As Filed with the Securities and Exchange Commission on May 1, 1998
Registration No. 33-9651
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 15
to
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
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Life of Virginia Separate Account II
(Exact Name of Registrant)
The Life Insurance Company of Virginia
(Name of Depositor)
6610 West Broad Street,
Richmond, Virginia 23230
(Address of Principal Executive Office)
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Linda L. Lanam, Esq.
Senior Vice President, General Counsel & Secretary
The Life Insurance Company of Virginia
6610 West Broad Street, Richmond, Virginia 23230
(Name and Address of Agent for Service of Process)
Copy to:
Stephen E. Roth, Esq.
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Ave., N.W. Washington, D.C. 20004-2415
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It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of
Rule 485
X on May 1, 1998 pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a) of Rule
485
on pursuant to paragraph (a) of Rule 485
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Title of Securities Being Registered:
Interest in a separate account under Flexible Premium Variable Life Insurance
Policies
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<PAGE>
RECONCILIATION AND TIE BETWEEN ITEMS
IN FORM N-8B-2 AND THE PROSPECTUS
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ITEM NO. OF FORM N-8B-2 CAPTION IN PROSPECTUS
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1 ..................... Cover Page
2 ..................... Cover Page
3 ..................... Not Applicable
4 ..................... Distribution of the Policies
5 ..................... Life of Virginia and Separate Account II
6 ..................... Separate Account II
7 ..................... Not Required
8 ..................... Not Required
9 ..................... Legal Proceedings
10 .................... Introduction; Separate Account II; The Funds;Charges and
Deductions; The Policy; Policy Benefits; Voting Rights;
General Provisions
11 .................... Introduction; The Funds
12 .................... Introduction; The Funds
13 .................... Introduction; Charges and Deductions; The Funds
14 .................... Introduction; The Policies
15 .................... The Policies
16 .................... The Policies; The Funds
17 .................... Introduction; Charges and Deductions; Policy Rights; The
Funds
18 .................... The Funds; The Policies
19 .................... General Provisions; Voting Rights
20 .................... Not Applicable
21 .................... Policy Rights; General Provisions
22 .................... Not Applicable
23 .................... Safekeeping of the Assets of Separate Account II
24 .................... General Provisions
25 .................... The Life Insurance Company of Virginia
26 .................... Not Applicable
27 .................... The Life Insurance Company of Virginia
28 .................... Executive Officers and Directors
29 .................... The Life Insurance Company of Virginia
30 .................... Not Applicable
31 .................... Not Applicable
32 .................... Not Applicable
33 .................... Not Applicable
34 .................... Not Applicable
35 .................... Distribution of the Policies
36 .................... Not Required
37 .................... Not Applicable
38 .................... Introduction; Distribution of the Policies
39 .................... Distribution of the Policies; Introduction
40 .................... Distribution of the Policies
41 .................... The Life Insurance Company of Virginia; Distribution of the
Policies
42 .................... Not Applicable
43 .................... Not Applicable
44 .................... The Policy
45 .................... Not Applicable
46 .................... Policy Benefits; Charges and Deductions; General Provisions
47 .................... The Funds
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<TABLE>
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ITEM NO. OF FORM N-8B-2 CAPTION IN PROSPECTUS
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48 .................... Not Applicable
49 .................... Not Applicable
50 .................... Separate Account II
51 .................... Cover Page; Introduction; The Policies; Charges and
Deductions
52 .................... The Funds
53 .................... Federal Tax Matters
54 .................... Not Applicable
55 .................... Not Applicable
56 .................... Not Required
57 .................... Not Required
58 .................... Not Required
59 .................... Financial Statements
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
COMMONWEALTH THREE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FORM P1096 1/87
Issued by
THE LIFE INSURANCE COMPANY OF VIRGINIA
6610 West Broad Street
Richmond, Virginia 23230
(804) 281-6000
This prospectus describes a flexible premium variable life insurance
policy ("Policy") issued by The Life Insurance Company of Virginia ("Life of
Virginia") known as Commonwealth Three. This type of life insurance is also
commonly called variable universal life. The Policy permits the Policyowner to
vary premium payments and adjust the Life Insurance Proceeds payable under the
Policy; the Policy has been designed for maximum flexibility in meeting
changing insurance needs.
The Policy provides for the payment of the Life Insurance Proceeds upon
the death of the Insured, and for a cash value that can be obtained by
completely or partially surrendering the Policy. Life Insurance Proceeds may,
and cash value will, vary with the investment experience of Life of Virginia
Separate Account II ("Separate Account II"). The Policyowner bears the entire
investment risk; there is no guaranteed minimum cash value. Life of Virginia
generally will not issue a Policy to insure persons older than age 75. The
minimum specified amount for which a Policy will be issued is $50,000; however,
Life of Virginia reserves the right to increase or decrease this amount for a
class of Policies issued after some future date.
Under the Policy, net premiums are placed in Separate Account II. The
Policyowner selects the Investment Subdivision(s) of Separate Account II in
which to invest, and determines the allocation of the net premiums among those
Investment Subdivisions. The Policyowner allocates net premiums among one or
more of the 37 Investment Subdivisions of Account II. Each Investment
Subdivision of Account II will invest solely in a designated investment
portfolio that is part of a series-type investment company ("Fund"). Currently,
there are ten such Funds available under this 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, the PBHG Insurance Series Fund, Inc. and Goldman Sachs Variable
Insurance Trust (collectively referred to as the "Funds"). The Funds, their
investment managers and their currently available portfolios are listed on the
following page.
THIS PROSPECTUS MUST BE READ ALONG WITH CURRENT PROSPECTUSES FOR THE FUNDS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
SHARES IN THE FUNDS AND INTERESTS IN THE POLICIES ARE NOT DEPOSITS WITH OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, A BANK, AND THE SHARES AND
INTERESTS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
Please read this prospectus carefully and retain it for future reference.
The date of this Prospectus is May 1, 1998.
1
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Janus Aspen Series, which is managed by Janus Capital Corporation, has
seven portfolios that are available to Policyowners through Separate Account
II:
Growth Portfolio
Aggressive Growth Portfolio
Worldwide Growth Portfolio
International Growth Portfolio
Balanced Portfolio
Flexible Income Portfolio
Capital Appreciation Portfolio
Variable Insurance Products Fund, which is managed by Fidelity Management
& Research Company, has three portfolios that are available to Policyowners
through Separate Account II:
VIP Equity-Income Portfolio
VIP Overseas Portfolio
VIP Growth Portfolio
Variable Insurance Products Fund II, which is managed by Fidelity
Management & Research Company, has two portfolios that are available to
Policyowners through Separate Account II: VIP II Asset Manager Portfolio and
VIP II Contrafund Portfolio.
Variable Insurance Products Fund III, which is managed by Fidelity
Management & Research Company, has two portfolios that are available to
Policyowners through Separate Account II: VIP III Growth & Income Portfolio and
VIP III Growth Opportunities Portfolio, are available to Policyowners through
Separate Account II.
GE Investments Funds, Inc, which is managed by GE Investment Management,
Inc., has nine portfolios that are available to Policyowners through Separate
Account II:
S&P 500 Index Fund
Money Market Fund
Total Return Fund
International Equity Fund
Real Estate Securities Fund
Global Income Fund
Value Equity Fund
Income Fund
U.S. Equity Fund (not available in California)
Oppenheimer Variable Account Funds, which is managed by Oppenheimer Funds
Inc., has five portfolios that are available to Policyowners through Separate
Account II:
Oppenheimer High Income Fund
Oppenheimer Bond Fund
Oppenheimer Aggressive Growth Fund
Oppenheimer Growth Fund
Oppenheimer Multiple Strategies Fund
Federated Insurance Series, which is managed by Federated Advisers, has
three portfolios that are available to Policyowners through Separate Account
II:
Federated American Leaders Fund II
Federated Utility Fund II
Federated High Income Bond Fund II
The Alger American Fund, which is managed by Fred Alger Management, Inc.,
has two portfolios that are available to Policyowners through Separate Account
II: Alger American Growth Portfolio and Alger American Small Capitalization
Portfolio.
PBHG Insurance Series Fund, In., which is managed by Pilgrim Baxter &
Associates, Ltd., has two portfolios that are available to Policyowners through
Separate Account II: Growth II Portfolio and Large Cap Growth Portfolio.
2
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Goldman Sachs Variable Insurance Trust, which is managed by Goldman Sachs
Asset Management, has two portfolios that are available to policyowners through
Separate Account II: Growth and Income Fund and Mid Cap Equity Fund. Neither of
these funds are currently available to policyowners in the state of California.
The accompanying prospectuses for the Funds describe the investment
objectives and the risks of each of the Funds' portfolios.
During the Initial Investment Period, all net premiums will be placed in
the Investment Subdivision of Separate Account II that invests exclusively in
the Money Market Fund of the GE Investments Funds, Inc. At the end of that
period, the cash value at that time and all subsequent net premiums will be
allocated in accordance with Policyowner instructions.
It may not be advantageous to purchase a Policy either as a replacement
for another type of life insurance policy, or to obtain additional insurance
protection if another flexible premium variable life insurance policy is owned.
3
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TABLE OF CONTENTS
<TABLE>
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Page
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DEFINITIONS 6
SUMMARY 7
The Policy 7
Separate Account II 7
Premiums 8
Policy Benefits 8
Charges 9
Distribution of the Policy 10
Tax Treatment 10
Refund Privilege 10
Exchange Privilege 10
Illustrations of Death Benefits, Cash Values
and Surrender Values 10
Fund Annual Expenses 11
Other Policies 12
Life of Virginia and Separate Account II 12
The Life Insurance Company of Virginia 12
IMSA Disclosure 13
General Electric Company 13
Separate Account II 13
Addition, Deletion, or Substitution of
Investments 13
THE FUNDS 14
Janus Aspen Series 15
Variable Insurance Products Fund 15
Variable Insurance Products Fund II 15
Variable Insurance Products Fund III 16
GE Investments Funds 16
Oppenheimer Variable Account Funds 17
Federated Insurance Series 17
The Alger American Fund 17
PBHG Insurance Series Fund 18
Goldman Sachs Variable Insurance Trust 18
Resolving Material Conflicts 18
Termination of Participation Agreements 19
THE POLICY 19
Purpose of the Policy 19
Purchasing a Policy 20
Premiums 20
Policy Lapse and Reinstatement 21
Examination of Policy (Refund Privilege) 22
Exchange Privilege 22
POLICY BENEFITS 22
Cash Value Benefits 23
Transfers 24
Telephone Transfers 25
Dollar-Cost Averaging 25
Portfolio Rebalancing 25
Powers of Attorney 26
Loan Benefits 26
</TABLE>
<TABLE>
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Page
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Life Insurance Proceeds 27
Benefits at Maturity 30
Optional Payment Plans 30
Specialized Uses of the Policy 31
CHARGES AND DEDUCTIONS 32
Deductions From Premiums 32
Charges Against Separate Account II 33
Surrender Charge 34
Other Charges 34
Reduction of Charges for Group Sales 34
GENERAL PROVISIONS 35
Postponement of Payment 35
Limits on Contesting the Policy 35
The Contract 35
Misstatement of Age or Sex 35
Suicide 35
Annual Statement 36
Nonparticipating 36
Written Notice 36
The Owner 36
The Beneficiary 36
Changing the Owner or Beneficiary 36
Using the Policies as Collateral 36
Optional Insurance Benefits 36
Reinsurance 37
DISTRIBUTION OF THE POLICIES 37
FEDERAL TAX MATTERS 37
Tax Status of the Policy 37
Tax Treatment of Policy Proceeds 38
Tax Treatment of Policy Loans and Other
Distributions Under Certain Policies 39
Taxation of the Company 40
Income Tax Withholding 40
Other Considerations 40
Year 2000 Compliance 40
LEGAL DEVELOPMENTS REGARDING
EMPLOYMENT RELATED BENEFIT
PLANS 41
VOTING RIGHTS 41
STATE REGULATION OF LIFE OF VIRGINIA 41
EXECUTIVE OFFICERS AND DIRECTORS
OF LIFE OF VIRGINIA 42
LEGAL MATTERS 42
LEGAL PROCEEDINGS 42
EXPERTS 43
CHANGE IN AUDITORS 43
Additional Information 43
Financial Statements 43
Appendix C-1
</TABLE>
This Policy is not available in all States.
4
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This prospectus does not constitute an offering in any jurisdiction in
which such offering may not be lawfully made. No dealer, salesman, or other
person is authorized to give any information or make any representations in
connection with this offering other than those contained in this Prospectus,
and, if given or made, such other information or representations must not be
relied upon.
The purpose of this variable life insurance policy is to provide insurance
protection. Life insurance is a long term investment. Prospective Policyowners
should consider their need for insurance coverage and the policy's long term
investment potential. No claim is made that the Policy is in any way similar or
comparable to an investment in a mutual fund.
5
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DEFINITIONS
Age -- The Insured's age on his or her nearest birthday.
Attained Age -- The Insured's age on the policy date plus the number of
years since the Policy Date.
Beneficiary -- Primary and contingent beneficiaries are designated by the
Policyowner in the application and may be changed by filing the change in good
form with Life of Virginia. More than one primary and contingent Beneficiary
may be named. If changed, the primary Beneficiary or contingent Beneficiary is
as shown in the latest change filed with Life of Virginia. If no Beneficiary
survives the Insured, the Policyowner or the Policyowner's estate will be the
beneficiary. The interest of any Beneficiary may be subject to that of any
assignee.
Business Day -- Any day on which the New York Stock Exchange is open for
business and any other day in which there is a change in the value of the
shares of a portfolio of any one of the funds sufficient to materially affect
the value of the assets in the Investment Subdivision of Separate Account II
that invests in that portfolio.
Continuation Amount -- An amount set forth in the Policy for each of the
first 120 Policy Months. The Policy will not lapse during the first ten policy
years 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.
Due Proof of Death -- Proof of death that is satisfactory to Life of
Virginia. Such proof may consist of the following if acceptable to Life of
Virginia:
(a) A certified copy of the death certificate; or
(b) A certified copy of the decree of a court of competent jurisdiction
as to the finding of death.
Effective Date -- The date that coverage begins under the Policy.
Funds -- The mutual funds designated as eligible investments for Separate
Account II.
General Account -- The assets of Life of Virginia that are not segregated
in any of the separate investment accounts of Life of Virginia.
Home Office -- The principal offices of The Life Insurance Company of
Virginia at 6610 W. Broad Street, Richmond, Virginia, 23230.
Initial Investment Period -- The period that commences on the Effective
Date and ends on the date of receipt at the Home Office of the Policy Delivery
and Acceptance Letter, signed and dated by the Policyowner, indicating that the
Policyowner has received and accepted the Policy, or, if the Policy is not
accepted, when all amounts due are refunded, whichever is applicable.
Insured -- The person upon whose life a Policy is issued.
Investment Subdivision -- A Subdivision of Separate Account II, each of
which invests exclusively in shares of a designated portfolio of one of the
Funds. All Investment Subdivisions may not be available in all states.
Life Insurance Proceeds -- The amount payable under a Policy upon the
death of the Insured.
Maturity Date -- The date on which a Policy's cash value becomes payable
to the Policyowner, if living. This date may be designated by the Policyowner.
If no designation is made, the maturity date will be the policy anniversary
nearest to the Insured's 95th birthday. The Policy terminates on the maturity
date.
Maximum Loan Amount -- The maximum amount that may be borrowed under a
Policy. The maximum loan amount equals 90% of the Policy's cash value less any
applicable surrender charges.
Monthly Anniversary Day -- The same date in each month as the Policy
Date. Whenever the Monthly Anniversary Day falls on a date other than a
Business Day, the Monthly Anniversary Day will be deemed the next Business Day.
Net Total Premium -- The total of all premiums paid less any partial
surrenders and outstanding Policy Debt where both partial surrenders and
outstanding policy debt are divided by the Net Premium Factor of 92.5%.
Periodic Plan -- A premium schedule providing for the payment of level
premiums at fixed intervals over a specified period of time.
6
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Policy -- The flexible premium variable life insurance policy issued by
Life of Virginia that is described in this prospectus. The term "Policy" or
"Policies" includes the Policy described in this prospectus, the Policy
application, any supplemental applications, any endorsements and riders.
Policy Date -- The date set forth in a Policy that is used to determine
policy years and Policy Months. Policy anniversaries are measured from the
Policy Date.
Policy Debt -- The total of all outstanding policy 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.
Policyowner ("Owner") -- The person who owns a Policy. The original
Policyowner is named in the application. Contingent Owners may also be named.
Separate Account II ("Account") -- Life of Virginia Separate Account II,
a separate investment account established by Life of Virginia to receive and
invest net premiums paid under the Policies.
Specified Amount -- The amount of insurance under a Policy. This amount
may or may not include the cash value, as selected by the policyowner. The
current Specified Amount is set forth on the data page in each Policy.
Surrender Value -- A Policy's cash value, reduced by any outstanding
Policy Debt and reduced by any applicable surrender charges. This amount is
payable to the Policyowner if the Policy matures or is surrendered.
Valuation Period -- The period between the close of business on a
Business Day and the close of business on the next succeeding Business Day.
SUMMARY
The Following Summary of Prospectus Information Should Be Read In
Conjunction With The Detailed Information Appearing Elsewhere In This
Prospectus.
The Policy
Under the Policy, subject to certain limitations, the Policyowner has
flexibility in determining the frequency and amount of premiums. (See
Premiums.) Thus, unlike conventional fixed benefit life insurance, the Policy
does not require a Policyowner to adhere to a fixed premium schedule. Also,
unlike conventional fixed benefit life insurance, the amount and/or duration of
the life insurance coverage and the cash values of this Policy are not
guaranteed and may increase or decrease, depending upon the amount and
frequency of premium payments, and investment experience of the assets
supporting the Policy. Accordingly, the Policyowner bears the investment risk
of any depreciation in value of the underlying assets, but reaps the benefit of
any appreciation in values. So long as a Policy has sufficient cash value to
remain in force, the Policy will provide Life Insurance Proceeds payable to a
Beneficiary upon the Insured's death, the accumulation of cash value, surrender
rights, and policy loan privileges. The minimum Specified Amount for which a
Policy will be issued is $50,000; however, Life of Virginia reserves the right
to increase or decrease this amount for a class of Policies issued after some
future date.
A prospective Policyowner who already has life insurance coverage should
consider whether or not changing or adding to existing coverage would be
advantageous. Generally, it is not advisable to purchase another policy as a
replacement for an existing policy.
Separate Account II
Separate Account II currently has thirty-seven Investment Subdivisions to
which premiums and cash values may be allocated. Each Investment Subdivision
invests exclusively in the shares of a portfolio of one of the Funds. (See The
Funds.) Currently, the Funds include 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, the PBHG Insurance Series Fund, Inc. and Goldman Sachs Variable Insurance
Trust. The accompanying prospectuses for the Funds describe the investment
objectives and the risks of each of the Funds' portfolios.
Cash value will, and Life Insurance Proceeds may, vary with the investment
experience of the Investment Subdivisions, as well as with the frequency and
amount of premium payments, any partial surrenders, and any charges imposed in
connection with the Policy. (See Cash Value Benefits.)
7
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Premiums
The full first premium for a Policy is due on the policy date. Net
premiums will be allocated among the Investment Subdivisions in accordance with
the Policyowner's written instructions; however, during the Initial Investment
Period, all net premiums will be placed in the Investment Subdivision of
Separate Account II that invests exclusively in the Money Market Fund of the GE
Investments Funds, Inc. In order to allocate money out of the Money Market Fund
of the GE Investments Funds, the Policyowner must have submitted to Life of
Virginia the signed and dated Delivery and Acceptance Letter. Thereafter, a
Policy's cash value may not be invested in more than seven Investment
Subdivisions at any given point in time.
The amount of the full first premium must be sufficient to keep the Policy
in force for at least one policy month. Thereafter, if there are no outstanding
policy loans (See Loan Benefits.), unscheduled premiums may be paid in any
amount and at any frequency, subject only to the maximum premium limitations
and minimum premium requirements specified in the Policy. (See Premiums.) A
Policyowner may also choose a periodic plan, which is a plan under which a
level premium may be paid at fixed intervals over a specified period of time.
Failure to pay premiums in accordance with the schedule will not in itself
cause the Policy to lapse. (See Policy Lapse and Reinstatement.) The timing of
premium payments may affect the amount of the deferred sales charge under a
Policy as the charge is based only on premiums actually paid during the first
policy year, up to the amount of the designated premium. (See Surrender
Charge.) The Policyowner may wish to reduce the deferred sales charge that the
Policy is subject to by reducing the premiums paid in the first Policy year.
However, by reducing the premiums paid in the first year, values under the
Policy may decrease, cost of insurance charges may increase and the risk of the
Policy lapsing prematurely may increase.
A Policy will only lapse when the surrender value is insufficient to pay
the monthly deduction, (See Charges and Deductions -- Monthly Deduction), and
a grace period expires without a sufficient payment, and, during the first 10
years only, the Net Total Premium is less than the continuation amount for the
number of months that the policy has been in force. (See Policy Lapse and
Reinstatement -- Lapse.) This Policy, therefore, differs in two important
respects from a conventional life insurance policy. First, the failure to pay a
planned periodic premium will not in itself automatically cause a Policy to
lapse. Second, under the circumstances described above, a Policy can lapse even
if planned periodic premiums or premiums in other amounts have been paid.
Policy Benefits
Cash Value Benefits. The Policy provides for a cash value. A Policy's cash
value in Separate Account II will reflect the amount and frequency of premium
payments, the investment experience of the Investment Subdivisions of Separate
Account II in which net premiums are placed, policy loans, transfers, any
partial surrenders, and any charges imposed in connection with the Policy. The
entire investment risk is borne by the Policyowner; Life of Virginia does not
guarantee a minimum cash value. (See Policy Benefits -- Calculation of Cash
Value.)
The Policyowner may at any time surrender a Policy and receive the
Surrender Value (cash value reduced by any outstanding policy debt and any
applicable surrender charges). Subject to certain limitations, the Policyowner
may also partially surrender the Policy and obtain a portion of the cash value
at any time prior to the Maturity Date. Partial surrenders will reduce both the
cash value and Life Insurance Proceeds payable under the Policy. (See Surrender
Privileges.) A charge will be deducted from the cash value upon partial
surrender. (See Charges and Deductions -- Other Charges.)
Transfers. The Policyowner may transfer amounts among the Investment
Subdivisions that are available at the time the transfer is requested up to
twelve times each calendar year. According to the terms of the Policy, the
first such transfer in each calendar month is free, subsequent transfers in
that year will be assessed a charge of $10.00. (See Transfers.) Life of
Virginia's current practice is to waive this policy limitation and allow one
free transfer each calendar month. Subsequent transfers in that month will be
assessed a charge of $10.00. However, Life of Virginia reserves the right to
enforce the policy limitation of one free transfer per calendar year at any
time in the future.
Life of Virginia may not honor transfers made by third parties holding
multiple powers of attorney. (See Powers of Attorney.) Also, where permitted by
state law, Life of Virginia reserves the right to refuse to execute any
transfer if any of the Investment Subdivisions that would be affected by the
transfer are unable to purchase or redeem shares of the mutual funds in which
they invest.
Policy Loans. After the first policy anniversary, the Policyowner may
exercise certain loan privileges under a Policy. (See Loan Benefits.) Loans
will accrue interest at a rate not more than the maximum rate set forth in the
Policy. When a loan is made, a portion of the Policy's cash value sufficient to
secure the loan will be transferred from Separate Account II
8
<PAGE>
to Life of Virginia's general account as security for the loan and will earn
interest daily at a fixed annual rate of 4%. For Policies issued on or after
May 1, 1993, a portion of the amount of cash value transferred to secure the
loan may earn interest at a higher rate after the tenth policy year. Interest
earned will be credited on each Monthly Anniversary Day and transferred at that
time to Separate Account II. Upon partial or full loan repayment, the portion
of cash value in the General Account securing the repaid portion of the policy
debt will be transferred to Separate Account II. (See Loan Benefits --
Repayment of Policy Debt.) Depending upon the investment performance of
Surrender Value and the amount of any Policy loan, such loans may cause a
Policy to lapse. If a Policy is not a Modified Endowment Contract, lapse of the
Policy with Policy loans outstanding may result in adverse tax consequences.
(See Federal Tax Matters.)
Life Insurance Proceeds. The Policy provides for the payment of Life
Insurance Proceeds upon the death of the Insured. The Policy contains two
benefit options: Option A and Option B. Under Option A, the Life Insurance
Proceeds will be the greater of (i) the Specified Amount plus the Policy's cash
value on the date of the Insured's death or (ii) the cash value on the date of
the Insured's death multiplied by the corridor percentage. Under Option B, the
Life Insurance Proceeds will be the greater of (i) the Specified Amount or (ii)
the cash value on the date of the Insured's death multiplied by the applicable
corridor percentage as set forth in the Policy.
Under either benefit option, so long as a Policy remains in force, Life
Insurance Proceeds will not be less than the current specified amount of the
Policy. Life Insurance Proceeds may, however, exceed the specified amount. The
amount by which Life Insurance Proceeds exceed the Specified Amount depends
upon the benefit option chosen and the cash value of the Policy. (See Life
Insurance Proceeds.) Life Insurance Proceeds will be reduced by any outstanding
policy debt and any due and unpaid charges. The proceeds may be paid in a lump
sum or in accordance with an optional payment plan.
Any time after the first policy year, the Policyowner may, subject to
certain restrictions, adjust the Life Insurance Proceeds payable under a Policy
by increasing or decreasing the Specified Amount. (See Change in Existing
Coverage.) In addition, the Policyowner may change the benefit option in
effect. (See Change in Benefit Option.)
Benefits at Maturity. On the maturity date of a Policy, if the Insured is
still living, the Policyowner will be paid the cash value reduced by any
outstanding Policy Debt. This is the policy's maturity value.
Charges
The net premium equals the paid premium multiplied by the Net Premium
Factor. The Net Premium Factor equals 92.5%. The difference between the actual
premium payment and the net premium (a total charge of 7.5%) will be used to
compensate Life of Virginia for expenses incurred in connection with the
distribution of the Policies (5.0%) and for premium taxes imposed by various
states and subdivisions (2.5%). (See Charges and Deductions -- Deductions from
Premiums.)
In addition, there is a deferred sales charge of 45% of the first year's
premiums, up to the amount of the designated premium (which is always less than
the guideline annual premium), to compensate Life of Virginia for certain sales
and distribution expenses. No additional amount of deferred sales charge is
charged on premiums paid after the first policy year. The charge is deducted
from the cash value in equal amounts at the beginning of policy years 2 through
10. Any uncollected deferred sales charge will be deducted from the cash value
if the Policy is surrendered during policy years 1 through 9, with the
exception that during years 1 and 2 the amount that will be collected upon
surrender may be limited to less than the full amount of the uncollected
deferred sales charge. (See Surrender Charge.) Thus, if the Policyowner were to
surrender the Policy during its first two policy years, the total amount of
sales charge deducted may be less than if the surrender occurred after the
second year. If the initial specified amount is at least $250,000, the deferred
sales charges will be 40% rather than 45% of the first year premium paid up to
the designated premium. (See Charges and Deductions -- Sales Charges)
Cash value will be reduced each policy month by the monthly deduction. The
monthly deduction compensates Life of Virginia for the insurance benefits
provided under the Policy and for administrative costs. A charge equal to the
lesser of $25 or 2% of the amount requested will be deducted from the amount
paid to the Policyowner upon partial surrender of a Policy. (See Other
Charges.) During each month, a $10 fee will be charged for the second and
subsequent transfers of assets among the Investment Subdivisions. (See
Transfers.) If a Policyowner increases the specified amount of his Policy,
there will be a one-time charge per increase equal to the lesser of $1.50 per
$1,000 of increase or $300. This charge is to compensate Life of Virginia for
underwriting and administrative costs associated with the increase. (See Other
Charges).
If a Policy is surrendered or lapses during the first 9 policy years, a
charge is made to cover the expenses of issuing the policy. The charge varies
by initial specified amount and age at issue, subject to a maximum of $500 per
Policy. The charge will decrease after the fifth policy year and disappear
after the ninth policy year. (See Surrender Charge)
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<PAGE>
A charge equal to .70% of the net assets of Separate Account II will be
imposed against those assets to compensate Life of Virginia for certain
mortality and expense risks incurred in connection with the Policy. (See
Charges Against Separate Account II.)
Finally, the value of the net assets of Separate Account II will also
reflect the investment advisory fee and other expenses incurred by the Funds.
Distribution of the Policy
The Policy will be distributed by registered representatives of Capital
Brokerage Corporation, which acts as the principal underwriter of the Policy.
Capital Brokerage Corporation is registered as a broker-dealer with the
Securities and Exchange Commission and is a member of the National Association
of Securities Dealers, Inc. The Policy will also be distributed through other
registered broker-dealers that have entered into written sales agreements with
the principal underwriter.
Tax Treatment
Cash value under a Policy should be subject to the same federal income tax
treatment as cash value in a conventional fixed benefit policy. Under existing
tax law, the Policyowner is not deemed to be in constructive receipt of cash
values under a Policy until actual surrender. A change of Owners or a partial
or total surrender may have tax consequences depending upon the particular
circumstances.
Like death benefits payable under conventional life insurance policies,
Life Insurance Proceeds payable under a Policy should be excludable from the
gross income of the Beneficiary. As a result, the Beneficiary will not be taxed
on these proceeds. (See Federal Tax Matters.)
Certain policies may be treated as Modified Endowment Contracts depending
on the amount of premium paid in relation to the death benefit. (See Federal
Tax Matters.) If the Policy is a Modified Endowment Contract, then certain
distributions including policy loans and surrenders may have tax consequences.
In addition, prior to age 59 1/2 or death, any income resulting from
distributions generally will be subject to a 10% penalty tax.
For a discussion of additional tax issues and related developments which
may affect the tax treatment of the Policy, see "Federal Tax Matters".
Refund Privilege
The Policyowner is granted a period of time to examine a Policy and return
it for refund. The applicable period of time is 10 days after the Policy is
received or 45 days after Part I of the application is signed, whichever is
later. In certain states the Policyowner may have more than 10 days to return
the Policy for a refund. (See Examination of Policy (Refund
Privilege))
Exchange Privilege
During the first 24 months, the Policyowner may convert this Policy to a
permanent fixed benefit policy in accordance with Life of Virginia's
procedures. (See Exchange Privilege)
Illustrations of Death Benefits, Cash Values and Surrender Values
Illustrations in the Appendix show how the Death Benefit, Cash Value, and
Surrender Value may vary based on certain rate of return assumptions and how
these benefits compare with amounts which would accumulate if premiums were
invested to earn interest (after taxes) at 5% compounded annually. Nonetheless,
the illustrations are based on the hypothetical investment rates of return and
are not guaranteed. They are illustrative only and are not a representation of
past or future performance. Actual rates of return may be more or less than
those reflected in the illustrations and, therefore, actual values will be
different than those illustrated. If the Policy is surrendered in the early
policy years, the Surrender Value will be low as compared with premiums
accumulated with interest, and consequently, the insurance protection provided
will be costly.
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Fund Charges. The fees and expenses for each of the Funds (as a percentage
of net assets) for the year ended December 31, 1997 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 Other Expenses
(after fee waiver (after reimbursement- Total Annual
Fund as applicable) as applicable) Expenses
- - ---------------------------------------------------- ------------------- ----------------------- -------------
<S> <C> <C> <C>
Janus Aspen Series
Growth Portfolio .................................. 0.65% 0.05% 0.70%
Aggressive Growth Portfolio ....................... 0.73% 0.03% 0.76%
International Growth Portfolio .................... 0.67% 0.29% 0.96%
Worldwide Growth Portfolio ........................ 0.66% 0.08% 0.74%
Balanced Portfolio ................................ 0.76% 0.07% 0.83%
Flexible Income Portfolio ......................... 0.65% 0.10% 0.75%
Capital Appreciation Portfolio .................... 0.23% 1.03% 1.26%
Variable Insurance Products Fund:*
Equity-Income Portfolio ........................... 0.50% 0.08% 0.58%
Overseas Portfolio ................................ 0.75% 0.17% 0.92%
Growth Portfolio .................................. 0.60% 0.09% 0.69%
Variable Insurance Products Fund II:*
Asset Manager Portfolio ........................... 0.55% 0.10% 0.65%
Contrafund Portfolio .............................. 0.60% 0.11% 0.71%
Variable Insurance Products Fund III:*
Growth & Income Portfolio ......................... 0.49% 0.21% 0.70%
Growth Opportunities Portfolio .................... 0.60% 0.14% 0.74%
GE Investments Funds, Inc.:
S&P 500 Index Fund ................................ 0.34% 0.12% 0.46%
Money Market Fund ................................. 0.20% 0.12% 0.32%
Total Return Fund ................................. 0.50% 0.15% 0.65%
International Equity Fund ......................... 0.98% 0.36% 1.34%
Real Estate Securities Fund ....................... 0.83% 0.12% 0.95%
Global Income Fund ................................ 0.40% 0.17% 0.57%
Value Equity Fund ................................. 0.37% 0.09% 0.46%
Income Fund ....................................... 0.42% 0.17% 0.59%
U.S. Equity Fund .................................. 0.55% 0.25% 0.80%
Oppenheimer Variable Account Funds:
Oppenheimer Bond Fund ............................. 0.73% 0.05% 0.78%
Oppenheimer Aggressive Growth Fund ................ 0.71% 0.02% 0.73%
Oppenheimer Growth Fund ........................... 0.73% 0.02% 0.75%
Oppenheimer High Income Fund ...................... 0.75% 0.07% 0.82%
Oppenheimer Multiple Strategies Fund .............. 0.72% 0.03% 0.75%
Federated Insurance Series:
Federated American Leaders Fund II ................ 0.66% 0.19% 0.85%
Federated Utility Fund II ......................... 0.48% 0.37% 0.85%
Federated High Income Bond Fund II ................ 0.51% 0.29% 0.80%
The Alger American Fund:
Alger American Growth Portfolio ................... 0.75% 0.04% 0.79%
Alger American Small Capitalization Portfolio ..... 0.85% 0.04% 0.89%
PBHG Insurance Series Fund, Inc.:
PBHG Growth II Portfolio .......................... 0.00% 1.20% 1.20%
PBHG Large Cap Growth Portfolio ................... 0.00% 1.10% 1.10%
Goldman Sachs Variable Insurance Trust Fund:
Goldman Sachs Growth and Income Fund .............. 0.75% 0.15% 0.90%
Goldman Sachs Mid Cap Equity Fund ................. 0.80% 0.15% 0.95%
</TABLE>
*The fees and expenses reported for Variable Insurance Products Fund,
Variable Insurance Products Fund II and Variable Insurance Products Fund,
Variable Insurance Products Fund II and Variable Insurance Products Fund III
are prior to any fee waiver and/or reimbursement as applicable.
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<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 the Account
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.
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., Goldman Sachs Variable Insurance Trust 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 reimbursements, the total annual expenses of the portfolios of the
Janus Aspen Series during 1997 would have been .78% for Growth Portfolio, .78%
for Aggressive Growth Portfolio, 1.08% for International Growth Portfolio, .81%
for Worldwide Growth Portfolio, .83% for Balanced Portfolio and 2.19% for
Capital Appreciation Portfolio.
With reimbursements, the total annual expenses of the portfolios of the
Variable Insurance Products Fund during 1997 would have been .57% for VIP
Equity-Income Portfolio, .90% for VIP Overseas Portfolio and .67% for VIP
Growth
Portfolio.
With reimbursements, the total annual expenses of the portfolios of the
Variable Insurance Products Fund II during 1997 would have been .64% for VIP II
Asset Manager Portfolio and .68% for VIP II Contrafund Portfolio.
With reimbursements, the total annual expenses of the portfolios of the
Variable Insurance Products Fund III during 1997 would have been .73% for VIP
III 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 1997
would have been .46% for S&P 500 Index Fund, .48% for Money Market Fund, .65%
for Total Return Fund, 1.43% for International Equity, .96% for Real Estate
Fund, .57% for Global Income Fund, .46% for Value Equity Fund, .76% for Income
Fund and .86% for U.S. Equity Fund.
Absent certain fee waivers or reimbursements, the total annual expenses of
the portfolios of the Federated Insurance Series during 1997 would have been
.94% for Federated American Leaders Fund II, 1.12% for Federated Utility Fund
II, and .89% for Federated High Income Bond Fund II.
Absent certain fee waivers or reimbursements, the total annual expenses of
the portfolios of PBHG Insurance Series Funds, Inc. during 1997 would have been
4.38% for Growth II Portfolio and 5.21% for Large Cap Growth Portfolio.
Absent reimbursements, the total annual expenses of the portfolios of
Goldman Sachs Variable Insurance Trust would have been 1.51% for Growth and
Income Fund and 1.33% for Mid Cap Equity Fund.
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.
LIFE OF VIRGINIA AND SEPARATE ACCOUNT II
The Life Insurance Company of Virginia
Life 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 ("GE Capital Assurance"). The remaining 20% is
owned by GE Financial Assurance Holdings, Inc. GE Capital Assurance and GE
Financial Assurance Holdings, 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 and is a wholly-owned
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<PAGE>
subsidiary of General Electric Company. Life of Virginia is principally engaged
in the offering of life insurance and annuity policies and ranks among the 25
largest stock life insurance companies in the United States in terms of
business in force. The Company is admitted to do business in 49 states and the
District of Columbia. The principal offices of Life of Virginia are at 6610
West Broad Street, Richmond, Virginia 23230.
IMSA Disclosure
Life of Virginia is a member of the Insurance Marketplace Standards
Association (IMSA). Life of Virginia may use the IMSA membership logo and
language in its advertisements, as outlined in IMSA's Marketing and Graphics
Guidelines. Companies that belong to IMSA subscribe to a set of ethical
standards covering the various aspects of sales and service for individually
sold like insurance and annuities
General Electric Company
General Electric Company ("GE") is a New York corporation founded more
than 100 years ago by Thomas Edison. GE is the world's largest manufacturer of
jet engines, engineering plastics, medical diagnostic equipment and large-sized
electric power generation equipment. Its subsidiary, GE Capital, is a
diversified financial services company with subsidiaries engaged in commercial
and industrial specialized, mid-market and indirect consumer financing
businesses. The GE family of companies includes numerous insurance companies,
including GE Capital Assurance, Great Northern Insured Annuity Corporation, GE
Capital Life Assurance Company of New York, Life of Virginia, First Colony Life
Insurance Company, Federal Home Life Insurance Company, The Harvest Life
Insurance Company, Union Fidelity Life Insurance Company and others.
The GE family of companies also includes Capital Brokerage Corporation (a
broker/dealer registered with the Securities and Exchange Commission) which
acts as principal underwriter for the Policies.
Separate Account II
Separate Account II was established by Life of Virginia as a separate
investment account on August 21, 1986. Separate Account II currently has
thirty-seven Investment Subdivisions available for allocation 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 ten Funds described below. After the Initial Investment
Period, net premiums are allocated in accordance with the instructions of the
Policyowner among up to seven of the thirty-seven Investment Subdivisions
available under this Policy.
The assets of Separate Account II are the property of Life of Virginia.
Nonetheless, the assets in Separate Account II attributable to the Policies are
not chargeable with liabilities arising out of any other business which Life of
Virginia may conduct. The assets of Separate Account II shall, however, be
available to cover the liabilities of Life of Virginia's 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 the Account without regard to the income, gains or losses
arising out of any other business Life of Virginia may conduct.
Separate Account II has been registered with the Securities and Exchange
Commission (the "Commission") as a unit investment trust under the Investment
Company Act of 1940 (the "1940 Act") and meets the definition of a separate
account under the federal securities laws. Registration with the Commission
does not involve supervision of the management or investment practices or
policies of Separate Account II by the Commission.
Addition, Deletion or Substitution of Investments
Life of Virginia reserves the right, subject to compliance with applicable
law, to make additions to, deletions from or substitutions for the shares of
the Fund portfolios that are held by Separate Account II or that Separate
Account II may purchase. If the shares of a portfolio are no longer available
for investment or if in its judgment further investment in any portfolio should
become inappropriate in view of the purposes of Separate Account II, Life of
Virginia reserves the right to eliminate the shares of any of the portfolios of
the Funds and to substitute shares of another portfolio of the Funds or of
another open-end, registered investment company. Life of Virginia will not
substitute any shares attributable to a Policyowner's cash value in Separate
Account II without notice and prior approval of the Commission, to the extent
required by the 1940 Act or other applicable law. Nothing contained herein
shall prevent Separate Account II from purchasing other securities for
13
<PAGE>
other series or classes of policies or from permitting a conversion between
portfolios or classes of policies on the basis of requests made by
policyowners.
Life of Virginia also reserves the right to establish additional
Investment Subdivisions of Separate Account II, each of which would invest in a
separate portfolio of the Funds, or in shares of another investment company,
with a specified investment objective. New Investment Subdivisions may be
established if, in the sole discretion of Life of Virginia, marketing, tax or
investment conditions warrant, and any new Investment Subdivisions may be made
available to existing Policyowners on a basis to be determined by Life of
Virginia. One or more Investment Subdivisions may also be eliminated if, in the
sole discretion of Life of Virginia, marketing, tax, or investment conditions
warrant.
In the event of any such substitution or change, Life of Virginia may, by
appropriate endorsement, make such changes in these and other policies as may
be necessary or appropriate to reflect such substitution or change. If deemed
by Life of Virginia to be in the best interests of persons having voting rights
under the Policy, Separate Account II may be operated as a management company
under the 1940 Act, may be deregistered under that Act in the event such
registration is no longer required, or may be combined with other Life of
Virginia separate accounts. To the extent permitted by applicable law, Life of
Virginia may also transfer the assets of Separate Account II associated with
the Policies to another separate account. In addition, Life of Virginia may,
when permitted by law, restrict or eliminate any voting rights of Policyowners
or other persons who have voting rights as to Separate Account II.
The Policyowner will be notified of any material change in the investment
policy of any portfolio in which the Owner has an interest. If the Policyowner
objects to the change, the Policy may be exchanged for a fixed benefit policy.
In addition, the Policyowner may exercise the right to surrender the Policy, in
whole or in part. (See Surrender Privileges.) If the Policyowner chooses to
exchange the 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. Life of Virginia will notify
Policyowners of the options available and procedures to follow if any material
change occurs.
THE FUNDS
Separate Account II currently invests in ten mutual funds. Each of the
Funds currently available under the Policy is a registered open-end,
diversified investment company of the series-type.
Each Investment Subdivision invests exclusively in a designated investment
portfolio of one of the Funds. The assets of each such 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 performance of any other portfolio. Some of the Funds
may, in the future, create additional portfolios.
Each of the Funds sells its shares to Separate Account II in accordance
with the terms of a participation agreement between the Fund and Life of
Virginia. The termination provisions of those agreements vary. A summary of
these termination provisions may be found in the Statement of Additional
Information. Should an agreement between Life of Virginia and a Fund terminate,
the Account will not be able to purchase additional shares of that Fund. In
that event, Policyowners will no longer be able to allocate Account Values or
Premium Payments to Investment Subdivisions investing in portfolios of that
Fund.
Additionally, in certain circumstances, it is possible that a Fund or a
portfolio of a Fund may refuse to sell its shares to Separate Account II
despite the fact that the participation agreement between the Fund and Life of
Virginia has not been terminated. Should a Fund or a portfolio of a Fund decide
not to sell its shares to Life of Virginia, Life of Virginia will be unable to
honor Policyowner requests to allocate their account values or premium payments
to Investment Subdivisions investing in shares of that Fund or portfolio.
Certain Investment Subdivisions invest in portfolios that have similar
investment objectives and/or policies; therefore, before choosing Investment
Subdivisions, carefully read the individual prospectuses for the Funds, along
with this prospectus.
14
<PAGE>
Janus Aspen Series
The Janus Aspen Series has seven portfolios that are available under this
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 objective 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.
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 seeking 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 objective 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 Janus Aspen Series, which
should be read carefully before investing.
Capital Appreciation Portfolio has the investment objective of seeking
long-term growth of capital by investing primarily in common stocks of
companies of any size.
Janus Capital Corporation serves as investment adviser to Janus Aspen
Series.
Variable Insurance Products Fund
Variable Insurance Products Fund has three portfolios that are available
under this Policy: VIP Equity-Income Portfolio, VIP Overseas Portfolio, and VIP
Growth 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 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.
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.
Fidelity Management & Research Company serves as investment adviser to
Variable Insurance Products Fund.
Variable Insurance Products Fund II
Variable Insurance Products Fund II has two portfolios that are available
under this Policy: VIP II Asset Manager Portfolio and VIP II Contrafund
Portfolio.
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<PAGE>
VIP II 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 money market instruments.
VIP II 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
Variable Insurance Products Fund II.
Variable Insurance Products Fund III
Variable Insurance Products Fund III has two portfolios that are available
under this Policy: VIP III Growth & Income Portfolio and VIP III Growth
Opportunities Portfolio.
VIP III Growth & Income Portfolio seeks high total return through a
combination of current income and capital appreciation by investing mainly in
equity securities.
VIP III 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
Variable Insurance Products Fund III.
GE Investments Funds, Inc.
GE Investments Funds, Inc. (GE Investments Funds) has nine portfolios that
are available under this Policy: S&P 500 Index Fund, Money Market Fund, Total
Return Fund, International Equity Fund, Real Estate Securities Fund, Global
Income Fund, Value Equity Fund, Income Fund, and U.S. Equity Fund. The U.S.
Equity Fund is not available in California at this time.
S&P 500 Index Fund1 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 and the
American Stock Exchange, to a limited extent, in the over-the-counter markets.
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.
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.
Global Income Fund has the investment objective of high total return,
emphasizing current income and, to a lesser extent, capital appreciation. The
portfolio seeks to achieve these objectives by investing primarily in
income-bearing debt securities and other income-bearing instruments of U.S. and
foreign issuers.
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.
- - ---------
1"Standard & Poor's," "S&P," and S&P "500" are trademarks of Mc-Graw 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.
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<PAGE>
Income Fund has the investment objective or 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.
U.S. Equity Fund has the investment objective of proving long-term growth
of capital by investing primarily in equity securities of U.S. companies.
GE Investment Management Incorporated serves as investment adviser to GE
Investments Funds.
Oppenheimer Variable Account Funds
Oppenheimer Variable Account Funds has five portfolios that are available
under this Policy: Oppenheimer High Income Fund, Oppenheimer Bond Fund,
Oppenheimer Aggressive Growth 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.
Secondarily, this Fund seeks capital growth when consistent with its primary
objective. Bond Fund will, under normal market conditions, invest at least 65%
of its total assets in investment grade debt securities.
Oppenheimer Aggressive Growth Fund seeks to achieve capital appreciation
by investing in "growth-type" companies. Prior to May, 1998, this fund was know
as Oppenheimer Capital Appreciation Fund.
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.
OppenheimerFunds, Inc. serves as investment adviser to Oppenheimer
Variable Accounts Funds.
Federated Insurance Series
The Federated Insurance Series has three portfolios that are available
under this 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
objective by investing primarily in a diversified portfolio of 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 Federated Insurance
Series.
The Alger American Fund
The Alger American Fund has two portfolios that are available under this
Policy: Alger American Growth Portfolio and Alger American Small Capitalization
Portfolio.
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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.
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.
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 available under this Policy: Growth II Portfolio and Large
Cap Growth Portfolio.
PBHG Growth II Portfolio seeks capital appreciation by investing at least
65% of its total assets in the equity securities of small and medium sized
growth companies (market capitalization of up to $4 billion) that, in the
Adviser's opinion, have an outlook for strong earnings growth and the potential
for significant capital appreciation.
PBHG Large Cap Growth Portfolio seeks long-term growth of capital by
investing primarily in the equity securities of large capitalization companies
(market capitalization of greater than $1 billion) that, in the Adviser's
opinion, have an outlook for strong growth in earnings and potential for
capital appreciation.
Pilgrim Baxter & Associates, Ltd. serves as the investment adviser to PBHG
Insurance Series Fund, Inc.
Goldman Sachs Variable Insurance Trust
Goldman Sachs Variable Insurance Trust has two portfolios that are
available under this Policy: Goldman Sachs Growth and Income Fund and Goldman
Sachs Mid Cap Equity Fund.
Goldman Sachs Growth and Income Fund and Goldman Sachs Mid Cap Equity Fund
are not available in California at this time.
Goldman Sachs Growth and Income Fund seeks long-term capital growth and
growth of income, primarily through equity securities that, in the management
team's view, offer favorable capital appreciation and/or dividend-paying
ability.
Goldman Sachs Mid Cap Equity Fund seeks long-term capital appreciation,
primarily through equity securities of companies with public stock market
capitalization between $500 million and $10 billion at the time of investment.
Goldman Sachs Asset Management serves as investment adviser to Goldman
Sachs Variable Insurance Trust.
THERE IS NO ASSURANCE THAT THE STATED OBJECTIVES AND
POLICIES OF ANY OF THE FUNDS WILL BE ACHIEVED.
Life of Virginia currently is compensated by an affiliate(s) of each of
the Funds based upon an annual percentage of the average assets held in the
Fund by Life of Virginia. These percentage amounts, which vary by Fund, are
intended to reflect administrative and other services provided by Life of
Virginia to the Fund and/or affiliate(s).
More detailed information concerning the investment objectives and
policies of the Funds and the investment advisory services and charges can be
found in the current prospectuses for the Funds which accompany or precede this
Prospectus. A prospectus for each Fund can be obtained by writing or calling
Life of Virginia's Home Office. The prospectus for each Fund should be read
carefully before any decision is made concerning the allocation of premium
payments or transfers among the Investment Subdivisions of Separate Account II.
Resolving Material Conflicts
The Funds are used as investment vehicles for variable life insurance and
variable annuity policies issued by Life of Virginia. In addition, all of the
Funds other than the GE Investments Funds, are available to separate accounts
of insurance
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companies other than Life of Virginia offering variable annuity and variable
life products. As a result, there is a possibility that a material conflict may
arise between the interests of Policyowners owning Policies whose cash values
are allocated to Separate Account II and of Policyowners owning policies whose
cash values are allocated to one or more other separate accounts investing in
any one of the Funds.
In addition, Janus Aspen Series, GE Investments Funds, The Alger American
Fund and Goldman Sachs Variable Insurance Trust may sell shares to certain
retirement plans. As a result, there is a possibility that a material conflict
may arise between the interests of Policyowners generally or certain classes of
Policyowners, and such retirement plans or participants in such retirement
plans.
In the event of a material conflict, Life of Virginia will take any
necessary steps, including removing Separate Account II assets from that Fund,
to resolve the matter. See the individual Fund Prospectus for greater details.
Termination of Participation Agreements
The participation agreements pursuant to which the Funds sell their shares
to Separate Account II contain varying provisions regarding termination. The
following summarizes those provisions:
Variable Insurance Products Fund, Variable Insurance Products Fund II and
Variable Insurance Products Fund III. (The "Fund") These agreements provide for
termination (1) on one year's advance notice by either party, (2) at Life of
Virginia's option if shares of the Fund are not reasonably available to meet
requirements of the policies, (3) at the option of either party if certain
enforcement proceedings are instituted against the other, (4) upon vote of the
policyowners to substitute shares of another mutual fund, (5) at Life of
Virginia's option if shares of the Fund are not registered, issued, or sold in
accordance with applicable laws or if the Fund ceases to qualify as regulated
investment companies under the Internal Revenue Code, (6) at the option of the
Fund or its principal underwriter if it determines that Life of Virginia has
suffered material adverse changes in its business or financial condition or is
the subject of material adverse publicity, (7) at the option of Life of
Virginia if the Fund has suffered material adverse changes in its business or
financial conditions or is the subject of material adverse publicity, or (8) at
the option of the Fund or its principal underwriter if Life of Virginia decides
to make another mutual fund available as a funding vehicle for its policies.
Oppenheimer Variable Account Funds. This agreement may be terminated by
the parties on six months' advance written notice.
Janus Aspen Series. This agreement may be terminated by the parties on six
months' advance written notice.
Federated Insurance Series. This agreement may be terminated by any of the
parties on 180 days advance written notice to the other parties.
The Alger American Fund. This agreement may be terminated at the option of
any party upon six months' written notice to the other parties, unless a
shorter time is agreed to by the parties.
PBHG Insurance Series Fund, Inc. This agreement may be terminated at the
option of any party upon six months' written notice to the other parties,
unless a shorter time is agreed to by the parties.
Goldman Sachs Variable Insurance Trust. This agreement may be terminated
at the option of any party upon six months' written notice to the other
parties, unless a shorter time is agreed to by the parties.
GE Investments Funds, Inc. has entered into a Stock Sale Agreement with
Life of Virginia pursuant to which the Fund sells is shares to Separate Account
II.
THE POLICY
This prospectus describes the basic Commonwealth Three Policy. There may
be differences because of requirements of the state where your Policy is
issued. Any such differences will be included in your Policy.
Purpose of the Policy
The Policy is designed to provide the Owner with both lifetime insurance
protection and significant flexibility in connection with the amount and
frequency of premium payments and the level of life insurance proceeds payable
under a Policy. Unlike conventional life insurance, the Policyowner is not
required to pay scheduled premiums to keep a Policy in force, but may, subject
to certain limitations, vary the frequency and amount of Premium Payments.
Moreover, the Policy allows a Policyowner to adjust the level of life insurance
proceeds payable under a Policy without having to purchase a new Policy by
increasing
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or decreasing the specified amount. Thus, as insurance needs or financial
conditions change, the Policyowner has the flexibility to adjust life insurance
proceeds and vary premium payments.
The Policy varies from conventional fixed benefit life insurance in a
number of additional respects. Because the life insurance proceeds may, and the
cash value will, vary with the investment experience of the chosen Investment
Subdivisions of Separate Account II, the Policyowner bears the investment risk
of any depreciation in value, but reaps the benefit of any appreciation in
value, of the underlying assets. As a result, whether or not a Policy continues
in force may depend in part upon the investment experience of the chosen
Investment Subdivision of Separate Account II. The failure to pay a planned
periodic premium will not necessarily cause the Policy to lapse, but the Policy
could lapse even if planned periodic premiums have been paid, depending upon
the investment experience of Separate Account II.
Purchasing a Policy
To purchase a Policy, a completed application must be sent to Life of
Virginia at its Home Office at 6610 W. Broad Street, Richmond, Virginia 23230.
Life of Virginia generally will not issue Policies to insure persons older than
age 75. Nonsmoker rates are only available to Insureds age 21 and over. The
minimum specified amount for a Policy is $50,000; however, Life of Virginia
reserves the right to increase or decrease this amount for a class of Policies
issued after some future date. Acceptance is subject to Life of Virginia's
underwriting rules and Life of Virginia may, at its sole discretion, reject any
application or premium for any lawful reason and in a manner that does not
unfairly discriminate against similarly-situated purchasers.
If the full first premium is not paid with the application, insurance will
become effective on the Effective Date, which is the date that premium is paid
and the Policy is delivered while all persons proposed for insurance are
insurable. If the full first premium is paid and a conditional receipt is given
to the applicant, then, subject to a maximum limitation, insurance as provided
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 by 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.
Premiums
Premiums must be paid to Life of Virginia at its Home Office. Net premiums
are premiums multiplied by the Net Premium Factor (See Charges and Deduction).
The initial premium will be allocated to the Investment Subdivision
investing in the Money Market Fund of GE Investments Funds on the Effective
Date. Once allocated, the policy's cash value will remain there until the end
of the Initial Investment Period. The Initial Investment Period ends either on
the date the Home Office receives a form satisfactory to Life of Virginia and
signed by the Policyowner, indicating that the Policyowner has received and
accepted the Policy, or if the Policy is not accepted when all amounts due are
refunded. For premiums received after the Policy is approved for issue, but
before the end of the Initial Investment Period, the net premiums will also be
placed in the Investment Subdivision that invests exclusively in the Money
Market Fund of the GE Investments Funds at the end of the valuation period
during which they were received until the end of the Initial Investment Period.
At the end of the Initial Investment Period, cash value at that time and
the net premiums subsequently received will be allocated among the Investment
Subdivisions of Separate Account II in accordance with the written instructions
of the Policyowner. The Policyowner may allocate premiums totally to one
Investment Subdivision of Separate Account II, or partially to any of these
Investment Subdivisions; however, at any point in time, the cash value may not
be invested in more than seven Investment Subdivisions. Furthermore, the
portion of each net premium allocated to any particular Investment Subdivision
must be at least 1%. The Policyowner may, by written notice to the Home Office,
change the allocation among the Investment Subdivisions of premium payments
received on or subsequent to the date of that written notice.
Premium Payments. The full first premium is due on the policy date. This
premium cannot be less than the continuation amount for the first policy month.
The continuation amounts for each of the first 120 policy months is set forth
in the Policy data pages. The total amount of premiums received by Life of
Virginia for a Policy through the end of the Policy's Refund Privilege period
may not exceed $100,000. (See Examination of Policy.)
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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. Policy months
and years are measured from the Policy Date. If the Policy Date would otherwise
fall on the 29th, 30th or 31st day of a month, the Policy Date will be the
28th.
If a Policy is issued as applied for, insurance coverage under the Policy
normally begins on the Policy Date or at the end of the valuation period during
which the full first premium is received at the Home Office, whichever is
later. If a Policy is issued on a basis other than as applied for the insurance
coverage will normally begin on the date the Policy is accepted by the
Policyowner or at the end of the valuation period during which the full first
premium is received at the Home Office, whichever is later.
The first premium is the only premium payment required under a Policy,
although additional premiums may be necessary to keep the Policy in effect.
Each Policyowner may determine a periodic plan, a plan under which a level
premium may be paid for a specified period of time on a quarterly, semi-annual
or annual basis. Premiums under a periodic plan ("planned periodic premiums")
may also be paid monthly if paid by pre-authorized check. The frequency or
amount of the planned periodic premium may be changed at any time by the
Policyowner by notifying Life of Virginia in writing at its home office.
Adherence to the periodic plan is not mandatory and the failure to pay
planned periodic premiums in accordance with a plan will not of itself cause a
Policy to lapse, nor will the payment of planned periodic premiums guarantee
that the Policy remains in effect, except that during the first 120 policy
months, the Policy will not lapse regardless of investment experience 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. (See Policy Lapse and
Reinstatement.)
If there is no outstanding policy debt, a Policyowner may make unscheduled
premium payments of any amount and at any frequency, subject only to the
minimum premium requirement and maximum premium limitation set forth in the
Policy and described below. Payments made by the Policyowner other than planned
periodic premiums 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.
Maximum Premium Limitations. In order to conform to requirements of the
Internal Revenue Code of 1986, as amended, Life of Virginia will limit the
total amount of premiums, both unscheduled and planned periodic, that may be
paid during each policy year. The applicable maximum premium limitation will be
set forth in each Policy. Because the maximum premium limitation is in part
dependent upon the specified amount for each Policy, changes in the specified
amount may affect this limitation. In the event that a premium is paid that
exceeds the maximum premium limitation, Life of Virginia will accept only the
portion of the premium equal to the maximum premium limitation and return the
excess to the Policyowner. Thereafter, no additional premiums will be accepted
until allowed by the maximum premium limitation set forth in the Policy. In
addition, Life of Virginia will not accept any Commonwealth Three premiums
prior to the end of the Refund Privilege period that cause the aggregate
premiums paid to date to exceed $100,000.
Minimum Premium Payment. Premiums paid in connection with a periodic plan
generally must be at least $20. If, however, planned periodic premiums are paid
monthly by pre-authorized check, the minimum premium payment is $15. 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 premium amount and the actual payment amount is
not more than 10%. All other premiums will be deemed unscheduled premiums.
Under Life of Virginia's current administrative rules, all unscheduled premium
payments must be at least $250 except where state regulation specifies a
smaller amount.
Policy Lapse and Reinstatement
Lapse. Unlike conventional life insurance policies, the failure to make a
planned periodic premium payment will not itself cause a Policy to lapse. Lapse
will only occur when the surrender value is insufficient to cover the monthly
deduction and the grace period expires without a sufficient payment. Insurance
coverage will continue during the grace period, but the Policy will be deemed
to have no cash value for purposes of policy loans and surrenders. The Life
Insurance Proceeds payable during the grace period will equal the amount of the
death benefit in effect immediately prior to the commencement of the grace
period. These proceeds will be reduced by any outstanding loan balance and any
due and unpaid deferred sales charges and monthly deductions.
If the surrender value is insufficient to cover the monthly deduction (See
Charges and Deductions -- Monthly Deduction), the Policyowner must, during the
grace period, make a payment which, when multiplied by the Net Premium Factor,
is at
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least equal to any excess Policy Debt and any due and unpaid monthly
deductions. A grace period of 61 days will begin on the date Life of Virginia
sends a notice of any insufficiency to the Policyowner. Excess Policy Debt is
the amount by which policy debt exceeds cash value less any applicable
surrender charges. (See Loan Benefits -- Policy Debt.) Failure to make a
sufficient payment during the grace period will cause a Policy to lapse and
terminate without value. So long as there is outstanding Policy Debt, that
portion of any payment received during the grace period that exceeds the amount
necessary to keep the Policy in force will be treated as a repayment of Policy
Debt. A lapse of the Policy may result in adverse tax consequences. (See
Federal Tax Matters.)
Notwithstanding the above, the Policy will not lapse during the first ten
policy years 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 any partial surrenders to date where both
Policy Debt and partial surrenders are divided by the Net Premium factor of
92.5%. (See Charges and Deductions, Deductions from Premiums). The continuation
amounts for each of the first 120 policy months are shown in the Policy data
pages. There are no continuation amounts after the 120th policy month.
Reinstatement. Prior to the Maturity Date, a Policy may be reinstated any
time within 3 years after the date of lapse by submitting to Life of Virginia
evidence satisfactory to the Company that the Insured is insurable. In
addition, a premium must be paid, as described below. Life of Virginia will,
however, accept a premium larger than this amount. The Policy will be
reinstated on the date the reinstatement is approved. Any Policy Debt which
existed at the end of the grace period will be reinstated if not paid. Life of
Virginia will not reinstate a Policy surrendered for its cash value.
If the Policy terminates and is reinstated, a premium must be paid which
equals (1) the minimum premium to keep the Policy in force from the first day
of the grace period to the date of reinstatement, plus (2) an amount sufficient
to keep the Policy in effect for two months after the date of reinstatement,
minus (3) the sum of monthly deductions that would have been made during the
period between termination and reinstatement, divided by the Net Premium
Factor. On the date of reinstatement, the cash value will equal (a) the cash
value on the first day of the grace period, plus (b) the premium paid to
reinstate multiplied by the Net Premium Factor minus (c) the total of any
deferred sales charge deductions which would have been made if the Policy had
remained continuously in effect, minus (d) any decrease in the contingent
deferred underwriting charge from the first day of the grace period to the date
of reinstatement.
On the date of reinstatement, the cash value less any outstanding Policy
Debt will be allocated to the Investment Subdivisions of Separate Account II.
Unless instructions are received from the Policyowner to the contrary, the cash
value will be allocated in the same manner as net premiums.
If the Policy is reinstated, the surrender charge will be as though this
Policy had been in effect continuously from its original Policy Date.
Examination of Policy (Refund Privilege)
The Policyowner may examine the Policy and return it for refund within 10
days after it is received or within 45 days after Part I of the application is
signed, whichever is later. The amount of refund will depend on the state in
which the Policy is issued. If authorized by state law, the amount of refund
will equal the sum of all charges deducted from premiums paid, plus the
advisory fee deducted from the Funds attributable to the Policy, plus the net
premiums allocated to Separate Account II adjusted by investment gains and
losses. Otherwise, the amount of the refund will equal the gross premiums paid.
In certain states the Policyowner may have more than 10 days to return the
policy for a refund. A Policyowner wanting a refund should return the Policy to
either Life of Virginia at its Home Office or to the registered agent who sold
it.
Exchange Privilege
During the first 24 months, the Policyowner may convert this Policy to a
permanent fixed benefit policy. The Policyowner 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 issue age and risk
classification of the Insured as the existing Policy. The conversion will be
subject to an equitable adjustment in payments and cash values to reflect
variances, if any, in the payments and cash values under the existing Policy
and the new policy.
POLICY BENEFITS
While a Policy is in effect, it provides for certain benefits prior to the
maturity date. Subject to certain limitations, the Policyowner may at any time
obtain cash value by completely or partially surrendering the Policy. (See
Surrender Privileges.)
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In addition, the Policyowner has certain policy loan privileges under the
Policy. (See Loan Benefits.) The Policy also provides for the payment of Life
Insurance Proceeds upon the death of the Insured under one of the two benefit
options selected by the Policyowner (see Life Insurance Proceeds), and benefits
upon the maturity of a Policy. (See Benefits at Maturity.)
Cash Value Benefits
Surrender Privileges. As long as a Policy is in effect, a Policyowner may
surrender the Policy in whole or in part at any time by sending a written
request in a form acceptable to Life of Virginia along with the Policy to Life
of Virginia at its Home Office. Surrender may be made at any time with the
exception of certain partial surrenders during the first policy year. (See
Partial Surrenders.)
Complete Surrenders. The amount payable on complete surrender of the
Policy is the surrender value at the end of the valuation period during which
the request is received. The surrender value may be paid in a lump sum or under
one of the optional payment plans specified in the Policy. (See Optional
Payment Plans.)
Partial Surrenders. A Policyowner may obtain a portion of the Policy's
cash value upon partial surrender of the Policy. A partial surrender must be at
least $500 and cannot exceed the lesser of (1) the surrender value less $500 or
(2) the maximum loan amount less outstanding Policy Debt. If Option B is in
effect, no partial surrender may occur during the first policy year. A charge
equal to the lesser of $25 or 2% of the amount requested will be deducted from
the cash value upon a partial surrender. (See Charges and Deductions.)
The partial surrender will be allocated among the Investment Subdivisions
in accordance with the written instructions of the Policyowner. If no such
instructions are received with the request for partial surrender, the partial
surrender will be allocated among the Investment Subdivisions in the same
proportion that the cash value in each Investment Subdivision bears to the cash
value in all Investment Subdivisions on the date the request is received at the
Home Office.
Partial surrenders will affect both the Policy's cash value and the Life
Insurance Proceeds payable under the Policy. The Policy's cash value will be
reduced by the amount of the partial surrender. If the Life Insurance Proceeds
payable under either benefit option both before and after the partial surrender
are the cash value multiplied by the corridor percentage set forth in the
Policy, a partial surrender will result in a reduction in Life Insurance
Proceeds equal to the amount of the partial surrender, multiplied by the
corridor percentage then in effect. If the Life Insurance Proceeds are not so
affected by the corridor percentage the reduction in Life Insurance Proceeds
will be equal to the partial surrender. (See Life Insurance Proceeds --
Benefit Options.)
The specified amount remaining in force after a partial surrender may not
be less than the minimum specified amount for the Policy established when it
was issued. As a result, Life of Virginia will not accomplish any partial
surrender that would reduce the specified amount below this minimum. If
increases in the specified amount previously have occurred, a partial surrender
will first reduce the specified amount of the most recent increase, then the
next most recent increases successively, then the coverage under the original
application. Thus, a partial surrender may affect the way in which the cost of
insurance charge is calculated. (See Monthly Deduction -- Cost of Insurance
Charge.)
Surrenders and partial surrenders may have federal tax consequences. (See
Federal Tax Matters.)
Surrender Value. The Surrender Value equals the cash value less any
outstanding Policy Debt and less any applicable surrender charges (See Charges
and Deductions -- Surrender Charge). Surrender Value will be determined at the
end of the Valuation Period during which the request for a surrender is
received. Proceeds will generally be paid within seven days of receipt of a
request for a surrender. Postponement of payments may occur in certain
circumstances. (See Postponement of Payment.)
Calculation of Cash Value. The Policy provides for the accumulation of
cash value. Cash value will be determined on a daily basis. A Policy's cash
value will reflect a number of factors, including net premiums paid, partial
surrenders, policy loans, charges assessed in connection with the Policy and
the investment performance of the Investment Subdivisions of Separate Account
II to which the cash value is allocated. There is no guaranteed minimum cash
value. The cash value of a Policy is equal to (1) the cash value in Separate
Account II, plus (2) any cash value held in the general account to secure
Policy Debt.
On the later of the Policy Date or at the end of the Valuation Period
during which the first premium is received, the cash value in each Investment
Subdivision is the portion of the net premium which has been allocated to the
Investment Subdivision, less the portion of any due and unpaid monthly
deductions allocated to the cash value in that Investment Subdivision
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plus the Policy's share of investment gains and losses in that Investment
Subdivision. At the end of each Valuation Period thereafter, the cash value in
each Investment Subdivision of Separate Account II is (1) plus (2) plus (3)
minus (4) minus (5), where:
(1) is the cash 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 period;
(2) is net premium payments (premiums multiplied by the Net Premium Factor)
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; and
(5) is any cash value transferred out of the Investment Subdivision during
the current Valuation Period.
In addition, whenever a Valuation Period includes the Monthly Anniversary
Day, the cash value at the end of such period is reduced by the monthly
deduction allocated to the cash value in the Investment Subdivision for that
monthly anniversary day. (See Charges and Deductions -- Monthly Deduction.) If
the Valuation Period includes the first monthly anniversary day in policy years
two through ten, the cash value at the end of such period is reduced by 1/9 of
the Deferred Sales Charge allocated to the cash value in the Investment
Subdivisions for that monthly anniversary day. (See Charges and Deductions --
Sales Charge.)
Unit Value. Each Investment Subdivision has a Unit Value. When premiums or
other amounts are transferred into an Investment Subdivision, a number of Units
are purchased based on the Unit Value of the Investment Subdivision 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.
For each Investment Subdivision, the Unit Value for the first Valuation
Period was $10.00. The Unit Value for each subsequent period 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 for
each day in the period.
Net Investment Factor. The Net Investment Factor measures investment
performance of the Investment Subdivisions of Separate Account II during a
Valuation Period. Each Investment Subdivision has its own Net Investment Factor
for a Valuation Period. The Net Investment Factor of an Investment Subdivision
for a Valuation Period is (a) divided by (b), minus (c), where:
(a) is (1) the value of the net assets of that Investment Subdivision at
the end of the preceding Valuation Period, plus (2) the investment income and
capital gains, realized or unrealized, credited to the net assets of that
Investment Subdivision during 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 that Investment Subdivision for taxes, or any amount
set aside during the Valuation Period by Life of Virginia as a provision for
taxes attributable to the operation or maintenance of that Subdivision; and
(b) is the value of the net assets of that Investment Subdivision at the
end of the preceding Valuation Period; and
(c) is a charge no greater than .0019246% for each day in the Valuation
Period. This corresponds to .70% per year of the net assets of that Investment
Subdivision for mortality and expense risks.
The value of the assets in Separate Account II will be taken at their fair
market value in accordance with generally accepted accounting principles and
applicable laws and regulations.
How the Period of Coverage under a Policy Can Vary. The period of coverage
under a Policy depends upon the cash value. The Policy will remain in force as
long as the Surrender Value is sufficient to pay the monthly deduction. (See
Charges and Deductions -- Monthly Deduction.) When, however, the Surrender
Value is insufficient to pay the monthly deduction and the grace period expires
without an adequate payment by the policyowner, the Policy will lapse and
terminate without value. (See Policy Lapse and Reinstatement -- Lapse.)
Transfers
After the Initial Investment Period, Policyowners may transfer, up to
twelve times each calendar year, amounts among the Investment Subdivisions of
Separate Account II that are available at the time of the request, by written
request to the Home Office. A transfer that would cause cash value to be in
more than seven Investment Subdivisions will not be permitted.
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Also, where permitted by state law, Life of Virginia reserves the right to
refuse to execute any transfer if any of the Investment Subdivisions that would
be affected by the transfer are unable to purchase or redeem shares of the
mutual funds in which they invest.
The transfer will be effective as of the end of the Valuation Period
during which the request is received at the Home Office. According to the terms
of the Policy, the first such transfer in each calendar month is free,
subsequent transfers in that year will be assessed a charge of $10.00. Life of
Virginia's current practice is to waive this policy limitation and allow one
free transfer each calendar month. Subsequent transfers in that month will be
assessed a charge of $10.00. However, Life of Virginia reserves the right to
enforce the policy limitation of one free transfer per calendar year at any
time in the future. The amount of the transfer charge is, once a Policy is
issued, guaranteed for the life of the Policy.
Telephone Transfers
Life of Virginia permits telephone transfers and may be liable for losses
resulting from unauthorized or fraudulent telephone transfers if it fails to
employ reasonable procedures to confirm that the telephone instructions that it
receives are genuine. Therefore, Life of Virginia will employ means to prevent
unauthorized or fraudulent telephone requests, such as sending written
confirmation, recording telephone requests, and/or requesting other identifying
information. In addition, Life of Virginia may require written authorization
before allowing Policyowners to make telephone transfers.
To request a telephone transfer, Policyowners should call Life of
Virginia's Telephone Transfer Line at 800-772-3844. Life of Virginia will
record all telephone transfer requests. Transfer requests received prior to the
close of the New York Stock Exchange will be executed that Business Day at that
day's prices. Requests received after that time will be executed on the next
Business Day at that day's prices.
Dollar-Cost Averaging
Policyowners may elect to have Life of Virginia automatically transfer
specified amounts from one of certain designated Investment Subdivisions of
Separate Account II to any other subdivision(s) on a monthly or quarterly
basis. This privilege is intended to permit Policyowners to utilize
"Dollar-Cost Averaging," a long-term investment method that provides for
regular investing over a period of time. Life of Virginia makes no
representations or guarantees that Dollar-Cost Averaging will result in a
profit or protect against loss.
