As filed with the Securities and Exchange Commission on May 1, 1998
Registration No. 33-76334
Registration No. 811-5343
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
Registration Statement Under the Securities Act of 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 9
For Registration Under the Investment Company Act of 1940
Amendment No. 22
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Life of Virginia Separate Account 4
(Exact Name of Registrant)
The Life Insurance Company of Virginia
(Name of Depositor)
6610 W. Broad Street
Richmond, Virginia 23230
(Address of Depositor's Principal Executive Office)
Depositor's Telephone Number: (804) 281-6000
Linda L. Lanam, Esquire
Senior Vice President, General Counsel & Secretary
The Life Insurance Company of Virginia
6610 W. Broad Street
Richmond, Virginia 23230
(Name and address of Agent for Service)
Copy to:
Stephen E. Roth, Esquire
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2415
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
on May 1, 1998 pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a) of Rule 485
X on May 1, 1998 pursuant to paragraph (a) of Rule 485
Title of Securities Being Registered:
Interests in a separate account under Individual
Flexible Premium Variable Deferred Annuity Policies
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<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 481
Showing Location in Part A (Prospectus) and Part B (Statement of
Additional Information) of Registration Statement of Information Required by
Form N-4
PART A
<TABLE>
<CAPTION>
ITEM of Form N-4 PROSPECTUS CAPTION
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<S> <C>
1. Cover Page ................................. Cover Page
2. Definitions ................................ Definitions
3. Synopsis ................................... Summary, Fee Table
4. Condensed Financial Information ............ Financial Information; Total Return and Yield
5. General
(a) Depositor ............................... The Life Insurance Company of Virginia
(b) Registrant .............................. Account 4
(c) Portfolio Company ....................... The Funds
(d) Fund Prospectus ......................... The Funds
(e) Voting Rights ........................... Voting Rights and Reports
(f) Administrators .......................... N/A
6. Deductions and Expenses
(a) General ................................. Charges and Deductions; Summary
(b) Sales Load % ............................ Sales Charges; Summary
(c) Special Purchase Plan ................... N/A
(d) Commissions ............................. Distribution of the Policies
(e) Expenses-Registrant ..................... Charges Against Account 4; Summary
(f) Fund Expenses ........................... The Funds; Other Charges
(g) Organizational Expenses ................. N/A
7. Contracts
(a) Persons with Rights ..................... Summary; The Policy; Distributions Under the Policy;
Income Payments; Voting Rights and Reports; General
Provisions
(b) (i) Allocation of Purchase Payments ..... Allocation of Premium Payments
(ii) Transfers .......................... Transfers; Transfer Charges
(iii) Exchanges ......................... N/A
(c) Changes ................................. Additions, Deletions or Substitutions of Investments;
Changes by the Owner
(d) Inquiries ............................... Cover page; Summary; (SAI) Written Notice
8. Annuity Period ............................. Income Payments; Transfers; (SAI) Transfer of Annuity Units
9. Death Benefit .............................. Death Provisions; Death Benefit; Payment of Benefits
10. Purchases and Contract Value ...............
(a) Purchases ............................... Purchasing the Policies; Accumulation of Account Value;
Value of Accumulation Units
(b) Valuation ............................... Value of Accumulation Units
(c) Daily Calculation ....................... Value of Accumulation Units
(d) Underwriter ............................. Distribution of the Policies
11. Redemptions ................................
(a) - By Owners ............................. Surrenders; Partial Surrenders
- By Annuitant .......................... Optional Payment Plans
(b) Texas ORP ............................... Restrictions on Distributions From Certain Policies
(c) Check Delay ............................. Payment Under the Policies
(d) Lapse ................................... N/A
(e) Free Look ............................... Examination of Policy (Refund Privilege)
12. Taxes ...................................... Federal Tax Matters
13. Legal Proceedings .......................... Legal Proceedings
<PAGE>
14. Table of Contents for the Statement of
Additional Information ...................... Statement of Additional Information Table of Contents
PART B
ITEM of Form N-4................................. Part B CAPTION
15. Cover Page .................................. Cover Page
16. Table of Contents ........................... Table of Contents
17. General Information and History ............. The Life Insurance Company of Virginia
18. Services
(a) Fees and Expenses of Registrant ............ N/A
(b) Management Contracts ....................... N/A
(c) Custodian .................................. N/A
Independent Public Accountant .............. Experts
(d) Assets of Registrant ....................... N/A
(e) Affiliated Persons ......................... N/A
(f) Principal Underwriter ...................... Transfer of Annuity Units;
Distribution of the Policies
19. Purchase of Securities Being Offered ........ (Prospectus) Distribution of the Policies
Offering Sales Load ......................... N/A
20. Underwriters ................................ (Prospectus) Distribution of the Policies
21. Calculation of Performance Data ............. Calculation of Total Return and Yield;
(Prospectus) Yield and Total Return
22. Annuity Payments ............................ (Prospectus) Income Payments
23. Financial Statements ........................ Financial Statements
PART C -- OTHER INFORMATION
ITEM of Form N-4................................. Part C CAPTION
24. Financial Statements and Exhibits............ Financial Statements and Exhibits
(a) Financial Statements........................ (a) Financial Statements
(b) Exhibits.................................... (b) Exhibits
25. Directors and Officers of the Depositor...... Directors and Officers of Life of Virginia
26. Persons Controlled By or Under Common Persons Controlled By or In Common Control with the
Control with the Depositor or Registrant..... Depositor or Registrant
27. Number of Contractowners .................... Number of Policyowners
28. Indemnification ............................. Indemnification
29. Principal Underwriters ...................... Principal Underwriters
30. Location of Accounts and Records ............ Location of Accounts and Records
31. Management Services ......................... Management Services
32. Undertakings ................................ Undertakings
Signature Page .............................. Signatures
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
PROSPECTUS FOR THE
FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY POLICY
FORM P1143 4/94
Offered by
THE LIFE INSURANCE COMPANY OF VIRGINIA
6610 West Broad Street, Richmond, Virginia 23230
(804) 281-6000
This Prospectus describes the above-named individual flexible premium
variable deferred annuity policy ("Policy") issued by The Life Insurance
Company of Virginia ("Life of Virginia"). The Policy is designed to help
individuals in long-term financial planning and provides for the accumulation
of capital on a tax-deferred basis for retirement or other long-term purposes.
The Policy may be used in connection with retirement plans, some of which may
qualify for favorable federal income tax treatment under the Internal Revenue
Code.
The Premium Payments are placed in Life of Virginia Separate Account 4
("Account 4"). Premium payments from other flexible premium variable deferred
annuity policies issued by Life of Virginia are also placed in Account 4. The
Policyowner allocates net premiums among one or more of the 37 Investment
Subdivisions of Account 4. Each Investment Subdivision of Account 4 will invest
solely in a designated investment portfolio that is part of a series-type
investment company. 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.
Please Read This Prospectus Carefully And Retain It For Future Reference
This Prospectus sets forth the basic information that a prospective
investor should know before investing. A Statement of Additional Information
containing more detailed information about the Policy and Account 4 is
available free by writing Life of Virginia at the address above or by calling
(800) 352-9910. The Statement of Additional Information, which has the same
date as this Prospectus, has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. The Table of Contents of
the Statement of Additional information is included at the end of this
Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE 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 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.
The Date of This Prospectus Is May 1, 1998
1
<PAGE>
Janus Aspen Series:
Growth Portfolio, Aggressive Growth Portfolio, International Growth Portfolio,
Worldwide Growth Portfolio, Balanced Portfolio, Flexible Income Portfolio,
Capital Appreciation Portfolio
Variable Insurance Products Fund:
VIP Equity-Income Portfolio, VIP Overseas Portfolio, VIP Growth Portfolio
Variable Insurance Products Fund II:
VIP II Asset Manager Portfolio, VIP II Contrafund Portfolio
Variable Insurance Products Fund III:
VIP III Growth & Income Portfolio, VIP III Growth Opportunities Portfolio
GE Investments Funds, Inc.:
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*
Oppenheimer Variable Account Funds:
Oppenheimer Bond Fund, Oppenheimer Aggressive Growth Fund, Oppenheimer Growth
Fund, Oppenheimer High Income Fund, Oppenheimer Multiple Strategies Fund
Federated Insurance Series:
Federated American Leaders Fund II, Federated Utility Fund II, Federated High
Income Bond Fund II
The Alger American Fund:
Alger American Growth Portfolio, Alger American Small Capitalization Portfolio
PBHG Insurance Series Fund, Inc.:
PBHG Growth II Portfolio, PBHG Large Cap Growth Portfolio
Goldman Sachs Variable Insurance Trust Fund:*
Goldman Sachs Growth and Income Fund, Goldman Sachs Mid Cap Equity Fund
* The U.S. Equity Fund for GE Investments Funds, Growth and Income Fund and
Mid-Cap Equity Fund for Goldman Sachs Variable Insurance Trust are not
available at this time in connection with policies issued to California
policyowners.
2
<PAGE>
TABLE OF CONTENTS
Page
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DEFINITIONS 4
FEE TABLE 5
SUMMARY 20
FINANCIAL INFORMATION 22
THE LIFE INSURANCE COMPANY OF
VIRGINIA AND LIFE OF VIRGINIA
SEPARATE ACCOUNT 4 25
The Life Insurance Company of Virginia 25
IMSA Disclosure 25
Account 4 25
Additions, Deletions, or Substitutions of
Investments 25
THE FUNDS 26
Janus Aspen Series 26
Variable Insurance Products Fund 27
Variable Insurance Products Fund II 27
Variable Insurance Products Fund III 27
GE Investments Funds, Inc. 27
Oppenheimer Variable Account Funds 28
Federated Insurance Series 29
The Alger American Fund 29
PBHG Insurance Series Fund, Inc. 29
Goldman Sachs Variable Insurance Trust 30
Resolving Material Conflicts 30
TOTAL RETURN AND YIELDS 30
THE POLICY 31
Purchasing the Policies 32
Allocation of Premium Payments 32
Accumulation of Account Value 32
Value of Accumulation Units 33
Transfers 33
Telephone Transfers 34
Dollar-Cost Averaging 34
Portfolio Rebalancing 34
Powers of Attorney 35
Examination of Policy (Refund Privilege) 35
DISTRIBUTIONS UNDER THE POLICY 35
Surrender 35
Systematic Withdrawals 36
Death Provisions 37
Restrictions on Distributions from Certain
Policies 39
CHARGES AND DEDUCTIONS 40
Charges Against Account 4 40
Policy Maintenance Charge 40
Page
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Annual Death Benefit Charge 40
Sales Charges 41
Surrender Charge 41
Transfer Charges 42
Premium Taxes 42
Other Taxes 42
Other Charges 43
INCOME PAYMENTS 44
Monthly Income Benefit 44
Determination of Monthly Income Benefits 45
Optional Payment Plans 45
FEDERAL TAX MATTERS 47
Introduction 47
Non-Qualified Policies 47
Qualified Policies 49
IRA Policies 49
Roth IRAs 51
Simplified Employee Pension Plans 52
SIMPLE IRAs 52
Section 403(b) Annuities 52
Deferred Compensation Plans of State and
Local Government and Tax-Exempt
Organizations 53
Other Qualified Retirement Plans 53
Legal and Tax Advice for Qualified Plans 54
Direct Rollover and Mandatory Withholding
Requirements 54
Federal Income Tax Withholding 54
GENERAL PROVISIONS 54
The Owner 54
The Annuitant 54
The Beneficiary 54
Changes by the Owner 55
Evidence of Death, Age, Sex or Survival 55
Joint Policy 55
Payment Under The Policies 55
DISTRIBUTION OF THE POLICIES 55
VOTING RIGHTS AND REPORTS 56
YEAR 2000 COMPLIANCE 56
LEGAL PROCEEDINGS 57
STATEMENT OF ADDITIONAL
INFORMATION TABLE OF CONTENTS 58
3
<PAGE>
DEFINITIONS
Account Value -- The value of the Policy equal to the Account Value
allocated to the Investment Subdivisions of Account 4.
Account 4 -- Life of Virginia Separate Account 4, a separate investment
account established by Life of Virginia to receive and invest premiums paid
under the Policies, and other variable annuity policies issued by Life of
Virginia.
Accumulation Unit -- An accounting unit of measure used in calculating the
Account Value prior to the Maturity Date.
Additional Premium Payment -- Any Premium Payment made after the initial
Premium Payment.
Annuitant -- The Annuitant is the person named in the Policy upon whose
age and, where appropriate, sex Monthly Income Benefits are determined.
Annuity Unit -- An accounting unit of measure used in the calculation of
the amount of the second and each subsequent Variable Income Payment.
Business Day -- Any day that the New York Stock Exchange is open for
business and any other day in which there is a material change in the value of
the assets in Account 4.
Code -- The Internal Revenue Code of 1986, as amended.
Death Benefit -- The optional benefit provided under a Policy upon the
death of an Annuitant prior to the Maturity Date.
Designated Beneficiary(ies) -- The person(s) designated in the Policy who
is alive (or in existence for non-natural designations) on the date of an
Owner's, Joint Owner's or Annuitant's death and who will be treated as the sole
owner of the Policy following such a death.
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.
Fixed Income Payments -- Payments made pursuant to an optional payment
plan the value of which are fixed and guaranteed by Life of Virginia.
Funds -- The mutual funds designated as eligible investments for Account
4.
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 West Broad Street, Richmond, Virginia 23230.
Income Payment -- One of a series of payments made under either a Monthly
Income Benefit or one of the optional payment plans.
Investment Subdivision -- A subdivision of Account 4, 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.
Joint Owner -- Joint Owners own the Policy equally. If one Joint Owner
dies, the surviving Joint Owner has a right of survivorship to the Policy.
IRA Policy -- An individual retirement annuity policy that receives
favorable federal income tax treatment under Section 408 of the Code.
Maturity Date -- The date stated in the Policy on which Income Payments
are scheduled to commence, if the Annuitant is living on that date.
Maturity Value -- The Surrender Value of the Policy on the date
immediately preceding the Maturity Date.
Monthly Income Benefit -- The monthly amounts payable to the Owner
beginning on the Maturity Date if the Annuitant is still living.
4
<PAGE>
Net Investment Factor -- An index applied to measure the investment
performance of an Investment Subdivision from one Valuation Period to the next.
Non-Qualified Policy -- Policies not sold or used in connection with
retirement plans receiving favorable federal income tax treatment under the
Code.
Owner -- The person or persons (in the case of Joint Owners) entitled to
receive Income Payments after the Maturity Date. The Owner is also entitled to
the ownership rights stated in the Policy during the lifetime of the Annuitant.
The original Owner is named in the Policy.
Policy -- The variable annuity policy issued by Life of Virginia and
described in this Prospectus. The term "Policy" or "Policies" includes the
Policy described in this Prospectus, a policy application, any supplemental
applications, any endorsements and riders.
Policy Date -- Generally, the first date on which the application, if
attached to the Policy, was signed or the initial premium was received and
accepted by Life of Virginia at its Home Office.
Premium Payment(s) -- An amount paid to Life of Virginia by the Owner or
on the Owner's behalf as consideration for the benefits provided by the Policy.
Qualified Policies -- Policies used in connection with retirement plans
which receive favorable federal income tax treatment under the Code.
Surrender Value -- The Account Value less any applicable surrender
charge.
Valuation Period -- The period between the close of business on a
Business Day and the close of business on the next succeeding Business Day.
Variable Income Payments -- Payments made pursuant to a payment plan and
which fluctuate based on the investment performance of Investment Subdivisions
selected by the Owner.
FEE TABLE
<TABLE>
<S> <C>
Owner Transaction Expenses:
Sales Charge on Premium Payments ..................................................... none
Maximum Contingent Deferred Sales Charge (as a percentage of premium payments) ....... 6.00%
Other surrender fees ................................................................. none
Transfer charge ......................................................................
First transfer each month ............................................................ none
Subsequent transfers ................................................................. $ 10.00
Annual Expenses:
(as a percentage of account value) ...................................................
Mortality and expense risk charge .................................................... 1.25%
Administrative Expense Charge ........................................................ .15%
Total Annual Expenses ................................................................ 1.40%
Other Annual Expenses:
Annual Policy Maintenance Charge ..................................................... $ 25.00
Maximum Annual Death Benefit Charge
-- Elective Guaranteed Minimum Death Benefit (as a percentage of average benefit 0.35%*
amount)
-- Elective Optional Death Benefit (as a percentage of Account Value) .............. 0.25%**
</TABLE>
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* If the Elective Guaranteed Minimum Death Benefit applies.
** If the Elective Optional Death Benefit applies.
5
<PAGE>
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
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<S> <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 .............................. 0.0% 1.20% 1.20%
PBHG Large Cap Growth Portfolio ....................... 0.0% 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>
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* The fees and expenses reported for 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.
6
<PAGE>
The purpose of these tables is to assist the Owner in understanding the
various costs and expenses that an Owner will bear, directly and indirectly.
Except as noted below, the Tables reflect charges and expenses of Account 4 as
well as the underlying Funds as of Decmber 31, 1997 for the most recent fiscal
year. For more information on the charges described in these Tables See Charges
and Deductions and the Prospectuses for the underlying Funds which accompany
this Prospectus. In addition to the expenses listed above, premium taxes
varying from 0 to 3.5% may be applicable.
The expense information regarding the Funds was provided by those Funds.
The Variable Insurance Products Fund, Variable Insurance Products Fund II,
Variable Insurance Products Fund III, Oppenheimer Variable Account Funds, Janus
Aspen Series, Federated Insurance Series, The Alger American Fund, PBHG
Insurance Series Fund, Inc., 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 except for Variable Insurance
Products Fund, Variable Insurance Products Fund II and Variable Insurance
Products Fund III. 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 certain fee waivers or 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.
7
<PAGE>
EXAMPLES: A Policyowner would pay the following expense on a $1,000
investment, assuming a 5% annual return on assets and the charges and expenses
reflected in the Fee Table above (excluding the elective optional death benefit
rider, and the elective guaranteed minimum death benefit rider.):
1. If you surrender* your Policy at the end of the applicable period:
<TABLE>
<CAPTION>
Subdivision Investing In: 1 Year 3 Years 5 Years 10 Years
- ------------------------- ---------- ----------- ----------- -----------
<S> <C>
Janus Aspen Series
Balanced ................................. 77.61 126.74 160.53 266.60
Flexible Income .......................... 76.81 124.33 156.49 258.49
Growth ................................... 76.31 122.82 153.96 253.39
Aggressive Growth ........................ 76.91 124.63 157.00 259.51
Worldwide Growth ......................... 76.71 124.02 155.99 257.48
Capital Appreciation ..................... 81.91 139.62 181.94 308.97
International Growth ..................... 78.91 130.65 167.05 279.62
Variable Insurance Products Fund
Equity-Income ............................ 75.10 119.18 147.86 241.04
Overseas ................................. 78.51 129.45 165.05 275.63
Growth ................................... 76.21 122.51 153.46 252.37
Variable Insurance Products Fund II
Asset Manager ............................ 75.81 121.30 151.43 248.27
Contrafund ............................... 76.41 123.12 154.47 254.42
Variable Insurance Products Fund III
Growth and Income ........................ 76.31 122.82 153.96 253.39
Growth Opportunities ..................... 76.71 124.02 155.99 257.48
GE Investments Funds, Inc.
Income ................................... 75.20 119.48 148.37 242.08
S&P 500 Index ............................ 73.90 115.53 141.73 228.53
Total Return ............................. 75.81 121.30 151.43 248.27
International Equity ..................... 82.71 141.99 185.87 316.64
Real Estate Securities ................... 78.81 130.35 166.55 278.62
Global Income ............................ 75.00 118.87 147.35 240.00
Value Equity ............................. 73.90 115.53 141.73 228.53
Money Market ............................. 72.49 111.25 134.52 213.73
U.S. Equity .............................. 77.31 125.84 159.02 263.57
Oppenheimer Variable Account Funds
Multiple Strategies ...................... 76.81 124.33 156.49 258.49
Aggressive Growth ........................ 76.61 123.72 155.48 256.46
Growth ................................... 76.81 124.33 156.49 258.49
High Income .............................. 77.51 126.44 160.03 265.59
Bond ..................................... 77.11 125.23 158.01 261.54
Federated Insurance Series
High Income Bond II ...................... 77.31 125.84 159.02 263.57
Utility II ............................... 77.81 127.34 161.54 268.61
American Leaders II ...................... 77.81 127.34 161.54 268.61
The Alger American Fund
Growth ................................... 77.21 125.53 158.51 262.55
Small Capitalization ..................... 78.21 128.55 163.55 272.63
PBHG Insurance Series Fund, Inc.
Growth II ................................ 81.31 137.83 178.98 303.18
Large Cap Growth ......................... 80.31 134.85 174.03 293.43
Goldman Sachs Variable Insurance Trust Fund
Growth and Income ........................ 78.31 128.85 164.05 273.63
Mid Cap Equity ........................... 78.81 130.35 166.55 278.62
</TABLE>
- -------------
* surrender includes annuitization over a period of less than 5 years.
8
<PAGE>
2. If you annuitize at the end of the applicable period, or do not surrender*:
<TABLE>
<CAPTION>
Subdivision Investing In: 1 Year 3 Years 5 Years 10 Years
- ------------------------- ---------- --------- ----------- -----------
<S> <C>
Janus Aspen Series
Balanced ................................. 23.61 72.74 124.53 266.60
Flexible Income .......................... 22.81 70.33 120.49 258.49
Growth ................................... 22.31 68.82 117.96 253.39
Aggressive Growth ........................ 22.91 70.63 121.00 259.51
Worldwide Growth ......................... 22.71 70.02 119.99 257.48
Capital Appreciation ..................... 27.91 85.62 145.94 308.97
International Growth ..................... 24.91 76.65 131.05 279.62
Variable Insurance Products Fund
Equity-Income ............................ 21.10 65.18 111.86 241.04
Overseas ................................. 24.51 75.45 129.05 275.63
Growth ................................... 22.21 68.51 117.46 252.37
Variable Insurance Products Fund II
Asset Manager ............................ 21.81 67.30 115.43 248.27
Contrafund ............................... 22.41 69.12 118.47 254.42
Variable Insurance Products Fund III
Growth and Income ........................ 22.31 68.82 117.96 253.39
Growth Opportunities ..................... 22.71 70.02 119.99 257.48
GE Investments Funds, Inc.
Income ................................... 21.20 65.48 112.37 242.08
S&P 500 Index ............................ 19.90 61.53 105.73 228.53
Total Return ............................. 21.81 67.30 115.43 248.27
International Equity ..................... 28.71 87.99 149.87 316.64
Real Estate Securities ................... 24.81 76.35 130.55 278.62
Global Income ............................ 21.00 64.87 111.35 240.00
Value Equity ............................. 19.90 61.53 105.73 228.53
Money Market ............................. 18.49 57.25 98.52 213.73
U.S. Equity .............................. 23.31 71.84 123.02 263.57
Oppenheimer Variable Account Funds
Multiple Strategies ...................... 22.81 70.33 120.49 258.49
Aggressive Growth ........................ 22.61 69.72 119.48 256.46
Growth ................................... 22.81 70.33 120.49 258.49
High Income .............................. 23.51 72.44 124.03 265.59
Bond ..................................... 23.11 71.23 122.01 261.54
Federated Insurance Series
High Income Bond II ...................... 23.31 71.84 123.02 263.57
Utility II ............................... 23.81 73.34 125.54 268.61
American Leaders II ...................... 23.81 73.34 125.54 268.61
The Alger American Fund
Growth ................................... 23.21 71.53 122.51 262.55
Small Capitalization ..................... 24.21 74.55 127.55 272.63
PBHG Insurance Series Fund, Inc.
Growth II ................................ 27.31 83.83 142.98 303.18
Large Cap Growth ......................... 26.31 80.05 138.03 293.43
Goldman Sachs Variable Insurance Trust Fund
Growth and Income ........................ 24.31 74.85 128.05 273.63
Mid Cap Equity ........................... 24.81 76.35 130.55 278.62
</TABLE>
- -------------
* surrender includes annuitization over a period of less than 5 years.
9
<PAGE>
EXAMPLES: A Policyowner would pay the following expense on a $1,000
investment, assuming a 5% annual return on assets and the charges and expenses
reflected in the Fee Table above (including the elective guaranteed minimum
death benefit rider but excluding the elective optional death benefit rider.):
1. If you surrender* your Policy at the end of the applicable period:
<TABLE>
<CAPTION>
Subdivision Investing In: 1 Year 3 Years 5 Years 10 Years
- ------------------------- ---------- ----------- ----------- -----------
<S> <C>
Janus Aspen Series
Balanced ................................. 81.17 137.82 179.69 308.73
Flexible Income .......................... 80.37 135.42 175.69 300.80
Growth ................................... 79.87 133.92 173.18 295.81
Aggressive Growth ........................ 80.47 135.72 176.19 301.79
Worldwide Growth ......................... 80.27 135.12 175.19 299.80
Capital Appreciation ..................... 85.46 150.63 200.89 350.19
International Growth ..................... 82.47 141.71 186.15 321.47
Variable Insurance Products Fund
Equity-Income ............................ 78.67 130.30 167.14 283.72
Overseas ................................. 82.07 140.52 184.16 317.57
Growth ................................... 79.77 133.62 172.68 294.81
Variable Insurance Products Fund II
Asset Manager ............................ 79.37 132.41 170.67 290.79
Contrafund ............................... 79.97 134.22 173.69 296.81
Variable Insurance Products Fund III
Growth and Income ........................ 79.87 133.92 173.18 295.81
Growth Opportunities ..................... 80.27 135.12 175.19 299.80
GE Investments Funds, Inc.
Income ................................... 78.77 130.60 167.65 284.73
S&P 500 Index ............................ 77.47 126.67 161.06 271.47
Total Return ............................. 79.37 132.41 170.67 290.79
International Equity ..................... 86.26 152.99 204.78 357.69
Real Estate Securities ................... 82.37 141.41 185.65 320.50
Global Income ............................ 78.57 130.00 166.64 282.70
Value Equity ............................. 77.47 126.67 161.06 271.47
Money Market ............................. 76.01 121.97 152.64 251.15
U.S. Equity .............................. 80.87 136.92 178.19 305.76
Oppenheimer Variable Account Funds
Multiple Strategies ...................... 80.37 135.42 175.69 300.80
Aggressive Growth ........................ 80.17 134.82 174.69 298.81
Growth ................................... 80.37 135.42 175.69 300.80
High Income .............................. 81.07 137.52 179.19 307.74
Bond ..................................... 80.67 136.32 177.19 303.78
Federated Insurance Series
High Income Bond II ...................... 80.87 136.92 178.19 305.76
Utility II ............................... 81.37 138.42 180.68 310.70
American Leaders II ...................... 81.37 138.42 180.68 310.70
The Alger American Fund
Growth ................................... 80.77 136.62 177.69 304.77
Small Capitalization ..................... 81.77 139.62 182.67 314.63
PBHG Insurance Series Fund, Inc.
Growth II ................................ 84.87 148.85 197.96 344.52
Large Cap Growth ......................... 83.87 145.88 193.05 334.99
Goldman Sachs Variable Insurance Trust Fund
Growth and Income ........................ 81.87 139.92 183.17 315.61
Mid Cap Equity ........................... 82.37 141.41 185.65 320.50
</TABLE>
- -------------
* surrender includes annuitization over a period of less than 5 years.
10
<PAGE>
2. If you annuitize at the end of the applicable period, or do not
surrender*:
<TABLE>
<CAPTION>
Subdivision Investing In: 1 Year 3 Years 5 Years 10 Years
- ------------------------- ---------- --------- ----------- -----------
<S> <C>
Janus Aspen Series
Balanced ................................. 27.17 83.82 143.69 308.73
Flexible Income .......................... 26.37 81.42 139.69 300.80
Growth ................................... 25.87 79.92 137.18 295.81
Aggressive Growth ........................ 26.47 81.72 140.19 301.79
Worldwide Growth ......................... 26.27 81.12 139.19 299.80
Capital Appreciation ..................... 31.46 96.63 164.89 350.19
International Growth ..................... 28.47 87.71 150.15 321.47
Variable Insurance Products Fund
Equity-Income ............................ 24.67 76.30 131.14 283.72
Overseas ................................. 28.07 86.52 148.16 317.57
Growth ................................... 25.77 79.62 136.68 294.81
Variable Insurance Products Fund II
Asset Manager ............................ 25.37 78.41 134.67 290.79
Contrafund ............................... 25.97 80.22 137.69 296.81
Variable Insurance Products Fund III
Growth and Income ........................ 25.87 79.92 137.18 295.81
Growth Opportunities ..................... 26.27 81.12 139.19 299.80
GE Investments Funds, Inc.
Income ................................... 24.77 76.60 131.65 284.73
S&P 500 Index ............................ 23.47 72.67 125.06 271.47
Total Return ............................. 25.37 78.41 134.67 290.79
International Equity ..................... 32.26 98.99 168.78 357.69
Real Estate Securities ................... 28.37 87.41 149.65 320.50
Global Income ............................ 24.57 76.00 130.64 282.70
Value Equity ............................. 23.47 72.67 125.06 271.47
Money Market ............................. 22.01 67.97 116.64 251.15
U.S. Equity .............................. 26.87 82.92 142.19 305.76
Oppenheimer Variable Account Funds
Multiple Strategies ...................... 26.37 81.42 139.69 300.80
Aggressive Growth ........................ 26.17 80.82 138.69 298.81
Growth ................................... 26.37 81.42 139.69 300.80
High Income .............................. 27.07 83.52 143.19 307.74
Bond ..................................... 26.67 82.32 141.19 303.78
Federated Insurance Series
High Income Bond II ...................... 26.87 82.92 142.19 305.76
Utility II ............................... 27.37 84.42 144.68 310.70
American Leaders II ...................... 27.37 84.42 144.68 310.70
The Alger American Fund
Growth ................................... 26.77 82.62 141.69 304.77
Small Capitalization ..................... 27.77 85.62 146.67 314.63
PBHG Insurance Series Fund, Inc.
Growth II ................................ 30.87 94.85 161.96 344.52
Large Cap Growth ......................... 29.87 91.88 157.05 334.99
Goldman Sachs Variable Insurance Trust Fund
Growth and Income ........................ 27.87 85.92 147.17 315.61
Mid Cap Equity ........................... 28.37 87.41 149.65 320.50
</TABLE>
- -------------
* surrender includes annuitization over a period of less than 5 years.
11
<PAGE>
EXAMPLES: A Policyowner would pay the following expense on a $1,000
investment, assuming a 5% annual return on assets and the charges and expenses
reflected in the Fee Table above (including the elective optional death benefit
rider excluding the elective guaranteed minimum death benefit rider.):
1. If you surrender* your Policy at the end of the applicable period:
<TABLE>
<CAPTION>
Subdivision Investing In: 1 Year 3 Years 5 Years 10 Years
- ------------------------- ---------- ----------- ----------- -----------
<S> <C>
Janus Aspen Series
Balanced ................................. 80.11 134.25 173.03 291.47
Flexible Income .......................... 79.31 131.85 169.05 283.59
Growth ................................... 78.81 130.35 166.55 278.62
Aggressive Growth ........................ 79.41 132.15 169.55 284.58
Worldwide Growth ......................... 79.21 131.55 168.55 282.59
Capital Appreciation ..................... 84.40 147.03 194.17 332.71
International Growth ..................... 81.41 138.13 179.47 304.15
Variable Insurance Products Fund
Equity-Income ............................ 77.61 126.74 160.53 266.60
Overseas ................................. 81.01 136.94 177.50 300.27
Growth ................................... 78.71 130.05 166.05 277.63
Variable Insurance Products Fund II
Asset Manager ............................ 78.31 128.85 164.05 273.63
Contrafund ............................... 78.91 130.65 167.05 279.62
Variable Insurance Products Fund III
Growth and Income ........................ 78.81 130.35 166.55 278.62
Growth Opportunities ..................... 79.21 131.55 168.55 282.59
GE Investments Funds, Inc.
Income ................................... 77.71 127.04 161.03 267.60
S&P 500 Index ............................ 76.41 123.12 154.47 254.42
Total Return ............................. 78.31 128.85 164.05 273.63
International Equity ..................... 85.20 149.38 198.05 340.18
Real Estate Securities ................... 81.31 137.83 178.98 303.18
Global Income ............................ 77.51 126.44 160.03 265.59
Value Equity ............................. 76.41 123.12 154.47 254.42
Money Market ............................. 75.00 118.87 147.35 240.00
U.S. Equity .............................. 79.81 133.35 171.54 288.52
Oppenheimer Variable Account Funds
Multiple Strategies ...................... 79.31 131.85 169.05 283.59
Aggressive Growth ........................ 79.11 131.25 168.05 281.60
Growth ................................... 79.31 131.85 169.05 283.59
High Income .............................. 80.01 133.95 172.54 290.49
Bond ..................................... 79.61 132.75 170.55 286.55
Federated Insurance Series
High Income Bond II ...................... 79.81 133.35 171.54 288.52
Utility II ............................... 80.31 134.85 174.03 293.43
American Leaders II ...................... 80.31 134.85 174.03 293.43
The Alger American Fund
Growth ................................... 79.71 133.05 171.04 287.54
Small Capitalization ..................... 80.71 136.04 176.01 297.34
PBHG Insurance Series Fund, Inc.
Growth II ................................ 83.80 145.25 191.25 327.07
Large Cap Growth ......................... 82.81 142.29 186.36 317.59
Goldman Sachs Variable Insurance Trust Fund
Growth and Income ........................ 80.81 136.34 176.51 298.32
Mid Cap Equity ........................... 81.31 137.83 178.98 303.18
</TABLE>
- -------------
* surrender includes annuitization over a period of less than 5 years.
12
<PAGE>
2. If you annuitize at the end of the applicable period, or do not
surrender*:
<TABLE>
<CAPTION>
Subdivision Investing In: 1 Year 3 Years 5 Years 10 Years
- ------------------------- ---------- --------- ----------- -----------
<S> <C>
Janus Aspen Series
Balanced ................................. 26.11 80.25 137.03 291.47
Flexible Income .......................... 25.31 77.85 133.05 283.59
Growth ................................... 24.81 76.35 130.55 278.62
Aggressive Growth ........................ 25.41 78.15 133.55 284.58
Worldwide Growth ......................... 25.21 77.55 132.55 282.59
Capital Appreciation ..................... 30.40 93.03 158.17 332.71
International Growth ..................... 27.41 84.13 143.47 304.15
Variable Insurance Products Fund
Equity-Income ............................ 23.61 72.74 124.53 266.60
Overseas ................................. 27.01 82.94 141.50 300.27
Growth ................................... 24.71 76.05 130.05 277.63
Variable Insurance Products Fund II
Asset Manager ............................ 24.31 74.85 128.05 273.63
Contrafund ............................... 24.91 76.65 131.05 279.62
Variable Insurance Products Fund III
Growth and Income ........................ 24.81 76.35 130.55 278.62
Growth Opportunities ..................... 25.21 77.55 132.55 282.59
GE Investments Funds, Inc.
Income ................................... 23.71 73.04 125.03 267.60
S&P 500 Index ............................ 22.41 69.12 118.47 254.42
Total Return ............................. 24.31 74.85 128.05 273.63
International Equity ..................... 31.20 95.38 162.05 340.18
Real Estate Securities ................... 27.31 83.83 142.98 303.18
Global Income ............................ 23.51 72.44 124.03 265.59
Value Equity ............................. 22.41 69.12 118.47 254.42
Money Market ............................. 21.00 64.87 111.35 240.00
U.S. Equity .............................. 25.81 79.35 135.54 288.52
Oppenheimer Variable Account Funds
Multiple Strategies ...................... 25.31 77.85 133.05 283.59
Aggressive Growth ........................ 25.11 77.25 132.05 281.60
Growth ................................... 25.31 77.85 133.05 283.59
High Income .............................. 26.01 79.95 136.54 290.49
Bond ..................................... 25.61 78.75 134.55 286.55
Federated Insurance Series
High Income Bond II ...................... 25.81 79.35 135.54 288.52
Utility II ............................... 26.31 80.85 138.03 293.43
American Leaders II ...................... 26.31 80.85 138.03 293.43
The Alger American Fund
Growth ................................... 25.71 79.05 135.04 287.54
Small Capitalization ..................... 26.71 82.04 140.01 297.34
PBHG Insurance Series Fund, Inc.
Growth II ................................ 29.80 91.25 155.25 327.07
Large Cap Growth ......................... 28.81 88.29 150.36 317.59
Goldman Sachs Variable Insurance Trust Fund
Growth and Income ........................ 26.81 82.34 140.51 298.32
Mid Cap Equity ........................... 27.31 83.83 142.98 303.18
</TABLE>
- -------------
* surrender includes annuitization over a period of less than 5 years.
13
<PAGE>
EXAMPLES: A Policyowner would pay the following expense on a $1,000
investment, assuming a 5% annual return on assets and the charges and expenses
reflected in the Fee Table above (including the elective optional death benefit
rider and the elective guaranteed minimum death benefit rider):
1. If you surrender* your Policy at the end of the applicable period:
<TABLE>
<CAPTION>
Subdivision Investing In: 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------- ---------- ----------- ----------- -----------
<S> <C>
Janus Aspen Series
Balanced ................................. 83.67 145.29 192.07 333.07
Flexible Income .......................... 82.87 142.90 188.13 325.35
Growth ................................... 82.37 141.41 185.65 320.50
Aggressive Growth ........................ 82.97 143.20 188.62 326.32
Worldwide Growth ......................... 82.77 142.61 187.63 324.38
Capital Appreciation ..................... 87.95 157.99 213.00 373.40
International Growth ..................... 84.97 149.15 198.45 345.47
Variable Insurance Products Fund
Equity-Income ............................ 81.17 137.82 179.69 308.73
Overseas ................................. 84.57 147.96 196.49 341.67
Growth ................................... 82.27 141.11 185.16 319.52
Variable Insurance Products Fund II
Asset Manager ............................ 81.87 139.92 183.17 315.61
Contrafund ............................... 82.47 141.71 186.15 321.47
Variable Insurance Products Fund III
Growth & Income .......................... 82.37 141.41 185.65 320.50
Growth Opportunities ..................... 82.77 142.61 187.63 324.38
GE Investments Funds, Inc.
Income ................................... 81.27 138.12 180.19 309.72
S&P 500 Index ............................ 79.97 134.22 173.69 296.81
Total Return ............................. 81.87 139.92 183.17 315.61
International Equity ..................... 88.74 160.34 216.84 380.70
Real Estate Securities ................... 84.87 148.85 197.96 344.52
Global Income ............................ 81.07 137.52 179.19 307.74
Value Equity ............................. 79.97 134.22 173.69 296.81
Money Market ............................. 78.52 129.52 165.24 276.43
U.S. Equity .............................. 83.37 144.39 190.59 330.18
Oppenheimer Variable Account Funds
Multiple Strategies ...................... 82.87 142.90 188.13 325.35
Aggressive Growth ........................ 82.67 142.31 187.14 323.41
Growth ................................... 82.87 142.90 188.13 325.35
High Income .............................. 83.57 144.99 191.58 332.11
Bond ..................................... 83.17 143.80 189.61 328.25
Federated Insurance Series
High Income Bond II ...................... 83.37 144.39 190.59 330.18
Utility II ............................... 83.87 145.88 193.05 334.99
American Leaders II ...................... 83.87 145.88 193.05 334.99
The Alger American Fund
Growth ................................... 83.27 144.10 190.10 329.22
Small Capitalization ..................... 84.27 147.07 195.02 338.81
PBHG Insurance Series Fund, Inc.
Growth II ................................ 87.35 156.23 210.11 367.89
Large Cap Growth ......................... 86.36 153.28 205.27 358.62
Goldman Sachs Variable Insurance Trust Fund
Growth and Income ........................ 84.37 147.37 195.51 339.77
Mid Cap Equity ........................... 84.87 148.85 197.96 344.52
</TABLE>
- -------------
*surrender includes annuitization over a period of less than 5 years.
14
<PAGE>
2. If you annuitize at the end of the applicable period, or do not
surrender*:
<TABLE>
<CAPTION>
Subdivision Investing In: 1 Year 3 Years 5 Years 10 Years
- ------------------------- ---------- --------- ----------- -----------
<S> <C>
Janus Aspen Series
Balanced ................................. 29.67 91.29 156.07 333.07
Flexible Income .......................... 28.87 88.90 152.13 325.35
Growth ................................... 28.37 87.41 149.65 320.50
Aggressive Growth ........................ 28.97 89.20 152.62 326.32
Worldwide Growth ......................... 28.77 88.61 151.63 324.38
Capital Appreciation ..................... 33.95 103.99 177.00 373.40
International Growth ..................... 30.97 95.15 162.45 345.47
Variable Insurance Products Fund
Equity-Income ............................ 27.17 83.82 143.69 308.73
Overseas ................................. 30.57 93.96 160.49 341.67
Growth ................................... 28.27 87.11 149.16 319.52
Variable Insurance Products Fund II
Asset Manager ............................ 27.87 85.92 147.17 315.61
Contrafund ............................... 28.47 87.71 150.15 321.47
Variable Insurance Products Fund III
Growth and Income ........................ 28.37 87.41 149.65 320.50
Growth Opportunities ..................... 28.77 88.61 151.63 324.38
GE Investments Funds, Inc.
Income ................................... 27.27 84.12 144.19 309.72
S&P 500 Index ............................ 25.97 80.22 137.69 296.81
Total Return ............................. 27.87 85.92 147.17 315.61
International Equity ..................... 34.74 106.34 180.84 380.70
Real Estate Securities ................... 30.87 94.85 161.96 344.52
Global Income ............................ 27.07 83.52 143.19 307.74
Value Equity ............................. 25.97 80.22 137.69 296.81
Money Market ............................. 24.52 75.52 129.24 276.43
U.S. Equity .............................. 29.37 90.39 154.59 330.18
Oppenheimer Variable Account Funds
Multiple Strategies ...................... 28.87 88.90 152.13 325.35
Aggressive Growth ........................ 28.67 88.31 151.14 323.41
Growth ................................... 28.87 88.90 152.13 325.35
High Income .............................. 29.57 90.99 155.58 332.11
Bond ..................................... 29.17 89.80 153.61 328.25
Federated Insurance Series
High Income Bond II ...................... 29.37 90.39 154.59 330.18
Utility II ............................... 29.87 91.88 157.05 334.99
American Leaders II ...................... 29.87 91.88 157.05 334.99
The Alger American Fund
Growth ................................... 29.27 90.10 154.10 329.22
Small Capitalization ..................... 30.27 93.07 159.02 338.81
PBHG Insurance Series Fund, Inc.
Growth II ................................ 33.35 102.23 174.11 367.89
Large Cap Growth ......................... 32.36 99.28 169.27 358.62
Goldman Sachs Variable Insurance Trust Fund
Growth and Income ........................ 30.37 93.37 159.51 339.77
Mid Cap Equity ........................... 30.87 94.85 161.96 344.52
</TABLE>
- -------------
* surrender includes annuitization over a period of less than 5 years.
15
<PAGE>
SUMMARY
The following Summary Of Prospectus Information Should Be Read In
Conjunction With the Detailed Information Appearing Elsewhere In This
Prospectus.
The Policy
The Policy allows the Owner to accumulate funds on a tax-deferred basis
based on the investment experience of the assets underlying the Policy. After
the Maturity Date, this Policy also permits Variable Income Payments to be made
based upon either the investment performance of the selected Investment
Subdivisions of Account 4 or Fixed Income Payments based upon the guarantees of
Life of Virginia. The Policy may be purchased on a non-tax qualified basis
(i.e., a Non-Qualified Policy) or it can be purchased with the proceeds from
certain retirement or savings plans qualifying for favorable federal income tax
treatment (i.e., a Qualified Policy).
The Owner can allocate premiums among up to ten Investment Subdivisions.
Before the Maturity Date, the Account Value depends on the investment
experience of the selected Investment Subdivisions; therefore, before Income
Payments begin, the Owner bears the entire investment risk under this Policy.
The payee will bear the investment risk after Income Payments begin with
respect to Variable Income Payments.
In addition, under Policies sold through certain distribution systems,
Owners can allocate premiums or transfer amounts from the Investment
Subdivisions to a Guarantee Account. Contributions and/or transfers to the
Guarantee Account become part of the General Account of Life of Virginia.
Premium Payments
Except for certain group sales, an initial Premium Payment of at least
$5,000 ($2,000 for an IRA Policy) is required. Additional Premium Payments of
at least $500 for Non-Qualified Policies or $100 for Qualified Policies or $50
for IRA Policies generally may be made any time before Income Payments begin.
(See Purchasing the Policies.)
Except as stated under Refund Privilege, Premium Payments are allocated
among the Investment Subdivisions (or, if applicable, a guarantee account) in
accordance with the Owner's written instructions. Premium payments may be
allocated among up to ten Investment Subdivisions at any one time (however, at
any point in time, Account Value may not be invested in more than ten
Investment Subdivisions). The minimum allocation permitted is 1% of each
Premium Payment but not less than $100.00. The Owner may, by written request or
by calling Life of Virginia's Telephone Transfer Line at 800-772-3844, change
the allocation of subsequent Premium Payments. In states that require a return
of Premium Payments as a refund privilege, initial Premium Payments will be
placed in the Investment Subdivision that invests in the Money Market Fund of
the GE Investments Funds, Inc. (See Allocation of Premium Payments.)
Transfers
Before Income Payments begin the Owner may transfer amounts among the
Investment Subdivisions that are available at the time the transfer is
requested. Currently, there is no limit on the number of transfers that may be
made; however, Life of Virginia reserves the right to impose such a limit in
the future. The first transfer in each calendar month will be made without a
transfer charge. Thereafter, each time amounts are transferred, a transfer
charge of $10 will be imposed. (See Transfers.) Life of Virginia may not honor
transfers made by third parties holding multiple powers of attorney. (See
Powers of Attorney.)
After Variable Income Payments begin, the payee may transfer Annuity Units
among the available Investment Subdivisions once each calendar year. No
transfer charge will be imposed on such transfers.
Full and Partial Surrenders
Full or partial surrenders may be made any time before Income Payments
begin provided that the surrender is for at least $500 and that the surrender
will not reduce the Account Value to below $5,000 ($2,000 for an IRA Policy).
(See Surrender.) Amounts surrendered will generally be subject to a surrender
charge (also known as a contingent deferred sales charge). (See Sales Charges.)
16
<PAGE>
Charges and Deductions
To cover the costs of administering the Policies, Life of Virginia deducts
a daily charge at an effective annual rate of .15% of the average daily net
assets in Account 4 attributable to the policies, and an annual policy
maintenance charge of $25 from the Account Value attributable to each Policy.
The annual charge is made at the earlier of 1) next policy anniversary, or 2)
surrender.
Life of Virginia does not deduct any sales charge from Premium Payments;
however, it may deduct a surrender charge (also referred to as a contingent
deferred sales charge). (See Sales Charges -- Surrender Charge.) A surrender
charge is deducted from full surrenders and certain partial surrenders that
occur within six years of any Premium Payments. If there is a full surrender of
the Policy during the first four years following a Premium Payment, a maximum
surrender charge equal to 6% of the amount surrendered will be imposed.
Thereafter, the charge decreases 2% per year, so that no surrender charge, or
portion thereof, is ever attributable to a Premium Payment made more than six
years prior to the date of a full surrender.
Similarly, a surrender charge may be imposed on certain partial surrenders
where the Account Value surrendered is attributable to a Premium Payment made
within the last six years. The charge is calculated by multiplying (1) the
surrender charge percentage, described above and (2) the lesser of (a) the
amount surrendered attributable to the Premium Payment and (b) the premium
paid, less the total of all surrender amounts previously deemed to reduce that
Premium Payment. The first partial surrender in a policy year is not subject to
the charge if the amount of that surrender is 10% of the Account Value, or
less.
A daily charge at an effective annual rate of 1.25% of the average daily
net assets in Account 4 attributable to the Policies is imposed against those
assets to compensate Life of Virginia for mortality and expense risks assumed
by it. (See Charges Against Account 4.)
Life of Virginia may deduct a charge for any premium taxes incurred. Any
applicable premium tax may be deducted from either the premium paid or from
proceeds (including benefits for surrender, maturity and death). (See Premium
Taxes.)
In the event that the Owner elects to purchase a Guaranteed Minimum Death
Benefit Rider (See Elective Guaranteed Minimum Death Benefit Rider), a charge
will be made each year for expenses related to the Death Benefit under the
Rider, not exceeding .35% of the average Guaranteed Minimum Death Benefit
during the prior year. (See Annual Death Benefit Charge.)
Income Payments
Beginning on the Maturity Date, if the Annuitant is living on that date,
the Owner may receive Monthly Income Benefits based upon either the investment
performance of the selected Investment Subdivisions or the guarantees of
Life of Virginia. The amount of the Monthly Income Benefits will depend on:
(1) the Maturity Value; (2) the amount of any applicable state and/or local
premium tax; (3) the Annuitant's sex, where appropriate, and age on the Maturity
Date; and (4) the optional payment plan chosen.
With respect to Monthly Income Benefits and any Income Payments derived
from Death Benefit or Surrender Value, the Owner may select from a number of
optional payment plans including Income Payments for the life of an Annuitant
(or a different or additional person, depending upon the benefit payable) with a
guaranteed number of Income Payments. (See Optional Payment Plans.)
Death Provisions
Subject to a number of distribution rules, certain benefits and other
policy options are available to certain persons on the death of an Owner, Joint
Owner or Annuitant prior to the Maturity Date while the Policy is in force.
(See Distributions Under the Policy -- Death Provisions.) Owners may also elect
to purchase a Guaranteed Minimum Death Benefit Rider. (See Elective Guaranteed
Minimum Death Benefit Rider.)
For policies issued on or after July 31, 1997, the Owner may also elect to
purchase a Guaranteed Minimum Death Benefit Rider and/or an Optional Death
Benefit Rider. (See "Elective Guaranteed Minimum Death Benefit Rider" and
"Elective Optional Death Benefit Rider.")
