.2 million, $63.1 million and $102.1 million for the
nine months ended December 31, 1996, three months ended March 31, 1996
and the years ended December 31, 1995 and 1994, respectively.
In December 1994, Life of Virginia ceded to CICA $406.6 million of its
guaranteed investment contract liabilities. In conjunction with the
liability cession, Life of Virginia transferred to CICA available for
sale fixed maturities with a fair value of $278.1 million and a cost of
$287.2 million and preferred stock with a fair value of $110.5 million
and a cost of $119.7 million. Included in receivable from affiliates at
December 31, 1995 is $212.6 million which represents the remaining ceded
guaranty investment contract liability.
(Continued)
23
<PAGE>
(4) CONTINUED
In July 1994, Life of Virginia ceded to Union Fidelity Life Insurance
Company ("UFLIC") $280.7 million of its credit life and health reserves
and associated acquisition costs of $107.0 million. In conjunction with
the liability cession, Life of Virginia recognized a $29.1 million loss
which is reflected as a $20.8 million premium ceded and $8.3 million
realized loss on investments.
Premiums, benefits to policyholders, and commissions and general expenses
ceded to UFLIC during the second six months of 1994 amounted to $35.0
million, $14.4 million, and $14.2 million, respectively.
In January 1995, Life of Virginia ceded to CICA $600 million of its
single premium deferred annuity liabilities. In conjunction with the
liability cession, Life of Virginia transferred to CICA available for
sale fixed maturities with a fair value of $436.1 million and cost of
$501.4 million and held to maturity fixed maturities with a fair value of
$81.4 million and a cost of $95.1 million. In addition, $5.5 million of
accrued income related to the assets above was transferred to CICA. This
transaction resulted in a deferred reinsurance gain of $77.0 million, $24
million of which was recognized in 1995. Additionally, Life of Virginia
recognized a $79.0 million realized investment loss. Included in
receivable from affiliates at December 31, 1995 is $357.5 million which
represents the ceded single premium deferred annuity liability of $410.5
million less a deferred reinsurance gain of $53 million.
In connection with the sale of the Company, the following transactions
occurred effective January 1, 1996: single premium deferred annuity
liabilities reinsured with CICA in 1995 were recaptured, guaranteed
investment contract liabilities reinsured with CICA in 1994 were
recaptured, other lines of CICA insurance business inforce were assumed,
and other related liabilities of CICA were assumed. In conjunction with
the recapture and assumption, CICA transferred to Life of Virginia assets
with a fair market value totaling $842.6 million. For the three months
ended March 31, 1996, premiums of $33.9 million, benefits of $46.7
million, commission expense of $10.2 million and a capital contribution
of $69.3 million as a result of various reinsurance transactions. The $53
million deferred reinsurance gain remaining at December 31, 1995 from the
January 1995 single premium deferred annuity cession to CICA was
recognized as a capital contribution. The tables below summarize the
assets and liabilities transferred from CICA to the Company.
(Continued)
24
<PAGE>
(4) CONTINUED
<TABLE>
<CAPTION>
Millions Fair Market Value
- ---------------------------------------------------------------------------------
<S><C>
Assets transferred:
Fixed maturity $ 727.4
Preferred stock 88.2
Policy loans 14.2
Accrued investment income 10.0
Cash 2.8
- ---------------------------------------------------------------------------------
Total 842.6
- ---------------------------------------------------------------------------------
Liabilities recaptured and assumed:
Single premium deferred annuity 410.5
Guaranteed investment contracts 212.6
Universal life contracts 156.6
Individual traditional contracts 33.2
Other lines of business inforce 19.9
Other liabilities 16.5
- ---------------------------------------------------------------------------------
Total 849.3
- ---------------------------------------------------------------------------------
</TABLE>
(5) EMPLOYEE BENEFITS
SAVINGS PLAN
Beginning April 1, 1996, Life of Virginia's salaried and commissioned
employee's participated in a General Electric contributory savings plan.
Provisions made for the savings plan were $.6 million for the nine months
ended December 31, 1996.
Prior to the acquisition on April 1, 1996, Life of Virginia participated
in Aon's contributory savings plan for the benefit of salaried and
commissioned employees. Provisions made for the savings plan were $.3
million, $.8 million and $1.2 million for the three months ended March
31, 1996, and the years ended December 31, 1995 and 1994, respectively.
This plan terminated upon the acquisition of Life of Virginia by GE
Capital.
EMPLOYEE STOCK OWNERSHIP PLAN
Prior to the acquisition on April 1, 1996, Life of Virginia participated
in Aon's leveraged ESOP for the benefit of salaried and certain
commissioned employees. Contributions to the ESOP for the three months
ended March 31, 1996 and the years ended December 31, 1995 and 1994
charged to Life of Virginia's operations amounted to $.1 million, $.5
million and $.6 million, respectively. This plan terminated upon the
acquisition of Life of Virginia by GE Capital.
(Continued)
25
<PAGE>
(5) CONTINUED
PENSION PLAN
Beginning April 1, 1996, Life of Virginia's salaried and commissioned
employee's participated in a General Electric contributory defined
benefit pension plan. Generally, benefits are based on the greater of a
formula recognizing career earnings or a formula recognizing length of
service and final average earnings. Benefit provisions are subject to
collective bargaining. General Electric's funding policy is to contribute
amounts sufficient to meet minimum funding requirements as set forth in
employee benefit and tax laws plus such additional amounts as determined
appropriate. The components of net periodic pension cost and benefit
obligations of the General Electric defined benefit plan are not
separately available for Life of Virginia. In connection with Life of
Virginia's participation in the General Electric contributory defined
benefit pension plan a $.4 million expense was incurred for the nine
months ended December 31, 1996.
Prior to the acquisition on April 1, 1996, Life of Virginia participated
in Aon's non-contributory defined benefit pension plan providing
retirement benefits for salaried employees and certain commissioned
employees based on years of service and salary. Aon's funding policy was
to contribute amounts to the plan sufficient to meet the minimum funding
requirements set forth in the Employee Retirement Income Security Act of
1974, plus such additional amounts as Aon determines to be appropriate
from time to time. The components of net periodic pension cost and
benefit obligations of the Aon defined benefit plan were not separately
available for Life of Virginia. In connection with Life of Virginia's
participation in the Aon defined benefit plan, net pension credits of
$1.2 million, $3.8 million and $3.1 million in the three months ended
March 31, 1996 and the years ended December 31, 1995 and 1994. This plan
terminated upon the acquisition of Life of Virginia by GE Capital.
During 1993, the Aon Pension Plan was amended to include certain
additional amounts of compensation in determining plan benefits and in
1994 to reduce the maximum amount of compensation that can be considered
under the plan as required by law. Further, the Pension Plan was amended
in 1994 to provide increases in benefits to current pensioners.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Beginning April 1, 1996, Life of Virginia's salaried and commissioned
employee's participated in a General Electric retiree health and life
insurance benefit plan. The plan's principally provide health and life
insurance benefits to employees who retire under the General Electric
pension plan with 10 or more years of service. Retirees share in the cost
of their health care benefits. The funding policy for retiree health
benefits is generally to pay covered expenses as they are incurred.
Expenses incurred by Life of Virginia for the nine months ended December
31, 1996 for the retiree health and life insurance benefit plan were $1.3
million.
(Continued)
26
<PAGE>
(5) CONTINUED
Prior to the acquisition on April 1, 1996, Aon sponsored two defined
benefit postretirement health and welfare plans in which Life of Virginia
participated that cover both salaried and nonsalaried employees. One plan
provides medical benefits, prior to and subsequent to Medicare
eligibility, and the other provides life insurance benefits. The
postretirement health care plan is contributory, with retiree
contributions adjusted annually; the life insurance plan is
noncontributory. Both plans are funded on a pay-as-you-go basis. These
plans terminated upon the acquisition of Life of Virginia by GE Capital.
(6) LEASE COMMITMENTS
Life of Virginia has noncancelable operating leases for certain office
space, equipment and automobiles. Future minimum rental payments required
under operating leases that have initial or remaining noncancelable lease
terms in excess of one year at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
(millions) Minimum lease payments
-------------------------------------------------------------------
<S> <C>
1997 $ 1.1
1998 0.8
1999 0.4
2000 0.2
2001 0.1
Later years -
-------------------------------------------------------------------
Total minimum payments required $ 2.6
-------------------------------------------------------------------
</TABLE>
MINIMUM LEASE PAYMENTS
Rental expenses for all operating leases for the nine months ended
December 31, 1996, the three months ended March 31, 1996 and the years
ended December 31, 1995 and 1994 amounted to $2.5 million, $.8 million,
$3.6 million and $5.1 million, respectively.
(7) RELATED PARTY TRANSACTIONS
Life of Virginia pays investment advisory fees and other fees to
affiliates; Parent after April 1, 1996 and Aon previous to that date.
Amounts incurred for these items aggregated $3.2 million, $3.5 million,
$5.8 million and $37.8 million for nine months ended December 31, 1996,
the three months ended March 31, 1996 and the years ended December 31,
1995 and 1994, respectively. Life of Virginia charges affiliates for
certain services and for the use of facilities and equipment which
aggregated $2.0 million, $1.0 million, $10.0 million and $101.2 million
for the nine months ended December 31, 1996, the three months ended March
31, 1996 and the years ended December 31, 1995, and 1994, respectively.
(Continued)
27
<PAGE>
(7) CONTINUED
At December 31, 1996 and 1995, Life of Virginia held investments in
securities of certain affiliates amounting to $2.6 million and $12.6
million, respectively. Amounts included in net investment income related
to these holdings totaled $0.1 million, $0.2 million, $1.0 million and
$3.5 million for the nine months ended December 31, 1996, the three
months ended March 31, 1996 and the years ended December 31, 1995 and
1994, respectively.
In January 1995, Life of Virginia dividended 100% of its Globe Life
Insurance Company ("Globe") common stock to CICA, a subsidiary of Aon. At
December 31, 1994, Globe had assets of $954.9 million, liabilities of
$765.7 million and stockholders' equity of $189.2 million. The fair
market value of this dividend was $193.3 million.
In 1995, Life of Virginia received from CICA, in the form of a capital
contribution, fixed maturities with a fair value of $45.0 million.
In January 1995, Life of Virginia transferred limited partnership
investments with a fair value of $8.0 million and cost of $7.5 million,
common stocks with a fair value of $5.6 million and cost of $3.4 million,
and cash of $6.4 million to pay a $20.0 million dividend declared but not
paid in 1994. A $2.7 million realized investment gain was recorded on
this transfer.
In December 1994, Life of Virginia exchanged common stocks with a fair
value of $61.4 million and cost of $67.1 million for CICA's available for
sale fixed maturities and related accrued income with fair values of
$60.9 million and $.5 million, respectively. Life of Virginia recorded
the fixed maturity securities at CICA's fair value of $60.9 million
resulting in a $5.7 million realized loss that is reflected in the
statement of income.
(8) LITIGATION
Life of Virginia is subject to numerous claims and lawsuits that arise in
the ordinary course of business. In some of these cases the remedies that
may be sought or damages claimed are substantial, including cases that
seek punitive or extraordinary damages. Accruals for these lawsuits have
been provided to the extent that losses are deemed probable and are
estimable. Although the ultimate outcome of these suits cannot be
ascertained and liabilities in indeterminate amounts may be imposed on
Life of Virginia, on the basis of present information, availability of
insurance coverage, and advice received from counsel, it is the opinion
of management that the disposition or ultimate determination of such
claims and lawsuits will not have a material adverse effect on the
consolidated financial position or results of operations of Life of
Virginia.
(Continued)
28
<PAGE>
(9) FINANCIAL INSTRUMENTS
INTEREST RATE RISK MANAGEMENT
Life of Virginia used interest rate swap agreements to manage asset and
liability durations relating to its capital accumulation annuity
business. As of December 31, 1995 and 1994, these swap agreements had the
net effect of lengthening liability durations. Variable rates received on
interest rate swap agreements correlate with crediting rates paid on
outstanding liabilities. The net effect of swap payments is settled
periodically and reported in income. There was no settlement of
underlying notional amounts.
Life of Virginia performed frequent analyses to measure the degree of
correlation associated with its derivative program. Life of Virginia
assessed the adequacy of the correlation analyses results in determining
whether the derivatives qualify for hedge accounting. Realized gains and
losses on derivatives that qualify as hedges were deferred and reported
as an adjustment of the cost basis of the hedged item. Deferred gains and
losses were amortized into income over the life of the hedged item. The
fair value of swap agreements hedging liabilities were not recognized in
the consolidated statements of financial position.
These interest rate swaps gave rise to credit risks due to possible
non-performance by counterparties. The credit risk was generally limited
to the fair value of those contracts that were favorable to Life of
Virginia. Life of Virginia limited its credit risk by restricting
investments in derivative contracts to a diverse group of highly rated
major financial institutions. Life of Virginia closely monitored the
credit worthiness of, and exposure to, its counterparties and considered
its credit risk to be minimal.
Life of Virginia had $0.0 million and $250.0 million notional
amount of interest rate swaps outstanding at December 31, 1996 and
1995, respectively.
During the three months ended March 31, 1996 and the year ended
December 31, 1995 Life of Virginia amortized $.6 million and $1.4
million, respectively, of net deferred losses relating to interest rate
swaps into income.
The interest rates on Life of Virginia's principal outstanding swaps at
December 31, are presented below:
Pay Receive
Fixed Variable
------------------------------------------------------------------
1995 7.9 - 8.3% 5.40%
------------------------------------------------------------------
As of December 31, 1995, the principal swaps have maturities ranging from
September 1999 to October 2000 and variable rates based on five year
treasury rates. These swaps were terminated prior to March 31, 1996
resulting in a $1.1 million gain which was deferred.
(Continued)
29
<PAGE>
(9) CONTINUED
OTHER FINANCIAL INSTRUMENTS
Life of Virginia has certain investment commitments to provide fixed-rate
loans. The investment commitments, which would be collateralized by
related properties of the underlying investments, involve varying
elements of credit and market risk. Investment commitments outstanding at
December 31, 1996 and December 31, 1995, totaled $1.7 million and $21.7
million, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Accounting standards require the disclosure of fair values for certain
financial instruments. The fair value disclosures are not intended to
encompass the majority of policy liabilities, various other non-financial
instruments, or other intangible items related to Life of Virginia's
business. Accordingly, care should be exercised in deriving conclusions
about Life of Virginia's business or financial condition based on the
fair value disclosures.
The carrying amount and fair value of certain of Life of Virginia's
financial instruments are as follows:
<TABLE>
<CAPTION>
Preacquisition
----------------------------
December 31, 1996 December 31, 1995
-------------------------------------------------------
Carrying Fair Carrying Fair
(millions) Amount Value Amount Value
- ------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Fixed maturities and
equity securities
(note 2) $ 5,308.2 5,308.2 4,567.9 4,567.9
Mortgage loans on
real estate 585.4 622.6 592.5 638.2
Policy loans 179.5 179.5 151.7 150.2
Cash, short-term
investments and
receivables 186.4 186.4 727.5 727.5
Assets held in separate accounts 2,762.7 2,762.7 2,019.6 2,019.6
- ------------------------------------------------------------------------------------------------------
Liabilities:
Investment type
insurance contracts 3,055.0 3,027.6 2,769.7 2,796.9
Commissions and
general expenses 46.8 46.8 12.8 12.8
Interest rate swaps - - - 24.1
Liabilities related to separate accounts 2,762.7 2,762.7 2,019.6 2,019.6
- ------------------------------------------------------------------------------------------------------
</TABLE>
See Note 1 regarding the method used to estimate fair values.
(Continued)
30
<PAGE>
(10) STOCKHOLDERS' EQUITY
Generally, the capital and surplus of Life of Virginia available for
transfer to the Parent are limited to the amounts that the statutory
capital and surplus exceed minimum statutory capital requirements;
however, payments of the amounts as dividends may be subject to approval
by regulatory authorities. The maximum amount of dividends which can be
paid by the Company without prior approval at December 31, 1996, is $41.9
million.
Statutory net income (loss) and stockholders' equity is summarized below:
<TABLE>
<CAPTION>
Preacquisition
------------------------------------------------------
Nine months Three months
ended ended
December 31, March 31, December 31, December 31,
(millions) 1996 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S><C>
Statutory net income $ 69.7 (8.3) 53.9 58.2
Statutory stockholders equity 419.1 360.5 364.2 400.6
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The National Association of Insurance Commissioners has developed certain
Risk Based Capital (RBC) requirements for life insurers. If prescribed
levels of RBC are not maintained, certain actions may be required on the
part of the Company or its regulators. At December 31, 1996 the Company's
Total Adjusted Capital and Authoritized Control Level - RBC were, $504.6
million and $78.6 million, respectively. This level of adjusted capital
qualifies under all tests.
================================================================================
31
<PAGE>
<PAGE>
Part II
OTHER INFORMATION
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore, or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
The Life Insurance Company of Virginia's By-laws provide, in Article V,
Section 5, for indemnification of directors, officers and employees of the
Company.
Insofar as indemnification for liability arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provision, or otherwise
under circumstances where the burden of proof set forth in Section 11(b) of the
Act has not been sustained, the Registrant 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 is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant 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 Registrant 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.
REPRESENTATION PURSUANT TO SECTION 26(e)(2)(A)
Life of Virginia hereby represents that the fees and charges deducted
under the Policy, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by Life of
Virginia.
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
The prospectus consisting of ___ pages. The undertaking to file
reports.
The Rule 484 undertaking.
Representation pursuant to Section 26(e)(2)(A).
The Signatures.
Written consents of the following persons:
(a) J. Neil McMurdie
(b) Messrs. Sutherland, Asbill & Brennan LLP
(c) Bruce E. Booker, F.S.A.
