As Filed with the Securities and Exchange Commission on July 25, 1997
Registration No. 333- ______
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUST
REGISTERED ON FORM N-8B-2
LIFE OF VIRGINIA SEPARATE ACCOUNT II
(Exact name of trust)
THE LIFE INSURANCE COMPANY OF VIRGINIA
(Name of depositor)
6610 West Broad Street
Richmond, Virginia 23230
(Complete address of depositor's principal executive offices)
Name and complete address of Copy to:
agent for service:
J. Neil McMurdie, Esq. Stephen E. Roth, Esq.
The Life Insurance Company of Virginia Sutherland, Asbill & Brennan, L.L.P.
6610 West Broad Street 1275 Pennsylvania Avenue, N.W.
Richmond, Virginia 23230 Washington, DC 20004-2404
Approximate date of proposed public offering: As soon as practicable after the
effective date of this Registration Statement
Securities Being Offered: Flexible Premium Variable Life Insurance Policies
Pursuant to Rule 24f-2 of the Investment Company Act of 1940, the Registrant has
elected to register an indefinite amount of the securities being offered.
The Registrant hereby amends this Registration Statement on such dates as may be
necessary to delay its effective date until the Registrant shall file a further
amendment which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on such
date as the Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
THE LIFE INSURANCE COMPANY OF VIRGINIA
Cross Reference to Items Required by form N-8B-2
N-8B-2 ITEM CAPTION IN PROSPECTUS
- ----------- ---------------------
1 Cover Page
2 Cover Page
3 Not applicable
4 Sale of the Policies
5 Separate Account II
6 Separate Account II
7 Not applicable
8 Separate Account II
9 Litigation
10 Summary and Diagram of the Policy; Premiums; Allocation
Options; Death Benefits; Other Policy Benefits and Provisions;
Surrender Benefits; Loan Benefits; Separate Account II; Voting
of Fund Shares
11 Separate Account II; Allocation Options
12 Separate Account II; Allocation Options
13 Charges and Deductions
14 Premiums
15 Premiums; Allocation Options
16 Allocation Options
17 Premiums; Surrender Benefits; Loan Benefits; Requesting
Payments and Telephone Transactions
18 Separate Account II; Allocation Options; Other Policy Benefits
and Provisions
19 Reports to Policy Owners
20 Separate Account II
21 Loan Benefits
22 Not applicable
23 Life of Virginia
24 Not applicable
25 Life of Virginia
26 Charges and Deductions
27 Life of Virginia
28 Life of Virginia
29 Life of Virginia
30 Not applicable
31 Not applicable
32 Not applicable
33 Not applicable
34 Not applicable
35 Life of Virginia
36 Not applicable
<PAGE>
N-8B-2 ITEM CAPTION IN PROSPECTUS
- ----------- ---------------------
37 Not applicable
38 Sale of the Policies
39 Sale of the Policies
40 Not Applicable
41 Sale of the Policies
42 Not applicable
43 Not applicable
44 How Your Policy Account Values Vary
45 Not applicable
46 How Your Policy Account Values Vary
47 Allocation Options
48 Life of Virginia; Separate Account II; Allocation Options
49 Not applicable
50 Separate Account II; Allocation Options
51 Premiums; Allocation Options; Charges and Deductions; Surrender
Benefits
52 Separate Account II; Allocation Options; Other Policy Benefits
and Provisions
53 Tax Considerations
54 Not applicable
55 Hypothetical Illustrations
56 Not applicable
57 Not applicable
58 Not applicable
59 Financial Statements
<PAGE>
PART I
<PAGE>
PROSPECTUS DATED JULY 25, 1997
Flexible Premium Variable Life Insurance Policy
LIFE OF VIRGINIA SEPARATE ACCOUNT II
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, Virginia 23230
Telephone (804) 281-6000
This prospectus describes a flexible premium variable life insurance
policy offered by The Life Insurance Company of Virginia. The Policy is designed
to provide life insurance protection on the Insured named in the Policy and at
the same time provide flexibility to vary the amount and timing of premiums and
to change the amount of death benefit payable under the Policy. This flexibility
allows you to provide for changing insurance needs under a single insurance
policy.
You may allocate Net Premiums and Account Value to one or more
Investment Subdivisions of the Life of Virginia Separate Account II, within
certain limits. Each Investment Subdivision invests solely in a corresponding
portfolio of the available Funds. Currently, there are nine Funds available
under the Policy: the Janus Aspen Series, the Variable Insurance Products Fund,
the Variable Insurance Products Fund II, the Variable Insurance Products Fund
III, the GE Investments Funds, Inc., the Oppenheimer Variable Account Funds, the
Federated Insurance Series, The Alger American Fund, and the PBHG Insurance
Series Fund, Inc.
You can elect one of two Death Benefit Options under the Policy. Under
Option A, the Life Insurance Proceeds will equal the greater of (1) the
Specified Amount plus the Policy's Account Value, or (2) the Account Value
multiplied by the applicable corridor percentage. Under Option B, the Life
Insurance Proceeds will equal the greater of (1) the Specified Amount, or (2)
the Account Value multiplied by the applicable corridor percentage. Under both
options, the Specified Amount and Account Value are determined on the date of
the Insured's death. We guarantee that the Life Insurance Proceeds will never be
less than the Specified Amount so long as the Policy is in force.
The Policy provides for a Surrender Value. Because this value is based
on the performance of the Funds, to the extent of allocations to Separate
Account II, there is no guaranteed Surrender Value or guaranteed minimum
Surrender Value. On any given day, the Surrender Value could be more or less
than the premiums paid. If the Surrender Value is insufficient to cover the
charges due under the Policy, the Policy will lapse without value. However, the
Policy will not lapse during the Continuation Period, regardless of the
sufficiency of the Surrender Value, so long as the Net Total Premium is at least
equal to the Continuation Amount.
The Policy also provides for Policy loans and permits partial
surrenders within limits. In addition, you can elect dollar-cost averaging or
portfolio rebalancing programs.
<PAGE>
THIS PROSPECTUS SHOULD BE READ CAREFULLY AND RETAINED
FOR FUTURE REFERENCE. PROSPECTUSES FOR THE FUNDS MUST
ACCOMPANY THIS PROSPECTUS AND SHOULD BE READ IN
CONJUNCTION WITH THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
INTERESTS IN THE POLICIES AND FUNDS ARE NOT DEPOSITS WITH,
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY BANK
OR BANK AFFILIATE, AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION (FDIC), THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page Page
---- ----
<S> <C>
SUMMARY AND DIAGRAM OF HYPOTHETICAL ILLUSTRATIONS
THE POLICY REQUESTING PAYMENTS AND
Fund Charges TELEPHONE TRANSACTIONS
DEFINITIONS Requesting Payments
PREMIUMS Telephone Transactions
Applying for a Policy OTHER POLICY BENEFITS AND
Free Look Right to Cancel PROVISIONS
Premiums Exchange Privilege
Periodic Premium Plan Optional Payment Plans
Premium to Prevent Lapse Other Policy Provisions
Minimum Premium Payment Owner
Death Benefit Guarantee Beneficiary
Crediting Premium to the Policy Reinstatement
ALLOCATION OPTIONS Trustee
Net Premium Allocations Other Changes
Investment Subdivisions Reports
Transfers Change of Owner
Dollar-Cost Averaging Supplemental Benefits
Portfolio Rebalancing Using the Policy as Collateral
Powers of Attorney Reinsurance
CHARGES AND DEDUCTIONS LIFE OF VIRGINIA
Premium Charge The Life Insurance Company of
Mortality and Expense Risk Virginia
Charge State Regulation
Monthly Deduction Executive Officers and
Surrender Charge Directors
Cost of Insurance Separate Account II
Other Charges Changes to Separate Account II
Reduction of Charges for Group Sales Voting of Fund Shares
HOW YOUR ACCOUNT VALUE TAX CONSIDERATIONS
VARIES Tax Status of the Policy
Account Value Tax Treatment of Policy Proceeds
Surrender Value Tax Treatment of Policy Loans
Investment Subdivision Values and Other Distributions
DEATH BENEFITS Taxation of Life of Virginia
Amount of Death Benefit Payable Income Tax Withholding
Death Benefit Options Other Considerations
Changing the Death Benefit Option LEGAL DEVELOPMENTS -
Effect of Partial Surrenders on REGARDING EMPLOYMENT
Life Insurance Proceeds RELATED BENEFIT PLANS
Change in Existing Coverage ADDITIONAL INFORMATION
Changing the Beneficiary Sale of Policies
LOAN BENEFITS Other Information
Interest Litigation
Repayment of Policy Debt Legal Matters
Effect of Policy Loan Experts
SURRENDER BENEFITS Change in Auditors
Full Surrender Financial Statements
Partial Surrender
</TABLE>
<PAGE>
This prospectus does not constitute an offering in any jurisdiction in which
such offering may not be lawfully made. No person is authorized to make any
representations in connection with this offering other than those
representations contained in this prospectus and the Fund prospectuses and
Statements of Additional Information.
<PAGE>
SUMMARY AND DIAGRAM OF THE POLICY
The following summary of prospectus information and diagram of the
important features of the Policy should be read in conjunction with the more
detailed information appearing elsewhere in this prospectus. Unless otherwise
indicated, the description of the Policy in this prospectus assumes that the
Policy is in force and there is no Policy Debt. Definitions of certain terms
used in this prospectus may be found by referring to the DEFINITIONS section
immediately following the diagram.
Purpose of the Policy. The Policy is designed to provide insurance
benefits with a long-term investment element. The Policy should be considered in
conjunction with your other insurance. It may not be advantageous to replace
existing insurance with the Policy.
Comparison with Universal Life Insurance. The Policy is similar in many
ways to universal life insurance. As with universal life insurance: the Owner
pays premiums for insurance coverage on the Insured; the Policy provides for the
accumulation of Surrender Value that is payable if the Policy is surrendered
during the Insured's lifetime; and the Surrender Value may be substantially
lower than the premiums paid. However, the Policy differs from universal life
insurance in that the Surrender Value may decrease if the investment performance
of the Investment Subdivisions to which Account Value is allocated is
sufficiently adverse. If the Surrender Value becomes insufficient to cover
charges when due and the Continuation Period is not in effect, the Policy will
lapse without value after a grace period. See "Premium to Prevent Lapse."
Tax Considerations. We intend for the Policy to satisfy the definition
of a life insurance contract under section 7702 of the Internal Revenue Code of
1986, as amended (the "Code"). Under certain circumstances, a Policy could be
treated as a "modified endowment contract." We will monitor Policies and will
attempt to notify you on a timely basis if his or her Policy is in jeopardy of
becoming a modified endowment contract. For further discussion of the tax status
of a Policy and the tax consequences of being treated as a life insurance
contract or a modified endowment contract, see the "TAX CONSIDERATIONS" section
below.
Free Look Right to Cancel. For a limited time after the Policy is
issued, you have the right to cancel your Policy and receive the sum of all
charges deducted from premiums paid plus Net Premiums adjusted by investment
gains and losses or, if required by state law, a full refund of all premiums
paid. See "Free Look Right to Cancel" and "Net Premium Allocations."
Inquiries. If you have any questions, you may write or call our Home
Office at 6610 West Broad Street, Richmond, Virginia 23230, (804) 281-6000.
<PAGE>
DIAGRAM OF POLICY
- --------------------------------------------------------------------------------
PREMIUMS
- You select a premium payment plan. You are not required to pay premiums
according to the plan, but may vary the frequency and amount, within
limits, and can skip planned premiums. See "Periodic Premium Plan."
- Premium amounts depend on the Insured's Age, sex (where applicable), risk
class, Specified Amount selected, and any supplemental benefit riders. See
"Premiums."
- Unscheduled premium payments may be made, within limits. See "Premiums."
- Under certain circumstances, extra premiums may be required to prevent
lapse. See "Premium to Prevent Lapse."
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DEDUCTION FROM PREMIUMS
- Currently, a 3% premium charge (5% maximum) is deducted from each premium
before allocation to an Investment Subdivision resulting in a Net Premium.
A premium charge will not be assessed against the policy loan portion of a
premium received from the rollover of a life insurance policy. See "Premium
Charge."
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ALLOCATION OF NET PREMIUMS
- You direct the allocation of Net Premiums among up to seven of the
Investment Subdivisions of Separate Account II. For states that require the
refund of premiums during the free look period, we will allocate Net
Premiums to the Money Market Investment Subdivision for 15 days, then to
your designated Investment Subdivisions. See "Net Premium Allocations" for
rules and limits.
- The Investment Subdivisions invest in corresponding portfolios of the
following Funds:
<TABLE>
<CAPTION>
Janus Aspen Series GE Investments Funds, Inc. (Continued)
<S> <C>
Growth Portfolio Total Return Fund
Aggressive Growth Portfolio International Equity Fund
International Growth Portfolio Real Estate Securities Fund
Worldwide Growth Portfolio Global Income Fund
Balanced Portfolio Value Equity Fund
Flexible Income Portfolio Oppenheimer Variable Account Funds
Capital Appreciation Portfolio Oppenheimer Bond Fund
Variable Insurance Products Fund Oppenheimer Capital Appreciation Fund
Equity-Income Portfolio Oppenheimer Growth Fund
Overseas Portfolio Oppenheimer High Income Fund
Growth Portfolio Oppenheimer Multiple Strategies Fund
Variable Insurance Products Fund II Federated Insurance Series
Asset Manager Portfolio Federated American Leaders Fund II
Contrafund Portfolio Federated Utility Fund II
Variable Insurance Products Fund III Federated High Income Bond Fund II
Growth & Income Portfolio The Alger American Fund
Growth Opportunities Portfolio Alger American Growth Portfolio
GE Investments Funds, Inc. Alger American Small Capitalization Portfolio
S&P 500 Index Fund PBHG Insurance Series Fund, Inc.
Government Securities Fund PBHG Growth II Portfolio
Money Market Fund PBHG Large Cap Growth Portfolio
</TABLE>
See "Investment Subdivision Options."
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
DEDUCTIONS FROM ASSETS
- Management fees and other expenses are deducted from the assets of each
Fund. See "Fund Charges."