Policyowners must select Dollar-Cost Averaging on the application or
complete a Dollar-Cost Averaging Agreement or call the Telephone Transfer Line
at 800-772-3844 in order to begin the Dollar-Cost Averaging program. Currently,
the Investment Subdivision designated for the purpose of Dollar-Cost Averaging
is the Investment Subdivision that invests in the Money Market Fund of GE
Investments Funds. Cash value may also be transferred to the designated
Investment Subdivision from other subdivisions within the Separate Account. Any
amount allocated or transferred must conform to the minimum percentage
requirements. (See Premiums.) Transfers made for the purpose of Dollar-Cost
Averaging will count toward the free transfer each calendar month as well as
the twelve maximum transfers permitted each calendar year. Transfers made from
an Investment Subdivision for the purpose of Dollar-Cost Averaging must be at
least $100. (See Transfers.)
Dollar-Cost Averaging will continue until the entire cash value in the
designated Investment Subdivision is depleted. The Policyowner has the option
of discontinuing Dollar-Cost Averaging by sending Life of Virginia a written
cancellation notice or by calling Life of Virginia Telephone Transfer Line at
800-772-3844. Policyowners may make changes to their Dollar-Cost Averaging
program by calling Life of Virginia's Telephone Transfer Line. Also, Life of
Virginia reserves the right to discontinue or modify Dollar-Cost Averaging upon
30 days written notice to the Policyowner.
Portfolio Rebalancing
Owners may elect to have Life of Virginia automatically transfer amounts
on a quarterly, semi-annual or annual basis to maintain a specified percentage
of Cash Value in each of two or more Investment Subdivisions designated by the
Owner. This privilege is intended to permit owners to use "Portfolio
Rebalancing," a strategy that maintains over time the Owner's desired
allocation percentage in the designated Investment Subdivisions. The percentage
of Cash Value in each of the Investment Subdivisions may shift from the Premium
Payment allocation percentage due to the performance of the Investment
Subdivisions. Life of Virginia makes no representations or guarantees that
Portfolio Rebalancing will result in a profit or protect against loss.
Owners must complete the Portfolio Rebalancing agreement to participate in
the Portfolio Rebalancing program. Owners may designate the Investment
Subdivisions and specify the rebalancing percentages in the agreement. The
specified percentages must be in whole percentages and must be at least 1%. The
date that a rebalancing transfer is effected is measured from the
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Policy Date, or other date selected at the sole discretion of Life of Virginia,
based on the rebalancing frequency chosen by an Owner. Cash Value must be
allocated to each of the designated Investment Subdivisions for rebalancing to
become effective.
Portfolio Rebalancing is offered free of charge and will continue as long
as there is Cash Value in each of the designated Investment Subdivisions. Prior
to that time, Owners may discontinue rebalancing by sending Life of Virginia a
written cancellation notice. Owners may make changes to their Portfolio
Rebalancing program by calling Life of Virginia's Telephone Transfer Line at
800-772-3844. Portfolio Rebalancing transfers are not included for the purpose
of determining any transfer charge. Owners should consider the possible effects
of electing other automatic programs such as Dollar-Cost Averaging concurrent
with Portfolio Rebalancing. Life of Virginia reserves the right to exclude
investment subdivisions from Portfolio Rebalancing. Life of Virginia also
reserves the right to discontinue Portfolio Rebalancing upon 30 days written
notice to the Owner.
Powers of Attorney
As a general rule and as a convenience to Policyowners, Life of Virginia
allows the use of powers of attorney whereby Policyowners give third parties
the right to effect cash value transfers on behalf of the Policyowners.
However, when the same third party possesses powers of attorney executed by
many Policyowners, the result can be simultaneous transfers involving large
amounts of cash value. Such transfers can disrupt the orderly management of the
mutual funds underlying the variable policy, can result in higher costs to
Policyowners, and are generally not compatible with the long-range goals of
purchasers of variable policies. Life of Virginia believes that such
simultaneous transfers effected by such third parties are not in the best
interests of all shareholders of the funds underlying its policies, and this
position is shared by the managements of those mutual funds.
Therefore, to the extent necessary to reduce the adverse effects of
simultaneous transfers made by third parties holding multiple powers of
attorney, Life of Virginia may not honor such powers of attorney and has
instituted or will institute procedures to assure that the transfer requests
that it receives have, in fact, been made by the Policyowners in whose names
they are submitted. However, these procedures will not prevent Policyowners
from making their own cash value transfer requests.
Loan Benefits
Policy Loans. So long as a Policy remains in effect, a Policyowner may
borrow money from Life of Virginia at any time after the first policy
anniversary using the Policy as the only security for the loan. Life of
Virginia's claim for repayment of a policy loan has priority over the claims of
any assignee or other person. The maximum loan amount is 90% of the cash value
at the end of the valuation period during which the loan request is received,
less any surrender charges and less any previously outstanding loan.
Policy loans ordinarily will be paid within seven days after Life of
Virginia receives a request for a loan at its home office, although payments
may be postponed under certain circumstances. (See Postponement of Payment.)
When a policy loan is made, a portion of the Policy's cash value equal to the
loan is transferred out of Separate Account II and into Life of Virginia's
general account. Cash value equal to any loan interest that is due and unpaid
will also be transferred.
Even though the loan may be repaid in whole or in part at any time while
the Insured is living, policy loans will permanently affect the cash value of a
Policy and may permanently affect the Life Insurance Proceeds payable. The
effect could be favorable or unfavorable depending upon whether the investment
performance of the Investment Subdivision(s) from which the cash value was
transferred is less than or greater than the interest rate being credited to
the cash value in the general account while the loan is outstanding. In
comparison to a Policy under which no loan was made, policy values will be
lower where such interest rate credited was less than the performance of the
Investment Subdivision(s), but will be greater where such interest rate was
greater than the performance of the Investment Subdivision(s). In addition,
Life Insurance Proceeds will be reduced by the amount of any outstanding Policy
Debt.
When a policy loan is made, a portion of the Policy's cash value
sufficient to secure the loan will be 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. The cash value will be transferred out of
the Investment Subdivisions in accordance with the written instruction of the
Policyowner. If no such written instruction is received with the loan request,
the cash value transferred out will automatically be allocated among the
Investment Subdivisions in the same proportion that the cash value in each
Investment Subdivision bears to the total cash value in all Investment
Subdivisions on the date the loan is made.
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 surrender value under
the Policy less
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the sum of all premium payments made. Life of Virginia currently intends to
credit interest at an annual rate of 6% to that portion of cash value
transferred to the general account which is equal to preferred policy debt. An
annual rate of 4% is and will be credited to that portion of cash value
transferred to the general account which exceeds preferred policy debt. Life of
Virginia reserves the right to decrease, at its discretion, the rate of
interest credited to the amount of cash value transferred to the general
account to an effective annual rate of not less than 4%.
The Preferred Loan Availability Date is the later of:
(a) the tenth policy anniversary; and
(b) May 1, 2003
Preferred Policy Debt is currently only available to policies issued on or
after May 1, 1993, and may not be available in all states.
Policy loans may have federal tax consequences. (See Federal Tax Matters.)
In addition, a policy loan entails the risk that the Policy will lapse if
interest credited to the Cash Value in the general account while the loan is
outstanding plus earnings on Cash Value in the Investment Subdivisions is
insufficient to prevent policy debt from exceeding Cash Value less applicable
surrender charges. Adverse tax consequences may result from a lapse if policy
debt is outstanding. The risk of lapse due to a policy loan is greater where
interest charged on the loan is not paid when due.
Loan Interest. Life of Virginia will charge interest on any outstanding
policy loan. The maximum interest rate on policy loans is 8% per year. Life of
Virginia may, in its sole discretion, charge an interest rate lower than 8%. If
the loan interest rate is less than 8%, Life of Virginia can increase the rate
once each policy year but by not more than 1% per year. With respect to
outstanding policy loans, Life of Virginia will send notice of any change to
the policyowner and any assignee of record at the Company's home office at
least 40 days before the increased rate is made effective for those existing
loan amounts. Interest accrues daily and is due and payable at the end of each
policy year. If interest is not paid when due, an amount equal to the amount
owed will be transferred out of Separate Account II to become part of the
policy loan and interest will be charged on that amount. Interest transferred
out of Separate Account II will be transferred from each Investment Subdivision
in the same proportion that the cash value in that Investment Subdivision bears
to the total cash value in all Investment Subdivisions at the time of interest
transfer.
Policy Debt. Policy Debt equals the total of all outstanding policy loans
and accrued interest on policy loans. If Policy Debt exceeds cash value less
any applicable surrender charges, Life of Virginia will notify the Policyowner.
and any assignee of record. A payment at least equal to the excess Policy Debt
must be made to Life of Virginia within 61 days from the date notice is sent,
otherwise the Policy will lapse and terminate without value. (See Policy Lapse
and Reinstatement.) The Policy may, however, later be reinstated.
Repayment of Policy Debt. Policy Debt may be repaid in whole or in part
any time during the Insured's life and before the Maturity Date so long as the
Policy is in effect. Any payments made by a Policyowner other than planned
periodic premiums will be treated first as the repayment 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. Upon the repayment, the cash
value of a Commonwealth Three Policy in the general account securing the repaid
portion of the Policy Debt will be transferred to Separate Account II and
allocated among the Investment Subdivisions in accordance with the written
instructions of the Policyowner. If no written instruction is received with the
repayment, the allocation among the Investment Subdivisions will be the same as
would be applied to net premiums received at that time.
Outstanding Policy Debt is subtracted from life insurance proceeds payable
at the Insured's death, from cash value upon complete surrender or from the
maturity value.
Life Insurance Proceeds
So long as a Policy remains in force, the Policy provides for the payment
of Life Insurance Proceeds upon the death of the Insured. Proceeds will be paid
to a named Beneficiary or contingent Beneficiary. One or more Beneficiaries or
contingent Beneficiaries may be named. 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 Life of Virginia, 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
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added by rider. The proceeds will ordinarily be paid within seven days after
Life of Virginia receives due proof of death. Payment may, however, be
postponed under certain circumstances. (See Postponement of Payment.)
Benefit Options. Policyowners designate in the initial application one of
two benefit options offered under the Policy. The amount of Life Insurance
Proceeds payable under a Policy will depend upon the option in effect at the
time of the Insured's death. Under Option A, Life Insurance Proceeds will be
based on the larger of the Specified Amount plus the cash value or the cash
value multiplied by the corridor percentage. Accordingly, under Option A the
Life Insurance Proceeds will always vary as the cash value varies. The cash
value and Specified Amount will be determined at the end of the Valuation
Period during which the Insured dies. Policyowners who seek to have the
favorable investment performance reflected in increased insurance coverage
should purchase Option A.
Under Option B, Life Insurance Proceeds will be based on the larger of the
current Specified Amount or the cash value multiplied by the corridor
percentage. Accordingly, under Option B the Life Insurance Proceeds will remain
level unless the cash value multiplied by the corridor percentage exceeds the
current Specified Amount, in which case the amount of insurance proceeds will
vary as the cash value varies. Thus, Policyowners who are not seeking to
increase the amount of insurance coverage, but wish to have favorable
investment performance reflected to the maximum extent in increasing cash
values should select Option B.
The corridor percentage depends upon the attained age of the Insured on
the date of death. The corridor percentage for each age is set forth in the
table below.
<TABLE>
<CAPTION>
Corridor Corridor Corridor
Attained Age Percentage Attained Age Percentage Attained Age Percentage
- - ----------------- ------------ -------------- ------------ -------------- -----------
<S> <C> <C> <C> <C> <C>
40 or younger 250% 54 157% 68 117%
4l 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
48 197 62 126 through 105
49 191 63 124 90
50 185 64 122 91 104
51 178 65 120 92 103
52 171 66 119 93 102
53 164 67 118 94 101
</TABLE>
Illustrations. For both illustrations, assume that the Insured is under
the age of 40 and that there is no outstanding policy debt.
Under Option A, a Policy with a specified amount of $50,000 will generally
pay Life Insurance Proceeds of $50,000 plus cash value. Thus, for example, a
Policy with a specified amount of $50,000 and cash value of $10,000 will yield
Life Insurance Proceeds equal to $60,000 ($50,000 + $10,000); cash value of
$20,000 will yield Life Insurance Proceeds of $70,000 ($50,000 + $20,000). The
Life Insurance Proceeds cannot, however, be less than 250% (the applicable
corridor percentage) of cash value. As a result, if the cash value of the
Policy exceeds $33,333, the Life Insurance Proceeds will be greater than the
Specified Amount plus cash value. Each additional dollar added to cash value
above $33,333 will increase the Life Insurance Proceeds by $2.50. A Policy with
a cash value of $40,000 will, therefore, have Life Insurance Proceeds of
$100,000 (250% x $40,000); cash value of $100,000 will yield Life Insurance
Proceeds of $250,000 (250% x $100,000); and a cash value of $200,000 will yield
Life Insurance Proceeds of $500,000 (250% x $200,000).
Similarly, any time cash value exceeds $33,333, each dollar taken out of
cash value will reduce the Life Insurance Proceeds by $2.50. If at any time,
however, cash value multiplied by the corridor percentage is less than the
Specified Amount plus cash value, then the Life Insurance Proceeds will be the
Specified Amount plus cash value.
Under Option B, a Policy with a Specified Amount of $50,000 will generally
pay $50,000 in Life Insurance Proceeds. However, because Life Insurance
Proceeds cannot be less than 250% (the applicable corridor percentage) of cash
value, any time the cash value of this Policy exceeds $20,000, Life Insurance
Proceeds will exceed the $50,000 specified amount. If the cash value equals or
exceeds $20,000, each additional dollar added to the cash value will increase
the Life Insurance
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Proceeds by $2.50. Thus, for a Policy with a Specified Amount of $50,000 and a
cash value of $40,000, the beneficiary will be entitled to Life Insurance
Proceeds of $100,000 (250% x $40,000); cash value of $60,000 will yield Life
Insurance Proceeds of $150,000 (250% x $60,000), and a cash value of $100,000
will yield Life Insurance Proceeds of $250,000 (250% x $100,000). Similarly, so
long as cash value exceeds $20,000, each dollar taken out of cash value will
reduce the Life Insurance Proceeds by $2.50. If at any time the cash value
multiplied by the corridor percentage is less than the Specified Amount, the
Life Insurance Proceeds will equal the Specified Amount of the Policy.
The applicable corridor percentage becomes lower as the Insured's attained
age increases. If the attained age of the Insured in the illustration were, for
example, 50 (rather than 40), the applicable corridor percentage would be 185%.
Under Option A, the Life Insurance Proceeds payable would be the sum of the
cash value plus $50,000 unless the cash value exceeded $58,823 (rather than
$33,333), and each $1 then added to or taken from the cash value would change
the Life Insurance Proceeds by $1.85 (rather than $2.50). Under Option B, the
Life Insurance Proceeds payable would not exceed the $50,000 Specified Amount
unless the cash value exceeded approximately $27,027 (rather than $20,000), and
each $1 then added to or taken from the cash value would change the Life
Insurance Proceeds by $1.85 (rather than $2.50).
Change In Benefit Option. The benefit option in effect may be changed by
sending Life of Virginia a written request for change. The effective date of a
change will be the monthly anniversary day following receipt of the request. If
the benefit option is changed from Option A to Option B, the Specified Amount
will be increased by the Policy's cash value on the effective date of the
change. If the benefit option is changed from Option B to Option A, the
Specified Amount will be decreased by an amount equal to the Policy's cash
value on the effective date of the change. A change in the benefit option may
not be made if it would result in a Specified Amount which is less than the
minimum Specified Amount for the Policy when issued. A change in benefit option
will affect the cost of insurance charges. (See Charges and Deductions.)
Change in Existing Coverage. After a Policy has been in effect for one
year, a Policyowner may adjust the existing insurance coverage by increasing or
decreasing the Specified Amount. To make a change, the Policyowner must send a
written request and the Policy to Life of Virginia at its 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 a Policyowner's cost of insurance
charge. (See Charges and Deductions.) In addition, any change in the Specified
Amount would affect the maximum premium limitation. (See Maximum Premium
Limitations.) If decreases in the Specified Amount cause the premiums paid to
exceed the new lower limitations required by federal tax law, the excess will
be withdrawn from cash value and refunded so that the Policy will continue to
meet these requirements. The cash value so withdrawn and refunded will be
withdrawn from each Investment Subdivision in the same proportion that the cash
value in that Investment Subdivision bears to the total cash value in all
Investment Subdivisions at the time of the withdrawal.
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 first five policy years, Life of Virginia can limit the
amount of any decrease. The Specified Amount following a decrease can never be
less than the minimum Specified Amount for the Policy when it was issued.
To apply for an increase, a supplemental application must be completed and
evidence of insurability satisfactory to Life of Virginia must be submitted.
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 deduction for the
cost of the increased insurance 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 increase becomes effective. This
charge will never exceed $300 per increase.
A change in the existing insurance coverage may have federal tax
consequences. (See Federal Tax Matters.)
How Life Insurance Proceeds May Vary in Amount. As long as the Policy
remains in force, Life of Virginia guarantees that the Life Insurance Proceeds
will never be less than the current Specified Amount of the Policy. Proceeds
will be reduced by any outstanding policy debt and any due and unpaid charges.
Life Insurance Proceeds may, however, vary with the Policy's cash value. Life
Insurance Proceeds under Option A will always vary with the cash value since
life insurance proceeds equal the Specified Amount plus the cash value. Under
Option B, Life Insurance Proceeds will only vary whenever the cash value
multiplied by the corridor percentage exceeds the Specified Amount of the
Policy.
Insurance Protection. A Policyowner may increase or decrease the pure
insurance protection provided by a Policy -- the difference between the Life
Insurance Proceeds and the cash value -- in one of several ways as insurance
needs change.
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<PAGE>
These ways include increasing or decreasing the Specified Amount of insurance,
changing the level of premium payments, and, to a lesser extent, partially
surrendering the Policy. Although the consequences of each of these methods
will depend upon the individual circumstances, they may be generally summarized
as follows:
(a) A decrease in the Specified Amount will, subject to the applicable
corridor percentage (see Benefit Options.), decrease the life insurance
protection and the charges under the Policy without reducing the cash
value.
(b) If Option B is elected, an increased level of premium payments also
will reduce the pure insurance protection, until the applicable
percentage of cash value exceeds the Specified Amount. However,
increased premiums should increase the amount of funds available to keep
the Policy in force.
(c) A partial surrender will reduce the Life Insurance Proceeds payable.
(See Surrender Privileges.) However, a partial surrender has no effect
on the amount of pure insurance protection and charges under the Policy
unless the Life Insurance Proceeds payable are subject to the corridor
percentages.
(d) An increase in the Specified Amount may increase the amount of pure
insurance protection, depending on the amount of cash value and the
resultant applicable corridor percentage. If the pure insurance
protection is increased, the charges for cost of insurance will increase
as well.
(e) A reduced level of premium payments also generally increases the amount
of pure insurance protection, again depending on the applicable corridor
percentage. Furthermore, it results in a reduced amount of cash value
and increases the possibility that the Policy will lapse.
In comparison, an increase in the Life Insurance Proceeds payable due to
the operation of the corridor percentage occurs automatically and is intended
to help assure that the Policy remains qualified as life insurance under
federal tax law. The calculation of Life Insurance Proceeds based upon the
corridor percentage occurs only when the cash value of a Policy reaches a
certain proportion of the Specified Amount, which is not guaranteed to occur.
Additional premium payments, favorable investment performance of Separate
Account II and large initial premiums tend to increase the likelihood of the
corridor percentages becoming operational after the first few policy years.
Such increases will be temporary, however, if the investment performance of
Separate Account II becomes unfavorable and/or premium payments are stopped or
decreased.
Benefits at Maturity
If the Policy is in effect on the Maturity Date, Life of Virginia will pay
to the Policyowner the Policy's cash value less outstanding Policy Debt. (See
Policy Debt.) This is the Policy's maturity value. Benefits at maturity may be
paid in a lump sum or under an optional payment plan. The Maturity Date is the
date shown in the Policy. To change the Maturity Date, a written request and
the Policy must be sent to Life of Virginia at its Home Office. Any request
must be received by Life of Virginia before the Maturity Date then in effect.
The requested Maturity Date must be: (1) on a policy anniversary; (2) at least
one year from the date the request is received; (3) after the 10th policy year;
and (4) not after the policy anniversary nearest to the Insured's 95th
birthday.
Optional Payment Plans
Life insurance proceeds and surrender value paid upon complete surrender
of a Policy or at maturity may be paid in whole or in part under an optional
payment plan. There are currently six optional payment plans available. A plan
may be designated in the application or by notifying Life of Virginia in
writing at its Home Office. Any amount left with Life of Virginia for payment
under an optional payment plan will be transferred to its general account.
During the life of the Insured, the Policyowner can select a plan. If a plan
has not been chosen at the Insured's death, a Beneficiary can choose a plan. If
a Beneficiary is changed, the plan selection will no longer be in effect unless
the Policyowner requests that it continue.
In selecting an optional payment plan: (1) the payee under a plan cannot be
a corporation, association or fiduciary, (2) the proceeds applied under a plan
must be at least $10,000, and (3) the amount of each payment under a plan must
be at least $50. Certain plans may be unavailable for Policies issued in
connection with qualified retirement plans. Payments under Plans 1, 2, 3 or 5
will begin on the date of the Insured's death, on surrender, or on the Policy's
maturity date. Payments under Plan 4 will begin at the end of the first interest
period after the date proceeds are otherwise payable.
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. Guaranteed amounts payable under the plan will earn
interest at a minimum rate of 3% compounded yearly. If the payee dies, the
amount of the remaining guaranteed payments will be
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<PAGE>
discounted to the date of the payee's death at a yearly rate of 3%. The
discounted amount will be paid in one sum to the payee's estate unless
otherwise provided.
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. Guaranteed amounts payable under this plan will earn interest at a
minimum rate of 3% compounded yearly. If the payee dies before the end of the
guaranteed period, the amount of remaining payments for the minimum period will
be discounted at a yearly rate of 3%. The discounted amount will be paid in one
sum to the payee's estate unless otherwise provided.
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. 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 a minimum rate of 3% compounded yearly. 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. If the payee is age 80 or
older, payments under Plan 3 may not qualify for favorable tax treatment if the
expected payment period exceeds the life expectancy of the payee.
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. Proceeds left
under this plan will earn interest at a minimum rate of 3% compounded yearly.
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. 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. The guaranteed amount payable under
this plan will earn interest at a minimum rate of 3% compounded yearly.
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 a yearly rate of 3%. The discounted
amount will be paid in one sum to the last surviving payee's estate unless
otherwise provided.
Plan 6 -- Single Premium Endowment at Age 95. This option may be elected
only while this Policy is in force and during the lifetime of the Insured. Upon
request in writing, all or part of the Policy's surrender value will be applied
as the premium in an exchange towards the purchase of a Single Premium
Endowment at Age 95 policy on the life of the Insured. The endowment policy
will provide level death benefit protection until the policy anniversary
nearest the Insured's 95th birthday. On that policy anniversary, if the Insured
is living, the endowment policy will mature, the cash value (which is equal to
the amount of death benefit protection) will be paid to the Policyowner, and
the policy will provide no further benefits. The maximum policy amount that can
be purchased without evidence of insurability is the life insurance proceeds
that would be payable upon the death of the Insured under the Policy on the
date of the exchange, less the cash value on the date of the exchange, plus the
amount applied as the premium for the new policy. An additional amount can be
purchased upon submission of evidence satisfactory to Life of Virginia that the
Insured is insurable. In all events, the most that can be applied as the
premium for the new policy is the Policy's surrender value. Depending upon
individual circumstances, this transaction may qualify for favorable tax
treatment under Section 1035 of the Internal Revenue Code. Amounts distributed
to the Policyowner incident to the election of this option generally will give
rise to taxable income. (See Federal Tax Matters.)
Specialized Uses of the Policy
The Policy should be purchased as a long-term investment designed to
provide a death benefit. The Policy's Surrender Value, as well as its death
benefit, may be used to provide proceeds for various individual and business
financial planning purposes. However, loans and partial withdrawals will affect
the Surrender Value and death benefit proceeds, and may cause the Policy to
lapse. If the investment performance of Investment Subdivisions to which cash
value is allocated is not sufficient to provide funds for the specific planning
purpose contemplated, or if insufficient payments are made or cash value
maintained, then the Owner may not be able to utilize the Policy to achieve the
purposes for which it was purchased. Because the Policy is designed to provide
benefits on a long-term basis, before purchasing a Policy for a specialized
purpose a purchaser should consider whether the long-term nature of the Policy,
and the potential impact of any contemplated loans and partial withdrawals, are
consistent with the purpose for which the Policy is being considered.
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CHARGES AND DEDUCTIONS
Deductions from Premiums
The net premium equals the premium paid multiplied by the Net Premium
Factor of 92.5%. The net premium is that portion of each premium paid that is
allocated to Separate Account II. The 7.5% charge deducted from each premium
will be used to compensate Life of Virginia for (i) sales and distribution
expenses incurred in connection with the Policies and for (ii) premium taxes
imposed by various states and subdivisions, both as described below. The charge
is guaranteed not to increase over the life of a Policy.
Sales Charge. A charge is made to the Policy to pay certain sales and
distribution expenses. Sales and distribution expenses include agent sales
commissions, the cost of printing prospectuses and sales literature and any
advertising costs. Part of the sales charge will be deducted from each premium
received in an amount equal to 5% of the premium. 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 ( 1/9 of
the total deferred sales charge) at the beginning of each of the policy years
two through ten. This charge is subject to a maximum of 45% of the designated
premium for the Insured's age, sex, rate class, and Specified Amount at issue.
This maximum is stated in the data pages of the policy. The designated premium
for a particular age, sex, rate class and Specified Amount is always less than
the corresponding guideline annual premium. The timing of premium payments may
affect the amount of the deferred sales charge under a Policy as the charge is
based only on premiums actually paid during the first policy year. The
Policyowner may wish to reduce the deferred sales charge that the Policy is
subject to by reducing the premiums paid in the first Policy year. However, by
reducing the premiums paid in the first year, values under the Policy may
decrease, cost of insurance charges may increase and the risk of the Policy
lapsing prematurely may increase. Any uncollected deferred sales charge will be
deducted from the cash value if the Policy is surrendered during policy years 1
through 9. If the initial specified amount of the Policy is at least $250,000,
the deferred sales charge percentages in this paragraph will be 40% rather than
45%. When Policies are issued to Insureds with higher mortality risks or to
Insureds who have selected optional insurance benefits, a portion of the total
amount deducted is used to pay sales and distribution expenses associated with
these additional coverages.
The sales charge in any Policy year is not necessarily related to actual
distribution expenses incurred in that year. Instead, Life of Virginia expects
to incur the majority of distribution expenses in the first policy year and to
recover any deficiency over the life of the Policy and from Life of Virginia's
general assets, including amounts derived from the mortality and expense risk
charges and from mortality gains. Life of Virginia has reviewed this
arrangement and concluded that the distribution financing arrangement will
benefit Separate Account II and the Policyowners.
Premium Tax Charge. Various states and subdivisions impose a tax on
premiums received by insurance companies. Premium taxes vary from state to
state. A charge of 2.5% of each premium will be deducted from each premium
payment. The charge represents an amount Life of Virginia considers necessary
to pay all typical premium taxes imposed by the states and any subdivision
thereof.
Monthly Deduction. A deduction is made from cash value in Separate Account
II on each monthly anniversary day for the Monthly Administrative Charge and
for the cost of insurance and any optional benefits added by rider. Because
these costs can vary from month to month, the amount of each monthly deduction
may also vary.
Monthly Administrative Charge. The Monthly Administrative Charge is
deducted from the cash value on each Monthly Anniversary Day. This charge is to
pay certain administrative expenses including processing premiums and claims,
keeping records and communicating with the policyowners. The current Monthly
Administrative Charge for newly issued Policies is $6. This charge may be
increased but is guaranteed in the Policy not to exceed two times the initial
administrative charge shown in the Policy.
Life of Virginia may administer the Policy itself, or Life of Virginia may
purchase administrative services from such sources (including affiliates) as
may be available. Such services will be acquired on a basis which, in Life of
Virginia's sole discretion, affords the best services at the lowest cost. Life
of Virginia reserves the right to select a company to provide services which
Life of Virginia deems, in its sole discretion, is the best able to perform
such services in a satisfactory manner even though the costs for such services
may be higher than would prevail elsewhere.
Cost of Insurance Charge. The cost of insurance charge is calculated on
each Monthly Anniversary Day. If the monthly anniversary falls on a day other
than a Business Day, the charge will be determined on the next Business Day. To
determine the cost of insurance charge, Life Insurance Proceeds are divided by
1.0032737 (which reduces the net amount at risk, solely for purposes of
computing the cost of insurance, by taking into account assumed monthly
earnings at an annual rate of 4%)
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and then reduced by the cash value. The result, the net amount at risk, is then
divided by 1000 and multiplied by the cost of insurance rate or rates.
The net amount at risk will be affected by changes in the Policy's cash
value and Specified Amount. In addition, the net amount at risk will be
calculated separately for each risk class. Under Option B, if the initial
Specified Amount is increased and the risk class applicable to the increase is
different from the risk class applicable to the initial Specified Amount, the
cash value is first considered part of the initial Specified Amount. If the
cash value is more than the initial Specified Amount, it will be considered
part of any increase in the order the increases became effective.
Changes in the benefit option may affect the total cost of insurance
charge. Because the cost of insurance charge varies with the specified amount,
any increase or decrease in specified amount, including those resulting from a
change in the benefit option and those resulting from partial surrenders, will
affect the monthly cost of insurance charge.
Cost of Insurance Rate. The monthly cost of insurance rate is based on the
Insured's sex (where appropriate), attained age, policy duration and risk
class. The risk class (and, therefore, the 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 currently charged by Life of
Virginia are, at most ages, lower than the maximum permitted under the Policies
and are determined by Life of Virginia according to expectations of future
experience. The rates may be changed from time to time at the discretion of
Life of Virginia, but will never be more than the maximum 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 cost of insurance rate generally increases as the Insured's attained
age increases. Therefore, the older the Insured, the higher the investment
experience necessary to achieve the same impact on death benefits and cash
values.
Risk Class. The risk class of an Insured will affect the cost of insurance
rate. Life of Virginia currently places Insureds into standard risk classes or
risk classes involving a higher mortality risk. In an otherwise identical
Policy, Insureds in standard risk classes will have lower costs of insurance
than those in the risk classes with higher mortality risks. The standard risk
classes consist of four categories: non-smokers, smokers, preferred non-smokers
and preferred smokers. The risk classes involving higher mortality risks are
also divided into two categories: smokers and non-smokers. Non-smoking Insureds
will generally incur a lower cost of insurance than similar Insureds who smoke.
Optional Insurance Benefits. At issue, certain optional additional
benefits may be obtained by rider. The monthly deduction will be increased to
include the cost of any optional insurance benefits which are added to the
Policy by rider. Examples of such optional benefits include term insurance on
spouse or children, additional death benefits if the Insured dies in an
accident, or waiver of monthly deductions if the Insured becomes disabled as
defined in the rider. Detailed information concerning available riders may be
obtained from the agent selling the Policy.
Charges Against Separate Account II
Mortality and Expense Risk Charge. A mortality and expense risk charge is
deducted from each Investment Subdivision of Separate Account II to compensate
Life of Virginia for certain risks assumed in connection with the Policies. The
charge is deducted daily and equals .0019246% for each day in the Valuation
Period. This corresponds to an annual rate of .70% of the net assets of the
Investment Subdivision. This rate is guaranteed not to increase for the
duration of a Policy. The mortality risk assumed is that Insureds may live for
a shorter period of time than estimated and, therefore, a greater amount of
Life Insurance Proceeds than expected will be payable. The expense risk assumed
is that expenses incurred in issuing and administering the Policies will be
greater than estimated and, therefore, will exceed the expense charge limits
set by the Policies. If proceeds from this charge are not needed to cover
mortality and expense risks, Life of Virginia may use proceeds to finance
distributions of the Policies.
Taxes. Currently no charge is made to Separate Account II for Federal
income taxes that may be attributable to the Account. Life of Virginia may,
however, make such a charge in the future. Charges for other taxes, if any,
attributable to Separate Account II may also be made. At present, state and
local taxes, other than premium taxes, are not significant and, therefore, Life
of Virginia is not currently making a charge against Separate Account II for
such amounts. (See Federal Tax Matters.).
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Surrender Charge
If the Policy is surrendered or lapses during the first 9 policy years, a
charge is made to cover the expenses of issuing the Policy. This includes the
costs of processing applications, underwriting the Policy, and establishing
records relating to the Policy. This charge is an amount per $1,000 of initial
Specified Amount. It varies by age, ranging from $2.50 from issue ages 0
through 30 to $7.50 at issue ages above 60, subject to a maximum charge of
$500. This charge will be reduced for Policies which are surrendered or lapsed
after the fifth Policy year. At the beginning of each of Policy years six
through ten, the charge decreases by 20% of the initial amount and will
disappear entirely after the beginning of the tenth Policy year.
There is an additional surrender charge in Policy years 1 through 9 equal
to the uncollected deferred sales charge. (See Charges and Deductions -- Sales
Charge.) However, if the Policy is surrendered during the first two Policy
years, the total sales charge assessed as a surrender charge will never exceed
(a) minus (b) where:
(a) is the lesser of 25% of the guideline annual premium (as defined below)
and 25% of the actual premium payments made up to the amount of a
guideline annual premium; and
(b) is the total deferred sales charges previously deducted from cash values.
The guideline annual premium is used to provide an assumption for purposes
of calculating permissible sales loading and is defined as the level amount
that would have to be paid each policy year, through age 95, to provide the
future benefits under the policy, on the assumption that the cost of insurance
is based on the 1980 Commissioners' Standard Ordinary Mortality Table, net
investment earnings are at 5%, and sales loading, administration and cost of
insurance charges are deducted at rates specified in the policy.
Other Charges
A charge equal to the lesser of $25 or 2% of the amount requested will be
deducted from amounts paid upon a partial surrender of the Policy. The charge
will compensate Life of Virginia for costs incurred in accomplishing the
partial surrender. During a calendar month, a $10 fee will be charged for the
second and subsequent transfers of assets among the Investment Subdivisions.
If a Policyowner requests a projection of illustrative future life
insurance and cash value proceeds from Life of Virginia, a service fee of $25
must be paid. The fee will compensate Life of Virginia for the cost of preparing
the projection.
Because Separate Account II purchases shares of the Funds, the net assets
of each Investment Subdivision in the Account will reflect the investment
advisory fee and other expenses incurred by the portfolio of the Fund in which
the Investment Subdivision invests (see "The Funds" on page 13 for a discussion
of these charges). For more information concerning these charges, read the
individual Fund prospectus.
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 increase becomes effective. This
charge will never exceed $300 per increase.
Reduction of Charges for Group Sales
The sales charge or other charges 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 in sales charges
or other charges or deductions will be determined by Life of Virginia based on
the following factors:
(1) The size of the group. Generally, the sales expenses for each
individual policyowner 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 purchase payments to be received from a group. Per
policy sales and other expenses are generally proportionately less on
larger purchase 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, sales and other expenses can be reduced.
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(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, Life of Virginia's sales and other expenses are reduced.
(5) There may be other circumstances of which Life of Virginia is not
presently aware, which could result in reduced sales expenses.
If, after consideration of the foregoing factors, Life of Virginia
determines that a group purchase would result in reduced sales expenses, such a
group may be entitled to a reduction in sales charges. Reductions in these
charges will not be unfairly discriminatory against any person including the
affected owners and all other owners of Policies funded by Separate
Account II.
GENERAL PROVISIONS
Postponement of Payment
General. Payment of any amount upon complete or partial surrender, payment
of any policy loan and the payment of Life Insurance Proceeds or benefits at
maturity 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 as determined 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 not
reasonably practicable to determine the value of the net assets of Separate
Account II.
Payment by Check. Payments under a 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.
Limits on Contesting the Policies
Life of Virginia relies on statements in the Policy application. In the
absence of fraud, the statements are considered representations, not
warranties. Life of Virginia can contest a Policy or an increase in the
specified amount if any material misrepresentation of fact was made in the
application or in a supplemental application, and a copy of that application
was attached to the Policy when issued or was made a part of the Policy when a
change in coverage went into effect.
With respect to the original Specified Amount, a Policy will not be
contested after it has been in effect during the Insured's life for two years
from the Policy Date. With respect to increases in the Specified Amount, an
increase in the Specified Amount will not be contested after that increase has
been in effect for two years from the effective date of the increase. This
provision does not apply to riders that provide disability benefits.
The Contract
"Policy" means the flexible premium variable life policy (Commonwealth
Three) described in this prospectus, the Policy application, any supplemental
application and any endorsements. A Policy is a legal contract and constitutes
the entire contract between the Policyowner and Life of Virginia. An agent
cannot change this contract. Any change to a Policy must be in writing and
approved by the President or Vice President of Life of Virginia.
Misstatement of Age or Sex
If the Insured's age or sex (where appropriate) was misstated in an
application, Life Insurance Proceeds and benefits will be adjusted. The
adjusted Life Insurance Proceeds will be (a) the cash value plus (b) the Life
Insurance Proceeds reduced by the cash 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 (where
appropriate). All amounts are those in effect, with respect to the Insured, in
the Policy Month of the Insured's death.
Suicide
If the Insured commits suicide while sane or insane, within two years of
the Policy Date, Life Insurance Proceeds payable under a Policy will be limited
to all premiums paid, less outstanding Policy Debt and less amounts paid upon
partial surrender of the Policy.
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If the Insured commits suicide while sane or insane, 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 total cost of
insurance applied to the increase.
Annual Statement
Within 30 days after each Policy anniversary, an annual statement will be
sent to each Policyowner. The statement will show the amount of Life Insurance
Proceeds payable under the Policy, the cash value for each Investment
Subdivision, the Surrender Value, and Policy Debt. The statement will also show
premiums paid and charges made during the policy year.
Nonparticipating
The Policies do not participate in the divisible surplus of Life of
Virginia. No dividends are payable.
Written Notice
Any written notice should be sent to Life of Virginia at its 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 Life of
Virginia to a Policyowner will be sent to the address shown in the application
unless an appropriate address change form has been filed with the Company.
The Owner
The Policyowner is the person so designated in the application or as
subsequently changed. The Policyowner has rights in a Policy during the
Insured's lifetime. If the Policyowner dies before the Insured and there is no
contingent Owner, ownership passes to the Policyowner's estate. Unless an
optional payment plan is chosen, the proceeds payable on the Maturity Date or
on complete surrender of the Policy will be paid to the Policyowner in a lump
sum.
The Beneficiary
The original Beneficiaries and contingent Beneficiaries are designated by
the Policyowner in the application. If changed, the primary Beneficiary or
contingent Beneficiary is as shown in the latest change filed with Life of
Virginia. One or more Primary 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 requested otherwise by
the Policyowner.
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 the Policyowner or the Policyowner's estate.
Changing the Owner or Beneficiary
During the Insured's life, the Policyowner may be changed. If the right is
reserved, the Beneficiary may also be changed during the Insured's life. To
make a change, written request must be sent to Life of Virginia at its Home
Office. The request and the change must be in a form satisfactory to Life of
Virginia and must actually be received by Life of Virginia. The change will
take effect as of the date the request is signed by the Policyowner. The change
will be subject to any payment made before the change is recorded by Life of
Virginia.
Using the Policies as Collateral
These Policies can be assigned as collateral security. Life of Virginia
must be notified in writing if a Policy is assigned. Any payment made before
the assignment is recorded at Life of Virginia's Home Office will not be
affected. Life of Virginia is not responsible for the validity of an
assignment. A Policyowner's rights and the rights of a Beneficiary may be
affected by an assignment.
Optional Insurance Benefits
Optional additional benefits may be obtained by rider. Examples of these
benefits include term insurance on spouse or children, additional death
benefits if the Insured dies in an accident, and waiver of either monthly
deductions or a stipulated amount if the Insured becomes disabled as defined in
the rider. Detailed information concerning available riders may be obtained
from the agent selling the Policy.
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Reinsurance
Life of Virginia intends to reinsure a portion of the risks assumed under
the Policies.
DISTRIBUTION OF THE POLICIES
The Policies will be sold by individuals who, in addition to being
licensed as life insurance agents for Life of Virginia, are also registered
representatives of Capital Brokerage Corporation, the principal underwriter of
the Policies, or of broker-dealers who have entered into written sales
agreements with the principal underwriter. Capital Brokerage Corporation, a
Virginia corporation, located at 6610 W. Broad Street, Richmond, VA 23230, is
registered with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 as a broker-dealer and is a member of the National
Association of Securities Dealers, Inc. Capital Brokerage Corporation also
serves as principal underwriter for other variable life insurance and variable
annuity policies issued by Life of Virginia. However, no amounts have been
retained by Capital Brokerage Corporation for acting as principal underwriter
of the Life of Virginia policies.
Writing agents of Life of Virginia will receive commissions based on a
commission schedule and rules. First-year commissions depend on the Insured's
age, rating class, and the size of the Policy. In the first policy year, the
agent will receive a commission of up to 40% of the designated premium plus up
to 2.5% of premiums paid in excess of the designated premium. In renewal years,
the agent receives up to 2.5% of the premiums paid. The commission paid on an
increase in Specified Amount is an amount of up to 40% of the increase in the
cost of insurance in the year following the increase in Specified Amount.
Agents may also be eligible to receive certain bonuses and allowances, as
well as retirement plan credits, based on commissions earned. Field management
of Life of Virginia receives compensation which may be in part based on the
level of agent commissions in their management units. Broker-dealers and their
registered agents will receive first-year and renewal commissions equivalent to
the total commissions and benefits received by the field management and writing
agents of Life of Virginia.
FEDERAL TAX MATTERS
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE
Tax Status of the Policy
The Internal Revenue Code of 1986, as amended, (the "Code"), in Section
7702, establishes a statutory definition of life insurance for tax purposes.
Life of Virginia believes 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
the Policyowner 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 the
Policyowner's 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 Technical and Miscellaneous Revenue Act of 1988 ("TAMRA") places
limits on certain of the policy charges used in determining the maximum amount
of premiums that may be paid under Section 7702 for Policies entered into on or
after October 21, 1988. There is some uncertainty as to the interpretation of
these limits. Nonetheless, Life of Virginia believes that the maximum amount of
premiums it has determined for the Policies will comply with the requirements
of Section 7702 as amended by TAMRA. If it is determined that only a lower
amount of premiums may be paid for a Policy under the TAMRA limits, Life of
Virginia will refund any premiums paid which exceed that lower amount within 60
days after each anniversary of the Policy, and will reflect interest or
earnings (which will be includable in income subject to tax) as required by law
on the amount refunded.
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 Life of
Virginia does not control the Funds (other than GE Investments Funds), it has
entered into agreements regarding participation in the Funds, which require the
Funds
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to be operated in compliance with the requirements prescribed by the Treasury.
Thus, Life of Virginia believes 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 Department has announced, in
connection with the issuance of temporary regulations concerning
diversification requirements, that those temporary regulations "do not provide
guidance concerning the circumstances in which investor control of the
investments of a segregated 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, the Owner of this Policy has 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 a Policyowner being considered, under the standard of those rulings, the
owner of the assets of Separate Account II. To ascertain the tax treatment of
its Policyowners, Life of Virginia has requested, with regard to a policy
similar to this Policy, a ruling from the Service that it, and not its
policyowners, is the owner of the assets of the separate account there involved
for federal income tax purposes. The Service informed Life of Virginia that it
will not rule on the request until issuance of the promised guidance referred
to in the preceding paragraph. Because Life of Virginia does not know what
standards will be set forth in the regulations or revenue rulings which the
Treasury has stated it expects to be issued, Life of Virginia has reserved the
right to modify its practices to attempt to prevent the Policyowner 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 Department were to issue regulations or a
ruling which treated a Policyowner 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, a
Policyowner might be retroactively determined to be the owner of the assets of
Separate Account II.
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 the Policyowner is not deemed to be in
constructive receipt of the cash values 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."
Except as noted below, a loan received under a Policy will be treated as
indebtedness of the Policyowner, so that no part of any loan under a Policy
will constitute income to the Owner 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 the Policyowner as being in receipt of certain amounts of income.
38
<PAGE>
Generally, interest paid on any loans under a Policy owned by any
individual will not be tax deductible. In addition, in the case of Policies
issued to a non-natural taxpayer, such as a corporation or trust (or held for
the benefit of such an entity), a portion of the taxpayer's otherwise
deductible interest expenses may not be deductible as a result of ownership of
a Policy even if no loans are taken under the Policy. An exception to this rule
is provided for certain life insurance contracts which cover the life of an
individual who is a 20-percent owner, or an officer, director, or employee of,
a trade or business. Entities that are considering purchasing the Policy, or
entities that will be beneficiaries under a Policy, should consult a tax
advisor.
The right to exchange the Policy for a permanent fixed benefit policy (See
Exchange Privileges), the right to change Owners (See Changing the Owner or
Beneficiary), as well as 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 or when maturity
benefits are paid, if the amount received plus the Policy Debt exceeds the
total premiums paid that are not treated as previously withdrawn by the
Policyowner, the excess generally will be treated as ordinary income. If a
distribution is made from the Policy at the time amounts are applied under Plan
6, the amounts distributed will be includable in income to the extent the
surrender value of the policy, before reduction by any loan, exceeds the total
premiums paid less any previous untaxed withdrawals.
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 Policyowner or Beneficiary.
Tax Treatment of Policy Loans and Other Distributions Under Certain Policies
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 contract 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 contract 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 modified endowment
contract will be considered distributions.
4. Distributions (including partial surrenders, loans and loan interest,
assignments and pledges) from a modified endowment contract will be
taxed first as distributions of income from the contract (to the extent
that the cash value of the contract, before reduction by any surrender
charge or loan, exceeds the total premiums paid less any previous
untaxed withdrawals), and then as non-taxable recovery of premium.
5. A penalty tax of 10% will be imposed on distributions (including
complete and partial surrenders, loans and loan interest, assignments
and pledges) from a modified endowment contract includable in income,
unless such distributions are made (1) after the Policyowner attains age
59 1/2, (2) because the Policyowner has become disabled, or (3) as
substantially equal annuity payments over the life or life expectancy of
the Policyowner (or over the joint lives or life expectancies of the
Policyowner and his or her Beneficiary).
Policies entered into prior to June 21, 1988, will not be classified as
modified endowment contracts unless the Policyowner increases benefits or adds
additional benefits after June 20, 1988. If a Policy is not classified as a
modified endowment contract, loans and other distributions will be treated as
described under "Tax Status of the Policy" and "Tax Treatment of Policy
Proceeds." 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 the Owner as being in
receipt of certain amounts of income. In the event that benefits are increased
or added, if subsequent premium payments are made more rapidly than the 7-Pay
Test allows, the Policy will be classified as a modified endowment contract and
loans and other distributions will be treated as described immediately above.
Policies entered into on or after June 21, 1988, in order to avoid
classification as modified endowment contracts, must not have been issued in
exchange for a modified endowment contract, and premiums paid under the
Policies must not be paid more rapidly than the 7-Pay Test allows. Life of
Virginia will provide Policyowners guidance as to the amount of premium
payments that may be paid if the Policyowner wishes to avoid treatment of the
Policies as modified endowment
contracts.
39
<PAGE>
Additionally, all life insurance contracts which are treated as modified
endowment contracts and which are issued by Life of Virginia or any of its
affiliates with the same person designated as the Policyowner within the same
calendar year will be aggregated and treated as one contract for purposes of
determining any tax on distributions.
The provisions of TAMRA are complex and are open to considerable variation
in interpretation. Policyowners should consult their tax advisors before making
any decisions regarding increases or decreases in or additions to coverage or
distributions from their Policies.
Taxation of the Company
Because of its current status under the Code, Life of Virginia does 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, Life of
Virginia determines that such taxes may be incurred, it may assess a charge for
those taxes from Separate Account II.
Life of Virginia 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 the Policyowner provides Life of Virginia a written
election to the contrary before a distribution is made, Life of Virginia is
required to withhold income taxes from any portion of the money received by the
Policyowner upon surrender of the Policy or if the Policy matures (and if the
Policy is a modified endowment contract, upon a partial surrender or a Policy
loan). If the Policyowner requests that no taxes be withheld, or if Life of
Virginia does not withhold a sufficient amount of taxes, the Policyowner will
be responsible for the payment of any taxes and early distribution penalties
that may be due on the amounts received. The Policyowner may also be required
to pay penalties under the estimated tax rules, if the Policyowner's
withholding and estimated tax payments are insufficient to satisfy the
Policyowner's total tax liability. The Policyowner may, therefore, want to
consult a tax advisor.
Other Considerations
The foregoing discussion is general and is not intended as tax advice. Any
person concerned about these tax implications should consult a competent tax
advisor. This discussion is based on Life of Virginia's 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.
YEAR 2000 COMPLIANCE
Like other financial services providers, Life of Virginia utilizes
computer systems that may be affected by Year 2000 date data processing issues
and it also relies on services providers, including banks, custodians,
administrators, and investment managers that also may be affected. Life of
Virginia is engaged in a process to evaluate and develop plans to have its
computer systems and critical applications ready to process Year 2000 date
data. It is also confirming that its service providers are also so engaged. The
resources that are being devoted to this effort are substantial. Remedial
actions include inventorying the company's computer systems, applications and
interfaces, assessing the impact of the Year 2000 date data on them, developing
a range of solutions specific to particular situations and implementing
appropriate solutions. Some systems, applications and interfaces will be
replaced or upgraded to new software or new releases of existing software which
are Year 2000 ready. Others will be modified as necessary to become ready. It
is difficult to predict with precision whether the amount of resources
ultimately devoted, or the outcome of these efforts, will have any negative
impact on Life of Virginia and Account II. However, as of the date of this
prospectus, it is not anticipated that Owners will experience negative effects
on their investment, or on the services provided in connection therewith, as a
result of Year 2000 readiness implementation. Life of Virginia's target dates
for completion of these activities depend upon the particular situation. The
Company's goal is to be substantially Year 2000 ready for critical applications
by mid-1999, but there can be no assurance that Life of Virginia will be
successful in meeting its goal, or that interaction with other service
providers will not impair Life of Virginia's services at that time.
40
<PAGE>
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 described in this
prospectus 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.
VOTING RIGHTS
To the extent required by law, Life of Virginia will vote the Funds'
shares held in Separate Account II at regular and special shareholder meetings
of the Funds in accordance with instructions received from persons having
voting interests in Separate Account II. If, however, the Investment Company
Act of 1940 or any regulation thereunder should be amended or if the present
interpretation thereof should change, and as a result Life of Virginia
determines that it is permitted to vote Fund shares in its own right, it may
elect to do so.
The number of votes which each Policyowner has the right to instruct will
be determined by dividing a Policy's cash value in an Investment Subdivision of
Separate Account II by the net asset value per share of the corresponding
portfolio in which the Subdivision invests. Fractional shares will be counted.
The number of votes which the Policyowner has the right to instruct will be
determined as of dates coincident with the dates established by a particular
Fund for determining shareholders eligible to vote at the meeting of that Fund.
Voting instructions will be solicited by written communications prior to such
meeting in accordance with procedures established by that Fund.
Life of Virginia will vote Fund shares held in Separate Account II as to
which no timely instructions are received and Fund shares held in Separate
Account II that it owns as a consequence of accrued charges under the Policies,
in proportion to the voting instructions which are received with respect to all
Policies funded through Separate Account II. Each person having a voting
interest will receive proxy materials, reports, and other materials relating to
the appropriate portfolio.
Disregard of Voting Instructions. Life of Virginia may, when required by
state insurance regulatory authorities, disregard voting instructions if the
instructions require that the shares be voted so as to cause a change in the
sub-classification or investment objective of a Fund or one or more of its
portfolios or to approve or disapprove an investment advisory contract for a
portfolio of a Fund. In addition, Life of Virginia itself may disregard voting
instructions in favor of changes initiated by a Policyowner in the investment
policy or the investment advisor of a portfolio of a Fund if Life of Virginia
reasonably disapproves of such changes. A change would be disapproved only if
the proposed change is contrary to state law or prohibited by state regulatory
authorities or Life of Virginia determined that the change would have an
adverse effect on its general account in that the proposed investment policy
for the portfolio may result in overly speculative or unsound investments. In
the event Life of Virginia does disregard voting instructions, a summary of
that action and the reasons for such action will be included in the next
semi-annual report to Policyowners.
STATE REGULATION OF LIFE OF VIRGINIA
Life of Virginia, a stock life insurance company organized under the laws
of Virginia, is 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 the
operations and reporting on the financial condition of Life of Virginia as of
December 31 of the preceding year. Periodically, the Commissioner of Insurance
examines the liabilities and reserves of Life of Virginia and Separate Account
II and certifies their adequacy, and a full examination of Life of Virginia's
operations is conducted by the State Corporation Commission, Bureau of
Insurance of the Commonwealth of Virginia at least once every five years.
41
<PAGE>
EXECUTIVE OFFICERS AND DIRECTORS OF LIFE OF VIRGINIA
In addition, Life of Virginia is subject to the insurance laws and
regulations of other states within which it is licensed to operate. Generally,
the Insurance Department of any other state applies the laws of the state of
domicile in determining permissible investments.
<TABLE>
<CAPTION>
Name and Position(s) With Life of Virginia* Principal Occupations Last Five Years
- - ------------------------------------------------ ------------------------------------------------------------------
<S> <C>
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
Selwyn L. Flournoy, Jr.* ................... Director, Life of Virginia, since 5/89; Senior Vice President and
Chief Financial Officer, Life of Virginia, 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 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 May 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.
</TABLE>
- - ---------
* Messrs. Dolan, Flournoy, Chinn, and Ms. Lanam are members of the Executive
Committee of the Board of Directors of Life of Virginia.
The principal business address of each person listed, unless otherwise
indicated, is The Life Insurance Company of Virginia, 6610 W. Broad Street,
Richmond, VA 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.
LEGAL MATTERS
Sutherland, Asbill & Brennan LLP of Washington, D.C. has provided advice
on certain legal matters relating to Federal securities laws applicable to the
issue and sale of the flexible premium variable life insurance Policies
described in this prospectus. All matters of Virginia law pertaining to the
Policy, including the validity of the Policies and Life of Virginia's right to
issue the Policies under Virginia insurance law, have been passed upon by J.
Neil McMurdie, Assistant Vice President and Associate Counsel.
LEGAL PROCEEDINGS
Life of Virginia, like all other companies, is involved in lawsuits,
including class action lawsuits. In some class action and other lawsuits
involving insurance companies, substantial damages have been sought and/or
material settlement payments
42
<PAGE>
have been made. Although the outcome of any litigation cannot be predicted with
certainty, Life of Virginia believes that at the present time there are no
pending or threatened lawsuits that are reasonably likely to have a material
adverse impact on it or Account II.
EXPERTS
KPMG Peat Marwick LLP.
The consolidated balance sheets of The Life Insurance Company of Virginia
and subsidiary as of December 31, 1997 and 1996, and the related consolidated
statements of income, stockholders' equity and cash flows for the year ended
December 31, 1997, nine month period ended December 31, 1996 and the
preacquisition three month period ended March 31, 1996, and the statement of
assets and liabilities of Life of Virginia Separate Account II as of December
31, 1997 and the related statements of operations and changes in net assets for
each of the two years or lesser periods 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 such firm as experts in accounting and
auditing.
The report of KPMG Peat Marwick LLP with respect to the consolidated
financial statements of The Life Insurance Company of Virginia and subsidiary
contains an explanatory paragraph that states 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.
Ernst & Young LLP.
The consolidated statements of income, stockholder's equity and cash flows
of The Life Insurance Company of Virginia and subsidiaries for the year ended
December 31, 1995 and the statement of operations and changes in net assets of
Life of Virginia Separate Account II for the year or period 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 accounting
and auditing.
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 Marwick LLP is the auditor for GE
Capital, the indirect parent of GNA Corporation. This change 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 contain any adverse opinion or a disclaimer of opinion,
or was qualified or modified as to 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 matters of the
disagreement in connection with their reports.
ADDITIONAL INFORMATION
A registration statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, with respect to the
Policies offered hereby. This prospectus does not contain all the information
set forth in the registration statement and the amendments and exhibits to the
registration statement to all of which reference is made for further
information concerning Separate Account II, Life of Virginia and the Policies
offered hereby. Statements contained in this prospectus as to the contents of
the Policies and other legal instruments are summaries. For a complete
statement of the terms thereof reference is made to such instruments as filed.
FINANCIAL STATEMENTS
The consolidated financial statements of The Life Insurance Company 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 the ability of Life of Virginia to meet its obligations under the
Policies. Such consolidated financial statements of The Life Insurance Company
of Virginia and subsidiaries should not be considered as bearing on the
investment performance of the assets held in Separate Account II.
43
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Assets and Liabilities (Audited)
Year ended December 31, 1997
(With Independent Auditors' Report Thereon)
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Table of Contents
Year ended December 31, 1997
===================================================================
Page
Independent Auditors' Report...................................1
Financial Statements:
Statements of Assets and Liabilities.....................3
Statements of Operations.................................9
Statements of Changes in Net Assets.....................20
Notes to Financial Statements.................................31
=====================================================================
<PAGE>
1
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 GE Investments Funds,
Inc.--S&P 500 Index, Money Market, Total Return, International Equity, Real
Estate Securities, Global Income, Value Equity and Income Funds; the Oppenheimer
Variable Account Funds--Bond, Capital Appreciation, Growth, High Income and
Multiple Strategies Funds; the Variable Insurance Products Fund--Equity-Income,
Growth and Overseas Portfolios; the Variable Insurance Products Fund II--Asset
Manager and Contrafund Portfolios; Variable Insurance Products Fund III--Growth
& Income and Growth Opportunities Portfolios; the Federated Investors Insurance
Series--American Leaders, High Income Bond and Utility Funds II; the Alger
American--Small Cap and Growth Portfolios; the PBHG Insurance Series Fund--PBHG
Large Cap Growth and PBHG Growth II Portfolios; and the Janus Aspen
Series--Aggressive Growth, Growth, Worldwide Growth, Balanced, Flexible Income,
International Growth and Capital Appreciation Portfolios) as of December 31,
1997 and the related statements of operations and changes in net assets for the
aforementioned funds and the GE Investments Funds, Inc.--Government Securities
Fund; Oppenheimer Variable Account Funds--Money Fund; Variable Insurance
Products Fund--Money Market and High Income Portfolios; and Neuberger & Berman
Advisers Management Trust--Balanced, Bond and Growth Portfolios of Life of
Virginia Separate Account II for each of the two years or lesser 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 audits. The accompanying statements of operations and
changes in net assets of Life of Virginia Separate Account II for the year or
period ended December 31, 1995, were audited by other auditors, whose report
thereon dated February 8, 1996 expressed an unqualified opinion on those
statements.
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. Our procedures included
confirmation of securities owned as of December 31, 1997, by correspondence with
the underlying mutual funds or their transfer agent. 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.
<PAGE>
In our opinion, the 1997 and 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, 1997 and the results of their operations and changes in their net
assets for each of the two years or lesser periods then ended in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Richmond, Virginia
February 13, 1998
<PAGE>
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 the year 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, the
Janus Aspen Aggressive Growth, Growth and Worldwide Growth 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 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 audit.
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. 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 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.
ERNST & YOUNG LLP
Richmond, Virginia
February 8, 1996
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Assets and Liabilities
<TABLE>
<CAPTION>
December 31, 1997
- - ----------------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc. (formerly Life of Virginia Series Fund, Inc.)
-------------------------------------------------------
S&P 500 Money Total
Index Market Return
Assets Fund Fund Fund
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in GE Investments Funds, Inc., at fair value (note 2):
S&P 500 Index Fund (177,190 shares; cost - $3,199,555) $ 3,407,368 - -
Money Market Fund (2,394,566 shares; cost - $2,394,047) - 2,394,566 -
Total Return Fund (252,424 shares; cost - $3,888,937) - - 3,334,515
International Equity Fund (7,074 shares; cost - $81,487) - - -
Real Estate Securities Fund (13,085 shares; cost - $200,184) - - -
Global Income Fund (938 shares; cost - $9,564) - - -
Value Equity Fund (1,032 shares; cost - $13,530) - - -
Income Fund (31,553 shares; cost - $381,579) - - -
Receivable from affiliate 1,802 - 270,286
Receivable for units sold 99 22,746 87
- - ----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 3,409,269 2,417,312 3,604,888
- - ----------------------------------------------------------------------------------------------------------------------------------
Liabilities
- - ----------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 1,280 155,396 1,220
Payable for units withdrawn - - -
- - ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,280 155,396 1,220
- - ----------------------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable life policyholders $ 3,407,989 2,261,916 3,603,668
- - ----------------------------------------------------------------------------------------------------------------------------------
Outstanding units 82,478 139,024 117,921
- - ----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit $ 41.32 16.27 30.56
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
- - -----------------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc. (formerly Life of Virginia Series Fund, Inc.)
----------------------------------------------------------
International Real Estate Global
Equity Securities Income
Assets Fund Fund Fund
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in GE Investments Funds, Inc., at fair value (note 2):
S&P 500 Index Fund (177,190 shares; cost - $3,199,555) - - -
Money Market Fund (2,394,566 shares; cost - $2,394,047) - - -
Total Return Fund (252,424 shares; cost - $3,888,937) - - -
International Equity Fund (7,074 shares; cost - $81,487) 75,551 - -
Real Estate Securities Fund (13,085 shares; cost - $200,184) - 199,931 -
Global Income Fund (938 shares; cost - $9,564) - - 9,235
Value Equity Fund (1,032 shares; cost - $13,530) - - -
Income Fund (31,553 shares; cost - $381,579) - - -
Receivable from affiliate - 497 -
Receivable for units sold - 50 -
- - ----------------------------------------------------------------------------------------------------------------------------------
Total assets 75,551 200,478 9,235
- - ----------------------------------------------------------------------------------------------------------------------------------
Liabilities
- - ----------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 47 69 12
Payable for units withdrawn - - -
- - ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 47 69 12
- - ----------------------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable life policyholders 75,504 200,409 9,223
- - ----------------------------------------------------------------------------------------------------------------------------------
Outstanding units 5,950 10,723 896
- - ----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit 12.69 18.69 10.29
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
- - ----------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
(formerly Life of Virginia Series Fund, Inc.)
-----------------------------------------------------
Value
Equity Income
Assets Fund Fund
- - ----------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in GE Investments Funds, Inc., at fair value (note 2):
S&P 500 Index Fund (177,190 shares; cost - $3,199,555) - -
Money Market Fund (2,394,566 shares; cost - $2,394,047) - -
Total Return Fund (252,424 shares; cost - $3,888,937) - -
International Equity Fund (7,074 shares; cost - $81,487) - -
Real Estate Securities Fund (13,085 shares; cost - $200,184) - -
Global Income Fund (938 shares; cost - $9,564) - -
Value Equity Fund (1,032 shares; cost - $13,530) 13,531 -
Income Fund (31,553 shares; cost - $381,579) - 382,102
Receivable from affiliate 35 -
Receivable for units sold - 672
- - ----------------------------------------------------------------------------------------------------------------
Total assets 13,566 382,774
- - ----------------------------------------------------------------------------------------------------------------
Liabilities
- - ----------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 5 4,723
Payable for units withdrawn 2 -
- - ----------------------------------------------------------------------------------------------------------------
Total liabilities 7 4,723
- - ----------------------------------------------------------------------------------------------------------------
Net assets attributable to variable life policyholders 13,559 378,051
- - ----------------------------------------------------------------------------------------------------------------
Outstanding units 1,028 37,767
- - ----------------------------------------------------------------------------------------------------------------
Net asset value per unit 13.19 10.01
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Assets and Liabilities, Continued
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
--------------------------------------------------
Capital
Bond Appreciation Growth
Assets Fund Fund Fund
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Oppenheimer Variable Account Funds, at fair value (note 2):
Bond Fund (24,675 shares; cost - $285,798) $ 293,873 - -
Capital Appreciation Fund (75,642 shares; cost - $2,781,093) - 3,098,278 -
Growth Fund (70,077 shares; cost - $1,792,473) - - 2,273,298
High Income Fund (143,091 shares; cost - $1,583,597) - - -
Multiple Strategies Fund (38,927 shares; cost - $579,533) - - -
Receivable from affiliate - - 2,610
Receivable for units sold - 2,461 2,878
- - -------------------------------------------------------------------------------------------------------------------------------
Total assets $ 293,873 3,100,739 2,278,786
- - -------------------------------------------------------------------------------------------------------------------------------
Liabilities
- - -------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 1,450 1,663 873
Payable for units withdrawn 10 - -
- - -------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,460 1,663 873
- - -------------------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable life policyholders $ 292,413 3,099,076 2,277,913
- - -------------------------------------------------------------------------------------------------------------------------------
Outstanding units 13,037 76,126 54,030
- - -------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit $ 22.43 40.71 42.16
- - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
----------------------------------------------
High Multiple
Income Strategies
Assets Fund Fund
- - ----------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Oppenheimer Variable Account Funds, at fair value (note 2):
Bond Fund (24,675 shares; cost - $285,798) - -
Capital Appreciation Fund (75,642 shares; cost - $2,781,093) - -
Growth Fund (70,077 shares; cost - $1,792,473) - -
High Income Fund (143,091 shares; cost - $1,583,597) 1,648,403 -
Multiple Strategies Fund (38,927 shares; cost - $579,533) - 662,141
Receivable from affiliate 2,974 4,474
Receivable for units sold - 105
- - ----------------------------------------------------------------------------------------------------------------
Total assets 1,651,377 666,720
- - ---------------------------------------------------------------------------------------------------------------
Liabilities
- - ---------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 626 254
Payable for units withdrawn - -
- - ---------------------------------------------------------------------------------------------------------------
Total liabilities 626 254
- - ---------------------------------------------------------------------------------------------------------------
Net assets attributable to variable life policyholders 1,650,751 666,466
- - ---------------------------------------------------------------------------------------------------------------
Outstanding units 48,043 22,561
- - ---------------------------------------------------------------------------------------------------------------
Net asset value per unit 34.36 29.54
- - ---------------------------------------------------------------------------------------------------------------
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Assets and Liabilities, Continued
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund
------------------------------------------------
Equity-
Income Growth Overseas
Assets Portfolio Portfolio Portfolio
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Variable Insurance Products Fund, at fair value (note 2):
Equity-Income Portfolio (220,390 shares; cost - $4,396,274) $ 5,351,063 - -
Growth Portfolio (133,529 shares; cost - $4,006,008) - 4,953,922 -
Overseas Portfolio (90,312 shares; cost - $1,566,587) - - 1,733,985
Receivable from affiliate 45,062 8,654 4,438
Receivable for units sold 3,537 1,075 1,424
- - -----------------------------------------------------------------------------------------------------------------------
Total assets $ 5,399,662 4,963,651 1,739,847
- - -----------------------------------------------------------------------------------------------------------------------
Liabilities
- - -----------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 2,070 1,904 667
Payable for units withdrawn - - -
- - -----------------------------------------------------------------------------------------------------------------------
Total liabilities 2,070 1,904 667
- - -----------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable life policyholders $ 5,397,592 4,961,747 1,739,180
- - -----------------------------------------------------------------------------------------------------------------------
Outstanding units 134,168 115,551 72,315
- - -----------------------------------------------------------------------------------------------------------------------
Net asset value per unit $ 40.23 42.94 24.05
- - -----------------------------------------------------------------------------------------------------------------------
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Assets and Liabilities, Continued
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Variable Insurance
Products Fund II Products Fund III
------------------------- ---------------------------
Asset Growth & Growth
Manager Contrafund Income Opportunities
Assets Portfolio Portfolio Portfolio Portfolio
- - ----------------------------------------------------------------------------------------------------- ---------------------------
<S> <C>
Investment in Variable Insurance Products Fund II, at fair value (note 2):
Asset Manager Portfolio (231,056 shares; cost - $3,570,825) $4,161,312 - - -
Contrafund Portfolio (99,615 shares; cost - $1,718,112) - 1,986,321 - -
Investment in Variable Insurance Product Fund III, at fair value (note 2):
Growth & Income Portfolio (3,792 shares; cost - $48,622) - - 47,520 -
Growth Opportunities Portfolio (3,671 shares; cost - $67,316) - - - 70,749
Receivable from affiliate 9,326 24,966 - 859
Receivable for units sold 371 2,807 - -
- - --------------------------------------------------------------------------------------------------------------------------------
Total assets $4,171,009 2,014,094 47,520 71,608
- - --------------------------------------------------------------------------------------------------------------------------------
Liabilities
- - --------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 1,604 771 73 28
Payable for units withdrawn - - 88 3
- - --------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,604 771 161 31
- - --------------------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable life policyholders $4,169,405 2,013,323 47,359 71,577
- - --------------------------------------------------------------------------------------------------------------------------------
Outstanding units 163,699 97,028 3,813 5,805
- - --------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit $ 25.47 20.75 12.42 12.33
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Assets and Liabilities, Continued
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
Federated Investors
Insurance Series
-------------------------------------------
American High
Leaders Income Bond Utility
Assets Fund II Fund II Fund II
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments in Federated Investors Insurance Series, at fair value (note 2):
American Leaders Fund II (2,354 shares; cost - $43,154) $ 46,208 - -
High Income Bond Fund II (8,592 shares; cost - $87,736) - 94,083 -
Utility Fund II (11,466 shares; cost - $133,879) - - 163,847
Investment in Alger American, at fair value (note 2):
Small Cap Portfolio (17,963 shares; cost - $812,937) - - -
Growth Portfolio (20,074 shares; cost - $760,160) - - -
Investment in PBHG Insurance Series Fund, at fair value (note 2):
PBHG Large Cap Growth Portfolio (2,210 shares; cost - $26,028) - - -
PBHG Growth Portfolio (1,829 shares; cost - $19,804) - - -
Receivable from affiliate 47 768 -
Receivable for units sold - - -
- - -----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 46,255 94,851 163,847
- - -----------------------------------------------------------------------------------------------------------------------------------
Liabilities
- - -----------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 18 37 568
Payable for units withdrawn 8 8 3
- - -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 26 45 571
- - -----------------------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable life policyholders $ 46,229 94,806 163,276
- - -----------------------------------------------------------------------------------------------------------------------------------
Outstanding units 3,169 6,188 9,543
- - -----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit $ 14.59 15.32 17.11
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
PBHG Insurance
Alger American Series Fund
-------------------------- ------------------------
PBHG
Small Large Cap PBHG
Cap Growth Growth Growth II
Assets Portfolio Portfolio Portfolio Portfolio
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments in Federated Investors Insurance Series, at fair value (note 2):
American Leaders Fund II (2,354 shares; cost - $43,154) - - - -
High Income Bond Fund II (8,592 shares; cost - $87,736) - - - -
Utility Fund II (11,466 shares; cost - $133,879) - - - -
Investment in Alger American, at fair value (note 2):
Small Cap Portfolio (17,963 shares; cost - $812,937) 785,901 - - -
Growth Portfolio (20,074 shares; cost - $760,160) - 858,363 - -
Investment in PBHG Insurance Series Fund, at fair value (note 2):
PBHG Large Cap Growth Portfolio (2,210 shares; cost - $26,028) - - 26,120 -
PBHG Growth Portfolio (1,829 shares; cost - $19,804) - - - 19,662
Receivable from affiliate 34,258 7,119 400 -
Receivable for units sold - - - 1,471
- - -----------------------------------------------------------------------------------------------------------------------------------
Total assets 820,159 865,482 26,520 21,133
- - -----------------------------------------------------------------------------------------------------------------------------------
Liabilities
- - -----------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 314 333 10 33
Payable for units withdrawn 150 37 2 -
- - -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 464 370 12 33
- - -----------------------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable life policyholders 819,695 865,112 26,508 21,100
- - -----------------------------------------------------------------------------------------------------------------------------------
Outstanding units 76,251 63,799 2,254 1,972
- - -----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit 10.75 13.56 11.76 10.70
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Assets and Liabilities, Continued
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series
-------------------------------------------
Aggressive Worldwide
Growth Growth Growth
Assets Portfolio Portfolio Portfolio
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Janus Aspen Series, at fair value (note 2):
Aggressive Growth Portfolio (95,370 shares; cost - $1,908,924) $ 1,959,861 - -
Growth Portfolio (105,234 shares; cost - $1,689,937) - 1,944,717 -
Worldwide Growth Portfolio (131,053 shares; cost - $2,692,376) - - 3,065,339
Balanced Portfolio (36,099 shares; cost - $572,600) - - -
Flexible Income Portfolio (5,976 shares; cost - $70,239) - - -
International Growth Portfolio (17,080 shares; cost - $298,567) - - -
Capital Appreciation Portfolio (683 shares; cost - $7,921) - - -
Receivable from affiliate 65,297 16,839 16,400
Receivable for units sold 812 193 -
- - ---------------------------------------------------------------------------------------------------------------------------------
Total assets $ 2,025,970 1,961,749 3,081,739
- - ---------------------------------------------------------------------------------------------------------------------------------
Liabilities
- - ---------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 778 751 1,178
Payable for units withdrawn - - 1,742
- - ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 778 751 2,920
- - ---------------------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable life policyholders $ 2,025,192 1,960,998 3,078,819
- - ---------------------------------------------------------------------------------------------------------------------------------
Outstanding units 116,793 108,163 161,110
- - ---------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit $ 17.34 18.13 19.11
- - ---------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series
--------------------------------------------------------
--------
Flexible International Capital
Balanced Income Growth Appreciation
Assets Portfolio Portfolio Portfolio Portfolio
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Janus Aspen Series, at fair value (note 2):
Aggressive Growth Portfolio (95,370 shares; cost - $1,908,924) - - - -
Growth Portfolio (105,234 shares; cost - $1,689,937) - - - -
Worldwide Growth Portfolio (131,053 shares; cost - $2,692,376) - - - -
Balanced Portfolio (36,099 shares; cost - $572,600) 630,652 - - -
Flexible Income Portfolio (5,976 shares; cost - $70,239) - 70,394 - -
International Growth Portfolio (17,080 shares; cost - $298,567) - - 315,644 -
Capital Appreciation Portfolio (683 shares; cost - $7,921) - - - 8618
Receivable from affiliate 1,353 278 1,155 5
Receivable for units sold 295 - 4,131 -
- - ---------------------------------------------------------------------------------------------------------------------------------
Total assets 632,300 70,672 320,930 8,623
- - ---------------------------------------------------------------------------------------------------------------------------------
Liabilities
- - ---------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 236 22 122 3
Payable for units withdrawn - - - -
- - ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 236 22 122 3
- - ---------------------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable life policyholders 632,064 70,650 320,808 8,620
- - ---------------------------------------------------------------------------------------------------------------------------------
Outstanding units 42,477 5,589 23,264 684
- - ---------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit 14.88 12.64 13.79 12.60
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Operations
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc. (formerly Life of Virginia Series Fund, Inc.)