21
<PAGE>
Refund Privilege
The Owner has 10 days after the Policy is received to examine the Policy
and return it for a refund. Unless state law requires that Premium Payments be
returned as the refund, the amount of the refund will equal the Account Value
(without reduction of any surrender charges). If state law requires that
Premium Payments be returned, the amount of the refund will equal the greater
of (1) the Account Value (without reduction by any surrender charges) plus any
amount deducted from the Premium Payments prior to allocation to Account 4 and
(2) the Premium Payments made. In certain states the Owner may have more than
10 days to return the policy for a refund. (See Examination of Policy (Refund
Privilege).)
Questions
Any questions about the Policy or the Funds in which the subdivisions
invest will be answered by Life of Virginia's Home Office. All inquiries can be
addressed to Life of Virginia, Variable Products Department, 6610 West Broad
Street, Richmond, VA 23230; if by phone, call (800) 352-9910.
FINANCIAL INFORMATION
Financial statements for Account 4 and consolidated financial statements
for Life of Virginia (as well as the auditors' reports thereon) are in the
Statement of Additional Information.
22
<PAGE>
Condensed Financial Information
The Accumulation Unit Values and the number of accumulation units
outstanding for each Investment Subdivision for the periods shown are as
follows:
<TABLE>
<CAPTION>
Accumulation Accumulation No. of Accumulation Accumulation No. of
Unit Values Unit Values Units Unit Values Unit Values Units
as of as of as of as of as of As of
Funds 1/02/98 12/31/97 12/31/97 1/01/96 12/31/96 12/31/96
- ------ -------------- -------------- ------------ -------------- -------------- ------------
<S> <C>
Janus Aspen Series
Growth ................................... 18.98 18.95 7,270,898 13.41 15.66 4,882,922
Aggressive Growth ........................ 19.86 20.04 3,442,667 16.95 18.04 2,662,051
Worldwide Growth ......................... 22.98 22.85 10,111,685 14.91 11.67 682,605
International Growth++ ................... 13.65 13.63 3,001,600 -- 18.97 5,146,187
Balanced ................................. 14.66 14.65 2,804,435 10.62 12.17 992,496
Flexible Income .......................... 12.49 12.45 869,089 10.48 11.29 325,169
Capital Appreciation++ ................... 12.51 12.54 163,550 -- -- --
Variable Insurance Products Fund
Equity-Income ............................ 36.54 36.47 10,074,173 25.62 28.87 7,041,867
Growth ................................... 38.59 38.45 3,614,598 27.93 31.58 3,026,574
Overseas ................................. 20.76 20.65 1,762,588 16.82 18.78 1,557,443
Variable Insurance Products Fund II
Asset Manager ............................ 24.06 24.03 2,678,933 17.87 20.20 2,248,519
Contrafund ............................... 20.29 20.32 8,595,677 13.88 16.60 5,493,999
Variable Insurance Products Fund III
Growth and Income ++ ..................... 12.38 12.36 976,086 -- -- --
Growth Opportunities ++ .................. 12.35 12.28 1,049,540 -- -- --
GE Investments Funds, Inc.
Money Market ............................. 14.43 14.42 4,980,487 13.35 13.88 3,893,379
Government Securities .................... -- -- -- 16.60 16.59 276,196
S&P 500 Index ............................ 38.82 38.68 3,025,140 24.52 30.11 1,262,502
Total Return ............................. 28.37 28.26 928,145 22.27 24.29 659,251
International Equity ..................... 12.57 12.50 614,410 10.61 11.51 332,403
Real Estate Securities ................... 18.28 18.34 1,478,247 11.59 15.57 428,969
Global Income++ .......................... 10.24 10.24 79,290 -- -- --
Value Equity++ ........................... 13.11 13.13 730,616 -- -- --
Income ................................... 10.05 10.01 903,249 -- -- --
U.S. Equity .............................. -- -- -- -- -- --
Oppenheimer Variable Account Funds
High Income .............................. 30.60 30.57 2,934,974 24.31 27.63 1,715,755
Bond ..................................... 20.54 20.42 994,017 18.35 18.96 707,097
Aggressive Growth ........................ 35.33 35.64 3,176,448 27.31 32.37 2,121,294
Growth ................................... 36.75 36.72 2,462,359 23.81 29.40 1,091,602
Multiple Strategies ...................... 25.90 25.80 1,200,126 19.60 22.32 748,002
Federated Insurance Series
Federated Utility II ..................... 16.68 16.75 1,325,701 12.20 13.41 1,130,433
Federated High Income Bond II ............ 15.01 15.00 1,886,887 11.86 13.37 809,989
Federated American Leaders II ............ 14.45 14.42 2,056,691 -- 11.05 265,832
The Alger American Fund
AA Growth ................................ 13.13 13.34 4,380,186 9.63 10.76 2,962,177
AA Small Capitalization .................. 10.47 10.58 5,645,458 9.38 9.63 3,568,152
PBHG Insurance Series Fund, Inc.
Growth II++ .............................. 10.52 10.65 576,010 -- -- --
Large Cap Growth++ ....................... 11.61 11.71 346,833 -- -- --
Goldman Sachs Variable Insurance Trust
Fund
Growth and Income ........................ -- -- -- -- -- --
Mid Cap Equity ........................... -- -- -- -- -- --
</TABLE>
- ---------
++ Unit Values are not shown for the Investment Subdivisions investing in
these portfolios, as they were not available to Account 4 Owners during the
periods shown.
@@ Accumulation Unit Values as of 1/31/95 are not shown for the Investment
Subdivisions investing in these portfolios as they were not available to
Account 4 Owners at that time.
Financial statements for Account 4 and consolidated financial statements
for Life of Virginia (as well as the auditors' reports thereon) are in the
Statement of Additional Information.
23
<PAGE>
Condensed Financial Information
The Accumulation Unit Values and the number of accumulation units
outstanding for each Investment Subdivision for the periods shown are as
follows:
<TABLE>
<CAPTION>
Accumulation Accumulation No. of Accumulation Accumulation No. of
Unit Values Unit Values Units Unit Values Unit Values Units
as of as of As of as of as of As of
Funds 1/03/95 12/31/95 12/31/95 7/21/94 12/31/94 12/31/94
- ----- -------------- -------------- ----------- -------------- -------------- ---------
<S> <C>
Janus Aspen Series
Growth .................................... 10.48 13.41 1,875,640 10.30 10.44 159,068
Aggressive Growth ......................... 13.53 16.95 1,251,004 11.51 13.48 169,799
Worldwide Growth .......................... 11.91 14.91 1,227,070 11.63 11.87 117,700
International Growth++ -- -- --
Balanced .................................. -- 10.62 73,538 -- -- --
Flexible Income ........................... -- 10.48 36,272 -- -- --
Capital Appreciation++ -- -- -- -- -- --
Variable Insurance Products Fund
Equity-Income ............................. 19.56 25.62 3,119,975 18.71 19.23 276,392
Growth .................................... 21.27 27.93 1,525,015 19.45 20.92 141,845
Overseas .................................. 15.82 16.82 829,371 16.18 15.55 197,672
Variable Insurance Products Fund II
Asset Manager ............................. 15.70 17.87 1,469,667 15.80 15.50 450,885
Contrafund ................................ -- 13.88 2,007,948 -- -- --
Variable Insurance Products Fund III
Growth and Income ++ ...................... -- -- -- -- -- --
Growth Opportunities ++ ................... -- -- -- -- -- --
GE Investments Funds, Inc.
Money Market .............................. 13.01 13.35 1,508,360 12.61 12.79 75,600
Government Securities ..................... 14.61 16.60 153,756 14.47 14.38 889
S&P 500 Index ............................. 18.58 24.52 400,009 17.96 18.27 10,408
Total Return .............................. 17.94 22.27 252,584 17.15 17.65 12,498
International Equity ...................... -- 10.61 47,044 -- -- --
Real Estate Securities .................... -- 11.59 34,477 -- -- --
Global Income++ ........................... -- -- -- -- -- --
Value Equity++ ............................ -- -- -- -- -- --
Income .................................... -- -- -- -- -- --
U.S. Equity ............................... -- -- -- -- -- --
Oppenheimer Variable Account Funds
High Income ............................... 20.83 24.31 561,144 20.99 20.49 77,818
Bond ...................................... 16.17 18.35 275,480 16.08 15.90 11,655
Aggressive Growth ......................... 21.25 27.31 582,579 19.39 20.90 68,052
Growth .................................... 17.97 23.81 423,764 16.88 17.67 12,276
Multiple Strategies ....................... 17.66 19.60 256,681 16.27 16.38 26,302
Federated Insurance Series
Federated Utility II ...................... -- 12.20 463,476 -- -- --
Federated High Income Bond II ............. -- 11.86 123,152 -- -- --
Federated American Leaders II -- -- -- -- -- --
The Alger American Fund
AA Growth ................................. -- 9.63 312,011 -- -- --
AA Small Capitalization ................... -- 9.38 401,258 -- -- --
PBHG Insurance Series Fund, Inc.
Growth II++ ............................... -- -- -- -- -- --
Large Cap Growth++ ........................ -- -- -- -- -- --
Goldman Sachs Variable Insurance Trust Fund
Growth and Income ......................... -- -- -- -- -- --
Mid Cap Equity ............................ -- -- -- -- -- --
</TABLE>
- ---------
++ Unit Values are not shown for the Investment Subdivisions investing in
these portfolios, as they were not available to Account 4 Owners during the
periods shown.
@@ Accumulation Unit Values as of 1/31/95 are not shown for the Investment
Subdivisions investing in these portfolios as they were not available to
Account 4 Owners at that time.
24
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA
AND LIFE OF VIRGINIA SEPARATE ACCOUNT 4
The Life Insurance Company 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 Life Insurance Group, Inc. are indirectly, wholly-owned
subsidiaries of General Electric Capital Corporation ("GE Capital"). GE
Capital, a New York corporation, is a diversified financial services company.
GE Capital subsidiaries consist of commercial and industrial specialized,
mid-market and indirect consumer financing businesses. GE Capital's indirect
parent, General Electric Company, founded more than one hundred years ago by
Thomas Edison, is the world's largest manufacturer of jet engines, engineering
plastics, medical diagnostic equipment and large-sized electric power
generation equipment.
Life of Virginia is principally engaged in the offering of life insurance
policies and ranks among the twenty-five (25) largest stock life insurance
companies in the United States in terms of business in force. Life of Virginia
is admitted to do business in forty-nine (49) states and the District of
Columbia. The principal offices of Life of Virginia are at 6610 W. 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 life insurance and annuities.
Account 4
Life of Virginia Separate Account 4 was established by Life of Virginia as
a separate investment account on August 19, 1987. Account 4 currently has 74
investment subdivisions, 37 of which are available under the Policy. Premiums
are allocated in accordance with the instructions of the Owner among up to 10
of the 37 investment subdivisions available under this Policy. Each of these
investment subdivision invests exclusively in an investment portfolio of one of
the ten Funds described below.
The assets of Account 4 are the property of Life of Virginia. Income and
both realized and unrealized gains or losses from the assets of Account 4 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.
Although the assets in Account 4 attributable to the Policies are not
chargeable with liabilities arising out of any other business which Life of
Virginia may conduct, all obligations arising under the policies, including the
promise to make Income Payments, are general corporate obligations of Life of
Virginia. Furthermore, the assets of Account 4 are available to cover the
liabilities of Life of Virginia's General Account to the extent that the assets
of Account 4 exceed its liabilities arising under the Policies supported by it.
Account 4 is 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, however, does not
involve supervision of the management or investment practices or policies of
Account 4 by the Commission.
Additions, Deletions, or Substitutions 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 Account 4 or that Account 4 may purchase.
Life of Virginia also reserves the right to establish additional
Investment Subdivisions of Account 4, each of which would invest in a separate
portfolio of a Fund, or in shares of another investment company, with a
specified investment objective. One or more Investment Subdivisions may also be
eliminated if, in the sole discretion of Life of Virginia, marketing, tax, or
investment conditions warrant.
If deemed by Life of Virginia to be in the best interests of persons
having voting rights under the Policies, and, if permitted by law, Life of
Virginia may deregister Account 4 under the 1940 Act in the event such
registration is no longer required; manage Account 4 under the direction of a
committee; or combine Account 4 with other Life of Virginia separate
25
<PAGE>
accounts. To the extent permitted by applicable law, Life of Virginia may also
transfer the assets of Account 4 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 Owners or other persons who have
voting rights as to Account 4.
THE FUNDS
Account 4 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 Account 4 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 Account 4 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.
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
26
<PAGE>
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.
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. U.S. Equity
Fund is not available in California at this time.
27
<PAGE>
S&P 500 Index Fund(1) 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.
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 1, 1998 this fund was
known as the Capital Appreciation Fund.
- ---------
(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.
28
<PAGE>
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.
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.
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Goldman Sachs Variable Insurance Trust
Goldman Sachs Variable Insurance Trust has two portfolios that are under
this Policy: Goldman Sachs Mid Cap Equity Fund and Goldman Sachs Growth and
Income Fund. These Funds 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 to meet its objective primarily
through investments in equity securities of companies with public stock
market capitalizations within the range of the market capitalization of
companies constituting the Russell Midcap Index at the time of investment
(currently between $400 million and $16 billion).
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 their investment advisory services and charges can be
found in the current prospectuses for the Funds which accompany or precede this
Prospectus and the Funds' current statements of additional information. A
current prospectus for each Fund can be obtained by writing or calling Life of
Virginia at its 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.
Resolving Material Conflicts
The Funds are used as investment vehicles for both variable life insurance
and variable annuity policies issued by Life of Virginia. In addition, all of
the Funds, are also available to registered separate accounts of insurance
companies other than Life of Virginia offering variable annuity and variable
life policies. As a result, there is a possibility that an irreconcilable
material conflict may arise between the interests of Owners owning Policies
whose account values are allocated to Account 4 and of Owners owning policies
whose Account 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 Owners generally or certain classes of
Owners, 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 Account 4 assets from the Fund, to resolve
the matter. See the individual Fund Prospectus for additional details.
TOTAL RETURN AND YIELDS
From time to time, Life of Virginia may advertise total return and/or
yield for the Investment Subdivisions. These figures are based on historical
earnings and do not indicate or project future performance. Each Investment
Subdivision may, from time to time, advertise performance relative to certain
performance rankings and indices compiled by independent organizations. More
detailed information as to the calculation of performance information appears
in the Statement of Additional Information.
Total returns and yields for the Investment Subdivision are based on the
investment performance of the corresponding investment portfolios of the Funds.
Each portfolio's performance in part reflects its expenses. See the
Prospectuses for the Funds.
Total return for an Investment Subdivision refers to quotations made
assuming that an investment under a Policy has been held in that Investment
Subdivision for various period of time. When an Investment Subdivision has been
in operation for one, five, and ten years, respectively, the total return for
these periods will be provided.
An average annual total return quotation represents the average annual
compounded rate of return that would equate a hypothetical initial investment
of $1,000 (as of the first day of the period for which the total return
quotation is provided) to the redemption value of that investment (as of the
last day of the period). Such quotations show the average annual
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percentage change in the value of a hypothetical investment during the periods
specified. The standardized version of average annual total return reflects all
historical investment results, less all charges and deductions applied against
the Investment Subdivision (including any surrender charge that would apply if
an Owner terminated the Policy at the end of each period indicated, but
excluding, charges for elective riders).
In addition to the standardized version described above, total return
performance quotations computed on non-standard bases may be used in
advertisements. For example, average annual total return information may be
presented, computed on the same basis as described above, except deductions
will not include sales or administrative charges. Average annual total returns
that exclude sales or administrative expenses, or both, will be greater than
standardized average annual total returns for comparable periods. In addition,
Life of Virginia may present historic performance data for the Investment
Subdivisions since their inception reduced by some or all of the fees and
charges under the Policy. Such adjusted historic performance includes data that
precedes the inception dates of the Investment Subdivisions. This data is
designed to show the performance that would have resulted if the Policy had
been in existence during that time. From time to time Life of Virginia may
disclose average annual and/or cumulative total return in other non-standard
formats.
The yield of a "money market" Investment Subdivision refers to the income
generated by an investment in that Investment Subdivision over a specified
seven-day period, which is then annualized. Yield is calculated by assuming
that the income generated for that seven-day period is generated each seven-day
period over a 52-week period. The effective yield is calculated similarly but
the income earned by an investment in that money market Subdivision is assumed
to be reinvested each period. The effective yield will be slightly higher than
the yield because of the compounding effect of this assumed reinvestment.
Non-standard performance data will only be disclosed if the standard
performance data for the required periods is also disclosed. For additional
information regarding the calculation of performance data, please refer to the
Statement of Additional Information.
The yield of an Investment Subdivision (other than a "money market"
Subdivision) refers to the income generated by an investment in that Investment
Subdivision over a specified 30-day (or one-month) period. The income generated
over the period is assumed to be generated and reinvested each month for six
months. The resulting semi-annual yield is then doubled.
In advertising and sales literature, the performance of each Investment
Subdivision may be compared to the performance of other variable annuity
issuers in general or to the performance of particular types of variable
annuities investing in mutual funds, or investment portfolios of mutual funds
with investment objectives similar to each of the Investment Subdivisions.
Lipper Analytical Services, Inc. ("Lipper") and the Variable Annuity Research
Data Service ("VARDS") are independent services which monitor and rank the
performance of variable annuity issuers in each of the major categories of
investment objectives on an industry-wide basis.
Lipper's rankings include variable life insurance issuers as well as
variable annuity issuers. VARDS rankings compare only variable annuity issuers.
The performance analyses prepared by Lipper and VARDS each rank such issuers on
the basis of total return, assuming reinvestment of distributions, but do not
take sales charges, redemption fees, or certain expense deductions at the
separate account level into consideration. In addition, VARDS prepares risk
adjusted rankings, which consider the effects of market risk on total return
performance. This type of ranking provides data as to which funds provide the
highest total return within various categories of funds defined by the degree
of risk inherent in their investment objectives.
Advertising and sales literature may also compare the performance of each
Investment Subdivision to various widely recognized indices. One such index is
the Standard & Poor's 500 Composite Stock Price Index, a measure of stock
market performance. This unmanaged index does not consider tax consequences or
the expense of operating or managing an investment portfolio, and may not
consider reinvestment of income dividends.
Life of Virginia may also report other information including the effect of
tax-deferred compounding on an Investment Subdivision's investment returns, or
returns in general, which may be illustrated by tables, graphs, or charts. All
income and capital gains derived from the Investment Subdivisions' investments
in the Funds are reinvested on a tax-deferred basis.
THE POLICY
The Policy is an individual flexible premium variable deferred annuity
policy. The rights and benefits of the Policy are described below and in the
Policies. There may be differences in your Policy because of requirements of
the state where your Policy is issued. Any such differences will be included in
your Policy.
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Purchasing the Policies
Individuals wishing to purchase a Policy must apply through an authorized
registered agent. The minimum initial Premium Payment required under the Policy
is $5,000 ($2,000 for an IRA Policy). However, in certain cases where Policies
are being offered to members of a group of individuals, Life of Virginia may
agree to waive the $5,000 ($2,000 for an IRA Policy) initial premium
requirement. Acceptance of a request for a Policy and acceptance of Premium
Payments are subject to Life of Virginia's rules, and Life of Virginia reserves
the right to reject any request for a Policy and any initial Premium Payment
for any lawful reason and in a manner that does not unfairly discriminate
against similarly situated purchasers.
If Life of Virginia is unable to issue a Policy due to incomplete
information regarding the applicant, the initial Premium Payment will be
credited to the Policy within two Valuation Periods after the later of receipt
of the information needed to issue the Policy or receipt of the initial Premium
Payment by Life of Virginia at its Home Office. If the initial Premium Payment
cannot be credited within five Business Days after receipt by Life of Virginia,
Life of Virginia will contact the applicant, explain the reason for the delay,
and refund the initial Premium Payment immediately, unless the applicant
specifically consents to Life of Virginia retaining the initial Premium Payment
until the required information is made complete. If Life of Virginia retains
the initial Premium Payment, it will be credited within two Valuation Periods
after the necessary requirements are fulfilled.
The Owner may make Additional Premium Payments before the earliest of (1)
the date which is ten years preceding the Maturity Date, (2) the date the
Annuitant attains age 86 and (3) the date Income Payments begin. Subject to
applicable state requirements, Additional Premium Payments must be for $500 or
more if the Policy is a Non-Qualified Policy, $50 or more if the Policy is an
IRA Policy, and $100 or more if the Policy is a Qualified Policy other than an
IRA Policy. Additional Premium Payments made under Qualified Policies are
limited to proceeds from certain qualified plans. Additional Premium Payments
are credited as of the next close of business (on a Business Day) following
receipt of the payment at the Home Office.
"Policy Years" for the initial Premium Payment are measured from the
Policy Date. With regard to the determination of charges attributable to
Additional Premium Payments, however, "years" are measured from the date of
receipt of the Additional Premium Payment by Life of Virginia at its Home
Office. (See Sales Charges.)
Allocation of Premium Payments
The Owner, by written instructions, allocates Premium Payments among the
Investment Subdivisions. The Owner may allocate Premium Payments totally to one
Investment Subdivision of Account 4, or partially to any one of the available
Investment Subdivisions; however, at any time, the Account Value may not be
invested in more than 10 Investment Subdivisions. Allocations of less than 1%
of any Premium Payment, or less than $100, to any one Investment Subdivision
are not permitted.
In those states which require that Premium Payments be returned during the
right to examine Policy period (See Examination of Policy (Refund Privilege)),
during an initial period commencing on the date the initial Premium Payment is
credited to the Policy, Premium Payments will be placed in the Investment
Subdivision that invests exclusively in the Money Market Fund of the GE
Investments Funds. The Premium Payments will remain in that subdivision until
the earlier of 15 calendar days from the date the initial Premium Payment is
credited to the Policy or, if the Policy is not accepted by the Owner, when all
amounts due are refunded. At the end of the 15-day period, the Account Value at
that time, and all subsequent Premium Payments, will be allocated among the
Investment Subdivisions in accordance with the Owner's instructions.
The Owner may change the allocation of subsequent Premium Payments at any
time, without charge, by sending acceptable written notice to Life of Virginia
at its Home Office or by calling the Life of Virginia Telephone Transfer Line
at 800-772-3844. The allocation will apply to any Premium Payments received
after Life of Virginia records the change. The Account Value will vary with the
investment performance of the Investment Subdivisions the Owner selects, and
the Owner bears the entire investment risk for the Account Value in any
particular Investment Subdivision. The allocation of Premium Payments will
affect not only the Account Value prior to the Maturity Date, but it may also
affect the Death Benefit payable upon the Annuitant's death. The Owner should
periodically review his allocation of Account Value in light of market
conditions and overall financial planning requirements.
Accumulation of Account Value
The Policy provides for an accumulation of Account Value prior to the
Maturity Date. The Account Value equals the sum of the values of the amounts
allocated under the Policy to each Investment Subdivision. Account Value will
be determined on a daily basis and will reflect a number of factors, including
Premium Payments, partial surrenders, transfers, charges
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assessed in connection with the Policy, and the investment performance of the
shares purchased by the Investment Subdivisions to which the Account Value is
allocated. There is no guaranteed minimum Account Value.
On the date the initial Premium Payment is received and accepted by Life
of Virginia, the Account Value equals the initial Premium Payment. Thereafter,
prior to the Maturity Date, the Account Value in each Investment Subdivision is
determined by multiplying the number of Accumulation Units in that Investment
Subdivision credited to the Policy by the current value of an Accumulation Unit
for that Investment Subdivision. The number of Accumulation Units is increased
by any Additional Premium Payments and any transfers into that Investment
Subdivision and decreased by the policy maintenance charge, the Annual Death
Benefit Charge any transfers out of that Investment Subdivision, and any full
or partial surrenders.
Value of Accumulation Units
The Accumulation Units of each Investment Subdivision are valued
separately. The value of Accumulation Units will change each Valuation Period
according to the investment performance of the shares purchased by each
Investment Subdivision and the deduction of certain charges from Account 4.
For each Investment Subdivision, the value of an Accumulation Unit for the
first Valuation Period was $10. The value of an Accumulation Unit in an
Investment Subdivision for each subsequent Valuation Period equals the value of
the Accumulation Unit as of the immediately preceding Valuation Period,
multiplied by the Net Investment Factor for that Investment Subdivision for the
Valuation Period for which the Accumulation Unit Value is being calculated. The
Net Investment Factor is a number representing the change in the value of
Investment Subdivision assets on successive Business Days due to investment
income, realized or unrealized capital gains or losses, deductions for taxes,
if any, and deductions for the mortality and expense risk charge and
administrative expense charge.
The value of an Accumulation Unit for a Valuation Period is the same for
each day in the period.
Transfers
Before Income Payments begin, the Owner may transfer amounts among and
between the Investment Subdivisions that are available at the time of the
request by sending a written request to the Home Office. Telephone transfers
are subject to Life of Virginia's administrative requirements. All transfers
will be effective as of the end of the Valuation Period during which the
written or telephone request is received at the Home Office.
Currently, there is no limit to the number of transfers that may be made;
however, Life of Virginia reserves the right to limit, upon written notice, the
number of transfers to twelve each calendar year or, if it is necessary in
order that the Policy will continue to receive annuity treatment by the
Internal Revenue Service, a lower number.
The first transfer in each calendar month will be made without charge.
Thereafter, each time a transfer is made, a transfer charge of $10 will be
deducted from the amount transferred. The transfer charge is Life of Virginia's
estimate of the average actual cost of present and future typical transfers.
Once a Policy is issued, the amount of the transfer charge is guaranteed for
the life of the Policy.
If the amount of Account Value remaining in an Investment Subdivision
after the transfer is less than $100, Life of Virginia will transfer the amount
remaining in addition to the amount requested. Life of Virginia will not allow
a transfer into any Investment Subdivision unless the Account Value of that
Investment Subdivision after the transfer is at least $100.
After Income Payments begin, if Variable Income Payments are being made,
Annuity Units may be transferred among the Investment Subdivisions at the
payee's request once each calendar year. No transfer charge will be imposed on
such transfers. The transfer will be effective as of the end of the Valuation
Period during which Life of Virginia receives written request at its Home
Office. The Income Payment amount on the date of the transfer will not be
affected by the transfer, although subsequent Variable Income Payments will
reflect the investment experience of the selected Investment Subdivisions.
If the number of Annuity Units remaining in an Investment Subdivision
after a transfer is less than 1, then this unit will also be transferred. In
addition, transfers are only permitted into an Investment Subdivision if, after
the transfer, the number of Annuity Units of that Investment Subdivision is at
least 1.
Where permitted by state law, Life of Virginia reserves the right to
refuse to execute any transfer, whether requested before or after income
payments begin, 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.
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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 Owners to make telephone transfers.
To request a telephone transfer, Owners 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
Owners may elect to have Life of Virginia automatically transfer specified
amounts from one of certain designated Investment Subdivisions of Account 4 to
any other available Investment Subdivision(s) on a monthly or quarterly basis.
This privilege is intended to permit Owners to utilize "Dollar-Cost Averaging,"
a long-term investment method that provides for regular level investments 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.
Owners must complete the Dollar-Cost Averaging section of the application
or a Dollar-Cost Averaging Agreement or call Life of Virginia's Telephone
Transfer Line at 800-772-3844 in order to participate in the Dollar-Cost
Averaging program. Currently, the Investment Subdivision available to allocate
money for the purpose of Dollar-Cost Averaging is the Money Market Fund of the
GE Investments Funds. Money may be allocated to this subdivision as initial
premium, additional premium or in the form of a transfer from other Investment
Subdivisions within Account 4. Any amount allocated must conform to the minimum
amount and percentage requirements, (See Purchasing the Policies, and
Allocation of Premium Payments.) The minimum transfer amount permitted by the
Dollar-Cost Averaging program is $100. A Dollar-Cost Averaging transfer will
not count toward the one free transfer available each month or any limit on the
number of transfers available each year, except to the extent necessary for the
Policy to continue to be treated as an annuity under applicable law.
Dollar-Cost Averaging will continue until the entire Account Value in the
subdivision designated for Dollar-Cost Averaging is depleted. Prior to that
time, the Owner may discontinue Dollar-Cost Averaging by sending Life of
Virginia a written cancellation notice or by calling Life of Virginia's
Telephone Transfer Line at 800-772-3844. Owners may initiate or 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
Dollar-Cost Averaging upon 30 days written notice to the Owner.
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 Account 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 Account 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 Policy Date,
or other date selected at the sole discretion of Life of Virginia, based on the
rebalancing frequency chosen by an Owner. Account 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 Account 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 and
Systematic Withdrawals concurrent with Portfolio Rebalancing. Life of Virginia
reserves the right to exclude
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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 Owners, Life of Virginia allows
the use of powers of attorney whereby Owners give third parties the right to
effect account value transfers on behalf of the Owners. However, when the same
third party possesses powers of attorney executed by many Owners, the result
can be simultaneous transfers involving large amounts of Account Value. Such
transfers can disrupt the orderly management of the Funds, can result in higher
costs to Owners, and are generally not compatible with the long-range goals of
purchasers of the 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 and this position is shared by the managements of
those Funds.
Therefore, to the extent necessary to reduce the adverse effects of
simultaneous transfers made by third parties holding multiple powers of
attorney, 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 Owners in whose names they are
submitted. However, these procedures will not prevent Owners from making their
own Account Value transfer requests.
Examination of Policy (Refund Privilege)
The Owner may examine the Policy and return it for refund within 10 days
after it is received. Unless state law requires that Premium Payments be
returned as the refund, the amount of the refund will equal the Account Value
with any adjustments required by applicable law or regulation on the date Life
of Virginia receives the Policy. If state law requires that Premium Payments be
returned, the amount of the refund will equal the greater of (1) the Account
Value (without reduction by any surrender charges) plus any amount deducted
from the Premium Payments prior to allocation to Account 4 or (2) the Premium
Payments made. In certain states the Owner may have more than 10 days to return
the policy for a refund. An Owner wanting a refund should return the Policy to
Life of Virginia at its Home Office.
DISTRIBUTIONS UNDER THE POLICY
Surrender
The Owner may make a full or partial surrender of the Policy at any time
before Income Payments begin by sending a written request to Life of Virginia
at its Home Office.
Life of Virginia will not permit a partial surrender that is less than
$500 or that reduces the Account Value of the Policy to less than $5,000
($2,000 for an IRA Policy). In the event that a partial surrender request would
reduce the Account Value to less than $5,000 ($2,000 for an IRA Policy), Life
of Virginia will surrender only that amount of Account Value that would reduce
the remaining Account Value to $5,000 ($2,000 for an IRA Policy) and deduct any
surrender charge from the amount surrendered.
The amount payable on full surrender of the Policy is the Surrender Value
at the end of the Valuation Period during which the request is received. The
Surrender Value equals the Account Value on the date Life of Virginia receives
a request for surrender less any applicable surrender charge. (See Surrender
Charge.) Any premium tax paid by Life of Virginia which has not been previously
deducted may also be deducted from the Surrender Value, as will any applicable
Annual Death Benefit Charge and the Policy Maintenance Charge. (See Annual
Death Benefit Charge, and Policy Maintenance Charge.) 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.) 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 Payment Under the Policies.)
Upon partial surrender, the Owner may indicate, in writing, from which
Investment Subdivisions the Account Value is to be transferred. If no such
written instruction is received with the partial surrender request, the Account
Value transferred out will be transferred from the Investment Subdivisions in
the same proportion that the Account Value in each Investment Subdivision bears
to the total Account Value on the date Life of Virginia receives the written
request. A portion of the Policy's surrender charge may be assessed at the time
a partial surrender is made. Any applicable surrender charge will be deducted
from the amount surrendered. (See Surrender Charge.)
Full and partial surrenders may have federal tax consequences. (See
Federal Tax Matters.)
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Systematic Withdrawals.
The Owner may elect in writing to make a series of partial surrenders in
equal installments, adding up, in a 12 month period beginning with the date of
the first payment, to an amount not to exceed 10% of the Account Value as of
the effective date of the partial surrender ("Systematic Withdrawals. A
surrender charge will not be imposed on Systematic Withdrawals. A surrender
charge will however be applied to any additional surrender(s) made during the
time Systematic Withdrawal payments are being made on amounts that when
combined with the Systematic Withdrawal amounts, are in excess of 10% for that
year, unless all surrender charges have expired, (See Surrender Charge).
Systematic Withdrawal payments count as partial surrenders with reduced
charges. (See Reduced Charges on Certain Surrenders).
Systematic Withdrawals will be made from any Investment Subdivisions to
which Account Value is allocated. Withdrawals will be made from each of the
designated Investment Subdivisions in the same proportion that the Account
Value in each Investment Subdivision bears to the total Account Value in all
Investment Subdivisions from which the withdrawals are to be made. At any time
while Systematic Withdrawals are being made, each of the designated Investment
Subdivisions from which withdrawals are being made must count as one of the ten
Investment Subdivisions to which the Account Value of the policy may be
allocated at any one time (See Allocation of Premium Payments).
After a series of Systematic Withdrawals has begun, the frequency and/or
amount of payments may be changed upon request by the Owner, subject to the
following rules:
1) only one such change may be requested in a calendar quarter;
2) if the maximum amount was not elected at the time the current series of
Systematic Withdrawals was initiated, the remaining payments may be increased;
3) the total amount to be withdrawn during that 12-month period, including
amounts already paid, remains limited to 10% of the Account Value at the time
the current series of Systematic Withdrawals was initiated; and
4) if the current series of Systematic Withdrawals is discontinued, any
remaining payments in the current 12-month period will be paid in a lump sum on
request.
Systematic Withdrawals may be discontinued at any time by the Owner(s) by
notifying Life of Virginia in writing or by calling the Telephone Transfer Line
at 800-772-3844. Life of Virginia reserves the right to discontinue Systematic
Withdrawals upon 30 days written notice to Owners. Otherwise, payments will
continue until the earlier of (i) the date on which a Systematic Withdrawal
reduces the Account Value for the entire policy below $5,000 ($2,000 for an
IRA), or (ii) the date on which the total Account Value in all Investment
Subdivisions designated for Systematic Withdrawals is insufficient to provide
further payments on the mode in effect.
If any Systematic Withdrawal would be or becomes less than $50, Life of
Virginia reserves the right to reduce the frequency of payments to an interval
that would result in each payment being at least $50. Life of Virginia also
reserves the right to prohibit simultaneous Systematic Withdrawals and
Dollar-Cost Averaging, (See Dollar-Cost Averaging). Additional rules regarding
Systematic Withdrawals, available payment modes, and instructions for electing
this option are available upon request.
The amount of each Systematic Withdrawal should be considered as a
distribution and taxed in the same manner as a partial surrender of the Policy.
However, there is some uncertainty regarding the tax treatment of Systematic
Withdrawals, and it is possible that additional amounts may be includible in
income. In addition, a 10% penalty tax may, subject to certain exceptions, be
imposed on any amounts includible in income due to Systematic Withdrawals. It
is uncertain whether Systematic Withdrawals would qualify for an exception to
this penalty tax for a series of substantially equal periodic payments made
over the life (or life expectancy) of the recipient or the joint lives (or
joint life expectancies) of the recipient and his or her beneficiary. For more
information, See the "Federal Tax Matters" discussion of Taxation of Systematic
Withdrawals.
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Death Provisions
Prior to the Maturity Date, if an Owner, Joint Owner, or Annuitant dies
while the Policy is in force, the Designated Beneficiary will be treated as the
sole owner of the Policy, subject to the distribution rules set forth below. A
Death Benefit may be payable to the Designated Beneficiary upon receipt by Life
of Virginia of Due Proof of Death satisfactory to Life of Virginia. The
Designated Beneficiary is determined by identifying the first person named in
the following list who is alive or in existence on the date of death:
(1) Owner
(2) Joint Owner
(3) Beneficiary
(4) Contingent Beneficiary
(5) Owner's estate
If Joint Owners both survive, they become the Designated Beneficiary
together. In such cases, for purposes of the distribution rules discussed
below, each Designated Beneficiary will be treated separately with respect to
each Designated Beneficiary's portion of the Policy.
Even if the Designated Beneficiary is treated as the sole owner of this
Policy, the death of the Designated Beneficiary will not be treated as the
death of an Owner for purposes of the Death Benefit provisions below, nor will
such death increase the time during which any required distributions from the
Policy may be made.
After the Maturity Date (including after income payments begin), if an
Owner, Joint Owner, Annuitant, or Designated Beneficiary dies while the Policy
is in force, payments that are already being 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 the Policy.
Death Benefit at Death of Annuitant. For Policies issued before May 1,
1997 (unless a later date is required by applicable state regulation), if the
Annuitant was age 80 or younger on the Policy Date, and dies prior to the
Maturity Date while the Policy is in force, the Designated Beneficiary may
elect a Death Benefit within 90 days of the date of such death.
During the first six Policy years, the Death Benefit will be the greater
of: (1) the total premiums paid, reduced by any applicable premium tax and any
partial surrenders plus their applicable surrender charge, and (2) the Account
Value on the date Life of Virginia receives Due Proof of Death. During
subsequent six year periods, the Death Benefit will be the greater of: (1) the
Death Benefit on the last day of the previous six year period, plus any
premiums paid since then, reduced by any applicable premium tax and any partial
surrenders plus their applicable surrender charges since then, and (2) the
Account Value on the date Due Proof of Death is received.
If the request for payment of the Death Benefit occurs more than 90 days
after the date of 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.
For Policies issued on or after May 1, 1997 (but not until the necessary
endorsement to the contract is approved under applicable state law), if the
Annuitant dies before Income Payments begin, the Designated Beneficiary may
elect to surrender the Policy for a Death Benefit by notifying Life of Virginia
of such election within 90 days of the date of the Annuitant's death. (This
election may not be available in all states.) If notification occurs more than
90 days after the date of the Annuitant's death, the Surrender Value will be
payable instead of the Death Benefit.
The Death Benefit will be the greater of (1) the minimum death benefit
(described below); or (2) the Account Value on the date Life of Virginia
received Due Proof of Death of the Annuitant. During the first six Policy
Years, or if the Annuitant was age 81 or older on the Policy Date, the minimum
death benefit is the total of premiums paid, less adjustments for any partial
surrenders. During any subsequent six year period if the Annuitant was age 80
or younger on the Policy Date, the minimum death benefit will be the Death
Benefit on the last day of the previous six year period, plus any premiums paid
since that day, less adjustments for any partial surrenders since that day.
Once the necessary endorsement is approved in the applicable state, Life
of Virginia will issue the endorsement to the contract and this Death Benefit
will be effective after that date. Until then the previously described death
benefit will apply.
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Without regard to when a Policy is issued, if the Death Benefit is elected
and paid, the Policy will terminate and Life of Virginia will have no further
obligation under the Policy.
In lieu of payment of the Death Benefit, the Designated Beneficiary may
elect to continue the Policy after the Annuitant's death, provided that the
distribution rules (described below) do not require distribution of the entire
value of the Policy.
If the Designated Beneficiary is eligible and elects to continue the
Policy, the Account Value on the date Life of Virginia received Due Proof
of Death of the Annuitant will be set equal to the Death Benefit on that
date. Any increase in the Account Value will be allocated to the Investment
Subdivisions using the premium allocation in effect at that time. If the
Policy is continued after death of the Annuitant, any Death Benefit payable
subsequently (at the death of the new Annuitant) will be based on the new
Annuitant's age on the Policy Date, rather than the age of the previously
deceased Annuitant.
If the Designated Beneficiary is not eligible to continue the Policy, the
Account Value on the date we receive Due Proof of Death of the Annuitant
will be set equal to the Death Benefit on that date and the distribution
rules will govern payment of proceeds.
Surrender charges will apply if the Policy is surrendered more than 90 days
after death of the Annuitant, without regard to whether or not the Account
Value was increased.
Elective Guaranteed Minimum Death Benefit Rider. If an Annuitant dies
prior to the Maturity Date while the Guaranteed Minimum Death Benefit Rider is
in effect, the Designated Beneficiary may elect the Death Benefit described
below within 90 days of the date of such death. If this Death Benefit is paid,
the Policy will terminate, and Life of Virginia will have no further obligation
under the Policy. THE GUARANTEED MINIMUM DEATH BENEFIT RIDER MAY NOT BE
AVAILABLE IN ALL STATES OR MARKETS.
The Death Benefit under the Guaranteed Minimum Death Benefit Rider will be
the greater of: (1) the Death Benefit described above under "Death Benefit at
Death of Annuitant," and (2) the greater of (A) the Guaranteed Minimum Death
Benefit, and (B) the Account Value of the Policy on the date Life of Virginia
receives proof of the Annuitant's death, or, if later, the date of the request.
The Guaranteed Minimum Death Benefit is, on the Policy Date, equal to the
premium paid. At the end of each Valuation Period after such date, the
Guaranteed Minimum Death Benefit is the lesser of: (1) the total of all
premiums received, multiplied by two, less the amount of any partial surrenders
made prior to or during that Valuation Period; or (2) the Guaranteed Minimum
Death Benefit at the end of the preceding Valuation Period, increased as
specified below, plus any additional premium payments during the current
Valuation Period and less any partial surrenders plus their applicable
surrender charges during the current Valuation Period.
The amount of the increase for the Valuation Period will be calculated by
applying a factor to the Guaranteed Minimum Death Benefit at the end of the
preceding Valuation Period. Until the anniversary on which the Annuitant
attains age 80, the factor is determined for each Valuation Period at an
effective annual rate of 6%, except that with respect to amounts invested in
certain Investment Subdivisions shown in the Policy, the increase factor will
be calculated as the lesser of: (1) the Net Investment Factor for the Valuation
Period, minus one, and (2) a factor for the Valuation Period equivalent to an
effective annual rate of 6%. Currently, these subdivisions include only the
money market Investment Subdivisions. With respect to amounts invested in the
Guarantee Account, Item (1) above is replaced with a factor for the Valuation
Period equivalent to the credited rate(s) applicable to such amounts.
If the Guaranteed Minimum Death Benefit Rider has been elected, it is
effective on the Policy Date and will remain in effect while the Policy is in
force and before income payments begin, or until the Policy Anniversary
following the date of receipt of the Owner's request to terminate the rider.
There will be a charge made each year for expenses related to the Death Benefit
available under the terms of the Guaranteed Minimum Death Benefit Rider. (See
Annual Death Benefit Charge). Amounts payable under the Guaranteed Minimum
Death Benefit Rider are subject to the distributions rules described below.
Elective Optional Death Benefit Rider. The elective optional death benefit
rider provides for an Annual Step-up in death benefit, as described below. If
an Annuitant dies before the Maturity Date while the Optional Death Benefit
Rider is in effect, the Designated Beneficiary may elect the Death Benefit
described below within 90 days of the date of such death. If this Death Benefit
is paid, the Policy will terminate, and Life of Virginia will have no further
obligation under the Policy. THE OPTIONAL DEATH BENEFIT RIDER MAY NOT BE
AVAILABLE IN ALL STATES OR MARKETS.
The Death Benefit under the Optional Death Benefit Rider is the greater
of: (1) the Death Benefit described above under "Death Benefit at Death of
Annuitant," and (2) the minimum Death Benefit described below.
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During the first Policy year, the minimum Death Benefit under the Optional
Death Benefit Rider is the total of premiums paid, adjusted for any partial
surrenders. After the first Policy year and until the Policy anniversary
immediately preceding the Annuitant's 81st birthday, the minimum Death Benefit
is the Policy's greatest Death Benefit on any previous Policy anniversary, plus
the total Premium Payments made since that date, less adjustments for any
partial surrenders taken since that date. Beginning on the Policy anniversary
immediately preceding the Annuitant's 81st birthday, the minimum Death Benefit
is the Policy's minimum Death Benefit on that date, plus the total Premium
Payments made since that date, less adjustments for any partial surrenders
taken since that date.
If the Optional Death Benefit Rider has been elected, it is effective on
the Policy Date (unless another effective date is shown on the Policy data
pages). It will remain in effect while the Policy is in force and before income
payments begin, or until the Policy Anniversary following the date of receipt
of the Owner's request to terminate the rider. There will be a charge made each
year for expenses related to the Death Benefit available under the terms of the
Optional Death Benefit Rider. (See "Annual Death Benefit Charge.") Amounts
payable under the Optional Death Benefit Rider are subject to the distribution
rules described below.
Distribution Rules. The Code requires that if an Owner dies before the
Maturity Date, the entire value of the Policy must generally be distributed
within five years of the date of the Owner's death. In the case of Joint
Owners, this requirement applies if either of the Joint Owners dies before the
Maturity Date. The following distribution rules are designed to comply with
these Code requirements, and are applicable upon the death of an Owner or Joint
Owner, including the death of an Annuitant who is also an Owner. These
distribution rules will not apply upon the death of an Annuitant, if the
Annuitant was not also an Owner of the Policy, all Owners of the Policy are
natural persons, and a contingent Annuitant survives. Even if no contingent
Annuitant is alive on the death of the Annuitant, if the Owner is a natural
person, that Owner will be the contingent Annuitant. Therefore, on the death of
the Annuitant, the distribution rules apply only if (1) the Annuitant was an
Owner, or (2) any Owner was not a natural person.
Prior to the Maturity Date, if the Designated Beneficiary is not the
surviving spouse of the deceased Owner, Joint Owner or Annuitant, then the
Surrender Value or the applicable Death Benefit will be paid in one lump sum
to, or for the benefit of, the Designated Beneficiary. Instead of receiving a
lump sum distribution, however, the Designated Beneficiary may elect: (1) to
receive the Surrender Value at any time during the five year period following
the death of the Owner, Joint Owner, or Annuitant by partially or totally
surrendering the Policy; or (2) to apply the entire Surrender Value (or
applicable Death Benefit) under optional payment plan 1 or 2 (described
beginning on p. 35), with the first payment to the Designated Beneficiary being
made within 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 this five year period following the date of death of
the Owner, Joint Owner, or Annuitant, and payments have not begun in accordance
with (2) above, then, in accordance with Code requirements and (1) above, Life
of Virginia will terminate the Policy at the end of that five year period and
will pay the Surrender Value to, or for the benefit of, the Designated
Beneficiary. After this, there will be no remaining value in the Policy. If the
Designated Beneficiary dies before all required payments have been made, Life
of Virginia will make any remaining payments to any person named in writing by
the Designated Beneficiary. Otherwise, Life of Virginia will pay the Designated
Beneficiary's estate.
Rather than the distribution rules described above, special rules apply if
the Designated Beneficiary is the surviving spouse of the deceased Owner, Joint
Owner, or Annuitant. In these cases, 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 one of the Death Benefits described
above available upon the Annuitant's death. On the surviving spouse's death,
the entire interest in the Policy will be paid within five years of such
spouse's death to the Designated Beneficiary named by the surviving spouse (and
if no Designated Beneficiary has been named, such payment will be made to the
surviving spouse's estate).
Restrictions on Distributions from Certain Policies
Section 830.105 of the Texas Government Code permits participants in the
Texas Optional Retirement Program (ORP) to withdraw their interest in a
variable annuity contract issued under the ORP only upon (1) termination of
employment in the Texas public institutions of higher education, (2)
retirement, (3) death, or (4) the participant's attainment of age 70 1/2.
Accordingly, before any amounts may be distributed from the contract, proof
must be furnished to Life of Virginia that one of these four events has
occurred.
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Similar restrictions apply to variable annuity contracts used as funding
vehicles for Code Section 403(b) retirement plans. Section 403(b) of the Code
provides for tax-deferred retirement savings plans for employees of certain
non-profit and educational organizations. In accordance with the requirements
of section 403(b), any Policy used for a 403(b) plan will prohibit
distributions of (i) elective contributions made in years beginning after
December 31, 1988, (ii) earnings on those distributions and (iii) earnings on
amounts attributable to elective contributions held as of the end of the last
year beginning before January 1, 1989. However, distributions of such amounts
will be allowed upon death of the employee, attainment of age 59 1/2,
separation from service, disability, or financial hardship, except that income
attributable to elective contributions may not be distributed in the case of
hardship.
CHARGES AND DEDUCTIONS
Charges Against Account 4
Mortality and Expense Risk Charge. A charge will be deducted from each
Investment Subdivision to compensate Life of Virginia for certain mortality and
expense risks assumed in connection with the Policies. The charge will be
deducted daily and equals .003446% for each day in a Valuation Period. The
effective annual rate of this charge, which is compounded daily, is 1.25% of
the average daily net assets of Account 4. Life of Virginia guarantees that
this charge of 1.25% will never increase.
The mortality risk assumed by Life of Virginia arises from its contractual
obligation to make Income Payments to each payee regardless of how long all
payees or any individual payee may live. Although Variable Income Payments will
vary in accordance with the investment performance of the shares purchased by
each Investment Subdivision, they will not be affected by the mortality
experience of persons receiving such payments or of the general population.
This assures each payee that neither the longevity of fellow payees nor an
improvement in life expectancy generally will have an adverse effect on the
Variable Income Payments received under the Policy. Mortality risk also arises
from the possibility that the Death Benefit will be greater than the Account
Value.
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 the
mortality and expense charge are not needed to cover mortality and expense
risks, Life of Virginia may use proceeds to finance distribution of the
Policies.
Administrative Expense Charge. A charge will be deducted from each
Investment Subdivision to compensate Life of Virginia for certain
administrative expenses incurred in connection with the Policies. The charge
will be deducted daily and equals .000411% for each day in a Valuation Period.
The effective annual rate of this charge, which is compounded daily, is .15% of
the average daily net assets of Account 4.