- A daily mortality and expense risk charge at a current effective annual
rate of 0.70% (maximum effective annual rate of 0.90%) is deducted from
assets in the Investment Subdivisions. See "Mortality and Expense Risk
Charge."
- A monthly deduction is made each month from the Account Value for (1) the
cost of insurance, (2) a monthly policy charge of $12 declining to $6 per
month after the first Policy Year (maximum of $12 per month), and (3)
supplemental benefit charges. The monthly deduction will also include the
increase charge for the first month following an increase in the Specified
Amount. See "Monthly Deduction."
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACCOUNT VALUE
- Account Value is the total amount under the Policy in each Investment
Subdivision and the General Account. See "Account Value" and "Investment
Subdivision Account Value."
- Account Value serves as the starting point for calculating certain values
under a Policy, such as the Surrender Value and the Life Insurance
Proceeds. Account Value varies from day to day to reflect investment
experience of the Investment Subdivisions, charges deducted and other
Policy transactions (such as Policy loans, transfers and partial
surrenders.) See "HOW YOUR ACCOUNT VALUE VARIES."
- Account Value can be transferred among the Investment Subdivisions. A $10
transfer processing fee applies to each transfer made after the first
transfer in a Policy Month. See "Transfers" for rules and limits. Policy
loans reduce the amount available for allocations and transfers.
- There is no minimum guaranteed Account Value. During the Continuation
Period, the Policy will lapse if the Surrender Value is insufficient to
cover the monthly deduction and the Net Total Premium is less than the
Continuation Amount. After the Continuation Period, the Policy will lapse
if the Surrender Value is insufficient to cover the monthly deduction. See
"Premium to Prevent Lapse."
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------- ----------------------------------------------------
CASH BENEFITS DEATH BENEFITS
<S> <C>
- Policy loans are available for amounts up to - The minimum Specified Amount available
90% of Account Value less any Surrender is $100,000.
Charges, less any Policy Debt. See - A death benefit is available under one
"LOAN BENEFITS" for discussion of interest of two options: Option A (greater of
on Policy loans and additional rules and Specified Amount plus Account Value,
limits. See also "TAX CONSIDERATIONS." or a specified percentage of Account
- Partial surrenders are available under the Value); or Option B (greater of
Policy. The minimum partial surrender amount Specified Amount, or a specified
is $500, and a fee equal to the lesser of $25 percentage of Account Value). See
or 2% of the amount of the partial surrender "DEATH BENEFITS."
will apply to each Partial Surrender. See - A death benefit is payable as a lump
"Partial Surrender" for rules and limits. sum or under a variety of payment
- The Policy can be surrendered at any time options.
for its Surrender Value (Account Value - The Specified Amount and the Death
minus Policy Debt and minus any applicable Benefit Option may be changed. See
surrender charge). A surrender charge will "Change in Existing Coverage" and
apply during the first 15 Policy Years. "Changing the Death Benefit Option"
See "Full Surrender" and "Surrender for rules and limits.
Charge." - During the Continuation Period, the
- A variety of payment options are available. death benefit guarantee keeps the
See "Requesting Payments." Policy in force regardless of the
sufficiency of Surrender Value so
long as Net Total Premium is at
least equal to the Continuation
Amount. See "Death Benefit
Guarantee."
- ----------------------------------------------------- ----------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Fund Charges. The fees and expenses for each of the Funds (as a
percentage of net assets) for the most recent fiscal year are set forth in the
following table. For more information on these fees and expenses, see the
prospectuses for the Funds which accompany this prospectus.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Management Other Expenses Total Annual
Fund Fees (after reimbursement) Expenses
<S> <C>
Janus Aspen Series:
Growth Portfolio 0.65% 0.04% 0.69%
Aggressive Growth Portfolio 0.72% 0.04% 0.76%
International Growth Portfolio 0.05% 1.21% 1.26%
Worldwide Growth Portfolio 0.66% 0.14% 0.80%
Balanced Portfolio 0.79% 0.15% 0.94%
Flexible Income Portfolio 0.65% 0.19% 0.84%
Capital Appreciation Portfolio * 0.75% 0.30% 1.05%
Variable Insurance Products Fund:
Equity-Income Portfolio 0.51% 0.07% 0.58%
Overseas Portfolio 0.76% 0.17% 0.93%
Growth Portfolio 0.61% 0.08% 0.69%
Variable Insurance Products Fund II:
Asset Manager Portfolio 0.64% 0.10% 0.74%
Contrafund Portfolio 0.61% 0.13% 0.74%
Variable Insurance Products Fund III:
Growth and Income Portfolio 0.50% 0.20% 0.70%
Growth Opportunities Portfolio 0.61% 0.16% 0.77%
GE Investments Funds, Inc.:
S&P 500 Index Fund 0.35% 0.13% 0.48%
Government Securities Fund 0.50% 0.17% 0.67%
Money Market Fund 0.10% 0.05% 0.15%
Total Return Fund 0.50% 0.10% 0.60%
International Equity Fund 1.00% 0.50% 1.50%
Real Estate Securities Fund 0.85% 0.22% 1.07%
Global Income Fund * 0.60% 0.30% 0.90%
Value Equity Fund * 0.65% 0.26% 0.91%
Oppenheimer Variable Account Funds:
Oppenheimer Bond Fund 0.74% 0.04% 0.78%
Oppenheimer Capital Appreciation Fund 0.72% 0.03% 0.75%
Oppenheimer Growth Fund 0.75% 0.04% 0.79%
Oppenheimer High Income Fund 0.75% 0.06% 0.81%
Oppenheimer Multiple Strategies Fund 0.73% 0.04% 0.77%
Federated Insurance Series:
Federated American Leaders Fund II 0.53% 0.32% 0.85%
Federated Utility Fund II 0.24% 0.61% 0.85%
Federated High Income Bond Fund II 0.01% 0.79% 0.80%
The Alger American Fund:
Alger American Growth Portfolio 0.75% 0.04% 0.79%
Alger American Small Capitalization Portfolio 0.85% 0.03% 0.88%
PBHG Insurance Series Fund, Inc.:
Growth II Portfolio * 0.85% 0.30% 1.15%
Large Cap Growth Portfolio * 0.72% 0.38% 1.10%
</TABLE>
*The Global Income Fund and Value Equity Fund of the GE Investments Funds, Inc.,
the Capital Appreciation Portfolio of the Janus Aspen Series, and the Growth II
Portfolio and Large Cap Growth Portfolio of the PBHG Insurance Series Fund, Inc.
had not yet commenced operations as of December 31, 1996. Therefore, the fees
and expenses for these portfolios are estimates.
<PAGE>
DEFINITIONS
Account Value - Account Value is the total amount under the Policy in each
Investment Subdivision and the General Account.
Age - The age on the Insured's birthday nearest the Policy Date or a Policy
Anniversary.
Attained Age - The Insured's Age on the Policy Date plus the number of full
years since the Policy Date.
Beneficiary - The person or entity designated by you to receive the death
benefit payable at the death of the Insured.
Continuation Amount - A cumulative amount set forth on the policy data pages for
each month of the Continuation Period representing the minimum Net Total Premium
required to keep the Policy in force during the Continuation Period.
Continuation Period - The period during which the Policy will not lapse if the
Net Total Premium is at least equal to the Continuation Amount for the number of
Policy Months that the Policy has been in force.
Fund - Any open-end management investment company, or unit investment trust, in
which Separate Account II invests.
General Account - Assets of Life of Virginia other than those allocated to
Separate Account II or any of our other separate accounts.
Home Office - Life of Virginia's offices at 6610 West Broad Street, Richmond,
Virginia 23230, 1-804-281-6000.
Insured - The person upon whose life the Policy is issued.
Investment Subdivision - A subdivision of Separate Account II, the assets of
which are invested exclusively in a corresponding Fund.
Life Insurance Proceeds - The amount payable upon the death of the Insured. The
Life Insurance Proceeds will be reduced by outstanding Policy Debt and past due
charges, if any, to determine the death benefit payable under the Policy.
Life of Virginia - The Life Insurance Company of Virginia. "We," "us," or "our"
refers to Life of Virginia.
Monthly Anniversary Day - The same day in each month as the Policy Date.
Net Premium - The portion of each premium paid allocated to one or more
Investment Subdivision, and used in determining the Account Value.
Net Premium Factor - The factor used in determining the Net Premium which
represents a deduction from each premium paid.
Net Total Premium - On any date, Net Total Premium equals the total of all
premiums paid to that date less (a) divided by (b), where:
(a) is any outstanding Policy Debt, plus the sum of any partial
surrenders to date; and (b) is the Net Premium Factor.
Optional Payment Plan - A plan under which Life Insurance Proceeds or Surrender
Value proceeds can be used to provide a series of periodic payments to you or a
Beneficiary.
Owner - The Owner of the Policy. "You" or "your" refers to the Owner.
Contingent Owners may also be named.
Planned Periodic Premium - A level premium amount scheduled for payment at fixed
intervals over a specified period of time.
Policy - The Policy with any attached application(s), and any riders and
endorsements.
Policy Date - The date as of which the Policy is issued and as of which it
becomes effective. Policy Years and Anniversaries are measured from the Policy
Date.
Policy Debt - The amount of outstanding loans plus accrued interest.
Policy Month - A one-month period beginning on a Monthly Anniversary Day and
ending on the day immediately preceding the next Monthly Anniversary Day.
Separate Account II - The segregated asset account of Life of Virginia to which
Net Premiums are allocated.
Specified Amount - An amount used in determining the insurance coverage on an
insured life.
Surrender Value - The amount payable to you upon surrender of the Policy.
Unit Value - Unit of measure used to calculate the Account Value for each
Investment Subdivision.
Valuation Day - For each Investment Subdivision, each day on which the New York
Stock Exchange is open for business except for days that the Investment
Subdivision's corresponding Fund does not value its shares.
Valuation Period - The period that starts at the close of regular trading on the
New York Stock Exchange on any Valuation Day and ends at the close of regular
trading on the next succeeding Valuation Day.
<PAGE>
PREMIUMS
Applying for a Policy. To purchase a Policy, you must complete an
application and submit it to us at our Home Office at 6610 West Broad Street,
Richmond, VA 23230. You also must pay an initial premium of a sufficient amount.
See "Premiums," below. Your initial premium can be submitted with your
application or at a later date. Coverage becomes effective as of the Policy
Date.
Generally, we will issue a Policy covering an Insured up to Age 85 if
evidence of insurability satisfies our underwriting rules. Required evidence of
insurability may include, among other things, a medical examination of the
Insured. We may, in our sole discretion, issue a Policy covering an Insured over
Age 85. We reserve the right not to accept an application for any lawful reason.
Free Look Right to Cancel. During your "free-look" period, you may
cancel your Policy and receive a refund of all charges deducted from premiums
paid, plus the Net Premiums allocated to Separate Account II adjusted for
investment gains and losses. Some states require the refund of all premiums
paid. Generally, the free look period expires 10 days after you receive your
Policy. Some states may require a longer period. If you decide to cancel the
Policy, you must return it by mail or other delivery to us or to our authorized
agent. Immediately after mailing or delivery, the Policy will be deemed void
from the beginning.
Premiums. The premium amounts sufficient to fund a Policy depend on a
number of factors, such as the Age, sex (where appropriate) and risk class of
the proposed Insured, the desired Specified Amount, any supplemental benefits,
and investment performance of the Investment Subdivisions. After the initial
premium is paid, unscheduled premium payments may be paid in any amount and at
any time. We reserve the right, however, to limit the number and amount of any
unscheduled premium payment. Additionally, total premiums paid may not exceed
guideline premium limitations for life insurance set forth in the Code. We
reserve the right to reject any premium, or portion thereof, that would result
in the Policy being disqualified as life insurance under the Code and will
refund any rejected premium along with any interest accrued thereon. In
addition, we will monitor Policies and will attempt to notify you on a timely
basis if your Policy is in jeopardy of becoming a modified endowment contract
under the Code. See "TAX CONSIDERATIONS."
<PAGE>
Periodic Premium Plan. When you apply for a Policy, you select a
periodic premium payment plan. You may choose to send premiums directly to us
either annually, semi-annually, or quarterly. You can also arrange for annual,
semi-annual, quarterly or monthly premium payments to be paid via automatic
deduction from your bank account or a similar account acceptable to us. You are
not required to pay premiums in accordance with this premium plan; rather, you
can pay more or less than planned or skip a planned premium payment entirely.
You can change the amount of planned premiums and payment arrangements, or
switch between frequencies, whenever you want by providing satisfactory written
or telephone instructions to our Home Office, which will be effective upon our
receipt of the instructions. Depending on the Account Value at the time of an
increase in the Specified Amount and the amount of the increase requested, a
change in your periodic premium payments may be advisable. See "Change in
Existing Coverage."
Premium to Prevent Lapse. Failure to make a planned premium payment
will not automatically cause a Policy to lapse. Generally, a Policy will lapse
if the Surrender Value is not sufficient to cover the monthly deduction when
due. However, a Policy will not lapse during the Continuation Period, regardless
of the sufficiency of the Surrender Value, so long as the Net Total Premium is
at least equal to the Continuation Amount. See "Monthly Deduction." If
additional premium is necessary to prevent a Policy from lapsing, we will mail
to you notice of the amount required to be paid to keep the Policy in force, and
you will have a 61-day grace period from the date we mail the notice to make the
required premium payment.
Your Policy will remain in effect during the grace period. If the
Insured should die during the grace period before the required premium is paid,
the death benefit will still be payable to the Beneficiary, although the amount
of the Life Insurance Proceeds will be reduced by the amount of premium that
would have been required to keep the Policy in force. See "DEATH BENEFITS --
Amount of Death Benefit Payable." If the required premium has not been paid
before the grace period ends, your Policy will lapse. It will have no value and
no benefits will be payable. But see "Death Benefit Guarantee" and
"Reinstatement" for a mention of your reinstatement rights.
A grace period also may begin if Policy Debt on any Monthly Anniversary
Day exceeds the Account Value less any applicable surrender charges. See "Effect
of Policy Loan" for details.
<PAGE>
Minimum Premium Payment. Generally, the minimum amount of premium we
will accept in connection with a periodic premium payment plan is $20 ($15 for
payments made via automatic deduction from your bank or similar account).