(d) KPMG Peat Marwick LLP
(e) Ernst & Young LLP
The following exhibits, corresponding to those required by paragraph A
of the instructions as to exhibits in Form N-8B-2:
(1)(a) Resolution of the Board of Directors of Life of Virginia
authorizing the establishment of Separate Account II.(1)
(1)(b) Resolution of the Board of Directors of Life of Virginia
authorizing the addition of Investment Subdivisions to
Separate Account II.(1)
(1)(c) Resolution of the Board of Directors of Life of Virginia
authorizing the establishment of Investment Subdivisions of
Separate Account II which invest in shares of the Fidelity
Variable Insurance Products Fund II Asset Manager Portfolio
and Neuberger and Berman Advisers Management Trust Balanced
Portfolio.(1)
(1)(d) Resolution of the Board of Directors of Life of Virginia
authorizing the establishment of Investment Subdivisions of
Separate Account II which invest in shares of Janus Aspen
Series, Growth Portfolio, Aggressive Growth Portfolio and
Worldwide Growth Portfolio.(3)
(1)(e) Resolution of the Board of Directors of Life of Virginia
authorizing the establishment of Investment Subdivisions of
Separate Account II which invest in shares of the Utility Fund
of the Investment Management Series.(4)
(1)(f) Resolution of the Board of Directors of Life of Virginia
authorizing the establishment of two additional Investment
Subdivisions of Separate Account II which invest in shares of
the Corporate Bond Fund of the Insurance Management Series and
the Contrafund Portfolio of the Variable Insurance Products
Fund II.(4)
(1)(g) Resolution of the Board of Directors of Life of Virginia
authorizing the establishment of four additional Investment
Subdivisions of Separate Account II which invest in shares of
the Alger American Growth Portfolio and the Alger American
Small Capitalization Portfolio of The Alger American Fund, and
the Balanced Portfolio and Flexible Income Portfolio of the
Janus Aspen Series.(6)
(1)(h) Resolution of the Board of Directors of Life of Virginia
authorizing the establishment of two additional Investment
Subdivisions of Separate Account 4 investing in shares of the
Federated American Leaders Fund II of the Federated Insurance
Series, and the International Growth Portfolio of the Janus
Aspen Series.(7)
<PAGE>
(1)(i) Resolution of the Board of Directors of Life of Virginia
authorizing additional Investment Subdivisions investing in
shares of Growth and Income Portfolio and Growth Opportunities
Portfolio of Variable Insurance Products Fund III; Growth II
Portfolio and Large Cap Growth Portfolio of the PBHG Insurance
Series Fund, Inc.; and Global Income Fund and Value Equity
Fund of GE Investments Funds, Inc.(8)
(1)(j) Resolution of the Board of Directors of Life of Virginia
authorizing additional Investment Subdivisions investing in
shares of Capital Appreciation Portfolio of Janus Aspen
Series.(8)
1A(2) Not Applicable
1A(3)(a) Underwriting Agreement(1)
1A(3)(b)(i) Underwriting Agreement dated April 2, 1996, between The Life
Insurance Company of Virginia and Fourth Financial Securities
Corporation.(7)
1A(3)(b)(ii) Selling Agreement(1)
1A(4) Not Applicable
1A(5) Policy Form, Commonwealth Four
1A(5) (a) Accelerated Benefit Rider
(b) Disability Benefit Rider
(c) Disability Benefit Rider
(d) Insurance Rider for Additional Insured Person
(e) Children's Insurance Rider
(f) Accidental Death Benefit Rider
(g) Guarantee Account Rider
(h) Unisex Rider
(i) Unit Value Endorsement
1A(6)(a) Articles of Incorporation of The Life Insurance Company of
Virginia(1)
1A(6)(b) By-Laws of The Life Insurance Company of Virginia(1)
1A(7) Not Applicable
1A(8)(a) Stock Sale Agreement(1)
1A(8)(a)(i) Amendment to Stock Sale Agreement between The Life Insurance
Company of Virginia and Life of Virginia Series Fund, Inc.(1)
1A(8)(b) Amendment to Participation Agreement among Variable Insurance
Products Fund II, Fidelity Distributors Corporation, and The
Life Insurance Company of Virginia.(7)
1A(8)(b)(i) Amendment to Participation Agreement among Variable Insurance
Products Fund, Fidelity Distributors Corporation, and The Life
Insurance Company of Virginia.(7)
1A(8)(b)(ii) Participation Agreement among Variable Insurance Products
Fund, Fidelity Distributors Corporation, and The Life
Insurance Company of Virginia.(1)
1A(8)(c) Agreement between Oppenheimer Variable Account Funds,
Oppenheimer Management Corporation, and The Life Insurance
Company of Virginia.(1)
1A(8)(d) Amendment to the Participation Agreement between Oppenheimer
Variable Account Funds, Oppenheimer Management Corporation,
and The Life Insurance Company of Virginia.(1)
1A(8)(e) Participation Agreement among Variable Insurance Products Fund
II, Fidelity Distributors Corporation and The Life Insurance
Company of Virginia.(1)
<PAGE>
1A(8)(f) Sales Agreement between Advisers Management Trust and The Life
Insurance Company of Virginia.(1)
1A(8)(g) Amendment to Sales Agreement between Advisers Management Trust
and The Life Insurance Company of Virginia.(1)
1A(8)(h) Fund Participation Agreement between Janus Aspen Series and
The Life Insurance Company of Virginia.(3)
1A(8)(i) Fund Participation Agreement between Insurance Management
Series, Federated Securities Corporation, and The Life
Insurance Company of Virginia.(4)
1A(8)(j) Fund Participation Agreement between The Alger American Fund,
Fred Alger and Company, Inc., and The Life Insurance Company
of Virginia.(6)
1A(8)(k) Fund Participation Agreement between Variable Insurance
Products Fund III and The Life Insurance Company of
Virginia.(8)
1A(8)(l) Fund Participation Agreement between PBHG Insurance Series
Fund, Inc., and The Life Insurance Company of Virginia.(8)
1A(9) Administrative Agreement(1)
1A(10) Application for Commonwealth Four Policy(1)
2 See Exhibit 1(A)5
3(a) Opinion and Consent of Counsel
3(b) Consent of Messrs. Sutherland, Asbill & Brennan LLP
3(c) Consent of KPMG Peat Marwick LLP
3(d) Consent of Ernst & Young LLP
4 Not Applicable
5 Not Applicable
6 Opinion and Consent of Bruce E. Booker, Actuary
7 Memorandum describing Life of Virginia's Issuance, Transfer,
Redemption and Exchange Procedures for the Policies.
8 Undertaking to Guarantee performance of obligations of
principal underwriter.(1)
9 Power of Attorney(2)
Power of Attorney dated April 2, 1996.(7)
Power of Attorney dated April 16, 1997.(8)
- --------------------
1. Filed April 24, 1992 with Post-Effective Amendment Number 7 to Forms S-6
for Life of Virginia Separate Account II, Registration Number 33-9651.
2. Filed April 30, 1993 with Post-Effective Amendment Number 8 to Form S-6
for Life of Virginia Separate Account II, Registration Number 33-9651.
<PAGE>
3. Filed April 29, 1994 with Post-Effective Amendment Number 9 to Form S-6
for Life of Virginia Separate Account II, Registration Number 33-9651.
4. Filed January 3, 1995 with Post-Effective Amendment Number 10 to Form S-6
for Life of Virginia Separate Account II, Registration Number 33-9651.
5. Filed April 28, 1995 with Post-Effective Amendment Number 11 to Form S-6
for Life of Virginia Separate Account II, Registration Number 33-9651.
6. Filed September 28, 1995 with Post-Effective Amendment Number 12 to Form
S-6 for Life of Virginia Separate Account II, Registration Number
33-9651.
7. Filed May 1, 1996 with Post-Effective Amendment Number 13 to Form S-6 for
Life of Virginia Separate Account II, Registration Number 33-9651.
8. Filed May 1, 1997 with Post-Effective Amendment Number 14 to Form S-6 for
Life of Virginia Separate Account II, Registration Number 33-9651
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Life of Virginia Separate Account II has duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, and its seal to be hereunto affixed and attested, all in the
County of Henrico in the Commonwealth of Virginia, on the 17th day of November,
1997.
Life of Virginia Separate Account II
(Seal) The Life Insurance Company of Virginia
(Depositor)
Attest: /s/ Laura C. Deusebio
-----------------------------
By: /s/ Selwyn L. Flournoy, Jr.
-------------------------------
Selwyn L. Flournoy, Jr.
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, The Life
Insurance Company of Virginia certifies that it has duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, and its seal to be hereunto affixed and attested, all in the
County of Henrico in the Commonwealth of Virginia on the 17th day of November,
1997.
(Seal) The Life Insurance Company of Virginia
Attest: /s/ Laura C. Deusebio
-------------------------
By: /s/ Selwyn L. Flournoy, Jr.
-----------------------------
Selwyn L. Flournoy, Jr.
Senior Vice President
Given under my hand this 17th day of November, 1997 in the
City/County of Henrico, Commonwealth of Virginia.
/s/ Laura C. Deusebio
------------------------------
Notary Public
My Commission Expires January 31, 2000
-----------------
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date(s) indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C>
/s/RONALD V. DOLAN
- ------------------
Ronald V. Dolan Director, Chairman of the Board 11/17/97
/s/PAUL E. RUTLEDGE
- --------------------
Paul E. Rutledge III Director, President, and Chief Operating Officer 11/17/97
/s/Selwyn L. Flournoy, Jr.
- ------------------------
Selwyn L. Flournoy, Jr. Director, Senior Vice President 11/17/97
Chief Financial Officer
/s/LINDA L. LANAM
- -----------------
Linda L. Lanam Director, Senior Vice President 11/17/97
/s/ROBERT D. CHINN
- ------------------
Robert D. Chinn Director, Senior Vice President 11/17/97
/s/VICTOR C. MOSES Director 11/17/97
- ------------------
Victor C. Moses
/s/GEOFFREY S. STIFF
- --------------------
Geoffrey S. Stiff Director 11/17/97
</TABLE>
By /s/Selwyn L. Flournoy, Jr., pursuant to Power of Attorney executed on
April 16, 1997.
<PAGE>
Exhibit List
1A(5) Policy Form, Commonwealth Four
1A(5) (a) Accelerated Benefit Rider
(b) Disability Benefit Rider
(c) Disability Benefit Rider
(d) Insurance Rider for Additional Insured Person
(e) Children's Insurance Rider
(f) Accidental Death Benefit Rider
(g) Guarantee Account Rider
(h) Unisex Rider
(i) Unit Value Endorsement
3(a) Opinion and Consent of Counsel
3(b) Consent of Messrs. Sutherland, Asbill & Brennan LLP
3(c) Consent of KPMG Peat Marwick LLP
3(d) Consent of Ernst & Young LLP
6 Opinion and Consent of Bruce E. Booker, Actuary
7 Memorandum describing Life of Virginia's Issuance, Transfer,
Redemption and Exchange Procedures for the Policies
TABLE OF CONTENTS
FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE POLICY
LIFE OF
VIRGINIA
Please read your Policy carefully. This Policy is a legal contract between you
and the Company. You, the Owner, have benefits and rights described in this
Policy. The Insured is named in the Policy. The Beneficiary is as named in the
attached application, unless later changed. We will pay the Life Insurance
Proceeds on this Policy when we receive due proof that the Insured died while
this Policy was in effect. This is a Flexible Premium Variable Life Insurance
Policy. You may increase or decrease the Specified Amount. We will allocate Net
Premiums to the Separate Account named on the policy data pages.
THIS POLICY'S ACCOUNT VALUE IN THE SEPARATE ACCOUNT IS BASED ON THE INVESTMENT
EXPERIENCE OF THAT ACCOUNT, AND MAY INCREASE OR DECREASE DAILY. IT IS NOT
GUARANTEED AS TO DOLLAR AMOUNT. THE AMOUNT OF THE DEATH BENEFIT OR THE DURATION
OF THE DEATH BENEFIT MAY VARY. THE MAXIMUM LOAN AMOUNT IS NINETY PERCENT OF THE
DIFFERENCE BETWEEN THE ACCOUNT VALUE AND ANY SURRENDER CHARGE ON THE DATE OF THE
LOAN.
Refund Privilege. You may return this Policy to our Home Office or to our agency
within 10 days after its delivery for a refund. The amount of the refund will
equal the sum of all charges deducted from premiums paid, plus the Net Premiums
allocated to the Separate Account adjusted by investment gains and losses.
For The Life Insurance Company of Virginia
/s/PAUL E. RUTLEDGE III
PRESIDENT
o Flexible Premium Variable Life Insurance Policy
o Life Insurance Proceeds payable at the Insured's death
o Adjustable death benefit
o Flexible premiums payable for the Insured's life
o Some benefits reflect investment results
o No dividends
THE LIFE INSURANCE
COMPANY OF VIRGINIA
6610 West Broad Street, Richmond, Virginia 23230
A Stock Company
<PAGE>
TABLE OF CONTENTS
Policy Data Pages ......................................... 3
Definitions ............................................... 4
Introduction
The Policy and Its Parts ................................ 5
When This Policy Will Terminate ..........................5
The Owner and the Beneficiary
The Owner ............................................... 6
The Beneficiary .......................................... 6
Changing the Owner or Beneficiary ....................... 6
Using the Policy as Collateral for a Loan ............... 6
Trustee .................................................. 6
Premium Payments
Premiums After the First Premium......................... 6
When and Where to Pay Premiums.......................... 7
Allocation of Net Premiums ............................. 7
Continuation Amount and Continuation
Period ............................................... 7
Grace Period ........................................... 7
How This Policy Can Be Reinstated ...................... 8
Life Insurance Proceeds
How We Determine Proceeds ............................. 9
Corridor Percentage Chart ............................. 9
Compliance as Life Insurance ........................... 10
Change in Existing Coverage ............................ 10
Change in Death Benefit Options ........................ 10
The Separate Account
Insulation of Assets ................................... 11
Investment Subdivisions ................................ 11
Changes to the Separate Account and
Investment Subdivisions .............................. 11
Valuation of Separate Account Assets ....................11
Policy Exchange ........................................ 12
Unit Value ............................................. 12
Transfers .............................................. 12
<PAGE>
Account Value Benefits
How We Determine Account Value ......................... 13
How We Determine Net Premium ........................... 13
Monthly Deduction ...................................... 13
Cost of Insurance ...................................... 14
Insufficient Account Value ............................. 14
Continuation of Coverage ............................... 14
Surrender .............................................. 14
Receiving the Surrender Value .......................... 15
Postponement of Payments ............................... 15
Loan Benefits
Making a Policy Loan ................................... 15
Policy Loan Interest ................................... 16
Preferred Policy Debt .................................. 16
Repaying Policy Debt ................................... 16
Minimum Loan Payment ................................... 16
General Information
Annual Statement ........................................17
Calculation of Values ...................................17
Exchange Provision ......................................17
Limits on Contesting This Policy ........................17
Misstatement of Age or Sex ............................. 18
Nonparticipating ....................................... 18
Suicide ................................................ 18
Written Notice ......................................... 18
Optional Payment Plans
Plan 1 ................................................. 19
Plan 2 ................................................. 19
Plan 3 ................................................. 19
Plan 4 ................................................. 19
Plan 5 ..................................................19
Plan 1 Table ........................................... 20
Plan 2 Table ........................................... 20
Plan 5 Table ........................................... 20
Settlement Age Chart ................................... 20
A copy of the application and any riders and endorsements follow page 20.
<PAGE>
POLICY DATA
SCHEDULE OF BENEFITS SCHEDULE OF PREMIUM
AMOUNT PAYABLE
LIFE INSURANCE NONSMOKER
PLANNED PERIODIC PREMIUM $ 363.36 ANNUALLY
MINIMUM NET PREMIUM FACTOR: 0.95 (THE MINIMUM NET PREMIUM FACTOR REFLECT THE
MAXIMUM DEDUCTION OF 5% OF EACH PREMIUM RECEIVED)
MAXIMUM MONTHLY POLICY CHARGE: $12.00
INCREASE CHARGE PER $1,000: $1.50 PER $1000, MAXIMUM $300 PER INCREASE
TRANSFER CHARGE: $10.00
POLICY LOAN INTEREST RATE: 6.00 % PER ANNUM PAYABLE IN ARREARS
PREFERRED LOAN AVAILABILITY DATE: SEPTEMBER 1, 2007
MINIMUM SPECIFIED AMOUNT $100,000
NOTE: IT IS POSSIBLE THAT COVERAGE WILL EXPIRE IF SUFFICIENT PREMIUMS ARE NOT
PAID. SEE THE GRACE PERIOD PROVISION.
OWNER THE INSURED
INSURED JOHN DOE MALE 35 AGE NEAREST BIRTHDAY
POLICY NUMBER N00000000 NONSMOKER STANDARD RATING CLASS
POLICY DATE SEPTEMBER 1, 1997
MONTHLY ANNIVERSARY DAY 1
PLAN FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
$100,000 INSURED'S SPECIFIED AMOUNT - DEATH BENEFIT OPTION B
<PAGE>
<TABLE>
<S> <C>
POLICY NUMBER.....[00000000]
SEPARATE ACCOUNT II
INVESTMENT SUBDIVISIONS ARE INVESTED IN
- ----------------------- ---------------
THE ALGER AMERICAN FUND
AAF SMALL CAPITALIZATION ALGER AMERICAN SMALL CAPITALIZATION
PORTFOLIO
AAF GROWTH ALGER AMERICAN GROWTH PORTFOLIO
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
FID EQUITY - INCOME EQUITY - INCOME PORTFOLIO
FID GROWTH GROWTH PORTFOLIO
FID OVERSEAS OVERSEAS PORTFOLIO
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
FID ASSET MANAGER ASSET MANAGER PORTFOLIO
FID CONTRAFUND CONTRAFUND PORTFOLIO
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
FID GROWTH AND INCOME GROWTH & INCOME PORTFOLIO
FID GROWTH OPPORTUNITIES GROWTH OPPORTUNITIES PORTFOLIO
FEDERATED INSURANCE SERIES
FED UTILITY II FEDERATED UTILITY FUND II
FED HIGH INCOME BOND II FEDERATED HIGH INCOME BOND FUND II
FED AMERICAN LEADERS II FEDERATED AMERICAN LEADERS FUND II
JANUS ASPEN SERIES
JAN BALANCED BALANCED PORTFOLIO
JAN FLEXIBLE INCOME FLEXIBLE INCOME PORTFOLIO
JAN GROWTH GROWTH PORTFOLIO
JAN AGGRESSIVE GROWTH AGGRESSIVE GROWTH PORTFOLIO
JAN WORLDWIDE GROWTH WORLDWIDE GROWTH PORTFOLIO
JAN INTERNATIONAL GROWTH INTERNATIONAL GROWTH PORTFOLIO
JAN CAPITAL APPRECIATION CAPITAL APPRECIATION PORTFOLIO
GE INVESTMENTS FUNDS INC.
GEI MONEY MARKET MONEY MARKET FUND
GEI INCOME INCOME FUND
GEI S&P 500 INDEX * S&P 500 INDEX FUND
GEI TOTAL RETURN TOTAL RETURN FUND
GEI INTERNATIONAL EQUITY INTERNATIONAL EQUITY FUND
GEI REAL ESTATE SECURITIES REAL ESTATE SECURITIES FUND
GEI GLOBAL INCOME GLOBAL INCOME FUND
GEI VALUE EQUITY VALUE EQUITY FUND
OPPENHEIMER VARIABLE ACCOUNT FUNDS
OPP HIGH INCOME OPPENHEIMER HIGH INCOME FUND
OPP BOND OPPENHEIMER BOND FUND
OPP CAP APPRECIATION OPPENHEIMER CAPITAL APPRECIATION FUND
OPP GROWTH OPPENHEIMER GROWTH FUND
OPP MULTI STRATEGIES OPPENHEIMER MULTIPLE STRATEGIES FUND
PBHG INSURANCE SERIES FUND, INC.
PIL GROWTH II GROWTH II PORTFOLIO
PIL LARGE CAP GROWTH LARGE CAP GROWTH PORTFOLIO
</TABLE>
<PAGE>
YOU MAY ALLOCATE YOUR NET PREMIUMS AND ACCOUNT VALUE TO AS MANY AS SEVEN.
THE PORTION OF EACH NET PREMIUM ALLOCATED MUST BE AT LEAST 1%.
CONSULT YOUR PROSPECTUS FOR INVESTMENT DETAILS.
* "STANDARD & POOR'S," "S&P," "S&P 500," "STANDARD & POOR'S 500," AND "500" ARE
TRADEMARKS OF THE MCGRAW-HILL COMPANIES, INC. AND HAVE BEEN LICENSED FOR USE BY
GE INVESTMENT MANAGEMENT INCORPORATED. THE S&P 500 INDEX FUND IS NOT SPONSORED,
ENDORSED, SOLD OR PROMOTED BY STANDARD & POOR'S AND STANDARD & POOR'S MAKES NO
REPRESENTATION REGARDING THE ADVISABILITY OF INVESTING IN THE FUND.