Policy Maintenance Charge
A charge of $25 will be deducted annually from the Account Value of each
Policy to compensate Life of Virginia for certain administrative expenses
incurred in connection with the Policies. The charge will be deducted at each
anniversary and at surrender. Life of Virginia will waive this charge if the
Account Value exceeds $75,000 at the time the charge is due. The policy
maintenance charge will compensate Life of Virginia for issuance, processing,
start-up and on-going administration expenses. These expenses include the cost
of processing applications, establishing Policy records, premium collection,
recordkeeping, processing Death Benefit claims, full or partial surrenders,
transfers, and reporting and overhead costs. Once a Policy is issued, the
amount of the Policy Maintenance Charge is guaranteed for the life of the
Policy.
The annual Policy Maintenance Charge will be allocated among the
Investment Subdivisions 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 time the charge is made. Other allocation
methods may be available upon request.
Annual Death Benefit Charge
There will be separate charges made each year for expenses related to the
Death Benefit available under the terms of an elected Guaranteed Minimum Death
Benefit Rider and/or Optional Death Benefit Rider. Life of Virginia deducts
these charges against the Account Value in Account 4 at each anniversary and at
surrender to compensate it for the increased risks associated with providing
the enhanced Death Benefit(s). If the Guarantee Account is available under the
Policy and the Account Value is not sufficient to cover the charge for the
Optional Death Benefit Rider, the charge will be deducted first from the
available Account Value, if any, and then from the Guarantee Account. Each
charge at full surrender will be a pro-rata portion of the annual charge.
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For the elective Guaranteed Minimum Death Benefit, Life of Virginia
guarantees that this charge will never exceed an annual rate of 0.35% of the
prior year's average Guaranteed Minimum Death Benefit. For the elective
Optional Death Benefit, Life of Virginia guarantees that this charge will never
exceed an annual rate of 0.25% of the Account Value.
Sales Charges
Life of Virginia incurs certain sales and other distribution expenses when
the Policies are issued. The majority of these expenses consist of commissions
paid for sales of these Policies; however, other distribution expenses are
incurred in connection with the printing of prospectuses, conducting seminars
and other marketing, sales, and promotional activities. To recover a portion of
these expenses, a surrender charge (also referred to as a contingent deferred
sales charge) is imposed on full and certain partial surrenders.
Set forth below is a general discussion of the amount and nature of the
charge, followed by a more technical explanation of how the charge is
calculated.
Surrender Charge
Surrender charges (also referred to as a contingent deferred sales charge)
will be imposed on full and partial surrenders that occur within six years of
any Premium Payments. Surrender charges are made to cover certain expenses
relating to the sale of the Policy, including commissions to registered
representatives and other promotional expenses. Surrender charges also apply to
proceeds received upon maturity if the Maturity Date occurs within six years of
receipt of a Premium Payment.
For Policies issued prior to May 1, 1998, surrender charges are deducted
from the amount surrendered. All or part of the amount surrendered may be
subject to charge. Any amount subject to charge is considered a surrender of
Premium Payments. Surrender charges are determined using the assumption that
Premium Payments are surrendered on a first-in first-out basis, up to the
amount surrendered. For each such Premium Payment, the charge is a percentage
of the Premium Payment (or portion thereof) surrendered.
For Policies issues on or after May 1, 1998, surrender charges are
deducted from the amount surrendered. All or part of the amount surrendered may
be subject to change. Amounts surrendered will be deducted first from any gain
in the Policy. Surrender charges are not assessed on amounts surrendered which
represent gain. For purposes of this section, "gain" is calculated as (a) plus
(b) minus (c) minus (d), but not less than zero where:
(1) is the Account Value on the date we receive your surrender request;
(2) is the total of any partial surrenders previously taken;
(3) is the total of premium payments made; and
(4) is the total of any gain previously surrendered.
For all Policies, the charge is calculated separately for each Premium
Payment at the time it is surrendered, as specified in the table below.
Number of Full
Completed Years Between Surrender Charge as a
The Date of Receipt of Premium Percentage of Premium
Payment and Date of Surrender Payment Surrendered
- -------------------------------- ----------------------
Less than 1 6%
1 6%
2 6%
3 6%
4 4%
5 2%
6 or more 0%
After all Premium Payments have been surrendered, any remaining Account
Value may be surrendered. Surrender charges do not apply after all Premium
Payments have been surrendered.
Reduced Charges on Certain Surrenders. For Policies issued before May 1,
1998, no surrender charge applies to the first surrender of the policy year, if
the amount surrendered is not more than 10% of the Account Value at the end of
the Valuation Period during which the surrender request is received. If the
first surrender of the policy year is a full surrender, or a partial surrender
of more than 10% of the Account Value, no surrender charge will apply to a
portion of the amount
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surrendered equal to 10% of the Account Value. Any remaining portion of the
amount surrendered may be subject to surrender charges, as described above. The
amount subject to charge will not exceed the amount surrendered.
For Policies issued after May 1, 1998, in addition to any gain, an amount
equal to 10% of the total premium payments can also be withdrawn each policy
year without a surrender charge (the "10% free withdrawal amount"). The 10%
free withdrawal amount is not cumulative from policy year to policy year. Any
amount surrendered in excess of (1) the gain on the date of surrender, plus (2)
10% of the total premium payments, will be the amount subject to a surrender
charge. For purposes of determining the applicable surrender charge, the amount
subject to a surrender charge will be deducted from premium payments on a
first-in, first-out basis. Amounts surrendered which are not subject to
surrender charge may be taken as a series of periodic payments instead of a
lump sum.
Waived Surrender Charges for Certain Payment Plans. Surrender charges
otherwise applicable will be waived if and to the extent that proceeds are not
distributed in a lump sum and are applied to optional payment plans 1, 2 (for a
period of five or more years) or 5.
Waiver of Surrender Charges in the Event of Hospital or Nursing Facility
Confinement. Surrender charges arising from a full surrender or one or more
partial surrenders occurring before income payments begin will be waived if:
An 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
Such confinement begins at least one year after the policy date; and
An Annuitant was age 80 or younger on the policy date; and
The request for the full or partial surrender, together with proof of such
confinement is received in the Home Office of Life of Virginia while the
Annuitant is confined or within 90 days after discharge from the facility.
For purposes of this provision, Annuitant means either the Annuitant,
Joint Annuitant or Final Annuitant, whichever is applicable.
The waiver of surrender charges in the event of hospital or nursing
facility confinement may not be available in all states or all markets.
Transfer Charges
The Owner may transfer amounts among the Investment Subdivisions.
Currently, there is no limit on the number of transfers that may be made;
however, Life of Virginia reserves the right to impose such a limit in the
future before Income Payments begin. 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 first transfer in each calendar month will be made without charge.
Thereafter, each time amounts are transferred during that calendar month, a
transfer charge of $10 will be deducted from the amount transferred to
compensate Life of Virginia for the costs in making the transfer. No transfer
charge is imposed on transfers occurring after Income Payments begin.
Premium Taxes
Life of Virginia may deduct a charge for any premium taxes incurred. The
premium tax rates incurred by Life of Virginia currently range from 0 to 3.5%.
Any applicable premium tax charge may be deducted from either the premium paid
or from proceeds, (including benefits for surrender, maturity and death).
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Other Taxes
Under present laws, Life of Virginia will incur state and local taxes
(other than premium or similar taxes) in several states. At present, Life of
Virginia is not making a charge for these taxes but it reserves the right to
charge for such taxes.
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
Account 4. Based upon this expectation, no charge is being made currently to
Account 4 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
Account 4.
Other Charges
Because Account 4 purchases shares of the Funds, the net assets of each
Investment Subdivision will reflect the investment advisory fee and other
expenses incurred by the investment portfolio of the Fund in which the
Investment Subdivision invests. For more information concerning these charges,
read the individual Fund prospectuses.
Reduction of Charges for Group Sales
The surrender charge 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 expenses incurred by Life of
Virginia in connection with the sale of the Policies. The entitlement to such a
reduction in such charge 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 Owner for a larger group are less than for a smaller group because
more Policies can be implemented with fewer sales contacts and less
administrative cost.
(2) The total amount of Premium Payments to be received from a group. Per
Policy sales and other expenses are generally proportionately less on larger
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.
(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.
Reductions in this charge will not be unfairly discriminatory against any
person including the affected owners and all other owners of the Policies.
Additional information about charge reductions is available from Life of
Virginia at its Home Office.
INCOME PAYMENTS
Monthly Income Benefit
Life of Virginia will pay a Monthly Income Benefit to the Owner beginning
on the Maturity Date if the Annuitant is still living. The Monthly Income
Benefit will be paid in the form of Variable Income Payments similar to those
described in Optional Payment Plan 1, Life Income with 10 Years Certain
(automatic payment plan), using the sex and settlement age of the Annuitant
instead of the payee, unless another election is made by the Owner.
Under the Life Income with 10 Years Certain plan, if the Annuitant lives
longer than ten 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. If the remaining payments are Variable Income Payments, the amount of
each payment to be discounted will be assumed equal to the value of the payment
amount on the date we receive Due Proof of Death. This discounted amount will
be paid in one sum. The Policy does not specify a maximum maturity age or
latest maturity date unless state law requires it.
Unless a different date is requested, the Maturity Date is the Policy
anniversary that the Annuitant reaches age 90. The Owner may change the
Maturity Date to any date at least 10 years after the date of the most recent
premium payment by sending Life of Virginia written notice before the Maturity
Date then in effect. The Policy does not specify a maximum maturity age or
latest maturity date unless state law requires it.
During the lifetime of the Annuitant and prior to the Maturity Date,
however, the Owner, or the Designated Beneficiary upon the Owner's death, may
elect by written notice to the Home Office, to receive proceeds in a lump sum
or under one of the optional payment plans described below. If the election is
being made by the Designated Beneficiary, only available plans may be chosen.
Income payments will be made monthly unless the Owner elects quarterly,
semi-annual or annual payments by written request to Life of Virginia.
Certain states prohibit the use of actuarial tables that distinguish
between men and women in determining benefits for annuity polices issued on the
lives of residents. Therefore, policies offered by this Prospectus on the lives
of residents of those states have annuity income payments which are based on
actuarial tables that do not differentiate on the basis of sex.
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Determination of Monthly Income Benefits
The Maturity Value will be equal to the Surrender Value on the date
immediately preceding the Maturity Date.
The initial Monthly Income Benefit under the automatic payment plan will
be calculated by multiplying (a) times (b) divided by (c) where: (a) is the
monthly payment per $1,000, shown under the optional payment plans for Life
Income with 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 less any
premium taxes paid by Life of Virginia that were not recouped previously by a
premium tax charge; and (c) is $1,000. (See Optional Payment Plans for
information about subsequent variable income payments.)
If at the time Income Payments begin, the Owner has not provided Life of
Virginia with a written election not to have federal income taxes withheld,
Life of Virginia must by law withhold such taxes from the taxable portion of
such Income Payments and remit that amount to the federal government. Also, in
some other circumstances, Life of Virginia may withhold taxes. (See Direct
Rollover and Mandatory Withholding Requirements, and Federal Income Tax
Withholding.) In addition, any proceeds applied under an optional payment plan
are subject to the imposition of a premium tax charge in those states which
impose such a tax upon annuitization, or deduction of the deferred premium tax
in those states which impose such a tax on Life of Virginia for premiums
received. (See Premium Taxes.)
Optional Payment Plans
Proceeds payable on the Maturity Date will be paid as described in the
Monthly Income Benefit section. Death and surrender proceeds will be paid in
one sum. Subject to the rules stated below, and to the Death Benefit and
distribution rules stated above, however, any part of death or surrender
proceeds can be left with us and paid under a payment plan. (For the tax
treatment of surrender proceeds and death benefits, see Taxation of Partial and
Full Surrenders, and Taxation of Death Benefit Proceeds.) Any proceeds left
with us will be applied to calculate the amount of the income. During the
Annuitant's life, the Owner may choose a payment plan. If a Beneficiary is
changed, then the payment plan selection is no longer in effect unless a
request to continue it is made. The Designated Beneficiary can choose a plan at
the death of the Annuitant if one has not been chosen.
Optional payment plans can provide either Fixed Income Payments or
Variable Income Payments as selected by the Owner or the payee. There are
currently five optional payment plans available. Optional payment plans 1
through 5 can be used to provide Fixed Income Payments while only optional
payment plans 1 and 5 are available to provide Variable Income Payments. A plan
and the form of the Income Payments may be designated in the application or by
notifying Life of Virginia in writing at its Home Office. If the payee is not a
natural person, consent of Life of Virginia is required prior to selecting a
plan.
The effect of choosing a Fixed Income Payment is that the minimum amount
of each Income Payment will be calculated on the date the first Income Payment
is made and will not change. If Fixed Income Payments are chosen, the proceeds
will be transferred to the General Account of Life of Virginia on the date the
Income Payments begin. Fixed Income Payments will be fixed in amount and
duration on that date, based on current rates for the optional payment plan
chosen and, if applicable, the age and sex of the payee. The current rates for
optional payment plans are based on interest, mortality and expense assumptions
made by Life of Virginia. The current rates may change from time to time but
will never be less than the guaranteed minimum rate described and shown in the
Policy form. For further information, the Owner should contact Life of Virginia
at its Home Office.
If the Owner, (or the Designated Beneficiary) elects to receive Variable
Income Payments under the applicable optional payment (Plan 1 or Plan 5), the
proceeds may be allocated among up to ten Investment Subdivisions. The first
Variable Income Payment is determined by the rate for the optional payment plan
chosen and the amount of proceeds applied to the plan. The dollar amount of
subsequent Income Payments will reflect the investment experience of the
selected Investment Subdivisions and is determined by means of Annuity Units.
The number of Annuity Units for an Investment Subdivision will be
determined when Income Payments begin and will remain fixed unless transferred.
(See Transfers.) 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 an Investment Subdivision; and (b) is the Annuity Unit Value for
that Investment Subdivision seven days before the first Income Payment is due.
For subsequent payments, 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.
For each Investment Subdivision, the Annuity Unit Value for the first
Valuation Period was $10. The Annuity Unit Value for each subsequent Valuation
Period is (a) times (b) times (c) where: (a) is the Net Investment Factor for
that period
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(See Statement of Additional Information -- Net Investment Factor.); (b) is
the Annuity Unit Value for the immediately preceding Valuation Period; and (c)
is the investment result adjustment factor.
The investment result adjustment factor recognizes an assumed interest
rate of 3% per year used in determining the amounts of the Income Payments.
This means that if the net investment experience of the Investment Subdivision
to which the Annuity Units apply for a given month exceeds the monthly
equivalent of 3% per year, the monthly payment will be greater than the
previous payment. If the net investment experience for such Subdivision is less
than the monthly equivalent of 3% per year, the monthly payment will be less
than the previous monthly payment.
Payments under Plans 1, 2, 3 or 5 will begin on the date we receive proof
of 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 4 is not available under Qualified Policies.
Under all of the optional payment plans, if any payment made more
frequently than annually would be or becomes less than $100, Life of Virginia
reserves 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
is less than $20, Life of Virginia will pay the Surrender Value in a lump sum.
Upon making such a payment, Life of Virginia will have no future obligation
under the Policy.
The fixed income options are shown below. Variable income options, if
applicable, have the same initial payment as the corresponding fixed option.
Plan 1 -- Life Income with Period Certain. 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 3% compounded yearly. Life of Virginia 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 Life of Virginia 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-2 -- Income for a Fixed Period. Equal 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 this plan
will earn interest at 3% compounded yearly. Life of Virginia may increase the
interest and the amount of any payment. If the payee dies, the amount of the
remaining guaranteed payments will be discounted to the date of the payee's
death at 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.
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. If Fixed Income Payments
are made under this plan, unpaid Proceeds will earn interest at 3% compounded
yearly. Life of Virginia may increase the interest rate; if the interest rate
is increased, 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. Periodic payments of interest earned from the
proceeds left with Life of Virginia will be paid. Payments can be annual,
semi-annual, quarterly, or monthly, and will begin at the end of the first
period chosen. Proceeds will earn interest at 3% compounded yearly. Life of
Virginia 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. This
plan is not available under Qualified Policies.
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. Payments will continue as long as
either payee is living. If Fixed Income Payments are made under this Plan, the
guaranteed amount payable under this plan will earn interest at 3% compounded
yearly. Life of Virginia may increase the interest rate and the amount of any
payment. 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 Income Payments. The discounted amount will be paid in
one sum to the survivor's estate unless otherwise provided.
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FEDERAL TAX MATTERS
Introduction
The following discussion is general in nature and is not intended as tax
advice. The federal income tax consequences associated with the purchase of a
Policy are complex, and the application of the pertinent tax rules to a
particular person may vary according to facts peculiar to that person.
This discussion is based on the law, regulations, and interpretations
existing on the date of this prospectus. These authorities, however, are
subject to change by Congress, the Treasury Department, and judicial decisions.
This discussion does not address state or other local tax consequences
associated with the purchase of a Policy. In addition, LIFE OF VIRGINIA MAKES
NO GUARANTEE REGARDING ANY TAX TREATMENT -- FEDERAL, STATE, OR LOCAL -- OF ANY
POLICY OR OF ANY TRANSACTION INVOLVING A POLICY.
Non-Qualified Policies
Premium Payments. A purchaser of a Policy that does not qualify for the
special tax treatment discussed below in connection with Policies used as
individual retirement annuities or used with other qualified retirement plans
may not deduct or exclude from gross income the amount of the premiums paid. In
this discussion, such a Policy is called a "Non-Qualified Policy".
Tax Deferral During Accumulation Period. In general, until distributions
are made or deemed to be made from a Non-Qualified Policy (as discussed below),
an Owner who is a natural person is not taxed on increases in the Account Value
resulting from the investment experience of Account 4. However, this rule
applies only if (1) the investments of Account 4 are "adequately diversified"
in accordance with Treasury Department regulations, and (2) Life of Virginia,
rather than the Owner, is considered the owner of the assets of Account 4 for
federal tax purposes.
(1) Diversification Requirements. Treasury Department regulations
prescribe the manner in which the investments of a separate account such as
Account 4 are to be "adequately diversified." Any failure of Account 4 to
comply with the requirements of these regulations would cause each Owner to be
taxable currently on the increase in the Account Value.
Account 4, through the Funds, intends to comply with the diversification
requirements prescribed by the Treasury Department regulations. Although Life
of Virginia does not control the investments of the Funds (other than the GE
Investments Funds), it has entered into agreements regarding participation in
the Funds which require the Funds to be operated in compliance with the
requirements prescribed by the Treasury Department.
(2) Ownership Treatment. 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 their contracts. In those circumstances,
income and gains from the separate account assets would be includible 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 regulations concerning investment
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated
asset [i.e. separate] account may cause the investor, rather than the insurance
company, to be treated as the owner of the assets in the account." This
announcement also stated that guidance would be issued by way of regulations or
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." As of the date of this prospectus, no such guidance
has been issued.
The ownership rights under the Policy are similar to, but different in
certain respects from, those 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 Account Values, and may be able to reallocate more
frequently, than in such rulings. These differences could result in an Owner
being considered, under the standard of those rulings, the owner of the assets
of Account 4. To ascertain the tax treatment of its Owners, Life of Virginia
requested, with regard to a policy similar to this Policy, a ruling from the
Service that it, and not its Owners, 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 regulations or
revenue rulings which the Treasury Department has stated it expects to be
issued, Life of Virginia has reserved the right to modify its practices to
attempt to prevent the Owner from being considered the owner of the assets of
Account 4.
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Frequently, if the Service or the Treasury Department 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 an Owner as the owner of the assets
of Account 4, that treatment might apply only on a prospective basis. However,
if the ruling or regulations were not considered to set forth a new position,
an Owner might retroactively be determined to be the owner of the assets of
Account 4.
An Owner who is not a natural person -- that is, an entity such as a
corporation or a trust -- generally is taxable currently on the annual increase
in the Account Value of a Non-Qualified Policy, unless an exception to this
general rule applies. Exceptions exist for, among other things, an Owner which
is not a natural person but which holds the Policy as an agent for a natural
person. The following discussion applies to Policies owned by natural persons.
In addition, if the Policy's Maturity Date occurs at a time when the
Annuitant is at an advanced age, such as over age 85, it is possible that the
Owner will be taxable currently on the annual increase in the Account Value.
Taxation of Partial and Full Surrenders. A distribution is made from a
Non-Qualified Policy upon the Policy's partial or full surrender. Any amount so
distributed upon a partial surrender is includible in income to the extent that
the Account Value immediately before the partial surrender exceeds the
"investment in the contract" at that time. The amount distributed upon a full
surrender is includible in income to the extent that the Policy's Surrender
Value exceeds the investment in the contract at the time of surrender. For
these purposes, the investment in the contract at any time equals the total of
the Premium Payments made for a Policy to that time, less any amounts
previously received from the Policy which were not included in income.
If an Owner transfers a Policy without adequate consideration to a person
other than the Owner's spouse (or to a former spouse incident to divorce), the
Owner will be taxed on the difference between his or her Account Value and the
investment in the contract at the time of transfer. In such case, the
transferee's investment in the contract will be increased to reflect the
increase in the transferor's income.
In addition, the Policy provides a Death Benefit that in certain
circumstances may exceed the greater of the Premium Payments and the Account
Value. As described elsewhere in this Prospectus, Life of Virginia imposes
certain charges with respect to the Death Benefit. It is possible that some
portion of those charges could be treated for federal tax purposes as a partial
surrender of the Policy.
All non-qualified annuity contracts which are issued after October 21,
1988 by Life of Virginia or any of its affiliates with the same person
designated as the Owner within the same calendar year will be aggregated and
treated as one contract for purposes of determining any tax on distributions.
The foregoing rules will apply to amounts distributed in connection with
the Waiver of Surrender Charges in the Event of Hospital or Nursing Facility
Confinement.
Taxation of Annuity Payments. Amounts may be distributed from a
Non-Qualified Policy as payments under one of the five optional payment plans.
In the case of optional payment plans other than Plan 4 (Interest Income),
typically a portion of each payment is includible in income when it is
distributed. Normally, the portion of a payment includible in income equals the
excess of the payment over the exclusion amount. The exclusion amount, in the
case of Variable Income Payments under Plans 1 and 5, is the amount determined
by dividing the "investment in the contract" allocated to that plan for the
Policy when the payments begin to be made (as defined above), adjusted for any
period-certain or refund feature, by the number of payments expected to be made
(determined by Treasury Department regulations). Also, in the case of Fixed
Income Payments under Plans 1, 2, 3, and 5, the exclusion amount is the amount
determined by multiplying the payment by the ratio of such investment in the
contract allocated to that plan, adjusted for any period-certain or refund
feature, to the Policy's "expected return" (determined under Treasury
Department regulations). However, payments which are received after the
investment in the contract has been fully recovered -- i.e., after the sum of
the excludable portions of the payments equal the investment in the contract --
will be fully includible in income. On the other hand, should the payments
cease because of the death of the Annuitant before the investment in the
contract has been fully recovered, the Annuitant (or, in certain cases, the
Designated Beneficiary) is allowed a deduction for the unrecovered amount.
If certain amounts such as the Death Benefit or Guaranteed Minimum Death
Benefit become payable in a lump sum from a Policy, it is possible that such
amounts might be viewed as constructively received and thus subject to tax,
even though not actually received. A lump sum will not be constructively
received if it is applied under an optional payment plan within 60 days after
the date on which it becomes payable. (Any optional payment plan selected must
comply with applicable minimum distribution requirements imposed by the Code.)
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In the case of Plan 4, the proceeds left with Life of Virginia are
considered distributed for tax purposes at the time Plan 4 takes effect, and
are taxed in the same manner as a full surrender of the Policy, as described
above. The periodic interest payments are includible in the recipient's income
when they are paid or made available. In addition, if amounts are applied under
Plan 3 when the payee is at an advanced age, such as age 80 or older, it is
possible that such amounts would be treated in a manner similar to that under
Plan 4.
Taxation of Systematic Withdrawals. In the case of Systematic Withdrawals,
described on page 28, the amount of each withdrawal should be considered as a
distribution and taxed in the same manner as a partial surrender of the Policy,
as described above. However, there is some uncertainty regarding the tax
treatment of Systematic Withdrawals, and it is possible that additional amounts
may be includible in income.
Taxation of Death Benefit Proceeds. Amounts may be distributed before the
Maturity Date from a Non-Qualified Policy because of the death of the Owner, a
Joint Owner, or the Annuitant. Such Death Benefit Proceeds are includible in
the income of the recipient as follows: (1) if distributed in a lump sum, they
are taxed in the same manner as a full surrender of the Policy, as described
above (substituting the Death Benefit Proceeds for the Surrender Value), or (2)
if distributed under an optional payment plan, they are taxed in the same
manner as annuity payments, as described above.
Penalty Tax on Premature Distributions. Subject to certain exceptions, a
penalty tax is also imposed on the foregoing distributions from a Non-Qualified
Policy, equal to 10 percent of the amount of the distribution that is
includible in income. The exceptions provide, however, that this penalty tax
does not apply to distributions made (1) on or after the recipient attains age
59-1/2, (2) because the recipient has become disabled (as defined in the tax
law), (3) on or after the death of the Owner, or if such Owner is not a natural
person, on or after the death of the primary annuitant under the Policy (as
defined in the tax law), or (4) as part of a series of substantially equal
periodic payments over the life (or life expectancy) of the recipient or the
joint lives (or life expectancies) of the recipient and his or her designated
beneficiary (as defined in the tax law). In the case of Systematic Withdrawals,
it is uncertain whether such distributions will qualify for exception (4)
above. If Systematic Withdrawals did qualify for this exception, any
modification of the Systematic Withdrawals could result in certain adverse tax
consequences. In addition, a transfer between Investment Subdivisions may
result in payments not qualifying for exception (4) above.
Assignments. An assignment or pledge of (or an agreement to assign or
pledge) a Non-Qualified Policy is taxed in the same manner as a partial
surrender, as described above, to the extent of the value of the Policy so
assigned or pledged. The investment in the contract is increased by the amount
includible as income with respect to such assignment or pledge, though it is
not affected by any other amount in connection with the assignment or pledge
(including its release).
Loss of Interest Deduction Where Policies are Held by or for the Benefit
of Certain Non-Natural Persons. In the case of Policies issued after June 8,
1997 to a non-natural taxpayer (such as a corporation or a trust), or held for
the benefit of such an entity, otherwise deductible interest may no longer be
deductible by the entity, regardless of whether the interest relates to debt
used to purchase or carry the Policy. However, this interest deduction
disallowance does not affect Policies where the income on such Policies is
treated under section 72(u) of the Code as ordinary income that is received or
accrued by the Owner during the taxable year. Entities that are considering
purchasing the Policy, or entities that will be beneficiaries with respect to a
Policy, should consult a tax advisor.
Qualified Policies
The following sections describe tax considerations of Policies used as
Individual Retirement Annuities or other qualified retirement plans ("Qualified
Policies"). Life of Virginia does not currently offer all of the types of
Qualified Policies described, and may not offer them in the future. Prospective
purchasers of Qualified Policies should therefore contact Life of Virginia's
Home Office to ascertain the availability of Qualified Policies at any given
time.
IRA Policies
Premium Payments. A Policy that meets certain requirements set forth in
the tax law may be used as an individual retirement annuity (i.e., an "IRA
Policy"). Both the amount of the Premium Payments that may be paid, and the tax
deduction that the Owner may claim for such Premium Payments, are limited under
an IRA Policy.
In general, the Premium Payments that may be made for any IRA Policy for
any year are limited to the lesser of $2,000 or 100 percent of the individual's
earned income for the year. Also, with respect to an individual who has less
income than his or her spouse, Premium Payments may be made by that individual
to an IRA Policy to the extent of the lesser of (1) $2,000, or (2) the sum of
(i) the compensation includible in such individual's gross income for the
taxable year and (ii) the
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compensation includible in the gross income of the individual's spouse for the
taxable year reduced by the amount allowed as a deduction for IRA contributions
to such spouse. An excise tax is imposed on IRA contributions that exceed the
law's limits.
The deductible amount of the Premium Payments made for an IRA Policy for
any taxable year is limited to the amount of the Premium Payments that may be
paid for the Policy for that year. Furthermore, a single person who is an
active participant in a qualified retirement plan (that is, a qualified
pension, profit-sharing, or annuity plan, a simplified employee pension plan, a
"SIMPLE" retirement account, or a "section 403(b)" annuity plan, as discussed
below) and who has adjusted gross income in excess of $40,000 may not deduct
Premium Payments, and such a person with adjusted gross income between $30,000
and $40,000 may deduct only a portion of such payments. Also, married persons
who file a joint return, one of whom is an active participant in a qualified
retirement plan, and who have adjusted gross income in excess of $60,000 may
not deduct Premium Payments, and those with adjusted gross income between
$50,000 and $60,000 may deduct only a portion of such payments. Additional
rules may apply.
In applying these and other rules applicable to an IRA Policy, all
individual retirement accounts and annuities owned by an individual are treated
as one contract, and all amounts distributed during any taxable year are
treated as one distribution.
Tax Deferral During Accumulation Period. Until distributions are made from
an IRA Policy, increases in the Account Value of the Policy are not taxed.
IRA Policies generally may not provide life insurance coverage, but they
may provide a death benefit that equals the greater of the premiums paid and
the contract value. The Policy provides a Death Benefit that in certain
circumstances may exceed the greater of the Premium Payments and the Account
Value. It is possible that the Policy's Death Benefit provisions could be
viewed as violating the prohibition on investment in life insurance contracts
with the result that the policy would not be viewed as satisfying the
requirements of an IRA Policy.
Taxation of Distributions and Rollovers. If all Premium Payments made to
an IRA Policy were deductible, all amounts distributed from the Policy are
included in the recipient's income when distributed. However, if nondeductible
Premium Payments were made to an IRA Policy (within the limits allowed by the
tax law), a portion of each distribution from the Policy typically is included
in income when it is distributed. In such a case, any amount distributed as an
annuity payment or in a lump sum upon death or a full surrender is taxed as
described above in connection with such a distribution from a Non-Qualified
Policy, treating as the investment in the contract the sum of the nondeductible
Premium Payments at the end of the taxable year in which the distribution
commences or is made (less any amounts previously distributed that were
excluded from income). Also in such a case, any amount distributed upon a
partial surrender is partially includible in income. The includible amount is
the excess of the distribution over the exclusion amount which in turn equals
the distribution multiplied by the ratio of the investment in the contract to
the Account Value.
In any event, subject to the direct rollover and mandatory withholding
requirements (discussed below) amounts may be "rolled over" from a qualified
retirement plan to an IRA Policy (or from one individual retirement annuity or
individual retirement account to an IRA Policy) without incurring tax if
certain conditions are met. Only certain types of distributions from qualified
retirement plans or individual retirement annuities may be rolled over.
Penalty Taxes. Subject to certain exceptions, a penalty tax is also
imposed on distributions from an IRA Policy equal to 10 percent of the amount
of the distribution includible in income. (Amounts rolled over from an IRA
Policy generally are excludable from income.) The exceptions provide, however,
that this penalty tax does not apply to distributions made (1) on or after age
59 1/2, (2) on or after death or because of disability (as defined in the tax
law), or (3) as part of a series of substantially equal periodic payments over
the life (or life expectancy) of the recipient or the joint lives (or joint
life expectancies) of the recipient and his or her designated beneficiary (as
defined in the tax law). In addition to the foregoing, failure to comply with a
minimum distribution requirement will result in the imposition of a penalty tax
of 50 percent of the amount by which a minimum required distribution exceeds
the actual distribution from an IRA Policy. Under this requirement,
distributions of minimum amounts from an IRA Policy as specified in the tax law
must commence by April 1 of the calendar year following the calendar year in
which the Annuitant attains age 70 1/2, or when he or she retires, whichever is
later. Further, after 1988, such distributions generally must begin by April 1
of the calendar year in which the employee attains age 70 1/2 regardless of
whether he or she has retired.
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Roth IRAs
Recently enacted Section 408A of the Code permits eligible individuals to
contribute to a type of IRA Policy known as a "Roth IRA." Roth IRAs differ from
other IRA Policies in several respects. Among the differences is that, although
Premium Payments to a Roth IRA are not tax deductible, "qualified
distributions" from a Roth IRA will be excludable from income. Additionally,
the eligibility and mandatory distribution requirements for Roth IRAs differ
from non-Roth IRA Policies.
Premium Payments. The maximum amount of contributions allowable for any
taxable year to all Roth IRAs maintained for an individual (the "contribution
limit") generally is the lesser of $2,000 and 100% of compensation for the
taxable year. The contribution limit is reduced by the amount of any deductible
and non-deductible contributions to a non-Roth IRA Policy. For individuals who
file a joint return and receive less compensation for the taxable year than
their spouse, special rules apply.
For taxpayers with adjusted gross incomes in excess of certain limits, no
contribution (or only a reduced contribution) to a Roth IRA is allowed. For
married individuals filing a joint return, the contribution limit is phased out
for adjusted gross incomes between $150,000 and $160,000. (Special rules apply
to married individuals filing separate returns.) For single individuals, the
contribution limit is phased out for adjusted gross incomes between $95,000 and
$110,000.
Rollovers. A rollover may be made to a Roth IRA only if it is a "qualified
rollover contribution." A "qualified rollover contribution" is a rollover
contribution to a Roth IRA from another Roth IRA or from a non-Roth IRA Policy,
but only if such rollover contribution meets the rollover requirements for IRA
Policies under section 408(d)(3) of the Code. In addition, a transfer may be
made to a Roth IRA directly from another Roth IRA or from a non-Roth IRA
Policy. Persons with adjusted gross incomes in excess of $100,000 or who are
married and file a separate return are not eligible to make a qualified
rollover contribution or a transfer in a taxable year from a non-Roth IRA
Policy to a Roth IRA.
In the case of a qualified rollover contribution or a transfer from a
non-Roth IRA Policy to a Roth IRA, any portion of the amount rolled over which
would be includible in gross income were it not part of a qualified rollover
contribution or a nontaxable transfer will be includible in gross income.
However, the 10 percent penalty tax on premature distributions generally will
not apply. If such a rollover occurs before January 1, 1999, any portion of the
amount rolled over which is required to be included in gross income must be
included ratably over the 4-taxable year period beginning with the taxable year
in which the rollover is made.
Conversions. All or part of amounts in a non-Roth IRA Policy may be
converted into a Roth IRA. Such a conversion can be made without taking an
actual distribution from the IRA Policy. For example, an individual may make a
conversion by notifying the IRA Policy issuer or trustee, whichever is
applicable. The conversion of an IRA Policy to a Roth IRA is a special type of
qualified rollover contribution. Hence, the IRA Policy participant must be
eligible to make a qualified rollover contribution in order to convert an IRA
Policy to a Roth IRA. A conversion typically will result in the inclusion of
some or all of the IRA Policy value in gross income, as described above.
UNDER SOME CIRCUMSTANCES, IT MAY NOT BE ADVISABLE TO ROLLOVER, TRANSFER,
OR CONVERT ALL OR PART OF A NON-ROTH IRA POLICY TO A ROTH IRA. WHETHER AN OWNER
SHOULD DO SO WILL DEPEND ON THE IRA POLICY OWNER'S PARTICULAR FACTS AND
CIRCUMSTANCES, INCLUDING, BUT NOT LIMITED TO, SUCH FACTORS AS WHETHER THE OWNER
IS QUALIFIED TO MAKE SUCH A ROLLOVER, TRANSFER, OR CONVERSION, HIS OR HER
FINANCIAL SITUATION, AGE, CURRENT AND FUTURE INCOME NEEDS, YEARS TO RETIREMENT,
CURRENT AND FUTURE TAX RATES, AND ABILITY AND DESIRE TO PAY CURRENT INCOME
TAXES WITH RESPECT TO AMOUNTS ROLLED OVER, TRANSFERRED, OR CONVERTED, AND
WHETHER SUCH TAXES MIGHT NEED TO BE PAID WITH WITHDRAWALS FROM THE OWNER'S ROTH
IRA (SEE DISCUSSION BELOW OF "NONQUALIFIED DISTRIBUTIONS" AND "PENDING
LEGISLATION"). PERSONS CONSIDERING A ROLLOVER, TRANSFER, OR CONVERSION SHOULD
CONSULT A QUALIFIED TAX ADVISOR.
Qualified Distributions. Any "qualified distribution" from a Roth IRA is
excludible from gross income. A "qualified distribution" is a payment or
distribution which satisfies two requirements. First, the payment or
distribution must be (a) made after the Owner attains age 59 1/2, (b) made
after the Owner's death, (c) attributable to the Owner being disabled, or (d) a
qualified first-time homebuyer distribution within the meaning of section
72(t)(2)(F) of the Code. Second, the payment or distribution must be made in a
taxable year that is at least five years after (a) the first taxable year for
which a contribution was made to any Roth IRA established for the Owner, or (b)
in the case of a payment or distribution properly allocable to a qualified
rollover contribution from a non-Roth IRA Policy (or income allocable thereto),
the taxable year in which the rollover contribution was made.
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Nonqualified Distributions. A distribution from a Roth IRA which is not a
qualified distribution is generally taxed in the same manner as a distribution
from a non-Roth IRA Policy. However, such a distribution will be treated as
made first from contributions to the Roth IRA to the extent that such
distribution, when added to all previous distributions from the Roth IRA, does
not exceed the aggregate amount of contributions to the Roth IRA. Generally,
all Roth IRAs are aggregated to determine the tax treatment of distributions.
Mandatory Distributions. Distributions of minimum amounts from a Roth IRA
need not commence at age 70 1/2. However, if the Owner dies before the entire
interest in a Roth IRA is distributed, any remaining interest in the Policy
must be distributed by December 31 of the calendar year containing the fifth
anniversary of the Owner's death, subject to certain exceptions.
As described in "Federal Tax Matters," there is some uncertainty regarding
the proper characterization of the Policy's death benefit for purposes of the
tax rules governing IRA Policies (which include Roth IRAs). Additionally, the
foregoing discusses the federal income tax consequences surrounding Roth IRAs
and does not address any state income tax consequences that may apply. Persons
intending to use the Policy in connection with a Roth IRA should seek competent
advice regarding these issues.
Pending Legislation. Pending legislation may modify these rules
retroactively to January 1, 1998
Simplified Employee Pension Plans
An employer may use a Policy to establish for an employee an individual
retirement annuity plan known as a "simplified employee pension plan" (or
"SEP"), if certain requirements set forth in the tax law are satisfied. Premium
Payments may be made into a Policy used in a SEP generally in accordance with
the rules applicable to individual retirement annuities, though with expanded
contribution limits. Such payments are deductible by the employer and are not
includible in the income of the employee. The taxation of distributed amounts
generally follows the rules applicable to individual retirement annuities. As
discussed above (See IRA Policies), there is some uncertainty regarding the
proper characterization of the Policy's Death Benefit provisions for purposes
of certain tax rules governing IRAs (which would include SEP IRAs). Employers
intending to use the Policy in connection with a SEP should seek competent tax
advice.
SIMPLE IRAs
Section 408(p) of the Code permits certain small employers to establish
"SIMPLE retirement accounts," including SIMPLE IRAs, for their employees. Under
SIMPLE IRAs, certain deductible contributions are made by both employees and
employers. SIMPLE IRAs are subject to various requirements, including limits on
the amounts that may be contributed, the persons who may be eligible, and the
time when distributions may commence. As discussed above (See IRA Policies),
there is some uncertainty regarding the proper characterization of the Policy's
Death Benefit provisions for purposes of certain tax rules governing IRAs
(which would include SIMPLE IRAs). Employers intending to use the Policy in
connection with a SIMPLE retirement account should seek competent tax advice.
Section 403(b) Annuities
Premium Payments. Premiums paid for a Policy on behalf of an employee by a
public educational institution or certain other tax-exempt employers are not
included in the employee's income if the Policy meets certain requirements set
forth in the tax law. There are a number of limitations on contributions to a
"Section 403(b) Policy". For example, Premium Payments made as elective
deferrals through a salary reduction agreement with an employee generally are
limited to $9,500 per year (or, if greater, $7,000 per year as adjusted by the
Service for cost of living increases). (Note that contributions to certain
other qualified retirement plans, such as Section 401(k) plans or to SEP plans,
by the Owner may reduce these limits on elective deferrals.) Other limitations
may be more restrictive.
In applying these and other rules applicable to a Section 403(b) Policy,
that Policy and all similar contracts purchased by the same employer for the
same employee are treated as one contract.
Tax Deferral During Accumulation Period. Until distributions are made from
a Section 403(b) Policy, increases in the Account Value are not taxed.
Purchasers should consider that the Policy provides a Death Benefit that
in certain circumstances may exceed the greater of the Premium Payments and the
Account Value. It is possible that such Death Benefit could be characterized as
an incidental death benefit. If the Death Benefit were so characterized, this
could result in currently taxable income to purchasers. In addition, there are
limitations on the amount of incidental death benefits that may be provided
under a Section 403(b) Policy. Even if the Death Benefit under the Policy were
characterized as an incidental death benefit, it is unlikely to violate those
limits unless the purchaser also purchases a life insurance contract as part of
his or her Section 403(b) Policy.
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Taxation of Distributions and Rollovers. If no portion of the premiums
paid into a Section 403(b) Policy were includible in the employee's income, all
amounts distributed from the Policy are included in the recipient's income when
distributed. However, if Premium Payments were made to a Section 403(b) Policy
which were includible in the employee's income, a portion of each distribution
from the Policy typically is included in income when it is distributed. In such
a case, any amount distributed as an annuity payment or in a lump sum upon
death or a full surrender is taxed as described above in connection with such a
distribution from a Non-Qualified Policy, treating as the investment in the
contract the sum of the Premium Payments made into the Policy which were not
excluded from income as of the time the distribution commences or is made (less
any amounts previously distributed that were excluded from income). Also in
such a case, any amount distributed upon a partial surrender is partially
includible in income. The includible amount is the excess of the distribution
over the exclusion amount, which in turn equals the distribution multiplied by
the ratio of the investment in the contract to the Account Value.
In any event, subject to the direct rollover and mandatory withholding
requirements (discussed below), amounts may be rolled over from a Section
403(b) Policy (or similarly qualifying contract) to another Section 403(b)
Policy (or similarly qualifying contract) or to an individual retirement
account or individual retirement annuity without incurring tax if certain
conditions are met. Only certain types of distributions may be rolled over.
Beginning in 1989, a Section 403(b) Policy is required to prohibit
distributions of amounts attributable to elective deferrals and earnings
thereon (made under a salary reduction agreement) prior to age 59 1/2,
separation from service, death or disability. Distributions of elective
deferrals (but not any income earned thereon) may nonetheless be permitted in
the case of hardship.
Penalty Taxes. Subject to certain exceptions, a penalty tax is also
imposed on distributions from a Section 403(b) Policy equal to 10 percent of
the amount of the distribution includible in income. (Amounts rolled over from
a Section 403(b) Policy generally are excludable from income, although various
withholding requirements may nonetheless apply to such amounts, as discussed
below). The exceptions provide, however, that this penalty tax does not apply
to distributions made (1) on or after age 59 1/2, (2) on or after death or
because of disability (as defined in the tax law), (3) as part of a series of
substantially equal periodic payments beginning after the employee separates
from service and made over the life (or life expectancy) of the employee or the
joint lives (or joint life expectancies) of the employee and his or her
designated beneficiary (as defined in the tax law), or (4) after separation
from service after attainment of age 55.
In addition to the foregoing, failure to comply with a minimum
distribution requirement will result in the imposition of a penalty tax of 50
percent of the amount by which a minimum required distribution exceeds the
actual distribution from a Section 403(b) Policy. Under this requirement,
distributions of minimum amounts specified by the tax law must generally
commence by April 1 of the calendar year following the calendar year in which
the employee attains age 70 1/2, or when he or she retires, whichever is later.
Deferred Compensation Plans of State and Local Governments and Tax-Exempt
Organizations
Section 457 of the Code permits employees of state and local governments
and tax-exempt organizations to defer a portion of their compensation without
paying current taxes. The employees must be participants in an eligible
deferred compensation plan. Generally, a Policy purchased by a state or local
government or a tax-exempt organization will not be treated as an annuity
contract for federal income tax purposes. Those who intend to use the Policies
in connection with such plans should seek competent tax advice.
Other Qualified Retirement Plans
Premium Payments. Premium Payments made by an employer for a Policy used
in connection with a pension, profit-sharing, or annuity plan qualified under
section 401 or 403(a) of the Code are deductible by the employer within certain
limits. Such payments are also excludable from the income of the employee
within certain limits.
Tax Deferral and Taxation of Distributions. The deferral of taxation on
Account Value increases and the tax treatment of distributed amounts (including
the penalty tax) described above in the case of IRA Policies and Section 403(b)
Policies generally applies with respect to amounts held under or distributed
from Policies used in connection with other qualified retirement plans. For
Policies and amounts distributed therefrom to be eligible for such treatment,
certain requirements specified in the tax law must be satisfied.
The Policy provides a Death Benefit that in certain circumstances may
exceed the greater of the Premium Payments and the Account Value. It is
possible that such Death Benefit could be characterized as an incidental death
benefit. There are limitations on the amount of incidental death benefits that
may be provided under pension and profit sharing plans. In addition, the cost
of providing such benefits may be currently includible in income.
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Legal and Tax Advice for Qualified Plans
The requirements of the tax law applicable to qualified retirement plans,
and the tax treatment of amounts held and distributed under such plans, are
quite complex. Accordingly, a prospective purchaser of a Policy to be used in
connection with any such plan should seek competent legal and tax advice
regarding the suitability of the Policy for the situation involved, the
applicable requirements, and the treatment of the rights and benefits under a
Policy so used.
Direct Rollover and Mandatory Withholding Requirements
If a Policy is used in connection with a pension, profit-sharing, or
annuity plan qualified under sections 401(a) or 403(a) of the Code, or is a
Section 403(b) Policy, any "eligible rollover distribution" from the Policy
will be subject to direct rollover and mandatory withholding requirements. An
eligible rollover distribution generally is any taxable distribution from a
qualified pension plan under section 401(a) of the Code, qualified annuity plan
under section 403(a) of the Code, or section 403(b) annuity or custodial
account, excluding certain amounts (such as minimum distributions required
under section 401(a)(9) of the Code and distributions which are part of a
"series of substantially equal periodic payments" made for the life or a
specified period of 10 years or more). Under these requirements, withholding at
a rate of 20 percent will be imposed on any eligible rollover distribution
received from the Policy. Unlike withholding on certain other amounts
distributed from the Policy, discussed below, the recipient cannot elect out of
withholding with respect to an eligible rollover distribution. However, this 20
percent withholding will not apply if, instead of receiving the eligible
rollover distribution, the plan participant elects to have it directly
transferred to certain qualified retirement plans. Prior to receiving an
eligible rollover distribution, the plan participant will receive notice (from
the plan administrator or Life of Virginia) explaining generally the direct
rollover and mandatory withholding requirements and how to avoid the 20 percent
withholding by electing a direct transfer.
Federal Income Tax Withholding
Amounts distributed from a Policy, to the extent includible in income
under the federal tax laws, are subject to federal income tax withholding. Life
of Virginia will withhold and remit a portion of such amounts to the U.S.
Government unless properly notified by the Owner or other payee, at or before
the time of the distribution, that he or she chooses not to have any amounts
withheld. In some instances, however, Life of Virginia may be required to
withhold amounts. (See the discussion above regarding withholding requirements
applicable to distributions from various qualified retirement plans including
Section 403(b) policies.)
GENERAL PROVISIONS
The Owner
The Owner or Joint Owners are designated in the policy. (Joint Owners own
the Policy equally with the right of survivorship.) The Owner or Joint Owners
may exercise all of the rights and privileges under the Policy, subject to the
rights of any beneficiary named irrevocably, and any assignee under an
assignment filed with Life of Virginia. Disposition of the Policy is subject to
the Policy's death provisions (See Death Provisions). If the Owner dies before
the Annuitant, the Designated Beneficiary will become the sole owner of the
Policy following such a death, subject to the distribution rules in the
Policy's death provisions. If the Owner does not name a Joint Owner or a
primary beneficiary or contingent Beneficiary, or if a Joint Owner or primary
beneficiary or contingent Beneficiary is not living (or in existence for
purposes of non-natural designations) at the Owner's death, ownership will pass
to the Owner's estate. The Designated Beneficiary, for purposes of the required
distribution rules of Section 72(s) of the Code, will receive the required
distribution if the Owner dies prior to the Maturity Date. The required
distribution is more fully described in Death Provisions.
The Annuitant
The Policy names the Owner or someone else as the Annuitant. A Contingent
Annuitant also may be named. If no Contingent Annuitant has been named, the
Owner shall be treated as the Contingent Annuitant at the death of the
Annuitant. Life of Virginia reserves the right to restrict the election of the
Contingent Annuitant to conform to its administrative procedures and within the
restrictions of federal and state law. 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).
The Beneficiary
One or more primary and contingent Beneficiary(ies) may be designated by
the Owner in an application or in a written request. If changed, the primary
beneficiary or contingent Beneficiary is as shown in the latest change filed
with Life of Virginia.
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Changes By the Owner
Prior to the Maturity Date and during the Annuitant's life, the Owner or
Joint Owner may be changed by written request to the Home Office if this right
is reserved. Such changes may give rise to taxable income and a 10% penalty
tax. (See Taxation of Partial and Full Surrenders.) The primary Beneficiary,
contingent Beneficiary and contingent Annuitant may also be changed if this
right is reserved.
To make a change, a 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 the Company. The change will
take effect as of the date the request is signed by the Owner. The change will
be subject to any payment made before the change is recorded by Life of
Virginia.
Evidence of Death, Age, Sex or Survival
Life of Virginia will require proof of death before it acts on Policy
provisions relating to the death of the Owner or other person(s). Life of
Virginia may also require proof of the age, sex or survival of any person or
persons before acting on any applicable Policy provision.
Joint Policy
The Policy may be purchased as a Joint Policy. In making this selection,
the Owner must name an Annuitant and contingent Annuitant. The Owner must also
relinquish any right to change the contingent Annuitant. An additional
contingent Annuitant may not be named if the Annuitant or contingent Annuitant
dies before the Maturity Date.