Notwithstanding payment of this minimum amount, a Policy may lapse. See "Premium
to Prevent Lapse." For purposes of the minimum premium payment requirements, any
payment is deemed a planned periodic premium if it is received within 30 days
(before or after) of the scheduled date for a planned periodic premium payment
and the percentage difference between the planned amount and the actual payment
amount is not more than 10%. All other premium payments will be deemed
unscheduled premium payments.
Death Benefit Guarantee. On any Monthly Anniversary Day during the
Continuation Period (the first 10 Policy Years) so long as the Net Total Premium
is at least equal to the Continuation Amount for your Policy, the Policy will
remain in force, regardless of the sufficiency of Surrender Value to cover the
monthly deduction. At the end of the Continuation Period, you may, however, have
to make an additional premium payment to keep the Policy in force. See "Premium
to Prevent Lapse."
An increase in Specified Amount will increase the Continuation Amounts.
Any termination and subsequent reinstatement of the Policy will reduce the
Continuation Amounts. Notwithstanding termination and reinstatement, the
Continuation Period will be as though the Policy had been in effect continuously
from its original Policy Date. See "Reinstatement."
Crediting Premium to the Policy. Your initial premium payment will be
credited to the Policy on the Policy Date. Any subsequent premium payment (see
"Net Premium Allocations," below) will be credited to the Policy on the
Valuation Day it is received at our Home Office.
ALLOCATION OPTIONS
Net Premium Allocations. When you apply for a Policy, you specify the
percentage of Net Premium to be allocated to each Investment Subdivision. You
may not allocate your Net Premiums and Account Value to more than seven
Investment Subdivisions at any given time. You can change the allocation
percentages at any time by sending satisfactory written instructions to our Home
Office. The change will apply to all premiums received with or after we receive
your instructions. Net Premium allocations must be in percentages totaling 100%,
and each allocation percentage must be a whole number of at least 1%.
<PAGE>
In general, during the free look period Net Premiums will be allocated
to the Investment Subdivisions based on the Net Premium allocation percentages
specified in the application. However, for states requiring the refund of
premiums during the free look period, all Net Premiums will be allocated to the
Investment Subdivision investing in the Money Market Fund of GE Investments
Funds. Fifteen days following this allocation, the Account Value is transferred
to the Investment Subdivisions based on the Net Premium allocation percentages
selected by you. See "How Your Policy Account Values Vary."
Investment Subdivisions. Separate Account II currently invests in nine
series-type mutual funds. Each of the Funds currently available under the Policy
is registered with the Securities and Exchange Commission ("SEC") as a
diversified open-end management investment company under the Investment Company
Act of 1940, as amended (the "1940 Act"). There are currently thirty-four
Investment Subdivisions available under the Policy. Each Investment Subdivision
invests exclusively in a designated investment portfolio of one of the Funds.
The assets of each portfolio are separate from other portfolios of that Fund and
each portfolio has separate investment objectives and policies. As a result,
each portfolio operates as a separate investment portfolio and the investment
performance of one portfolio has no effect on the investment of any other
portfolio. Some of the Funds may, in the future, activate additional portfolios.
Before choosing the Investment Subdivisions to allocate your Net
Premium and Account Value, carefully read the individual prospectuses for the
Funds, along with this prospectus. The investment objectives of each of the
portfolios are summarized below. There is no assurance that these objectives
will be met.
Janus Aspen Series. The Janus Aspen Series has seven portfolios that
are currently available under the Policy: Growth Portfolio, Aggressive Growth
Portfolio, Worldwide Growth Portfolio, International Growth PortfolioJanus Aspen
Series. The Janus Aspen Series has seven portfolios that are currently available
under the Policy: Growth Portfolio, Aggressive Growth Portfolio, Worldwide
Growth Portfolio, International Growth Portfolio, Balanced Portfolio, Flexible
Income Portfolio and Capital Appreciation Portfolio.
Growth Portfolio has the investment objective of long-term capital
growth in a manner consistent with the preservation of capital. The Growth
Portfolio is a diversified portfolio that pursues its objectives by investing in
common stocks of companies of any size. Generally, this Portfolio emphasizes
larger, more established issuers.
Aggressive Growth Portfolio has the investment objective of long-term
growth of capital. The Aggressive Growth Portfolio is a non-diversified
portfolio that will seek to achieve its objective by normally investing at least
50% of its equity assets in securities issued by medium-sized companies.
<PAGE>
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 long-term growth of
capital, consistent with the preservation of capital and balanced by current
income. The Portfolio normally invests 40-60% of its assets in securities
selected primarily for their growth potential and 40-60% of its assets in
securities selected primarily for their income potential.
Flexible Income Portfolio has the investment objective of seeking to
obtain maximum total return, consistent with preservation of capital. Total
return is expected to result from a combination of income and capital
appreciation. The Portfolio pursues its objectives primarily by investing in any
type of income-producing securities. This Portfolio may have substantial
holdings of lower-rated debt securities or "junk" bonds. The risks of investing
in junk bonds are described in the prospectus for the Janus Aspen Series, which
should be read carefully before investing.
Capital Appreciation Portfolio is a nondiversified portfolio that has
the investment objective of seeking long-term growth of capital. It pursues its
objective by investing primarily in common stocks of issuers of any size.
Janus Capital Corporation serves as investment adviser to the
portfolios of Janus Aspen Series.
Variable Insurance Products Fund. Variable Insurance Products Fund has
three portfolios that are currently available under the Policy: VIP
Equity-Income Portfolio, VIP Growth Portfolio, and VIP Overseas
PortfolioVariable Insurance Products Fund. Variable Insurance Products Fund has
three portfolios that are currently available under the Policy: VIP
Equity-Income Portfolio, VIP Growth Portfolio, and VIP Overseas Portfolio.
VIP Equity-Income Portfolio seeks reasonable income by investing
primarily in income-producing equity securities. In choosing these securities,
the portfolio will also consider the potential for capital appreciation. The
portfolio's goal is to achieve a yield which exceeds the composite yield on the
securities comprising the Standard & Poor's Composite Index of 500 Stocks.
<PAGE>
VIP Growth Portfolio seeks to achieve capital appreciation. The
portfolio normally purchases common stocks, although its investments are not
restricted to any one type of security. Capital appreciation may also be found
in other types of securities, including bonds and preferred stocks.
VIP Overseas Portfolio seeks long-term growth of capital primarily
through investments in foreign securities. The portfolio provides a means for
investors to diversify their own portfolios by participating in companies and
economies outside of the United States.
Fidelity Management & Research Company serves as investment adviser to
the Variable Insurance Products Fund.
Variable Insurance Products Fund II. Variable Insurance Products Fund
II has two portfolios that are currentlyVariable Insurance Products Fund II.
Variable Insurance Products Fund II has two portfolios that are currently
available under the Policy: VIP Asset Manager Portfolio and VIP Contrafund
Portfolio.
VIP Asset Manager Portfolio seeks high total return with reduced risk
over the long-term by allocating its assets among domestic and foreign stocks,
bonds and short-term fixed income instruments.
VIP Contrafund Portfolio seeks capital appreciation by investing mainly
in equity securities of companies believed to be undervalued or out-of favor.
Fidelity Management & Research Company serves as investment adviser to
the Variable Insurance Products Fund II.
Variable Insurance Products Fund III. Variable Insurance Products Fund
III has two portfolios that are currentlyVariable Insurance Products Fund III.
Variable Insurance Products Fund III has two portfolios that are currently
available under the Policy: VIP Growth & Income Portfolio and VIP Growth
Opportunities Portfolio.
VIP Growth & Income Portfolio seeks high total return through a
combination of current income and capital appreciation by investing mainly in
equity securities.
VIP Growth Opportunities Portfolio seeks capital growth by investing
primarily in common stock and securities convertible to common stock.
Fidelity Management & Research Company serves as investment adviser to
the Variable Insurance Products Fund III.
<PAGE>
GE Investments Funds, Inc. GE Investments Funds, Inc. ("GE Investments
Funds") has eight portfolios that are currently available under the Policy:
Money Market Fund, Government Securities Fund, S&P 500 Index Fund, Total Return
Fund, International Equity Fund, Real Estate Securities Fund, Global Income Fund
and Value Equity Fund are available to Owners through Separate Account II.
Money Market Fund has the investment objective of providing the highest
level of current income as is consistent with high liquidity and safety of
principal by investing in high quality money market securities.
Government Securities Fund has the investment objective of seeking high
current income and protection of capital through investments in intermediate and
long-term debt instruments issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
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.
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.
- ---------------------
(1) "Standard & Poor's," "S&P," and "S&P 500" are trademarks of
McGraw-Hill Companies, Inc. and have been licensed for use by GE Investment
Management Incorporated. The S&P 500 Index Fund is not sponsored, endorsed, sold
or promoted by Standard & Poor's, and Standard & Poor's makes no representation
or warranty, express or implied, regarding the advisability of investing in this
Fund or the Policy.
<PAGE>
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.
GE Investment Management, Inc. serves as investment adviser to GE
Investments Funds.
Oppenheimer Variable Account Funds. Oppenheimer Variable Account Funds
has five portfolios that are currently available under the Policy: Oppenheimer
High Income Fund, Oppenheimer Bond Fund, Oppenheimer Capital
AppreciatOppenheimer Variable Account Funds. Oppenheimer Variable Account Funds
has five portfolios that are currently available under the Policy: Oppenheimer
High Income Fund, Oppenheimer Bond Fund, Oppenheimer Capital Appreciation Fund,
Oppenheimer Growth Fund, and Oppenheimer Multiple Strategies Fund.
Oppenheimer High Income Fund seeks a high level of current income from
investment in high yield fixed income securities, including unrated securities
or high risk securities in the lower rating categories. These securities may be
considered to be speculative. This fund may have substantial holdings of
lower-rated debt securities or "junk" bonds. The risks of investing in junk
bonds are described in the prospectus for the Oppenheimer Variable Account
Funds, which should be read carefully before investing.
Oppenheimer Bond Fund primarily seeks a high level of current income
from investment in high yield fixed income securities rated "Baa" or better by
Moody's or "BBB" or better by Standard & Poor's. Secondarily, it seeks capital
growth when consistent with its primary objective.
Oppenheimer Capital Appreciation Fund seeks to achieve capital
appreciation by investing in `growth-type' companies.
Oppenheimer Growth Fund seeks to achieve capital appreciation by
investing in securities of well-known established companies.
Oppenheimer Multiple Strategies Fund seeks a total investment return
(which includes current income and capital appreciation in the value of its
shares) from investments in common stocks and other equity securities, bonds and
other debt securities, and "money market" securities.
Oppenheimer Funds, Inc. serves as investment adviser to Oppenheimer
Variable Account Funds.
<PAGE>
Federated Insurance Series. The Federated Insurance Series has three
portfolios that are currently available under the Policy: Federated Utility Fund
II, Federated High Income Bond Fund II and Federated American Leaders FFederated
Insurance Series. The Federated Insurance Series has three portfolios that are
currently available under the Policy: Federated Utility Fund II, Federated High
Income Bond Fund II and Federated American Leaders Fund II.
Federated Utility Fund II has the investment objective of high current
income and moderate capital appreciation. The Federated Utility Fund II will
seek to achieve its objective by investing primarily in equity and debt
securities of utility companies.
Federated High Income Bond Fund II has the investment objective of high
current income. The Federated High Income Bond Fund II will seek to achieve its
investment objective by investing primarily in a diversified portfolio of
professionally managed fixed-income securities. THE FIXED-INCOME SECURITIES IN
WHICH THE FUND INTENDS TO INVEST ARE LOWER-RATED CORPORATE DEBT OBLIGATIONS,
COMMONLY REFERRED TO AS "JUNK" BONDS. The risks of these securities are
described in the prospectus for the Federated Insurance Series, which should be
read carefully before investing.
Federated American Leaders Fund II has the primary investment objective
of long-term growth of capital, and a secondary objective of providing income.
The Federated American Leaders Fund II will seek to achieve its objective by
investing, under normal circumstances, at least 65% of its total assets in
common stock of "blue chip" companies.
Federated Advisers serves as investment adviser to the Federated
Insurance Series.
The Alger American Fund. The Alger American Fund has two portfolios
that are currently available under the PolicThe Alger American Fund. The Alger
American Fund has two portfolios that are currently available under the Policy:
Alger American Small Capitalization Portfolio and Alger American Growth
Portfolio.
Alger American Small Capitalization Portfolio seeks long-term capital
appreciation. Except during temporary defensive periods, the portfolio invests
at least 65% of its total assets in equity securities of companies that, at the
time of purchase of the securities, have total market capitalization within the
range of companies included in the Russell 2000 Growth Index or the S&P Small
Cap 600 Index, updated quarterly. Both indexes are broad indexes of small
capitalization stocks. The portfolio may invest up to 35% of its total assets in
equity securities of companies that, at the time of purchase, have total market
capitalization outside this combined range and in excess of that amount (up to
100% of its assets) during temporary defensive periods.
Alger American Growth Portfolio has the investment objective of
long-term capital appreciation. Except during temporary defensive periods, this
portfolio invests at least 65% of its total assets in equity securities of
companies that, at the time of purchase, have a total market capitalization of
$1 billion or greater.
<PAGE>
Fred Alger Management, Inc. serves as the investment manager to The
Alger American Fund.
PBHG Insurance Series Fund, Inc. PBHG Insurance Series Fund, Inc.
("PBHG Insurance Series Fund") has two portfolios that are currently available
under the Policy: Growth II Portfolio and Large Cap Growth Portfolio.
Growth II Portfolio seeks long-term capital appreciation by investing
in equity securities of small and medium sized companies (market capitalization
of up to $4 billion) which have an outlook for strong earnings growth and
significant capital appreciation.
Large Cap Growth Portfolio seeks long-term capital appreciation by
investing primarily in equity securities of larger capitalization companies
(market capitalization of greater than $1 billion) which have an outlook for
strong growth in earnings and potential for capital appreciation.
Pilgrim Baxter & Associates serves as investment adviser to the PBHG
Insurance Series Fund.