------------------------------------------------------------------------
S&P 500 Government
Index Securities
Fund Fund
---------------------------------- ------------------------------------
Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ 88,899 751,436 20,611 - 31,170 18,835
Expenses - Mortality and expense
risk charges (note 3) 17,405 9,854 5,975 2,085 2,175 1,930
- - --------------------------------------------------------------------------------------------------------------------------
Net investment income 71,494 741,582 14,636 (2,085) 28,995 16,905
- - --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 18,179 65,600 33,666 1,254 289 2,130
Unrealized appreciation
(depreciation) on investments 504,771 (498,697) 203,288 18,064 (28,379) 23,073
- - --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 522,950 (433,097) 236,954 19,318 (28,090) 25,203
- - --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations $ 594,444 308,485 251,590 17,233 905 42,108
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc. (formerly Life of Virginia Series Fund, Inc.)
------------------------------------------------------------------------------
Money Market Total Return
Fund Fund
----------------------------------- ------------------------------------------
Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 107,705 97,157 64,373 456,798 846,101 210,985
Expenses - Mortality and expense
risk charges (note 3) 13,717 15,476 12,610 24,218 20,200 9,371
- - --------------------------------------------------------------------------------------------------------------------------
Net investment income 93,988 81,681 51,763 432,580 825,901 201,614
- - --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) 298,840 (325,593) 68,408 (54,073) 68,427 17,126
Unrealized appreciation
(depreciation) on investments (300,439) 345,223 (25,977) 123,159 (708,053) 18,487
- - --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments (1,599) 19,630 42,431 69,086 (639,626) 35,613
- - --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 92,389 101,311 94,194 501,666 186,275 237,227
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc. (formerly Life of Virginia Series Fund, Inc.) (continued)
------------------------------------------------------------------------------
International Real Estate
Equity Fund Securities Fund
------------------------------------------ -----------------------------------
Period from
August 25,
Year ended Year ended 1995 to Year ended Year ended
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1997 1996
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ 8,566 1,884 176 20,680 1,678
Expenses - Mortality and expense risk
charges (note 3) 399 152 11 814 57
- - ----------------------------------------------------------------------------------------------------------------------------------
Net investment income 8,167 1,732 165 19,866 1,621
- - ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized (loss) gain on
investments:
Net realized gain 654 510 4 2,800 381
Unrealized appreciation (depreciation)
on investments (5,290) (839) 193 (2,725) 2,468
- - ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized (loss) gain on
investments (4,636) (329) 197 75 2,849
- - ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations $ 3,531 1,403 362 19,941 4,470
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
(formerly Life of Virginia Series Fund, Inc.) (continued)
-------------------------------------------------------------
Global Value
Real Estate Income Equity Income
Securities Fund Fund Fund Fund
----------------- -------------- -------------- --------------
Period from Period from Period from Period from
October 5, June 18, June 17, December 12,
1995 to 1997 to 1997 to 1997 to
December 31, December 31, December 31, December 31,
1995 1997 1997 1997
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 22 461 115 992
Expenses - Mortality and expense risk
charges (note 3) - 30 17 116
- - --------------------------------------------------------------------------------------------------------------------
Net investment income 22 431 98 876
- - --------------------------------------------------------------------------------------------------------------------
Net realized and unrealized (loss) gain on investments:
Net realized gain - 35 (9) (838)
Unrealized appreciation (depreciation)
on investments 4 (329) 1 523
- - ---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized (loss) gain on
investments 4 (294) (8) (315)
- - ---------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 26 137 90 561
- - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
------------------------------------------------------------------------------------
Money Bond
Fund Fund
--------------------------------------- --------------------------------------------
Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ 27 224 662 17,586 16,705 8,365
Expenses - Mortality and expense
risk charges (note 3) 4 31 82 1,872 1,790 844
- - -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 23 193 580 15,714 14,915 7,521
- - -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) - - - 276 128 407
Unrealized appreciation
(depreciation) on investments - - - 5,965 (3,916) 9,889
- - -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments - - - 6,241 (3,788) 10,296
- - -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations $ 23 193 580 21,955 11,127 17,817
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
--------------------------------------------------------------------------------------
Capital
Appreciation Growth
Fund Fund
------------------------------------------- ------------------------------------------
Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 119,431 99,449 5,317 94,465 72,782 10,459
Expenses - Mortality and expense
risk charges (note 3) 19,370 13,659 10,098 13,535 7,950 3,854
- - -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 100,061 85,790 (4,781) 80,930 64,832 6,605
- - -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 264,595 128,677 57,411 112,639 59,611 22,586
Unrealized appreciation
(depreciation) on investments (89,502) 103,509 281,347 226,521 113,315 125,878
- - -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 175,093 232,186 338,758 339,160 172,926 148,464
- - -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 275,154 317,976 333,977 420,090 237,758 155,069
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds (continued)
------------------------------------------
High
Income
Fund
-------------------------------------------
Year ended December 31,
1997 1996 1995
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ 105,625 78,385 47,571
Expenses - Mortality and expense risk charges (note 3) 8,770 5,650 3,622
- - ----------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 96,855 72,735 43,949
- - ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 11,476 8,045 1,112
Unrealized appreciation (depreciation) on investments 28,520 28,139 30,017
- - ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 39,996 36,184 31,129
- - ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations $ 136,851 108,919 75,078
- - ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds (continued)
--------------------------------------------------
Multiple
Strategies
Fund
--------------------------------------------------
Year ended December 31,
1997 1996 1995
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 45,313 33,554 35,104
Expenses - Mortality and expense risk charges (note 3) 4,459 3,353 3,322
- - ----------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 40,854 30,201 31,782
- - ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 26,553 22,006 5,112
Unrealized appreciation (depreciation) on investments 27,703 14,047 48,453
- - ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 54,256 36,053 53,565
- - ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 95,110 66,254 85,347
- - ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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,
1997 1996 1995 1997 1996 1995
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ 31,897 17,813 34,581 16,812 24,435 12,908
Expenses - Mortality and expense
risk charges (note 3) 1,948 2,449 4,231 1,461 1,779 1,682
- - ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 29,949 15,364 30,350 15,351 22,656 11,226
- - ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) - - - 41,295 7,114 4,603
Unrealized appreciation
(depreciation) on investments - - - (23,320) 1,632 25,411
- - ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments - - - 17,975 8,746 30,014
- - ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations $ 29,949 15,364 30,350 33,326 31,402 41,240
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund
--------------------------------------------------------------------------------------
Equity-
Income Growth
Portfolio Portfolio
------------------------------------------- -------------------------------------------
Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 339,803 85,939 72,375 135,480 213,091 9,023
Expenses - Mortality and expense
risk charges (note 3) 30,384 17,180 8,801 30,276 25,014 16,541
- - -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 309,419 68,759 63,574 105,204 188,077 (7,518)
- - -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 125,398 98,124 44,633 193,439 342,839 237,960
Unrealized appreciation
(depreciation) on investments 539,549 149,934 255,114 566,792 (104,224) 415,406
- - -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 664,947 248,058 299,747 760,231 238,615 653,366
- - -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 974,366 316,817 363,321 865,435 426,692 645,848
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance
Products Fund (continued) Variable Insurance Products Fund II
-------------------------------------- -------------------------------------------
Asset
Overseas Manager
Portfolio Portfolio
-------------------------------------- -------------------------------------------
Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ 155,793 36,638 6,739 417,972 183,395 38,074
Expenses - Mortality and expense
risk charges (note 3) 12,638 11,528 8,185 26,984 19,647 16,293
- - -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 143,155 25,110 (1,446) 390,988 163,748 21,781
- - -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 95,087 39,291 6,569 68,861 105,006 25,753
Unrealized appreciation
(depreciation) on investments (45,710) 126,664 107,430 222,652 98,064 313,566
- - -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 49,377 165,955 113,999 291,513 203,070 339,319
- - -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations $ 192,532 191,065 112,553 682,501 366,818 361,100
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------
Variable Insurance
Variable Insurance Products Fund II Products Fund III
------------------------------------------- ------------------------------
Growth & Growth
Contrafund Income Opportunities
Portfolio Portfolio Portfolio
------------------------------------------- ------------------------------
Period from Period from Period from
February 7, May 30, May 30,
Year ended Year ended 1995 to 1997 to 1997 to
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1997 1997
- - --------------------------------------------------------------------------------------- ------------------------------
<S> <C>
Investment income:
Income - Dividends 33,739 2,964 3,470 - -
Expenses - Mortality and expense
risk charges (note 3) 11,153 4,608 700 45 148
- - ----------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 22,586 (1,644) 2,770 (45) (148)
- - ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 198,947 14,028 2,651 1,642 472
Unrealized appreciation
(depreciation) on investments 135,687 119,895 12,626 (1,102) 3,433
- - ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 334,634 133,923 15,277 540 3,905
- - ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 357,220 132,279 18,047 495 3,757
- - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management Trust
-------------------------------------------------------------------------------------
Balanced Bond
Portfolio Portfolio
---------------------------------------- --------------------------------------------
Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ 16,310 41,530 5,568 4,664 7,068 2,839
Expenses - Mortality and expense
risk charges (note 3) 1,723 1,799 1,863 462 581 491
- - -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 14,587 39,731 3,705 4,202 6,487 2,348
- - -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 36,568 4,564 5,430 (162) 38 450
Unrealized appreciation
(depreciation) on investments (14,898) (28,989) 43,147 (48) (3,678) 3,567
- - -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 21,670 (24,425) 48,577 (210) (3,640) 4,017
- - -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations $ 36,257 15,306 52,282 3,992 2,847 6,365
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management Trust
---------------------------------------------
Growth
Portfolio
---------------------------------------------
Year ended December 31,
1997 1996 1995
- - ------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 11,458 13,580 4,462
Expenses - Mortality and expense
risk charges (note 3) 982 1,005 1,076
- - ------------------------------------------------------------------------------------------
Net investment income (expense) 10,476 12,575 3,386
- - ------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 37,624 4,264 6,665
Unrealized appreciation
(depreciation) on investments (18,849) (6,024) 29,994
- - ------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 18,775 (1,760) 36,659
- - ------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 29,251 10,815 40,045
- - ------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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
August 14, October 31,
Year ended 1996 to Year ended Year
ended 1995 to Year ended December
31, December 31, December 31,
December 31, December 31, December
31,
1997 1996 1997 1996 1995 1997
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ 148 9 3,619 1,592 7 4,929
Expenses - Mortality and expense
risk charges (note 3) 113 2 656 127 1 860
- - ------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 35 7 2,963 1,465 6 4,069
- - ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 598 4 836 51 - 1,782
Unrealized appreciation
(depreciation) on investments 3,025 29 5,274 1,038 35 25,287
Net realized and unrealized gain (loss)
on investments 3,623 33 6,110 1,089 35 27,069
- - ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations $ 3,658 40 9,073 2,554 41 31,138
- - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------
Utility Fund II
- - ----------------------------------------------------------------------------
Period from
March 22,
Year ended
Year ended 1995 to
December 31, December 31,
1996 1995
- - ----------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 2,283 862
Expenses - Mortality and expense
risk charges (note 3) 364 132
- - ----------------------------------------------------------------------------
Net investment income (expense) 1,919 730
- - ----------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 2,332 167
Unrealized appreciation
(depreciation) on investments 700 3,982
Net realized and unrealized gain (loss)
on investments 3,032 4,149
- - ----------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 4,951 4,879
- - ----------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------------
Alger American
- - ---------------------------------------------------------------------------------------------------------------------------------
Small
Cap Growth
Portfolio Portfolio
-----------------------------------------------------------------------------------
Period from
October 11,
Year ended Year ended 1995 to Year ended Year ended
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1997 1996
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ 23,157 502 - 10,016 3,815
Expenses - Mortality and expense
risk charges (note 3) 5,518 1,659 24 7,350 2,350
- - ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 17,639 (1,157) (24) 2,666 1,465
- - ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 109,665 4,156 (52) 103,893 1,107
Unrealized appreciation
(depreciation) on investments (21,855) (4,745) (436) 100,012 (1,956)
- - ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 87,810 (589) (488) 203,905 (849)
- - ---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations $ 105,449 (1,746) (512) 206,571 616
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------
PBHG Insurance
Series Fund
- - ------------------------------------------------------------------------------------------------
PBHG
Large Cap PBHG
Growth Growth II
Portfolio Portfolio
--------------------------------------------------
Period from Period from Period from
October 23, May 30, May 30,
1995 to 1997 to 1997 to
December 31, December 31, December 31,
1995 1997 1997
- - ------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends - - -
Expenses - Mortality and expense
risk charges (note 3) 12 63 43
- - ------------------------------------------------------------------------------------------------
Net investment income (expense) (12) (63) (43)
- - ------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 7 584 34
Unrealized appreciation
(depreciation) on investments 147 92 (142)
- - ------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 154 676 (108)
- - ------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 142 613 (151)
- - ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Janus Aspen Series
--------------------------------------------------------------------------
Aggressive Growth Portfolio Growth Portfolio
--------------------------------------- --------------------------------
Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995
------------ ----------- ---------- --------- --------- --------
<S> <C>
Investment income:
Income -- Dividends ..................... $ -- 9,052 7,589 47,255 21,456 7,206
Expenses -- Mortality and expense risk
charges (note 3) ...................... 10,376 6,061 3,092 11,319 5,068 1,335
--------- ----- ----- ------ ------ -----
Net investment income (expense) .......... (10,376) 2,991 4,497 35,936 16,388 5,871
--------- ----- ----- ------ ------ -----
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) ................ 202,593 49,684 24,104 94,811 21,606 8,766
Unrealized appreciation (depreciation) on
investments ........................... (21,456) (6,584) 74,041 155,268 67,602 33,088
--------- ------ ------ ------- ------ ------
Net realized and unrealized gain (loss) on
investments ............................. 181,137 43,100 98,145 250,079 89,208 41,854
--------- ------ ------ ------- ------ ------
Increase (decrease) in net assets from
operations .............................. $ 170,761 46,091 102,642 286,015 105,596 47,725
========= ====== ======= ======= ======= ======
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Janus Aspen Series (continued)
---------------------------------------------------------------------------
Worldwide Growth Portfolio Balanced Portfolio
------------------------------- -------------------------------------------
Period from
November 14,
Year ended Year ended 1995 to
Year ended December 31, December 31, December 31, December 31,
1997 1996 1995 1997 1996 1995
---------- --------- ---------- -------------- -------------- -------------
<S> <C>
Investment income:
Income -- Dividends .................... $ 35,818 17,129 1,537 12,092 3,497 584
Expenses -- Mortality and expense
risk charges (note 3) ................ 16,118 6,046 2,178 2,145 931 66
-------- ------ ----- ------ ----- ---
Net investment income (expense) ......... 19,700 11,083 (641) 9,947 2,566 518
-------- ------ ----- ------ ----- ---
Net realized and unrealized gain (loss)
on investments:
Net realized gain (loss) ............... 89,852 102,324 8,523 8,229 2,098 395
Unrealized appreciation (depreciation)
on investments ....................... 251,916 66,974 56,274 41,009 14,575 2,467
-------- ------- ------ ------ ------ -----
Net realized and unrealized gain (loss)
on investments ......................... 341,768 169,298 64,797 49,238 16,673 2,862
-------- ------- ------ ------ ------ -----
Increase (decrease) in net assets from
operations ............................. $361,468 180,381 64,156 59,185 19,239 3,380
======== ======= ====== ====== ====== =====
</TABLE>
<TABLE>
<CAPTION>
Janus Aspen Series (continued)
----------------------------------------------------------------------------------------
Capital
International Growth Appreciation
Flexible Income Portfolio Portfolio Portfolio
-------------------------------------------- ----------------------------- -------------
Period from Period from Period from
December 20, July 9, May 21,
Year ended Year ended 1995 to Year ended 1996 to 1997 to
December 31, December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1997 1996 1997
-------------- -------------- -------------- -------------- -------------- -------------
<S> <C>
Investment income:
Income -- Dividends ................. $3,492 541 1 1,716 136 27
Expenses -- Mortality and
expense risk charges (note 3) ..... 240 34 -- 1,442 40 34
------ --- -- ----- --- --
Net investment income (expense) ...... 3,252 507 1 274 96 (7)
------ --- -- ----- --- -----
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) ............ 305 13 -- 5,037 152 106
Unrealized appreciation
(depreciation) on investments ..... 72 83 (1) 16,037 1,040 697
------ --- ----- ------ ----- ----
Net realized and unrealized gain
(loss) on investments ............... 377 96 (1) 21,074 1,192 803
------ --- ----- ------ ----- ----
Increase (decrease) in net assets
from operations ..................... $3,629 603 -- 21,348 1,288 796
====== === ==== ====== ===== ====
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
(formerly Life of Virginia Series Fund, Inc.)
------------------------------------------------------------------
S&P 500 Government
Index Securities
Fund Fund
---------------------------------- ------------------------------
Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income $ 71,494 741,582 14,636 (2,085) 28,995 16,905
Net realized gain (loss) 18,179 65,600 33,666 1,254 289 2,130
Unrealized appreciation (depreciation) on investments 504,771 (498,697) 203,288 18,064 (28,379) 23,073
- - -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 594,444 308,485 251,590 17,233 905 42,108
- - -----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 496,133 308,147 205,386 36,517 37,229 37,525
Loan interest (2,663) (455) (592) 290 878 244
Transfers (to) from the general account of Life of Virginia:
Death benefits (146,232) (1,955) - - - -
Surrenders (28,437) (15,204) (35,272) (15,385) (3,155) -
Loans (12,720) (16,280) 33 (4,137) (2,302) -
Cost of insurance and administrative expense (note 3) (235,713) (158,228) (112,723) (23,090) (23,586) (22,993)
Transfer gain (loss) and transfer fees (793) 109 1,890 (675) (75) (368)
Interfund transfers 954,081 289,390 91,482 (322,397) (18,963) 21,812
- - -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 1,023,656 405,524 150,204 (328,877) (9,974) 36,220
- - -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 1,618,100 714,009 401,794 (311,644) (9,069) 78,328
Net assets at beginning of year 1,789,889 1,075,880 674,086 311,644 320,713 242,385
- - -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 3,407,989 1,789,889 1,075,880 - 311,644 320,713
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
(formerly Life of Virginia Series Fund, Inc.)
-------------------------------------------------------------------
Money Market Total Return
Fund Fund
------------------------------------ -----------------------------
Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income 93,988 81,681 51,763 432,580 825,901 201,614
Net realized gain (loss) 298,840 (325,593) 68,408 (54,073) 68,427 17,126
Unrealized appreciation (depreciation) on investments (300,439) 345,223 (25,977) 123,159 (708,053) 18,487
- - ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 92,389 101,311 94,194 501,666 186,275 237,227
- - ------------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 3,634,434 5,619,954 5,903,130 169,809 143,160 180,914
Loan interest (3,118) (1,840) (33) (299) (178) (130)
Transfers (to) from the general account of Life of Virginia:
Death benefits (15,944) (1,302) - (7,452) (25,232) -
Surrenders (10,646) (7,042) (25,025) (14,564) (14,027) (22,038)
Loans (5,231) (59,410) 215 (3,824) (6,948) (6,501)
Cost of insurance and administrative expense (note 3) (284,457) (257,113) (201,089) (357,384) (339,757) (173,014)
Transfer gain (loss) and transfer fees (233,325) (28,760) (164,726) 39,224 125,446 105,770
Interfund transfers (3,317,791) (4,363,145) (5,222,614) (2,809) 124,895 2,309,889
- - ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (236,078) 901,342 289,858 (177,299) 7,359 2,394,890
- - ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (143,689) 1,002,653 384,052 324,367 193,634 2,632,117
Net assets at beginning of year 2,405,605 1,402,952 1,018,900 3,279,301 3,085,667 453,550
- - ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year 2,261,916 2,405,605 1,402,952 3,603,668 3,279,301 3,085,667
- - ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets, Continued
</TABLE>
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
(formerly Life of Virginia Series Fund, Inc.) (continued)
--------------------------------------------------------------
International Real Estate
Equity Fund Securities Fund
-------------------------------------- -------------------
Period from
August 25,
Year ended Year ended 1995 to Year ended
December 31, December 31, December 31, December 31,
1997 1996 1995 1997
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase in net assets
From operations:
Net investment income $ 8,167 1,732 165 19,866
Net realized gain 654 510 4 2,800
Unrealized appreciation (depreciation) on investments (5,290) (839) 193 (2,725)
- - ------------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 3,531 1,403 362 19,941
From capital transactions:
Net premiums 23,197 18,822 3,961 79,557
Loan interest 4 7 - 2
Transfers (to) from the general account of Life of Virginia:
Death benefits - - - -
Surrenders (904) (1,403) - (692)
Loans (289) (229) - (874)
Cost of insurance and administrative expense (note 3) (5,480) (3,119) (316) (17,806)
Transfer gain (loss) and transfer fees (1,837) 86 (5) 300
Interfund transfers 22,059 10,273 5,381 89,769
- - ------------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 36,750 24,437 9,021 150,256
- - ------------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 40,281 25,840 9,383 170,197
Net assets at beginning of period 35,223 9,383 - 30,212
- - ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 75,504 35,223 9,383 200,409
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
(formerly Life of Virginia Series Fund, Inc.) (continued)
--------------------------------------------------------------------
Global Value
Real Estate Income Equity Income
Securities Fund Fund Fund Fund
----------------------- ---------- ----------- ------------
Period from Period from Period from Period from
October 5, June 18, June 17, December 12,
Year ended 1995 to 1997 to 1997 to 1997 to
December 31, December 31, December 31, December 31, December 31,
1996 1995 1997 1997 1997
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase in net assets
From operations:
Net investment income 1,621 22 431 98 876
Net realized gain 381 - 35 (9) (838)
Unrealized appreciation (depreciation) on investments 2,468 4 (329) 1 523
- - -------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 4,470 26 137 90 561
From capital transactions:
Net premiums 15,327 143 1,293 5,797 735
Loan interest - - - 2 12
Transfers (to) from the general account of Life of Virginia:
Death benefits - - - - -
Surrenders (347) - - - -
Loans - - (243) - -
Cost of insurance and administrative expense
(note 3) (1,892) (31) (373) (1,002) (1,655)
Transfer gain (loss) and transfer fees 190 2 (9) 35 (30)
Interfund transfers 12,060 264 8,418 8,637 378,428
- - -------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 25,338 378 9,086 13,469 377,490
- - -------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 29,808 404 9,223 13,559 378,051
Net assets at beginning of period 404 - - - -
- - -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 30,212 404 9,223 13,559 378,051
- - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
------------------------------------------------------------------
Money Bond
Fund Fund
-------------------------------- ---------------------------------
Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ 23 193 580 15,714 14,915 7,521
Net realized gain (loss) - - - 276 128 407
Unrealized appreciation (depreciation) on investments - - - 5,965 (3,916) 9,889
- - ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 23 193 580 21,955 11,127 17,817
From capital transactions:
Net premiums 111 - 7,628 56,837 41,062 36,446
Loan interest - - - (13) (2) 1
Transfers (to) from the general account of Life of Virginia:
Death benefits - - - - - -
Surrenders - - (954) (17,569) (3,478) (1,208)
Loans - - - (2,018) - (134)
Cost of insurance and administrative expense (note 3) (205) (997) (1,976) (23,294) (21,145) (15,526)
Transfer gain (loss) and transfer fees 15 (8) (12) (1,279) 6 (54)
Interfund transfers (651) (10,491) (3,849) (12,046) 50,864 63,844
- - ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (730) (11,496) 837 618 67,307 83,369
- - ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (707) (11,303) 1,417 22,573 78,434 101,186
Net assets at beginning of year 707 12,010 10,593 269,840 191,406 90,220
- - ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ - 707 12,010 292,413 269,840 191,406
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------
Oppenheimer Variable Account Funds
--------------------------------------------------------------------
Capital
Appreciation Growth
Fund Fund
----------------------------------- ------------------------------
Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ 100,061 85,790 (4,781) 80,930 64,832 6,605
Net realized gain (loss) 264,595 128,677 57,411 112,639 59,611 22,586
Unrealized appreciation (depreciation) on investments (89,502) 103,509 281,347 226,521 113,315 125,878
- - -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 275,154 317,976 333,977 420,090 237,758 155,069
From capital transactions:
Net premiums 794,773 615,934 394,900 460,957 310,615 175,911
Loan interest 305 (174) (114) (541) (155) 12
Transfers (to) from the general account of Life of Virginia:
Death benefits (313) - (2,168) - (3,934) (2,519)
Surrenders (41,954) (128,744) (58,441) (69,141) (18,216) (7,126)
Loans (38,517) (8,425) (9,348) (12,664) (21,680) (5,542)
Cost of insurance and administrative expense (note 3) (307,499) (242,592) (174,402) (176,831) (107,526) (61,493)
Transfer gain (loss) and transfer fees 13,531 6,908 (5,711) (4,635) (1,119) 2,839
Interfund transfers 61,532 270,794 151,112 180,805 266,465 216,857
- - -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 481,858 513,701 295,828 377,950 424,450 318,939
- - -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 757,012 831,677 629,805 798,040 662,208 474,008
Net assets at beginning of year 2,342,064 1,510,387 880,582 1,479,873 817,665 343,657
- - -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $3,099,076 2,342,064 1,510,387 2,277,913 1,479,873 817,665
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds (continued)
-----------------------------------------------------------------
High Multiple
Income Strategies
Fund Fund
------------------------------------ ----------------------------
Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income $ 96,855 72,735 43,949 40,854 30,201 31,782
Net realized gain (loss) 11,476 8,045 1,112 26,553 22,006 5,112
Unrealized appreciation (depreciation) on investments 28,520 28,139 30,017 27,703 14,047 48,453
- - -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 136,851 108,919 75,078 95,110 66,254 85,347
- - -----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 359,877 311,435 225,228 132,071 122,291 183,632
Loan interest (10) 16 179 (129) (18) (48)
Transfers (to) from the general account of Life of Virginia:
Death benefits - (18,532) (386) - (17,498) -
Surrenders (19,540) (7,723) (26,138) (51,445) (183,972) (11,026)
Loans (25,149) (133,614) (3,839) (4,961) (729) (617)
Cost of insurance and administrative expense (note 3) (162,386) 559 (106,764) (65,223) (50,034) (67,361)
Transfer gain (loss) and transfer fees 944 111,802 692 (84) 6,336 (572)
Interfund transfers 367,417 - 132,318 (13,534) 87,158 52,156
- - -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 521,153 263,943 221,290 (3,305) (36,466) 156,164
- - -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 658,004 372,862 296,368 91,805 29,788 241,511
Net assets at beginning of year 992,747 619,885 323,517 574,661 544,873 303,362
- - -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 1,650,751 992,747 619,885 666,466 574,661 544,873
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<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,
1997 1996 1995 1997 1996 1995
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ 29,949 15,364 30,350 15,351 22,656 11,226
Net realized gain (loss) - - - 41,295 7,114 4,603
Unrealized appreciation (depreciation) on investments - - - (23,320) 1,632 25,411
- - ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 29,949 15,364 30,350 33,326 31,402 41,240
- - ------------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums - 1,850 96,485 208 - 91,883
Loan interest (34) (14) 102 (41) (22) 245
Transfers (to) from the general account of Life of Virginia:
Death benefits - - - - - (393)
Surrenders (2) (19,871) (2,975) (2,471) (36,177) (6,219)
Loans (1,093) (1,250) - (1,664) (2,449) -
Cost of insurance and administrative expense
(note 3) (18,137) (30,816) (65,636) (16,918) (30,421) (49,478)
Transfer gain (loss) and transfer fees (15,912) (5,041) (991) 1,294 (553) 373
Interfund transfers (310,424) (89,691) (162,335) (226,946) (34,288) 36,951
- - ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (345,602) (144,833) (135,350) (246,538) (103,910) 73,362
- - ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (315,653) (129,469) (105,000) (213,212) (72,508) 114,602
Net assets at beginning of year 315,653 445,122 550,122 213,212 285,720 171,118
- - ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ - 315,653 445,122 - 213,212 285,720
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund
------------------------------------------------------------------
Equity-
Income Growth
Portfolio Portfolio
--------------------------------- --------------------------------
Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ 309,419 68,759 63,574 105,204 188,077 (7,518)
Net realized gain (loss) 125,398 98,124 44,633 193,439 342,839 237,960
Unrealized appreciation (depreciation) on investments 539,549 149,934 255,114 566,792 (104,224) 415,406
- - ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 974,366 316,817 363,321 865,435 426,692 645,848
- - ------------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 1,111,418 923,240 487,170 1,063,353 928,744 621,255
Loan interest 623 (54) 34 (786) (476) (2,442)
Transfers (to) from the general account of Life of Virginia:
Death benefits (276) (22,109) - (12,511) (24,929) (2,486)
Surrenders (74,706) (120,408) (19,474) (119,903) (179,684) (78,450)
Loans (43,806) (12,984) (4,694) (102,452) (72,457) 5,101
Cost of insurance and administrative expense
(note 3) (475,456) (336,646) (199,167) (468,850) (419,528) (324,187)
Transfer gain (loss) and transfer fees 21,702 18,395 3,592 (321) 34,069 (20,621)
Interfund transfers 662,909 643,935 410,782 127,136 (78,376) 590,049
- - ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 1,202,408 1,093,369 678,243 485,666 187,363 788,219
- - ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 2,176,774 1,410,186 1,041,564 1,351,101 614,055 1,434,067
Net assets at beginning of year 3,220,818 1,810,632 769,068 3,610,646 2,996,591 1,562,524
- - ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 5,397,592 3,220,818 1,810,632 4,961,747 3,610,646 2,996,591
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
Variable Insurance
Products Fund (continued)
-------------------------------------------------
Overseas
Portfolio
------------------------------------------------
Year ended December 31,
1997 1996 1995
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ 143,155 25,110 (1,446)
Net realized gain (loss) 95,087 39,291 6,569
Unrealized appreciation (depreciation) on investments (45,710) 126,664 107,430
- - ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 192,532 191,065 112,553
- - ------------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 366,213 455,202 445,508
Loan interest (656) (10) (29)
Transfers (to) from the general account of Life of Virginia:
Death benefits (264) (3,636) -
Surrenders (78,977) (76,054) (19,836)
Loans (29,580) (29,577) (7,544)
Cost of insurance and administrative expense
(note 3) (181,619) (199,651) (190,510)
Transfer gain (loss) and transfer fees 2,923 5,668 (13,025)
Interfund transfers (292,022) (2,943) 233,172
- - ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (213,982) 148,999 447,736
- - ------------------------------------------------------------------------------------------------------------------------------------
Increase in net assets (21,450) 340,064 560,289
Net assets at beginning of period 1,760,630 1,420,566 860,277
- - ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 1,739,180 1,760,630 1,420,566
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund II
--------------------------------------------------------
Asset
Manager
Portfolio
-------------------------------------------------------
Year ended December 31,
1997 1996 1995
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 390,988 163,748 21,781
Net realized gain (loss) 68,861 105,006 25,753
Unrealized appreciation (depreciation) on investments 222,652 98,064 313,566
- - -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 682,501 366,818 361,100
- - -----------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 644,004 695,446 756,041
Loan interest (381) (44) 209
Transfers (to) from the general account of Life of Virginia:
Death benefits - (22,120) (1,919)
Surrenders (122,367) (107,389) (51,751)
Loans (29,206) 70 (20,572)
Cost of insurance and administrative expense
(note 3) (329,030) (341,676) (352,049)
Transfer gain (loss) and transfer fees 12,971 (36) (3,037)
Interfund transfers 430,161 (462,667) 294,547
- - -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 606,152 (238,416) 621,469
- - -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets 1,288,653 128,402 982,569
Net assets at beginning of period 2,880,752 2,752,350 1,769,781
- - -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 4,169,405 2,880,752 2,752,350
- - -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund II (continued)
-------------------------------------------------------
Contrafund
Portfolio
------------------------------------------------------
Period from
February 7,
Year ended Year ended 1995 to
December 31, December 31, December 31,
1997 1996 1995
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 22,586 (1,644) 2,770
Net realized gain (loss) 198,947 14,028 2,651
Unrealized appreciation (depreciation) on investments 135,687 119,895 12,626
- - -------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 357,220 132,279 18,047
- - -------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 617,546 331,802 104,232
Loan interest (140) 107 4
Transfers (to) from the general account of Life of Virginia:
Death benefits (5,439) - -
Surrenders (90,538) (8,625) -
Loans (13,250) (4,921) (396)
Cost of insurance and administrative expense
(note 3) (207,378) (91,674) (18,015)
Transfer gain (loss) and transfer fees 17,537 1,153 3,247
Interfund transfers 292,298 398,084 180,143
- - -------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 610,636 625,926 269,215
- - -------------------------------------------------------------------------------------------------------------------------
Increase in net assets 967,856 758,205 287,262
Net assets at beginning of period 1,045,467 287,262 -
- - -------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 2,013,323 1,045,467 287,262
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------
Variable Insurance
Products Fund III
-----------------------------------
Growth & Growth
Income Opportunities
Portfolio Portfolio
-----------------------------------
Period from Period from
May 30, May 30,
1997 to 1997 to
December 31, December 31,
1997 1997
- - -----------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) (45) (148)
Net realized gain (loss) 1,642 472
Unrealized appreciation (depreciation) on investments (1,102) 3,433
- - -----------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 495 3,757
- - -----------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 5,448 6,899
Loan interest - -
Transfers (to) from the general account of Life of Virginia:
Death benefits - -
Surrenders - -
Loans - -
Cost of insurance and administrative expense
(note 3) (1,504) (1,447)
Transfer gain (loss) and transfer fees 1,159 860
Interfund transfers 41,761 61,508
- - -----------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 46,864 67,820
- - -----------------------------------------------------------------------------------------------------
Increase in net assets 47,359 71,577
Net assets at beginning of period - -
- - -----------------------------------------------------------------------------------------------------
Net assets at end of period 47,359 71,577
- - -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management Trust
------------------------------------------------------
Balanced
Portfolio
-----------------------------------------------------
Year ended December 31,
1997 1996 1995
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ 14,587 39,731 3,705
Net realized gain (loss) 36,568 4,564 5,430
Unrealized appreciation (depreciation) on investments (14,898) (28,989) 43,147
- - -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 36,257 15,306 52,282
- - -----------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 321 - 52,871
Loan interest (32) (7) 6
Transfers (to) from the general account of Life of Virginia:
Death benefits - (16,809) (1,989)
Surrenders (12,775) (3,543) (3,754)
Loans (1,513) - (305)
Cost of insurance and administrative expense
(note 3) (11,724) (16,515) (24,013)
Transfer gain (loss) and transfer fees (153) (143) 7
Interfund transfers (254,395) (26,358) 5,186
- - -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (280,271) (63,375) 28,009
- - -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (244,014) (48,069) 80,291
Net assets at beginning of year 244,014 292,083 211,792
- - -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ - 244,014 292,083
- - -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management Trust (continued)
--------------------------------------------------------
Bond
Portfolio
--------------------------------------------------------
Year ended December 31,
1997 1996 1995
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 4,202 6,487 2,348
Net realized gain (loss) (162) 38 450
Unrealized appreciation (depreciation) on investments (48) (3,678) 3,567
- - -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 3,992 2,847 6,365
- - -----------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums - - 37,211
Loan interest - - -
Transfers (to) from the general account of Life of Virginia:
Death benefits - - -
Surrenders (61) - (3,175)
Loans - - -
Cost of insurance and administrative expense
(note 3) (1,655) (3,975) (6,373)
Transfer gain (loss) and transfer fees (1,438) (55) (170)
Interfund transfers (80,382) (11,128) 5,181
- - -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (83,536) (15,158) 32,674
- - -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (79,544) (12,311) 39,039
Net assets at beginning of year 79,544 91,855 52,816
- - -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of year - 79,544 91,855
- - -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management Trust (continued)
--------------------------------------------------------
Growth
Portfolio
------------------------------------------------------
Year ended December 31,
1997 1996 1995
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 10,476 12,575 3,386
Net realized gain (loss) 37,624 4,264 6,665
Unrealized appreciation (depreciation) on investments (18,849) (6,024) 29,994
- - ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 29,251 10,815 40,045
- - ----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 578 30 43,607
Loan interest (111) (118) 2
Transfers (to) from the general account of Life of Virginia:
Death benefits - - -
Surrenders (3,450) - (9,384)
Loans (1,168) (4,361) (1,132)
Cost of insurance and administrative expense
(note 3) (6,896) (8,829) (13,364)
Transfer gain (loss) and transfer fees 2,241 273 (357)
Interfund transfers (154,994) (24,783) (2,815)
- - ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (163,800) (37,788) 16,557
- - ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (134,549) (26,973) 56,602
Net assets at beginning of year 134,549 161,522 104,920
- - ----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year - 134,549 161,522
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
Federated Investors
Insurance Series
---------------------------------
American
Leaders
Fund II
----------------------------------
Period from
August 14,
Year ended 1996 to
December 31, December 31,
1997 1996
- - --------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ 35 7
Net realized gain (loss) 598 4
Unrealized appreciation (depreciation) on investments 3,025 29
- - --------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 3,658 40
- - --------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 26,104 941
Loan interest - -
Transfers (to) from the general account of Life of Virginia:
Surrenders - -
Loans - -
Cost of insurance (note 3) (3,533) (101)
Transfer gain (loss) and transfer fees 46 (1)
Interfund transfers 17,684 1,391
- - --------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 40,301 2,230
- - --------------------------------------------------------------------------------------------------------------
Increase in net assets 43,959 2,270
Net assets at beginning of period 2,270 -
- - --------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 46,229 2,270
- - --------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------
Federated Investors
Insurance Series
-----------------------------------------------------
High
Income
Bond
Fund II
-----------------------------------------------------
Period from
October 31,
Year ended Year ended 1995
December 31, December 31, December 31
1997 1996 1995
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 2,963 1,465 6
Net realized gain (loss) 836 51 0
Unrealized appreciation (depreciation) on investments 5,274 1,038 35
- - -------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 9,073 2,554 41
- - -------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 41,464 18,547 8
Loan interest - - -
Transfers (to) from the general account of Life of Virginia:
Surrenders - - -
Loans (3,068) - -
Cost of insurance (note 3) (9,342) (3,746) (74)
Transfer gain (loss) and transfer fees 332 362 62
Interfund transfers 20,749 9,630 8,214
- - -------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 50,135 24,793 8,210
- - -------------------------------------------------------------------------------------------------------------------------
Increase in net assets 59,208 27,347 8,251
Net assets at beginning of period 35,598 8,251 -
- - -------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 94,806 35,598 8,251
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------
Federated Investors
Insurance Series
-------------------------------------------------------
Utility
Fund II
------------------------------------------------------
Period from
March 22,
Year ended Year ended 1995 to
December 31, December 31, December 31,
1997 1996 1995
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 4,069 1,919 730
Net realized gain (loss) 1,782 2,332 167
Unrealized appreciation (depreciation) on investments 25,287 700 3,982
- - ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 31,138 4,951 4,879
- - ------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 43,641 27,264 39,132
Loan interest - - -
Transfers (to) from the general account of Life of Virginia:
Surrenders - (60) -
Loans - - -
Cost of insurance (note 3) (10,455) (6,249) (3,417)
Transfer gain (loss) and transfer fees (196) (372) 30
Interfund transfers 11,808 236 20,946
- - ------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 44,798 20,819 56,691
- - ------------------------------------------------------------------------------------------------------------------------
Increase in net assets 75,936 25,770 61,570
Net assets at beginning of period 87,340 61,570 -
- - ------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 163,276 87,340 61,570
- - ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------
Alger American
-------------------------------------
Small
Cap
Portfolio
-------------------------------------
Year ended Year ended
December 31, December 31,
1997 1996
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ 17,639 (1,157)
Net realized gain (loss) 109,665 4,156
Unrealized appreciation (depreciation) on investments (21,855) (4,745)
- - ---------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 105,449 (1,746)
- - ---------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 293,677 151,593
Loan interest 1,571 (3,345)
Transfers (to) from the general account of Life of Virginia:
Surrenders (3,177) (1,160)
Loans (3,833) (13,496)
Cost of insurance (note 3) (88,074) (37,209)
Transfer gain (loss) and transfer fees 22,932 9,170
Interfund transfers 69,375 281,412
- - ---------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 292,471 386,965
- - ---------------------------------------------------------------------------------------------------------------------
Increase in net assets 397,920 385,219
Net assets at beginning of period 421,775 36,556
- - ---------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 819,695 421,775
- - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
Alger American
-----------------------------------------------------------------
Small Cap Growth
Portfolio Portfolio
--------------- ---------------------------------------------------
Period from Period from
October 11, October 23,
1995 to Year ended Year ended 1995 to
December 31, December 31, December 31, December 31,
1995 1997 1996 1995
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) (24) 2,666 1,465 (12)
Net realized gain (loss) (52) 103,893 1,107 7
Unrealized appreciation (depreciation) on investments (436) 100,012 (1,956) 147
- - -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations (512) 206,571 616 142
- - -----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 4,392 338,476 180,079 2,473
Loan interest - 578 31 2
Transfers (to) from the general account of Life of Virginia:
Surrenders - (17,220) (1,243) -
Loans - (5,609) (956) -
Cost of insurance (note 3) (879) (109,328) (34,162) (500)
Transfer gain (loss) and transfer fees 208 (92,300) 6,248 170
Interfund transfers 33,347 (862,640) 1,232,717 20,967
- - -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 37,068 (748,043) 1,382,714 23,112
- - -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 36,556 (541,472) 1,383,330 23,254
Net assets at beginning of period - 1,406,584 23,254 -
- - -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 36,556 865,112 1,406,584 23,254
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------
PBHG Insurance
Series Fund
--------------------------------------
Large Cap
Growth Growth II
Portfolio Portfolio
--------------------------------------
Period from Period from
May 30, May 30,
1997 to 1997 to
December 31, December 31,
1997 1997
- - ------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) (63) (43)
Net realized gain (loss) 584 34
Unrealized appreciation (depreciation) on investments 92 (142)
- - ------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 613 (151)
- - ------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 4,425 10,354
Loan interest - -
Transfers (to) from the general account of Life of Virginia:
Surrenders (181) -
Loans - -
Cost of insurance (note 3) (1,384) (1,598)
Transfer gain (loss) and transfer fees 401 (24)
Interfund transfers 22,634 12,519
- - ------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 25,895 21,251
- - ------------------------------------------------------------------------------------------------------
Increase in net assets 26,508 21,100
Net assets at beginning of period - -
- - ------------------------------------------------------------------------------------------------------
Net assets at end of period 26,508 21,100
- - ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series
-----------------------------------------------------------
Aggressive
Growth Portfolio
-----------------------------------------------------------
Year ended December 31,
1997 1996 1995
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ (10,376) 2,991 4,497
Net realized gain (loss) 202,593 49,684 24,104
Unrealized appreciation (depreciation) on investments (21,456) (6,584) 74,041
- - ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 170,761 46,091 102,642
- - ----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 525,446 440,252 272,031
Loan interest (1,809) 50 101
Transfers (to) from the general account of Life of Virginia:
Death benefits - (155) -
Surrenders (39,796) (55,525) (6,433)
Loans (7,351) (9,797) (590)
Cost of insurance and administrative expense (note 3) (186,650) (128,435) (69,676)
Transfer gain (loss) and transfer fees 45,321 5,450 10,642
Interfund transfers 436,211 161,707 197,192
- - ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 771,372 413,547 403,267
- - ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 942,133 459,638 505,909
Net assets at beginning of period 1,083,059 623,421 117,512
- - ----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 2,025,192 1,083,059 623,421
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series (continued)
--------------------------------------------------------------
Growth
Portfolio
------------------------------------------------------------
Year ended December 31,
1997 1996 1995
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 35,936 16,388 5,871
Net realized gain (loss) 94,811 21,606 8,766
Unrealized appreciation (depreciation) on investments 155,268 67,602 33,088
- - ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 286,015 105,596 47,725
- - ----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 531,252 350,437 130,419
Loan interest 514 59 -
Transfers (to) from the general account of Life of Virginia:
Death benefits - (151) -
Surrenders (19,282) (67,362) (364)
Loans (17,285) (5,035) (28)
Cost of insurance and administrative expense (note 3) (173,865) (88,814) (39,647)
Transfer gain (loss) and transfer fees 8,623 5,548 1,834
Interfund transfers 231,416 454,994 138,995
- - ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 561,373 649,676 231,209
- - ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 847,388 755,272 278,934
Net assets at beginning of period 1,113,610 358,338 79,404
- - ----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 1,960,998 1,113,610 358,338
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series (continued)
-------------------------------------------------------------
Worldwide
Growth
Portfolio
------------------------------------------------------------
Year ended December 31,
1997 1996 1995
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 19,700 11,083 (641)
Net realized gain (loss) 89,852 102,324 8,523
Unrealized appreciation (depreciation) on investments 251,916 66,974 56,274
- - --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 361,468 180,381 64,156
- - --------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 822,511 381,650 165,843
Loan interest 740 270 -
Transfers (to) from the general account of Life of Virginia:
Death benefits - - -
Surrenders (35,503) (40,322) (6,089)
Loans (11,414) (19,483) 5
Cost of insurance and administrative expense (note 3) (279,525) (115,529) (55,173)
Transfer gain (loss) and transfer fees 3,261 8,504 1,721
Interfund transfers 795,994 610,432 97,041
- - --------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 1,296,064 825,522 203,348
- - --------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 1,657,532 1,005,903 267,504
Net assets at beginning of period 1,421,287 415,384 147,880
- - --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 3,078,819 1,421,287 415,384
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Statement of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series (continued)
---------------------------------------------------------
Balanced
Portfolio
---------------------------------------------------------
Period from
November 14,
Year ended Year ended 1995 to
December 31, December 31, December 31,
1997 1996 1995
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income $ 9,947 2,566 518
Net realized gain 8,229 2,098 395
Unrealized appreciation (depreciation) on investments 41,009 14,575 2,467
- - --------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 59,185 19,239 3,380
- - --------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 73,161 19,054 336
Loan interest 6 - -
Transfers (to) from the general account of Life of Virginia:
Death benefits - - -
Surrenders (6,904) - -
Loans (577) - -
Cost of insurance (note 3) (31,146) (11,055) (792)
Transfer gain (loss) and transfer fees 305 1,193 (248)
Interfund transfers 369,258 63,919 73,750
- - --------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 404,103 73,111 73,046
- - --------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 463,288 92,350 76,426
Net assets at beginning of period 168,776 76,426 -
- - --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 632,064 168,776 76,426
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series (continued)
--------------------------------------------------------------
Flexible
Income
Portfolio
-----------------------------------------------------------
Period from
December 20,
Year ended Year ended 1995 to
December 31, December 31, December 31,
1997 1996 1995
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income 3,252 507 1
Net realized gain 305 13 -
Unrealized appreciation (depreciation) on investments 72 83 (1)
- - ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 3,629 603 -
- - ----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 40,176 3,048 13
Loan interest - - -
Transfers (to) from the general account of Life of Virginia:
Death benefits - - -
Surrenders - - -
Loans - - -
Cost of insurance (note 3) (10,448) (840) (4)
Transfer gain (loss) and transfer fees 271 1 1
Interfund transfers 28,139 6,026 35
- - ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 58,138 8,235 45
- - ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 61,767 8,838 45
Net assets at beginning of period 8,883 45 -
- - ----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 70,650 8,883 45
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series (continued)
-------------------------------------------------------------
International Capital
Growth Appreciation
Portfolio Portfolio
--------------------------------------- --------------------
Period from Period from
July 9, May 21,
Year ended 1996 to 1997 to
December 31, December 31, December 31,
1997 1996 1997
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income 274 96 (7)
Net realized gain 5,037 152 106
Unrealized appreciation (depreciation) on investments 16,037 1,040 697
- - -------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 21,348 1,288 796
- - -------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 137,587 19,750 1,504
Loan interest 7 - -
Transfers (to) from the general account of Life of Virginia:
Death benefits - - -
Surrenders (3,539) - -
Loans (462) - -
Cost of insurance (note 3) (30,132) (1,705) (1,135)
Transfer gain (loss) and transfer fees 1,187 (43) 4
Interfund transfers 140,874 34,648 7,451
- - -------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 245,522 52,650 7,824
- - -------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 266,870 53,938 8,620
Net assets at beginning of period 53,938 - -
- - -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 320,808 53,938 8,620
- - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Notes to Financial Statements
===========================================================================
(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 Financial
Assurance Holdings, Inc. General Electric Capital Assurance Corporation
and GE Financial Assurance Holdings, Inc. are indirectly, wholly-owned
subsidiaries of General Electric Capital Corporation ("GE Capital"). GE
Capital, a diversified financial services company, is a wholly-owned
subsidiary of General Electric Company (GE), a New York corporation.
Prior to April 1, 1996, Life of Virginia was an indirect wholly-owned
subsidiary of Aon Corporation (Aon).
In May 1997, seven new investment subdivisions were added to the
Account. The Growth & Income Portfolio and Growth Opportunities
Portfolio each invest solely in a designated portfolio of the Variable
Insurance Products Fund III. The Global Income Fund and the Value
Equity Fund each invest 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 invest solely in a
designated portfolio of the PBHG Insurance Series Fund. All designated
portfolios described above are series type mutual funds.
During 1997, the Life of Virginia Series Fund, Inc. changed its name to
the GE Investments Funds, Inc. As a result the Life of Virginia Series
Funds, Inc.--Common Stock Index, Government Securities, Money Market,
Total Return, International Equity and Real Estate Securities
Portfolios were renamed the GE Investments Funds, Inc.--S&P 500 Index,
Government Securities, Money Market, Total Return, International Equity
and Real Estate Securities Funds, respectively. On December 12, 1997,
the Account added the GE Investments Funds, Inc.--Income Fund as a new
investment subdivision and made the following substitutions of shares
held by the investment subdivisions:
<TABLE>
<S> <C>
Before the Substitution After the Substitution
Shares of Money Market Portfolio - Shares of Money Market Fund -
Variable Insurance Products Fund GE Investments Funds, Inc.
<PAGE>
(1) Continued
Before the Substitution After the Substitution
Shares of Money Fund - Shares of Money Market Fund -
Oppenheimer Variable Account Funds GE Investments Funds, Inc.
Shares of Government Securities Fund - Shares of Income Fund -
GE Investments Funds, Inc. GE Investments Funds, Inc.
Shares of Bond Portfolio - Shares of Income Fund -
Neuberger & Berman Advisers GE Investments Funds, Inc.
Management Trust
Shares of High Income Portfolio - Shares of High Income Fund -
Variable Insurance Products Fund Oppenheimer Variable Account Funds
Shares of Growth Portfolio - Shares of Growth Portfolio Fund -
Neuberger & Berman Advisers Management Trust Variable Insurance Products Fund
Shares of Balanced Portfolio - Shares of Balanced Portfolio -
Neuberger & Berman Advisers Management Trust Janus Aspen Series
</TABLE>
The foregoing substitutions were carried out pursuant to an order of
the Securities and Exchange Commission (Commission) issued on December
11, 1997, with the approval of any necessary department of insurance.
The effect of such a share substitution was to replace certain
portfolios of Variable Insurance Products Fund, Oppenheimer Variable
Account Funds, GE Investments Funds, Inc., and Neuberger & Berman
Advisers Management Trust with those of GE Investments Funds, Inc.,
Oppenheimer Variable Account Funds, Variable Insurance Products Fund,
and Janus Aspen Series as investment options.
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 invest
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 invest solely
in a designated portfolio of GE Investment
<PAGE>
(1) Continued
Funds, Inc., a series type mutual fund. The Balanced Portfolio and
Flexible Income Portfolio each invest solely in a designated portfolio
of the Janus Aspen Series, a series type mutual fund. The Growth
Portfolio and Small Cap Portfolio each invest 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 invest 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 invest 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 and
income distributions are recorded on the ex-dividend 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,
1997, were:
Cost of Proceeds
Shares from
Fund/Portfolio Acquired Shares Sold
- - ----------------------------------------------------------------------------
GE Investments Funds, Inc.:
S&P 500 Index $ 2,421,588 571,889
Government Securities 410,712 711,146
Money Market 12,663,722 12,135,125
Total Return 1,505,900 444,003
International Equity 63,352 13,258
Real Estate Securities 214,996 40,188
Global Income 12,578 3,048
Value Equity 14,881 1,342
Income 761,837 379,420
Oppenheimer Variable Account Funds:
Money 1,813 2,492
Bond 127,847 110,136
Capital Appreciation 2,465,078 1,896,848
Growth 998,636 535,975
High Income 879,871 262,329
Multiple Strategies 262,282 224,756
Variable Insurance Products Fund:
Money Market 77,914 384,986
High Income 22,730 254,138
Equity-Income 2,606,594 1,084,415
Growth 1,850,462 1,260,670
Overseas 744,665 820,557
Variable Insurance Products Fund II:
Asset Manager 1,731,479 753,717
Contrafund 2,267,666 1,656,816
Variable Insurance Products Fund III
Growth & Income 75,900 28,920
Growth Opportunities 84,040 17,196
<PAGE>
(2) Continued
Cost of Proceeds
Shares from
Fund/Portfolio, Continued Acquired Shares Sold
- - ---------------------------------------------------------------------------
Advisers Management Trust:
Balanced $ 17,148 283,936
Bond 61,870 141,290
Growth 20,097 172,844
Federated Investors Insurance Series:
American Leaders II 49,651 9,336
High Income Bond II 71,541 18,670
Utility II 74,818 25,430
Alger American:
Small Cap 4,515,733 4,229,406
Growth 3,338,095 4,049,014
PBHG Insurance Series Fund:
PBHG Large Cap Growth 44,351 18,907
PBHG Growth II 21,715 1,945
Janus Aspen Series:
Aggressive Growth 7,117,628 6,402,194
Growth 1,384,477 762,866
Worldwide Growth 1,955,465 639,065
Balanced 478,781 65,175
Flexible Income 142,813 81,679
International Growth 305,903 65,108
Capital Appreciation 9,058 1,243
- - ---------------------------------------------------------------------------
Capital Transactions
The increase (decrease) in outstanding units from capital transactions
for the years or periods ended December 31, 1997, 1996 and 1995 are as
follows:
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
Notes to Financial Statements
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------
(2) Continued
GE Investments Funds, Inc.
-------------------------------------------------------------------------
Government International
S&P 500 Index Securities Money Market Total Return Equity
Fund Fund Fund Fund Fund
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Units outstanding at December 31, 1994 35,274 15,187 72,058 24,280
Net premiums 8,832 2,156 290,272 8,350 388
Loan interest (25) 14 (2) (6) -
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - - -
Surrenders (1,517) - (1,231) (1,017) -
Loans 1 - 11 (300) -
Cost of insurance and administrative expenses (4,847) (1,321) (9,888) (7,985) (31)
Interfund transfers 3,934 1,253 (256,809) 106,601 527
- - ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units from
capital transactions 6,378 2,102 22,353 105,643 884
- - ----------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 41,652 17,289 94,411 129,923 884
Net premiums 10,935 2,279 364,289 5,129 1,663
Loan interest (16) 54 (119) (6) 1
Transfers (to) from the
general account of Life of Virginia:
Death benefits (69) - (84) (904) -
Surrenders (540) (193) (456) (503) (124)
Loans (578) (141) (3,851) (249) (20)
Cost of insurance and administrative expenses (5,615) (1,444) (16,666) (12,173) (276)
Interfund transfers 10,270 (1,161) (282,823) 4,475 908
- - ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units from
capital transactions 14,387 (606) 60,290 (4,231) 2,152
- - ----------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 56,039 16,683 154,701 125,692 3,036
Net premiums 12,804 1,856 229,013 6,095 1,752
Loan interest (69) 15 (196) (11) -
Transfers (to) from the
general account of Life of Virginia:
Death benefits (3,774) - (1,005) (267) -
Surrenders (734) (782) (671) (523) (68)
Loans (328) (210) (330) (137) (22)
Cost of insurance and administrative expenses (6,083) (1,174) (17,924) (12,827) (414)
Interfund transfers 24,623 (16,388) (224,564) (101) 1,666
- - ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 26,439 (16,683) (15,677) (7,771) 2,914
- - ----------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 82,478 - 139,024 117,921 5,950
- - ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------
(2) Continued
GE Investments Funds, Inc.
-----------------------------------------------------------
Real Estate
Securities Global Income Value Equity Income
Fund Fund Fund Fund
- - --------------------------------------------------------------------------------------------------------------
<S> <C>
Units outstanding at December 31, 1994
Net premiums 13 - - -
Loan interest - - - -
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - -
Surrenders - - - -
Loans - - - -
Cost of insurance and administrative expenses (3) - - -
Interfund transfers 25 - - -
- - --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units from
capital transactions 35 - - -
- - --------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 35 - - -
Net premiums 1,148 - - -
Loan interest - - - -
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - -
Surrenders (26) - - -
Loans - - - -
Cost of insurance and administrative expenses (142) - - -
Interfund transfers 903 - - -
- - --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units from
capital transactions 1,883 - - -
- - --------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 1,918 - - -
Net premiums 4,672 128 444 74
Loan interest - - - 1
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - -
Surrenders (41) - - -
Loans (51) (24) - -
Cost of insurance and administrative expenses (1,046) (37) (77) (166)
Interfund transfers 5,271 829 661 37,858
- - --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 8,805 896 1,028 37,767
- - --------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 10,723 896 1,028 37,767
- - --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------------
(2) Continued
Oppenheimer Variable Account Funds
---------------------------------------------------------------------------
Capital High Multiple
Money Bond Appreciation Growth Income Strategies
Fund Fund Fund Fund Fund Fund
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Units outstanding at December 31, 1994 746 5,276 37,680 17,304 14,353 16,523
Net premiums 539 4,449 4,997 17,058 4,813 9,487
Loan interest - 4 - (5) - (2)
Transfers (to) from the
general account of Life of Virginia:
Death benefits - (8) - (94) (69) -
Surrenders (67) (516) (166) (2,524) (195) (570)
Loans - (76) (18) (404) (152) (32)
Cost of insurance and administrative expenses (140) (2,109) (2,129) (7,533) (1,682) (3,480)
Interfund transfers (272) 2,613 8,754 6,527 5,933 2,695
- - -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units from
capital transactions 60 4,357 11,438 13,025 8,648 8,098
- - -------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 806 9,633 49,118 30,329 23,001 24,621
Net premiums - 4,046 8,958 16,813 6,706 5,628
Loan interest - - - (5) (3) (1)
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - - (85) (805)
Surrenders - (241) (759) (3,514) (393) (8,467)
Loans - (100) - (230) (468) (34)
Cost of insurance and administrative expenses (66) (1,736) (4,613) (6,622) (2,322) (2,303)
Interfund transfers (695) 1,453 11,095 7,391 5,754 4,012
- - -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units from
capital transactions (761) 3,422 14,681 13,833 9,189 (1,970)
- - -------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 45 13,055 63,799 44,162 32,190 22,651
Net premiums 6 (539) 20,919 11,890 10,966 3,690
Loan interest - - 8 (14) - (4)
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - (8) - - -
Surrenders - 167 (1,104) (1,783) (595) (1,437)
Loans - 19 (1,014) (327) (766) (139)
Cost of insurance and administrative expenses (12) 221 (8,094) (4,561) (4,949) (1,822)
Interfund transfers (39) 114 1,620 4,663 11,197 (378)
- - -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions (45) (18) 12,327 9,868 15,853 (90)
- - -------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 - 13,037 76,126 54,030 48,043 22,561
- - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
(2) Continued
Variable Insurance Products
Variable Insurance Products Fund Fund II
----------------------------------------------------------------------------------
Money High Equity-
Market Income Income Growth Overseas Asset Manager
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Units outstanding at December 31, 1994 38,823 9,102 37,010 68,322 48,521 110,061
Net premiums 6,426 4,512 20,189 22,373 24,216 45,133
Loan interest 7 12 1 (88) (2) 12
Transfers (to) from the
general account of Life of Virginia:
Death benefits - (19) - (90) - (115)
Surrenders (198) (305) (807) (2,825) (1,078) (3,089)
Loans - - (195) 184 (410) (1,228)
Cost of insurance and administrative
expenses (4,372) (2,430) (8,253) (11,675) (10,355) (21,016)
Interfund transfers (10,812) 1,815 17,022 21,249 12,674 17,584
- - ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units from
capital transactions (8,949) 3,585 27,957 29,128 25,045 37,281
- - ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 29,874 12,687 64,967 97,450 73,566 147,342
Net premiums 127 - 31,658 34,244 23,922 34,545
Loan interest (1) (1) (2) (18) (1) (2)
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - (758) (919) (191) (1,099)
Surrenders (1,370) (1,514) (4,129) (6,625) (3,997) (5,334)
Loans (86) (103) (445) (2,672) (1,554) 3
Cost of insurance and administrative
expenses (2,125) (1,273) (11,544) (15,468) (10,492) (16,972)
Interfund transfers (6,185) (1,435) 22,081 (2,890) (155) (22,982)
- - -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units from
capital transactions (9,640) (4,326) 36,861 5,652 7,532 (11,841)
- - -----------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 20,234 8,361 101,828 103,102 81,098 135,501
Net premiums - 6 30,443 27,236 14,830 30,613
Loan interest (2) (1) 17 (20) (27) (18)
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - (8) (320) (11) -
Surrenders - (83) (2,046) (3,071) (3,198) (5,817)
Loans (67) (56) (1,200) (2,624) (1,198) (1,388)
Cost of insurance and administrative
expenses (1,113) (571) (13,023) (12,010) (7,354) (15,641)
Interfund transfers (19,052) (7,656) 18,157 3,258 (11,825) 20,449
- - ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions (20,234) (8,361) 32,340 12,449 (8,783) 28,198
- - ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 - - 134,168 115,551 72,315 163,699
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------------
(2) Continued
Variable Insurance Variable Insurance
Products Fund II Products Fund III Advisers Management Trust
------------------------------------------------------------------------------
Growth & Growth
Contrafund Income Opportunities Balanced Bond Growth
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Units outstanding at December 31, 1994 - - - 16,155 4,819 9,495
Net premiums 8,054 - - 2,225 7,196 3,178
Loan interest - - - - - -
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - - - (120)
Surrenders - - - (190) (1,548) (226)
Loans (31) - - - (187) (18)
Cost of insurance and administrative expenses (1,392) - - (381) (2,205) (1,443)
Interfund transfers 13,917 - - 310 (465) 312
- - -------------------------------------------------------------------- --------------------------------------------------------------
Net increase (decrease) in units from
capital transactions 20,548 - - 1,964 2,791 1,683
- - -------------------------------------------------------------------- --------------------------------------------------------------
Units outstanding at December 31, 1995 20,548 - - 18,119 7,610 11,178
Net premiums 22,057 - - - - -
Loan interest 7 - - - (4) -
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - - - (687)
Surrenders (573) - - - - (145)
Loans (327) - - - (143) -
Cost of insurance and administrative expenses (6,094) - - (1,013) (290) (676)
Interfund transfers 26,464 - - (2,836) (815) (1,078)
- - -------------------------------------------------------------------- --------------------------------------------------------------
Net increase (decrease) in units from
capital transactions 41,534 - - (3,849) (1,252) (2,586)
- - -------------------------------------------------------------------- --------------------------------------------------------------
Units outstanding at December 31, 1996 62,082 14,270 6,358 8,592
Net premiums 36,387 454 598 17 - 30
Loan interest (8) - - (2) - (6)
Transfers (to) from the
general account of Life of Virginia:
Death benefits (320) - - - - -
Surrenders (5,335) - - (651) (5) (179)
Loans (781) - - (77) - (60)
Cost of insurance and administrative expenses (12,219) (125) (125) (597) (128) (357)
Interfund transfers 17,222 3,484 5,332 (12,960) (6,225) (8,020)
- - -------------------------------------------------------------------- --------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 34,946 3,813 5,805 (14,270) (6,358) (8,592)
- - -------------------------------------------------------------------- --------------------------------------------------------------
Units outstanding at December 31, 1997 97,028 3,813 5,805 - - -
- - -------------------------------------------------------------------- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------
(2) Continued
Federated Investors
Insurance Series Alger American
--------------------------------------------------------
American
Leaders High Income Utility Small Cap Growth
Fund II Fund II Fund II Portfolio Portfolio
- - -------------------------------------------------------------------------------------------------------------------
<S> <C>
Units outstanding at December 31, 1994 - - - - -
Net premiums - - 3,462 464 260
Loan interest - - - - -
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - - -
Surrenders - - - - -
Loans - - - - -
Cost of insurance and administrative expenses - (6) (302) (93) (53)
Interfund transfers - 697 1,854 3,522 2,203
- - --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units from
capital transactions - 691 5,014 3,893 2,410
- - --------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 - 691 5,014 3,893 2,410
Net premiums 86 1,470 1,811 15,849 16,630
Loan interest - - - (350) 3
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - - -
Surrenders - - (4) (121) (115)
Loans - - - (1,411) (88)
Cost of insurance and administrative expenses (9) (297) (415) (3,890) (3,155)
Interfund transfers 128 763 16 29,422 113,835
- - --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units from
capital transactions 205 1,936 1,408 39,499 127,110
- - --------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 205 2,627 6,422 43,392 129,520
Net premiums 1,922 2,964 3,027 35,801 33,924
Loan interest - - - 192 58
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - - -
Surrenders - - - (387) (1,726)
Loans - (219) - (467) (562)
Cost of insurance and administrative expenses (260) (668) (725) (10,737) (10,957)
Interfund transfers 1,302 1,484 819 8,457 (86,458)
- - --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 2,964 3,561 3,121 32,859 (65,721)
- - --------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 3,169 6,188 9,543 76,251 63,799
- - --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------
(2) Continued
PBHG Insurance
Series Fund Janus Aspen Series
-------------------------- ------------------------
Large Cap Aggressive
Growth Growth II Growth Growth
Portfolio Portfolio Portfolio Portfolio
- - -------------------------------------------------------------------------------------------------------
<S> <C>
Units outstanding at December 31, 1994 - - 10,290 8,119
Net premiums - - 151 14,001
Loan interest - - - 5
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - -
Surrenders - - - (331)
Loans - - - (30)
Cost of insurance and administrative expenses - - (355) (3,586)
Interfund transfers - - 33,027 10,149
- - -------------------------------------------------------------------------------------------------------
Net increase (decrease) in units from
capital transactions - - 32,823 20,208
- - -------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 - - 43,113 28,327
Net premiums - - 7,091 50,232
Loan interest - - - 6
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - (18)
Surrenders - - - (6,335)
Loans - - - (1,118)
Cost of insurance and administrative expenses - - (4,114) (14,654)
Interfund transfers - - 23,785 18,450
- - -------------------------------------------------------------------------------------------------------
Net increase (decrease) in units from
capital transactions - - 26,762 46,563
- - -------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 - - 69,875 74,890
Net premiums 391 960 33,956 31,979
Loan interest - - (117) 31
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - -
Surrenders (16) - (2,572) (1,161)
Loans - - (475) (1,040)
Cost of insurance and administrative expenses (122) (148) (12,062) (10,466)
Interfund transfers 2,001 1,160 28,188 13,930
- - -------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 2,254 1,972 46,918 33,273
- - -------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 2,254 1,972 116,793 108,163
- - -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------
(2) Continued
Janus Aspen Series
------------------------------------------------------------------
Flexible International Capital
Worldwide Balanced Income Growth Appreciation
Portfolio Portfolio Portfolio Portfolio Portfolio
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Units outstanding at December 31, 1994 15,214 - - - -
Net premiums 10,566 5,909 1 - -
Loan interest - - - - -
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - - -
Surrenders (29) (217) - - -
Loans (2) - - - -
Cost of insurance and administrative expenses (3,212) (1,966) - - -
Interfund transfers 11,262 3,457 3 - -
- - ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units from
capital transactions 18,585 7,183 4 - -
- - ---------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 33,799 7,183 4 - -
Net premiums 30,707 3,070 287 1,725 -
Loan interest 5 2 - - -
Transfers (to) from the
general account of Life of Virginia:
Death benefits (13) - - - -
Surrenders (5,903) (324) - - -
Loans (441) (157) - - -
Cost of insurance and administrative expenses (7,782) (929) (79) (149) -
Interfund transfers 39,868 4,910 568 3,026 -
- - ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units from
capital transactions 56,441 6,572 776 4,602 -
- - ---------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 90,240 13,755 780 4,602 -
Net premiums 45,089 5,204 3,339 10,507 131
Loan interest 41 - - 1 -
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - - -
Surrenders (1,946) (491) - (270) -
Loans (626) (41) - (35) -
Cost of insurance and administrative expenses (15,323) (2,215) (868) (2,301) (99)
Interfund transfers 43,635 26,265 2,338 10,760 652
- - ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 70,870 28,722 4,809 18,662 684
- - ---------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 161,110 42,477 5,589 23,264 684
- - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(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
Financial statements prepared in conformity with generally accepted
accounting principles require management to make estimates and
assumptions that affect amounts and disclosures 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 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
GE Investments Funds, Inc. (the Fund) is an open-end diversified
management investment company.
Capital Brokerage Corporation, an affiliate of Life of Virginia, is a
Washington Corporation registered with the Commission under the
Securities Exchange Act of 1934 as a broker-dealer and is a member of
the National Association of Securities Dealers, Inc. Capital Brokerage
Corporation also serves as principal underwriter for variable life
insurance Policies issued by Life of Virginia.
GE Investment Management Incorporated (Investment Advisor), a
wholly-owned subsidiary of GE, currently serves as investment advisor
to GE Investments Funds, Inc. 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, .10% for the Government Securities Fund, .50%
for the Money Market and Total Return Funds, 1.00% for the
International Equity Fund and .85% for the Real Estate Securities Fund.
Prior to May 1, 1997, Aon Advisors, Inc. served as investment advisor
to the Fund and was subject to the same compensation arrangement as GE
Investment Management Incorporated.
Certain officers and directors of Life of Virginia are also officers
and directors of Capital Brokerage Corporation.
<PAGE>
THE LIFE INSURANCE COMPANY OF
VIRGINIA AND SUBSIDIARY
Consolidated Financial Statements
December 31, 1997, 1996, and 1995
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
The 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 subsidiary as of December 31, 1997 and 1996,
and the related consolidated statements of income, stockholders' equity, and
cash flows for the year ended December 31, 1997 and 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 consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. The accompanying consolidated
financial statements of The Life Insurance Company of Virginia for the year
ended December 31, 1995, were audited by other auditors whose report, dated
February 8, 1996 on those consolidated 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Life Insurance
Company of Virginia and subsidiary as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for the year ended December 31,
1997, 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.
KPMG Peat Marwick LLP
Richmond, Virginia
January 6, 1998
<PAGE>
REPORT OF INDEPENDENT AUDITIORS
Board of Directors
The Life Insurance Company of Virginia
We have audited the accompanying consolidated statements of income,
stockholder's equity, and cash flows of The Life Insurance Company of Virginia
and subsidiaries for the year 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 audit.