Under a Joint Policy, if both the Annuitant and contingent Annuitant are
alive at the Maturity Date, proceeds will be paid in the form of Variable
Income Payments under Optional Payment Plan 5, Joint Life and Survivor Income,
using the sexes, if permitted, and ages nearest birthday of the Annuitant and
contingent Annuitant. If only one is surviving at the Maturity Date, then
proceeds will be paid in the form of Variable Income Payments under Optional
Payment Plan 1, Life Income with 10 Years Certain, using the sex, if permitted,
and settlement age of such survivor.
Payment under the Policies
Life of Virginia will usually pay any amounts payable as a result of full
or partial surrender within seven days after it receives a written request at
its Home Office in a form satisfactory to it. Life of Virginia will usually pay
any Death Benefit within seven days after it receives Due Proof of Death.
Amounts payable as a result of full or partial surrender, death of the
Annuitant or the Maturity Date 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; or (ii) the Commission by order permits postponement for the
protection of Owners; or (iii) an emergency exists, as determined by the
Commission, as the 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 Account 4.
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.
If, at the time the Owner makes a full or partial surrender request, he or
she has not provided Life of Virginia with a written election not to have
federal income taxes withheld, Life of Virginia must by law withhold such taxes
and remit that amount to the federal government. Moreover, the Code provides
that a 10% penalty will be imposed on certain early surrenders. (See Federal
Tax Matters.)
Any Death Benefit proceeds that are paid in one lump sum will include
interest from the date of receipt of Due Proof 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 applicable law.
DISTRIBUTION OF THE POLICIES
The Policies will be sold by individuals who, in addition to being
licensed to sell variable annuity policies for Life of Virginia, are also
registered representatives of Capital Brokerage Corporation (doing business in
Indiana and Texas as GE 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,
an affiliate of Life of Virginia, is a Washington corporation located at 6630
West Broad Street, Richmond, Virginia 23230. Capital Brokerage Corporation is
registered with the Commission under the Securities Exchange Act of 1934 as a
broker-dealer and is a member of the National Association
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of Securities Dealers, Inc. Capital Brokerage Corporation also serves as
principal underwriter for variable life insurance policies issued by Life of
Virginia. No amounts have been retained, however, 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. Commissions depend on the premiums paid. The
agent will receive a commission of 3% of the initial premium paid and any
Additional Premium Payments.
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 based in part on the
level of agent commissions in their management units. Broker-dealers and their
registered agents will receive first-year and subsequent year commissions
equivalent to the total commissions and benefits received by the field
management and writing agents of Life of Virginia.
VOTING RIGHTS AND REPORTS
To the extent required by law, Life of Virginia will vote the Funds'
shares held in Account 4 at regular and special shareholder meetings of the
Funds, in accordance with instructions received from persons having voting
interests in Account 4. If, however, the 1940 Act 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.
Before Income Payments begin, the Owner exercises the voting rights under
the Policy. After Income Payments begin, the person receiving the Income
Payments has the voting interests. Before Income Payments begin, the number of
votes which each Owner has the right to instruct will be determined for a
portfolio by dividing a Policy's Account Value in the subdivision investing in
that portfolio by the net asset value per share of the portfolio. Fractional
shares will be counted. After Income Payments begin, the number of votes after
the first Income Payment is received will be determined by dividing the reserve
for such Policy allocated to the Investment Subdivision by the net asset value
per share of the corresponding portfolio. After Income Payments begin, the
reserves attributable to a Policy decrease as the reserves allocated to the
Investment Subdivision decrease. Fractional shares will be counted.
The number of votes which the Owner has the right to instruct will be
determined as of the date coincident with the date 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.
The Funds serve as investment vehicles for variable life insurance
policies sold by Life of Virginia as well as for other variable life insurance
and variable annuity policies sold by insurers other than Life of Virginia and
funded through other separate investment accounts. Persons owning all such
other policies as well as the persons receiving income payments under all such
other policies will enjoy similar voting rights. Life of Virginia will vote
Fund shares held in Account 4 as to which no timely instructions are received,
and Fund shares held in Account 4 that it owns as a consequence of accrued
charges under the Policies and other variable annuity policies supported by
Account 4, in proportion to the voting instructions which are received with
respect to all policies funded through Account 4. Each person having a voting
interest will receive proxy materials, reports and other materials relating to
the appropriate portfolio.
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 4. 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
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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.
LEGAL PROCEEDINGS
Life of Virginia and its subsidiaries, like other life insurance
companies, are involved in lawsuits, including class action lawsuits. In some
class action and other lawsuits involving insurers, substantial damages have
been sought and/or material settlement payments 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 ate reasonably likely to have a material adverse impact on Account 4 or
Life of Virginia.
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STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Page
-----
The Life Insurance Company of Virginia .............................. 3
The Policies ........................................................ 3
Transfer of Annuity Units ........................................... 3
Net Investment Factor ............................................... 3
Termination of Participation Agreements ............................. 4
Calculation of Performance Data ..................................... 4
Money Market Investment Subdivisions ................................ 4
Other Investment Subdivisions ....................................... 5
Federal Tax Matters ................................................. 9
Taxation of Life of Virginia ........................................ 9
IRS Required Distributions .......................................... 9
General Provisions .................................................. 9
Using the Policies as Collateral .................................... 9
Non-Participating ................................................... 9
Misstatement of Age or Sex .......................................... 9
Incontestability .................................................... 10
Statement of Values ................................................. 10
Written Notice ...................................................... 10
Distribution of the Policies ........................................ 10
Legal Developments Regarding Employment-Related Benefit Plans ....... 10
Additions, Deletions, or Substitutions .............................. 10
State Regulation of Life of Virginia ................................ 11
Legal Matters ....................................................... 11
Experts ............................................................. 11
Change in Auditors .................................................. 11
Financial Statements ................................................ 11
Dated May 1, 1998
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, Virginia 23230
A Statement of Additional Information containing more detailed information
about the Policy and Account 4 is available free by writing Life of Virginia at
the address above or by calling (800) 352-9910.
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SUPPLEMENT TO PROSPECTUS
FOR LIFE OF VIRGINIA SEPARATE ACCOUNT 4
General Information
Contributions and/or transfers to a Guarantee Account, as described below,
become part of the General Account of Life of Virginia. Because of exemptive
and exclusionary provisions, interests in the General Account have not been
registered under the Securities Act of 1933 (the "1933 Act"), and the General
Account is not registered as an investment company under the Investment Company
Act of 1940 (the "1940 Act"). Accordingly, neither the General Account nor any
interests therein are subject to the provisions of the 1933 Act or the 1940
Act, and the information in this supplement has not been reviewed by the staff
of the Securities and Exchange Commission. Disclosure regarding a Guarantee
Account and the General Account, however, may be subject to certain generally
applicable provisions of the federal securities laws relating to the accuracy
and completeness of statements made in prospectuses.
The Guarantee Account
The Owner may allocate premium payments to the Guarantee Account(s) or
transfer amounts between the Guarantee Account(s) and the Investment
Subdivisions of Account 4. Upon maturity or surrender of the Policy, any amount
in a Guarantee Account is added to the Account Value in Account 4, and, after
deduction of any applicable surrender charge, is paid in a lump sum, or applied
under an optional payment plan (See Income payments).
Each time a Policyowner allocates purchase payments or transfer funds to
the Guarantee Account, Life of Virginia establishes an interest rate guarantee
period. Each interest rate guarantee period is guaranteed an interest rate for
a specified period of time (the available interest rate guarantee periods are
shown in your policy form). At the end of the interest rate guarantee period, a
new interest rate will be come effective, and a interest rate guarantee period
will commence for any remaining portion of that particular allocation. Interest
rates are determined by Life of Virginia in its sole discretion. The
determination made will be influenced by, but not necessarily correspond to,
interest rates available on fixed income investments which the Company may
acquire with the amounts it receives as premium payments or transfers of
Account Value under the Policies. A Policyowner will have no direct or indirect
interest in these investments. Life of Virginia will also consider other
factors in determining the interest rates, for the interest rate guarantee
period, including, but not limited to, regulatory and tax requirements, sales
commissions, and administrative expenses borne by the Company, general economic
trends, and competitive factors. Amounts allocated to the Guarantee Account
will not share in the investment performance of the General Account of Life of
Virginia, or any portion thereof. THE COMPANY'S MANAGEMENT WILL MAKE THE FINAL
DETERMINATION OF THE INTEREST RATES IT DECLARES FOR AN INTEREST RATE GUARANTEE
PERIOD. LIFE OF VIRGINIA CANNOT PREDICT OR GUARANTEE THE LEVEL OF INTEREST
RATES IN FUTURE INTEREST RATE GUARANTEE PERIODS. HOWEVER, THE INTEREST RATES
FOR ANY INTEREST RATE GUARANTEE PERIOD WILL BE AT LEAST THE GUARANTEED INTEREST
RATE SHOWN IN YOUR POLICY FORM.
Life of Virginia reserves the right to credit bonus interest on premium
allocated to a Guarantee Account participating in a Dollar-Cost Averaging
program. (This may not be available to all classes of policies.)
Charges
The Mortality and Expense Risk and Administrative Expense charges are not
deducted from the Guarantee Account(s). Such charges are borne solely by the
Separate Account. The Annual Policy Maintenance Charge and the Annual Death
Benefit Charge, if applicable, will be deducted from the Guarantee Account(s)
if there is no account value in the Separate Account. If there is insufficient
account value in the Separate Account at the time the charges are deducted, the
excess of these charges over the amount deducted from the Separate Account will
be deducted from the Guarantee Account(s). (See Policy Maintenance Charge).
Surrender charges apply to account values allocated to a Guarantee Account
in the same manner in which these charges apply to account values allocated to
the Separate Account.
Transfers
The Owner may transfer amounts between a Guarantee Account and the
available Investment Subdivisions of Account 4. Transfers will be effective on
the date the Owner's transfer request is received by Life of Virginia. With
respect to transfers between a Guarantee Account and the available Investment
Subdivisions, the following restrictions may be imposed:
<PAGE>
Transfers from any particular allocation to a Guarantee Account to an
Investment Subdivision may be made only during the 30 day period
beginning with the end of the preceding interest rate guarantee period
applicable to that particular allocation. Life of Virginia may limit the
amount which may be transferred to the Investment Subdivisions. For any
particular allocation to a Guarantee Account, the limited amount will not
be less than (a) any accrued interest on that allocation, plus (b) 25% of
the original amount of that allocation.
No transfers from an Investment Subdivision to a Guarantee Account may be
made during the six month period following the transfer of any amount
from a Guarantee Account to any Investment Subdivision.
In all other respects, the rules and charges applicable to transfers
between the available Investment Subdivisions of Account 4 will apply to
transfers involving a Guarantee Account.
Dollar-Cost Averaging
As an alternative to the Dollar-Cost Averaging program described in the
prospectus (See "Dollar-Cost Averaging"), Owners may elect to have Life of
Virginia automatically transfer specified amounts from a Guarantee Account to
any available Investment Subdivision on a monthly or quarterly basis. To make
the election, Owners must complete the Dollar-Cost Averaging section of the
application or a Dollar-Cost Averaging Agreement. Money may be allocated to a
Guarantee Account as an initial or additional premium or in the form of a
transfer of Account Value from one or more Investment Subdivisions. Such
allocations must comply with all applicable minimum amount and percentage
requirements (See "Purchasing the Policies" and "Allocation of Premium
Payments") as well as the rules applicable to transfers to the Guarantee
Account(s). Apart from automatic transfers under a Dollar-Cost Averaging
program, all rules regarding transfers from the Guarantee Account(s) will
apply.
Owners may designate the amount allocated to a Guarantee Account that is
subject to the Dollar-Cost Averaging program. Life of Virginia reserves the
right to limit the minimum amount of each automatic transfer to 10% per month
of the amount so designated. Each automatic transfer, as described above, will
be made on a first-in first-out basis until the entire value of the designated
amount in a Guarantee Account is depleted. Prior to that time, an Owner may
discontinue such automatic transfers by sending Life of Virginia written
notice.
Life of Virginia reserves the right to transfer any remaining portion of
an allocation used for Dollar-Cost Averaging to a Guarantee Account with a new
one year interest rate guarantee period upon termination of the Dollar-Cost
Averaging program for that allocation. Life of Virginia also reserves the right
to discontinue or modify this alternative Dollar-Cost Averaging program at any
time for any reason on 30 days written notice to the Owner.
Surrenders
Surrenders may be made from the Guarantee Account(s) in addition to the
Account 4. (See "Distributions Under the Policy.") If a partial surrender is
requested, the Owner may specify the Guarantee Account(s) from which the
deduction should be made. If no Guarantee Account is specified, the amount of
the partial surrender will be deducted first from the Investment Subdivisions
of the Separate Account on a pro-rata basis, in proportion to the Account Value
in the Separate Account. Any amount remaining will be deducted from the
Guarantee Account(s). Deductions from the Guarantee Account(s) will be taken
from the amounts (including interest credited to such amounts) which have been
in the Guarantee Account(s) for the longest period of time.
Deferral of Payment
Life of Virginia may defer payment of any amount from the Guarantee
Account(s) for up to six months. Payment will not be deferred if applicable law
requires earlier payment, or if the amount payable is to be used to pay
premiums on policies in force with Life of Virginia.
THE GUARANTEE ACCOUNT MAY NOT BE AVAILABLE IN ALL STATES OR MARKETS
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, Virginia 23230
<PAGE>
PART B
THE LIFE INSURANCE COMPANY OF VIRGINIA
SEPARATE ACCOUNT 4
STATEMENT OF ADDITIONAL INFORMATION
FOR THE FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY POLICY
FORM P1143 4/94
OFFERED BY
THE LIFE INSURANCE COMPANY OF VIRGINIA
(A VIRGINIA STOCK CORPORATION)
6610 W. BROAD STREET
RICHMOND, VIRGINIA 23230
This Statement of Additional Information expands upon subjects discussed in
the current Prospectus for the above-named Flexible Premium Variable Deferred
Annuity Policy ("Policy") offered by The Life Insurance Company of Virginia. You
may obtain a copy of the Prospectus dated May 1, 1998 by calling (800) 352-9910,
or writing to The Life Insurance Company of Virginia, 6610 W. Broad Street,
Richmond, Virginia 23230. Terms used in the current Prospectus for the Policy
are incorporated in this Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS
NOT A PROSPECTUS AND SHOULD BE READ ONLY
IN CONJUNCTION WITH THE PROSPECTUS FOR THE POLICY.
Dated May 1, 1998
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
Page
-----
<S> <C>
The Life Insurance Company of Virginia .............................. 3
The Policies ........................................................ 3
Transfer of Annuity Units .......................................... 3
Net Investment Factor .............................................. 3
Termination of Participation Agreements ............................. 4
Calculation of Performance Date ..................................... 4
Money Market Investment Subdivisions ............................... 4
Other Investment Subdivisions ...................................... 5
Federal Tax Matters ................................................. 9
Taxation of Life of Virginia ....................................... 9
IRS Required Distributions ......................................... 9
General Provisions .................................................. 9
Using the Policies as Collateral ................................... 9
Non-Participating .................................................. 9
Misstatement of Age or Sex ......................................... 9
Incontestability ................................................... 10
Statement of Values ................................................ 10
Written Notice ..................................................... 10
Distribution of the Policies ........................................ 10
Legal Developments Regarding Employment-Related Benefit Plans ....... 10
Additions, Deletions, or Substitutions of Investments ............... 10
State Regulation of Life of Virginia ................................ 11
Legal Matters ....................................................... 11
Experts ............................................................. 11
Change in Auditors .................................................. 11
Financial Statements ................................................ 11
</TABLE>
THE LIFE INSURANCE COMPANY OF VIRGINIA
The Life Insurance Company of Virginia ("Life of Virginia") has operated as
a stock life insurance company since March 21, 1871 under a charter granted by
the Commonwealth of Virginia and has done business continuously since that time
as "The Life Insurance Company of Virginia."
Eighty percent of the capital stock of Life of Virginia is owned by General
Electric Capital Assurance Company. The remaining 20% is owned by GE Financial
Assurance Holdings, Inc. General Electric Capital Assurance Company and GE
Financial Assurance, Inc. are indirectly, wholly-owned subsidiaries of GE
Capital. GE Capital is a diversified financial services company. GE Capital's
subsidiaries consist of commercial and industrial specialized, mid-market and
indirect consumer financing businesses. GE Capital's indirect parent, General
Electric Company, founded more than one hundred years ago by Thomas Edison, is
the world's largest manufacturer of jet engines, engineering plastics, medical
diagnostic equipment and large-sized electric power generation equipment.
GNA Corporation indirectly owns the stock of Capital Brokerage Corporation
(a broker/dealer registered with the Commission, which acts as principal
underwriter for the Policies).
THE POLICIES
Transfer of Annuity Units
Upon the Owner's request, Annuity Units may be transferred once per
calendar year from the Investment Subdivision in which they are currently held.
However, 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 the Investment Subdivisions invest. The amount of the
increase in the number of Annuity Units for the Investment Subdivision to which
the transfer is made is (a) times (b) divided by (c) where: (a) is
<PAGE>
the number of Annuity Units for the Investment Subdivision in which the Annuity
Units are currently held; (b) is the Annuity Unit Value for the Investment
Subdivision in which the Annuity Units are currently held; and (c) is the
Annuity Unit Value for the Investment Subdivision to which the transfer is made.
If the number of Annuity Units remaining in an Investment Subdivision after
the transfer is less than 1, Life of Virginia will transfer the amount remaining
in addition to the amount requested. Life of Virginia will not transfer into any
Investment Subdivision unless the number of Annuity Units of that Investment
Subdivision after the transfer is at least 1. The amount of the Income Payment
as of the date of the transfer will not be affected by the transfer.
Net Investment Factor
The Net Investment Factor measures investment performance of the Investment
Subdivisions of Account 4 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 available under the policies 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 .003857% for each day in the Valuation
Period. This corresponds to 1.25% and 0.15% per year of the net assets of
that Investment Subdivision for mortality and expense risks, and for
administrative expenses, respectively.
The value of the assets in Account 4 will be taken at their fair market
value in accordance with generally accepted accounting practices and applicable
laws and regulations.
TERMINATION OF PARTICIPATION AGREEMENTS
The participation agreements pursuant to which the Funds sell their shares
to Account 4 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, if the Fund ceases to qualify as a regulated
investment company under the 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
condition 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 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.
<PAGE>
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 its shares to Separate Account
4.
CALCULATION OF PERFORMANCE DATA
From time to time, Life of Virginia may disclose total return, yield, and
other performance data for the Investment Subdivisions pertaining to the
Policies. Such performance data will be computed, or accompanied by performance
data computed, in accordance with the standards defined by the Securities and
Exchange Commission.
The calculations of yield, total return, and other performance data do not
reflect the effect of any premium tax that may be applicable to a particular
Policy. Premium taxes currently range from 0% to 3.5% of premium based on the
rules of the state in which the Policy is sold.
"Money Market" Investment Subdivisions
From time to time, advertisements and sales literature may quote the yield
of one or more of the "money market" Investment Subdivisions for a seven-day
period, in a manner which does not take into consideration any realized or
unrealized gains or losses on shares of the corresponding money market
investment portfolio or on its portfolio securities. This current annualized
yield is computed by determining the net change (exclusive of unrealized gains
and losses on the sale of securities and unrealized appreciation and
depreciation and income other than investment income) at the end of the seven-
day period in the value of a hypothetical account under a Policy having a
balance of one unit in that "money market" Investment Subdivision at the
beginning of the period, dividing such net change in account value by the value
of the account at the beginning of the period to determine the base period
return, and annualizing the result on a 365-day basis. The net change in account
value reflects: 1) net income from the investment portfolio attributable to the
hypothetical account; and 2) charges and deductions imposed under the Policy
which are attributable to the hypothetical account. The charges and deductions
include the per unit charges for the policy maintenance charge, administrative
expense charge, annual death benefit charge and the mortality and expense risk
charge. For purposes of calculating current yields for a Policy, an average per
unit policy maintenance charge is used. Current Yield will be calculated
according to the following formula:
Current Yield = ((NCP - ES)/UV) X (365/7)
where:
NCP = the net change in the value of the investment portfolio (exclusive of
realized gains or losses on the sale of securities and unrealized
appreciation and depreciation and income other than investment
income) for the seven-day period attributable to a hypothetical
account having a balance of one Investment Subdivision unit.
ES = per unit expenses of the hypothetical account for the seven-day
period.
UV = the unit value on the first day of the seven-day period.
The current yields for the "money market" Investment Subdivisions of
Account 4 available under the policy, based on the seven-day period ending
December 31, 1997 were:
GE Investments Funds, Inc. 3.93%
The effective yield of a "money market" Investment Subdivision determined
on a compounded basis for the same seven-day period may also be quoted. The
effective yield is calculated by compounding the base period return according to
the following formula:
Effective Yield = (1+((NCP - ES)/UV))365/7 - 1
where:
NCP = the net change in the value of the investment portfolio (exclusive of
realized gains or losses on the sale of securities and unrealized
appreciation and depreciation and income other than investment income)
for the seven-day period attributable to a hypothetical account having
a balance of one Investment Subdivision unit.
ES = per unit expenses of the hypothetical account for the seven-day period.
UV = the unit value for the first day of the seven-day period.
<PAGE>
The effective yields for the "money market" Investment Subdivisions of
Account 4 available under the policy, based on the seven-day period ending
December 31, 1997 were:
GE Investments Funds, Inc. 4.01%
The yield on amounts held in a "money market" Investment Subdivision
normally will fluctuate on a daily basis. Therefore, the disclosed yield for any
given past period is not an indication or representation of future yields or
rates of return. A "money market" Investment Subdivision's actual yield is
affected by changes in interest rates on money market securities, average
portfolio maturity of the Investment Subdivision's corresponding money market
investment portfolio, the types and quality of portfolio securities held by that
investment portfolio, and that investment portfolio's operating expenses.
Because of the charges and deductions imposed under the Policy, the yield for a
"money market" Investment Subdivision will be lower than the yield for its
corresponding "money market" investment portfolio.
Yield calculations do not take into account the Surrender Charge under the
Policy, a maximum of 6% of each Premium Payment made during the six years prior
to a full or partial surrender, or charges for the GMDB and GMIB riders.
Other Investment Subdivisions
Total return for an Investment Subdivision refers to quotations made
assuming that an investment under a Policy has been held in that Investment
Subdivision for various period of time. When an Investment Subdivision has been
in operation for one, five, and ten years, respectively, the total return for
these periods will be provided.
Average annual total return for a period represents the average annual
compounded rate of return that would equate an initial investment of $1,000
under a Policy to the redemption value of that investment as of the last day of
the period. The ending date for each period for which total return quotations
are provided will be for the most recent practicable, considering the type and
media of the communication, and will be stated in the communication.
Average annual total return will be calculated using Investment Subdivision
unit values and deductions for the policy maintenance charge, annual death
benefit charge and the surrender charge as described below:
1. Life of Virginia calculates unit value for each Valuation Period based
on the performance of the Investment Subdivision's underlying
investment portfolio (after deductions for Fund expenses, the
administrative expense charge, and the mortality and expense risk
charge).
2. The policy maintenance charge is $25 per year, deducted at the
beginning of each Policy Year after the first. For purposes of
calculating average annual total return, an average policy maintenance
charge (currently 0.1% of account value attributable to the
hypothetical investment) is used.
3. The surrender charge will be determined by assuming a surrender of the
Policy at the end of the period. Average annual total return for
periods of six years or less will therefore reflect the deduction of a
surrender charge.
4. Total return does not consider the GMDB, OBD and GMIB charges.
5. Total return will then be calculated according to the following
formula:
TR = (ERV/P)1/N - 1
where:
TR = the average annual total return for the period.
ERV = the ending redeemable value (reflecting deductions as described above)
of the hypothetical investment at the end of the period.
P = a hypothetical single investment of $1,000.
N = the duration of the period (in years).
<PAGE>
Total return for the available Investment Subdivisions is as follows:
<TABLE>
<CAPTION> From the
Date of
For the 1-year For the 3-year For the 5-year Subaccount Date of
period ended period ended period ended Inception to Subaccount
Subdivision 12/31/97 12/31/97 12/31/97 12/31/97 Inception
---------------- ---------------- ---------------- -------------- ----------
<S> <C>
Janus Aspen Series
Balanced .................................... 14.27% 17.73% N/A 16.88% 10/02/95
Flexible Income ............................. 4.14% 11.46% N/A 8.47% 10/02/95
Growth ...................................... 14.91% 20.48% N/A 15.31% 09/13/93
Aggressive Growth ........................... 4.99% 12.45% N/A 16.86% 09/13/93
Worldwide Growth ............................ 14.33% 22.95% N/A 20.55% 09/13/93
Capital Appreciation ........................ N/A N/A N/A 19.29% ++ 05/01/97
International Growth ........................ 10.73% 22.07% N/A 17.07% -
VIPF
Equity-Income ............................... 20.19% 22.32% 17.93% 14.19% 05/02/88
Overseas .................................... 3.95% 8.12% 11.88% 7.67% 05/02/88
Growth ...................................... 15.63% 21.02% 15.80% 14.82% 05/02/88
VIPF II
Asset Manager ............................... 12.85% 14.10% 10.73% 11.09% 10/01/89
Contrafund .................................. 16.28% N/A N/A 25.35% 01/04/95
VIPF III
Growth and Income ........................... N/A N/A N/A 17.51% ++ 05/01/97
Growth Opportunities ........................ N/A N/A N/A 16.64% ++ 05/01/97
GE Investments Funds, Inc.
Income Fund ................................. N/A N/A N/A -5.40% ++ 05/02/88
S&P 500 Index ............................... 22.44% 27.05% 18.20% 14.89% 05/02/88
Total Return ................................ 10.21% 15.40% 12.05% 11.22% 05/02/88
International Equity ........................ 2.67% N/A N/A 6.60% 05/01/95
Real Estate Securities ...................... 11.72% N/A N/A 23.76% 05/01/95
Global Income ............................... 4.00% N/A N/A -3.19% ++ 05/01/97
Value Equity ................................ N/A N/A N/A 25.19% ++ 05/01/97
U.S. Equity Fund ............................ N/A N/A N/A N/A 05/01/98
Oppenheimer Variable Account Funds
Multiple Strategies ......................... 9.47% 14.73% 11.09% 10.32% 05/02/88
Capital Appreciation ........................ 4.06% 17.94% 13.72% 13.92% 05/02/88
Growth ...................................... 18.79% 26.23% 16.40% 14.31% 05/02/88
High Income ................................. 4.57% 12.61% 11.54% 12.45% 05/02/88
Bond ........................................ 1.81% 6.86% 5.98% 7.79% 05/02/88
Federated Insurance Series
High Income Bond II ......................... 6.13% 12.85% N/A 12.85% 01/04/95
Utility II .................................. 18.74% 17.37% N/A 17.25% 01/04/95
American Leaders II ......................... 24.36% 25.91% N/A 21.25% 01/04/95
The Alger American Fund
Growth ...................................... 17.87% 21.59% 17.07% 13.52% 10/02/95
Small Capitalization ........................ 3.80% 15.49% 10.43% 2.39% 10/02/95
PBHG Insurance Series Fund, Inc.
Growth II ................................... N/A N/A N/A 0.64% ++ 05/01/97
Large Cap Growth ............................ N/A N/A N/A 10.98% ++ 05/01/97
Goldman Sachs Variable Investment Trust .....
Growth & Income Fund ........................ N/A N/A N/A N/A 05/01/98
Mid Cap Equity Fund ......................... N/A N/A N/A N/A 05/01/98
</TABLE>
- ---------
++ Returns for periods of less than one year are not annualized.
<PAGE>
The Funds have provided the price information for the Portfolios, including
the Portfolio price information used to calculate the total returns of the
Investment Subdivisions for periods prior to the inception of the Investment
Subdivisions. 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., Advisers Management Trust and Goldman Sachs
Variable Insurance Trust are not affiliated with Life of Virginia. While Life of
Virginia has no reason to doubt the accuracy of the figures provided by these
nonaffiliated Funds, Life of Virginia has not independently verified such
information.
Other Performance Data
Life of Virginia may disclose cumulative total return in conjunction with
the standard format described above. The cumulative total return will be
calculated using the following formula:
CTR = (ERV/P) - 1
where:
CTR = the cumulative total return for the period.
ERV = The ending redeemable value (reflecting deductions as described above)
of the hypothetical investment at the end of the period.
P = a hypothetical single investment of $1,000.
Sales literature may also quote cumulative and/or average annual total
return that does not reflect the surrender charge. This is calculated in exactly
the same way as average annual total return, except that the ending redeemable
value of the hypothetical investment is replaced with an ending value for the
period that does not take into account any charges on withdrawn amounts.
Other non-standard quotations of Investment Subdivision performance may
also be used in sales literature. Such quotations will be accompanied by a
description of how they were calculated.
FEDERAL TAX MATTERS
Taxation of Life of Virginia
Life of Virginia does not expect to incur any federal income tax liability
attributable to investment income or capital gains retained as part of the
reserves under the Policies. (See Federal Tax Matters section of the
prospectus.) Based upon these expectations, no charge is being made currently to
Account 4 for federal income taxes which may be attributable to the Account.
Life of Virginia will periodically review the question of a charge to Account 4
for federal income taxes related to the Account. Such a charge may be made in
future years if Life of Virginia believes that it may incur federal income
taxes. This might become necessary if the tax treatment of Life of Virginia is
ultimately determined to be other than what Life of Virginia currently believes
it to be, if there are changes made in the federal income tax treatment of
annuities at the corporate level, or if there is a change in Life of Virginia's
tax status. In the event that Life of Virginia should incur federal income taxes
attributable to investment income or capital gains retained as part of the
reserves under the Policies, the Account Value would be correspondingly adjusted
by any provision or charge for such taxes.
Life of Virginia may also incur state and local taxes (in addition to
premium taxes) in several states. At present, these taxes, with the exception of
premium taxes, are not significant. If there is a material change in applicable
state or local tax laws causing an increase in taxes other than premium taxes
(for which Life of Virginia currently imposes a charge), charges for such taxes
attributable to Account 4 may be made.
IRS Required Distributions
In order to be treated as an annuity contract for federal income tax
purposes, section 72(s) of the Code requires any Non-Qualified Policy to provide
that (a) if any Owner dies on or after the Maturity Date but prior to the time
the entire interest in the Policy has been distributed, the remaining portion of
such interest will be distributed at least as rapidly as under the method of
distribution being used as of the date of that Owner's death; and (b) if any
Owner dies prior to the Maturity Date, the entire interest in the Policy will be
distributed (1) within five years after the date of that Owner's death, or (2)
as Income Payments which will begin within one year of that Owner's death and
which will be made over the life of the Owner's "designated beneficiary" or over
a period not extending beyond the life expectancy of that beneficiary. The
"designated beneficiary" generally is the person who will be treated as the sole
owner of the Policy following the death of
<PAGE>
the Owner, Joint Owner or, in certain circumstances, the Annuitant. However, if
the "designated beneficiary" is the surviving spouse of the decedent, these
distribution rules will not apply until the surviving spouse's death (and this
spousal exception will not again be available). If any Owner is not an
individual, the death of the Annuitant will be treated as the death of an Owner
for purposes of these rules.
The Non-Qualified Policies contain provisions which are intended to comply
with the requirements of section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. Life of Virginia intends
to review such provisions and modify them if necessary to assure that they
comply with the requirements of Code section 72(s) when clarified by regulation
or otherwise.
Other rules may apply to Qualified Policies.
GENERAL PROVISIONS
Using the Policies as Collateral
A Non-Qualified Policy 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.
An Owner's rights and the rights of a Beneficiary may be affected by an
assignment.
A Qualified Policy may not be sold, assigned, transferred, discounted,
pledged or otherwise transferred except under such conditions as may be allowed
under applicable law.
Non-Participating
The Policy is non-participating. No dividends are payable.
Misstatement of Age or Sex
If an Annuitant's age or sex was misstated on the policy data page, any
policy benefits or proceeds, or availability thereof, will be determined using
the correct age and sex.
Incontestability
Life of Virginia will not contest the Policy.
Statement of Values
At least once each year, Life of Virginia will send the Owner a statement
of values within 30 days after each report date. The statement will show Account
Value, Premium Payments and charges made during the report period.
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 policy number and the
Annuitant's full name must be included.
Life of Virginia will send all notices to the Owner at the last known
address on file with the company.
DISTRIBUTION OF THE POLICIES
Capital Brokerage Corporation, the principal underwriter of the Policies,
is registered with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 as a broker-dealer and is member of the National
Association of Securities Dealers, Inc.
The Policies are offered to the public through brokers licensed under the
federal securities laws and state insurance laws that have entered into
agreements with Capital Brokerage Corporation. The offering is continuous and
Capital Brokerage Corporation does not anticipate discontinuing the offering of
the Policies. However, Life of Virginia does reserve the right to discontinue
the offering of the Policies.
0-11
<PAGE>
LEGAL DEVELOPMENTS REGARDING EMPLOYMENT-RELATED BENEFIT PLANS
On July 6, 1983, the Supreme Court held in Arizona Governing Committee for
Tax Deferred Annuity v. Norris, 463 U.S. 1073 (1983), that optional annuity
benefits provided under an employee's deferred compensation plan could not,
under Title VII of the Civil Rights Act of 1964, vary between men and women on
the basis of sex. The Policy contains guaranteed annuity purchase rates for
certain optional payment plans 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.
ADDITIONS, DELETIONS, OR SUBSTITUTIONS 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 Account 4 or that Account 4 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 Account 4, 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 or of another open-end, registered investment company. Life of
Virginia will not substitute any shares attributable to an Owner's Account Value
in Account 4 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 Account 4 from purchasing other securities for other series or classes
of policies or from permitting a conversion between portfolios or classes of
policies on the basis of requests made by Owners.
Life of Virginia also reserves the right to establish additional Investment
Subdivisions of Account 4, each of which would invest in a separate portfolio of
a Fund, or in shares of another investment company, with a specified investment
objective. New Investment Subdivisions may be established when, 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 Owners 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 Policies, and, if permitted by law, Life of Virginia may deregister
Account 4 under the 1940 Act in the event such registration is no longer
required; manage Account 4 under the direction of a committee; or combine
Account 4 with other Life of Virginia separate accounts. To the extent permitted
by applicable law, Life of Virginia may also transfer the assets of Account 4
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
Owners or other persons who have voting rights as to Account 4.
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 Account 4 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.
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. Presently, Life of Virginia is
licensed to do business in the District of Columbia and all states, except New
York.
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 Policies described in this Prospectus. J. Neil McMurdie,
Associate Counsel and Assistant Vice President of Life of Virginia, has provided
advice on certain legal matters pertaining to the Policy, including the validity
of the Policy and Life of Virginia's right to issue the Policies under Virginia
insurance law.
<PAGE>
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, the nine month period ended December 31, 1996 and the
preacquisition three months period ended March 31, 1996, and the statement of
assets and liabilities of Life of Virginia Separate Account 4 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 statements of operations and changes in net assets of
Life of Virginia Separate Account 4 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 matter of the
disagreement in connection with their reports.
FINANCIAL STATEMENTS
This Statement of Additional Information contains financial statements for
Life of Virginia Separate Account 4 as of December 31, 1997, and for each of the
three years in the period then ended.
The consolidated financial statements of The Life Insurance Company of
Virginia and subsidiaries included herein should be distinguished from the
financial statements of Account 4 and should be considered only as bearing on
the ability of Life of Virginia to meet its obligations under the Policy.
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 Account 4.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Assets and Liabilities
Year ended December 31, 1997
(With Independent Auditors' Report Thereon)
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
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
Contractholders
Life of Virginia Separate Account 4
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 4 (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; the Variable Insurance Products 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 Funds--Money Market and High Income Portfolios; and Neuberger & Berman
Advisers Management Trust--Balanced, Bond and Growth Portfolios of Life of
Virginia Separate Account 4 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 4 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 4 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
-------------------------
KPMG PEAT MARWICK LLP
Richmond, Virginia
February 13, 1998
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Policyholders
Life of Virginia Separate Account 4
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 May 23, 1995 (date of inception) to December 31, 1995 for the
Life of Virginia Series Fund, Inc. International Equity portfolio, for the
period from May 2, 1995 (date of inception) to December 31, 1995 for the Life of
Virginia Series Fund, Inc. Real Estate Securities portfolio, for the period from
January 5, 1995 (date of inception) to December 31, 1995 for the Variable
Insurance Products Fund II Contrafund portfolio, for the period from February 3,
1995 (date of inception) to December 31, 1995 for the Insurance Management
Series Corporate Bond portfolio, for the period from January 27, 1995 (date of
inception) to December 31, 1995 for the Insurance Management Series Utility
portfolio, for the period from October 11, 1995 (date of inception) to December
31, 1995 for the Janus Aspen Balanced portfolio, for the period from October 13,
1995 (date of inception) to December 31, 1995 for the Janus Aspen Flexible
Income portfolio, for the period from October 3, 1995 (date of inception) to
December 31, 1995 for the Alger American Small Cap portfolio and for the period
from October 4, 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 out 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 net assets for
the periods described in the first paragraph of each of the respective
portfolios constituting Life of Virginia Separate Account 4, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Richmond, Virginia
February 8, 1996
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Policyholders
Life of Virginia Separate Account III
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, and
for the period from June 30, 1995 (date of inception) to December 31, 1995
for the Life of Virginia Series Fund, Inc. International Equity portfolio,
for the period from December 6, 1995 (date of inception) to December 31, 1995
for the Life of Virginia Series Fund, Inc. Real Estate Securities portfolio,
for the period from January 16, 1995 (date of inception) to December 31, 1995
for the Variable Insurance Products Fund II Contrafund portfolio for the period
from February 7, 1995 (date of inception) to December 31, 1995 for the
Insurance Management Series portfolios, for the year ended December 31, 1995
and for the period from May 11, 1994 (date of inception) to December 31, 1994
for the Janus Aspen Aggressive Growth, Growth, and Worldwide Growth portfolios,
for the period from October 27, 1995 (date of inception) to December 31, 1995
for the Janus Aspen Balanced portfolio, for the period from November 1, 1995
(date of inception) to December 31, 1995 for the Janus Aspen Flexible Income
portfolio, for the period from October 6, 1995 (date of inception) to December
31, 1995 for the Alger American Small Cap portfolio and for the period from
November 2, 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 net assets for
the periods described in the first paragraph of each of the respective
portfolios constituting Life of Virginia Separate Account III, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Richmond, Virginia
February 8, 1996
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Assets and Liabilities
December 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GE Investment Funds, Inc.
(formerly Life Of Virginia Series Fund, Inc.)
------------------------------------------------
S&P 500 Money Total
Index Market Return
Fund Fund Fund
<S> <C>
- ----------------------------------------------------------------------------------------------------------------
Investment GE Investments Funds, Inc.,
at fair value (note 2):
S&P 500 Index Fund (7,976,419 shares; cost - $145,723,059) $ 153,386,538 - -
Money Market Fund (118,336,576 shares; cost - $117,791,205) - 118,336,576 -
Total Return Fund (3,370,192 shares; cost - $48,733,062) - - 44,520,238
International Equity Fund (2,151,087 shares; cost - $24,524,231) - - -
Real Estate Securities Fund (3,452,544 shares; cost - $48,950,718) - - -
Global Income Fund (611,834 shares; cost - $6,150,915) - - -
Value Equity Fund (1,199,676 shares; cost - $14,841,949) - - -
Income Fund (1,845,624 shares; cost - $22,362,706) - - -
Receivable from affiliate 131,054 - 34,825
Receivable for units sold 52,884 5,964,313 -
- ----------------------------------------------------------------------------------------------------------------
$ 153,570,476 124,300,889 44,555,063
- ----------------------------------------------------------------------------------------------------------------
Liabilities
- ----------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) $ 144,152 606,185 27,866
Payable for units withdrawn - - 80
- ----------------------------------------------------------------------------------------------------------------
Total liabilities 144,152 606,185 27,946
- ----------------------------------------------------------------------------------------------------------------
Net Assets $ 153,426,324 123,694,704 44,527,117
- ----------------------------------------------------------------------------------------------------------------
Analysis of net assets:
Attributable to:
Variable deferred annuity contractholders $ 153,426,324 123,694,704 44,527,117
The Life Insurance Company
of Virginia - - -
- ----------------------------------------------------------------------------------------------------------------
Net assets $ 153,426,324 123,694,704 44,527,117
- ----------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 918,847 3,512,260 631,828
- ----------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I $ 39.63 14.77 28.96
- ----------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 3,025,140 4,980,487 928,145
- ----------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II $ 38.68 14.42 28.26
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
(formerly Life of Virginia Series Fund, Inc.)(continued)
---------------------------------------------------------------------
International Real Estate Global Value
Equity Securities Income Equity Income
Fund Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S><C>
Investment GE Investments Funds, Inc.,
at fair value (note 2):
S&P 500 Index Fund (7,976,419 shares; cost - $145,723,059) - - - - -
Money Market Fund (118,336,576 shares; cost - $117,791,205) - - - - -
Total Return Fund (3,370,192 shares; cost - $48,733,062) - - - - -
International Equity Fund (2,151,087 shares; cost - $24,524,231) 22,973,610 - - - -
Real Estate Securities Fund (3,452,544 shares; cost - $48,950,718) - 52,754,866 - - -
Global Income Fund (611,834 shares; cost - $6,150,915) - - 6,026,567 - -
Value Equity Fund (1,199,676 shares; cost - $14,841,949) - - - 15,727,748 -
Income Fund (1,845,624 shares; cost - $22,362,706) - - - - 22,350,507
Receivable from affiliate 12,571 26,750 - 14,492 -
Receivable for units sold - 27 89,788 166,328 -
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets 22,986,181 52,781,643 6,116,355 15,908,568 2,350,507
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 7,311 22,389 1,057 8,560 306,136
Payable for units withdrawn 102,337 75,457 - - 33,511
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 109,648 97,846 1,057 8,560 339,647
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets 22,876,533 52,683,797 6,115,298 15,900,008 22,010,860
- ----------------------------------------------------------------------------------------------------------------------------------
Analysis of net assets:
Attributable to:
Variable deferred annuity contractholders 9,954,696 33,635,732 944,793 11,923,320 22,010,860
The Life Insurance Company
of Virginia 12,921,837 19,048,065 5,170,505 3,976,688 -
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets 22,876,533 52,683,797 6,115,298 15,900,008 22,010,860
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 1,212,802 1,385,306 516,898 479,621 1,295,638
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I 12.53 18.46 10.26 13.15 10.01
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 614,410 1,478,247 79,290 730,616 903,249
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II 12.50 18.34 10.24 13.13 10.01
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Statements of Assets and Liabilities, Continued
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds
-----------------------------------------------------------------
Capital High Multiple
Bond Appreciation Growth Income Strategies
Assets Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Oppenheimer Variable Account Funds,
at fair value (note 2):
Bond Fund (3,338,044 shares; cost-$38,648,132) $39,756,108 - - - -
Capital Appreciation Fund (5,085,365 shares; cost-$177,299,340) - 208,296,549 - - -
Growth Fund (4,282,333 shares; cost-$115,624,020) - - 138,918,887 - -
High Income Fund (12,856,952 shares; cost-$143,356,020) - - - 148,112,092 -
Multiple Strategies Fund (4,239,791 shares; cost-$61,776,406) - - - - 72,118,841
Receivable from affiliate 3,463 56,595 - 89,573 13,227
Receivable for units sold 84,091 81,846 211,756 188,070 6,302
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $39,843,662 208,434,990 139,130,643 148,389,735 72,138,370
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) $ 43,140 587,754 114,827 104,109 114,775
Payable for units withdrawn 54,839 - - - 42
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 97,979 587,754 114,827 104,109 114,817
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable deferred annuity
contractholders $39,745,683 207,847,236 139,015,816 148,285,626 72,023,553
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 929,630 2,591,419 1,291,813 1,869,843 1,553,549
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I $ 20.92 36.52 37.62 31.32 26.43
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 994,017 3,176,448 2,462,359 2,934,974 1,200,126
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II $ 20.42 35.64 36.72 30.57 25.80
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Statements of Assets and Liabilities, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund
-----------------------------------------
Equity-
Income Growth Overseas
Portfolio Portfolio Portfolio
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------
Investment in Variable Insurance Products
Fund, at fair value (note 2):
Equity-Income Portfolio (25,284,474 shares; cost - $481,451,916) $ 613,907,020 - -
Growth Portfolio (8,496,260 shares; cost - $238,768,154) - 315,211,237 -
Overseas Portfolio (5,812,347 shares; cost - $99,900,187) - - 111,597,056
Receivable from affiliate 204,695 116,417 14,558
Receivable for units sold 118,450 58,665 -
- -----------------------------------------------------------------------------------------------------------------------
Total assets $ 614,230,165 315,386,319 111,611,614
- -----------------------------------------------------------------------------------------------------------------------
Liabilities
- -----------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note3) $ 437,839 312,937 172,653
Payable for units withdrawn 209,554 59,775 3,134,340
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities 647,393 372,712 3,306,993
- -----------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable deferred annuity contractholders $ 613,582,772 315,013,607 108,304,621
- -----------------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 6,589,338 4,467,825 3,398,260
- -----------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I $ 37.36 39.40 21.16
- -----------------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 10,074,173 3,614,598 1,762,588
- -----------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II $ 36.47 38.45 20.65
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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
Portfolio Portfolio Portfolio Portfolio
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Investment in Variable Insurance Products Fund II, at fair value (note 2):
Asset Manager Portfolio (26,932,347 shares; cost - $393,528,382) $ 485,051,564 - - -
Contrafund Portfolio (12,134,794 shares; cost - $193,722,470) - 241,967,789 - -
Investment in Variable Insurance Products Fund III, at fair value (note 2):
Growth & Income Portfolio (1,247,313 shares; cost - $15,170,737) - - 15,628,837 -
Growth Opportunities Portfolio (883,879 shares; cost - $15,976,584) - - - 17,032,342
Receivable from affiliate 5,351 176,780 25,307 3,157
Receivable for units sold 43,195 255,163 64,010 64,775
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets $ 485,100,110 242,399,732 15,718,154 17,100,274
- ---------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ---------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) $ 1,187,116 176,209 9,932 12,499
Payable for units withdrawn 38,182 86,127 - -
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,225,298 262,336 9,932 12,499
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable deferred annuity contractholders $ 483,874,812 242,137,396 15,708,222 17,087,775
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 17,101,510 3,296,201 294,329 341,417
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I $ 24.53 20.47 12.38 12.30
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 2,678,933 8,595,677 976,086 1,049,540
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II $ 24.03 20.32 12.36 12.28
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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 (1,767,003 shares; cost - $31,138,913) $ 34,686,268 - -
High Income Bond Fund II (3,216,287 shares; cost - $33,511,201) - 35,218,348 -
Utility Fund II (2,126,742 shares - cost - $24,061,328) - - 30,391,148
Investment in Alger American, at fair value (note 2):
Small Cap Portfolio (1,690,554 shares; cost - $70,050,792) - - -
Growth Portfolio (1,691,682 shares; cost - $61,989,581) - - -
PBHG Insurance Series Fund at fair value (note 2):
PBHG Large Cap Growth Portfolio (401,761 shares; cost - $4,598,913) - - -
PBHG Growth II Portfolio (629,476 shares; cost - $6,856,693) - - -
Receivable from affiliate 9,118 6,282 20,101
Receivable for units sold 223,715 12,611 12,121
- -------------------------------------------------------------------------------------------------------------------------
Total assets $ 34,919,101 35,237,241 30,423,370
- -------------------------------------------------------------------------------------------------------------------------
Liabilities
- -------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) $ 25,357 26,612 22,088
Payable for units withdrawn 18 15,282 3,388
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities 25,375 41,894 25,476
- -------------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable deferred annuity contractholders $ 34,893,726 35,195,347 30,397,894
- -------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 361,619 456,124 485,332
- -------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I $ 14.48 15.11 16.88
- -------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 2,056,691 1,886,887 1,325,701
- -------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II $ 14.42 15.00 16.75
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
Statements of Assets and Liabilities, Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Alger American
---------------------------
Small
Cap Growth
Assets Portfolio Portfolio
<S> <C>
- ------------------------------------------------------------------------------------------------------------
Investments in Federated Investors Insurance Series, at fair value (note 2):
American Leaders Fund II (1,767,003 shares; cost - $31,138,913) - -
High Income Bond Fund II (3,216,287 shares; cost - $33,511,201) - -
Utility Fund II (2,126,742 shares - cost - $24,061,328) - -
Investment in Alger American, at fair value (note 2):
Small Cap Portfolio (1,690,554 shares; cost - $70,050,792) 73,961,717 -
Growth Portfolio (1,691,682 shares; cost - $61,989,581) - 72,336,337
PBHG Insurance Series Fund at fair value (note 2):
PBHG Large Cap Growth Portfolio (401,761 shares; cost - $4,598,913) - -
PBHG Growth II Portfolio (629,476 shares; cost - $6,856,693) - -
Receivable from affiliate 23,461 28,703
Receivable for units sold - 7,598
- -----------------------------------------------------------------------------------------------------------
Total assets 73,985,178 72,372,638
- -----------------------------------------------------------------------------------------------------------
Liabilities
- -----------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 56,893 156,426
Payable for units withdrawn 100,595 62,399
- -----------------------------------------------------------------------------------------------------------
Total liabilities 157,488 218,825
- -----------------------------------------------------------------------------------------------------------
Net assets attributable to variable deferred annuity contractholders 73,827,690 72,153,813
- -----------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 1,325,070 1,022,514
- -----------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I 10.64 13.42
- -----------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 5,645,458 4,380,186
- -----------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II 10.58 13.34
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Statements of Assets and Liabilities, Continued
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PBHG Insurance Series Fund
--------------------------
PBHG Large PBHG
Cap Growth Growth II
Assets Portfolio Portfolio
<S> <C>
- -------------------------------------------------------------------------------------------------------
Investments in Federated Investors Insurance Series, at fair value (note 2):
American Leaders Fund II (1,767,003 shares; cost - $31,138,913) - -
High Income Bond Fund II (3,216,287 shares; cost - $33,511,201) - -
Utility Fund II (2,126,742 shares - cost - $24,061,328) - -
Investment in Alger American, at fair value (note 2):
Small Cap Portfolio (1,690,554 shares; cost - $70,050,792) - -
Growth Portfolio (1,691,682 shares; cost - $61,989,581) - -
PBHG Insurance Series Fund at fair value (note 2):
PBHG Large Cap Growth Portfolio (401,761 shares; cost - $4,598,913) 4,748,811 -
PBHG Growth II Portfolio (629,476 shares; cost - $6,856,693) - 6,766,864
Receivable from affiliate 19,040 423
Receivable for units sold 24,969 241,497
- -------------------------------------------------------------------------------------------------------
Total assets 4,792,820 7,008,784
- -------------------------------------------------------------------------------------------------------
Liabilities
- -------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 21,750 5,127
Payable for units withdrawn 52,803 51,717
- -------------------------------------------------------------------------------------------------------
Total liabilities 74,553 56,844
- -------------------------------------------------------------------------------------------------------
Net assets attributable to variable deferred annuity contractholders 4,718,267 6,951,940
- -------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 55,997 76,611
- -------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I 11.73 10.67
- -------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 346,833 576,010
- -------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II 11.71 10.65
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Statements of Assets and Liabilities, Continued
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Janus Aspen Series
-----------------------------------------------------------
Aggressive Worldwide
Growth Growth Growth Balanced
Assets Portfolio Portfolio Portfolio Portfolio
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Investment in Janus Aspen Series,
at fair value (note 2):
Aggressive Growth Portfolio
(5,150,041 shares; cost - $90,470,714) 105,833,338 - - -
Growth Portfolio (12,128,299
shares; cost - $177,459,821) - 224,130,972 - -
Worldwide Growth Portfolio
(14,763,565 shares; cost - $285,300,634) - - 345,319,777 -
Balanced Portfolio (4,444,303
shares; cost - $72,670,094) - - - 77,641,966
Flexible Income Portfolio
(1,218,449 shares; cost - $14,017,277) - - - -
International Growth Portfolio
(3,130,281 shares; cost - $56,025,325) - - - -
Capital Appreciation Portfolio
(214,897 shares; cost - $2,699,822) - - - -
Receivable from affiliate 48,595 24,477 118,902 52,126
Receivable for units sold 10,900 166,892 194,595 5,036
- -------------------------------------------------------------------------------------------------------------------------------
Total assets 105,892,833 224,322,341 345,633,274 77,699,128
- -------------------------------------------------------------------------------------------------------------------------------
Liabilities
- -------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 77,711 253,424 249,062 52,851
Payable for units withdrawn - - 258,130 8,042
- -------------------------------------------------------------------------------------------------------------------------------
Total liabilities 77,711 253,424 507,192 60,893
- -------------------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable deferred annuity contractholders $105,815,122 224,068,917 345,126,082 77,638,235
- -------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 1,817,576 4,505,765 4,938,272 2,481,552
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I 20.26 19.15 23.10 14.73
- -------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 3,442,667 7,270,898 10,111,685 2,804,435
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II 20.04 18.95 22.85 14.65
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
Statements of Assets and Liabilities, Continued
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------------------
Flexible International Capital
Income Growth Appreciation
Assets Portfolio Portfolio Portfolio
<S> <C>
- ------------------------------------------------------------------------------------------------------------------
Investment in Janus Aspen Series, at fair value (note 2):
Aggressive Growth Portfolio
(5,150,041 shares; cost - $90,470,714) - - -
Growth Portfolio (12,128,299
shares; cost - $177,459,821) - - -
Worldwide Growth Portfolio
(14,763,565 shares; cost - $285,300,634) - - -
Balanced Portfolio (4,444,303
shares; cost - $72,670,094) - - -
Flexible Income Portfolio
(1,218,449 shares; cost - $14,017,277) 14,353,326 - -
International Growth Portfolio
(3,130,281 shares; cost - $56,025,325) - 57,847,585 -
Capital Appreciation Portfolio
(214,897 shares; cost - $2,699,822) - - 2,712,004
Receivable from affiliate 4,412 34,124 812
Receivable for units sold 42,930 - 1,500
- ------------------------------------------------------------------------------------------------------------------
Total assets 14,400,668 57,881,709 2,714,316
- ------------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 10,126 40,026 39,487
Payable for units withdrawn 53,791 3,175,957 5,254
- ------------------------------------------------------------------------------------------------------------------
Total liabilities 63,917 3,215,983 44,741
- ------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable deferred annuity contractholders 14,336,751 54,665,726 2,669,575
- ------------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 280,878 1,004,669 49,257
- ------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I 12.52 13.69 12.56
- ------------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 869,089 3,001,600 163,550
- ------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II 12.45 13.63 12.54
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (formerly Life of Virginia Series Fund, Inc.)