TRANSFERS. You may transfer Account Value among the Investment
Subdivisions at any time after the end of the free look period. Transfer
requests may be made in writing or in any other form acceptable to us. A
transfer will take effect as of the end of the Valuation Period during which we
receive your request at our Home Office.
We may defer transfers under the same conditions that we may delay
paying proceeds. See "Requesting Payments." Currently, there is no limit on the
number of transfers among the Investment Subdivisions. However, there is a $10
transfer charge for each transfer after the first transfer in any calendar
month. The transfer charge is taken from the amount transferred. For purposes of
assessing this fee, each transfer request is considered one transfer, regardless
of the number of Investment Subdivisions affected by the transfer. We reserve
the right to modify, restrict, suspend or eliminate the transfer privileges,
including telephone transfer privileges, at any time, for any reason.
DOLLAR-COST AVERAGING. The dollar-cost averaging program permits you to
systematically transfer on a monthly or quarterly basis a set dollar amount from
the Investment Subdivision investing in the Money Market Fund of GE Investments
Funds to any combination of other Investment Subdivisions. The dollar-cost
averaging method of investment is designed to reduce the risk of making
purchases only when the price of units is high, but you should carefully
consider your financial ability to continue the program over a long enough
period of time to purchase units when their value is low as well as when it is
high. Dollar-cost averaging does not assure a profit or protect against a loss.
<PAGE>
You may participate in the dollar-cost averaging program by selecting
the program on the application, completing a dollar-cost averaging agreement, or
calling our Home office. To use the dollar-cost averaging program, you must
transfer at least $100 from the Money Market Investment Subdivision with each
transfer. Any amount allocated or transferred must also conform to the minimum
percentage requirements for Net Premium allocations. See "Net Premium
Allocations." Once elected, dollar-cost averaging remains in effect from the
date we receive your request until the value of the Investment Subdivision from
which transfers are being made is depleted, or until you cancel the program by
written request or by telephone if we have your telephone authorization on file.
There is no additional charge for dollar-cost averaging. A transfer under this
program will count toward the free transfer each calendar month as well as the
twelve maximum transfers permitted each calendar year. We reserve the right to
discontinue offering or to modify the dollar-cost averaging program at any time
and for any reason.
Portfolio Rebalancing. Once your money has been allocated among the
Investment Subdivisions, the performance of each Investment Subdivision may
cause your allocation to shift. You may instruct us to automatically rebalance
(on a quarterly, semi-annual or annual basis) your Account Value to return to
the percentages specified in your allocation instructions. You may elect to
participate in the portfolio rebalancing program at any time by completing the
portfolio rebalancing agreement. Your percentage allocations must be in whole
percentages and be at least 1% per allocation. Subsequent changes to your
percentage allocations may be made at any time by written or telephone
instructions to the Home Office. Once elected, portfolio rebalancing remains in
effect from the date we receive your written request until you instruct us to
discontinue portfolio rebalancing. There is no additional charge for using
portfolio rebalancing, and a portfolio rebalancing transfer is not considered a
transfer for purposes of assessing a transfer charge or calculating the maximum
number of transfers permitted in a calendar year. We reserve the right to
discontinue offering the portfolio rebalancing program at any time and for any
reason. Portfolio rebalancing does not guarantee a profit or protect against
loss.
Powers of Attorney. As a general rule and as a convenience to you, we
allow the use of powers of attorney whereby you give a third party the right to
effect transfers on your behalf. However, when the same third party possesses
powers of attorney executed by many Owners, the result can be simultaneous
transfers involving large amounts of Account Value. Such transfers can disrupt
the orderly management of the Funds underlying the Policy, can result in higher
costs to Owners, and are generally not compatible with the long-range goals of
Owners. We believe that such simultaneous transfers effected by such third
parties are not in the best interests of all shareholders of the Funds
underlying the Policies, and this position is shared by the managements of those
Funds.
<PAGE>
Therefore, to the extent necessary to reduce the adverse effects of
simultaneous transfers made by third parties holding multiple powers of
attorney, we may not honor such powers of attorney and have instituted or will
institute procedures to assure that the transfer requests that we receive have,
in fact, been made by the Owners in whose names they are submitted. These
procedures will not, however, prevent Owners from making their own transfer
requests.
CHARGES AND DEDUCTIONS
The following charges are deducted. Certain of the charges depend on a
number of variables, and are illustrated in the hypothetical illustrations
below. The charges are for the services and benefits provided, costs and
expenses incurred, and risks assumed by us under or in connection with the
Policies. The services and benefits provided include: the cash and death
benefits provided by the Policy; investment options, including Net Premium
allocations, dollar-cost averaging and portfolio rebalancing programs;
administration of various elective options under the Policy; and the
distribution of various reports to Owners. The costs and expenses incurred
include: those associated with underwriting applications, increases in Specified
Amount, and riders; various overhead and other expenses associated with
providing the services and benefits provided by the Policy; sales and marketing
expenses; and other costs of doing business, such as federal, state and local
premium and other taxes and fees. The risks assumed include the risks that
insureds may live for a shorter period of time than estimated, resulting in the
payment of greater death benefits than expected, and that the costs of providing
the services and benefits under the Policies will exceed the charges deducted.
PREMIUM CHARGE. We currently deduct a 3% charge (5% maximum) from each
premium before allocating the resulting Net Premium to the Investment
Subdivisions. A premium charge will not be assessed against the policy loan
portion of a premium received from the rollover of a life insurance policy.
MORTALITY AND EXPENSE RISK CHARGE. We currently deduct a daily charge
from assets in the Investment Subdivisions attributable to the Policies at an
effective annual rate of 0.70% of net assets. This charge is guaranteed not to
exceed an effective annual rate of 0.90% of net assets. This charge is factored
into the net investment factor. See "How Your Account Values Vary."
MONTHLY DEDUCTION. We make a monthly deduction on the Policy Date and
each Monthly Anniversary Day from Account Value. The monthly deduction for each
Policy consists of (1) the cost of insurance charge discussed below, (2) a
current monthly Policy charge of $12 declining to $6 per month after the first
Policy Year (it cannot exceed $12 per month), and (3) any charges for additional
benefits added by riders to the Policy (see "Supplemental Benefits"). If an
increase in Specified Amount becomes effective, there will be a one-time charge
(per increase) of $1.50 per $1,000 of increase included in the monthly deduction
(it can not exceed $300 per increase). See "Change in Existing Coverage."
<PAGE>
SURRENDER CHARGE. If the Policy is fully surrendered during the
surrender charge period, we will deduct a surrender charge. The surrender charge
will depend on the Insured's Age at issue, sex (where appropriate), and risk
class. The surrender charge is calculated based on an amount per $1,000 of the
lowest Specified Amount in effect prior to the surrender. The surrender charge
remains level for the first five Policy Years and then decreases each Policy
month to zero over the next 10 Policy Years or at Age 95, whichever is earlier.
The surrender charge will be deducted before the Surrender Value is paid.
Decreases in the Specified Amount to less than the lowest Specified
Amount that had previously been in effect (other than as a result of partial
surrenders or changes in Death Benefit Options), will also incur a surrender
charge. The amount of surrender charge will be the charge for a full surrender
multiplied by the ratio of (a) to (b), where:
(a) is the lowest Specified Amount that was in effect prior to the
current decrease, minus the Specified Amount after the current
decrease; and
(b) is the lowest Specified Amount that was in effect prior to the
current decrease.
COST OF INSURANCE. The cost of insurance is a significant charge under
your Policy because it is the primary charge for the death benefit provided by
your Policy. The cost of insurance charge depends on a number of variables that
cause the charge to vary from Policy to Policy and from Monthly Anniversary Day
to Monthly Anniversary Day. It is calculated separately for the Specified Amount
at issue and for any increase in the Specified Amount. The cost of insurance is
calculated on each Monthly Anniversary Day and is based on the net amount at
risk. The net amount at risk is calculated by dividing the Life Insurance
Proceeds by 1.0032737, and then subtracting the Account Value. To determine the
cost of insurance for a particular Policy Month, we divide the net amount at
risk by 1000 and multiply that result by the applicable cost of insurance rate.
If Option B is in effect, and the Specified Amount has increased, the Account
Value is first considered part of the initial Specified Amount. If the Account
Value is more than the initial Specified Amount, it will be considered part of
the increased Specified Amounts resulting from increases in the order of the
increases.
The monthly cost of insurance rate is based on the Insured's sex (where
appropriate), Age at issue, policy duration and risk class. The risk class (and,
therefore, the cost of insurance rates) will be determined separately for the
initial Specified Amount and for any increase in the Specified Amount requiring
evidence of insurability. The maximum cost of insurance rates allowable under
the Policies are based on the Commissioners' 1980 Standard Ordinary Mortality
Table. The rates we currently charge are, at most ages, lower than the maximum
permitted under the Policies and are determined by us according to our
expectation of future experience with respect to mortality, expenses,
persistency, and taxes. The rates may be changed from time to time at our sole
discretion, but will never be more than the rates shown in the Table of
Guaranteed Maximum Insurance Rates contained in the Policies. A change in rates
will apply to all persons of the same Age, sex (where appropriate), and risk
class and whose Policies have been in effect for the same length of time.
<PAGE>
The monthly cost of insurance rate generally increases as the Insured's
Age increases. Therefore, the older the Insured, the higher the investment
experience necessary to achieve the same impact on Life Insurance Proceeds and
Account Value. See "Hypothetical Illustrations" for examples showing the effects
of the cost of insurance charge.
OTHER CHARGES. If you request a projection of illustrative future life
insurance under the Policy and Policy values, we reserve the right to charge a
maximum fee of $25 for the cost of preparing the projection. See also
"Transfers," for a discussion of the transfer charge, and "Partial Surrenders,"
for a discussion of the partial surrender processing fee.
REDUCTION OF CHARGES FOR GROUP SALES. Charges and/or deductions may be
reduced for sales of the Policies to a trustee, employer or similar entity
representing a group or to members of the group where such sales result in
savings of sales or administrative expenses. The entitlement to such a reduction
in charges or deductions will be determined by us based on the following
factors:
1. The size of the group. Generally, the sales expenses for each
individual owner for a larger group are less than for a smaller group
because more Policies can be implemented with fewer sales contacts and
less administrative cost.
2. The total amount of premium payments to be received from a group. Per
Policy sales and other expenses are generally proportionately less on
larger premium payments than on smaller ones.
3. The purpose for which the policies are purchased. Certain types of
plans are more likely to be stable than others. Such stability reduces
the number of sales contacts and administrative and other services
required, reduces sales administration and results in fewer Policy
terminations. As a result, our sales and other expenses are reduced.
4. The nature of the group for which the Policies are being purchased.
Certain types of employee and professional groups are more likely to
continue Policy participation for longer periods than are other groups
with more mobile membership. If fewer Policies are terminated in a
given group, our sales and other expenses are reduced.
5. There may be other circumstances of which we are not presently aware,
which could result in reduced sales expenses.
<PAGE>
If, after consideration of the foregoing factors, we determine that a
group purchase would result in reduced sales expenses, such a group may be
entitled to a reduction in charges and/or deductions. Reductions in these
charges and/or deductions will not be unfairly discriminatory against any
person, including the affected owners and all other owners of Policies funded by
Separate Account II.
HOW YOUR ACCOUNT VALUE VARIES
ACCOUNT VALUE. The Account Value serves as a starting point for
calculating certain values under a Policy. It is the sum of the Account Value in
each Investment Subdivision and the Account Value held to secure Policy Debt.
See "Loan Benefits." The Account Value is determined first on the Policy Date
and thereafter on each Valuation Day. The Account Value will vary to reflect the
performance of the Investment Subdivisions to which amounts have been allocated
and Policy Debt, charges, transfers, partial surrenders, Policy loan interest,
and Policy loan repayments. It may be more or less than premiums paid.
SURRENDER VALUE. The Surrender Value on a Valuation Day is the Account
Value reduced by both any surrender charge that would be deducted if the Policy
were surrendered that day and any Policy Debt.
INVESTMENT SUBDIVISION VALUES. On any Valuation Day, the value of an
Investment Subdivision is equal to the number of Investment Subdivision units
credited to the Policy multiplied by the Unit Value for that day. When
allocations are made to an Investment Subdivision, either by Net Premium
allocation, transfer of Account Value, transfer of loan interest from the
General Account, or repayment of a Policy loan, your Policy is credited with
units in that Investment Subdivision. The number of units is determined by
dividing the amount allocated, transferred or repaid to the Investment
Subdivision by the Investment Subdivision's Unit Value for the Valuation Day
when the allocation, transfer or repayment is effected. The number of units
credited to a Policy will decrease whenever the allocated portion of the monthly
deduction is taken from the Investment Subdivision, a Policy loan is taken from
the Investment Subdivision, an amount is transferred from the Investment
Subdivision, a partial surrender is taken from the Investment Subdivision, or
the Policy is surrendered.
Unit Values. An Investment Subdivision's Unit Value varies to reflect
the investment experience of the underlying Fund, and may increase or decrease
from one Valuation Day to the next. The unit value for each Investment
Subdivision was arbitrarily set at $10 when the Investment Subdivision was
established. For each Valuation Period after the date of establishment, the Unit
Value is determined by multiplying the value of a unit for an Investment
Subdivision for the prior Valuation Period by the net investment factor for the
Investment Subdivision for the current Valuation Period.
<PAGE>
Net Investment Factor. The net investment factor is an index used to
measure the investment performance of an Investment Subdivision from one
Valuation Period to the next. The net investment factor reflects the change in
the net asset value of each share of the Fund held in the Investment Subdivision
from one Valuation Period to the next, adjusted for the daily deduction of the
mortality and expense risk charge from assets in the Investment Subdivision. If
any "ex-dividend" date occurs during the Valuation Period, the per share amount
of any dividend or capital gain distribution is taken into account. Also, if any
taxes need to be reserved, a per share charge or credit for any taxes reserved
for, which is determined by us to have resulted from the operations of the
Investment Subdivision, is taken into account.
DEATH BENEFITS
As long as the Policy remains in force, we will pay the death benefit
upon receipt at our Home Office of satisfactory proof of the Insured's death.
See "Requesting Payments." The death benefit will be paid to the Beneficiary.