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. 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 financial statements referred to above present fairly,
in all material respects, the consolidated results of operations and cash flows
of The Life Insurance Company of Virginia and subsidiaries for the year ended
December 31, 1995, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Richmond, Virginia
February 8, 1996
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1997 and 1996
(in millions)
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------
Assets 1997 1996
- - ------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments:
Fixed maturities:
Available for sale - at fair value (amortized cost:
December 31, 1997 - $5,468.1; 1996 - $5,102.2) $ 5,622.6 5,142.7
Equity securities - at fair value
Common stocks (cost: December 31, 1997 - $43.1; 1996 - $31.6) 54.1 34.7
Preferred stocks (cost: December 31, 1997 - $87.6; 1996 - $123.5) 97.6 130.8
Mortgage loans on real estate (net of reserve for losses:
December 31, 1997 - $17.2; 1996 - $20.8) 496.2 585.4
Real estate (net) 11.8 19.4
Policy loans 188.4 179.5
Short-term investments - 42.4
- - ------------------------------------------------------------------------------------------------------------------
Total investments 6,470.7 6,134.9
- - ------------------------------------------------------------------------------------------------------------------
Cash 0.2 6.4
Receivables:
Premiums and other 6.6 7.9
Reinsurance recoverable 8.7 13.1
Accrued investment income 123.1 116.6
- - ------------------------------------------------------------------------------------------------------------------
Total receivables 138.4 137.6
Deferred policy acquisition costs 165.0 70.3
Goodwill (net of accumulated amortization: December 31, 1997 - $11.3;
1996 - $5.0) 117.1 125.4
Present value of future profits (net) 332.6 419.2
Property and equipment at cost (net) 3.2 1.7
Deferred income taxes 57.4 72.9
Other assets 15.4 12.3
Assets held in separate accounts 4,066.4 2,762.7
- - ------------------------------------------------------------------------------------------------------------------
Total assets $ 11,366.4 9,743.4
- - ------------------------------------------------------------------------------------------------------------------
</TABLE>
(continued)
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
Consolidated Balance Sheets, Continued
December 31, 1997 and 1996
(in millions, except share data)
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity 1997 1996
- - ------------------------------------------------------------------------------------------------------------------
<S> <C>
Policy liabilities:
Future policy benefits $ 520.6 518.3
Policy and contract claims 83.0 69.1
Unearned and advance premiums 0.1 0.1
Other policyholder funds 5,369.2 5,094.4
- - ------------------------------------------------------------------------------------------------------------------
Total policy liabilities 5,972.9 5,681.9
General liabilities:
Payable to affiliate, net 9.4 8.8
Commissions and general expenses 51.1 46.8
Current income taxes 45.8 45.4
Other liabilities 71.5 192.2
Liabilities related to separate accounts 4,066.4 2,762.7
- - ------------------------------------------------------------------------------------------------------------------
Total liabilities 10,217.1 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
Additional paid-in capital 925.9 928.1
Net unrealized investment gains 74.3 19.4
Retained earnings 145.1 54.1
- - ------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,149.3 1,005.6
- - ------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 11,366.4 9,743.4
- - ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
Consolidated Statements of Income
For the year ended December 31, 1997, the periods from April 1, 1996 to December
31, 1996 and from January 1, 1996 to March 31, 1996, and the year ended December
31, 1995 (in millions)
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------
Preacquisition
--------------------------------
Nine months Three months
Year ended ended ended Year ended
December 31, December 31, March 31, December 31,
1997 1996 1996 1995
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Revenue
Premiums and policy fees $ 273.2 154.7 92.4 179.3
Separate account fees 44.4 23.1 5.9 17.7
Net investment income (note 2) 472.5 334.4 112.0 402.1
Realized investment gains (losses) (note 2) 13.3 6.0 9.0 (76.5)
Other income 2.5 0.6 1.0 2.8
- - ----------------------------------------------------------------------------------------------------------------------
Total revenue earned 805.9 518.8 220.3 525.4
- - ----------------------------------------------------------------------------------------------------------------------
Benefits and Expenses
Benefits to policyholders 509.8 326.4 166.0 372.9
Commissions and general expenses 82.5 53.2 28.8 43.7
Amortization of intangibles 59.6 50.1 0.6 3.2
Amortization of deferred policy acquisition
costs 10.8 3.2 6.0 39.3
- - ----------------------------------------------------------------------------------------------------------------------
Total benefits and expenses 662.7 432.9 201.4 459.1
Income Before Income Tax 143.2 85.9 18.9 66.3
Provision for income tax (note 3)
Current expense (benefit) 64.8 39.7 (3.8) 37.9
Deferred expense (benefit) (12.6) (7.9) 10.8 (10.8)
- - ----------------------------------------------------------------------------------------------------------------------
52.2 31.8 7.0 27.1
- - ----------------------------------------------------------------------------------------------------------------------
Net income $ 91.0 54.1 11.9 39.2
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
For the year ended December 31, 1997, the periods from April 1, 1996 to December
31, 1996 and from January 1, 1996 to March 31, 1996, and the year ended December
31, 1995 (in millions)
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------
Preacquisition
---------------------------------
Nine months Three months
Year ended ended ended Year ended
December 31, 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
- - ------------------------------------------------------------------------------------------------------------------
Additional Paid-in Capital
Balance at beginning of period 928.1 818.4 749.1 704.1
Adjustment to reflect purchase method (note 1) (2.2) 109.7 - -
Capital contribution from parent (notes 4, 7) - - 69.3 45.0
- - ------------------------------------------------------------------------------------------------------------------
Balance at end of period 925.9 928.1 818.4 749.1
- - ------------------------------------------------------------------------------------------------------------------
Net Unrealized Investment Gains (Losses)
Balance at beginning of period 19.4 11.9 103.1 (97.5)
Adjustment to reflect purchase method
(note 1) - (11.9) - -
Net unrealized investment gains (losses) 54.9 19.4 (91.2) 200.6
- - ------------------------------------------------------------------------------------------------------------------
Balance at end of period 74.3 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
(note 1) - 22.4 - -
Net income 91.0 54.1 11.9 39.2
Dividends to stockholder - - - (40.0)
Stock dividend to affiliate (note 7) - - - (193.3)
- - ------------------------------------------------------------------------------------------------------------------
Balance at end of period 145.1 54.1 (22.4) (34.3)
- - ------------------------------------------------------------------------------------------------------------------
Stockholders' equity at end of period $ 1,149.3 1,005.6 811.9 821.9
- - ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the year ended December 31, 1997, the periods from April 1, 1996 to December
31, 1996 and from January 1, 1996 to March 31, 1996, and the year ended December
31, 1995 (in millions)
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------------
Preacquisition
----------------------------
Nine months Three months
Year ended ended ended Year ended
December 31, December 31, March 31, December 31,
1997 1996 1996 1995
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Cash flows from operating activities:
Net income $ 91.0 54.1 11.9 39.2
Adjustments to reconcile net income to cash provided by
(used in) operating activities:
Change in policy liabilities 239.0 53.5 (32.8) 114.2
Change in accrued investment income (6.5) (37.6) 4.1 (2.1)
Deferred policy acquisition costs (112.3) (74.9) (22.2) (76.1)
Amortization of deferred policy acquisition costs 10.8 3.2 6.0 39.3
Amortization of intangibles 59.6 50.1 0.6 3.2
Other amortization and depreciation 8.0 7.3 1.4 (1.2)
Premiums and operating receivables, commissions and general
expenses, income taxes and other (128.5) 77.8 22.9 (65.7)
Realized investment (gains) losses (13.3) (6.0) (9.0) 76.5
- - ------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) operating activities 147.8 127.5 (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
Fixed maturities - available for sale
Maturities - 201.5 46.1 35.0
Calls and prepayments - 353.5 101.0 58.6
Sales 739.1 452.0 115.8 1,700.3
All other investments 145.1 177.3 44.9 124.6
Purchase of investments:
Fixed maturities - available for sale (1,104.1) (1,279.5) (144.1) (1,950.7)
All other investments (30.8) (39.5) (65.5) (183.5)
Purchase of property and equipment (2.4) - (0.2) (0.8)
- - ------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) investing activities (210.7) (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 4.7 (12.7) 28.8 -
Interest sensitive life, annuity and investment contract deposits 1,894.2 1,275.4 301.9 1,059.5
Interest sensitive life, annuity and investment contract withdrawals (1,842.2) (1,305.6) (358.8) (1,031.7)
- - ------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) financing activities 56.7 (42.9) (65.3) 21.8
- - ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash (6.2) (0.7) 5.5 (21.4)
Cash at beginning of period 6.4 7.1 1.6 23.0
- - ------------------------------------------------------------------------------------------------------------------------------
Cash at end of period $ 0.2 6.4 7.1 1.6
- - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA & SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1997
===============================================================================
(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 ("Life
of Virginia" or "Company") and its subsidiary, Assigned Settlements
Inc. 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 Financial Assurance Holdings, Inc. ("GEFAH").
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 23%, 34% and 43% of premium and
annuity consideration collected, in 1997, 1996, and 1995, respectively,
came from customers residing in the South Atlantic region of the United
States.
Although the Company markets its products through numerous
distributors, approximately 22%, 21% and 14% of the Company's sales in
1997, 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.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA & SUBSIDIARY
Notes to Consolidated Financial Statements
===============================================================================
(1) Continued
Estimates
Financial statements prepared in conformity with generally accepted
accounting principles require management to make estimates and
assumptions that could affect amounts and disclosures reported therein.
Actual results could differ from those estimates. 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.
Certain 1996 and 1995 amounts have been reclassified to conform to 1997
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. The net purchase price for Life of Virginia and
its subsidiary of $929.9 million was allocated 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.
In addition to revaluing all material tangible assets and liabilities
to their respective estimated fair values as of the closing date of the
sale, Life of Virginia also recorded in its consolidated 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 $118
million (net of purchase accounting adjustments of $2.2 million in
1997), 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.
<PAGE>
(1) Continued
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 (which becomes the new cost basis) 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
an appropriate rate.
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 range 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 12.4%,
11.6%, 10.8%, 9.5% and 8.1% for the years ended December 31, 1998
through 2002, 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.
<PAGE>
(1) Continued
The projected ending balance of PVFP will be further adjusted to
reflect the impact of unrealized gains or losses on fixed maturities
classified 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 applicable income
tax. The components of PVFP are as follows:
<TABLE>
<CAPTION>
Preacquisition
------------------------------
Nine months Three months
Year ended ended ended Year ended,
December 31, December 31, March 31, December 31,
(millions) 1997 1996 1996 1995
- - ---------------------------------------------------------------------------------------------------------------
<S> <C>
PVFP - beginning of period $ 419.2 - 32.6 48.6
Adjustment related to the purchase
method of accounting - 484.0 - -
Interest accreted at 6.75% for 1997
and 6.25% for 1996 28.4 22.4 0.5 2.1
Gross amortization, excluding interest (81.6) (67.5) (1.1) (5.3)
Dividend of Globe Life Insurance
Company (note 7) - - - (12.8)
Effect of net unrealized
investment (gains) losses (33.4) (19.7) - -
- - ---------------------------------------------------------------------------------------------------------------
PVFP - end of period $ 332.6 419.2 32.0 32.6
- - ---------------------------------------------------------------------------------------------------------------
</TABLE>
Goodwill
Under the purchase method of accounting, Goodwill is the excess of the
purchase price over the fair value of assets and liabilities acquired
and PVFP. The Company has elected to amortize goodwill on the straight
line basis over a 20 year period.
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 consolidated
financial statements. As of December 31, 1997, the Company believes
that no such adjustment is necessary.
<PAGE>
(1) Continued
Deferred Tax Assets and Liabilities
Pursuant to the acquisition on April 1, 1996, GE Capital, 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 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 the payment of a 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.
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.
<PAGE>
(1) Continued
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 classified as available for sale and 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 mortgage-backed securities. Investment income on
mortgage-backed securities is initially based upon yield, cash flow and
prepayment assumptions at the date of purchase. Subsequent revisions in
those assumptions are recorded using the retrospective method, whereby
the amortized cost of the securities is adjusted to the amount that
would have existed had the revised assumptions been in place at the
date of purchase. The adjustments to amortized cost are recorded as a
charge or credit to investment income.
Short-term investments are carried at amortized cost which approximates
fair value. Equity securities are valued at fair value. Mortgage loans
are carried at their unpaid principal balance, net of allowances for
estimated uncollectible amounts. 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.
Changes in the market values of investments available-for-sale, net of
the effect on deferred policy acquisition costs, present value of
future profits and deferred federal income taxes are reflected as
unrealized investment gains or losses in a separate component of
stockholders' interest and accordingly, have no effect on net income.
<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
value 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 consolidated statements of
income. In general, the Company ceases to accrue investment income when
interest or dividend payments are in arrears.
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.
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.
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 policy acquisition costs is 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.
<PAGE>
(1) Continued
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.
The components of deferred policy acquisition costs are as follows:
<TABLE>
<CAPTION>
Preacquisition
-------------------------
Nine months Three months
Year ended ended ended Year ended
December 31, December 31, March 31, December 31,
(millions) 1997 1996 1996 1995
- - ------------------------------------------------------------------------------------------------------------
<S> <C>
Deferred policy acquisition costs - $ 70.3 - 363.9 388.1
beginning of period
Commissions and expenses deferred 112.3 74.9 22.2 76.1
Amortization (10.8) (3.2) (6.0) (39.3)
Dividend of Globe Life Insurance
Company (note 7) - - - (22.8)
Effect of net unrealized investment
(gains) losses (6.8) (1.4) 17.9 (38.2)
- - ------------------------------------------------------------------------------------------------------------
Deferred policy acquisition costs - end of period $ 165.0 70.3 398.0 363.9
- - ------------------------------------------------------------------------------------------------------------
</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
<PAGE>
(1) Continued
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.
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, 1997, approximately $44.6 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
<PAGE>
(1) Continued
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.
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 fair 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.
<PAGE>
(2) Continued
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, 1997 and 1996 were as
follows:
<TABLE>
<CAPTION>
December 31, 1997
-------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(millions) Cost Gains Losses Value
- - ----------------------------------------------------------------------------------------------------------------
<S> <C>
Available for sale:
U.S. government and agencies $ 44.3 1.3 - 45.6
States and political subdivisions 1.8 0.3 - 2.1
Foreign governments 200.1 6.5 (0.3) 206.3
Corporate securities 3,362.1 120.6 (8.1) 3,474.6
Mortgage-backed securities 1,859.8 39.6 (5.4) 1,894.0
- - ----------------------------------------------------------------------------------------------------------------
Total fixed maturities 5,468.1 168.3 (13.8) 5,622.6
Total equity securities 130.7 21.5 (0.5) 151.7
- - ----------------------------------------------------------------------------------------------------------------
Total available for sale $ 5,598.8 189.8 (14.3) 5,774.3
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
<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>
<PAGE>
(2) Continued
The scheduled maturity distribution of the fixed maturity portfolio at
December 31 follows. Expected maturities may differ from scheduled
contractual maturities because issuers of securities may have the right
to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
1997
---------------------------
Amortized Fair
(millions) Cost Value
- - ----------------------------------------------------------------------------------------------------------
<S> <C>
Due in one year or less $ 105.8 106.7
Due after one year through five years 1,196.8 1,224.3
Due after five years through ten years 1,654.9 1,705.3
Due after ten years 650.8 692.3
- - -----------------------------------------------------------------------------------------------------------
Subtotals 3,608.3 3,728.6
Mortgage-backed securities 1,859.8 1,894.0
- - -----------------------------------------------------------------------------------------------------------
Totals $ 5,468.1 5,622.6
- - -----------------------------------------------------------------------------------------------------------
</TABLE>
As required by law, the Company has investments on deposit with
governmental authorities and banks for the protection of policyholders
of $4.7 million and $4.5 million at December 31, 1997 and 1996,
respectively.
At December 31, 1997, approximately 24.8% and 15.9% of the Company's
investment portfolio is comprised of securities issued by the
manufacturing and financial industries, respectively, the vast majority
of which are rated investment grade, and which are senior secured
bonds. No other industry group comprises more than 10% of the Company's
investment portfolio. This portfolio is widely diversified among
various geographic regions in the United States, and is not dependent
on the economic stability of one particular region.
At December 31, 1997, the Company did not hold any fixed maturity
securities, other than securities issued or guaranteed by the U.S.
government, which exceeded 10% of shareholders interest.
<PAGE>
(2) Continued
The credit quality of the fixed maturity portfolio at December 31,
follows. The categories are based on the higher of the ratings
published by Standard & Poors or Moody's.
<TABLE>
<CAPTION>
1997 1996
------------------------- -------------------------
Fair Fair
value Percent value Percent
- - ------------------------------------------------------------------------------------------------------
<S> <C>
Agencies and treasuries $ 308 5.5% $ 317 6.2%
AAA/Aaa 1,465 26.0 1,437 27.9
AA/Aa 320 5.7 247 4.8
A/A 1,101 19.6 988 19.2
BBB/Baa 1,862 33.1 1,864 36.3
BB/Ba 307 5.5 207 4.0
B/B 77 1.4 13 0.3
Not rated 182 3.2 69 1.3
- - -----------------------------------------------------------------------------------------------------
Totals $ 5,622 100.0% $ 5,142. 100.0%
- - -----------------------------------------------------------------------------------------------------
</TABLE>
Bonds with earnings ranging from AAA/Aaa to BBB-/Baa3 are generally
regarded as investment grade securities. Some agencies and treasuries
(that is, those securities issued by the United States government or an
agency thereof) are not rated, but all are considered to be investment
grade securities. Finally, some securities, such as private placements,
have not been assigned a rating by any rating service and are therefore
categorized as "not rated." This has neither positive nor negative
implications regarding the value of the security.
<PAGE>
(2) Continued
The Company had $6.4 million and $12.6 million of non-income producing
investments on December 31, 1997 and December 31, 1996, respectively.
"Impaired" loans are defined under generally accepted accounting
principles as loans for which it is probable that the lender will be
unable to collect all amounts due according to the original contractual
terms of the loan agreement. That definition excludes, among other
things, leases or large groups of smaller-balance homogenous loans, and
therefore applies principally to the Company's commercial loans.
Under these principles, the Company has two types of "impaired" loans
as of December 31, 1997 and 1996: loans requiring allowances for losses
and loans expected to be fully recoverable because the carrying amount
has been reduced previously through charge-offs or deferral at income
recognition ($23.0 million and $-, respectively). There was no
allowance for losses on these loans as of December 31, 1997 and 1996.
Average investment in impaired loans during 1997 was $23.0 million and
interest income earned on these loans while they were considered
impaired was $2.0 million. There were no impaired loans nor related
interest income earned on such loans in 1996.
The Company's mortgage and real estate portfolio is distributed by
geographic location and type. However, the Company has concentration
exposures in certain regions and in certain types as shown in the
following two tables.
Geographic distribution as of December 31, 1997:
<TABLE>
<CAPTION>
Mortgage Real estate
- - -----------------------------------------------------------------------------------------------------------
<S> <C>
South Atlantic 47.0% 60.3%
East North Central 14.8 2.3
Mountain 14.1 -
West South Central 12.0 37.4
Pacific 6.6 -
Middle Atlantic 3.9 -
East South Central 1.6 -
- - ------------------------------------------------------------------------------------------------------------
Total 100.0% 100.0%
- - ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(2) Continued
Type distribution as of December 31, 1997:
<TABLE>
<CAPTION>
Mortgage Real estate
- - --------------------------------------------------------------------------------------------------------
<S> <C>
Office building 19.8% 51.1%
Retail 23.7 21.3
Industrial 21.2 -
Apartments 21.8 25.3
Other 13.5 2.3
- - --------------------------------------------------------------------------------------------------------
Total 100.0% 100.0%
- - --------------------------------------------------------------------------------------------------------
</TABLE>
Net unrealized gains and losses on investment securities classified as
available-for-sale are reduced by deferred income taxes and adjustments
to the present value of future profits and deferred policy acquisition
costs that would have resulted had such gains and losses been realized.
Net unrealized gains and losses on available-for-sale investment
securities reflected as a separate component of stockholders' equity
are summarized as follows:
<TABLE>
<CAPTION>
Preacquisition
-------------------------------------
Nine months Three months
Year ended ended ended Year ended
December 31, December 31, March 31, December 31,
(millions) 1997 1996 1996 1995
- - --------------------------------------------------------------------------------------------------------------------
<S> <C>
Net unrealized gains on available-for-sale investment securities before
adjustments:
Fixed maturities $ 154.5 40.5 2.8 143.8
Equity securities 21.0 10.4 5.8 23.2
- - --------------------------------------------------------------------------------------------------------------------
Subtotal 175.5 50.9 8.6 167.0
Adjustments to the present value
of future profits and deferred policy
acquisition costs (61.2) (21.1) 9.9 (8.0)
Deferred income taxes (40.0) (10.4) (6.6) (55.9)
- - --------------------------------------------------------------------------------------------------------------------
Net unrealized gains on
available-for-sale investment
securities 74.3 19.4 11.9 103.1
- - --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(2) Continued
The source of investment income of the Company is as follows:
<TABLE>
<CAPTION>
Preacquisition
----------------------------------
Nine months Three months
Year ended ended ended Year ended
December 31, December 31, March 31, December 31,
(millions) 1997 1996 1996 1995
- - --------------------------------------------------------------------------------------------------------------
<S> <C>
Fixed maturities $ 398.5 274.4 93.1 332.8
Equity securities 7.3 8.7 4.2 10.8
Mortgage loans on real estate 48.3 41.3 13.5 49.8
Short-term investments 1.0 2.5 0.5 3.5
Other investments 22.3 12.9 3.0 13.2
- - --------------------------------------------------------------------------------------------------------------
Gross investment income 477.4 339.8 114.3 410.1
Investment expenses (4.9) (5.4) (2.3) (8.0)
- - --------------------------------------------------------------------------------------------------------------
Net investment income $ 472.5 334.4 112.0 402.1
- - --------------------------------------------------------------------------------------------------------------
</TABLE>
Gross realized investment gains and losses resulting from the sales of
investment securities were as follows:
<TABLE>
<CAPTION>
Preacquisition
---------------------------------
Nine months Three months
Year ended ended ended Year ended
December 31, December 31, March 31, December 31,
(millions) 1997 1996 1996 1995
- - ------------------------------------------------------------------------------------------------------
<S> <C>
Fixed maturities available for sale:
Gross gains $ 8.3 0.6 0.5 12.9
Gross losses - (0.7) (1.4) (90.2)
Fixed maturities held to maturity:
Gross gains - - - 1.1
Gross losses - - - (13.8)
Equity securities 3.4 6.0 10.3 5.6
Mortgage loans on real estate (0.8) - (0.4) 2.3
Other 2.4 0.1 - 5.6
- - ---------------------------------------------------------------------------------------------------
Total before tax 13.3 6.0 9.0 (76.5)
Less applicable tax (4.7) (2.3) (1.9) 26.8
- - ----------------------------------------------------------------------------------------------------
Total $ 8.6 3.7 7.1 (49.7)
- - ----------------------------------------------------------------------------------------------------
</TABLE>
<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
Year ended ended ended Year ended
December 31, December 31, March 31, December 31,
(millions) 1997 1996 1996 1995
- - --------------------------------------------------------------------------------------------------------------
<S> <C>
Fixed maturities:
Available for sale $ 114.0 40.5 (141.0) 298.7
Held to maturity - - - 233.7
Equity securities 10.6 10.4 (17.4) 26.1
- - --------------------------------------------------------------------------------------------------------------
Net unrealized investment gains (losses) $ 124.6 50.9 (158.4) 558.5
- - --------------------------------------------------------------------------------------------------------------
</TABLE>
(3) Income Tax
Beginning April 1, 1996, Life of Virginia and its subsidiary have been
included in the life insurance company consolidated federal income tax
return of GE Capital Assurance and are also subject to a separate
tax-sharing agreement, as approved by state insurance regulators, the
provisions of which are substantially the same as the tax-sharing
agreement with GE Capital. Prior to 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.
<PAGE>
(3) Continued
Income taxes are recorded in the statements of income and directly in
stockholders' equity accounts. Income taxes for the years ending
December 31 was allocated as follows:
<TABLE>
<CAPTION>
Preacquisition
-----------------------------------
Nine months Three months
Year ended ended ended Year ended
December 31, December 31, March 31, December 31,
(millions) 1997 1996 1996 1995
- - ---------------------------------------------------------------------------------------------------------
<S> <C>
Statement of income:
Operating income (excluding
realized investment gains
and losses) $ 47.5 29.5 5.1 53.9
Realized investment gains/losses 4.7 2.3 1.9 (26.8)
- - --------------------------------------------------------------------------------------------------------
Income tax expense included
in the statement of income 52.2 31.8 7.0 27.1
Stockholders' equity:
Unrealized gains/(losses) on
securities available for sale 29.6 10.4 (49.3) 86.0
- - --------------------------------------------------------------------------------------------------------
Total $ 81.8 42.2 (42.3) 113.1
- - --------------------------------------------------------------------------------------------------------
</TABLE>
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
Year ended ended ended Year ended
December 31, December 31, December 31, December 31,
1997 1996 1996 1995
--------------------- --------------------- -------------------- ---------------------
<S> <C>
Statutory tax rate ..................... $ 50.1 35.0% $ 30.1 35.0% $ 6.6 35.0% $ 23.2 35.0%
Tax-exempt investment income
deductions ............................ ( 0.9) (0.7) ( 1.0) (1.2) -- (0.1) ( 0.1) (0.1)
Adjustment of prior year taxes ......... -- -- -- -- -- -- 3.5 5.3
Other-net .............................. 3.0 2.2 2.7 3.2 0.4 2.1 0.5 0.7
------- ---- ------- ---- ------ ---- ------- ----
Effective tax rate ..................... $ 52.2 36.5% $ 31.8 37.0% $ 7.0 37.0% $ 27.1 40.9%
======= ==== ======= ==== ====== ==== ======= ====
</TABLE>
Significant compnents of Life of Virginia's deffered tax liabilities and
assets are as follows (in millions):
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
-------------- -------------
<S> <C>
Deferred tax liabilities:
Present value of future profits ......... $ 79.1 89.9
Unrealized investment gains ............. 40.0 10.4
Other ................................... 2.7 6.5
------ -----
Total deferred tax liabilities ........... 121.8 106.7
------ -----
Deferred tax assets:
Insurance reserve amounts ............... 142.9 120.4
Policy acquisition costs ................ 11.8 34.3
Guaranty fund amounts ................... 9.4 10.8
Other ................................... 15.1 14.1
------ -----
Total deferred tax assets ................ 179.2 179.6
------ -----
Net deferred tax assets .................. $ 57.4 72.9
====== =====
</TABLE>
Deferred taxes are allocated to individual subsidiaries by applying the
asset and liability method of accounting for deferred income taxes.
Intercompany balances are settled annually.
<PAGE>
(3) Continued
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 (refunded) for the year ended December
31, 1997, the nine months ended December 31, 1996, three months ended
March 31, 1996, and the year ended December 31, 1995 was $64.4 million,
$38.6 million, $(2.4) million and $44.9 million, respectively.
(4) Reinsurance and Claim Reserves
Life of Virginia is involved in both the cession and assumption of
reinsurance with other companies. Life of Virginia's reinsurance
consists primarily of long-duration contracts that are entered into
with 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
Year ended ended ended Year ended
December 31, December 31, March 31, December 31,
1997 1996 1996 1995
--------------- --------------- --------------- ---------------
Earned Earned Earned Earned
--------------- --------------- --------------- ---------------
<S> <C>
Direct $ 337.3 210.5 77.2 261.5
Assumed 20.7 6.6 35.0 4.3
Ceded 84.8 62.4 19.8 86.5
- - -------------------------------------------------------------------------------------------------------
Net premiums 273.2 154.7 92.4 179.3
- - -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(4) Continued
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
$72.7 million, $60.5 million, $17.2 million and $63.1 million for the
year ended December 31, 1997, the nine months ended December 31, 1996,
three months ended March 31, 1996 and the year ended December 31, 1995,
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.
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 book
value of $501.4 million and held to maturity fixed maturities with a
fair value of $81.4 million and a book value 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.
<PAGE>
(4) Continued
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 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.
<TABLE>
<CAPTION>
Millions Fair 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>
<PAGE>
(5) Employee Benefits
Savings Plan
Beginning April 1, 1996, Life of Virginia's salaried and commissioned
employees participated in a General Electric contributory savings plan.
Provisions made for the savings plan were $.9 million and $.6 million
for the year ended December 31, 1997 and 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 and $.8 million for the three months ended March
31, 1996, and the year ended December 31, 1995, 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 year ended December 31, 1995
charged to Life of Virginia's operations amounted to $.1 million and
$.5 million, respectively. This plan terminated upon the acquisition of
Life of Virginia by GE Capital.
Pension Plan
Beginning April 1, 1996, Life of Virginia's salaried and commissioned
employees 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 $.6 million and $.4 million expense were
incurred for the year ended December 31, 1997 and the nine months ended
December 31, 1996.
<PAGE>
(5) Continued
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
determined 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, the Company had net pension credits of $1.2 million and
$3.8 million in the three months ended March 31, 1996 and the year
ended December 31, 1995. This plan terminated upon the acquisition of
Life of Virginia by GE Capital.
Postretirement Benefits Other Than Pensions
Beginning April 1, 1996, Life of Virginia's salaried and commissioned
employees participated in a General Electric retiree health and life
insurance benefit plan. The plans principally provides 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 year ended
December 31, 1997 and the nine months ended December 31, 1996 for the
retiree health and life insurance benefit plan were $1.9 million and
$1.3 million, respectively.
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 provided medical benefits, prior to and subsequent
to Medicare eligibility, and the other provided life insurance
benefits. The postretirement health care plan was contributory, with
retiree contributions adjusted annually; the life insurance plan was
noncontributory. Both plans were funded on a pay-as-you-go basis. These
plans terminated upon the acquisition of Life of Virginia by GE
Capital.
<PAGE>
(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, 1997
are as follows:
<TABLE>
<CAPTION>
(millions) Minimum lease payments
- - ------------------------------------------------------------------------
<S> <C>
1998 $ 1.1
1999 0.8
2000 0.5
2001 0.3
2002 -
Later years -
- - ------------------------------------------------------------------------
Total minimum payments required $ 2.7
- - ------------------------------------------------------------------------
</TABLE>
Rental expense for all operating leases for the year ended December 31,
1997, for the nine months ended December 31, 1996, the three months
ended March 31, 1996 and the year ended December 31, 1995 amounted to
$1.3 million, $2.5 million, $.8 million and $3.6 million, respectively.
(7) Related Party Transactions
Life of Virginia pays investment advisory fees and other fees to
affiliates. Amounts incurred for these items aggregated $7.6 million,
$3.2 million, $3.5 million and $5.8 million for the year ended December
31, 1997, the nine months ended December 31, 1996, the three months
ended March 31, 1996 and the year ended December 31, 1995,
respectively. Life of Virginia charges affiliates for certain services
and for the use of facilities and equipment which aggregated $4.6
million, $2.0 million, $1.0 million, and $10.0 million for the year
ended December 31, 1997, the nine months ended December 31, 1996, the
three months ended March 31, 1996, and the year ended December 31,
1995, respectively.
<PAGE>
(7) Continued
At December 31, 1997 and 1996, Life of Virginia held investments in
securities of certain affiliates amounting to $2.6 million. Amounts
included in net investment income related to these holdings totaled
$0.1 million, $0.1 million, $0.2 million and $1.0 million for the year
ended December 31, 1997, for the nine months ended December 31, 1996,
the three months ended March 31, 1996 and the year ended December 31,
1995, respectively.
In January 1995, Life of Virginia dividend 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
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 book value of $7.5
million, common stocks with a fair value of $5.6 million and book value
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.
(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.
<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, 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 no interest rate swaps outstanding at December 31,
1997 and 1996.
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.
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.
<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, 1997 and December 31, 1996,
totaled $16.7 million and $1.7 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 Company has no derivative financial instruments as defined by SFAS
No. 119 at December 31, 1997, other than mortgage loan commitments of
$67.7 million.
<PAGE>
(9) Continued
The carrying amount and fair value of certain of Life of Virginia's
financial instruments are as follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
------------------------------------------------
Carrying Fair Carrying Fair
(millions) Amount Value Amount Value
- - ---------------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Fixed maturities and
equity securities
(note 2) $ 5,774.3 5,774.3 5,308.2 5,308.2
Mortgage loans on
real estate 496.2 532.2 585.4 622.6
Policy loans 188.4 188.4 179.5 179.5
Cash, short-term
investments and
receivables 138.6 138.6 186.4 186.4
Assets held in separate accounts 4,066.4 4,066.4 2,762.7 2,762.7
- - ------------------------------------------------------------------------------------------------------------
Liabilities:
Investment type
insurance contracts 3,113.8 3,100.7 3,055.0 3,027.6
Commissions and
general expenses 51.1 51.1 46.8 46.8
Liabilities related to separate accounts 4,066.4 4,066.4 2,762.7 2,762.7
- - ------------------------------------------------------------------------------------------------------------
</TABLE>
See Note 1 regarding the method used to estimate fair values.
<PAGE>
1
(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,
1997, is $51.8 million.
Statutory net income (loss) and stockholders' equity is summarized
below:
<TABLE>
<CAPTION>
Preacquisition
------------------------------
Nine months Three months
Year ended ended ended
December 31, December 31, March 31, December 31,
(millions) 1997 1996 1996 1995
- - ----------------------------------------------------------------------------------------------------------
<S> <C>
Statutory net income $ 73.9 69.7 (8.3) 53.9
Statutory stockholders' equity 522.5 419.1 360.5 364.2
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
The National Association of Insurance Commissioners has developed
certain Risk Based Capital (RBC) requirements to help regulators
identify life insurers that may be inadequately capitalized. 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,
1997 the Company's Total Adjusted Capital and Authorized Control Level
- RBC were above the calculated minimum regulatory thresholds.
<PAGE>
APPENDIX C
Illustrations of Death Benefits, Cash Values and Surrender Values
The following tables illustrate how the Surrender Value, Cash Value and
Death Benefit of a Policy change with the investment experience of Separate
Account II and with changes in the cost of insurance rates and administrative
charges. The tables illustrate the Policy values that would result based upon
the hypothetical investment rates of return if premiums are paid as indicated.
The tables are also based on the assumption that the Policyowner has not
requested an increase or decrease in the Specified Amount of the Policy, and
that no policy loans or partial surrenders have been made. Upon request, Life
of Virginia will provide an illustration based upon the proposed Insured's age,
sex (where appropriate), and underwriting classification, the proposed
Specified Amount of insurance, and the frequency and amount of proposed premium
payments.
The tables on the following pages illustrate a Policy issued to a male,
age 40, with an initial Specified Amount of $50,000 (of insurance) and premium
payments of $600 per year. The second column of the illustrations shows the
accumulated value of the premiums paid at the stated interest rate. The
remaining columns illustrate the Surrender Value, Cash Value and Death Benefit
of a Policy over the designated period under varying assumptions of investment
rates of return, underwriting risk classification, cost of insurance and death
benefit option. Policy values also take into account the charges deducted from
premium payments and Cash Value (See Charges and Deductions).
The maximum cost of insurance rates allowable under the Policy (shown in
the illustrations as "guaranteed") are based upon the 1980 Commissioners'
Standard Ordinary Mortality Table. At most ages, Life of Virginia currently
charges lower cost of insurance rates (shown in the illustrations as "current")
and anticipates charging these rates for the foreseeable future.
The tables differ as shown below:
<TABLE>
<CAPTION>
Rates of
Investment Underwriting Cost of Death
Return Risk Insurance Benefit
Illustrated Classification Rates Option Page
- - ------------- ---------------- ------------ -------- -----
<S> <C> <C> <C> <C>
0,6 & 12% PNS Guaranteed A A-3
0,6 & 12% PNS Current A A-4
0,6 & 12% PNS Guaranteed B A-5
0,6 & 12% PNS Current B A-6
0,6 & 12% NS Guaranteed A A-7
0,6 & 12% NS Current A A-8
0,6 & 12% NS Guaranteed B A-9
0,6 & 12% NS Current B A-10
0,6 & 12% PS Guaranteed A A-11
0,6 & 12% PS Current A A-12
0,6 & 12% PS Guaranteed B A-13
0,6 & 12% PS Current B A-14
0,6 & 12% S Guaranteed A A-15
0,6 & 12% S Current A A-16
0,6 & 12% S Guaranteed B A-17
0,6 & 12% S Current B A-18
</TABLE>
The illustrations using the cost of insurance rates currently charged by
Life of Virginia assume those current cost of insurance rates are continued for
the entire period indicated. Although Life of Virginia currently makes
deductions for cost of insurance based upon the currrent rates, and anticipates
continuing such practice for the foreseeable future, THERE IS NO GUARANTEE THAT
SUCH RATES WILL BE CONTINUED. At the discretion of Life of Virginia, the rates
could be increased or decreased, based upon its estimate of expected mortality.
Thus, the values in the third through the eleventh columns of those
illustrations using current cost of insurance rates indicate values that would
be available, assuming the stated investment rates of return, if the current
rate of cost of insurance and monthly administrative charges were continued.
THOSE COLUMNS DO NOT ILLUSTRATE VALUES THAT WOULD BE GUARANTEED IF THE
HYPOTHETICAL INVESTMENT RATES OF RETURN WERE EARNED.
The amounts shown for the Surrender Value, Cash Value, and Death Benefit
reflect the fact that the net investment return of the Subdivision is lower
than the gross return on the assets held in the particular Fund as a result of
expenses paid by it and charges levied against the Investment Subdivision. The
illustrations take into account a charge of 0.58%, which represents the average
investment advisory fee of the Funds, and a charge of .22%, which represents
the average annual
C-1
<PAGE>
expenses of the Funds. Assumed charges for fees and expenses, as an annual
percentage of the average daily net assets of the Funds, are based on the
actual fees and expenses incurred by the funds in 1997. Actual fees and
expenses charged to a policy will depend on the Investment Subdivisions chosen
by the Policyowner. The illustrations also take into account the charge by Life
of Virginia to an Investment Subdivision for assuming mortality and expense
risks, made daily at an annual rate of .70% of the net assets of the Investment
Subdivision. After deduction of these amounts, the illustrated gross annual
investment rates of return of 0%, 6% and 12%, correspond to approximate net
annual rates of -1.50%, 4.50% and 10.50%, respectively.
The annual fees and expenses used for all the funds in these illustrations
are net of certain reimbursements and fee waivers by the Funds' investment
advisors. Life of Virginia cannot guarantee that the reimbursements will
continue.
All of the information used to determine average fees and expenses for the
illustrations was provided by the Funds. In some cases, estimates were
substituted by the Funds for the actual fees and expenses. Life of Virginia
does not represent that such estimates are true and complete, and has not
independently verified these figures.
The hypothetical values shown in the tables do not reflect any charges for
Federal income taxes against Separate Account II, since Life of Virginia is not
currently making such charges. However, such charges may be made in the future
and, in that event, the gross annual investment rate of return would have to
exceed 0%, 6% or 12%, by an amount sufficient to cover the tax charges in order
to produce the surrender values, cash values, and death benefits illustrated
(see Federal Tax Matters).
The tables do not reflect the increased premium required for underwriting
risk classes with anticipated mortality in excess of non-smoker (standard); if
such tables were shown they would indicate for otherwise identical Polices
higher cost of insurance charges and lower cash values and surrender values.
The tables also do not reflect any reduction in sales charges available to
certain groups (see Reduction of Charges for Group Sales); if the reduced
charges were illustrated they would show increased cash values and surrender
values. The cost of insurance could be reduced, and/or the death benefit
increased (under Option A) depending on how the reductions in administrative
charges and mortality costs were applied.
C-2
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 40 Initial Specified Amount $50,000
Preferred Nonsmoker Underwriting Risk Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $ 600
</TABLE>
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Gross Annual Investment Gross Annual Investment Gross Annual Investment
Return with Maximum Charges Return with Maximum Charges Return with Maximum Charges
Premiums (2)(3) (2)(3) (2)(3)
End Accumulated ------------------------------- ------------------------------- ------------------------------
of At 5% Interest Surrender Account Death Surrender Account Death Surrender Account Death
Policy Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- - -------- --------------- ----------- --------- --------- ----------- --------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 630 62 362 50,362 89 389 50,389 117 417 50,417
2 1,292 286 616 50,616 359 689 50,689 437 767 50,767
3 1,986 550 857 50,857 687 994 50,994 836 1,144 51,144
4 2,715 799 1,084 51,084 1,017 1,302 51,302 1,264 1,549 51,549
5 3,481 1,035 1,298 51,298 1,350 1,612 51,612 1,724 1,987 51,987
6 4,285 1,286 1,496 51,496 1,714 1,924 51,924 2,247 2,457 52,457
7 5,129 1,520 1,677 51,677 2,078 2,236 52,236 2,804 2,962 52,962
8 6,016 1,737 1,842 51,842 2,442 2,547 52,547 3,399 3,504 53,504
9 6,947 1,936 1,988 51,988 2,804 2,856 52,856 4,035 4,088 54,088
10 7,924 2,115 2,115 52,115 3,162 3,162 53,162 4,714 4,714 54,714
15 13,594 2,490 2,490 52,490 4,659 4,659 54,659 8,716 8,716 58,716
20 20,832 1,956 1,956 51,956 5,510 5,510 55,510 14,143 14,143 64,143
25 30,068 * * * 4,872 4,872 54,872 21,139 21,139 71,139
30 41,856 * * * 1,122 1,122 51,122 29,273 29,273 79,273
35 56,902 * * * * * * 37,053 37,053 87,053
</TABLE>
- - ---------
* Premium in addition to the planned premium is required to keep the
Policy in effect.
(1) The values illustrated assume the planned premium of $ 600 is paid at the
beginning of each policy year. Values will 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 cash
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, OPTIONS. THE GROSS HYPOTHETICAL INVESTMENT RATES
OF RETURN OF 0%, 6% AND 12% SHOWN ABOVE CORRESPOND TO NET ANNUAL RATES OF
- - -1.50%, 4.50% AND 10.50%. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD
BE DIFFERENT 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.
C-3
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 40 Initial Specified Amount $50,000
Preferred Nonsmoker Underwriting Risk Initial Premium and Planned
Death Benefit Option A Premium (Payable Annually) (1) $ 600
</TABLE>
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Gross Annual Investment Gross Annual Investment Gross Annual Investment
Return with Maximum Charges Return with Maximum Charges Return with Maximum Charges
Premiums (2)(3) (2)(3) (2)(3)
End Accumulated ------------------------------- ------------------------------- --------------------------------
of At 5% Interest Surrender Account Death Surrender Account Death Surrender Account Death
Policy Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- - -------- --------------- ----------- --------- --------- ----------- --------- --------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 630 62 362 50,362 89 389 50,389 117 417 50,417
2 1,292 357 687 50,687 433 763 50,763 513 843 50,843
3 1,986 692 999 50,999 838 1,145 51,145 996 1,304 51,304
4 2,715 1,011 1,296 51,296 1,248 1,533 51,533 1,518 1,803 51,803
5 3,481 1,321 1,584 51,584 1,672 1,935 51,935 2,087 2,349 52,349
6 4,285 1,657 1,867 51,867 2,144 2,354 52,354 2,743 2,953 52,953
7 5,129 1,989 2,146 52,146 2,634 2,792 52,792 3,463 3,620 53,620
8 6,016 2,316 2,421 52,421 3,144 3,249 53,249 4,252 4,357 54,357
9 6,947 2,640 2,692 52,692 3,675 3,728 53,728 5,119 5,172 55,172
10 7,924 2,959 2,959 52,959 4,227 4,227 54,227 6,072 6,072 56,072
15 13,594 4,299 4,299 54,299 7,168 7,168 57,168 12,311 12,311 62,311
20 20,832 5,251 5,251 55,251 10,508 10,508 60,508 22,226 22,226 72,226
25 30,068 5,365 5,365 55,365 13,785 13,785 63,785 37,544 37,544 87,544
30 41,856 4,034 4,034 54,034 16,226 16,226 66,226 60,909 60,909 110,909
35 56,902 255 255 50,255 16,338 16,338 66,338 96,049 96,049 146,049
</TABLE>
- - ---------
(1) The values illustrated assume the planned premium of $ 600 is paid at the
beginning of each policy year. Values will 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 cash
value.
(3) The values and benefits are shown using the cost of insurance rates
currently in effect. 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 IILLUSTRATIONS 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 - 1.50%, 4.50% AND 10.50%. THE DEATH BENEFIT
AND CASH 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 BIRGNIA OR THE FUNDS THAT THESE
HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
C-4
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 40 Initial Specified Amount $50,000
Preferred Nonsmoker Underwriting Risk Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $ 600
</TABLE>
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Gross Annual Investment Gross Annual Investment Gross Annual Investment
Return with Maximum Charges Return with Maximum Charges Return with Maximum Charges
Premiums (2)(3) (2)(3) (2)(3)
End Accumulated ------------------------------- ------------------------------- ------------------------------
of At 5% Interest Surrender Account Death Surrender Account Death Surrender Account Death
Policy Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- - -------- --------------- ----------- --------- --------- ----------- --------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 630 63 363 50,000 90 390 50,000 118 418 50,000
2 1,292 301 619 50,000 375 693 50,000 452 770 50,000
3 1,986 555 863 50,000 693 1,000 50,000 844 1,151 50,000
4 2,715 808 1,093 50,000 1,027 1,312 50,000 1,277 1,562 50,000
5 3,481 1,049 1,311 50,000 1,366 1,629 50,000 1,745 2,008 50,000
6 4,285 1,304 1,514 50,000 1,738 1,948 50,000 2,279 2,489 50,000
7 5,129 1,545 1,702 50,000 2,113 2,270 50,000 2,851 3,008 50,000
8 6,016 1,769 1,874 50,000 2,489 2,594 50,000 3,465 3,570 50,000
9 6,947 1,977 2,029 50,000 2,865 2,918 50,000 4,126 4,179 50,000
10 7,924 2,166 2,166 50,000 3,241 3,241 50,000 4,837 4,837 50,000
15 13,594 2,617 2,617 50,000 4,903 4,903 50,000 9,189 9,189 50,000
20 20,832 2,201 2,201 50,000 6,128 6,128 50,000 15,684 15,684 50,000
25 30,068 333 333 50,000 6,219 6,219 50,000 25,736 25,736 50,000
30 41,856 * * * 3,603 3,603 50,000 42,477 42,477 50,000
35 56,902 * * * * * * 71,217 71,217 76,202
</TABLE>
- - ---------
* Premium in addition to the planned premium is required to keep Policy in
effect.
(1) The values illustrated assume the planned premium of $ 600 is paid at the
beginning of each policy year. Values will 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 cash
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 -1.50%, 4.50% AND 10.50%. THE DEATH BENEFIT
AND CASH 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.
C-5
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 40 Initial Specified Amount $50,000
Preferred Nonsmoker Underwriting Risk Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $ 600
</TABLE>
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Gross Annual Investment Gross Annual Investment Gross Annual Investment
Return with Maximum Charges Return with Maximum Charges Return with Maximum Charges
Premiums (2)(3) (2)(3) (2)(3)
End Accumulated ------------------------------- ------------------------------- --------------------------------
of At 5% Interest Surrender Account Death Surrender Account Death Surrender Account Death
Policy Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- - -------- --------------- ----------- --------- --------- ----------- --------- --------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 630 63 363 50,000 90 390 50,000 118 418 50,000
2 1,292 372 690 50,000 449 767 50,000 528 846 50,000
3 1,986 698 1,005 50,000 844 1,152 50,000 1,004 1,312 50,000
4 2,715 1,021 1,306 50,000 1,260 1,545 50,000 1,532 1,817 50,000
5 3,481 1,336 1,599 50,000 1,690 1,953 50,000 2,110 2,372 50,000
6 4,285 1,678 1,888 50,000 2,170 2,380 50,000 2,777 2,987 50,000
7 5,129 2,016 2,173 50,000 2,671 2,828 50,000 3,512 3,669 50,000
8 6,016 2,350 2,455 50,000 3,192 3,297 50,000 4,320 4,425 50,000
9 6,947 2,682 2,734 50,000 3,737 3,789 50,000 5,210 5,262 50,000
10 7,924 3,009 3,009 50,000 4,305 4,305 50,000 6,191 6,191 50,000
15 13,594 4,406 4,406 50,000 7,370 7,370 50,000 12,693 12,693 50,000
20 20,832 5,462 5,462 50,000 10,988 10,988 50,000 23,345 23,345 50,000
25 30,068 5,778 5,778 50,000 14,936 14,936 50,000 40,896 40,896 50,000
30 41,856 4,785 4,785 50,000 18,954 18,954 50,000 69,875 69,875 81,055
35 56,902 1,355 1,355 50,000 22,558 22,558 50,000 116,997 116,997 125,187
</TABLE>
- - ---------
(1) The values illustrated assume the planned premium of $ 600 is paid at the
beginning of each policy year. Values will 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 cash
value.
(3) The values and benefits are shown using the cost of insurance rates
currently in effect. 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 -1.50%, 4.50% AND 10.50%. THE DEATH BENEFIT
AND CASH 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.
C-6
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 40 Initial Specified Amount $50,000
Nonsmoker Underwriting Risk Initial Premium and Planned
Death Benefit Option A Premium (Payable Annually) (1) $ 600
</TABLE>
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Gross Annual Investment Gross Annual Investment Gross Annual Investment
Return with Maximum Charges Return with Maximum Charges Return with Maximum Charges
Premiums (2)(3) (2)(3) (2)(3)
End Accumulated ------------------------------- ------------------------------- ------------------------------
of At 5% Interest Surrender Account Death Surrender Account Death Surrender Account Death
Policy Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- - -------- --------------- ----------- --------- --------- ----------- --------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 630 62 362 50,362 89 389 50,389 117 417 50,417
2 1,292 286 616 50,616 359 689 50,689 437 767 50,767
3 1,986 550 857 50,857 687 994 50,994 836 1,144 51,144
4 2,715 799 1,084 51,084 1,017 1,302 51,302 1,264 1,549 51,549
5 3,481 1,035 1,298 51,298 1,350 1,612 51,612 1,724 1,987 51,987
6 4,285 1,286 1,496 51,496 1,714 1,924 51,924 2,247 2,457 52,457
7 5,129 1,520 1,677 51,677 2,078 2,236 52,236 2,804 2,962 52,962
8 6,016 1,737 1,842 51,842 2,442 2,547 52,547 3,399 3,504 53,504
9 6,947 1,936 1,988 51,988 2,804 2,856 52,856 4,035 4,088 54,088
10 7,924 2,115 2,115 52,115 3,162 3,162 53,162 4,714 4,714 54,714
15 13,594 2,490 2,490 52,490 4,659 4,659 54,659 8,716 8,716 58,716
20 20,832 1,956 1,956 51,956 5,510 5,510 55,510 14,143 14,143 64,143
25 30,068 * * * 4,872 4,872 54,872 21,139 21,139 71,139
30 41,856 * * * 1,122 1,122 51,122 29,273 29,273 79,273
35 56,902 * * * * * * 37,053 37,053 87,053
</TABLE>
- - ---------
* Premium in addition to the planned premium is required to keep Policy in
effect.
(1) The values illustrated assume the planned premium of $ 600 is paid at the
beginning of each policy year. Values will 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 cash
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 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 -1.50%, 4.50% AND 10.50%. THE DEATH BENEFIT
AND CASH 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.
C-7
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 40 Initial Specified Amount $50,000
Nonsmoker Underwriting Risk Initial Premium and Planned
Death Benefit Option A Premium (Payable Annually) (1) $ 600
</TABLE>
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Gross Annual Investment Gross Annual Investment Gross Annual Investment
Return with Maximum Charges Return with Maximum Charges Return with Maximum Charges
Premiums (2)(3) (2)(3) (2)(3)
End Accumulated ------------------------------- ------------------------------- --------------------------------
of At 5% Interest Surrender Account Death Surrender Account Death Surrender Account Death
Policy Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- - -------- --------------- ----------- --------- --------- ----------- --------- --------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 630 62 362 50,362 89 389 50,389 117 417 50,417
2 1,292 357 687 50,687 433 763 50,763 513 843 50,843
3 1,986 692 999 50,999 838 1,145 51,145 996 1,304 51,304
4 2,715 1,011 1,296 51,296 1,248 1,533 51,533 1,518 1,803 51,803
5 3,481 1,315 1,578 51,578 1,666 1,928 51,928 2,081 2,343 52,343
6 4,285 1,633 1,843 51,843 2,118 2,328 52,328 2,717 2,927 52,927
7 5,129 1,934 2,091 52,091 2,575 2,733 52,733 3,400 3,557 53,557
8 6,016 2,216 2,321 52,321 3,035 3,140 53,140 4,134 4,239 54,239
9 6,947 2,481 2,533 52,533 3,499 3,551 53,551 4,925 4,977 54,977
10 7,924 2,743 2,743 52,743 3,982 3,982 53,982 5,793 5,793 55,793
15 13,594 3,840 3,840 53,840 6,558 6,558 56,558 11,494 11,494 61,494
20 20,832 4,632 4,632 54,632 9,525 9,525 59,525 20,627 20,627 70,627
25 30,068 4,449 4,449 54,449 12,168 12,168 62,168 34,459 34,459 84,459
30 41,856 2,552 2,552 52,552 13,486 13,486 63,486 54,997 54,997 104,997
35 56,902 * * * 11,580 11,580 61,580 84,772 84,772 134,772
</TABLE>
- - ---------
* Premium in addition to the planned premium is required to keep Policy in
effect.
(1) The values illustrated assume the planned premium of $ 600 is paid at the
beginning of each policy year. Values will 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 cash
value.
(3) The values and benefits are shown using the cost of insurance rates
currently in effect. 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 -1.50%, 4.50% AND 10.50%. THE DEATH BENEFIT
AND CASH 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.
C-8
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 40 Initial Specified Amount $50,000
Nonsmoker Underwriting Risk Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $ 600
</TABLE>
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Gross Annual Investment Gross Annual Investment Gross Annual Investment
Return with Maximum Charges Return with Maximum Charges Return with Maximum Charges
Premiums (2)(3) (2)(3) (2)(3)
End Accumulated ------------------------------- ------------------------------- ------------------------------
of At 5% Interest Surrender Account Death Surrender Account Death Surrender Account Death
Policy Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- - -------- --------------- ----------- --------- --------- ----------- --------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 630 63 363 50,000 90 390 50,000 118 418 50,000
2 1,292 301 619 50,000 375 693 50,000 452 770 50,000
3 1,986 555 863 50,000 693 1,000 50,000 844 1,151 50,000
4 2,715 808 1,093 50,000 1,027 1,312 50,000 1,277 1,562 50,000
5 3,481 1,049 1,311 50,000 1,366 1,629 50,000 1,745 2,008 50,000
6 4,285 1,304 1,514 50,000 1,738 1,948 50,000 2,279 2,489 50,000
7 5,129 1,545 1,702 50,000 2,113 2,270 50,000 2,851 3,008 50,000
8 6,016 1,769 1,874 50,000 2,489 2,594 50,000 3,465 3,570 50,000
9 6,947 1,977 2,029 50,000 2,865 2,918 50,000 4,126 4,179 50,000
10 7,924 2,166 2,166 50,000 3,241 3,241 50,000 4,837 4,837 50,000
15 13,594 2,617 2,617 50,000 4,903 4,903 50,000 9,189 9,189 50,000
20 20,832 2,201 2,201 50,000 6,128 6,128 50,000 15,684 15,684 50,000
25 30,068 333 333 50,000 6,219 6,219 50,000 25,736 25,736 50,000
30 41,856 * * * 3,603 3,603 50,000 42,477 42,477 50,000
35 56,902 * * * * * * 71,217 71,217 76,202
</TABLE>
- - ---------
* Premium in addition to the planned premium is required to keep Policy in
effect.
(1) The values illustrated assume the planned premium of $ 600 is paid at the
beginning of each policy year. Values will 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 cash
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 -1.50%, 4.50% AND 10.50%. THE DEATH BENEFIT
AND CASH 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.
C-9
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 40
Initial Specified Amount $50,000
Nonsmoker Underwriting Risk Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $600
</TABLE>
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Gross Annual Investment Gross Annual Investment Gross Annual Investment
Return with Maximum Charges Return with Maximum Charges Return with Maximum Charges
Premiums (2)(3) (2)(3) (2)(3)
End Accumulated ------------------------------- ------------------------------- --------------------------------
of At 5% Interest Surrender Account Death Surrender Account Death Surrender Account Death
Policy Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- - -------- --------------- ----------- --------- --------- ----------- --------- --------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 630 63 363 50,000 90 390 50,000 118 418 50,000
2 1,292 372 690 50,000 449 767 50,000 528 846 50,000
3 1,986 698 1,005 50,000 844 1,152 50,000 1,004 1,312 50,000
4 2,715 1,021 1,306 50,000 1,260 1,545 50,000 1,532 1,817 50,000
5 3,481 1,330 1,593 50,000 1,685 1,947 50,000 2,104 2,366 50,000
6 4,285 1,654 1,864 50,000 2,146 2,356 50,000 2,752 2,962 50,000
7 5,129 1,963 2,120 50,000 2,614 2,772 50,000 3,453 3,610 50,000
8 6,016 2,254 2,359 50,000 3,089 3,194 50,000 4,209 4,314 50,000
9 6,947 2,530 2,582 50,000 3,571 3,623 50,000 5,030 5,082 50,000
10 7,924 2,803 2,803 50,000 4,074 4,074 50,000 5,935 5,935 50,000
15 13,594 3,970 3,970 50,000 6,805 6,805 50,000 11,966 11,966 50,000
20 20,832 4,872 4,872 50,000 10,083 10,083 50,000 21,951 21,951 50,000
25 30,068 4,899 4,899 50,000 13,463 13,463 50,000 38,324 38,324 50,000
30 41,856 3,319 3,319 50,000 16,472 16,472 50,000 65,513 65,513 75,995
35 56,902 * * * 18,151 18,151 50,000 109,630 109,630 117,304
</TABLE>
- - ---------
* Premium in addition to the planned premium is required to keep Policy in
effect.
(1) The values illustrated assume the planned premium of $ 600 is paid at the
beginning of each policy year. Values will 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 cash
value.
(3) The values and benefits are shown using the cost of insurance rates
currently in effect. 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 -1.50%, 4.50% AND 10.50%. THE DEATH BENEFIT
AND CASH 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.
C-10
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 40 Initial Specified Amount $50,000
Preferred Smoker Underwriting Risk Initial Premium and Planned
Death Benefit Option A Premium (Payable Annually) (1) $ 600
</TABLE>
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Gross Annual Investment Gross Annual Investment Gross Annual Investment
Return with Maximum Charges Return with Maximum Charges Return with Maximum Charges
Premiums (2)(3) (2)(3) (2)(3)
End Accumulated ------------------------------- ------------------------------- ------------------------------
of At 5% Interest Surrender Account Death Surrender Account Death Surrender Account Death
Policy Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- - -------- --------------- ----------- --------- --------- ----------- --------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 630 0 280 50,280 5 305 50,305 29 329 50,329
2 1,292 173 513 50,513 238 578 50,578 306 646 50,646
3 1,986 411 727 50,727 532 848 50,848 664 980 50,980
4 2,715 645 938 50,938 837 1,130 51,130 1,057 1,349 51,349
5 3,481 877 1,146 51,146 1,156 1,424 51,424 1,488 1,757 51,757
6 4,285 1,135 1,350 51,350 1,517 1,732 51,732 1,992 2,207 52,207
7 5,129 1,390 1,552 51,552 1,893 2,054 52,054 2,544 2,705 52,705
8 6,016 1,643 1,750 51,750 2,283 2,390 52,390 3,148 3,255 53,255
9 6,947 1,892 1,946 51,946 2,688 2,742 52,742 3,809 3,863 53,863
10 7,924 2,138 2,138 52,138 3,109 3,109 53,109 4,535 4,535 54,535
15 13,594 2,861 2,861 52,861 5,001 5,001 55,001 8,896 8,896 58,896
20 20,832 2,725 2,725 52,725 6,433 6,433 56,433 15,018 15,018 65,018
25 30,068 1,334 1,334 51,334 6,756 6,756 56,756 23,420 23,420 73,420
30 41,856 * * * 4,722 4,722 54,722 34,478 34,478 84,478
35 56,902 * * * * * * 48,354 48,354 98,354
</TABLE>
- - ---------
* Premium in addition to the planned premium is required to keep Policy in
effect.
(1) The values illustrated assume the planned premium of $ 600 is paid at the
beginning of each policy year. Values will 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 cash
value.
(3) The values and benefits are shown using the cost of insurance rates
currently in effect. 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 -1.50%, 4.50% AND 10.50%. THE DEATH BENEFIT
AND CASH 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.
C-11
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 40 Initial Specified Amount $50,000
Preferred Smoker Underwriting Risk Initial Premium and Planned
Death Benefit Option A Premium (Payable Annually) (1) $ 600
</TABLE>
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Gross Annual Investment Gross Annual Investment Gross Annual Investment
Return with Maximum Charges Return with Maximum Charges Return with Maximum Charges
Premiums (2)(3) (2)(3) (2)(3)
End of Accumulated ------------------------------- ------------------------------- ------------------------------
Policy At 5% Interest Surrender Account Death Surrender Account Death Surrender Account Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- - -------- --------------- ----------- --------- --------- ----------- --------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 630 0 280 50,280 5 305 50,305 29 329 50,329
2 1,292 101 441 50,441 164 504 50,504 230 570 50,570
3 1,986 264 580 50,580 375 691 50,691 498 814 50,814
4 2,715 400 693 50,693 570 863 50,863 767 1,059 51,059
5 3,481 511 780 50,780 748 1,017 51,017 1,035 1,304 51,304
6 4,285 623 838 50,838 934 1,149 51,149 1,330 1,545 51,545
7 5,129 705 867 50,867 1,098 1,259 51,259 1,620 1,781 51,781
8 6,016 757 865 50,865 1,234 1,342 51,342 1,903 2,010 52,010
9 6,947 777 831 50,831 1,342 1,396 51,396 2,176 2,229 52,229
10 7,924 762 762 50,762 1,415 1,415 51,415 2,433 2,433 52,433
15 13,594 * * * 909 909 50,909 3,149 3,149 53,149
20 20,832 * * * * * * 2,178 2,178 52,178
25 30,068 * * * * * * * * *
30 41,856 * * * * * * * * *
35 56,902 * * * * * * * * *
</TABLE>
- - ---------
* Premium in addition to the planned premium is required to keep Policy in
effect.
(1) The values illustrated assume the planned premium of $600 is paid at the
beginning of each policy year. Values will 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 cash
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 -1.50%, 4.50% AND 10.50%. THE DEATH BENEFIT
AND CASH 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.
C-12
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 40 Initial Specified Amount $50,000
Preferred Smoker Underwriting Risk Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $ 600
</TABLE>
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Gross Annual Investment Gross Annual Investment Gross Annual Investment
Return with Maximum Charges Return with Maximum Charges Return with Maximum Charges
Premiums (2)(3) (2)(3) (2)(3)
End of Accumulated ------------------------------- ------------------------------- ------------------------------
Policy At 5% Interest Surrender Account Death Surrender Account Death Surrender Account Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- - -------- --------------- ----------- --------- --------- ----------- --------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 630 0 282 50,000 6 306 50,000 31 331 50,000
2 1,292 178 518 50,000 243 583 50,000 312 652 50,000
3 1,986 419 736 50,000 542 858 50,000 676 992 50,000
4 2,715 659 952 50,000 854 1,146 50,000 1,077 1,369 50,000
5 3,481 896 1,165 50,000 1,180 1,449 50,000 1,519 1,788 50,000
6 4,285 1,161 1,376 50,000 1,552 1,767 50,000 2,038 2,253 50,000
7 5,129 1,424 1,586 50,000 1,940 2,101 50,000 2,608 2,769 50,000
8 6,016 1,685 1,793 50,000 2,344 2,451 50,000 3,234 3,342 50,000
9 6,947 1,944 1,997 50,000 2,765 2,819 50,000 3,924 3,978 50,000
10 7,924 2,200 2,200 50,000 3,205 3,205 50,000 4,684 4,684 50,000
15 13,594 3,004 3,004 50,000 5,272 5,272 50,000 9,412 9,412 50,000
20 20,832 3,009 3,009 50,000 7,107 7,107 50,000 16,637 16,637 50,000
25 30,068 1,792 1,792 50,000 8,247 8,247 50,000 28,133 28,133 50,000
30 41,856 * * * 7,676 7,676 50,000 47,691 47,691 55,321
35 56,902 * * * 3,371 3,371 50,000 80,360 80,360 85,985
</TABLE>
- - ---------
* Premium in addition to the planned premium is required to keep Policy in
effect.
(1) The values illustrated assume the planned premium of $600 is paid at the
beginning of each policy year. Values will 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 cash
value.
(3) The values and benefits are shown using the cost of insurance rates
currently in effect. 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 -1.50%, 4.50% AND 10.50%. THE DEATH BENEFIT
AND CASH 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.
C-13
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 40 Initial Specified Amount $50,000
Preferred Smoker Underwriting Risk Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $ 600
</TABLE>
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Gross Annual Investment Gross Annual Investment Gross Annual Investment
Return with Maximum Charges Return with Maximum Charges Return with Maximum Charges
Premiums (2)(3) (2)(3) (2)(3)
End of Accumulated ------------------------------- ------------------------------- ------------------------------
Policy At 5% Interest Surrender Account Death Surrender Account Death Surrender Account Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- - -------- --------------- ----------- --------- --------- ----------- --------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 630 0 282 50,000 6 306 50,000 31 331 50,000
2 1,292 106 446 50,000 169 509 50,000 235 575 50,000
3 1,986 272 588 50,000 384 701 50,000 509 825 50,000
4 2,715 413 705 50,000 586 878 50,000 785 1,078 50,000
5 3,481 529 798 50,000 772 1,040 50,000 1,065 1,334 50,000
6 4,285 647 862 50,000 968 1,183 50,000 1,374 1,589 50,000
7 5,129 738 899 50,000 1,143 1,304 50,000 1,683 1,844 50,000
8 6,016 798 905 50,000 1,294 1,402 50,000 1,990 2,098 50,000
9 6,947 827 880 50,000 1,419 1,473 50,000 2,293 2,347 50,000
10 7,924 820 820 50,000 1,511 1,511 50,000 2,589 2,589 50,000
15 13,594 * * * 1,141 1,141 50,000 3,662 3,662 50,000
20 20,832 * * * * * * 3,495 3,495 50,000
25 30,068 * * * * * * 36 36 50,000
30 41,856 * * * * * * * * *
35 56,902 * * * * * * * * *
</TABLE>
- - ---------
* Premium in addition to the planned premium is required to keep Policy in
effect.
(1) The values illustrated assume the planned premium of $600 is paid at the
beginning of each policy year. Values will 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 cash
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 -1.50%, 4.50% AND 10.50%. THE DEATH BENEFIT
AND CASH 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.
C-14
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 40 Initial Specified Amount $50,000
Preferred Smoker Underwriting Risk Initial Premium and Planned
Death Benefit Option A Premium (Payable Annually) (1) $ 600
</TABLE>
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Gross Annual Investment Gross Annual Investment Gross Annual Investment
Return with Maximum Charges Return with Maximum Charges Return with Maximum Charges
Premiums (2)(3) (2)(3) (2)(3)
End of Accumulated ------------------------------- ------------------------------- ------------------------------
Policy At 5% Interest Surrender Account Death Surrender Account Death Surrender Account Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- - -------- --------------- ----------- --------- --------- ----------- --------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 630 0 280 50,280 5 305 50,305 29 329 50,329
2 1,292 101 441 50,441 164 504 50,504 230 570 50,570
3 1,986 264 580 50,580 375 691 50,691 498 814 50,814
4 2,715 400 693 50,693 570 863 50,863 767 1,059 51,059
5 3,481 511 780 50,780 748 1,017 51,017 1,035 1,304 51,304
6 4,285 623 838 50,838 934 1,149 51,149 1,330 1,545 51,545
7 5,129 705 867 50,867 1,098 1,259 51,259 1,620 1,781 51,781
8 6,016 757 865 50,865 1,234 1,342 51,342 1,903 2,010 52,010
9 6,947 777 831 50,831 1,342 1,396 51,396 2,176 2,229 52,229
10 7,924 762 762 50,762 1,415 1,415 51,415 2,433 2,433 52,433
15 13,594 * * * 909 909 50,909 3,149 3,149 53,149
20 20,832 * * * * * * 2,178 2,178 52,178
25 30,068 * * * * * * * * *
30 41,856 * * * * * * * * *
35 56,902 * * * * * * * * *
</TABLE>
- - ---------
* Premium in addition to the planned premium is required to keep Policy in
effect.
(1) The values illustrated assume the planned premium of $600 is paid at the
beginning of each policy year. Values will 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 cash
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 -1.50%, 4.50% AND 10.50%. THE DEATH BENEFIT
AND CASH 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.
C-15
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 40 Initial Specified Amount $50,000
Smoker Underwriting Risk Initial Premium and Planned
Death Benefit Option A Premium (Payable Annually) (1) $ 600
</TABLE>
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Gross Annual Investment Gross Annual Investment Gross Annual Investment
Return with Current Charges Return with Current Charges Return with Current Charges
Premiums (2)(3) (2)(3) (2)(3)
End of Accumulated ------------------------------- ------------------------------- ------------------------------
Policy At 5% Interest Surrender Account Death Surrender Account Death Surrender Account Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- - -------- --------------- ----------- --------- --------- ----------- --------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 630 0 280 50,280 5 305 50,305 29 329 50,329
2 1,292 173 513 50,513 238 578 50,578 306 646 50,646
3 1,986 406 722 50,722 527 843 50,843 659 975 50,975
4 2,715 612 905 50,905 803 1,095 51,095 1,021 1,313 51,313
5 3,481 791 1,060 51,060 1,065 1,334 51,334 1,392 1,661 51,661
6 4,285 970 1,185 51,185 1,339 1,554 51,554 1,801 2,016 52,016
7 5,129 1,128 1,290 51,290 1,604 1,765 51,765 2,226 2,387 52,387
8 6,016 1,284 1,392 51,392 1,877 1,985 51,985 2,690 2,797 52,797
9 6,947 1,439 1,492 51,492 2,161 2,215 52,215 3,196 3,250 53,250
10 7,924 1,592 1,592 51,592 2,455 2,455 52,455 3,751 3,751 53,751
15 13,594 1,910 1,910 51,910 3,665 3,665 53,665 6,996 6,996 56,996
20 20,832 1,418 1,418 51,418 4,279 4,279 54,279 11,327 11,327 61,327
25 30,068 * * * 3,276 3,276 53,276 16,424 16,424 66,424
30 41,856 * * * * * * 21,400 21,400 71,400
35 56,902 * * * * * * 24,159 24,159 74,159
</TABLE>
- - ---------
* Premium in addition to the planned premium is required to keep Policy in
effect.
(1) The values illustrated assume the planned premium of $600 is paid at the
beginning of each policy year. Values will 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 cash
value.
(3) The values and benefits are shown using the cost of insurance rates
currently in effect. 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 -1.50%, 4.50% AND 10.50%. THE DEATH BENEFIT
AND CASH 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.
C-16
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 40 Initial Specified Amount $50,000
Smoker Underwriting Risk Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $ 600
</TABLE>
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Gross Annual Investment Gross Annual Investment Gross Annual Investment
Return with Maximum Charges Return with Maximum Charges Return with Maximum Charges
Premiums (2)(3) (2)(3) (2)(3)
End of Accumulated ------------------------------- ------------------------------- ------------------------------
Policy At 5% Interest Surrender Account Death Surrender Account Death Surrender Account Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- - -------- --------------- ----------- --------- --------- ----------- --------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 630 0 282 50,000 6 306 50,000 31 331 50,000
2 1,292 106 446 50,000 169 509 50,000 235 575 50,000
3 1,986 272 588 50,000 384 701 50,000 509 825 50,000
4 2,715 413 705 50,000 586 878 50,000 785 1,078 50,000
5 3,481 529 798 50,000 772 1,040 50,000 1,065 1,334 50,000
6 4,285 647 862 50,000 968 1,183 50,000 1,374 1,589 50,000
7 5,129 738 899 50,000 1,143 1,304 50,000 1,683 1,844 50,000
8 6,016 798 905 50,000 1,294 1,402 50,000 1,990 2,098 50,000
9 6,947 827 880 50,000 1,419 1,473 50,000 2,293 2,347 50,000
10 7,924 820 820 50,000 1,511 1,511 50,000 2,589 2,589 50,000
15 13,594 * * * 1,141 1,141 50,000 3,662 3,662 50,000
20 20,832 * * * * * * 3,495 3,495 50,000
25 30,068 * * * * * * 36 36 50,000
30 41,856 * * * * * * * * *
35 56,902 * * * * * * * * *
</TABLE>
- - ---------
* Premium in addition to the planned premium is required to keep Policy in
effect.
(1) The values illustrated assume the planned premium of $600 is paid at the
beginning of each policy year. Values will 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 cash
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 -1.50%, 4.50% AND 10.50%. THE DEATH BENEFIT
AND CASH 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.
C-17
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 40 Initial Specified Amount $50,000
Smoker Underwriting Risk Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $ 600
</TABLE>
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Gross Annual Investment Gross Annual Investment Gross Annual Investment
Return with Current Charges Return with Current Charges Return with Current Charges
Premiums (2)(3) (2)(3) (2)(3)
End of Accumulated ------------------------------- ------------------------------- ------------------------------
Policy At 5% Interest Surrender Account Death Surrender Account Death Surrender Account Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- - -------- --------------- ----------- --------- --------- ----------- --------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 630 0 282 50,000 6 306 50,000 31 331 50,000
2 1,292 178 518 50,000 243 583 50,000 312 652 50,000
3 1,986 415 731 50,000 537 853 50,000 671 987 50,000
4 2,715 626 919 50,000 820 1,113 50,000 1,042 1,334 50,000
5 3,481 813 1,081 50,000 1,092 1,361 50,000 1,426 1,695 50,000
6 4,285 1,000 1,215 50,000 1,379 1,594 50,000 1,852 2,067 50,000
7 5,129 1,168 1,329 50,000 1,658 1,820 50,000 2,300 2,462 50,000
8 6,016 1,334 1,442 50,000 1,950 2,057 50,000 2,793 2,900 50,000
9 6,947 1,500 1,553 50,000 2,253 2,307 50,000 3,334 3,388 50,000
10 7,924 1,664 1,664 50,000 2,569 2,569 50,000 3,931 3,931 50,000
15 13,594 2,060 2,060 50,000 3,963 3,963 50,000 7,585 7,585 50,000
20 20,832 1,677 1,677 50,000 4,947 4,947 50,000 13,029 13,029 50,000
25 30,068 * * * 4,613 4,613 50,000 21,113 21,113 50,000
30 41,856 * * * 1,256 1,256 50,000 34,019 34,019 50,000
35 56,902 * * * * * * 57,134 57,134 61,133
</TABLE>
- - ---------
* Premium in addition to the planned premium is required to keep Policy in
effect.