- -------------------------------------------------------------------------------------------------
<S> <C>
S&P 500 Government
Index Securities
Fund Fund
-------------------------------- -------------------------------
Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
Investment income:
Income - Dividends 4,001,897 23,435,279 411,769 - 1,309,648 565,524
Expenses - Mortality and expense
risk charges (note 3) 1,356,740 492,403 139,329 147,796 143,919 83,929
- ----------------------------------------------------------------------------------------------------------
Net investment income (expense) 2,645,157 22,942,876 272,440 (147,796) 1,165,729 481,595
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments:
Net realized gain (loss) (899,446) 1,510,464 345,068 (242,895) (68,248) (20,275)
Unrealized appreciation
(depreciation) on investments 21,611,136 (16,204,375) 2,539,788 987,049 (995,503) 567,616
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 20,711,690 (14,693,911) 2,884,856 744,154 (1,063,751) 547,341
- ----------------------------------------------------------------------------------------------------------
Increase in net assets
from operations 23,356,847 8,248,965 3,157,296 596,358 101,978 1,028,936
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (formerly Life
of Virginia Series Fund, Inc.)
-----------------------------------------------------------------
<S> <C>
Money Market Total Return
Fund Fund
--------------------------------- ----------------------------------
Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995
- --------------------------------------------------------------------------------------------------------
Investment income:
Income - Dividends 5,626,589 5,204,323 1,098,198 6,098,862 9,319,880 1,576,466
Expenses - Mortality and expense
risk charges (note 3) 1,421,044 980,270 144,841 496,469 357,589 187,419
- --------------------------------------------------------------------------------------------------------
Net investment income (expense) 4,205,545 4,224,053 953,357 5,602,393 8,962,291 1,389,047
- --------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments:
Net realized gain (loss) (4,421,730) 1,686,452 312,501 (454,827) 614,446 308,073
Unrealized appreciation
(depreciation) on investments 4,383,879 (2,984,484) (757,472) 657,828 (6,827,262) 1,987,241
- --------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments (37,851) (1,298,032) (444,971) 203,001 (6,212,816) 2,295,314
- --------------------------------------------------------------------------------------------------------
Increase in net assets
from operations 4,167,694 2,926,021 508,386 5,805,394 2,749,475 3,684,361
- --------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (formerly Life
of Virginia Series Fund, Inc.)
(continued)
<S> <C>
-------------------------------------------------------------------------------
International Real Estate
Equity Securities
Fund Fund
--------------------------------- ----------------------------------------
Period from Period from
May 23, May 2,
Year ended Year ended 1996 to Year ended Year ended 1995 to
December 31 December 31 December 31, December 31, December 31, December 31
1997 1996 1995 1997 1996 1995
- ------------------------------------------------------- ----------------------- -----------------------------------------
Investment income:
Income - Dividends 2,686,699 1,056,063 31,010 5,456,896 1,627,291 670,339
Expenses - Mortality and expense risk
charges (note 3) 113,987 56,953 4,298 292,230 49,030 2,663
- ------------------------------------------------------- ----------------------- -----------------------------------------
Net investment income 2,572,712 999,110 26,712 5,164,666 1,578,261 667,676
- ------------------------------------------------------- ----------------------- -----------------------------------------
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) 665,649 86,537 646 2,710,582 299,159 24,928
Unrealized appreciation (depreciation)
on investments (1,565,382) (11,119) 25,880 (1,305,117) 4,059,521 1,049,744
- ------------------------------------------------------- ------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments (899,733) 75,418 26,526 1,405,465 4,358,680 1,074,672
- ------------------------------------------------------- ------------------------------------------------------------------
Increase in net assets from operations 1,672,979 1,074,528 53,238 6,570,131 5,936,941 1,742,348
- ------------------------------------------------------- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
(formerly Life of Virginia Series Fund, Inc.)
(continued)
-------------------------------------------
Global Value
Income Equity Income
Fund Fund Fund
---------- ---------- ----------
Period from Period from Period from
May 1, May 1, December 12,
1997 to 1997 to 1997 to
December 31 December 31 December 31,
1997 1997 1997
- ------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 300,672 142,788 58,034
Expenses - Mortality and expense risk
charges (note 3) 2,982 38,307 14,197
- ------------------------------------------------------------------------------------
Net investment income 297,690 104,481 43,837
- -----------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) 2,417 357,048 (6,710)
Unrealized appreciation (depreciation)
on investments (124,348) 885,799 (12,199)
- -----------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments (121,931) 1,242,847 (18,909)
- -----------------------------------------------------------------------------------
Increase in net assets from operations 175,759 1,347,328 24,928
- -----------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, Continued
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds
-----------------------------------
Money
Fund
----------------------------------
Year ended December 31,
1997 1996 1995
- --------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ 110,711 175,537 303,556
Expenses - Mortality and expense
risk charges (note 3) 25,908 40,663 64,415
- ---------------------------------------------------------------------
Net investment income (expense) 84,803 134,874 239,141
- ---------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments:
Net realized gain - - -
Unrealized appreciation
(depreciation) on investments - - -
- --------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments - - -
- --------------------------------------------------------------------
Increase in net assets
from operations $ 84,803 134,874 239,141
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds (continued)
---------------------------------------------
Bond
Fund
-----------------------------------
Year ended December 31,
1997 1996 1995
- ---------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 2,260,511 1,774,226 1,222,079
Expenses - Mortality and expense
risk charges (note 3) 437,693 336,825 220,766
- ---------------------------------------------------------------------
Net investment income (expense) 1,822,818 1,437,401 1,001,313
- ---------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments:
Net realized gain 187,695 106,242 53,120
Unrealized appreciation
(depreciation) on investments 663,371 (442,815) 1,654,610
- ---------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 851,066 (336,573) 1,707,730
- ---------------------------------------------------------------------
Increase in net assets
from operations 2,673,884 1,100,828 2,709,043
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds (continued)
-----------------------------------------------
Capital
Appreciation
Fund
------------------------------------
Year ended December 31,
1997 1996 1995
- --------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 8,221,818 6,069,096 331,803
Expenses - Mortality and expense
risk charges (note 3) 2,381,196 1,506,102 868,053
- ---------------------------------------------------------------------
Net investment income (expense) 5,840,622 4,562,994 (536,250)
- ---------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments:
Net realized gain 6,868,228 6,301,279 1,666,666
Unrealized appreciation
(depreciation) on
investments) 5,927,622 7,478,382 18,977,772
- ---------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 12,795,850 13,779,661 20,644,438
- ----------------------------------------------------------------------
Increase in net assets
from operations 18,636,472 18,342,655 20,108,188
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds (continued)
---------------------------------------------
Growth
Fund
---------------------------------
Year ended December 31,
1997 1996 1995
- ----------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 4,911,400 3,110,376 393,011
Expenses - Mortality and expense
risk charges (note 3) 1,372,378 599,846 265,718
- ----------------------------------------------------------------------------
Net investment income (expense) 3,539,022 2,510,530 127,293
- ----------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments:
Net realized gain 5,826,603 1,959,742 739,151
Unrealized appreciation
(depreciation) on
investments) 11,621,155 5,568,726 5,287,316
- ----------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 17,447,758 7,528,468 6,026,467
- ----------------------------------------------------------------------------
Increase in net assets
from operations 20,986,780 10,038,998 6,153,760
- ----------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, 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>
Investment income:
Income - Dividends $9,138,791 6,387,294 3,582,283 4,485,399 3,343,955 2,521,297
Expenses - Mortality and expense
risk charges (note 3) 1,397,317 825,956 471,932 794,598 571,993 410,701
- ------------------------------------------------------------------------------------------------------
Net investment income 7,741,474 5,561,338 3,110,351 3,690,801 2,771,962 2,110,596
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) 1,298,149 763,575 (105,319) 1,435,981 701,256 353,442
Unrealized appreciation
(depreciation) on
investments) 2,089,422 2,079,281 2,497,291 4,025,778 2,786,345 3,750,075
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 3,387,571 2,842,856 2,391,972 5,461,759 3,487,601 4,103,517
- -----------------------------------------------------------------------------------------------------
Increase in net assets
from operations $11,129,045 8,404,194 5,502,323 9,152,560 6,259,563 6,214,113
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund
--------------------------------------------------------------------------------------------------
High Equity-
Money Market Income Income
Portfolio Portfolio Portfolio
-------------------------------- -----------------------------------------------------------------
Year ended December 31, Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $843,023 1,655,033 3,320,468 1,930,318 2,780,632 1,144,671 42,510,440 12,605,854 10,037,638
Expenses - Mortality and expense
risk charges (note 3) 212,121 382,911 699,880 277,254 332,922 297,241 6,650,343 4,253,036 2,138,272
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 630,902 1,272,122 2,620,588 1,653,064 2,447,710 847,430 35,860,097 8,352,818 7,899,366
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) - - - 4,673,705 479,085 425,760 15,417,526 9,394,625 4,284,587
Unrealized appreciation
(depreciation) on
investments - - - (2,814,608) 308,688 2,702,738 65,899,106 23,601,942 37,953,951
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments - - - 1,859,097 787,773 3,128,498 81,316,632 32,996,567 42,238,538
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from
operations $630,902 1,272,122 2,620,588 3,512,161 3,235,483 3,975,928 117,176,729 41,349,385 50,137,904
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Variable Insurance Products Fund
----------------------------------------
Growth
Portfolio (continued)
---------------------------------------
Year ended December 31,
1997 1996 1995
- -----------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 9,229,913 13,903,188 567,790
Expenses - Mortality and expense
risk charges (note 3) 3,552,903 2,834,086 1,696,933
- ----------------------------------------------------------------------
Net investment income (expense) 5,677,010 11,069,102 (1,129,143)
- ----------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) 14,576,544 9,229,819 7,510,176
Unrealized appreciation
(depreciation) on
investments) 34,536,532 6,990,625 29,804,134
- ---------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 49,113,076 16,220,444 37,314,310
- ---------------------------------------------------------------------
Increase in net assets from
operations 54,790,086 27,289,546 36,185,167
- ---------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, Continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund Variable Insurance Products Fund II
-------------------------------- ---------------------------------------------------
Asset
Overseas Manager Contrafund
Portfolio Portfolio Portfolio
------------------------------- ------------------------------- ---------------------
Year ended Year ended
Year ended December 31, Year ended December 31, December 31, December 31,
1997 1996 1995 1997 1996 1995 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $9,303,257 2,309,161 644,375 52,909,448 27,801,550 9,085,957 4,672,962 634,656
Expenses - Mortality and expense
risk charges (note 3) 1,401,167 1,245,263 999,548 5,474,604 4,059,911 4,926,810 2,588,608 1,322,883
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 7,902,090 1,063,898 (355,173) 47,434,844 23,741,639 4,159,147 2,084,354 (688,227)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments:
Net realized gain 6,802,686 2,693,770 734,798 9,093,636 7,507,674 1,958,733 9,468,307 2,738,082
Unrealized appreciation
(depreciation) on investments (3,387,543) 7,585,836 6,428,977 24,430,304 23,008,153 55,306,129 26,750,686 17,275,767
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on
investments 3,415,143 10,279,606 7,163,775 33,523,940 30,515,827 57,264,862 36,218,993 20,013,849
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations $ 11,317,233 11,343,504 6,808,602 80,958,784 54,257,466 61,424,009 38,303,347 19,325,622
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Variable Insurance Products Variable Insurance Products
Fund II (continued) Fund III
----------------------------- --------------------------
Growth & Growth
Contrafund Income Opportunities
Portfolio Portfolio Portfolio
------------- --------- ----------
Period from Period from Period from
January 5, May 1, May 1,
1995 to 1997 to 1997 to
December 3 December 31, December 31,
1995 1997 1997
- ------------------------------------------------------- -------------------------
<S> <C>
Investment income:
Income - Dividends 784,088 - -
Expenses - Mortality and expense risk
charges (note 3) 323,922 53,296 69,440
- ----------------------------------------------------- -------------------------
Net investment income (expense) 460,166 (53,296) (69,440)
- ----------------------------------------------------- -------------------------
Net realized and unrealized gain (loss) on
investments:
Net realized gain 905,255 103,153 67,071
Unrealized appreciation (depreciation)
on investments 4,218,866 458,100 1,055,758
- ----------------------------------------------------- -----------------------
Net realized and unrealized gain on
investments 5,124,121 561,253 1,122,829
- ----------------------------------------------------- -----------------------
Increase in net assets from operations 5,584,287 507,957 1,053,389
- ------------------------------------------------------- ----------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
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 $1,992,971 5,226,886 748,770 550,544 1,231,424 958,338
Expenses - Mortality and expense
risk charges (note 3) 337,918 381,777 385,789 99,586 151,484 210,707
- ----------------------------------------------- ----------------------------------------------------
Net investment income 1,655,053 4,845,109 362,981 450,958 1,079,940 747,631
- ----------------------------------------------- ----------------------------------------------------
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) 5,097,861 419,822 895,552 12,018 (136,701) 45,793
Unrealized appreciation
(depreciation) on
investments) (2,501,835) (3,501,201) 5,264,633 (23,525) (646,673) 816,276
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 2,596,026 (3,081,379) 6,160,185 (11,507) (783,374) 862,069
- ------------------------------------------------------------------------------------------------------
Increase in net assets from
operations $ 4,251,079 1,763,730 6,523,166 439,451 296,566 1,609,700
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Neuberger & Berman Advisers
Management Trust (continued)
-----------------------------------
Growth
Portfolio
-----------------------------------
Year ended December 31,
1997 1996 1995
- --------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 903,849 1,152,528 246,676
Expenses - Mortality and expense
risk charges (note 3) 132,989 146,484 127,144
- --------------------------------------------------------------------
Net investment income 770,860 1,006,044 119,532
- --------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) 2,304,768 315,046 242,067
Unrealized appreciation
(depreciation) on
investments) (880,241) (363,320) 1,957,190
- --------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 1,424,527 (48,274) 2,199,257
- --------------------------------------------------------------------
Increase in net assets from
operations 2,195,387 957,770 2,318,789
- ---------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Federated Investors Insurance
Series
--------------------------------------------------------------------------------------
American High Income
Leaders Bond Utility
Fund II Fund II Fund II
--------------------- ------------------------------- --------------------------------
Year ended Period from Year ended Year ended Period from Year ended Year ended Period from
December 31, May 6, 1996 to December 31, December 31, February 3, December 31, December 31, January 27,
1997 December 31, 1997 1996 1995 to 1997 1996 1995 to
1996 December 31, December 31,
1995 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $228,362 15,977 1,129,533 579,337 45,272 1,046,132 766,616 223,744
Expenses - Mortality
and expense risk
charges (note 3) 228,448 12,003 302,211 87,381 6,392 326,253 243,314 61,497
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income
(expense) (86) 3,974 827,322 491,956 38,880 719,879 523,302 162,247
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on
investments:
Net realized gain
(loss) 544,140 29,680 630,351 31,769 3,368 731,431 336,527 90,613
Unrealized appreciation
(depreciation) on
investments 3,385,309 162,046 1,256,745 424,014 26,388 4,302,272 1,113,241 914,307
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) loss
on investments 3,929,449 191,726 1,887,096 455,783 29,756 5,033,703 1,449,768 1,004,920
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net
assets from operations $3,929,363 195,700 2,714,418 947,739 68,636 5,753,582 1,973,070 1,167,167
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Alger American
----------------------------------------------------------------
Small
Cap Growth
Portfolio Portfolio
-------------------------------- -------------------------------
Period from Period from
October 3, October 4,
Year ended Year ended 1995 to Year ended Year ended 1995 to
December 31, December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 2,044,748 105,411 - 528,437 668,828 -
Expenses - Mortality and expense
risk charges (note 3) 799,242 414,206 9,745 811,338 358,846 6,776
- ----------------------------------------------------------------------------------------------------------
Net investment income (expense) 1,245,506 (308,795) (9,745) (282,901) 309,982 (6,776)
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) 411,624 (122,299) (20,417) 3,954,588 315,644 (2,380)
Unrealized appreciation
(depreciation) on
investments) 4,016,910 (80,937) (25,048) 8,095,163 2,224,353 27,240
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
loss) on investments 4,428,534 (203,236) (45,465) 12,049,751 2,539,997 24,860
- -----------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 5,674,040 (512,031) (55,210) 11,766,850 2,849,979 18,084
- ------------------------------------------------------------------------------------------------------------
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
PBHG Insurance
Series Fund
---------------------
PBHG
Large Cap PBHG
Growth Growth II
Portfolio Portfolio
---------- ----------
Period from Period from
May 1, May 1,
1997 to 1997 to
December 31, December 31,
1997 1997
- -------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ - -
Expenses - Mortality and expense
risk charges (note 3) 17,112 30,512
- ---------------------------------------------------------------------
Net investment income (expense) (17,112) (30,512)
- ---------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain 13,525 7,643
Unrealized appreciation
(depreciation) on investments 149,898 (89,829)
- ---------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 163,423 (82,186)
- ---------------------------------------------------------------------
Increase (decrease) in net assets
from operations $ 146,311 (112,698)
- ---------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, Continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series
--------------------------------------------------------------------------
Aggressive
Growth Growth
Portfolio Portfolio
------------------------------------ ------------------------------------
Year ended Year ended
December 31, December 31,
1997 1996 1995 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ - 755,467 701,550 5,821,316 3,316,849 1,774,926
Expenses - Mortality and expense risk charges
(note 3) 1,187,720 880,271 464,496 2,533,302 1,496,337 686,203
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) (1,187,720) (124,804) 237,054 3,288,014 1,820,512 1,088,723
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments:
Net realized gain 6,675,700 3,422,984 1,735,504 9,346,395 4,286,543 1,220,855
Unrealized appreciation (depreciation) on
investments 5,540,954 109,555 7,840,280 23,212,981 11,457,707 11,886,046
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 12,216,654 3,532,539 9,575,784 32,559,376 15,744,250 13,106,901
- ------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations $ 11,028,934 3,407,735 9,812,838 35,847,390 17,564,762 14,195,624
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Janus Aspen Series (continued)
--------------------------------------
Worldwide
Growth
Portfolio
------------------------------------
Year ended
December 31,
1997 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 4,490,822 2,094,632 225,282
Expenses - Mortality and expense risk charges
(note 3) 3,656,021 1,418,611 477,320
- ----------------------------------------------------------------------------------------
Net investment income (expense) 834,801 676,021 (252,038)
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments:
Net realized gain 11,585,008 5,069,677 439,501
Unrealized appreciation (depreciation) on
investments 32,530,512 18,944,795 9,549,318
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 44,115,520 24,014,472 9,988,819
- ----------------------------------------------------------------------------------------
Increase in net assets from operations 44,950,321 24,690,493 9,736,781
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, Continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series (continued)
--------------------------------------------------------------------------
Flexible
Balanced Income
Portfolio Portfolio
-------------------------------------- ------------------------------------
Period from Period from
October 11, October 13,
Year ended Year ended 1995 to Year ended 1995 to
December 31,December 31, December 31, December 31, December 31,
1997 1996 1995 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ 1,376,630 283,521 12,299 699,223 288,802 20,133
Expenses - Mortality and expense risk charges
(note 3) 445,275 113,425 2,009 120,354 40,424 980
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 931,355 170,096 10,290 578,869 248,378 19,153
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments:
Net realized gain 1,239,519 122,576 9,364 86,470 4,524 29
Unrealized appreciation (depreciation) on
investments 4,013,343 920,620 37,909 269,390 68,898 (2,240)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments 5,252,862 1,043,196 47,273 355,860 73,422 (2,211)
- ------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations $ 6,184,217 1,213,292 57,563 934,729 321,800 16,942
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Janus Aspen Series (continued)
-----------------------------------------
International Capital
Growth Appreciation
Portfolio Portfolio
----------------------- --------------
Period from Period from
May 3, 1996 May 2, 1997
Year ended to
December 31, December 31, December 31,
1997 1996 1997
- -------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 348,585 54,433 8,437
Expenses - Mortality and expense risk charges
(note 3) 516,236 45,378 9,981
- --------------------------------------------------------------------------------------------
Net investment income (expense) (167,651) 9,055 (1,544)
- --------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments:
Net realized gain 3,329,942 187,391 31,894
Unrealized appreciation (depreciation) on
investments 1,235,644 586,615 12,182
- --------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments 4,565,586 774,006 44,076
- --------------------------------------------------------------------------------------------
Increase in net assets from operations 4,397,935 783,061 42,532
- --------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
(formerly Life of Virginia Series Fund, Inc.)
----------------------------------------------------
S&P 500
Index
Fund
---------------------------------------------------
Year ended December 31,
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ 2,645,157 22,942,876 272,440
Net realized gain (loss) (899,446) 1,510,464 345,068
Unrealized appreciation (depreciation)
on investments 21,611,136 (16,204,375) 2,539,788
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 23,356,847 8,248,965 3,157,296
- -----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 40,575,050 18,225,715 7,357,078
Transfers (to) from the general account of
Life of Virginia:
Death benefits (1,735,027) (77,864) (143,652)
Surrenders (3,415,596) (1,079,082) (306,506)
Administrative expense (note 3) (102,362) (45,091) (22,813)
Transfer gain (loss) and transfer fees (4,503) 7,463 (8,822)
Transfers (to) from the Guarantee
Account (note 1) 14,747,561 3,139,208 695,771
Interfund transfers 24,135,903 5,665,381 5,341,899
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 74,201,026 25,835,730 12,912,955
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 97,557,873 34,084,695 16,070,251
Net assets at beginning of year 55,868,451 21,783,756 5,713,505
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 153,426,324 55,868,451 21,783,756
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc. (formerly Life of Virginia Series Fund, Inc.)
--------------------------------------------------------------------------
Government
Securities
Fund
------------------------------------------------------
Year ended December 31,
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) (147,796) 1,165,729 481,595
Net realized gain (loss) (242,895) (68,248) (20,275)
Unrealized appreciation (depreciation)
on investments 987,049 (995,503) 567,616
- -------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 596,358 101,978 1,028,936
- -------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 1,053,538 3,734,757 1,619,783
Transfers (to) from the general account of
Life of Virginia:
Death benefits (64,230) (76,802) (44,216)
Surrenders (666,510) (492,750) (500,706)
Administrative expense (note 3) (18,501) (21,731) (17,040)
Transfer gain (loss) and transfer fees (36,688) 8,420 (9,439)
Transfers (to) from the Guarantee
Account (note 1) 827,432 135,548 60,927
Interfund transfers (14,821,369) (65,339) 2,038,922
- -------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions (13,726,328) 3,222,103 3,148,231
- -------------------------------------------------------------------------------------------------------------
Increase in net assets (13,129,970) 3,324,081 4,177,167
Net assets at beginning of year 13,129,970 9,805,889 5,628,722
- -------------------------------------------------------------------------------------------------------------
Net assets at end of year - 13,129,970 9,805,889
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
GE Investments Funds, Inc.
(formerly Life of Virginia Series Fund, Inc.) (continued)
----------------------------------------------------------
Money Market
Fund
-------------------------------------------------
Year ended December 31,
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 4,205,545 4,224,053 953,357
Net realized gain (loss) (4,421,730) 1,686,452 312,501
Unrealized appreciation (depreciation)
on investments 4,383,879 (2,984,484) (757,472)
- ------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 4,167,694 2,926,021 508,386
- ------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 107,140,555 153,728,177 52,511,585
Transfers (to) from the general account of
Life of Virginia:
Death benefits (1,753,311) (781,386) (4,954)
Surrenders (18,383,973) (8,255,412) (2,099,100)
Administrative expense (note 3) (134,339) (78,769) (17,072)
Transfer gain (loss) and transfer fees (130,614) 28,173 52,426
Transfers (to) from the Guarantee
Account (note 1) 10,195,112 4,298,099 4,957,966
Interfund transfers (67,593,593) (93,981,321) (30,878,764)
- ------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 29,339,837 54,957,561 24,522,087
- ------------------------------------------------------------------------------------------------------------
Increase in net assets 33,507,531 57,883,582 25,030,473
Net assets at beginning of year 90,187,173 32,303,591 7,273,118
- ------------------------------------------------------------------------------------------------------------
Net assets at end of year 123,694,704 90,187,173 32,303,591
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc. (formerly Life of Virginia Series Fund, Inc.) (continued)
- --------------------------------------------------------------------------------------------------------------
Total Return
Fund
- --------------------------------------------------------------------------------------------------------------
Year ended December 31,
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 5,602,393 8,962,291 1,389,047
Net realized gain (loss) (454,827) 614,446 308,073
Unrealized appreciation (depreciation)
on investments 657,828 (6,827,262) 1,987,241
- ----------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 5,805,394 2,749,475 3,684,361
- ----------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 5,641,626 8,515,814 4,777,568
Transfers (to) from the general account of
Life of Virginia:
Death benefits (271,179) (153,153) (184,615)
Surrenders (2,558,265) (946,894) (685,070)
Administrative expense (note 3) (60,731) (51,588) (40,610)
Transfer gain (loss) and transfer fees (15,082) (69,616) 5,627
Transfers (to) from the Guarantee
Account (note 1) 2,622,768 919,901 401,449
Interfund transfers (231,875) 75,151 2,419,115
- ----------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 5,127,262 8,289,615 6,693,464
- ----------------------------------------------------------------------------------------------------------------
Increase in net assets 10,932,656 11,039,090 10,377,825
Net assets at beginning of year 33,594,461 22,555,371 12,177,546
- ----------------------------------------------------------------------------------------------------------------
Net assets at end of year 44,527,117 33,594,461 22,555,371
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc. (formerly Life of Virginia Series Fund, Inc.)
(continued)
---------------------------------------------
International
Equity
Fund
--------------------------------------------
Period from
May 23,
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 $ 2,572,712 999,110 26,712
Net realized gain (loss) 665,649 86,537 646
Unrealized appreciation (depreciation) on investments (1,565,382) (11,119) 25,880
- -------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 1,672,979 1,074,528 53,238
- -------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 1,854,537 2,563,735 332,761
Transfers (to) from the general account of Life of Virginia:
Death benefits (2,360) (3,522) (2,053)
Surrenders (349,063) (103,501) (1,796)
Administrative expense (note 3) (10,458) (6,060) (661)
Transfer gain and transfer fees 49,348 (92,027) 1,565
Capital contribution - 10,925,561 -
Transfers from the Guarantee Account (note 1) 1,095,648 557,466 101,612
Interfund transfers 664,758 1,263,184 1,237,114
- -------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 3,302,410 15,104,836 1,668,542
- -------------------------------------------------------------------------------------------------------------------
Increase in net assets 4,975,389 16,179,364 1,721,780
Net assets at beginning of period 17,901,144 1,721,780 -
- -------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 22,876,533 17,901,144 1,721,780
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc. (formerly Life of Virginia
Series Fund, Inc.) (continued)
-------------------------------------------------------
Real Estate
Securities
Fund
-------------------------------------------------------
Period from
May 2,
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 5,164,666 1,578,261 667,676
Net realized gain (loss) 2,710,582 299,159 24,928
Unrealized appreciation (depreciation) on investments (1,305,117) 4,059,521 1,049,744
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 6,570,131 5,936,941 1,742,348
- -----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 10,679,221 2,949,990 301,414
Transfers (to) from the general account of Life of Virginia:
Death benefits (18,462) - (1,392)
Surrenders (654,786) (41,760) (1,136)
Administrative expense (note 3) (19,846) (3,136) (286)
Transfer gain and transfer fees 122,915 (107,856) 1,212
Capital contribution - - 10,000,000
Transfers from the Guarantee Account (note 1) 4,443,497 539,647 70,614
Interfund transfers 5,849,780 4,063,439 261,308
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 20,402,319 7,400,324 10,631,734
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 26,972,450 13,337,265 12,374,082
Net assets at beginning of period 25,711,347 12,374,082 -
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 52,683,797 25,711,347 12,374,082
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
(formerly Life of Virginia Series Fund, Inc.) (continued)
----------------------------------------------------------------
Global Value
Income Equity Income
Fund Fund Fund
------------------ ----------------- -----------------
Period from Period from Period from
May 1, May 1, December 12,
1997 to 1997 to 1997 to
December 31, December 31, December 31,
1997 1997 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income 297,690 104,481 43,837
Net realized gain (loss) 2,417 357,048 (6,710)
Unrealized appreciation (depreciation) on investments (124,348) 885,799 (12,199)
- --------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 175,759 1,347,328 24,928
- --------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 198,123 3,244,942 19,521
Transfers (to) from the general account of Life of Virginia:
Death benefits - (1,960) -
Surrenders (5,701) (75,503) (59,137)
Administrative expense (note 3) (209) (1,938) (2,414)
Transfer gain and transfer fees (472) 15,109 (467)
Capital contribution 5,000,000 3,000,000 -
Transfers from the Guarantee Account (note 1) 234,749 2,034,025 52,096
Interfund transfers 513,049 6,338,005 21,976,333
- --------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 5,939,539 14,552,680 21,985,932
- --------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 6,115,298 15,900,008 22,010,860
Net assets at beginning of period - - -
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 6,115,298 15,900,008 22,010,860
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
--------------------------------------------------------
Money
Fund
-------------------------------------------------------
Year ended December 31,
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ 84,803 134,874 239,141
Net realized gain - - -
Unrealized appreciation (depreciation) on investments - - -
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 84,803 134,874 239,141
- -----------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 440 1,000 1,236,189
Transfers (to) from the general account of Life of Virginia:
Death benefits - (25,650) -
Surrenders $ (84,605) (248,877) (534,163)
Administrative expense (note 3) - (7,741) (12,911)
Transfer gain (loss) and transfer fees (4,611) (6,711) (10,807)
Transfers (to) from the Guarantee Account (note 1) (9,897) (72,686) (522,980)
Interfund transfers (2,736,806) (1,858,335) (3,724,005)
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (2,835,479) (2,219,000) (3,568,677)
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (2,750,676) (2,084,126) (3,329,536)
Net assets at beginning of year 2,750,676 4,834,802 8,164,338
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ - 2,750,676 4,834,802
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds (continued)
--------------------------------------------------------
Bond
Fund
-------------------------------------------------------
Year ended December 31,
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 1,822,818 1,437,401 1,001,313
Net realized gain 187,695 106,242 53,120
Unrealized appreciation (depreciation) on investments 663,371 (442,815) 1,654,610
- --------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 2,673,884 1,100,828 2,709,043
- --------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 3,472,666 6,447,661 3,897,393
Transfers (to) from the general account of Life of Virginia:
Death benefits (234,610) (255,232) (103,070)
Surrenders (2,350,488) (1,174,644) (1,044,752)
Administrative expense (note 3) (53,814) (47,633) (43,224)
Transfer gain (loss) and transfer fees (12,509) 15,212 (70,035)
Transfers (to) from the Guarantee Account (note 1) 3,535,189 1,424,034 277,812
Interfund transfers 1,076,424 1,248,636 1,434,738
- --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 5,432,858 7,658,034 4,348,862
- --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 8,106,742 8,758,862 7,057,905
Net assets at beginning of year 31,638,941 22,880,079 15,822,174
- --------------------------------------------------------------------------------------------------------------------------
Net assets at end of year 39,745,683 31,638,941 22,880,079
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds (continued)
--------------------------------------------------------
Capital
Appreciation
Fund
------------------------------------------------------
Year ended December 31,
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 5,840,622 4,562,994 (536,250)
Net realized gain 6,868,228 6,301,279 1,666,666
Unrealized appreciation (depreciation) on investments 5,927,622 7,478,382 18,977,772
- -------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 18,636,472 18,342,655 20,108,188
- -------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 25,418,900 35,523,585 13,056,769
Transfers (to) from the general account of Life of Virginia:
Death benefits (450,528) (577,949) (315,870)
Surrenders (7,755,383) (5,679,609) (3,725,572)
Administrative expense (note 3) (291,649) (237,053) (179,980)
Transfer gain (loss) and transfer fees (53,714) (234,268) (110,449)
Transfers (to) from the Guarantee Account (note 1) 13,461,161 5,093,547 910,511
Interfund transfers 37,796 16,982,928 899,125
- -------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 30,366,583 50,871,181 10,534,534
- -------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 49,003,055 69,213,836 30,642,722
Net assets at beginning of year 158,844,181 89,630,345 58,987,623
- -------------------------------------------------------------------------------------------------------------------------
Net assets at end of year 207,847,236 158,844,181 89,630,345
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds (continued)
------------------------------------------------------
Growth
Fund
------------------------------------------------------
Year ended December 31,
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 3,539,022 2,510,530 127,293
Net realized gain 5,826,603 1,959,742 739,151
Unrealized appreciation (depreciation) on investments 11,621,155 5,568,726 5,287,316
- ----------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 20,986,780 10,038,998 6,153,760
- ----------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 31,719,458 15,322,231 8,623,363
Transfers (to) from the general account of Life of Virginia:
Death benefits (350,617) (246,052) (11,683)
Surrenders (5,238,134) (1,802,707) (531,276)
Administrative expense (note 3) (138,883) (79,593) (49,718)
Transfer gain (loss) and transfer fees (28,403) (9,390) (2,381)
Transfers (to) from the Guarantee Account (note 1) 12,928,357 2,323,647 807,793
Interfund transfers 11,277,889 8,265,699 5,644,624
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 50,169,667 23,773,835 14,480,722
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 71,156,447 33,812,833 20,634,482
Net assets at beginning of year 67,859,369 34,046,536 13,412,054
- ----------------------------------------------------------------------------------------------------------------------
Net assets at end of year 139,015,816 67,859,369 34,046,536
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds (continued)
--------------------------------------------------------
High
Income
Fund
-------------------------------------------------------
Year ended December 31,
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income $ 7,741,474 5,561,338 3,110,351
Net realized gain (loss) 1,298,149 763,575 (105,319)
Unrealized appreciation (depreciation) on investments 2,089,422 2,079,281 2,497,291
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 11,129,045 8,404,194 5,502,323
- -----------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 21,931,355 22,356,655 11,530,804
Transfers (to) from the general account of Life of Virginia:
Death benefits (689,590) (693,092) (69,961)
Surrenders (5,920,831) (2,655,530) (1,461,891)
Administrative expense (note 3) (139,006) (100,320) (73,580)
Transfer gain (loss) and transfer fees (112,330) (25,953) 144,255
Transfers (to) from the Guarantee Account (note 1) 12,750,648 3,777,050 1,497,477
Interfund transfers 23,573,698 9,730,803 2,860,809
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 51,393,944 32,389,613 14,427,913
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets 62,522,989 40,793,807 19,930,236
Net assets at beginning of year 85,762,637 44,968,830 25,038,594
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 148,285,626 85,762,637 44,968,830
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds (continued)
-------------------------------------------------------
Multiple
Strategies
Fund
-------------------------------------------------------
Year ended December 31,
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income 3,690,801 2,771,962 2,110,596
Net realized gain (loss) 1,435,981 701,256 353,442
Unrealized appreciation (depreciation) on investments 4,025,778 2,786,345 3,750,075
- -------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 9,152,560 6,259,563 6,214,113
- -------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 9,089,218 8,520,761 4,566,130
Transfers (to) from the general account of Life of Virginia:
Death benefits (332,263) (389,751) (183,215)
Surrenders (4,493,985) (2,097,537) (1,641,635)
Administrative expense (note 3) (119,442) (104,392) (93,990)
Transfer gain (loss) and transfer fees (8,995) (27,395) (65,699)
Transfers (to) from the Guarantee Account (note 1) 4,101,390 1,507,791 282,847
Interfund transfers 516,158 198,943 787,704
- -------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 8,752,081 7,608,420 3,652,142
- -------------------------------------------------------------------------------------------------------------------------
Increase in net assets 17,904,641 13,867,983 9,866,255
Net assets at beginning of year 54,118,912 40,250,929 30,384,674
- -------------------------------------------------------------------------------------------------------------------------
Net assets at end of year 72,023,553 54,118,912 40,250,929
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund
--------------------------------------------------------
Money Market
Portfolio
-------------------------------------------------------
Year ended December 31,
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ 630,902 1,272,122 2,620,588
Net realized gain - - -
Unrealized appreciation (depreciation) on investments - - -
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 630,902 1,272,122 2,620,588
- -----------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums (28,472) 117,921 36,176,530
Transfers (to) from the general account of Life of Virginia:
Death benefits (193,170) (458,667) 103,982
Surrenders (1,206,916) (2,213,343) (4,660,173)
Administrative expense (note 3) (39,130) (65,257) (121,073)
Transfer gain (loss) and transfer fees 86,971 (204,381) 49,754
Transfers (to) from the Guarantee Account (note 1) (27,901) (661,457) (141,309)
Interfund transfers (21,205,932) (23,959,305) (47,938,008)
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (22,614,550) (27,444,489) (16,530,297)
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (21,983,648) (26,172,367) (13,909,709)
Net assets at beginning of year 21,983,648 48,156,015 62,065,724
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ - 21,983,648 48,156,015
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund (continued)
--------------------------------------------------------
High
Income
Portfolio
-------------------------------------------------------
Year ended December 31,
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 1,653,064 2,447,710 847,430
Net realized gain 4,673,705 479,085 425,760
Unrealized appreciation (depreciation) on investments (2,814,608) 308,688 2,702,738
- -------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 3,512,161 3,235,483 3,975,928
- -------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 8,207 (248,987) 7,262,170
Transfers (to) from the general account of Life of Virginia:
Death benefits (66,792) (33,131) (117,911)
Surrenders (2,281,288) (1,859,776) (953,927)
Administrative expense (note 3) (46,012) (54,571) (51,018)
Transfer gain (loss) and transfer fees (18,007) (14,545) (10,918)
Transfers (to) from the Guarantee Account (note 1) (23,044) (109,624) 860,461
Interfund transfers (25,886,326) (7,008,575) 4,509,566
- -------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (28,313,262) (9,329,209) 11,498,423
- -------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (24,801,101) (6,093,726) 15,474,351
Net assets at beginning of year 24,801,101 30,894,827 15,420,476
- -------------------------------------------------------------------------------------------------------------------------
Net assets at end of year - 24,801,101 30,894,827
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund (continued)
--------------------------------------------------------
Equity-
Income
Portfolio
------------------------------------------------------
Year ended December 31,
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 35,860,097 8,352,818 7,899,366
Net realized gain 15,417,526 9,394,625 4,284,587
Unrealized appreciation (depreciation) on investments 65,899,106 23,601,942 37,953,951
- -------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 117,176,729 41,349,385 50,137,904
- -------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 78,673,490 91,217,558 63,044,040
Transfers (to) from the general account of Life of Virginia:
Death benefits (3,144,602) (2,317,929) (623,306)
Surrenders (22,544,378) (12,923,609) (7,390,359)
Administrative expense (note 3) (744,663) (565,181) (384,060)
Transfer gain (loss) and transfer fees (156,609) (81,577) (128,097)
Transfers (to) from the Guarantee Account (note 1) 34,236,802 14,669,920 8,592,478
Interfund transfers 4,787,401 12,688,430 43,164,815
- -------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 91,107,441 102,687,612 106,275,511
- -------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 208,284,170 144,036,997 156,413,415
Net assets at beginning of year 405,298,602 261,261,605 104,848,190
- -------------------------------------------------------------------------------------------------------------------------
Net assets at end of year 613,582,772 405,298,602 261,261,605
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund (continued)
-----------------------------------------------------
Growth
Portfolio
-----------------------------------------------------
Year ended December 31,
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 5,677,010 11,069,102 (1,129,143)
Net realized gain 14,576,544 9,229,819 7,510,176
Unrealized appreciation (depreciation) on investments 34,536,532 6,990,625 29,804,134
- ----------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 54,790,086 27,289,546 36,185,167
- ----------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 19,742,111 40,351,417 35,842,400
Transfers (to) from the general account of Life of Virginia:
Death benefits (1,127,415) (1,395,457) (338,418)
Surrenders (15,488,583) (8,362,725) (5,531,711)
Administrative expense (note 3) (502,085) (441,506) (345,393)
Transfer gain (loss) and transfer fees (84,076) (243,398) 13,309
Transfers (to) from the Guarantee Account (note 1) 9,277,787 7,334,280 3,842,828
Interfund transfers (3,139,585) (3,259,632) 18,922,427
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 8,678,154 33,982,979 52,405,442
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 63,468,240 61,272,525 88,590,609
Net assets at beginning of year 251,545,367 190,272,842 101,682,233
- ----------------------------------------------------------------------------------------------------------------------
Net assets at end of year 315,013,607 251,545,367 190,272,842
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements 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) $ 7,902,090 1,063,898 (355,173)
Net realized gain 6,802,686 2,693,770 734,798
Unrealized appreciation (depreciation) on investments (3,387,543) 7,585,836 6,428,977
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 11,317,233 11,343,504 6,808,602
- -----------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 5,009,263 11,020,984 10,634,049
Transfers (to) from the general account of Life of Virginia:
Death benefits (527,674) (528,522) (556,976)
Surrenders (5,102,924) (3,972,175) (3,063,268)
Administrative expense (note 3) (220,173) (214,759) (208,318)
Transfer gain (loss) and transfer fees (38,435) (85,300) (53,050)
Transfers (to) from Guarantee Account (note 1) 3,378,950 3,116,987 590,771
Interfund transfers (12,846,872) (4,620,473) (7,084,976)
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (10,347,865) 4,716,742 258,232
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 969,368 16,060,246 7,066,834
Net assets at beginning of period 107,335,253 91,275,007 84,208,173
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 108,304,621 107,335,253 91,275,007
- -----------------------------------------------------------------------------------------------------------------------------
</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) 47,434,844 23,741,639 4,159,147
Net realized gain 9,093,636 7,507,674 1,958,733
Unrealized appreciation (depreciation) on investments 24,430,304 23,008,153 55,306,129
- --------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 80,958,784 54,257,466 61,424,009
- --------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 12,956,133 15,580,792 21,217,331
Transfers (to) from the general account of Life of Virginia:
Death benefits (2,389,147) (3,090,108) (2,849,779)
Surrenders (26,860,066) (23,863,347) (23,760,769)
Administrative expense (note 3) (1,170,300) (1,159,170) (1,245,010)
Transfer gain (loss) and transfer fees (5,281,252) (2,150,299) (305,606)
Transfers (to) from Guarantee Account (note 1) 4,580,560 2,112,849 (7,015,144)
Interfund transfers (14,758,069) (31,512,425) (58,702,053)
- --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (32,922,141) (44,081,708) (72,661,030)
- --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 48,036,643 10,175,758 (11,237,021)
Net assets at beginning of period 435,838,169 425,662,411 436,899,432
- --------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 483,874,812 435,838,169 425,662,411
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund II (continued)
------------------------------------------------------
Contrafund
Portfolio
------------------------------------------------------
Period from
January 5,
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) 2,084,354 (688,227) 460,166
Net realized gain 9,468,307 2,738,082 905,255
Unrealized appreciation (depreciation) on investments 26,750,686 17,275,767 4,218,866
- -----------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 38,303,347 19,325,622 5,584,287
- -----------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 39,049,020 41,520,289 26,666,752
Transfers (to) from the general account of Life of Virginia:
Death benefits (778,781) (569,391) (17,699)
Surrenders (7,578,528) (3,409,236) (676,614)
Administrative expense (note 3) (239,385) (139,550) (42,327)
Transfer gain (loss) and transfer fees (1,813) (6,491) (28,134)
Transfers (to) from Guarantee Account (note 1) 20,874,655 8,894,897 4,851,438
Interfund transfers 9,642,188 15,486,630 25,426,220
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 60,967,356 61,777,148 56,179,636
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 99,270,703 81,102,770 61,763,923
Net assets at beginning of period 142,866,693 61,763,923 -
- -----------------------------------------------------------------------------------------------------------------------
Net assets at end of period 242,137,396 142,866,693 61,763,923
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Variable Insurance Products
Fund III
------------------------------------
Growth & Growth
Income Opportunities
Portfolio Portfolio
------------------------------------
Period from Period from
May 1, May 1,
1997 to 1997 to
December 31, December 31,
1997 1997
- ----------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) (53,296) (69,440)
Net realized gain 103,153 67,071
Unrealized appreciation (depreciation) on investments 458,100 1,055,758
- ----------------------------------------------------------------------------------------------------
Increase in net assets from operations 507,957 1,053,389
- ----------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 5,782,503 6,759,512
Transfers (to) from the general account of Life of Virginia
Death benefits (2,062) (11,218)
Surrenders (116,741) (178,411)
Administrative expense (note 3) (3,046) (4,370)
Transfer gain (loss) and transfer fees 358,955 734
Transfers (to) from Guarantee Account (note 1) 2,665,501 2,684,605
Interfund transfers 6,515,155 6,783,534
- ----------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 15,200,265 16,034,386
- ----------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 15,708,222 17,087,775
Net assets at beginning of period - -
- ----------------------------------------------------------------------------------------------------
Net assets at end of period 15,708,222 17,087,775
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements 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 $ 1,655,053 4,845,109 362,981
Net realized gain (loss) 5,097,861 419,822 895,552
Unrealized appreciation (depreciation) on investments (2,501,835) (3,501,201) 5,264,633
- ------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 4,251,079 1,763,730 6,523,166
- ------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums (6,001) - 2,535,815
Transfers (to) from the general account of Life of Virginia:
Death benefits (126,435) (191,199) (153,937)
Surrenders (2,675,228) (2,074,244) (1,503,514)
Administrative expense (note 3) (71,576) (82,124) (88,114)
Transfer gain (loss) and transfer fees (78,959) (12,205) 7,049
Capital contribution (629,209) - -
Transfers (to) from the Guarantee Account (note 1) (185,078) (37,694) (134,229)
Interfund transfers (31,241,057) (3,810,712) (2,179,193)
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (35,013,543) (6,208,178) (1,516,123)
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (30,762,464) (4,444,448) 5,007,043
Net assets at beginning of year 30,762,464 35,206,912 30,199,869
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ - 30,762,464 35,206,912
- ------------------------------------------------------------------------------------------------------------------------------
</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 450,958 1,079,940 747,631
Net realized gain (loss) 12,018 (136,701) 45,793
Unrealized appreciation (depreciation) on investments (23,525) (646,673) 816,276