AMOUNT OF DEATH BENEFIT PAYABLE. The amount of death benefit payable
equals the Life Insurance Proceeds determined under the Death Benefit Option in
effect on the date of the Insured's death, plus any supplemental death benefits
provided by rider, minus any Policy Debt on that date and, if the date of death
occurred during a grace period, minus the premium that would have been required
to keep the Policy in force. Under certain circumstances, the amount of the
death benefit payable may be further adjusted. See "OTHER POLICY PROVISIONS --
Incontestability" and "Misstatement of Age or Sex."
DEATH BENEFIT OPTIONS. Under Option A, the Life Insurance Proceeds
equals the greater of (1) the Specified Amount plus the Account Value, or (2)
the applicable corridor percentage of the Account Value as determined using the
table of percentages shown below. Under Option B, the Life Insurance Proceeds
equals the greater of (1) the Specified Amount, or (2) the applicable corridor
percentage of the Account Value as determined using the table of percentages
shown below. Under both options, the Specified Amount and Account Value are
determined on the date of the Insured's death. The percentage is 250% to Age 40
and declines thereafter as the Insured's Attained Age increases. If the table of
percentages currently in effect becomes inconsistent with any federal income tax
laws and/or regulations, we reserve the right to change the table.
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Table of Percentages of Account Value
- ----------------------------------------------------------------------------------------------------------------
Corridor Corridor Corridor
Attained Age Percentage Attained Age Percentage Attained Age Percentage
<S> <C>
0-40 250% 54 157% 68 117%
41 243% 55 150% 69 116%
42 236% 56 146% 70 115%
43 229% 57 142% 71 113%
44 222% 58 138% 72 111%
45 215% 59 134% 73 109%
46 209% 60 130% 74 107%
47 203% 61 128% 75 - 90 105%
48 197% 62 126% 91 104%
49 191% 63 124% 92 103%
50 185% 64 122% 93 102%
51 178% 65 120% 94+ 101%
52 171% 66 119%
53 164% 67 118%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Under Option A, the Life Insurance Proceeds will vary directly with the
investment performance of the Account Value. Under Option B, the Life Insurance
Proceeds ordinarily will not change until the applicable percentage amount of
the Account Value exceeds the Specified Amount or you change the Specified
Amount. To see how and when investment performance may begin to affect the Life
Insurance Proceeds, please see the hypothetical illustrations below.
CHANGING THE DEATH BENEFIT OPTION. You select the Death Benefit Option
when you apply for the Policy. You may change the Death Benefit Option on your
Policy subject to the following rules. Each change must be submitted by written
request received by our Home Office. The effective date of the change will be
the Monthly Anniversary Day after we receive the request for the change. We will
send you revised Policy schedule pages reflecting the new Death Benefit Option
and the effective date of the change. If you request a change from Option A to
Option B, the Specified Amount will be increased by the Account Value on the
effective date of the increase. If you request a change from Option B to Option
A, the Specified Amount after the change will be decreased by the Account Value
on the effective date of the change. A change in Death Benefit Option will
affect the cost of insurance charges.
EFFECT OF PARTIAL SURRENDERS ON LIFE INSURANCE PROCEEDS. A partial
surrender will reduce both the Account Value and the Life Insurance Proceeds by
the amount of the partial surrender. We will not permit partial surrenders
during the first Policy Year if Death Benefit Option B is in effect.
CHANGE IN EXISTING COVERAGE. After a Policy has been in effect for one
year, you may increase or decrease the Specified Amount. To make a change, you
must send a written request and the Policy to our Home Office. Any change in the
Specified Amount may affect the cost of insurance rate and the net amount at
risk, both of which will affect your cost of insurance. See "Monthly Deduction"
and Cost of Insurance." In addition, any change in the Specified Amount affects
the maximum premium limitation. If decreases in the Specified Amount cause the
premiums to exceed new lower limitations required by federal tax law, the excess
will be withdrawn from Account Value and refunded so that the Policy will
continue to meet these requirements. The Account Value so withdrawn and refunded
will be withdrawn from each Investment Subdivision in the same proportion that
the Account Value in that Investment Subdivision bears to the total Account
Value in all Investment Subdivisions under the Policy at the time of the
withdrawal (i.e. on a pro-rata basis).
<PAGE>
Any decrease in the Specified Amount will become effective on the
Monthly Anniversary Day after the date the request is received. The decrease
will first apply to coverage provided by the most recent increase, then to the
next most recent increases successively, then to the coverage under the original
application. During the Continuation Period, we will not allow a decrease unless
the Account Value less any Policy Debt is greater than the surrender charge. The
Specified Amount following a decrease can never be less than the minimum
Specified Amount for the Policy when it was issued. A decrease may cause a
surrender charge to be assessed and may require a payment to you of excess
Account Value.
To apply for an increase, you must complete a supplemental application
and submit evidence of insurability satisfactory to us. Any approved increase
will become effective on the date shown in the supplemental policy data page. An
increase will not become effective, however, if the Policy's Surrender Value is
insufficient to cover the monthly deduction for the Policy Month following the
increase.
If there is an increase in Specified Amount, there will be a one-time
charge (per increase) of $1.50 per $1,000 of increase to cover underwriting and
administrative costs associated with the increase. This charge will be included
in the monthly deduction for the month the decrease becomes effective. This
charge will never exceed $300 per increase.
A change in the existing insurance coverage may have federal tax
consequences. See "TAX CONSIDERATIONS."
CHANGING THE BENEFICIARY. If the right is reserved, the Beneficiary may
also be changed during the Insured's life. To make a change, send a written
request to our Home Office. The request and the change must be in a form
satisfactory to us and must actually be received by us. The change will take
effect as of the date you signed the request.
LOAN BENEFITS
You may borrow up to 90% of the difference between (1) your Account
Value at the end of the Valuation Period during which the loan request is
received, and (2) any surrender charges on the date of the loan. See "Requesting
Payments." Requests for Policy loans may be made in writing or by telephone. See
"REQUESTING PAYMENTS AND TELEPHONE TRANSACTIONS." Outstanding Policy Debt,
including accrued interest, reduces the amount available for new loans.
<PAGE>
When a loan is made, an amount equal to the loan proceeds is
transferred from the Account Value in Separate Account II to our General Account
and is held as "collateral" for the loan. If you do not direct an allocation for
this transfer when requesting the loan we will make it on a pro-rata basis. When
a loan is repaid, an amount equal to the repayment is transferred from our
General Account to Separate Account II and allocated as you direct when
submitting the repayment. If you provide no direction, the amount will be
allocated in accordance with your standing instructions for Net Premium
allocations.
A portion of Policy loans taken or existing on or after the Preferred
Loan Availability Date will be designated as Preferred Policy Debt. Preferred
Policy Debt will be that portion of Policy Debt which equals the Account Value
under the Policy less the sum of all premium payments made. We redetermine the
amount of Preferred Policy Debt each Policy Month. We currently intend to credit
interest at an annual rate of 6% to that portion of Account Value transferred to
the General Account which is equal to Preferred Policy Debt. We reserve the
right to change, at our sole discretion, the rate of interest credited to the
amount of Account Value transferred to the General Account and guarantee that
Preferred Policy Debt will earn at least a minimum annual interest rate of 4%.
An annual rate of 4% is and will be credited to that portion of Account Value
transferred to the General Account which exceeds Preferred Policy Debt..
INTEREST. We will charge interest daily on any outstanding Policy loan
at an effective annual rate of 6%. Interest is due and payable at the end of
each Policy Year while a Policy loan is outstanding. If, on any Policy
Anniversary, interest accrued since the last Policy Anniversary has not been
paid, the amount of the interest is added to the loan and becomes part of the
outstanding Policy Debt. Interest transferred out of Separate Account II will be
transferred from each Investment Subdivision on a pro-rata basis.
REPAYMENT OF POLICY DEBT. You may repay all or part of your Policy Debt
at any time while the Insured is living and the Policy is in force. Any payments
by you other than planned periodic premiums will be treated first as the
repayment of any outstanding Policy Debt. The portion of the payment in excess
of any outstanding Policy Debt will be treated as an unscheduled premium
payment. We will first apply any repayment to reduce the portion of Policy Debt
that is not Preferred Policy Debt. Loan repayments must be sent to our Home
Office and will be credited as of the date received. A Policy loan repayment is
not treated as a premium payment and is not subject to the 3% premium charge.
EFFECT OF POLICY LOAN. A Policy loan, whether or not repaid, will
affect Policy values over time because the investment results of the Investment
Subdivisions will apply only to the non-loaned portion of the Account Value. The
longer the loan is outstanding, the greater the effect is likely to be.
Depending on the investment results of the Investment Subdivisions while the
Policy loan is outstanding, the effect could be favorable or unfavorable. Policy
loans, particularly if not repaid, could make it more likely than otherwise for
a Policy to terminate. See "Tax Considerations," below, for a discussion of
adverse tax consequences if a Policy lapses with Policy loans outstanding. If
the death benefit becomes payable while there is an outstanding Policy loan,
Policy Debt will be deducted from the Life Insurance Proceeds. If Policy Debt
exceeds the Account Value less any applicable surrender charge on any Monthly
Anniversary Day and the Continuation Period is not in effect, the Policy will
lapse without payment of a required loan payment. During the Continuation
Period, if Policy Debt on any Monthly Anniversary Day exceeds the Account Value
less any applicable surrender charge, and the Net Total Premium is less than the
Continuation Amount, your Policy will lapse without payment of a required loan
payment. In either event, we will mail to you notice of the amount required to
be paid to keep the Policy in force, and you will have a 61-day grace period
from the date we mail the notice to make the required loan payment.
SURRENDER BENEFITS
Full Surrender. You may surrender your Policy at any time for its
Surrender Value. See "Requesting Payments." A surrender charge may apply. See
"Schedule of Surrender Charge." Your Policy will terminate and cease to be in
force if it is surrendered for a lump sum. It cannot later be reinstated.
Partial Surrender. You may make partial surrenders under your Policy.
See "Requesting Payments." Requests for partial surrenders may be made in
writing or by telephone. See "REQUESTING PAYMENTS AND TELEPHONE TRANSACTIONS."
The minimum partial surrender amount is $500. A partial surrender processing fee
equal to the lesser of $25 or 2% of the amount surrendered will be assessed for
a partial surrender. The amount of a partial surrender will equal the amount
requested for surrender plus the partial surrender processing fee. When you
request a partial surrender, you can direct how the partial surrender will be
deducted from your Account Value. If you provide no directions, the partial
surrender will be deducted from your Account Value in the Investment
Subdivisions on a pro-rata basis.
HYPOTHETICAL ILLUSTRATIONS
The following illustrations show how certain values under a sample
Policy change with assumed investment performance over an extended period of
time. In particular, they illustrate how Account Values, Surrender Values and
Life Insurance Proceeds payable under a Policy covering an Insured of a given
Age on the Policy Date, would vary over time if planned premiums were paid
annually and the return on the assets in the Investment Subdivisions were a
uniform gross annual rate of 0%, 6% or 12%, before deduction of any fees and
charges, including Fund fees and charges. The tables also show planned premiums
accumulated at 5% interest. The values under a Policy would be different from
those shown if the returns averaged 0%, 6% or 12% but fluctuated over and under
those averages throughout the years shown. The hypothetical investment rates of
return are illustrative only and should not be deemed a representation of past
or future investment rates of return. Actual rates of return for a particular
Policy may be more or less than the hypothetical investment rates of return used
in the illustrations.
<PAGE>
The illustrations assume an average annual expense ratio of .82% of the
average daily net assets of the Funds available under the Policies, based on the
estimated expense ratios of each of the Funds for the first year of operations.
For information on Fund expenses, see the prospectus for the Funds accompanying
this prospectus. The current illustrations also reflect the 0.70% mortality and
expense risk charge to the Separate Account II. The guaranteed illustrations
reflect the maximum 0.90% mortality and expense risk charge to the Separate
Account II. After deduction of estimated Fund expenses and the mortality and
expense risk charge, the illustrated gross annual investment rates of return of
0%, 6% and 12% would correspond to approximate net annual rates of return for
the Investment Divisions of -1.52%, 4.48% and 10.48%, respectively.
The illustrations also reflect the monthly deduction for the
hypothetical Insured. Our current charges and the higher guaranteed charges we
have the contractual right to charge are reflected in separate illustrations on
each of the following pages. All the illustrations reflect the fact that no
charges for Federal or state income taxes are currently made against Separate
Account II and assume no Policy Debt or charges for supplemental benefits.
The illustrations are based on our sex distinct rates for non-tobacco
users. Upon request, we will furnish a comparable illustration based upon the
proposed Insured's individual circumstances. Such illustrations may assume
different hypothetical rates of return than those illustrated.
[Hypothetical Illustrations to be included by pre-effective amendment]
REQUESTING PAYMENTS AND TELEPHONE TRANSACTIONS
Requesting Payments. Written requests for payment (except where
telephone requests are authorized by us) must be sent to our Home Office or
given to our authorized agent for forwarding to our Home Office. We will
ordinarily pay any Life Insurance Proceeds, loan proceeds or surrender or
partial surrender proceeds in a lump sum within seven days after receipt at our
Home Office of all the documents required for such a payment. Other than the
Life Insurance Proceeds, which are determined as of the date of the Insured's
death, the amount will be determined as of the date our Home Office receives all
required documents. Life Insurance Proceeds may be paid in a lump sum or under
an optional payment plan. See "Optional Payment Plans." Any Life Insurance
Proceeds that are paid in one lump sum will include interest from the date of
death to the date of payment. Interest will be paid at a rate set by us, or by
law if greater. The minimum interest rate which will be paid is 2.5%. Interest
will not be paid beyond one year or any longer time set by law. Life Insurance
Proceeds will be reduced by any outstanding Policy Debt and any due and unpaid
charges and increased by any benefits added by rider.
<PAGE>
We may delay making a payment or processing a transfer request if: (1)
the disposal or valuation of Separate Account II's assets is not reasonably
practicable because the New York Stock Exchange is closed for other than a
regular holiday or weekend, trading is restricted by the SEC, or the SEC
declares that an emergency exists; or (2) the SEC by order permits postponement
of payment to protect our Policy Owners. We also may defer making payments
attributable to a check that has not cleared the bank on which it is drawn.