(1) The values illustrated assume the planned premium of $600 is paid at the
beginning of each policy year. Values will 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 cash
value.
(3) The values and benefits are shown using the cost of insurance rates
currently in effect. 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 -1.50%, 4.50% AND 10.50%. THE DEATH BENEFIT
AND CASH 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.
C-18
<PAGE>
PART II
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 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 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 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 RULE 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 the
Life of Virginia.
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) Sutherland, Asbill & Brennan LLP
(c) Bruce E. Booker, FSA
(d) KPMG Peat Marwick LLP
(e) Ernst & Young LLP
The following exhibits:
See next page
II-1
<PAGE>
EXHIBITS
1. The following exhibits correspond to those required by paragraph A of the
instructions as to exhibits in Form N-8B-2:
<TABLE>
<S> <C>
(1)(a)
Resolution of Board of Directors of Life of Virginia authorizing the establishment of Separate Account II. 9/
(1)(b)
Resolution of Board of Directors of Life of Virginia authorizing the addition of Investment Subdivisions to Separate
Account II. 9/
(1)(c)
Resolution of Board of Directors of Life of Virginia authorizing the establishment of Investment Subdivisions of
Separate Account II which invest in shares of Fidelity Variable Insurance Products Fund II, Asset Manager Portfolio
and Neuberger & Berman Advisers Management Trust, Balanced Portfolio. 9/
(1)(d)
Resolution of 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. 9/
(1)(e)
Resolution of Board of Directors of Life of Virginia authorizing the establishment of an Investment Subdivision of
Separate Account II which invests in shares of the Utility Fund of the Investment Management Series. 9/
(1)(f)
Resolution of 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. 9/
(1)(g)
Resolution of 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 International Equity Portfolio and the Real Estate
Securities Portfolio of the Life of Virginia Series Fund. 9/
(1)(h)
Resolution of 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)(i)
Resolution of 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/
(1)(j)
Resolution of 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/
<PAGE>
(1)(k)
Resolution of Board of Directors of Life of Virginia authorizing additional Investment Subdivisions investing in
shares of Capital Appreciation Portfolio of Janus Aspen Series. 8/
(1)(m)
Resolution of Board of Directors of Life of Virginia authorizing additional Investment Subdivisions investing in U.S.
Equity Fund of GE Investments Funds, Inc., Growth and Income Fund of Goldman Sachs Variable Insurance Trust and
Mid-Cap Equity Fund of Goldman Sachs Variable Insurance Trust.
1A(2)
Not Applicable
1A(3)
Underwriting Agreement dated December 12, 1997 between The Life Insurance Company of Virginia and Capital Brokerage
Corporation.9/
1A(3)(a)
Dealer Sales Agreement dated December 13, 1997.9/
1A(3)(c)
See Exhibit 1A(3)(a)
1A(4)
Not Applicable
1A(5)
Policy Form, Commonwealth Three 9/
1A(5)(a)
Endorsement to policy 9/
1A(6)(a)
Articles of Incorporation of The Life Insurance Company of Virginia 9/
1A(6)(b)
By-Laws of The Life Insurance Company of Virginia 9/
1A(7)
Not Applicable
1A(8)(a)
Stock Sale Agreement 9/
1A(8)(a)(i)
Amendment to Stock Sale Agreement between The Life Insurance Company of Virginia and Life of Virginia Series Fund,
Inc. 9/
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/
<PAGE>
1A(8)(c)
Participation Agreement among Variable Insurance Products Fund, Fidelity Distributors Corporation, and The Life
Insurance Company of Virginia. 9/
1A(8)(d)
Agreement between Oppenheimer Variable Account Funds, Oppenheimer Management Corporation, and The Life Insurance
Company of Virginia. 9/
1A(8)(d)(i)
Amendment to the Participation Agreement between Oppenheimer Variable Account Funds, Oppenheimer Management
Corporation, and The Life Insurance Company of Virginia. 9/
1A(8)(e)
Participation Agreement Among Variable Insurance Products Fund II, Fidelity Distributors Corporation and The Life
Insurance Company of Virginia. 9/
1A(8)(f)
Fund Participation Agreement between Janus Aspen Series and The Life Insurance Company of Virginia. 9/
1A(8)(g)
Fund Participation Agreement between Insurance Management Series, Federated Securities Corporation, and The Life
Insurance Company of Virginia. 9/
1A(8)(h)
Fund Participation Agreement between The Alger American Fund, Fred Alger and Company, Inc., and The Life Insurance
Company of Virginia. 6/
1A(8)(i)
Fund Participation Agreement between Variable Insurance Products Fund III and The Life Insurance Company of Virginia.
8/
1A(8)(j)
Fund Participation Agreement between PBHG Insurance Series Fund, Inc. and The Life Insurance Company of Virginia.8/
1A(8)(k) Fund Participation Agreement between Goldman Sachs Variable Insurance Trust and The Life Insurance Company of
Virginia.
1A(9)
Administrative Agreement 9/
1A(10)
Application for Commonwealth Three 9
2
See Exhibit 1(A)5
3(a)
Opinion and Consent of Counsel
3(b)
Consent of Sutherland, Asbill and Brennan LLP
3(c)
Consent of Independent Auditors
<PAGE>
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
Policies.7/
8
Undertaking to Guarantee performance of obligations of principal underwriter. 9/
9
Power of Attorney dated April 2, 1996. 7/
- - --------------------------
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.
9/ Filed May 1, 1998 with Post-Effective Amendment Number 15 to Form S-6 for
Life of Virginia Separate Account II, Registration Number 33-9651.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Life of Virginia Separate Account III, certifies that it meets all
the requirements for effectiveness of this registration statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this amendment
to the 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 day of . 1998
Life of Virginia Separate Account III
(Seal)The Life Insurance Company of
Virginia
(Depositor)
Attest: /s/ Laura 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 meets the requirements for
effectiveness of this registration statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this amendment to the 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 day of May, 1998.
(Seal)The Life Insurance Company of
Virginia
Attest: /s/ Laura Deusebio
-------------------------------
By: /s/ Selwyn L. Flournoy, Jr.
-----------------------------------
Selwyn L. Flournoy, Jr.
Senior Vice President
Given under my hand this 29 day of April, 1998 in the
City/County of Henrico, Commonwealth of Virginia.
/s/ Laura Deusebio
----------------------------------------
Notary Public
My Commission Expires 01/2000
------------------
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
</TABLE>
<TABLE>
<CAPTION>
Signature Title Date
- - --------------------------------------- --------------------------------- ------
<S> <C> <C>
RONALD V. DOLAN Director, Chairman of the Board 04/29/98
- - --------------------------------------
Ronald V. Dolan
SELWYN L. FLOURNOY, JR. Director, Senior Vice President 04/29/98
- - --------------------------------------
Selwyn L. Flournoy, Jr.
LINDA L. LANAM Director, Senior Vice President 04/29/98
- - --------------------------------------
Linda L. Lanam
ROBERT D. CHINN Director, Senior Vice President 04/29/98
- - --------------------------------------
Robert D. Chinn
VICTOR C. MOSES Director 04/29/98
- - --------------------------------------
Victor C. Moses
GEOFFREY S. STIFF Director 04/29/98
- - --------------------------------------
Geoffrey S. Stiff
</TABLE>
By /s/ Selwyn L. Flournoy, Jr., pursuant to Power of Attorney executed on
April 16, 1998.
II-5
<PAGE>
EXHIBITS
LIFE OF VIRGINIA SEPARATE ACCOUNT II
<TABLE>
<S> <C>
(1)(a) Resolution of Board of Directors of Life of Virginia authorizing the establishment of Separate
Account II.
(1)(b) Resolution of Board of Directors of Life of Virginia authorizing the addition of Investment Subdivisions
to Separate Account II.
(1)(c) Resolution of Board of Directors of Life of Virginia authorizing the addition of Fidelity Asset Manager
Portfolio and Neuberger & Berman Advisers Management Trust to Separate Account II.
(1)(d) Resolution of 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.
(1)(e) Resolution of Board of Directors of Life of Virginia authorizing the establishment of an additional
Investment Subdivision of Separate Account II which invests in shares of the Utility Fund of the
Insurance Management Series.
(1)(f) Resolution of Board of Directors of Life of Virginia authorizing the establishment of 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.
(1)(g) Resolution of 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 International Equity
Portfolio and the Real Estate Securities Portfolio of the Life of Virginia Series Fund.
(1)(h) Resolution of 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 American Growth Portfolio
and the American Small Capitalization Portfolio of The Alger American Fund, and the Balanced Portfolio
and Flexible Income Portfolio of the Janus Aspen Series.
(1)(l) Resolution of Board of Directors of Life of Virginia authorizing additional investment
subdivisions investing in shares of U.S. Equity Fund of GE Investment Funds Inc., Growth and Income
Fund of Goldman Sachs Variable Income Trust and Mid Cap Equity Fund of Goldman
Sachs Variable Trust Income Fund.
(5)(a) Policy Form
(5)(b) Endorsement to Policy
(6)(a) Certificate of Incorporation of The Life Insurance Company of Virginia
(6)(b) By-Laws of The Life Insurance Company of Virginia
(8)(a) Stock Sale Agreement between The Life Insurance Company of Virginia and Life of Virginia Series Fund,
Inc.
(8)(a)(i) Amendments to Stock Sale Agreement between The Life Insurance Company of Virginia and Life of
Virginia Series Fund, Inc.
(8)(b) Participation Agreement among The Life Insurance Company of Virginia, Variable Insurance Products
Fund II and Fidelity Distributors Corporation.
(8)(c) Participation Agreement Among Variable Insurance Products Fund, Fidelity Distributors Corporation and
The Life Insurance Company of Virginia.
(8)(d) Agreement between Oppenheimer Variable Account Funds, Oppenheimer Management Corporation and
The Life Insurance Company of Virginia.
(8)(d)(i) Amendment to Agreement between Oppenheimer Variable Account Funds, Oppenheimer Management
Corporation and The Life Insurance Company of Virginia.
(8)(f) Fund Participation Agreement between Janus Aspen Series and The Life Insurance Company of Virginia.
(8)(k) Form of Participation Agreement between Goldman Sachs Variable
Insurance Trust and the Life Insurance Company of Virginia
3. Consents of the following:
(3)(a) Opinion and Consent of J. Neil McMurdie, Associate Counsel and Assistant Vice President for Life of
Virginia
(3)(b) Consent of Sutherland, Asbill & Brennan LLP, Outside Counsel
(3)(c) Consent of KPMG Peat Marwick LLP
(3)(d) Consent of Ernst & Young LLP
6. Opinion and Consent of Actuary Bruce E. Booker, Vice President and Actuary of Life of Virginia
II-6
</TABLE>
EXHIBIT (1) (a)
Resolution of Board of directors of Life of Virginia
authorizing the establishment of Separate Account II
2
<PAGE>
Resolution: Establishing Life of Virginia Separate Account II
BE IT RESOLVED, That the Executive Committee of the Board of Directors of The
Life Insurance Company of Virginia ("Company"), pursuant to the provisions of
Sections 38.2-3113 of the Code of Virginia, hereby establishes a separate
account designated "Life of Virginia Separate Account II" (hereinafter "Separate
Account II") for the following use and purposes, and subject to such conditions
as hereinafter set forth:
FURTHER RESOLVED, That Separate Account II is established for the purpose of
providing for the issuance by the Company of variable flexible premium
adjustable life insurance policies ("Policies"), or other insurance contracts,
and shall constitute a separate account into which are allocated amounts paid to
or held by the Company under such Policies; the form of such Policies shall be
kept on file in the Secretary's Office; and
FURTHER RESOLVED, That the income, gains and losses whether or not realized,
from assets allocated to Separate Account II shall, in accordance with the
Policies, be credited to or charged against such account without regard to other
income, gains, or losses of the Company; and
FURTHER RESOLVED, That Separate Account II shall be divided into Investment
Subdivisions, each Investment Subdivision in Separate Account II shall invest in
the shares of a designated mutual fund portfolio and net premiums under the
Policies shall be allocated to the eligible Portfolios set forth in the Policies
in accordance with instructions received from owners of the Policies; and
FURTHER RESOLVED, That the Executive Committee of the Board of Directors
expressly reserves the right to add or remove any Investment Subdivision of
Separate Account II as it may hereafter deem necessary or appropriate; and
FURTHER RESOLVED, That the President, and Senior Vice President, or the
Treasurer, and each of them, with full power to act without the others, be, and
they hereby are, severally authorized to invest such amount or amounts of the
Company's cash in Separate Account II or in any Investment Subdivision thereof
as may be deemed necessary or appropriate to facilitate the commencement of
Separate Account II's operations and/or to meet any minimum capital
requirements under the Investment Company Act of 1940; and
FURTHER RESOLVED, That the President, any Senior Vice President, any Vice
President, or the Treasurer, and each of them, with full power to act without
the others, be, and they hereby are severally authorized to transfer cash from
time to time between the Company's general account and Separate Account II as
deemed
3
<PAGE>
necessary or appropriate and consistent with the terms of the Policies; and
FURTHER RESOLVED, That the Executive Committee of the Board of Directors of the
Company reserves the right to change the designation of Separate Account II
hereafter to such other designation as it may deem necessary or appropriate;
and
FURTHER RESOLVED, That the President, any Senior Vice President, or any Vice
President, and each of them, with full power to act without the others, with
such assistance from the Company's independent certified public accountants,
legal counsel and independent consultants or others as they may require, be, and
they hereby are, severally authorized and directed to take all action necessary
to: (a) Register Separate Account II as a unit investment trust under the
Investment Company Act of 1940, as amended; (b) Register the Policies in such
amounts, which may be an indefinite amount, as the said officers of the Company
shall from time to time deem appropriate under the Securities Act of 1933: and
(c) Take all other actions which are necessary in connection with the offering
of said Policies for sale and the operation of Separate Account II in order to
comply with the Investment Company Act of 1940, the Securities Exchange Act of
1934, the Securities Act of 1933, and other applicable federal laws, including
the filing of any amendments to registration statements, any undertakings, and
any applications for exemptions from the Investment Company Act of 1940 or other
applicable federal laws as the said officers of the Company shall deem necessary
or appropriate; and
FURTHER RESOLVED, That the President, any Senior Vice President, or any Vice
President, and each of them, with full power to act without the others, hereby
are severally authorized and empowered to prepare, execute and cause to be
filed with the Securities and Exchange Commission on behalf of Separate
Account II, and by the Company as sponsor and depositor a Form of Notification
of Registration Statement under the Securities Act of 1933 registering the
Policies, and any and all amendments; to the foregoing on behalf of
Separate Account II and the Company and on behalf of and as attorneys-in-fact
for the principal executive officer and/or the principal financial officer
and/or the principal accounting officer and/or any other officer of the
Company; and
FURTHER RESOLVED, That John J. Palmer, Senior Vice President, and Paul J.
Mason, Esquire, are duly appointed as agents for service under any such
registration statement, duly authorized to receive communications and notices
from the Securities and Exchange
4
<PAGE>
Commission with respect thereto; and
FURTHER RESOLVED, That the President, any Senior Vice President, or any Vice
President, and each of them, with full power to act without the others, hereby
is severally authorized on behalf of Separate Account II and on behalf of the
company to take any and all action that each of them may deem necessary or
advisable in order to offer and sell the Policies, including any registrations,
filings and qualifications both of the Company, its officers, agents and
employees, and of the policies, under the insurance and securities laws of any
of the states of the United States of America or other jurisdictions, and in
connections therewith to prepare, execute, deliver and file all such
applications, reports, covenants, resolutions, applications for exemptions,
consents to service or process and other papers and instruments as may be
required under such laws, and to take any all further action which the said
officers or legal counsel of the Company may deem necessary or desirable
(including entering into whatever agreements and contracts may be necessary) in
order to maintain such registrations or qualifications for as long as the said
officers or legal counsel deem it to be in the best interests of Separate
Account II and the Company; and
FURTHER RESOLVED, That the President, any Senior Vice president, or any Vice
president, and each of them, with full power to act without the others, be, and
they hereby are severally authorized in the names and on behalf of Separate
Account II and the Company to execute and file irrevocable written consents on
the part of Separate Account II and of the Company to be used in such states
wherein such consents to service of process may be requisite under the insurance
or securities laws therein in connection with said registration or qualification
of the Policies and to appoint the appropriate state official, or such other
person as may be allowed by said insurance or securities laws, agent of Separate
Account II and of the Company for the purpose of receiving and accepting
process; and
FURTHER RESOLVED, That the President, any Senior Vice President, or any Vice
President, and each of them, with full power to act without the others, be, and
hereby is, severally authorized to establish procedures under which the Company
will institute procedures for providing voting rights for owners of the Policies
with respect to securities owned by Separate Account II; and
FURTHER RESOLVED, That the President, any Senior Vice President, or any Vice
President, and each of them, with full power to act without the others, is
hereby severally authorized to execute such agreement or agreements as deemed
necessary and appropriate (i) with Life of Virginia Security Sales, Ltd.
("Security Sales") or other qualified entity under which Security Sales or such
other entity will be appointed principal underwriter and distributor for
5
<PAGE>
the Policies and (ii) with one or more qualified banks or other qualified
entities to provide administrative and/or custodial serviced in connection
with the establishment and maintenance of Separate Account II and the design,
issuance, and administration of the Policies.
FURTHER RESOLVED, That because it is expected that Separate Account II will
invest solely in the securities issued by a specific mutual fund corporation
registered under the Investment Company Act of 1940, the President, any Senior
Vice President, or any Vice President, and each of them, with full power to act
without the others are hereby severally authorized to execute whatever agreement
or agreements as may be necessary or appropriate to enable such investments to
be made.
FURTHER RESOLVED, That the President, any Senior Vice President, or any Vice
President, and each of them, with full power to act without the others, are
hereby severally authorized to execute and deliver such agreements and others
documents and do such acts and things as each of them may deem necessary or
desirable to carry out the foregoing resolutions and the intent and purpose
thereof.
***************************
The undersigned hereby certifies that he is the Secretary of The Life Insurance
Company of Virginia, a corporation organized and existing under the laws of the
Commonwealth of Virginia; that the foregoing is a true and correct copy of a
resolution duly adopted by the Executive Committee of the Board of Directors at
a meeting held on the 21st day of August, 1986; that passage of this resolution
was in all respects legal and that this resolution remains in full force and
affect as of this 29th day of August, 1986.
_________________________________
Secretary
6
EXHIBIT (1) (b)
Resolution of Board of Directors of Life of Virginia
authorizing the addition of Investment Subdivisions to
Separate Account II
7
<PAGE>
WHEREAS, The Executive Committee of the Board of Directors of The Life
Insurance Company of Virginia ("Company") pursuant to the provisions of
Sections 38.2-3113 of the Code of Virginia, adopted resolutions establishing
Life of Virginia Separate Account II ("Separate Account II") on August 21, 1986;
and
WHEREAS, Separate Account II was originally established with four investment
subdivisions, the Common Stock subdivision, the Bond subdivision, the Money
Market subdivision and the Total Return subdivision, each of which invested in
the shares of corresponding Portfolios of Life of Virginia Series Fund, Inc; and
WHEREAS, The Company wishes to establish additional investment subdivisions of
Separate Account II which will invest in shares of corresponding Portfolios of
certain other mutual funds,
NOW, THEREFORE, BE IT RESOLVED, That the Executive Committee of the Board of
Directors of the Company does hereby establish and create the following
additional investment subdivisions of Separate Account II which will invest in
shares of the mutual fund portfolios set forth below:
INVESTMENT SUBDIVISIONS TO BE INVESTED IN
----------------------- -----------------
AMERICAN LIFE/ANNUITIES SERIES
AMR CASH MANAGEMENT CASH MANAGEMENT FUND
AMR HIGH-YIELD BOND HIGH- YIELD BOND FUND
AMR GROWTH-INCOME GROWTH-INCOME FUND
ARM GROWTH GROWTH FUND
AMR GOV GUAR SECUR'S U.S.GOVERNMENT GUARANTEED/
AAA-RATED SECURITIES FUND
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND
FID MONEY MARKET MONEY MARKET PORTFOLIO
FID HIGH INCOME HIGH INCOME PORTFOLIO
FID EQUITY-INCOME EQUITY-INCOME PORTFOLIO
FID GROWTH GROWTH PORTFOLIO
FID OVERSEAS OVERSEAS PORTFOLIO
OPPENHEIMER VARIABLE
ACCOUNT FUNDS
OPP MONEY OPPENHEIMER MONEY FUND
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
8
<PAGE>
FURTHER RESOLVED, That the President, any Senior Vice President, or any Vice
President, and each of them, with full power to act without the others, are
hereby severally authorized to execute whatever agreement or agreements as may
be necessary or appropriate to enable such investments to be made, and the
Executive Committee hereby ratifies the action of any such officer in executing
any such agreement prior to the date of these resolutions; and
FURTHER RESOLVED, That the President, any Senior Vice President, or any Vice
President, and each of them, with full power to act without the others, are
hereby severally authorized to execute and deliver such other documents and do
such acts and things as each of them may deem necessary or desirable to carry
out the foregoing resolutions and the intent and purposes thereof.
***************************
The undersigned hereby certifies that she is the Assistant Secretary of The Life
Insurance Company of Virginia; a corporation organized and existing under the
laws of the Commonwealth of Virginia; that the foregoing is a true and
correct copy of resolutions duly adopted by Unanimous Consent by the Executive
Committee of the Board of Directors on the 18th day of January, 1988; that
passage of these resolutions were in all respects legal, and that these
resolutions remain in full force and effect as of this 20th day of January 1988.
_________________________________
Margaret M. Parker
Assistant Secretary
9
EXHIBIT (1) (c)
Resolution of Board of directors of Life of Virginia authorizing the
establishment of Investment Subdivisions of Separate Account II which
invest in shares of Fidelity Variable Insurance Products Fund II, Asset
Manager Portfolio and Neuberger & Bermans Adviser Management Trust,
Balanced Portfolio
11
<PAGE>
Resolution: Separate Account II
WHEREAS, The Executive Committee of the Board of Directors of the Life Insurance
Company of Virginia ("Company"), pursuant to the provisions of Section 38.2-3113
of the Code of Virginia, adopted resolutions establishing Life of Virginia
Separate Account II ("Separate Account II") on August 21, 1986; and
WHEREAS, The Company wishes to establish two additional investment subdivisions
of Separate Account II which will invest in shares of the Asset Manager
Portfolio of Fidelity's Variable Insurance Products Fund II and the Balanced
Portfolio of Neuberger and Berman's Adviser Management Trust; and
NOW, THEREFORE, BE IT RESOLVED, That, the Executive Committee of the Board of
Directors of the Company does hereby establish and create the following
additional investment subdivisions of Separate Account II which will invest in
shares of the mutual fund portfolios set forth below:
INVESTMENT SUBDIVISIONS TO BE INVESTED IN
----------------------- ---------------------------
Fidelity Variable Insurance
Products Fund II:
FID Asset Manager - Asset Manager Portfolio
Neuberger and Berman's
Advisers Management Trust:
N & B Balanced - Balanced Portfolio
FURTHER RESOLVED, That the President, any Senior Vice President, or any Vice
President, and each of them, with full power to act without the others, are
hereby severally authorized to execute whatever agreement or agreements as may
be necessary or appropriate to enable such investments to be made, and the
Executive Committee hereby ratifies the action of any such officer in executing
any such agreement prior to the date of these resolutions; and
FURTHER RESOLVED, That the President, any Senior Vice President, or any Vice
President, and each of them, with full power to act without the others, are
hereby severally authorized to execute and deliver such other documents and to
such acts and things as each of them may deem necessary or desirable to carry
out the foregoing resolutions and the intent and purposes thereof.
******************************************************************
12
<PAGE>
The undersigned hereby certifies that she is the Assistant Secretary of The Life
Insurance Company of Virginia, a corporation organized and existing under the
laws of the Commonwealth of Virginia; that the foregoing is a true and exact
copy of a resolution adopted by the Executive Committee at a meeting held on the
5th day of September, 1989; that passage of this resolution was in all respects
legal; and that the resolution remains in full force and effect as of this 7th
day of September, 1989.
_______________________________________
Margaret M. Parker, Assistant Secretary
13
EXHIBIT (1) (d)
Resolution of Board of Directors
15
<PAGE>
WHEREAS, The Executive committee of the Board of Directors of The Life Insurance
Company of Virginia ("Company"), pursuant to the provisions of Section 38.2-3113
of the Code of Virginia, adopted resolutions establishing Life of Virginia
Separate Account II ("Separate Account II") on August 21, 1986; and
WHEREAS, The company wishes to establish three additional investment
subdivisions of Separate Account II which will invest in shares of the Growth
Portfolio, the Aggressive Growth Portfolio and the Worldwide Growth Portfolio of
the Janus Aspen Series;
NOW, THEREFORE, BE IT RESOLVED, That the Executive committee of the Board of
Directors of the Company does hereby establish and create the following
additional investment subdivisions of Separate Account II which will invest in
shares of the mutual fund portfolios set forth below:
INVESTMENT SUBDIVISION TO BE INVESTED IN
---------------------- ----------------------
Janus Aspen Series
JAN Growth Growth Portfolio
JAN Aggressive Growth Aggressive Growth Portfolio
JAN Worldwide Growth Worldwide Growth Portfolio
FURTHER RESOLVED, That the President, or any Senior Vice President, and each of
them, with full power to act without the others, are hereby severally
authorized to execute whatever agreement or agreements as may be necessary
or appropriate to enable such investments to be made, and the Executive
Committee hereby ratifies the action of any such officer in executing any such
agreement prior to the date of these resolutions; and
FURTHER RESOLVED, That the President, or any Senior Vice President, and each of
them, with full power to act without the others, are hereby severally authorized
to execute and deliver such other documents and do such acts and things as each
of them deem necessary or desirable to carry out the foregoing resolutions and
the intent and purposed thereof.
****************************************
16
<PAGE>
The undersigned hereby certifies that she is the Secretary of The Life Insurance
Company of Virginia, a corporation organized and existing under the laws of the
Commonwealth of Virginia; that the foregoing is a true and exact copy of a
resolution adopted by the Executive Committee by unanimous consent dated the 3rd
day of September, 1993; that passage of this resolution was in all respects
legal; and that the resolution remains in full force and effect as of this 1st
day of March, 1994.
_________________________________
Linda L. Lanam, Secretary
17
EXHIBIT (1) (e)
Resolution of Board of Directors of Life of Virginia
18
<PAGE>
UNANIMOUS WRITTEN CONSENT OF
THE EXECUTIVE COMMITTEE OF
THE LIFE INSURANCE COMPANY OF VIRGINIA
The undersigned, being all of the members of the Executive Committee of the
Board of Directors of The Life Insurance Company of Virginia, a Virginia
corporation, in lieu of a meeting held for the purpose and pursuant to the
provisions of Section 13.1-685 of the Code of Virginia do hereby approve the
following resolutions:
WHEREAS, The Executive Committee of the Board of Directors of The Life Insurance
Company of Virginia ("Company"), pursuant to the provisions of Section 38.2-3113
of the Code of Virginia, adopted resolutions establishing Life of Virginia
Account II ("Separate Account II") on August 19, 1987; and
WHEREAS, The Company wishes to establish one additional investment subdivision
of Separate Account III which will invest in shares of the Utility Fund
portfolio of the Insurance Management Series;
NOW, THEREFORE BE IT RESOLVED, That the Executive Committee of the Board of
Directors of the Company does hereby establish and create the following
additional investment subdivisions of Separate Account III which will invest in
shares of the mutual fund portfolios set forth below:
INVESTMENT SUBDIVISION TO BE INVESTED IN
IMS Utility Insurance Management Series - Utility Fund
FURTHER RESOLVED, That the President, or any Senior Vice President, and each of
them, with full power to act without the others, are hereby severally authorized
to execute whatever agreement or agreements as may be necessary or appropriate
to enable such investments to be made, and the Executive Committee hereby
ratifies the action of any such officer in executing any such agreement prior to
the date of these resolutions; and
FURTHER RESOLVED, That the President, or any Senior Vice President, and each of
them, with full power to act without the others, are hereby severally authorized
to execute and deliver such other documents and do such acts and things as each
of them may deem necessary or desirable to carry out the foregoing resolutions
and the intent and purposes thereof.
/s/WILLIAM D. BALDWIN 11/7/94 /s/ROBERT A. BOWEN 11/11/94
___________________________________ ________________________________________
William D. Baldwin Robert A. Bowen
/s/DANIEL T. COX 11/11/94 /s/SELWYN L. FLOURNOY,JR. 11/7/94
___________________________________ ________________________________________
Daniel T. Cox Selwyn L. Flournoy, Jr.
/s/H. GAYLORD HODGES, JR. 11/7/94 /s/LINDA L. LANAM 11/3/94
___________________________________ ________________________________________
H. Gaylord Hodges, Jr. Linda L. Lanam
/s/J. GARNETT NELSON 11/7/94 /s/JOHN J. PALMER 11/16/94
___________________________________ ________________________________________
J. Garnett Nelson John J. Palmer
/s/PAUL E. RUTLEDGE III 11/7/94
___________________________________
Paul E. Rutledge III
19
EXHIBIT (1) (f)
Resolution of Board of Directors
20
<PAGE>
UNANIMOUS WRITTEN CONSENT OF
THE EXECUTIVE COMMITTEE OF
THE BOARD OF DIRECTORS OF
THE LIFE INSURANCE COMPANY OF VIRGINIA
The undersigned, being all of the members of the Executive Committee of the
Board of Directors of The Life Insurance Company of Virginia, a Virginia
corporation, in lieu of a meeting held for the purpose and pursuant to the
provisions of Section 13.1-685 of the Code of Virginia do hereby approve the
following resolutions:
WHEREAS, The Executive Committee of the Board of Directors of The Life Insurance
Company of Virginia ("Company"), pursuant to the provisions of Section 38.2-3113
of the Code of Virginia, adopted resolutions establishing Life of Virginia
Separate Account 4 ("Separate Account II") on August 19, 1987; and
WHEREAS, The Company wishes to establish two additional investment subdivisions
of Separate Account II which will invest in shares of the Corporate Bond Fund
portfolio of the Insurance Management Series and the Contrafund Portfolio of the
Variable Insurance Products Fund II.
NOW, THEREFORE, BE IT RESOLVED. That the Executive Committee of the Board of
Directors of the Company does hereby establish and create the following
additional investment subdivisions of Separate Account II will invest in shares
of the mutual fund portfolios set forth below:
INVESTMENT SUBDIVISION TO BE INVESTED IN
---------------------- ----------------------
IMS Corporate Bond Insurance Management Series - Corporate
Bond Fund
FID Contrafund Variable Insurance Products Fund II -
Contrafund Portfolio
FURTHER RESOLVED, That the President, or any Senior Vice President, and each of
them, with full power to act without the others, are hereby severally authorized
to execute whatever agreement or agreements as may be necessary or appropriate
to enable such investments to be made, and the Executive Committee hereby
ratifies the action of any such officer in executing any such agreement prior to
the date of these resolutions; and
FURTHER RESOLVED, That the President, or any Senior Vice President, and each of
them, with full power to act without the others, are hereby severally authorized
to execute and deliver such other documents and do such acts and things as each
of them may deem
21
<PAGE>
necessary or desirable to carry out the foregoing resolutions and the intent
and purposes thereof.
11/30/94
_______________________________________________________
WILLIAM D. BALDWIN DATE
_______________________________________________________
DANIEL T. COX DATE
11/29/94
_______________________________________________________
H. GAYLORD HODGES, JR. DATE
12/1/94
_______________________________________________________
J. GARNETT NELSON DATE
11/29/94
_______________________________________________________
PAUL E. RUTLEDGE III DATE
12/1/94
_______________________________________________________
ROBERT A. BOWEN DATE
11/29/94
_______________________________________________________
SELWYN L. FLOURNOY, JR. DATE
11/29/94
_______________________________________________________
LINDA L. LANAM DATE
12/1/94
_______________________________________________________
JOHN J. PALMER DATE
22
EXHIBIT 1 (g)
Resolution of Board of Directors
23
<PAGE>
UNANIMOUS WRITTEN CONSENT OF
THE EXECUTIVE COMMITTEE OF
THE BOARD OF DIRECTORS OF
THE LIFE INSURANCE COMPANY OF VIRGINIA
The undersigned, being all of the members of the Executive Committee of the
Board of Directors of The Life Insurance Company of Virginia, a Virginia
corporation, in lieu of a meeting held for the purpose and pursuant to the
provisions of Section 13.1-685 of the Code of Virginia do hereby approve the
following resolutions:
WHEREAS, The Executive committee of the Board of Directors of The Life Insurance
Company of Virginia ("Company"), pursuant to the provisions of Section 38.2-3113
of the Code of Virginia, adopted resolutions establishing Life of Virginia
Separate Account II ("Separate Account II") on August 19, 1987; and
WHEREAS, The Company wishes to establish four additional investment subdivisions
of Separate Account II which will invest in shares of the International Equity
Portfolio and the Real Estate Securities Portfolio of Life of Virginia Series
Fund, Inc.
NOW, THEREFORE, BE IT RESOLVED, That the Executive Committee of the Board of
Directors of the Company does hereby establish and create the following
additional investment subdivisions of Separate Account II which will invest in
shares of the mutual fund portfolios set forth below:
INVESTMENT SUBDIVISION TO BE INVESTED IN
---------------------- -----------------
LOVSF International Equity Life of Virginia Series
Fund, Inc. International
Equity Portfolio
LOVSF Real Estate Securities Life of Virginia Series
Fund, Inc. Real Estate
Securities Portfolio
LOVSF International Equity B Life of Virginia Series
Fund, Inc. International
Equity Portfolio
LOVSF Real Estate Securities B Life of Virginia Series
Fund, Inc. Real Estate
Securities Portfolio
FURTHER RESOLVED, That the President, or any Senior Vice President, and each of
them, with full power to act without the others, are hereby severally authorized
to execute whatever agreement or agreements as may be necessary or appropriate
to enable such investments to be made, and the Executive Committee hereby
ratifies the action of any such officer in executive any such agreement prior to
the date of these resolutions; and
24
<PAGE>
FURTHER RESOLVE, That the President, or any senior Vice President, and each of
them, with full power to act without the others, are hereby severally authorized
to execute and deliver such other documents and do such acts and things as each
of them may deem necessary or desirable to carry out the foregoing resolutions
and the intent and purposes thereof.
1/16/95
_____________________________________
WILLIAM D. BALDWIN DATE
17JAN95
_____________________________________
ROBERT A BOWEN DATE
1/16/95
_____________________________________
DANIEL T. COX DATE
1/16/95
_____________________________________
SELWYN L. FLOURNOY, JR DATE
1/16/95
_____________________________________
H. GAYLORD HODGES, JR. DATE
1/16/95
_____________________________________
LINDA L. LANAM DATE
1/16/95
_____________________________________
JOHN J. PALMER DATE
1/16/95
_____________________________________
J. GARNETT NELSON DATE
1/12/95
_____________________________________
PAUL E. RUTLEDGE III DATE
25
EXHIBIT 1 (h)
Resolution of Board of Directors
<PAGE>
UNANIMOUS WRITTEN CONSENT OF
THE EXECUTIVE COMMITTEE OF
THE BOARD OF DIRECTORS OF
THE LIFE INSURANCE COMPANY OF VIRGINIA
The undersigned, being all of the members of the Executive Committee of the
Board of Directors of The Life Insurance Company of Virginia, a Virginia
corporation, in lieu of a meeting held for the purpose and pursuant to the
provisions of Section 13.1-685 of the Code of Virginia do hereby approve the
following resolutions:
WHEREAS, The Executive committee of the Board of Directors of The Life Insurance
Company of Virginia ("Company"), pursuant to the provisions of Section 38.2-3113
of the Code of Virginia, adopted resolutions establishing Life of Virginia
Separate Account III ("Separate Account III") on February 10, 1987; and
WHEREAS, The Company wishes to establish two additional investment subdivisions
of Separate Account III which will invest in shares of the International Equity
Portfolio and the Real Estate Securities Portfolio of Life of Virginia Series
Fund, Inc.
NOW, THEREFORE, BE IT RESOLVED, That the Executive Committee of the Board of
Directors of the Company does hereby establish and create the following
additional investment subdivisions of Separate Account III which will invest in
shares of the mutual fund portfolios set forth below:
INVESTMENT SUBDIVISION TO BE INVESTED IN
LOVSF International Equity Life of Virginia Series
Fund, Inc. - International
Equity Portfolio
LOVSF Real Estate Securities Life of Virginia Series
Fund, Inc. - Real Estate
Securities Portfolio
FURTHER RESOLVED, That the President, or any Senior Vice President, and each of
them, with full power to act without the others, are hereby severally authorized
to execute whatever agreement or agreements as may be necessary or appropriate
to enable such investments to be made, and the Executive Committee hereby
ratifies the action of any such officer in executive any such agreement prior to
the date of these resolutions; and
FURTHER RESOLVE, That the President, or any Senior Vice President, and each of
them, with full power to act without the others, are hereby severally authorized
to execute and deliver such other documents and do such acts and things as each
of them may deem necessary or desirable to carry out the foregoing resolutions
and
<PAGE>
the intent and purposes thereof.
/s/ WILLIAM D. BALDWIN 17 JAN 95 /s/ ROBERT A. BOWEN 1/16/95
- - ----------------------- -------------------
WILLIAM D. BALDWIN DATE ROBERT A BOWEN DATE
/s/ SELWYN L. FLOURNOY, JR. 1/16/95
- - ----------------------- ---------------------------
DANIEL T. COX DATE SELWYN L. FLOURNOY,JR DATE
/s/H. GAYLORD HODGES, JR. 1/16/95 /s/LINDA L. LANAM 1/16/95
- - ------------------------- ------------------------
H. GAYLORD HODGES,JR. DATE LINDA L. LANAM DATE
/s/J. GARNETT NELSON 1/16/95 /s/JOHN J. PALMER 1/16/95
- - ---------------------- ---------------------
J. GARNETT NELSON DATE JOHN J. PALMER DATE
/s/PAUL E. RUTLEDGE III 1/12/95
- - -----------------------
PAUL E. RUTLEDGE III DATE
EXHIBIT (1)(l)
(1)(l) Resolution of Board of Directors of Life of Virginia
authorizing the establishment of six additional investment
subdivisions of Separate Account II, investing in shares of the
U.S. Equity Fund of the GE Investments Funds, Inc., Growth
and Income Fund of the Goldman Sachs Variable Insurance Trust
Fund and Mid Cap Equity Fund of Goldman Sachs Variable
Insurance Trust Fund. Further a name change for Oppenheimer
Variable Account Fund Capital Appreciation Fund to
Oppenheimer Variable Account Fund Aggressive Growth Fund.
<PAGE>
UNANIMOUS WRITTEN CONSENT OF
THE BOARD OF DIRECTORS OF
THE LIFE INSURANCE COMPANY OF VIRGINIA
The undersigned, being all of the members of the Board of Directors of The
Life Insurance Company of Virginia, a Virginia corporation, in lieu of a meeting
held for the purpose and pursuant to the provisions of Section 13.1-685 of the
Code of Virginia do hereby approve the following resolutions:
WHEREAS, The Board of Directors of The Life Insurance Company of Virginia
("Company"), pursuant to the provisions of Section 38.2-3113 of the Code of
Virginia, adopted resolutions establishing Life of Virginia Separate Account II
("Separate Account II") on August 21, 1986; and
WHEREAS, The Company wishes to establish six investment subdivisions of each of
the aforesaid separate accounts which will invest in shares of the U.S. Equity
Fund of the GE Investment Funds, Inc., Growth and Income Fund of the Goldman
Sachs Variable Insurance Trust Fund and the Mid Cap Equity Fund of the Goldman
Sachs Variable Insurance Trust Fund
NOW, THEREFORE, BE IT RESOLVED, That the Board of Directors of the Company does
hereby establish and create six additional investment subdivisions of each of
the aforementioned separate accounts. Each of the new subdivisions shall invest
in shares of a single mutual fund portfolio as set forth below:
INVESTMENT SUBDIVISIONS: TO BE INVESTED IN:
GE Investments Funds, Inc. -
GEI U.S. Equity U.S. Equity Fund
GEI U.S. Equity - B U.S. Equity Fund
Goldman Sachs Variable Insurance Trust Fund
GEI Growth and Income Growth and Income Fund
GEI Growth and Income - B Growth and Income Fund
GEI Mid Cap Equity Mid Cap Equity Fund
GEI Mid Cap Equity - B Mid Cap Equity Fund
FURTHER RESOLVED, That Oppenheimer Capital Appreciation Fund is now known as
Oppenheimer Aggressive Growth.
<PAGE>
INVESTMENT SUBDIVISIONS: TO BE INVESTED IN:
Oppenheimer Variable Account Fund
OPP Aggressive Growth Aggressive Growth
OPP Aggressive Growth - B Aggressive Growth
FURTHER RESOLVED, That the President, or any Senior Vice President, and each of
them, with full power to act without the others, are hereby severally authorized
to execute whatever agreement or agreements may be necessary or appropriate to
enable such investments to be made, and the Board of Directors hereby ratifies
the action of any such in executing any such agreement prior to the date of
these resolutions; and
FURTHER RESOLVED, That the President, or any Senior Vice President, and each of
them, with full power to act without the others, are hereby severally authorized
to execute and deliver such other documents and do such acts and things as each
or any of them may deem necessary or desirable to carry out the foregoing
resolutions and the intent and purposes thereof.
FURTHER RESOLVED, That these resolutions shall take effect as of May 1, 1998.
- - -------------------------- ----------------------------
Robert D. Chinn Ronald V. Dolan
- - -------------------------- ----------------------------
Selwyn L. Flournoy, Jr. Linda L. Lanam
- - -------------------------- ----------------------------
Victor C. Moses Geoffrey S. Stiff
Dated: April 24, 1998
Original Form of Policy
<PAGE>
FLEXIBLE PREMIUM VARIABLE
DEFERRED ANNUITY POLICY
LIFE OF
VIRGINIA
To the policyowner:
Please read your policy carefully. This policy is legal contract between you and
the Company. You, the owner, have benefits and rights described in this policy.
The annuitant is named in the policy. We will make income payments beginning on
the Maturity Date, if the annuitant is still living on that date.
THIS POLICY'S INCOME PAYMENTS DEPEND ON THE ACCOUNT
VALUE. THE 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.
RIGHT TO CANCEL. You may return this policy to our home office within 10 days
after its delivery for a refund. The amount of the refund will equal the account
value with any adjustments required by applicable law or regulation.
For the Life Insurance Company of Virginia
Daniel T. Cox Paul E. Rutledge III
CHAIRMAN PRESIDENT
*Flexible Premium Variable Deferred
*Income payments beginning at maturity
*No dividends *Some benefits reflect investment results
THE LIFE INSURANCE
COMPANY OF VIRGINIA
6610 West Broad Street, Richmond 23230
<PAGE>
POLICY DATA
SCHEDULE OF BENEFITS SCHEDULE OF PREMIUMS
AMOUNT PAYABLE FOR
ANNUITY $25,000.00 SINGLE PAYMENT
INITIAL PREMIUM DUE: $25,000.00
ADDITIONAL PREMIUM PAYMENTS MAY BE MADE. SEE PREMIUM PAYMENTS SECTION.
CHARGES:
PREMIUM TAX RATE: 0.00%
ANNUAL POLICY MAINTENANCE CHARGE: $25.00
MORTALITY AND EXPENSE RISK CHARGE: 1.25% ANNUALLY ( .003446% DAILY)
ADMINISTRATIVE EXPENSE CHARGE: 0.15% ANNUALLY ( .000411% DAILY)
TRANSFER CHARGE $10.00
OWNER THE ANNUITANT
ANNUITANT JOHN DOE 35 AGE LAST BIRTHDAY
POLICY NUMBER 000000000
POLICY DATE May 1, 1994 May 1, 2029 MATURITY DATE
<PAGE>
PAGE 3 PLAN FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY
POLICY NUMBER 000000000
SEPARATE ACCOUNT 4
<TABLE>
<CAPTION>
INVESTMENT SUBDIVISIONS ARE INVESTED IN
<S> <C>
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
FID MONEY MARKET - B MONEY MARKET PORTFOLIO
FID HIGH INCOME - B HIGH INCOME PORTFOLIO
FID EQUITY-INCOME - B EQUITY - INCOME PORTFOLIO
FID GROWTH - B GROWTH PORTFOLIO
FID OVERSEAS - B OVERSEAS PORTFOLIO
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
FID ASSET MANAGER - B ASSET MANAGER PORTFOLIO
JANUS ASPEN SERIES
JAN GROWTH - B GR0WTH PORTFOLIO
JAN AGGRESSIVE GROWTH - B AGGRESSIVE GROWTH PORTFOLIO
JAN WORLDWIDE GROWTH - B WORLDWIDE GROWTH PORTFOLIO
LIFE OF VIRGINIA SERIES FUND, INC.
LOV MONEY MARKET - B MONEY MARKET PORTFOLIO
LOV GOVERNMENT SECURITIES - B GOVERNMENT SECURITIES PORTFOLIO
LOV COMMON STOCK INDEX - B COMMON STOCK INDEX PORTFOLIO
LOV TOTAL RETURN - B TOTAL RETURN PORTFOLIO
NEUBERGER & BERMAN
ADVISERS MANAGEMENT TRUST
N&B LIM MAT BOND - B LIMITED MATURITY BOND PORTFOLIO
N&B GROWN - B GROWTH PORTFOLIO
N&B BALANCED - B BALANCED PORTFOLIO
OPPENHEIMER VARIABLE ACCOUNT FUNDS
OPP MONEY - B OPPENHEIMER MONEY FUND
OPP HIGH INCOME - B OPPENHEIMER HIGH INCOME FUND
OFF BOND - B OPPENHEIMER BOND FUND
OFF CAP APPRECIATION - B OPPENHEIMER CAPITAL APPRECIATION FUND
OFF GROWTH - B OPPENHEIMER GROWTH FUND
OFF MULTI STRATEGIES - B OPPENHEIMER MULTIPLE STRATEGY FUND
</TABLE>
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YOU MAY ALLOCATE YOUR ACCOUNT VALUE TO AS MANY AS SEVEN INVESTMENT
SUBDIVISIONS.
CONSULT YOUR PROSPECTUS FOR INVESTMENT DETAILS.
POLICY NUMBER: 000000000
TABLE OF SURRENDER CHARGES
YEARS SURRENDER CHARGE PERCENTAGE
1 6%
2 6%
3 6%
4 6%
5 4%
6 2%
YEARS 7 AND LATER 0
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TABLE OF CONTENTS
Policy Data ................................................................. 3
Introduction................................................................. 6
Owner, Annuitant and Beneficiary Provisions.................................. 7
Death Provisions............................................................. 8
Premium Payments............................................................. 9
Monthly Income Benefit....................................................... 10
Account Value Benefits....................................................... 11
Separate Account............................................................. 13
General Information.......................................................... 16
Optional Payment Plans....................................................... 17
Copies of any application, riders and endorsements follow page 19.
WORD INDEX
Account Value................................................................ 11
Allocation of Premiums....................................................... 9
Annual Statement............................................................. 16
Beneficiary.................................................................. 7
Beneficiary Change........................................................... 7
Death Benefit................................................................ 9
Investment Subdivisions...................................................... 13
Misstatement of Age or Sex................................................... 16
Notices...................................................................... 16
Optional Payment Plans......................................................7-19
Owner........................................................................ 7
Ownership change............................................................. 7
Premiums..................................................................... 9
Separate Account............................................................. 13
Surrender.................................................................... 11
Surrender Value.............................................................. 11
Transfers.................................................................... 14
Unit Value................................................................... 14
INTRODUCTION
This is a flexible premium variable deferred annuity policy. The initial premium
payment is due on the policy date. Additional premiums may be paid at any time
before the earlier of (1) the maturity date and (2) the policy anniversary on
which the Annuitant attains age 86. In return for these premiums and any
application, we provide certain benefits.
As used in this policy, you or yours refers to the Owner or Owners. We, us or
ours refers to The Life Insurance Company of Virginia. The Owner and the
Annuitant are shown on page 3.
Person, as used in this policy is a human being, a trust, a corporation or any
other legally recognized entity.
The policy provides a monthly income beginning on the maturity date. The amount
of monthly income will depend on:
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o the maturity value;
o the amount of any applicable premium tax;
o the Annuitant's sex and settlement age on the maturity date; and
o the payment plan chosen.
Depending upon the conditions described in the Death Provisions section, this
policy provides for either the payment of a death benefit or the continuation of
the policy at the death of the Owner, Joint Owner or Annuitant prior to the
maturity date.
The Policy and Its Parts
This 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. READ YOUR POLICY CAREFULLY.
Policy means this policy with any attached application and any riders and
endorsements. All statements in any application are considered representations
and not warranties.
We reserve the right to amend this contract as needed to maintain its status as
an annuity under the Internal Revenue Code. If the contract is amended, we will
send you a copy of the amendment, together with the applicable regulation,
ruling or other requirement imposed by the Internal Revenue Service which
requires such amendment.
Age
Age on the policy date or on a policy anniversary prior to the date payments
begin means the person's age on his or her last birthday.
Dates Used in the Policy
The policy goes into effect on the policy date shown on page 3. Policy years and
anniversaries for the initial premium are measured from this date. Years for
determining charges related to additional premiums are measured from the date of
receipt of each additional premium.
The maturity date is the date we start to pay a monthly income if the Annuitant
is still living. This date is shown on page 3 unless changed after issue.
OWNER, ANNUITANT AND BENEFICIARY PROVISIONS
The Owner
The Owner or Joint Owners are shown in the policy. Joint Owners own the policy
equally with the right of survivorship. Right of survivorship means that if a
Joint Owner dies, his or her interest in the policy will pass to the surviving
Joint Owner. Disposition of the policy upon death of an Owner is subject to the
Death Provisions .
An Owner or Joint Owner has rights while this policy is in force, subject to the
rights of any beneficiary named irrevocably, and any assignee under an
assignment filed with us.
The Annuitant
The Annuitant is the person upon whose age and sex guaranteed monthly income
benefits are determined. The policy names you or someone else as the Annuitant.
The Contingent Annuitant, if any, is shown in the application if attached to
this policy. If an application is not attached and you wish to name a Contingent
Annuitant, you may do so by sending a written request to our home office. At the
death of the Annuitant prior to the maturity date, the Contingent Annuitant, if
any, may become the Annuitant in certain circumstances, (see Death Provisions).
If no Contingent Annuitant is alive, the Owner (if a natural person, otherwise,
the Joint Owner, if a natural person) will be the Contingent Annuitant.
The Beneficiary
The Primary Beneficiary and any Contingent Beneficiaries are shown in the
application if attached to this policy. If an application is not attached and
you wish to name a Primary or Contingent Beneficiary(ies), you may do so by
sending a written request to our home office.
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Changing the Owner, Contingent Annuitant or Beneficiary
During the Annuitant's life, you can change the Owner, the Contingent Annuitant
and any Beneficiary if you reserved this right. A person named irrevocably may
be changed only with that person's written consent. 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. 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. Except as described above, the Annuitant cannot be changed.
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DEATH PROVISIONS
Designated Beneficiary
If the Owner, Joint Owner or the Annuitant dies while this policy is in force
and before income payments begin, the Designated Beneficiary will be treated as
the sole owner of the policy following such a death, subject to the distribution
rules set forth below. The Designated Beneficiary will be the person first
listed below who is alive or in existence on the date of the death of the Owner,
Joint Owner or the Annuitant:
(1) Owner
(2) Joint Owner
(3) Primary Beneficiary
(4) Contingent Beneficiary
(5) Owner's Estate
If Joint Owners both survive, they will become the Designated Beneficiary
together.
Distribution Rules
The following distribution rules will apply if the Owner, Joint Owner or the
Annuitant dies before income payments begin:
If the Designated Beneficiary is someone other than the surviving spouse of the
deceased Owner, Joint Owner or Annuitant, no further premium payments will be
accepted and we will pay the Surrender Value to, or for the benefit of, the
Designated Beneficiary. That payment will be made in one lump sum upon receipt
of due proof of death. Instead of receiving that distribution, the Designated
Beneficiary may elect:
(a) to receive the Surrender Value at any time during the five year period
following the date of death of the Owner, Joint Owner or Annuitant by
partially or totally surrendering the contract during that period; or
(b) to apply the entire Surrender Value under Optional Payment Plan 1 or 2
with the first payment to the Designated Beneficiary being made no
later than one year after the date of death of the Owner, Joint Owner
or Annuitant, and with payments being made over the life of the
Designated Beneficiary or over a period not exceeding the Designated
Beneficiary's life expectancy.
If the entire Surrender Value has not been paid to the Designated Beneficiary by
the end of the five year period following the date of death of the Owner, Joint
Owner or Annuitant and payments have not begun in accordance with (b) above, the
policy will terminate at the end of that five-year period, and we will pay any
remaining Surrender Value to, or for the benefit of, the Designated Beneficiary.
If the Designated Beneficiary dies before the required payments have been made,
the Designated Beneficiary will not be treated as an Owner of the policy for
purposes of these Death Provisions, and any remaining payments we make will be
made to the person named by the Designated Beneficiary in writing or, if no
person is so named, the estate of the Designated Beneficiary.
If the Designated Beneficiary is the surviving spouse of the deceased Owner,
Joint Owner or Annuitant, the surviving spouse may continue the policy as the
Owner. In addition, that person will also become the Annuitant if the deceased
was the Annuitant, there is no surviving Contingent Annuitant and the policy has
not been surrendered for the death benefit which is available at the Annuitant's
death under the conditions set forth on the following page. On the surviving
spouse's death, the entire interest in the contract will be paid within 5 years
of such spouse's death to the Beneficiary named by the surviving spouse (and if
no Beneficiary is named, such payment will be made to the surviving spouse's
estate).
If there is more than one Designated Beneficiary, each Designated Beneficiary
will be treated separately according to that Designated Beneficiary's portion of
the policy for purposes of this Death Provisions section.
These special Distribution Rules will not apply at the death of the Annuitant if
all of the following conditions exist:
o the Annuitant was not also an Owner of the policy;
o all owners of the policy are natural persons; and
<PAGE>
o a Contingent Annuitant survives.
Optional Death Benefit at Death of Annuitant
If the death of the Annuitant occurs before income payments begin, and he or she
was age 80 or younger on the policy date, the Designated Beneficiary may
surrender the policy for the Death Benefit within 90 days of the date of such
death. If this optional death benefit is paid, the policy will terminate, and we
will have no further obligation under the policy.
During the first six policy years, the Death Benefit will be the greater of:
o The total of premiums paid reduced by any applicable premium tax and
any partial surrenders plus their surrender charges; or
o The Account Value of the policy on the date we receive proof of the
Annuitant's death.
During any subsequent six year period, the Death Benefit will be the greater of:
o The Death Benefit on the last day of the previous six year period, plus
any premium paid since then, reduced by any applicable premium tax and
any partial surrenders plus their surrender charges since then; or
o The Account Value of the policy on the date we receive proof of the
Annuitant's death.
If the surrender occurs more than 90 days after the Annuitant's death, and/or if
the deceased Annuitant was age 81 or older on the policy date, the Surrender
Value will be payable instead of the Death Benefit. If the policy is not
surrendered, it will remain in force subject to the preceding provisions.
Payment of Benefits
Instead of receiving payment in a lump sum, the Designated Beneficiary may elect
to receive proceeds under Optional Payment Plans 1 or 2 with the first payment
to the Designated Beneficiary being made no later than one year after the date
of death of the Owner, Joint Owner or Annuitant. Payments will be made over the
life of the Designated Beneficiary or over a period not exceeding the Designated
Beneficiary's life expectancy.
Payment of Benefits After Income Payments Have Begun
If the Owner, Joint Owner, or the Annuitant dies while this policy is in force
and after income payments have begun, or if a Designated Beneficiary receiving
income payments dies after the date income payments have begun, payments made
under the policy will be made at least as rapidly as under the method of
distribution in effect at the time of such death, notwithstanding any other
provision of this policy.
PREMIUM PAYMENTS
The initial premium is due on the policy date.
Additional Premium Payments
You may make additional premium payments at any time before the earlier of (1)
the date which is ten years preceding the maturity date and (2) the policy
anniversary on which the Annuitant attains age 86. Each additional premium
payment must be at least $1,000.
When and Where to Pay Premiums
Each premium is payable in advance. Pay each premium to our home office. Make
any checks or money orders payable to Life of Virginia.
Allocation of Premiums
You may allocate premiums to one or more Investment Subdivisions of the Separate
Account, up to the maximum number shown in the policy data page. The portion of
each premium allocated to any particular Investment Subdivision must be at least
10%. Premiums will initially be allocated in accordance with the
8
<PAGE>
allocations requested by you.
You may change the allocation of later premiums at any time, without charge, by
sending a written notice to us at our home office. The allocation will apply to
premiums received after we record the change.
MONTHLY INCOME BENEFIT
We will pay you a monthly income for a guaranteed minimum period beginning on
the maturity date if the Annuitant is still living. The monthly income will be a
variable income payment similar to that described in the provision titled
"Variable Income Options" under the Optional Payment Plans section. Payments
will be made under a Life Income with 10 Years Certain plan, unless you choose
otherwise.
Under the Life Income 10 Years Certain plan, if the Annuitant lives longer than
10 years, payments will continue for his or her life. If the Annuitant dies
before the end of ten years, the remaining payments for the ten year period will
be discounted at the same rate used to calculate the monthly income. The
discounted amount will be paid in one sum to you.
At any time, while the Annuitant is living, and before the maturity date, you
may choose to change the payment plan by written request. If you do choose a
different plan, the monthly income will reflect the plan chosen. Payment plans
which base payment on the life or lives of one or more individuals will base
such payment on the life of the Annuitant or the Annuitant and an additional
individual. You may elect to receive the maturity value in a lump sum instead of
receiving a monthly income. If we pay the maturity value, we will have no
further obligation under the policy.
The maturity value is equal to the Surrender Value on the day immediately
preceding the maturity date.
The initial income payment under the automatic payment plan, payable monthly, is
calculated by multiplying (a) times (b), divided by (c) where:
(a) is the monthly payment rate per $1000, shown under the Optional Payment
Plans for Life Income 10 years Certain, using the sex and settlement
age of the Annuitant, instead of the payee, on the maturity date;
(b) is the maturity value; and (c) is $1,000.
Annuity payments will be made monthly unless quarterly, semi-annual or annual
payments are chosen by written request. However, if any payment made more
frequently than annually would be or becomes less than $100, we reserve the
right to reduce the frequency of payments to an interval that would result in
each payment being at least $100. If the annual payment payable at maturity is
less than $20, we will pay the maturity value and the policy will terminate
effective as of maturity date.
Maturity Date
The maturity date is shown on page 3, unless changed after issue. You may change
the maturity date to any date at least ten years after the date of the last
premium payment. To make a change, send us written notice before the maturity
date then in effect.
If you change the maturity date, maturity date will then mean the maturity date
you selected. You may pay premiums until the date which is ten years preceding
the newly selected maturity date unless that right has been terminated by the
provisions of this policy.
ACCOUNT VALUE BENEFITS
The Account Value of the policy is equal to the account value allocated to the
Investment Subdivisions of the Separate Account.
On the date the initial premium is received and accepted, the Account Value
equals the initial premium. At the end of each valuation period after such date,
the Account Value allocated to each Investment Subdivision of the Separate
Account is (a) plus (b) plus (c) minus (d) minus (e) minus (f), where:
(a) is the Account Value allocated to the Investment Subdivision at the end
of the preceding valuation
<PAGE>
period, multiplied by the Investment Subdivision's Net Investment
Factor for the current period; (b) is premium payments received during the
current valuation period; (c) is any other amounts transferred into the
Investment Subdivision during the current valuation period; (d) is Account
Value transferred out of the Investment Subdivision during the current
valuation period; (e) is any partial surrender made from the Investment
Subdivision during the current valuation period; (f) any premium tax
deductions.
In addition, after the policy date whenever a valuation period includes the
policy anniversary day, the Account Value at the end of such period is reduced
by the Annual Policy Maintenance Charge allocated to the Account Value in the
Investment Subdivision for that policy anniversary day. This charge 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 year.
Annual Policy Maintenance Charge
There will be a charge made each year for maintenance of the policy. This charge
is made once for each policy year against the Account Value allocated to the
Separate Account. The charge for a policy year will be made at the earlier of
the next policy anniversary or the date the policy is surrendered. The amount of
this charge is shown on page 3. We will waive this charge if the Account Value
exceeds $75,000 at the time the charge is due.
Surrender
You can fully or partially surrender this policy by sending a written request to
our home office. We must receive the request before income payments begin. You
may be required to pay a surrender charge and any applicable premium tax (see
Premium Tax). These charges will be deducted from the amount surrendered.
Full Surrender. You must send us your policy with your request for surrender.
The amount payable is the Surrender Value. The Surrender Value of this policy
is the Account Value on the date we receive your written request for surrender
in our home office, less any surrender charge. See Deferred Premium Tax.
Partial Surrender. You may make a partial surrender from the Account Value of
this policy at any time. We will not permit the amount of a partial surrender to
be less than $500 or to reduce the Account Value to less than $5000. The amount
payable will be the amount of the partial surrender less any surrender charge.
See Deferred Premium Tax.
You may tell us how to deduct the partial surrender from the Investment
Subdivisions of the Separate Account. If you do not, the partial surrender will
be deducted from each Investment Subdivision in the same proportion that the
policy's Account Value in that Investment Subdivision bears to the total Account
Value in all Investment Subdivisions on the date we receive the request in our
home office. See Deferred Premium Tax.
Deferred Premium Tax. If we paid a tax on a premium and we did not previously
deduct the tax, then we may deduct it at the time of surrender. See Premium
Tax.
Surrender Charge
All or part of the amount surrendered may be subject to a surrender charge. The
amount subject to a charge is the lesser of (a) or (b), where:
(a) is the amount surrendered;
(b) is the total premiums, less the total of all surrender amounts
previously allocated to premium payments.
The surrender charge will be the applicable percentage(s) of the amount subject
to a charge. For purposes of determining the applicable percentage(s), surrender
amounts that are subject to a charge will be allocated to remaining premium
payments in the order that the premium payments were received. Remaining premium
payments are the premium payments, less the amount of any surrenders previously
allocated to them. The applicable percentage for each premium payment is found
on the policy data pages in the Table of Surrender Charges next to the number
representing the number of full and partially completed years since the premium
10
<PAGE>
payment.
Reduced Charges on Certain Surrenders. Surrender charges will be reduced for the
first surrender in each policy year. If the first surrender of the policy year
is a partial surrender of 10% of the Account Value, or less, the amount
surrendered will not be subject to a charge.
If the first surrender of the policy year is a full surrender, or a partial
surrender of more than 10% of the Account Value, the amount of the surrender
that is subject to a charge will be reduced by 10% of the Account Value.
There will be no surrender charge if you choose one of the following Optional
Payment Plans:
o Plan 1;
o Plan 2 for a period of 5 or more years;
o Plan 5.
Waiver of Surrender Charges in the Event of Hospital or Nursing Facility
Confinement
We will waive the surrender charges otherwise applicable to a full surrender or
one or more partial surrenders occurring before income payments begin if:
o The Annuitant is, or has been confined to a state licensed or legally
operated hospital or inpatient nursing facility for at least 30
consecutive days; and
o Such confinement begins at least one year after the policy date; and
o The Annuitant was age 80 or younger on the policy date; and
o The request for the full or partial surrender, together with proof of
such confinement, is received in the Home Office while the Annuitant is
confined or within 90 days after discharge from the facility.
Postponement of Payments
We will usually pay any amounts payable as a result of full or partial
surrenders within seven days after we receive written request in our home
office, in a form satisfactory to us. We will usually pay any proceeds payable
as a result of death within seven days after we receive due proof of death.
Payment of any amount payable on surrender, partial surrender or death may be
postponed whenever:
o the New York Stock Exchange is closed other than customary weekend and
holiday closings, or 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 practical or it is not reasonably practical to determine the
value of net assets of the Separate Account.
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.
SEPARATE ACCOUNT
The Separate Account named in the policy data pages will be used to support the
operation of this policy and certain other variable annuity 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 annuities.
We own assets in the Separate Account. However, these assets are not part of our
general account. Income, gains and losses, whether or not realized, from assets
allocated to the Separate Account will be credited to or charged against the
account without regard to our other income, gains or losses.
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
regulates the operations of insurance companies incorporated in Virginia.
11
<PAGE>
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 in the state in
which this policy was delivered.
The Separate Account is divided into Investment Subdivisions. The Investment
Subdivisions are named in the policy data pages. We reserve the right to remove
any Investment Subdivision of the Separate Account, or to add new Investment
Subdivisions. Each Investment Subdivision of the Separate Account will invest in
shares of a mutual fund, or of a portfolio of a series type of mutual fund named
in the data pages. You determine the percentage of premiums which will be
allocated to each Investment Subdivision.
The Owner will share only the income, gains and losses of the Investment
Subdivisions to which his or her premium payments have been allocated.
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.
We also have the right, subject to compliance with applicable law, to make
additions to, deletions from, or substitutions for the shares of a mutual fund
portfolio that are held by the Separate Account or that the Separate Account may
purchase. We reserve the right to eliminate the shares of any portfolio named in
the data pages, and to substitute shares of another portfolio, if the shares of
the portfolio are no longer available for investments, or if in our judgment
further investment in the portfolio should become inappropriate in view of the
purposes of the Separate Account. 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.
We also reserve the right to 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. If this type of transfer is made, the term
Separate Account, as used in this policy, shall then mean the Separate Account
to which the assets were transferred.
When permitted by law, we also reserve the right to:
(a) deregister the Separate Account under the Investment Company Act of 1940;
(b) manage the Separate Account under the direction of a committee;
(c) restrict or eliminate any voting rights of Owners, or other persons who
have voting rights as to the Separate Account; and
(d) combine the Separate Account with other accounts.
We will value the assets of the Separate Account each business day.
We will value the assets in the Separate Account at their fair market value in
accordance with accepted accounting practices and applicable laws and
regulations.
Unit Value
Each Investment Subdivision has a Unit Value. When premiums or other amounts are
transferred into an Investment Subdivision, a number of Units are purchased
based on the subdivision's Unit Value for the valuation period during which the
transfer is made. When amounts are transferred out of an Investment Subdivision,
Units are redeemed in a similar manner. The Unit Value for a valuation period
applies to each day in the period. Before income payments begin, Unit Values are
referred to as Accumulation Unit Values. Once income payments have begun, they
are referred to as Annuity Unit Values.
For each Investment Subdivision, the Accumulation Unit Value for the first
valuation period was $10. The Accumulation Unit Value for each subsequent period
is the Net Investment Factor for that period, multiplied by the Accumulation
Unit Value for the immediately preceding period.
For each Investment Subdivision, the Annuity Unit Value for the first valuation
period was $10. The Annuity
<PAGE>
Unit Value for each subsequent period is (a) times (b) times (c), where:
(a) is the Net Investment Factor for that period;
(b) is the Annuity Unit Value for the preceding period; and
(c) is the investment result adjustment factor for that period.
The investment result adjustment factor recognizes an assumed interest rate of
3% per year used in determining the income payment amounts and is equal to
0.99991902 daily.
Each valuation period includes a business day and any non-business day or
consecutive non-business days immediately preceding it. Assets are valued at the
close of the business day. A business day is any day the New York Stock Exchange
is open for trading, or any day in which there is a material change in the value
of the assets in the Separate Account.
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.
The Net Investment Factor for a valuation period is (a) divided by (b), minus
(c), where:
(a) is (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 at the end of the preceding valuation
period; and
(c) is a factor representing the charge for mortality and expense risks we
assume and for administrative expenses. The annual rate for these
charges is shown on page 3.
Transfers Before Income Payments Begin
You may transfer amounts among the Investment Subdivisions of the Separate
Account by sending a written request to us at our home office. 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. The amount of the transfer charge is shown on page 3. 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.
We reserve the right to limit, upon written notice, the number of transfers to
twelve each calendar year or, if it is necessary for the policy to continue to
be treated as an annuity policy by the IRS, a lower number. Also, we reserve the
right to refuse to execute any transfer if any of the Investment Subdivisions
which would be affected by the transfer is unable to purchase or redeem shares
of the mutual fund in which the Investment Subdivision invests. The transfer
will be effective as of the end of the valuation period during which we receive
your request at our home office. If the amount of your Account Value remaining
in an Investment Subdivision after the transfer is less than $100, we will
transfer the amount remaining in addition to the amount requested. We will not
allow a transfer into any Investment Subdivision unless the Account Value of
that Investment Subdivision after the transfer is at least $100.
Transfers After Variable Income Payments Begin
If income payments are made under one of the Variable Income Options you may
transfer Annuity Units among the Investment Subdivisions of the Separate Account
by sending a written request to us at our home office. You may make one transfer
in each calendar year. We reserve the right to limit the number of transfers if
it is necessary for the policy to continue to be treated as an annuity policy by
the IRS. Also, we reserve the right to refuse to execute any transfer if any of
the Investment Subdivisions that would be affected by the transfer is unable to
purchase or redeem shares of the mutual fund in which the Investment Subdivision
invests. If the number of annuity units remaining in an Investment Subdivision
after the transfer is less than 1, we will
<PAGE>
transfer the amount remaining in addition to the amount requested. We will not
allow a transfer into any Investment Subdivision unless the number of annuity
units of that Investment Subdivision after the transfer is at least 1. No
transfer charge is imposed for transfers of annuity units. The amount of the
income payment as of the date of the transfer will not be affected by the
transfer.
GENERAL INFORMATION
Annual Statement
Within 30 days after each policy anniversary, we will send you an annual
statement. The statement will show the Account Value and Surrender Value as of
the policy anniversary. The statement will also show premiums paid and charges
made during the policy year.
Calculation of Values
If the Net Investment Factor is always equivalent to an effective annual
interest rate of 4%, the account 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.
Evidence of Death, Age, Sex or Survival
We will require proof of death before we act on policy provisions relating to
death of any person or persons. We may also require proof of the age, sex or
survival of any person or persons before we act on any policy provision
dependent upon age, sex or survival.
Incontestability
We will not contest this policy.
Misstatement of Age or Sex
If the Annuitant's age or sex is misstated on the policy data page, any policy
benefits or proceeds, or the availability thereof, will be determined using the
correct age and sex.
Premium Tax
Premium tax rules vary by state and change from time to time. Some states assess
a tax against us upon receipt of premium and some states upon annuitization of
proceeds.
Tax assessed upon receipt of premium: The premium tax rate shown on page 3 is
the rate that was in effect in your state at policy issue. To calculate any
applicable premium tax in effect on the date we receive the premium payment,
multiply the premium payment by the premium tax rate. This is the amount of any
state and/or local premium tax charged to us for this policy. We reserve the
right to deduct any such tax either from your premium payment(s) when received,
or from proceeds later when paid. (Proceeds includes benefits from surrender,
maturity and death.)
Tax assessed upon annuitization of proceeds: Since some states assess a premium
tax on proceeds used to purchase income payments, we reserve the right to deduct
from such proceeds any premium tax paid by us. Because state premium tax rules
change from time to time, the tax rate, if any, applicable to proceeds used to
purchase income payments is not shown in your policy. You may request
notification of the amount of this tax before income payments begin.
Nonparticipating
This policy is nonparticipating. No dividends are payable.
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
Annuitant's full name.
<PAGE>
Any notice we send you will be sent to the last known address on file with our
company. You should request an address change form if you move.
OPTIONAL PAYMENT PLANS
Death benefit and Surrender Value proceeds will be paid in one lump sum, and
maturity proceeds will be paid as described in the Monthly Income Benefit
section. Subject to the rules stated below, however, any part of the death or
surrender proceeds can be left with us and paid under a payment plan. If you
choose to leave the proceeds with us and receive payments under a payment plan,
the proceeds less any applicable premium tax will be applied to calculate your
income. During the Annuitant's life you (or the Designated Beneficiary at your
death) can choose a plan. If a plan has not been chosen at the death of the
Annuitant, the Designated Beneficiary can choose a plan if the death benefit is
to be paid.
There are several important payment plan rules:
o Our consent must be obtained prior to selecting an optional payment
plan if the payee is not a natural person.
o Payment made under an Optional Payment Plan at the death of the Owner,
Joint Owner or Annuitant must conform with the rules in the Death
Provisions, including the Payment of Benefits section.
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 $100.
o Payments under a Fixed Income option will begin on the date we receive
proof of the Annuitant's death, on surrender, or on the policy's
maturity date.
o Payments under a Variable Income option will begin within seven days
after the date payments would begin under the corresponding fixed
option.
o Payments under Plan 4 will begin at the end of the first interest
period after the date proceeds are otherwise payable.
Fixed Income Options
Optional Payment Plans 1 through 5 are available as Fixed Income Options. Any
amount left with us under a Fixed Income option will be transferred to our
general account. Payments made will equal or exceed those required by the state
where this policy is delivered.
Variable Income Options
Optional Payment Plans 1 and 5 are available as Variable Income Options. This
means that income payments, after the first, will reflect the investment
experience of the Investment Subdivisions of the Separate Account.
Proceeds may be allocated to one or more Investment Subdivisions of the Separate
Account. The first income payment is determined by the Plan chosen and the
amount of proceeds applied to the Plan. The dollar amount of subsequent income
payments is determined by means of Annuity Units.