- -----------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 439,451 296,566 1,609,700
- -----------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 1,800 - 4,761,820
Transfers (to) from the general account of Life of Virginia:
Death benefits (196,037) (225,838) (7,505)
Surrenders (508,821) (366,908) (522,591)
Administrative expense (note 3) (15,911) (24,278) (37,167)
Transfer gain (loss) and transfer fees (11,476) (9,665) (23,158)
Capital contribution - - -
Transfers (to) from the Guarantee Account (note 1) (86,454) (92,797) 798,511
Interfund transfers (9,344,589) (5,700,964) (9,447,152)
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (10,161,488) (6,420,450) (4,477,242)
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (9,722,037) (6,123,884) (2,867,542)
Net assets at beginning of year 9,722,037 15,845,921 18,713,463
- -----------------------------------------------------------------------------------------------------------------------
Net assets at end of year - 9,722,037 15,845,921
- -----------------------------------------------------------------------------------------------------------------------
</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 770,860 1,006,044 119,532
Net realized gain (loss) 2,304,768 315,046 242,067
Unrealized appreciation (depreciation) on investments (880,241) (363,320) 1,957,190
- ------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 2,195,387 957,770 2,318,789
- ------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 6,456 4,370 2,833,430
Transfers (to) from the general account of Life of Virginia:
Death benefits (58,098) (56,431) (78,819)
Surrenders (247,815) (415,296) (251,354)
Administrative expense (note 3) (22,353) (25,172) (23,723)
Transfer gain (loss) and transfer fees (2,057) (10,420) (697)
Capital contribution - - -
Transfers (to) from the Guarantee Account (note 1) - (14,970) 36,976
Interfund transfers (12,373,616) (3,652,818) 1,961,133
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (12,697,483) (4,170,737) 4,476,946
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (10,502,096) (3,212,967) 6,795,735
Net assets at beginning of year 10,502,096 13,715,063 6,919,328
- ------------------------------------------------------------------------------------------------------------------------
Net assets at end of year - 10,502,096 13,715,063
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Federated Investors Insurance
Series
---------------------------------------
American
Leaders
Fund II
---------------------------------------
Period from
Year ended May 6, 1996 to
December 31, December 31,
1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ (86) 3,974
Net realized gain 544,140 29,680
Unrealized appreciation (depreciation)
on investments 3,385,309 162,046
- ---------------------------------------------------------------------------------------------------------
Increase in net assets
from operations 3,929,363 195,700
- ---------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 13,540,849 2,249,062
Transfers (to) from the general account
of Life of Virginia:
Death benefits (91,917) -
Surrenders (423,567) (28,376)
Administrative expense (note 3) (11,789) (522)
Transfer gain (loss) and transfer fees 791 4,221
Transfers from the Guarantee Account (note 1) 4,966,466 146,563
Interfund transfers 9,208,512 1,208,370
- ---------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 27,189,345 3,579,318
- ---------------------------------------------------------------------------------------------------------
Increase in net assets 31,118,708 3,775,018
Net assets at beginning of period 3,775,018 -
- ---------------------------------------------------------------------------------------------------------
Net assets at end of period $ 34,893,726 3,775,018
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Federated Investors Insurance
Series (continued)
----------------------------------------------------------
High Income
Bond
Fund II
----------------------------------------------------------
Period from
February 3,
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) 827,322 491,956 38,880
Net realized gain 630,351 31,769 3,368
Unrealized appreciation (depreciation)
on investments 1,256,745 424,014 26,388
- ---------------------------------------------------------------------------------------------------------------------------
Increase in net assets
from operations 2,714,418 947,739 68,636
- ---------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 9,254,617 4,468,263 1,448,946
Transfers (to) from the general account
of Life of Virginia:
Death benefits (120,443) (42,084) -
Surrenders (861,128) (428,701) (12,805)
Administrative expense (note 3) (18,435) (5,233) (601)
Transfer gain (loss) and transfer fees (2,424) (43) 5,535
Transfers from the Guarantee Account (note 1) 4,882,888 670,397 200,240
Interfund transfers 5,675,771 6,113,878 235,916
- ---------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 18,810,846 10,776,477 1,877,231
- ---------------------------------------------------------------------------------------------------------------------------
Increase in net assets 21,525,264 11,724,216 1,945,867
Net assets at beginning of period 13,670,083 1,945,867 -
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 35,195,347 13,670,083 1,945,867
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Federated Investors Insurance
Series (continued)
------------------------------------------------------
Utility
Fund II
------------------------------------------------------
Period from
January 27,
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) 719,879 523,302 162,247
Net realized gain 731,431 336,527 90,613
Unrealized appreciation (depreciation)
on investments 4,302,272 1,113,241 914,307
- -----------------------------------------------------------------------------------------------------------------------
Increase in net assets
from operations 5,753,582 1,973,070 1,167,167
- -----------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 3,510,754 7,032,730 4,723,697
Transfers (to) from the general account
of Life of Virginia:
Death benefits (63,646) (172,666) -
Surrenders (1,420,075) (708,499) (150,715)
Administrative expense (note 3) (32,050) (25,376) (7,470)
Transfer gain (loss) and transfer fees (1,043) 11,752 (650)
Transfers from the Guarantee Account (note 1) 1,540,929 1,313,211 982,260
Interfund transfers (1,399,267) 830,436 5,539,763
- -----------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 2,135,602 8,281,588 11,086,885
- -----------------------------------------------------------------------------------------------------------------------
Increase in net assets 7,889,184 10,254,658 12,254,052
Net assets at beginning of period 22,508,710 12,254,052 -
- -----------------------------------------------------------------------------------------------------------------------
Net assets at end of period 30,397,894 22,508,710 12,254,052
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Alger American
--------------------------------------------------------------
Small
Cap
Portfolio
--------------------------------------------------------------
Period from
October 3,
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) $ 1,245,506 (308,795) (9,745)
Net realized gain (loss) 411,624 (122,299) (20,417)
Unrealized appreciation (depreciation)
on investments 4,016,910 (80,937) (25,048)
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 5,674,040 (512,031) (55,210)
- --------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 12,048,925 25,934,981 3,369,922
Transfers (to) from the general account
of Life of Virginia:
Death benefits (296,448) (167,439) -
Surrenders (1,974,869) (837,016) (18,166)
Administrative expense (note 3) (69,752) (32,819) (1,420)
Transfer gain (loss) and transfer fees 20,656 (18,410) 7,625
Transfers from the Guarantee Account (note 1) 9,339,897 5,067,731 298,188
Interfund transfers 1,782,889 10,297,239 3,969,177
- --------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 20,851,298 40,244,267 7,625,326
- --------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 26,525,338 39,732,236 7,570,116
Net assets at beginning of period 47,302,352 7,570,116 -
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 73,827,690 47,302,352 7,570,116
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Alger American
----------------------------------------------------
Growth
Portfolio
----------------------------------------------------
Period from
October 4,
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) (282,901) 309,982 (6,776)
Net realized gain (loss) 3,954,588 315,644 (2,380)
Unrealized appreciation (depreciation)
on investments 8,095,163 2,224,353 27,240
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 11,766,850 2,849,979 18,084
- ----------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 13,470,987 21,518,317 2,632,716
Transfers (to) from the general account
of Life of Virginia:
Death benefits (317,671) (22,815) -
Surrenders (2,065,182) (539,265) (4,789)
Administrative expense (note 3) (68,206) (26,996) (895)
Transfer gain (loss) and transfer fees (390,379) (32,858) 1,883
Transfers from the Guarantee Account (note 1) 6,594,835 3,628,084 (47,006)
Interfund transfers (1,557,814) 11,823,073 2,922,881
- ----------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 15,666,570 36,347,540 5,504,790
- ----------------------------------------------------------------------------------------------------------------------
Increase in net assets 27,433,420 39,197,519 5,522,874
Net assets at beginning of period 44,720,393 5,522,874 -
- ----------------------------------------------------------------------------------------------------------------------
Net assets at end of period 72,153,813 44,720,393 5,522,874
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
PBHG Insurance Series Fund
------------------------------------
PBHG PBHG
Large Cap Growth II
Portfolio Portfolio
------------------------------------
Period from Period from
May 1, May 1,
1997 to 1997 to
December 31, December 31,
1997 1997
------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) (17,112) (30,512)
Net realized gain (loss) 13,525 7,643
Unrealized appreciation (depreciation)
on investments 149,898 (89,829)
- --------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 146,311 (112,698)
- --------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 1,239,113 3,502,382
Transfers (to) from the general account
of Life of Virginia:
Death benefits (715) -
Surrenders (12,383) (53,142)
Administrative expense (note 3) (684) (1,455)
Transfer gain (loss) and transfer fees 865 787
Transfers from the Guarantee Account (note 1) 610,146 1,108,447
Interfund transfers 2,735,614 2,507,619
- --------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 4,571,956 7,064,638
- --------------------------------------------------------------------------------------------------
Increase in net assets 4,718,267 6,951,940
Net assets at beginning of period - -
- --------------------------------------------------------------------------------------------------
Net assets at end of period 4,718,267 6,951,940
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements 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) $ (1,187,720) (124,804) 237,054
Net realized gain 6,675,700 3,422,984 1,735,504
Unrealized appreciation (depreciation) on investments 5,540,954 109,555 7,840,280
- ----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 11,028,934 3,407,735 9,812,838
- ----------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 11,681,150 17,880,226 16,756,982
Transfers (to) from the general account of Life of Virginia:
Death benefits (427,386) (394,284) (86,506)
Surrenders (2,997,601) (2,851,517) (1,216,524)
Administrative expense (note 3) (120,078) (112,813) (73,928)
Transfer gain (loss) and transfer fees (19,458) (40,003) 38,529
Transfers (to) from the Guarantee Account (note 1) 4,987,441 3,328,781 2,434,875
Interfund transfers (2,281,417) 8,025,078 7,553,096
- ----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 10,822,651 25,835,468 25,406,524
- ----------------------------------------------------------------------------------------------------------------------------
Increase in net assets 21,851,585 29,243,203 35,219,362
Net assets at beginning of year 83,963,537 54,720,334 19,500,972
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 105,815,122 83,963,537 54,720,334
- ----------------------------------------------------------------------------------------------------------------------------
</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) 3,288,014 1,820,512 1,088,723
Net realized gain 9,346,395 4,286,543 1,220,855
Unrealized appreciation (depreciation) on investments 23,212,981 11,457,707 11,886,046
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 35,847,390 17,564,762 14,195,624
- ----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 30,338,859 35,456,497 20,907,687
Transfers (to) from the general account of Life of Virginia:
Death benefits (1,849,634) (483,092) (292,563)
Surrenders (9,041,380) (3,747,509) (1,304,563)
Administrative expense (note 3) (280,500) (199,595) (125,440)
Transfer gain (loss) and transfer fees (152,642) (208,664) (42,445)
Transfers (to) from the Guarantee Account (note 1) 16,216,500 7,027,293 2,397,459
Interfund transfers 1,293,752 11,381,396 14,146,981
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 36,524,955 49,226,326 35,687,116
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 72,372,345 66,791,088 49,882,740
Net assets at beginning of year 151,696,572 84,905,484 35,022,744
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year 224,068,917 151,696,572 84,905,484
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series
-----------------------------------------------------------------
Worldwide
Growth
Portfolio
---------------------------------------------------------------
Year ended
December 31,
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 834,801 676,021 (252,038)
Net realized gain 11,585,008 5,069,677 439,501
Unrealized appreciation (depreciation) on investments 32,530,512 18,944,795 9,549,318
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 44,950,321 24,690,493 9,736,781
- ---------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 77,908,754 45,862,046 14,202,159
Transfers (to) from the general account of Life of Virginia:
Death benefits (916,155) (407,146) (146,748)
Surrenders (9,754,795) (2,394,900) (1,173,774)
Administrative expense (note 3) (346,218) (172,873) (87,512)
Transfer gain (loss) and transfer fees (116,774) (183,599) (23,608)
Transfers (to) from the Guarantee Account (note 1) 30,845,279 8,313,366 1,874,804
Interfund transfers 25,144,972 42,049,450 7,110,222
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 122,765,063 93,066,344 21,755,543
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 167,715,384 117,756,837 31,492,324
Net assets at beginning of year 177,410,698 59,653,861 28,161,537
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year 345,126,082 177,410,698 59,653,861
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series (continued)
-----------------------------------------------------------------
Balanced
Portfolio
--------------------------------------------------------------
Period from
October 11,
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) $ 931,355 170,096 10,290
Net realized gain 1,239,519 122,576 9,364
Unrealized appreciation (depreciation) on investments 4,013,343 920,620 37,909
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 6,184,217 1,213,292 57,563
- -----------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 15,654,806 8,643,527 619,039
Transfers (to) from the general account of
Life of Virginia:
Death benefits (98,529) (37,496) -
Surrenders (1,560,191) (271,087) (61,992)
Administrative expense (note 3) (34,113) (7,301) (379)
Transfer gain (loss) and transfer fees (11,920) 5,413 (240)
Transfer (to) from the Guarantee Account (note 1) 6,551,408 1,091,622 210,233
Interfund transfers 34,492,843 3,850,513 1,147,007
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 54,994,304 13,275,191 1,913,668
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets 61,178,521 14,488,483 1,971,231
Net assets at beginning of period 16,459,714 1,971,231 -
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 77,638,235 16,459,714 1,971,231
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series (continued)
--------------------------------------------------------------
Flexible
Income
Portfolio
--------------------------------------------------------------
Period from
October 13,
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) 578,869 248,378 19,153
Net realized gain 86,470 4,524 29
Unrealized appreciation (depreciation) on investments 269,390 68,898 (2,240)
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 934,729 321,800 16,942
- ---------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 3,465,715 2,591,080 312,671
Transfers (to) from the general account of Life of Virginia:
Death benefits (55,866) - -
Surrenders (425,891) (29,518) (451)
Administrative expense (note 3) (8,897) (2,717) (111)
Transfer gain (loss) and transfer fees 1,786 (413) 179
Transfer (to) from the Guarantee Account (note 1) 3,010,637 345,536 41,646
Interfund transfers 2,406,219 992,086 419,589
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 8,393,703 3,896,054 773,523
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 9,328,432 4,217,854 790,465
Net assets at beginning of period 5,008,319 790,465 -
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 14,336,751 5,008,319 790,465
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series (continued)
-------------------------------------------------------------
International Capital
Growth Appreciation
Portfolio Portfolio
--------------------------------------- -------------------
Period from Period from
May 3, 1996 May 2, 1997
Year ended to to
December 31, December 31, December 31,
1997 1996 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) (167,651) 9,055 (1,544)
Net realized gain 3,329,942 187,391 31,894
Unrealized appreciation (depreciation) on investments 1,235,644 586,615 12,182
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 4,397,935 783,061 42,532
- -----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 19,031,016 4,654,797 720,613
Transfers (to) from the general account of Life of Virginia:
Death benefits (197,552) - -
Surrenders (1,293,141) (51,116) (37,177)
Administrative expense (note 3) (39,068) (3,441) (826)
Transfer gain (loss) and transfer fees 24,476 3,766 (33,752)
Transfer (to) from the Guarantee Account (note 1) 8,279,728 935,954 446,414
Interfund transfers 10,950,154 7,189,157 1,531,771
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 36,755,613 12,729,117 2,627,043
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 41,153,548 13,512,178 2,669,575
Net assets at beginning of period 13,512,178 - -
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 54,665,726 13,512,178 2,669,575
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Notes to Financial Statements
December 31, 1997
================================================================================
(1) Description of Entity
Life of Virginia Separate Account 4 (the Account) is a separate
investment account established in 1987 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 deferred annuity 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 ("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, for both Type I and II policies. 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:
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Notes to Financial Statements
================================================================
(1) Continued
<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.
Shares of Money Fund - Shares of Money Market Fund -
Oppenheimer Variable Account Funds GE Investments Funds, Inc.
Shares of Bond Portfolio - Shares of Income Fund Neuberger & Berman -
Advisers Management Trust GE Investments Funds, Inc.
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 -
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.
<PAGE>
(1) Continued
In May 1996, two new investment subdivisions were added to the Account,
for both Type I and II policies. 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, for both Type I and Type II policies. 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, a series type mutual fund. The
International Equity Portfolio and the Real Estate Securities Portfolio
each invest solely in a designated portfolio of GE Investments 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 for both
Type I and Type II policies. For each policy type, 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 Funds, a series type mutual fund.
Policyowners may transfer cash values between the Account's portfolios
and the Guarantee Account that is part of the general account of Life
of Virginia. Amounts transferred to the Guarantee Account earn interest
at the interest rate in effect at the time of such transfer and remain
in effect for one year, after which a new rate may be declared.
<PAGE>
(2) Summary of Significant Accounting Policies
Unit Classes
There are two unit classes included in the Account. Type I units are
sold under policy form P1140 and P1141. Type II units are sold under
policy forms P1142, P1142N and P1143. Type II unit sales began in the
third quarter of 1994.
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 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 $ 132,222,938 31,818,054
Government Securities 10,499,388 23,055,080
Money Market 887,060,254 868,724,486
Total Return 30,724,166 10,679,067
International Equity 18,393,561 11,389,194
Real Estate Securities 43,204,050 16,152,111
Global Income 6,336,231 187,733
Value Equity 17,622,017 3,137,116
Income 25,679,422 3,310,006
Oppenheimer Variable Account Funds:
Money 314,112 3,030,625
Bond 16,807,159 9,544,382
Capital Appreciation 93,466,672 56,992,604
Growth 85,183,495 31,490,581
High Income 95,915,615 36,944,770
Multiple Strategies 23,819,771 11,316,157
Variable Insurance Products Fund:
Money Market 1,556,148 23,557,498
High Income 3,620,650 30,349,068
Equity - Income 220,439,185 93,043,056
Growth 83,553,084 68,794,613
Overseas 72,741,759 71,928,713
Variable Insurance Products Fund II:
Asset Manager 85,456,484 70,466,360
Contrafund 118,473,800 55,310,933
Variable Insurance Products Fund III:
Growth & Income 18,484,934 3,417,350
Growth Opportunities 17,590,719 1,681,206
- ----------------------------------------------------------------------------
<PAGE>
(2) Continued
Cost of Proceeds
Shares from
Fund/Portfolio Acquired Shares Sold
- -----------------------------------------------------------------------------
Neuberger & Berman Advisers
Management Trust:
Balanced $ 2,635,418 36,069,865
Bond 1,856,865 11,649,317
Growth 977,918 12,925,079
Federated Investors Insurance Series:
American Leaders II 32,823,606 5,793,581
High Income Bond II 38,421,195 18,759,547
Utility 10,012,564 7,198,898
II
Alger American:
Small Cap 46,888,772 24,542,187
Growth 46,869,978 31,444,158
PBHG Insurance Series Fund:
PBHG Large Cap Growth 6,296,317 1,710,929
PBHG Growth II 7,969,729 1,120,679
Janus Aspen Series:
Aggressive Growth 99,975,217 90,226,548
Growth 86,207,354 46,144,088
Worldwide Growth 183,578,974 59,756,806
Balanced 67,917,334 11,980,846
Flexible Income 12,301,658 3,313,161
International Growth 94,751,055 54,755,744
Capital Appreciation 5,675,613 3,007,685
- -----------------------------------------------------------------------------
Capital Transactions
The increase (decrease) in outstanding units for Type I and Type II
from capital transactions for the years or periods ended December 31,
1997, 1996 and 1995 are as follows:
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Notes to Financial Statements
(2) Continued
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
-----------------------------------------------------------------------------
S&P 500 Government Money Total International Real Estate
Index Securities Market Return Equity Securities
Type I Units Fund Fund Fund Fund Fund Fund
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1994 297,274 384,930 484,719 666,497 - -
Net premiums 37,545 7,450 265,952 38,485 5,889 3,842
Transfers (to) from the
general account of Life of Virginia:
Death benefits (3,332) (2,593) (365) (8,225) (201) (130)
Surrenders (11,616) (27,386) (138,205) (30,218) (166) (82)
Administrative expenses (991) (994) (1,241) (1,911) (64) (27)
Transfers (to)/from the Guarantee Account 17,804 (78) 347,444 6,958 8,347 6,278
Interfund transfers 142,337 67,621 (64,330) 73,915 101,757 13,762
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 181,747 44,020 409,255 79,004 115,562 23,643
- ---------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 479,021 428,950 893,974 745,501 115,562 23,643
Net premiums 34,082 36,100 706,581 33,745 22,527 14,587
Transfers (to) from the
general account of Life of Virginia:
Death benefits (1,231) (163) (16,043) (6,096) - -
Surrenders (22,370) (25,884) (412,885) (31,853) (5,008) (1,361)
Administrative expenses (1,347) (1,204) (4,925) (2,175) (446) (192)
Transfers (to)/from the Guarantee Account 37,400 4,534 358,505 1,905 22,249 21,124
Interfund transfers 54,702 62,264 1,023,952 (32,962) 52,528 147,118
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 101,236 75,647 1,655,185 (37,436) 91,850 181,276
- ---------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 580,257 504,597 2,549,159 708,065 207,412 204,919
Net premiums 43,467 2,027 273,183 24,404 (153,291) 215,116
Transfers (to) from the
general account of Life of Virginia:
Death benefits (2,505) (3,654) (88,771) (5,480) - -
Surrenders (34,875) (27,521) (773,658) (56,645) 494,961 (112,838)
Administrative expenses (1,886) (938) (6,382) (1,805) 20,280 (5,712)
Transfers (to)/from the Guarantee Account 41,669 9,540 304,035 5,882 (736,706) 208,742
Interfund transfers 292,720 (484,051) 1,254,694 (42,593) 1,380,146 875,079
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 338,590 (504,597) 963,101 (76,237) 1,005,390 1,180,387
- ---------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 918,847 - 3,512,260 631,828 1,212,802 1,385,306
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GE Investments Funds, Inc. Oppenheimer Variable Account Funds
----------------------------------- -------------------------------------------
Global Capital
Income Value Equity Income Money Bond Appreciation Growth
Type I Units Fund Fund Fund Fund Fund Fund Fund
<S> <C>
- ---------------------------------------------------------------------------------- -------------------------------------------
Units outstanding at December 31, 1994 - - - 549,261 967,029 2,708,957 734,287
Net premiums - - - 36,722 (11,303) 222,696 (521,582)
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - - 263 (31,865) 48,092
Surrenders - - - (38,250) 5,282 (311,147) 564,254
Administrative expenses - - - (910) 309 (13,475) 27,690
Transfers (to)/from the Guarantee Account - - - (33,828) (4,115) 27,379 (11,025)
Interfund transfers - - - (230,533) (4,765) 45,448 144,969
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions - - - (266,799) (14,329) (60,964) 252,398
- ----------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 - - - 282,462 952,700 2,647,993 986,685
Net premiums - - - - (4,744) (181,755) 267,359
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - (1,782) 2,016 44,441 (29,174)
Surrenders - - - (16,283) 7,728 332,700 (364,042)
Administrative expenses - - - (531) 407 14,718 (16,121)
Transfers (to)/from the Guarantee Account - - - (4,896) (7,110) (185,173) 105,286
Interfund transfers - - - (96,465) (9,728) 53,131 240,629
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions - - - (119,957) (11,431) 78,062 203,937
- ----------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 - - - 162,505 941,269 2,726,055 1,190,622
Net premiums 15,669 30,034 595 - 12,729 48,378 50,650
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - - (4,708) (2,476) (1,990)
Surrenders (2,874) (1,979) (5,500) (5,366) (114,775) (146,760) (99,247)
Administrative expenses (489) (345) (199) (298) (2,868) (6,721) (2,955)
Transfers (to)/from the Guarantee Account 131,841 33,741 - - 30,993 33,837 40,477
Interfund transfers 372,751 418,170 1,300,742 (156,841) 66,990 (60,894) 114,256
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 516,898 479,621 1,295,638 (162,505) (11,639) (134,636) 101,191
- ----------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 516,898 479,621 1,295,638 - 929,630 2,591,419 1,291,813
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(2) Continued
<TABLE>
<CAPTION> Oppenheimer Variable
Account Funds Variable Insurance Products Fund
----------------------- ----------------------------------------------------------
High Multiple Money High Equity-
Income Strategies Market Income Income Growth Overseas
Type I Units Fund Fund Portfolio Portfolio Portfolio Portfolio Portfolio
- ----------------------------------------------- ---------------------------------------------------------------------------------
<S> <C>
Units outstanding at December 31, 1994 1,125,497 1,797,950 4,123,571 804,420 5,088,608 4,641,036 5,128,595
Net premiums 44,999 65,632 730,434 85,480 485,381 247,726 200,203
Transfers (to) from the
general account of Life of Virginia:
Death benefits (296) (9,569) 8,759 (5,083) (26,937) (11,327) (22,477)
Surrenders (12,636) (95,101) (323,643) (42,301) (295,625) (179,497) (183,059)
Administrative expenses (1,249) (5,559) (8,471) (2,631) (16,777) (12,038) (12,905)
Transfers (to)/from the Guarantee Account 10,579 (3,036) 36,658 35,020 214,956 67,303 (35,433)
Interfund transfers 96,818 12,445 (2,144,243) 83,390 1,492,501 433,983 (566,178)
- ----------------------------------------------- ---------- ----------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 138,215 (35,188) (1,700,506) 153,875 1,853,499 546,150 (619,849)
- ----------------------------------------------- ---------- ----------------------------------------------------------------------
Units outstanding at December 31, 1995 1,263,712 1,762,762 2,423,065 958,295 6,942,107 5,187,186 4,508,746
Net premiums 15,693 26,028 8,114 (11,013) 209,607 133,676 102,472
Transfers (to) from the
general account of Life of Virginia:
Death benefits (411) (15,299) (26,867) - (39,084) (25,152) (17,537)
Surrenders (23,047) (88,160) (136,342) (64,247) (314,228) (232,300) (188,428)
Administrative expenses (1,163) (4,615) (4,247) (2,193) (16,695) (13,593) (11,116)
Transfers (to)/from the Guarantee Account 13,792 26,304 (46,251) (1,584) 129,570 60,757 48,453
Interfund transfers 89,651 (66,358) (1,024,299) (147,328) (63,823) (278,909) (373,467)
- ----------------------------------------------- ---------- ----------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 94,515 (122,100) (1,229,892) (226,365) (94,653) (355,521) (439,623)
- ----------------------------------------------- ---------- ----------------------------------------------------------------------
Units outstanding at December 31, 1996 1,358,227 1,640,662 1,193,173 731,930 6,847,454 4,831,665 4,069,123
Net premiums 44,846 26,455 (2,769) - 132,909 46,481 33,637
Transfers (to) from the
general account of Life of Virginia:
Death benefits (6,846) (7,589) (3,458) (2,224) (25,251) (14,556) (15,035)
Surrenders (87,976) (127,118) (72,594) (65,456) (376,813) (325,620) (189,716)
Administrative expenses (3,299) (4,137) (2,380) (1,503) (17,119) (12,146) (9,227)
Transfers (to)/from the Guarantee Account 54,141 17,555 (1,822) (257) 81,689 26,348 10,283
Interfund transfers 510,750 7,721 (1,110,150) (662,490) (53,531) (84,347) (500,805)
- ----------------------------------------------- ---------- ----------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 511,616 (87,113) (1,193,173) (731,930) (258,116) (363,840) (670,863)
- ----------------------------------------------- ---------- ----------------------------------------------------------------------
Units outstanding at December 31, 1997 1,869,843 1,553,549 - - 6,589,338 4,467,825 3,398,260
- ----------------------------------------------- ---------- ----------------------------------------------------------------------
</TABLE>
(2) Continued
<TABLE>
<CAPTION>
Variable Insurance Products Variable Insurance Products
Fund II Fund III Advisers Management Trust
---------------------------- --------------------------- -------------------------------
Asset Growth & Growth
Manager Contrafund Income Opportunities Balanced Bond Growth
Type I Units Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Units outstanding at December 31, 1994 27,382,848 - - - 2,303,795 1,644,509 619,834
Net premiums 387,499 582,483 - - 19,872 (319,688) (14,507)
Transfers (to) from the
general account of Life of Virginia:
Death benefits (158,949) (1,220) - - (260) 29,267 4,454
Surrenders (1,411,202) (39,641) - - (16,268) 86,040 50,773
Administrative expenses (74,816) (3,373) - - (1,256) 8,665 2,990
Transfers (to)/from the Guarantee Account (514,204) 257,604 - - 22,814 19,812 13,112
Interfund transfers (3,617,814) 1,639,032 - - (302,761) (529,362) 79,845
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions (5,389,486) 2,434,885 - - (277,859) (705,266) 136,667
- ---------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 21,993,362 2,434,885 - - 2,025,936 939,243 756,501
Net premiums 164,394 191,853 - - - 692 -
Transfers (to) from the
general account of Life of Virginia:
Death benefits (142,857) (14,740) - - (13,542) (625) (7,106)
Surrenders (1,189,857) (156,723) - - (19,441) (46,729) (82,100)
Administrative expenses (60,017) (7,215) - - (1,491) (2,782) (3,304)
Transfers (to)/from the Guarantee Account (9,338) 168,994 - - (6,661) (1,863) (1,563)
Interfund transfers (1,775,712) 480,447 - - (300,225) (348,334) (131,122)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions (3,013,387) 662,616 - - (341,360) (399,641) (225,195)
- --------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 18,979,975 3,097,501 - - 1,684,576 539,602 531,306
Net premiums 152,156 110,477 41,831 30,072 (343) 141 348
Transfers (to) from the
general account of Life of Virginia:
Death benefits (89,850) (9,932) - - (4,573) (13,722) (3,133)
Surrenders (1,096,143) (211,184) (813) (5,989) (131,590) (27,704) (10,160)
Administrative expenses (52,182) (7,854) (183) (318) (3,702) (1,043) (1,125)
Transfers (to)/from the Guarantee Account 25,895 101,581 19,562 24,545 (9,256) (144) -
Interfund transfers (818,341) 215,612 233,932 293,107 (1,535,112) (497,130) (517,236)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions (1,878,465) 198,700 294,329 341,417 (1,684,576) (539,602) (531,306)
- ---------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 17,101,510 3,296,201 294,329 341,417 - - -
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(2) Continued
<TABLE>
<CAPTION>
Federated Investors Insurance PBHG Insurance
Series Alger American Series Fund
--------------------------------- --------------------- --------------------
American High
Leaders Income Large Cap
Portfolio Bonds Utility Small Cap Growth Growth Growth II
Type I Units Fund II Fund II Fund II Portfolio Portfolio Portfolio Portfolio
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1994 - - - - - - -
Net premiums - 6,661 74,380 67,353 46,215 - -
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - - - - -
Surrenders - (60) (682) (606) (423) - -
Administrative expenses - (15) (144) (147) (90) - -
Transfers (to)/from the Guarantee Account - 1,534 126,922 8,574 4,799 - -
Interfund transfers - 32,694 339,152 330,617 210,724 - -
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions - 40,814 539,628 405,791 261,225 - -
- ------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 - 40,814 539,628 405,791 261,225 - -
Net premiums 6,132 11,997 34,892 260,309 140,387 - -
Transfers (to) from the
general account of Life of Virginia:
Death benefits - (1,489) (13,689) (10,458) - - -
Surrenders (234) (8,472) (35,752) (35,446) (31,027) - -
Administrative expenses (47) (273) (1,868) (2,659) (2,129) - -
Transfers (to)/from the Guarantee Account 1,547 23,451 31,866 150,713 122,150 - -
Interfund transfers 68,264 145,478 (9,854) 571,403 700,068 - -
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 75,662 170,692 5,595 933,862 929,449 - -
- ------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 75,662 211,506 545,223 1,339,653 1,190,674 - -
Net premiums 35,396 49,848 7,670 694,521 66,490 1,019 17,111
Transfers (to) from the
general account of Life of Virginia:
Death benefits - (469) (853) (42,319) (2,907) - -
Surrenders (1,961) (14,353) (38,555)(1,148,701) (80,029) (92) (49)
Administrative expenses (502) (718) (1,375) (36,907) (3,546) (32) (101)
Transfers (to)/from the Guarantee Account 24,074 50,940 9,699 749,029 2,066 2,432 1,623
Interfund transfers 228,950 159,370 (36,477) (230,206) (150,234) 52,670 58,027
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 285,957 244,618 (59,891) (14,583) (168,160) 55,997 76,611
- ------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 361,619 456,124 485,332 1,325,070 1,022,514 55,997 76,611
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(2) Continued
<TABLE>
<CAPTION>
Janus Aspen Series
----------------------------------------------------------------------------------
Aggressive Flexible International Capital
Growth Growth Worldwide Balanced Income Growth Appreciation
Type I Units Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1994 1,272,142 3,183,404 2,247,224 - - - -
Net premiums 41,540 495,631 154,654 47,108 369 - -
Transfers (to) from the
general account of Life of Virginia:
Death benefits - (8,424) (9,493) (2,123) - - -
Surrenders (37,096) (129,651) (38,101) (16,212) (8) - -
Administrative expenses (196) (9,290) (4,194) (1,376) (11) - -
Transfers (to)/from the Guarantee Account 90,712 109,046 25,268 9,645 2,769 - -
Interfund transfers 598,635 792,010 381,858 74,930 35,960 - -
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 693,595 1,249,322 509,992 111,972 39,079 - -
- ----------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 1,965,737 4,432,726 2,757,216 111,972 39,079 - -
Net premiums 1,581 1,661,740 880,684 49,343 4,021 34,924 -
Transfers (to) from the
general account of Life of Virginia:
Death benefits - (181,059) (51,566) (2,953) - - -
Surrenders (429) (2,320,448) (739,842) (15,986) (1,075) (1,689) -
Administrative expenses (22) (113,310) (48,025) (1,541) (194) (301) -
Transfers (to)/from the Guarantee Account 1,256 1,066,999 455,640 26,519 11,223 37,626 -
Interfund transfers 7,695 217,761 916,700 191,453 64,966 403,878 -
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 10,081 331,683 1,413,591 246,835 78,941 474,438 -
- ----------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 1,975,818 4,764,409 4,170,807 358,807 118,020 474,438 -
Net premiums 55,368 109,351 257,478 32,492 8,506 99,898 2,452
Transfers (to) from the
general account of Life of Virginia:
Death benefits (1,972) (66,404) (7,323) - - - -
Surrenders (87,614) (321,901) (229,991) (34,024) (17,779) (40,170) (1,327)
Administrative expenses (4,772) (11,195) (12,079) (1,430) (403) (2,200) (58)
Transfers (to)/from the Guarantee Account 29,407 64,006 148,276 55,427 78,205 64,693 344
Interfund transfers (148,659) (32,501) 611,104 2,070,280 94,329 408,010 47,846
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions (158,242) (258,644) 767,465 2,122,745 162,858 530,231 49,257
- ----------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 1,817,576 4,505,765 4,938,272 2,481,552 280,878 1,004,669 49,257
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Notes to Financial Statements
- ------------------------------------------------------------------------------
(2) Continued
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
-----------------------------------------------------------------------------
S&P 500 Government Money Total International Real Estate
Index Securities Market Return Equity Securities
Type II Units Fund Fund Fund Fund Fund Fund
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1994 10,408 889 75,600 12,498 - -
Net premiums 287,747 94,804 3,703,628 189,643 26,411 23,750
Transfers (to) from the
general account of Life of Virginia:
Death benefits (3,020) - - (523) - -
Surrenders (1,937) (2,139) (17,008) (2,245) (10) (23)
Administrative expenses (18) (6) (18) (12) (1) -
Transfers (to)/from the Guarantee Account 12,961 3,954 18,590 12,174 1,577 324
Interfund transfers 93,868 56,254 (2,272,432) 41,049 19,067 10,426
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 389,601 152,867 1,432,760 240,086 47,044 34,477
- ------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 400,009 153,756 1,508,360 252,584 47,044 34,477
Net premiums 647,438 194,563 10,719,294 345,169 204,787 214,051
Transfers (to) from the
general account of Life of Virginia:
Death benefits (1,638) (4,586) (41,657) (930) (313) -
Surrenders (17,183) (4,362) (189,358) (11,361) (4,056) (1,826)
Administrative expenses (290) (130) (792) (196) (80) (43)
Transfers (to)/from the Guarantee Account 78,749 3,809 (49,295) 38,959 26,698 19,914
Interfund transfers 155,417 (66,854) (8,053,173) 35,026 58,323 162,396
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 862,493 122,440 2,385,019 406,667 285,359 394,492
- ------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 1,262,502 276,196 3,893,379 659,251 332,403 428,969
Net premiums 1,106,640 58,332 7,321,970 188,455 143,803 604,427
Transfers (to) from the
general account of Life of Virginia:
Death benefits (46,669) - (31,824) (4,811) (188) (1,092)
Surrenders (61,683) (10,472) (497,702) (40,510) (16,180) (24,343)
Loans - - - - - -
Administrative expenses (1,001) (115) (2,877) (508) (358) (445)
Transfers (to)/from the Guarantee Account 376,140 37,807 406,500 93,000 69,865 236,279
Interfund transfers 389,211 (361,748) (6,108,959) 33,268 85,065 234,452
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 1,762,638 (276,196) 1,087,108 268,894 282,007 1,049,278
- ------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 3,025,140 - 4,980,487 928,145 614,410 1,478,247
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(2) Continued
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
---------------------------------------
Global
Income Value Equity Income
Type II Units Fund Fund Fund
<S> <C>
- ----------------------------------------------------------------------------------------
Units outstanding at December 31, 1994 - - -
Net premiums - - -
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - -
Surrenders - - -
Administrative expenses - - -
Transfers (to)/from the Guarantee Account - - -
Interfund transfers - - -
- ----------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions - - -
- ----------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 - - -
Net premiums - - -
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - -
Surrenders - - -
Administrative expenses - - -
Transfers (to)/from the Guarantee Account - - -
Interfund transfers - - -
- ----------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions - - -
- ----------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 - - -
Net premiums 19,022 242,987 1,357
Transfers (to) from the
general account of Life of Virginia:
Death benefits - (153) -
Surrenders (487) (5,196) (415)
Loans - - -
Administrative expenses (8) (28) (42)
Transfers (to)/from the Guarantee Account 19,733 146,978 5,210
Interfund transfers 41,030 346,028 897,139
- ----------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 79,290 730,616 903,249
- ----------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 79,290 730,616 903,249
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(2) Continued
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds
-------------------------------------------------------------------------
Capital High Multiple
Money Bond Appreciation Growth Income Strategies
Type II Units Fund Fund Fund Fund Fund Fund
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1994 50,143 11,655 68,052 12,276 77,818 26,302
Net premiums 54,745 214,451 355,504 325,547 366,507 185,233
Transfers (to) from the
general account of Life of Virginia:
Death benefits - (219) (166) (229) - (1,207)
Surrenders (652) (5,734) (5,891) (3,339) (1,757) (2,408)
Administrative expenses (31) (49) (30) (68) (24) (36)
Transfers (to)/from the Guarantee Account (4,360) 13,097 21,250 28,166 20,898 17,850
Interfund transfers (41,682) 42,279 143,860 61,411 97,702 30,947
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 8,020 263,825 514,527 411,488 483,326 230,379
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 58,163 275,480 582,579 423,764 561,144 256,681
Net premiums 70 307,614 1,152,800 440,344 922,316 383,300
Transfers (to) from the
general account of Life of Virginia:
Death benefits - (3,625) (23,778) (2,446) (14,183) (3,190)
Surrenders (1,020) (13,875) (34,224) (9,335) (24,799) (11,252)
Administrative expenses (6) (160) (668) (213) (520) (329)
Transfers (to)/from the Guarantee Account (156) 32,015 169,506 50,413 94,808 45,770
Interfund transfers (33,183) 109,648 275,079 189,075 176,989 77,022
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions (34,295) 431,617 1,538,715 667,838 1,154,611 491,321
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 23,868 707,097 2,121,294 1,091,602 1,715,755 748,002
Net premiums 30 167,289 713,649 880,279 703,696 349,189
Transfers (to) from the
general account of Life of Virginia:
Death benefits - (8,306) (10,958) (8,211) (16,328) (5,971)
Surrenders (202) (30,599) (79,872) (48,836) (109,043) (55,647)
Loans - - - - - -
Administrative expenses (5) (513) (1,748) (951) (1,245) (701)
Transfers (to)/from the Guarantee Account - 156,266 369,347 337,722 379,179 151,804
Interfund transfers (23,691) 2,783 64,736 210,754 262,960 13,450
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions (23,868) 286,920 1,055,154 1,370,757 1,219,219 452,124
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 - 994,017 3,176,448 2,462,359 2,934,974 1,200,126
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(2) Continued
<TABLE>
<CAPTION>
Variable Insurance Product Funds
-------------------------------------------------------------
Money High Equity-
Market Income Income Growth Overseas
Type II Units Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C>
- --------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1994 450,740 56,076 276,392 141,845 197,672
Net premiums 1,923,388 288,601 2,285,441 1,079,779 464,979
Transfers (to) from the
general account of Life of Virginia:
Death benefits (1,352) (1,092) (898) (663) (12,509)
Surrenders (10,590) (7,686) (33,936) (16,831) (10,082)
Administrative expenses (211) (53) (378) (170) (235)
Transfers (to)/from the Guarantee Account (48,336) 9,984 165,649 72,558 71,820
Interfund transfers (1,333,295) 149,732 427,705 248,497 117,726
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 529,604 439,486 2,843,583 1,383,170 631,699
- --------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 980,344 495,562 3,119,975 1,525,015 829,371
Net premiums 138 - 3,158,538 1,222,269 521,600
Transfers (to) from the
general account of Life of Virginia:
Death benefits (5,285) (1,518) (43,181) (21,919) (11,961)
Surrenders (18,734) (18,658) (134,965) (50,499) (31,329)
Administrative expenses (323) (228) (2,658) (1,349) (733)
Transfers (to)/from the Guarantee Account (31) (3,382) 402,673 186,018 127,385
Interfund transfers (659,500) (168,501) 541,485 167,039 123,110
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions (683,735) (192,287) 3,921,892 1,501,559 728,072
- --------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 296,609 303,275 7,041,867 3,026,574 1,557,443
Net premiums 931 306 2,260,371 504,224 230,215
Transfers (to) from the
general account of Life of Virginia:
Death benefits (9,387) (206) (70,511) (17,520) (11,283)
Surrenders (6,379) (17,828) (310,722) (121,652) (59,094)
Loans - - - - -
Administrative expenses (179) (172) (5,614) (2,437) (1,374)
Transfers (to)/from the Guarantee Account - (595) 959,930 232,691 169,290
Interfund transfers (281,595) (284,780) 198,852 (7,282) (122,609)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions (296,609) (303,275) 3,032,306 588,024 205,145
- --------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 - - 10,074,173 3,614,598 1,762,588
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(2) Continued
<TABLE>
<CAPTION>
Variable Insurance Variable Insurance
Products Fund II Products Fund III Advisers Management Trust
-------------------- ------------------------- --------------------------------
Asset Growth & Growth
Manager Contrafund Income Opportunities Balanced Bond Growth
Type II Units Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1994 450,885 - - - 22,065 83,962 13,906
Net premiums 902,148 1,499,030 - - 199,692 240,461 167,067
Transfers (to) from the
general account of Life of Virginia:
Death benefits (13,552) (200) - - - - (1,865)
Surrenders (26,495) (14,316) - - (2,564) (2,394) (1,381)
Administrative expenses (510) (43) - - (46) (47) (47)
Transfers (to)/from the Guarantee Account 88,564 128,048 - - 6,725 11,012 19,747
Interfund transfers 68,627 395,429 - - (34,434) 65,282 12,482
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 1,018,782 2,007,948 - - 169,373 314,314 196,003
- ---------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 1,469,667 2,007,948 - - 191,438 398,276 209,909
Net premiums 640,444 2,595,994 - - - (252) -
Transfers (to) from the
general account of Life of Virginia:
Death benefits (19,704) (23,500) - - (1,089) (8,981) (1,419)
Surrenders (67,829) (72,281) - - (2,814) (3,959) (6,733)
Administrative expenses (1,135) (2,159) - - (103) (315) (174)
Transfers (to)/from the Guarantee Account 117,636 428,333 - - - 120 -
Interfund transfers 109,440 559,664 - - (44,480) (127,260) (46,447)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 778,852 3,486,051 - - (48,486) (140,647) (54,773)
- ---------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 2,248,519 5,493,999 - - 142,952 257,629 155,136
Net premiums 317,380 2,003,590 452,458 553,737 25 - -
Transfers (to) from the
general account of Life of Virginia:
Death benefits (14,483) (32,105) (176) (968) (2,194) (1,620) -
Surrenders (101,528) (196,054) (9,166) (9,539) (10,921) (12,250) (3,242)
Loans - - - - - - -
Administrative expenses (1,272) (4,990) (79) (66) (108) (204) (81)
Transfers (to)/from the Guarantee Account 132,093 1,027,864 208,287 207,607 (601) (6,721) -
Interfund transfers 98,224 303,373 324,762 298,769 (129,153) (236,834) (151,813)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 430,414 3,101,678 976,086 1,049,540 (142,952) (257,629) (155,136)
- -----------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 2,678,933 8,595,677 976,086 1,049,540 - - -
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(2) Continued
<TABLE>
<CAPTION>
Federated Investors Insurance
Series
-----------------------------------
American High
Leaders Income
Portfolio Bonds Utility
Type II Units Fund II Fund II Fund II
<S> <C>
- ----------------------------------------------------------------------------------------
Units outstanding at December 31, 1994 - - -
Net premiums - 112,682 377,786
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - -
Surrenders - (398) (2,336)
Administrative expenses - - (32)
Transfers (to)/from the Guarantee Account - 4,581 19,944
Interfund transfers - 6,287 68,114
- ----------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions - 123,152 463,476
- ----------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 - 123,152 463,476
Net premiums 208,871 343,618 543,077
Transfers (to) from the
general account of Life of Virginia:
Death benefits - (1,859) (3,067)
Surrenders (2,478) (25,640) (28,920)
Administrative expenses (2) (143) (566)
Transfers (to)/from the Guarantee Account 12,459 29,882 81,126
Interfund transfers 46,982 340,979 75,307
- ----------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 265,832 686,837 666,957
- ----------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 265,832 809,989 1,130,433
Net premiums 998,765 599,938 229,931
Transfers (to) from the
general account of Life of Virginia:
Death benefits (7,020) (7,987) (3,557)
Surrenders (30,390) (46,149) (62,619)
Loans - - -
Administrative expenses (399) (579) (981)
Transfers (to)/from the Guarantee Account 355,249 292,000 95,492
Interfund transfers 474,654 239,675 (62,998)
- ----------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 1,790,859 1,076,898 195,268
- ----------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 2,056,691 1,886,887 1,325,701
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(2) Continued
<TABLE>
<CAPTION>
PBHG Insurance
Alger American Series Fund Janus Aspen Series
------------------------------------------- ----------------------
Large Cap Aggressive
Small Cap Growth Growth Growth II Growth Growth
Type II Units Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C>
- --------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1994 - - - - 169,799 159,068
Net premiums 291,288 228,664 - - 781,202 1,408,112
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - - - (2,390)
Surrenders (1,324) (74) - - (487) (24,299)
Administrative expenses (2) (3) - - (77) (303)
Transfers (to)/from the Guarantee Account 23,122 (9,752) - - 84,482 173,800
Interfund transfers 88,174 93,176 216,085 161,652
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 401,258 312,011 - - 1,081,205 1,716,572
- --------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 401,258 312,011 - - 1,251,004 1,875,640
Net premiums 2,385,857 1,979,744 - - 1,109,539 1,939,884
Transfers (to) from the
general account of Life of Virginia:
Death benefits (6,505) (2,249) - - (5,075) (28,847)
Surrenders (49,583) (21,913) - - (20,314) (111,109)
Administrative expenses (658) (517) - - (141) (2,321)
Transfers (to)/from the Guarantee Account 364,980 234,626 - - 99,771 288,072
Interfund transfers 472,803 460,475 - - 227,267 921,603
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 3,166,894 2,650,166 - - 1,411,047 3,007,282
- --------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 3,568,152 2,962,177 - - 2,662,051 4,882,922
Net premiums 1,139,813 1,030,593 108,061 306,146 608,750 1,633,216
Transfers (to) from the
general account of Life of Virginia:
Death benefits (25,827) (23,277) (63) - (22,328) (36,365)
Surrenders (95,915) (104,485) (998) (4,853) (80,725) (180,611)
Loans - - - - - -
Administrative expenses (3,710) (2,759) (28) (35) (1,935) (4,325)
Transfers (to)/from the Guarantee Account 865,037 527,894 51,297 100,624 253,985 867,094
Interfund transfers 197,908 (9,957) 188,564 174,128 22,869 108,967
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 2,077,306 1,418,009 346,833 576,010 780,616 2,387,976
- --------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 5,645,458 4,380,186 346,833 576,010 3,442,667 7,270,898
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(2) Continued
<TABLE>
<CAPTION>
Janus Aspen Series
------------------------------------------------------------------
Flexible International Capital
Worldwide Balanced Income Growth Appreciation
Type II Units Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1994 117,700 - - - -
Net premiums 873,533 55,928 30,062 - -
Transfers (to) from the
general account of Life of Virginia:
Death benefits (786) (74) - - -
Surrenders (10,106) (831) (36) - -
Administrative expenses (144) (10) - - -
Transfers (to)/from the Guarantee Account 88,410 6,328 1,290 - -
Interfund transfers 158,463 12,197 4,956 -
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 1,109,370 73,538 36,272 - -
- ---------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 1,227,070 73,538 36,272 - -
Net premiums 2,853,570 547,525 240,317 388,753 -
Transfers (to) from the
general account of Life of Virginia:
Death benefits (26,212) (1,525) - - -
Surrenders (94,535) (10,808) (1,714) (2,959) -
Administrative expenses (2,275) (267) (63) (11) -
Transfers (to)/from the Guarantee Account 475,568 75,940 21,420 47,466 -
Interfund transfers 713,001 308,093 28,937 249,356 -
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 3,919,117 918,958 288,897 682,605 -
- ---------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 5,146,187 992,496 325,169 682,605 -
Net premiums 3,372,062 1,117,148 284,347 1,872,823 55,458
Transfers (to) from the
general account of Life of Virginia:
Death benefits (35,456) (7,246) (4,723) (15,267) -
Surrenders (228,974) (78,945) (17,933) (60,571) (1,630)
Loans - - - - -
Administrative expenses (4,300) (1,005) (342) (863) (7)
Transfers (to)/from the Guarantee Account 1,289,775 423,506 175,029 576,462 35,560
Interfund transfers 572,391 358,481 107,542 446,411 74,169
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 4,965,498 1,811,939 543,920 2,818,995 163,550
- ---------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 10,111,685 2,804,435 869,089 3,501,600 163,550
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(2) Continued
Federal Income Taxes
The Account is not taxed separately because the operations of the
Account are part of the total operations of Life of Virginia. Life of
Virginia is taxed as a life insurance company under the Internal
Revenue Code (the Code). Life of Virginia is included in the General
Electric Capital Assurance Company consolidated federal income tax
return. The Account will not be taxed as a regulated investment company
under subchapter M of the Code. Under existing federal income tax law,
no taxes are payable on the investment income or on the capital gains
of the Account.