Telephone Transactions. You may make certain requests under the Policy
by telephone provided we have your written authorization on file at the Home
Office. These include requests for transfers, partial surrenders, Policy loans,
changes in premium allocation designations, dollar-cost averaging changes and
changes in the portfolio rebalancing program. Our Home Office will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. Such procedures may include, among others, requiring some form of
personal identification prior to acting upon instructions received by telephone,
providing written confirmation of such transactions, and/or tape recording of
telephone instructions. Your request for telephone transactions authorizes us to
record telephone calls. If reasonable procedures are not employed, we may be
liable for any losses due to unauthorized or fraudulent instructions. However,
if reasonable procedures are employed, we will not be liable for any losses due
to unauthorized or fraudulent instructions.
OTHER POLICY BENEFITS AND PROVISIONS
Exchange Privilege. During the first 24 Policy Months, you may convert
the Policy to a permanent fixed benefit policy. If you object to a material
change in the investment policy of Separate Account II or the Investment
Subdivisions, you may also convert the Policy to a permanent fixed benefit
policy within 60 days after the change. In either case, you may elect either the
same death benefit or the same net amount at risk as the existing Policy at the
time of conversion. Premiums will be based on the same Age at issue and risk
classification of the Insured as the existing Policy. The conversion will be
subject to an equitable adjustment in payments and Account Value to reflect
variances, if any, in the payments and Account Value under the existing Policy
and the new policy. See your Policy for further information.
Optional Payment Plans. The Policy currently offers the following five
optional payment plans as alternatives to the payment of a death benefit or
Surrender Value in a lump sum:
Plan 1 - Income for a Fixed Period. Periodic payments will be made for
a fixed period not longer than 30 years. Payments can be annual, semi-annual,
quarterly or monthly.
<PAGE>
Plan 2 - Life Income. Equal monthly payments will be made for a
guaranteed minimum period. If the payee lives longer than the minimum period,
payments will continue for his or her life. The minimum period can be 10, 15 or
20 years.
Plan 3 - Income of a Definite Amount. Equal periodic payments of a
definite amount will be paid. Payments can be annual, semi-annual, quarterly or
monthly.
Plan 4 - Interest Income. Periodic payments of interest earned from the
proceeds will be paid. Payments can be annual, semi-annual, quarterly or monthly
and will begin at the end of the first period chosen.
Plan 5 - Joint Life and Survivor Income. Equal monthly payments will be
made to two payees for a guaranteed minimum of 10 years. Each payee must be at
least 35 years old when payments begin.
An optional payment plan can be selected in the application or by
notifying us in writing at our Home Office. Any amount left with us for payment
under an optional payment plan will be transferred to our general account.
Payments under an optional payment plan will not vary with the investment
performance of Separate Account II because they are all forms of fixed-benefit
annuities. See "Tax Treatment of Policy Proceeds." Certain conditions and
restrictions apply to payments received under an optional payment plan. For
further information, review your Policy or contact an authorized Life of
Virginia agent.
Other Policy Provisions. The Policy contains provisions addressing the
following matters:
Dividends. The Policy is non-participating. No dividends will be paid
on the Policy.
Incontestability. The Policy limits our right to contest the Policy as
issued or as increased, except for material misstatements contained in the
application or a supplemental application, after it has been in force during the
Insured's lifetime for a minimum period, generally for two years from the Policy
Date or effective date of the increase. This provision does not apply to riders
that provide disability benefits.
Suicide Exclusion. If the Insured commits suicide while sane or insane,
within two years of the Policy Date, Life Insurance Proceeds payable under the
Policy will be limited to all premiums paid, less outstanding Policy Debt and
less amounts paid upon partial surrender of the Policy.
If the Insured commits suicide while sane or insane, more than two
years after the Policy Date but within two years after the effective date of an
increase in the Specified Amount, the proceeds payable with respect to the
increase will be limited to the cost of insurance applied to the increase.
<PAGE>
Misstatement of Age or Sex. Life Insurance Proceeds will be adjusted
if the Insured's Age or sex has been misstated in the application.
Written Notice. Any written notice should be sent to us at our Home
Office at 6610 West Broad Street, Richmond, Virginia 23230. The notice should
include the Policy number and the Insured's full name. Any notice sent by us to
you will be sent to the address shown in the application unless an appropriate
address change form has been filed with us.
Owner. You have rights in the Policy during the Insured's lifetime.
If you die before the Insured and there is no contingent Owner, ownership passes
to your estate.
Beneficiary. You designate the Primary Beneficiaries and Contingent
Beneficiaries when you apply for the Policy. If changed, the Primary Beneficiary
and Contingent Beneficiary is as shown in the latest change filed with us. One
or more Primary Beneficiaries or Contingent Beneficiaries may be named in the
application. In such a case, the proceeds will be paid in equal shares to the
survivors in the appropriate Beneficiary class, unless you request otherwise.
Unless an optional payment plan is chosen, the proceeds payable at the
Insured's death will be paid in a lump sum to the Primary Beneficiary(ies). If
the Primary Beneficiary(ies) dies before the Insured, the proceeds will be paid
to the Contingent Beneficiary(ies). If no Beneficiary(ies) survives the Insured,
the proceeds will be paid to you or your estate.
Reinstatement. If the Policy has not been surrendered, the Policy may
be reinstated within three years after lapse, subject to compliance with certain
conditions, including the payment of a necessary premium and submission of
satisfactory evidence of insurability. See your Policy for further information.
Trustee. If a trustee is named as the Owner or Beneficiary of the
Policy and subsequently exercises ownership rights or claims benefits
thereunder, we will have no obligation to verify that a trust is in effect or
that the trustee is acting within the scope of his/her authority. Payment of
policy benefits to the trustee will release us from all obligations under the
Policy to the extent of the payment. When we make a payment to the trustee, we
will have no obligation to ensure that such payment is applied according to the
terms of the trust agreement.
Other Changes. At any time we may make such changes in the Policy as
are necessary to assure compliance at all times with the definition of life
insurance prescribed by the Code; to make the Policy, our operations, or the
operation of Separate Account II conform with any law or regulation issued by
any government agency to which they are subject; or to reflect a change in the
operation of Separate Account II, if allowed by the Policy. Only the President
or a Vice-President of Life of Virginia has the right to change the Policy. No
agent has the authority to change the Policy or waive any of its terms. All
endorsements, amendments, or riders must be signed by such officer to be valid.
<PAGE>
Reports. We maintain records and accounts of all transactions involving
the Policy, Separate Account II and Policy Debt. Within 30 days after each
Policy Anniversary, you will be sent a report showing information about your
Policy for the period covered by the report. The report will show the amount of
Life Insurance Proceeds, the Account Value in each Investment Subdivision, the
Surrender Value and Policy Debt. The report will also show premiums paid and
charges made during the Policy Year. You will also be sent an annual and a
semi-annual report for each Fund underlying an Investment Subdivision to which
you have allocated Account Value, as required by the 1940 Act. In addition, when
you pay premiums (other than by pre-authorized checking account deduction), or
if you take out a Policy loan, make transfers or make partial surrenders, you
will receive a written confirmation of these transactions.
Change of Owner. You may change the Owner of the Policy by sending a
written request on a form satisfactory to us to our Home Office while the
Insured is alive and the Policy is in force. The change will take effect the
date you sign the written request, but the change will not affect any action we
have taken before we receive the written request. A change of Owner does not
change the Beneficiary designation.
Supplemental Benefits. Supplemental benefits are available and may be
added to your Policy by rider. Monthly charges for these benefits will be
deducted from your Account Value as part of the monthly deduction. See "Monthly
Deduction." Examples of these supplemental benefits include term insurance on a
spouse or children, additional death benefits if the insured dies in an
accident, and waiver of either the monthly deduction or a stipulated amount if
the Insured becomes disabled as defined in the rider. Additional rules and
limits apply to these supplemental benefits. Please ask your authorized Life of
Virginia agent for further information or contact our Home Office.
Using the Policy as Collateral. The Policy can be assigned as
collateral security. We must be notified in writing if you assign the Policy.
Any payments made before the assignment and recorded at our Home Office will not
be affected. We are not responsible for the validity of an assignment. Your
rights and the rights of the Beneficiary may be affected by an assignment.
Reinsurance. We intend to reinsure a portion of the risks assumed
under the Policies.
<PAGE>
LIFE OF VIRGINIA
The Life Insurance Company of Virginia. We are a stock life insurance
company operating under a charter granted by the Commonwealth of Virginia on
March 21, 1871. We are principally engaged in the offering of life insurance and
annuity policies and rank among the 25 largest stock life insurance companies in
the United States in terms of business in force. We are admitted to do business
in 49 states and the District of Columbia. Our principal offices are at 6610
West Broad Street, Richmond, Virginia 23230.
Eighty percent of our capital stock is owned by General Electric
Capital Assurance Corporation ("GE Capital Assurance"). The remaining 20% is
owned by GE Life Insurance Group, Inc. GE Capital Assurance and GE Life
Insurance Group, Inc. are indirectly wholly-owned subsidiaries of General
Electric Capital Corporation ("GE Capital"). GE Capital, a New York corporation,
is a diversified financial services company whose subsidiaries consist of
specialty insurance, equipment management, and commercial and consumer financing
businesses. GE Capital's parent, General Electric Company, founded more than one
hundred years ago by Thomas Edison, is the world's largest manufacturer of jet
engines, engineering plastics, medical diagnostic equipment and large electric
power generation equipment.
State Regulation. We are subject to regulation by the State Corporation
Commission of the Commonwealth of Virginia. An annual statement is filed with
the Virginia Commissioner of Insurance on or before March 1 of each year
covering our operations and reporting on our financial condition as of December
31 of the preceding year. Periodically, the Commissioner of Insurance examines
our liabilities and reserves and those of Separate Account II and certifies
their adequacy, and a full examination of our operations is conducted by the
State Corporation Commission, Bureau of Insurance of the Commonwealth of
Virginia at least every five years.
We are also subject to the insurance laws and regulation of other
states within which it is licensed to operate.
Executive Officers and Directors. We are managed by a board of
directors. The following table sets forth the name, address and principal
occupations during the past five years of each of our executive officers and
directors.
<PAGE>
Name and Position(s)
With Life of Virginia* Principal Occupations Last Five Years
- --------------------------------------------------------------------------------
Ronald V. Dolan* Director, Chairman of the Board, Life of
Virginia since 1997; President and Chief
Executive Officer of First Colony Life
Insurance Company 1992-1997; President,
First Colony Corporation since 1985.
Paul E. Rutledge III* Director, President and Chief Executive
Officer since 1997; President and Chief
Operating Officer, Life of Virginia, 5/91 to
4/97; Executive Vice President and Chief
Operating Officer, United Investors Life
Insurance Company, Birmingham, Alabama, 9/87
to 4/91.
Selwyn L. Flournoy, Jr.* Director, Life of Virginia since 5/89;
Senior Vice President, Life of Virginia,
since 1980. Chief Financial Officer since
1980.
Linda L. Lanam* Director, Life of Virginia, since 2/93;
Senior Vice President since 1997; Vice
President and Senior Counsel, Life of
Virginia, since 1989; Corporate Secretary
for Life of Virginia and for a number of
Life of Virginia affiliates, since 1992.
Robert D. Chinn* Director, Life of Virginia since 1997;
Senior Vice President - Agency, Life of
Virginia, since 1/92; Vice President, Life
of Virginia, since 1985.
Thomas A. Barefield* Director, Life of Virginia since 1997;
Senior Vice President - Special Markets,
Life of Virginia, since 1993; Vice President
- Special Markets, Life of Virginia, 1/91 to
12/93; Vice President - Registered Products,
Life of Virginia, 12/86 to 1/91.
Michael Weitz Senior Vice President - Brokerage since
1995.
Elliott Rosenthal Senior Vice President - Investment Products
since 1997; Vice President and Senior
Investment Actuary, 1/95 - 4/97; Investment
Actuary, 1/82 - 2/95.
Victor C. Moses Director, Life of Virginia, since April 1,
1996. Director of GNA since April 1994.
Senior Vice President, Business Development,
and Chief Actuary of GNA since Mary 1993.
Senior Vice President and Chief Financial
Officer of GNA, 1991-1993. Vice President
and Chief Actuary of GNA, 1983-1991. Senior
Vice President, Controller and Treasurer GNA
Investors Trust, 1992-1993.
<PAGE>
Geoffrey S. Stiff Director, Life of Virginia, since April 1,
1996. Director of GNA since April 1994.
Senior Vice President, Chief Financial
Officer and Treasurer of GNA since May 1993.
Vice President, Chief Financial Officer and
Director of Employers Reinsurance
Corporation 1987-1993. Senior Vice
President, Controller and Treasurer of GNA
Investors Trust since 1993.
- --------------------------------------------------------------------------------
* Messrs. Dolan, Rutledge, Flournoy, Chinn, Barefield and Ms. Lanam are members
of our Executive Committee.
The principal business address of each person listed, unless otherwise
indicated, is The Life Insurance Company of Virginia, 6610 W. Broad Street,
Richmond, Virginia 23230.
The principal business address for Mr. Dolan and Mr. Stiff is First Colony
Life Insurance Company, 700 Main Street, Post Office 1280, Lynchburg, VA
24505-1280.
The principal business address for Mr. Moses is GNA Corporation, Two Union
Square, 601 Union Street, Seattle, WA 98101.
The composition of our Board of Directors changed following our sale on April
1, 1996.
Separate Account II. Separate Account II was established by us as a
separate investment account on August 21, 1986. Separate Account II currently
has thirty-four Investment Subdivisions available under the Policy, but that
number may change in the future. Each Investment Subdivision invests exclusively
in shares representing an interest in a separate corresponding portfolio of one
of the nine Funds described above. Net Premiums are allocated in accordance with
your instructions among up to seven of the thirty-four Investment Subdivisions
available under the Policy.
The assets of Separate Account II belong to us. Nonetheless, the assets
in Separate Account II attributable to the Policies are not chargeable with
liabilities arising out of any other business which we may conduct. The assets
of Separate Account II shall, however, be available to cover the liabilities of
our General Account to the extent that the assets of Separate Account II exceed
its liabilities arising under the Policies supported by it. Income and both
realized and unrealized gains or losses from the assets of Separate Account II
are credited to or charged against Separate Account II without regard to the
income, gains or losses arising out of any other business we may conduct.