<PAGE>
POLICY NUMBER: N00000000
TABLE OF MAXIMUM PREMIUMS
POLICY MAXIMUM POLICY MAXIMUM
YEAR PREMIUM YEAR PREMIUM
1 14,304.27 36 45,724.68
2 14,304.27 37 46,994.81
3 14,304.27 38 48,264.94
4 14,304.27 39 49,535.07
5 14,304.27 40 50,805.20
6 14,304.27 41 52,075.33
7 14,304.27 42 53,345.46
8 14,304.27 43 54,615.59
9 14,304.27 44 55,885.72
10 14,304.27 45 57,155.85
11 14,304.27 46 58,425.98
12 15,241.56 47 59,696.11
13 16,511.69 48 60,966.24
14 17,781.82 49 62,236.37
15 19,051.95 50 63,506.50
16 20,322.08 51 64,776.63
17 21,592.21 52 66,046.76
18 22,862.34 53 67,316.89
19 24,132.47 54 68,587.02
20 25,402.60 55 69,857.15
21 26,672.73 56 71,127.28
22 27,942.86 57 72,397.41
23 29,212.99 58 73,667.54
24 30,483.12 59 74,937.67
25 31,753.25 60 76,,207.80
26 33,023.38 61 77,477.93
27 34,293.51 62 78,748.06
28 35,563.64 63 80,018.19
29 36,833.77 64 81,288.32
30 38,103.90 65 & LATER 82,558.45
31 39,374.03
32 40,644.16
33 41,914.29
34 43,184.42
35 44,454.55
ACCORDING TO OUR UNDERSTANDING OF CURRENT FEDERAL TAX LAW, YOU MAY NOT PAY MORE
THAN THESE AMOUNTS AND MAINTAIN THE TAX STATUS OF THIS POLICY AS LIFE INSURANCE.
THIS TABLE IS SUBJECT TO CHANGE.
<PAGE>
POLICY NUMBER: N00000000
TABLE OF CONTINUATION AMOUNTS
<TABLE>
<CAPTION>
POLICY CONTINUATION POLICY CONTINUATION POLICY CONTINUATION
MONTH AMOUNT MONTH AMOUNT MONTH AMOUNT
<S> <C>
1 30.28 41 1,241.48 81 2,452.68
2 60.56 42 1,271.76 82 2,482.96
3 90.84 43 1,302.04 83 2,513.24
4 121.12 44 1,332.32 84 2,543.52
5 151.40 45 1,362.60 85 2,573.80
6 181.68 46 1,392.88 86 2,604.08
7 211.96 47 1,423.16 87 2,634.36
8 242.24 48 1,453.44 88 2,664.64
9 272.52 49 1,483.72 89 2,694.92
10 302.80 50 1,514.00 90 2,725.20
11 333.08 51 1,544.28 91 2,755.48
12 363.36 52 1,574.56 92 2,785.76
13 393.64 53 1,604.84 93 2,816.04
14 423.92 54 1,635.12 94 2,846.32
15 454.20 55 1,665.40 95 2,876.60
16 484.48 56 1,695.68 96 2,906.88
17 514.76 57 1,725.96 97 2,937.16
18 545.04 58 1,756.24 98 2,967.44
19 575.32 59 1,786.52 99 2,997.72
20 605.60 60 1,816.80 100 3,028.00
21 635.88 61 1,847.08 101 3,058.28
22 666.16 62 1,877.36 102 3,088.56
23 696.44 63 1,907.64 103 3,118.84
24 726.72 64 1,937.92 104 3,149.12
25 757.00 65 1,968.20 105 3,179.40
26 787.28 66 1,998.48 106 3,209.68
27 817.56 67 2,028.76 107 3,239.96
28 847.84 68 2,059.04 108 3,270.24
29 878.12 69 2,089.32 109 3,300.52
30 908.40 70 2,119.60 110 3,330.80
31 938.68 71 2,149.88 111 3,361.08
32 968.96 72 2,180.16 112 3,391.36
33 999.24 73 2,210.44 113 3,421.64
34 1,029.52 74 2,240.72 114 3,451.92
35 1,059.80 75 2,271.00 115 3,482.20
36 1,090.08 76 2,301.28 116 3,512.48
37 1,120.36 77 2,331.56 117 3,542.76
38 1,150.64 78 2,361.84 118 3,573.04
39 1,180.92 79 2,392.12 119 3,603.32
40 1,211.20 80 2,422.40 120 3,633.60
</TABLE>
CONTINUATION AMOUNTS ARE DESCRIBED IN THE CONTINUATION AMOUNT AND CONTINUATION
PERIOD PROVISION
POLICY NUMBER: N00000000
<PAGE>
TABLE OF SURRENDER CHARGES
<TABLE>
<CAPTION>
POLICY SURRENDER POLICY SURRENDER POLICY SURRENDER
MONTH CHARGE MONTH CHARGE MONTH CHARGE
<S> <C>
1 619.00 37 619.00 73 551.00
2 619.00 38 619.00 74 546.00
3 619.00 39 619.00 75 541.00
4 619.00 40 619.00 76 536.00
5 619.00 41 619.00 77 531.00
6 619.00 42 619.00 78 526.00
7 619.00 43 619.00 79 520.00
8 619.00 44 619.00 80 515.00
9 619.00 45 619.00 81 510.00
10 619.00 46 619.00 82 505.00
11 619.00 47 619.00 83 500.00
12 619.00 48 619.00 84 495.00
13 619.00 49 619.00 85 489.00
14 619.00 50 619.00 86 484.00
15 619.00 51 619.00 87 479.00
16 619.00 52 619.00 88 474.00
17 619.00 53 619.00 89 469.00
18 619.00 54 619.00 90 464.00
19 619.00 55 619.00 91 458.00
20 619.00 56 619.00 92 453.00
21 619.00 57 619.00 93 448.00
22 619.00 58 619.00 94 443.00
23 619.00 59 619.00 95 438.00
24 619.00 60 619.00 96 433.00
25 619.00 61 613.00 97 427.00
26 619.00 62 608.00 98 422.00
27 619.00 63 603.00 99 417.00
28 619.00 64 598.00 100 412.00
29 619.00 65 593.00 101 407.00
30 619.00 66 588.00 102 402.00
31 619.00 67 582.00 103 396.00
32 619.00 68 577.00 104 391.00
33 619.00 69 572.00 105 386.00
34 619.00 70 567.00 106 381.00
35 619.00 71 562.00 107 376.00
36 619.00 72 557.00 108 371.00
</TABLE>
POLICY NUMBER: N00000000
<PAGE>
TABLE OF SURRENDER CHARGES
POLICY SURRENDER POLICY SURRENDER
MONTH CHARGE MONTH CHARGE
109 365.00 145 179.00
110 360.00 146 174.00
111 355.00 147 169.00
112 350.00 148 164.00
113 345.00 149 159.00
114 340.00 150 154.00
115 334.00 151 148.00
116 329.00 152 143.00
117 324.00 153 138.00
118 319.00 154 133.00
119 314.00 155 128.00
120 309.00 156 123.00
121 303.00 157 117.00
122 298.00 158 112.00
123 293.00 159 107.00
124 288.00 160 102.00
125 283.00 161 97.00
126 278.00 162 92.00
127 272.00 163 86.00
128 267.00 164 81.00
129 262.00 165 76.00
130 257.00 166 71.00
131 252.00 167 66.00
132 247.00 168 61.00
133 241.00 169 55.00
134 236.00 170 50.00
135 231.00 171 45.00
136 226.00 172 40.00
137 221.00 173 35.00
138 216.00 174 30.00
139 210.00 175 25.00
140 205.00 176 20.00
141 200.00 177 15.00
142 195.00 178 10.00
143 190.00 179 5.00
144 185.00 180 0.00
<PAGE>
POLICY NUMBER: N00000000
TABLE OF GUARANTEED MAXIMUM INSURANCE RATES
PER $1,000 OF NET AMOUNT AT RISK
AGE LIFE
MONTHLY
RATE
35 0.14096
36 0.14764
37 0.15682
38 0.16684
39 0.17854
40 0.19107
41 0.20610
42 0.22115
43 0.23870
44 0.25625
45 0.27716
46 0.29974
47 0.32401
48 0.34996
49 0.37926
50 0.41025
51 0.44713
52 0.48988
53 0.53770
54 0.59311
55 0.65444
56 0.72254
57 0.79492
58 0.87327
59 0.96181
60 1.06060
61 1.17052
62 1.29584
63 1.43920
64 1.60154
65 1.78128
66 1.97512
67 2.18573
68 2.41240
69 2.66044
CONTINUED
<PAGE>
POLICY NUMBER: N00000000
TABLE OF GUARANTEED MAXIMUM INSURANCE RATES
PER $1,000 OF NET AMOUNT AT RISK
AGE LIFE
MONTHLY
RATE
70 2.94130
71 3.31274
72 3.63092
73 4.05839
74 4.54125
75 5.06274
76 5.62182
77 6.21386
78 6.83323
79 7.49615
80 8.22966
81 9.05444
82 9.99708
83 11.07331
84 12.26711
85 13.55590
86 14.91786
87 16.34412
88 17.80841
89 19.33266
90 20.94167
91 22.66794
92 24.57677
93 26.76406
94 29.63735
95 33.93111
96 41.27938
97 56.03985
98 83.33333
99 & 83.33333
Older
<PAGE>
DEFINITIONS
Account Value - The total amount under the Policy in each Investment Subdivision
and our General Account.
Age - The Insured's Age on his or her birthday nearest the Policy Date or a
policy anniversary.
Attained Age - The Insured's Age on the Policy Date plus the number of full
years since the Policy Date.
Beneficiary - The person or entity designated by the Owner to receive the Life
Insurance Proceeds payable at the death of the Insured.
Continuation Amount - A cumulative amount set forth on the policy data pages for
each month of the Continuation Period.
Continuation Period - The period during which the Policy will not lapse if the
Net Total Premium is at least equal to the Continuation Amount for the number of
Policy Months that the Policy has been inforce.
The Company - The Life Insurance Company of Virginia. "We", "us" or "our"
refers to the Company.
Fund - Any open-end management investment company or investment portfolio
thereof, or unit investment trust or series thereof, in which an Investment
Subdivision invests.
General Account - Assets of the Company other than those allocated to the
Separate Account or any other Separate Account of the Company.
Home Office - The Company's offices at 6610 West Broad Street, Richmond,
Virginia 23230.
Insured - The person upon whose life this Policy is issued.
Investment Subdivision - Subdivision of the Separate Account, the assets of
which are invested exclusively in a corresponding Fund.
Life Insurance Proceeds - The amount payable upon the death of the Insured.
Monthly Anniversary Day - The same day in each month as the Policy Date. This
day is shown on the policy data pages.
Net Premium - The portion of each premium paid which is used in determining the
Account Value. It is equal to the premium paid times the Net Premium Factor.
<PAGE>
Net Premium Factor - The factor used in determining the Net Premium which
reflects a deduction from each premium paid.
Net Total Premium - On any date, Net Total Premium means the total of all
premiums paid to that date less (a) divided by (b), where:
(a) is any outstanding Policy Debt, plus the sum of any partial
surrenders to date; and
(b) is the Net Premium Factor.
Optional Payment Plan - A plan whereby any part of Life Insurance Proceeds or
Surrender Value proceeds can be left with us to provide a series of periodic
payments to an Owner or Beneficiary.
Owner - The Owner of the Policy as named in this Policy. "You" or "your" refers
to the Owner. Contingent owners may also be named.
Planned Periodic Premium - A level premium amount scheduled for payment at fixed
intervals over a specified period of time.
Policy - This Policy with any attached application(s), and any riders and
endorsements.
Policy Date - Date as of which the Company issues the Policy and as of which the
Policy becomes effective. Policy years and anniversaries are measured from the
Policy Date. The Policy Date is shown on the policy data pages.
Policy Debt - The amount of outstanding loans plus accrued interest. Policy Debt
is deducted from proceeds payable at the Insured's death or on surrender.
Policy Month - A one-month period beginning on a Monthly Anniversary Day and
ending on the day immediately preceding the next Monthly Anniversary Day.
Separate Account - The segregated asset account of the Company shown on the
policy data pages.
Specified Amount - An amount used in determining the insurance coverage on an
insured life. The original Specified Amount is shown on the policy data pages.
Surrender Value - The amount payable to the Owner upon surrender of the Policy.
Unit Value - Unit of measure used to calculate the Account Value for each
Investment Subdivision.
Valuation Day - For each Investment Subdivision, each day on which the New York
Stock Exchange is open for business except for days that the Investment
Subdivision's corresponding Fund does not value its shares.
Valuation Period - Period that starts at the close of regular trading on the New
York Stock Exchange on any Valuation Day and ends at the close of regular
trading on the next succeeding Valuation Day.
<PAGE>
INTRODUCTION
This is a flexible premium variable life insurance policy. The first premium
payment is due on the Policy Date. Subsequent premiums may be paid at any time
while this Policy is in effect, subject to conditions specified in the Premium
Payments section. In return for these premiums and the insurance application, we
provide certain benefits.
The Policy provides Life Insurance Proceeds. Proceeds can be paidin a lump sum
or under an Optional Payment Plan.
During the Insured's life, the Policy has an Account Value. The Account Value
reflects the investment experience of the Separate Account. (See THE SEPARATE
ACCOUNT section.) This Account Value is the basis for certain benefits you can
use before the Insured's death.
We will provide a projection of illustrative future life insurance and Account
Value proceeds. To receive the illustration, send a written request to our Home
Office and pay any service fee in effect at that time, but not more than $25 per
illustration.
The illustration will assume:
o amounts of insurance;
o coverage options;
o future premium payments you specify; and
o other assumptions specified by you or by us.
The Policy and Its Parts
The Policy is a legal contract. It is the entire contract between you and us. An
agent cannot change this contract. Any change to it must be in writing and
approved by us. Only our President or one of our Vice-Presidents can give our
approval.
We will not use any statement in the original application to deny a claim unless
a copy of that application was attached to this Policy when issued or delivered.
We will not use any statement in a supplemental application to deny a claim
unless a copy of that application was sent to you when the change in coverage
went into effect. We will not use any statement in a reinstatement application
to deny a claim unless a copy of the reinstatement application was sent to you
when the Policy was reinstated.
READ YOUR POLICY CAREFULLY.
When This Policy Will Terminate
All coverage under this Policy will terminate when:
o you request that coverage terminate and you return this Policy;
o the Insured dies; or
o the grace period ends without sufficient premium being paid.
This Policy will also terminate as stated in the Suicide provision.
<PAGE>
THE OWNER AND THE BENEFICIARY
The Owner
You have rights in the Policy during the Insured's life. The Policy names you or
someone else as the Insured. If you are not the Insured, you should name a
contingent owner who will become the Owner if you die before the Insured. If you
die before the Insured and there is no contingent owner, ownership passes to
your estate.
The Beneficiary
You may name primary and contingent Beneficiaries. Your original Beneficiary
choice is shown in the attached application. Unless an Optional Payment Plan is
chosen, the proceeds payable at the Insured's death will be paid in a lump sum
to the primary Beneficiary. If the primary Beneficiary dies before the Insured,
the proceeds will be paid to the contingent Beneficiary. If no Beneficiary
survives the Insured, the proceeds will be paid to you or your estate.
You may name more than one primary or contingent Beneficiary. If you do, the
proceeds will be paid in equal shares to the survivors in the appropriate
Beneficiary class, unless you have requested otherwise.
Changing the Owner or Beneficiary
During the Insured's life, you may change the Owner. You may also changethe
Beneficiary during the Insured's life if you reserved this right.
How to Change the Owner or Beneficiary. To make a change, send a written request
to our Home Office. The request must be received by us in a form satisfactory to
us. The change will take effect as of the date you sign the request. The change
will be subject to any payment we make before we record the change.
Using the Policy as Collateral for a Loan
This Policy may be assigned as collateral security. We must be notified in
writing if you assign the Policy. Any payment we make before we record the
assignment at our Home Office will not be affected. We are not responsible for
the validity of an assignment. Your rights and the rights of a Beneficiary may
be affected by an assignment.
Trustee
If a trustee is named as the Owner or Beneficiary of this Policy and
subsequently exercises ownership rights or claims benefits hereunder, we will
have no obligation to verify that a trust is in effect or that the trustee is
acting within the scope of his/her authority. Payment of policy benefits to the
trustee will release us from all obligations under the Policy to the extent of
the payment. When we make a payment to the trustee, we will have no obligation
to ensure that such payment is applied according to the terms of the trust
agreement.
<PAGE>
PREMIUM PAYMENTS
This Policy's first premium is due on the Policy Date.
Premiums After the First Premium
Any premium payments after the first premium may be made under a periodic plan
or at any time while this Policy is in effect.
Periodic Premium Plan. You may request that we send reminders of your Planned
Periodic Premium. You may choose to send premiums directly to us either
annually, semi-annually, or quarterly. We can also arrange for pre-authorized
payments from your bank account or similar facility either annually,
semi-annually, quarterly or monthly. Planned Periodic Premiums will be subject
to our ruleson minimum amount.
You can change the frequency or amount of your Planned Periodic Premium. We
reserve the right to limit the amount of any increase in Planned Periodic
Premiums.
Unscheduled Payments. You can make an unscheduled premium payment at any time
while this Policy is in effect. Unscheduled payments are applied first to repay
any Policy Debt, unless you direct us otherwise. We reserve the right to limit
the number and amount of any unscheduled premium payments.
Maximum Premiums. We will limit the total of all premiums paid to date for this
Policy to the amounts shown in the table of maximum premiums in the policy data
pages. Any portion of a premium paid that causes the total of all premiums paid
to date to exceed the maximum premium will be returned to you along with any
earnings thereon. We reserve the right to change the table of maximum premiums
when necessary as a result of changes in coverage or to maintain compliance with
the Internal Revenue Code. If we do, we will send you a new table of maximum
premiums reflecting the adjusted amounts.
When and Where to Pay Premiums
Each premium is payable in advance. Send each premium to our Home Office. Make
the check or money order payable to The Life Insurance Company of Virginia.
Allocation of Net Premiums
You may allocate the Net Premium to one or more Investment Subdivisions of the
Separate Account, but not to more than the maximum number of allocations shown
in the policy data pages. The minimum percentage of each Net Premium which may
be allocated to any particular Investment Subdivision is shown on the policy
data pages. Net Premiums will initially be allocated in accordance with the
allocations requested by you. You may change the allocation of Net Premiums at
any time, without charge, simply by sending written notice to us at our Home
Office. The changed allocation will apply to premiums received after we record
the change.
<PAGE>
Continuation Amount and Continuation Period
On any Monthly Anniversary Day during the Continuation Period, if the Surrender
Value of this Policyis not sufficient to cover the monthly deduction, this
Policy will remain in effect if the Net Total Premium is at least equal to the
Continuation Amount.
At the end of the Continuation Period, you may have to pay an additional premium
to keep the Policy inforce. (See Insufficient Account Value provision.)
An increase in Specified Amount will increase the Continuation Amounts while a
decrease in Specified Amount will reduce the Continuation Amounts. Any
termination and subsequent reinstatement of the Policy will reduce the
Continuation Amounts. We will send you a supplemental policy data page
reflecting the adjusted amounts. The Continuation Period will be as though the
Policy had been in effect continuously from its original Policy Date.
Grace Period
On any Monthly Anniversary Day during the Continuation Period, if (1) the
Surrender Value is not sufficient to cover the monthly deduction, and (2) the
Net Total Premium is less than the Continuation Amount, you must pay a premium
sufficient to keep the Policy in effect or coverage will terminate. The amount
of the sufficient premium will equal the lesser of (a) and (b), where:
(a) equals the monthly deduction due minus the Surrender Value, and
that result divided by the Net Premium Factor; and
(b) equals the Continuation Amount minus the Net Total Premium.
All amounts in (a) and (b) above are as of the Monthly Anniversary Day at the
beginning of the grace period. The monthly deduction is described in the ACCOUNT
VALUE BENEFITS section.