The number of Annuity Units for an Investment Subdivision will be determined at
the time income payments begin and will remain fixed unless transferred (as
shown below). The number of Annuity Units for an Investment Subdivision is (a)
divided by (b), where:
(a) is the portion of the first income payment allocated to that Investment
Subdivision; and
(b) is the Annuity Unit Value for that Investment Subdivision seven days
before the income payment is due.
After the first income payment, each subsequent income payment is a dollar
amount equal to the sum of the income payment amounts for each Investment
Subdivision. The income payment amount for an Investment Subdivision is the
number of Annuity Units for that Investment Subdivision times the Annuity Unit
Value for that Investment Subdivision seven days before the payment is due.
15
<PAGE>
Annuity Units may be transferred upon request. The number of Annuity Units for
the new Investment Subdivision is (a) times (b), divided by (c), where:
(a) is the number of Annuity Units for the current Investment Subdivision;
(b) is the Annuity Unit Value for the current Investment Subdivision; and
(c) is the Annuity Unit Value for the new Investment Subdivision.
Payment Plans
The fixed income options are shown below. Variable income options, if
applicable, have the same initial payment as the corresponding fixed option. The
monthly payment rate per $1000, as shown in the Plan 1 and Plan 5 Tables, is
based on the 1983 Table `a', using 3% interest.
Plan 1. Life lncome with Period Certain. 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 below. 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 rate used in calculating
income payments. Discounted means we will deduct the amount of interest each
remaining payment would have earned had it not been paid out early. The
discounted amounts will be paid in one sum to the payee's estate unless
otherwise provided.
Plan 1 Table
<TABLE>
<CAPTION>
Monthly payment rates for each $1,000 of proceeds under Plan 1.
- - ------------------------------------------------------------------------------------------
Settlement Male Payee Female Payee
Age
-----------------------------------------------------------------------------
10 Years 15 Years 20 Years 10 Years 15 Years 20 Years
Certain Certain Certain Certain Certain Certain
<S> <C>
- - ------------------------------------------------------------------------------------------
20 $2.90 $2.89 $2.89 $2.80 $2.80 $2.80
25 2.99 2.98 2.98 2.88 2.87 2.87
30 3.10 3.10 3.09 2.96 2.96 2.96
35 3.24 3.24 3.23 3.08 3.07 3.07
40 3.43 3.41 3.39 3.22 3.21 3.20
45 3.66 3.64 3.60 3.40 3.39 3.37
50 3.95 3.91 3.85 3.63 3.61 3.59
51 4.02 3.97 3.91 3.68 3.66 3.63
52 4.09 4.04 3.96 3.74 3.72 3.68
53 4.16 4.11 4.02 3.80 3.77 3.74
54 4.24 4.18 4.08 3.86 3.83 3.79
55 4.32 4.25 4.15 3.93 3.90 3.85
56 4.41 4.33 4.21 4.00 3.96 3.91
57 4.50 4.41 4.28 4.07 4.03 3.97
58 4.60 4.49 4.34 4.15 4.10 4.03
59 4.70 4.58 4.41 4.23 4.18 4.10
60 4.81 4.67 4.48 4.32 4.26 4.17
61 4.92 4.77 4.55 4.42 4.35 4.24
62 5.04 4.86 4.62 4.52 4.43 4.31
63 5.17 4.96 4.69 4.62 4.53 4.39
64 5.30 5.06 4.76 4.73 4.62 4.46
- - ------------------------------------------------------------------------------------------
</TABLE>
Values for ages not shown will be furnished upon request.
<TABLE>
<CAPTION>
Monthly payment rates for each $1,000 of proceeds under Plan 1.
- - ------------------------------------------------------------------------------------------
Settlement Male Payee Female Payee
Age
------------------------------------------------------------------------------
10 Years 15 Years 20 Years 10 Years 15 Years 20 Years
Certain Certain Certain Certain Certain Certain
<S> <C>
- - ------------------------------------------------------------------------------------------
65 $5.44 $5.17 $4.83 $4.85 $4.72 $4.54
66 5.58 5.28 4.89 4.97 4.83 4.62
67 5.74 5.38 4.96 5.10 4.93 4.69
68 5.89 5.49 5.02 5.24 5.04 4.77
69 6.05 5.60 5.08 5.39 5.16 4.84
70 6.22 5.70 5.13 5.55 5.28 4.92
71 6.39 5.81 5.18 5.71 5.39 4.99
72 6.57 5.91 5.23 5.88 5.51 5.05
73 6.75 6.01 5.27 6.06 5.63 5.12
74 6.93 6.10 5.31 6.25 5.75 5.17
75 7.12 6.19 5.35 6.44 5.87 5.22
76 7.30 6.28 5.38 6.64 5.98 5.27
77 7.49 6.35 5.40 6.85 6.09 5.31
78 7.67 6.43 5.42 7.06 6.19 5.35
79 7.85 6.49 5.44 7.27 6.28 5.38
80 8.02 6.55 5.46 7.48 6.37 5.41
81 8.18 6.61 5.47 7.68 6.45 5.43
82 8.34 6.65 5.48 7.88 6.52 5.45
83 8.49 6.69 5.49 8.08 6.58 5.47
84 8.63 6.73 5.50 8.26 6.63 5.48
85 8.76 6.76 5.50 8.43 6.68 5.49
- - ------------------------------------------------------------------------------------------
</TABLE>
Values for ages not shown will be furnished upon request.
Plan 2. 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 below.
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
16
<PAGE>
discounted to the date of the payee's death at the same rate used in calculating
income payments. The discounted amount will be paid in one sum to the payee's
estate unless otherwise provided.
<TABLE>
<CAPTION>
Plan 2 Table
Monthly payment rates for each $1,000 of proceeds under Plan 2.
- - -------------------------------------------------------------------------------------------------------------------------------
Years 1 2 3 4 5 6 7 8 9 10
Payable
<S> <C>
- - -------------------------------------------------------------------------------------------------------------------------------
Monthly $84.47 $42.86 $28.99 $22.06 $17.91 $15.14 $13.16 $11.68 $10.53 $9.61
Payment
- - -------------------------------------------------------------------------------------------------------------------------------
Years 16 17 18 19 20 21 22 23 24 25
Payable
- - -------------------------------------------------------------------------------------------------------------------------------
Monthly $6.53 $6.23 $5.96 $5.73 $5.51 $5.32 $5.15 $4.99 $4.84 $4.71
Payment
- - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Annual, semi-annual or quarterly payments are determined by multiplying the
monthly payment by 11.838, 5.963 or 2.992, respectively.
<TABLE>
<CAPTION>
Plan 2 Table
Monthly payment rates for each $1,000 of proceeds under Plan 2.
- - -------------------------------------------------------------------------
Years 11 12 13 14 15
Payable
<S> <C>
- - -------------------------------------------------------------------------
Monthly $8.86 $8.24 $7.71 $7.26 $6.87
Payment
- - -------------------------------------------------------------------------
Years 26 27 28 29 30
Payable
- - -------------------------------------------------------------------------
Monthly $4.59 $4.47 $4.37 $4.27 $4.18
Payment
- - -------------------------------------------------------------------------
</TABLE>
Annual, semi-annual or quarterly payments are determined by multiplying the
monthly payment by 11.838, 5.963 or 2.992, respectively.
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
rate used in calculating the monthly income. The discounted amount will be paid
in one sum to the survivor's estate unless otherwise provided.
<TABLE>
<CAPTION>
Plan 5 Table
Monthly payment rates for each $1,000 of proceeds under Plan 5.
- - ------------------------------------------------------------------------------------------------------------------------------
Male Settlement Female Settlement Age
--------------------------------------------------------------------------------------------------------------
Age 35 40 45 50 55 60 65 70
<S> <C>
- - ------------------------------------------------------------------------------------------------------------------------------
35 $2.85 $3.00 $3.06 $3.11 $3.15 $3.18 $3.20 $3.22
40 2.98 3.06 3.13 3.20 3.26 3.31 3.35 3.38
45 3.01 3.10 3.20 3.30 3.39 3.46 3.53 3.58
50 3.03 3.14 3.25 3.38 3.51 3.63 3.73 3.81
55 3.04 3.16 3.30 3.45 3.62 3.79 3.94 4.08
60 3.05 3.18 3.33 3.51 3.72 3.94 4.16 4.37
65 3.06 3.19 3.36 3.56 3.79 4.07 4.37 4.68
70 3.07 3.20 3.37 3.59 3.85 4.17 4.55 4.97
75 3.07 3.21 3.38 3.61 3.89 4.24 4.68 5.20
80 3.07 3.21 3.39 3.62 3.91 4.28 4.76 5.37
85 & Over 3.07 3.22 3.39 3.62 3.92 4.31 4.81 5.47
- - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Figures for intermediate ages, for two males or two females will be furnished
upon request.
17
Plan 5 Table
Monthly payment rates for each $1,000 of proceeds under Plan 5.
- - ------------------------------------------------------------
Male Settlement
--------------------------------------------
Age 75 80 85 & Over
- - ------------------------------------------------------------
35 $3.23 $3.24 $3.24
40 3.40 3.41 3.42
45 3.61 3.64 3.65
50 3.87 3.91 3.93
55 4.18 4.25 4.29
60 4.55 4.67 4.75
65 4.96 5.18 5.32
70 5.39 5.75 6.00
75 5.78 6.32 6.73
80 6.08 6.81 7.40
85 & Over 6.28 7.15 7.91
- - ------------------------------------------------------------
Figures for intermediate ages, for two males or two females
will be furnished upon request.
<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 payee.
- - ----------------------------------------------------------
Year Payments Begin Age
After Prior To Adjustment
- - ----------------------------------------------------------
---- 2001 0
2000 2026 3
2025 2051 7
2050 ---- 10
- - ----------------------------------------------------------
18
<PAGE>
FLEXIBLE PREMIUM VARIABLE
DEFERRED ANNUITY POLICY
* Income payments beginning at maturity
* No dividends
* Some benefits reflect investment results
THE LIFE INSURANCE
COMPANY OF VIRGINIA
19
EXHIBIT 1A (5) (b)
Endorsement to Policy
67
<PAGE>
ENDORSEMENT
The policy is hereby amended by items 1, 2, 3, and 4 listed in this endorsement.
1. The Allocation of Net Premiums provision of the policy is deleted and
replaced by the following:
Allocation of Net Premiums
The net premium is the premium paid, multiplied by the Net Premium Factor
shown in the policy data pages. You may allocate the net premiums to one
or more Investment Subdivisions of the Separate Account. The Portion of
each net premium allocated to any particular Investment Subdivision must
be at least 10%.
We will initially allocate net premiums to the LOV Money Market Investment
Subdivision. Upon receipt at our home office of a form satisfactory to us,
signed by the policyowner, indicating that the policyowner has received
and accepted and accepted the policy, the cash value in that Investment
Subdivision will be transferred to the other Investment Subdivisions of
the Separate Account in accordance with the net premium allocation
percentages. For any premium received after we receive the signed form,
the net premium will be allocated in accordance with the written
instructions of the policyowner. You may change the allocation of later
premiums at any time, without charge, simply by sending written notice to
us at our home office. The allocation will apply to premiums received
after we record the change. The Refund Privilege is described on the
policy cover.
2. The SEPARATE ACCOUNT section of the policy is amended as follows.
The following paragraph is deleted:
The Separate Account is divided into Investment Subdivisions. The
Investment Subdivisions are named in the policy data pages. We reserve
the right to remove any Investment Subdivisions of the Separate
Account, or to add new Investment Subdivisions. Each Investment
Subdivision in the Separate Account will invest in shares of a
designated portfolio of Life of Virginia Series Fund, Inc., a series
type of mutual fund. You determine the percentages of net premiums
which will be allocated to each Investment Subdivision.
The above deleted paragraph is replaced by the following paragraph:
The Separate Account is divided into Investment Subdivisions. The
Investment Subdivisions are named in the policy data pages. We reserve
the right to remove any Investment Subdivision of the Separate Account,
or to add new Investment Subdivisions. Each Investment Subdivision in
the Separate Account will invest in shares of
68
<PAGE>
a mutual fund, or of a portfolio of a series type of mutual fund named
in the data pages. You determine the percentage of net premiums which
will be allocated to each Investment Subdivision.
69
EXHIBITS 1A(6)(a)
Articles of Incorporation of Life of Virginia
70
<PAGE>
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
I, George W. Bryant, Jr., First Assistant Clerk of the State Corporation
Commission, do hereby certify that the foregoing is a true copy of all documents
constituting as of this date the charter of The Life Insurance Company of
Virginia.
In Testimony Whereof I hereunto set my hand and
affix the Official Seal of The State
Corporation Commission, at
Richmond, this 8th day of
May A.D. 1984
George W. Bryant, Jr.
_____________________
First Assistant Clerk of the Commission
71
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA
ARTICLES OF AMENDMENT TO THE
RESTATED ARTICLES OF INCORPORATION
1. The name of the corporation is:
THE LIFE INSURANCE COMPANY OF VIRGINIA
2. The amendment adopted to the Restated Articles of Incorporation is appended
hereto as Exhibit A.
3. On October 20, 1983 the Board of Directors, pursuant to the provisions of
Section 13.1-58 of the Code of Virginia, found the amendment in the best
interests of the Corporation and directed that it be submitted to the
Corporation's sole stockholder, continental financial Services Company, for
its approval.
4. 3,515,949 shares of Capital Stock, $5.00 per value, are outstanding and on
October 21, 1983 the sole holder thereof, Continental Financial Services
Company, consented in writing to such amendment, in lieu of a stockholders'
meeting therefor, pursuant to the provisions of Section 13.1-28 of the Code
of Virginia, there being no other class of capital stock entitled to vote
thereon.
Executed in the name of the Corporation by its President and its Secretary who
declare under the penalties of perjury that the facts stated therein are true.
THE LIFE INSURANCE COMPANY
OF VIRGINIA
BY:___________________________
SAMUEL H. TURNER, PRESIDENT
AND BY:________________________
ROY G. McLEOD, SECRETARY
72
<PAGE>
Dated: October 21, 1983
EXHIBIT A
---------
Section 1. Be it enacted by the General Assembly of Virginia, That A. G.
McIIwaine, D'Arcy Paul, David B. Tennant, Robert B. Bolling, Wm. Cameron, Wm R.
Mallory, John Arrington, John Mann, R. G. Pegram, Robert H. Mann, Reuben
Ragland, T.T. Books, Wm. R. Johnson, Robert D. McIIwaine, S. W. Venable, Dr.
Thomas Withers, S. A. Plummer, George Cameron, J. C. Riddle, c. w. Spicer, Wm.
A. Bragg, Dr. James Dunn, Dr. D. W. Lassiter, Samuel B. Paul, H. L. Plummer,
George H. Davis, J. C. Drake, David Callender, A. A. Allen, Bartlett Roper, J.
P. Williamson, J. M. West, C. Baker Raine, Robert Harrison, Jr., Robert A.
Martin, and all other persons who shall hereafter become stockholders in the
Company hereby incorporated, are hereby created a body politic and corporate by
the name and style of The Life Insurance Company of Virginia, for the purpose of
carrying on the business of insurance on lives, and to make all and every
insurance appertaining thereto or connected therewith; to cause themselves to be
reinsured; to grant endowments; to grant, purchase, or dispose of annuities, and
to contract for reversionary payments; and shall and may have perpetual
succession, and shall be capable in law of contracting and being contracted
with, and of suing and being sued, pleading and being impleaded, either in law
or equity, in all courts of record in this State or elsewhere, and they and
their successors shall and may have a common seal, and may change the same at
their will and pleasure, and may also, from time to time, ordain and establish
such by-laws, ordinances and regulations, the same not being inconsistent with
the laws of the State and of the United States, as may appear to them necessary
or expedient for the management of said corporation, its business, and affairs,
and may, from time to time, alter, amend, or repeal the same, or any of them.
The Company is authorized and empowered to insure persons against personal
injuries resulting from accidents and against sickness, or either, and to make
all and every insurance appertaining thereto or connected therewith. The Company
is also authorized and empowered to act as an agent or agency in the sale of
life insurance policies, annuity policies, endowment policies and accident and
sickness insurance policies.
The Company shall also be authorized to exercise and enjoy all other
powers, rights and privileges granted by an Act of the General Assembly of
Virginia entitled "An Act Concerning Corporations" which become a law on the
21st day of May, 1903, to companies of this character, and all the powers
conferred upon such companies by the then existing laws of the State of
Virginia, so far as not in conflict therewith, or subject to all the
restrictions imposed by law upon said companies; the enumeration of certain
powers herein not being intended as exclusive or as a waiver of any powers,
rights or privileges granted or conferred on such companies by the Act, which
became a law on the 21st day of May, 1903, aforesaid, of the laws of this State,
then now or hereafter in force.
73
<PAGE>
SCC9A 3 3 1 1 3 0 0 6 5
002510
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
RICHMOND, NOVEMBER 15, 1983
The accompanying articles having been delivered to the State Corporation
Commission on behalf of
THE LIFE INSURANCE COMPANY OF VIRGINIA
and the Commission having found that the articles comply with the requirements
of law and that all required fees have been paid, it is
ORDERED THAT THIS CERTIFICATE OF AMENDMENT
be issued, and that this order, together with the articles, be admitted to
record in the office of the Commission; and that the corporation have the
authority conferred on it by law in accordance with the articles, subject to the
conditions and restrictions imposed by law.
STATE CORPORATION COMMISSION
BY ___________________________________
THOMAS P. HARWOOD, JR. COMMISSIONER
74
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA
ARTICLES OF SERIAL INCORPORATION
--------------------------------
The Life Insurance Company of Virginia certifies as follows:
A. The name of the Company is The Life Insurance Company of
Virginia.
B. The following resolutions, setting forth the designation and number of
shares of two new series of Preferred Stock of the Company and the relative
rights and preferences thereof, to the extent that variations are permitted by
the Company's Articles of Incorporation, were duly adopted by the Board of
Directors of the Company on May 19, 1983 by Unanimous Consent in lieu of a
meeting therefor, pursuant to the provisions of Section 13.1-41.1 of the Code of
Virginia.
"RESOLVED, that 96,000 authorized but unissued shares of Preferred Stock
are hereby designated as shares of the $6.00 Cumulative Preferred Stock, Series
A (hereinafter called the $6.00 Series A"), with the following rights and
preferences.
1. Dividends. The rate of dividends payable on the shares of the $6.00
Series A shall be $6.00 per share per annum and no more, which amount shall be
payable, when and as declared by the Board of Directors, in equal quarterly
installments on the last day of February, May, August and November, beginning
August 31, 1983, to holders of record of shares of the $6.00 Series A on the
respective dates, not exceeding fifty days preceding such dividend payment
dates, fixed for the purpose by the Board of Directors in advance of payment of
each particular dividend; but such payments shall be made only out of the
unreserved and unrestricted earned surplus of the Company. Dividends shall be
cumulative and accrue on shares of the $6.00 Series A from June 1, 1983.
If at any time fixed herein for the payment of dividends on the $6.00
Series A dividends are not paid in full thereon, no greater proportion of the
dividends fixed in a Certificate of Serial Designation for any other series of
Preferred Stock shall be paid. Unless full dividends on the $6.00 Series A for
all past dividend periods and the then current dividend period shall have been
paid or declared and a sum sufficient for the payment thereof set apart: (i) no
dividend whatsoever (other than a dividend payable in 'subordinate stock', as
hereinafter defined) shall be paid or declared, and no distribution shall be
made on any subordinate stock of the Company; (ii) no shares of subordinate
stock, Preferred Stock (except to the extent required by Section 3(a) hereof) or
parity stock, as hereinafter defined, shall be repurchased or redeemed or
acquired by the Company; and (iii) no monies shall be paid to or set
75
<PAGE>
aside or made available for a sinking fund for the repurchase or redemption of
any such subordinate stock or Preferred Stock (except to the extent required by
Section 3(a) hereof) or parity stock.
As used in these Articles 'subordinate stock' shall mean Capital Stock and
any other stock not ranking prior to or on a parity with the Preferred Stock as
to the payment of dividends and the distribution of the Company's assets in the
event of liquidation, dissolution or winding up; the term 'parity stock' shall
mean stock ranking on a parity with the Preferred Stock as to the payment of
dividends or the distribution of the Company's assets in the event of
liquidation, dissolution or winding up; and 'prior stock' shall mean stock
ranking prior to the Preferred Stock as to the payment of dividends or the
distribution of the Company's assets in the event of liquidation, dissolution or
winding up.
2. Voting Rights. Except as may otherwise be required by law, the holders
of shares of the $6.00 Series A shall be not entitled to vote upon the election
of Directors or upon any other corporate matter or purpose without limitation.
3. Redemption.
(a) Mandatory Redemption. The Company shall annually redeem, as of the
following dates, the aggregate number of shares of the $6.00 Series A shown
below, upon payment of a redemption price of $100.00 per share, plus dividends
accrued and unpaid as such shares to such dates:
Aggregate Number of Shares of
Mandatory Redemption Dates $6.00 Series A to be Redeemed
-------------------------- -----------------------------
May 31, 1984 32,000 shares
May 31, 1985 32,000 shares
May 31, 1986 32,000 shares
The shares of the $6.00 Series A no redeemed shall be selected pro rata or
by lot or in such other equitable manner as the Board of Directors of the
Company may determine if there be more than one holder of record thereof at any
mandatory redemption date.
(b) Optional Redemption. On or after June 1, 1983, the shares of the Series
shall be redeemable at the option of the Company, in whole or in part, at any
time or from time to time, at $100.00 per share, plus dividends accrued and
unpaid to the date fixed for redemption. The shares of the $6.00 Series A so
redeemed shall be selected pro rata or by lot or in such other equitable manner
as the Board of Directors of the Company may determine if there be more than one
holder of record thereof at any optional redemption date.
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(c) Redemption Procedures To Be Followed by Company. Not less than thirty
(30) days' previous notice of every redemption shall be mailed to the holders of
record of the shares of the $6.00 Series A to be redeemed, at their last known
post office addresses as shown by the Company's records. No defect in such
mailed notice or the failure of any holder to receive such notice of redemption
shall affect the validity of the proceedings for the redemption of any shares so
to be redeemed.
If notice of redemption of any such shares shall have been duly mailed as
hereinabove provided or irrevocable authorization and direction for such mailing
shall have been given to the bank or trust company hereinafter mentioned, and if
on or before the redemption date designated in such notice, the Company shall
deposit in trust with any bank or trust company in Richmond, Virginia, having
capital and surplus aggregating at least Fifty Million Dollars ($50,000,000)
named in such notice, funds sufficient to redeem such shares upon the date
specified in the notice of redemption,with irrevocable instruction and authority
to pay the redemption price to the holders of such shares upon surrender of
certificates therefor, then from and after the time of such deposit all shares
for the redemption of which such deposit shall have been so made shall, whether
or not the certificates thereafter shall have been surrendered for cancellation,
be deemed not longer to be outstanding for any purpose and all rights with
respect to such shares, shall thereupon cease and terminate, except the right to
receive from each bank or trust company, at any time after the time of such
deposits, the redemption price of such shares to be redeemed, but without
interest on such funds. Any interest accrued on such funds shall be paid to the
Company from time to time.
(d) The Company shall also have the right, subject to the restrictions
contained in Section 1, above, to acquire by repurchase shares of the $6.00
Series A from time to time at such price or prices as the Board of Directors may
determine.
(e) Shares of the $6.00 Series A redeemed or repurchased by the Company
shall not thereafter be disposed of as shares of such Series, but upon issuance
by the State Corporation Commission of Virginia of a Certificate of Reduction,
such shares shall become authorized and unissued shares of Preferred Stock which
may be designated as shares of any other series.
4. Liquidation. In the event of liquidation, dissolution or winding up the
Company, whether voluntary or involuntary, the holders of the $6.00 Series A
shall be entitled to be paid a liquidation price of $100.00 per share, plus
accrued and unpaid dividends, and no more, before any distribution or payment
shall be made to the holders of
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subordinate stock, as hereinbefore defined, and after payment to the holders of
the $6.00 Series A and to the holders of other series of Preferred Stock and
prior and parity stock, as hereinbefore defined, of the amounts to which they
are respectively entitled, the balance, if any, shall be paid to the holders of
subordinate stock according to their respective rights. In case the net assets
of the Company are insufficient to pay to holders of all outstanding shares of
$6.00 Series A and other series of Preferred Stock and prior and parity stock
the full amounts to which they are respectively entitled, the entire net assets
of the Company remaining after providing for any prior stock shall be
distributed ratably to the holders of all outstanding shares of $6.00 Series A
and other series of Preferred Stock and parity stock, in proportion to the full
amounts to which they are respectively entitled.
RESOLVED FURTHER, that 64,000 authorized but unissued shares of Preferred
Stock are hereby designated as shares of the $6.00 Cumulative Preferred Stock,
Series B (hereinafter called the "$6.00 Series B") with the following rights and
preferences.
1. Dividends. The rate of dividends payable on the shares of the $6.00
Series B shall b $6.00 per share per annum and no more, which amount shall be
payable, when and as declared by the Board of Directors, in equal quarterly
installments on the last day of February, May, August and November of each year,
beginning August 31, 1983, to holders of record shares of the $6.00 Series B on
the respective dates, not exceeding fifty days preceding such dividend payment
dates, fixed for the purpose by the Board of Directors in advance of payment of
each particular dividend; but such payments shall be made only out of the
unreserved and unrestricted earned surplus of the Company. Dividends shall
cumulative and accrue on shares of the $6.00 Series B from June 1, 1983.
If at any time fixed herein for the payment of dividends on the $6.00
Series B dividends are not paid in full thereon, no greater proportion of the
dividends fixed in a Certificate of Serial Designation for any other series of
Preferred Stock shall be paid. Unless full dividends on the $6.00 Series B for
all past dividends periods and the then current dividend period shall have been
paid or declared and a sum sufficient for the payment thereof set apart: (i) no
dividend whatsoever (other than a dividend payable in 'subordinate stock", as
hereinafter defined) shall be paid or declared, and no distribution shall be
made, on any subordinate stock of the Company: (ii) no shares of subordinate
stock, Preferred Stock (except to the extent required by Section 3(a) hereof) or
parity stock, as hereinafter defined, shall be repurchased or redeemed or
acquired by the Company: and (iii) no monies shall be paid to or set aside or
made available for a sinking fund for the repurchase or redemption of any such
subordinate stock or Preferred Stock (except to the extent required by Section
3(a) hereof) or parity stock.
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As used in these Articles, 'subordinate stock' shall mean Capital Stock and
any other stock not ranking prior to or on a parity with the Preferred Stock as
to the payment of dividends and the distribution of the Company's assets in the
event of liquidation, dissolution or winding up; the term 'parity stock' shall
mean stock ranking on a parity with the Preferred Stock as to the payment of
dividends or the distribution of the Company's assets in the event of
liquidation, dissolution or winding up; and 'prior stock' shall mean stock
ranking prior to the Preferred Stock as to the payment of dividends or the
distribution of the Company's assets in the event of liquidation, dissolutions
or winding up.
2. Voting Rights. Except as may otherwise be required by law, the holders
of shares of the $6.00 Series B shall be not entitled to vote upon the election
of Directors or upon any other corporate matter of purpose without limitation.
3. Redemption.
(a) Mandatory Redemption. The Company shall annually redeem, as of the
following dates, the aggregate number of shares of the $6.00 Series B shown
below, upon payment of a redemption price of $100.00 per share, plus dividends
accrued and unpaid on such shares to such dates:
Aggregate Number of Shares of
Mandatory Redemption Dates $6.00 Series B To Be Redeemed
-------------------------- -----------------------------
May 31, 1987 32,000 shares
May 31, 1988 32,000 shares
The shares of the $6.00 Series B so redeemed shall be selected pro rata or
by lot or in such other equitable manner as the Board of Directors of the
Company may determine if there be more than one holder of record thereof at any
mandatory redemption date.
(b) Optional Redemption. On or after June 1, 1983, the shares of the Series
shall be redeemable at the option of the Company, in whole or in part, at any
time or from time to time, at $100.00 per share, plus dividends accrued and
unpaid to the date fixed for redemption. The shares of the $6.00 Series B so
redeemed shall be selected pro rata or by lot or in such other equitable manner
as the Board of Directors of the Company may determine if there e more than one
holder of record thereof at any optional redemption date.
(c) Redemption Procedures To Be Followed by Company. Not less than thirty
(30) day's previous notice of every redemption shall be mailed to the holders of
record of the shares of the $6.00 Series B to
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be redeemed, at their last know post office addresses as shown by the Company's
records. No defect in such mailed notice or the failure of any holder to receive
such notice of redemption shall affect the validity of the proceedings for the
redemption of any shares so to be redeemed.
If notice of redemption of any such shares shall have been duly mailed as
hereinabove provided or irrevocable authorization and direction for such mailing
shall have been given to the bank or trust company hereinafter mentioned, and if
on or before the redemption date designated in such notice, the Company shall
deposit in trust with any bank or trust company in Richmond, Virginia, having
capital and surplus aggregating at least Fifty Million Dollars ($50,000.000),
named in such notice, funds sufficient to redeem such shares upon the date
specified in the notice of redemption, with irrevocable instruction and
authority to pay the redemption price to the holders of such shares upon
surrender of certificates therefore, then from and after the time of such
deposit all shares for the redemption of which such deposit shall have been so
made shall, whether or not the certificates therefor shall have been surrendered
for cancellation, be deemed no longer to be outstanding for any purpose and all
rights with respect to such shares shall thereupon cases and terminate, except
the right to receive from such bank or trust company, at any time after the time
of such deposit, the redemption price of such shares to be redeemed, but without
interest on such funds. Any interest accrued on such funds shall be paid to the
Company time of time.
(d) The Company shall also have the right, subject to the restrictions
contained in Section 1 above, to acquire by repurchase shares of the $6.00
Series B from time to time at such price or prices as the Board of Directors may
determine.
(e) Shares of the $6.00 Series B redeemed or repurchased by the Company
shall not thereafter be disposed of as shares of such Series, but upon issuance
by the State Corporation Commission of Virginia of a Certificate of Reduction,
such shares shall become authorized and unissued shares of Preferred Stock which
may be designated as shares of any other series.
4. Liquidation. In the event of liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary, the holders of the $6.00 Series B
shall be entitled to be paid a liquidation price of $100.00 per share, plus
accrued and unpaid dividends, and no more, before any distribution or payment
shall be made to the holders of subordinate stock, as hereinbefore defined, and
after payment to the holders of the $6.00 Series B and to the holders of other
series of Preferred Stock and prior and parity stock, as hereinbefore define, of
the amounts to which they are respectively entitled, the balance, if any, shall
be paid to the holders of subordinate stock according to
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their respective rights. In case the net assets of the Company are insufficient
to pay to holders of all outstanding shares of $6.00 Series B and other series
of Preferred Stock and prior and parity stock the full amounts to which they are
respectively entitled, the entire net assets of the Company remaining after
providing for any prior stock shall be distributed ratably to the holders of all
outstanding shares of $6.00 Series B and other series of Preferred Stock and
parity stock, in proportion to the full amounts to which they are respectively
entitled.
THE LIFE INSURANCE COMPANY
OF VIRGINIA
By:________________
Samuel H. Turner
President
And:_____________
Roy G. McLeod
Secretary
Dated: June 10, 1983
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COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
AT RICHMOND, MAY 31, 1983
APPLICATION OF
THE LIFE INSURANCE COMPANY
OF VIRGINIA CASE NO. IKS830137
For approval of certain Preferred Stock
provisions Virginia Code $$38.1-187
ORDER GRANTING APPROVAL OF APPLICATION
ON A FORMER DAY came Applicant and filed with the Clerk of the
Commission an application for approval, under the provisions of Virginia Code
$$38.1-187, of redemptions and repurchases required or permitted under the
provisions
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of a proposed $6.00 Cumulative Preferred Stock issue described in a Stock
Purchase Agreement dated May 10, 1983 under which Applicant proposes to acquires
all of the outstanding capital stock of American Agency Life Insurance Company,
a Georgia corporation. Under the Agreement, Applicant proposes to issue, as a
portion of the consideration, 160,000 shares of Applicant's $6.00 Cumulative
Preferred Stock ($100.00 per value) to be issued in two Series, Series A (96,000
shares) and Series B (64,000 shares). Mandatory annual redemption of the
Preferred Stock at a redemption price of $100.00 per share will be required over
a 5 year period, and optional redemptions at a redemption price of $100.00 per
share or repurchases at prices negotiated by the Applicant will be permitted
from time to time prior to the dates fixed for mandatory redemption. In
satisfying any mandatory or optional redemptions or repurchases of the preferred
Stock, Applicant will use only fund and assets comprising its excess capital and
surplus.
AND THE COMMISSION, having considered the application and supporting
documents herein, the recommendation of the Bureau of Insurance that the
aforesaid application of Applicant for approval under the aforesaid Code Section
be granted and the law applicable hereto, is of the opinion and finds that
approval of the proposal to issue Preferred Stock of the Applicant carrying
mandatory redemption requirements and optional redemption and repurchase
provisions should be granted.
THEREFORE, IT IS ORDERED that the application of Applicant for approval of
the proposal under the provisions of Virginia
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Code $$38.1-187 be, and the same is hereby, GRANTED.
AN ATTESTED COPY, hereof shall be sent by the Clerk of the Commission to
George E. Parsons, Esquire, Associate General Counsel, Continental Financial
Services Company, 6600 West Broad Street, Richmond, Virginia 23238, counsel for
Applicant; and the Bureau of Insurance in once of First Deputy Commissioner
Thomas S. Kardo.
George W. Bryant, Jr.
First Assistant Clerk of the
State Corporation Commission
COMMONWEALTH OF VIRGINIA
STATE OF CORPORATION COMMISSION
RICHMOND, JUNE 14, 1983
The accompanying articles having been delivered to the State Corporation
Commission on behalf of
THE LIFE INSURANCE COMPANY OF VIRGINIA
and the Commission having found that the articles comply with the requirements
of law and that all required fees have been paid, it is
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ORDERED that this CERTIFICATE OF SERIAL DESIGNATION
be issued, and that this order, together with the articles, be admitted to
record in the office of the Commission; and that the corporation have the
authority conferred on it by law in accordance with the articles, subject to the
conditions and restrictions imposed by law.
STATE CORPORATION COMMISSION
By
____________________________________
Thomas P. Harwood, Jr., Commissioner
THE LIFE INSURANCE COMPANY OF VIRGINIA
ARTICLES OF AMENDMENT
RESTATING THE ARTICLES OF INCORPORATION
1. The name of the corporation is
THE LIFE INSURANCE COMPANY OF VIRGINIA
2. The amendment adopted is the Restated Articles of Incorporation
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appended hereto as Exhibit A.
3. On May 19, 1983 the Board of Directors, by Unanimous Consent in lieu of a
meeting therefor, pursuant to the provisions of Section 13.1-41.1 of the Code
of Virginia, found the amendment in the best interests of the Corporation and
directed that it be submitted to the Corporation's sole stockholder,
Continental Financial Services Company, for its approval.
4. 3,515,949 shares of Capital Stock, $5.00 par value, are outstanding and on
May 20, 1983 the sole holder thereof, Continental Financial Services Company,
consented in writing to such amendment, in lieu of a stockholders' meeting
therefor, pursuant to the provisions of Section 13.1-28 of the Code of
Virginia.
5. The stated capital of the Corporation on the effective date of the amendment
shall be $17,579,745.
THE LIFE INSURANCE COMPANY
OF VIRGINIA
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By: ____________________________
Samuel H. Turner, President
and By: ________________________
Roy G. McLeod, Secretary
Dated: June 10, 1983
EXHIBIT A
THE LIFE INSURANCE COMPANY OF VIRGINIA
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RESTATED ARTICLES OF INCORPORATION
SECTION 1. Be it enacted by the General Assembly of Virginia, That A.G.
McIlwaine, D'Arcy Paul, David B. Tennant, Robert B. Bolling, Wm. Cameron, Wm. R.
Mallory, John Arrington, John Mann, R. G. Pegram, Robert H. Mann, Reuben
Ragland, T. T. Books, Wm. R. Johnson, Robert D. McIlwaine, S. W. Venable, Dr.
Thomas Withers, S. A. Plummer, George Cameron, J. C. Riddle, c. W. Spicer, Wm.
A. Bragg, Dr. James Dunn, Dr. d. W. Lassiter, Samuel B. Paul, H. L. Plummer,
George H. Davis, J. C. Drake, David Callendar, A. A. Allen, Bartlett Roper, J.
P. Williamson, J. M. West, C. Baker Raine, Robert Harrison, Jr., Robert A.
Martin, and all other persons who shall hereafter become stockholders in the
Company hereby incorporated, are hereby created a body politic and corporate by
the name and style of The Life Insurance Company of Virginia, for the purpose of
carrying on the business of insurance on lives, and to make all and every
insurance appertaining thereto or connected therewith; to cause themselves to be
reinsured; to grant endowments; to grant, purchase, or dispose of annuities, and
to con- tract for reversionary payments; and shall and may have perpetual
succession, and shall be capable in law of contracting and being contracted
with, and of suing and being sued, pleading and being impleaded, either in law
or equity, in all courts of record in this State or elsewhere, and they and
their successors shall and may have a common seal, and may change the same at
their will and pleasure, and may also, from time to time, ordain and establish
such by-laws, ordinances and regulations, the same not being inconsistent with
the laws of the State and of the United States, as may appear to them necessary
or expedient for the management of said corporation, its business, and affairs,
and may, from time to time, alter, amend, or repeal the same, or any of them.
The Company is also authorized and em- powered to insure persons against
personal injuries resulting from acci- dents and against sickness, or either,
and to make all and every insurance appertaining thereto or connected therewith.
The Company shall also be authorized to exercise and enjoy all other
powers, rights and privileges granted by an Act of the General Assembly of
Virginia entitled, "An Act Concerning Corporations" which become a law on the
21st day of May, 1903, to companies of this character, and all the powers
conferred upon such companies by the then existing laws of the State of
Virginia, so far as not in conflict therewith, or subject to all the
restrictions imposed by law upon said companies; the enumeration of certain
powers herein not being intended as exclusive or as a waiver of any powers,
rights or privileges granted or conferred on such companies by the Act, which
became a law on the 21st day of May, 1903, aforesaid, of the laws of this State,
then, now or hereafter in force.
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SECTION 2. Principal Office. The Principal office of the Company shall be
located in the State of Virginia.
SECTION 3. Capital Stock. The Company shall have authority to issue two
classes of capital stock: 500,000 shares of Preferred Stock, $100.00 per value
each (Preferred Stock) and 4,000,000 shares of Capital Stock, $5.00 par value
each (Capital Stock).
Authority is expressly vested in the Board of Directors to divide the
Preferred Stock into series and, within the following limitations, to fix and
determine the relative rights and preferences of the shares of any series so
established and to provide for the issuance thereof. Each series shall be so
designated as to distinguish the shares thereof from the shares of all other
series and classes. All shares of the Preferred Stock shall be identical except
as to the following relative rights and preferences as to which there may be
variations between different series:
(a) The rate of dividend, the time of payment, whether dividends shall be
cumulative and, if so, the dates from which they shall be cumulative, and the
extent of participation rights, if any;
(b) Any right to vote with holders of shares of any other series or class
and any right to vote as a class, either generally or as a condition to
specified corporation action;
(c) The price at and the terms and conditions on which shares may be
redeemed;
(d) The amount payable upon shares in event of involuntary liquidation;
(e) The amount payable upon shares in event of voluntary liquidation;
(f) Sinking fund provisions for the redemption or purchase of shares; and
(g) The terms and conditions on which shares may be converted, if the
shares of any series are issued with the privilege of conversion.
Prior to the issuance of any shares of a series of Preferred Stock the
Board of Directors shall have establish such series by adopting a resolution
setting forth the designation and number of shares of the series and the
relative rights and preferences thereof to the extent permitted by the
provisions hereof and the Company shall have filed in the office of the State
Corporation Commission of Virginia Articles of Serial Designa-
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tion as required by law and the Commission shall have issued a Certificate of
Serial Designation.
All series of Preferred Stock shall rank on a parity, as to dividends and
assets with all other series according to the respective dividend rates and
amounts distributable upon any and voluntary or involuntary liquidation of the
Company fixed for each such series and without preference or priority of any
series over any other series; but all shares of the Preferred Stock shall be
preferred over the Capital Stock as to both dividends and amounts distributable
upon any voluntary or involuntary liquidation of the Company to the extent
provided in any Certificate of Serial Designation applicable thereto.
The holders of the Capital Stock shall, to the exclusion of the holders of
any other class of capital stock of he Company, have the sole and full power to
vote for the election of Directors and for all other purposes without limitation
except only (i) as otherwise provided in any Certificate of Series Designation
Applicable to any series of Preferred Stock, and (ii) as other wise expressly
provided by the then existing statues of the State of Virginia. The holders of
the Capital Stock shall have one (1) vote for each share of Capital Stock held
by them.
Subject to the provisions of Certificates of Serial Designation applicable
to particular series of Preferred Stock, the holders of shares of Capital Stock
shall be entitled to receive dividends if, when and as declared by the Board of
Directors out of funds legally available therefor and to the net assets
remaining after payment of all liabilities upon voluntary or involuntary
liquidation of the Company.
SECTION 4. Management of Company. The general management of the business
and affairs of the Company shall be vested in a Board of Directors. Unless
otherwise fixed in the by-laws the number of Directors constituting the Board of
Directors shall be seen (7). There shall be a President and a Secretary; there
may also be a Chairman of the Board, a Vice Chairman of the Board, an Executive
Vice President, one or more Vice Presidents, a Treasurer and such other officers
as may from time to time be created or prescribed by the by-laws.
SECTION 5. Executive Committee. The Board of Directors may, if authorized
by the stockholders, or by the by-laws, by a resolution passed by a majority of
the whole Board, Designate three or more of their number to constitute an
Executive Committee who, to the extent provided in said resolution, or in the
by-laws of the Company, shall have and exercise the power of the Board of
Directors in the management of the business and affairs of the Company.
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SECTION 6. Real Estate. The amount of real estate to which the holdings of
the Company at any time are to be limited is the amount held in accordance with
the laws of the State of Virginia.
SECTION 7. Investment of Funds. The Company may invest its funds in
accordance with the laws of the State of Virginia.
91
EXHIBIT 1A(6)(b)
By-Laws of Life of Virginia
92
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BY-LAWS
OF
THE LIFE INSURANCE COMPANY OF VIRGINIA
ARTICLE 1
STOCKHOLDERS
SECTION 1. Annual Meeting. A meeting of the stockholders of the Company shall be
held annually at the principal office of the Company in the State of Virginia on
the Tuesday preceding the third Wednesday in January of each year, if not a
legal holiday, and, if a legal holiday, then on the immediately preceding day
not a legal holiday, for the purpose of electing Directors and for the
transaction of such other business as may be brought before the meeting.
SECTION 2. Special Meetings. Except as otherwise provided by law, special
meetings of the stockholders shall be held at the principal office of the
Company whenever called by the Chairman of the Board, the Vice chairman of the
Board, the President, the Board of Directors, or the Executive Committee, or on
the call of stockholders holding together at least ten per cent of the capital
stock, such call in any case to be in writing and addressed to the Secretary.
SECTION 3. Notice of Meetings. Notice of each meeting of the stockholders,
whether annual or special,shall, at least ten days before the day on which the
meeting is to be held, be given to each stockholder of the Company by delivering
a written or printed notice thereof to him, her, or it personally or by posting
such notice in a prepaid postage envelope, addressed to him, her, or it at the
post office address of such stockholder of record with the Company, and, except
as otherwise required by statute, publication of any such notice shall not be
required. Every such notice shall state the time and place of the meeting. At
any such meeting action may be taken upon any subject which is not by statute
required to be stated in the notice of the meeting; and in addition thereto upon
any special subject which might be acted upon at a special meeting called for
the purpose, when, in the last mentioned case, in the notice of any such annual
or special meeting, the purpose to consider and act upon such special subject is
stated. Every stockholder of the Company shall furnish to its Secretary, from
time to time, the post office address to which notice of all meetings of
stockholders may be mailed. If any stockholders shall fail or decline or so to
furnish a post office address to the Secretary, it shall not e necessary to give
notice to any such stockholder or any meeting of the stockholders, or any other
notice whatsoever. Notice of any meeting of the stockholders shall not be
required to be given to any stockholders who shall attend such meeting in person
or by proxy; and if any stockholder shall in person or by attorney thereunto
authorized, in writing or by
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telegram, waive notice of any meeting, notice thereof need not be given to him.
Notice of any adjourned meeting of the stockholders shall not be required to be
given.
SECTION 4. Quorum. At any meeting of the stockholders the holders of a
majority of all the shares of the capital stock of the Company, present in
person or represented by proxy, shall constitute a quorum of the stockholders
for all purposes.
If the holders of the amount of stock necessary to constitute a quorum shall
fail to attend in person or by proxy at the time and place fixed by these
by-laws for an annual meeting, or fixed by notice as above provided for a
special meeting, a majority in interest of the stockholders present in person or
by proxy may adjourn, from to time to time, without notice other than by
announcement at the meeting, until holders of the amount of stock requisite to
constitute a quorum shall attend in person or by proxy. At any adjourned meeting
at which a quorum shall be present any business may be transacted which might
have been transacted at the meeting as originally notified.
SECTION 5. Organization. The Chairman of the Board, or, in his absence, the
Vice Chairman of the Board, or in his absence, the President, or in his absence,
the Executive Vice President, or, in his absence, any one of the Vice
Presidents, shall call all meetings of the stockholders to order and act as
chairman of such meetings. The Chairman of the Board or other officer so
presiding may yield to any person of his selection present at the meeting for
such portion or portions of the meeting as he may desire. The Secretary of the
Company, or, in his absence, an Assistant Secretary, shall act as Secretary.
SECTION 6. Voting. At each meeting of the stockholders every stockholder
shall be entitled to vote in person or by proxy appointed by an instrument in
writing subscribed by such stockholder or by his duly authorized attorney, and
delivered to the Secretary, who shall deliver it to the inspectors at the
meeting, and he shall have one vote for each share of stock standing registered
in his name upon the date determined by the Board Directors as hereinafter
provided.
At each meeting of the stockholders a full, true and complete list, in
alphabetical order, of all the stockholders entitled to vote at such meeting,
and indicating the number of shares held by each, certified by the Secretary,
shall be furnished.
The votes for Directors, and, upon demand of any stockholder, the votes upon any
question before the meeting, shall be by ballot.
Section 7. Record Date. The Board of Directors shall fix in advance a date not
less than ten nor more than fifty days preceding the date of any meeting of
stockholder, or the date for the payment of any dividend, as a record for the
determination of the stockholders entitled to notice of and to vote at any such
meeting,
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or entitled to receive payment of any such dividend, and in any such case only
stockholders of record at the close of business on the date so fixed shall be
entitled to such notice of and to vote at such meeting, or to receive payment of
such dividend, as the case may be, and notwithstanding any transfer of any stock
on the books of the corporation after such record date fixed as aforesaid.
SECTION 8. INSPECTORS. The presiding officer at all meetings of stockholders
shall appoint three inspectors, who shall receive and take in charge all
proxies, and all questions touching the qualification of voters, the validity of
proxies and the acceptance or rejection of votes shall be decided by said
inspectors, and their certificate as to the regularity of the proxies and as to
the number of shares held by the persons who severally and respectively executed
the same, or who are personally present and entitled to vote at such meeting,
shall be received as prima facie evidence thereof for the purpose of
establishing the presence of a quorum at such meeting, or organizing the same,
and for all other purposes.
SECTION 9. Order of Business. The order of business at the meetings of
stockholders shall be as determined by the chairman, subject to the approval of
a majority in interest of the stockholders present in person or by proxy at such
meeting and entitled to vote there at.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Number, Qualification, Powers and Election of Directors. The business
and property of the Company shall be managed by the Board of Directors, and
except as otherwise expressly provided by law or by these by-laws, all of the
powers of the Company shall be vested in said Board. The number of directors
shall be not less than five (5) nor more than fifteen (15), but shall be
increased as and when required by the Charter and, subject to the provisions of
the Charter, may be increased or decreased at any time by amendment of these
by-laws, provided the number of directors shall not be less than three (3).
Directors need not be residents of Virginia or stockholders of the Corporation.
At each annual meeting of stockholders the stockholders entitled to vote shall
elect the directors. Each director shall hold office for the term for which he
is elected and until his successor shall have been elected, unless otherwise
provided in the Charter.
SECTION 2. Vacancies. Any vacancy occurring in the Board of Directors,
including a vacancy resulting from amending these by-laws to increase the number
of directors by not more than two (2) may be filled by the affirmative vote of a
majority of the remaining directors though less than a quorum of the Board of
Directors.
SECTION 3. Regular Meetings. Regular meetings of the Board of Directors shall
be held on the Thursday following the third Wednesday in each January, April,
July and October, at such time and such place as the Board of Directors by
resolution shall determine.
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The Secretary shall given notice of each regular meeting by mailing or
delivering the same in person at least two days before the meeting, or by
telegraphing the same at least two days before the meeting to each of the
Directors, but such notice may be waived in writing or by telegraph by any
Director.
At any regular meeting at which every Director shall be present, even though
without any notice, any business may be legally transacted.
SECTION 4. Special Meetings. Special Meetings of the Board of Directors may
be called by the Chairman of the Board, or by the Vice Chairman of the Board, or
by the President, or, in his absence by the Executive Vice President, or in his
absence by any Vice President who is a Director, or by any three Directors.
The Secretary shall give notice of each special meeting by mailing or delivering
the same in person at least two days before the meeting, or by telegraphing the
same at least two days before the meeting, to each of the Directors, but such
notice may be waived in writing or by telegraph by any Director.
At any special meeting at which every Director shall be present, even though
without any notice, any business may be legally transacted.
SECTION 5. Business Transacted at Meeting. Any business may be transacted and
any corporate action taken at any regular or special meeting of the Directors,
whether stated in the notice of the meeting or not.
SECTION 6. Quorum. A majority of the Directors at any time in office shall
constitute a quorum. Should less than a quorum by present at any meeting, the
meeting may be adjourned from time to time by those present without notice,
other than announcement at the meeting, until a quorum shall be present. Except
as otherwise provided in these by-laws, the act of a majority of the Directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors. The Directors shall act only as a Board and the individual
Directors shall have no power as such.
SECTION 7. Compensation of Directors. A Director who is a paid employee of
the company shall not receive any compensation for his attendance at any meeting
of the Board of Directors, or of any committee of the Board, but a Director who
is not a paid employee of the Company shall receive such compensation for
attendance as the Board of Directors may determine.
ARTICLE III
COMMITTEES
SECTION 1. The Executive Committee. The Executive Committee shall consist of
three (3) or more Directors to be designated by the Board by a resolution passed
by a majority of the whole
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Board, and one of whom shall be the President who shall be ex-officio Chairman
of the Committee. During the intervals between the meetings of the Board, the
Executive Committee shall have an exercise the power of the Board in the
management of the business and affairs of the Company. The Executive Committee,
however, shall not have the power to declare dividends upon the capital stock of
the Company.
SECTION 2. Other Standing Committees. An investment committee and other standing
committees may from time to time be created by he Board of Directors, consisting
of such persons as may be designated by the Board by resolutions passed by a
majority of the whole Board, and said committees shall respectively have and
exercise such powers, not inconsistent with law or the by-laws, as may from time
to time be stated in the resolutions with reference thereto. The President may
be a member of each said committee and, except in the case of the Investment
Committee if there is a chairman of the Committee elected by the Board of
Directors, and except when otherwise provided by the Board of Directors, shall
be ex-officio Chairman thereof.
SECTION 3. Regulation of Standing Committees. Each standing committee shall
from time to time determine by resolution the times and places of its regular
meetings and the manner in which special meetings shall be called, and the
notices, if any, to be given of meetings. The affirmative vote of a majority of
the whole number of members of any standing committee shall be necessary to its
taking any action. All actions of the standing committees shall be reported to
the Board of Directors at its meetings next succeeding such actions,
respectively.
SECTION 4. Committees of Officers or Employees. The Board of Directors, by
resolutions passed by a majority of the whole Board, may, from time to time as
may be necessary or convenient for the conduct of the business of the Company,
appoint committees or officers or employees of the Company; and each such
committee shall have and exercise such powers, not inconsistent with law or the
by-laws, as may from time to time be stated in the resolution creating the
committee or in a subsequent resolution with reference thereto. Each such
committee, unless otherwise restricted by such resolution, may act with the
concurrence of a majority of the whole number of its members without the
necessity of a meeting, and shall make such reports to the Board as shall from
time to time be required by the Board.
ARTICLE IV
OFFICERS
SECTION 1. Officers. The executive officers of the Company, all of whom shall be
elected by the Board of Directors, shall be a President, as many Vice Presidents
as the Board of Directors may from time to time determine, a Treasurer and a
Secretary. The Board of Directors may also elect from its members a Chairman of
the Board, a Vice Chairman of the Board and a Chairman of the Investment
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Committee. The Board of Directors may designate one of the Vice Presidents,
elected or to be elected, as Executive Vice President. The President shall be a
member of the Board of Directors. The Board of Directors shall have power to
elect a General Counsel, an Actuary, a Medical Director, and such Second Vice
Presidents, Assistant Vice Presidents, Assistant Treasurers, Assistant
Secretaries, and other officers as they shall deem necessary for the proper
conduct of the Company's business, which officers shall have such authority and
shall perform such duties, in addition to those prescribed by these by-laws, as,
from time to time, shall be prescribed by the Board of Directors, the Executive
Committee, the President, the Executive Vice President, or a Vice President.
SECTION 2. Chairman of the Board. The Chairman of the Board, or in his
absence the Vice Chairman of the Board, or in the absence of both, or if there
be none, then the President, shall preside at all meetings of the stockholders
and of the Board of Directors, except that after calling to order a meeting of
the Stockholders he may yield the chair to some other person present. The
Chairman of the Board and the Vice Chairman of the Board shall have supervision
of such matters as shall be assigned to each by the Board of Directors.
SECTION 3. President. The President shall be the chief executive officer of the
Company, and shall actively manage its business and affairs. He shall, in the
absence of the Chairman of the Board and the Vice Chairman of the Board, preside
at all meetings of the Board of Directors. The President may delegate to any of
the Vice Presidents such of his duties as President as he may desire to assign
to them. He shall see that all orders and resolutions of the Board are carried
into effect. He may sign and execute all checks, drafts, policies or legal
documents in the name of the Company, and, with the Secretary or one of the
Assistant Secretaries, may sign all certificates of the shares of the capital
stock of the Company. The President shall have general superintendence and
direction over all the officers of the Company, except the Chairman of the
Board, the Vice Chairman of the Board and the chairman of the Investment
Committee, and shall see that their duties are properly performed. He shall
employ or appoint, or cause to be employed or appointed, such employees and
agents, including, but not by way of limitation, division heads, section heads
and others, as he shall deem necessary for the proper conduct of the Company's
business, and he shall have general superintendence and direction over them. He
shall from time to time report to the Board of Directors all matters within his
knowledge which the interest of the Company may require to be brought to their
attention, or as to which or in respect of which inquiry of him may be made by
the Board of Directors. He shall do and perform such other duties as may from
time to time be assigned to him by the Board of Directors or the Executive
Committee.
SECTION 4. Executive Vice President. If the Board Directors designates one of
the Vice Presidents as Executive Vice President, such officer, subject to the
Board of Directors, the Executive Committee, and the President, shall have
general supervision over all of the business and affairs of the Company and
shall give general superintendence and direction to all officers of the Company,
except the President, the Chairman of the Board, the Vice Chairman of the Board,
and the Chairman of the Investment Committee, and see
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that their duties are properly performed. He may sign and execute all checks,
drafts, policies and all legal documents in the name of the Company, and, with
the Secretary or one of the Assistant Secretaries, may sign all certificates of
the shares of capital stock of the Company. He shall do and perform such other
duties as may, from time to time, be assigned to him by the Board of Directors,
the Executive Committee, or the President.
SECTION 5. Powers and Duties of Vice Presidents. Each Vice President may sign
all checks, drafts, policies, or legal documents, and with the Secretary or one
of the Assistant Secretaries, may sign all certificates of the shares of the
capital stock of the Company, and shall have such other powers and perform such
other duties as may be assigned to him by the Board of Directors, the Executive
Committee, the President, or the Executive Vice President.
SECTION 6. Powers and Duties of Second Vice Presidents. Each Second Vice
Presidents may sign all checks, drafts, policies or legal documents, and with
the Secretary or one of the Assistant Secretaries, may sign all certificates of
the shares of the capital stock of the Company, and shall have such other powers
and shall perform such other duties as may be assigned to him by the Board of
Directors, the Executive Committee, the President, the Executive Vice President,
or a Vice President.
SECTION 7. Powers and duties of Assistant Vice Presidents. Each Assistant Vice
President may sign all checks, drafts, policies or legal documents, and with the
Secretary or one of the Assistant Secretaries, may sign all certificates of the
shares of the capital stock of the Company, and shall have such other powers and
shall perform such other duties as may be assigned to him by the Board of
Directors, the Executive Committee, the President, the Executive Vice President,
or a Vice President.
SECTION 8. Power and duties of Treasurer. The Treasurer shall have custody of
all the securities of the Company. He may endorse on behalf of the Company for
collection checks, notes and other obligations, and may sign all receipts and
vouchers for payment of interest or principal of loans or other investments made
by the Company. He may sign checks, drafts or legal documents. He shall perform
all acts incident to the position of Treasurer, subject to the control of the
Board of Directors, the Executive Committee, the President, the Executive vice
president, or a Vice President.
The Treasurer shall give a bond for the faithful discharge of his duties in such
sum as the Board of Directors or the Executive Committee may require.
SECTION 9. Powers and Duties of Assistant Treasurer. Each Assistant Treasurer
may endorse on behalf of the Company for collection checks, notes and other
obligations, and may sign all receipts and vouchers for payment of interest or
principal of loans or other investments made by the Company. Each is authorized
to countersign all checks or drafts made by the Company and shall have such
other powers and perform such other duties as may be assigned to him by the
Board of Directors, the Executive Committee, the President, the Executive Vice
President, or a Vice President. Each Assistant Treasurer shall give a bond for
the faithful discharge of his duties in such sum as the Board
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of Directors or the Executive Committee may require.
SECTION 10. Powers and Duties of Secretary. The Secretary shall keep the minutes
of all meetings of the stockholder, the Board of Directors, the Executive
Committees, and all other standing committees, in books provided for that
purpose; he shall attend to the giving and serving of all notices of the
Company; he is authorized to sign or countersign all policies, checks, drafts,
contracts or legal documents, and affix the seal of the Company to such
documents as require it; he may sign, with the President, the Executive Vice
President, a Vice President, a Second Vice President or an Assistant Vice
President, certificates of the shares of the capital stock of the Company, and
shall have charge of the stock certificate books, transfer books and stock
ledgers, and such other books and papers as the President, or the Executive Vice
President may direct, all of which shall, at all times, be open to the
examination of any officer of the Company; and he shall in general perform all
the duties incident to the office of Secretary, or any other duties that may be
assigned to him by the Board of Directors, the Executive Committee, the
President, the Executive Vice President, or a Vice President.
SECTION 11. Powers and Duties of Assistant Secretaries. Each Assistant Secretary
may countersign all policies, checks, drafts, or legal documents, and affix the
seal of the Company to such documents as require it; each may sign with the
President, the Executive Vice President, a Vice President, a Second Vice
President, or an Assistant Vice President, certificates of the shares of the
capital stock of the Company and shall have such other powers and shall perform
such other duties as may be assigned to him by the Board of Directors, the
President, the Executive Committee, the Executive Vice President or a Vice
president.
SECTION 12. Acting Secretaries. Acting Secretaries who shall take and certify
the minutes of meetings instead of the Secretary, or one of the Assistant
Secretaries, may be appointed by the President or presiding officer of any
meeting of the Board of Directors, or any standing committee thereof, and the
minutes so certified shall be as valid and authentic as if taken and certified
to by the Secretary or one of the Assistant Secretaries.
ARTICLE V
MISCELLANEOUS
SECTION 1. Policies. All policies of insurance signed or countersigned by such
officer, or by the printed or lithographed signature of such officer, as these
by-laws may prescribe, or the Board of Directors, or the Executive Committee may
empower, shall be obligatory on the Company and have the same effect as if
attested by the corporate seal of the Company.
SECTION 2. Seal. The Seal of the Company shall consist of the arms of the
State of Virginia, surrounded by the words, "The Life Insurance Company of
Virginia."
SECTION 3. Examination of Accounts. At the close of each fiscal year the books,
accounts and assets of the Company shall be examined by a certified public
account, or accountants, selected by
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the Board of Directors, the Executive Committee, the President, or the Executive
Vice President; but the Board in its discretion may dispense with such
examination.
SECTION 4. Signature to Checks, etc. All checks, drafts, notes and similar
instruments drawn in the name of the Company shall be sufficiently executed when
signed by any officer authorized to sign the same and, except as may be provided
in accordance with the next succeeding paragraph, when countersigned by any
officer authorized to countersign the same, provided, however, that the same
person shall not sign and countersign the same instrument.
The Board of Directors, or the Executive Committee, under such restriction as
are deemed advisable, may provide that the signature of any officer authorized
to sign may be impressed on checks by the use of a check signing machine, and
may further provide that checks executed by the use of any such impressed
signature shall be sufficient with countersignature.
The Board of Directors, or the Executive Committee, may authorized the use of a
form check to accomplish only the transfer of funds from one depository bank
account of the Company to another depository bank account of the Company which
check shall, in order to effect such transfer, require no signature or
countersignature other than the name of the Company printed on the face of the
check.
In addition to the authority given to certain officers by these by-laws to sign
or countersign or to endorse on behalf of the Company for collection checks,
drafts, notes and similar instruments, the Board Directors, or the Executive
Committee may authorize other officers or any employee to sign, countersign, or
endorse such instruments.
SECTION 5. Indemnification of Directors and Officers.
(a) The Corporation shall indemnify each director, officer and employee of this
Company who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suite or proceeding, whether civil,
criminal, administrative, arbitrative, or investigative (other than an action by
or in the right of the Corporation) by reason of the fact that he is or was a
director, officer or employee of the Corporation, or is or was serving at the
request of the Corporation as a director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in the best interests or the Corporation, and with
respect to any criminal action, had no cause to believe his conduct unlawful.
The termination of any action, suit or proceeding by judgement, order,
settlement, conviction, or upon a plea of nolo contendere, shall not of itself
create a presumption that the person did not act in good faith, or in a manner
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, believed his conduct unlawful.
(b) The Corporation shall indemnify each director, officer or employee of the
Corporation who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgement in its favor by reason of the fact
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that he is or was a director, officer or employee of the Corporation, or is or
was serving at the request of the Corporation as a director, officer or employee
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suite if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only to
the extent that the court in which such action or suite was brought shall
determine upon application that, despite the adjudication of liability but in a
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
(c). Any indemnification under subsections (a) and (b) (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer or employee
is proper in the circumstances because he has met the applicable standard of
conduct set forth in subsections (a) and (b). Such determination shall be made
(1) by the Board of Directors of the Corporation by a majority vote of a quorum
consisting of the directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders of the Corporation.
(d). Expenses (including attorney's fees) incurred in defending an action,
suit or proceeding, whether civil criminal, administrative, arbitrative or
investigative, may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized in the manner
provided in subsection (c) upon receipt of an undertaking by or on behalf of the
director, officer, or employee to repay such amount to the Corporation unless it
shall ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this Article.
(e). The Corporation shall have the power to make any other or further indemnity
to any person referred to in this section except an indemnity against gross
negligence or willful misconduct.
(f). Every reference herein to director, officer or employee shall include
every director, officer or employee, or former director, officer or employee of
the Corporation and its subsidiaries and shall enure to the benefit of the
heirs, executors and administrators of such person.
(g). The foregoing rights and indemnification shall not be exclusive of any
other rights and indemnifications to which the directors, officers and employees
of the Corporation may be entitled according to law.
SECTION 6. Amendments. These by-laws may be altered or amended by the
stockholders at any annual or special meeting. They may also be altered or
amended by the Board of Directors at any meeting by a vote of the majority of
the whole Board. Any by-law adopted by the Board shall be subject to alteration,
amendment or repeal at any time by the stockholders at any annual or special
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meeting.
********************
The undersigned hereby certifies that she is the Assistant Secretary of the
Life Insurance Company of Virginia, a corporation organized and existing under
the laws of the Commonwealth of Virginia; that the foregoing is a true and
correct copy of the by-laws and that these by-laws remain in full force and
effect as of this 28th day of August, 1986.
_______________________________________
Margaret M. Parker, Assistant Secretary
103
EXHIBIT 1A(8)(a)
Stock Sale Agreement
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STOCK SALE AGREEMENT
Agreement dated October 16, 1986, between THE LIFE INSURANCE COMPANY OF
VIRGINIA, a stock company organized under the laws of Virginia ("LOV"), and LIFE
OF VIRGINIA SERIES FUND, INC., a corporation organized under the laws of
Virginia (the "Fund"):
WITNESSETH:
WHEREAS, the Fund will serve as the investing medium for Life of Virginia
Separate Account II established by LOV ("Separate Account") under Section
38.1-443 of the Code of Virginia; and
WHEREAS, the Fund desires to sell its shares to the Separate Account, to
LOV itself and to organizations approved by LOV (the Separate Account, LOV and
the other organizations being herein collectively called "Prospective
Purchasers"); and
WHEREAS, some of the prospective purchasers desire to purchase shares of
the Fund and other prospective purchasers may desire to do so.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and other good and valuable consideration the receipt
of which is hereby acknowledged, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Sales of Shares to Prospective Purchasers. The fund will sell its shares
at the "net asset value" of such shares (as defined in the preliminary
prospectus forming part of the
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registration statement of the Fund, Registration No. 2-91369 under the
Securities Act of 1933) to such of the prospective purchasers as shall
request to Fund to sell its shares to them. Such sales will be made:
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed in their corporate names, all as of the date first above written.
THE LIFE INSURANCE COMPANY
OF VIRGINIA
ATTEST; By:
___________________ _____________________
Secretary John J. Palmer
Senior Vice President
LIFE OF VIRGINIA SERIES
FUND, INC.
ATTEST: By:
___________________ _____________________
Secretary Eric T. Henry
President
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AMENDMENT TO STOCK SALE AGREEMENT
The Stock Sale Agreement dated September 3, 1986 between The Life Insurance
Company of Virginia ("LOV") and Life of Virginia Series Fund, Inc. (the "Fund")
pursuant to which shares of the Fund are sold to Life of Virginia Separate
Account II is hereby amended by the addition of the following paragraph:
5. The Fund shall furnish all state insurance regulatory authorities,
including, but not limited to, the California Insurance Commissioner,
with any information or reports in connection with services provided
under this agreement which such regulatory authorities may request in
order to ascertain whether the variable insurance product operations of
LOV are being conducted in a manner consistent with all applicable laws
and regulations, including, but not limited to, the California Variable
Life Insurance Regulations.
IN WITNESS WHEREOF, the parties hereto have caused this amendment to be executed
as of April 15, 1988.
THE LIFE INSURANCE COMPANY
OF VIRGINIA
ATTEST: By: William D. Baldwin
___________________ _____________________
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Assistant Secretary Senior Vice President
LIFE OF VIRGINIA SERIES
FUND, INC.
ATTEST: By:
___________________ _____________________
Assistant Secretary John J. Palmer
President
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EXHIBIT 1A (8)(a)(i)
Amendment to Stock Sale Agreement between the Life Insurance
Company of Virginia and Life of Virginia Series Fund, Inc.
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AMENDMENT TO STOCK SALE AGREEMENT
The Stock Sale Agreement dated September 3, 1986 between The Life Insurance
Company of Virginia ("LOV") and Life of Virginia Series Fund, Inc. (he "Fund")
pursuant to which shares of the Fund are sold to Life of Virginia Separate
Account II is hereby amended by the addition of the following paragraph:
6. LOV shall have the right, at all reasonable times, to inspect, audit
and copy all records of the Fund that pertain to the Fund's performance
of its obligations under this agreement.
IN WITNESS WHEREOF, the parties hereto have caused this amendment to be executed
as of June 6, 1988.
THE LIFE INSURANCE COMPANY
OF VIRGINIA
ATTEST: By:
____________________ ______________________
Assistant Secretary William D. Baldwin
Senior Vice President
LIFE OF VIRGINIA SERIES
FUND,INC.
ATTEST: By:
____________________ ______________________
Assistant Secretary John J. Palmer
President
110
EXHIBIT (8) (e)
Participation Agreement among The Life Insurance Company
of Virginia, Variable Insurance Products Fund II and
Fidelity Distributors Corporation
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PARTICIPATION AGREEMENT
AMONG
VARIABLE INSURANCE PRODUCTS FUND II,
FIDELITY DISTRIBUTORS CORPORATION
and
THE LIFE INSURANCE COMPANY OF VIRGINIA
THIS AGREEMENT, made and entered into as of this 15th day of July, 1989
by and among THE LIFE INSURANCE COMPANY OF VIRGINIA, (hereinafter the
"Company"), a Virginia corporation, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule C hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"), and the VARIABLE INSURANCE PRODUCTS FUND II, an unincorporated
business trust organized under the laws of the Commonwealth of Massachusetts
(hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the
"Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
substantially identical to this Agreement (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest in
a particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 17, 1986 (File No. 812-6422), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity management & Research Company (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
life and variable annuity contracts under the 1033 Act; and
WHEREAS, each Account is duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company on the data shown for such Account on Schedule C hereto, to set aside
and invest assets attributable to the aforesaid variable life and annuity
contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities 2nd Exchange Commission under the Securities Exchange Act of 1934, as
amended, (hereinafter the "1934 Act"), and is a member in good standing of the
National Association of Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
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NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Underwriter agrees to sell to the Company those shares of the
Fund which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section 1.1, the Company
shall be the designee of the Fund for receipt of such orders from each Account
and receipt by such designee shall constitute receipt by the Fund; provided that
the Fund receives notice of such order by 9:30 a.m. Boston time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Trustees") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Trustees
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Sections 2.5 and 2.12 of
Article II of this agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus. The Company agrees that all net amounts
available under the variable life and variable annuity contracts with the form
number(s) which are listed on Schedule A attached hereto and incorporated herein
by this reference, as such Schedule A may be amended from time to time hereafter
by mutual written agreement of all the parties hereto, (the "Contracts") shall
be invested in the Fund, in such other funds advised by the Adviser as may be
mutually agreed to in writing by the parties hereto, or in the Company's general
account, provided that such amounts may also be invested in an investment
company other than the Fund if (a) such other investment company, or series
thereof, has investment objectives or policies of all the Portfolios of the
Fund; or (b) the Company gives the Fund and the Underwriter 45 days written
notice of its intention to make such other investment company available as a
funding vehicle for the Contracts; or (c) such other investment company was
available as a funding vehicle for the Contracts prior to the date of this
Agreement and the Company so informs the Fund and Underwriter prior to their
signing this Agreement; or (d) the Fund or Underwriter consents to the use of
such other investment company.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
For purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
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1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as re
payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 7 p.m. Boston
time.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable Federal and State laws
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established each
Account prior to any issuance or sale thereof as a segregated asset account
under Section 38.2-3113 of the Virginia Insurance Code and has registered or,
prior to any issuance or sale of the Contracts, will register each Account as a
unit investment trust in accordance with the provisions of the 1940 Act to serve
as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Virginia and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if an to the extent deemed advisable by the Fund or the
Underwriter.
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Company represents that the Contracts are currently treated as
endowment, annuity or life insurance contracts, under applicable provisions of
the Code and that it will make every effort to maintain such treatment and that
it will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. The Fund has adopted a "no
fee" or "defensive" Rule 12b-1 Plan under which it makes no payments for
distribution expenses. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the Fund undertakes to have a board of
trustees, a majority of whom are not interested persons of the Fund, formulate
and approve any plan under Rule 12b-1 to finance distributions expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
accept that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Virginia and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Virginia to the extent required to perform this
Agreement.
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2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Virginia and all applicable state
and federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of Virginia and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Section 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the are and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Fund, in an amount not less than the minimal coverage as required currently
by Section 270.17g-1 of the 1940 Act or related provisions as may be promulgated
from time to time. The aforesaid Bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.12. The Company represents and warrants that it will not purchase
Fund shares with Account assets derived from the sale of Contracts to deferred
compensation plans with respect to service for state and local governments which
qualify under Section 457 of the federal Internal Revenue Code, as may be
amended. The Company may purchase Fund shares with Account assets derived from
any sale of a Contract to any other type of tax-advantaged employee benefit
plan; provided however that such plan has no more than 500 employees who are
eligible to participate at the time of the first such purchase hereunder by the
Company of Fund shares derived from the sale of such Contract.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company (at the Company's
expense) with as many copies of the Fund's current prospectus as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund shall
provide such documentation (including a final copy of the new prospectus as set
in type at the Fund's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the prospectus
for the Fund is amended) to have the prospectus for the Contracts and the Fund's
prospectus printed together in one document (such printing to be at the
Company's expense).
3.2. The Fund's prospectus shall state that the Statement of Additional
information for the Fund is available from the Underwriter (or in the Fund's
discretion, the Prospectus shall state that such Statement is available from the
Fund), and the Underwriter (or the Fund), at its expense, shall print and
provide such Statement free of charge to the Company and to any owner of a
Contract or prospective owner who requests such Statement.