Use of Estimates
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 deferred annuity products, less deductions retained as
compensation for premium taxes. For policies issued on or after May 1,
1993, the deduction for premium taxes will be deferred until surrender.
For Type I policies, during the first ten years following a premium
payment, a charge of .20% of the premium payment is deducted monthly
from the policy Account values to reimburse Life of Virginia for
certain distribution expenses. In addition, a charge is imposed on full
and certain partial surrenders that occur within six years of any
premium payment (seven years for certain Type II policies) to cover
certain expenses relating to the sale of a policy. Subject to certain
limitations, the charge equals 6% (or less) of the premium surrendered,
depending on the time between premium payment and surrender.
Life of Virginia will deduct a charge of $30 per year and $25 plus .15%
per year from the policy account values for certain administrative
expenses incurred for policy Type I and Type II, respectively. For Type
II policies, the $25 charge may be waived if the account value is
greater than $75,000. In addition, Life of Virginia charges the Account
1.15% and 1.25% on policy Type I and Type II, respectively, for the
mortality and expense risk
<PAGE>
(3) Continued
that Life of Virginia assumes. Administrative expenses as well as
mortality and risk charges are deducted daily and reflect the effective
annual rates.
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>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
All required financial statements are included in Part B of this
Registration Statement.
(b) Exhibits
(1)(a) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of Separate Account 4. 12/
(1)(b) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of additional investment subdivisions of
Separate Account 4, investing in shares of the Asset Manager
Portfolio of the Fidelity Variable Insurance Products Fund II
and the Balanced Portfolio of the Advisers Management Trust. 12/
(1)(c) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of additional investment subdivisions of
Separate Account 4, investing in shares of the Growth Portfolio,
the Aggressive Growth Portfolio, and the Worldwide Growth
Portfolio of the Janus Aspen Series. 12/
(1)(d) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of twenty-two (22) additional subdivisions of
Separate Account 4, investing in shares of Money Market
Portfolio, High Income Portfolio, Equity-Income Portfolio,
Growth Portfolio and Overseas Portfolio of the Fidelity Variable
Insurance Products Fund; Asset Manager Portfolio of the Fidelity
Variable Insurance Products Fund II; Money Market Portfolio,
Government Securities Portfolio, Common Stock Index Portfolio,
Total Return Portfolio of the Life of Virginia Series Fund,
Inc.; Limited Maturity Bond Portfolio, Growth Portfolio and
Balanced Portfolio of the Neuberger & Berman Advisers Management
Trust; Growth Portfolio, Aggressive Growth Portfolio, and
Worldwide Growth Portfolio of the Janus Aspen Series; Money
Fund, High Income Fund, Bond Fund, Capital Appreciation Fund,
Growth Fund, Multiple Strategies Fund of the Oppenheimer
Variable Account Funds. 12/
(1)(e) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of three additional investment subdivisions of
Separate Account 4, investing in shares of the Utility Fund and
Corporate Bond Fund of the Insurance Management Series, and the
Contrafund Portfolio of the Variable Insurance Products Fund II.
12/
(1)(f) 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 International
Equity Portfolio and the Real Estate Securities Portfolio of
Life of Virginia Series Fund. 12/
(1)(g) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of four additional investment subdivisions of
Separate Account 4, investing in shares of the American Growth
Portfolio and the American Small Capitalization Portfolio of The
Alger American Fund, and the Growth Portfolio and Flexible
Income Portfolio of the Janus Aspen Series. 8/
(1)(h) 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. 9/
(1)(i) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of twelve additional investment subdivisions
of Separate Account 4, investing in shares of the Growth &
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.; Global
Income Fund and Value Equity Fund of GE Investments Funds,
Inc.11/
(1)(j) 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 Capital
Appreciation Portfolio of the Janus Aspen Series. 11/
(1)(k) Resolution of Board of Directors of Life of Virginia
authorizing the establishment of six additional investment
subdivisions of Separate Account 4, 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.12/
(2) Not Applicable.
(3)(a) Underwriting Agreement dated December 12, 1997 between The Life
Insurance Company of Virginia and Capital Brokerage Corporation. 12/
(b) Dealer Sales Agreement dated December 13, 1997. 12/
(4)(a) Form of Policy.
(i) Original Form of Policy. 12/
(b) Endorsements to Policy.
(i) IRA Endorsement 12/
(ii) Pension Endorsement 12/
(iii) Section 403(b) Endorsement 12/
(iv) Guaranteed Minimum Death Benefit Rider 12/
(v) Optional Death Benefit at Death of Annuitant Endorsement 11
(5)(a) Form of Application. 12/
(6)(a) Certificate of Incorporation of The Life Insurance Company of
Virginia. 12/
(b) By-Laws of The Life Insurance Company of Virginia. 12/
(7) Not Applicable.
(8)(a) Stock Sale Agreement between The Life Insurance Company of
Virginia and The Life of Virginia Series Fund, Inc. 12/
(a)(i) Amendment to Stock Sale Agreement between The Life Insurance
Company of Virginia and The Life of Virginia Series Fund, Inc.
12/
(b) Participation Agreement among Variable Insurance Products Fund,
Fidelity Distributors Corporation, and The Life Insurance
Company of Virginia. 12/
(b)(i) Amendment to Participation Agreement Referencing Policy
Form Numbers. 12/
(b)(ii) Amendment to Participation Agreement among Variable Insurance
Products Fund II, Fidelity Distributors Corporation,
and The Life Insurance Company of Virginia. 9/
(b)(iii) Amendment to Participation Agreement among Variable Insurance
Products Fund, Fidelity Distributors Corporation, and
The Life Insurance Company of Virginia. 9/
(c) Agreement between Oppenheimer Variable Account Funds,
Oppenheimer Management Corporation, and The Life Insurance
Company of Virginia. 12/
(c)(i) Amendment to Agreement between Oppenheimer Variable Account
Funds, Oppenheimer Management Corporation, and The Life
Insurance Company of Virginia. 12/
(d) Participation Agreement among Variable Insurance Products
Fund II, Fidelity Distributors Corporation and The Life
Insurance Company of Virginia. 12/
(e) Participation Agreement between Janus Capital Corporation and
The Life Insurance Company of Virginia. 12/
(f) Participation Agreement between The Alger American Fund, Fred
Alger and Company, Inc., and The Life Insurance Company
of Virginia. 8/
(g) Participation Agreement between Variable Insurance Products
Fund III and The Life Insurance Company of Virginia. 11/
(h) Participation Agreement between PBHG Insurance Series Fund,
Inc. and The Life Insurance Company of Virginia.11/
(9) Opinion and Consent of Counsel.12/
(10)(a) Consent of Counsel.12/
(b) Consent of Independent Auditors.12/
(11) Not Applicable.
(12) Not Applicable.
--------------------------
8/ Incorporated herein by reference to post-effective amendment number 3 to
the Registrant's registration statement on Form N-4, File No. 33-76334,
filed with the Securities and Exchange Commission on September 28, 1995.
9/ Incorporated herein by reference to post-effective amendment number 4 to
the Registrant's registration statement on Form N-4, File No. 33-76334,
filed with the Securities and Exchange Commission on April 30, 1996.
10/ Incorporated herein by reference to post-effective amendment number 6 to
the Registrant's registration statement on Form N-4, File No. 33-76334,
filed with the Securities and Exchange Commission on March 24, 1997.
11/ Incorporated herein by reference to post-effective amendment number 7 to
the Registrant's registration statement on Form N-4, File No. 33-76334
filed with the Securities and Exchange Commission on May 1, 1997.
12/ Incorporated herein
<PAGE>
Item 25. Directors and Officers of Life of Virginia
<TABLE>
<CAPTION>
Name Address Positions and Offices with Depositor
- -------------------------------- ---------------------------- -------------------------------------
<S> <C>
Ronald V. Dolan* First Colony Life Director and Chairman of the
700 Main Street Board
Lynchburg, VA 24505
Selwyn L. Flournoy, Jr.* Life of Virginia Director and Senior Vice President
6610 W. Broad Street
Richmond, VA 23230
Linda L. Lanam* Life of Virginia Director and Senior Vice President
6610 W. Broad Street
Richmond, VA 23230
Robert D. Chinn* Life of Virginia Director and Senior Vice President
6610 W. Broad Street --Agency
Richmond, VA 23230
Elliot Rosenthal Life of Virginia Senior Vice President--Investment
6610 W. Broad Street Products
Richmond, VA 23230
Victor C. Moses GE Financial Assurance Director
601 Union Street, Ste. 5600
Seattle, WA 98101
Geoffrey S. Stiff First Colony Life Director
700 Main Street
Lynchburg, VA 23219
</TABLE>
Item 26. Persons Controlled by or Under Common Control With the Depositor or
Registrant
The Depositor, The Life Insurance Company of Virginia, is an indirectly,
wholly-owned subsidiary of GNA Corporation. GNA Corporation is a wholly-owned
subsidiary of General Electric Capital Corporation. The Registrant, Life of
Virginia Separate Account 4, is a segregated asset account of Life of Virginia.
Previously, Life of Virginia was an indirectly, wholly-owned subsidiary of Aon
Corporation, an affiliate of Aon Advisors.
Item 27. Number of Policyowners
For the period ended April 1, 1998, there were 42,899 Policyowners.
Item 28. Indemnification
Section 13.1-698 and 13.1-702 of the Code of Virginia, in brief, allow a
corporation to indemnify any person made party to a proceeding because such
person is or was a director, officer, employee, or agent of the corporation,
against liability incurred in the proceeding if: (1) he conducted himself in
good faith; and (2) he believed that (a) in the case of conduct in his official
capacity with the corporation, his conduct was in its best interests; and (b) in
all other cases, his conduct was at least not opposed to the corporation's best
interests and (3) in the case of any criminal proceeding, he had no reasonable
cause to believe his conduct was unlawful. The termination of a proceeding by
judgment, order, settlement or conviction is not, of itself, determinative that
the director, officer, employee, or agent of the corporation did not meet the
standard of conduct described. A corporation may not indemnify a director,
officer, employee, or agent of the corporation in connection with a proceeding
by or in the right of the corporation, in which such person was adjudged liable
to the corporation, or in connection with any other proceeding charging improper
personal benefit to such person, whether or not involving action in his official
capacity, in which such person was adjudged liable on the basis that personal
benefit was improperly received by him. Indemnification permitted under these
sections of the Code of Virginia in connection with a proceeding by or in the
right of the corporation is limited to reasonable expenses incurred in
connection with the proceeding.
Section 5 of the By-Laws of Life of Virginia further provides that:
(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, suit 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), judgements [sic], fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action,
suit or proceeding if he acted
<PAGE>
in good faith and in a manner he reasonably believed to be in the best
interests of 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 [sic], 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 [sic] in its favor
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) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit 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 suit was brought shall determine upon application that,
despite the adjudication of liability but in 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 attorneys' 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 indemnification to which the directors, officers and
employees of the Corporation may be entitled according to law.
* * *
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
depositor pursuant to the foregoing provisions, or otherwise, the depositor has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the depositor of expenses incurred
or paid by a director, officer or controlling person of the depositor in
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 depositor will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
Item 29. Principal Underwriters
(a) Capital Brokerage Corporation is the principal underwriter of the
Policies as defined in the Investment Company Act of 1940, and is also
the principal underwriter for flexible premium variable life insurance
policies issued through Life of Virginia Separate Accounts I, II, III
and V.
<PAGE>
<TABLE>
<CAPTION>
Name Address Positions and Offices with Depositor
- ------------------------------ ---------------------------------- -----------------------------------------
<S> <C>
Scott A. Curtis GE Financial Assurance President and Chief Executive Officer
6610 W. Broad St.
Richmond, VA 23230
Stephen P. Joyce GE Financial Assurance Senior Vice President
777 Long Ridge Rd., Bldg. "B"
Stamford, CT 06927
Charles A. Kaminski GE Financial Assurance Senior Vice President
601 Union St., Ste.
5600 Seattle, WA 98101
Victor C. Moses GE Financial Assurance Senior Vice President
601 Union St., Ste. 5600
Seattle, WA 98101
Geoffrey S. Stiff First Colony Life Senior Vice President
700 Main St.
Lynchburg, VA 23219
Mary Catherine Yeagley GE Financial Assurance Senior Vice President
601 Union St., Ste. 5600
Seattle, WA 98101
Jeffrey I. Hugunin GE Financial Assurance Treasurer
6604 W. Broad St.
Richmond, VA 23230
John W. Attey GE Financial Assurance Vice President, Counsel & Assistant
7125 W. Jefferson Ave., Ste. 200 Secretary
Lakewood, CO 80235
Thomas W. Casey GE Financial Assurance Vice President & Chief Financial Officer
6604 W. Broad St.
Richmond, VA 23230
Stephen N. DeVos GE Financial Assurance Vice President & Controller
6604 W. Broad St.
Richmond, VA 23230
Scott A. Reeks GE Financial Assurance Vice President & Assistant Treasurer
6610 W. Broad St.
Richmond, VA 23230
Edward J. Wiles, Jr. GE Financial Assurance Vice President, Counsel & Secretary
777 Long Ridge Rd., Bldg. "B"
Stamford, CT 06927
</TABLE>
Item 30. Location of Accounts and Records
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the rules under it are maintained by Life of
Virginia at its executive offices.
Item 31. Management Services
All management contracts are discussed in Part A or Part B of this
Registration Statement.
Item 32. Undertakings
(a) Registrant undertakes that it will file a post-effective amendment to
this Registration Statement as frequently as necessary to ensure that
the audited financial statements in the Registration Statement are never
more than 16 months old for so long as payments under the variable
annuity contracts may be accepted.
(b) Registrant undertakes that it will include either (1) as part of any
application to purchase a contract offered by the prospectus, a space
that an applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written communication affixed
to or included in the Prospectus that the applicant can remove to send
for a Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available
under this Form promptly upon written or oral request to Life of
Virginia at the address or phone number listed in the Prospectus.
<PAGE>
STATEMENT PURSUANT TO RULE 6c-7
Life of Virginia offers and will offer Policies to participants in the
Texas Optional Retirement Program. In connection therewith, Life of Virginia
and Account 4 rely on 17 C.F.R. Section 270.6c-7 and represent that the
provisions of paragraphs (a)-(d) of the Rule have been or will be complied
with.
SECTION 403(b) REPRESENTATIONS
Life of Virginia represents that in connection with its offering of
Policies as funding vehicles for retirement plans meeting the requirements of
Section 403(b) of the Internal Revenue Code of 1986, it is relying on a
no-action letter dated November 28, 1988, to the American Council of Life
Insurance (Ref. No. IP-6-88) regarding Sections 22(e), 27(c)(1), and 27(d) of
the Investment Company Act of 1940, and that paragraphs numbered (1) through
(4) of that letter will be complied with.
SECTION 26(e)(2)(A) REPRESENTATION
Life of Virginia hereby represents that the fees and charges deducted
under the Policy, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by Life
of Virginia.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the registrant, Life of Virginia Separate Account 4, certifies that it
meets the requirements of Securities Act Rule 485(b) for effectiveness of this
registration statement and has caused this registration statement to be signed
on its behalf by the undersigned thereunto duly authorized, and its seal to be
hereunto affixed and attested, in the County of Henrico in the Commonwealth of
Virginia, on the .
Life of Virginia Separate Account 4
(Registrant)
By: /s/ Selwyn L. Flournoy, Jr.
--------------------------
Selwyn L. Flournoy, Jr.
Senior Vice President
The Life Insurance Company of Virginia
The Life Insurance Company of Virginia
(Depositor)
/s/ Selwyn L. Flournoy, Jr.
By:________________________________
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
01/2000
- -------------------
My Commission Expires
II-8
<PAGE>
As required by the Securities Act of 1933, this registration statement has
been signed below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------------------- -------------------------------- -----
<S> <C>
/s/ RONALD V. DOLAN Director, Chairman of the Board 4-29-98
----------------------------------
Ronald V. Dolan
/s/ Selwyn L. Flournoy, Jr. Director, Senior Vice President 4-29-98
----------------------------------
Selwyn L. Flournoy, Jr.
/s/ LINDA L. LANAM Director, Senior Vice President 4-29-98
----------------------------------
Linda L. Lanam
/s/ ROBERT D. CHINN Director, Senior Vice President 4-29-98
----------------------------------
Robert D. Chinn
/s/ VICTOR C. MOSES Director 4-29-98
----------------------------------
Victor C. Moses
/s/ GEOFFREY S. STIFF Director 4-29-98
----------------------------------
Geoffrey S. Stiff
</TABLE>
By /s/ Selwyn L. Flournoy, Jr., pursuant to Power of Attorney executed on April
16, 1997.
EXHIBIT (1) (a)
Resolution of Board of Directors of Life of Virginia
authorized the establishment of Separate Account 4.
<PAGE>
Resolution: Approval of Separate Account 4
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
Section 38.2-3113 of the Code of Virginia, hereby establishes a separate account
designated "Life of Virginia Separate Account 4" (hereinafter "Separate Account
4") for the following use and purposes, and subject to such conditions as
hereinafter set forth:
FURTHER RESOLVED, That Separate Account 4 is established for the purpose of
providing for the issuance by the Company of flexible premium variable annuity
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 4 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 4 shall be divided into Investment
Subdivisions, and each Investment Subdivision in Separate Account 4 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 instruction 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 4 as it may hereafter deem necessary or appropriate; and
FURTHER RESOLVED, That the President, and 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 invest such amount
or amounts of the Company's cash in Separate Account 4 or in any Investment
Subdivision thereof as may be deemed necessary or appropriate to facilitate the
commencement of Separate Account 4'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 4 as
deemed necessary or appropriate and consistent with the terms of the Policies;
and
<PAGE>
FURTHER RESOLVED, That the Executive Committee of the Board of Directors of the
Company reserves the right to change the designation of Separate Account 4
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 form the Company's independent certified public accounts, legal
counsel and independent consultants or others as they may require, be and they
hereby are, severally authorized and directed to take all actions necessary to
(a) Register Separate Account 4 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 4 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 4, 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 4 and the Company
and on behalf of and as attorneys-in-fact for the principal executive 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 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 4 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,
filing and qualifications both of the Company, its officers,
<PAGE>
agents and employees, and of the Policies, under the insurance and securities
laws of the United States of America or the State of New York, and in connection
therewith to prepare, execute, deliver and file all such applications, reports,
covenants, resolutions, applications for exemptions, consents to service of
process and other papers and instruments as may be required under such laws, and
to take any and 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) said officers or legal counsel deem
it to be in the best interest of Separate Account 4 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 4 and the Company to execute and file any irrevocable written consents
on the part of Separate Account 4 and of the Company to service of process that
may be required under the insurance or securities laws of the State of New York
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 4 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
they hereby are, severally authorized to establish procedures under which the
Company provide voting rights for owners of the Policies with respect to
securities owned by Separate Account 4 insofar as such rights are required by
any applicable law; 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 of agreements as deemed
necessary and appropriate (i) with Forth Financial Securities Corporation
("Forth") or other qualified entity under which Forth or such other entity will
be appointed principal underwriter and distributor for the Policies and (ii)
with one or more qualified banks or other qualified entities to provide
administrative and/or custodial services in connection with the establishment
and maintenance of Separate Account 4 and the design, issuance, and
administration of the Policies; and
<PAGE>
FURTHER RESOLVED, That because it is expected that Separate Account 4 will
invest solely in the securities issued by specific mutual fund corporations
registered under the Investment Company Act of 1940, the 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
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 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.
EXHIBIT (1)(b)
Resolution of Board of Directors of Life of Virginia authorizing the
establishment of additional investment subdivisions of Separate Account 4,
investing in shares of the Asset Manager Portfolio of the Fidelity Variable
Insurance Products Fund II and the Balanced Portfolio of the Advisers
Management Trust.
<PAGE>
Resolution: Separate Account 4
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 4") on August 26, 1987; and
WHEREAS, Separate Account 4 was originally established with twenty investment
subdivisions which invested in the shares of corresponding portfolios of Life of
Virginia Series Fund, Inc., the American Life/Annuity Series, the Variable
Insurance Products Fund and the Oppenheimer Variable Accounts Funds; and
WHEREAS, the elimination of the five investment subdivisions that invested in
shares of the five portfolios of the American Life/ Annuity Series was
authorized by resolutions adopted by the Board of Directors of the Company on
May 25, 1989; and
WHEREAS, The Company wishes to establish two additional investment subdivisions
of Separate Account 4 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 Advisers Management Trust,
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 4 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
<PAGE>
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 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
-------------------
Margaret M. Parker
Assistant Secretary
EXHIBIT (1) (c)
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 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 4") on August 19, 1987; and
WHEREAS, The Company wishes to establish three additional investment
subdivisions of Separate Account 4 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 4 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 may deem necessary or desirable to carry out the foregoing resolutions
and the intent and purposes thereof.
<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 19th
day of April, 1994.
--------------------------------
Linda L. Lanam, Secretary
EXHIBIT (1) (d)
Resolution of Board of Directors
<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 4 ("Separate Account 4") on August 19, 1987; and
WHEREAS, Separate Account 4 was established for the purpose of providing for the
issuance by the Company of flexible premium variable annuity policies or other
insurance contracts; and
WHEREAS, Separate Account 4 currently has twenty-two (22) investment
subdivisions which invest in shares of corresponding portfolios of Life of
Virginia Series Fund, Inc., Variable Insurance Products Fund, Variable Insurance
Products Fund II, Oppenheimer Variable Accounts Funds, Neuberger and Berman
Advisers
Management Trust and Janus Aspen Series; and
WHEREAS, the Company wishes to establish twenty-two (22) additional investment
subdivisions of Separate Account 4 which will invest in shares of corresponding
portfolios of the same mutual fund companies identified above and will be
utilized in conjunction with a new form or forms of flexible premium variable
annuity policy ("New Policies");
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 4 which will invest in
shares of the mutual fund portfolios set forth below:
INVESTMENT SUBDIVISION: TO BE INVESTED IN:
- ----------------------- ------------------
Life of Virginia Series Fund,Inc.
LOV Money Market - B Money Market Portfolio
LOV Government Securities - B Government Securities
LOV Common Stock Index - B Common Stock Index Portfolio
LOV Total Return - B Total Return Portfolio
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
Variable Insurance Products
Fund II
FID Asset Manager - B Asset Manager Portfolio
<PAGE>
INVESTMENT SUBDIVISION: TO BE INVESTED IN:
- ----------------------- ------------------
Oppenheimer Variable Accounts Funds
OPP Money - B Oppenheimer Money Fund
OPP High Income - B Oppenheimer High Income Fund
OPP Bond - B Oppenheimer Bond Fund
OPP Cap Appreciation - B Oppenheimer Capital Appreciation
Fund
OPP Growth - B Oppenheimer Growth Fund
OPP Multi Strategies - B Oppenheimer Multiple Strategies
Fund
Neuberger & Berman Advisers
Management Trust
N & B Lim Mat Bond - B Limited Maturity Bond Portfolio
N & B Growth - B Growth Portfolio
N & B Balanced - B Balanced Portfolio
Janus Aspen Series
JAN Growth - B Growth Portfolio
JAN Aggressive Growth - B Aggressive Growth Portfolio
JAN Worldwide Growth - B Worldwide Growth Portfolio
FURTHER RESOLVED, that the President, any Senior Vice President, or any Vice
President named on the attached Schedule, and each of them, with full power to
act without the others, be, and they hereby are, 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;
FURTHER RESOLVED, that the President, any Senior Vice President, or any Vice
President named on the attached Schedule, 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 actions necessary to register the New 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 to
take all other actions that are necessary in connection with the offering of
said New Policies for sale and the operation of Separate Account 4 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 registration statements and/or amendments to registrations
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;
<PAGE>
FURTHER RESOLVED, that the President, any Senior Vice President, or any Vice
President named on the attached Schedule, and each of them, with full power to
act without the other, be, and they 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 4, and by the Company as
sponsor and depositor and any and all amendments to the Registration statement
under the 1940 Act registering Separate Account 4, and the Registration
Statement under the Securities Act of 1933 registering the New Policies, on
behalf of Separate Account 4 and the Company and on behalf of and as
attorneys-in-fact for the principal executive officer and/or the principal
financial of 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 Stephen E.
Roth, Esq.,are duly appointed as agents for service under any such registration
statement duly authorized to receive communications and notices from the
Securities and Exchange Commission with respect thereto; and
FURTHER RESOLVED, that the President, any Senior Vice President, or any Vice
President named on the attached Schedule, and each of them, with full power to
act without the other, be, and they hereby are, severally authorized on behalf
of Separate Account 4 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
New Policies, including any registrations, filings and qualifications both of
the Company, its officers, agents and employees, and of the New Policies, under
the insurance and securities laws of the federal and state governments, and in
connection therewith to prepare, execute, deliver and file all such
applications, reports, covenants, resolutions, applications for exemptions,
consents to service of process and other papers and instruments as may be
required under such laws, and to take any and 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 4 and the Company; and
FURTHER RESOLVED, that the President, any Senior Vice President, or any Vice
President named on the attached Schedule, and each of them, with full power to
act without the others, be, and they hereby are, severally authorized to
establish procedures under which the Company will provide voting rights for
owners of the New Policies with respect to securities owned by Separate Account
4 insofar as such rights are required by any applicable law; and
<PAGE>
FURTHER RESOLVED, that the President, any Senior Vice President, or any Vice
President named on the attached Schedule, and each of them, with full power to
act without the others, are hereby severally authorized to execute and deliver
such agreements and 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.
IN WITNESS WHEREOF, the undersigned have executed this Unanimous Written Consent
on January 27, 1994.
*********************************************
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 a unanimous consent dated the
27th day of January, 194; 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
EXHIBITS (1) (e)
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 4 ("Separate Account 4") on August 19, 1987; and
WHEREAS, The Company wishes to establish three additional investment
subdivisions of Separate Account 4 which will invest in shares of the Utility
Fund and the Corporate Bond Fund portfolios 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 4 which will invest in
shares of the mutual fund portfolios set forth below:
INVESTMENT SUBDIVISION TO BE INVESTED IN
IMS Utility - B Insurance Management Series -
Utility Fund
IMS Corporate Bond B Insurance Management Series -
Corporate Bond Fund
FID Contrafund - B 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
the, 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.
<PAGE>
5DEC94 12/2/94
- ---------------------------- --------------------------
WILLIAM D. BALDWIN DATE ROBERT A. BOWEN DATE
12/2/94 12/2/94
- ---------------------------- --------------------------
DANIEL T. COX DATE SELWYN L. FLOURNOY,JR DATE
12/2/94 12/7/94
- ---------------------------- --------------------------
H. GAYLORD HODGES, JR. DATE LINDA L. LANAM DATE
12/5/94 12/2/94
- ---------------------------- --------------------------
J. GARNETT NELSON DATE JOHN J. PALMER DATE
12/2/94
- ----------------------------
PAUL E. RUTLEDGE III DATE
EXHIBIT 1 (f)
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 4 ("Separate Account 4") on August 19, 1987; and
WHEREAS, The Company wishes to establish four additional investment subdivisions
of Separate Account 4 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 4 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
<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.
17JAN95 1/16/95
- ------------------------------- -----------------------------
WILLIAM D. BALDWIN DATE ROBERT A BOWEN DATE
1/16/95
- ------------------------------- -----------------------------
DANIEL T. COX DATE SELWYN L. FLOURNOY,JR DATE
1/16/95 1/16/95
- ------------------------------- -----------------------------
H. GAYLORD HODGES,JR. DATE LINDA L. LANAM DATE
1/16/95 1/16/95
- ------------------------------- -----------------------------
J. GARNETT NELSON DATE JOHN J. PALMER DATE
1/12/95
- -------------------------------
PAUL E. RUTLEDGE III DATE
EXHIIBIT 1(k)
(1) (k). Resolution of Board of Directors of Life of Virginia
authorizing the establishment of six additional investment
subdivisions of Separate Account 4, 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.12/
<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 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 4") on August 19, 1987; and
WHEREAS, The Company wishes to establish six additional investment subdivisions
of Separate Account 4 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 Separate
Account 4. 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.
INVESTMENT SUBDIVISIONS: TO BE INVESTED IN:
Oppenheimer Variable Account Fund
OPP Aggressive Growth Aggressive Growth
OPP Aggressive Growth - B Aggressive Growth
<PAGE>
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
EXHIBIT (3)(a)
UNDERWRITING AGREEMENT DATED DECEMBER 12, 1998 BETWEEN
THE LIFE INSURANCE COMPANY OF VIRGINIA
AND CAPITAL BROKERAGE CORPORATION
<PAGE>
UNDERWRITING AGREEMENT
AGREEMENT dated December 12, 1997, by and between THE LIFE INSURANCE
COMPANY OF VIRGINIA (" Life of Virginia"), a Virginia corporation, on its own
behalf and on behalf of Life of Virginia Separate Account I, Life of Virginia
Separate Account II, Life of Virginia Separate Account III, and Life of Virginia
Separate Account 4 (the "Separate Accounts"), and CAPITAL BROKERAGE CORPORATION
(doing business in Indiana, Minnesota, New Mexico, and Texas as GE Capital
Brokerage Corporation) ("CBC"), a Washington corporation with its principal
office at 6630 West Broad Street, Post Office Box 26266, Richmond, VA 23261.
W I T N E S S E T H:
WHEREAS, the Separate Accounts are segregated asset accounts
established and maintained by Life of Virginia pursuant to the laws of the
Commonwealth of Virginia for certain variable annuities and variable life
insurance policies to be issued by Life of Virginia (hereinafter referred to as
the "Variable Contracts"), under which income, gains and losses, whether or not
realized, from assets allocated to such Separate Accounts, will be, in
accordance with the Variable Contracts, credited to or charged against such
Separate Accounts without regard to other income, gains or losses of Life of
Virginia;
WHEREAS, Life of Virginia has registered the Separate Accounts as a
unit investment trust-type investment companies under the Investment Company Act
of 1940 (the"1940 Act");
WHEREAS, CBC has registered as a broker-dealer under the Securities
Exchange Act of 1934 (the "1934 Act") and is a member firm of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, Life of Virginia has registered the Variable Contracts under
Securities Act of 1933 (the "1933 Act") and proposes to issue and sell the
Variable Contracts to the public through CBC, acting as the principal
underwriter of the Variable Contracts;
NOW, THEREFORE, in consideration of the mutual agreements made herein,
Life of Virginia and CBC hereby agree as follows:
1. Underwriter.
(a) Life of Virginia grants to CBC the exclusive right, during the term
of this Agreement, subject to the registration requirements of the 1933 Act and
the 1940 Act and the provisions of the 1934 Act, to be the principal underwriter
of the Variable Contracts. CBC agrees to use its best efforts to distribute the
Variable Contracts, and to undertake to provide sales and services relative to
the Variable Contracts and otherwise to perform all duties and functions
necessary and proper for the distribution of the Variable Contracts. It is the
intent of the parties hereto that substantially similar successor variable
deferred annuity contracts hereafter issued by Life of Virginia in addition to
or in substitution for the Variable Contracts shall be covered by this Agreement
so long as this Agreement has not been previously terminated prior to date of
introduction thereof.
<PAGE>
(b) To the extent necessary to offer the Variable Contracts, CBC shall
be duly registered or otherwise qualified under the securities laws of any state
or other jurisdiction. All registered representatives of CBC soliciting
applications for the Variable Contracts shall be duly and appropriately
licensed, registered or otherwise qualified for the sale of such Variable
Contracts (and the riders offered in connection therewith) under the federal
securities laws, the state insurance laws and any applicable state securities
laws of each state or other jurisdiction in which such Variable Contracts may
lawfully be sold and in which Life of Virginia is licensed to sell the Variable
Contracts. CBC shall be responsible for the training, supervision, and control
of its own registered representatives for purposes of the Rules of the NASD and
federal and state securities law requirements applicable to them in connection
with the offer and sale of the Variable Contracts.
(c) CBC agrees to offer the Variable Contracts for sale in accordance
with the prospectuses therefor then in effect. CBC is not authorized to give any
information or to make any representations concerning the Variable Contracts
other than those contained in the current prospectuses therefor filed with the
Securities and Exchange Commission ("Commission") or in such sales literature as
may be authorized by Life of Virginia.
(d) Payments made in connection with the Variable Contracts whether
premium or otherwise are the exclusive property of Life of Virginia. Such
payments received by CBC shall be held in a fiduciary capacity and shall be
transmitted immediately to Life of Virginia or its designated servicing agent in
accordance with the administrative procedures of Life of Virginia. Life of
Virginia will credit all payments made by or on behalf of Policyowners to their
respective accounts, and will allocate amounts to the investment subdivisions of
the Separate Accounts in accordance with the instructions of Policyowners and
the provisions of the Variable Contracts.
2. Sales and Services Agreement.
CBC is hereby authorized to enter into separate written sales or
services agreements, on such terms and conditions as CBC may determine not
inconsistent with this Agreement, with broker-dealers that are registered as
such under the Securities Exchange Act and are members of the NASD and that
agree to participate in the distribution of the Variable Contracts. All
broker-dealers that agree to participate in the distribution of the Variable
Contracts shall act as independent contractors and nothing herein contained
shall constitute the directors, officers, employees, agents, or registered
representatives of such broker-dealers as employees of CBC or Life of Virginia
for any purpose whatsoever.
3. Suitability.
Life of Virginia and CBC each wish to ensure that the Variable
Contracts distributed by CBC will be issued to purchasers for whom the Variable
Contracts will be suitable. CBC shall take reasonable steps to ensure that its
own registered representatives shall not make recommendations to an applicant to
purchase a Variable Contract in the absence of reasonable grounds to believe
that the purchase of the Variable Contract is suitable for such applicant under
the NASD Conduct Rules regarding Recommendations to Customers. While not limited
to the following, a determination of suitability shall be based on information
furnished to a registered representative after reasonable inquiry of such
applicant concerning the applicant's financial status, tax status and insurance
and investment objectives and needs.
<PAGE>
4. Prospectuses and Promotional Material.
Life of Virginia shall furnish CBC with copies of all prospectuses,
statements of additional information, financial statements and other documents
and materials which CBC reasonably requests for use in connection with the
distribution of the Variable Contracts. Life of Virginia shall have
responsibility for the preparation, filing and printing of all required
prospectuses and/or registration statements in connection with the Variable
Contracts, and the payment of all related expenses. CBC and Life of Virginia
shall cooperate fully in the design, drafting and review of sales promotion
materials, and with respect to the preparation of individual sales proposals
related to the sale of the Variable Contracts. CBC shall not use or distribute
any such materials not provided or approved by Life of Virginia.
5. Records and Reports.
CBC shall have the responsibility for maintaining records relating to
its registered representatives that are licensed, registered and otherwise
qualified to sell the Variable Contracts and relating to broker-dealers engaged
in the distribution of the Variable Contracts, and shall provide periodic
reports thereof to Life of Virginia as requested.
6. Administrative Services.
Life of Virginia agrees to maintain all required books of account and
related financial records on behalf of CBC. All such books of account and
recorded shall be maintained and preserved pursuant to Rule 17a-3 and 17a-4
under the 1934 Act (or the corresponding provisions of any future Federal
securities laws or regulations). In addition, Life of Virginia will maintain
records of all sales commissions paid to registered representatives of CBC in
connection with the sale of the Variable Contracts. All such books and records
shall be maintained by Life of Virginia on behalf of and as agent for CBC, whose
property they are and shall remain for all purposes, and shall at all times be
subject to reasonable periodic, special, or other examination by the Commission
and all other regulatory bodies having jurisdiction. Life of Virginia also
agrees to send to CBC's customers all required confirmations on customer
transactions relating to Variable Contracts. Life of Virginia shall also make
commission and such other disbursements as may be requested by CBC, in
connection with the operations of CBC, for the account and risk of CBC.
7. Compensation.
(a) For the sale of the Variable Contracts, unless otherwise expressly
agreed to in writing by the parties, sales commissions shall be paid by Life of
Virginia, and CBC authorizes such payment, directly to those registered
representatives of CBC who are also agents of Life of Virginia and to those
broker-dealers (or their affiliated insurance agencies) who have entered into
sales agreements with CBC. Such payment shall be made pursuant to the insurance
agent/agency agreement between the agent/agency and Life of Virginia, and CBC
shall not pay any sales commissions itself to such persons upon their sale of
the Variable Contracts.
(b) In recognition of the administrative services to be rendered by CBC
in coordinating the distribution activities required by this Agreement, Life of
Virginia shall pay to CBC such administrative fees as may be mutually agreed
upon in separate writings exchanged from time to time between Life of Virginia
and CBC.
<PAGE>
8. Investigation and Proceedings.
(a) CBC and Life of Virginia agree to cooperate fully in any insurance
regulatory investigation or proceeding or judicial proceeding arising in
connection with the Variable Contracts distributed under this Agreement. CBC and
Life of Virginia further agree to cooperate fully in any securities regulatory
inspection, inquiry, investigation or proceeding or any judicial proceeding with
respect to Life of Virginia or CBC to the extent that such inspection, inquiry,
investigation or proceeding is in connection with the Variable Contracts
distributed under this Agreement. Without limiting the foregoing:
(i) CBC will be notified promptly of any customer complaint or
notice of any regulatory inspection, inquiry, investigation or
proceeding or judicial proceeding received by Life of Virginia
with respect to Life of Virginia or CBC or any broker-dealer
in connection with any Variable Contracts distributed under
this Agreement or any activity in connection with any Variable
Contracts.
(ii) CBC will promptly notify Life of Virginia of any customer
complaint or notice of any regulatory inspection, inquiry,
investigation or proceeding received by CBC with respect to
Life of Virginia or CBC or any broker-dealer in connection
with any Variable Contracts distributed under this Agreement
or any activity in connection with any such Variable
Contracts.
(b) In the case of any such customer complaint, CBC and Life of
Virginia will cooperate in investigating such complaint and arrive at a mutually
satisfactory response.
9. Termination.
This Agreement shall be effective upon its execution and shall remain
in force for a term of one (1) year from the date hereof, and shall
automatically renew from year to year thereafter, unless either party notifies
the other in writing six (6) months prior to the expiration of an annual period.
This Agreement may not be assigned and shall automatically terminate if it is
assigned. Upon termination of this Agreement all authorizations, rights and
obligations shall cease except (i) the obligation to settle accounts hereunder,
including commissions due or to become due and payable on Variable Contracts in
effect at the time of termination or issued pursuant to applications received by
Life of Virginia prior to termination, and (ii) the obligations contained in
Paragraph 8 hereof.
<PAGE>
10. Exclusivity.
The services of CBC hereunder are not to be deemed exclusive and CBC
shall be free to render similar services to others so long as its services
hereunder are not impaired or interfered with thereby.
11. Regulation.
This Agreement shall be subject to the provisions of the 1940 Act and
the 1934 Act and the rules, regulation, and rulings thereunder and of the NASD,
from time to time in effect, including such exemptions from 1940 Act as the
Securities and Exchange Commission may grant. CBC shall submit to all regulatory
and administrative bodies having jurisdiction over the operations of CBC, Life
of Virginia or the Separate Accounts, any information, reports or other material
which any such body by reason of this Agreement may request or require pursuant
to applicable laws or regulations. Without limiting the generality of the
foregoing, CBC shall furnish the Virginia State Corporation Commission or the
Bureau of Insurance thereof with any information or reports which the Commission
or the Bureau of Insurance may request in order to ascertain whether the
variable annuity operations of Life of Virginia are being conducted in an manner
consistent with the Commission's variable annuity contract regulations and any
other applicable law or regulations.
12. Indemnities.
(a) Life of Virginia agrees to indemnify and hold harmless CBC and each
person who controls or is associated with CBC within the meaning of the 1933 Act
or the 1934 Act against any losses, claims, damages or liabilities, joint or
several, to which CBC or such controlling or associated person may become
subject, under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact,
required to be stated therein or necessary to make the statements therein not
misleading, contained:
(i) in the 1933 Act Registration Statements covering the Variable
Contracts or in any related Prospectuses included thereunder,
or
(ii) in any written information or sales material authorized for,
and supplied or furnished by Life of Virginia to CBC and its
sales representatives.
Life of Virginia will reimburse CBC and each such controlling person, for any
legal or other expenses reasonably incurred by CBC or such controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action covered by this Paragraph 12(a); provided that Life of
Virginia will not be liable in any such case to the extent that such loss,
claim, damage or liability arises out of, or is based upon, an untrue statement
or omission or alleged untrue statement or omission made in reliance upon
information (including, without limitation, negative responses to inquiries)
furnished to Life of Virginia by or on behalf of CBC or its affiliates
specifically for use in the preparation of the said Registration Statements or
any related Prospectuses included therein or any amendment thereto or supplement
thereto. This indemnity agreement will be in addition to any liability which
Life of Virginia may otherwise have, the premises considered.
<PAGE>
(b) CBC agrees to indemnify and hold harmless Life of Virginia and each
of its directors (including any person named in the 1933 Act Registration
Statements covering the Variable Contracts, with his/her consent, as nominee for
directorship), each of its officers who signed a Registration Statement and each
person, if any, who controls Life of Virginia within the meaning of the 1933 Act
or the 1934 Act, against any losses, claims, damages or liabilities to which
Life of Virginia and any such director or officer or controlling person may
become subject, under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon:
(i) any untrue statement or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact
required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under
which they were made, not misleading, contained in the
Registration Statements or in any related Prospectuses
included therein, to the extent, but only to the extent, that
such untrue statement or omission or alleged untrue statement
or omission was made in reliance upon information (including,
without limitation, negative responses to inquiries) furnished
to Life of Virginia by or on behalf of CBC or its affiliates
as the case may be, specifically for use in the preparation of
the Registration Statements or related Prospectuses included
therein or any amendment thereto or supplement thereto; or
(ii) any unauthorized use of sales materials or any verbal or
written misrepresentations or any unlawful sales practices
concerning the Variable Contracts by CBC.
CBC will reimburse Life of Virginia and any director or officer or controlling
person Life of Virginia for any legal or other expenses reasonably incurred by
Life of Virginia or such director, officer or controlling person in connection
with investigating or defending any such loss, claim, damage, liability or
action covered by this Paragraph 12(b). This indemnity agreement will be in
addition to any liability which CBC may otherwise have, the premises considered.
<PAGE>
(c) After receipt by a party entitled to indemnification ("indemnified
party") under this Section 12 of notice of the commencement of any action, if a
claim in respect thereof is to be made against any person obligated to provide
indemnification under this Section 12 ("indemnifying party"), such indemnified
party will notify the indemnifying party in writing of the commencement thereof
as soon as practicable thereafter, and the omission so to notify the
indemnifying party will not relieve it from any liability under this Section 12,
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. In case any such action is brought against
any indemnified party and it notifies an indemnifying party of the commencement
thereof, the indemnified party shall be entitled, to the extent it may wish,
jointly with any other indemnified party similarly notified, to participate in
the defense thereof, with separate counsel. Such participation shall not relieve
such indemnifying party of the obligation to reimburse the indemnified party for
reasonable legal and other expenses incurred by such indemnified party in
defending itself or himself, except for such expenses incurred after the
indemnifying party deposited funds sufficient to effect the settlement, with
prejudice, of the claim in respect of which indemnity is sought. Any such
indemnifying party shall not be liable to any such indemnified party on account
of any settlement of any claim or action effected without the consent of such
indemnifying party.
The indemnity agreements contained in this Section 12 shall remain
operative and in full force and effect, regardless of (i) any investigation made
by or on behalf of CBC or any controlling person thereof or by or on behalf of
Life of Virginia, (ii) delivery of any Variable Contracts and payments therefor,
or (iii) any termination of this Agreement. A successor by law of CBC or of any
the parties to this Agreement, as the case may be, shall be entitled to the
benefits of the indemnity agreements contained in this Section 12.
13. Severability.
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise the remainder of this Agreement shall
not be affected thereby.
14. Applicable Law.
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the Commonwealth of Virginia.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
THE LIFE INSURANCE COMPANY OF VIRGINIA
Attest: By: _____________________________________
_____________________________ Title: __________________________________
Secretary
Date: ___________________________________
CAPITAL BROKERAGE CORPORATION
Attest: By: _____________________________________
_____________________________ Title: __________________________________
Secretary
Date: ___________________________________
EXHIBIT (3)(b)
DEALER SALES AGREEMENT DATED DECEMBER 13, 1997
<PAGE>
[GE LOGO] Capital Brokerage Corporation
6630 West Broad Street
Post Office Box 26266
Richmond, VA 23261
- -------------------------------------------------------------------------------
The Life Insurance Company of Virginia
BROKER-DEALER SALES AGREEMENT
Name of Broker-Dealer: Address of Broker-Dealer:
- -------------------------------------------------------------------------------
This Agreement is made this ___________ day of ___________________, 19___, by
and between Capital Brokerage Corporation (doing business in Indiana, Minnesota,
New Mexico, and Texas as GE Capital Brokerage Corporation), a Washington
corporation with its principal office as listed above ("Capital Brokerage"), and
______________________
___________________________________________________________________________, a
_________________ corporation with its principal office as listed above
("Broker-Dealer").
In consideration of the mutual benefits to be derived and intending to be
legally bound the parties hereby agree to the following terms and conditions:
SECTION I - DEFINITIONS
1.1 The Life Insurance Company of Virginia ("Life of Virginia") is a
Virginia corporation which has developed certain variable life
insurance policies (hereafter referred to as the "Policies", listed in
Schedule A, which is attached hereto and made part of this Agreement)
and certain variable annuity contracts (hereafter referred to as
"Annuities", listed in Schedule B, which is attached hereto and made
part of this Agreement) registered with the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933 (the "1933
Act").
1.2 Capital Brokerage is a Broker-Dealer registered as such under the
Securities Exchange Act of 1934 (the "1934 Act") and a member of the
National Association of Securities Dealers, Inc. ("NASD"). Life of
Virginia has appointed Capital Brokerage as principal underwriter for
the Policies and Annuities.
1.3 Broker-Dealer is registered as a Broker-Dealer under the 1934 Act, is a
member of the NASD and is properly licensed and appointed to promote,
offer and sell the Policies and Annuities.
1.4 Registered Representatives are employees of the Broker-Dealer whom
Broker-Dealer wishes to have appointed by Life of Virginia to sell
Policies and Annuities.
2. REPRESENTATIONS AND WARRANTIES OF CAPITAL BROKERAGE
2.1 Capital Brokerage represents and warrants that:
a. it has full power and authority to enter into this Agreement
and that it has all appropriate licenses to carry on its
business and to market the Policies and the Annuities;
b. the 1933 Act Registration Statements pertaining to the
Policies and the Annuities filed with the SEC have been
declared effective;
<PAGE>
c. the 1933 Act Registration Statements pertaining to the
Policies and the Annuities comply or will comply in all
material respects with the provisions of the 1933 Act, the
1934 Act, the Investment Company Act of 1940 (the "1940 Act")
and the rules and regulations of the SEC; and
d. the 1933 Act Registration Statements do not contain an untrue
statement of a material fact or fail to state a material fact
required to be stated.
2.2 Section 2.1c. shall not apply to statements made in or omissions from
Registration Statements and any related materials, which statements or
omissions were made in reliance upon written statements furnished by
Broker-Dealer.
2.3 Capital Brokerage represents and warrants that it, or an affiliate of
Capital Brokerage, will use its best efforts to obtain insurance
licenses and appointments to allow Registered Representatives to sell
the Policies or the Annuities provided Broker-Dealer cooperates in
obtaining such licenses.