On any Monthly Anniversary Day after the Continuation Period, if the Surrender
Value is not sufficient to cover the monthly deduction, you must pay a premium
sufficient to keep the Policy in effect or coverage will terminate. In this
case, the amount of the sufficient premium will equal the monthly deduction due
minus the Surrender Value, and that result divided by the Net Premium Factor. As
used in this paragraph, the monthly deduction due and the Surrender Value are
both as of the Monthly Anniversary Day at the beginning of the grace period.
In either case, we will mail you written notice of the sufficient premium. This
notice will be sent to your last known address. You have a 61-day grace period
from the date we mail the notice to pay the sufficient premium.
Coverage continues during the 61-day grace period. If the Insured dies during
the grace period, proceeds will be reduced by the amount of the sufficient
premium (as described in this provision) that would have been required to keep
the Policy in effect.
If the sufficient premium is not paid by the end of the grace period, this
Policy will terminate without value.
<PAGE>
How This Policy Can Be Reinstated
You may reinstate this Policy within three years of the end of the grace period
if:
(1) you submit an application for reinstatement;
you provide required evidence of insurability satisfactory to us
that the Insured is insurable;
(3) the Policy has not been surrendered for cash; and
(4) you pay the premium as described in this section.
The Policy will be reinstated effective on the date we approve the
reinstatement. The surrender charge and the Continuation Period will be as
though the Policy had been in effect continuously from its original Policy Date.
On the date of reinstatement, the Account Value will be allocated to the
Investment Subdivisions of the Separate Account. Unless you tell us otherwise,
these allocations will be made in the same manner that Net Premiums are
allocated.
If this Policy terminates and is reinstated before the end of the Continuation
Period, you will have to pay an amount equal to (1) minus (2) minus (3) plus
(4), where:
(1) is the Continuation Amount as of the date of reinstatement;
(2) is the sum of the monthly deductions that would have been made
during the period between termination and reinstatement, divided
by the Net Premium Factor;
(3) is the Net Total Premium on the date of termination; and
(4) is an amount sufficient to keep the Policy in effect for two
Policy Months after the date of reinstatement.
On the date of reinstatement, the Account Value will equal (a) plus (b) minus
(c), where:
(a) is the Account Value on the first day of the grace period;
(b) is the premium paid to reinstate multiplied by the Net Premium
Factor; and
(c) is the monthly deduction for the month following the date of
reinstatement.
If this Policy terminates before the end of the Continuation Period, and is
reinstated after the end of the Continuation Period, you will have to pay a
premium which, after multiplying by the Net Premium Factor, equals (1) plus (2)
minus (3), where:
(1) is the surrender charge on the date of termination; and
(2) is an amount equal to the monthly deductions for two months after
the date of reinstatement; and
(3) is the Account Value on the date of termination.
On the date of reinstatement, the Account Value will equal (a) plus (b) plus
(c), where:
(a) is the surrender charge in effect on the date of reinstatement;
(b) is an amount equal to the monthly deductions for the two months
after the date of reinstatement, minus the monthly deduction for
the month following the date of reinstatement; and
(c) is any premium paid in excess of the required reinstatement
premium, multiplied by the Net Premium Factor.
If this Policy terminates after the end of the Continuation Period and is
reinstated, you will have to pay a premium sufficient to keep the Policy in
effect for at least two months.
On the date of reinstatement, the Account Value will equal (a) plus (b) minus
(c), where:
<PAGE>
(a) is the surrender charge in effect on the date of reinstatement;
(b) is the premium paid to reinstate multiplied by the Net Premium
Factor; and
(c) is the monthly deduction for the month following the date of
reinstatement.
LIFE INSURANCE PROCEEDS
Life Insurance Proceeds are payable at the death of the Insured. We will pay the
Life Insurance Proceeds on this Policy when we receive:
o this Policy;
o due proof that the Insured died while this Policy was in effect; and
o proof of the interest of the claimant.
Proceeds can be paid in a lump sum or under an Optional Payment Plan.
How We Determine Proceeds
In the application for original coverage, the Owner elected one of two death
benefit options.
Under Option A, Life Insurance Proceeds are based on the greater of (1) and (2),
where:
(1) is the Specified Amount plus the Account Value; and
(2) is the Account Value multiplied by the corridor percentage.
Under Option B, Life Insurance Proceeds are based on the greater of (1) and (2),
where:
(1) is the Specified Amount; and
(2) is the Account Value multiplied by the corridor percentage.
For both Option A and Option B, references to Specified Amount and Account Value
in items (1) and (2), are amounts in effect on the date of death.
In no event will Life Insurance Proceeds be less than the amount required to
keep the Policy qualified as life insurance.
The corridor percentage will depend on the Attained Age of the Insured on the
date of death. (See the corridor percentage chart in this section.)
Actual Amount of Proceeds. The actual amount of proceeds will depend on:
o the Life Insurance Proceeds as determined in this section;
o the use of the Account Value;
o any partial surrenders;
o any Policy Debt;
o any additional insurance provided by rider;
o any increase or decrease in existing coverage;
o the Insured's suicide during the first two policy years; and
o a misstatement of the Insured's Age or sex.
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Table of Percentages of Account Value
- -------------------------------------------------------------------------------------------------------------------
Corridor Corridor Corridor
Attained Age Percentage Attained Age Percentage Attained Age Percentage
------------ ---------- ------------ ---------- ------------ ----------
<S> <C>
0-40 250% 54 157% 68 117%
41 243% 55 150% 69 116%
42 236% 56 146% 70 115%
43 229% 57 142% 71 113%
44 222% 58 138% 72 111%
45 215% 59 134% 73 109%
46 209% 60 130% 74 107%
47 203% 61 128% 75 - 90 105%
48 197% 62 126% 91 104%
49 191% 63 124% 92 103%
50 185% 64 122% 93 102%
51 178% 65 120% 94+ 101%
52 171% 66 119%
53 164% 67 118%
------------------ ------------------- ------------------ ------------------ ------------------- ------------------
</TABLE>
Compliance as Life Insurance
We reserve the right to amend this Policy as necessary to maintain compliance
with the Internal Revenue Code. We will send any such amendments to you. You
have the right to refuse such amendments and accept full responsibility for any
consequences as a result of such refusal.
Change in Existing Coverage
After the Policy has been in effect for one year, you can increase or decrease
the Specified Amount. To make a change, send a written request along with the
Policy to our Home Office.
Decrease in Specified Amount. Any decrease will become effective on the Monthly
Anniversary Day after the date we receive the request. The decrease will first
apply to coverage provided by the most recent increase, then to the next most
recent increases successively, then to the coverage provided under the original
application.
During the Continuation Period, we will not allow a decrease unless the Account
Value less any Policy Debt is greater than the surrender charge. A decrease may
not cause the Specified Amount to be less than the minimum Specified Amount
shown on the policy data pages. A decrease may cause a surrender charge to be
assessed and may require a payment to you to keep the Policy qualified as life
insurance.If this event occurs, we will send you revised policy data pages. (See
Surrender Charge on Decrease in Specified Amount in the Surrender provision.)
Increase in Specified Amount. You must apply for an increase in Specified Amount
on a supplemental application. You will have to submit evidence satisfactory to
us that the Insured is insurable.
Any approved increase will become effective on the date shown in the
supplemental policy data pages, provided that there is sufficient Account Value
to cover the first monthly deduction following the increase. (See Monthly
Deduction provision.)
<PAGE>
Change in Death Benefit Options
If you elected death benefit Option A, you can request a change to death benefit
Option B. The Specified Amount after the change will equal the sum of (1) plus
(2), where:
(1) is the Specified Amount on the date your request becomes effective;
and
(2) is the Account Value on the date your request becomes effective.
If you elected death benefit Option B, you can request a change to death benefit
Option A. This will decrease the Specified Amount by the amount of Account
Value.
Any change in death benefit options will become effective on the first Monthly
Anniversary Day after the date we receive the request in our Home Office.
THE SEPARATE ACCOUNT
The Separate Account supports the operation of this Policy and certain other
variable life insurance policies we may offer. We will not allocate assets to
the Separate Account to support the operation of any contracts or policies that
are not variable life insurance.
We own the assets in the Separate Account. These assets are held separately from
our other assets and are not part of our General Account.
The Separate Account is registered with the Securities and Exchange Commission
as a unit investment trust under the Investment Company Act of 1940. The
Separate Account is also subject to laws of the Commonwealth of Virginia which
regulate the operations of insurance companies incorporated in Virginia. The
investment policy of the Separate Account will not be changed without the
approval of the Insurance Commissioner of the Commonwealth of Virginia. The
approval process is on file with the Insurance Commissioner of the state in
which this Policy was delivered.
Insulation of Assets
The portion of the assets of the Separate Account which equals the reserves and
other policy liabilities of the policies which are supported by the Separate
Account will not be charged with liabilities arising from any other business we
conduct. We have the right to transfer to our General Account any assets of the
Separate Account which are in excess of such reserves and other policy
liabilities.
Investment Subdivisions
The Separate Account is divided into Investment Subdivisions. The income, gains
and losses, realized or unrealized, from the assets allocated to an Investment
Subdivision are credited to or charged against such Investment Subdivision
without regard to other income, gains or losses of the Company.
The Investment Subdivisions available under this Policy are shown in the policy
data pages. Each Investment Subdivision in the Separate Account invests
exclusively in shares of a designated portfolio of a series type of mutual fund
(a "Fund"). Any amounts of income, dividends and gains distributed from the
shares of a Fund are reinvested in additional shares of that Fund.
<PAGE>
Changes to the Separate Account and Investment Subdivisions
Where permitted by applicable law, the Company may:
1. create new separate accounts;
2. combine separate accounts, including the Separate Account;
3. transfer assets of the Separate Account, which we determine to be
associated with the class of policies to which this Policy belongs,
to another separate account;
4. add new Investment Subdivisions to or remove existing Investment
Subdivisions from the Separate Account or combine Investment
Subdivisions;
5. make Investment Subdivisions (including new Investment Subdivisions)
available to such classes of policies as we may determine;
6. add new Funds or remove existing Funds;
7. substitute new Funds for any existing Fund whose shares are no
longer available for investment;
8. substitute new Funds for any existing Fund which we determine is no
longer appropriate in light of the purposes of the Separate Account;
9. deregister the Separate Account under the Investment Company Act of
1940; and
10. operate the Separate Account under the direction of a committee or
in any other form permitted by law. In the event of any
substitution or change, we may, by appropriate endorsement, make
such changes in this and other policies as may be necessary or
appropriate to reflect the substitution or change.
Valuation of Separate Account Assets
We will value the assets of the Separate Account each Valuation Day at their
fair market value in accordance with accepted accounting practices and
applicable laws and regulations.
Policy Exchange
If you object to a material change in the investment policy of the Separate
Account or any Investment Subdivision, you have the right to exchange this
Policy for a fixed benefit policy. No evidence of insurability will be required.
We will notify you of the options available, and the procedures to follow if you
decide to make an exchange. You must make an exchange within sixty days after
the change in investment policy becomes effective. There will always be one
policy available for exchange.
Unit Value
Each Investment Subdivision has a Unit Value. When Net Premiums or other amounts
are transferred into an Investment Subdivision, a number of units are purchased
based on that Investment Subdivision's Unit Value as of the end of the Valuation
Period during which the transfer is made. Likewise, when amounts are transferred
out of an Investment Subdivision, units are redeemed in a similar manner.
The Unit Value of each Investment Subdivision was arbitrarily set when the
Investment Subdivision began operations. The Unit Value for each subsequent
ValuationPeriod is the net investment factor for that period, multiplied by the
Unit Value for the immediately preceding period. The Unit Value for a Valuation
Period applies to each day in the period.
Each Investment Subdivision has its own net investment factor. In the following
definition, "assets" refers to the assets in each Investment Subdivision. "Any
amount charged against the Separate Account" refers to those amounts that are
allocated to each Investment Subdivision.
<PAGE>
The net ivnvestment factor for a Valuation Period is (a) divided by (b), minus
(c), where: (a) is the result of:
1. the value of the assets at the end of the preceding
Valuation Period; plus
2. the investment income and capital gains, realized or
unrealized, credited to those assets at the end of the
Valuation Period for which the net investment factor is
being determined; minus
3. the capital losses, realized or unrealized, charged
against those assets during the Valuation Period; minus
4. any amount charged against the Separate Account for taxes,
or any amount we set aside during the Valuation Period as
a provision for taxes attributable to the operation or
maintenance of the Separate Account; and
(b) is the value of the assets in the Investment Subdivision at
the end of the preceding Valuation Period; and
(c) is a charge no greater than .0024769% for each day in the
Valuation Period. This corresponds to .90% per year.
Transfers
You may transfer Account Value among the Investment Subdivisions of the Separate
Account. The transfer will be effective as of the end of the Valuation Period
during which we receive your request at our Home Office. You must request a
transfer in writing or in any other form acceptable to us. We reserve the right
to limit the number of transfers to twelve each calendar year. The first
transfer in each calendar month will be made without a transfer charge. A
transfer charge will be imposed for each subsequent transfer in a calendar
month. This transfer charge is shown on the policy data pages. When we make
transfers, the Account Value on the date of the transfer will not be affected by
the transfer except to the extent of the transfer charge. The transfer charge
will be taken from the amount transferred.
ACCOUNT VALUE BENEFITS
How We Determine Account Value
At the end of the Valuation Period during which the first premium is received,
the Account Value in each Investment Subdivision is equal to (a) minus (b),
where:
(a) is the portion of the Net Premium which has been paid and
allocated to that Investment Subdivision; and
(b) is the portion of any due and unpaid monthly deductions
allocated to the Account Value in that Investment
Subdivision.
At the end of each Valuation Period after such date, the Account Value allocated
to each Investment Subdivision of the Separate Account is (1) plus (2) plus (3)
minus (4) minus (5) minus (6), where:
(1) is the Account Value allocated to the Investment Subdivision at the
end of the preceding Valuation Period, multiplied by the Investment
Subdivision's net investment factor for the current Valuation
Period;
(2) is Net Premiums received during the current Valuation Period and
which are allocated to the Investment Subdivision;
(3) is any other amount transferred into the Investment Subdivision
during the current Valuation Period;
(4) is any partial surrender made from the Investment
Subdivision during the current Valuation Period;
(5) is any Account Value transferred out of the Investment Subdivision
during the current Valuation Period;
(6) any monthly deduction allocated to the Investment Subdivision
during the current Valuation Period.
<PAGE>
How We Determine Net Premium
To calculate the Net Premium, multiply the premium paid times the Net Premium
Factor.
The minimum Net Premium Factor is shown on the policy data pages. We may use a
Net Premium Factor greater than the minimum Net PremiumFactor at our sole
discretion.
Monthly Deduction
The monthly deduction is a charge made on the Policy Date and each Policy Month
thereafter against the Account Value. It is determined by adding the cost of
insurance, the cost of additional benefits provided by rider, and the monthly
policy charge. The monthly deduction for the month when an increase in the
Specified Amount becomes effective will include the increase charge per $1000
for each $1000 of increase.
The actual monthly policy charge will never be greater than the maximum monthly
policy charge shown on the policy data pages. The increase charge per $1,000 is
also shown on the policy data pages.
The monthly deduction for a Policy Month will be allocated among the Investment
Subdivisions of the Separate Account in the same proportion that the Policy's
Account Value in each Investment Subdivision bears to the total Account Value in
all Investment Subdivisions at the beginning of the Policy Month.
<PAGE>
Cost of Insurance
The cost of insurance is calculated on each Monthly Anniversary Day and is based
on the net amount at risk. The net amount at risk is calculated by dividing the
Life Insurance Proceeds by 1.0032737, and then subtracting the Account Value. To
determine the cost of insurance for a particular Policy Month, we divide the net
amount at risk by 1000 and multiply that result by the applicable cost of
insurance rate. If Option B is in effect, and the Specified Amount has
increased, the Account Value is first considered part of the initial Specified
Amount. If the Account Value is more than the initial Specified Amount, it will
be considered part of the increased Specified Amounts resulting from increases
in the order of the increases.
Cost of Insurance Rate. The monthly rate is based on the Insured's sex, issue
age, policy duration and risk class. The risk class (and therefore the rates)
will be determined separately for the initial Specified Amount and for any
increase in the Specified Amount that requires evidence of insurability. The
rates are determined by us according to our expectations of future experience
for mortality, lapse, taxes, interest, and expenses. We can change the rates
from time to time, but they will never be more than the maximum rates shown in
the table of guaranteed maximum insurance rates. A change in rates will apply to
all persons of the same age, sex and risk class and whose policies have been in
effect for the same length of time.
Insufficient Account Value
On a Monthly Anniversary Day, if the Account Value less the surrender charge and
less any Policy Debt is not enough to cover the monthly deduction for that
Monthly Anniversary Day, the Grace Period provision will apply.
Continuation of Coverage
This Policy and any riders will remain in effect:
o as long as the Account Value less the surrender charge and less
any Policy Debt covers the monthly deduction; or
o as provided for in the Continuation Amount and Continuation Period
provision under PREMIUM PAYMENTS.
A rider attached to this Policy will not continue beyond its termination date
under any circumstances.
Surrender
You can make a full or partial surrender of this Policy by sending a written
request and the Policy to our Home Office. Unless an Optional Payment Plan is
chosen, any proceeds payable will be paid to you in a lump sum. A surrender must
take place during the Insured's life.
Amount Payable on Surrender. The Surrender Value of this Policy is the Account
Value on the date we receive your request for surrender in our Home Office less
any Policy Debt and less any surrender charge that applies.
Surrender Charge. We will charge a surrender charge during the surrender charge
period in the case of a full surrender of this Policy, and for decreases in
Specified Amount as described below. The amount of surrender charge is shown in
the policy data pages. The surrender charge period is the period of Policy
Months for which a surrender charge is shown in the policy data pages.
<PAGE>
Surrender Charge on Decrease in Specified Amount. If the Specified Amount is
decreased to less than the smallest Specified Amount that had previously been in
effect, we may charge a surrender charge. The amount of surrender charge will be
the charge for a full surrender, multiplied by the ratio of (a) to (b), where:
(a) is the smallest Specified Amount that was in effect prior to the
current decrease, minus the Specified Amount after the current
decrease; and
(b) is the smallest Specified Amount that was in effect prior to the
current decrease.
Surrender charges in effect prior to the decrease will be adjusted to reflect
any assessments made.
Partial Surrender. You can make a partial surrender of this Policy. A partial
surrender cannot be less than $500. A partial surrender cannot exceed the
lesser of:
o the Surrender Value, less $500; or
o the available loan amount.
We generally will reduce both the Account Value and the Life Insurance Proceeds
by the amount of any partial surrender. A partial surrender will not be
permitted during the first policy year if death benefit Option B is in effect.
You may tell us how to allocate the partial surrender among the Investment
Subdivisions of the Separate Account. If you do not, the partial surrender will
be allocated among each Investment Subdivision in the same proportion that the
Policy's Account Value in each Investment Subdivision bears to the total Account
Value in all Investment Subdivisions on the date we receive the request in our
Home Office.
We will deduct a charge from the amount of each partial surrender. This charge
will equal the lesser of (i) $25, or (ii) 2% of the amount of the partial
surrender.
Receiving the Surrender Value
The Surrender Value is payable in one lump sum unless you choose to receive
periodic payments under an Optional Payment Plan.
Postponement of Payments
We will usually pay any amounts payable as a result of surrender, partial
surrender, or policy loan within seven days after we receive written request in
our Home Office, in a form satisfactory to us. We will usually pay any Life
Insurance Proceeds within seven days after we receive due proof of death.