3.3. The Fund, at its expense, shall provide the Company with copies of
its proxy material, reports to stockholders and other communications to
stockholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract Owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
portfolio for which instructions
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have been received: so long as and to the extent that
the Securities and Exchange Commission continues to
interpret the Investment Company Act to required
pass-through voting privileges for variable contract
owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to
the extent permitted by law. Participating Insurance
Companies shall be responsible for assuring that each of
their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with
the standards set forth on Schedule B attached hereto and
incorporated herein by this reference, which standards
will also be provided to the other Participating
Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16 (a) and, if and when applicable, 16(b). Further, the Fund will act
in accordance with the securities and Exchange Commission's interpretation of
the requirements of Section 16(a) with respect to periodic elections of trustees
and with whatever rules the commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. The Underwriter will use
its best efforts to review materials within a shorter time period as the Company
will have requested in a letter accompanying such material. No such material
shall be used if the Fund or its designee object to such use within fifteen
Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be Furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee object to such use
within fifteen Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the Contracts or
each account, contemporaneously with the filing of such document with the
Securities and Exchange Commission.
4.7. For purposes of this Article IV, the phrase "sales literature
or other
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promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs for billboards, motion pictures, or other public media), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses,
Statements of Additional Information, shareholder reports, and proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Fund and Underwriter shall pay no fee or other compensation to
the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund. Currently,
no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are Registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of printing and distributing
the Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. Diversification
6.1. The Fund will at all times invest money from the Contracts in such
a manner as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder. Without limiting the scope
of the foregoing, the Fund will at all times comply with Section 817 (h) of the
Code and Treasury Regulation $1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts and
any amendments or other modifications to such Section or Regulations.
ARTICLE VII. Potential Conflicts
7.1. The Board of Trustees of the Fund (the "Board") will monitor the
Fund for the existence of any material irreconcilable conflict between the
interests of the contract owners of all separate accounts investing in the Fund.
An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by variable
annuity contract and variable life insurance contract owners; or (f) a decision
by an insurer to disregard the voting instructions of contract owners. The Board
shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the
Fund, or submitting the question whether such segregation should be
implemented to a vote of all affected Contract owners and, as appropriate,
segregating the assets of any appropriate group (i.e., annuity contract
owners, life insurance contract owners, or variable contract owners of
one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected contract owners the option of making
such a change; and (2), establishing a new registered management investment
company or managed separate account.
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7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the Account's investment in
the Fund and terminate this agreement; provided, however that such withdrawal
and termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Any such withdrawal and termination must
take place within six (6) months after the Fund gives written notice that this
provision is being implemented, and until the end of that six month period the
Underwriter and Fund shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares and the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement within
six months after the Board informs the Company in writing that it has determined
that such decision has created an irreconcilable material conflict; provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested members of the Board. Until the end of the
foregoing six month period, the Underwriter and Funds shall continue to accept
and implement orders by the Company for the purchase and redemption) of shares
of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of
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the disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund and
each of its Trustees and officers and each person, if any, who controls the Fund
within the meaning of Section 15 of the 1933 Act (collectively, the
("Indemnified parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the Contracts
and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the Registration Statement or prospectus for the Contracts or
contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to the Company by or on behalf of the Fund for use
in the Registration Statement or prospectus for the Contracts
or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale
of the Contracts or Fund shares; or (ii) arise out of or a
result of statements or representative (other than statements
or representatives contained in the Registration Statement,
prospectus or sales literature of the Fund not supplied by the
Company, or persons under its control) or wrongful conduct of
the Company or persons under its control, with respect to the
sale or distribution of the Contracts or Fund Shares; or (iii)
arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement,
prospectus, or sales literature of the Fund or any amendment
thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in
reliance upon information furnished to the Fund by or on
behalf of the Company; or (iv) arise as a result of any
failure by the Company to provide the services and furnish the
materials under the terms of this Agreement; or (v) arise out
of or result from any material breach of any representation
and/or warranty made by the Company in this Agreement or arise
out of or result from any other material breach of this
Agreement by the Company, as limited by and in accordance with
the provisions of Sections 8.1(b) and 8.1(c) hereof.
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8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise by subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under Agreement or to the
Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of
the Company's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Company will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.1(d) The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund Shares or the Contracts or the operation of the
Fund.
8.2. Indemnification by the Underwriter
8.2(a) The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale
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or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement or prospectus or sales literature of
the Fund (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to the Underwriter or Fund by or on behalf of the
Company for use in the registration Statement or prospectus
for the Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale
of the Contracts or Fund shares: or
(ii) arise out of or as a result of statements or
representatives (other than statements or representations
contained in the Registration Statement, prospectus or sales
literature for the Contracts not supplied by the Underwriter
or persons under its control) or wrongful conduct of the Fund,
Adviser or Underwriter or persons under their control, with
respect to the sale or distribution of the Contracts or Fund
shares: or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registered
Statement, or sales literature covering the Contracts, or
any amendment thereof or supplement thereto, or the omission
or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon information furnished
to the Company by or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the
diversification requirements specified in Article VI of this
Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Underwriter;
as limited by and in accordance with the provisions of
Sections 8.2(b) and 8.2(c) hereof.
8.2(b) The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company or each Account, whichever is applicable.
8.2(c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be
entitled to participate, at its own expense, in the defense thereof. The
Underwriter also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the
Underwriter to such party of the Underwriter's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Underwriter will not be liable to
such party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
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8.2(d) The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. Indemnification By the Fund
8.3(a) The Fund agrees to indemnify and hold harmless
the Company, and each of its directors and officers and each
person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Fund) or
litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute, at
common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect
thereof) or settlements result from the gross negligence, bad
faith or willful misconduct of the Trustees or any member
thereof, are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to
provide the services and furnish the materials under
the terms of this Agreement (including a failure to
comply with the diversification requirements
specified in Article VI of this Agreement); or (ii)
arise out of or result from any material breach of
any representation and/or warranty made by the Fund
in this Agreement or arise out of or result from any
other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions
of Sections 8.3(b) and 8.3(c) hereof.
8.3(b) The Fund shall not be liable under this
indemnification provision with respect to any losses,
claims, damages, liabilities or litigation to which an
Indemnified Party would otherwise by subject by reason of
such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified
Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this
Agreement or to be Company, the Fund, the Underwriter or
each Account, whichever is applicable.
8.3(c) The Fund shall not be liable under this
indemnification provision with respect to any claim made
against an Indemnified Party unless such Indemnified Party
shall have notified the Fund in writing within a reasonable
time after the summons or other first legal process giving
information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated
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<PAGE>
agent), but failure to notify the Fund of any such claim shall
not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified
Parties, the Fund will be entitled to participate, at its own
expense, in the defense thereof. The Fund also shall be
entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice
from the Fund to such party of the Fund's election to assume
the defense thereof, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the
Fund will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such
party independently in connection with the defense thereof
other than reasonable costs of investigation.
8.3(d) The Company and the Underwriter agree promptly
to notify the Fund of the commencement of any litigation or
proceedings against it or any of its respective officers or
directors in connection with this Agreement, the issuance
or sale of the Contracts, with respect to the operation of
either Account, or the sale or acquisition of shares of the
Fund.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934, and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
therewith.
ARTICLE X. Termination
10.1 This Agreement shall terminate:
(a) at the option of any party upon one year advance written notice to
the other parties; or
(b) at the option of the Company to the extent that shares of
Portfolios are not reasonably available to meet the requirements of
the Contracts as determined by the Company, provided however, that
such termination shall apply only to the Portfolio(s) not reasonably
available. Prompt notice of the election to terminate for such cause
shall be furnished by the Company; or
(c) at the option of the Fund in the event that formal
administrativeproceedings are instituted against the Company by
the National Association of Securities Dealers, Inc. ("NASD"),
the Securities and Exchange Commission, the Insurance Commissioner
or any other regulatory body regarding the Company's duties under
this Agreement or related to the sale of the Contracts, with respect
to the operation of any Account, or the purchase of the Fund shares,
provided, however, that the Fund determines in its sole judgment
exercised in good faith, that any such administrative proceedings will
have a material adverse effect upon the ability of the Company to
perform its obligations under this Agreement; or
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<PAGE>
(d) at the option of the Company in the event that formal
administrative proceedings are instituted against the Fund or
Underwriter by the NASD, the Securities and Exchange Commission, or any
state securities or insurance department or any other regulatory body,
provided, however, that the Company determines in its sole judgment
exercised in good faith, that any such administrative proceedings will
have a material adverse effect upon the ability of the Fund or
Underwriter to perform its obligations under this Agreement; or
(e) with respect to any Account, upon requisite vote of the Contract
owners having an interest in such Account (or any subaccount) to
substitute the shares of another investment company for the
corresponding Portfolio shares of the Fund in accordance with the
terms of the Contracts for which those Portfolio shares had been
selected to serve as the underlying investment media. The Company
will give 30 days' prior written notice to the Fund of the date of
any proposed vote to replace the Fund's shares; or
(f) at the option of the Company, in the event any of the Fund's
shares are not registered, issued or sold in accordance with
applicable state and/or federal law or such law precludes the use
of such shares as the underlying investment media of the Contracts
issued or to be issued by the Company; or
(g) at the option of the Company, if the Fund ceases to qualify as a
Regulated Investment Company under Subchapter M of the Code or
under any successor or similar provision, or if the Company
reasonably believes that the Fund may fail to so qualify; or
(h) at the option of the Company, if the fund fails to meet the
diversification requirements specified in Article VI hereof; or
(i) at the option of either the fund or the Underwriter, if (1) the
Fund or the Underwriter, respectively, shall determine, in their sole
judgment reasonably exercised in good faith, that the Company has
suffered a material adverse change in its business or financial
condition or is the subject of material adverse publicity and such
material adverse change or material adverse publicity will have
a material adverse impact upon the business and operations of either
the Fund or the Underwriter, (2) the Fund or the Underwriter shall
notify the Company in writing of such determination and its intent to
terminate this Agreement, and (3) after considering the actions taken
by the Company and any other changes in circumstances since the giving
of such notice, such determination of the Fund or the Underwriter
shall continue to apply on the sixtieth (60th) day following
the giving of such notice, which sixtieth day shall be the effective
date of termination; or
(j) at the option of the, Company, if (1) the Company shall
determine, in its sole judgment reasonably exercised in good faith,
that either the Fund or the Underwriter has suffered a material
adverse change in its business or financial condition or is the
subject of material adverse publicity and such material adverse
change or material adverse publicity will have a material adverse
impact upon the business and operations of the Company, (2) the
Company shall notify the Fund and the Underwriter in writing of such
determination and its intent to terminate the Agreement, and (3)
after considering the actions taken by the Fund and/or the
Underwriter and any other charges in circumstances since the giving of
such notice, such determination shall continue to apply on the
sixtieth (60th) day following the giving of such notice, which
sixtieth day shall be the effective date of termination; or (k) at the
option of either the Fund or the Underwriter, if the Company gives the
Fund and the Underwriter the written notice specified in Section 1.6(b)
hereof and at the time such notice was given there was no notice of
termination outstanding under any other provision of this Agreement;
provided, however any termination under this Section 10.1
(k) shall be effective forty five (45) days after the notice specified
in Section 1.6(b) was given.
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<PAGE>
10.2 It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1(a) may be exercised for any
reason or for not reason.
10.3 Notice Requirement No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of
its intent to terminate which notice shall set forth
the basis for such termination. Furthermore,
(a) In the event that any termination is based upon the provisions of
Article VII, or the provision of Section 10.1(a), 10.1(i), 10.1(j) or
10.1(k) of this Agreement, such prior written notice shall be given in
advance of the effective date of termination as required by such
provisions; and
(b) In the event that any termination is based upon the provisions of
Section 10.1(c) or 10.1(d) of this Agreement, such prior written notice
shall be given at least ninety (90) days before the effective date of
termination.
10.4 Effect of Termination. Notwithstanding any termination of
this Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts or the Company, whichever shall have the legal authority to do so,
shall be permitted to reallocate investments in the Fund, redeem investments in
the Fund and/or invest in the Fund upon the making of additional purchase
payments under the Existing Contracts. The parties agree that this Section 10.4
shall not apply to any terminations under Article VII and the effect of such
Article VII terminations shall be governed by Article VII of this Agreement.
10.5 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in either account) except (i) as necessary to implement Contract Owner initiated
transactions, or (ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter referred
to as a "Legally Required Redemption"). Upon request, the Company will promptly
furnish to the Fund and the Underwriter the opinion of counsel for the Company
(which counsel shall be reasonably satisfactory to the Fund and the Underwriter)
to the effect that any redemption pursuant to clause (ii) above is a Legally
Required Redemption. Furthermore, except in cases where permitted under the
terms of the Contracts, the Company shall not prevent Contract Owners from
allocating payments to a Portfolio that was otherwise available under the
Contracts without first giving the Fund or the Underwriter 90 days notice of its
intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
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<PAGE>
If to the Company:
6610 West Broad Street, P. O. Box 27601
Richmond, Va. 23261
Attention: William D. Baldwin, Senior Vice President
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. Miscellaneous
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund
as neither the Trustees, officers, agents or shareholders assume any
personal liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and
regulatory authority, each party hereto shall treat as confidential the
names and addresses of the owners of the Contracts and all information
reasonably identified as confidential in writing by any other party
hereto and, except as permitted by this Agreement, shall not disclose,
disseminate or utilize such names and address and other confidential
information until such time as it may come into the public domain
without the express written consent of the affected party.
12.3 The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of
the provisions hereof or otherwise effect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute one
and the same instrument.
12.5 If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder
of the Agreement shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party
and all appropriate governmental authorities (including without
limitation the Securities and Exchange Commission, the NASD and state
insurance regulators) and shall permit such authorities reasonable
access to its books and records in connection with any investigation or
inquiry relating to this Agreement or the transactions contemplated
hereby. Notwithstanding the generality of the foregoing, each party
hereto further agrees to furnish the California Insurance Commissioner
with any information or reports in connection with services provided
under this Agreement which such Commissioner may request in order to
ascertain whether the variable life insurance operations of the Company
are being conducted in a manner consistent with the California Variable
Life Insurance Regulations and any other applicable law or regulations.
12.7 The Fund and Underwriter agree that to the extent any
advisory or other fees received by the Fund, the Underwriter or the
Adviser are determined to be unlawful in legal or administrative
proceedings under the 1973 NAIC model variable life insurance
regulation in the states of California, Colorado, Maryland or Michigan,
the Underwriter shall indemnify and reimburse the Company for any out
of pocket expenses and actual damages the Company has incurred as a
result of any such proceeding; provided however that the provisions
of Section 8.2(b) of this and 8.2(c) shall apply to such
indemnification and reimbursement obligation. Such indemnification
and reimbursement obligation shall be in addition to any other
indemnification and reimbursement obligations of the Fund and/or the
Underwriter under this Agreement.
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12.8 The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights,
remedies and obligations, at law or in equity, which the parties hereto
are entitled to under state and federal laws.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
Company:
THE LIFE INSURANCE COMPANY OF VIRGINIA
By its authorized officer.
SEAL By: William D. Baldwin
------------------
Title: Senior Vice President
---------------------
Date: August 21, 1989
---------------
Fund:
VARIABLE INSURANCE PRODUCTS FUND II
By its authorized officer,
SEAL By: J. Garry Burkhead
------------------
Title: Senior Vice President
---------------------
Date:
---------------------
FIDELITY DISTRIBUTORS CORPORATION
By its authorized officer,
SEAL By: Roger
-----------
Title:
-----------
Date:
------------
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<PAGE>
Schedule A
Contracts
Flexible Premium Variable Deferred Annuity Form P1098A 8/87
Flexible Premium Variable Life Policy Form P1097A 1/87
Flexible Premium Variable Life Insurance Form P1096A 1/87
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<PAGE>
Schedule C
Accounts
Name of Account Date of Resolution of Company's Board which
Established the Account
Life of Virginia Separate Account III February 10, 1987
Life of Virginia Separate Account II
Life of Virginia Separate Account 4 February 10, 1987
123
EXHIBIT 1A(8)(b)
Participation Agreement Among Variable Insurance
Products Fund, Fidelity Distributors Corporation and The
Life Insurance Company of Virginia
68
<PAGE>
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND,
FIDELITY DISTRIBUTORS CORPORATION
and
THE LIFE INSURANCE COMPANY OF VIRGINIA
THIS AGREEMENT, made and entered into this 22nd day of June, 1987 by and among
The Life Insurance Company of Virginia, (hereinafter the "Company") on its own
behalf and on behalf of Life of Virginia Separate Account 4, (hereinafter the
"Account"), a segregated asset account of the Company, and the VARIABLE
INSURANCE PRODUCTS FUND, an unincorporated business trust organized under the
laws of the Commonwealth of Massachusetts (hereinafter the "Fund") and FIDELITY
DISTRIBUTORS CORPORATION (hereinafter the "Underwriter").
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively referred to herein as "Variable Insurance Products") to be offered
by insurance companies which have entered into participation agreements
substantially identical to this Agreement (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several series of
shares, each designated a "Portfolio" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated October 15, 1985 (File No. 812-6102), granting Participating
Insurance Companies and variable annuity and variable life insurance separate
accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940
Act") and Rules 6e-2(b) (15) and 6e- 3(T) (b) (15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment company
under the 1940 Act and its shares are registered under the Securities Act of
1933, as amended (hereinafter the "l933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable annuity
and variable life insurance contracts under the 1933 Act; and
WHEREAS, the Account is a duly organized, validly existing segregated asset
account, established by resolution of the Executive Committee of the Board of
Directors of the Company on February 10, 1987, to set aside and invest assets
attributable to the aforesaid variable annuity and variable life insurance
contracts; and
WHEREAS, the Company has registered or will register the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as amended,
(hereinafter the "1934 Act"), and is a member in good standing of the National
Association of Securities Dealers, Inc. (hereinafter "NASD"); and
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<PAGE>
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company intends to purchase shares in the Portfolios on behalf of the
Account to fund certain of the aforesaid variable annuity and variable life
insurance contracts and the Underwriter is authorized to sell such shares to
unit investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the Fund
and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Underwriter agrees to sell to the Company those shares of the
Fund which the Account orders, executing such orders on a daily basis at the net
asset value next computed after receipt by the Fund or its designee of the order
for the shares of the Fund. For purposes of this Section 1.1, the Company shall
be the designee of the Fund for receipt of such orders from the Account and
receipt by such designee shall constitute receipt by the Fund; provided that the
Fund receives notice of such order by 9:30 a.m. Boston time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
separate Account on those days on which the Fund calculates its net asset value
pursuant to rules of the Securities and Exchange Commission and the Fund shall
use reasonable efforts to calculate such net asset value on each day which the
New York Stock Exchange is open for trading and as otherwise required pursuant
to the prospectus of the Fund. Notwithstanding the foregoing, the Board of
Trustees of the fund (hereinafter the "Trustees") may refuse to sell shares of
any Portfolio to any person, or suspend or terminate the offering of shares of
any Portfolio if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Trustees acting in good
faith and in light of their fiduciary duties under federal and any applicable
state laws, necessary in the best interests of the shareholders of such
Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Sections 2.5 and 2.12 of
Article II of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from the Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6 The company agrees to purchase and redeem the sales of each
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus and Sections 1.1 and 1.5 of this
agreement. The Company agrees that all net amounts available under the variable
annuity and variable life insurance contracts with the form number(s) which are
listed on Schedule A attached hereto and incorporated herein by this reference,
as such Schedule A may be amended from time to time hereafter by mutual written
agreement of all the parties hereto, (the "Contracts") shall be invested in the
Fund, in such other Funds advised by the Adviser as may be mutually agreed to in
writing by the parties hereto, or in the Company's general account, provided
that such amounts may also be invested in an investment company other than the
Fund if (a) such other investment company, or series thereof, has investment
objectives or policies that are substantially different from the investment
objectives and policies of all the portfolios of the Fund; or (b) the Company
gives the Fund and the Underwriter 45 days written notice of its intention to
make such other investment company available as a funding vehicle for the
Contracts; or (c) such other investment company was available as a funding
vehicle for the Contracts prior to the date of this Agreement and the Company so
informs the Fund and Underwriter prior to
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<PAGE>
their signing this Agreement; or (d) the Fund or Underwriter consents to the use
of such other investment company.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
1.8. Issuance and transfer of the Funds' shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Fund will be recorded in an appropriate title for the
Account or the appropriate subaccount of the Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributors payable on the Funds' shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 7 p.m. Boston
time.
ARTICLE II. Representatives and Warranties
2.1. The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable Federal and State laws
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. The Company further represents and
warrants that it is in an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established the Account
prior to any issuance or sale thereof as a segregated asset account under
Section 38.2-3113 of the Virginia Insurance Code and has registered or, prior to
any issuance or sale of the Contracts, will register the Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the Commonwealth of
Massachusetts and all applicable federal and state securities laws and that the
Fund is and shall remain registered under the 1940 Act. The Fund shall amend the
Registration Statement for its shares under the 1933 Act and the 1940 Act from
time to time as required in order to effect the continuous offering of its
shares. The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states only if and to the extent deemed advisable
by the Fund or the Underwriter.
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Company represents that the Contracts are currently treated as
annuity, endowment or life insurance contracts, under applicable provisions of
the Code and that it will make every effort to maintain such treatment and that
it will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. The fund has adopted a "no
fee" or "defensive" Rule 12b-1 Plan under which it makes no payments for
distribution expenses. To the extent that it decides to finance
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distribution expenses pursuant to Rule 12b-1, the fund undertakes to have a
board of trustees, a majority of whom are not interested persons of the fund,
formulate and approve any plan under 12b-1 to finance distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Virginia and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Virginia to the extent required to perform this
Agreement.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Virginia and all applicable state
and federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the Commonwealth of Massachusetts and any applicable state and federal
securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than
$500,000. The aforesaid Bond shall include coverage for larceny and embezzlement
and shall be issued by a reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Company, in an amount not less than $500,000. The aforesaid Bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.12. The Company represents and warrants that it will not purchase
Fund shares with Account assets derived from the sale of Contracts to
individuals or entities which qualify under current or future state or federal
law for any type of tax advantage (whether by a reduction or deferral of,
deduction or exemption from, or credit against income or otherwise). Examples of
such types of funds under current law include: any tax-advantage retirement
program, whether maintained by an individual, employer, employee association or
otherwise (including without limitation, retirement programs which qualify under
Sections 401(a), 401(k), 403(a) amended), and any retirement programs maintained
for employees of the Government of the United States or by the government of any
State or political subdivision thereof, or by any agency or instrumentality of
any of the foregoing.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company (at the Company's
expense) with as many copies of the Fund's current prospectus as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund shall
provide such documentation (including a final copy of the new prospectus as set
in type at the Fund's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the prospectus
for the fund is amended) to have the prospectus for the Contracts and the Fund's
prospectus printed together in one document (such printing to be at the
Company's expense).
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3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter (or in the Fund's
discretion, the Prospectus shall state that such Statement is available from the
Fund), and the Underwriter (or the Fund), at its expense, shall print and
provide such Statement free of charge to the Company and to any owner of a
Contract or prospective owner who requests such Statement.
3.3. The Fund, at its expense, shall provide the Company with copies of
its proxy material, reports to stockholders and other communications to
stockholders including materials needed to solicit voting instructions from
owners of Contracts in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4. If and to the extent required by law the Company
shall:
(i) solicit voting instructions from Contract
Owners;
(ii) vote the Fund shares in accordance with
instructions
(iii) vote Fund shares for which no instructions
have been received in the same proportion
as Fund shares of such portfolio for
which instructions have been received: so
long as and to the extent that the Securities
and Exchange Commission continues to
interpret the Investment Company Act to
require pass-through voting privileges for
variable contract owners. The Company
reserves the right to vote Fund shares held
in any segregated asset account in its own
right, to the extent permitted by law.
Participating Insurance Companies shall be
responsible for assuring that each of
their separate accounts participating in
the Fund calculates voting privileges in
a manner consistent with the standards set
forth on Schedule B attached hereto and
incorporated herein by this reference, which
standards will also be provided to the
other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the Securities and Exchange Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees and
with whatever rules the Commission may promulgate with request thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. The Underwriter will use
its best efforts to review materials within a shorter time period as the Company
will have requested in a letter accompanying such material. No such material
shall be used if the Fund or its designee object to such use within fifteen
Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company, and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee object to such use
within fifteen Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company, the
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
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registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for the Account which are in the public domain
or approved by the Company for distribution to Contract owners or participants,
or in sales literature or other promotional material approved by the Company or
its designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements (including materials relating to proxy solicitation),
sales literature and other promotional materials, applications for exemptions,
requests for not-action letters, and all amendments to any of the above, that
relate to the Fund or its shares, contemporaneously with the filing of such
document with the Securities and Exchange Commission or other regulatory
authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the Contracts or
the Account, contemporaneously with the filing of such document with the
Securities and Exchange Commission.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements (or
preliminary drafts of such registration statements) prospectuses, Statements of
Additional Information, shareholder reports, and proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Fund and Underwriter shall pay no fee or other compensation to
the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund. Currently,
no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials (including voting solicitation
materials) and reports to shareholders (including the costs of printing a
prospectus that constitutes an annual report), the preparation of all statements
and notices required by any federal or state law, all taxes on the issuance or
transfer of the Fund's shares.
5.3. The Company shall bear the expenses of printing and distributing
the Fund's prospectus to owners of or applicants applying for contracts issued
or to be issued by the Company and of distributing the Fund's proxy materials,
voting instruction solicitation materials relating to the Fund and reports to
such Contract owners.
ARTICLE VI. Diversification
6.1. The Fund will at all times invest money from the Contracts in such
a manner as to ensure that the Contracts will be treated as variable contracts
under the code and the regulations issued thereunder. Without
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limiting the scope of the foregoing, the Fund will at all times comply with
Section 817(h) of the Code and Temporary Regulation $ 1.817-5T, dated, September
12, 1986 relating to the diversification requirements for variable annuity,
endowment or life insurance contracts and any amendments or other modifications
to such Section or Regulations.
ARTICLE VII. Potential Conflicts
7.1. The Board of Trustees of the Fund (the "Board") will monitor the
Fund for the existence of any material irreconcilable conflict between the
interests of the contract owners of all separate accounts investing in the Fund.
An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by variable
annuity contract and variable life insurance contract owners; or (f) a decision
by an insurer to disregard the voting instructions of contract owners. The Board
shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregard.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the Account's investment in
the Fund and terminate this Agreement; provided, however that such withdrawal
and termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Any such withdrawal and termination must
take place within six (6) months after the Funds gives written notice that this
provision is being implemented, and until the end of that six month period the
Underwriter and Fund shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
Account's investment in the Fund and terminate this Agreement within six months
after the Board informs the Company in writing that it has determined that such
decision has created an irreconcilable material conflict; provided, however,
that such withdrawal and termination shall be limited to the extent required by
the foregoing material irreconcilable conflict as determined by a majority of
the disinterested members of the Board. Until the end of the foregoing six month
period, the Underwriter and Fund shall continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Fund.
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7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy and irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund and
each of its Trustees and officers and each person, if any, who controls the Fund
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company) or litigation (including legal and other expenses in
connection with such litigation), to which the Indemnified Parties may become
subject under any statute, regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in the Registration Statement or prospectus for the
Contracts or contained in the Contracts or sales
literature for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of
the Fund for use in the Registration Statement or
prospects for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of or as a result of statements or
representatives (other than statements or representations
contained in the Registration Statement, prospectus or
sales literature of the Fund not supplied by the Company,
or persons under its control) or wrongful conduct of the
Company or persons under its control, with respect to the
sale or distribution of the Contracts or Fund Shares
(including without limitation the receipt and transmission
of orders for purchases of Fund shares as designee of the
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Fund pursuant to Section 1.1 hereof); or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature of the Fund or any
amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading if such a statement or omission was made in
reliance upon information furnished to the Fund by or on
behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company, as limited by and in
accordance with the provisions of Sections 8.1(b) and 8.1(c)
hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other legal process giving information of
the nature of the claim shall have been served upon such Indemnified Party (or
after such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Company of any such claim shall not
relieve the Company from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than to account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Company shall be entitled to participate, at its own
expense, in the defense of such action. The Company also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Company to such party of the Company's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Company will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund Shares or the Contracts or the operation of the
Fund.
8.2. Indemnification by the Underwriter
8.2.(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses in connection with such litigation) to which
the Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
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(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any
material fact contained in the Registration Statement
or prospectus or sales literature of the Fund (or any
amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the
alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance
upon and in conformity with information furnished to the
Underwriter or Fund by or on behalf of the Company for
use in the Registration Statement or prospectus for the
Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the
sale of the Contracts or Fund shares: or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Registration Statement,
prospectus or sales literature for the Contracts not
supplied by the Underwriter, Fund, Adviser or persons
under their control) or wrongful conduct of the Fund,
Adviser or Underwriter or persons under their control,
with respect to the sale or distribution of the
Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
Registration Statement, prospectus, or sales literature
covering the Contracts, or any amendment thereof or
supplement thereto, or the omission or alleged omission
to state therein a material fact required to be stated
therein not misleading, if such statement or omission
was made in reliance upon information furnished to the
Company by or on behalf of the Fund: or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter; as limited by an
in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this Indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
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Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3. Indemnification By the Fund
8.3(a). The Fund agrees to indemnify and hold harmless the Company, and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses in connection with such litigation) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements result from the gross negligence, bad faith or willful
misconduct of the Trustees or any member thereof, are related to the operations
of the fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the
diversification requirements specified in Article VI of this
Agreement);or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund; as limited by and in
accordance with the provisions of Sections 8.3(b) and 8.3(c)
hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise by subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or the Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled participate, at its
own expense, in the defense thereof. The Fund also shall be entitled to assume
the defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Fund to such party of the Fund's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Company agrees promptly to notify the Fund of the
commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.
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ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934, and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon one year
advance written notice to the other parties;
or
(b) at the option of the Company to the extent
that shares of Portfolio(s) are not
reasonably available to meet the
requirements of the Contracts as determined
by the Company, provided however, that such
termination shall apply only to the
Portfolio(s) not reasonably available.
Prompt notice of the election to terminate
for such cause shall be furnished by the
Company; or
(c) at the option of the Fund in the event that
formal administrative proceedings are
instituted against the Company by the
National Associations of Securities Dealers,
Inc. ("NASD"), the Securities and Exchange
Commission, the Insurance Commissioner or
any other regulatory body regarding the
Company's duties under this Agreement or
related to the sale of the Contracts, the
operation of the Account, or the purchase of
the Fund shares, provided, however, that the
Fund determines in its sole judgment
exercised in good faith, that any such
administrative proceedings will have a
material adverse effect upon the ability of
the Company to perform its obligations under
this Agreement; or
(d) at the option of the Company in the event
that formal administrative proceedings are
instituted against the Fund or Underwriter
by the NASD, the Securities and Exchange
Commission, or any state securities or
insurance department or any other regulatory
body, provided, however, that the Company
determines in its sole judgment exercised in
good faith, that any such administrative
proceedings will have a material adverse
effect upon the ability of the Fund or
Underwriter to perform its obligations under
this Agreement; or
(e) upon requisite vote of the Contract owners
having an interest in the Account (or any
subaccount) to substitute the shares of
another investment company for the
corresponding Portfolio shares of the Fund
in accordance with the terms of the
Contracts for which those portfolio shares
had been selected to serve as the underlying
investment media. The Company will give 30
days' prior written notice to the Fund of
the date of any proposed vote to replace the
Fund's shares; or
(f) at the option of the Company, in the even
any of the Fund's shares are not registered,
issued or sold in accordance with applicable
state and/or federal law or such law
precludes the use of such shares as the
underlying investment media of the Contracts
issued or to be issued by the Company; or
(g) at the option of the Company, if the Fund
ceases to qualify as a Regulated Investment
Company under Subchapter M of the Code or
under any successor or similar provision, or
if the Company reasonably believes that the
Fund may fail to so qualify; or
(h) at the option of the Company, if the Fund
fails to meet the diversification
requirements specified in Article VI hereof;
or
(i) the option of either the Fund or the
Underwriter, if
(1) the Fund or the Underwriter,
respectively, shall determine, in their sole
judgment reasonably exercised in good faith,
that the Company has suffered a material
adverse change in its business or financial
condition or is the subject of
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material adverse publicity and such material
adverse change or material adverse publicity
will have a material adverse impact upon the
business and operations of either the Fund
or the Underwriter, (2) the fund or the
Underwriter shall notify the Company in
writing of such determination and its intent
to terminate this Agreement, and (3) after
considering the actions taken by the Company
and any other charges in circumstances since
the giving of such notice, such
determination of the Fund or the Underwriter
shall continue to apply on the sixtieth
(60th) day following the giving of such
notice, which sixtieth day shall be the
affective date of termination; or
(j) at the option of the Company, if (1) the
Company shall determine, in its sole
judgment reasonably exercised in good faith,
that either the fund or the Underwriter has
suffered a material adverse change in its
business or financial condition or is the
subject of material adverse publicity and
such material adverse change or material
adverse publicity will have a material
adverse impact upon the business and
operations of the Company, (2) the Company
shall notify the Fund and the Underwriter in
writing of such determination and its intent
to terminate the Agreement, and (3) after
considering the actions taken by the Fund
and/or the Underwriter and any other changes
in circumstances since the giving of such
notice, such determination shall continue to
apply on the sixtieth (60th) day following
the giving of such notice, which sixtieth
day shall be the effective date of
termination; or
(k) at the option of either the Fund or the
Underwriter, if the Company gives the Fund
and the Underwriter the written notice
specified in Section 1.6(b) hereof and at
the time such notice was given there was no
notice of termination outstanding under any
other provision of this Agreement; provided,
however any termination under this Section
10.1(k) shall be effective forty five (45)
days after the notice specified in Section
1.6(b) was given. 10.2. It
is understood and agreed that the right of
any party hereto to terminate this Agreement
pursuant to Section 10.1(a) may beexercised
for any reason or for no reason.10.3. Notice
------ Requirement. No termination of this
Agreement shall be effective unless and
until ------------ the party terminating
this Agreement gives prior written notice to
all other parties to this Agreement of its
intent to terminate which notice shall set
forth the bases for such termination.
Furthermore,
(a) In the event that any termination is based
upon the provisions of Article VII, or the
provision of Section 10.1(a), 10.1(i),
10.1(j) or 10.1(k) of this Agreement, such
prior written notice shall be given in
advance of the effective date of termination
as required by such provisions; and
(b) in the event that any termination is based
upon the provisions of Section 10.1(c) or
10.1(d) of this Agreement, such prior
written notice shall be given at least
ninety (90) days before the effective date
of termination.
10.4. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts or the Company, whichever shall have legal authority to do so, shall
be permitted to reallocate investments in the Fund, redeem investments in the
Fund and/or invest in the Fund upon the making additional purchase payments
under the Existing Contracts. The parties agree that this Section 10.4 shall not
apply to any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
10.5. The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract
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Owner initiated transactions, or (ii) as required by state and/or federal laws
or regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"). Upon request, the
Company will promptly furnish to the Fund and the Underwriter the opinion of
counsel for the Company (which counsel shall be reasonably satisfactory to the
Fund and the Underwriter) to the effect that any redemption pursuant to clause
(ii) above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contracts, the Company shall not prevent
Contract Owners from allocating payments to a Portfolio that was otherwise
available under the Contracts without first giving the Fund or the Underwriter
90 days notice of its intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered
or certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify in
writing to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
6610 West Broad Street
Richmond, Virginia 23261
Attention: Eric T. Henry, Senior Vice President
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. Miscellaneous
12.1 All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Trustees, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation to the
Securities and Exchange Commission, the NASD and state insurance regulators) and
shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
12.7 The Fund and Underwriter agree that to the extent any advisory or
other fees received by the Fund, the Underwriter or the adviser are determined
to be unlawful in legal or administrative proceedings under the 1973 NAIC model
variable life insurance regulation in the states of California, Colorado,
Maryland, Massachusetts, Michigan or Pennsylvania, the Underwriter shall
indemnify and reimburse the Company for any out of pocket expenses and actual
damages the Company has incurred as a result of any such proceeding; provided
however that the provisions of Section 8.2(b) of this and 8.2(c) shall apply to
such indemnification and reimbursement obligation. Such indemnification and
reimbursement obligation shall be in addition to any other indemnification and
reimbursement obligations of the Fund and/or the Underwriter under this
Agreement.
12.8. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto
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are entitled to under state and federal laws.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
Company:
By its authorized officer,
The Life Insurance Company of Virginia
By:
-----------------------------------
William Baldwin
Title: Senior Vice President
Date: 15 June 87
----------
VARIABLE INSURANCE PRODUCTS FUND
By its authorized officer,
SEAL
By: /s/ JOHN F. O'BRIEN
-----------------------------
John F. O'Brien
Title: Senior Vice President
Date: June 27, 1987
-------------
Underwriter:
FIDELITY DISTRIBUTORS CORPORATION
By its authorized officer,
By: /s/ JOHN F. O'BRIEN
-------------------
John F. O'Brien
SEAL
Title: President
Date: June 27, 1987
-------------
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<PAGE>
Schedule A
Contracts
1. Variable Life Insurance Policy identified as Contract Form P1097A
1/87 or P1097B 1/87.
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<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the
Underwriter as early as possible before the date set by the Fund for
the shareholder meeting (the "Record Date") to facilitate the
establishment of tabulation procedures. At this time the Underwriter
will inform the Company of the Record, Mailing and Meeting dates. This
will be done verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run"
or other activity, which will generate the names, addresses and number
of units/shares which are attributed to each contract owner/
policyholder (the "Customer") as of the Record Date. Allowance should
be made for account adjustments made after this date that could affect
the status of the Customers' accounts as of the Record Date.
Note: The number of voting instruction cards is determined
by the activities described in Step #2. The Company
will use its best efforts to call in the number of
Customer to Fidelity, as soon as possible, but no
later than two weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy
statement. Underwriter will provide at least one copy of the last
Annual Report to the Company.
4. The Voting Instruction Cards ("Cards" or "Card") are produced and paid
for by the Fund and sent to Company. (This and related steps may occur,
later in the chronological process due to possible uncertainties
relating to the proposals.)
5. Company will, at its expense, print account information on the Cards.
6. Allow approximately 2-4 business days for printing information on the
Cards. Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of shares/units (depends upon
tabulation process used by the computer system, i.e. whether
or not system knows number of shares held just be "reading"
the account number)
e. individual Card number for use in tracking and verification
of votes (already on Cards as printed by the Fund)
Note: When the Cards are printed by the fund, each Card is
numbered individually to guard against potential
Card/vote Duplication.
7. During this time, the Legal Department of the Underwriter or its
affiliate ("Fidelity Legal") will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document).
Printed and folded notices and statements will be sent to Company for
insertion into envelopes (envelopes and return envelopes are provided
and paid for by the Insurance Company). Contents of envelope sent to
Customers by Company will include:
a. Voting Instruction Card
b. proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to
the Company or its tabulation agent.
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<PAGE>
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as
quickly as possible and that their vote is important.
e. cover letter - optional, supplied by Company and reviewed
and approved in advance by Fidelity Legal.
8. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
9. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended,
but not necessary, to receive a proper response percentage.)
Solicitation time is calculated as days from (but not
including the meeting, counting backwards.
** If the Customers were actually the shareholders, at least 50%
of the outstanding shares must be represented and 66 2/3% of
that 50% must have voted affirmatively on the proposals to
have an effective vote. However, since the Company is the
shareholder, the Customers' votes will (except in certain
limited circumstances) be used to dictate how the Company will
vote.
10. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival into vote
categories of all yes, no, or mixed replies, and to begin data entry.
* Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal
procedure and has not been required by Fidelity in the past.
11. Signatures on Card checked against legal name on account registration
which was printed on the Card.
* This verifies whether an individual has signed correctly for
self with the same name as is on the account registration.
For Example:
If the account registration is under "Bertram C. Jones,
Trustee, "then that is the exact legal name to be printed on
the Card and is the signature needed on the Card.
12. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter, a new Card and return envelope. The mutilated or illegible
Card is disregarded and considered to be not received for purposes of
--- --------
vote tabulation. Any Cards that have "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to
why they did not complete the system. Any questions on those Cards
are usually remedied individually.
13. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to sort
the Cards as they first arrive into categories depending upon their
vote; an estimate of how the vote is progressing may be calculated. If
the initial estimates and the actual vote do not coincide, then an
internal audit of that vote should occur. This may entail a recount.
14. The actual tabulation of votes is done in units and in shares. (It is
very important that the Fund receives the tabulations stated in terms
of a percentage and the number of shares.)
15. Final tabulation in shares is verbally given by the Company to the
Legal Department on the morning of the meeting by 10:00 a.m. Boston
time.
16. Vote is verified by the Company and is sent to Fidelity Legal.
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17. Company then votes its proxy in accordance with the votes received from
the Customers the morning of the meeting (except in limited
circumstances as may be otherwise required by law). A letter
documenting the Company's vote is supplied by Fidelity Legal and is
sent to officer of company for his signature. This letter is normally
sent after the meeting has taken place.
18. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity will
be permitted reasonable access to such Cards.
19. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
20. During tabulation procedures, the Fund and Company determine if a
resolicitation is required and what form that resolicitation should
take, whether it should be by a mailing, or by recorded telephone line.
A resolicitation is considered when the vote response is slow and it
appears that not enough votes would be received by the meeting date.
The meeting could be adjourned to leave enough time for the
resolicitation.
A determination is made by the Company and the Fund to find the most
cost effective candidates for resolicitation. These are Customers who
have not yet voted, but whose balances are large enough to bring in the
required vote with minimal costs.
a. By mail: Fidelity Legal amends the voting instruction cards,
if necessary, and writes a resolicitation letter. The Fund
supplies these to the Company. The Company generates a mailing
list etc., as per step 3 onward.
b. By phone: Rarely used. This must be done on a recorded line.
Fidelity Legal and the Fund will supply this necessary
procedures and script if a phone resolicitation were to be
required.
87
EXHIBIT 1A(8)(c)
Agreement between Oppenheimer Variable Account Funds,
Oppenheimer Management Corporation, and The Life
Insurance Company of Virginia.
<PAGE>
AGREEMENT BETWEEN OPPENHEIMER VARIABLE ACCOUNT FUNDS, OPPENHEIMER
MANAGEMENT CORPORATION AND THE LIFE INSURANCE COMPANY OF VIRGINIA
AGREEMENT DATED as of May 27, 1987 between OPPENHEIMER
VARIABLE ACCOUNT FUNDS (the "Fund"), OPPENHEIMER MANAGEMENT CORPORATION (OMC),
and THE LIFE INSURANCE COMPANY OF VIRGINIA (LOV).
WHEREAS, the Fund represents and warrants that it is and will remain an
open-end diversified investment company registered as such under the
Investment Company Act of 1940 whose shares are registered under the Securities
Act of 1933;
WHEREAS, the Funds represents and warrants that its shares, which currently
are issued with respect to six (6) separate series, are offered only for
purchase by separate accounts of life insurance companies as an investment
medium for variable life or variable annuity policies;
WHEREAS, the Fund and OMC represent and warrant that shares of the Fund shall
be sold only to insurance companies that are purchasing those shares for
separate accounts established for variable life insurance and variable annuity
policies ("participating insurance companies");
WHEREAS, LOV desires to utilize shares of the Fund as one of the funding
media of Life of Virginia Separate Account II, which will support variable
life insurance policies (the "policies") to be issued by LOV;
WHEREAS, LOV represents and warrants that it has or will register the
Policies under the Securities Act of 1933;
WHEREAS, LOV represents and warrants that life of Virginia Separate Account
II has or will register as a unit investment trust under the Investment Company
Act of 1940;
WHEREAS, the Fund represents and warrants that it has obtained an order from
the Securities and Exchange Commission granting participating insurance
companies and variable life insurance and variable annuity separate accounts
exemptions from the provisions o Sections 9(a), 15(b) of the Investment
Company Act of 1940, as amended, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder to the extent necessary to permit shares of the funds to be
sold to and held by variable annuity and variable life separate accounts of
both affiliated and unaffiliated life insurance companies (the "Order");
Now, therefore, in consideration of the premises and the mutual promises
and covenants hereinafter set forth, the Fund, OMC and LOV agree as follows:
1. The Fund shall make its shares available for purchase at net asset value
by one or more separate accounts of LOV to support policies to be issued by
LOV. Orders for such shares shall be executed on a daily basis at the net
asset value next computed after receipt by the Fund of the order.
2. The Fund agrees to redeem for cash, on LOV's request, any full or
fractional shares of the Fund held by LOV, executing such requests on a daily
basis at the net asset value next computed after receipt by the Fund of
the request for redemption.
3. LOV shall pay for Fund shares on the next Business Day after an order
to purchase Fund shares is made in accordance with provisions of Section 1.
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4. The Fund shall furnish same day notice by telecopier to LOV of any
income dividends or capital gains distributions payable on the Fund's shares.
LOV will receive all such income dividends or capital gains distributions
payable with respect to a series in additional shares attributable to that
series. The Fund shall notify LOV of the number of shares issued as
payment of such income dividends or capital gains distributions.
5. The Fund shall make the net asset value per share of each series available
to LOV on a daily basis as soon as reasonably possible after the net asset
value per share is calculated and shall use its best efforts to make such
net asset value per share available to LOV by 5:30 pm New York time.
6. LOV shall pay for the reasonable costs of printing and mailing
all shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials) of the Fund that are
required by the federal securities laws to be sent to owners of policies
issued by LOV. Lov shall also pay the reasonable costs of printing and
distributing the Fund's prospectuses and statements of additional
information to owners of and applicants applying for policies for which
the Fund is serving or is to serve as an investment vehicle.
7. The Fund shall prepare and be responsible for filing with the Securities
and Exchange Commission and any state securities regulators requiring such
filing all shareholder reports, notices, proxy materials (or similar
materials such as voting instruction solicitation materials), prospectuses
and statements of additional information of the Fund.
8. The Fund agrees that the investment portfolios of each series of the
Fund will comply with the diversification requirements set forth in Section
817(h) of the Internal Revenue Code of 1986, as amended.
9. In the event this agreement is terminated, the Fund agrees that, as long
as shares of the Fund are available for purchase by separate accounts of any
other insurance companies, it will permit LOV to continue to purchase shares
of the Fund for the account of its policyholders then funding policies, in
whole or in part, with shares of the Fund, provided LOV continues to pay the
costs described in Section 6 above.
10. LOV shall not give any information or make any representations or
statements on behalf of or concerning the Fund or OMC in connection with
the sale of the policies other than the information or representations
contained in the registration statement or prospectus for the Fund shares,
as such registration statements and prospectus may be amended from time to
time, or in reports or proxy statements for the Fund, or in sales literature
approved by the Fund or OMC, except as required by legal process or
regulatory authorities or with permission of the Fund and OMC.
11. The Fund and OMC shall not give any information or make any
representation on behalf of or concerning LOV, the separate account(s) of LOV,
or the policies, other than the information or representations contained
in a registration statement or prospectus for the policies, as such
registration statement and prospectus may be amended from time to time, or in
materials approves by LOV for distribution, including sales literature or
promotional materials, except as required by legal process or regulatory or
with permission of LOV.
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12. The Fund shall bear the cost of registration and qualifications of
the Fund's shares, preparation and filing of the Fund's prospectus and
registration statement, proxy materials and reports (including al documents
related to the solicitation of voting instructions from owners of the
policies), the preparation of all statements and notices relating to
the Fund that may be required by any federal or state low, and all taxes
to which an issuer is subject on the issuance and transfer of the Fund's
shares.
13.1 The Board of Trustees of the Fund will monitor the Fund for any
material irreconcilable conflicts between the interests of the owners of
all policies whose cash values are held in separate accounts investing
in the Fund ("Policyowners") and will promptly report to the fund's board
any potential or existing material irreconcilable conflict between the
Policyowners. LOV and OMC will assist the Board in carrying out its
responsibilities in monitoring such conflicts, by providing the Board in
a timely manner with all information reasonably necessary for the Board
to consider any issues raised, including information as to a decision by
LOV to disregard voting instructions of Policyowners. This includes, but
is not limited to, reporting to the Board on all matters referred to in the
Order and in the application for the Order. The responsibility to report
such information and conflicts and to assist the Board will be carried out
with a view only to the interests of policyowners.
13.2 If it is determined by either a majority of the Board of Trustees of
the Fund or a majority of its disinterested trustees, that a material
irreconcilable conflict exists, LOV shall, at its expense and to the
extent reasonably practicable (as determined by the majority of the Fund's
disinterested trustees) take whatever steps are necessary to remedy or
eliminate the material irreconcilable conflict, up to and including:
(a) withdrawing the assets allocable to Life of Virginia Separate Account
III from the Fund (or any series of the Fund) and reinvesting such
assets in a different investment medium, including another series of the
Fund, or submitting the question whether such segregation should be
implemented to a vote of all affected policyowners and, as appropriate,
segregating the assets of any group voting in favor of segregation, or
offering to affected policyowners the option of making such a change; and
(b) establishing and registered management investment company or
managed separate account.
These responsibilities will be carried out with a view only to the interest
of Policyowners. No penalty will be imposed by the Fund on LOV for
withdrawing assets from the Fund (or any series of the Fund) in the event
of a material irreconcilable conflict.
For purposes of this Section 13.2 a majority of the disinterested trustees
shall determine whether any proposed action adequately remedies any
material irreconcilable conflict, but in no event will the Fund or OMC be
required to establish a new funding medium for any variable contract.
LOV shall not be required by this Section 13.2 to establish new funding
medium for any variable contract if an offer to do so has been declined by
vote of a majority of the Policyowners materially adversely affected by the
material irreconcilable conflict. LOV will recommend to its Policyowners
that they decline an offer to establish a new funding medium only if the
company believes it in the best interest of the Policyowners.
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13.3 So long as, and to the extent that the Securities and Exchange
Commission interprets the Investment Company Act of 1940 to require
pass-through voting privileges for variable policyowners, LOV will
provide pass-through voting privileges to owners of policies whose cash
values are invested, through LOV Separate Account III, in shares of the
Fund. LOV shall be responsible for assuring that Life of Virginia Separate
Account III calculates voting privileges in a manner consistent with all other
separate accounts investing in the Fund. LOV will vote shares of the Fund
held in Life of Virginia Separate Account III for which no timely voting
instructions from Policyowners are received, as well as shares it owns, in
the same proportion as those shares for which voting instructions are
received.
13.4 The Fund and LOV shall comply with Rule 6e-2, 6e-3(T) or, if adopted,
6e-3 of the Securities and Exchange Commission, if and to the extent they are
amended to provide exemptive relief with respect to mixed or shared funding.
13.5 OMC and LOV shall at least annually submit to the Fund's board of
Trustees such reports, materials or data as the Trustees may reasonably
request so that the Trustees may fully carry out the obligations imposed upon
them by the Order, and said reports, materials and data shall be submitted
more frequently if deemed appropriate by the Trustees.
13.6 The Fund hereby represents and warrants that it has not and will not
sell Fund shares to any insurance company or separate account unless an
agreement containing provisions substantially the same as Sections 13.1
through 13.5 of this agreement is in effect to govern such sales.
13.7 Each of the undertakings in this Section 13 will survive termination
of this Agreement and will remain in effect for as long as shares of the
Fund are held by LOV for the account of its Policyowners.
14. LOV agrees to indemnify and hold harmless the Fund and OMC, each member
of their Board of Trustees or Board of Directors, each of their officers, and
each person who controls the Fund within the meaning of Section 15 of The
Securities Act of 1933 against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
LOV), or any expenses of litigation (including court costs and reasonable
attorney's fees), to which the indemnified parties amy become subject under
statute or regulation or at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements are related to the sale or acquisition of the Fund's shares
and;
(a) arise out of any untrue or allegedly untrue statements of any material
fact contained in the registration statement or prospectus for the
policies, in the policies themselves or in sales literature created or
approved by LOV for the policies, or arise out of or are based upon the
omission or alleged omission to state therein any material fact required
to be stated therein or necessary to make the statements therein not
misleading, provided that such statements or omissions were not made in
reliance upon and in conformity with information furnished by LOV by or on
behalf of the Fund or OMC; or
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(b) arise out of or as a result of statements or representations or
wrongful conduct of LOV or persons under its controls, with respect
to sale or distribution of the policies, provided any such statement or
representation or wrongful conduct was not made in reliance upon and
in conformity with information furnished to LOV or on behalf of the Fund
or OMC; or
(c) arise out of any untrue or allegedly untrue statement of a material
fact contained in the Fund's registration statement, prospectus or sales
literature or omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading if such statement or mission was made in reliance upon
information furnished to the Fund or OMC by LOV, or
(d) arise as a result of a breach of this agreement or a breach of
any misrepresentation and/or warranty made by LOV in this agreement.
15.1. The Fund agrees to indemnify and hold harmless LOV, each member of its
Board of Directors, each of its officers, and any person that controls
LOV within the meaning of Section 15 of the Securities Act of 1933 against
any and all losses, claims, damages, liabilities (including amounts paid in
settlement with written consent of the Fund), or expenses of litigation
(including court costs and reasonable attorney's fees) to which the
indemnified parties may become subject under any statute or regulation or
at common law or otherwise, insofar as such losses, claims, damages,
liabilities, or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Fund's shares or the policies and;
(a) arise out of any untrue or allegedly untrue statement of any material
fact contained in the registration statement or prospectus or sales
literature for the Fund, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make statements therein not misleading, provided
that such statements or omissions were not made in reliance upon and in
conformity with information furnished to the Fund by or on behalf of LOV;
or
(b) arise out of or as a result of statements or representations or
wrongful conduct of the Fund, or persons under the control of the Fund,
with respect to sale or distribution of the policies, provided any
such statement or representation or wrongful conduct was not made in
reliance upon and in conformity with information furnished to the Fund by
or on behalf of LOV; or
(c) arise out of any untrue or allegedly untrue statement of any material
fact contained in the registration statement or prospectus for the
policies, or the omission or the alleged omission to state therein not
misleading if such statement or omission was made in reliance upon
information furnished to LOV by the Funds; or
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(d) arise as a result of a breach of this agreement or a breach of
any representation and/or warranty made by the Fund in this agreement.
15.2 OMC agrees to indemnify and hold harmless LOV, each member of its Board
of Directors, each of its officers and any person that controls LOV
within the meaning of Section 15 of The Securities Act of 1933 against any
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of OMC), or expenses of litigation
(including court costs and reasonable attorney's fees) to which the
indemnified parties may become subject under any statute or regulation or at
common law or otherwise, insofar as such losses, claims, damages,
liabilities, or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the policies
and;
(a) arise out of any untrue or allegedly untrue statement of any material
fact contained in the registration statement or prospectus or sales
literature for the Fund, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
provided that such statements or omissions were not made in reliance
upon and in conformity with information furnished to OMC by or on behalf
of LOV; or
(b) arise out of or as a result of statements or representations or
wrongful conduct of OMC or persons under the control of OMC, with
respect to sale or distribution of the policies, provided any such
statement, or representation or wrongful conduct was not made in
reliance upon and in conformity with information furnished to OMC by or
on behalf of LOV; or
(c) arise out of any untrue or allegedly untrue statement of any material
fact contained in the registration statement, prospectus or sales
literature for the policies, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statement therein not misleading if such statement or omission was
made in reliance upon information furnished to LOV by OMC; or
(d) arise as a result of a breach of this agreement or a breach of
any representation and/or warranty made by OMC in this agreement.
16. The indemnification provided under Sections 14, 15.1 and 15.2 shall not
be available to an indemnified party if the loss, claim, damages,
liability or litigation for which indemnification is sought resulted from
such indemnified party's willful misfeasance, bad faith or gross negligence
in the performance of such indemnified party's duties or by reason of
such indemnified party's reckless disregard of obligations and duties under
this agreement.
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17. No indemnification shall be available under Sections 14, 15.1 or 15.2
unless the indemnified party gave written notice of the nature of the claim
for which indemnification is sought to the party from whom indemnification is
sought. Said notice must be given within a reasonable time after the summons
or other initial legal process giving information as to the nature of the
claim is served upon the indemnified party. However, failure to notify
the party against whom indemnification is sought shall not relieve that
party of any liability which it might have in the absence of Sections 14,
15.1 and 15.2 of this agreement
18. In the event that an action is brought against a party indemnified
under Sections 14, 15.1 or 15.2, the party owning the obligation to
indemnify (the "indemnifying party") may participate, at its own
expense in the defense thereof. The indemnifying party may also assume the
defense of any such action, with counsel satisfactory to the indemnified
party. After the indemnifying party notifies the indemnified party of its
intention to assume the defense of an action, the indemnified party shall
bear the expenses of any additional counsel obtained by it, and the
indemnifying party shall not be liable to the indemnified party for any
legal or other expenses subsequently incurred by the indemnified party
independently in connection with the defense thereof.
19. Subject to the requirements of legal process and regulatory
authorities, each party to this agreement shall treat as confidential the
names and addresses of the owners of the policies.
20. Each party to this agreement shall cooperate with the other parties and
with all governmental authorities (including without limitation, the
Securities and Exchange Commission, the NASD and the state insurance and
securities regulators) and shall permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this agreement or the transactions contemplated hereby.
21. This agreement may be terminated by any party upon six month's
advance written notice to the other parties.
22. OMC and LOV each understands that the obligations of the Fund under
this Agreement are not binding upon any shareholder or Trustee of
the Fund personally, but bind only the Fund and the Fund's property; OMC
and LOV each represent that it has notice of the provisions of the
Declaration of Trust of the Fund disclaiming shareholder and Trustee
liability for acts or obligations of the Fund.
IN WITNESS WHEREOF, LOV, the Fund and OMC has caused this agreement to
be duly executed as of the day and year first above written.
The Life Insurance Company of Virginia
by:/s/ WILLIAM D. BALDWIN
----------------------
Senior Vice President
Oppenheimer Variable Account Funds
by:/s/ ROBERT G. GALLI
--------------------
Vice President
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Oppenheimer Management Corporation
by: /s/ ROBERT G.GALLI
-----------------------------
Executive Vice President
100
EXHIBIT (8) (F)
Participation Agreement
125
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JANUS ASPEN SERIES
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 3rd day of September, 1993, between JANUS
ASPEN SERIES, an open-end management investment company organized as a Delaware
business trust (the "Trust"), and The Life Insurance Company of Virginia, life
insurance company organized under the laws of the Commonwealth of Virginia (the
"Company"), on its own behalf and on behalf of each segregated asset account of
the Company set forth on Schedule A, as may be amended from time to time (the
"Accounts").
W I T N E S S E T H :
WHEREAS, the Trust has filed a registration statement with the
Securities and Exchange Commission to register itself as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 ACT"), and to register the offer and sale of its shares under the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that have entered into
participation agreements with the Trust (the "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Trust has applied for an order from the Securities and
Exchange Commission granting Participating Insurance Companies and their
separate accounts exemptions from the provisions of sections 9(a), 13(a), 15(a)
and 15(b) of the 1940 Act, and rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder,
to the extent necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Shared Trust Exemptive Order"); and
WHEREAS, the Company has registered or will register certain variable
life insurance policies and/or variable annuity contracts under the 1933 Act
(the "Contracts");and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Company desires to utilize shares of one or more
Portfolios as an investment vehicle of the Accounts;
NOW THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I.
Sale of Trust Shares
1.1. The Trust shall make shares of its Portfolios available to the
Accounts at the net asset value next computed after receipt of such purchase
order by the Trust (or its agent), as established in accordance with the
provisions of the then current prospectus of the Trust. Shares of a particular
Portfolio of the Trust shall be ordered in such quantities and at such times
as determined by the Company to be necessary to meet the requirements of the
Contracts. The Trustees of the Trust (the "Trustees") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the
Trustees acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, necessary in the best interests of
the shareholders of such Portfolio.
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1.2. The Trust will redeem any full or fractional shares of any
Portfolio when requested by the Company on behalf of an Account at the net asset
value next computed after receipt by the Trust (or its agent) of the request for
redemption, as established in accordance with the provisions of the then current
prospectus of the Trust. The Trust shall make payment for such shares in the
manner established from time to time by the Trust, but in no event shall payment
be delayed for a greater period than is permitted by the 1940 Act.
1.3. For the purposes of sections 1.1 and 1.2, the Trust hereby
appoints the Company as its agent for the limited purpose of receiving and
accepting purchase and redemption orders resulting from investment in and
payments under the Contracts. Receipt by the Company shall constitute receipt by
the Trust provided that i) such orders are received by the Company in good order
prior to the time the net asset value of each Portfolio is priced in accordance
with its prospectus and ii) the Trust receives notice of such orders by 10:00
a.m. New York time on the next following Business Day. "Business Day" shall mean
any day on which the New York Stock Exchange is open for trading and on which
the Trust calculates its net asset value pursuant to the rules of the Securities
and Exchange Commission.
1.4. Purchase orders that are transmitted to the Trust in accordance
with Section 1.3 shall be paid for on the same Business Day that the Trust
receives notice of the order. Payments shall be made in federal funds
transmitted by wire.
1.5. Issuance and transfer of the Trust's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Trust will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.6. The Trust shall furnish same day notice to the Company of any
income dividend or capital gain distributions payable on the Trust's shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional shares of
that Portfolio. The Trust shall notify the Company of the number of shares so
issued as payment of such dividends and distributions.
1.7. The Trust shall make the net asset value per share for share
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share its calculated and shall use its
best efforts to make such net asset value per share available by 6 p.m. New York
time.
1.8. The Trust agrees that its shares will be sold only to
Participating Insurance Companies and their separate accounts and to certain
qualified pension and retirement plans to the extent permitted by the Shared
Trust Exemptive Order. No shares of any Portfolio will be sold directly to the
general public. The Company agrees that Trust shares will be used only for the
purposes of funding the Contracts and Accounts listed in Schedule A. as amended
from time to time.
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1.9. The Trust agrees that all Participating Insurance Companies shall
have the obligations and responsibilities regarding pass through voting and
conflicts of interest corresponding to those contained in section 2.8 and
Article IV of this Agreement.
ARTICLE II.
Obligations of the Parties
2.1. The Trust shall prepare and be responsible for filing with the
Securities and Exchange Commission and any state regulators requiring such
filing all shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and statements
of additional information of the Trust. The Trust shall bear the costs of
registration and qualification of its shares, preparation and filing of the
documents listed in this section 2.1. and all taxes to which an issuer is
subject on the issuance and transfer of its shares.
2.2. At the option of the Company, the Trust shall either (a) provide
the Company (at the Company's expense) with as many copies of the Trust's
current prospectus, annual report, semi-annual report and other shareholder
communications, including any amendments or supplements to any of the foregoing,
as the Company shall reasonably request: or (b) provide the Company with a
camera ready copy of such documents in a form suitable for printing. The Trust
shall provide the Company with a copy of its statement of additional information
in a form suitable for duplication by the Company. The Trust (at its expense)
shall provide the Company with copies of any Trust-sponsored proxy materials in
such quantity as the Company shall reasonably require for distribution to
Contract owners.
2.3. The Company shall bear the costs of printing and distributing the
Trust's prospectus, statement of additional information, shareholder reports and
other shareholder communications to owners of and applicants for policies for
which the Trust is serving or is to serve as an investment vehicle. The Company
shall bear the costs of distributing proxy materials (or similar materials such
as voting solicitation instructions) to Contract owners. The Company assumes
sole responsibility for ensuring that such materials are delivered to Contract
owners in accordance with applicable federal and state securities laws.
2.4. The Company agrees and acknowledges that the Trust's adviser,
Janus Capital Corporation ("Janus Capital"), is the sole owner of the name and
mark "Janus" and that all use of any designation comprised in whole or part of
Janus (a "Janus Mark") under this agreement shall inure to the benefit of Janus
Capital. Except as provided in section 2.5, the Company shall not use any Janus
Mark on its own behalf or on behalf of the Accounts or Contracts in any
registration statement, advertisement, sales literature or other materials
relating to the Accounts or Contracts without the prior written consent of Janus
Capital. Upon Termination of this Agreement for any reason, the Company shall
cease all use of any Janus Mark(s) as soon as reasonably practicable.
2.5. The Company shall furnish, or cause to be furnished, to the Trust
(or its designee), a copy of the initial Contract prospectus and statement of
additional information in which the Trust or its investment adviser is first
named prior to the filing of such document with the Securities and Exchange
Commission. The Company shall furnish, or shall cause to be furnished, to the
Trust (or its designee) a copy of each subsequent Contract prospectus and
statement of additional information in which the Trust or its investment adviser
is named concurrently with the filing of such document with the Securities and
Exchange Commission provided that there are no material changes in
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disclosure related to the Trust or its investment adviser. The Trust may, in its
reasonable discretion, request that the Company modify any references to the
Trust or its investment adviser in subsequent filings.
The Company shall furnish, or shall cause to be furnished, to the Trust (or its
designee), each piece of sales literature or other promotional material in which
the Trust or its investment adviser is named, at least five Business Days prior
to its use or concurrently with the filing of such document with the National
Association of Securities Dealers, whichever is greater. No such material shall
be used if the Trust (or its designee) reasonably objects to such use within
five Business Days after receipt of such material.
2.6. The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust or
its investment adviser in connection with the sale of the Contracts other than
information or representations contained in or accurately derived from the
registration statement or prospectus for the Trust shares (as such registration
statement and prospectus may be amended or supplemented from time to time),
reports of the Trust. Trust-sponsored proxy statements, or in sales literature
or other promotional material approved by the Trust (or its designee), except as
required by legal process or regulatory authorities or with the written
permission of the Trust (or its designee).
2.7. The Trust shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or representations
contained in or accurately derived from the registration statement or prospectus
for the Contracts (as such registration statement and prospectus may be amended
or supplemented from time to time), or in materials approved by the Company for
distribution including sales literature or other promotional materials, except
as required by legal process or regulatory authorities or with the written
permission of the Company.
2.8. So long as, and to the extent that the Securities and Exchange
Commission interprets the 1940 Act to require pass-through voting privileges for
variable policyowners, the Company will provide pass-through voting privileges
to owners of policies whose cash values are invested, through the Accounts, in
shares of the Trust. The Trust shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and the Company
shall be responsible for assuring that the Accounts calculate voting privileges
in the manner established by the Trust. With respect to each Account, the
Company will vote shares of the Trust held by the Account and for which no
timely voting instructions from policyowners are received as well as it owns
that are held by that Account, in the same proportion as those shares for which
voting instructions are received. The Company and its agents will in no way
recommend or oppose or interfere with the solicitation of proxies for Trust
shares held by Contract owners without the prior written consent of the Trust,
which consent may be withheld in the Trust's sole discretion.
ARTICLE III.
Representations and Warranties
3.1. The Company represents and warrants that it is an insurance
company duly organized and in good standing under the laws of the Commonwealth
of Virginia and that it has legally and validly established each Account as a
segregated asset account under such law on the date set forth in Schedule A.
3.2. The Company represents and warrants that it has registered or,
prior to any issuance or sale of the Contracts, will register each Account as a
unit investment trust in accordance with the provisions of the 1940 Act to serve
as a segregated investment account for the Contracts.
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3.3. The Company represents and warrants that the Contracts will be
registered under the 1933 Act and such registration will be effective prior to
any issuance or sale of the Contracts; the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws;
and the sale of the Contracts shall comply in all material respects with state
insurance suitability requirements.
3.4. The Trust represents and warrants that it is duly organized and
validly existing under the laws of the State of Delaware.
3.5. The Trust represents and warrants that the Trust shares offered
and sold pursuant to this Agreement will be registered under the 1933 act and
the Trust shall be registered under the 1940 Act and such registration will be
effective prior to any issuance or sale of such shares. The Trust shall amend
its registration statement under the 1933 Act and 1940 Act from time to time as
required in order to effect the continuous offering of its shares. The Trust
shall register and qualify its shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Trust.
3.6. The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements set forth in Section
817(h) of the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.
ARTICLE IV.
Potential Conflicts
4.1. The Parties acknowledge that the Trust's shares may be made
available for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies. An irreconcilable material conflict may arise
for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Trustees shall promptly inform the Company if they determine that an
irreconcilable material conflict exists and the implications thereof.
4.2. The Company agrees to promptly report and potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Shared Trust Exemptive
Order by providing the Trustees with all information reasonably necessary for
the Trustees to consider any issues raised including, but not limited to,
information as to a decision by the Company to disregard Contract owner voting
instructions.
4.3. If it is determined by a majority of the Trustees, or a majority
of its disinterested Trustees, that a material irreconcilable conflict exists
that affects the interest of Contract owners, the Company shall, in cooperation
with other Participating Insurance Companies whose contract owners are also
affected, at its expense and to the extent reasonably practicable (as determined
by the Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include; (a) withdrawing the
assets allocable to some or all of the Accounts from the Trust or any Portfolio
and reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Trust, or submitting the question of
whether or not such segregation should be implemented to a vote of all affected
Contract owners and, as appropriate, segregating the assets of any appropriate
group (i.e., annuity contract owners, life insurance contract owners, or
variable contract owners or more Participating Insurance Companies) that votes
in favor of such segregation, or offering of more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the
affected Contract owners the option of making such a change; and (b)
establishing a new registered management investment company or managed
separate account.
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4.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be limited
to the extent required by the foregoing material irreconcilable conflict as
determined by a majority to the disinterested Trustees. Any such withdrawal and
termination must take place within six (6) months after the Trust gives written
notice that this provision is being implemented. Until the end of such six (6)
month period, the Trust shall continue to accept and implement orders by the
Company for the purchase and redemption of shares of the Trust.
4.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Trust and terminate this Agreement with
respect to such Account within six (6) months after the Trustees inform the
Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees. Until the end of such six (6) month period, the Trust shall continue
to accept and implement orders by the Company for the purchase and redemption of
shares of the Trust.
4.6. For purposes of sections 4.3 through 4.6 of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Company be required to establish a new funding medium for the Contracts
if an offer to do so has been declined by vote of a majority of Contract owners
materially adversely affected by the irreconcilable material conflict. In the
event that the Trustees determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
Account's investment in the Trust and terminate this Agreement within six (6)
months after the Trustees inform the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict as
determined by a majority of the disinterested Trustees.
4.7. The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonable request so that the
Trustees may fully carry out the duties imposed upon them by the Shared Trust
Exemptive Order, and said reports, materials and data shall be submitted more
frequently if deemed appropriate by the Trustees.
4.8. If an to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Trust Exemptive Order) on terms and conditions
materially different from those contained in the Shared Trust Exemptive Order,
then the Trust and/or in the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are
applicable.
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ARTICLE V.
Indemnification
5.1. Indemnification By the Company. The Company agrees to indemnify
and hold harmless the Trust and each of its Trustees, officers, employees and
agents and each person, if any who controls the Trust within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes
of this Article V) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Company)
or expenses (including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable legal counsel
fees incurred in connection therewith (collectively, "Losses"), to which the
Indemnified Parties may become subject under any statute or regulation, or at
common law or otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a registration
statement or prospectus for the Contracts or in the Contracts themselves or in
sales literature generated or approved by the Company on behalf of the Contracts
or Accounts (or any amendment or supplement to any of the foregoing)
(collectively, "Company Documents" for the purposes of this Article V), or arise
out of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement or
omission was made in reliance upon and was accurately derived from written
information furnished to the Company by or on behalf of the Trust for use in
Company Documents or otherwise for use in connection with the sale of the
Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in or accurately
derived from Trust Documents as defined in Section 5.2(a) or wrongful
conduct of the Company or persons under its control, with respect to
the sale or acquisition of the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Trust Documents as
defined in Section 5.2(a) or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading if such statement or
omission was made in reliance upon and accurately derived from written
information furnished to the Trust by or on behalf of the Company; or
(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under the terms
of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company.
5.2. Indemnification By the Trust. The Trust agrees to indemnify and
hold harmless the Company and each of its directors, officers, employees and
agents and each person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes
of this
132
<PAGE>
Article V) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Trust) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement or prospectus for the Trust (or any amendment
or supplement thereto) collectively, "Trust Documents" for the
purposes of this Article V), or arise out of or are based therein or
necessary to make the statements therein not misleading, provided
that this indemnity shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission
was made in reliance upon and was accurately derived from written
information furnished to the Trust by or on behalf of the Company for
use in Trust Documents or otherwise for use in connection with the
sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in or accurately
derived from Company Documents) or wrongful conduct of the Trust or
persons under its control, with respect to the sale or acquisition of
the Contracts or Trust Shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Company Documents or
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made in
reliance upon and accurately derived from written information furnished
to the Company by or on behalf of the Trust; or
(d) arise out of or result from any failure by the Trust to
provide the services or furnish the materials required under the terms
of this Agreement; or
(e) arise out of or result from any material breach of any
representatives and/or warranty made by the Trust in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Trust.
5.3. Neither the Company nor the Trust shall be liable under the
indemnification provisions of sections 5.1 or 5.2, as applicable, with respect
to any Losses incurred or assessed against an Indemnified Party that arise from
such Indemnified Party's willful misfeasance, bad faith or gross negligence in
the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations or duties under this
Agreement.
5.4. Neither the company nor the Trust shall be liable under the
indemnification provisions of sections 5.1 or 5.2, as applicable, with respect
to any claim made against an Indemnified Party unless such Indemnified Party
shall have notified the other party in writing within a reasonable time after
the summons, or other first written notification, giving information of the
nature of the claim shall have been served upon or otherwise received by such
Indemnified Party (or after such Indemnified Party shall have received notice of
service upon any agent designated to receive service of process), but failure to
notify the party against whom indemnification is sought of any such claim or
shall not relieve that party from any liability which it may have to the
Indemnified Party in the absence of sections 5.1 and 5.2.