<PAGE>
Separate Account II is registered with the SEC as a unit investment
trust under the 1940 Act and meets the definition of a separate account under
the federal securities laws. Registration with the SEC does not involve
supervision of the management or investment practices or policies of Separate
Account II by the SEC.
Changes to Separate Account II. Separate Account II may include other
Investment Subdivisions that are not available under the Policy and are not
otherwise discussed in this prospectus. We may substitute another investment
subdivision or insurance company separate account under the Policy if, in our
judgment, investment in a Investment Subdivision should no longer be possible or
becomes inappropriate to the purposes of the Policies, or if investment in
another investment subdivision or insurance company separate account is in the
best interest of Owners. No substitution may take place without notice to Owners
and prior approval of the SEC and insurance regulatory authorities, to the
extent required by the 1940 Act and applicable law.
We may also, where permitted by law: (1) create new separate accounts;
(2) combine separate accounts, including Separate Account II; (3) add new
Investment Subdivisions or remove Investment Subdivisions from Separate Account
II; (4) make the Investment Subdivisions available under other policies we
issue; (5) deregister Separate Account II under the 1940 Act; and (6) operate
Separate Account II under the direction of committee or in another form.
Voting of Fund Shares. We are the legal owner of shares held by the
Investment Subdivisions and as such have the right to vote on all matters
submitted to shareholders of the Funds. However, as required by law, we will
vote shares held in the Investment Subdivisions at regular and special meetings
of shareholders of the Funds in accordance with instructions received from
Owners with Account Value in the Investment Subdivisions. To obtain voting
instructions from Owners, before a meeting of shareholders of the Funds, we will
send Owners voting instruction material, a voting instruction form and any other
related material. Shares held by an Investment Subdivision for which no timely
instructions are received will be voted by us in the same proportion as those
shares for which voting instructions are received. Should the applicable federal
securities laws, regulations or interpretations thereof change so as to permit
us to vote shares of the Funds in our own right, we may elect to do so. We may,
if required by state insurance officials, disregard your voting instructions if
such instructions would require shares to be voted so as to cause a change in
sub-classification or investment objectives of one or more of the Funds, or to
approve or disapprove an investment advisory agreement. In addition, we may
under certain circumstances disregard voting instructions that would require
changes in the investment policy or investment adviser of one or more of the
Funds, provided that we reasonably disapprove of such changes in accordance with
applicable federal regulations. If we ever disregards voting instructions,
Owners will be advised of that action and of the reasons for such action in the
next report to Owners.
<PAGE>
TAX CONSIDERATIONS
The following discussion is general and is not intended as tax advice.
Tax Status of the Policy. The Code, in section 7702, establishes a
statutory definition of life insurance for tax purposes. We believe that the
Policy meets the statutory definition of life insurance, which places
limitations on the amount of premiums that may be paid. If the Specified Amount
of a Policy is increased or decreased, the applicable premium limitation may
change. In the case of a decrease in the Specified Amount, a partial surrender,
a change from Option A to Option B, or any other such change that reduces
benefits under the Policy during the first 15 years after a Policy is issued and
that results in a cash distribution to you in order for the Policy to continue
complying with section 7702 definitional limitations on premiums and cash
values, certain amounts prescribed in section 7702 which are so distributed will
be includable in your ordinary income (to the extent of any gain in the Policy).
Such income inclusion will also occur, in certain circumstances, with respect to
cash distributions made in anticipation of reductions in benefits under the
Policy.
The Code (section 817(h)) and regulations promulgated thereunder by the
Secretary of the Treasury (the "Treasury") prescribe diversification standards
for the investments of Separate Account II which must be met in order for the
Policy to be treated as a life insurance contract for federal tax purposes.
Separate Account II, through the Funds, intends to comply with the
diversification requirements prescribed by the Treasury. Although we do not
control the Funds, we have entered into agreements regarding participation in
the Funds which require the Funds to be operated in compliance with the
requirements prescribed by the Treasury. Thus, we believe that Separate Account
II will be treated as adequately diversified for federal tax purposes.
In certain circumstances, variable contract owners may be considered
the owners, for federal tax purposes, of the assets of the separate account used
to support such contracts. In those circumstances, income and gains from the
separate account assets would be includable in the variable contract owners'
gross income annually as earned. The Internal Revenue Service (the "Service")
has stated in published rulings that a variable contract owner will be
considered the owner of separate account assets if the owner possesses incidents
of ownership in those assets, such as the ability to exercise investment control
over the assets. The Treasury has announced, in connection with the issuance of
regulations concerning diversification requirements, that those regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset [i.e. separate] account may cause the
investor, rather than the insurance company, to be treated as the owner of the
assets of the account." This announcement also stated that guidance would be
issued by the way of regulation or published rulings on the "extent to which
policyholders may direct their investments to particular sub-accounts [of a
separate account] without being treated as owners of the underlying assets."
<PAGE>
The ownership rights under the Policy are similar to, but different in
certain respects from, those present in situations addressed by the Service in
rulings in which it was determined that contract owners were not owners of
separate account assets. For example, you have the choice of more Funds to which
to allocate premiums and cash values and may be able to reallocate more
frequently than in such rulings. These differences could result in you being
considered, under the standard of those rulings, the owner of the assets of
Separate Account II. To ascertain the tax treatment of our policyowners, we have
requested, with regard to a policy similar to this Policy, a ruling from the
Service that we, and not our policyowners, are the owner of the assets of the
separate account there involved for federal income tax purposes. The Service
informed us that it will not rule on the request until issuance of the promised
guidance referred to in the preceding paragraph. Because we do not know what
standards will be set forth in the regulations or revenue rulings which the
Treasury has stated it expects to issue, we have reserved the right to modify
our practices to attempt to prevent you from being considered the owner of the
assets of Separate Account II.
Frequently, if the Service or the Treasury sets forth a new position
which is adverse to taxpayers, the position is applied on a prospective basis
only. Thus, if the Service or the Treasury were to issue regulations or a ruling
which treated you as the owner of the assets of Separate Account II, that
treatment might only apply on a prospective basis. However, if the ruling or
regulations were not considered to set forth a new position, you might be
retroactively determined to be the owner of a portion of the assets of Separate
Account II for tax purposes.
The following discussion assumes that the Policy will qualify as a life
insurance contract for federal tax purposes.
Tax Treatment of Policy Proceeds. The Policies should receive the same
Federal income tax treatment as fixed benefit life insurance. As a result, the
Life Insurance Proceeds payable under either benefit option are excludable from
the gross income of the Beneficiary under section 101 of the Code, and you will
not be deemed to be in constructive receipt of the Surrender Value under a
Policy until actual surrender. If proceeds payable upon death of the Insured are
paid under optional payment Plan 4 (interest income), the interest payments will
be includable in the Beneficiary's income. If proceeds payable on death are
applied under optional payment plan 3 and the Beneficiary is at an advanced age
at such time, such as age 80 or older, it is possible that payments would be
treated in a manner similar to that under Plan 4. If the proceeds payable upon
death of the Insured are paid under one of the other optional payment plans, the
payments will be prorated between amounts attributable to the death benefit
which will be excludable from the Beneficiary's income and amounts attributable
to interest which will be includable in the Beneficiary's income. In the event
of certain cash distributions under the Policy resulting from any change which
reduces future benefits under the Policy, the distribution will be taxed in
whole or in part as ordinary income (to the extent of gain in the Policy). See
discussion above, "Tax Status of the Policy."
For an Insured who survives beyond the end of the Commissioners' 1980
Standard Ordinary Mortality Table, there may be a question about taxation of
death benefit proceeds and constructive receipt. Because we continue to charge
for the insurance risk beyond age 100, we believe that the proceeds will
continue to be protected from taxation. Therefore, we have no current plans to
withhold or report taxes in this situation.
Except as noted below, a loan received under a Policy will be treated
as your indebtedness, so that no part of any loan under a Policy will constitute
income to you so long as the Policy remains in force, and a partial surrender
under a Policy will not constitute income except to the extent it exceeds the
total premiums paid for the Policy (reduced by any amounts previously withdrawn
which were not treated as income). However, with respect to the portion of any
loan that is attributable to cash value in excess of the total premium payments
under the Policy, it is possible that the Service could treat you as being in
receipt of certain amounts of income.
Generally, interest paid on loans under a Policy will not be tax
deductible, except in the case of certain loans under a Policy covering a "key
person." A tax adviser should be consulted before taking any policy loan.
The right to exchange the Policy for a permanent fixed benefit policy
(see "Exchange Privilege" ), the right to change Owners (see "Change of Owner"),
the provision for surrenders, the right to change from one death benefit option
to another, and other changes reducing future death benefits may have tax
consequences depending on the circumstances of such exchange, change or
surrender. Upon complete surrender, if the amount received plus the Policy Debt
exceeds the total premiums paid (less any amounts treated as previously
withdrawn by you), the excess generally will be treated as ordinary income.
<PAGE>
Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Owner or Beneficiary.
Tax Treatment of Policy Loans and Other Distributions. TAMRA includes
the following provisions, which affect the taxation of distributions (other than
proceeds paid at the death of the insured) from life insurance contracts:
1. If premiums are paid more rapidly than the rate defined by a "7-Pay
Test," the Policy will be classified as a "modified endowment
contract." This test applies a cumulative limit on the amount of
payments that can be made into a Policy in order to avoid modified
endowment contract treatment.
2. Any Policy received in exchange for a policy classified as a modified
endowment contract will be treated as a modified endowment contract
regardless of whether it meets the 7-Pay Test.
3. Loans (including unpaid interest thereon) from a Policy classified as a
modified endowment contract will be considered distributions.
4. Distributions (including partial surrenders, loans and loan interest,
assignments and pledges) from a Policy classified as a modified
endowment contract will be taxed first as distributions of income from
the Policy (to the extent that the cash value of the Policy, before
reduction by any surrender charge or loan, exceeds the total premiums
paid less any previous untaxed withdrawals), and then as a non-taxable
recovery of premium.
5. A penalty tax of 10% will be imposed on distributions includable in
income (including complete and partial surrenders, loans and loan
interest, assignments and pledges) from a Policy classified as a
modified endowment contract, unless such distributions are made (1)
after you attain age 59 1/2, (2) because you have become disabled, or
(3) as substantially equal annuity payments over your life or life
expectancy (or over the joint lives or life expectancies of you and
your beneficiary).
In order to avoid classification as a modified endowment contract, a
Policy must not have been issued in exchange for a modified endowment contract,
and premiums paid under the Policy must not be paid more rapidly than the 7-Pay
Test allows. We will provide you guidance as to the amount of premium payments
that may be paid if you wish to avoid treatment of the Policy as a modified
endowment contract.
<PAGE>
Additionally, all life insurance contracts which are treated as
modified endowment contracts and which are issued by us or any of our affiliates
with the same person designated as the owner within the same calendar year will
be aggregated and treated as one contract for purposes of determining any tax on
distributions.
The provisions of TAMRA are complex and are open to considerable
variation in interpretation. You should consult your tax advisor before making
any decisions regarding increases or decreases in or additions to coverage or
distributions from your Policy.
Taxation of Life of Virginia. Because of our current status under the
Code, we do not expect to incur any Federal income tax liability that would be
chargeable to Separate Account II. Based upon this expectation, no charge is
being made currently to Separate Account II for Federal income taxes. If,
however, we determine that such taxes may be incurred, we may assess a charge
for those taxes from Separate Account II.
We may also incur state and local taxes (in addition to premium taxes
for which a deduction from premiums is currently made) in several states. At
present, these taxes are not significant. If there is a material change in state
or local tax laws, charges for such taxes attributable to Separate Account II
may be made.
Income Tax Withholding. Generally, unless you provide us with a written
election to the contrary before a distribution is made, we are required to
withhold income taxes from any portion of the money received by you upon
surrender of the Policy (and if the Policy is a modified endowment contract,
upon a partial surrender or a Policy loan). If you request that no taxes be
withheld, or if we do not withhold a sufficient amount of taxes, you will be
responsible for the payment of any taxes and early distribution penalties that
may be due on the amounts received. You may also be required to pay penalties
under the estimated tax rules, if your withholding and estimated tax payments
are insufficient to satisfy your total tax liability. You may, therefore, want
to consult a tax advisor.
The foregoing discussion is general and is not intended as tax advice.
Other Considerations. Any person concerned about these tax implications
should consult a competent tax advisor. This discussion is based on our
understanding of the present Federal income tax laws as they are currently
interpreted by the Service. No representation is made as to the likelihood of
continuation of these current laws and interpretations. It should be further
understood that the foregoing discussion is not exhaustive and that special
rules not described in this prospectus may be applicable in certain situations.
Moreover, no attempt has been made to consider any applicable state or other tax
laws.
<PAGE>
LEGAL DEVELOPMENTS REGARDING EMPLOYMENT-RELATED BENEFIT PLANS
In 1983, the Supreme Court held in Arizona Governing Committee v.
Norris, that optional annuity benefits provided under an employee's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women on the basis of sex. The Policy contains guaranteed
cost of insurance rates and guaranteed purchase rates for certain settlement
options that distinguish between men and women. Accordingly, employers and
employee organizations should consider, in consultation with legal counsel, the
impact of Norris, and Title VII generally, on any employment-related insurance
or benefit program for which a Policy may be purchased.
ADDITIONAL INFORMATION
Sale of Policies. The Policies will be sold by our licensed life
insurance agents who are also registered representatives of Forth Financial
Securities Corporation, the principal underwriter of the Policies, or of
broker-dealers who have entered into written sales agreements with the principal
underwriter. Forth Financial Securities Corporation, a Virginia Corporation,
located at 6610 W. Broad Street, Richmond, Virginia 23230, is registered with
the SEC under the Securities Exchange Act of 1934 as a broker-dealer and a
member of the National Association of Securities Dealers, Inc. Forth Financial
Securities Corporation also serves as principal underwriter for other variable
life insurance and variable annuity policies issued by us. However, no amounts
have been retained by Forth Financial Securities Corporation for acting as
principal underwriter of these other policies.