Payment of any amount payable on surrender, partial surrender, policy loan or
Life Insurance Proceeds may be postponed whenever:
o the New York Stock Exchange is closed other than customary week-end
and holiday closings, or
o trading on the New York Stock Exchange is restricted as determined
by the Securities and Exchange Commission; or
o the Securities and Exchange Commission by order permits postponement
for the protection of policyowners; or
o an emergency exists, as determined by the Securities and Exchange
Commission, as a result of which disposal of securities is not
reasonably practicable or it is not reasonably practicable to
determine the value of the net assets of the Separate Account.
<PAGE>
We have the right to defer payment which is derived from any amount recently
paid to us by check or draft, until we are satisfied the check or draft has been
paid by the bank on which it is drawn.
LOAN BENEFITS
This Policy has loan benefits that are described below.
Making A Policy Loan
You may obtain a policy loan from us. This Policy is the only security required.
The maximum loan amount is 90% of the difference between (a) the Account Value
and (b) any surrender charge on the date of the loan. The available loan amount
is the maximum loan amount less any outstanding Policy Debt.
When a policy loan is made, an amount of Account Value sufficient to secure the
loan is transferred out of the Separate Account and into our General Account.
You may tell us how to allocate that Account Value among the Investment
Subdivisions of the Separate Account. If you do not, that Account Value will be
allocated among each Investment Subdivision in the same proportion that the
Policy's Account Value in each Investment Subdivision bears to the total Account
Value in all Investment Subdivisions on the date we make the loan.
Any loan transaction will permanently affect the values of the Policy.
Policy Loan Interest
The interest rate paid on policy loans is shown on the policy data pages.
Interest accrues daily, and is due and payable on each policy anniversary. If
interest is not paid when due, an amount equal to the amount owed will be
transferred out of the Separate Account to become part of the Policy Debt and
interest will be charged on that amount. Interest transferred out of the
Separate Account will be transferred from each Investment Subdivision in the
same proportion that the Account Value in that Investment Subdivision bears to
the total Account Value in all Investment Subdivisions at the time of interest
transfer.
Preferred Policy Debt
Account Value in the General Account will earn interest daily at a minimum
annual rate of 4%. On each policy anniversary day, the interest earned since the
preceding policy anniversary day will be transferred into the Separate Account.
Unless you tell us otherwise, this interest will be allocated to the Investment
Subdivisions in the same manner as Net Premiums.
A portion of policy loans taken and/or existing after the preferred loan
availability date (shown on the policy data pages) will be designated as
preferred policy debt. The amount of preferred policy debt is redetermined each
policy month. Borrowed Account Value that corresponds to preferred policy debt
will earn interest at no less than the minimum annual rate of 4%. At our sole
discretion, we may use an interest rate higher than the guaranteed interest
rate.
Preferred policy debt will be at least as large as:
(a) the Account Value less any surrender charge that applies, minus
(b) the total premiums paid.
Repaying Policy Debt
You can repay Policy Debt in part or in full any time during the Insured's life
while this Policy is in effect. Loan payments will first be applied to reduce
the portion of Policy Debt that does not correspond to preferred policy debt.
<PAGE>
When a loan repayment is made, Account Value in the General Account related to
that payment will be transferred into the Separate Account. You may tell us how
to allocate this Account Value among each Investment Subdivision of the Separate
Account. If you do not, we will allocate that amount among the Investment
Subdivisions in the same proportion that Net Premiums are being allocated.
If you do not repay Policy Debt, it will be deducted from any proceeds or
benefit payable at the Insured's death or on surrender. Any Policy Debt which
exists at the end of the 61-day grace period will be deducted from the Account
Value and considered repaid as of the date of termination.
Minimum Loan Payment
During the Continuation Period, if Policy Debt on any Monthly Anniversary Day
exceeds the Account Value less any surrender charge that applies, and the Net
Total Premium is less than the Continuation Amount, your Policy will enter a
61-day grace period. You will have the 61-day grace period to pay a minimum loan
payment equal to the lesser of (a) and (b), where:
(a) equals the amount by which Policy Debt exceeds the Account Value
less any surrender charge; and
(b) equals the Net Premium Factor times the difference between the
Continuation Amount and the Net Total Premium.
All amounts in (a) and (b) above are as of the Monthly Anniversary Day when
excess Policy Debt first occurs.
After the Continuation Period, if Policy Debt on any Monthly Anniversary Day
exceeds the Account Value less any surrender charge that applies, your Policy
will enter a 61-day grace period. In this case, you will have the 61-day grace
period to pay a minimum loan payment equal to the amount by which Policy Debt
exceeds the Account Value less any surrender charge. As used in this paragraph,
Policy Debt, Account Value and surrender charge are all as of the Monthly
Anniversary Day when excess Policy Debt first occurs.
We will send written notice of the minimum loan payment to you and any assignee
of record at our Home Office at least 30 days prior to the date of termination.
If you do not pay the minimum loan payment by the end of the grace period, your
Policy will terminate without value.
GENERAL INFORMATION
Annual Statement
On each policy anniversary, we will send you an annual statement. The statement
will show the Specified Amount, the Account Value, the Surrender Value and
Policy Debt as of the policy anniversary. The statement will also show premiums
paid and charges made during the policy year.
Calculation of Values
Our calculations of guaranteed maximum cost of insurance rates are based on the
Commissioners' 1980 Standard Ordinary Smoker or Nonsmoker Mortality Table for
issue ages 15 and above. For issue ages 0-14, they are based on the
Commissioner's 1980 Standard Ordinary Mortality Tables without distinction for
smoker or nonsmoker status, until attained age 15; then for attained ages 15 and
over, they are based on the Commissioner's 1980 Standard Ordinary Nonsmoker
Mortality Table.
<PAGE>
If this Policy or an increased Specified Amount is in a special rating class,
the guaranteed maximum insurance rates are increased in the manner described in
the table of guaranteed maximum insurance rates.
If the net investment factor is always equivalent to an effective annual
interest rate of 4%, the values in this Policy will always at least equal the
account values required of an equivalent general account policy by the law where
this Policy was delivered. A detailed statement of how we calculate the values
in this Policy has been filed with the insurance department where this Policy
was delivered.
Exchange Provision
During the first 24 policy months, you have the right to exchange this Policy
for a permanent fixed benefit policy. We will not require evidence of
insurability. If you decide to make an exchange, we will notify you of the
policies available for exchange and the procedures to follow.
You may elect to have the amount of the new policy be either (a) or (b) where:
(a) is the Life Insurance Proceeds on the date of exchange, and
(b) is the Life Insurance Proceeds minus the Account Value on the date
of exchange.
The new policy will have the same policy date, sex, issue age and rating class
as this Policy. The new policy will include such riders and endorsements as were
included in this Policy, if such riders and endorsements are available with the
new policy.
The exchange is subject to an equitable adjustment in payments and Account
Values to reflect variances, if any, in the payments and Account Values under
the existing Policy and the new policy.
Limits on Contesting This Policy
In deciding to issue this Policy, we relied on statements in the application for
the Policy. If we increase the Specified Amount or reinstate the Policy after it
lapses, we rely on statements in a supplemental application or a reinstatement
application. The statements in all such applications are considered
representations and not warranties.
We can contest this Policy, an increase in Specified Amount and/or a
reinstatement of this Policy, if:
o any material misrepresentation of fact was made in the application,
a supplemental application or a reinstatement application; and
o a copy of that application was attached to the Policy when issued or
delivered, or was made a part of the Policy when a change in coverage
or Policy reinstatement went into effect.
With respect to the original Specified Amount, we will not contest this Policy
after it has been in effect during the lifetime of the Insured for two years
from its policy date. We will not contest an increase in Specified Amount after
that increase has been in effect during the lifetime of the Insured for two
years from the effective date of the increase. We will not contest a
reinstatement of this Policy after the reinstated Policy has been in effect
during the lifetime of the Insured for two years from the date of reinstatement.
This provision does not apply to riders that provide disability benefits.
<PAGE>
Misstatement of Age or Sex
If the Insured's Age or sex was misstated in an application, Life Insurance
Proceeds will be adjusted. The Life Insurance Proceeds after adjustment will be
the sum of (a) and (b), where:
(a) is the Account Value at the time of the Insured's death; and
(b) is the unadjusted Life Insurance Proceeds, reduced by the Account
Value at the time of the Insured's death, and multiplied by the
ratio of (1) the most recent monthly deduction based on the Age and
sex shown in the application, to (2) the most recent monthly
deduction based on the true Age or sex.
All amounts are those in effect, with respect to the Insured, in the Policy
Month of the Insured's death.
In no event will Life Insurance Proceeds be less than the amount required to
keep the Policy qualified as life insurance.
Nonparticipating
This is not a participating policy. No dividends are payable.
Suicide
If the Insured commits suicide, while sane or insane, within two years of the
Policy Date, all coverage under the Policy will end, and we will pay a limited
amount of proceeds. The limited amount of proceeds will equal all premiums paid
on the Policy, less Policy Debt and partial surrenders.
If the Insured commits suicide, while sane or insane, more than two years after
the policy date and within two years after an increase in the Specified Amount
became effective, the Specified Amount will be reduced to the amount in effect
prior to the increase. The amount payable with respect to the increase will
equal the monthly deductions that were made for that increase.
Any limited amount payable will be treated as Life Insurance Proceeds and paid
to the Beneficiary under the same conditions as the original Specified Amount.
Written Notice
Any written notice to us should be sent to our Home Office at 6610 West Broad
Street, Richmond, Virginia 23230. Please include the policy number and the
Insured's full name.
Any notice we send to you will be sent to your address shown in the application.
Notify us of any change of address.
OPTIONAL PAYMENT PLANS
Life insurance or surrender value proceeds will be paid in one lump sum, unless
requested otherwise. Any part of the proceeds can be left with us and paid under
a payment plan. During the Insured's life, you can choose a plan. A Beneficiary
can choose a plan if you have not chosen one at the Insured's death.
<PAGE>
There are several important payment plan rules:
o The payee under a plan cannot be a corporation, association or
fiduciary.
o If you change a Beneficiary, your plan selection will no longer be in
effect unless you request that it continue
o Any choice or change of a plan must be sent in writing to our Home
Office.
o The amount of each payment under a plan must be at least $50.
o Payments will begin either on the date of death or on lapse, except
for payments under Plan 4 which begin at the end of the first
interest period.
o Payments are backed by assets in our General Account.
Plan 1. Income for A Fixed Period. We will make equal periodic payments for a
fixed period, not longer than 30 years. Payments can be annual, semi-annual,
quarterly or monthly. Payments will be made according to the table in this
section. Guaranteed amounts payable under this plan will earn interest at 3%
compounded yearly. We may increase the interest and the amount of any payment.
If the payee dies, the amount of the remaining guaranteed payments will be
discounted to the date of the payee's death at a yearly rate of 3%. Discounted
means we will deduct the amount of interest each remaining payment would have
included had it not been paid out early. The discounted amount will be paid in
one sum to the payee's estate unless otherwise provided.
Plan 2. Life Income. `We will make equal monthly payments for a guaranteed
minimum period. If the payee lives longer than the minimum period, payments will
continue for his or her life. The minimum period can be 10, 15 or 20 years.
Payments will be according to the table in this section. Guaranteed amounts
payable under this plan will earn interest at 3% compounded yearly. We may
increase the interest rate and the amount of any payment. If the payee dies
before the end of the guaranteed period, the amount of remaining payments for
the minimum period will be discounted at the same interest rate used to
calculate the monthly income. The discounted amounts will be paid in one sum to
the payee's estate unless otherwise provided.
Plan 3. Income of A Definite Amount. We will make equal periodic payments of a
definite amount. Payments can be annual, semi-annual, quarterly or monthly. The
amount paid each year must be at least $120 for each $1,000 of proceeds.
Payments will continue until the proceeds are exhausted. The last payment will
equal the amount of any unpaid proceeds. Unpaid proceeds will earn interest at
3% compounded yearly. We may increase the interest rate. If we do, the payment
period will be extended. If the payee dies, the amount of the remaining proceeds
with earned interest will be paid in one sum to his or her estate unless
otherwise provided.
Plan 4. Interest Income. We will make periodic payments of interest earned from
the proceeds left with us. Payments can be annual, semi-annual, quarterly or
monthly, and will begin at the end of the first period chosen. Proceeds left
under this plan will earn interest at 3% compounded yearly. We may increase the
interest rate and the amount of any payment. If the payee dies, the amount of
remaining proceeds and any earned but unpaid interest will be paid in one sum to
his or her estate unless otherwise provided.
Plan 5. Joint Life and Survivor Income. We will make equal monthly payments to
two payees for a guaranteed minimum of 10 years. Each payee must be at least 35
years old when payments begin. The guaranteed amount payable under this plan
will earn interest at 3% compounded yearly. We may increase the interest rate
and the amount of any payment. Payments will continue as long as either payee is
living. If both payees die before the end of the minimum period, the amount of
the remaining payments for the 10 year period will be discounted at the same
interest rate used to calculate the monthly income. The discounted amount will
be paid in one sum to the survivor's estate unless otherwise provided.
<PAGE>
Plan 1 Table: Monthly payment rates for each $1,000 of proceeds under Plan 1.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Years 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Payable
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Mthly 84.47 42.68 28.99 22.06 17.91 15.14 $13.16 $11.68 $10.53 $9.61 $8.86 $8.24 $7.71 $7.26 $6.87
Paymnt
- ------------------------------------------------------------------------------------------------------------------------------------
Years 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Payable
- ------------------------------------------------------------------------------------------------------------------------------------
Mnthly $6.53 $6.23 $5.96 $5.73 $5.51 $5.32 $5.15 $4.99 $4.84 $4.71 $4.595 $4.47 $4.37 $4.27 $4.18
Paymnt
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Figures for intermediate ages, for two males or two females will be furnished
upon request.
Plan 2 Table: Monthly payment rates for ech $1,000 of proceeds under Plan 2.
<TABLE>
<CAPTION>
Settlmt Male Payee Female Payee Settlmt. Male Payee Female Payee
Age Age
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
10 yr 15 yr 20 yr 10 yr 15 yr 20 yr 10 yr 15 yr 20 yr 10 yr 15 yr 20 yr
Certain Certain Certain Certain Certain Certain Certain Certain Certain Certain Certain Certain
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
20 2.90 2.89 2.89 2.80 2.80 2.80 65 5.44 5.17 4.83 4.85 4.72 4.54
- ----------------------------------------------------------------------------------------------------------------------------------
25 2.99 2.98 2.98 2.88 2.87 2.87 66 5.58 5.28 4.89 4.97 4.83 4.62
- ----------------------------------------------------------------------------------------------------------------------------------
30 3.10 3.10 3.09 2.96 2.96 2.96 67 5.74 5.38 4.96 5.10 4.93 4.69
- ----------------------------------------------------------------------------------------------------------------------------------
35 3.24 3.24 3.23 3.08 3.07 3.07 68 5.89 5.49 5.02 5.24 5.04 4.77
- ----------------------------------------------------------------------------------------------------------------------------------
40 3.43 3.41 3.39 3.22 3.21 3.20 69 6.05 5.60 5.08 5.39 5.16 4.84
- ----------------------------------------------------------------------------------------------------------------------------------
45 3.66 3.64 3.60 3.40 3.39 3.37 70 6.22 5.70 5.13 5.55 5.28 4.92
- ----------------------------------------------------------------------------------------------------------------------------------
50 3.95 3.91 3.85 3.63 3.61 3.59 71 6.39 5.81 5.18 5.71 5.39 4.99
- ----------------------------------------------------------------------------------------------------------------------------------
51 4.02 3.97 3.91 3.68 3.66 3.63 72 6.57 5.91 5.23 5.88 5.51 5.05
- ----------------------------------------------------------------------------------------------------------------------------------
52 4.09 4.04 3.96 3.74 3.72 3.68 73 6.75 6.01 5.27 6.06 5.63 5.12
- ----------------------------------------------------------------------------------------------------------------------------------
53 4.16 4.11 4.02 3.80 3.77 3.74 74 6.93 6.10 5.31 6.25 5.75 5.17
- ----------------------------------------------------------------------------------------------------------------------------------
54 4.24 4.18 4.08 3.86 3.83 3.79 75 7.12 6.19 5.35 6.44 5.87 5.22
- ----------------------------------------------------------------------------------------------------------------------------------
55 4.32 4.25 4.15 3.93 3.90 3.85 76 7.30 6.28 5.38 6.64 5.98 5.27
- ----------------------------------------------------------------------------------------------------------------------------------
56 4.41 4.33 4.21 4.00 3.96 3.91 77 7.49 6.35 5.40 6.85 6.09 5.31
- ----------------------------------------------------------------------------------------------------------------------------------
57 4.50 4.41 4.28 4.07 4.03 3.97 78 7.67 6.43 5.42 7.06 6.19 5.35
- ----------------------------------------------------------------------------------------------------------------------------------
58 4.60 4.49 4.34 4.15 4.10 4.03 79 7.85 6.49 5.44 7.27 6.28 5.38
- ----------------------------------------------------------------------------------------------------------------------------------
59 4.70 4.58 4.41 4.23 4.18 4.10 80 8.02 6.55 4.46 7.48 6.37 5.41
- ----------------------------------------------------------------------------------------------------------------------------------
60 4.81 4.67 4.48 4.32 4.26 4.17 81 8.18 6.61 5.47 7.68 6.45 5.43
- ----------------------------------------------------------------------------------------------------------------------------------
61 4.92 4.77 4.55 4.42 4.35 4.24 82 8.34 6.65 5.48 7.88 6.52 5.45
- ----------------------------------------------------------------------------------------------------------------------------------
62 5.04 4.86 4.62 4.52 4.53 4.39 84 8.63 6.73 5.50 8.26 6.63 5.48
- ----------------------------------------------------------------------------------------------------------------------------------
64 5.30 5.06 4.76 4.73 4.62 4.46 85& 8.76 6.76 5.50 8.43 6.68 5.49
over
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Values for ages not shown will be furnished upon request.
Plan 5 Table: Monthly payment rates for each $1000 of proceeds under Plan 5.
Monthly payment rates for each $1,000 of proceeds under Plan 5.
<TABLE>
<CAPTION>
- ----------------- -------------------------------------------------------------------------------------------
Male Settlement Female Settlement Age
Age
35 40 45 50 55 60 65 70 75 80 85 & over
<S> <C>
35 $2.95 $3.00 $3.06 $3.11 $3.15 $3.18 $3.20 $3.22 $3.23 $3.24 $3.24
40 2.98 3.06 3.13 3.20 3.26 3.31 3.35 3.38 3.40 3.41 3.42
45 3.01 3.10 3.20 3.30 3.39 3.46 3.53 3.58 3.61 3.64 3.65
50 3.03 3.14 3.25 3.38 3.51 3.63 3.73 3.38 3.87 3.91 3.93
55 3.04 3.16 3.30 3.45 3.62 3.79 3.94 4.08 4.18 4.25 4.29
60 3.05 3.18 3.33 3.51 3.72 3.94 4.16 4.37 4.55 4.67 4.75
65 3.06 3.19 3.36 3.56 3.79 4.07 4.37 4.68 4.96 5.18 5.32
70 3.07 3.20 3.37 3.59 3.85 4.17 4.55 4.97 5.39 5.75 6.00
75 3.07 3.21 3.38 3.61 3.89 4.24 4.68 5.20 5.78 6.32 6.73
80 3.07 3.21 3.39 3.62 3.91 4.28 4.76 5.37 6.08 6.81 7.40
85 & over 3.07 3.22 3.39 3.62 3.92 4.31 4.81 5.47 6.28 7.15 7.91
- ----------------- ------- ------- ------- -------- ------- ------- -------- ------- ------ ------- ----------
</TABLE>
Figures for intermediate ages, for two males or two females
<PAGE>
Settlement Age: The settlement age is the payee's age nearest birthday on the
date payments begin, minus an age adjustment from the table below. The age
adjustment cannot exceed the age of the payment.