133
<PAGE>
5.5. In case any such action is brought against the Indemnified
Parties, the indemnifying party shall be entitled to participate, at its own
expense, in the defense of such action. The indemnifying party also shall be
entitled to assume the defense thereof, with counsel reasonably satisfactory to
the party named in the action. After notice from the indemnifying party to the
Indemnified Party of an election to assume such defense, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the indemnifying party will not be liable to the Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
ARTICLE VI.
Termination
6.1. This Agreement may be terminated by either party for any reason by
six (6) months advance written notice delivered to the other party.
6.2. Notwithstanding any termination of this Agreement, the Trust
shall, at the Option of the Company, continue to make available additional
shares of the Trust (or any Portfolio) pursuant to the terms and conditions of
this agreement for all Contracts in effect on the effective date of termination
of this Agreement, provided that the Company continues to pay the costs set
forth in section 2.3.
6.3. The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.8 shall survive the
termination of this Agreement as long as shares of the Trust are held on behalf
of Contract owners in accordance with section 6.2.
ARTICLE VII.
Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust:
100 Fillmore Street, Suite 300
Denver, Colorado 80206
Attention: David C. Tucker, Esq.
If to the Company:
The Life Insurance Company of Virginia
6610 W. Broad Street
Richmond, Virginia 23230
Attention: William D. Baldwin
ARTICLE VIII.
Miscellaneous
8.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
<PAGE>
8.3. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
8.4. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of State of Colorado.
8.5. The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
8.6. Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
8.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
8.8. The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect.
8.9. Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party without the prior written approval of the other
party.
8.10. No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized properly authorized and
executed by both parties.
8.11. Subject to the requirements of legal process and regulatory
authorities, each party shall treat as confidential the names and address of
Contract owners.
8.12. Each party shall have the right, upon reasonable notice and
during normal business hours, to inspect, audit and copy all records of the
other party that pertain to that party's performance of its obligation under
this agreement.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
THE LIFE INSURANCE COMPANY OF VIRGINIA
By:
---------------------
Name: William D. Baldwin
Title: Senior Vice President
JANUS ASPEN SERIES
By:
---------------------
Name: David C. Tucker
Title: Vice President
135
<PAGE>
Schedule A
Separate Accounts and Associated Contracts
Name of Separate Account and Contracts Funded
Date Established by Board of Directors By Separate Account
Life of Virginia Separate Account II Commonwealth 3 variable
(established August 21, 1986) life insurance policy
Life of Virginia Separate Account III Asset Allocation Life
(established February 0, 1987) variable life
insurance policy
Commonwealth VL
variable life
insurance policy
Life of Virginia Separate Account 4 Asset Allocation
(established August 19, 1987) Annuity variable
annuity policy
Commonwealth Annuity
variable annuity
policy
136
FORM OF PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into this __ day of May, 1998 by and
between GOLDMAN SACHS VARIABLE INSURANCE TRUST, an unincorporated business trust
formed under the laws of Delaware (the "Trust"), GOLDMAN, SACHS & CO., a New
York limited partnership (the "Distributor"), and THE LIFE INSURANCE COMPANY OF
VIRGINIA, a Virginia life insurance company (the "Company"), on its own behalf
and on behalf of each separate account of the Company identified herein.
WHEREAS, the Trust is a series-type mutual fund offering shares of
beneficial interest (the "Trust shares") consisting of one or more separate
series ("Series") of shares, each such Series representing an interest in a
particular investment portfolio of securities and other assets (a "Fund"), and
which Series may be subdivided into various classes ("Classes") with each such
Class supporting a distinct charge and expense arrangement; and
WHEREAS, the Trust was established for the purpose of serving as an
investment vehicle for insurance company separate accounts supporting variable
annuity contracts and variable life insurance policies to be offered by
insurance companies and may also be utilized by qualified retirement plans; and
WHEREAS, the Distributor has the exclusive right to distribute Trust
shares to qualifying investors; and
WHEREAS, the Company desires that the Trust serve as an investment
vehicle for a certain separate account(s) of the Company and the Distributor
desires to sell shares of certain Series and/or Class(es) to such separate
account(s);
NOW, THEREFORE, in consideration of their mutual promises, the Trust,
the Distributor and the Company agree as follows:
ARTICLE I
Additional Definitions
1.1. "Account" -- the separate account of the Company described more
specifically in Schedule 1 to this Agreement. If more than one separate account
is described on Schedule 1, the term shall refer to each separate account so
described.
1.2. "Business Day" -- each day that the Trust is open for business as
provided in the Trust's Prospectus.
1.3. "Code" -- the Internal Revenue Code of 1986, as amended, and any
successor thereto.
1.4. "Contracts" -- the class or classes of variable annuity contracts
and/or variable life insurance policies issued by the Company and described more
specifically on Schedule 2 to this Agreement.
1.5. "Contract Owners" -- the owners of the Contracts, as distinguished
from all Product Owners.
1.6. "Participating Account" -- a separate account investing all or a
portion of its assets in the Trust, including the Account.
1.7. "Participating Insurance Company" -- any insurance company
investing in the Trust on its behalf or on behalf of a Participating Account,
including the Company.
1.8. "Participating Plan" -- any qualified retirement plan investing in
the Trust.
1.9. "Participating Investor" -- any Participating Account,
Participating Insurance Company or Participating Plan, including the Account and
the Company.
1.10. "Products" -- variable annuity contracts and variable life
insurance policies supported by Participating Accounts, including the Contracts.
1.11. "Product Owners" -- owners of Products, including Contract
Owners.
1.12. "Trust Board" -- the board of trustees of the Trust.
1.13. "Registration Statement" -- with respect to the Trust shares or a
class of Contracts, the registration statement filed with the SEC to register
such securities under the 1933 Act, or the most recently filed amendment
thereto, in either case in the form in which it was declared or became
effective. The Contracts' Registration Statement for each class of Contracts is
described more specifically on Schedule 2 to this Agreement. The Trust's
Registration Statement is filed on Form N-1A (File No. 333-35883).
1.14. "1940 Act Registration Statement" -- with respect to the Trust or
the Account, the registration statement filed with the SEC to register such
person as an investment company under the 1940 Act, or the most recently filed
amendment thereto. The Account's 1940 Act Registration Statement is described
more specifically on Schedule 2 to this Agreement. The Trust's 1940 Act
Registration Statement is filed on Form N-1A (File No.
811-08361).
1.15. "Prospectus" -- with respect to shares of a Series (or Class) of
the Trust or a class of Contracts, each version of the definitive prospectus or
supplement thereto filed with the SEC pursuant to Rule 497 under the 1933 Act.
With respect to any provision of this Agreement requiring a party to take action
in accordance with a Prospectus, such reference thereto shall be deemed to be to
the version for the applicable Series, Class or Contracts last so filed prior to
the taking of such action. For purposes of Article IX, the term "Prospectus"
shall include any statement of additional information incorporated therein.
1.16. "Statement of Additional Information" -- with respect to the
shares of the Trust or a class of Contracts, each version of the definitive
statement of additional information or supplement thereto filed with the SEC
pursuant to Rule 497 under the 1933 Act. With respect to any provision of this
Agreement requiring a party to take action in accordance with a Statement of
Additional Information, such reference thereto shall be deemed to be the last
version so filed prior to the taking of such action.
1.17. "SEC" -- the Securities and Exchange Commission.
1.18. "NASD" -- The National Association of Securities Dealers, Inc.
1.19. "1933 Act" -- the Securities Exchange Act of 1933, as amended.
1.20. "1940 Act" -- the Investment Company Act of 1940, as amended.
ARTICLE II
Sale of Trust Shares
2.1. Availability of Shares
(a) The Trust has granted to the Distributor exclusive
authority to distribute the Trust shares and to select which Series or
Classes of Trust shares shall be made available to Participating
Investors. Pursuant to such authority, and subject to Article X hereof,
the Distributor shall make available to the Company for purchase on
behalf of the Account, shares of the Series and Classes listed on
Schedule 3 to this Agreement, such purchases to be effected at net
asset value in accordance with Section 2.3 of this Agreement. Such
Series and Classes shall be made available to the Company in accordance
with the terms and provisions of this Agreement until this Agreement is
terminated pursuant to Article X or the Distributor suspends or
terminates the offering of shares of such Series or Classes in the
circumstances described in Article X.
(b) Notwithstanding clause (a) of this Section 2.1, Series or
Classes of Trust shares in existence now or that may be established in
the future will be made available to the Company only as the
Distributor may so provide, subject to the Distributor's rights set
forth in Article X to suspend or terminate the offering of shares of
any Series or Class or to terminate this Agreement.
(c) The parties acknowledge and agree that: (i) the Trust may
revoke the Distributor's authority pursuant to the terms and conditions
of its distribution agreement with the Distributor; and (ii) the Trust
reserves the right in its sole discretion to refuse to accept a request
for the purchase of Trust shares, including but not limited to requests
for purchases by persons considered by the Trust to be market timers.
2.2. Redemptions. The Trust shall redeem, at the Company's request, any
full or fractional Trust shares held by the Company on behalf of the Account,
such redemptions to be effected at net asset value in accordance with Section
2.3 of this Agreement. Notwithstanding the foregoing, (i) the Company shall not
redeem Trust shares attributable to Contract Owners except in the circumstances
permitted in Article X of this Agreement, and (ii) the Trust may delay
redemption of Trust shares of any Series or Class to the extent permitted by the
1940 Act, any rules, regulations or orders thereunder, or the Prospectus for
such Series or Class.
2.3. Purchase and Redemption Procedures
(a) The Trust hereby appoints the Company as an agent of the
Trust for the limited purpose of receiving purchase and redemption
requests on behalf of the Account (but not with respect to any Trust
shares that may be held in the general account of the Company) for
shares of those Series or Classes made available hereunder, based on
allocations of amounts to the Account or subaccounts thereof under the
Contracts, other transactions relating to the Contracts or the Account
and customary processing of the Contracts. Receipt of any such requests
(or effectuation of such transaction or processing) on any Business Day
by the Company as such limited agent of the Trust prior to the Trust's
close of business as defined from time to time in the applicable
Prospectus for such Series or Class (which as of the date of execution
of this Agreement is defined as the close of regular trading on the New
York Stock Exchange (normally 4:00 p.m. New York Time)) shall
constitute receipt by the Trust on that same Business Day, provided
that the Company uses its best efforts to provide actual and sufficient
notice of such request to the Trust by 8:30 a.m. New York Time on the
next following Business Day and the Trust receives such notice no later
than 9:00 a.m. New York time on such Business Day. Such notice may be
communicated by telephone to the office or person designated for such
notice by the Trust as indicated on Schedule 5 to this Agreement, and
shall be confirmed by facsimile.
(b) The Company shall pay for shares of each Series or Class
on the same day that it provides actual notice to the Trust of a
purchase request for such shares. Payment for Series or Class shares
shall be made in Federal funds transmitted to the Trust by wire to be
received by the Trust by 3:30 p.m. New York Time on the day the Trust
receives actual notice of the purchase request for Series or Class
shares (unless the Trust determines and so advises the Company that
sufficient proceeds are available from redemption of shares of other
Series or Classes effected pursuant to redemption requests tendered by
the Company on behalf of the Account). In no event may proceeds from
the redemption of shares requested pursuant to an order received by the
Company after the Trust's close of business on any Business Day be
applied to the payment for shares for which a purchase order was
received prior to the Trust's close of business on such day. If the
issuance of shares is canceled because Federal funds are not timely
received, the Company shall indemnify the respective Fund and
Distributor with respect to all costs, expenses and losses relating
thereto. Upon the Trust's receipt of Federal funds so wired, such funds
shall cease to be the responsibility of the Company and shall become
the responsibility of the Trust. If Federal funds are not received on
time, such funds will be invested, and Series or Class shares purchased
thereby will be issued, as soon as practicable after actual receipt of
such funds but in any event not on the same day that the purchase order
was received.
(c) Payment for Series or Class shares redeemed by the Account
or the Company shall be made in Federal funds transmitted by wire to
the Company or any other person properly designated in writing by the
Company. The Trust shall use its best efforts to transmit such funds by
6:00 p.m. New York Time on the same Business Day after the Trust
receives actual notice of the redemption order for Series or Class
shares (unless redemption proceeds are to be applied to the purchase of
Trust shares of other Series or Classes in accordance with Section
2.3(b) of this Agreement), except that the Trust reserves the right to
redeem Series or Class shares in assets other than cash and to delay
payment of redemption proceeds to the extent permitted by the 1940 Act,
any rules or regulations or orders thereunder, or the applicable
Prospectus. The Trust shall not bear any responsibility whatsoever for
the proper disbursement or crediting of redemption proceeds by the
Company; the Company alone shall be responsible for such action.
(d) Any purchase or redemption request for Series or Class
shares held or to be held in the Company's general account shall be
effected at the net asset value per share next determined after the
Trust's actual receipt of such request, provided that, in the case of a
purchase request, payment for Trust shares so requested is received by
the Trust in Federal funds prior to close of business for determination
of such value, as defined from time to time in the Prospectus for such
Series or Class.
(e) Prior to the first purchase of any Trust shares hereunder,
the Company and the Trust shall provide each other with all information
necessary to effect wire transmissions of Federal funds to the other
party and all other designated persons pursuant to such protocols and
security procedures as the parties may agree upon. Should such
information change thereafter, the Trust and the Company, as
applicable, shall notify the other in writing of such changes,
observing the same protocols and security procedures, at least three
Business Days in advance of when such change is to take effect. The
Company and the Trust shall observe customary procedures to protect the
confidentiality and security of such information.
(f) The procedures set forth herein are subject to any
additional terms set forth in the applicable Prospectus for the Series
or Class or by the requirements of applicable law.
2.4. Net Asset Value. The Trust shall make the net asset value per
share for each Series or Class available to the Company on a daily basis as soon
as reasonably practicable after the net asset value per share for such Series or
Class is calculated and shall use its best efforts to make such net asset value
per share available by 6:30 p.m. New York Time each business day. The Trust will
notify the Company as soon as possible if on any Business Day it is determined
that the calculation of net asset value per share will be available after 6:30
p.m. New York Time. The Trust shall calculate such net asset value in accordance
with the Prospectus for such Series or Class.
2.5. Dividends and Distributions. The Trust shall furnish notice to the
Company as soon as reasonably practicable of any income dividends or capital
gain distributions payable on any Series or Class shares. The Company, on its
behalf and on behalf of the Account, hereby elects to receive all such dividends
and distributions as are payable on any Series or Class shares in the form of
additional shares of that Series or Class. The Company reserves the right, on
its behalf and on behalf of the Account, to revoke this election and to receive
all such dividends and capital gain distributions in cash; to be effective, such
revocation must be made in writing and received by the Trust at least three (3)
Business Days prior to a dividend or distribution date. The Trust shall notify
the Company promptly of the number of Series or Class shares so issued as
payment of such dividends and distributions.
2.6. Book Entry. Issuance and transfer of Trust shares shall be by book
entry only. Stock certificates will not be issued to the Company or the Account.
Purchase and redemption orders for Trust shares shall be recorded in an
appropriate ledger for the Account or the appropriate subaccount of the Account.
2.7. Pricing Errors. Any material errors in the calculation of net
asset value, dividends or capital gain information shall be reported immediately
upon discovery to the Company. An error shall be deemed "material" based on the
Trust's reasonable interpretation of the SEC's position and policy with regard
to materiality, as it may be modified from time to time. Neither the Trust, any
Fund, the Distributor, nor any of their affiliates shall be liable for any
information provided to the Company pursuant to this Agreement which information
is based on incorrect information supplied by or on behalf of the Company or any
other Participating Company to the Trust or the Distributor[; otherwise if the
Trust provides the Company with a materially incorrect share net asset value,
the Company on behalf of the Account(s) described in Schedule 1, shall be
entitled to an adjustment to the number of shares purchased or redeemed to
reflect correct net asset value.]
2.8. Limits on Purchasers. The Distributor and the Trust shall sell
Trust shares only to insurance companies and their separate accounts and to
persons or plans ("Qualified Persons") that qualify to purchase shares of the
Trust under Section 817(h) of the Code and the regulations thereunder without
impairing the ability of the Account to consider the portfolio investments of
the Trust as constituting investments of the Account for the purpose of
satisfying the diversification requirements of Section 817(h). The Distributor
and the Trust shall not sell Trust shares to any insurance company or separate
account unless an agreement complying with Article VIII of this Agreement is in
effect to govern such sales. The Company hereby represents and warrants that it
and the Account are Qualified Persons.
ARTICLE III
Representations and Warranties
3.1. Company. The Company represents and warrants that: (i) the Company
is an insurance company duly organized and in good standing under Virginia
insurance law; (ii) the Account is a validly existing separate account, duly
established and maintained in accordance with applicable law; (iii) the
Account's 1940 Act Registration Statement will be or has been filed with the SEC
in accordance with the provisions of the 1940 Act and the Account will be or is
duly registered as a unit investment trust thereunder; (iv) the Contracts'
Registration Statement has been declared effective by the SEC prior to the
issuance or sale of the Contracts; (v) the Contracts will be issued in
compliance in all material respects with all applicable Federal and state laws;
(vi) the Contracts have been filed, qualified and/or approved for sale under the
insurance laws and regulations of the states in which the Contracts will be
offered only if and to the extent required by applicable law; (vii) the Account
will maintain its registration under the 1940 Act and will comply in all
material respects with the 1940 Act; (viii) subject to Article VI hereof, the
Contracts currently are, and at the time of issuance and for so long as they are
outstanding will be, treated as annuity contracts or life insurance policies,
whichever is appropriate, under applicable provisions of the Code; and (ix) the
Company's entering into and performing its obligations under this Agreement does
not and will not violate its charter documents or by-laws, rules or regulations,
or any agreement to which it is a party. The Company will notify the Trust
promptly if for any reason it is unable to perform its obligations under this
Agreement.
3.2. Trust. The Trust represents and warrants that: (i) the Trust is an
unincorporated business trust duly formed and validly existing under the
Delaware law; (ii) the Trust's 1940 Act Registration Statement has been filed
with the SEC in accordance with the provisions of the 1940 Act and the Trust is
duly registered as an open-end management investment company thereunder; (iii)
the Trust's Registration Statement has been declared effective by the SEC; (iv)
the Trust shares will be issued in compliance in all material respects with all
applicable federal laws; (v) the Trust will remain registered under and will
comply in all material respects with the 1940 Act during the term of this
Agreement; (vi) each Fund of the Trust qualifies or will qualify as a "regulated
investment company" under Subchapter M of the Code and complies or will comply
with the diversification standards prescribed in Section 817(h) of the Code and
the regulations thereunder; and (vii) the investment policies of each Fund are
in material compliance with any investment restrictions set forth on Schedule 4
to this Agreement. The Trust, however, makes no representation as to whether any
aspect of its operations (including, but not limited to, fees and expenses and
investment policies) otherwise complies with the insurance laws or regulations
of any state.
3.3. Distributor. The Distributor represents and warrants that: (i) the
Distributor is a limited partnership duly organized and in good standing under
New York law; (ii) the Distributor is registered as a broker-dealer under
federal and applicable state securities laws and is a member of the NASD; and
(iii) the Distributor is registered as an investment adviser under federal
securities laws. The Distributor further represents that it will sell and
distribute Fund shares in accordance with applicable federal and state
securities laws, including without limitation, the 1933 Act, the Securities
Exchange Act of 1934, and the 1940 Act.
3.4. Legal Authority. Each party represents and warrants that the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein have been duly authorized by all necessary
corporate, partnership or trust action, as applicable, by such party, and, when
so executed and delivered, this Agreement will be the valid and binding
obligation of such party enforceable in accordance with its terms.
ARTICLE IV
Regulatory Requirements
4.1. Trust Filings. The Trust shall amend the Trust's Registration
Statement and the Trust's 1940 Act Registration Statement from time to time as
required in order to effect the continuous offering of Trust shares in
compliance with applicable law and to maintain the Trust's registration under
the 1940 Act for so long as Trust shares are sold.
4.2. Contracts Filings. The Company shall amend the Contracts'
Registration Statement and the Account's 1940 Act Registration Statement from
time to time as required in order to effect the continuous offering of the
Contracts in compliance with applicable law or as may otherwise be required by
applicable law, but in any event shall maintain a current effective Contracts'
Registration Statement and the Account's Registration Statement under the 1940
Act for so long as the Contracts are outstanding unless the Company (i) has
supplied the Trust with an SEC no-action letter or opinion of counsel
satisfactory to the Trust's counsel to the effect that maintaining such
Registration Statement(s) on a current basis is no longer required, or (ii) has
made a reasonable determination based on SEC no-action or interpretive positions
that maintaining such Registration Statement(s) is no longer required, provided
that this subsection (ii) shall not apply to circumstances where the Company has
determined that maintaining such registration(s) is not required pursuant to
Section 3(c)(1) or 3(c)(7) of the 1940 Act or the non-public offering exemptions
under the 1933 Act. The Company shall be responsible for filing all such
Contract forms, applications, marketing materials and other documents relating
to the Contracts and/or the Account with state insurance commissions, as
required or customary, and shall use its best efforts: (a) to obtain any and all
approvals thereof, under applicable state insurance law, of each state or other
jurisdiction in which Contracts are or may be offered for sale; and (b) to keep
such approvals in effect for so long as the Contracts are outstanding.
4.3. Voting of Trust Shares. With respect to any matter put to vote by
the holders of Trust shares ("Voting Shares"), the Company will provide
"pass-through" voting privileges to owners of Contracts registered with the SEC
as long as the 1940 Act requires such privileges in such cases. In cases in
which "pass-through" privileges apply, the Company will (i) solicit voting
instructions from Contract Owners of SEC-registered Contracts; (ii) vote Voting
Shares attributable to Contract Owners in accordance with instructions or
proxies timely received from such Contract Owners; and (iii) vote Voting Shares
held by it that are not attributable to reserves for SEC-registered Contracts or
for which it has not received timely voting instructions in the same proportion
as instructions received in a timely fashion from Owners of SEC-registered
Contracts. The Company shall be responsible for ensuring that it calculates
"pass-through" votes for the Account in a manner consistent with the provisions
set forth above and with other Participating Insurance Companies. Neither the
Company nor any of its affiliates will in any way recommend action in connection
with, or oppose or interfere with, the solicitation of proxies for the Trust
shares held for such Contract Owners, except with respect to matters as to which
the Company has the right under Rule 6e-2 or 6e-3(T) under the 1940 Act, to vote
Voting Shares without regard to voting instructions from Contract Owners.
4.4. State Insurance Restrictions. The Company acknowledges and agrees
that it is the responsibility of the Company and other Participating Insurance
Companies to determine investment restrictions and any other restrictions,
limitations or requirements under state insurance law applicable to any Fund or
the Trust or the Distributor, and that neither the Trust nor the Distributor
shall bear any responsibility to the Company, other Participating Insurance
Companies or any Product Owners for any such determination or the correctness of
such determination. Schedule 4 sets forth the investment restrictions that the
Company and/or other Participating Insurance Companies have determined are
applicable to any Fund and with which the Trust has agreed to comply as of the
date of this Agreement. The Company shall inform the Trust of any investment
restrictions imposed by state insurance law that the Company determines may
become applicable to the Trust or a Fund from time to time as a result of the
Account's investment therein, other than those set forth on Schedule 4 to this
Agreement. Upon receipt of any such information from the Company or any other
Participating Insurance Company, the Trust shall determine whether it is in the
best interests of shareholders to comply with any such restrictions. If the
Trust determines that it is not in the best interests of shareholders (it being
understood that "shareholders" for this purpose shall mean Product Owners) to
comply with a restriction determined to be applicable by the Company, the Trust
shall so inform the Company, and the Trust and the Company shall discuss
alternative accommodations in the circumstances. If the Trust determines that it
is in the best interests of shareholders to comply with such restrictions, the
Trust and the Company shall amend Schedule 4 to this Agreement to reflect such
restrictions, subject to obtaining any required shareholder approval thereof.
4.5. Drafts of Filings. The Trust and the Company shall provide to each
other copies of draft versions of any Registration Statements, Prospectuses,
Statements of Additional Information, periodic and other shareholder or Contract
Owner reports, proxy statements, solicitations for voting instructions,
applications for exemptions, requests for no-action letters, and all amendments
or supplements to any of the above, prepared by or on behalf of either of them
and that mentions the other party by name. Such drafts shall be provided to the
other party sufficiently in advance of filing such materials with regulatory
authorities in order to allow such other party a reasonable opportunity to
review the materials; provided that each party shall only comment on that
portion of the draft that relates to that party or the conduct of its business.
4.6. Copies of Filings. The Trust and the Company shall provide to each
other at least one complete copy of all Registration Statements, Prospectuses,
Statements of Additional Information, periodic and other shareholder or Contract
Owner reports, proxy statements, solicitations of voting instructions,
applications for exemptions, requests for no-action letters, and all amendments
or supplements to any of the above, that relate to the Trust, the Contracts or
the Account, as the case may be, promptly after the filing by or on behalf of
each such party of such document with the SEC or other regulatory authorities
(it being understood that this provision is not intended to require the Trust to
provide to the Company copies of any such documents prepared, filed or used by
Participating Investors other than the Company and the Account).
4.7. Regulatory Responses. Each party shall promptly provide to all
other parties copies of responses to no-action requests, notices, orders and
other rulings received by such party with respect to any filing covered by
Section 4.6 of this Agreement.
4.8. Complaints and Proceedings
(a) The Trust and/or the Distributor shall immediately notify
the Company of: (i) the issuance by any court or regulatory body of any
stop order, cease and desist order, or other similar order (but not
including an order of a regulatory body exempting or approving a
proposed transaction or arrangement) with respect to the Trust's
Registration Statement or the Prospectus of any Series or Class; (ii)
any request by the SEC for any amendment to the Trust's Registration
Statement or the Prospectus of any Series or Class; (iii) the
initiation of any proceedings for that purpose or for any other
purposes relating to the registration or offering of the Trust shares;
or (iv) any other action or circumstances that may prevent the lawful
offer or sale of Trust shares or any Class or Series in any state or
jurisdiction, including, without limitation, any circumstance in which
(A) such shares are not registered and, in all material respects,
issued and sold in accordance with applicable state and federal law or
(B) such law precludes the use of such shares as an underlying
investment medium for the Contracts. The Trust will make every
reasonable effort to prevent the issuance of any such stop order, cease
and desist order or similar order and, if any such order is issued, to
obtain the lifting thereof at the earliest possible time.
(b) The Company shall immediately notify the Trust and the
Distributor of: (i) the issuance by any court or regulatory body of any
stop order, cease and desist order, or other similar order (but not
including an order of a regulatory body exempting or approving a
proposed transaction or arrangement) with respect to the Contracts'
Registration Statement or the Contracts' Prospectus; (ii) any request
by the SEC for any amendment to the Contracts' Registration Statement
or Prospectus; (iii) the initiation of any proceedings for that purpose
or for any other purposes relating to the registration or offering of
the Contracts; or (iv) any other action or circumstances that may
prevent the lawful offer or sale of the Contracts or any class of
Contracts in any state or jurisdiction, including, without limitation,
any circumstance in which such Contracts are not registered, qualified
and approved, and, in all material respects, issued and sold in
accordance with applicable state and federal laws. The Company will
make every reasonable effort to prevent the issuance of any such stop
order, cease and desist order or similar order and, if any such order
is issued, to obtain the lifting thereof at the earliest possible time.
(c) Each party shall immediately notify the other parties when
it receives notice, or otherwise becomes aware of, the commencement of
any litigation or proceeding against such party or a person affiliated
therewith in connection with the issuance or sale of Trust shares or
the Contracts.
(d) The Company shall provide to the Trust and the Distributor
any complaints it has received from Contract Owners pertaining to the
Trust or a Fund, and the Trust and Distributor shall each provide to
the Company any complaints it has received from Contract Owners
relating to the Contracts.
4.9. Cooperation. Each party hereto shall cooperate with the other
parties and all appropriate government authorities (including without limitation
the SEC, the NASD and state securities and insurance regulators) and shall
permit such authorities reasonable access to its books and records in connection
with any investigation or inquiry by any such authority relating to this
Agreement or the transactions contemplated hereby. However, such access shall
not extend to attorney-client privileged information.
ARTICLE V
Sale, Administration and Servicing of the Contracts
[5.1. Sale of the Contracts. The Company shall be responsible for the
sale and marketing of the Contracts. Subject to Article II and Section 5.4, the
Company shall provide Contracts, the Contracts' and Trust's Prospectuses,
Contracts' and Trust's Statements of Additional Information, and all amendments
or supplements to any of the foregoing to Contract Owners and prospective
Contract Owners, all in material compliance accordance with federal and state
laws. The Company shall, consistent with industry practice, use its best efforts
to ensure that all persons offering the Contracts are duly licensed and
registered under applicable insurance and securities laws. The Company shall
ensure that procedures are in place that sales of the Contracts satisfy
applicable suitability requirements under insurance and securities laws and
regulations, including without limitation the rules of the NASD. The Company
shall adopt and implement procedures reasonably designed to ensure that
information concerning the Trust and the Distributor that is intended for use
only by brokers or agents selling the Contracts (i.e., information that is not
intended for distribution to Contract Owners or offerees) is so used.]
5.2. Administration and Servicing of the Contracts. In connection with
the offering of the Contracts, the Company shall be fully responsible for the
underwriting, issuance, service and administration of the Contracts and for the
administration of the Account, including, without limitation, the calculation of
performance information for the Contracts, the timely payment of Contract Owner
redemption requests and processing of Contract transactions, and the maintenance
of a service center. The Company shall use its best efforts to perform such
functions in all respects at a level commensurate with those standards
prevailing in the variable insurance industry. Subject to Section 5.4, the
Company shall provide to Contract Owners all Trust reports, solicitations for
voting instructions including any related Trust proxy solicitation materials,
and updated Trust Prospectuses as required under the federal securities laws.
5.3. Customer Complaints. The Company shall establish reasonable
procedures to promptly address all customer complaints and resolve such
complaints consistent with high ethical standards and principles of ethical
conduct.
5.4. Trust Prospectuses and Reports. In order to enable the Company to
fulfill its obligations under this Agreement and the federal securities laws,
the Trust shall provide the Company with a copy, in camera-ready form or form
otherwise suitable for printing or duplication of: (i) the Trust's Prospectus
for the Series and Classes listed on Schedule 3 and any supplement thereto; (ii)
each Statement of Additional Information and any supplement thereto; (iii) any
Trust proxy soliciting material for such Series or Classes; and (iv) any Trust
periodic shareholder reports or other communications with shareholders. The
Trust and the Company may agree upon alternate arrangements, but in all cases,
the Trust reserves the right to approve the printing of any such material. The
Trust shall provide the Company at least 10 days advance written notice when any
such material shall become available, provided, however, that in the case of a
supplement, the Trust shall provide the Company notice reasonable in the
circumstances, it being understood that circumstances surrounding such
supplement may not allow for advance notice. The Company may not alter any
material so provided by the Trust or the Distributor (including without
limitation presenting or delivering such material in a different medium, e.g.,
electronic or Internet) without the prior written consent of the Distributor.
5.5. Trust Advertising Material. No piece of advertising or sales
literature or other promotional material in which the Trust or the Distributor
is named shall be used by the Company or any person directly or indirectly
authorized by the Company, including without limitation, underwriters,
distributors, and sellers of the Contracts, except with the prior written
consent of the Trust or the Distributor, as applicable, as to the form, content
and medium of such material, which consent shall not be unreasonably withheld;
provided that such prior written consent shall not be required if the Company
receives a written or facsimile acknowledgement from the Trust or the
Distributor that such material has been received by the Trust or the Distributor
for review at least 10 Business Days prior to its use, and, after the expiration
of such 10 Business Day period, the Trust or the Distributor has not commented
upon the content of such material and is therefore deemed to consent to its use.
No further changes may be made to material approved in accordance with this
Section 5.5 without obtaining the Trust's or Distributor's consent to such
changes as set forth in the preceding sentence. The Trust or Distributor may at
any time in its sole discretion revoke such consent upon reasonable
determination that such revocation is necessary, and upon notification of such
revocation, the Company shall discontinue use of the material subject to such
revocation, it being understood that the Company shall be afforded a reasonable
period of time to discontinue such use. Until further notice to the Company, the
Trust has delegated its rights and responsibilities under this provision to the
Distributor.
5.6. Contracts Advertising Material. No piece of advertising or sales
literature or other promotional material in which the Company is named shall be
used by the Trust or the Distributor, except with the prior written consent of
the Company, which consent shall not be unreasonably withheld; provided that
such prior written consent shall not be required if the Trust receives a written
or facsimile acknowledgement that such material has been received by the Company
for review at least 10 Business Days prior to its use and, after the expiration
of such 10 Business Day period, the Company has not commented upon the content
of such material and is therefore deemed to consent to its use. The Company may
at any time in its sole discretion revoke any consent upon reasonable
determination that such revocation is necessary, and upon notification of such
revocation, the Trust and the Distributor shall discontinue use of the material
subject to such revocation, it being understood that Trust and Distributor shall
be afforded a reasonable period of time to discontinue such use. The Company,
upon prior written notice to the Trust, may delegate its rights and
responsibilities under this provision to the principal underwriter for the
Contracts.
5.7. Trade Names. No party shall use any other party's names, logos,
trademarks or service marks, whether registered or unregistered, without the
prior written consent of such other party, or after written consent therefor has
been revoked, provided that separate consent is not required under this Section
5.7 to the extent that consent to use a party's name, logo, trademark or service
mark in connection with a particular piece of advertising or sales literature
has previously been given by a party under Section 5.5 or 5.6 of this Agreement.
The Company shall not use in advertising, publicity or otherwise the name of the
Trust, Distributor, or any of their affiliates nor any trade name, trademark,
trade device, service mark, symbol or any abbreviation, contraction or
simulation thereof of the Trust, Distributor, or their affiliates without the
prior written consent of the Trust or the Distributor in each instance. The
Trust and the Distributor shall not use in advertising, publicity or otherwise
the name of the Company, or any of its affiliates nor any trade name, trademark,
trade device, service mark, symbol or any abbreviation, contraction or
simulation thereof of the Company, or its affiliates without the prior written
consent of the Company in each instance.
5.8. Representations by Company. Except with the prior written consent
of the Trust, the Company shall not give any information or make any
representations or statements about the Trust or the Funds nor shall it
authorize or allow any other person to do so except information or
representations contained in the Trust's Registration Statement or the Trust's
Prospectuses or in reports or proxy statements for the Trust, or in sales
literature or other promotional material approved in writing by the Trust or its
designee in accordance with this Article V, or in published reports or
statements of the Trust in the public domain.
5.9. Representations by Trust. Except with the prior written consent of
the Company, the Trust shall not give any information or make any
representations on behalf of the Company or concerning the Company, the Account
or the Contracts other than the information or representations contained in the
Contracts' Registration Statement or Contracts' Prospectus or in published
reports of the Account which are in the public domain or in sales literature or
other promotional material approved in writing by the Company in accordance with
this Article V.
5.10. Advertising. For purposes of this Article V, the phrase "sales
literature or other promotional material" includes, but is not limited to, any
material constituting sales literature or advertising under the NASD rules, the
1940 Act or the 1933 Act.
5.11 Periodic Trust Information. The Trust agrees to use its best
efforts to provide to the Company, within 5 Business Days after the end of a
calendar month and shall provide no later than 10 Business Days after the end of
the calendar month, the following information with respect to each Fund of the
Trust set forth on Schedule 3, each as of the last Business Day of such calendar
month: each Fund's 10 largest portfolio holdings (based on the percentage of
each Fund's net assets); the five industry sectors in which each Fund's
investments are most heavily weighted; and year-to-date SEC standardized
performance data. In addition, the Trust agrees to use its best efforts to
provide to the Company within 10 Business Days after the end of a calendar
quarter and shall provide no later than 15 Business Days after the end of the
calendar quarter a market commentary from the portfolio manager of each Fund set
forth on Schedule 3, as of the last Business Day of such quarter. Also, the
Trust agrees to provide the Company, within 15 Business Days after a request is
submitted to the Trust by the Company, the following information with respect to
each Fund set forth on Schedule 3, each as of the date or dates specified in
such request: net asset value; net asset value per share; and such other share
information as may be agreed by the Company and the Trust from time to time. The
Trust acknowledges that such information may be furnished to the Company's
internal or independent auditors and to the insurance departments in which the
Company does business.
ARTICLE VI
Compliance with Code
6.1. Section 817(h). Each Fund of the Trust shall comply with Section
817(h) of the Code and the regulations issued thereunder to the extent
applicable to the Fund as an investment company underlying the Account, and the
Trust shall (i) notify the Company immediately upon having a reasonable basis
for believing that a Fund has ceased to so qualify or that it might not so
qualify in the future, and (ii) take all reasonable steps to adequately
diversify a Fund to achieve compliance with the grace period afforded by
Treasury Regulation 1.817-5.
6.2. Subchapter M. Each Fund of the Trust shall maintain the
qualification of the Fund as a registered investment company (under Subchapter M
or any successor or similar provision), and the Trust shall (i) notify the
Company immediately upon having a reasonable basis for believing that a Fund has
ceased to so qualify or that it might not so qualify in the future, and (ii)
take all reasonable steps to maintain qualification or to requalify the Funds as
a registered investment company under Subchapter M.
6.3. Contracts. The Company shall ensure the continued treatment of the
Contracts as annuity contracts or life insurance policies, whichever is
appropriate, under applicable provisions of the Code and shall notify the Trust
and the Distributor immediately upon having a reasonable basis for believing
that the Contracts have ceased to be so treated or that they might not be so
treated in the future.
ARTICLE VII
Expenses
7.1. Expenses. All expenses incident to each party's performance under
this Agreement (including expenses expressly assumed by such party pursuant to
this Agreement) shall be paid by such party to the extent permitted by law.
7.2. Trust Expenses. Expenses incident to the Trust's
performance of its duties and obligations under this Agreement include, but
are not limited to, the costs of:
(a) registration and qualification of the Trust shares under the
federal securities laws;
(b) preparation and filing with the SEC of the Trust's
Prospectuses, Trust's Statement of Additional Information,
Trust's Registration Statement, Trust proxy materials and
shareholder reports, and preparation of a camera-ready copy of
the foregoing;
(c) preparation of all statements and notices required by any
Federal or state securities law;
(d) printing of all materials and reports required to be provided
by the Trust to existing shareholders and Contract Owners;
(e) all taxes on the issuance or transfer of Trust shares;
(f) payment of all applicable fees relating to the Trust,
including, without limitation, all fees due under Rule 24f-2
in connection with sales of Trust shares to qualified
retirement plans, custodial, auditing, transfer agent and
advisory fees, fees for insurance coverage and Trustees' fees;
and
(g) any expenses permitted to be paid or assumed by the Trust
pursuant to a plan, if any, under Rule 12b-1 under the 1940
Act.
7.3. Company Expenses. Expenses incident to the Company's performance
of its duties and obligations under this Agreement include, but are not limited
to, the costs of:
(a) registration and qualification of the Contracts under the
federal securities laws;
(b) preparation and filing with the SEC of the Contracts'
Prospectus and Contracts' Registration Statement;
(c) the sale, marketing and distribution of the Contracts,
including printing and dissemination of Contracts' and the
Trust's Prospectuses for new sales of Contracts and
compensation for Contract sales;
(d) administration of the Contracts;
(e) distribution of and solicitation of voting instructions with
respect to Trust proxy materials to existing Contract Owners;
(f) mailing of all materials and reports required to be provided
by the Trust to existing Shareholders and Contract Owners;
(g) payment of all applicable fees relating to the Contracts,
including, without limitation, all fees due under Rule 24f-2;
(h) preparation, printing and dissemination of all statements and
notices to Contract Owners required by any Federal or state
insurance law other than those paid for by the Trust; and
(i) preparation, printing and dissemination of all marketing
materials for the Contracts and Trust (to the extent it
relates to the Contracts) except where other arrangements are
made in advance.
7.4. 12b-1 Payments. The Trust shall pay no fee or other compensation
to the Company under this Agreement, except that if the Trust or any Series or
Class adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act to
finance distribution expenses, then payments may be made to the Company in
accordance with such plan. The Trust currently does not intend to make any
payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940
Act or in contravention of such rule, although it may make payments pursuant to
Rule 12b-1 in the future. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1 and such formulation is required by the 1940 Act
or any rules or order thereunder, the Trust undertakes to have a Board of
Trustees, a majority of whom are not interested persons of the Trust, formulate
and approve any plan under Rule 12b-1 to finance distribution expenses.
ARTICLE VIII
Potential Conflicts
8.1. Exemptive Order. The parties to this Agreement acknowledge that
the Trust has received an order (the "Exemptive Order") granting relief from
various provisions of the 1940 Act and the rules thereunder to the extent
necessary to permit Trust shares to be sold to and held by variable annuity and
variable life insurance separate accounts of both affiliated and unaffiliated
Participating Insurance Companies and other Qualified Persons (as defined in
Section 2.8 hereof). The Exemptive Order requires the Trust and each
Participating Insurance Company to comply with conditions and undertakings
substantially as provided in this Article VIII. The Trust will not enter into a
participation agreement with any other Participating Insurance Company unless it
imposes the same conditions and undertakings on that company as are imposed on
the Company pursuant to this Article VIII.
8.2. Company Monitoring Requirements. The Company will monitor its
operations and those of the Trust for the purpose of identifying any material
irreconcilable conflicts or potential material irreconcilable conflicts between
or among the interests of Participating Plans, Product Owners of variable life
insurance policies and Product Owners of variable annuity contracts.
8.3. Company Reporting Requirements. The Company shall report any
conflicts or potential conflicts to the Trust Board and will provide the Trust
Board, at least annually, with all information reasonably necessary for the
Trust Board to consider any issues raised by such existing or potential
conflicts or by the conditions and undertakings required by the Exemptive Order.
The Company also shall assist the Trust Board in carrying out its obligations
including, but not limited to: (a) informing the Trust Board whenever it
disregards Contract Owner voting instructions with respect to variable life
insurance policies, and (b) providing such other information and reports as the
Trust Board may reasonably request. The Company will carry out these obligations
with a view only to the interests of Contract Owners.
8.4. Trust Board Monitoring and Determination. The Trust Board shall
monitor the Trust for the existence of any material irreconcilable conflicts
between or among the interests of Participating Plans, Product Owners of
variable life insurance policies and Product Owners of variable annuity
contracts and determine what action, if any, should be taken in response to
those conflicts. A majority vote of Trustees who are not interested persons of
the Trust as defined in the 1940 Act (the "disinterested trustees") shall
represent a conclusive determination as to the existence of a material
irreconcilable conflict between or among the interests of Product Owners and
Participating Plans and as to whether any proposed action adequately remedies
any material irreconcilable conflict. The Trust Board shall give prompt written
notice to the Company and Participating Plan of any such determination.
8.5. Undertaking to Resolve Conflict. In the event that a material
irreconcilable conflict of interest arises between Product Owners of variable
life insurance policies or Product Owners of variable annuity contracts and
Participating Plans, the Company will, at its own expense, take whatever action
is necessary to remedy such conflict as it adversely affects Contract Owners up
to and including (1) establishing a new registered management investment
company, and (2) withdrawing assets from the Trust attributable to reserves for
the Contracts subject to the conflict and reinvesting such assets in a different
investment medium (including another Fund of the Trust) or submitting the
question of whether such withdrawal should be implemented to a vote of all
affected Contract Owners, and, as appropriate, segregating the assets supporting
the Contracts of any group of such owners that votes in favor of such
withdrawal, or offering to such owners the option of making such a change. The
Company will carry out the responsibility to take the foregoing action with a
view only to the interests of Contract Owners.
8.6. Withdrawal. If a material irreconcilable conflict arises because
of the Company's decision to disregard the voting instructions of Contract
Owners of variable life insurance policies and that decision represents a
minority position or would preclude a majority vote at any Fund shareholder
meeting, then, at the request of the Trust Board, the Company will redeem the
shares of the Trust to which the disregarded voting instructions relate. No
charge or penalty, however, will be imposed in connection with such a
redemption.
8.7. Expenses Associated with Remedial Action. In no event shall the
Trust be required to bear the expense of establishing a new funding medium for
any Contract. The Company shall not be required by this Article to establish a
new funding medium for any Contract if an offer to do so has been declined by
vote of a majority of the Contract Owners materially adversely affected by the
irreconcilable material conflict.
8.8. Successor Rules. If and to the extent that Rule 6e-2 and Rule
6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive relief from
any provisions of the 1940 Act or the rules promulgated thereunder with respect
to mixed and shared funding on terms and conditions materially different from
those contained in the Exemptive Order, then (i) the Trust and/or the Company,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, or Rule 6e-3, as adopted, as applicable, to the
extent such rules are applicable, and (ii) Sections 8.2 through 8.5 of this
Agreement shall continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in such Rule(s) as so
amended or adopted.
ARTICLE IX
Indemnification
9.1. Indemnification by the Company. The Company hereby agrees to, and
shall, indemnify and hold harmless the Trust, the Distributor and each person
who controls or is affiliated with the Trust or the Distributor within the
meaning of such terms under the 1933 Act or 1940 Act (but not any Participating
Insurance Companies or Qualified Persons) and any officer, trustee, partner,
director, employee or agent of the foregoing, against any and all losses,
claims, damages or liabilities, joint or several (including any investigative,
legal and other expenses reasonably incurred in connection with, and any amounts
paid in settlement of, any action, suit or proceeding or any claim asserted), to
which they or any of them may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement of any
material fact contained in the Contracts Registration
Statement, Contracts Prospectus, sales literature or other
promotional material for the Contracts or the Contracts
themselves (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in
light of the circumstances in which they were made; provided
that this obligation to indemnify shall not apply if such
statement or omission was made in reliance upon and in
conformity with information furnished in writing to the
Company by the Trust or the Distributor for use in the
Contracts Registration Statement, Contracts Prospectus or in
the Contracts or sales literature or promotional material for
the Contracts (or any amendment or supplement to any of the
foregoing) or otherwise for use in connection with the sale of
the Contracts or Trust shares; or
(b) arise out of any untrue statement of a material fact contained
in the Trust Registration Statement, any Prospectus for Series
or Classes or sales literature or other promotional material
of the Trust (or any amendment or supplement to any of the
foregoing), or the omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made, if such statement or
omission was made in reliance upon and in conformity with
information furnished to the Trust or Distributor in writing
by or on behalf of the Company; or
(c) arise out of or are based upon any wrongful conduct of, or
violation of federal or state law by, the Company or persons
under its control or by any broker-dealers or agents
authorized to sell the Contracts, with respect to the sale,
marketing or distribution of the Contracts or Trust shares; or
(d) arise as a result of any failure by the Company, or persons
under its control or any third party with which the Company
has contractually delegated administration responsibilities
for the Contracts, to provide services, furnish materials or
make payments as required under this Agreement; or
(e) arise out of any material breach by the Company or persons
under its control of this Agreement (including any breach of
any warranties contained in Article III hereof); or
(f) arise out of any failure to transmit a request for redemption
or purchase of Trust shares or payment therefor on a timely
basis in accordance with the procedures set forth in Article
II, or any unauthorized use of the names or trade names of the
Trust or the Distributor.
This indemnification is in addition to any liability that the Company may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is caused by the wilful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
9.2. Indemnification by the Trust. The Trust hereby agrees to, and
shall, indemnify and hold harmless the Company and each person who controls or
is affiliated with the Company within the meaning of such terms under the 1933
Act or 1940 Act and any officer, director, employee or agent of the foregoing,
against any and all losses, claims, damages or liabilities, joint or several
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amounts paid in settlement of, any action, suit or
proceeding or any claim asserted), to which they or any of them may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement of any
material fact contained in the Trust Registration Statement,
any Prospectus for Series or Classes or sales literature or
other promotional material of the Trust (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made; provided that this
obligation to indemnify shall not apply if such statement or
omission was made in reliance upon and in conformity with
information furnished in writing by the Company to the Trust
or the Distributor for use in the Trust Registration
Statement, Trust Prospectus or sales literature or promotional
material for the Trust (or any amendment or supplement to any
of the foregoing) or otherwise for use in connection with the
sale of the Contracts or Trust shares; or
(b) arise out of any untrue statement of a material fact contained
in the Contracts Registration Statement, Contracts Prospectus
or sales literature or other promotional material for the
Contracts (or any amendment or supplement to any of the
foregoing), or the omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made, if such statement or
omission was made in reliance upon information furnished in
writing by the Trust to the Company; or
(c) arise out of or are based upon wrongful conduct of or
violation of federal or state law by the Trust or its Trustees
or officers or persons under its control with respect to the
sale of Trust shares; or
(d) arise as a result of any failure by the Trust or its Trustees
or officers or persons under its control to provide services,
furnish materials or make payments as required under the terms
of this Agreement;
(e) arise out of any material breach by the Trust of this
Agreement or persons under its control (including any breach
of Section 6.1 of this Agreement and any warranties contained
in Article III hereof);
(f) arise out of any unauthorized use of the names or trade names
of the Company; or
[(g) arise out of or result from the materially incorrect or
untimely calculation or reporting of the daily net asset value
per share or dividend or capital gain distribution rate,
provided the foregoing shall not apply where such
miscalculation or report is the result of (i) incorrect
information supplied by or on behalf of the Company or any
other Participating Company to the Trust or the Distributor,
or (ii) circumstances outside the Trust's or the Distributor's
control.]
it being understood that in no way shall the Trust be liable to the Company with
respect to any violation of insurance law, compliance with which is a
responsibility of the Company under this Agreement or otherwise or as to which
the Company failed to inform the Trust in accordance with Section 4.4 hereof.
This indemnification is in addition to any liability that the Trust may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is caused by the wilful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
9.3. Indemnification by the Distributor. The Distributor hereby agrees
to, and shall, indemnify and hold harmless the Company and each person who
controls or is affiliated with the Company within the meaning of such terms
under the 1933 Act or 1940 Act and any officer, director, employee or agent of
the foregoing, against any and all losses, claims, damages or liabilities, joint
or several (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amounts paid in settlement of, any action,
suit or proceeding or any claim asserted), to which they or any of them may
become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement of any
material fact contained in the Trust Registration Statement,
any Prospectus for Series or Classes or sales literature or
other promotional material of the Trust (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made; provided that this
obligation to indemnify shall not apply if such statement or
omission was made in reliance upon and in conformity with
information furnished in writing by the Company to the Trust
or Distributor for use in the Trust Registration Statement,
Trust Prospectus or sales literature or promotional material
for the Trust (or any amendment or supplement to any of the
foregoing) or otherwise for use in connection with the sale of
the Contracts or Trust shares; or
(b) arise out of any untrue statement of a material fact contained
in the Contracts Registration Statement, Contracts Prospectus
or sales literature or other promotional material for the
Contracts (or any amendment or supplement to any of the
foregoing), or the omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made, if such statement or
omission was made in reliance upon information furnished in
writing by the Distributor to the Company; or
(c) arise out of or are based upon wrongful conduct of or
violation of federal or state law by the Distributor or
persons under its control with respect to the sale of Trust
shares; or
(d) arise as a result of any failure by the Distributor or persons
under its control to provide services, furnish materials or
make payments as required under the terms of this Agreement;
(e) arise out of any material breach by the Distributor or persons
under its control of this Agreement (including any breach of
Section 6.1 of this Agreement and any warranties contained in
Article III hereof); or
(f) arise out of any unauthorized use of the names or trade names
of the Company;
it being understood that in no way shall the Distributor be liable to the
Company with respect to any violation of insurance law, compliance with which is
a responsibility of the Company under this Agreement or otherwise or as to which
the Company failed to inform the Distributor in accordance with Section 4.4
hereof. This indemnification is in addition to any liability that the
Distributor may otherwise have; provided, however, that no party shall be
entitled to indemnification if such loss, claim, damage or liability is caused
by the wilful misfeasance, bad faith, gross negligence or reckless disregard of
duty by the party seeking indemnification.
9.4. Rule of Construction. It is the parties' intention that, in the
event of an occurrence for which the Trust has agreed to indemnify the Company,
the Company shall seek indemnification from the Trust only in circumstances in
which the Trust is entitled to seek indemnification from a third party with
respect to the same event or cause thereof.
9.5. Indemnification Procedures. After receipt by a party entitled to
indemnification ("indemnified party") under this Article IX of notice of the
commencement of any action, if a claim in respect thereof is to be made by the
indemnified party against any person obligated to provide indemnification under
this Article IX ("indemnifying party"), such indemnified party will notify the
indemnifying party in writing of the commencement thereof as soon as practicable
thereafter, provided that the omission to so notify the indemnifying party will
not relieve it from any liability under this Article IX, except to the extent
that the omission results in a failure of actual notice to the indemnifying
party and such indemnifying party is damaged solely as a result of the failure
to give such notice. The indemnifying party, upon the request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the reasonable fees and disbursements
of such counsel related to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying party
and the indemnified party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but if settled with such consent
or if there be a final judgment for the plaintiff, the indemnifying party agrees
to indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article IX. The
indemnification provisions contained in this Article IX shall survive any
termination of this Agreement.
ARTICLE X
Relationship of the Parties; Termination
10.1. Non-Exclusivity and Non-Interference. The parties hereto
acknowledge that the arrangement contemplated by this Agreement is not
exclusive; the Trust shares may be sold to other insurance companies and
investors (subject to Section 2.8 hereof) and the cash value of the Contracts
may be invested in other investment companies, provided, however, that until
this Agreement is terminated pursuant to this Article X:
(a) the Company shall promote the Trust and the Funds made
available hereunder on a substantially similar basis as other
funding vehicles available under the Contracts;
(b) the Company shall not, without prior notice to the Distributor
(unless otherwise required by applicable law), take any action
to operate the Account as a management investment company
under the 1940 Act;
(c) the Company shall not, without the prior written consent of
the Distributor, which consent shall not be unreasonably
withheld, solicit, induce or encourage Contract Owners to
change or modify the Trust, or to change the Trust's
distributor or investment adviser (unless otherwise required
by applicable law);
(d) the Company shall not solicit, induce or encourage Contract
Owners to transfer or withdraw Contract Values allocated to a
Fund or to exchange their Contracts for contracts not allowing
for investment in the Trust, except with 60 days prior written
notice to the Distributor under circumstances where the
Company has determined such solicitation, inducement or
encouragement to be in the best interests of Contract Owners
(unless otherwise required by applicable law), provided that
the foregoing shall not apply in connection with the
implementation and operation of an asset allocation program by
the Company;
(e) the Company shall not substitute another investment company
for one or more Funds without providing written notice to the
Distributor at least [30] days in advance of effecting any
such substitution; and
(f) the Company shall not withdraw the Account's investment in the
Trust or a Fund of the Trust except as necessary to facilitate
Contract Owner requests and routine Contract processing.
10.2. Termination of Agreement. This Agreement shall not terminate
until (i) the Trust is dissolved, liquidated, or merged into another entity, or
(ii) as to any Fund that has been made available hereunder, the Account no
longer invests in that Fund and the Company has confirmed in writing to the
Distributor, if so requested by the Distributor, that it no longer intends to
invest in such Fund. However, certain obligations of, or restrictions on, the
parties to this Agreement may terminate as provided in Sections 10.3 through
10.5 and the Company may be required to redeem Trust shares pursuant to Section
10.6 or in the circumstances contemplated by Article VIII. Article IX and
Sections 5.7 and 10.7 shall survive any termination of this Agreement.
10.3. Termination of Offering of Trust Shares. The obligation of the
Trust and the Distributor to make Trust shares available to the Company for
purchase pursuant to Article II of this Agreement shall terminate at the option
of the Distributor upon written notice to the Company as provided below:
(a) upon institution of formal proceedings against the Company, or
the Distributor's reasonable determination that institution of
such proceedings is being considered by the NASD, the SEC, the
insurance commission of any state or any other regulatory body
regarding the Company's duties under this Agreement or related
to the sale of the Contracts, the operation of the Account,
the administration of the Contracts or the purchase of Trust
shares, or an expected or anticipated ruling, judgment or
outcome which would, in the Distributor's reasonable judgment
exercised in good faith, materially impair the Company's or
Trust's ability to meet and perform the Company's or Trust's
obligations and duties hereunder, such termination effective
upon 15 days prior written notice;
(b) subject to the Trust's compliance with Article VI, in the
event any of the Contracts are not registered, issued or sold
in accordance with applicable federal and/or state law, such
termination effective immediately upon receipt of written
notice;
(c) if the Distributor shall determine, in its sole judgment
exercised in good faith, that either (1) the Company shall
have suffered a material adverse change in its business or
financial condition or (2) the Company shall have been the
subject of material adverse publicity which is likely to have
a material adverse impact upon the business and operations of
either the Trust or the Distributor, such termination
effective upon 30 days prior written notice;
(d) if the Distributor suspends or terminates the offering of
Trust shares of any Series or Class to all Participating
Investors or only designated Participating Investors, if such
action is required by law or by regulatory authorities having
jurisdiction or if, in the sole discretion of the Distributor
acting in good faith, suspension or termination is necessary
in the best interests of the shareholders of any Series or
Class (it being understood that "shareholders" for this
purpose shall mean Product Owners), such notice effective
immediately upon receipt of written notice, it being
understood that a lack of Participating Investor interest in a
Series or Class may be grounds for a suspension or termination
as to such Series or Class and that a suspension or
termination shall apply only to the specified Series or Class;
(e) upon the Company's assignment of this Agreement (including,
without limitation, any transfer of the Contracts or the
Account to another insurance company pursuant to an assumption
reinsurance agreement) unless the Trust consents thereto, such
termination effective upon 30 days prior written notice;
(f) if the Company is in material breach of any provision of this
Agreement, which breach has not been cured to the satisfaction
of the Trust within 10 days after written notice of such
breach has been delivered to the Company, such termination
effective upon expiration of such 10-day period;
(g) upon (i) the determination of the Trust's Board to dissolve,
liquidate or merge the Trust as contemplated by Section
10.2(i), in connection with which the Trust and the
Distributor undertake to provide the Company with advance
notice of any such meeting at which dissolution, liquidation
or merger of the Trust is considered, (ii) termination of the
Agreement pursuant to Section 10.2(ii), or (iii) notice from
the Company pursuant to Section 10.4 or 10.5, such termination
pursuant hereto to be effective upon 15 days prior written
notice; or
(h) at any time upon six months prior notice.
Except in the case of an option exercised under clause (b), (d) or (g), the
obligations shall terminate only as to new Contracts and the Distributor shall
continue to make Trust shares available to the extent necessary to permit owners
of Contracts in effect on the effective date of such termination (hereinafter
referred to as "Existing Contracts") to reallocate investments in the Trust,
redeem investments in the Trust and/or invest in the Trust upon the making of
additional purchase payments under the Existing Contracts.
10.4. Termination of Investment in a Fund. The Company may elect to
cease investing in a Fund, promoting a Fund as an investment option under the
Contracts, or withdraw its investment or the Account's investment in a Fund,
subject to compliance with applicable law, upon written notice to the Trust of
any of the following events (unless provided otherwise below, effective as soon
as reasonably practicable but in no event later than 10 days after the
occurrence of the event):
(a) if the Trust informs the Company pursuant to Section 4.4 that
it will not cause such Fund to comply with investment
restrictions as requested by the Company and the Trust and the
Company are unable to agree upon any reasonable alternative
accommodations;
(b) if shares in such Fund are not reasonably available to meet
the requirements of the Contracts as determined by the Company
(including any non-availability as a result of notice given by
the Distributor pursuant to Section 10.3(d)), and the
Distributor, after receiving written notice from the Company
of such non-availability, fails to make available, within 5
Business Days after receipt of such notice, a sufficient
number of shares in such Fund to meet the requirements of the
Contracts; or
(c) if such Fund fails to meet the diversification requirements
specified in Section 817(h) of the Code and any regulations
thereunder and the Trust, upon written request, fails to
provide reasonable assurance that it will take action to cure
or correct such failure;
(d) if the Company determines in its sole judgement, exercised in
good faith, that either the Investment Adviser or the
Distributor has suffered a material adverse change in its
business, operations or financial condition since the date of
this Agreement, or is the subject of material adverse
publicity which is likely to have a material adverse impact
upon the business and operations of the Company, such
termination effective upon 30 days prior written notice;
(e) upon the Trust's or the Distributor's assignment of this
Agreement, unless the Company consents thereto, such
termination effective upon 30 days prior written notice; or
(f) at any time upon 6 months prior notice.
Such termination shall apply only as to the affected Fund and shall not apply to
any other Fund in which the Company or the Account invests.
10.5. Termination of Investment by the Company. The Company may elect
to cease investing in all Series or Classes of the Trust made available
hereunder, promoting the Trust as an investment option under the Contracts, or
withdraw its investment or the Account s investment in the Trust, subject to
compliance with applicable law, upon written notice to the Trust within 15 days
of the occurrence of any of the following events (unless provided otherwise
below):
(a) upon institution of formal proceedings against the Trust or
the Distributor (but only with regard to the Trust) by the
NASD, the SEC or any state securities or insurance commission
or any other regulatory body;
(b) if, with respect to the Trust or a Fund, the Trust or the Fund
ceases to qualify as a regulated investment company under
Subchapter M of the Code, as defined therein, or any successor
or similar provision, or if the Company reasonably believes
that the Trust may fail to so qualify, and the Trust, upon
written request, fails to provide reasonable assurance that it
will take action to cure or correct such failure within 30
days;
(c) if the Trust or Distributor is in material breach of a
provision of this Agreement, which breach has not been cured
to the satisfaction of the Company within 10 days after
written notice of such breach has been delivered to the Trust
or the Distributor, as the case may be, such termination
effective upon expiration of such 10-day "cure" period;
(d) if the Company determines in its sole judgement, exercised in
good faith, that either the Investment Adviser or the
Distributor has suffered a material adverse change in its
business, operations or financial condition since the date of
this Agreement, or is the subject of material adverse
publicity which is likely to have a material adverse impact
upon the business and operations of the Company, such
termination effective upon 30 days prior written notice;
(e) upon the Trust's or the Distributor's assignment of this
Agreement, unless the Company consents thereto, such
termination effective upon 30 days prior written notice; or
(f) at any time upon 6 months prior notice.
10.6. Company Required to Redeem. The parties understand and
acknowledge that it is essential for compliance with Section 817(h) of the Code
that the Contracts qualify as annuity contracts or life insurance policies, as
applicable, under the Code. Accordingly, if any of the Contracts cease to
qualify as annuity contracts or life insurance policies, as applicable, under
the Code, or if the Trust reasonably believes that any such Contracts may fail
to so qualify, the Trust shall have the right to require the Company to redeem
Trust shares attributable to such Contracts upon notice to the Company and the
Company shall so redeem such Trust shares in order to ensure that the Trust
complies with the provisions of Section 817(h) of the Code applicable to
ownership of Trust shares. Notice to the Company shall specify the period of
time the Company has to redeem the Trust shares or to make other arrangements
satisfactory to the Trust and its counsel, such period of time to be determined
with reference to the requirements of Section 817(h) of the Code. In addition,
the Company may be required to redeem Trust shares pursuant to action taken or
request made by the Trust Board in accordance with the Exemptive Order described
in Article VIII or any conditions or undertakings set forth or referenced
therein, or other SEC rule, regulation or order that may be adopted after the
date hereof. The Company agrees to redeem shares in the circumstances described
herein and to comply with applicable terms and provisions. Also, in the event
that the Distributor suspends or terminates the offering of a Series or Class
pursuant to Section 10.3(d) of this Agreement, the Company, upon request by the
Distributor, will cooperate in taking appropriate action to withdraw the
Account's investment in the respective Fund.
10.7. Confidentiality. A party will keep confidential any information
acquired as a result of this Agreement regarding the business and affairs of the
other parties to this Agreement and their affiliates.
ARTICLE XI
Applicability to New Accounts and New Contracts
The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect, as appropriate, changes in or relating to the
Contracts, any Series or Class, additions of new classes of Contracts to be
issued by the Company and separate accounts therefor investing in the Trust.
Such amendments may be made effective by executing the form of amendment
included on each schedule attached hereto. The provisions of this Agreement
shall be equally applicable to each such class of Contracts, Series, Class or
separate account, as applicable, effective as of the date of amendment of such
Schedule, unless the context otherwise requires. The parties to this Agreement
may amend this Agreement from time to time by written agreement signed by all of
the parties.
ARTICLE XII
Notice, Request or Consent
Any notice, request or consent to be provided pursuant to this
Agreement is to be made in writing and shall be given:
If to the Trust:
Douglas C. Grip
President
Goldman Sachs Variable Insurance Trust
One New York Plaza
New York, NY 10004
If to the Distributor:
Douglas C. Grip
Vice President
Goldman Sachs & Co.
One New York Plaza
New York, NY 10004
If to the Company:
______________________________[Name]
______________________________[Title]
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, VA 23230
or at such other address as such party may from time to time specify in writing
to the other party. Each such notice, request or consent to a party shall be
sent by registered or certified United States mail with return receipt requested
or by overnight delivery with a nationally recognized courier, and shall be
effective upon receipt. Notices pursuant to the provisions of Article II may be
sent by facsimile to the person designated in writing for such notices.
ARTICLE XIII
Miscellaneous
13.1. Interpretation. This Agreement shall be construed and the
provisions hereof interpreted under and in accordance with the laws of the state
of Delaware, without giving effect to the principles of conflicts of laws,
subject to the following rules:
(a) This Agreement shall be subject to the provisions of the 1933
Act, 1940 Act and Securities Exchange Act of 1934, as amended,
and the rules, regulations and rulings thereunder, including
such exemptions from those statutes, rules, and regulations as
the SEC may grant, and the terms hereof shall be limited,
interpreted and construed in accordance therewith.
(b) The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or
effect.
(c) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of the Agreement shall not be affected thereby.
(d) The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all
rights, remedies and obligations, at law or in equity, which
the parties hereto are entitled to under state and federal
laws.
13.2. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which together shall constitute one and the
same instrument.
13.3. No Assignment. Neither this Agreement nor any of the rights and
obligations hereunder may be assigned by the Company, the Distributor or the
Trust without the prior written consent of the other parties.
13.4. Declaration of Trust. A copy of the Declaration of Trust of the
Trust is on file with the Secretary of State of the state of Delaware, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as trustees, and is not binding upon any of the Trustees,
officers or shareholders of the Trust individually, but binding only upon the
assets and property of the Trust. No Series of the Trust shall be liable for the
obligations of any other Series of the Trust.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly authorized officer
on the date specified below.
GOLDMAN SACHS VARIABLE INSURANCE TRUST
(Trust)
Date:_______________ By:___________________________________
Name:
Title:
GOLDMAN, SACHS & CO.
(Distributor)
Date:_______________ By:___________________________________
Name:
Title:
THE LIFE INSURANCE COMPANY OF VIRGINIA
(Company)
Date:_______________ By:___________________________________
Name:
Title:
<PAGE>
Schedule 1
Accounts of the Company
Investing in the Trust
Effective as of the date the Agreement was executed, the following separate
accounts of the Company are subject to the Agreement:
<TABLE>
<CAPTION>
Date Established by
Name of Account and Board of Directors of SEC 1940 Act Type of Product Supported
Subaccounts the Company Registration Number by Account
- - ----------------------------- ----------------------------- ---------------------------- ----------------------------
<S> <C>
- - ----------------------------- ----------------------------- ---------------------------- ----------------------------
- - ----------------------------- ----------------------------- ---------------------------- ----------------------------
- - ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
[Form of Amendment to Schedule 1]
Effective as of , the following separate accounts of the Company are hereby
added to this Schedule 1 and made subject to the Agreement:
<TABLE>
<CAPTION>
Date Established by
Name of Account and Board of Directors of SEC 1940 Act Type of Product Supported
Subaccounts the Company Registration Number by Account
- - ----------------------------- ----------------------------- ---------------------------- ----------------------------
<S> <C>
- - ----------------------------- ----------------------------- ---------------------------- ----------------------------
- - ----------------------------- ----------------------------- ---------------------------- ----------------------------
- - ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this
Schedule 1 in accordance with Article XI of the Agreement.
- - ---------------------------------- ------------------------------------
Goldman Sachs Variable Insurance Trust The Life Insurance Company of Virginia
- - ---------------------------------- ------------------------------------
Goldman, Sachs & Co.
<PAGE>
Schedule 2
Classes of Contracts
Supported by Separate Accounts
Listed on Schedule 1
Effective as of the date the Agreement was executed, the following classes of
Contracts are subject to the Agreement:
<TABLE>
<CAPTION>
Date Established by
Name of Account and Board of Directors of SEC 1940 Act Type of Product Supported
Subaccounts the Company Registration Number by Account
- - ----------------------------- ----------------------------- ---------------------------- ----------------------------
<S> <C>
- - ----------------------------- ----------------------------- ---------------------------- ----------------------------
- - ----------------------------- ----------------------------- ---------------------------- ----------------------------
- - ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
[Form of Amendment to Schedule 2]
Effective as of _______, the following classes of Contracts are hereby added to
this Schedule 2 and made subject to the Agreement:
<TABLE>
<CAPTION>
Date Established by
Name of Account and Board of Directors of SEC 1940 Act Type of Product Supported
Subaccounts the Company Registration Number by Account
- - ----------------------------- ----------------------------- ---------------------------- ----------------------------
<S> <C>
- - ----------------------------- ----------------------------- ---------------------------- ----------------------------
- - ----------------------------- ----------------------------- ---------------------------- ----------------------------
- - ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this
Schedule 2 in accordance with Article XI of the Agreement.
- - ---------------------------------- ------------------------------------
Goldman Sachs Variable Insurance Trust The Life Insurance Company of Virginia
- - ---------------------------------- ------------------------------------
Goldman, Sachs & Co.
<PAGE>
Schedule 3
Trust Classes and Series
Available Under
Each Class of Contracts
Effective as of the date the Agreement was executed, the following Trust Classes
and Series are available under the Contracts:
Contracts Marketing Name Trust Classes and Series
-------------------------------------- --------------------------------------
-------------------------------------- --------------------------------------
-------------------------------------- --------------------------------------
-------------------------------------- --------------------------------------
[Form of Amendment to Schedule 3]
Effective as of __________________, this Schedule 3 is hereby amended to reflect
the following changes in Trust Classes and Series:
Contracts Marketing Name Trust Classes and Series
-------------------------------------- --------------------------------------
-------------------------------------- --------------------------------------
-------------------------------------- --------------------------------------
-------------------------------------- --------------------------------------
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this
Schedule 3 in accordance with Article XI of the Agreement.
- - ---------------------------------- ------------------------------------
Goldman Sachs Variable Insurance Trust The Life Insurance Company of Virginia
- - ---------------------------------- -----------------------------------
Goldman, Sachs & Co.
<PAGE>
Schedule 4
Investment Restrictions
Applicable to the Trust
Effective as of the date the Agreement was executed, the following investment
restrictions are applicable to the Trust:
- - ------------------------------------------------------------------------------
[Form of Amendment to Schedule 4]
Effective as of ___________________, this Schedule 4 is hereby amended to
reflect the following changes:
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this
Schedule 4 in accordance with Article XI of the Agreement.
- - ---------------------------------- ------------------------------------
Goldman Sachs Variable Insurance Trust The Life Insurance Company of Virginia
- - ---------------------------------- -----------------------------------
Goldman, Sachs & Co.
<PAGE>
Schedule 5
Notice Provided Pursuant to Section 2.3(a)
Notice provided to the Trust by the Company concerning purchases and redemption
orders pursuant to Section 2.3(a) of this Agreement shall be made to:
Goldman Sachs Asset Management
Shareholder Services (Chicago)
April 23, 1998
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, VA 23230
Gentlemen:
With reference to Post-Effective Amendment No. 15 to Registration Statement
33-9651 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
Post Effective Amendment No. 15 to the Registration Statement on Form S-6 (File
Number 33-9651) 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
STEPHEN E. ROTH
DIRECT LINE: (202) 383-0158
Internet: [email protected]
April 27, 1998
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, VA 23230
Re: Life of Virginia Separate Account II
Gentlemen:
We hereby consent to the reference to our name under the
caption "Legal Matters" in the Prospectus filed as part of the Post-Effective
Amendment No. 1 to the Registration Statement on Form S-6 filed by Life of
Virginia Separate Account II for certain variable life insurance contracts (File
No. 33-9651). 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 LLP
By: _____________________________
Stephen E. Roth
[letterhead of KPMG Independent Auditors]
Consent of Independent Auditors
The Board of Directors
The Life Insurance Company of Virginia:
We consent to the use of our reports for The Life Insurance Company of Virginia
and Life of Virginia Separate Account II included herein (post-effective
amendment no. 15 to Form S-6 of registration no. 33-9651) and to the references
to our firm under the caption "Experts" in the prospectus.
Our report with respect to The Life Insurance Company of Virginia dated January
6, 1998, contains an explanatory paragraph that states 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
---------------------------
KPMG Peat Marwick LLP
Richmond, Virginia
April 29, 1998
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 Life of
Virginia Separate Account II, in the Post- Effective Amendment No. 15 to the
Registration Statement (Form S-6 No. 33- 9651) and related Prospectus of Life of
Virginia Separate Account II for the registration of an indefinite amount of
securities.
ERNST & YOUNG LLP
Richmond, Virginia
April 27, 1998
EXHIBIT 6
Opinion and Consent of Actuary
<PAGE>
April 27, 1998
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
Post-Effective Amendment No. 15 to Registration Statement No. 33-9651 on Form
S-6 describes the Policy. I have provided actuarial advice concerning the
preparation0 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 cash 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,
Bruce E. Booker, FSA, MAAA
Vice President & Actuary