3. REPRESENTATIONS OF BROKER-DEALER
3.1 Broker-Dealer represents and warrants that it has full power and
authority to enter into this Agreement and that it has all appropriate
licenses to carry on its business and to market the Policies and the
Annuities.
3.2 Broker-Dealer represents and warrants that it is registered as a
Broker-Dealer under the 1934 Act, is a member in good standing of the
NASD, is bonded as required by all applicable laws and regulations, and
that it, or a subsidiary or affiliate, has all insurance licenses
required by the states in which the Broker-Dealer intends to market the
Policies and the Annuities.
3.3 Broker-Dealer represents and warrants that all individuals recommended
for licensing and appointment to sell the Policies and Annuities will
be Registered Representatives who are appropriately registered with the
NASD and who possess or can obtain all required insurance licenses.
3.4 Broker-Dealer further represents and warrants that:
a. it made or will make a thorough and diligent inquiry and
investigation relative to each Registered Representative it
seeks to have appointed to sell the Policies and Annuities
including an investigation of the Registered Representative's
identity and business reputation;
b. all Registered Representatives are or will be personally known
to Broker-Dealer, are of good moral character, reliable,
financially responsible and worthy of an insurance license;
c. all examinations, training, and continuing educational
requirements have been or will be met for the NASD and the
specific state(s) in which Registered Representative is
requesting an insurance license;
d. if Registered Representative is required to submit to Life of
Virginia a picture or a signature in conjunction with an
application for an insurance license, that any such items
forwarded to Life of Virginia will be those of Registered
Representative and any evidence of a securities registration
forwarded to Life of Virginia will be a true copy of the
original;
e. no Registered Representatives will apply for insurance
licenses with Life of Virginia in order to place insurance on
their life or property, the lives or property of their
relatives, or property or lives of their associates;
f. each Registered Representative will receive close and adequate
supervision consistent with the requirements of the NASD, and
Broker-Dealer will review, when necessary, any Policies or
Annuities written by Registered Representative;
g. Broker-Dealer will be responsible for all acts and omissions
of its Registered Representatives within the scope of their
appointment with Life of Virginia or as Registered
Representatives;
<PAGE>
h. Broker-Dealer will not permit its Registered Representatives
to act as insurance agents until properly trained (including
training in the Policies and Annuities), licensed and
appointed nor will Broker-Dealer pay compensation to any
Registered Representative not properly licensed and appointed
to sell the Policies and Annuities;
i. Broker-Dealer will immediately notify Capital Brokerage and
Life of Virginia of any change in the NASD registration or
insurance licensing status of any Registered Representative
and will maintain a list of all Registered Representatives
authorized to sell the Policies or the Annuities;
j. Broker-Dealer agrees to indemnify, defend and hold Life of
Virginia and Capital Brokerage harmless against any losses,
claims, damages, liabilities or expenses, including reasonable
attorneys fees, to which Capital Brokerage or Life of Virginia
may be liable to the extent that the losses, claims, damages,
liabilities or expenses, including reasonable attorneys fees,
arise out of allegations that Broker-Dealer or any of its
registered representatives did not have the right or authority
to make discretionary purchases or to make or change a
client's asset allocation; and
k. Broker-Dealer, in the conduct of its business selling Policies
and the Annuities, shall observe high standards of commercial
honor and just and equitable principles of trade consistent
with the Conduct Rules of the NASD.
4. SALE OF POLICIES AND ANNUITIES
4.1 Soliciting Applications.
a. Broker-Dealer is hereby authorized by Capital Brokerage to
solicit applications for the purchase of Policies and
Annuities through its Registered Representatives in states
where the Broker-Dealer and its Registered Representatives are
appropriately licensed and appointed. This authorization is
non-exclusive and is limited to the states in which Policies
and Annuities have been approved for sale.
b. Broker-Dealer shall have no authority on behalf of Capital Brokerage
or Life of Virginia to:
(1) make, alter or discharge any contract;
(2) waive or modify any terms, conditions or limitations
of any Policy or Annuity;
(3) extend the time for payment of any premiums, bind
Life of Virginia to the reinstatement of any
terminated Policy, or accept notes for payment of
premiums;
(4) adjust or settle any claim or commit Life of Virginia
with respect thereto;
(5) incur any indebtedness or liability, or expend or
contract for the expenditure of funds; or
(6) enter into legal proceedings in connection with any
matter pertaining to Capital Brokerage 's or Life of
Virginia's business without the prior consent of
Capital Brokerage or Life of Virginia, unless
Broker-Dealer is named as a party to the proceedings.
c. Broker-Dealer acknowledges that only applications bearing the
signature of a Registered Representative who is on the list of
properly licensed Registered Representatives provided by
Broker-Dealer, according to this Agreement, will be processed
by Life of Virginia.
4.2 Suitability.
a. Capital Brokerage wishes to ensure that the Policies and
Annuities solicited by Broker-Dealer through Registered
Representatives will be issued to persons for whom they will
be suitable.
b. Broker-Dealer shall take reasonable steps to ensure that none
of its Registered Representatives makes recommendations to any
applicant to purchase a Policy or Annuity in the absence of
reasonable grounds to believe that the purchase is suitable
for the applicant under the NASD Conduct Rules regarding
Recommendations to Customers.
<PAGE>
c. A determination of suitability for the purchase of a Policy or
Annuity shall include, but not be limited to, a reasonable
inquiry of each applicant concerning the applicant's financial
status, tax status, and insurance and investment objectives
and needs.
4.3 Delivery of Prospectus(es) by Broker-Dealer.
a. The current Prospectus(es), the Statement(s) of Additional
Information where required by law, and all Supplements
relating to the Policies and the Annuities shall be delivered
by Broker-Dealer to every applicant seeking to purchase a
Policy or Annuity prior to the completion of an application.
b. Broker-Dealer shall not give any information or make any
representations concerning the Policies or the Annuities, Life
of Virginia or Capital Brokerage unless the information or
representations are contained in the current Prospectus(es) or
are contained in sales literature or advertisements furnished
or approved in writing by Life of Virginia and Capital
Brokerage.
4.4 Issuance of Policies or Annuities.
a. Life of Virginia, at its sole discretion, will determine
whether to issue a Policy or an Annuity.
b. Once a Policy or Annuity has been issued:
(1) Life of Virginia will mail it promptly, accompanied
by any required notice of withdrawal rights and any
additional required documents to the individual or
entity designated by the Broker-Dealer;
(2) Life of Virginia will confirm to the owner, with a
copy to Broker-Dealer, the allocation of the initial
premium under the Policy or the Annuity; and
(3) Life of Virginia will also notify the owner of the
name of the Broker-Dealer through whom the Policy or
the Annuity was solicited.
4.5 Life of Virginia will administer all Policies and Annuities issued
according to the terms and conditions set forth in the Policy or
Annuity.
4.6 Capital Brokerage or Life of Virginia, at their own expense, will
furnish to Broker-Dealer, in reasonably sufficient quantities, the
following materials:
a. The current Prospectus(es) for the Policies and Annuities and
any underlying mutual funds;
b. Any Prospectus Supplement for the Policies and Annuities and
any underlying mutual funds, including any Statement(s) of
Additional Information if requested by client or required by
law;
c. Advertising materials and sales literature approved for use by
Capital Brokerage and Life of Virginia; and
d. Applications for Policies and Annuities.
4.7 Money due Life of Virginia or Capital Brokerage.
a. All money payable in connection with the Policies or the
Annuities whether as premium or otherwise is the property of
Life of Virginia.
b. Money due Life of Virginia and received by the Broker-Dealer
under this Agreement shall be held in a fiduciary capacity and
shall be transmitted immediately to Life of Virginia in
accordance with the administrative procedures of Life of
Virginia.
<PAGE>
c. Unless express prior written consent to the contrary is given
to Broker-Dealer by Life of Virginia, money due Life of
Virginia shall be forwarded without any deduction or offset
for any reason, including by example, but not limitation, any
deduction or offset for compensation claimed by Broker-Dealer.
d. Unless express prior written consent to the contrary is given
to Broker-Dealer by Life of Virginia, checks or money orders
in payment for Policies or Annuities, shall be drawn to the
order of "The Life Insurance Company of Virginia" or "Life of
Virginia."
e. Checks drawn by or money orders purchased by the Registered
Representative will not be accepted by Life of Virginia or
Capital Brokerage.
5. INDEMNIFICATION
5.1 Capital Brokerage agrees to indemnify and hold harmless Broker-Dealer
against any losses, claims, damages, liabilities or expenses, including
reasonable attorneys fees, to which Broker-Dealer may be liable to the
extent that the losses, claims, damages, liabilities or expenses,
including reasonable attorneys fees, arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact or
omission or alleged omission of material fact contained in the 1933 Act
Registration Statement covering the Policies or the Annuities or in the
Prospectuses for the Policies or the Annuities or in any written
information or sales materials authorized and furnished to
Broker-Dealer by Capital Brokerage or Life of Virginia.
5.2 Capital Brokerage will not be liable to the extent that such loss,
claim, damage, liability or expense, including reasonable attorneys'
fees, arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon
information provided by Broker-Dealer, including, without limitation,
negative responses to inquiries furnished to Capital Brokerage or Life
of Virginia by or on behalf of Broker-Dealer, specifically for use in
the preparation of the 1933 Act Registration Statement covering the
Policies or the Annuities or in any related Prospectuses.
5.3 Broker-Dealer agrees to indemnify and hold harmless Capital Brokerage
and Life of Virginia, against any losses, claims, damages, liabilities
or expenses, including reasonable attorney's fees, to which Capital
Brokerage, Life of Virginia and any affiliate, parent, officer,
director, employee or agent may be liable to the extent that the
losses, claims, damages, liabilities or expenses, including reasonable
attorneys fees, arise out of or are based upon:
a. Any untrue statement or alleged untrue statement of a material
fact or omission or alleged omission of a material fact
contained in the Registration Statement covering the Policies
or the Annuities or related Prospectuses but only to the
extent, that such untrue statement or alleged untrue statement
or omission or alleged omission is made in reliance upon
information, including, without limitation, negative responses
to inquiries, furnished to Capital Brokerage or Life of
Virginia by or on behalf of Broker-Dealer specifically for use
in the preparation of the 1933 Act Registration Statement
covering the Policies or the Annuities or in any related
Prospectuses;
b. Any unauthorized use of advertising materials or sales
literature or any verbal or written misrepresentations or any
unlawful sales practices concerning the Policies or the
Annuities by Broker-Dealer, its Registered Representatives or
its affiliates; and
c. Claims by Registered Representatives or employees of
Broker-Dealer for commissions or other compensation or
remuneration of any type.
5.4 The party seeking indemnification agrees to notify the indemnifying
party within a reasonable time of receipt of a claim or demand. In the
case of a lawsuit, the party seeking indemnification must notify the
indemnifying party within ten (10) calendar days of receipt of written
notification that a lawsuit has been filed.
5.5 Broker-Dealer agrees that Life of Virginia or Capital Brokerage may
negotiate, settle and or pay any claim or demand against them which
arises from:
a. any wrongful act or transaction of Broker-Dealer or its
Registered Representatives. Wrongful act or transaction
includes, but is not limited to, fraud, misrepresentation,
deceptive practices, negligence, errors or omissions;
<PAGE>
b. the breach of any provision of this Agreement; or
c. the violation or alleged violation of any insurance or
securities laws.
Upon sufficient proof that the claim or demand arose from the
occurrences listed above, Capital Brokerage or Life of Virginia may
request reimbursement for any amount paid plus any reasonable expenses
incurred in investigating, defending against and/or settling the claim
or demand. Broker-Dealer agrees to reimburse Capital Brokerage or Life
of Virginia for these expenses.
Broker-Dealer shall immediately notify Capital Brokerage and Life of Virginia,
in writing of any complaint or grievance relating to the Policies or
the Annuities, including, but not limited to any complaint or grievance
arising out of or based on advertising or sales literature approved by
Life of Virginia or the marketing or sale of the Policies or Annuities.
Broker-Dealer shall promptly furnish all written materials requested by Capital
Brokerage or Life of Virginia in connection with the investigation of
any such complaint and will cooperate in the investigation. Life of
Virginia or Capital Brokerage will notify in a timely manner the
Broker-Dealer of any complaint.
Broker-Dealer shall immediately notify Capital Brokerage and Life of Virginia,
in writing of any state, federal, or self regulatory organization
investigation or examination regarding the marketing and sales
practices relating to the Policies or Annuities or any pending or
threatened litigation regarding the marketing and sales practices
relating to the Policies or Annuities.
6. TERMINATION
This Agreement may be terminated by either Capital Brokerage or
Broker-Dealer at any time, for any reason, upon thirty (30) calendar
days advance written notice delivered to the other party under the
terms of Section 10.10 of this Agreement.
This Agreement will terminate immediately:
a. If the Broker-Dealer is dissolved, liquidated, or otherwise
ceases business operations;
b. If the Broker-Dealer fails, in Capital Brokerage's sole
judgment, to comply with any of its obligations under this
Agreement;
c. If the Broker-Dealer ceases to be registered under the 1934
Act or a member in good standing of the NASD; or
d. In the event one party assigns or transfers its rights or
liabilities under this Agreement to any third party without
the prior written consent of the other party.
6.3 The following provisions of the Agreement shall survive termination:
a. Section One - Definitions
b. Section Two - Representations
c. Section Five - Indemnification
d. Section Nine - Recordkeeping
e. Section Ten - General Provisions, Sub-Section 10 - Notices
<PAGE>
7. COMPENSATION
7.1 Unless otherwise expressly agreed to in writing by the parties, no
compensation shall be payable to Broker-Dealer for its services under
this Agreement. All compensation payable with respect to sales of the
Policies and the Annuities by Broker-Dealer shall be paid in accordance
with the terms of the General Agent Agreement in effect between Life of
Virginia and Broker-Dealer, or a duly licensed subsidiary or affiliate
thereof.
8. ADVERTISEMENTS
8.1 Broker-Dealer shall not use any advertisements or sales literature for
the Policies or the Annuities or any advertisements or sales literature
referencing Life of Virginia or Capital Brokerage without prior written
approval of Life of Virginia or Capital Brokerage. This includes
brochures, letters, illustrations, training materials, materials
prepared for oral presentations and all other similar materials.
9. RECORDKEEPING
9.1 Each party agrees to keep all records required by federal and state
laws, to maintain its books, accounts, and records so as to clearly and
accurately disclose the precise nature and details of transactions, and
to assist one another in the timely preparation of records.
9.2 Each party grants to the other and/or its representatives the right and
power at reasonable times to inspect, check, make extracts from, and
audit each of its books, accounts and records as they relate to this
Agreement, including, but not limited to advertisements and sales
materials, for the purpose of verifying adherence to each of the
provisions of this Agreement.
10. GENERAL PROVISIONS
10.1 Effective. This Agreement shall be effective upon execution by both
parties and will remain in effect unless terminated as provided in
Section Six.
10.2 Assignment. This Agreement may not be assigned or transferred to any
third party by either Capital Brokerage or Broker-Dealer without the
other party's prior written consent.
10.3 Governing Law. This Agreement shall be construed in accordance with
the laws of the Commonwealth of Virginia.
10.4 Severability. If any provision of this Agreement shall be held or
rendered invalid by a court decision, state or federal statute,
administrative rule or otherwise, the remainder of this Agreement shall
not be rendered invalid.
10.5 Complete Agreement. The parties declare that, other than the General
Agent's Agreement between Broker-Dealer (or its affiliated insurance
agency) and Life of Virginia (or its affiliated marketing company)
there are no oral or other agreements or understandings between them
affecting this Agreement or relating to the offer or sale of the
Policies or the Annuities and that this constitutes the entire
Agreement between the parties.
10.6 Waiver. Forbearance by Capital Brokerage to enforce any of the terms of
this Agreement shall not constitute a waiver of such terms.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
10.8 Independent contractors. Broker-Dealer is an independent contractor.
Nothing contained in this Agreement shall create, or shall be construed
to create, the relationship of employer and employee between Capital
Brokerage and Broker-Dealer or Broker-Dealer's directors, officers,
employees, agents or Registered Representatives.
10.9 Cooperation. Each party to this Agreement shall cooperate with the
other and with all governmental authorities, including, without
limitation, the SEC, the NASD and any state insurance or 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 under this
Agreement.
<PAGE>
10.10 Notices. All notices, requests, demands and other communications which
must be provided under this Agreement shall be in writing and shall be
deemed to have been given on the date of service if served personally
on the party to whom notice is to be given or on the date of mailing if
sent by United States registered or certified mail, postage prepaid.
Notices should be sent to the parties at the addresses first listed in
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
representatives.
CAPITAL BROKERAGE CORPORATION ____________________________________
(Name of Broker-Dealer)
- --------------------------------- ------------------------------------
(Signature) (Signature)
- --------------------------------- ------------------------------------
(Name) (Name)
- --------------------------------- ------------------------------------
(Title) (Title)
Tax Identification Number __________
Date: ___________________________ Date: ______________________________
<PAGE>
SCHEDULE A
to
BROKER-DEALER SALES AGREEMENT
VARIABLE LIFE INSURANCE POLICIES:
<PAGE>
SCHEDULE B
to
BROKER-DEALER SALES AGREEMENT
VARIABLE ANNUITY CONTRACTS:
EXHIBIT (4)(a)(i)
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>
<PAGE>
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
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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
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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
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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
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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.
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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
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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
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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 (4)(b)(i)
IRA ENDORSEMENT
ENDORSEMENT
In order to qualify this contract as an Individual Retirement Annuity under
Section 408 of the Internal Revenue Code of 1986, as amended, (hereafter
referred to as The Code), the following provisions and restrictions are hereby
made applicable, notwithstanding any provisions to the contrary contained in the
policy. In the case of a conflict between the policy and the endorsement, the
endorsement overrides the policy.
ARTICLE 1 - Non-Transferability and Non-Forfeitability
The owner may not change the ownership of the policy and the policy may not be
sold,
20
<PAGE>
assigned or pledged as collateral for a loan or as security for the performance
of an obligation or for any other purpose to anyone. The owner's rights shall at
all times be non-forfeitable.
ARTICLE 2 - Premium Limitation
Except in the case of a rollover contribution, as that term is described in
Section 402(a)(5), 402(a)(6), 402(a)(7); 403(a)(4), 403(b)(8), or 408(d)(3) of
The Code, or a direct transfer from one Individual Retirement Annuity issued by
the Company to another Individual Retirement Annuity issued by the Company, no
premiums will be accepted unless they are in cash, and the total of such
premiums shall not exceed $2000 for any taxable year. If the premium consists
entirely of an employer contribution under a simplified employee pension, as
such is defined in Section 408(k) of The Code, the maximum amount of premium
stated in paragraph 1 of this article shall be increased by the amount of this
limitation in effect under section 415(c)(1)(A) of The Code.
The minimum premium required for each additional premium payment under this IRA
is $50. The sentence stating that "Each additional premium payment must be at
least $1,000" found in the Premium Payments section of the policy is deleted.
ARTICLE 3 - Refund of Premiums
Any refund of premiums (other than those attributable to excess contributions)
will be applied towards the payment of future premiums or the purchase of
additional benefits before the close of the calendar year following the year of
the refund.
ARTICLE 4 - Distributions Before Death Of The Owner
Federal tax law requires that minimum distributions from individual retirement
arrangements, including Individual Retirement Annuities, begin not later than
April 1 of the calendar year following the year in which the owner attains age
70 1/2. In order to comply with this requirement, the Surrender Value of this
annuity may be distributed as a lump sum or may be distributed in equal or
substantially equal amounts over (a) the life of the owner, or the lives of the
owner and a designated beneficiary, or (b) a period certain not extending beyond
the life expectancy of the owner, or the joint life expectancy of the owner and
a designated beneficiary.
If distributions are to be made to the owner in the manner described in (a) or
(b) of this Article, the amount to be distributed each year, beginning with the
first calendar year for which distributions are required and then for each
succeeding calendar year, shall not be less than the quotient obtained by the
dividing the Surrender Value as of the beginning of each year by the lesser of
(1) the applicable life expectancy or (2) if the owner's spouse is not the
designated beneficiary, the applicable divisor determined from the table set
forth in Q&A-4 of Section 1.401(a)(9)-2 of the Proposed Income Tax Regulations.
For purposes of this calculation only, "Surrender Value at the beginning of each
year" will include amounts not in this Individual Retirement Annuity at the
beginning of the year because they have been withdrawn for the purpose of making
a rollover contribution to another individual retirement plan. Distributions
after the death of the owner shall be distributed using the applicable life
expectancy as the relevant divisor without regard to Section 1.401(a)(9)-2 of
the Proposed Income Tax Regulations.
Life expectancy and joint and last survivor expectancy are computed by use of
the expected return multiples in Tables V of Section 1.72-9 of the Income Tax
Regulations. Unless otherwise elected by the owner by the time distributions are
required to begin, life expectancies shall be subsequent years. The life
expectancy of a non-spouse beneficiary may not be recalculated, instead life
expectancy will be calculated using the attained age of such beneficiary during
the calendar year in which distributions are required to begin pursuant to this
section, and payments for subsequent years shall be calculated based on such
life expectancy reduced by one for each calendar year which has elapsed since
the calendar year life expectancy was first calculated. Distributions under this
annuity shall be made in accordance with the requirements of Section 401(a)(9)
of the Code and the regulations thereunder.
21
<PAGE>
ARTICLE 5 - Distributions Upon Death Of The Owner
If the owner dies after distribution of his or her interest has commenced, the
remaining portion of such interest will continue to be distributed at least as
rapidly as under the method of distribution being used prior to the owner's
death.
If the owner dies before distribution of his or her interest commences, the
owner's entire interest will be distributed in accordance with one of the
following four provisions: (a) The owner's entire interest will be paid within
five years after the owner's death. (b) If the owner's interest is payable to a
designated beneficiary and the owner has not elected (a) above, then the entire
interest will be distributed in substantially equal installments over the life
or life expectancy of the designated beneficiary commencing no later than one
year after the date of the owner's death. The designated beneficiary may elect
at any time to receive greater payments to the extent of payments guaranteed to
be made. (c) If the designated beneficiary is the owner's surviving spouse, the
spouse may elect within the five year period commencing with the owner's date of
death to receive equal or substantially equal payments over the life or life
expectancy of the surviving spouse commencing at any date prior to the date on
which the deceased owner would have attained age 70 1/2. The surviving spouse
may increase the frequency or amount of these payments at any time to the extent
of any payments guaranteed to be made. (d) If the designated beneficiary is the
owner's surviving spouse, the spouse may treat the contract as his or her own
individual retirement annuity. This election will be deemed to have been made if
such surviving spouse makes a regular IRA contribution to the contract, makes a
rollover to or from such contract, or fails to elect any of the above three
provisions.
For purposes of this Article 5, payments will be calculated by use of he
expected return multiples in Tables V and VI of Section 1.72-9 of the Income Tax
Regulations. Unless otherwise elected by the surviving spouse by the time
distributions are required to begin, life expectancies shall be recalculated
annually. Such election shall be irrevocable as to the surviving spouse and
shall apply to all subsequent years. In the case of any other designated
beneficiary, life expectancy will be calculated at the time payment first
commences and payments for any 12-consecutive month period will be based on such
life expectancy minus the number of whole years passed since distribution first
commenced.
Any amount paid to a child of the owner will be treated as if it had been paid
to the surviving spouse if the remainder of the interest becomes payable to the
surviving spouse when the child reaches the age of majority.
ARTICLE 6 - Applicant
The applicant for the policy is the owner/annuitant of the policy. This policy
is established for the exclusive benefit of the owner(s) or his or her
beneficiaries.
ARTICLE 7 - Annual Reports
The Company will furnish annual calendar year reports concerning the status of
the annuity.
ARTICLE 8 - Amendments
The Company shall have the right, solely at its discretion, to amend any and all
provisions of the policy in order to maintain qualification of the policy as an
Individual Retirement Annuity under Section 408 of The Code. Such endorsement
will be effective with respect to the annuitant and this policy upon receipt by
the owner. The owner has the right to refuse to accept any amendment; however,
the Company shall not be held liable for any such tax consequences incurred by
the owner as a result of his or her refusal to accept such amendment.
For THE LIFE INSURANCE COMPANY OF VIRGINIA
Paul E. Rutledge, III
President
22
EXHIBIT (4)(b)(ii)
PENSION ENDORSEMENT
ENDORSEMENT
In order to use this contract under the Internal Revenue Code of 1986, as
amended, (hereafter referred to as The Code), the following provisions and
restrictions are hereby made applicable, notwithstanding any provisions to the
contrary contained in the policy.
Non-Transferability
The owner may not change the ownership of the policy and the policy may not be
sold, assigned or pledged as collateral for a loan or as security for the
performance of an obligation or for any other purpose to anyone other than The
Life Insurance Company of Virginia unless the owner is the trustee of an
employee trust qualified under The Code. The purpose of this provision is to
qualify the annuity under Section 401(g) of The Code, and it shall be so
construed.
Monthly Income Benefit
We will make monthly payments to the annuitant for a guaranteed period. If the
annuitant dies before the end of the guaranteed minimum period, the remaining
payments will be discounted at the same rate used to calculate the monthly
income. The discounted amount will be paid in one sum to the annuitant's estate
unless otherwise provided.
23
<PAGE>
Optional Payment Plans
We will make payments that do not depend on the sex of the annuitant. New
monthly payment rates for the Life Income plan or the Joint Life and Survivor
Income plan are contained in this endorsement.
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
- -------------------------------------------------------------------------------
LIFE INCOME PLAN TABLE
<TABLE>
<CAPTION>
Monthly Payment Rates for each $1000 of proceeds
- ---------------------------------------------------------------------------------------------
Age 10 15 20 Age 10 15 20
Years Years Years Years Years Years
Certain Certain Certain Certain Certain Certain
<S> <C>
- ---------------------------------------------------------------------------------------------
20 $2.82 $2.82 $2.82 55 $4.00 $3.96 $3.90
25 2.90 2.89 2.89 56 4.07 4.03 3.96
30 2.99 2.99 2.98 57 4.15 4.10 4.03
35 3.11 3.10 3.10 58 4.23 4.18 4.09
40 3.26 3.25 3.24 59 4.32 4.25 4.16
45 3.45 3.43 3.42 60 4.41 4.34 4.23
50 3.59 3.67 3.64 61 4.51 4.42 4.30
51 3.74 3.72 3.68 62 4.61 4.51 4.37
52 3.80 3.78 3.74 63 4.72 4.61 4.44
53 3.87 3.84 3.79 64 4.83 4.70 4.52
54 3.93 3.90 3.85 65 4.95 4.80 4.59
- ---------------------------------------------------------------------------------------------
*Age means Settlement Age
</TABLE>
LIFE INCOME PLAN TABLE
<TABLE>
<CAPTION>
Monthly Payment Rates for each $1000 of proceeds
- --------------------------------------------------------------------------------------------
Age 10 15 20 Age 10 15 20
Years Years Years Years Years Years
Certain Certain Certain Certain Certain Certain
<S> <C>
- --------------------------------------------------------------------------------------------
66 $5.08 $4.91 $4.67 77 $6.96 $6.14 $5.33
67 5.22 5.02 4.74 78 7.16 6.23 5.36
68 5.36 5.13 4.82 79 7.36 6.32 5.39
69 5.51 5.24 4.89 80 7.57 6.40 5.42
70 5.66 5.35 4.96 81 7.77 6.47 5.44
71 5.83 5.47 5.02 82 7.96 6.54 5.46
72 6.00 5.58 5.09 83 8.14 6.60 5.47
73 6.18 5.70 5.15 84 8.32 6.65 5.48
74 6.37 5.81 5.20 85&over 8.48 6.69 5.49
75 6.56 5.93 5.25
76 6.76 6.03 5.29
- --------------------------------------------------------------------------------------------
*Age means Settlement Age
</TABLE>
<TABLE>
<CAPTION>
JOINT LIFE AND SURVIVOR INCOME PLAN TABLE
Monthly Payment Rates for each $1000 of proceeds
- -------------------------------------------------------------------------------------------------------------------------------
Settlement Settlement
Age Age
-------------------------------------------------------------------------------------------------------------
35 40 45 50 55 60 65 70
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------------
35 $2.92 $2.97 $3.00 $3.03 $3.06 $3.07 $3.08 $3.09
40 2.97 3.03 3.08 3.13 3.17 3.20 3.22 3.23
45 3.00 3.08 3.16 3.23 3.29 3.34 3.38 3.41
50 3.03 3.13 3.23 3.33 3.43 3.51 3.57 3.62
55 3.06 3.17 3.29 3.43 3.56 3.68 3.79 3.87
60 3.07 3.20 3.34 3.51 3.68 3.86 4.03 4.16
65 3.08 3.22 3.38 3.57 3.79 4.03 4.27 4.49
70 3.09 3.23 3.41 3.62 3.87 4.16 4.49 4.83
75 3.10 3.24 3.42 3.65 3.93 4.27 4.68 5.14
80 3.10 3.25 3.44 3.67 3.96 4.34 4.81 5.38
85&over 3.11 3.25 3.44 3.68 3.99 4.38 4.89 5.54
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
For the Life Insurance Company of Virginia
<TABLE>
<CAPTION>
JOINT LIFE AND SURVIVOR INCOME PLAN TABLE
Monthly Payment Rates for each $1000 of proceeds
- --------------------------------------------------------------
Settlement Settlement
Age Age
----------------------------------------------
75 80 85&over
<S> <C>
- --------------------------------------------------------------
35 $3.10 $3.10 $3.11
40 3.24 3.25 3.25
45 3.42 3.44 3.44
50 3.65 3.67 3.68
55 3.93 3.96 3.99
60 4.27 4.34 4.38
65 4.68 4.81 4.89
70 5.14 5.38 5.54
75 5.61 6.02 6.30
80 6.02 6.63 7.10
85&over 6.30 7.10 7.76
- --------------------------------------------------------------
</TABLE>
For the Life Insurance Company of Virginia
Paul E. Rutledge III
President
24
<PAGE>
25
<PAGE>
26
EXHIBIT (4)(b)(iii)
Section 403b Endorsement
27
<PAGE>
ENDORSEMENT
Cash Value Withdrawal Restrictions Effective January 1, 1989
You may not withdraw cash value resulting from:
* premiums paid after December 31, 1988, as elective deferrals through a salary
reduction agreement;
* earnings on those premiums;
* earnings on the amount of cash value as of December 31, 1988, attributable to
premiums paid as elective deferrals.
These restrictions are required by Section 403(b)(11), which was added to the
Internal Revenue Code by the Tax Reform Act of 1986. They override any policy
provisions to the contrary.
Exceptions to Restrictions on Cash Value Withdrawals
The restrictions listed above do not apply to withdrawals due to your:
* death;
* attainment of age 59 1/2;
* ending employment with the employer sponsoring the 403(b) plan;
* disability, as defined in Section 403(b)(11); or
* financial hardship, as defined in Section 403(b)(11). In the case of financial
hardship, only cash value from premiums paid through elective deferrals, and
not cash value from income on those premiums, may be withdrawn.
For The Life Insurance Company of Virginia,
Paul E. Rutledge, III
President
28
EXHIBIT (4)(b)(iv)
Guaranteed Minimum Death Benefit Rider
29
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA
GUARANTEED MINIMUM DEATH BENEFIT RIDER
This rider provides for an Optional Death Benefit in addition to the Optional
Death Benefit provided for in the policy. The Death Benefit will be the greater
of:
* The Death Benefit provided for Under the Death Provisions
section in the policy; or
* The Death Benefit provided for in this rider.
Optional Death Benefit at Death of Annuitant
If any Annuitant dies while this rider is in effect and before income payments
begin, the Designated Beneficiary may surrender the policy for the Death Benefit
within 90 days of the date of such death. If this Death Benefit is paid, the
policy will terminate, and we will have no further obligation under this policy.
The Death Benefit will be the greater of:
* The Guaranteed Minimum Death Benefit; or
* The Account Value of the policy on the date we receive proof
of the Annuitant's death or, if later, the date of your
request.
Guaranteed Minimum Death Benefit. On the policy date, the Guaranteed Minimum
Death Benefit is equal to the premium paid. At the end of each valuation period
after such date, the Guaranteed Minimum Death Benefit is the lesser of:
* The total of all premiums received, multiplied by two, less
the amount of any partial surrenders, plus their surrender
charges, made prior to or during that valuation period; or
* The Guaranteed Minimum Death Benefit at the end of the
preceding valuation period, increased as specified below, plus
any additional premium payments during the current valuation
period and less the amount of any partial surrenders, plus
their surrender charges, made during the current valuation
period.
The amount of increase for the valuation period will be calculated by applying a
factor to the Guaranteed Minimum Death Benefit at the end of the preceding
valuation period. Until the anniversary on which the Annuitant attains age 80,
the factor is determined for each valuation period at an annual rate of 6%,
except that with respect to amounts invested in certain investment Subdivisions
shown in the policy data pages, the increase factor will be calculated as the
lesser of;
* The Net Investment Factor of the Investment Subdivision of the
valuation period, minus one; or
* A factor for the valuation period equivalent to an annual rate
of 6%.
With respect to amounts invested in the Guarantee Account, if it applies, the
increase factor for each such amount will be calculated as the lesser of:
* A factor for the valuation period equivalent to the annual
rate that applies to such amount; or
* A factor for the valuation period equivalent to an annual rate
of 6%.
After the anniversary on which the Annuitant attains age 80, the factor will be
zero.
If the surrender occurs more than 90 days after the Annuitant's death, the
Surrender Value will be payable instead of the Death Benefit. Amounts payable
under this rider are subject to the Distribution Rules and Payment of Benefits
provisions in the policy.
The following paragraph is added to the Account Value Benefits section of the
policy:
If the Guarantee Account applies and if the Account Value in the Separate
Account is insufficient to cover the Annual Death Benefit Charge, then the
deduction will be made first from the Account Value in the Separate Account. The
excess of the charges over the Account Value in the Separate Account will then
be deducted from the Account Value in the Guarantee Account. Deductions from the
Guarantee Account will be taken from the amounts which have been in the
Guarantee Account for the longest period of time.
30
<PAGE>
The following provision is added to the Account Value Benefits section of the
policy:
Annual Death Benefit Charge
There will be a charge made each year for expenses related to the Death Benefit
that is available under the terms of the rider. This charge is made at the
beginning of each policy year after the first, and at surrender, against the
Account Value allocated to the Separate Account. The amount of this charge is
shown on page 3 and is applied to the average Guaranteed Minimum Death Benefit
during the previous year. The charge at surrender will be a pro-rata portion of
the annual charge.
When this Rider is Effective
This rider is effective on the policy date and will remain in effect while this
policy is in force and before income payments begin, or until the policy
anniversary following the date of receipt of your request to terminate the
rider.
For The Life Insurance Company of Virginia,
Paul E. Rutledge, III
President
31
EXHIBIT (5)(a)
FORM OF APPLICATION
32
<PAGE>
LIFE OF THE LIFE INSURANCE COMPANY OF VIRGINIA
VIRGINIA VARIABLE ANNUITY APPLICATION
1 Proposed -------------
Annuitant Social Security No. -------------
--------------------------
Name(if no middle name, use
NMN)
-------------
------------------------- Date of Birth -------------
Street address
------------------------- Age _____
City State Zip
( )___________________ Sex [ ] Male [ ] Female
Telephone
1a
Contingent -------------
Annuitant ------------------------- Social Security No. -------------
Name(if no middle name,use
NMN)
-------------
-------------------------- Date of Birth -------------
Street address
__________________________ Age_____
City State Zip
( )____________________ Sex: [ ] Male [ ] Female
Telephone
Taxpayer ID or
----------------
2 Owner Social Security No. ----------------
--------------------------
Name(if no middle name,use If applicable:
NMN)
-------
Date of Birth -------
Street address
Age
City State Zip
-- --
( ) Sex: --Male --Female
Telephone
Taxpayer ID or
2a Joint ---------------
Owner ------------------------- Social Security No.---------------
Name(if no middle name, use
NMN) If applicable:
-------
Date of Birth -------
-------------------------
Street address
------------------------- Age________
City State Zip
------------------------ Sex: [ ] Male [ ] Female
Telephone
3 Beneficiary
[ ]
Primary
[ ] _____
---------------------- Relationship
Name(if no middle Name, to owner
use NMN) [ ] _____
Annuitant
------------------------
Street address
Contingent [ ]
<PAGE>
----------------------- Relationship [ ]
Name (if no middle name, to owner
use NMN
Annuitant [ ]
-----------------------
Street Address
CHANGES IN DESIGNATIONS
The following designations may be changed by the Owner at any time, unless they
are irrevocable. Check the appropriate boxes below ONLY if a designation is to
become irrevocable:
[ ]Primary [ ] Contingent [ ] Contingent
Beneficiary Beneficiary Annuitant
4 TYPE OF [ ] Nonqualified [ ] Qualified:
PLAN
[ ] Individual [ ] IRA(circle One):
[ ] Joint Regular payment;
tax year
Rollover
Direct Transfer
[ ] Simplified
Employee Pension
[ ] TSA/403(b)
[ ] Other
Owner: -- --
--Does --Does Not
wish to have Federal
Income Tax withheld from
surrenders or annuity
payments.
5 Payment
With
Application $25,000
(initial minimum: $5,000)
6 Allocation Investment Subdivisions
of Purchase
Payments %
------ ----------------------------------
Enter a %
------ ----------------------------------
percentage %
------ ----------------------------------
of at %
------ ----------------------------------
least 10% %
------ ----------------------------------
for each %
------ ----------------------------------
fund %
------ ----------------------------------
selected % Guarantee Account(where available)
Percentages ------ ----------------------------------
must total 100%
<PAGE>
35
7 Dollar-Cost TRANSFER DOLLAR AMOUNTS FROM THE Money Market
Averaging Subdivision to the following investment subdivisions according
to the frequency indicated:
FREQUENCY AMOUNTS TRANSFER TO INVESTMENT
(must be $100 or more) SUBDIVISIONS
[ ] MONTHLY (on the
5th of each
month.) $ ___________ ____________
$ ___________ ____________
$ ___________ ____________
[ ] QUARTERLY(on the $ ___________ ____________
last business $ ___________ ____________
each calendar $ ___________ ____________
quarter.)
I understand that the account value in my elected Money Market Subdivision must
be kept at or above the account value level which will permit the dollar-cost
averaging transfers requested; otherwise, these transfers will end. This request
is in lieu of the requirement for individual written transfer requests. I may
also change or terminate these transfers by written notice to the address below,
or by telephone if a Personal Identification Number (PIN) has been issued (See
Section 8). Initials of owner:
--
8 Telephone [ ] Telephone Transfer Agreement Form for assigning
Transfer Personal Identification Number for telephone transfers is
(optional) being submitted with this application.
[ ] Please send Telephone Transfer Agreement Form.
9 Replacement Will the proposed contract replace any existing annuity or
insurance contract?
[ ] No [ ] Yes (If yes, list company name, plan and year of
issue.)
10 Additional
Remarks
11 Signatures
Important All statements made in this application are true to the best
Information. of our knowledge and belief, and the answers to these
Please Read questions, together with this agreement, are the basis for
Carefully. issuing the policy. I/We agree to all terms and conditions as
shown on the front and back. I/We further agree that this
application shall be a part of the annuity contract, and
verify our understanding that ALL PAYMENTS AND VALUES PROVIDED
BY THE CONTRACT, WHEN BASED ON THE INVESTMENT EXPERIENCE OF
THE SEPARATE ACCOUNT, ARE VARIABLE AND NOT GUARANTEED AS TO
DOLLAR AMOUNT. THE OWNER ACKNOWLEDGES RECEIPT OF
PROSPECTUSES AND ALL APPLICABLE AMENDMENTS DATED WITHIN 13
MONTHS OF THIS APPLICATION FOR THE SEPARATE ACCOUNT AND ALL
MUTUAL FUNDS APPLICABLE TO THE POLICY. I/We agree that no
one, except the President, the Secretary, or a Vice
President of the Company can make or change any annuity.
Proposed
Dated at on ,19 Annuitant
City, State Month,day
Witness to Contingent
all signatures Annuitant
Licensed Resident Agent/Broker (Signature required if designates
as irrevocable)
Owner
Business name or stamp (Signature required of other than
Proposed Annuitant)
Joint Owner
36
<PAGE>
AGENTS STATEMENT - Do you have knowledge or reason to believe that replacement
of insurance is involved?
[ ] Yes [ ] No If "Yes",explain and submit a completed replacement form
where required.
Licensed Resident Agent/Broker
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Agency/Brokerage and Code (Print) Agent/Broker and Code (Print) Agent/Broker code(Print)
- ------------------------------------------------------------------------------------------------------------------------------------
Agent's/Broker Social Security/Tax ID no. Agent's/Broker's address Telephone Number
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Life Insurance Company of Virginia
6610 W. Broad Street
Richmond, Virginia 23230
37
EXHIBITS 1A(6)(a)
Articles of Incorporation of Life of Virginia
38
<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
39
<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
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
40
<PAGE>
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.
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
41
<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 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:
42
<PAGE>
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.
(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 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
43
<PAGE>
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.
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.
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(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 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
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.
45
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THE LIFE INSURANCE COMPANY
OF VIRGINIA
By:
----------------
Samuel H. Turner
President
And:
---------------
Roy G. McLeod
Secretary
Dated: June 10, 1983
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 $$38.1-187
ORDER GRANTING APPROVAL OF APPLICATION
ON A FORMER DAY came Applicant and filed with the
Clerk of the Commission an application for approval, under
46
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the provisions of Virginia Code $$38.1-187, of redemptions and repurchases
required or permitted under the provisions 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 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
47
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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
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 appended
hereto as Exhibit A.
3. On May 19, 1983 the Board of Directors, by Unanimous Consent
48
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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
By:
--------------------------
Samuel H. Turner, President
and By:
Roy G. McLeod, Secretary
Dated: June 10, 1983
49
<PAGE>
EXHIBIT A
THE LIFE INSURANCE COMPANY OF VIRGINIA
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.
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
50
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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 Designation 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,
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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.
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.
52
EXHIBIT 1A(6)(b)
By-Laws of Life of Virginia
53
<PAGE>
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 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
54
<PAGE>
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, 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.
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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.
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 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
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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 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
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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 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 of Directors or
the Executive Committee may require.
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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 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.
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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 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.
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(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
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
61
EXHIBIT 1A(8)(a)
Stock Sale Agreement
<PAGE>
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 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
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<PAGE>
ATTEST; By:
--------------------- -------------------------
Secretary John J. Palmer
Senior Vice President
LIFE OF VIRGINIA SERIES
FUND, INC.
ATTEST: By:
---------------------- ----------------------------
Secretary Eric T. Henry
President
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
------------------- ------------------
Assistant Secretary Senior Vice President
<PAGE>
LIFE OF VIRGINIA SERIES
FUND, INC.
ATTEST: By:
-------------------- ------------------
Assistant Secretary John J. Palmer
President
65
<PAGE>
EXHIBIT 1A (8)(a)(i)
Amendment to Stock Sale Agreement between the
Life Insurance Company of Virginia and Life of
Virginia Series Fund, Inc.
66
<PAGE>
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
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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<PAGE>
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
80
<PAGE>
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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<PAGE>
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
82
<PAGE>
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
-------------
83
<PAGE>
Schedule A
Contracts
1. Variable Life Insurance Policy identified as Contract Form P1097A
1/87 or P1097B 1/87.
84
<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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<PAGE>
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 (8)(b)(i)
Amendment to Participation Agreement
<PAGE>
AMENDMENT NO. 1
This Amendment dated as of the 21st day of March, 1988 to the
Participation Agreement dated as of 22nd day of June, 1987 (the "Agreement")
between The Life Insurance Company of Virginia, (the "Company"), Fidelity
Distributors Corporation, (the "Underwriter") and Variable Insurance Products
Fund, (the "Fund").
The Company, the Underwriter and the Fund hereby agree to amend the
Amendment as follows:
1. By deleting the words "Life of Virginia Separate Account III,
(hereinafter the "Account"), a segregated asset account of the
Company" which appears in the third line of the first
paragraph of the Agreement and by substituting the following
therefore:
"each separate 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")."
2. By deleting the date, "February 10, 1987", which appears in
the sixth WHEREAS on page two of the Agreement and
substituting the words "the date shown for such Account on
Schedule C hereto."
3. By deleting Section 2.12 in its entirety and by substituting
the following therefor:
"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 300 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."
4. By adding the following at the end of Section 12.6:
"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 insurance product 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."
5. By deleting the language of Section 4 of Schedule B to the
Agreement in its entirety and by substituting the following
therefor:
"4. The text and format for the Voting Instruction Cards
("Cards" or "Card") is provided to the Company by the Fund.
The Company, at its expense, shall produce and personalize the
Voting Instruction Cards with the name, address, and number of
units/shares for each customer. (This and related steps may
occur later in the chronological process due to possible
uncertainties relating to the proposals.)"
6. By attaching to an making a part of the Agreement a copy of
this Amendment No. 1.
7. The Agreement, as amended hereby, is an shall remain in full
force and effect.
89
<PAGE>
In witness whereof, each of the parties has caused this Amendment to be
executed in its name and on its behalf by its duly authorized representative as
of the date first written above.
The Life Insurance Company of Virginia
By: /s/ WILLIAM D. BALDWIN
----------------------
William D. Baldwin
Title: Senior Vice President
---------------------
Fidelity Distributors Corporation
By: /s/JOHN F. O'BRIEN
John J. O'Brien
Title: President
---------
Variable Insurance Products Fund
By: /s/ JOHN F. O'BRIEN
--------------------
John J. O'Brien
Title: Senior Vice President
---------------------
90
<PAGE>
SCHEDULE C
NAME OF ACCOUNT DATE OF RESOLUTION OF
COMPANY'S BOARD WHICH
ESTABLISHED THE ACCOUNT
Life of Virginia Separate Account II August 21, 1986
Life of Virginia Separate Account III February 10, 1987
Life of Virginia Separate Account 4 August 26, 1987
91
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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<PAGE>
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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<PAGE>
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)(c)(i)
AMENDMENT
101
<PAGE>
The May 27, 1987 agreement between Oppenheimer Variable Account Funds (the
"Fund"), Oppenheimer Management Corporation (OMC), and The Life Insurance
Company of Virginia (LOV), as amended on September 1, 1987, is hereby amended as
follows effective January 1, 1988.
The September 1, 1987 amendment is hereby deleted in its entirety.
The fifth paragraph of the agreement is deleted in its entirety and replaced by
the following:
WHEREAS, LOV desires to utilize shares of the Fund as one of the funding
media of Life of Virginia Separate Account II, Life of Virginia Separate
Account III, Life of Virginia Separate Account 4, and other separate
accounts that may be established by LOV to support variable life
insurance and variable annuity policies (the "policies") to be issued by
LOV, hereinafter individually and/or collectively referred to as the
"Account" or the "Accounts",
The seventh paragraph of the agreement is deleted in its entirety and
replaced by the following:
WHEREAS, LOV represents and warrants that the aforementioned separate
accounts have registered or will register as unit investment trusts under
the Investment Company Act of 1940;
Paragraph (a) of Section 13.2 is deleted in its entirety and replaced by
the following:
(a) withdrawing the assets allocable to any or all of the Accounts
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
Section 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 the Accounts, in shares of the Fund. LOV shall be
responsible for assuring that the Accounts calculate voting privileges in a
manner consistent with all other separate accounts investing in the Fund. With
respect to each Account, LOV will vote shares of the Fund held by the
Account and for which no timely voting instructions from policyowners are
received as well as shares it owns that are held by that Account, in the
same proportion as those shares for which voting instructions are received.
IN WITNESS WHEREOF, LOV, the Fund and OMC have caused this amendment to be duly
executed as of the date indicated above.
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Oppenheimer Variable Account Funds
By: /s/ ROBERT G. GALLI
--------------------
Robert G. Galli, Vice President
Oppenheimer Management Corporation
By: /s/ ROBERT G. GALLI
--------------------------------
Robert G. Galli, Executive Vice
President
The Life Insurance Company of Virginia
By: /s/ WILLIAM D. BALDWIN
----------------------------------
William D. Baldwin, Senior Vice
President
103
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104
EXHIBIT (8) (e)
Participation Agreement among The Life Insurance Company
of Virginia, Variable Insurance Products Fund II and
Fidelity Distributors Corporation
105
<PAGE>
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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<PAGE>
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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<PAGE>
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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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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(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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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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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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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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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
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124
EXHIBIT (8) (F)
Participation Agreement
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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
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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
April 23, 1998
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, VA 23230
Gentlemen:
With reference to Post-Effective Amendment No. 9 to Form N-4 (File Number
33-76334) filed by The Life Insurance Company of Virginia and Life of Virginia
Separate Account 4 with the Securities and Exchange Commission covering flexible
premium variable deferred annuity 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 deferred annuity
policies by the Bureau of Insurance of the State Corporation Commission of
the Commonwealth of Virginia.
2. Life of Virginia Separate Account 4 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 deferred annuity policies, when issued as
contemplated by said Form N-4 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. 9 to the Registration Statement on Form N-4 (File
Number 33-76334) 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
Exhibit 10(b)
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
included herein and Life of Virginia Separate Account 4 included in the
Statement of Additional Information incorporated herein by reference
(post-effective amendment no. 9 to Form N-4 of registration no. 33-76334) 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
<PAGE>
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" and "Change
in Auditors" and to the use of our reports dated February 8, 1996, with respect
to the consolidated financial statements and the related financial statement
schedules of The Life Insurance Company of Virginia and subsidiaries and
Life of Virginia Separate Account 4, in the Post-Effective Amendment No. 9 to
the Registration Statement (Form N-4 No. 33-76334) and related Prospectus of
Life of Virginia Separate Account 4 for the registration of an indefinite
amount of securities.
ERNST & YOUNG LLP
Richmond, Virginia
April 27, 1998