- -------------------------------------------------------------------------------
YEAR Payments Begin AGE
ADJUSTMENT
AFTER PRIOR TO
- -------------------------------------------------------------------------------
0
----- 2001 3
2001 2026 7
2025 2051 10
2050 ----
<PAGE>
FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE POLICY
- --------------------------------------------------------------------------------
o Life Insurance Proceeds payable at the Insured's death
o Adjustable death benefit
o Flexible premiums payable for the Insured's life
o Some benefits reflect investment results
o No dividends
THE LIFE INSURANCE
COMPANY OF VIRGINIA
THE LIFE INSURANCE COMPANY OF VIRGINIA
ACCELERATED BENEFIT RIDER
This rider adds an accelerated benefit to the Policy, subject to the conditions
described below. Upon your election and subject to the provisions of this rider,
we will pay you an accelerated benefit if the Insured is terminally ill. Payment
will be made in a lump sum.
Terminal Illness
Terminal illness is a medical condition, resulting from bodily injury, or
disease, or both:
o which has been diagnosed by a licensed physician; and
o for which the diagnosis is supported by clinical, radiological,
laboratory or other evidence of the medical condition which is
satisfactory to us; and
o which a licensed physician certifies is expected to result in death
within 12 months of such certification.
Before payment of any accelerated benefit, we will require satisfactory proof
that the Insured has a terminal illness. Satisfactory proof will include a
properly completed claim form and a written statement from a licensed physician.
The licensed physician must be someone other than you or the Insured. We reserve
the right to obtain a second medical opinion at our expense.
Total Proceeds
Total Proceeds means the Life Insurance Proceeds of the Policy plus any
additional term insurance on the Insured added to the Policy by rider. (Not
including Children's Insurance Rider.)
Total Proceeds:
o will not have an adjustment for any Policy Debt; but
o will have adjustments for the misstatement of age or sex which would
be made to Life Insurance Proceeds at the death of the Insured, as
described in the Policy; and
o will exclude any Accidental Death Benefit; and
o will exclude any coverage from the Policy or from any additional term
insurance rider on the Insured that would expire within 24 months of
the date we receive proof of terminal illness.
Eligible Proceeds
Eligible Proceeds is the Total Proceeds subject to a maximum of $250,000 for the
total of all of our policies or certificates covering the Insured.
Living Benefit
The Living Benefit is the amount of the accelerated benefit that we will pay to
you under this rider.
<PAGE>
The Living Benefit is equal to the Eligible Proceeds:
o discounted for the life expectancy of the Insured at the rate of
interest charged for policy loans; and
o minus the amount of the single premium required to keep the Policy in
effect for the life expectancy of the Insured assuming current cost
of insurance rates, current expense charges, and the interest rate
stated above; and
o minus the Policy Debt on the date of the accelerated benefit payment
multiplied by the ratio of the Eligible Proceeds to the Total
Proceeds.
Effect of Living Benefit on the Policy
If the Eligible Proceeds are equal to the amount which would otherwise be
payable upon the death of the Insured, then upon payment of any benefit under
this rider:
o any insurance under the Policy on the life of someone other than the
Insured will be treated as though the Insured had died; and
o all insurance under the Policy on the life of the Insured, including
any riders, will end.
If the Eligible Proceeds are less than the amount which would otherwise be
payable upon the death of the Insured, then upon payment of any benefit under
this rider:
o the Policy will continue with the Specified Amount, Account Value and
any Policy Debt reduced appropriately, by the ratio of the Eligible
Proceeds to the Total Proceeds; and
o we will waive any surrender charge for the resulting decrease in
Specified Amount; and
o we will waive any minimum Specified Amount requirement for the
resulting decrease in Specified Amount; and
o any additional term insurance rider on the Insured will continue with
the amount of insurance reduced by the ratio of the Eligible Proceeds
to the Total Proceeds; and
o any other rider benefits will continue with no reduction.
Conditions
Payment of the Living Benefit is subject to the following conditions:
o The Policy and any additional term insurance rider on the Insured
must be in force on the date we receive proof of terminal illness.
o The release of any collateral assignees and the approval of any
irrevocable beneficiaries is required.
o The policy may not be in the grace period on the date we receive
proof of the terminal illness.
o You are not eligible for the Living Benefit:
(a) if you are required by law to use the Living Benefit
to meet the claims of creditors, whether in
bankruptcy or otherwise; or
(b) if you are required by a government agency to use
the Living Benefit in order to apply for, obtain, or
otherwise keep a government benefit or entitlement.
<PAGE>
Effective Date
This rider is effective on the Policy Date unless a different effective date is
shown on the policy data page.
There is no charge for this rider.
All provisions of the Policy apply to this rider unless otherwise specified.
For The Life Insurance Company of Virginia,
President
THE LIFE INSURANCE COMPANY OF VIRGINIA
DISABILITY BENEFIT RIDER
This rider provides benefits while the Insured is totally disabled. However, it
will not provide any benefits until after six months of continuous total
disability.
During the Continuation Period, on each Monthly Anniversary Day while the
Insured is totally disabled, we will credit to this Policy a premium equal to
the greater of the monthly deductions or the amount by which the Continuation
Amount for the current Policy Month exceeds the Continuation Amount for the
preceding Policy Month.
After the Continuation Period, on each Monthly Anniversary Day while the Insured
is totally disabled, we will waive the monthly deductions due under this Policy,
including the monthly costs of any benefits provided by rider.
After we receive proof the Insured has been continuously totally disabled for
six months, we will make benefits effective from the commencement of total
disability.
Coverage will continue during any period for which benefits are provided under
this rider.
The total disability must start while this rider is in effect. It also must
start before the policy anniversary nearest the Insured's 65th birthday.
We will not waive any deduction due on or after the policy anniversary nearest
the Insured's 65th birthday, except as provided below.
If the Insured is totally disabled and monthly deductions are being waived, this
Policy will not lapse solely because the Account Value becomes less than the
surrender charge.
When this Rider is Effective
Coverage provided as a result of the original application for this rider goes
into effect on the Policy Date unless another effective date is shown in the
policy data pages.
If you increase the Specified Amount under the Policy, the coverage under this
rider will increase at the same time. Coverage under this rider will end:
o on the policy anniversary nearest the Insured's 65th birthday; or
o if the grace period ends without sufficient premium being paid;
or
o if the Policy is surrendered; or if you send a written request
to end the rider; or
o if the Policy ends.
Any monthly deduction due on or after the policy anniversary nearest the
Insured's 65th birthday will be waived only if on that date the Insured:
o is totally disabled; and
has been continuously totally disabled during the previous five
years; and
o was entitled to benefits under this rider.
Totally Disabled
The Insured will be considered totally disabled if the total disability:
o results from bodily injury or disease; and
o continues uninterrupted for at least six months; and
o during its first two years causes the Insured to be unable to
perform the substantial duties of his or her regular occupation;
and
o after its first two years causes the Insured to be unable to
perform the substantial duties of any and every occupation or
work for pay or profit for which he or she is qualified by
education, training or experience.
Any of the following are presumed to cause the Insured to be totally disabled:
o The entire, irrevocable loss of sight of both eyes.
o The loss of use of both hands.
o The loss of use of both feet.
o The loss of use of one hand and one foot.
The loss must occur after this rider goes into effect.
Exceptions
This rider will not provide any benefits if total disability results from:
o an intentionally self-inflicted injury, while sane or insane; or
o an injury that occurred or disease that first became manifest
before this rider went into effect; or with respect to increases
in coverage, injury that occurred or disease that first became
manifest before the increase went into effect; or
o war, whether or not declared, or any act of war, or
participation in an insurrection; or
o service in any armed force engaged in a military conflict.
Limits on Contesting this Rider
With respect to coverage originally provided by this rider on its effective
date, we will not contest this rider after it has been in effect for two years
during the Insured's life and without the start of total disability. With
respect to increases in coverage due to increases in the Specified Amount under
the Policy, we will not contest an increase in coverage under this rider after
the increase has been in effect for two years during the Insured's life and
without the start of total disability.
<PAGE>
Claiming Benefits Under this Rider
Send us written notice and proof of the Insured's total disability. We must
receive proof of claim while the Insured is alive and totally disabled. If this
cannot be done, we will not reduce or deny the claim if we receive notice and
proof as soon as reasonably possible. We will not waive any Continuation Amount
or monthly deduction due prior to the 12 months before we receive notice of
disability, unless it was not reasonably possible to send notice sooner.
We require that proof of continuing total disability be given to us
periodically. We will not require proof more than once a year after total
disability has continued for two years. If the insured fails to give required
proof, we will not waive any future Continuation Amounts or monthly deductions.
Cost of this Rider
This rider is issued in consideration of the application and the inclusion of
the monthly cost of disability benefit in the policy's monthly deduction.
The monthly cost of disability benefit is (1) multiplied by (2), where:
(1) isthe disability percentage rate; and
(2) is the cost of insurance for the month.
The disability percentage rates are shown in the Table of Guaranteed Maximum
Insurance Rates in the policy data pages. The cost of insurance is the cost of
insurance for the Policy plus the cost of insurance for any rider insuring an
additional life.
This rider is subject to the provisions of the Policy.
For The Life Insurance Company of Virginia,
/s/PAUL E. RUTLEDGE III
----------------------------
President
THE LIFE INSURANCE COMPANY OF VIRGINIA
DISABILITY BENEFIT RIDER
The amount of Disability Benefit is shown in the policy data pages.
We will credit the Disability Benefit as a premium paid on this Policy, on each
Monthly Anniversary Day while the Insured is totally disabled. (See Statutory
Limitations below.) We will not credit Disability Benefits until after six
months of continuous total disability. After we receive proof the Insured has
been continuously totally disabled for six months, we will credit as a premium
paid on this Policy the total of the Disability Benefits that became payable
before we received the proof.
Coverage will continue as though you were paying premiums equal to the
Disability Benefit being credited. We will continue to subtract monthly
deductions.
The total disability must start while this rider is in effect. It also must
start before the policy anniversary nearest the Insured's 65th birthday.
We will not credit any Disability Benefit on or after the policy anniversary
nearest the Insured's 65th birthday, except as provided below.
Statutory Limitations
Federal Tax Law, or other statutes, may affect the amount that may be paid as
premiums on this Policy. Payment of too large a premium could jeopardize the
status of this Policy as life insurance. In the event a Disability Benefit
becomes payable, and is so large as to jeopardize the tax status of this Policy
as life insurance, we will waive the monthly deductions due under this Policy,
including the monthly costs of any benefits provided by rider.
See the Change in Amount of Disability Benefit provision.
When this Rider is Effective
Coverage provided as a result of the original application for this rider goes
into effect on the Policy Date unless another effective date is shown in the
policy data pages.
Coverage under this rider will end:
o on the policy anniversary nearest the Insured's 65th birthday; or
o if the grace period ends without sufficient premium being paid; or
o if the Policy is surrendered; or
o if you send a written request to end the rider; or
o if the Policy ends.
<PAGE>
Disability Benefits will be payable on or after the policy anniversary nearest
the Insured's 65th birthday only if on that date the Insured:
o is totally disabled; and
o has been continuously totally disabled during the previous five years;
and
o was entitled to benefits under this rider.
Totally Disabled
The Insured will be considered totally disabled if the total disability:
o results from bodily injury or disease; and
o continues uninterrupted for at least six months; and
o during its first two years causes the Insured to be unable to perform
the substantial duties of his or her regular occupation; and
o after its first two years causes the Insured to be unable to perform
the substantial duties of any and every occupation or work for pay or
profit for which he or she is qualified by education, training or
experience.
Any of the following losses will be presumed to cause the Insured to be totally
disabled:
o The entire, irrevocable loss of sight of both eyes.
o The loss of use of both hands.
o The loss of use of both feet.
o The loss of use of one hand and one foot.
The loss must occur after this rider goes into effect.
Exceptions
We will not credit Disability Benefits if total disability or presumed total
disability results from:
o an intentionally self-inflicted injury, while sane or insane; or
o an injury that occurred or disease that first became manifest before
this rider went into effect; or
o war, whether or not declared, or any act of war, or participation in
an insurrection; or
o service in any armed force engaged in a military conflict.
Limits on Contesting this Rider
With respect to coverage originally provided by this rider on its effective
date, we will not contest this rider after it has been in effect for two years
during the Insured's life and without the start of total disability. With
respect to increases in coverage, we will not contest an increase in coverage
under this rider after the increase has been in effect for two years during the
Insured's life and without the start of total disability.
Change in Amount of Disability Benefit
You can increase or decrease the amount of Disability Benefit payable under this
rider subject to our guidelines. To make a change, send a written request along
with the Policy to our Home Office.
<PAGE>
Decrease. A decrease will be effective on the Monthly Anniversary Day after we
receive the request.
Increase. You must apply for an increase on a supplemental application. You will
have to submit evidence satisfactory to us that the Insured is insurable under
our standards in effect for this benefit at the time we receive the application.
Any increase will become effective on the date shown in the supplemental policy
data page, subject to deduction of the cost of the increased benefit from the
Account Value of the Policy.
Required Decrease. If the Specified Amount under the Policy is decreased, we
will reduce the Disability Benefit, if necessary, to the greatest amount that
will comply with any statutory limitations in effect at that time.
Claiming Benefits Under this Rider
Send us written notice and proof of the Insured's total disability. We must
receive proof of claim while the Insured is alive and totally disabled. If this
cannot be done, we will not reduce or deny the claim if we receive notice and
proof as soon as reasonably possible. We will not credit any Disability Benefit
due prior to 12 months before we receive notice of disability.
We require that proof of continuing total disability be given to us
periodically. We will not require proof more than once a year after total
disability has continued for two years. If the Insured fails to give required
proof, we will not credit any future Disability Benefits.
Cost of this Rider
This rider is issued in consideration of the application and the inclusion of
the monthly cost of Disability Benefit in the Policy's monthly deduction.
The monthly cost of Disability Benefit is shown in the policy data pages.
This rider is subject to the provisions of the Policy.
For The Life Insurance Company of Virginia.
President
THE LIFE INSURANCE COMPANY OF VIRGINIA
INSURANCE RIDER FOR ADDITIONAL INSURED PERSON
This rider provides adjustable insurance on an additional insured person. We
will pay the insurance to the beneficiary named in the application for this
rider, unless another beneficiary has been designated and that designation is
effective when the insurance is payable. If no beneficiary survives the
additional insured person, the insurance will be paid to you or your estate.
Additional insured person means the person so named in the application for this
rider and also named in the policy data pages. The insurance is payable at the
death of the additional insured person while this rider is in effect.
Amount of Insurance
The amount of insurance is shown in the policy data pages.
Change in Existing Amount of Insurance
After this rider has been in effect for one year, you can increase or decrease
the amount of insurance. To make a change, send a written request and the Policy
to our Home Office.
Decrease
Any decrease will become effective on the Monthly Anniversary Day after the date
we receive the request. The decrease will first apply to coverage provided by
the most recent increase, then to the next most recent increases successively,
then to coverage provided under the original application. The least amount that
may be in effect after a change is $10,000.
Increase
To apply for an increase you must submit a supplemental application. You will
have to submit evidence satisfactory to us that the additional insured person is
insurable. Any approved increase will become effective on the date shown in the
supplemental policy data page. Any increase will be subject to deduction of the
first month's cost of increased insurance from the Account Value of this Policy.
Any increase will be limited by the company's rules in effect at the time of the
change.
When this Rider is Effective
This rider goes into effect on the policy date, unless another effective date is
shown in the policy data pages.
This rider will end:
o on the death of the Insured; or
o if the Policy is surrendered; or
o if you send us a written request to end the rider; or
o if the Policy ends; or
o on the policy anniversary nearest the additional insured person's
100th birthday.
<PAGE>
Misstatement of Age or Sex
If the age or sex of the additional insured person was misstated in the
application for this rider, the proceeds and benefits will be adjusted. We will
adjust proceeds and benefits by the difference between the actual monthly cost
of insurance and the monthly cost of insurance that should have been deducted at
the true age or sex.
Suicide
If the additional insured person under this rider dies from suicide, while sane
or insane, within two years from the effective date of coverage under this
rider, our liability will be limited to the total cost of insurance for this
rider for the months it is in force. If the additional insured person under this
rider dies from suicide within two years from the effective date of an increase
in the existing amount of insurance, our liability with respect to that increase
will be limited to the total cost of insurance for that increase for the months
the amount of increase is in force.
Exchanging this Rider for an Insurance Policy
While this rider is in effect, you can exchange it for a new policy. We will not
require any new evidence of insurability. To exchange this rider, send us a
written request and the Policy. This rider will end and the new policy will go
into effect on the Monthly Anniversary Day after we receive the request. This
cannot be later than the policy anniversary nearest the additional insured
person's 70th birthday. The full first premium must be paid before the new
policy will go into effect. If the exchange takes place within two years of the
effective date of this rider, we will rely on representations in the application
for this rider. We cannot contest coverage under the new policy if death occurs
after the two-year period following the effective date of coverage under this
rider. The new policy may be any plan of insurance we then offer for exchanges.
There will be at least one plan available. Premiums for the new policy will be
at rates then in effect for the additional Insured's sex and attained age. The
new policy will be subject to our rules on frequency of premium payment, minimum
premium and plan availability at the age of exchange. The amount of insurance
under the new policy will be the amount of insurance under this rider on the
effective date. A smaller amount of insurance may be arranged with our consent.
The new policy will include all provisions we regularly use in such policies on
the policy date. The new policy will not include any supplementary riders unless
we agree.
Death of the Insured
If you are not the Insured, and this rider ends because of the death of the
Insured, we will issue to you a new policy on the life of the additional insured
person. The requirements and provisions under Exchanging this Rider for an
Insurance Policy will apply. We must receive a written request within 30 days
after the Insured's death. If the Insured's date of death is the 29th, 30th, or
31st day of a calendar month, the new policy will be effective on the first day
of the following calendar month. Otherwise, the new policy will be effective on
the date of the Insured's death.
If you are the Insured and this rider ends because of your death, the additional
insured person may request the new policy. In this case, the additional insured
person will own the new policy. If the additional insured person dies within 30
<PAGE>
days after the Insured, and if a new policy has not been requested, we will pay
the amount of insurance that would have been paid under this rider had it not
ended. Our payment will be made as if this rider was still in effect.
Limits on Effect of Other Riders
No benefit rider, other than a Disability Benefit Rider, will affect this rider.
This rider will not increase the benefits paid under any other rider.
Limits on Contesting this Rider
We will not contest the amount of insurance originally provided by this rider
after it has been in effect during the additional insured person's life for two
years.
Cost of this Rider
This rider is issued in consideration of the application and the inclusion of
its monthly cost of insurance in the Policy's monthly deduction.
The monthly cost of insurance for this rider is (1) multiplied by (2) where:
(1)`is the cost of insurance rate for this rider; and
(2)`is the amount of insurance for this rider, divided by 1000.
Cost of Insurance Rate
The monthly rate is based on the additional insured person's sex, issue age,
policy duration and risk class. The rates are determined by us according to
expectations of future mortality. We can change the rates from time to time, but
they will never be more than the maximum rates shown in the Table of Guaranteed
Maximum Insurance Rates. A change in rates will apply to all persons of the same
age, sex and risk class and whose policies have been in effect for the same
length of time.
Reinstatement
You may reinstate this rider at the same time and under the same conditions as
the Policy. We require evidence satisfactory to us that the additional insured
person is insurable.