Our writing agents will receive commissions based on a commission
schedule and rules. First-year commissions depend on the Insured's Age, risk
class, and the size of the policy. In the first Policy Year, the agent will
receive a commission of up to __% of the maximum commissionable premium plus up
to 4.0% of premiums paid in excess of the maximum commissionable premium. In
renewal years, the agent receives up to 4.0% of the premiums paid. A trail
commission equal to an annual rate of 0.15% of Account Value may be paid on
Policies that after the fifth Policy Year have an Account Value equal to or
greater than $10,000.
Other Information. A registration statement under the Securities Act of
1933 has been filed with the SEC relating to the offering described in this
prospectus. This prospectus does not include all the information set forth in
the registration statement. The omitted information may be obtained at the SEC's
principal office in Washington, D.C. by paying the SEC's prescribed fees.
Litigation. No legal or administrative proceeding is pending that
would have a material effect upon Separate Account II.
<PAGE>
Legal Matters. The legal matters in connection with the Policy
described in this prospectus have been passed on by J. Neil McMurdie, Associate
Counsel and Assistant Vice President of Life of Virginia. Sutherland, Asbill &
Brennan, L.L.P of Washington, D.C. has provided advice on matters relating to
the federal securities laws.
Experts.
KPMG Peat Marwick LLP. The consolidated financial statements of The
Life Insurance Company of Virginia and subsidiaries as of December 31, 1996, and
for the nine months ended December 31, 1996, and the preacquisition three month
period ended March 31, 1996, and the financial statements of Life of Virginia
Separate Account II as of December 31, 1996, and for the years or periods then
ended have been included herein and in the registration statement in reliance
upon the reports of KPMG Peat Marwick LLP, independent auditors, appearing
elsewhere herein, and upon the authority of said firm as experts in account and
auditing.
Ernst & Young LLP. The consolidated financial statements of The Life
Insurance Company of Virginia and subsidiaries at December 31, 1995, and for
each of the two years in the period ended December 31, 1995, and the statements
of operations and statements of changes in net assets of Life of Virginia
Separate Account II for each of the two years or periods ended December 31,
1995, appearing in this Prospectus and registration statement have been audited
by Ernst & Young LLP, independent auditors, to the extent indicated in their
reports thereon also appearing elsewhere herein, and are included in reliance
upon such reports given upon the authority of said firm as experts in account
and auditing.
Actuarial Matters. Actuarial matters included in this prospectus have
been examined by Bruce E. Booker, an actuary of Life of Virginia, whose opinion
is filed as an exhibit to the registration statement.
Change in Auditors. Subsequent to our acquisition 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 of
auditors was approved by the members of our Board of Directors.
<PAGE>
Neither KPMG Peat Marwick LLP's nor Ernst & Young LLP's reports on the
financial statements contains any adverse opinions or a disclaimer of opinion,
or was qualified or modified as a uncertainty, audit scope or accounting
principles. Furthermore, there were no disagreements with either on any matter
of accounting principle or practice, financial statement disclosure or auditing
scope or procedure which would have caused them to make reference to the subject
matter of the disagreement in connection with their reports.
Financial Statements. The consolidated financial statements of Life of
Virginia and subsidiaries included herein should be distinguished from the
financial statements of Separate Account II and should be considered only as
bearing on our ability to meet our obligations under the Policies. Such
consolidated financial statements of Life of Virginia and subsidiaries should
not be considered as bearing on the investment performance of the assets held in
Separate Account II.
[Financial statements to be included in pre-effective amendment.]
<PAGE>
Part II
OTHER INFORMATION
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore, or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
The Life Insurance Company of Virginia's By-laws provide, in Article V,
Section 5, for indemnification of directors, officers and employees of the
Company.
Insofar as indemnification for liability arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provision, or otherwise
under circumstances where the burden of proof set forth in Section 11(b) of the
Act has not been sustained, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
REPRESENTATION PURSUANT TO SECTION 26(e)(2)(A)
Life of Virginia hereby represents that the fees and charges deducted
under the Policy, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by Life of
Virginia.
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
The prospectus consisting of ___ pages.
The undertaking to file reports.
The Rule 484 undertaking.
Representation pursuant to Section 26(e)(2)(A).
The Signatures.
Written consents of the following persons:
(a) J. Neil McMurdie(9)
(b) Messrs. Sutherland, Asbill & Brennan, L.L.P.(9)
(c) Bruce E. Booker, F.S.A.(9)
(d) KPMG Peat Marwick LLP(9)
(e) Ernst & Young LLP(9)
The following exhibits, corresponding to those required by paragraph A
of the instructions as to exhibits in Form N-8B-2:
(1)(a) Resolution of the Board of Directors of Life of Virginia
authorizing the establishment of Separate Account II.(1)
(1)(b) Resolution of the Board of Directors of Life of Virginia
authorizing the addition of Investment Subdivisions to
Separate Account II.(1)
(1)(c) Resolution of the Board of Directors of Life of Virginia
authorizing the establishment of Investment Subdivisions of
Separate Account II which invest in shares of the Fidelity
Variable Insurance Products Fund II Asset Manager Portfolio
and Neuberger and Berman Advisers Management Trust Balanced
Portfolio.(1)
(1)(d) Resolution of the Board of Directors of Life of Virginia
authorizing the establishment of Investment Subdivisions of
Separate Account II which invest in shares of Janus Aspen
Series, Growth Portfolio, Aggressive Growth Portfolio and
Worldwide Growth Portfolio.(3)
(1)(e) Resolution of the Board of Directors of Life of Virginia
authorizing the establishment of Investment Subdivisions of
Separate Account II which invest in shares of the Utility Fund
of the Investment Management Series.(4)
<PAGE>
(1)(f) Resolution of the Board of Directors of Life of Virginia
authorizing the establishment of two additional Investment
Subdivisions of Separate Account II which invest in shares of
the Corporate Bond Fund of the Insurance Management Series and
the Contrafund Portfolio of the Variable Insurance Products
Fund II.(4)
(1)(g) Resolution of the Board of Directors of Life of Virginia
authorizing the establishment of four additional Investment
Subdivisions of Separate Account II which invest in shares of
the Alger American Growth Portfolio and the Alger American
Small Capitalization Portfolio of The Alger American Fund, and
the Balanced Portfolio and Flexible Income Portfolio of the
Janus Aspen Series.(6)
(1)(h) Resolution of the Board of Directors of Life of Virginia
authorizing the establishment of two additional Investment
Subdivisions of Separate Account 4 investing in shares of the
Federated American Leaders Fund II of the Federated Insurance
Series, and the International Growth Portfolio of the Janus
Aspen Series.(13)
(1)(i) Resolution of the Board of Directors of Life of Virginia
authorizing additional Investment Subdivisions investing in
shares of Growth and Income Portfolio and Growth Opportunities
Portfolio of Variable Insurance Products Fund III; Growth II
Portfolio and Large Cap Growth Portfolio of the PBHG Insurance
Series Fund, Inc.; and Global Income Fund and Value Equity
Fund of GE Investments Funds, Inc.(8)
(1)(j) Resolution of the Board of Directors of Life of Virginia
authorizing additional Investment Subdivisions investing in
shares of Capital Appreciation Portfolio of Janus Aspen
Series.(8)
1A(2) Not Applicable
1A(3)(a) Underwriting Agreement(1)
1A(3)(b)(i) Underwriting Agreement dated April 2, 1996, between The Life
Insurance Company of Virginia and Fourth Financial Securities
Corporation.(7)
1A(3)(b)(ii) Selling Agreement(1)
1A(4) Not Applicable
1A(5) Policy Form, Commonwealth Four(9)
1A(5)(a) Endorsement to policy(9)
<PAGE>
1A(6)(a) Articles of Incorporation of The Life Insurance Company of
Virginia(1)
1A(6)(b) By-Laws of The Life Insurance Company of Virginia(1)
1A(7) Not Applicable
1A(8)(a) Stock Sale Agreement(1)
1A(8)(a)(i) Amendment to Stock Sale Agreement between The Life Insurance
Company of Virginia and Life of Virginia Series Fund, Inc.(1)
1A(8)(b) Amendment to Participation Agreement among Variable Insurance
Products Fund II, Fidelity Distributors Corporation, and The
Life Insurance Company of Virginia.(7)
1A(8)(b)(i) Amendment to Participation Agreement among Variable Insurance
Products Fund, Fidelity Distributors Corporation, and The Life
Insurance Company of Virginia.(7)
1A(8)(b)(ii) Participation Agreement among Variable Insurance Products
Fund, Fidelity Distributors Corporation, and The Life
Insurance Company of Virginia.(1)
1A(8)(c) Agreement between Oppenheimer Variable Account Funds,
Oppenheimer Management Corporation, and The Life Insurance
Company of Virginia.(1)
1A(8)(d) Amendment to the Participation Agreement between Oppenheimer
Variable Account Funds, Oppenheimer Management Corporation,
and The Life Insurance Company of Virginia.(1)
1A(8)(e) Participation Agreement among Variable Insurance Products Fund
II, Fidelity Distributors Corporation and The Life Insurance
Company of Virginia.(1)
1A(8)(f) Sales Agreement between Advisers Management Trust and The Life
Insurance Company of Virginia.(1)
1A(8)(g) Amendment to Sales Agreement between Advisers Management Trust
and The Life Insurance Company of Virginia.(1)
1A(8)(h) Fund Participation Agreement between Janus Aspen Series and
The Life Insurance Company of Virginia.(3)
1A(8)(i) Fund Participation Agreement between Insurance Management
Series, Federated Securities Corporation, and The Life
Insurance Company of Virginia.(4)
<PAGE>
1A(8)(j) Fund Participation Agreement between The Alger American Fund,
Fred Alger and Company, Inc., and The Life Insurance Company
of Virginia.(6)
1A(8)(k) Fund Participation Agreement between Variable Insurance
Products Fund III and The Life Insurance Company of
Virginia.(8)
1A(8)(l) Fund Participation Agreement between PBHG Insurance Series
Fund, Inc., and The Life Insurance Company of Virginia.(8)
1A(9) Administrative Agreement(1)
1A(10) Application for Commonwealth Four Policy(1)
2 See Exhibit 1(A)5
3(a) Opinion and Consent of Counsel(9)
3(b) Consent of Messrs. Sutherland, Asbill & Brennan, L.L.P.(9)
3(c) Consent of KPMG Peat Marwick LLP(9)
3(d) Consent of Ernst & Young LLP(9)
4 Not Applicable
5 Not Applicable
6 Opinion and Consent of Bruce E. Booker, Actuary(9)
7 Memorandum describing Life of Virginia's Issuance, Transfer,
Redemption and Exchange Procedures for the Policies.(7)
8 Undertaking to Guarantee performance of obligations of
principal underwriter.(1)
9 Power of Attorney(2)
Power of Attorney dated April 2, 1996.(7)
Power of Attorney dated April 16, 1997.(8)
- --------------------
1. Filed April 24, 1992 with Post-Effective Amendment Number 7 to Forms S-6
for Life of Virginia Separate Account II, Registration Number 33-9651.
2. Filed April 30, 1993 with Post-Effective Amendment Number 8 to Form S-6
for Life of Virginia Separate Account II, Registration Number 33-9651.
<PAGE>
3. Filed April 29, 1994 with Post-Effective Amendment Number 9 to Form S-6
for Life of Virginia Separate Account II, Registration Number 33-9651.
4. Filed January 3, 1995 with Post-Effective Amendment Number 10 to Form S-6
for Life of Virginia Separate Account II, Registration Number 33-9651.
5. Filed April 28, 1995 with Post-Effective Amendment Number 11 to Form S-6
for Life of Virginia Separate Account II, Registration Number 33-9651.
6. Filed September 28, 1995 with Post-Effective Amendment Number 12 to Form
S-6 for Life of Virginia Separate Account II, Registration Number
33-9651.
7. Filed May 1, 1996 with Post-Effective Amendment Number 13 to Form S-6 for
Life of Virginia Separate Account II, Registration Number 33-9651.
8. Filed May 1, 1997 with Post-Effective Amendment Number 14 to Form S-6 for
Life of Virginia Separate Account II, Registration Number 33-9651
9. To Be filed by Pre-Effective Amendment.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Life of Virginia Separate Account II has duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, and its seal to be hereunto affixed and attested, all in the
County of Henrico in the Commonwealth of Virginia, on the 23th day of July,
1997.
Life of Virginia Separate Account II
(Seal) The Life Insurance Company of Virginia
(Depositor)
Attest: /s/LAURIE DEUSEBIO
By:/s/SELWYN L. FLOURNOY, JR
Selywn L. Flournoy, Jr.
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, The Life
Insurance Company of Virginia certifies that it has duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, and its seal to be hereunto affixed and attested, all in the
County of Henrico in the Commonwealth of Virginia on the 23th day of July, 1997.
(Seal) The Life Insurance Company of Virginia
Attest: /s/LAURIE DEUSEBIO
By:/s/SELWYN L. FLOURNOY, JR.
Selywn L. Flournoy, Jr.
Senior Vice President
Given under my hand this ______ day of ___________, 19___ in the
City/County of ________________________, Commonwealth of Virginia.
------------------------------
Notary Public
My Commission Expires __________________
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date(s) indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C>
/s/RONALD V. DOLAN 7/23/97
Ronald V. Dolan Director, Chairman of the Board
/s/PAUL E. RUTLEDGE 7/23/97
Paul E. Rutledge III Director, President, and Chief Operating Officer
/s/SELWYN L. FLOURNOY Director, Senior Vice President 7/23/97
Selywn L. Flournoy, Jr. Chief Financial Officer
/s/LINDA L. LANAM 7/23/97
Linda L. Lanam Director, Senior Vice President
/s/ROBERT D. CHINN 7/23/97
Robert D. Chinn Director, Senior Vice President
/s/THOMAS S. BAREFIELD 7/23/97
Thomas A. Barefield Director, Senior Vice President
/s/VICTOR C. MOSES 7/23/97
Victor C. Moses Director
/s/GEOFFREY S. STIFF 7/23/97
Geoffrey S. Stiff Director
</TABLE>
By /s/SELWYN L. FLOURNOY, pursuant to Power of Attorney executed on April 16,
1997.