This rider has no account value.
This rider is subject to the provisions of the Policy.
For The Life Insurance Company of Virginia
President
THE LIFE INSURANCE COMPANY OF VIRGINIA
CHILDREN'S INSURANCE RIDER
This rider provides level term insurance payable at the death of each insured
child. We will pay the insurance to the Insured unless another beneficiary has
been designated and the designation is effective when the child dies.
Insured child means the Insured's child named in the application for this rider.
Insured child also means any child born to or adopted by the Insured while this
rider is effective. A child may not become an insured child before the 15th day
of the child's life or after the child's 18th birthday. However, a child who is
a full-time student and who has not yet attained his 22nd birthday may become an
insured child.
Insured means the Insured under the Policy.
Full-time student means a child who is currently enrolled as a full-time
student, in a secondary or postsecondary school. Full-time student also includes
a child who is absent from school due to summer vacation and who is scheduled to
return to school when the next school year begins.
Amount of Insurance
The amount of insurance is shown in the policy data pages.
When this Rider is Effective
This rider goes into effect on the Policy Date, unless another effective date is
shown in the policy data pages.
An insured child's coverage goes into effect on the date when this rider goes
into effect, the date of the child's adoption, or the 15th day of the child's
life, whichever is latest. An insured child's coverage ends on the policy
anniversary nearest the child's 25th birthday or when this rider ends, if
earlier.
This rider will end:
o on the death of the Insured; or
o if the Policy is surrendered; or
o if you send us a written request to end the rider; or
o if the Policy ends.
Continuation of Coverage at Death of Insured
In addition to providing term insurance on each insured child, this rider
provides for a term insurance benefit on the Insured. This benefit is
automatically applied at the death of the Insured to purchase a new policy
containing the same amount of benefit as this rider on each surviving insured
child. No further premium will be required on any new policy. Each new policy
will have account values which will be available to its owner. We will furnish
these values on request.
<PAGE>
Child's Option to Purchase a New Policy
An insured child may purchase a new policy on his own life, on the policy
anniversary nearest his 25th birthday or when the Policy ends, if earlier. No
evidence of insurability will be required.
The insured child must send us a written request within 30 days of the end of
his coverage under this rider. The new policy will go into effect on the date
coverage ends under this rider. However, the full first premium must be paid
before the new policy will go into effect.
The new policy can be a whole life policy or any other policy then offered by us
for exchanges. Premiums for the new policy will be at rates in effect for the
insured child's sex and attained age on its effective date. The new policy will
be subject to our rules on frequency of premium payment, minimum premium and
plan availability on its effective date. There will be at least one plan
available.
The insured child may elect an amount of insurance of from one to five times the
amount of insurance under this rider on the date coverage ends under this rider.
The new policy will not include any supplementary riders unless we agree.
Limits on Effect of Other Riders
No benefit rider, other than a Disability Benefit Rider, will affect this rider.
This rider will not increase the benefits paid under any other rider.
Limits on Contesting this Rider
With respect to any insured child named in the application, we will not contest
the amount of coverage originally provided by this rider after it has been in
effect during the child's life for two years. With respect to any insured child
who becomes insured after this rider goes into effect, we will not contest the
coverage provided that child by this rider.
Suicide
If the Insured commits suicide, while sane or insane, within two years of the
date this rider goes into effect, this rider will end. We will not issue a
paid-up policy on any surviving insured child. Instead, each surviving insured
child may purchase a new policy, as described under Child's Option to Purchase a
New Policy.
If, while this rider insures only one child, that insured child commits suicide,
while sane or insane, within two years of the date that his coverage under this
rider goes into effect, the benefit payable under this rider will be limited to
the cost of insurance deductions made with respect to this rider. If, while this
rider insures more than one child, one of those insured children commits
suicide, while sane or insane, within two years of the date that his coverage
under this rider goes into effect, no benefits will be paid under this rider
with respect to that child's death.
Cost of this Rider
This rider is issued in consideration of the application and the inclusion of
its monthly cost of insurance in the Policy's monthly deduction.
The monthly cost of insurance for this rider is (1) multiplied by (2), where
(1) is the cost of insurance rate for this rider; and
(2) is the amount of insurance for this rider, divided by 1,000.
The cost of insurance rate for this rider is shown in the policy data pages.
This rider is subject to the provisions of the Policy.
For The Life Insurance Company of Virginia,
President
THE LIFE INSURANCE COMPANY OF VIRGINIA
ACCIDENTAL DEATH BENEFIT RIDER
This rider provides an additional death benefit on the life of the Insured. We
will pay this benefit when we receive due proof of the Insured's death, if:
o the death resulted, directly and independently of all other causes,
from bodily injury caused solely by external, violent and accidental
means; and
o the injury and death occurred while this rider was in effect; and
o the death occurred within 180 days of the injury; and
o the death occurred after the policy anniversary nearest the Insured's
5th birthday; and
o the death occurred before the policy anniversary nearest the
Insured's 70th birthday.
Amount of Benefit
The amount of accidental death benefit is the Specified Amount of Accidental
Death Benefit shown in the policy data pages.
Change in Existing Amount of Benefit
After this rider has been in effect for one year, you can increase or decrease
the Specified Amount of Accidental Death Benefit. To make a change, send a
written request and the Policy to our Home Office.
Decrease. Any decrease will become effective on the Monthly Anniversary Day
after the date we receive the request. The decrease will first apply to coverage
provided by the most recent increase, then to the next most recent increases
successively, then to coverage provided under the original application. The
least Specified Amount of Accidental Death Benefit that may be in effect after a
change is $2,000.
Increase. To apply for an increase you must submit a supplemental application.
You will have to submit evidence satisfactory to us that the Insured is
insurable. Any approved increase will become effective on the date shown in the
supplemental policy data page. Any increase will be subject to deduction of the
first month's cost of increased insurance from the Account Value of this Policy.
Any increase will be limited by the Company's rules in effect at the time of the
change.
When the Rider is Effective
This rider goes into effect on the Policy Date unless another effective date is
shown in the policy data pages. The effective date of any increase is shown in
the policy data pages.
This rider will end:
o if the grace period ends without sufficient premium being paid; or
o if the policy is surrendered; or
o if you send us a written request to end the rider; or
o if the Policy ends; or
o on the policy anniversary nearest the Insured's 70th birthday.
<PAGE>
Exceptions
This benefit will not be paid if death results solely or partly, directly or
indirectly, from:
o suicide, or attempted suicide, while sane or insane; or
o committing or attempting to commit an assault or felony; or
o war, whether or not declared, or any act of war, or insurrection; or
o service in any armed force engaged in a military conflict; or
o participation in maneuvers of an armed force; or
o travel in, flight on, or descent from any aircraft unless the Insured
is on the aircraft solely as a passenger (Aircraft includes a rocket
or any vehicle for travel in or beyond the earth's atmosphere); or
o voluntary use of any drug or medication; or
o bodily or mental infirmity, disease or infection, or their medical or
surgical treatment. We will cover death from an infection which
occurs due to an accidental cut or wound.
Limits on Contesting this Rider
We will not contest this rider after it has been in effect during the Insured's
life for two years. We will not contest an increase in benefit after the
increase has been in effect during the Insured's life for two years from the
effective date of the increase.
Cost of this Rider
This rider is issued in consideration of the application and the inclusion of
its monthly cost of insurance in the Policy's monthly deduction.
The monthly cost of insurance for this rider is (1) multiplied by (2), where:
(1) is the cost of insurance rate for this rider; and
(2) is the Specified Amount of Accidental Death Benefit.
The cost of insurance rates for this rider are shown in the Table of Guaranteed
Maximum Insurance Rates in the policy data pages.
This rider is subject to the provisions of the Policy.
For The Life Insurance Company of Virginia,
President
THE LIFE INSURANCE COMPANY OF VIRGINIA
GUARANTEE ACCOUNT RIDER
This rider adds a Guarantee Account as described below. Subject to the
provisions of this rider, you may allocate premium payments to the Guarantee
Account. You may also transfer amounts between the Guarantee Account and the
Investment Subdivisions of the Separate Account.
The Account Value of the Policy includes:
o the Account Value allocated to the Investment Subdivisions of the
Separate Account;
o the Account Value allocated to the Guarantee Account; and
o the Account Value held in the General Account to secure Policy Debt.
This rider is effective on the Policy Date unless a different effective date is
shown in the policy data pages.
The Guarantee Account
Amounts allocated to the Guarantee Account become part of the General Account.
The General Account consists of the assets owned by us other than those
allocated to our Separate Accounts. Subject to applicable law, we have sole
discretion over the investment of the assets of the General Account. Such assets
may be chargeable with liabilities arising out of any business we may conduct.
You may elect to allocate premiums to the Guarantee Account, to Investment
Subdivisions of the Separate Account as described in the Policy, or to a
combination of both. The maximum number of Investment Subdivisions shown in the
policy data page includes the Guarantee Account. Any allocation of premium to
the Guarantee Account will take effect immediately regardless of policy
provisions relating to allocation during the initial investment period, if any.
You may also transfer amounts from the Guarantee Account to the Investment
Subdivisions of the Separate Account, or from the Investment Subdivisions of the
Separate Account to the Guarantee Account. (See Transfers below.)
Account Value of the Guarantee Account
We will credit interest on amounts allocated to the Guarantee Account. Each
allocation may be credited with a different interest rate. The guaranteed
minimum interest rate is 4% per year. We may credit a higher interest rate, in a
manner we determine. Any such interest rate determination will apply for one
year (the interest rate guarantee period).
A monthly deduction for the cost of insurance will be made against the Account
Value allocated to the Guarantee Account. (See the Monthly Deduction provision
in the Policy.)
Transfers
You may transfer amounts between the Guarantee Account and Investment
Subdivisions of the Separate Account. Transfers will be effective as of the end
of the Valuation Period during which we receive your request at our Home Office.
With respect to transfers between the Guarantee Account and the Investment
Subdivisions of the Separate Account, we reserve the right to impose the
following restrictions:
o For each allocation to the Guarantee Account, you have 30 days
following the end of its interest rate guarantee period to transfer to
the Investment Subdivisions of the Separate Account. We may limit the
amount which may be transferred from the Guarantee Account. We will not
limit it to less than 25% of the original allocation, plus any accrued
interest on that allocation remaining in the Guarantee Account.
o No transfers from any Investment Subdivision of the Separate Account
to the Guarantee Account may be made during the six month period
following the transfer of any amount from the Guarantee Account to any
Investment Subdivision of the Separate Account.
In all other respects, the rules and charges applicable to transfers between the
Investment Subdivisions of the Separate Account as described in the Policy will
apply to transfers involving the Guarantee Account.
Surrenders, Partial Surrenders and Loans
Any policy provisions regarding surrenders, partial surrenders and loans are not
affected by this rider, with the following exceptions:
With regard to partial surrenders or loans, you may specify whether the amounts
should be taken from the Guarantee Account or the Investment Subdivisions of the
Separate Account. If you do not, we will take the amount of the partial
surrender or loan first from the Investment Subdivisions of the Separate Account
on a pro-rata basis, in proportion to the Account Value in each Investment
Subdivision of the Separate Account. Any amount remaining will be taken from the
Guarantee Account. Amounts taken from the Guarantee Account will come from the
amounts which have been in the Guarantee Account for the longest period of time.
We reserve the right to defer payment of any amounts from the Guarantee Account
for up to six months. We will not defer if the law requires us to pay earlier,
or if the amount payable is to be used to pay premiums on policies with us.
For THE LIFE INSURANCE COMPANY OF VIRGINIA
/s/PAUL E. RUTLEDGE III
------------------------
President
THE LIFE INSURANCE COMPANY OF VIRGINIA
UNISEX RIDER
This Policy, including any attached riders and endorsements, is amended as
follows.
Unisex Policy
All references to "sex" are deleted. Values and rates are unisex. They do
not depend on the sex of the Insured.
Calculation of Values
Our calculations of guaranteed maximum cost of insurance rates for attained ages
15 and above are based on the 1980 CSO-NB and CSO-SB mortality tables for
nonsmokers and smokers, respectively. For attained ages 0-14, they are based on
the 1980 CSO-B table.
Optional Payment Plans
Optional Payment Plan Tables 2 and 5 are deleted from previous policy pages.
They are replaced by the following unisex tables.
Plan 2 Table: Monthly payment rates for each $1000 of proceeds.
<TABLE>
<CAPTION>
- ------- ------- ------- -------- ----- -------- ------- ------- ------- ------- ------- ------- ------ ------- ------- -------
10 15 20 10 15 20 10 15 20 10 15 20
Age* Years Years Years Age* Years Years Years Age* Years Years Years Age* Years Years Years
Cert. Cert. Cert. Cert. Cert. Cert. Cert. Cert. Cert. Cert. Cert. Cert.
- ------- ------- ------- -------- ----- -------- ------- ------- ------- ------- ------- ------- ------ ------- ------- -------
<S><C>
20 $2.82 $2.82 $2.82 55 $4.00 $3.96 $3.90 66 $5.08 $4.91 $4.67 77 $6.96 $6.14 $5.33
25 2.90 2.89 2.89 56 4.07 4.03 3.96 67 5.22 5.02 4.74 78 7.16 6.23 5.36
30 2.99 2.99 2.98 57 4.15 4.10 4.03 68 5.36 5.13 4.82 79 7.36 6.32 5.39
35 3.11 3.10 3.10 58 4.23 4.18 4.09 69 5.51 5.24 4.89 80 7.57 6.40 5.42
40 3.26 3.25 3.24 59 4.32 4.25 4.16 70 5.66 5.35 4.96 81 7.77 6.47 5.44
45 3.45 3.43 3.42 60 4.41 4.34 4.23 71 5.83 5.47 5.02 82 7.96 6.54 5.46
50 3.69 3.67 3.64 61 4.51 4.42 4.30 72 6.00 5.58 5.09 83 8.14 6.60 5.47
51 3.74 3.72 3.68 62 4.61 4.51 4.37 73 6.18 5.70 5.15 84 8.32 6.65 5.48
52 3.80 3.78 3.74 63 4.72 4.61 4.44 74 6.37 5.81 5.20 85 & 8.48 6.69 5.49
53 3.87 3.84 3.79 64 4.83 4.70 4.52 75 6.56 5.93 5.25 Over
54 3.93 3.90 3.85 65 4.95 4.80 4.59 76 6.76 6.03 5.29
- ------- ------- ------- -------- ----- -------- ------- ------- ------- ------- ------- ------- ------ ------- ------- -------
Values for ages not shown will be furnished upon request.
</TABLE>
<TABLE>
<CAPTION>
Plan 5 Table: Monthly Payment Rates for each $1000 of proceeds.
- ---------------------- -------- ------- ------- ------- ------- -------- ------- ------- ------- -------- --------------------
Settlement
Age 35 40 45 50 55 60 65 70 75 80 85&over
- ---------------------- -------- ------- ------- ------- ------- -------- ------- ------- ------- -------- --------------------
<S> <C>
35 $2.92 $2.97 $3.00 $3.03 $3.06 $3.07 $3.08 $3.09 $3.10 $3.10 $3.11
40 2.97 3.03 3.08 3.13 3.17 3.20 3.22 3.23 3.24 3.25 3.25
45 3.00 3.08 3.16 3.23 3.29 3.34 3.38 3.41 3.42 3.44 3.44
50 3.03 3.13 3.23 3.33 3.43 3.51 3.57 3.62 3.65 3.67 3.68
55 3.06 3.17 3.29 3.43 3.56 3.68 3.79 3.87 3.93 3.96 3.99
60 3.07 3.20 3.34 3.51 3.68 3.86 4.03 4.16 4.27 4.34 4.38
65 3.08 3.22 3.38 3.57 3.79 4.03 4.27 4.49 4.68 4.81 4.89
70 3.09 3.23 3.41 3.62 3.87 4.16 4.49 4.83 5.14 5.38 5.54
75 3.10 3.24 3.42 3.65 3.93 4.27 4.68 5.14 5.61 6.02 6.30
80 3.10 3.25 3.44 3.67 3.96 4.34 4.81 5.38 6.02 6.63 7.10
85&over 3.12 3.25 3.44 3.68 3.99 4.38 4.89 5.54 6.30 7.10 7.76
- ---------------------- -------- ------- ------- ------- ------- -------- ------- ------- ------- -------- --------------------
Figures for intermediate ages will be furnished upon request.
</TABLE>
For the Life Insurance Company of Virginia,
President
THE LIFE INSURANCE COMPANY OF VIRGINIA
UNIT VALUE ENDORSEMENT
The Policy to which this endorsement is attached is amended by deleting from the
definition of net investment factor in the Unit Value provision the following:
(c) is a charge no greater than .0024769% for each day in the Valuation
Period. This corresponds to .90% per year.
and by adding the following:
(c) is a charge no greater than .0019246% for each day in the Valuation
Period. This corresponds to .70% per year.
For THE LIFE INSURANCE COMPANY OF VIRGINIA
/s/PAUL E. RUTLEDGE III
----------------------
PRESIDENT
November 17, 1997
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, VA 23230
Gentlemen:
With reference to Pre-Effective Amendment No. 1 to Registration Statement
333-32701 on Form S-6, filed by The Life Insurance Company of Virginia and Life
of Virginia Separate Account II with the Securities and Exchange Commission
covering flexible premium variable life insurance policies, I have examined such
documents and such law as I considered necessary and appropriate, and on the
basis of such examination, it is my opinion that:
1. The Life Insurance Company of Virginia is duly organized and validly
existing under the laws of the Commonwealth of Virginia and has been duly
authorized to issue individual flexible premium variable life insurance
policies by the Bureau of Insurance of the State Corporation Commission of
the Commonwealth of Virginia.
2. Life of Virginia Separate Account II is a duly authorized and existing
separate account established pursuant to the provisions of Section
38.2-3113 of the Code of Virginia.
3. The flexible premium variable life insurance policies, when issued as
contemplated by said Form S-6 Registration Statement, will constitute
legal, validly issued and binding obligations of The Life Insurance
Company of Virginia.
I hereby consent to the use of this letter, or copy thereof, as an exhibit to
Pre Effective Amendment No. 1 to the Registration Statement on Form S-6 (File
Number 333-32701) and the reference to me under the caption "Legal Matters" in
the Statement of Additional Information contained in said Post-Effective
Amendment.
Sincerely,
/s/J. NEIL MCMURDIE
- -------------------------
J. Neil McMurdie
Associate Counsel and
Assistant Vice President
Law Department
Sutherland, Asbill & Brennan, LLP
ATLANTA . AUSTIN . NEW YORK . WASHINGTON
1275 Pennsylvania Ave., N.W. TEL (202) 383-0100
Washington,DC 20004-2404 FAX (202) 637-3593
Stephen E. Roth
Direct Line (202) 383-0158
November 14, 1997
VIA EDGARLINK
Board of Directors
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, Virginia 23230
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus filed as part of Pre-Effective Amendment No. 1 to the
registration statement on Form S-6 for Life of Virginia Separate Account II
(File No. 333-32701). In giving this consent, we do not admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN
By: /s/STEPHEN E. ROTH
------------------------------
Stephen E. Roth
Exhibit 3(c)
Consent of KPMG Peat Marwick LLP
<PAGE>
Consent of Independent Auditors
The Board of Directors
The Life Insurance Company of Virginia
Life of Virginia Separate Account II
We consent to the reference to our firm under the caption "Experts" in the
prospectus of Life of Virginia Separate Account II and to the use of our report
with respect to the consolidated financial statements of The Life Insurance
Company of Virginia and subsidiaries as of December 31, 1996, and for the
nine-month period ended December 31, 1996, and the preacquisition three-month
period ended March 31, 1996, dated January 15, 1997, and our report with respect
to the financial statements of Life of Virginia Separate Account II as of
December 31, 1996, and for the year or periods then ended, dated February 11,
1997, in Pre-Effective Amendment No. 1 to the Registration Statement (Form S-6
No 333-32701).
/s/KPMG PEAT MARWICK LLP
Chicago, Illinois
November 13, 1997
Exhibit 3(d)
Consent of Ernst & Young LLP
<PAGE>
<PAGE>
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" and "Change
in Auditors" and to the use of our reports dated February 8, 1996, with respect
to the consolidated financial statements and the related financial statement
schedules of The Life Insurance Company of Virginia and subsidiaries and the
Life of Virginia Separate Account II, in Amendment No. 1 to the Registration
Statement (Form S-6 No. 333-32701) and related Prospectus of Life of Virginia
Separate Account II for the registration of an indefinite amount of securities.
/s/ Ernst & Young LLP
Richmond, Virginia
November 17, 1997
[GE Life of Virginia Letterhead]
November 17, 1997
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, Virginia 23230
Gentlemen:
This opinion is furnished in connection with the registration by The Life
Insurance Company of Virginia of a flexible premium variable life insurance
policy ("Policies") under the Securities Act of 1933. The prospectus included in
Pre-Effective Amendment No. 1 to Registration Statement No. 333-32701 on Form
S-6 describes the Policy. I have provided actuarial advice concerning the
preparation of the Registration Statement and the preparation of the Policy form
described in the Registration Statement and Exhibits thereto.
In my professional opinion, the illustration of death benefits and account
values included in the Appendix of the prospectus, based on the assumptions
stated in the illustrations, are consistent with the provisions of the Policy.
The rate structure of the Policy has not been designed so as to make the
relationship between premiums and benefits, as shown in the illustrations,
appear more favorable to a prospective purchaser of a Policy for male age 55
than to prospective purchasers of Policies for males at other ages or
underwriting classes or for females.
Additionally, the prospectus information contained in the examples of the death
benefit options, based on the assumptions stated in those examples, are
consistent with the provisions of the policy.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in the
prospectus.
Sincerely,
/s/BRUCE E. BOOKER
- -------------------------------
Bruce E. Booker, FSA, MAAA
Vice President & Actuary
Description of Life of Virginia's Issuance
Redemption, Transfer and Exchange Procedures for Policies
This document sets forth the administrative procedures that will be followed by
The Life Insurance Company of Virginia ("Life of Virginia") in connection with
the issuance of its Flexible Premium Variable Life Insurance Policy ("Policy" or
"Policies"), the transfer of assets held thereunder, and the redemption or
exchange by policyowners of their interests in the Policies.
1. "Public Offering Price": Purchase and Related Transactions
Set out below is a summary of the principal policy provisions and administrative
procedures which might be deemed to constitute, either directly or indirectly, a
"purchase" transaction. The summary shows that, because of the insurance nature
of the Policies, the procedures involved necessarily differ in certain
significant respects from the purchase procedures for mutual funds and
contractual plans.
(a) Premium Schedules and Underwriting Standards
Premiums for the Policies will not be the same for all policyowners. The full
first premium is due on the policy date and cannot be less than the continuation
amount (1) for the first policy month. The cost of insurance charge deducted as
part of the monthly deduction, is based on the insured's sex, issue age, policy
duration, risk classification and net amount at risk of the Policy.
Other than the first premium, Life of Virginia does not require the payment of
any particular amount. Policyowners will determine a periodic plan, a plan under
which a level premium may be paid at fixed intervals for a specified period of
time. Payment of premiums in accordance with this plan is not, however,
mandatory and failure to do so will not of itself cause the Policy to lapse.
Instead, so long as there is no outstanding policy debt (policy loans plus
accrued interest) (2) policyowners may make premium payments in any amount and
at any frequency, subject only to the minimum premium requirements, (3) and the
maximum premium limitations.(4)
- --------------------------------------------------------------------------------
(1) The continuation amount is an amount set forth in the Policy for the
continuation period. The Policy will not lapse during the continuation period if
the Net Total Premium is at least equal to the continuation amount for the
number of months that the policy has been in force.
(2) See Repayment of Policy Debt, infra p.7
(3) For planned periodic premiums, the minimum premium is $20 unless premiums
are paid monthly by pre-authorized check in which case the minimum amount is
$15. Life of Virginia, in its sole discretion, may accept premium payments of a
lesser amount. We reserve the right to limit the number and amount of any
unscheduled premium payments.
(4) The maximum premium limitation will be set forth in the Policy. This
limitation is imposed to conform the Policy to certain restrictions on premiums
contained in the Internal Revenue Code. (After the free look period expires,
only the Internal Revenue Code maximum premium limitation will apply).
<PAGE>
If at any time a premium is paid which would result in total premiums exceeding
the current maximum premium limitation set forth in the Policy, Life of Virginia
will accept only that portion of the premium which will make the total premiums
equal that amount. Any portion of the premium in excess of the maximum premium
limitation will be returned to the policyowner and no further premiums will be
accepted until allowed by the current maximum set forth in the Policy.
The Policy will remain in force so long as the surrender value is sufficient to
pay the monthly deduction or if the Net Total Premium is at least equal to the
continuation amount for the number of months that the Policy has been in force.
Thus, the amount of a premium, if any, that must be paid to keep the Policy in
force depends on the account value of the Policy, which in turn depends on the
investment experience of Life of Virginia Separate Account II ("Separate Account
II") and the cost of insurance charge. The cost of insurance rate utilized in
computing the cost of insurance charge will not be the same for each
policyowner. The chief reason is that the principle of pooling and distribution
of mortality risks is based on the assumption that the cost of insuring each
insured is commensurate with their mortality risk which is actuarially
determined based upon factors such as sex, issue age, policy duration and risk
classification. Accordingly, while not all insureds will be subject to the same
cost of insurance rate, there will be a single "rate" for all insureds in a
given actuarial category.
The Policies will be offered and sold pursuant to established underwriting
standards and in accordance with state insurance laws. State insurance laws
prohibit unfair discrimination but recognize that premiums must be based upon
factors such as age, sex, health and occupation.
(b) Application and Initial Premium Processing
Upon receipt of a completed application, Life of Virginia will follow certain
insurance underwriting (i.e., evaluation of risks) procedures designed to
determine whether the proposed insured is insurable. This process may involve
such verification procedures as medical examinations or tests and may require
that further information be provided by the applicant before a determination can
be made. A Policy will not be issued until this underwriting procedure has been
completed.
Insurance coverage under the Policy will begin on the later of the policy date
or the end of the valuation period5) during which the full first premium is
paid. In general, during the free look period Net Premiums will be allocated to
the Investment Subdivisions based on the Net Premium allocation percentages
specified in the application. However, for states requiring the refund of
premiums during the free look period, all Net Premiums will be allocated to the
Investment Subdivision investing in the Money Market Fund of GE Investments
Funds. Fifteen days following this allocation, the Account Value is transferred
to the Investment Subdivisions based on the Net Premium allocation percentages
selected by you. If the first full premium is not paid with the application
(the Effective Date on which insurance becomes effective will be the date that
premium is paid and the Policy is delivered while all persons proposed for
insurance are insurable. If the first full premium is paid and a conditional
receipt is given to the applicant, then,
- --------------------------------------------------------------------------------
(5) The valuation period is the period between two successive business days,
commencing at the close of business of each business day and ending at the close
of business of the next succeeding business day. A business day is each day that
the New York Stock Exchange is open for business and any other day in which
there is sufficient trading in the Portfolios of the Fund to materially affect
the value of the assets in the Investment Subdivisions of Separate Account II
that invest exclusively in those Portfolios.
<PAGE>
subject to a maximum limitation, insurance as provided for by the terms and
conditions of the Policy applied for will become effective on the Effective Date
specified by the conditional receipt, provided the insured is found to be, on
the Effective Date, insurable at standard premium rates for the plan and amount
of insurance requested in the application. The Effective Date specified in the
conditional receipt is the latest of (i) the date of completion of the
application, (ii) the date of completion of all medical exams and tests required
by Life of Virginia, and (iii) the Policy date requested by the applicant when
that date is later than the date the application is completed.
The policy date is also the date used to determine policy years and policy
months. The policy date is assigned each Policy when the policy is issued. The
policy date will normally be a date between the date the application is signed
and the date the Policy is issued; however, the policy date may be any other
date mutually agreeable to Life of Virginia and the policyowner. If the policy
date would otherwise fall on the 29th, 30th or 31st day of a month, the policy
date will be the 28th.
For purposes of the minimum premium payment requirement, 6) a premium payment is
deemed a planned periodic premium if received within 30 days (before or after)
of the scheduled date for a planned periodic premium payment and the percentage
difference between the planned premium amount and the actual payment amount is
not more than 10%. All other premiums will be deemed unscheduled premiums.
Payments of any amount other than a planned periodic premium will be treated
first as payment of any outstanding policy debt. The portion of a payment in
excess of any outstanding policy debt will be treated as an unscheduled premium
payment.
(c) Reinstatement
The policy will not lapse during the continuation period if the Net Total
Premium is at least equal to the continuation amount for the number of months
that the policy has been in force. The Net Total Premium is the total of all
premiums paid to that date less any outstanding policy debt and less the sum of
any partial surrenders to date where both policy debt and partial surrenders are
divided by the Net Premium Factor.
If this Policy terminates and is reinstated before the end of the Continuation
Period, you will have to pay an amount equal to (1) minus (2) minus (3) plus
(4), where:
(1) is the Continuation Amount as of the date of reinstatement;
(2) is the sum of the monthly deductions that would have been made
during the period between termination and reinstatement, divided
by the Net Premium Factor;
(3) is the Net Total Premium on the date of termination; and
(4) is an amount sufficient to keep the Policy in effect for two
Policy Months after the date of reinstatement.
On the date of reinstatement, the Account Value will equal (a) (b) minus (c),
where:
(a) is the Account Value on the first day of the grace period;
(b) is the premium paid to reinstate multiplied by the Net Premium
Factor; and
(c) is the monthly deduction for the month following the date of
reinstatement.
<PAGE>
If this Policy terminates before the end of the Continuation Period, and is
reinstated after the end of the Continuation Period, you will have to pay a
premium which, after multiplying by the Net Premium Factor, equals (1) plus (2)
minus (3), where:
(1) is the surrender charge on the date of termination; and
(2) is an amount equal to the monthly deductions for two months after
the date of reinstatement; and
(3) is the Account Value on the date of termination.
On the date of reinstatement, the Account Value will equal (a) plus (b) (c),
where:
(a) is the surrender charge in effect on the date of reinstatement;
(b) is an amount equal to the monthly deductions for the two
months after the date of reinstatement, minus the monthly
deduction for the month following the date of reinstatement; and
(c) is any premium paid in excess of the required reinstatement
premium, multiplied by the Net Premium Factor.
If this Policy terminates after the end of the Continuation Period and is
reinstated, you will have to pay a premium sufficient to keep the Policy in
effect for a least two months.
On the date of reinstatement, the Account Value will equal (a) plus (b) minus
(c), where:
(a) is the surrender charge in effect on the date of reinstatement;
(b) is the premium paid to reinstate multiplied by the Net Premium
Factor; and
(c) is the monthly deduction for the month following the date of
reinstatement.
If the policy is reinstated, the surrender charge will be as though the policy
had been in effect continuously from its original policy date.
(d) Repayment of Policy Debt
A policy loan will be subject to a maximum interest rate set forth in the
Policy. Policy debt (policy loans plus accrued interest) may be repaid in whole
or in part at any time. While there is outstanding policy debt, any payment
other than a planned periodic premium will be treated as the repayment of that
debt. The portion of any payment in excess of outstanding policy debt will be
treated as an unscheduled premium payment. Upon the repayment, the Policy's
account value in the general account securing policy debt will be transferred to
Separate Account II. Life of Virginia will allocate the repayment of policy debt
at the end of the valuation period during which the repayment is received.
(e) Correction of Misstatement of Age or Sex
If the insured's age or sex was misstated in an application, life insurance
proceeds and benefits will be adjusted. The adjusted life insurance proceeds
will be (a) the account value plus (b) the life insurance proceeds reduced by
the account value, and multiplied by the ratio of (1) the monthly cost of
insurance actually applied, to (2) the monthly cost of insurance that should
have been applied at the true age or sex. All amounts are those in effect, with
respect to the insured, in the policy month of the insured's death.
<PAGE>
2. "Redemption Procedures": Surrender and Related Transactions
This section outlines those procedures which might be deemed to constitute
redemptions under the Policy. These procedures differ in certain significant
respects from redemption procedures for mutual funds and contractual plans.
(a) Partial Surrenders and Total Surrenders
As long as the Policy is in effect, the policyowner may partially or totally
surrender the Policy by sending a written request to Life of Virginia. Upon
complete surrender, the policyowner will receive the surrender value (account
value reduced by any outstanding policy debt and less any applicable surrender
charges) of the Policy computed as of the end of the valuation period during
which the surrender request is received by Life of Virginia at its home office.
Account value will be determined on a daily basis thereby enabling Life of
Virginia to pay a surrender value based on the next computed value after a
request is received. Surrenders will generally be paid within seven days of
receipt of a written request.7)
Under Life of Virginia's current procedures, if the Policy is being totally
surrendered, the Policy itself must be returned to Life of Virginia along with
the request.
Payment upon complete surrender of a Policy may be made in a lump sum or in
accordance with one of the optional payment plans described in the Policy. The
optional payment plans are subject to the restrictions and limitations set forth
in the Policy.
If the Policy is fully surrendered during the surrender charge period, we will
deduct a surrender charge. The surrender charge will depend on the Insured's Age
at issue, sex (where appropriate), and risk class. The surrender charge remains
level for the first five Policy Years and then decreases each Policy month to
zero over the next 10 Policy Years or at Age 95, whichever is earlier. The
surrender charge will be deducted before the Surrender Value is paid.
The amount of a partial surrender cannot be less than $500 and cannot exceed the
lesser of (1) the surrender value less $500 or (2) the maximum loan amount
reduced by any outstanding policy debt. A partial surrender will not be
permitted during the first policy year, if Death Benefit Option B is in effect.
If Death Benefit Option B is in effect, the specified amount will be reduced by
the amount of the partial surrender. The amount of the partial surrender will be
deducted from the Policy's account value as of the end of the valuation period
during which the request is received. A charge will be deducted from the account
value upon a partial surrender of the Policy.
(7) Payment may be postponed whenever: (i) the New York Stock Exchange is closed
other than customary weekend and holiday closings, or trading on the New York
Stock Exchange is restricted by the Commission; (ii) the Commission by order
permits postponement for the protection of policyowners; or (iii) an emergency
exists, as determined by the Commission, as a result of which disposal of
securities is not reasonably practicable or it is nor reasonably practicable to
determine the value of the net assets of Separate Account II. Payments under the
Policy which are derived from any amount paid to Life of Virginia by check or
draft may be postponed until such time as Life of Virginia is satisfied that the
check or draft has cleared the bank upon which it is drawn.
<PAGE>
(b) Benefit Claim
As long as the Policy remains in force, Life of Virginia will normally pay life
insurance proceeds to the primary or contingent beneficiary in accordance with
the designated benefit option within seven days after receipt of due proof of
death of the insured. Payment of Life insurance proceeds may, however, be
postponed under certain circumstances. 8) The amount of life insurance proceeds
payable under this Policy will be determined as of the end of the valuation
period during which the insured dies. The life insurance proceeds will be
reduced by any outstanding policy debt and any due and unpaid charges and
increased by any optional insurance benefits added by rider.
As long as there is no outstanding policy debt or any due and unpaid charges,
life insurance proceeds are guaranteed not to be less than the current specified
amount of the Policy. The life insurance proceeds may, however, exceed the
current specified amount. The amount by which life insurance proceeds exceed the
specified amount depends upon the benefit option in effect and the account value
of the Policy. Under Death Benefit Option A, the life insurance proceeds payable
under the policy equals the greater of (1) the Specified Amount plus the Account
Value, or (2) the applicable corridor percentage of the Account Value. Under
Death Benefit Option B ("Option B"), life insurance proceeds will only vary
whenever account value multiplied by the corridor percentage exceeds the
specified amount of the Policy.
(c) Policy Loans
After the first policy anniversary, the policyowner may borrow money from Life
of Virginia using the Policy as the only security for the loan. Loans have
priority over the claims of any assignee or any other person. The maximum amount
that may be borrowed under the Policy at any time is the maximum loan amount
less any outstanding policy debt. The maximum loan amount equals 90% of the
difference between the Account Value and the surrender charge. Policy debt
equals the total of all policy loans and any accrued interest on the loans. The
maximum loan amount will be determined as of the end of the valuation period
during which the loan request is received. The loan and any accrued interest may
be repaid in whole or in part at any time prior to the maturity date so long as
the insured is living. Interest accrues daily and is due and payable at the end
of each policy year. Any interest not paid when due becomes part of the policy
loan and will bear interest.
When a policy loan is made, a portion of the Policy's account value sufficient
to secure the loan is transferred out of Separate Account II and into Life of
Virginia's general account. Any loan interest that is due and unpaid will also
be so transferred. Account value in the general account will accrue interest
daily at an annual rate of 4%. This interest will be credited on each Policy
anniversary and transferred to Separate Account II.
If Policy Debt exceeds the Account Value less any applicable surrender charge on
any Monthly Anniversary Day and the Continuation Period is not in effect, the
Policy will lapse without payment of a required loan payment. During the
Continuation Period, if Policy Debt in any Monthly Anniversary Day exceeds the
Account Value less any applicable surrender charge, and the Net Total Premium is
less than the Continuation Amount, your Policy will lapse without payments of a
required loan payment.
- --------------------------------------------------------------------------------
(8) See note 7, supra.
<PAGE>
(d) Policy Lapse
Failure to make a planned premium payment will not automatically cause a Policy
to lapse. Generally, a Policy will lapse if the Surrender Value is not
sufficient to cover the monthly deduction when due. However, a Policy will not
lapse during the Continuation Period, regardless of the sufficiency of the
Surrender Value, so long as the Net Total Premium is at least equal to the
Continuation Amount. If additional premium is necessary to prevent a Policy from
lapsing, we will mail to you notice of the amount required to be paid to keep
the Policy in force, and you will have a 61-day grace period from the date we
mail the notice to make the required premium payment.
Your Policy will remain in effect during the grace period. If the Insured should
die during the grace period before the required premium is paid, the death
benefit will still be payable to the Beneficiary, although the amount of the
Life Insurance Proceeds will be reduced by the amount of premium that would have
been required to keep the Policy in force. If the required premium has not been
paid before the grace period ends, your Policy will lapse. It will have no value
and no benefits will be payable.
(e) Exchange of Policy
If there is a material change in the investment policy of Separate Account II or
any Portfolio in which a policyowner has an interest, the policyowner will be
notified of the change. If the policyowner objects to the change, the Policy may
be exchanged for a fixed benefit policy. No evidence of insurability will be
required. The new policy will be subject to normal exchange rules and other
conditions determined by Life of Virginia. The exchange must be made within 60
days after the change in investment policy becomes effective.
During the first 24 months, the policyowner may convert this policy to a
permanent fixed benefit policy. The policyowner may elect the same death benefit
or the same net amount at risk as the existing policy at the time of
conversion.(9) Premiums will be based on the same issue age and risk
classification of the insured as the existing policy. The conversion will be
subject to an equitable adjustment in payments and account values to reflect
variances, if any, in the payments and account values under the existing policy
and the new policy.
- --------------------------------------------------------------------------------
(9) See Reinstatement, p. 6.
